March 1, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Attention: Filing Desk
Gentlemen:
Re: Symbol Technologies, Inc.
Annual Report on Form 10-K
For Fiscal Year Ended
December 31, 1998
File No. 1-9802
On behalf of Symbol Technologies, Inc. (the "Company"), I
transmit for filing under the Securities and Exchange Act of 1934 (the
"Act"), the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998. I have been advised by the Company that the
financial statements contained in the report do not reflect any changes
from the preceding year's financial statements with respect to
accounting principles or practices or in the method of applying such
principles or practices.
If you have any questions regarding the enclosed materials,
please call the undersigned by collect telephone at (516) 738-4765.
Very truly yours,
s/Leonard H. Goldner
Leonard H. Goldner
Senior Vice President
and General Counsel
LHG:lac
March 1, 1999
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
In connection with the undersigned's Annual Report on Form
10-K for the year ended December 31, 1998 and pursuant to Item
601(b)(4)(iii) of Regulation S-K, the undersigned has not filed as
exhibit 10.6 an Industrial Revenue Bond financing agreement in respect
of its executive offices since the total amount of securities authorized
thereunder does not exceed 10 percent of the Registrant's total
consolidated assets. The Registrant, however, agrees to furnish a copy
of such document to the Commission if so requested.
Very truly yours,
SYMBOL TECHNOLOGIES, INC.
By: s/Kenneth V. Jaeggi
Kenneth V. Jaeggi
Senior Vice President-
Finance and Chief
Financial Officer
KVJ:lac
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission file number 1-9802
SYMBOL TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-2308681
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Symbol Plaza
Holtsville, NY 11742-1300
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (516) 738-2400
Securities registered pursuant to
Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange
(Title of each class) (Name of each Exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the voting stock held by persons other
than officers and directors (and their associates) of the registrant, as of
February 1, 1999 was approximately $ 3,139,000,000.
The number of shares outstanding of each of the registrant's classes of
common stock, as of December 31, 1998, was as follows:
Class Number of Shares
Common Stock, par value $.01 58,756,247
Documents Incorporated by Reference: The registrant's Proxy Statement to be
used in conjunction with the Annual Meeting of Shareholders to be held on
May 10, 1999 (the "Proxy Statement") is incorporated into Part III.
PART I
Item 1. Business
The Company
Symbol Technologies, Inc. ("Symbol" and, together with its
subsidiaries, the "Company"), a Delaware corporation, is the
successor by merger in 1987 to Symbol Technologies, Inc., a New
York corporation which commenced operations in 1975 and a leading
global provider of mobile data management systems. The Company
is the largest manufacturer of bar code-driven data transaction
systems and the only corporation in its industry with in-house
technology for the design and manufacture of bar code scanner
products, application specific mobile computers and radio
frequency (RF) data communications systems. The Company is
engaged in one reportable segment - the design, manufacture,
marketing and servicing of bar code reading equipment and scanner
integrated application specific mobile computer systems, a
substantial portion of which include radio frequency data
communications systems. These products are used as strategic
building blocks in data transaction systems in retail,
transportation and logistics, parcel delivery and postal service,
warehousing and distribution, factory automation, health care and
many other applications.
Company Products and Services
General
The Company develops, manufactures, sells and services one-
dimensional and two-dimensional bar code scanner products that
principally employ laser technology to read data encoded in bar
code symbols and scanner integrated application specific mobile
computer systems, a substantial portion of which incorporate
wireless local area network (WLAN) RF systems to transmit data.
The Company distributes the most complete line of bar code
reading equipment in the world. The Company's bar code scanner
equipment is compatible with a wide variety of data collection
systems, including computers, electronic cash registers and
portable data collection devices. Bar code scanners are used to
enhance accurate data entry and productivity in retail,
transportation and logistics, parcel delivery and postal service,
warehousing and distribution, factory automation and many other
applications.
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<PAGE>
The Company's scanner integrated application specific mobile
computer systems consist of hand-held computers, peripheral
devices, software and programming tools, and are designed to
provide solutions to specific customer needs in data
transactions. They are used to collect data at remote locations
and to transmit information between these locations and the
user's central data processing facility. Data can be entered by
a touch screen or a device which reads bar codes or may be keyed
into memory on a numeric or alpha-numeric keyboard. Data can be
transmitted and received through direct connection, regular
telephone lines with acoustic couplers and modems or by radio
waves. Approximately 90 percent of the Company's hand-held
computers include an integrated bar code reader.
Bar Code Scanner Products
Sales of the Company's bar code scanner products have
accounted for approximately 40 percent of the Company's total
revenues for the years ended December 31, 1998, 1997 and 1996.
The Company's bar code scanner products consist of devices
designed to scan and decode bar code symbols and transmit data.
The Company sells various models of its bar code reading systems,
each of which consists of a laser scanner and interface
controller. In most models, the interface controller is
integrated into the handle of the scanner. The laser scanner
reads the symbol and transmits a digitized signal to the
interface controller. The interface controller contains a
microprocessor which decodes the information received and
interfaces with the user's computer.
The Company sells several different hand-held laser
scanners, the most important of which is the LS 4000 which was
introduced in 1996. The LS 4000 is a trigger-operated, visible
laser diode-based scanner featuring high-performance scanning and
an advanced ergonomic form factor making it ideal for price
scanning and inventory management in a wide variety of retail and
commercial applications. In 1998, the Company introduced the LS
4000I, a ruggedized high performance version of the LS 4000
capable of reading both one-dimensional and certain two-
dimensional bar codes.
The LS 3000 Series, introduced in 1993, consists of trigger-
operated, visible laser diode-based scanners used to read all
common linear bar code symbologies and densities up to a distance
of 20 feet. The LS 3000 is particularly well-suited for
industrial and military applications because of its rugged
housing. These devices consume less than one watt of power
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during scanning. Specialty versions of the LS 3000 include long
range scanners capable of reading bar codes of virtually all
sizes at distances ranging from near contact to more than 35 feet
(LS 3000 ER) and low contrast reading capability scanners (LS
3000 HV) both using "spot and scan" two position triggers for
ease of aiming and visibility.
Introduced in 1995, the LS 3600 Series of laser bar code
scanners incorporate fuzzy logic technology and beam management
optical technology. Fuzzy logic allows these scanners to
accurately digitize and decode poor quality or damaged bar codes.
Beam management optical technology allows operators to scan bar
codes at varying distances.
In 1993, the Company introduced the first cableless hand-
held scanner, the LS 3070. The LS 3070 transmits data via narrow
band RF with a range of up to 50 feet from its base station.
This scanner is particularly useful in environments where
tethered scanning is inadequate. In 1997, the Company introduced
a less expensive cableless, hand-held scanner, the LS 4071. The
LS 4071 is a cordless version of the LS 4000 which utilizes a
Company designed RF communication protocol to provide the user
with a maximum working range of up to ten feet from its base
station. This allows for scanning of heavy or bulky items, which
cannot be easily moved for scanning. Designed to provide greater
productivity, flexibility and convenience, the LS 4071 is
intended for use in retail and light industrial applications.
In 1995, the Company introduced the LT 1800 LaserTouchr
visible laser diode-based bar code scanner that combines the
performance and accuracy of laser-based bar code technology with
scanning for applications where near contact scanning and touch
ergonomics are sufficient.
The LS 1000 Series, introduced in 1996, is the Company's
smallest and lightest trigger operated, hand-held laser scanner.
The LS 1000 is a less expensive scanner ideal for light use
scanning environments where cost is a critical factor.
The LS 2100 Series, introduced in 1998, is a trigger
operated, medium-range scanner capable of reading UPC bar codes
at distances up to 11 inches. Incorporating an SE 1200 series
scan engine and featuring a lightweight, ergonomic design, the LS
2100 is primarily sold in the indirect channel as a point-of-sale
scanner to specialty retail stores.
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In 1995, the Company introduced the LS 4800, a hand-held
laser scanner designed to read both PDF 417, a high-density,
high-capacity portable data file storing approximately one
kilobyte of data in a machine-readable code and all conventional
linear bar codes. PDF 417 is a two-dimensional bar code
symbology which incorporates error correction capability and has
one hundred times the information capacity of a traditional
linear bar code. Unlike linear bar codes, PDF 417 can contain an
entire data record reducing or eliminating the need for an
external system of linked data storage. PDF 417 may be read by
either a laser-based bar code reader or a one- or two-dimensional
charge coupled device (CCD) reader. Most other two-dimensional
codes can only be read by a CCD reader. The LS 4800 integrates a
miniature resonant 2D scan engine that rasters, reading PDF 417
symbols horizontally and vertically at 560 scans per second. Due
to its rapid scan rate and advanced optics, the LS 4800 is adept
at reading poor quality symbols. The LS 4900, introduced in 1996
is a battery-powered version of the LS 4800.
The PDF 620, introduced in 1995, is a fixed-station card
reading device designed for accurate reading of PDF 417 and
standard bar codes for a variety of identification card
applications. Using CCD technology, the PDF 620 accepts ISO
standard sized cards and has a typical first-time read rate of
100 percent.
In addition to its hand-held scanners, the Company also
offers several families of "hands-free" scanners. Unlike the
Company's hand-held scanners, these scanners are usually
triggered by an object sensor to enable use in situations where
use of both hands is required.
In 1994, the Company introduced the LS 9100, a laser-diode
based projection scanner. The LS 9100 generates a large omni-
directional pattern of twenty interlocking laser lines that can
read bar codes at various angles for high productivity scanning.
In 1996, the Company introduced the PCK 9100, a compact
price checker system that allows shoppers to pass bar-coded items
by its scan window and view the latest product information on its
high-visibility LCD display. The PCK 9100 incorporates an LS
9100 omni-directional scanner which assures accuracy over a wide
range of scanning angles, making it easy for customers to obtain
price information.
Introduced in 1998, the LS 6000 Series is a trigger
operated, high visibility laser diode-based scanner capable of
omni-directional and single-line scanning. A unique ergonomic
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design provides for comfortable use either as a hand-held scanner
or with an optional fixed-mount stand as a presentation scanner;
this flexibility allows for increased throughput in high-volume,
point-of-sale retail applications.
The LS 5700 and the LS 5800 miniaturized slot scanners were
introduced by the Company in 1996. The LS 5700 was designed to
accommodate all vertical or "on counter" applications and
incorporates a full sleep mode function which allows the motor
and laser to turn off after a prolonged period of scanner
inactivity, extending scanner longevity and reducing power
consumption. The LS 5800 operates in horizontal or "in counter"
applications and features rugged housing and a sealed exit window
that resists spills and dirt.
In 1999, the Company introduced the LS 7870, a multiplane,
high throughput scanner, primarily designed for point-of-sale
applications in the food retail market. Versions of the LS 7870
also incorporate a scale for simultaneous weighing and scanning
of items. The LS 7870 produces a multi-directional scan pattern
from two dimensions creating a 360 degree read zone that blankets the
bar-coded item in scan lines, allowing users to scan items
significantly faster with less fatigue.
Since 1988, the Company has been selling a series of
scanners consisting of solid state laser diode-based scanners.
These compact, non-contact scanners can be integrated internally
with the user's own equipment or used independently as
fixed-mount scanners on conveyor lines or robotic arms. The LS
1220, introduced in 1994, incorporates a Mylar scan element for
scanning conventional linear bar codes. The LS 6800 Series,
introduced in 1996, incorporates a high speed raster scan engine
that operates at 560 scans per second making it ideal for rapid
reading of one-dimensional and two-dimensional symbols.
In 1990, the Company began marketing bar code laser scanner
modules or scan engines which are integrated by unaffiliated
third parties into their portable computing devices.
In 1996, the Company introduced the low-cost, high-
performance SE 1200 Series scan engine. The SE 1200, which
measures less than one cubic inch and weighs less than one ounce,
enables third-party manufacturers to integrate high-performance
laser scanning into a variety of devices including hand-held
computers, medical instruments, diagnostic equipment, lottery
terminals, vending machines and robotics. The SE 1200 has a
working range and ability to read poor quality bar codes equal to
that of hand-held scanners. In 1997, the Company introduced a
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high density version of the SE 1200 capable of reading
miniaturized bar codes.
The SE 900, introduced by the Company in 1998, is the
smallest lightest and brightest scan engine available today.
Measuring only 0.2 cubic inch, the SE 900 is 20 percent the size
and 15 percent the weight of the SE 1200 allowing third-party
manufacturers to integrate bar code scanning capabilities into
smaller devices without compromising the ergonomic design of the
device.
In 1995, the Company introduced the SE 2000 Series scan
engine. The SE 2000 is a small, lightweight, high performing
scan engine capable of reading both one-dimensional and two-
dimensional bar codes.
The SE 2200, introduced by the Company in 1999, is a high
performance, scan engine that incorporates the Company's
technologically advanced Taut Band scan element and a high
visibility 650nm laser diode. The SE 2200 can read two-
dimensional and one-dimensional bar codes. The SE 2200 is
intended to replace the SE 2000.
The SE 9100 Series scan engine, introduced in 1995, is a
high speed, omni-directional scan engine providing dense scan
line coverage from the face of the scanner up to a distance of
eight inches allowing quick "swipe" scanning as well as standard
presentation scanning.
In 1995, the Company introduced the WSS 1000, an innovative
hand-mounted bar code-based data transaction system that allows
mobile hands-free bar code scanning, data collection and RF data
communications. The WSS 1000 is a wearable computer system for
users who rely on the efficiency and accuracy of bar code
scanning but require the use of both hands to perform job
functions. The system, which consists of two components,
combines the RS1, a miniature scanner worn as a ring that allows
the user to simply touch a thumb and index finger contact switch
to scan a bar code and a compact, light weight, wrist mounted 16-
bit computer with display which permits wireless communication to
the host computer.
In 1997, the Company introduced the WS 1200, the latest
addition to the Company's wearable computer family. Designed for
use in the WSS 1000 system, the WS 1200 is a back-of-the-hand
mounted scanner incorporating an SE 1200 scan engine. Similar to
the RS-1 wearable scanner, the WS 1200 is triggered by a thumb-
actuated switch mounted on the user's index finger, however the
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HF 1200 is capable of scanning at longer distances than the RS-1
ring scanner.
In 1998, the Company introduced a new category of "smart
scanners", the P 460. The P 460 is a hand-held memory scanner
with up to 1 MB of total memory and an integrated keypad and LCD
display that provide enhanced input and output capabilities.
Designed for multiple uses primarily in the retail market, the
P 460 is capable of operating interactively with a host as a
corded scanner for point-of-sale applications, as well as in
batch mode under battery power for back-office or in-store
applications such as physical inventory, cycle counts and gift
registry.
Introduced in 1998, the CyberPen is the Company's first
consumer-oriented data collection system designed for use in the
home or office. CyberPen combines the functionality of a contact
bar code scanner with memory and an A.T. Crossr writing
instrument. To scan a bar code, the user simply presses a button
on the side of the CyberPen and sweeps the wand tip across the
symbol. After scanning bar codes, the user returns the CyberPen
to its holder that uploads the data to a personal computer. The
small, lightweight, portable design makes CyberPen particularly
adaptable for home-office automation, catalog/Internet shopping
and home grocery applications.
The CS 2000, introduced by the Company in 1999, is a
miniature, laser-based memory scanner designed for use in the
consumer electronic retail market. The palm size CS 2000 allows
consumers to browse through retailers printed catalogues,
advertisements and documentation, scan a bar code for items of
interest, and quickly and efficiently order or obtain additional
information on the item through the Internet.
The Company also produces a series of low cost, interface
controllers. These devices permit the Company's scanner products
to easily interface with a wide range of standardized terminals,
personal computers, point-of-sale terminals, portable terminals
and dedicated computing hardware.
Product list prices for the Company's bar code scanner
equipment range between $195 to $5,395 depending on product
configuration. The Company offers discounts off list price for
quantity orders and sales are frequently made at prices below
list price.
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Scanner Integrated Application Specific Mobile Computing Systems
The Company's scanner integrated application specific mobile
computing systems consist of application specific portable data
transaction devices, peripheral devices, software and programming
tools. These systems collect data at remote locations and
transmit information between these locations and the user's
central data processing facility and are designed to provide data
collection solutions for a variety of applications. Approximately
90 percent of the Company's portable data transaction devices are
hand-held computers that also include an integrated bar code
reader. Approximately 40 percent of these devices also have RF
capability. These systems accounted for approximately 50 percent
of the Company's total revenues for the years ended December 31,
1998, 1997 and 1996.
Application Specific Portable Data Transaction Devices
The Company's application specific portable data transaction
devices are microprocessor-based, lightweight and battery-
operated hand-held computers. Data may be captured by a device
which reads bar codes or may be manually entered via a keyboard,
a touch screen or a pen computer display/entry device. The data
collected by the hand-held computer can then be transmitted to a
host computer by connection through regular telephone lines with
acoustic couplers and modems (batch file transfer mode) or
transmitted instantly via radio waves (real-time transaction
processing) by a transceiver in the hand-held computer.
Information from the Company's hand-held computers may be
communicated to a stand-alone receiver or computer which formats
the data for input into a host computer, directly into a host
computer by communications controllers supplied by the Company or
directly onto industry-standard Ethernet local area networks
(LANs) via Company manufactured access points. Depending on the
model, the Company's hand-held computers may have up to 16
megabytes of Random Access Memory (RAM) for data storage and
multiple input and output capabilities for the connection of
printers, bar code readers and communications devices. In
addition, based upon customer specifications, the hand-held
computers may also have built-in bar code readers and various
built-in communications devices for transmission and receipt of
data.
The Company offers two spread spectrum-based, WLAN family of
products. In 1990, the Company introduced its Spectrum Oner
direct sequence cellular RF network for wireless data
transactions. Spectrum 24r, introduced in 1995, is a high-
performance, frequency hopping network which operates at 2.4 Ghz
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frequency and is designed to comply with the recently adopted
IEEE 802.11 standard. Based on spread spectrum RF technology,
Spectrum One and Spectrum 24 networks both provide real-time
wireless data communications with a host computer for hundreds of
portable and fixed-station computers and radio-integrated
scanners. Unlike traditional narrow band RF-based networks,
spread spectrum installation requires no individual site license
from the U.S. Federal Communications' Commission (FCC).
Installation of these networks at various customer sites began in
1991 and these networks are now installed in over 40,000 sites
worldwide. The Spectrum One and Spectrum 24 systems work in
tandem with a broad range of the Company's RF capable hand-held
computers. In 1998, the Company introduced a 2Mb version of the
Spectrum 24 network.
The Spectrum 24 pager, introduced by the Company in 1997, is
a full-featured pager that permits one and two way paging of
messages of up to 250 characters and communicates via the
Company's Spectrum 24 WLAN eliminating the payment of service
fees and charges.
In 1998, the Company introduced the NetVision WLAN telephone
system. Based upon voice-over IP technology, the telephone which
looks like a standard cellular telephone, allows users to place
or receive calls at no cost, worldwide, without additional
charge, between other telephones or PC-based telephones located
at any site served by an internal TCP/IP network. To date sales
of the NetVision telephone have not been material. The NetVision
system connects to a user's TCP/IP system via the Company's
Spectrum 24 WLAN. In 1999, the Company introduced a new network
appliance in the NetVision line, the NetVision Data Phone. The
NetVision Data Phone integrates voice communication, a bar code
scanner, a data entry keypad, a Web browser, a serial port for
printing and a Spectrum 24 WLAN radio card into a single
lightweight device that allows users to bridge the gap between
voice and data networks and the Internet. The unique combination
of communication capabilities makes the NetVision Data Phone a
useful productivity tool for a wide range of industries including
retail, warehouse, healthcare and education.
Initial reaction to the NetVision telephone system has been
enthusiastic, however, potential markets for the system are to a
significant extent outside of the normal markets for the
Company's products. Due to the innovative nature of the system,
the Company is unable to predict whether the NetVision telephone
system will be widely accepted by its current customers or
whether the Company will be successful in developing new markets
for this system.
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Design engineering and support for both the Company and
third-party RF-based data communications systems is conducted in
the Company's San Jose, California facility. The focus of the
group is the design of wireless network transaction systems, the
Company's Spectrum One and Spectrum 24 WLANs and support for the
integration of those high-performance networks into customers'
data networks and enterprise-wide information systems.
The PDT family of general purpose hand-held computers
features advanced technology including Very Large Scale
Integrated (VLSI) circuits, which incorporate many standardized
integrated circuits into one computer chip allowing for size and
cost reductions. Also, the PDT family employs surface mounted
component technology for reduced size and increased performance
and dependability, as well as industry standard 8-, 16- and 32-
bit microprocessors. The PDT family includes a series of hand-
held computers which are available with different features and at
varying costs depending on customer requirements and preferences.
PDT hand-held computers feature up to sixteen lines of liquid
crystal display, slim, lightweight design, multiple input and
output ports and up to 7.6 megabytes of internal memory. PDT
hand-held computers have various keyboard configurations,
including a user configurable keyboard. The PDT family was
originally introduced in 1985.
In 1990, the Company introduced the PDT 3300, a 16-bit DOS-
compatible batch hand-held computer. The PDT 3300 provides
expanded program capacity and keyboard and display flexibility
coupled with an environmentally sealed unit for use in harsh
environments. The Company also offers versions of the PDT 3300
which operate with the Company's Spectrum One and Spectrum 24
networks.
The PDT 3100 hand-held computer, a 16-bit DOS-compatible
computer, was introduced in 1993. Most versions of the PDT 3100
incorporate the Company's SE 1200 scan engine and feature a
unique swivel-head scanner design which adjusts instantly for
right- or left-hand scanning operation. The PDT 3100 is the
Company's largest selling hand-held computer. In 1994, the
Company introduced versions of the PDT 3100 incorporating the
Company's Spectrum One data communications network and direct or
acoustic modems for telephone line communications and in 1996,
the Company introduced versions of the PDT 3100 which incorporate
the Company's Spectrum 24 WLAN communications capability.
In 1996, the Company introduced two other versions of the
PDT 3100, the PDT 3000 and the PDT 3500. The PDT 3000 is a
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compact, efficient, hand-held computer designed for use in the
food and drug retail and convenience store industries. Weighing
less than 13 ounces, the PDT 3000 is a limited performance, lower
cost version of the PDT 3100. The PDT 3500, features a larger
display screen, a choice of Spectrum One or Spectrum 24
networking options and an SE 2000 scan engine providing one- and
two- dimensional bar code scanning capability.
In 1997, the Company introduced the PDT 3200 hand-held
computer, a high-performance version of the PDT 3100 that
provides fast and accurate data management and improved
flexibility. The PDT 3200's PC compatible 32-bit 386
microprocessor facilitates accelerated data collection while a
user-accessible PC card slot provides for network connectivity,
memory expansion or fax/modem capability.
The PDT 3400, introduced in 1997, is a ruggedized wireless
hand-held computer designed for use in harsh mobile environments.
The PDT 3400 features a sealed housing that resists dust and
moisture, a PC card interface that allows for integration of
wireless wide area network radio modems and PC-based standard
architecture providing users with a simple application
development environment.
In 1998, the Company introduced the PDT 6100 Series of hand-
held computers, an extension of the PDT 3100 product line
incorporating a high-performance SE 900 scan engine and a sleek,
compact, ergonomically comfortable design. Depending upon
customer needs, the PDT 6100 is available with a 4-, 8- or 16-
line display and optional WLAN connectivity capability via the
Company's Spectrum One or Spectrum 24 networks.
In 1996, the Company introduced the PDT 1000, a pocket-sized
integrated laser scanning computer designed for batch processing.
The PDT 1000 is approximately one inch by two inches by 6.5
inches and weighs only seven ounces. The rugged construction,
simple three-button keyboard and 96 kilobyte memory make the PDT
1000 suitable for a wide variety of tracking and asset management
applications where bar code data capture and storage are
required.
Introduced in 1997, the PDT 2200 is a lightweight, hand-held
computer ergonomically designed for true one-handed operation.
The PDT 2200 features an easy to read eight row by 20 character
display and an integrated high visibility SE 1200 scan engine. A
386 PC/DOS compatible operating system makes the PDT 2200 easy to
program and to integrate into existing systems and a rugged,
environmentally sealed housing provides weather resistant
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protection for the mobile user. The PDT 2200 is the product the
Company is supplying in connection with the contract related to
the United States Postal Service.
The PDT 1100, introduced by the Company in 1999, is a
versatile, lightweight, pocket-sized hand-held computer. In
addition to a 26-button keypad, the PDT 1100 has eight dedicated,
programmable function keys that call up special applications or
functions at the touch of a button. An SE 1200 scan engine
allows users to scan bar codes as small as 40-mil at distances of
up to 22 inches. The PDT 1100 was designed for use in a variety
of applications including utility meter reading, sales
automation, route accounting, parcel delivery and inventory
maintenance.
The LRT 3800, introduced in 1990, incorporates in a single,
hand-held unit, high-performance laser bar code scanning, a 16-
bit DOS-based computer and a radio modem for communication via
the Company's Spectrum WLANs. Based on visible laser diode
scanning technology, the battery-operated LRT 3800 is compact and
ergonomically designed and provides up to 1.2 megabytes of memory
capacity.
The LDT 3805, also introduced in 1990, is identical to the
LRT 3800 in physical appearance. Its scanning and computing
functions are similar but it has no RF communication capability.
The LDT 3805 is optimized for collecting and storing data, later
to be downloaded to a host computer.
Both the LRT and LDT have the capability for data entry via
bar code scanning or by using the full-function keypad. The pair
are ideal for scan-intensive applications such as receiving,
shipping, inventory control, order and shelf-price verification
as well as other applications in both retail and warehousing.
The PDT 6800, introduced by the Company in 1998, is a
versatile hand-held computer combining ruggedized housing for use
in industrial settings with a small, light-weight, ergonomic form
factor suitable for scan intensive retail applications. The PDT
6800 has a 35- or 46-key alphanumeric keypad for easy data input
and a 16 line backlit display for greater data content and
readability. Versions of the PDT 6800 incorporate the Company's
Spectrum One and Spectrum 24 WLAN connectivity. The Company
anticipates that the LRT 3800 and the LDT 3805 will be replaced
by the PDT 6800 in 1999.
The PPT family of portable pen computers integrates several
key technologies for improving information management. These PC
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compatible hand-held computers incorporate pen and touch input on
an active matrix screen, a graphical user interface, an SE 1200
scan engine, and standard PCMCIA slots for memory, modem,
wireless or wide area network capability and other peripherals.
The PPT 4600, introduced in 1995, incorporates a 486
microprocessor which supports both DOS and Windows based
applications and an SE 2000 scan engine, making it the first
hand-held computer that has the capability to scan and decode PDF
417. Engineered to withstand rugged treatment and endure outdoor
conditions such as windblown rain or dust and extreme
temperatures, the PPT 4600 is intended for use in industrial and
mobile environments.
In 1996, the Company introduced versions of the PPT 4600
incorporating Spectrum 24 WLAN communication capability and a
fully integrated radio modem optimized for wireless wide area
communication.
In 1997, the Company introduced the PPT 4500, a mobile pen
computer with an integrated 486 processor that supports Windows
95 applications and features optional WLAN communication and bar
code scanning. Weighing less than two pounds, the PPT 4500 is
the Company's lightest and most powerful pen computer.
The PPT 4300, introduced by the Company in 1997, is a high-
performance mobile computer sealed in a ruggedized, splash-proof
housing. Capable of being configured to meet a wide range of
client/server application requirements particularly in the
medical/healthcare field, the PPT 4300 was designed for use in
information intensive applications where the flexibility of
mobile computing is important. The PPT 4300 features easy
operation using a full QWERTY keyboard, pen or touch screen
input, optional bar code scanning and wireless communication
facilitated by an integrated PC card.
In 1998, the Company and Palm Computing, Inc., a subsidiary
of 3Com Corporation and developers of the Palm Pilotr and the
Palm IIIr hand-held computers, entered into an agreement under
the terms of which the Company is the exclusive manufacturer and
distributor of palm sized personal productivity tools utilizing
the Palmr operating system with an embedded bar code reading
device. The SPT 1500, a pocket sized hand-held computer based
upon the Palm III architecture, is the first of such products to
be introduced by the Company. With an embedded SE 900 scan
engine the SPT 1500 provides users with the latest bar code
scanning technology for collecting data and the Palm operating
system allows programmers to easily build applications using
-14-
scan-embedded graphical development tools. Designed for use in
office workflow automation, route accounting, healthcare and
retail, the SPT 1500 is suited for use in any application where
mobile workers need to collect and manage data at the point of
activity. The SPT 1500 has 2MB each of random access memory and
flash memory and is available in an optional 4MB configuration to
accommodate larger application demands. Introduced in 1998 and
available for sale in the spring of 1999, the SPT 1700 is a
ruggedized version of the SPT 1500 designed for use in industrial
and warehouse settings. Versions of the SPT 1700 will
incorporate the Company's Spectrum 24 WLAN connectivity.
The PPT 5100, introduced by the Company in 1999, is the
first in a new line of pen-input products based on the Microsoft
Windows CEr operating system. Designed to work specifically with
mobile computers, the CE operating system allows PPT 5100 users
to collect data via a familiar Windows interface and allows
developers to create applications with standard 32-bit desktop
tools. The PPT 5100 incorporates pen-input capabilities, a
graphical user interface and an integrated bar code laser
scanner. Versions of the PPT 5100 are available with an optional
magnetic stripe card reader and Spectrum 24 WLAN connectivity.
In 1997, the Company introduced the VRC 4000, a ruggedized
vehicle mounted or wall mounted touch screen computer. Designed
for industrial use in warehouse and yard management applications,
the VRC 4000 is a PC compatible computer with 16 megabytes of
memory and includes a full 10.3 inch VGA display with an infrared
touch screen interface. The VRC 4000 is capable of communicating
with a host computer or other hand-held devices via the Company's
Spectrum 24 wireless network.
Datawand hand-held computers were first introduced by the
Company in 1985. The Company's principal Datawand product, the
Datawand IIB, is a self-contained optical wand bar code reader
hand-held computer which is only 7-1/4 inches long and one inch
in diameter and weighs slightly more than two ounces. In 1989,
the Company introduced a new optical wand bar code reader, the
Datawand III, which contains 32 kilobytes of memory and a 16
character single line display.
In 1993, the Company announced the co-development with
Albert Heijn of The Netherlands, Europe's largest grocery market
chain, and TNO Product Centre, a leading Dutch engineering design
firm, of a shoppers portable self checkout shopping system for
food and non-food retailers. The system, which is integrated
with the retailer's point-of-sale system, utilizes the Company's
LST 3803 or CST 2000, hand-held computers with an integrated
-15-
laser scanner which allow shoppers to scan and tabulate their
purchases as they shop. In 1996, the Company introduced an RF
version of the portable self checkout system.
In 1998, installation of the Company's portable self
checkout systems has expanded both to new customers and more
sites. There are currently systems installed or ordered in over
435 stores in 37 chains in 19 countries on five continents.
Although current customers have been very pleased with the
portable self checkout system and other food and non-food
retailers have expressed an interest in the self checkout
concept, due to the innovative nature of the concept, there can
be no assurance that self checkout will be implemented on a wide
scale either internationally or domestically.
Product list prices for the Company's portable data
collection equipment range between $350 to $30,000 depending on
product configuration. The Company offers discounts off list
price for quantity orders and sales are frequently made at prices
below list price.
Software and Programming Tools
The Company's portable hand-held computers utilize software
which consists of a number of specialized applications and
communications software programs, that run under Microsoft MS-DOS
and Windows operating systems. A series of application
development kits (ADKs) and software development kits (SDKs) are
available to allow the Company's programmers, value added
resellers (VARs) and end-user customers to develop applications
that fully utilize the integrated features of the Company's
family of portable hand-held computers. The ADKs and SDKs
provide the software drivers and libraries required to maximize
product performance. Used in conjunction with industry standard
development tools including Visual Basic and C++, software
developers can easily create and support applications to meet
specific customer requirements.
The Company has also developed several communication
applications designed to facilitate transmission and reception of
data between mobile computers and stand-alone receivers or host
computers. These applications include a suite of terminal
emulation products, host enablers and various protocols. The
Company has entered into alliances with independent suppliers of
software who assist the Company in development of software.
-16-
Customer Support
The Company has a customer support organization which
repairs and maintains the Company's products.
The Company's domestic customer support operations include
locations in Arkansas, California, Georgia, Illinois, Kentucky,
Massachusetts, Michigan, Minnesota, New Jersey, New York, North
Carolina and Texas. The Company also has foreign customer
support offices in Australia, Austria, Belgium, Canada, China,
Denmark, Finland, France, Germany, Italy, Japan, Mexico, the
Netherlands, Norway, Singapore, South Africa, Spain, Sweden and
the United Kingdom. These centers enhance the Company's ability
to respond to its customers' requirements for fast, efficient
service.
The Company currently offers a variety of service
arrangements to meet customer needs. The Company's on-site
service provides for maintenance and repairs at the customer's
location. Depot service includes maintenance and repairs at the
Company's service centers or through authorized service
providers. The Company's service contracts generally have a term
of from one to five years. In addition, the Company offers time-
and-materials service on a non-contract, as-needed basis.
The Company undertakes to correct defects in materials and
workmanship for a period of time after delivery of its products.
The period of time covered by these warranties varies depending
on the product involved as well as contractual arrangements but
is generally twelve months.
Maintenance and support revenues contributed less than 10
percent of the Company's total revenues for the years ended
December 31, 1998, 1997 and 1996.
Sales and Marketing
The Company presently markets its products domestically and
internationally through a variety of distribution channels,
including a direct sales force, original equipment manufacturers,
VARs and sales representatives and distributors. VARs distribute
the Company's products to customers while also selling to those
customers other products or services not provided by the Company.
The Company's sales organization includes domestic sales offices
located throughout the United States and foreign sales offices in
Australia, Austria, Belgium, Canada, China, Denmark, Finland,
France, Germany, Italy, Japan, Mexico, the Netherlands,
-17-
Singapore, South Africa, South Korea, Spain, Sweden and the
United Kingdom.
The Company currently has contractual relationships and
strategic alliances with unaffiliated partners. Through these
relationships, the Company is able to broaden its distribution
network and participate in industries other than those serviced
by the Company's direct sales force and distributors.
In 1998, sales to Lockheed Martin Corporation in connection
with the United States Postal Service under a contract entered
into in 1997 amounted to approximately 11 percent of the
Company's total sales. This contract will be substantially
completed in the first quarter of 1999.
Customers generally order products for delivery within 45
days. Accordingly, shipments made during any particular quarter
generally represent orders received either during that quarter or
shortly before the beginning of that quarter and generally
consist of products manufactured in the quarter. The Company
maintains significant levels of inventory to facilitate meeting
delivery requirements of its customers. The Company, pursuant to
contract or invoice, normally extends 30 day payment terms to its
customers. Actual payment terms vary from time to time but
generally do not exceed 90 days.
Since a substantial portion of the Company's sales of
scanner products are to retail organizations which tend not to
purchase equipment such as the Company's scanner products during
the Christmas selling season, the Company's business has, from
time to time, been seasonal in the fourth quarter. The Company
believes there may again be reduced demand for its scanner
products in the fourth quarter of the current fiscal year. The
Company attempts to offset the reduced demand of the retail
industry by selling its products to other market segments. While
this effort was successful in 1998, there can be no assurance
that the effort will succeed in 1999 and subsequent years.
-18-
<TABLE>
The following table sets forth certain information as to
international sales of the Company:
<CAPTION>
Year Ended
December 31,
(in thousands)
1998 1997 1996
Area
<S> <C> <C> <C>
Western Europe $278,836 $257,325 $222,611
Other $ 89,567 $ 68,800 $ 44,545
</TABLE>
The Company undertakes hedging activities to the extent of
known cash flow in an attempt to minimize the impact of foreign
currency fluctuations.
Manufacturing
The products which are manufactured by the Company are
manufactured at its Bohemia, New York facilities.
While components and supplies are generally available from a
variety of sources, the Company presently depends on a single
source or a limited number of suppliers for several components of
its equipment, certain subassemblies and certain of its products.
In the past, delays in delivery of such products has not had a
material adverse impact on the Company's ability to deliver its
products. However, there is no assurance that in the future
shortages of supplies and delays in delivery of components,
subassemblies or products will not have an adverse effect on the
Company's ability to deliver its products or to deliver its
products on time. Due to the general availability of components
and supplies, the Company does not believe that the loss of any
supplier or subassembly manufacturer would have a long-term
material adverse effect on its business although set-up costs and
delays could occur if the Company changes any single source
supplier.
Certain of the Company's products are manufactured by third
parties, a majority of which are outside the United States. In
particular, the Company has a long term strategic relationship
with Olympus Optical, Inc. of Japan ("Olympus") pursuant to which
Olympus and the Company jointly develop selected products which
are manufactured by Olympus exclusively for sale by the Company.
Several such products are currently being sold by the Company and
the Company expects the number of products developed in
collaboration with Olympus to increase in the future. The
-19-
Company has the right to manufacture such products if Olympus is
unable or unwilling to do so, but the loss of Olympus as a
manufacturer could have, at least, a temporary adverse impact on
the Company's ability to deliver such products to its customers.
The Company has no reason to believe that Olympus will not
continue to manufacture products under this arrangement.
The failure of any other third party to supply products to
the Company could have an adverse affect on the Company's ability
to deliver such products to its customers. However, the Company
has no reason to believe that these suppliers will be unable to
meet their supply or delivery obligations to the Company over any
extended period.
The Company employs certain advanced manufacturing processes
that require highly sophisticated and costly equipment and are
continuously being modified in an effort to improve efficiency,
reduce manufacturing costs and incorporate product improvements.
Research and Product Development
The Company believes that its future growth depends, in
large part, upon its ability to continue to apply its technology
to develop new products, improve existing products and expand
market applications for its products. The Company's research and
development projects include, among others: improvements to the
reliability, quality and readability of its laser scanners at
increased working distances, faster speeds and higher density
codes (including, but not limited to, two-dimensional codes);
improvements in and expansion of its series of interface
controllers; continued development of its solid state laser diode
scanners; improvements to packaging and miniaturization
technology for bar code data capture products, portable data
collection devices and integrated bar coded data capture
products; development of high-performance digital data radios,
high-speed radio frequency data communications networks and
telecommunications protocols and products; and the addition of
application software to provide a complete line of high-
performance interface hardware.
The Company uses both its own associates and from time-to-
time unaffiliated consultants in its product engineering and
research and development programs. Dr. Jerome Swartz, Chairman
of the Board of Directors and Chief Executive Officer of the
Company, leads the Company's research, patent and new product
development programs. From time-to-time the Company has
participated with and/or partially funded research projects
-20-
in conjunction with a number of universities including the
State University of New York at Stony Brook, Polytechnic
University of New York and Tel Aviv University in Israel.
The Company expended (including overhead charges)
approximately $31,030,000, $29,991,000 and $20,164,000 for
research and development during the years ended December 31,
1998, 1997 and 1996, respectively.
Competition
The business in which the Company is engaged is highly
competitive and acutely influenced by advances in technology,
product improvements and new product introduction, and price
competition. To the Company's knowledge, many firms are engaged
in the manufacture and marketing of portable data collection
systems and bar code reading equipment utilizing laser
technology. In addition, the Company's bar code reading
equipment also competes with devices which utilize technologies
other than laser scanners such as CCDs and optical wands.
Furthermore, numerous companies, including present manufacturers
of scanners, lasers, optical instruments, microprocessors,
notebook computers, PDAs and data radios have the technical
potential to compete with the Company. Many of these firms have
far greater financial, marketing and technical resources than the
Company. The Company competes principally on the basis of
performance and the quality of its products and services.
The Company believes that its principal competitors with
respect to bar code scanning products are Intermec Technologies
Corporation, Matsushita Electric Industrial Co., Ltd., Metrologic
Instruments, Inc., NipponDenso Co., Ltd., Opticon, Inc., PSC Inc.
and Welch Allyn, Inc. Its principal competitors with respect to
scanner integrated application specific mobile computing systems
are Fujitsu, Ltd., Hand Held Products, Inc., Intermec
Technologies Corporation, International Business Systems, Inc.,
LXE Inc., Motorola, Inc., NipponDenso Co., Telxon Corporation and
Teklogix Inc. Some of the Company's competitors with respect to
scanner integrated application specific mobile computing systems
products also participate in the field service market. Its
principal competitors with respect to radio frequency
communications products are BreezeCom, Inc., Lucent Technologies,
Inc., Netwave Technologies, Inc., Proxim, Inc., Raytheon Wireless
Solutions and Telxon Corporation. In addition, several large
companies, such as Motorola, Inc., Matsushita Electric Industrial
Co., Ltd. and Fujitsu, Ltd. while active in the RF area, are
-21-
currently not manufacturing a WLAN, but have the capability to be
able to readily compete with the Company.
Patent and Trademark Matters
The Company files domestic and foreign patent applications
to support its technology position and new product development.
The Company owns over 350 U.S. Letters Patents covering various
aspects of the technology used in the Company's principal
products and has entered into cross-license agreements with other
companies. In addition, the Company owns numerous foreign
companion patents. The Company has also filed additional patent
applications in the U.S. Patent and Trademark Office as well as
in foreign patent offices. The Company will continue to file
patents, both U.S. and foreign, to cover its most recent research
developments in the scanning, data collection and RF data
communications fields. Key patents covering basic hand-held
laser scanning technology begin to expire in June 2000 and key
patents covering scanner integrated hand-held computers begin to
expire in July 2005.
The Company believes that its patent portfolio does provide
some competitive advantage in that such patents tend to limit the
number of unlicensed competitors and permit the Company to
manufacture products which may have features which provide better
performance and/or lower cost. Although management believes that
its patents provide some competitive advantage, the Company
depends more for its success upon its proprietary know-how,
innovative skills, technical competence and marketing abilities.
In addition, because of rapidly changing technology, the
Company's present intention is not to rely primarily on patents
or other intellectual property rights to protect or establish its
market position. Instead, the Company has established an active
program to protect its investment in technology by enforcing and
licensing certain of its intellectual property rights. The
Company has entered into royalty-bearing license agreements with,
among others, Hand Held Products, Inc., Intermec Technologies
Corporation, LXE Inc., Metrologic Instruments, Inc., PSC Inc. and
Telxon Corporation.
On April 1, 1996, PSC Inc. (PSC) commenced suit against the
Company in Federal District court for the Western District of New
York, purporting to assert claims against the Company for alleged
violations of the federal antitrust laws, unfair competition and
also seeking a declaratory judgment of non-infringement and
invalidity as to certain of the Company's patents. PSC has
served a Third Amended Complaint, which purports to assert
-22-
essentially the same antitrust and unfair competition claims
against the Company, and also seek a declaratory judgment of
alleged non-infringement and invalidity of nine of the Company's
patents, and a declaratory judgment that PSC has not breached its
two agreements with the Company and that those agreements have
been terminated. The Company has amended its suit against PSC to
assert infringement of four of the Company's patents, breach of
contract and fraud. The Company had also sued Data General
Corporation (Data General), a manufacturer of portable integrated
scanning terminals which incorporate scan engines from PSC, for
infringement of the same four patents and five additional
patents. The nine patents asserted against Data General are the
same nine of the Company's patents as to which PSC is seeking
declaratory relief.
On October 9, 1996, the Court granted the Company's motion,
to sever and stay PSC's antitrust, unfair competition and related
claims. On the same day, the Court denied Data General's motion
to stay the Company's claims against it. The Court also set a
one week trial (a "Markman" hearing) for July 14,1997, to
construe the claims in all nine patents asserted by the Company
against Data General and PSC. On May 8, 1997, the Court
postponed the "Markman" hearing and in the interest of judicial
economy, the Court also stayed discovery on the patent claims
until a non-judicial arbitration which PSC had initiated on March
10, 1997 was completed. The arbitration involved an
interpretation of certain provisions of 1985 and 1995 license
agreements between the Company and Spectra-Physics Scanning
Systems, Inc.(Spectra-Physics) (which had been acquired by PSC)
concerning whether purchasers of PSC's scan engines were free to
incorporate such scan engines into their integrated scanning
terminals without any royalty payment to the Company beyond that
paid by PSC on the scan engine itself. The arbitration was heard
on July 22-24, 1997. On December 29, 1997, the Arbitrator
rendered his decision in favor of the Company and against PSC.
The Arbitrator ruled that the sale of PSC's scan engines passed
no immunity to PSC's customers under the Company's patents
covering the integration of the scan engine into integrated
scanning terminals. The Arbitrator's decision has been confirmed
by the Court.
By letter dated January 22, 1998, the Company requested that
the Court lift the stay it entered in the litigation, to permit
the Company to seek a ruling that the Company's agreements with
PSC, which PSC argues have been terminated and under which it has
ceased paying royalties for more than two years, remain in full
force and effect and require royalty payments to be made to the
Company pursuant to those agreements. PSC initially objected to
-23-
the Company's request and asked the Court that it continue to
hold the contract issues in abeyance and instead lift the stay
with respect to the pending patent issues and that discovery in
these claims be reopened. On April 3, 1998 the Court, with the
consent of the parties, lifted the stay previously in effect with
respect to the contractual issues in the litigation and ordered
that a trial on these issues be held commencing on October 13,
1998. Discovery by the Company and PSC on the contract issues has
essentially been completed. If the Company succeeds in the
contract action, it believes it will be owed, on an ongoing
basis, additional royalties of approximately $5,000,000 per
annum. If the Company does not prevail in the action, it will
continue to receive royalty payments from PSC at the same rate
and on the same products as it currently is receiving them.
On September 12, 1998, PSC filed a motion for partial
summary judgement alleging that the Company was guilty of patent
"misuse" since PSC is obligated under its 1991 Agreement with the
Company to pay royalties to the Company on sales of scan engines
to certain PSC customers who also pay royalties to the Company
when they incorporate these scan engines into their integrated
scanning terminals. On September 17, 1998, Judge Telesca, in
response to the filing by PSC of the motion, cancelled the
hearing which was scheduled to begin on October 13, 1998, and
will be rescheduled by the Court at a later time. In this
motion, PSC claimed that this practice should bar the Company
from collecting past royalties which the Company alleges are owed
by PSC under the 1991 Agreement. However, since July 1996, PSC
has not paid the Company any royalties under the 1991 Agreement
and has instead been paying royalties under agreements it
obtained in connection with the acquisition of Spectra-Physics.
The motion was argued on October 7, 1998 and on October 22,
1998 the Court issued a decision and order granting PSC's motion.
The ruling only prevents the Company from collecting past
royalties due and owing under the 1991 Agreement, none of which
have been paid to the Company or taken into income by the
Company. Moreover, the ruling does not affect PSC's future
royalty obligations to the Company except with respect to
royalties owed to the Company under the 1991 Agreement on scan
engines sold to other licensees of the Company since the Company
intends to prospectively cure the "misuse" without prejudice,
subject to the outcome of its appeal. The Company estimates that
royalties owed on PSC scan engines represent less than 10 percent
of the additional royalties PSC would owe the Company if it were
paying royalties under the 1991 Agreement. Furthermore, the
decision has no other impact on any royalties paid or to be paid
to the Company by any other licensee.
-24-
On November 5, 1998, the Company made a Motion for
Reconsideration of the Court's misuse decision, based on what the
Company believes to be legal and factual matters that the Court
overlooked in making its decision. On the same day, the Company
made a separate motion to have the misuse decision entered as a
final judgment, or in the alternative, to have the decision
certified to the United States Court of Appeals for the Federal
Circuit, which could enable the Company to obtain immediate
appellate review of the misuse decision. Both motions are now
pending before the Court.
Although the Company believes that its products and
technology do not infringe the proprietary rights of others,
there can be no assurance that third parties will not assert
infringement and other claims against the Company or that such
claims will not be successful. The Company has received and has
currently pending such claims and in the future may receive
additional such notices of claims of infringement of other
parties' rights. In such event, the Company has and will
continue to take reasonable steps to evaluate the merits of such
claims, take such action as it may deem appropriate, which action
may require that the Company enter into licensing discussions, if
available, and/or modify the affected products and technology, or
result in litigation against parties seeking to enforce a claim
which the Company reasonably believes is without merit. Such
litigation is currently pending and additional litigation may be
filed in the future. Such parties have and are likely to claim
damages and/or seek to enjoin commercial activities relating to
the Company's products or technology affected by such party's
rights. In addition to subjecting the Company to potential
liability for damages, such litigation may require the Company to
obtain a license in order to manufacture or market the affected
products and technology. To date, such activities have not had a
material adverse affect on the Company's business and the Company
has either prevailed in all litigation, obtained a license on
commercially acceptable terms or otherwise been able to modify
any affected products or technology. However, there can be no
assurance that the Company will continue to prevail in any such
actions or that any license required under any such patent would
be made available on commercially acceptable terms, if at all.
There are a significant number of U.S. and foreign patents and
patent applications in the Company's areas of interest, and the
Company believes that there has been and is likely to continue to
be significant litigation in the industry regarding patent and
other intellectual property rights.
-25-
The Company has also obtained certain domestic and
international trademark registrations for its products and
maintains certain details about its processes, products and
strategies as trade secrets.
The Company regards its software as proprietary and
attempts to protect it with copyrights, trade secret law and
international nondisclosure safeguards, as well as restrictions
on disclosure and transferability that are incorporated into its
software license agreements. The Company licenses its software
products to customers rather than transferring title. Despite
these restrictions, it may be possible for competitors or users
to copy aspects of the Company's products or to obtain
information which the Company regards as trade secrets. Computer
software generally has not been patented and existing copyright
laws afford only limited practical protection. In addition, the
laws of foreign countries generally do not protect the Company's
proprietary rights in its products to the same extent as do the
laws of the United States.
Government Regulations
The use of lasers and radio emissions are subject to
regulation in the United States and in other countries in which
the Company does business. In the United States, various Federal
agencies, including the Center for Devices and Radiological
Health of the Food and Drug Administration, the FCC, the
Occupational Safety and Health Administration and various State
agencies, have promulgated regulations which concern the use of
lasers and/or radio/electromagnetic emissions standards. Member
countries of the European community have enacted or are in the
process of adopting standards concerning electrical and laser
safety and electromagnetic compatibility and emissions standards.
The Company believes that all of its products are in
material compliance with current standards and regulations;
however, regulatory changes in the United States and other
countries may require modifications to certain of the Company's
products in order for the Company to continue to be able to
manufacture and market these products.
The Company's RF hand-held computers include various models
all of which intentionally transmit radio signals as part of
their normal operation. Certain versions of the Company's hand-
held computers and its Spectrum One and Spectrum 24 cellular
frequency networks utilize spread spectrum radio technology. The
Company has obtained certification from the FCC for its products
-26-
which utilize this radio technology. Such certification is valid
for the life of the product unless and until the circuitry of the
product is altered in material respects, in which case a new
certification may be required. Users of these products in the
United States do not require any license from the FCC to use or
operate the product. Certain of the Company's products transmit
narrow band radio signals as part of their normal operation. The
Company has obtained certification from the FCC for its narrow
band radio products. However, these models must not only be
accepted by the FCC prior to marketing but users of these devices
must themselves also obtain a site license from the FCC to
operate them.
Associates
At December 31, 1998, the Company had approximately 3,700
full-time associates. Of these, approximately 2,900 were
employed domestically. The Company also employs temporary
production personnel. None of the Company's associates are
represented by a labor union. The Company considers its
relationship with its associates to be good.
-27-
Item 2. Properties
The following table states the location, primary use and
approximate size of all principal plants and facilities of the
Company and its subsidiaries and the duration of the Company's
tenancy with respect to each facility.
<TABLE>
<CAPTION>
Location Principal Use Size Tenancy/Ownership
<S> <C> <C> <C>
One Symbol Plaza World headquarters 299,000 square Owned (subject to
Holtsville, NY feet mortgage)
116 Wilbur Place Administration 92,000 square Owned (subject to
Bohemia, NY feet mortgage)
110 Wilbur Place Manufacturing 30,000 square Owned (subject to
Bohemia, NY feet mortgage)
12 & 13 Oaklands Pk. Customer Service 21,700 square Owned
Fishponds Road feet
Wokingham, Berkshire
England
110 Orville Drive Manufacturing 110,000 square Leased: expires
Bohemia, NY feet Aug. 31, 2001
Valley Oak Network Systems 100,000 square Leased: expires
Technology Campus* Engineering, feet April 30, 2009
San Jose, CA Marketing
1101 Lakeland Ave. Manufacturing, 90,400 square Leased: expires
Bohemia, NY administration and feet Aug. 31, 2001
distribution
Berkshire Place International head- 55,533 square Leased: expires
Winnersh Triangle quarters, Marketing feet Dec. 31, 2012
Winnersh, Wokingham and Administration
Berkshire, England and U.K. headquarters
2145 Hamilton Ave. Network Systems, 51,500 square Leased: expires
San Jose, CA Engineering, feet August 31, 1999
Marketing
340 Fischer Ave. Service and sales 31,200 square Leased: expires
Costa Mesa, CA feet May 31, 2001
-28-
180 Orville Drive Warehousing and 22,612 square Leased: expires
Bohemia, NY facilities feet Aug. 31, 2001
management
Knaves Beech Customer Service 6,185 square Leased: expires
Business Center feet Sept. 28, 2003
High Wycombe,
Buckinghamshire
England
<FN>
*To be occupied in August, 1999.
</FN>
</TABLE>
In addition to these principal locations, the Company and
its subsidiaries also lease other offices throughout the world,
ranging in size from approximately 150 to 31,000 square feet.
Item 3. Legal Proceedings
See Patent and Trademark Matters for a discussion of
certain other litigation involving the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 4A. Executive Officers of the Registrant
The following table sets forth the names, ages and all
positions and offices held by the Company's executive officers:
<TABLE>
<S> <C> <C>
Jerome Swartz.......... 58 Chairman of the Board of Directors
Chief Executive Officer and Director
Tomo Razmilovic........ 56 President, Chief Operating Officer
and Director
Robert Blonk........... 52 Senior Vice President-Human
Resources
Richard Bravman........ 44 Senior Vice President,
Sales/Marketing-Wireless
Systems Division
Brian T. Burke......... 52 Senior Vice President, Controller
and Chief Accounting Officer
-29-
Richard M. Feldt....... 47 Senior Vice President,
General Manager-Worldwide Operations
Leonard H. Goldner..... 51 Senior Vice President, General
Counsel and Secretary
Kenneth Jaeggi......... 53 Senior Vice President-Finance and
Chief Financial Officer
Joseph Katz............ 46 Senior Vice President, Research and
Development
Boris Metlitsky........ 51 Senior Vice President, General
Manager-Scanner Products Division
Satya Sharma........... 58 Senior Vice President-Quality
</TABLE>
Dr. Swartz co-founded and has been employed by the Company
since it commenced operations in 1975. He has been the Chairman
of the Board of Directors and Chief Executive Officer of the
Company for more than the past fifteen years. Dr. Swartz was an
industry consultant for 12 years in the areas of optical and
electronic systems and instrumentation and has a total of some
150 technical papers and issued and pending U.S. patents to his
credit, including the Company's basic patents in hand-held laser
scanning. He is also a trustee of the Polytechnic University of
New York and an adjunct full professor of Electrical Engineering
at the State University of New York at Stony Brook. He is also a
fellow of the Institute of Electrical and Electronic Engineering.
Mr. Razmilovic has been the President and Chief Operating
Officer of the Company since October 1995. He was previously
Senior Vice President-Worldwide Sales and Services. He first
joined the Company in September 1989. From January 1989 to
August 1989, he was President and Chief Executive Officer of
Cominvest Group, a Swedish multinational high technology company.
From August 1985 to December 1988, he was President of ICL
International, a major European computer manufacturer and he also
led its industry marketing and software development divisions.
Mr. Blonk joined the Company in August 1997. Prior to
joining the Company, he had been employed for thirty years by
Lucent Technologies, Inc. in a number of positions, the most
recent of which was as its Director of Technical Business
Operations.
Mr. Bravman has been employed by the Company for more than
the past twenty years in various management positions.
-30-
Mr. Burke joined the Company in November 1987. From October
1984 to October 1987, he was President, Chief Executive Officer
and Director of Super Web Press Service Corporation, a
manufacturer of printing presses.
Mr. Feldt joined the Company in September 1995. From 1991
to August 1995, he was Vice President of Manufacturing at A.T.
Cross, a leading manufacturer of writing instruments. From July
1988 to December 1990, Mr. Feldt served as a Director of the
Imaging and Publishing Systems Division of Eastman Kodak.
Mr. Goldner joined the Company in September 1990. From
September 1979 until August 1990, he was a partner of the New
York law firm of Shereff, Friedman, Hoffman & Goodman, which firm
was securities counsel to the Company.
Mr. Jaeggi joined the Company in May 1997. From May 1996 to
May 1997, he was a member of the Office of the Chairman and the
Operating Committee of Electromagnetic Sciences in Atlanta, GA.
From December 1992 until May 1996, Mr. Jaeggi served as Senior
Vice President, Chief Financial Officer and consultant of
Scientific-Atlanta, Inc., a leading producer of cable network and
satellite communications systems. From June 1988 to December
1992, he was President and Chief Executive Officer of Imagraph
Corporation, a developer and manufacturer of graphics and imaging
hardware and software for application specific workstations. Mr.
Jaeggi served as Vice President, Chief Financial Officer and
consultant to Data General Corporation from June 1980 until June
1988.
Dr. Katz joined the Company in January 1989 and has held
several positions in Research and Development. From May 1981
until January 1989, Dr. Katz held a number of positions at the
Jet Propulsion Laboratory of the California Institute of
Technology, the most recent of which was as Technical Group
Supervisor.
Dr. Metlitsky joined the Company in March 1983 and has
served in various technical and managerial positions.
Dr. Sharma joined the Company in March 1995. Prior to
joining the Company, Dr. Sharma held various management positions
at AT&T. From April 1990 to March 1995 Dr. Sharma served as
Director of Quality of AT&T's Power Systems Division and from
January 1986 to April 1990 he was a Department Head at AT&T Bell
Labs.
-31-
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters
The Company's Common Stock is listed on the New York Stock
Exchange. The following table sets forth, for each quarter
period of the last two years, the high and low sales prices as
reported by the New York Stock Exchange.
<TABLE>
<CAPTION>
Year Ending: High Low
<S> <C> <C> <C>
December 31, 1997 First Quarter 24 9/16 19 1/4
Second Quarter 22 13/16 19
Third Quarter 29 13/16 20 3/16
Fourth Quarter 27 5/16 24
December 31, 1998 First Quarter 34 5/8 24 7/8
Second Quarter 39 7/16 33 3/64
Third Quarter 51 7/16 36 1/8
Fourth Quarter 63 15/16 39 3/16
</TABLE>
References to prices per share have been adjusted to reflect
a three-for-two stock split, effective April 1, 1997 and a three
for-two stock split effective April 3, 1998.
As of February 1, 1999 there were 1,196 holders of record of
the Company's Common Stock.
Historically, changes in the Company's results of operations
or projected results of operations have resulted in significant
changes in the market price of the Company's Common Stock. As a
result, the market price of the Company's Common Stock has been
highly volatile.
The Company's ability to pay cash dividends is limited by
certain of the Company's loan agreements, the most restrictive of
which would generally limit dividends payable in any year to an
amount not greater than 50 percent of the Company's net income.
Payment of future dividends is subject to approval by the
Company's Board of Directors. Recurrent declaration of dividends
will be dependent on the Company's future earnings, capital
requirements and financial condition.
On February 10, 1997, the Board of Directors of the Company
declared a semi-annual cash dividend of $.03 per share (on a pre-
split basis) and a three-for-two stock split, payable as a 50
percent dividend, each payable on April 1, 1997 to all
shareholders of record on March 10, 1997. On August 14, 1997,
the Board of Directors of the Company declared a semi-annual cash
dividend of $.02 per share, payable on October 6, 1997 to all
shareholders of record on September 12, 1997.
-32-
On February 9, 1998, the Board of Directors of the Company
declared a semi-annual cash dividend of $.02 per share (on a pre-
split basis) and a three-for-two stock split, payable as a 50
percent dividend, each payable on April 3, 1998 to all
shareholders of record on March 17, 1998. On August 17, 1998,
the Board of Directors of the Company declared a semi-annual cash
dividend of $.02 per share payable on October 5, 1998 to all
share holders of record on September 11, 1998.
On February 18, 1999, the Board of Directors of the Company
declared a semi-annual cash dividend of $.02 per share payable on
April 5, 1999 to all shareholders of record on March 15, 1999.
-33-
<TABLE>
Item 6. Selected Financial Data
(in thousands, except per share data)
<CAPTION>
Year Ended December 31,
Operating Results: 1998(1) 1997 1996(2) 1995(3) 1994
<S> <C> <C> <C> <C> <C>
Net Revenue $977,901 $774,345 $656,675 $555,163 $465,306
Net Earnings $92,964 $70,232 $50,256 $46,486 $34,984
Earnings Per Share:
Basic $1.58 $1.19 $0.86 $0.80 $0.63
Diluted $1.49 $1.15 $0.82 $0.76 $0.59
Financial Position:
Total Assets $838,399 $679,190 $614,238 $544,268 $474,213
Working Capital $295,317 $241,846 $221,678 $209,852 $191,823
Long-Term Debt, less
Current Maturities $64,596 $40,301 $50,541 $60,829 $59,884
Stockholders' Equity $530,928 $453,742 $399,676 $352,854 $316,167
Weighted Average Number of Common
Shares Outstanding:
Basic 58,796 59,038 58,197 58,036 55,768
Diluted 62,436 61,236 60,928 60,867 58,865
<FN>
(1) Includes a pre-tax charge for costs associated with a terminated acquisition of $3,597 or
$0.04 diluted earnings per share.
(2) Includes a pre-tax charge for costs associated with acquisition related matters of $12,341
or $0.13 diluted earnings per share.
(3) Includes a pre-tax charge for costs associated with a management change of $2,500 or $0.03
diluted earnings per share.
</FN>
</TABLE>
-34-
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER SECURITIES
LITIGATION REFORM ACT OF 1995; CERTAIN CAUTIONARY STATEMENTS
From time to time, the Company or its representatives have
made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in, but
not limited to, press releases, oral statements made with the
approval of an authorized executive officer or in various filings
made by the Company with the Securities and Exchange Commission,
including this one. The words or phrases "will likely result",
"are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). The
Company wishes to ensure that such statements are accompanied by
meaningful cautionary statements, so as to maximize to the
fullest extent possible the protections of the safe harbor
established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied
by the following discussion of certain important factors that
could cause actual results to differ materially from such
forward-looking statements. The Company undertakes no obligation
to publicly update any forward-looking statements.
The risks included here are not exhaustive. These are the
factors that the Company believes could cause actual results to
differ materially from expected and historical results.
Furthermore, other sections of this report also include
additional factors which could adversely impact the Company's
business and financial performance. Moreover, the Company
operates in a very competitive and rapidly changing environment.
New risk factors emerge from time to time and it is not possible
for management to predict all of such risk factors, nor to assess
the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward-looking statements. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual
results.
While the Company does communicate with securities analysts,
from time to time, it is against the Company's policy to disclose
to such analysts any material non-public information or other
confidential commercial information. Accordingly, shareholders
should not assume that the Company agrees with any statement or
report issued by any analyst irrespective of the content of such
statement or report. Furthermore, the Company has a policy
against issuing financial forecasts or projections or confirming
the accuracy of forecasts or projections issued by others.
Accordingly, to the extent that reports issued by securities
-35-
analysts contain any projections, forecasts or opinions, such
reports are not the responsibility of the Company.
Financial Performance. The Company's operating results may
fluctuate in the future as a result of a number of factors,
including:
- Changes in technology
- New competition
- Economic conditions as well as customer demand
- A shift in the mix of the Company's products and/or sales
channels
- The market acceptance of new or enhanced versions of the
Company's products
- The timing of introduction of other products and
technologies
- Any associated charges to earnings
- Any cancellation or postponement of orders
The volume and timing of orders received during a quarter
are difficult to forecast. In addition, from time to time,
customers have either canceled orders or rescheduled shipments
previously ordered from the Company. Additionally, the Company
has historically operated with a relatively small backlog. While
the Company does monitor backlog, it does not consider it to be a
reliable predictor of financial performance for periods other
than the then current quarter because customers generally order
products for delivery within 45 days. Accordingly, shipments
made during any particular quarter generally represent orders
received either during that quarter or shortly before the
beginning of that quarter. Shipments for orders received in a
fiscal quarter are generally from products manufactured in that
quarter. The Company maintains significant levels of raw
materials to facilitate meeting delivery requirements of its
customers. However, there can be no assurance that during any
given quarter, the Company has or can procure the appropriate mix
of raw materials in order to accommodate any given order. In
light of the levels of current and anticipated backlog, the
Company's financial performance in any quarter is dependent to a
significant degree upon obtaining orders in that quarter which
can be manufactured and delivered to its customers in that
quarter. Thus, financial performance for any given quarter
cannot be known or fully assessed until near the end of that
quarter. Furthermore, the Company's expense levels are based, in
part, on expectations of future revenues, and the Company has
been increasing and expects to continue to increase its total
operating expenses as it expands its operations. As a result of
the difficulty of forecasting revenue and the Company's planned
growth in spending, operating expenses could be
-36-
disproportionately high for any given quarter and the Company's
operating revenue for any given quarter and potentially several
quarters thereafter could be adversely affected.
In 1998, the Company's revenues grew at a rate of
approximately 26 percent due in part to revenues derived from the
contract relating to the United States Postal Service. The
contract will be substantially completed in the first quarter of
1999 and the Company currently does not have any other contracts
of comparable magnitude.
In addition, in 1999, customers concerned about correcting
their computer networks in order to avoid Year 2000 problems are
likely to devote a significant portion of their capital budget to
this problem. Accordingly, they may defer or delay purchases of
the Company's products until after this issue has been resolved.
Accordingly, the Company expects that the rate of revenue
growth in 1999 will be substantially less than the rate in 1998
due to:
- The substantial completion of the United States Postal
Service contract
- Year 2000 concerns
- Economic uncertainty in certain international markets
described below
Foreign Sales. Foreign sales have represented a substantial
portion of the Company's net revenues. In 1998, foreign sales
accounted for approximately 45 percent of net revenue. Such
sales are subject to the normal risks of foreign operations, such
as:
- Protective tariffs
- Other potential trade barriers, export/import controls
and transportation delays and interruptions
- Reduced protection for intellectual property rights in
some countries
- The impact of recessionary foreign economies
- Long receivable collection periods
The majority of the Company's equipment sales in Western
Europe and Asia are generally billed in foreign currencies and
are subject to currency exchange fluctuations. Since the
Company's products are principally manufactured in the United
States, sales and results of operations could be affected by
fluctuations in the U.S. dollar. Changes in the relative value
of the U.S. dollar in terms of foreign currencies in the past
have had an impact on the Company's sales and margins. In 1998,
results of operations were adversely affected by the continued
appreciation of the value of the U.S. dollar in relation to
-37-
certain key foreign currencies. The Company believes that its
1998 financial performance was satisfactory despite the negative
currency impact. There can be no assurance that the Company will
continue to adequately perform in the face of continued
fluctuation of the value of the U.S. dollar in relation to key
foreign currencies. It is impossible to predict whether the
United States or any other country will impose new quotas,
tariffs, taxes or other trade barriers upon the importation of
the Company's products or supplies or to gauge the effect that
such actions would have on the financial position or results of
operations.
Europe. In 1998, for the first time in several years, sales
growth in the United States outpaced sales growth in Europe.
This is in part due to the large United States Postal Service
contract, most of which was shipped in 1998. Additionally, the
United Kingdom, Germany and several other European nations have
begun to show signs of an economic slowdown. To the extent that
such economic difficulties may worsen or spread to other
countries in Europe the Company's business and financial
condition may be adversely affected in 1999.
The Company has identified the issues it believes will be
involved in the transition to the new European currency and is
developing and implementing solutions. The Company does not
expect the conversion to the new European currency to have a
material effect on the Company's business or results of
operations, however, there can be no guarantee that all the
problems attendant to such conversion have been anticipated or
that no material disruption of the Company's business will occur.
Asia. A number of Asian economies have been experiencing
significant ongoing economic difficulties for more than a year.
Revenues derived from such countries have been and are likely to
continue to be materially adversely affected by both the foreign
exchange issues as well as reduced demand due to the downturn in
these economies. Revenues derived from sales to Asia have
historically amounted to less than 5 percent of the Company's
annual revenues, therefore, the Company does not believe that
continual economic difficulties in Asia on their own will have a
material adverse impact on its results of operations. However,
in 1998, countries outside of Asia have begun experiencing
economic difficulties. The Company is not in a position at this
time to assess the magnitude of the effect, if any, that this
trend will have on its results of operations.
Latin America. The recent devaluation of Brazil's currency has
led to an economic downturn in Brazil that has begun to spread to
other Latin America countries. Revenues from Latin American
countries are likely to be materially affected by the currency
and economic difficulties facing this region. Although revenues
-38-
derived from Latin America constitute less than 5 percent of the
Company's annual revenues, sales to Brazil alone represent a
larger percent of the Company's annual revenues than do sales to
all of Asia (excluding Japan).
Although to date the economic situation in Latin America has
not had a material impact on the Company's business, the
combination of continued economic problems in Asia and Latin
America and the slowing of European business may adversely impact
the Company's results of operations in 1999.
Dependence upon Retail Industry. A significant portion of the
Company's revenues are derived from sales of products and
services to customers in the retail industry. The product demand
in this industry segment has shifted to a significant extent from
front-end point-of-sale scanner products to back room scanner
integrated hand-held computer systems. The Company is attempting
to expand its customer base to other industries including,
transportation and logistics and medical/healthcare and has had
some degree of success. However, for the current and foreseeable
future, the Company's financial performance remains materially
dependent upon revenues derived from the retail industry. In the
past, this industry has experienced financial vitality in demand
levels and there can be no assurance that it will not face a
downturn in the future. Recurring instability in the retail
industry could have an adverse affect on the Company's business
and financial performance.
Competition. The business in which the Company is engaged is
highly competitive and acutely influenced by advances in
technology, product improvements and new product introduction,
marketing and distribution capabilities, and price competition.
Failure to keep pace with product and technological advances
could adversely affect the Company's competitive position and
prospects for growth. In addition, in 1998, several of the
Company's key competitors had poor financial performance. There
is likely to be increased pricing pressure in 1999 as these
competitors attempt to reverse losses in their market share,
which may adversely affect the Company's revenues and/or gross
margins.
New Competitors. The products being manufactured and marketed by
the Company and its competitors are becoming increasingly more
complex. As the technological and functional capabilities of
future products increase these products will begin to compete
with those being offered by larger, traditional computer network
and communications industry participants who have substantially
greater financial, technical, marketing and manufacturing
resources than the Company. There can be no assurance that the
Company will be able to compete successfully against these new
-39-
competitors or that competitive pressures faced by the Company
would not adversely affect its business or operating results.
Price. Traditionally, the selling price of the Company's
products decreases over the life of the product. The Company
endeavors to reduce manufacturing costs of existing products and
to introduce new products, functions and other price/performance-
enhancing features in order to mitigate the effect of such
decreases. To the extent that such cost reductions, product
enhancements and new product introductions do not occur in a
timely manner or do not achieve market acceptance, the Company's
operating results could be materially adversely affected.
Research and Development. While the Company is currently
actively engaged in the research and development of new products
and technologies there can be no assurance that the Company's
research and development efforts will lead to the successful
introduction of new or improved products or that the Company will
not encounter delays or problems in connection therewith. New
products frequently take longer to develop, often have fewer
features than originally considered desirable and achieve higher
cost targets than initially estimated. Moreover, there can be no
assurance that there will not be delays in commencing volume
production of such products or that such products will ultimately
be commercially successful. In addition, products under
development are frequently announced before introduction and such
announcements may cause customers to delay purchases of existing
products in anticipation of new or improved versions of those
products. Such delays and/or deficiencies in development
manufacturing, delivery of or demand for new products or
realization of higher cost targets could have an adverse affect
on the Company's business, operating results or financial
condition.
New Product Introduction. Historically, the Company has been
dependent upon the introduction of new or improved product
offerings. This is particularly true for 1999, since the Company
has introduced a larger number of new products in the past
eighteen months than it has historically. The Company's
financial performance in 1999 will be heavily dependent upon the
successful introduction of such products. This success will be
dependent upon, among other factors:
- The ability of the Company to timely complete development
and launch of certain of such products within the year
- Customer acceptance of and demand for these products
- The ability of the Company to efficiently manufacture
such products and to meet delivery schedules.
Failure in any of these areas could have a material adverse
effect on the Company's financial results for 1999.
-40-
System Sales. Historically, sales to customers have been of
individual scanner and scanner integrated hand-held computer
products. Increasingly, the focus of the Company's sales efforts
has been on sales of complete data transaction systems. System
sales tend to be more costly and, therefore, require a longer
selling cycle, longer payment terms and more complex integration
and installation services.
Intellectual Property. The Company seeks to protect its
proprietary information and technology through contractual
confidentiality provisions and the application for United States
and foreign patents, trademarks and copyrights. There can be no
assurance that such applications will result in the issuance of
patents, trademarks or copyrights or that third parties will not
seek to challenge, invalidate or circumvent such applications or
resulting patents, trademarks or copyrights. Additionally,
competitors may independently develop equivalent or superior,
non-infringing technologies. The Company's licensing revenue
could be adversely affected to the extent that such technologies
avoid infringement of the Company's licensed patents.
Furthermore, there can be no assurance that third parties
will not assert claims of infringement of intellectual property
rights against the Company and that such claims will not lead to
litigation and/or require the Company to significantly modify or
even discontinue sales of certain of its products.
Manufacturing. In the event use of the Company's manufacturing
facilities in Bohemia, New York were interrupted by natural
disaster or otherwise, the Company's operations would be
materially adversely affected until alternative production and
service operations could be established. Certain of the
Company's products are manufactured by third parties inside and
outside the United States. The Company anticipates that an
increased percentage of new products will be manufactured by
third parties, including but not limited to Olympus, many of
which are located in foreign countries. The manufacture of these
items is subject to risks common to all foreign manufacturing
activities such as:
- Governmental regulation
- Currency fluctuations
- Transportation delays and interruptions
- Political and economic disruptions
- The risk of imposition of tariffs or other trade
barriers.
In the past, the Company has experienced manufacturing
problems that have caused delivery delays. There can be no
assurance that the Company will not experience production
-41-
difficulties and product delivery delays in the future as a
result of, among other matters, changing process technologies,
ramping production and installing new equipment at its
manufacturing facilities.
The Company has in the past, and may in the future,
encounter shortages of supplies and delays in deliveries of
necessary components or products. While past shortages and
delays have not had a material adverse effect on the Company,
shortages and delays could have such effect in the future.
Certain components, subassemblies and products are sourced from a
single supplier or a limited number of suppliers. The loss of
any such supplier may cause the Company to incur additional set-
up costs and delays in manufacturing and delivery of products.
Third Party Products. Historically, the Company has manufactured
almost all of it product offerings. Beginning in 1996, the
Company began offering for sale an increased number of third
party products. Although the Company hopes that sales of such
products will result in higher operating income, the sales of
third party products traditionally generate lower margins which
may not be fully offset by lower expenses. In the event that any
of these third party suppliers become unable or unwilling to
manufacture such products or fail to meet the Company's volume
and quality requirements and delivery schedules, the Company's
ability to market such products could be negatively affected. In
1999, the Company plans to market a large number of third party
products that were introduced in 1998, and will be introduced in
1999. In addition, many of these third party products are
manufactured outside of the United States and supply of such
products could be negatively affected by factors normally
attendant to the conduct of foreign trade, including imposition
of duties, taxes, fees or other trade restrictions fluctuation in
currency exchange rates and longer delivery times.
Government Regulations. The Company is also subject to the risks
associated with changes in United States and foreign regulatory
requirements. There can be no assurances that more stringent
regulatory requirements and/or safety and quality standards will
not be issued in the future with an adverse effect on the
business of the Company. In addition, sales of the Company's
products could be adversely affected if more stringent safety
standards are adopted by potential customers such as electronic
cash register manufacturers.
The Company's Spectrum One and Spectrum 24 spread spectrum
wireless communication products operate through the transmission
of radio signals. These products are subject to regulation by
the FCC in the United States and corresponding authorities in
other countries. Currently, operation of such products in
specified frequency bands does not require licensing by such
-42-
regulatory authorities. Regulatory changes restricting the use
of such bands or allocating available frequencies could have a
material adverse effect on the Company's business and its results
of operations.
Safety Risk. Recently, there has been some concern over the
potentially adverse effects of electromagnetic emissions
associated with cellular telephones. While the Company's RF
products do emit electromagnetic radiation, the Company believes
that due to the low power output of its products and the
logistics of their use, there is no health risk to end-users in
the normal operation of its products. There can be no assurance
that the Company's RF products will not become the subject of
such concerns in the future. Such safety issues and the
associated publicity could have a material adverse effect on the
Company's business and its results of operations.
Acquisitions. The Company has in the past and may in the future
acquire businesses or product lines as a way of expanding its
product offerings and acquiring new technology. Failure of the
Company to identify future acquisition opportunities and/or to
integrate effectively businesses that it may acquire could have a
material adverse effect on the Company's growth.
Reliance on Resellers, Distributors and OEMs. The Company sells
an increasing portion of its products through resellers,
distributors and original equipment manufacturers (OEMs). Such
reliance upon third party distribution sources subjects the
Company to risks of business failure by such individual
resellers, distributors and OEMs, and credit, inventory and
business concentration risks.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operation
The following table sets forth for the years indicated (i)
certain revenue and expense items expressed as a percentage of
net revenue and (ii) the percentage increase or decrease of such
items as compared to the corresponding prior year.
-43-
<TABLE>
<CAPTION>
Year to Year Changes
Year Ending December 31,
Percentage of Revenue 1998 1997
Year Ending December 31, vs. vs.
1998 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
Net Revenue 100.0% 100.0% 100.0% 26.3% 17.9%
Cost of Revenue 56.0 54.5 53.2 29.8 20.7
Amortization of Software
Development Costs 1.5 1.6 1.6 20.9 12.9
Gross Profit 42.5 44.0 45.2 22.2 14.8
Operating Expenses:
Engineering 7.3 7.4 7.1 24.8 21.8
Selling, General and
Administrative 19.9 21.4 22.8 17.6 10.7
Amortization of Excess of
Cost Over Fair Value of
Net Assets Acquired 0.5 0.6 0.6 (1.0) 32.1
Purchased Research and Development
and Merger Integration Costs - - 1.9 - -
Charges Related to Terminated
Acquisition 0.4 - - - -
28.0 29.4 32.3 20.6 7.1
Earnings from Operations 14.5 14.6 12.8 25.4 34.2
Gain on Sale of Business 0.1 - - - -
Net Interest Expense (0.4) (0.4) (0.5) 5.3 4.7
Earnings Before Income Taxes 14.2 14.2 12.3 26.4 35.4
Provision for Income Taxes 4.7 5.1 4.7 15.9 28.3
Net Earnings 9.5% 9.1% 7.7% 32.4% 39.7%
</TABLE>
-44-
For the year ended December 31, 1998
Net revenue of $977,901,000 for the year ended December 31,
1998, increased 26.3 percent over 1997. The increase in net
revenue is due in part to the Company's contract related to the
United States Postal Service as well as increased worldwide sales
of scanner products and scanner integrated application specific
mobile computer systems. During 1998, sales to Lockheed Martin
Corporation, in connection with the United States Postal Service
contract amounted to approximately 11 percent of total net
revenue. Due to the substantial completion of this contract and
the fact that the Company does not currently have any contracts of
similar magnitude, the Company expects the rate of revenue growth
to be substantially less in 1999. Foreign exchange fluctuations
unfavorably impacted the growth in net revenue by approximately
1.5 percentage points for the year ended December 31, 1998 and
unfavorably impacted the growth in net revenue by 2.1 percentage
points for the year ended December 31, 1997.
Geographically, North America revenue increased 36.0 percent
over the prior year due in part to the Company's contract related
to the United States Postal Service and the overall strong economy
in the United States. International revenue increased 13.0
percent over the prior year, notwithstanding the unfavorable
impact of foreign exchange rate fluctuations relative to the U.S.
dollar on net revenue previously described. North America and
International revenue continue to represent approximately three-
fifths and two-fifths of net revenue, for the year 1998 and the
prior year, respectively. The Company anticipates a continuation
of lower proportional growth in International markets compared to
North America markets in 1999, due in part to economic uncertainty
in certain International markets.
Cost of revenue (as a percentage of net revenue) of 56.0
percent for the year ended December 31, 1998, increased from 54.5
percent in 1997. This increase is principally due to the
unfavorable impact of foreign exchange rate fluctuations on net
revenue and due to the Company's roll out of its contract related
to the United States Postal Service which represented a lower
margin order relative to historical orders.
Amortization of software development costs totaling
$14,592,000 for the year ended December 31, 1998, increased from
$12,068,000 in the prior year due to new product releases.
Engineering costs increased to $71,090,000, for the year
ended December 31, 1998, from $56,961,000 for 1997. In absolute
dollars engineering expenses increased 24.8 percent for the year
-45-
ended December 31, 1998, from the prior year. As a percentage of
revenue such expenses decreased to 7.3 percent for the year ended
December 31, 1998, from 7.4 percent for the prior year. The
increase in absolute dollars is due to additional expenses
incurred in connection with the continuing research and
development of new products and the improvement of existing
products partially offset by increased capitalized costs incurred
for internally developed product software where economic and
technological feasibility has been established.
Selling, general and administrative expenses increased to
$194,775,000 for the year ended December 31, 1998, from
$165,647,000 in 1997. While in absolute dollars selling, general
and administrative expenses increased 17.6 percent for the year
ended December 31, 1998, from the prior year, as a percentage of
revenue such expenses decreased to 19.9 percent for the year ended
December 31, 1998, from 21.4 percent in 1997. The increase in
absolute dollars reflects expenses incurred to support a higher
revenue base and expenses incurred by four subsidiaries acquired
in 1997 and 1998.
Amortization of excess of cost over fair value of net assets
acquired of $4,812,000 for the year ended December 31, 1998,
decreased from $4,859,000 in 1997 due to foreign exchange
fluctuations coupled with the sale of stock and certain assets of
Symbol LIS Limited described below, partially offset by the
acquisition of four subsidiaries in 1998 and 1997 which resulted
in an increase in the gross value of excess of cost over fair
value of net assets acquired.
During 1998 the Company incurred $3,597,000 of various pre-
tax expenses, principally professional fees, associated with a
publicly announced attempt to acquire another company. In the
fourth quarter of 1998, the Company formally terminated its
efforts to complete this acquisition.
The gain from the sale of business resulted from the sale of
the stock and certain assets of Symbol LIS Limited, a wholly owned
subsidiary, engaged in the business of providing systems and
technology with respect to logistics and warehouse management
systems operations to a third party.
Net interest expense increased to $3,450,000, for the year
ended December 31, 1998, from $3,276,000 in 1997 primarily due to
increased borrowings under lines of credit.
-46-
The Company's effective tax rate for 1998 of 33.0 percent
decreased from 36.0 percent in the prior year period primarily due
to an increase in federal tax credits and the exempt earnings of
the foreign sales corporations.
At December 31, 1998, the Company had net deferred tax assets
of approximately $6,340,000, consisting of current deferred tax
assets of $34,428,000 and long-term deferred tax liabilities of
$28,088,000. The current deferred tax assets reflect a valuation
allowance of approximately $696,000 relating to New York State
investment tax credit carryforwards which may be recaptured. No
other valuation allowance is necessary due to the Company's
history of profitability and anticipated future profitability.
For the year ended December 31, 1997
Net revenue of $774,345,000 for the year ended December 31,
1997, increased 17.9 percent over 1996. The increase in net
revenue is primarily due to increased worldwide sales of scanner
products and scanner integrated application specific mobile
computer systems. Foreign exchange fluctuations unfavorably
impacted the growth in net revenue by approximately 2.1 percentage
points for the year ended December 31, 1997 and unfavorably
impacted the growth in net revenue by 0.8 percentage points for
the year ended December 31, 1996.
Geographically, North America revenue increased 15.1 percent
over the prior year and International revenue increased 22.1
percent over the prior year, notwithstanding the unfavorable
impact of foreign exchange rate fluctuations relative to the U.S.
dollar on net revenue previously described. North America and
International revenue continue to represent approximately three-
fifths and two-fifths of net revenue, for 1997 and 1996,
respectively.
Cost of revenue (as a percentage of net revenue) of 54.5
percent for the year ended December 31, 1997, increased from 53.2
percent in 1996. This increase is principally due to the
unfavorable impact of foreign exchange rate fluctuations on net
revenue previously described, coupled with a change in the mix of
the Company's products sold to a higher percentage of lower margin
products and an increase in revenue derived from the indirect
sales channel.
Amortization of software development costs totaling
$12,068,000 for the year ended December 31, 1997, increased from
$10,686,000 in the prior year due to new product releases.
-47-
Engineering costs increased to $56,961,000, for the year
ended December 31, 1997, from $46,752,000 for 1996. In absolute
dollars engineering expenses increased 21.8 percent for the year
ended December 31, 1997, from the prior year. As a percentage of
revenue such expenses increased to 7.4 percent for the year ended
December 31, 1997, from 7.1 percent for the prior year. These
increases are due to additional expenses incurred in connection
with the continuing research and development of new products and
the improvement of existing products partially offset by
increased capitalized costs incurred for internally developed
product software where economic and technological feasibility has
been established.
Selling, general and administrative expenses increased to
$165,647,000 for the year ended December 31, 1997, from
$149,602,000 in 1996. While in absolute dollars selling, general
and administrative expenses increased 10.7 percent for the year
ended December 31, 1997, from the prior year, as a percentage of
revenue such expenses were reduced to 21.4 percent for the year
ended December 31, 1997, from 22.8 percent in 1996 due to the
increase in revenue and ongoing cost-containment programs. The
increase in absolute dollars reflects expenses incurred to support
a higher revenue base and additional expenses incurred due to
newly acquired subsidiaries.
Amortization of excess of cost over fair value of net assets
acquired of $4,859,000 for year ended December 31, 1997, increased
from $3,679,000 in 1996 due to the acquisitions of the new
subsidiaries referred to above.
Net interest expense increased to $3,276,000, for the year
ended December 31, 1997, from $3,129,000 in 1996 primarily due to
increased interest expense resulting from an increase in interim
short term borrowings under existing credit lines and decreased
capitalized interest partially offset by a reduction in interest
expense due to annual mandatory repayments of indebtedness and an
increase in interest income.
The Company's effective tax rate for 1997 of 36.0 percent
decreased from 38.0 percent in the prior year period primarily due
to a decrease in the incremental foreign income tax expense.
At December 31, 1997, the Company had net deferred tax assets
of approximately $13,159,000, consisting of current deferred tax
assets of $24,908,000 and long-term deferred tax liabilities of
$11,749,000. The current deferred tax assets reflect a valuation
allowance of approximately $589,000 relating to New York State
investment tax credit carryforwards which may be recaptured. No
other valuation allowance is necessary due to the Company's
history of profitability and anticipated future profitability.
-48-
<TABLE>
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity
including the following:
<CAPTION>
Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Working Capital
(in thousands) $295,317 $241,846 $221,678
Current Ratio (Current
Assets to Current
Liabilities) 2.6:1 2.5:1 2.7:1
Long-Term Debt
to Capital 10.8% 8.1% 11.2%
(Long-term debt to long-
term debt plus equity)
</TABLE>
Current assets increased by $79,652,000 from December 31,
1997, principally due to an increase in accounts receivable as a
result of the increase in net revenue and inventories due to
increased operating levels partially offset by the decrease in
cash and temporary investments.
Current liabilities increased $26,181,000 from December 31,
1997, primarily due to increases in accounts payable and accrued
expenses.
The aforementioned activity resulted in a working capital
increase of $53,471,000 for the fiscal year ended December 31,
1998. The Company's current ratio at December 31, 1998, of 2.6:1
increased from 2.5:1 at December 31, 1997.
The Company generated $43,499,000 cash flow from operations,
but experienced an overall decrease in cash of $43,686,000 for
the year ended December 31, 1998. The positive cash flow
provided by operations, borrowings under lines of credit, and
cash flow generated from and tax benefits associated with the
exercise of stock options were offset by cash used in investing
activities and various financing activities, principally the
purchase of 1,145,000 shares of the Company's common stock,
dividends paid, acquisition of subsidiaries and other acquisition
related payments and expenditures for property, plant and
equipment. The purchases of common stock represent 865,000
shares purchased in the open market and 280,000 shares purchased
from officers in connection with the exercise of stock options.
For the year ended December 31, 1997 the Company generated
$108,172,000 of cash flow from operations and experienced an
overall increase in cash of $25,680,000. The positive cash flow
provided by operations was offset, in part, by cash used in
-49-
investing activities and various financing activities,
principally the purchase of 1,832,000 shares (stock split
effected) of the Company's common stock, acquisition of
subsidiaries and other acquisition related payments and
expenditures for property, plant and equipment. The purchase of
common stock represents both shares purchased in the open market
and shares purchased from officers related to the exercise of
stock options.
Property, plant and equipment expenditures for the year
ended December 31, 1998, totaled $89,334,000 compared to
$42,679,000 for the year ended December 31, 1997. During 1997
the Company entered into a construction commitment to expand its
existing Worldwide Headquarters facility, located in Holtsville,
New York, by approximately 125,000 square feet. The project cost,
including furniture, fixtures and equipment, is estimated at
approximately $20,000,000 and is anticipated to be completed in
March 1999. In addition, the Company continues to make capital
investments in major systems and networks conversions. The
Company does not have any other material commitments for capital
expenditures.
At December 31, 1998, the Company had $64,596,000 in long-
term debt outstanding, excluding current maturities. In March
1993 the Company issued $25,000,000 of its 7.76 percent Series A
Notes due February 15, 2003, and $25,000,000 of its 7.76 percent
Series B Senior Notes due February 15, 2003, to three insurance
companies for working capital and general corporate purposes.
The Series A Senior Notes are being repaid in equal annual
installments of $2,778,000 which began in February 1995. The
Series B Senior Notes are being repaid in equal annual
installments of $3,571,000 which began February 1997. The Senior
Notes represent $25,397,000 of the total long-term debt balance
outstanding at December 31, 1998. In December 1998, the Company
entered into a $200 million revolving credit facility with a
syndicate of U.S. and International banks (the "Credit
Agreement"). The terms of the Credit Agreement extend to 2003.
Use of the borrowings is unrestricted and the borrowings are
unsecured. At December 31, 1998, the Company had $35,000,000
borrowings outstanding under the Credit Agreement which have been
classified as long-term obligations. The remaining $4,199,000 of
long-term debt outstanding is primarily related to the Industrial
Development Bond financing completed in October 1989, a low-
interest loan from an agency of the State of New York and debt
assumed in connection with the purchase of the Company's
Worldwide Headquarters facility in 1995.
The Company's long-term debt to capital ratio increased to
10.8 percent at December 31, 1998, from 8.1 percent at December
31, 1997, primarily due to increased borrowings under the Credit
Agreement.
-50-
The Company believes that it has adequate liquidity to meet
its current and anticipated needs from the results of its
operations, working capital and existing credit facilities.
In the opinion of management, inflation has not had a
material effect on the operations of the Company.
In 1998 the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"), Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131") and Statement of Financial Accounting
Standards No. 132, "Employers' Disclosure about Pensions and
Other Post-Retirement Benefits - an amendment to FASB Statement
No. 87, 88 and 106" ("SFAS 132"). Each of these statements
required additional disclosure in the Company's consolidated
financial statements but did not have a material effect on the
Company's consolidated financial position or results of
operations.
Recent pronouncements of the Financial Accounting Standards
Board ("FASB") which are not required to be adopted at this date
include, Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 is effective for fiscal quarters of all
fiscal years beginning after June 15, 1999. Based upon current
data the adoption of this pronouncement is not expected to have a
material impact on the Company's consolidated financial
statements.
Year 2000
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Computer systems may recognize a date using
"00" as the year 1900 rather than the year 2000. This could
result in product and/or system failures or other computer errors
causing disruption of the Company's operations.
The Company has identified the following areas of risk:
a) the failure or disruption of systems used by the Company to
run its business operations and facilities, b) the failure or
disruption of systems used by the Company's suppliers and
vendors, c) warranty or other claims by customers due to failure
or malfunctioning of the Company's products.
The Company has established a steering committee including
senior executives to address Year 2000 issues which will report
periodically to the Board of Directors. The Company's plan to
-51-
address Year 2000 issues has resulted in the formation of three
main teams: (a) internal systems team, (b) product readiness
team, and (c) external vendors/suppliers team.
The Company is currently implementing new computer systems
that will substantially insure that the Company's operating
systems are not subject to Year 2000 transition problems. To the
extent that current systems that will not be replaced have been
determined to be non-compliant, the Company is working with the
suppliers of such systems to obtain upgrades and/or enhancements
to insure Year 2000 compliance. To the extent such system
implementation, replacement or modification is delayed or if
significant new non-compliance issues are identified or go
undetected, the Company's results of operations could be
adversely impacted.
The Company has initiated formal communications with all of
its significant hardware and software suppliers to determine the
extent to which the Company's interface systems and sources of
supply are vulnerable to those third parties' failure to
remediate their own Year 2000 issues.
Based on a recent assessment, the Company believes that it
will not be required to modify or replace significant portions of
its product offerings so that such products will function
properly with respect to dates in the Year 2000. However,
several Year 2000 related issues, mostly stemming from third
party operation systems, have been identified. The Company has
undertaken measures to inform customers of Year 2000 related
issues via its Year 2000 web site. However, it is not possible
to anticipate all end user situations and/or Year 2000 related
issues, particularly those involving third party products. The
Company may experience an increase in warranty and other claims
related to Year 2000 issues. Additionally, there may be
substantial Year 2000 litigation caused by failure of systems
which contain Company products or third party products sold by
the Company. The impact of such warranty and/or other claims may
have a material adverse impact on the Company's financial
condition.
In 1998, the Company expended less than $200,000 on external
resources in connection with its Year 2000 related activities.
Capitalized spending for upgrading and replacing non-compliant
computer systems was approximately $900,000 for the year. The
Company anticipates the total cost of its Year 2000 activities to
be approximately $3,000,000 through 1999 which includes
approximately $2,000,000 of capitalized fixed assets.
-52-
Based upon the Company's current estimates, total
incremental out-of-pocket costs of its Year 2000 program are
expected to be immaterial. These costs are expected to be
incurred primarily in fiscal 1999 and include third party
consultants, remediation of existing computer software and
hardware, and upgrading product offerings. Such costs do not
include internal management time and the deferral of other
projects, the effects of which are not expected to be material to
the Company's results of operations or financial condition. The
Company's total Year 2000 project costs include the estimated
costs and time associated with the impact of third party Year
2000 issues based on presently available information. However,
there can be no guarantee that other companies upon which the
Company relies will be able to timely address their Year 2000
compliance issues, the effects of which may have an adverse
impact on the Company's results of operations.
At this stage of the process, the Company believes that it
is difficult to specifically identify the cause of the most
reasonable worst case Year 2000 scenario. As is true for most
manufacturers and distributors of products such as those sold by
the Company, a reasonable worst case scenario would be the
failure of the Company's products to operate properly through the
millennium rollover causing customers' systems and/or operations
that are dependent upon such products to fail or be disrupted.
In the event of such failures, customers may commence legal
action against the Company or otherwise seek compensation for
their losses associated with such failures. An additional worst
case Year 2000 scenario would be the failure of key vendors
and/or suppliers to have corrected their own Year 2000 issues
which could cause disruption of the Company's operations and have
a material adverse effect on the Company's financial condition.
The impact of such disruption cannot be estimated at this time.
The Company's contingency plans to address worst case Year 2000
scenarios include developing or obtaining upgrades for its
products that have been tested and found to be non-compliant and
in the event the Company believes that any of its key suppliers
are unlikely to be able to resolve their Year 2000 issues, it
will seek a second source of supply.
Euro Conversion
As part of the European Economic and Monetary Union (EMU), a
single currency (the "Euro") will replace the national currencies
of most of the European countries in which the Company conducts
business. The conversion rates between the Euro and the
participating nations' currencies have been fixed irrevocably as
of January 1, 1999, with the participating national currencies
-53-
being removed from circulation between January 1, and June 30,
2002 and replaced by Euro notes and coinage. During the
"transition period" from January 1, 1999 through December 31,
2001, public and private entities as well as individuals may pay
for goods and services using either checks, drafts, or wire
transfers denominated in Euro or the participating country's
national currency.
Under the regulations governing the transition to a single
currency, there is a "no compulsion, no prohibition" rule which
states that no one is obliged to utilize the Euro until the notes
and coinage have been introduced on January 1, 2002. In keeping
with this rule, the Company is Euro "compliant" (able to receive
Euro denominated payments and able to invoice in Euro as
requested by vendors and suppliers, respectively) as of January
1, 1999 in the affected countries. Full conversion of all
affected country operations to Euro is expected to be completed
by the time national currencies are removed from circulation.
Phased conversion to the Euro is currently underway and the
effects on revenues, costs and various business strategies are
being assessed. The cost of software and business process
conversion is not expected to be material.
Market Risk Sensitivity
The Company is exposed to various market risks, including
changes in foreign currency exchange rates and interest rates.
Market risk is the potential loss arising from adverse changes in
market rates and prices, such as foreign currency exchange and
interest rates. The Company has a formal policy that prohibits
the use of currency derivatives or other financial instruments
for trading or speculative purposes. The policy permits the use
of financial instruments to manage and reduce the impact of
changes in foreign currency exchange rates that may arise in the
normal course of the Company's business. Currently, the Company
does not use interest rate derivatives. The counterparties in
derivative transactions are major financial institutions with
ratings of A or better, as determined by one of the major credit
rating services.
The Company enters into forward foreign exchange contracts
principally to hedge the currency fluctuations in transactions
denominated in foreign currencies, thereby limiting the Company's
risk that would otherwise result from changes in exchange rates.
During 1998, the principal transactions hedged were short-term
intercompany purchases. The periods of the forward foreign
exchange contracts correspond to the periods of the hedged
-54-
transactions. Gain and losses on forward foreign exchange
contracts and the offsetting losses and gains on hedged
transactions are reflected in the Company's statement of
earnings.
A large percentage of the Company's sales are transacted in
local currencies. As a result, the Company's international
operating results are subject to foreign exchange rate
fluctuations. A 5 percent strengthening or weakening of the U.S.
dollar against every applicable currency could have had a $7.1
million impact on the net earnings of the Company. The Company
does not use foreign exchange contracts to hedge expected
earnings.
The Company, which manufactures nearly all of its products
in the United States, generally invoices its international
subsidiaries in their local currency for finished and semi-
finished goods. As a result, the Company's annual U.S. dollar
cash flow is subject to foreign exchange rate fluctuations. A 5
percent strengthening or weakening of the U.S. dollar against
every applicable currency could have had a $6.3 million impact on
the value of the realized cash remittances from its subsidiaries.
The Company routinely uses foreign exchange contracts to hedge
cash flows that are either firm commitments or those which may be
forecasted to occur.
All of the Company debt is U.S. dollar denominated. At
year-end, about 47 percent of this indebtedness to third parties
was floating rate-based. Although the Company has exposure to
rising and falling rates, a 1 percent rise in rates on the year-
end bank borrowings would have had a $234,000 adverse impact on
net earnings. The Company does not use interest rate derivatives
to protect its exposure to interest rate market movements.
-55-
Item 8. Financial Statements and Supplementary Data
The following documents are filed on the pages listed
below, as part of Part II, Item 8 of this report.
Document Page
1. Financial Statements and Accountants' Report:
Independent Auditors' Report F-1
Consolidated Financial Statements:
Balance Sheets as of December 31, 1998 and 1997 F-2
Statements of Earnings for the Years Ended
December 31, 1998, 1997 and 1996 F-3
Statements of Stockholders' Equity for the F-4
Years Ended December 31, 1998, 1997 and 1996
Statements of Cash Flows for the Years Ended F-5
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements F-6
through
F-30
2. Financial Statement Schedules:
Schedule II S-1
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable
-56-
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors:
The section entitled "Nominees for Election"
contained in the Proxy Statement is hereby
incorporated by reference.
(b) Identification of Executive Officers:
See PART I of this Form 10-K.
Item 11. Executive Compensation
The section entitled "Management Remuneration and
Transactions" contained in the Proxy Statement is hereby
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The sections entitled "Principal Shareholders" and
"Security Ownership of Management" contained in the Proxy
Statement are hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
The section entitled "Management Remuneration and
Transactions" contained in the Proxy Statement is hereby
incorporated by reference.
-57-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a) 1. FINANCIAL STATEMENTS:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31,
1998 and 1997
Consolidated Statements of Earnings for the Years
Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998, 1997 and
1996
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Schedules:
II. Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of
conditions under which they are required or because the required
information is given in the consolidated financial statements or
notes thereto.
Individual financial statements of the Company are omitted
as the Company is primarily an operating company and the
subsidiaries included in the consolidated financial statements
filed are substantially wholly-owned and are not indebted to any
person other than the parent in amounts which exceed 5 percent of
total consolidated assets at the date of the latest balance sheet
filed, excepting indebtedness incurred in the ordinary course of
business which is not overdue and which matures within one year
from the date of its creation, whether evidenced by securities or
not, and indebtedness which is collateralized by the parent by
guarantee, pledge, assignment or otherwise.
-58-
3. Exhibits
Exhibit
3.1 Certificate of Incorporation of Symbol
Technologies, Inc. and amendments
thereto.(Incorporated by reference to Exhibit
3.1of the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 (the"1996
Form 10-K).)
3.3 By-laws of the Company as currently in
effect.
4.1 Form of Certificate for Shares of the Common
Stock of the Company.
10.1 Form of 2008 Stock Purchase Warrant issued
to certain directors. (Incorporated by
reference to Exhibit 10.1 to the Company's
Annual Report on Form 10K for the year ended
December 31,1997 (the "1997 Form 10-K")).
10.2 Form of 2000 Stock Purchase Warrant issued
to certain directors. (Incorporated by
reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1991 (the "1991 Form 10-K").)
10.3 1994 Directors Stock Option Plan.
(Incorporated by reference to Exhibit 4.1 to
Registration Statement No. 33-78678 on Form
S-8.)
10.4 1997 Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 4.2 to
Registration Statement No. 333-26593 on Form
S-8.)
10.5 1997 Employee Stock Option Plan.
(Incorporated by reference to Exhibit 16.5
to the 1998 Form 10-K.)
10.6 1991 Employee Stock Option Plan
(Incorporated by reference to Exhibit 10.1 of
the 1991 Form 10-K.)
10.7 1990 Non-Executive Stock Option Plan, as
amended. (Incorporated by reference to
Exhibit 10.1 of the Company's Annual Report
on Form 10-K for the year ended December 31,
1995 (the "1995 Form 10-K").)
-59-
10.8 Employment Agreement by and between the
Company and Frederic P. Heiman, dated as of
October 1, 1998.
10.9 Employment Agreement by and between the
Company and Raymond Martino, dated as of June
12, 1994. (Incorporated by reference to
Exhibit 10.3 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1994.)
10.10 Employment Agreement by and between the
Company and Jerome Swartz, dated as of June
30, 1995. (Incorporated by reference to
Exhibit 10.4 to the 1995 Form 10-K.)
10.11 Employment Agreement by and between the
Company and Tomo Razmilovic, dated as of
October 16, 1995. (Incorporated by reference
to Exhibit 10.5 of the 1995 Form 10-K.)
10.12 Employment Agreement by and between the
Company and Leonard H. Goldner, dated as of
November 1, 1995. (Incorporated by reference
to Exhibit 10.7 of the 1995 Form 10-K.)
10.13 Executive Retirement Plan, as amended.
(Incorporated by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1989 (the
"1989 Form 10-K").)
10.14 Symbol Technologies, Inc. Stock Ownership
and Option Retention Program.(Incorporated by
reference to Exhibit 10.13 of the 1995 Form
10-K.)
10.15 Summary of Symbol Technologies, Inc.
Executive Bonus Plan. (Incorporated by
reference to Exhibit 10.14 of the 1995 Form
10-K.)
10.16 Lease Agreement and Amended and Restated
Lease Agreement dated as of October 1, 1989
between Suffolk County Industrial Development
Agency and Symbol Technologies, Inc.
(Incorporated by reference to Exhibit 10.15
to the 1989 Form 10-K.)
-60-
10.17 Sublease dated June 28, 1995 between Grumman
Data Systems Corporation and Symbol
Technologies, Inc. (Incorporated by
reference to Exhibit 10.16 to the 1995 Form
10-K.)
10.18 Form of Note Agreements dated as of February
15, 1993 relating to the Company's 7.76
percent Series A and Series B Senior Notes
due February 15, 2003 (Incorporated by
reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1992.)
10.19 Credit Agreement dated as of December 21,
1998 among Symbol Technologies, Inc., the
lending institutions identified in the credit
agreement and Bank of America National Trust
and Savings Association as agent and as
letter of credit issuing bank.
22. Subsidiaries.
23. Consent of Deloitte & Touche LLP
(b) Reports on Form 8-K
Not Applicable
-61-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SYMBOL TECHNOLOGIES, INC.
(Registrant)
By: /s/Jerome Swartz
Jerome Swartz
Chairman of the Board
Dated: February 23, 1999
-62-
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Jerome Swartz Chairman of the February 23, 1999
Jerome Swartz Board and Director
(Principal Executive
Officer)
/s/Tomo Razmilovic Director February 23, 1999
Tomo Razmilovic
/s/Raymond R. Martino Director February 23, 1999
Raymond R. Martino
/s/Harvey P. Mallement Director February 23, 1999
Harvey P. Mallement
/s/Frederic P. Heiman Director February 23, 1999
Frederic P. Heiman
/s/Saul P. Steinberg Director February 23, 1999
Saul P. Steinberg
/s/Lowell C. Freiberg Director February 23, 1999
Lowell C. Freiberg
/s/George Bugliarello Director February 23, 1999
George Bugliarello
/s/Charles B. Wang Director February 23, 1999
Charles B. Wang
/s/Kenneth V. Jaeggi Senior Vice President February 23, 1999
Kenneth V. Jaeggi Finance (Chief
Financial Officer)
-63-
/s/Brian T. Burke Senior Vice President February 23, 1999
Brian T. Burke and Controller (Chief
Accounting Officer)
</TABLE>
-64-
SYMBOL TECHNOLOGIES, INC.
AND SUBSIDIARIES
------
CONSOLIDATED FINANCIAL STATEMENTS
COMPRISING ITEM 8 AND SCHEDULE II LISTED IN THE
INDEX AT ITEM 14(a)2 OF ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
I N D E X
PAGE
Independent auditors' report F-1
Consolidated financial statements:
Balance sheets F-2
Statements of earnings F-3
Statements of stockholders' equity F-4
Statements of cash flows F-5
Notes to consolidated financial
statements (1-15) F-6 through F-30
Additional financial information pursuant to the
requirements of Form 10-K:
Schedule:
II - Valuation and qualifying accounts S-1
Schedules not listed above have been omitted because they are
either not applicable or the required information has been
provided elsewhere in the consolidated financial statements or
notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Symbol Technologies, Inc.
Holtsville, New York
We have audited the accompanying consolidated balance sheets
of Symbol Technologies, Inc. and subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of
earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the
index at Item 14(a)2. These financial statements and
financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Symbol Technologies, Inc. and subsidiaries as of
December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 18, 1999
F-1
<TABLE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
<CAPTION>
December 31, December 31,
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS:
Cash, including temporary investments of
$3,018 and $31,909 respectively $ 16,284 $ 59,970
Accounts receivable, less allowance for doubtful
accounts of $10,031 and $10,995, respectively 205,416 162,789
Inventories, net 196,986 128,155
Deferred income taxes 34,428 24,908
Other current assets 26,490 24,130
TOTAL CURRENT ASSETS 479,604 399,952
PROPERTY, PLANT AND EQUIPMENT, net 174,867 118,745
INTANGIBLE ASSETS, net 115,954 115,275
SOFTWARE DEVELOPMENT COSTS, net 43,571 26,649
OTHER ASSETS 24,403 18,569
$838,399 $679,190
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $149,938 $121,714
Current portion of long-term debt 10,594 10,384
Income taxes payable 9,858 13,580
Deferred revenue 13,897 12,428
TOTAL CURRENT LIABILITIES 184,287 158,106
LONG-TERM DEBT, less current maturities 64,596 40,301
DEFERRED REVENUES 10,683 2,410
OTHER LIABILITIES 47,905 19,957
COMMON EQUITY PUT OPTIONS - 4,674
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00; authorized
10,000 shares, none issued or outstanding - -
Common stock, par value $0.01; authorized
100,000 shares; issued 66,439 shares and
43,519 shares, respectively 664 435
Additional paid-in capital 315,884 289,434
Cumulative translation adjustments (5,797) (7,792)
Retained earnings 365,950 274,976
676,701 557,053
Less:
Treasury stock at cost, 7,683 shares and
4,359 shares, respectively (145,773) (103,311)
530,928 453,742
$838,399 $679,190
</TABLE>
See notes to consolidated financial statements
F-2
<TABLE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(All amounts in thousands, except per share data)
<CAPTION>
Year ended December 31,
1998 1997 1996
<S> <C> <C> <C>
NET REVENUE $977,901 $774,345 $656,675
COST OF REVENUE 547,328 421,796 349,428
AMORTIZATION OF SOFTWARE
DEVELOPMENT COSTS 14,592 12,068 10,686
GROSS PROFIT 415,981 340,481 296,561
OPERATING EXPENSES:
Engineering 71,090 56,961 46,752
Selling, general and
administrative 194,775 165,647 149,602
Amortization of excess of
cost over fair value of
net assets acquired 4,812 4,859 3,679
Purchased research and
development and merger
integration costs - - 12,341
Charges related to
terminated acquisition 3,597 - -
274,274 227,467 212,374
EARNINGS FROM OPERATIONS 141,707 113,014 84,187
OTHER (EXPENSE)/INCOME:
Gain on sale of business 494 - -
Interest income 2,373 2,225 1,756
Interest expense (5,823) (5,501) (4,885)
(2,956) (3,276) (3,129)
EARNINGS BEFORE INCOME TAXES 138,751 109,738 81,058
PROVISION FOR INCOME TAXES 45,787 39,506 30,802
NET EARNINGS $ 92,964 $ 70,232 $ 50,256
EARNINGS PER SHARE:
Basic $1.58 $1.19 $0.86
Diluted $1.49 $1.15 $0.82
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 58,796 59,038 58,197
Diluted 62,436 61,236 60,928
</TABLE>
See notes to consolidated financial statements
F-3
<TABLE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(All amounts in thousands, except stock par value)
<CAPTION>
Accumulated Other
Common Stock Comprehensive
$0.01 Par Value Income
Additional Cumulative Total
Shares Paid-in Translation Retained Treasury Stockholders'
Issued Amount Capital Adjustments Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 27,229 $272 $245,728 ($8,299) $156,075 ($40,922) $352,854
Net earnings - - - - 50,256 - 50,256
Translation adjustments - - - 2,649 - - 2,649
Total comprehensive income 52,905
Exercise of stock options 919 10 22,701 - - - 22,711
Exercise of warrants 47 - 458 - - - 458
Proceeds from sale of common
equity put options - - 946 - - - 946
Reclassification of common
equity put options obligation - - (11,041) - - - (11,041)
Purchase of treasury shares - - - - - (19,157) (19,157)
BALANCE, DECEMBER 31, 1996 28,195 282 258,792 (5,650) 206,331 (60,079) 399,676
Net earnings - - - - 70,232 - 70,232
Translation adjustments - - - (2,142) - - (2,142)
Total comprehensive income 68,090
Exercise of stock options 1,218 12 24,062 - - - 24,074
Exercise of warrants 9 - 69 - - - 69
Proceeds from sale of common
equity put options - - 285 - - - 285
Reclassification of common
equity put options obligation - - 6,367 - - - 6,367
Purchase of treasury shares - - - - - (43,232) (43,232)
Stock split 14,097 141 (141) - - - -
Dividends paid - - - - (1,587) - (1,587)
BALANCE, DECEMBER 31, 1997 43,519 435 289,434 (7,792) 274,976 (103,311) 453,742
Net earnings - - - - 92,964 - 92,964
Translation adjustments - - - 1,995 - - 1,995
Total comprehensive income 94,959
Exercise of stock options 1,118 11 21,533 - - - 21,544
Exercise of warrants 43 - 461 - - - 461
Reclassification of common
equity put options obligation - - 4,674 - - - 4,674
Purchase of treasury shares - - - - - (42,462) (42,462)
Stock split 21,759 218 (218) - - - -
Dividends paid - - - - (1,990) - (1,990)
BALANCE, DECEMBER 31, 1998 66,439 $664 $315,884 ($5,797) $365,950 ($145,773) $530,928
</TABLE>
See notes to consolidated financial statements
F-4
<TABLE>
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(All amounts in thousands)
Year ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 92,964 $ 70,232 $ 50,256
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization of
property, plant and equipment 32,797 25,738 23,247
Other amortization 22,359 19,539 16,276
Provision for losses on accounts
receivable 2,921 2,253 2,270
Gain from sale of business (494) - -
Charge for purchased research and
development - - 10,741
Deferred income taxes 5,417 6,243 (2,835)
Changes in assets and liabilities net of
effect of acquisitions and divestitures:
Accounts receivable (43,006) (12,455) (24,481)
Sale of lease receivables - - 17,308
Inventories (64,948) 9,594 (33,880)
Other current assets (2,446) (11,583) 605
Software development costs (31,514) (14,743) (13,606)
Intangible assets (6,951) (3,387) (7,054)
Other assets (5,990) 2,053 (14,150)
Accounts payable and accrued expenses 22,021 15,113 10,981
Income taxes payable 7,217 4,380 (3,319)
Other liabilities and deferred revenue 13,152 (4,805) 1,496
Net cash provided by
operating activities 43,499 108,172 33,855
Cash flows from investing activities:
Note receivable - 2,500 500
Expenditures for property, plant
and equipment (89,334) (42,679) (34,680)
Proceeds from sale of business, net 11,911 - -
Acquisition of subsidiaries, net of
cash acquired (13,686) (8,026) (26,962)
Net cash used in investing activities (91,109) (48,205) (61,142)
Cash flows from financing activities:
Net proceeds from issuance and repayments
of long-term debt 24,505 (10,240) (6,814)
Exercise of stock options and warrants 22,005 24,143 23,169
Proceeds from common equity put options - 285 946
Dividends paid (1,990) (1,587) -
Purchase of treasury shares (42,462) (43,232) (19,157)
Net cash provided by/(used in)
financing activities 2,058 (30,631) (1,856)
Effects of exchange rate changes on cash 1,866 (3,656) (217)
Net (decrease)/increase in cash and
temporary investments (43,686) 25,680 (29,360)
Cash and temporary investments,
beginning of year 59,970 34,290 63,650
Cash and temporary investments, end
of year $ 16,284 $ 59,970 $ 34,290
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,496 $ 4,613 $ 4,987
Income taxes $ 21,281 $ 15,423 $ 19,685
</TABLE>
See notes to consolidated financial statements
F-5
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation
The consolidated financial statements include the accounts of
Symbol Technologies, Inc. and its subsidiaries (the "Company" or
"Symbol"), substantially all of which are wholly-owned.
Significant intercompany transactions and balances have been
eliminated in consolidation.
b. Temporary Investments
Temporary investments include highly liquid investments with
original maturities of three months or less and consist primarily
of money market funds and time deposits at December 31, 1998 and
1997. Temporary investments are stated at cost, which approximates
market value. These investments are not subject to significant
market risk.
c. Inventories
Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market.
d. Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation
and amortization is provided on a straight-line basis over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements 15 to 40 years
Machinery and equipment 3 to 7 years
Furniture, fixtures and office equipment 5 to 10 years
Computer hardware and software 3 to 7 years
Leasehold improvements (limited to terms
of the leases) 2 to 10 years
</TABLE>
The Company capitalized interest costs of $350,000, zero, and
$258,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
F-6
e. Intangible Assets
The excess of cost over fair value of net assets acquired is being
amortized on a straight-line basis over periods ranging from 7 to
40 years.
Patents and trademarks, including costs incurred in connection
with the protection of patents, are amortized over their estimated
useful lives, not exceeding 20 years, using the straight-line
method.
f. Software Development Costs
The Company capitalizes costs incurred for internally developed
product software where economic and technological feasibility has
been established and for qualifying purchased product software.
Capitalized software costs are amortized on a straight-line basis
over the estimated useful product lives (normally three years).
g. Long-Lived Assets
The Company reviews its long-lived assets, including property,
plant and equipment, identifiable intangibles and software
development costs for impairment whenever events or changes in
circumstances indicate that the carrying amounts of the assets may
not be fully recoverable. To determine recoverability of its
long-lived assets, the Company evaluates the probability that
future undiscounted net cash flows, without interest charges, will
be less than the carrying amount of the assets. Impairment is
measured at fair value and had no effect on the Company's
consolidated financial statements for the years ended December 31,
1998 and 1997.
h. Research and Development Expenses
The Company expenses all research and development costs as
incurred. The Company incurred research and development expenses
of approximately $31,030,000, $29,991,000 and $20,164,000, for the
years ended December 31, 1998, 1997 and 1996, respectively, which
are classified in engineering expenses.
i. Revenue Recognition
Revenue from sales of the Company's products is recognized upon
shipment. In conjunction with these sales, field service
F-7
maintenance agreements are sold for certain products. When such
revenue is recorded prior to providing repair and maintenance
service, it is deferred and recognized over the term of the
related agreements.
j. Income Taxes
Deferred income tax assets and liabilities were recognized for the
expected future tax consequences of events that have been included
in the Company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the differences between the financial accounting and tax bases
of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Investment, research and development and other tax credits are
accounted for by the flow-through method.
The cumulative amount of undistributed earnings of foreign
subsidiaries at December 31, 1998, approximates $36,000,000. The
Company does not provide deferred taxes on undistributed earnings
of foreign subsidiaries since the Company anticipates no
significant incremental U.S. income taxes on the repatriation of
these earnings as tax rates in foreign jurisdictions generally
approximate or exceed the U.S. Federal rate.
k. Earnings Per Share
Basic earnings per share are based on the weighted average number
of shares of common stock outstanding during the period. Diluted
earnings per share are based on the weighted average number of
shares of common stock and common stock equivalents (options and
warrants) outstanding during the period, computed in accordance
with the treasury stock method.
On February 9, 1998 the Board of Directors approved a three for
two split of the Company's common stock to be effected as a 50
percent stock dividend which was paid on April 3, 1998 to
shareholders of record on March 17, 1998. In these financial
statements, all earnings per share amounts and the weighted
average number of common shares outstanding have been
retroactively restated to reflect the stock split. In addition,
the number of common shares issued have been adjusted to reflect
the stock split and an amount equal to the par value of the
additional shares issued has been transferred from additional
F-8
paid in capital to common stock. On February 10, 1997 the Board
of Directors approved a three for two split of the Company's
common stock to be effected as a 50 percent stock dividend which
was paid on April 1, 1997 to shareholders of record on March 10,
1997.
l. Foreign Currency Translation and Transactions
Assets and liabilities of foreign subsidiaries are translated at
year-end exchange rates. Results of operations are translated
using the average exchange rates prevailing throughout the year.
Gains and losses from foreign currency transactions are included
in net earnings for the year and are not material. Exchange rate
changes arising from translation are included in the cumulative
translation adjustments component of stockholders' equity.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The
Company enters into foreign currency forward exchange contracts to
hedge a portion of its intercompany accounts receivable
transactions. The effect of this practice is to minimize the
impact of foreign exchange rate movements on the Company's
operating results. The Company's hedging activities do not subject
the Company to exchange rate risk because gains and losses on
these contracts offset losses and gains on the related
intercompany receivables being hedged.
As of December 31, 1998, the Company had $39,246,000 forward
exchange contracts outstanding. The Company had no foreign
exchange contracts outstanding at December 31, 1997. The forward
exchange contracts generally have maturities that do not exceed 12
months and require the Company to exchange foreign currencies for
U.S. dollars at maturity, at rates agreed to at inception of the
contracts. The fair value of these contracts was equal to their
carrying value. These contracts are primarily denominated in
European currencies, Canadian dollars, Japanese yen and Australian
dollars and have been marked to spot as of December 31, 1998 with
the resultant gains and losses included in net earnings.
m. Pervasiveness of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-9
n. Comprehensive Income
In 1998 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
This statement establishes rules for the reporting of
comprehensive income and its components. Comprehensive income
consists of net income and foreign currency translation
adjustments and is presented in the Consolidated Statement of
Shareholders' Equity. The adoption of SFAS 130 had no impact on
shareholders' equity. Prior year financial statements have been
reclassified to conform with these requirements.
o. Reclassifications
Certain reclassifications have been made to prior consolidated
financial statements to conform with current presentations.
2. ACQUISITIONS AND DIVESTITURES
During 1998 the Company incurred various pre-tax costs associated
with a publicly announced attempt to acquire another company. In
the fourth quarter of 1998 the Company formally terminated its
efforts to complete this acquisition. These pre-tax costs of
$3,597,000 primarily include legal, accounting, investment banking
and public relations fees which have been separately classified in
the Company's statement of earnings for the year ended December
31, 1998.
During the past three years the Company has established wholly
owned subsidiaries through the acquisition of various of its
international distributors. These acquisitions have been
accounted for as purchases and, accordingly, the related
acquisition costs have been allocated to net assets acquired
based upon fair values. The excess of cost over net assets
acquired related to these acquisitions is being amortized over
periods not exceeding twenty years. The following table
summarizes the terms of these acquisitions:
<TABLE>
<CAPTION>
Initial Excess of
Acquisition Subsidiary Purchase Cost over net
Date Location Price assets acquired
<S> <C> <C> <C>
October 1998 Finland $ 800,000 $ 550,000
July 1998 Sweden $5,300,000 $3,100,000
July 1997 Holland $3,000,000 $2,100,000
July 1997 Japan $4,700,000 $ 220,000
March 1996 Denmark $3,000,000 $2,700,000
January 1996 South Africa $4,080,000 $3,700,000
</TABLE>
F-10
Additional acquisition payments are contingent upon the
attainment of certain annual net revenue levels as defined in the
respective agreements during periods not exceeding five years
from the date of acquisition. The Company made additional
acquisition payments of $2,646,000 and $1,960,000, respectively
during the years ended December 31, 1998 and 1997 related to
these acquisitions.
Result of operations of these subsidiaries have been included in
consolidated operations as of their respective effective
acquisition dates. Pro forma results of operations, assuming
these acquisitions had been completed at the beginning of 1998,
1997 and 1996, would not differ materially from the reported
results.
In August, 1996, the Company acquired LIS Holdings Ltd., ("LIS")
headquartered in the United Kingdom. LIS was one of Europe's
largest providers of technology-based logistics management systems
providing technology solutions based on its own software products
in concert with bar code, wireless networking and ruggedized
terminals. The original terms of the acquisition included an
initial payment of $20,844,000 and subsequent additional payments
over a three year period which were renegotiated and settled
during 1998 in connection with the sale of Symbol LIS Limited,
described below. This acquisition had been accounted for as a
purchase. The purchase price(including acquisition costs)has been
allocated to net assets acquired based upon fair values. After
allocating the purchase price to net tangible assets, purchased
software, which had reached technological feasibility, was valued
using a cash flow model, under which future cash flows were
discounted utilizing an assessment of the life expectancy of the
purchased software. This purchased software of $1,000,000 had
been capitalized and is being amortized over three years.
Purchased research and development, which had not reached
technological feasibility and has no alternative future use was
valued using the same methodology. This purchased research and
development amounted to $10,741,000 and has been charged to
operations at the acquisition date. In addition, the Company has
charged 1996 operations with accrued merger integration costs of
$1,600,000, representing costs to be incurred associated primarily
with combining the Company's existing operations in the United
Kingdom with newly acquired facilities of LIS. The initial excess
of cost over net assets acquired, relating to the acquisition, is
being amortized over seven years.
F-11
Effective May 31, 1998, the Company sold all of the stock and
certain assets of Symbol LIS Limited, a wholly owned subsidiary,
engaged in the business of providing systems and technology with
respect to logistics and warehouse management systems operations
to a third party. Proceeds from the sale of $15,000,000 were
offset by the value of net assets sold, various disposition
expenses and the write-off of the proportional share of excess of
cost over net assets acquired, relating to the original
acquisition of LIS Holdings Ltd., in 1996. This resulted in a
gain from the sale of business of $494,000 which is classified as
non-operating income in the consolidated statement of earnings.
Additional payments to be made to the Company are contingent upon
the attainment of certain annual net revenue levels during the
next six years, subject to a minimum earnout amount as defined in
the stock purchase agreement.
<TABLE>
3. INVENTORIES
<CAPTION>
December 31, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Raw materials $ 77,435 $ 57,872
Work-in-process 30,306 14,039
Finished goods 89,245 56,244
$196,986 $128,155
</TABLE>
<TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
December 31, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Land $ 8,788 $ 8,516
Buildings and improvements 33,392 33,857
Machinery and equipment 83,078 65,256
Furniture, fixtures and office
equipment 34,749 29,910
Computer hardware and software 74,604 45,899
Leasehold improvements 11,071 8,030
Construction in progress 13,617 -
259,299 191,468
Less: Accumulated depreciation and
amortization 84,432 72,723
$174,867 $118,745
<FN>
In the fourth quarter of 1997 the Company began the expansion of
its existing Worldwide Headquarters facility, located in
F-12
Holtsville, New York, by approximately 125,000 square feet. The
project cost, including furniture, fixtures and equipment, is
estimated at approximately $20,000,000 and is anticipated to be
completed in March 1999 In addition, the Company continues to
make capital investments in major systems and networks
conversions. The Company does not have any other material
commitments for capital expenditures.
</FN>
</TABLE>
<TABLE>
5. INTANGIBLE ASSETS
<CAPTION>
December 31, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Excess of cost over fair value
of net assets acquired $126,375 $123,668
Patents, trademarks and purchased
technologies 32,811 27,681
Executive retirement plan
unrecognized prior service
costs 722 835
159,908 152,184
Less: Accumulated amortization 43,954 36,909
$115,954 $115,275
</TABLE>
<TABLE>
6. SOFTWARE DEVELOPMENT COSTS
<CAPTION>
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Beginning of year $26,649 $23,974 $21,054
Amounts capitalized 31,514 14,743 13,606
58,163 38,717 34,660
Less: Amortization 14,592 12,068 10,686
End of year $43,571 $26,649 $23,974
</TABLE>
<TABLE>
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<CAPTION>
December 31, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Accounts payable $ 65,025 $ 60,185
Accrued payroll, bonuses, fringe
benefits and payroll taxes 34,598 27,810
Other accrued expenses 50,315 33,719
$149,938 $121,714
</TABLE>
F-13
<TABLE>
8. LONG-TERM DEBT
<CAPTION>
December 31, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Revolving Credit Facility (a) $35,000 -
Senior Notes (b) 31,746 38,095
Industrial Development Bonds (c) 2,369 4,738
Assumed Revenue Bond Financing (d) 2,824 4,578
State Loan (e) 3,000 3,000
Other 251 274
75,190 50,685
Less: Current maturities 10,594 10,384
$64,596 $40,301
<FN>
(a) As of December 31, 1998, the Company had a $200,000,000
unsecured revolving credit facility with a syndicate of U.S.
and International banks. As of December 31, 1998 the Company
had outstanding borrowings of $35,000,000 under this
facility. These borrowings bear interest at either LIBOR
plus 75 basis points or the base rate of the syndication
agent bank, which approximated 7.5 percent at December 31,
1998. Since the proceeds under the credit agreement are
committed until 2003, the Company has classified these
borrowings as long-term obligations. The credit agreement
contains certain covenants regarding the maintenance of a
minimum level of tangible net worth, as well as certain
financial ratios, as defined, and certain restrictions
including limitations on indebtedness. As of December 31,
1997, the Company had loan agreements with three banks
pursuant to which the banks had agreed to provide lines of
credit totalling $75,000,000. There were no borrowings
outstanding under these lines at December 31, 1997.
(b) In March 1993 the Company issued $25,000,000 of its 7.76
percent Series A Senior Notes due February 15, 2003, and
$25,000,000 of its 7.76 percent Series B Senior Notes due
February 15, 2003, to three insurance companies. The Series A
Senior Notes are being repaid in equal annual installments of
$2,778,000 which began in February 1995. The Series B Senior
Notes are being repaid in equal annual installments of
$3,571,000 which began February 1997. Interest is payable
quarterly for these Notes. The financing agreements contain
certain covenants regarding the maintenance of a minimum
level of tangible net worth, as well as certain financial
ratios, as defined, and certain restrictions including
limitations on indebtedness.
F-14
(c) Borrowings under the Industrial Development Bond financing
accrue interest at the rate of 8.95 percent, payable
quarterly, and the loan is being repaid in equal annual
installments of $2,368,000 which began in October 1992. The
Company's owned facilities located in Bohemia, New York, are
pledged as collateral for this debt. The financing
agreements contain certain covenants regarding the
maintenance of a minimum level of tangible net worth and
working capital, as well as certain financial ratios, as
defined, and limitations on investments, dividends and
indebtedness.
(d) In June 1995 the Company assumed a $7,282,000 New York
Industrial Development bond which is collateralized by its
facilities located in Holtsville, New York. The bond bears
interest at 12.3 percent and principal and interest are being
repaid in ten equal semi-annual installments of $997,000
which began in October 1995. Based upon borrowing rates of
6.7 percent available to the Company at the time the
transaction occurred, a bond premium of $1,274,000 has been
recorded in long-term debt and is being amortized over the
life of the bond.
(e) In 1994, the Company received a $3,000,000 loan from an
agency of New York State. The loan bears interest at 1.0
percent, payable monthly, and the principal is to be repaid
in one installment in 2001. The interest rate is subject to
a covenant requiring a minimum level of full-time permanent
employees.
Based on the borrowing rates currently available to the Company
for bank loans with similar terms, the fair values of Senior
Notes and Industrial Development Bonds approximates their
carrying values. The fair value of the State Loan as of December
31, 1998, is approximately $2,577,000.
</FN>
</TABLE>
<TABLE>
Long-term debt maturities are:
<CAPTION>
Year ending December 31, (in thousands)
<C> <C>
1999 $10,594
2000 7,343
2001 9,377
2002 6,377
2003 41,377
Thereafter 122
$75,190
</TABLE>
F-15
<TABLE>
9. INCOME TAXES
<CAPTION>
The provision for income taxes consists of:
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Current:
Federal $28,757 $23,371 $19,460
State and local 5,434 4,300 4,036
Foreign 6,179 5,592 10,141
40,370 33,263 33,637
Deferred:
Federal 5,483 5,531 16
State and local (396) 880 (697)
Foreign 330 (168) (2,154)
5,417 6,243 (2,835)
Total Provision
for Income Taxes $45,787 $39,506 $30,802
</TABLE>
<TABLE>
A reconciliation between the statutory U.S. Federal income tax
rate and the Company's effective tax rate is:
<CAPTION>
Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Statutory U.S. Federal
rate 35.0% 35.0% 35.0%
State taxes, net of
Federal tax effect 2.4 3.1 2.7
Tax credits (3.0) (0.6) (2.6)
Amortization of excess of
cost over fair value of
net assets acquired 0.7 1.0 1.2
Exempt income of foreign
sales corporation (3.5) (3.0) (3.2)
Income of foreign
subsidiaries taxed at
(lower)higher tax rates 0.5 (0.1) 2.0
Other, net 0.9 0.6 2.9
33.0% 36.0% 38.0%
<FN>
At December 31, 1998, 1997 and 1996, other liabilities include
deferred income taxes of $28,088,000, $11,749,000 and $8,144,000
respectively. The deferred tax assets and liabilities at
December 31, 1998, 1997 and 1996, respectively, are comprised of:
</FN>
</TABLE>
F-16
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
Deferred Tax Deferred Tax Deferred Tax
Assets/ Assets/ Assets/
(Liabilities) (Liabilities) (Liabilities)
(in thousands)
<S> <C> <C> <C>
Receivables ($6,192) ($5,470) $3,176
Inventory 13,777 10,988 6,751
Net investment in
sales-type leases (4,240) (3,148) (3,360)
Accrued compensation
and associate benefits 5,692 4,944 4,051
Other accrued liabilities 14,196 6,403 4,509
Accrued restructuring
and severance costs 397 1,006 10
Deferred revenue - current 2,139 2,855 2,778
Deferred revenue - long term 4,209 950 1,689
Deferred patent and product
development costs (23,669) (15,708) (15,465)
Purchased technology &
other intangibles 3,938 5,175 4,814
Property, plant and
equipment (13,184) (5,255) (440)
Investments 158 158 557
Cumulative translation
adjustments 3,750 5,104 3,732
Tax credit carryforwards 2,883 2,185 2,438
Other, net 3,182 3,561 3,342
7,036 13,748 18,582
Less: Valuation allowance 696 589 601
Net Deferred Tax Asset $ 6,340 $13,159 $17,981
<FN>
The valuation allowance increased by $107,000 during 1998 and
decreased $12,000 and $211,000, 1997 and 1996 respectively. The
valuation allowance relates to state investment tax credit
carryforwards which are likely to be recaptured.
</FN>
</TABLE>
F-17
<TABLE>
10. COMMITMENTS AND CONTINGENCIES
a. Lease Agreements
Future minimum annual rental payments required under non-
cancelable operating leases are:
<CAPTION>
Year ending December 31, (in thousands)
<C> <C>
1999 $11,652
2000 9,793
2001 8,229
2002 5,859
2003 4,685
Thereafter 31,365
$71,583
<FN>
Rent expense under substantially all operating leases was
$9,938,000, $7,446,000 and $6,728,000, for the years ended
December 31, 1998, 1997 and 1996, respectively.
</FN>
</TABLE>
b. Employment Contracts
The Company has executed employment contracts with certain
executives that range from one to ten years, for which the Company
has a minimum commitment aggregating approximately $5,163,000 at
December 31, 1998.
c. Sale of Lease Receivables
The Company offers lease financing of its products to its
customers. During 1996, the Company sold certain lease receivables
relating to sales-type leases for approximately $17,308,000, which
represents the present value of uncollected receivable balances
sold as of the date of sale. Due to the fact that the sale of
these lease receivables was with recourse, the Company retains the
same credit risk as if the receivables had not been sold. An
allowance for doubtful accounts is maintained at a level which the
Company believes is sufficient to cover potential losses on
receivables sold. The balance of uncollected receivables as of
December 31, 1998 sold approximated $2,620,000. The sale was
recorded as a reduction of other current assets and other assets.
F-18
d. Legal Matters
The Company is currently involved in matters of litigation
arising from the normal course of business including matters
described below. Management is of the opinion that such
litigation will not have a material adverse effect on the
Company's consolidated financial position or results of
operations.
On April 1, 1996, PSC Inc. ("PSC") commenced suit against the
Company in Federal District Court for the Western District of New
York, purporting to assert claims against the Company for alleged
violations of the federal antitrust laws, unfair competition and
also seeking a declaratory judgment of non-infringement and
invalidity as to certain of the Company's patents. PSC has
served a Third Amended Complaint, which purports to assert
essentially the same antitrust and unfair competition claims
against the Company, and also seeks a declaratory judgment of
alleged non-infringement and validity of nine of the Company's
patents, and a declaratory judgment that PSC has not breached its
two agreements with the Company and that those agreements have
been terminated. The Company has amended its suit against PSC to
assert infringement of four Symbol patents, breach of contract
and fraud.
The Company had also sued Data General Corporation ("Data
General"), a manufacturer of portable integrated scanning
terminals which incorporate scan engines from PSC, for
infringement of the same four patents and five additional
patents. The nine patents asserted against Data General are the
same nine Symbol patents as to which PSC is seeking declaratory
relief.
On October 9, 1996, the Court granted the Company's motion to
sever and stay PSC's antitrust, unfair competition and related
claims. On the same day, the Court denied Data General's motion
to stay the Company's claims against it. The Court also set a one
week trial (a "Markman" hearing) for July 14,1997, to construe
the claims in all nine patents asserted by Symbol against Data
General and PSC. On May 8, 1997, the Court postponed the
"Markman" hearing and in the interest of judicial economy, the
Court also stayed discovery on the patent claims until a non-
judicial arbitration which PSC had initiated on March 10, 1997
was completed. The arbitration involved an interpretation of
certain provisions of 1985 and 1995 license agreements between
the Company and Spectra-Physics Scanning Systems, Inc.("Spectra-
Physics") (which had been acquired by PSC) concerning whether
purchasers of PSC's scan engines were free to incorporate such
scan engines into their integrated scanning terminals without any
royalty payment to the Company beyond that paid by PSC on the
scan engine itself. The arbitration was heard on July 22-24,
F-19
1997. On December 29, 1997, the Arbitrator rendered his decision
in favor of the Company and against PSC. The Arbitrator ruled
that the sale of PSC's scan engines passed no immunity to PSC's
customers under Symbol patents covering the integration of the
scan engine into integrated scanning terminals. The Arbitrator's
decision has been confirmed by the Court.
By letter dated January 22, 1998, the Company requested that the
Court lift the stay it entered in the litigation, to permit the
Company to seek a ruling that the Company's agreements with PSC,
which PSC argues have been terminated and under which it has
ceased paying royalties for more than two years, remain in full
force and effect and require royalty payments to be made to the
Company pursuant to those agreements. PSC initially objected to
the Company's request and asked the Court that it continue to
hold the contract issues in abeyance and instead lift the stay
with respect to the pending patent issues and that discovery in
these claims be reopened. On April 3, 1998 the Court, with the
consent of the parties, lifted the stay previously in effect with
respect to the contractual issues in the litigation and ordered
that a trial on these issues be held commencing on October 13,
1998. If the Company succeeds in the contract action, it believes
it will be owed, on an ongoing basis, additional royalties of
approximately $5,000,000 per annum. If the Company does not
prevail in the action, it will continue to receive royalty
payments from PSC at the same rate and on the same products as it
currently is receiving them.
On September 12, 1998, PSC filed a motion for partial summary
judgement alleging that the Company was guilty of patent "misuse"
since PSC is obligated under its 1991 Agreement with the Company
to pay royalties to the Company on sales of scan engines to
certain PSC customers who also pay royalties to the Company when
they incorporate these scan engines into their integrated
scanning terminals. On September 17, 1998, Judge Telesca, in
response to the filing by PSC of the motion, cancelled the
hearing which was scheduled to begin on October 13, 1998, and
will be rescheduled by the Court at a later time. In this
motion, PSC claimed that this practice should bar the Company
from collecting past royalties which the Company alleges are owed
by PSC under the 1991 Agreement. However, since July 1996, PSC
has not paid the Company any royalties under the 1991 Agreement
and has instead been paying royalties under agreements it
obtained in connection with the acquisition of Spectra-Physics
The motion was argued on October 7, 1998 and on October 22, 1998
the Court issued a decision and order granting PSC's motion. The
ruling only prevents the Company from collecting past royalties
due and owing under the 1991 Agreement, none of which have been
paid to the Company or taken into income by the Company. Moreover,
the ruling does not affect PSC's future royalty obligations to the
F-20
Company except with respect to royalties owed to the Company
under the 1991 Agreement on scan engines sold to other licenses
of the Company since the Company intends to prospectively cure
the "misuse" without prejudice, subject to the outcome of its
appeal. The Company estimates that royalties owed on PSC scan
engines represent less than 10 percent of the additional
royalties PSC would owe the Company if it were paying royalties
under the 1991 Agreement. Furthermore, the decision has no other
impact on any royalties paid or to be paid to the Company by any
other licensee. Discovery by the Company and PSC has essentially
been completed.
On November 5, 1998, the Company made a Motion for
Reconsideration of the Court's misuse decision, based on what the
Company believes to be legal and factual matters that the Court
overlooked in making its decision. On the same day, the Company
made a separate motion to have the misuse decision entered as a
final judgment, or in the alternative, to have the decision
certified to the United States Court of Appeals for the Federal
Circuit, which could enable the Company to obtain immediate
appellate review of the misuse decision. Both motions are now
pending before the Court.
11. STOCKHOLDERS' EQUITY
a. Common Equity Put Options
During April 1997 the Company issued common equity put options on
225,000 shares of its common stock which are exercisable for a
period of one year from the date of issuance and give independent
parties the right to sell such shares to the Company at a strike
price of $20.775 per share.
The balance of the common equity put option account as of December
31, 1997, represents the amount the Company would be obligated to
pay if all unexpired put options were exercised relating to
unexpired transactions outstanding as of the respective balance
sheet dates. On April 9, 1998, the obligation associated with the
common equity put options expired. As a result the balance in the
common equity put option account of $4,674,000 was reclassified to
additional paid in capital in April 1998.
b. Stock Option Plans
There are a total of 12,069,131 shares of Common Stock reserved
for issuance under the Company's stock option plans at December
31, 1998. Stock options granted to date generally vest over a
four to five year period, expire after ten years and have exercise
prices equal to the market value of the Company's common stock at
the date of grant.
F-21
<TABLE>
A summary of changes in the stock option plans is:
<CAPTION>
Shares Under Option
Number of Weighted Avg.
Option Price Shares (in Exercise
per Share thousands) Price
<S> <C> <C> <C> <C>
Shares under option
at January 1, 1996 9,024 $ 8.58
Granted $16.67 to $21.11 1,897 $18.52
Exercised $ 2.88 to $13.28 (2,068) $ 5.85
Cancelled $ 4.00 to $20.88 (293) $11.54
Shares under option
at December 31, 1996 $2.44 to $21.11 8,560 $11.33
Granted $21.46 to $27.58 3,368 $22.86
Exercised $ 2.44 to $17.50 (1,827) $ 6.26
Cancelled $ 4.00 to $23.33 (378) $15.77
Shares under option
at December 31, 1997 $ 4.00 to $27.58 9,723 $16.11
Granted $24.87 to $53.75 2,287 $30.95
Exercised $ 4.88 to $21.11 (1,118) $ 9.75
Cancelled $ 5.33 to $49.50 (248) $22.18
Shares under option
at December 31, 1998 $ 4.00 to $53.75 10,644 $19.82
Shares exercisable
at December 31, 1998 $ 4.00 to $24.87 4,348 $14.94
<CAPTION>
The following table summarizes information concerning currently
outstanding and exercisable options:
Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Life Exercise Exercisable Exercise
Prices (In thousands) (years) Price (In thousands) Price
<S> <C> <C> <C> <C> <C> <C>
$ 4.00 - $ 6.00 869 3.5 $ 5.37 869 $ 5.37
$ 6.01 - $ 9.00 482 4.0 $ 8.02 428 $ 8 00
$ 9.01 - $13.50 1,242 5.8 $11.85 800 $11.75
$13.51 - $20.25 2,515 7.2 $17.23 1,051 $16.91
$20.26 - $30.37 4,989 8.4 $23.99 1,200 $24.74
$30.38 - $45.56 83 9.3 $37.19 - -
$45.57 - $53.75 464 9.7 $46.76 - -
10,644 4,348
</TABLE>
F-22
At December 31, 1998, an aggregate of 1,425,208 shares remain
available for grant under the stock option plans. The tax
benefits arising from stock option exercises during the years
ended December 31, 1998, 1997 and 1996, in the amount of
$13,144,000, $13,057,000, and $10,761,000, respectively, were
recorded in stockholders' equity as additional paid-in capital.
The Company applies APB opinion No. 25 and related interpretations
in accounting for its plans. Accordingly, no compensation cost
has been recognized for the fixed portion of its plans.
If compensation cost for the Company's fixed stock options
(including outside directors' options and stock purchase warrants
discussed below) had been determined consistent with Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation to Employees" ("SFAS No. 123"), the Company's net
income and earnings per share would have been the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Net Income:
As Reported $92,964 $70,232 $50,256
Pro Forma $85,529 $65,557 $48,401
Basic Earnings Per Share:
As Reported $1.58 $1.19 $0.86
Pro Forma $1.45 $1.11 $0.83
Diluted Earnings Per Share:
As Reported $1.49 $1.15 $0.82
Pro Forma $1.37 $1.07 $0.79
</TABLE>
The weighted average fair value of options granted during 1998,
1997 and 1996 was $10.28, $7.69 and $6.23 per option,
respectively. In determining the fair value of options and
outside directors' options and stock purchase warrants granted in
1998, 1997 and 1996 for pro forma purposes the Company used the
Black-Scholes option pricing model and assumed the following: a
risk free interest rate of 5.0 percent, 5.5 percent and 5.5
percent; an expected option life of 4.0 years, 4.5 years and 4.5
years; an expected volatility of 33 percent, 29 percent and 29
percent; and dividend yield of 0.14 percent per year. As required
by SFAS No. 123, the impact of outstanding non-vested stock
options granted prior to 1995 has been excluded from the pro-forma
calculation; accordingly, the pro-forma adjustments reflected
above are not indicative of future period pro-forma adjustments
when the calculation will apply to all applicable stock options.
F-23
c. Outside Directors' Options and Stock Purchase Warrants
All options and stock purchase warrants issued to outside
directors vest over a two to four year period, expire after ten
years and have exercise prices equal to the market value of the
Company's common stock at the date of grant. The following table
indicates the number of common shares issuable upon exercise and
the exercise price per share of all outstanding outside Directors'
options and stock purchase warrants as of December 31, 1998:
<TABLE>
<CAPTION>
Number of
Shares Exercise Shares
Exercisable Issuable Price Vested at
to Upon Exercise per Share December 31,1998
<S> <C> <C> <C>
2000 6,000 $ 3.61 6,000
2004 45,000 $11.22 to $12.33 45,000
2005 22,000 $14.94 22,000
2006 28,000 $20.89 28,000
2007 19,000 $22.00 9,000
2008 88,000 $24.88 to $33.19 -
208,000 110,000
<FN>
The weighted average exercise price for the number of shares
issuable upon exercise were $20.08, $12.95 and $11.15,
respectively, for the years ended December 31, 1998, 1997 and
1996. The weighted average exercise price of shares vested were
$15.19, $10.78 and $8.49, respectively, for the years ended
December 31, 1998, 1997 and 1996. The weighted average fair value
of outside directors options and stock purchase warrants granted
during 1998, 1997 and 1996 was $8.76, $7.39 and $7.02 per share,
respectively.
</FN>
</TABLE>
d. Employee Stock Purchase Plan
During 1997, the Company adopted an employee stock purchase plan
which was approved by the Company's stockholders at the annual
meeting of shareholders. Participants may purchase shares of
stock for an amount equal to 85% of the lesser of the closing
price of a share of stock on the first trading day of the period
or the last trading day of the period, as defined by the plan.
The Company's only expense for this plan is for its
administration. The stock sold to plan participants shall be
authorized but unissued common stock, treasury shares or shares
purchased in the open market. The aggregate number of shares
which may be issued pursuant to the plan is 562,500. As of
December 31, 1998, 122,810 shares were issued to participants and
subsequent to December 31, 1998, 58,215 shares were issued to
participants by the Company all of which were purchased in the
open market by the Company. The weighted average fair value of
shares sold in 1998 was $9.39.
F-24
e. Treasury Stock
Treasury stock is comprised of 2,656,000 shares of Common Stock
purchased for a total cost of $49,809,000 from certain officers in
connection with the exercise of stock options and 5,027,000 shares
purchased in open market transactions for a total cost of
$95,965,000 pursuant to the various stock repurchase programs
authorized by the Board of Directors.
12. ASSOCIATE BENEFIT PLANS
a. Profit Sharing Retirement Plan
The Company maintains a 401(k) profit sharing retirement plan for all
U.S. associates meeting certain service requirements. The Company
contributes monthly, 50.0 percent of associates' contributions up to
a maximum of 6.0 percent of annual compensation. Plan expense for
the years ended December 31, 1998, 1997 and 1996 was $5,339,000,
$4,591,000 and $3,469,000, respectively.
b. Health Benefits
The Company pays substantially all costs incurred in connection
with providing associate health benefits through programs
administered by various insurance companies. Such costs amounted
to $12,935,000, $10,275,000, and $9,701,000, for the years ended
December 31, 1998, 1997 and 1996, respectively.
c. Executive Retirement Plan
In February, 1998, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132 "Employers'
Disclosures about Pensions and Other Post-Retirement Benefits - an
amendment of FASB Statement No. 87, 88 and 106" ("SFAS 132").
SFAS 132 revises employers' disclosures about pension and other
post-retirement benefit plans. It does not change the measurement
of recognition of those plans. The Company has adopted the
provisions of SFAS 132 in their disclosures below.
The Company maintains an Executive Retirement Plan (the "Plan") in
which certain highly compensated associates are eligible to
participate. Participants are selected by a committee of the
Board of Directors. Benefits vest after five years of service and
are based on a percentage of average compensation for the three
years immediately preceding termination of the participant's full-
time employment. As of December 31, 1998, 12 officers were
participants in the Plan. The Company's obligations under the Plan
are not funded apart from the Company's general assets.
F-25
<TABLE>
Change in benefit obligation:
<CAPTION>
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Benefit obligation at beginning
of year $8,234 $6,852 $5,548
Service cost 806 659 650
Interest cost 711 665 588
Amortization of unrecognized prior
service costs 112 112 112
Amendments - - -
Actuarial loss 8 - 8
Benefits paid (54) (54) (54)
Benefit obligation at end of year $9,817 $8,234 $6,852
Funded status (13,199) (9,596) (8,342)
Unrecognized actuarial loss 2,660 527 542
Unrecognized prior service cost 722 835 948
Net amount recognized ($9,817) ($8,234) ($6,852)
Amounts recognized in the balance
sheet consist of:
Accrued benefit liability (9,817) (8,234) (6,852)
Net amount recognized ($9,817) ($8,234) ($6,852)
<FN>
The Plan had $9,810,000, and $7,458,000 of vested benefit
obligations at December 31, 1998, and 1997, respectively, which
are included in other liabilities. The projected benefit
obligation at December 31, 1998, 1997 and 1996 was determined
using an assumed weighted average discount rate of 6.5 percent,
7.0 percent and 7.5 percent, respectively, and an assumed increase
in the long-term rate of compensation of 5.0 percent.
The Company has also purchased an annuity contract for former
executives who have been terminated. The annuity contract was
valued at approximately $2,500,000 at December 31, 1998 and is
included in other assets.
</FN>
</TABLE>
F-26
13. RECONCILIATION OF BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per common share are computed based on the
weighted-average number of common shares outstanding during each
period. Diluted earnings per common share are computed based on
the weighted-average number of common shares, after giving effect
to diluted common stock equivalents outstanding during each
period. The following table provides a reconciliation between
basic and diluted earnings per share:
<TABLE>
<CAPTION>
For The Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
(in thousands, except per share amounts)
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available
to common
stockholders $92,964 58,796 $1.58 $70,232 59,038 $1.19 $50,256 58,197 $0.86
Effect of Dilutive
Securities
Options/Warrants - 3,640 ($0.09) - 2,198 ($0.04) - 2,731 ($0.04)
Diluted EPS
Income available to
common stockholders
plus assumed
exercises $92,964 62,436 $1.49 $70,232 61,236 $1.15 $50,256 60,928 $0.82
</TABLE>
14. INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS
The Company operates in one reportable segment, the design,
manufacture, marketing and servicing of bar code reading equipment
and scanner integrated application specific mobile computer
systems, a substantial portion of which include radio frequency
data communications systems. During 1998, sales to Lockheed
Martin Corporation in connection with the United States Postal
Service contract amounted to approximately 11% of total net
revenue. The geographic distributions of the Company's
identifiable assets, operating income and revenues are summarized
in the following table.
F-27
<TABLE>
<CAPTION>
North Western
America Europe Other Eliminations Consolidated
(in thousands)
Year ended December 31, 1998:
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $609,498 $278,836 $89,567 $ - $977,901
Transfers between
geographic areas 197,105 - - (197,105) -
Total net revenue $806,603 $278,836 $89,567 ($197,105) $977,901
Earnings before
provision for income
taxes $131,754 $ 8,919 $ 2,688 ($4,610) $138,751
Identifiable assets $593,155 $120,657 $27,289 $ - $741,101
Corporate assets 97,298
Total assets $838,399
Year ended December 31, 1997:
Sales to unaffiliated
customers $448,220 $257,325 $68,800 $ - $774,345
Transfers between
geographic areas 167,996 - - (167,996) -
Total net revenue $616,216 $257,325 $68,800 ($167,996) $774,345
Earnings before
provision for income
taxes $ 96,360 $ 8,885 $ 1,518 $ 2,975 $109,738
Identifiable assets $413,477 $115,365 $23,513 $ - $552,355
Corporate assets 126,835
Total assets $679,190
Year ended December 31, 1996:
Sales to unaffiliated
customers $389,519 $222,611 $44,545 $ - $656,675
Transfers between
geographic areas 140,126 - - (140,126) -
Total net revenue $529,645 $222,611 $44,545 ($140,126) $656,675
Earnings before
provision for income
taxes $ 84,447 $ 1,939(1) ($366) ($4,962) $ 81,058
Identifiable assets $379,114 $108,871 $15,916 $ - $503,901
Corporate assets 110,337
Total assets $614,238
<FN>
(1) Includes a pre-tax charge of $10,741,000 related to acquisition costs
associated with purchased research and development.
</FN>
</TABLE>
F-28
In determining earnings before provision for income taxes for each
geographic area, sales and purchases between areas have been
accounted for on the basis of internal transfer prices set by the
Company. Certain U.S. operating expenses are allocated between
geographic areas based upon the percentage of geographic area
revenue to total revenue. This allocation has the effect of
reducing reported European and other operating profit.
Identifiable assets are those tangible and intangible assets used
in operations in each geographic area. Corporate assets are
principally temporary investments and the excess of cost over fair
value of net assets acquired.
The Company's export sales, primarily to Europe, approximated
$368,403,000, $326,125,000 and $267,156,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
The Company has customers in the retail industry which accounted
for approximately $55,586,000 and $40,317,000 in accounts
receivable at December 31, 1998 and 1997, respectively. The
carrying amounts of accounts receivable approximate fair value
because of the short maturity of these instruments.
<TABLE>
15. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
The following tables set forth unaudited quarterly financial
information for the years ended December 31, 1998, and 1997:
<CAPTION>
Quarter Ended
March 31 June 30 September 30 December 31
(in thousands, except per share amounts)
Year Ended
December 31, 1998:
<S> <C> <C> <C> <C>
Net revenue $213,310 $238,981 $256,806 $268,804
Gross profit 92,956 100,118 108,629 114,278
Net earnings 19,630 23,506 25,096 24,732
Basic earnings per share: $0.33 $0.40 $0.43 $0.42 (1)
Diluted earnings per share: $0.32 $0.38 $0.40 $0.39 (1)
Year Ended
December 31, 1997:
Net revenue $178,271 $187,663 $201,876 $206,535
Gross profit 79,055 82,482 88,472 90,472
Net earnings 15,445 16,174 18,496 20,117
Basic earnings per share: $0.26 $0.27 $0.31 $0.34
Diluted earnings per share: $0.25 $0.26 $0.30 $0.33
<FN>
(1) Includes a pre-tax charge of $3,597,000 ($0.04 per share
after tax) related to terminated acquisition costs.
</FN>
</TABLE>
F-29
The quarterly earnings per share information is computed
separately for each period. Therefore, the sum of such quarterly
per share amounts may differ from the total for the year.
F-30
SCHEDULE II
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
(1) (2)
Balance at Charged to Charged Balance
beginning cost and to other at end
Description of year expenses accounts Deductions of year
Allowance for doubtful
accounts:
<S> <C> <C> <C> <C> <C>
December 31, 1998 $10,995 $2,921 $ - (a) $3,885 (b) $10,031
December 31, 1997 $10,123 $2,253 $ 90 (a) $1,471 (b) $10,995
December 31, 1996 $7,816 $2,270 $890 (a) $ 853 (b) $10,123
<FN>
(a) Primarily collection of accounts previously written off.
(b) Uncollectible accounts written off.
</FN>
</TABLE>
S-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
ANNUAL REPORT
ON
FORM 10-K
FOR FISCAL YEAR ENDED
DECEMBER 31, 1997
__________________________________
SYMBOL TECHNOLOGIES, INC.
EXHIBITS
3. Exhibits
Exhibit Page No.
3.1 Certificate of Incorporation of Symbol Technologies, Inc.
and amendments thereto.(Incorporated by reference to
Exhibit 3.1of the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 (the"1996 Form 10-K).)
3.3 By-laws of the Company as currently in 5
effect.
4.1 Form of Certificate for Shares of the 23
Common Stock of the Company.
10.1 Form of 2008 Stock Purchase Warrant issued to
certain directors. (Incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form
10K for the year ended December 31,1997 (the "1997
Form 10-K")).
10.2 Form of 2000 Stock Purchase Warrant issued to
certain directors. (Incorporated by reference to
Exhibit 10.11 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991 (the "1991
Form 10-K").)
10.3 1994 Directors Stock Option Plan. (Incorporated by
reference to Exhibit 4.1 to Registration Statement
No. 33-78678 on Form S-8.)
10.4 1997 Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit 4.2 to Registration Statement
No. 333-26593 on Form S-8.)
10.5 1997 Employee Stock Option Plan.
(Incorporated by reference to Exhibit 16.5
to the 1998 Form 10-K.)
10.6 1991 Employee Stock Option Plan (Incorporated by
reference to Exhibit 10.1 of the 1991 Form 10-K.)
10.7 1990 Non-Executive Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10.1 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1995 (the "1995 Form 10-K").)
10.8 Employment Agreement by and between the 24
Company and Frederic P. Heiman, dated as
of October 1, 1998.
2
10.9 Employment Agreement by and between the Company and
Raymond Martino, dated as of June 12, 1994.
(Incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994.)
10.10 Employment Agreement by and between the Company and
Jerome Swartz, dated as of June 30, 1995.
(Incorporated by reference to Exhibit 10.4 to the
1995 Form 10-K.)
10.11 Employment Agreement by and between the Company and
Tomo Razmilovic, dated as of October 16, 1995.
(Incorporated by reference to Exhibit 10.5 of the
1995 Form 10-K.)
10.12 Employment Agreement by and between the Company and
Leonard H. Goldner, dated as of November 1, 1995.
(Incorporated by reference to Exhibit 10.7 of the
1995 Form 10-K.)
10.13 Executive Retirement Plan, as amended.(Incorporated
by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989 (the "1989 Form 10-K").)
10.14 Symbol Technologies, Inc. Stock Ownership and Option
Retention Program.(Incorporated by reference to
Exhibit 10.13 of the 1995 Form 10-K.)
10.15 Summary of Symbol Technologies, Inc. Executive Bonus
Plan. (Incorporated by reference to Exhibit 10.14
of the 1995 Form 10-K.)
10.16 Lease Agreement and Amended and Restated Lease
Agreement dated as of October 1, 1989 between
Suffolk County Industrial Development Agency and
Symbol Technologies, Inc. (Incorporated by
reference to Exhibit 10.15 to the 1989 Form 10-K.)
10.17 Sublease dated June 28, 1995 between Grumman Data
Systems Corporation and Symbol Technologies, Inc.
(Incorporated by reference to Exhibit 10.16 to the
1995 Form 10-K.)
10.18 Form of Note Agreements dated as of February 15,
1993 relating to the Company's 7.76 percent Series A
and Series B Senior Notes due February 15, 2003
(Incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1992.)
3
10.19 Credit Agreement dated as of December 21, 1998 among 38
Symbol Technologies, Inc., the lending institutions
identified in the credit agreement and Bank of
America National Trust and Savings Association as
agent and as letter of credit issuing bank.
22. Subsidiaries. 155
23. Consent of Deloitte & Touche LLP 159
(b) Reports on Form 8-K
Not Applicable
4
EXHIBIT 3.3
5
Amended as of August 17, 1998
By-Laws
OF
SYMBOL TECHNOLOGIES, INC.
__________________________
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered
office of the Corporation within the State of Delaware shall
be located at the principal place of business in said State of
such corporation or individual acting as the Corporation's
registered agent in Delaware.
Section 1.2. Other Offices. The Corporation may
also have offices and places of business at such other places
both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of
the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of
Stockholders shall be held at the principal office of the
Corporation, or at such other place within or without the
State of Delaware as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meeting. The annual Meeting
of Stockholders shall be held at such time on such day as
shall be fixed by and in the discretion of the Board of
Directors. At the annual meeting, the stockholders entitled
to vote for the election of directors hall elect, by a
plurality vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings
of stockholders, for any purpose or purposes, may be called by
the Chief Executive Officer and shall be called promptly by
6
the Chairman of Board, if there be a Chairman of the Board,
the President or the Secretary at the written request of a
majority of the entire Board of Directors or the holders of
record of at least fifty percent (50%) of the issued and
outstanding shares of the Corporation entitled to vote for the
election of directors. Any such request shall state the
purpose or purposes of the proposed meeting. At any special
meeting of stockholders, only such business may be transacted
as is related to the purpose or purposes set forth in the
notice or waiver of notice thereof.
Section 2.4. Notice of Meeting. Written notice of
every meeting of stockholders stating the place, date and hour
thereof and, in the case of a special meeting of stockholders,
the purpose or purposes thereof and the person or persons by
whom or at whose direction such meeting has been called and
such notice is being issued shall be given not less than ten
(10) nor more than (60) days before the date of the meeting,
either personally or by mail, such notice shall be deemed
given when deposited in the United States mail, with postage
prepaid, directed to the stockholder at his address as it
appears on the record of the shareholders or if he shall have
filed with the Secretary of the Corporation a written request
that notices to him be mailed to some other address, then
directed to him at such other address. Nothing herein
contained shall preclude any stockholder from waiving notice
as provided in Section 4 hereof.
Section 2.5. Quorum. The holders of a majority
of the issued and outstanding shares of stock of the
Corporation entitled to vote thereat, represented in person or
by proxy, shall be necessary to and shall constitute a quorum
for the transaction of business at any meeting of
stockholders. If, however, such quorum shall not be present
or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
At any such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which
might have been transacted at the meeting as originally
noticed. Notwithstanding the foregoing, if after any such
adjournment the Board of Directors shall fix a new record date
7
for the adjourned meeting, or if the adjournment is for more
than (30) days, a notice of such adjourned meeting shall be
given as provided in Section 2.4 of these By-laws, but such
notice may be waived as provided in Section 4 hereof.
Section 2.6. Voting. At each meeting of
stockholders, each holder of record of shares of stock
entitled to vote shall be entitled to vote in person or by
proxy, and each such holder shall be entitled to one vote for
every share standing in his name on the books of the
Corporation as of the record date fixed by the Board of
Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at
any meeting of stockholders shall be the vote of the
stockholders with respect to any item of business, unless
otherwise provided by any applicable provision of law, by
these By-laws or by the Certificate of Incorporation. The
Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting
shall be cast by written ballot.
Section 2.7. Proxies. Every stockholder entitled
to vote at a meeting may authorize another person or persons
to act for him by proxy. Each proxy shall be in writing
executed by the stockholder giving the proxy or by his duly
authorized attorney. No Proxy shall be valid after the
expiration of three (3) years from its date, unless a longer
period is provided for in such proxy. Unless and until
voted, every proxy shall be revocable at the pleasure of the
person who executed it, or his legal representative or assigns
except in those cases where an irrevocable proxy permitted by
law has been given.
Section 2.8. Written Consent. Any action required
or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were
present and voted.
8
Section 2.9. List of Stockholders. The officer of
the Corporation having charge of the stock ledger shall make,
at least ten (10) days before each meeting of stockholders, a
complete list of the stockholder entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical
order and showing the address of and the number and class and
series, if any, of shares held by each. Such list, for a
period of ten (10) days prior to such meeting, shall be kept
at the principal place of business of the Corporation or at
the office of the transfer agent or registrar of the
Corporation and such other places as required by statute and
shall be subject to inspection by any stockholder for any
purpose germane to the meeting at any time during usual
business hours. Such list shall also be produced and kept open
at the time and pace of the meeting and may be inspected by
any stockholder who is present.
Section 2.10. Stock Ledger. The stock ledger of
the Corporation shall be the only evidence as to who are the
stockholder entitled to examine the stock ledger, the list
required by Section 2.9 or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.
Section 2.11. Advance Notice Provision. Any
stockholder who desires to present, in person, a proposal to
be voted on at any meeting of stockholders, may do so only if
written notice of the stockholder's proposal is delivered to,
or mailed, postage prepaid, and received by, the Secretary of
the Corporation at the then principal executive offices of the
Corporation, not later than December 31 of the year preceding
the date of the meeting. Each such notice must set forth any
information relating to the proposal that would be required to
be disclosed in any filing required to be made by the
Corporation and/or the stockholder under applicable federal or
state law.
ARTICLE III
DIRECTORS
Section 3.1. Number of Directors. The number of
directors of the Corporation which shall constitute the entire
Board of Directors shall be fixed from time to time by a vote
9
of a majority of the entire Board and shall be fixed from time
to time by a vote of a majority of the entire Board and shall
be not less than one (1) nor more than fifteen (15).
Section 3.2. Election of Directors; Terms.
Except as otherwise provided in the By-laws, only persons who
are nominated in accordance with the procedures in this
Section shall be eligible for election as directors of the
Corporation.
Nominations of persons for election to the Board of Directors
may be made at any annual meeting of stockholders by or at the
direction of the Board of Directors, or by any stockholder of
record entitled to vote at the meeting if written notice of
the stockholder's intent to nominate such person or persons is
delivered to, or mailed, postage prepaid, and received by, the
Secretary of the Corporation at the principal executive
offices of the Corporation no later than December 31 of the
year preceding the date of the meeting.
Each such notice given by a stockholder must set forth any
information relating to the nominee that would be required to
be disclosed n a proxy statement or other filing required to
be made under state or federal securities laws. The directors
shall be elected at the annual meeting of stockholders and
until his successor shall have been elected and qualified.
Directors need not be stockholders of the Corporation.
Section 3.3. Resignations. Any director of the
Corporation may resign at any time by giving written notice to
the Board or to the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein,
or if the time be not specified, it shall take effect
immediately upon its receipt, and unless otherwise specified
therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.4. Removal. At a special meeting of
stockholders called for this purpose in the manner herein
provided, the Board of Directors, or any individual director,
may be removed from office, with or without cause, and a new
director or directors elected by a vote of stockholders
holding a majority of the outstanding shares entitled to vote
at an election of directors.
10
Section 3.5. Newly Created Directorships and
Vacancies. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized
number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be
filled by a majority vote of the directors then in office.
Any director elected in accordance with the preceding sentence
of this Section 3.5 shall hold office until the next meeting
of stockholders at which the election of directors is in the
regular course of business and until such director's successor
has been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten
the term of any incumbent director.
Section 3.6. Powers and Duties. Subject to the
applicable provisions of law, these By Laws or the Certificate
of Incorporation, but in furtherance and not in limitation of
any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of
the Corporation and shall exercise all such powers of the
Corporation and do all such lawful acts and things as may be
exercised by the Corporation.
Section 3.7. Place of Meetings. All meetings of
the Board of Directors may be held either within or without
the State of Delaware.
Section 3.8. Annual Meeting. If the first
meeting of each newly elected Board of Directors shall be held
immediately after the annual stockholder's meeting and in the
same place, notice thereof shall not be necessary in order to
constitute the meeting, provided a quorum shall be present.
In the event that such meeting is not held at such date, time
and place, the meeting may be held on any other date, time and
place as shall be specified in a notice thereof given as
hereinafter provided in Section 3.11 or as shall be specified
in any waiver of notice thereof.
11
Section 3.9. Regular Meetings. Regular meetings
of the Board of Directors may be held upon notice or without
notice, and at such time and at such place as shall from time
to time be determined by the Board.
Section 3.10. Special Meetings. Special meetings
of the Board of Directors may be called by the Chairman of the
Board, if there be a Chairman of the Board, or by the
President or if he is absent, unable or refuses to act, by the
Secretary and shall be called promptly upon the written
request of any two directors specifying the special purpose
thereof, on not less than two (2) days notice to each
directors. Such requests shall state the date, time and place
of the meeting. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice or waiver of notice
of such meeting.
Section 3.11. Notice of Meeting. Notice of each
special meeting of the Board (and of each regular meeting for
which notice shall be required) shall be given by the Chairman
of the Board, if there be a Chairman of the Board, the
President or the Secretary and shall state the place, date and
time of the meeting. Notice of each such meeting shall be
given orally or shall be mailed to each director at his
residence or usual place of business. If notice of less than
one week is given, it shall be oral, whether by telephone or
in person, or sent by special delivery or express mail,
telecopy, telex, cable, telegraph or any other electronic
means of communication. If mailed, the notice shall be deemed
given when deposited in the United States mail, postage
prepaid. Notice of any adjourned meeting, including the
place, date and tie of the new meeting, shall be given to all
directors not present at the time of the adjournment, as well
as to the other directors unless the place, date and time of
the new meeting is announced at the adjourned meeting.
Nothing herein contained shall preclude the directors from
waiving notice as provided in Section 4 hereof.
Section 3.12. Quorum and Voting. At all meetings
of the Board of Directors a majority of the entire board shall
be necessary to and shall constitute a quorum for the
transaction of business at any meeting of the Board of
Directors, unless otherwise provided by any applicable
12
provision of law, by these By-laws, or by the Certificate of
Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at
such time, shall be the act of the Board of Directors, unless
otherwise provided by any applicable provision of law, by
these By-laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 3.13. Compensation. The Board of
Directors, by the affirmative vote of a majority of the
directors then in office and irrespective of any personal
interest of any of its members, shall have authority to
establish reasonable compensation of all director for services
to the Corporation as directors, officers or otherwise. The
Board of Directors may also provide that the directors may be
reimbursed for their expenses, if any, or attendance at any
meeting of the Board or any committee thereof.
Section 3.14. Books and Records. The directors
may keep the books for the Corporation, except such as are
required by law to be kept within the state, outside of the
State of Delaware, at such place or places as they may from
time to time determine.
Section 3.15. Action Without a Meeting. Any
action required or permitted to be taken by the Board, or by a
committee of the Board, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent
in writing to the adoption of a resolution authorizing the
action. Any such resolution and the written consents thereto
by the members of the Board or committee shall be filed with
the minutes of the proceedings of the Board or committee.
Section 3.16. Telephonic Meetings. Any one or
more members of the Board, or any committee of the Board, may
participate in a meeting of the board or committee by means of
a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each
other at the same time. Participation by such means shall
constitute presence in person at a meeting.
13
Section 3.17. Committee of the Board. The Board
may, by resolution adopted by a majority of the entire Board,
designate from among its members an executive and other
committees, each consisting of one (1) or more directors. The
Board may designate one or more directors as alternate members
of any such committee. Such alternate members may replace any
absent member or members at any meeting of any such committee.
In the absence or disqualification of a member if a
committee, and n the absence of a designation by the Board of
Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at
any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting
in the place of any absent or disqualified member. The Board
may also designate one or more directors as an additional
member or members of any such committee solely or purposes of
a specific meeting or series of meetings of any such
committee. Each committee (including the members thereof)
shall serve at the pleasure of the Board and shall keep
minutes of its meetings and report the same to the Board.
Vacancies in the membership of the committee shall be filled
by the Board at a regular meeting or at a special meeting for
that purpose. A majority of the entire committee shall be
necessary to and shall constitute a quorum for the transaction
of business at any meeting of the committee, unless otherwise
provided by any applicable provision of law, these By-laws or
the Certificate of Incorporation. The act of a majority of
the members of the committee present at the time of the vote,
if a quorum is present at such time, shall be the act of the
quorum is present at such time, shall be the act of the
committee, unless otherwise provided by any applicable
provision of law, these By-laws or the Certificate of
Incorporation.
Section 3.18. Authority of Committees; Duties of
Directors. Except as otherwise provided by law, each such
committee shall have and may exercise all the authority of the
Board with respect to all matters, to the extent provided in
the resolution of the Board establishing such committee or in
any subsequent resolution of the Board.
14
ARTICLE IV
WAIVER
Section 4. Waiver. Whenever a notice is
required to be given by any provision of law, by these By-
laws, or by the Certificate of Incorporation, a waiver thereof
in writing, or by telecopy or any other means of communication
permissible by law, whether before or after the time stated
therein, shall be deemed equivalent to such notice. In
addition, any stockholder attending a meeting of stockholders
in person or by proxy without protesting prior to the
conclusion of the meeting the lack of notice thereof to him,
and any director attending a meeting of the Board of Directors
without protesting prior to the meeting or at its commencement
such lack of notice, shall be conclusively deemed to have
waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Officers. The officers of the
Corporation shall be a chairman of the Board, one or more Vice
Presidents and a Secretary. The Corporation may also have, at
the discretion of the Board, one or more Assistant
Secretaries, one or more Assistant Vice Presidents, one or
more Assistant Treasurers, a Controller and one or more
Assistant Controllers, and such other officers as the Board of
Directors shall at anytime or from time to time deem necessary
or advisable to designate as officers or as may be appointed
in accordance with the provisions of Section 5.3 of this
Article V. any person may hold two or more of such officers.
All officers, as between themselves and the Corporation,
shall have such authority and perform such duties in the
management of the business and affairs of the Corporation as
may be provided in these By-laws, or to the extent not so
provided, as may be prescribed by the Board of Directors or
the Chief Executive Officer as provided in Section 5.3 of this
Article V.
Section 5.2. Election. The officers of the
Corporation, except such officers as may be appointed in
accordance with the provisions of Section 5.3 or Section 5.5
of this Article, shall have been elected annually at the
15
annual meeting of the Board of Directors following the annual
meeting of stockholders and, as vacancies occur, from time to
time by the Board of Directors. Each officer shall hold his
office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall have been
elected and qualified. The officers of the Corporation need
not be stockholders of the Corporation nor, except for the
Chairman of the Board, need such officers be directors of the
Corporation.
Section 5.3. Subordinate Officers. The Board
may appoint, or may authorize the Chief Executive Officer to
appoint, such other officers as the business of the
Corporation may require, each of whom shall have authority and
perform such duties as are provided in these By-laws or as the
Board or the Chief Executive Officer may from time to time
specify and each shall hold office until he shall resign or
shall have been removed or otherwise disqualified to serve.
Section 5.4. Removal and Resignation. Any
officer may be removed, either with or without cause, by a
majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in the
case of an officer chosen by the Board, by any officer upon
whom such power of removal may be conferred by the Board. Any
office may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take
effect at the date of the receipt of such notice or at any
later time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5.5. Vacancies. A vacancy in any office
because of death, resignation, removal, disqualification or
any other cause shall be filled in the manner prescribed in
the By-laws for the regular appointments to such office.
Section 5.6. Compensation. The Salaries and
other compensation of all officers and agencies of the
Corporation shall be fixed by or in the manner prescribed by
the Board of the Directors.
16
Section 5.7. Chairman of Board. The Chairman of
the Board shall preside at all meetings of the Board of
Directors. The Chairman of the Board shall be the Chief
Executive Officer of the Corporation, if designated as such by
the Board of Directors.
Section 5.8. President. The President shall be
the Chief Executive Officer and/or the Chief Operating Officer
of the Corporation, as determined by the Board of Directors.
In the absence of the Chairman of the Board, if the President
is a director of the Corporation, the President shall preside
at meetings of the Board of Directors. The President shall
have general and active management of the business and affairs
of the Corporation and be responsible for its day-to-day
operations, subject to the control of the Board of Directors
and the Chief Executive Officer, if the President does not
hold that position, and shall see to it that all orders and
resolutions of the Board of Directors are carried into effect.
Section 5.9. Vice Presidents. Each Vice
President (including any Executive Vice President or Senior
Vice President) shall have such powers and limiting titles and
shall perform such duties as may from time to time be assigned
to him by the Board of Directors and/or the Chief Executive
Officer.
Section 5.10. Secretary. The Secretary shall
attend all meetings of the stockholders and all meetings of
the Board of Directors and shall record all proceedings taken
at such meeting in a book to be kept for the purpose; he or an
Assistant Secretary shall see that all notices of meetings of
stockholders and special meetings of the Board of Directors
are duly given in accordance with the provisions of these By-
laws or as required by law; and he shall be custodian of the
records and of the corporate seal or seals of the Corporation;
he or an Assistant Secretary shall have authority to affix the
corporate seal or seals to all documents, the execution of
which , on behalf of the Corporation, under its seal, is duly
authorized, and when so affixed it may be attested by his
signature or the signature of such Assistant Secretary; and in
general, he shall perform all duties incident to the office of
the Secretary of the Corporation and such other duties as the
Board of Directors may from time to time prescribe.
17
The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the
affixing by his signature.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of
the Corporation shall be represented by certificates signed by
the President or any Vice President or the Chairman of the
Board, if there be a Chairman, or any Vice Chairman of the
Board, if any, or the Treasurer to any Assistant Treasurer, if
any, and shall bear the seal of the Corporation or a facsimile
thereof. Each certificate representing shares shall state
upon its face (a) that the Corporation is formed under the
laws of the State of Delaware, (b) the name of the person or
persons to whom it is issued, (c) the number of shares which
such certificate represents and (d) the par value, if any, of
each share represented by such certificate.
Section 6.2. Registered Stockholders. The
Corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares of
stock to receive dividends or other distributions, and to vote
as such owner, and to hold liable for calls and assessments a
person registered on its books as the owner of shares of
stock, and shall not be bound to recognize any equitable or
legal claim to or interest in such share or shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender
to the Corporation or the appropriate transfer agent, if any,
of the Corporation, of a certificate representing shares of
stock of the Corporation, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to
transfer, and, in the event that the certificate refers to any
agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement,
a new certificate shall be issued to the person entitled
thereto, and the old certificate cancelled and the transaction
recorded upon the books of the Corporation.
18
Section 6.4. Lost Certificates, etc. The
Corporation may issue a new certificate for shares in place of
any certificate theretofore issued by it, alleged to have been
lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed
certificate, or his legal representatives, to make an
affidavit of that fact and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the
alleged loss, mutilation, theft or destruction of any such
certificate or the issuance of any such new certificate.
Section 6.5. Record Date. For the purpose of
determining the stockholders entitled to notice of, or to vote
at, any meeting of stockholders or any adjournment thereof, or
to express written consent to, or dissent from, any corporate
action without a meeting, or for the purpose of determining
stockholders entitled to receive payments of any dividend or
other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful
action, the Board may fix, in advance, a record date. Such
date shall not be more than sixty (60) nor less than (10) days
before the date of any such meeting, nor more than sixty (60)
days prior to any other action.
Section 6.6. Regulations. Except as otherwise
provided by law, the Board may make such additional rules and
regulations, not inconsistent with these By-laws, as it may
deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the
Corporation. The Board may appoint, or authorize any officer
or officers to appoint, one or more transfer agents and one or
more registrars and may require all certificates for shares of
capital stock to bear the signature or signatures of any of
them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions.
Dividends and other distributions upon or with respect to
outstanding shares of stock of the Corporation may be declared
19
by the Board of Directors at any regular or special meeting,
and may be paid in cash, bonds, property or in shares of stock
of the Corporation. The Board shall have full power and
discretion, subject to the provisions of the Certificate of
Incorporation or the terms of any other corporate document or
instrument binding upon the Corporation to determine what, if
any, dividends or distributions shall be declared and paid or
made.
Section 7.2. Checks, etc. All checks or demands
for money and notes or other instruments evidencing
indebtedness or obligations of the Corporation shall be signed
by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The Corporate seal shall
have inscribed thereon the name of the Corporation, the year
of its incorporation and the words "Corporate Seal Delaware".
The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of
the Corporation shall be determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts.
The Board may authorize from time to time the opening and
keeping of general and special bank accounts with such banks,
trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers
of the Corporation to whom such power of designation may be
delegated by the Board from time to time. The Board may make
such special rules and regulations with respect to such bank
accounts, not inconsistent with the provisions of these By-
laws, as it may deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 8.1. Indemnification by the Corporation.
The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including
but not limited to any action or suit by or in the right of
20
the Corporation to procure a judgment in its favor) by reason
of the fact that he is or was a director or officer of the
Corporation as a director, office, employee or agent of
another corporation, partnership, joint venture, trust, or
other enterprise in any capacity, against expenses (including
attorneys' fees), judgments fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding; provided,
however, that no indemnification shall be made to or on behalf
of any person if such indemnification would be prohibited
under applicable law. The foregoing indemnification shall be
in addition to any other rights to which those indemnified may
be entitled under any law, agreement, vote or stockholders, or
other otherwise.
Section 8.1. Contract Right; Advances. The
right to indemnification conferred in this Article VIII shall
be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any
proceeding referred to in Section 8.1 in advance of its final
disposition; provided, however, that the payment of such
expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person
while a director or officer) in advance of the final
disposition of a proceeding, shall be made only upon delivery
to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Article VIII or
otherwise.
Section 8.23. Indemnification of Other Persons.
The Corporation may, by action of the Board of Directors,
indemnify any other person to whom the Corporation is
permitted to provide indemnification or the advancement of
expenses under applicable directors and officers; provided,
however, that no indemnification shall be made to or on behalf
of any such other person if such indemnification would be
prohibited under applicable law.
Section 8.4. Right to Bring Suit. If a claim
for indemnification under Section 8.1 of this Article VIII is
not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the
21
claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled
to also be paid the expense of prosecuting such claim.
Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the
circumstances, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel
or its stockholders) that the claimant is not entitled to
indemnification or to reimbursement or advancement of
expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
Section 8.5. Insurance. The Corporation may
maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, truest or
other enterprise against any such expense, liability or loss
under the Delaware General Corporation law.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9. Amendments. These By-laws may be
repealed, altered or amended or new By-laws adopted by the
stockholders. The Board of Directors shall have the
authority, if such authority is conferred upon the Board of
Directors by the Certificate of Incorporation,, to repeal,
alter or amend these By-laws or adopt new By-laws (including,
without limitation, the amendment of any By-laws setting forth
the number of directors who shall constitute the whole Board
of Directors) subject to the power of the stockholders to
change or repeal such By-laws.
22
EXHIBIT 4.1
Filed under Form SE
23
EXHIBIT 10.8
24
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made as of the
1st day of October, 1998 by and between SYMBOL TECHNOLOGIES,
INC., a Delaware corporation (the "Corporation") and FREDERIC
P. HEIMAN, (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive and the Corporation are
parties to an employment agreement, dated as of June 30, 1995,
(the "Prior Employment Agreement"), setting forth the terms
and conditions of the Executive's employment by the
Corporation; and
WHEREAS, the Executive has expressed a desire to
retire and end his Prior Employment Agreement; and
WHEREAS, the Corporation desires to continue to
employ the Executive on a part-time basis for the remainder of
1998 and on a part-time and consulting basis for a ten year
period thereafter, and the Executive desires to continue to be
employed by the Corporation in the manner and on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
of the mutual and dependent agreements and covenants herein
set forth, the parties hereto agree as follows:
1. PRIOR EMPLOYMENT AGREEMENT
The Executive and the Corporation agree that the
Prior Employment Agreement will terminate upon the execution
of this Agreement.
2. EMPLOYMENT
The Corporation hereby agrees to employ the Executive
as its Executive Vice President, and the Executive hereby
25
agrees to render services in such capacity to the Corporation
and its subsidiaries, divisions and affiliates until January
1, 1999 and on the terms and conditions set forth in this
Agreement. Thereafter, the Executive shall assume a new
position as a part-time employee and consultant. The
Executive shall serve in this capacity for the balance of the
contractual term, and shall render such services as may be
required of the Executive by the Chairman of the Board, from
time, to time as set forth in Section 4 of this Agreement.
3. TERM
The Executive's employment under this Agreement shall
be as follows: From the date of the execution of this
Agreement through and including December 31, 1998, the
Executive shall remain an Executive Officer and part-time
employee of the Corporation, unless this Agreement is
terminated earlier pursuant to the provisions of Section 13
hereof. Effective January 1, 1999 and for the ten years
thereafter, the Executive shall be employed as a part-time
employee and consultant. The Executive shall be compensated
for his services hereunder pursuant to Section 5 of this
Agreement.
4. DUTIES
(a) In accordance with the provisions hereof, until
December 31, 1998, the Executive shall, subject to periods of
illness, vacation and other excused absences, devote 50% of
his business time, attention, and energies to the affairs of
the Corporation and its subsidiaries, divisions and
affiliates, use his best efforts to promote its and their best
interests and perform such executive duties as may be assigned
to him by the Chief Executive Officer or President of the
Corporation; provided, however, that such executive duties
shall be consistent with and shall generally be of the nature
of the services ordinarily and customarily performed by the
Executive prior to the date hereof. Such duties shall
include, but not be limited to, assisting his replacement as
General Manager of the Corporation's Network Systems
Organization as requested by the President, serving as advisor
to the Chief Executive Officer, assisting in key sales and
marketing activities, strategic alliances and new product
development.
26
(b) After December 31, 1998, it is contemplated
that the Executive shall spend on average one day per
week as a part-time employee and consultant. In this
position, he shall perform such functions as may be
assigned to him by the Chief Executive Officer, from
time to time, such duties shall include, but not be
limited to, serving as an advisor to the Chief
Executive Officer, assisting in product development,
key sales and marketing activities; analysis of
potential acquisitions; consultation with respect to
patent strategy, etc. The Executive shall arrange,
with the consent of the Chief Executive Officer, his
work schedule so that his other activities (which may
include profit making activities so long as they do not
conflict with the provisions of Section 10 hereof) do
not interfere with or take precedence over the
performance of his responsibilities and duties to the
Corporation hereunder.
(c) So long as the Executive's employment under this
Agreement shall continue pursuant to Section 3 above, the
Executive shall, if elected or appointed, serve as a director
or officer of the Corporation and an officer or director of any
subsidiary, division or affiliate of the Corporation and shall
hold, without any compensation other than that provided for in
this Agreement, the offices in the Corporation and in any such
subsidiary, division or affiliate to which he may, at any time
or from time to time, be elected or appointed. It is
contemplated that the Executive will not be an executive
officer of the Corporation after December 31, 1998. If the
Executive is elected or appointed to serve on the Corporation's
Board of Directors during the term hereof, the Executive shall
not be entitled to receive any fees (other than reimbursement
of covered expenses) that are provided by the Corporation to
its outside Directors, as it is contemplated that the
compensation provided to Executive, pursuant to Section 5
hereof, is designed to compensate Executive for all services he
may render to the Corporation.
27
5. COMPENSATION
The Corporation hereby agrees to pay to the
Executive, and the Executive hereby agrees to accept, as
compensation for services rendered under this Agreement:
(i) A base salary at the rate of two hundred
twenty-nine thousand dollars ($229,000)
per annum for the period from January 1,
1998 through and including December 31,
1998, payable at such intervals as the
Corporation customarily pays the salaries
of its executive officers, and
(ii) During the period commencing January 1,
1999 through December 31, 2008, the
Executive shall be paid a salary of
$150,000 per annum, for all services
rendered by him to the Corporation. Such
salary shall be payable at such intervals
as the Corporation pays the salaries of
its executive officers.
(b) In addition to the base salary provided for in
subsection 5(a)(i) above, in 1998 (but only 1998), the
Executive shall participate in the Corporation's Executive
Bonus Plan and thereby be entitled to receive an annual bonus
for fiscal year 1998. The Executive's annual target bonus
amount for the 1998 fiscal year shall be 55% of Executive's
base salary. Payment of the bonus provided herein shall be
paid to the Executive no later than 90 days after the
completion of the fiscal year.
(c) In addition to the foregoing, it is hereby
agreed that the Corporation shall, at its sole expense, provide
and the Executive shall be entitled to receive, during calendar
year 1998, the employee fringe benefits provided by the
Corporation, from time to time, to its executive officers, but
in no event less favorable to the Executive than benefits
provided to him by the Corporation as of the date of this
Agreement, including, but not limited to, benefits relating to
life, medical and disability insurance, vacation time, and
participation in the Corporation's existing Section 401(k)
Plan; provided, however, that as used in this Agreement, the
28
term "employee fringe benefits" shall not include any salary or
other bonus plan, except as set forth in this Agreement.
(d) In addition to the foregoing, it is hereby
agreed that commencing January 1, 1999 and continuing for the
balance of this Agreement the Corporation shall provide and
Executive shall be entitled to receive employee fringe benefits
provided by the Corporation, at its sole expense, no less
favorable to the Executive than the benefits provided to him by
the Corporation as of the date of this Agreement relating to
life and disability insurance. In addition, the Executive
shall be eligible to participate in the Corporation's group
health insurance plan and 401(k) plan; provided, however, that
in the event the Executive is not entitled to remain a member
of the Corporation's group health insurance plan, then
commencing on the date the Executive is no longer entitled to
remain a member and continuing for the term of this Agreement,
the Corporation shall pay the Executive's group health
insurance premiums to enable the Executive to remain a member
of the Corporation's group health insurance plan or a
comparable plan. This period shall constitute the Executive's
COBRA continuation period as required by applicable federal
law.
6. AUTOMOBILE
During the entire term of this Agreement, the
Corporation shall make available to the Executive the use of an
automobile, with a lease allotment of up to $1,200 per month as
well as in 1998, gasoline, maintenance and insurance expenses
associated with such automobile and maintenance and insurance
for the remainder of the term thereafter.
7. EXPENSES; OPTIONS
(a) The Corporation shall pay or reimburse the
Executive for all reasonable travel and other expenses incurred
or paid by him in connection with the performance of his
employment duties under this Agreement, upon presentation to
the Corporation of expense statements or vouchers and such
other supporting documentation as it may, from time to time,
reasonably require; provided however that the maximum amount
available for such expenses may, at any time or from time to
time, be fixed in advance by the Board of Directors of the
Corporation.
29
(b) All outstanding options to purchase shares of
Common Stock of the Corporation now held by the Executive or
hereafter awarded to the Executive during the term of this
Agreement shall vest regardless of any conditions precedent to
the vesting of such options (such as the passage of time) if
and when there is a "change in control of the Corporation" as
hereafter defined. As used in this Agreement, a "change in
control of the Corporation" shall mean a change in control of a
nature that would be required to be reported in response to
Item 5(f) of Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended, (the "Exchange
Act"); provided, that, without limitation, such a change in
control shall be deemed to have occurred if (i) any "person"
(as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Corporation or any "person" who
on the date hereof is a director or officer of the Company, is
or becomes the "beneficial owner", (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the Corporation representing 25% or more of the combined
voting power of the Company's then outstanding securities and
the Corporation's Board of Directors, after having been advised
that such ownership level has been reached, does not, within
fifteen (15) business days, adopt a resolution approving the
acquisition of that level of securities ownership by such
person; or (ii) during any period of two consecutive years
during the term of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors
cease for any reason to constitute at least a majority thereof,
unless the election of each director who was not a director at
the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors
then in office who were directors at the beginning of the
period.
(c) Notwithstanding the then-current state of the
Corporation's By-Laws, the Executive shall be entitled at all
times to the benefit of the maximum indemnification and
advancement of expenses available from time to time under the
laws of the State of Delaware.
(d) The Corporation and/or any of its subsidiaries,
divisions or affiliates may, from time to time, apply for and
obtain, for its or their benefit and at its or their sole
30
expense, key man life, health, accident, disability, or other
insurance upon the Executive, in any amounts that it or they
may deem necessary or desirable to protect its or their
respective interests, and the Executive agrees to cooperate
with and assist the Corporation or such subsidiary, division or
affiliate in obtaining any and all such insurance by submitting
to all reasonable medical examinations, if any, and by filling
out, executing, and delivering any and all such applications
and other instrument as may reasonably be necessary.
(8) INVENTIONS
(a) The Executive agrees to and hereby does assign
to the Corporation or any subsidiary, affiliate or division of
the corporation designated by the Corporation, all his right,
title and interest throughout the world in and to all ideas,
methods, developments, products, inventions, processes,
improvements, modifications, techniques, designs and/or
concepts relating directly or indirectly to the business of the
Corporation, its subsidiaries, affiliates or divisions, whether
patentable or unpatentable, which the Executive may conceive
and/or develop during his employment by the Corporation
(whether pursuant to this Agreement or otherwise) or which the
Executive may conceive and/or develop during a period of thirty
(30) months following the termination of his employment
(whether pursuant to this Agreement or otherwise) if such
conception and/or development during such thirty (30) month
period is a direct result of the Executive's activities while
employed by the Corporation, whether or not conceived and/or
developed at the request of the Corporation or any subsidiary,
affiliate or division (the "Inventions"); provided, however,
that if the Corporation or such subsidiary, affiliate or
division determine that it will not use any such Invention or
that it will license or transfer any such Invention to an
unaffiliated third party, then it will negotiate in good faith
with the Executive, if the Executive so requests, with respect
to a transfer or license of such Invention to the Executive.
(b) The Executive further agrees to promptly
communicate and disclose to the Corporation any and all such
Inventions as well as any other knowledge or information which
he may possess or obtain relating to any such Inventions.
31
(c) In furtherance of the foregoing, the Executive
agrees that at the request of the Corporation, and at its
expense, he will make or cooperate in the making of
applications for letters patent of the United States or
elsewhere and will execute such other agreements, documents or
instruments which the Corporation may reasonably consider
necessary to transfer to and vest in the Corporation or any
subsidiary, affiliate or division, all right, title and
interest in any such Inventions, and all applications for any
letters patent issued in respect of any of the foregoing.
(d) The Executive shall assist, upon request, in
locating writings and other physical evidence of the making of
the Inventions and provide unrecorded information relating to
them and give testimony in any proceeding in which any of the
Inventions or any application or patent directed thereto may be
involved, provided that reasonable compensation shall be paid
the Executive for such services and the Executive shall be
reimbursed for any expenses incurred by him in connection
therewith, except that during such period of time as the
Executive is employed by the Corporation, the Corporation shall
not be obligated to compensate the Executive at a higher rate
for the giving of testimony than the rate established by law
for the compensation of witnesses in the court or tribunal
where the testimony is given or in the district where the
testimony is taken. The Corporation shall give the Executive
reasonable notice should it require such services, and, to the
extent reasonably feasible, the Corporation shall use its best
efforts to request such assistance at times and places as will
least interfere with any other employment of the Executive.
(e) At the expense of the Corporation, the
Executive shall assign to the Corporation all his interest in
copyrightable material which he produces, composes, or write,
individually or in collaboration with others, which arises out
of work performed by him on behalf of the Corporation, and
shall sign all papers and do all other acts necessary to assist
the Corporation to obtain copyrights on such material in any
and all jurisdictions.
32
9. CONFIDENTIAL INFORMATION
The Executive hereby acknowledges that, in the course
of his employment by the corporation he has had and will have
access to secret and confidential information which relates to
or affects all aspects of the business and affairs of the
Corporation and its subsidiaries, affiliates and divisions, and
which are not available to the general public ("Confidential
Information"). Without limiting the generality of the
foregoing, Confidential Information shall include information
relating to inventions (including, without limitation,
Inventions), developments, specifications, technical and
engineering data, information concerning the filing or pendency
of patent applications, business ideas, trade secrets, products
under development, production methods and processes, sources of
supply, marketing plans, and the names of customers or
prospective customers or of persons who have or shall have
traded or dealt with the Corporation. Accordingly, the
Executive agrees that he will not, at any time, without the
express written consent of the Corporation, directly or
indirectly, disclose or furnish, or negligently permit to be
disclosed or furnished, any Confidential Information to any
person, firm, corporation or other entity except in performance
of his duties hereunder.
10. CONFIDENTIAL MATERIALS
The Executive hereby acknowledges and agrees that any
and all models, prototypes, notes, memoranda, notebooks,
drawings, records, plans, documents or other material in
physical form which contain or embody Confidential Information
and/or information relating to Inventions and/or information
relating to the business and affairs of the Corporation, its
subsidiaries, affiliates and divisions and/or the substance
thereof, whether created or prepared by the Executive or by
others (Confidential Materials), which are in the Executive's
possession or under his control, are the sole property of the
Corporation. Accordingly, the Executive hereby agrees that,
upon the termination of his employment with the Corporation,
whether pursuant to this Agreement or otherwise, or at the
Corporation's earlier request, the Executive shall return to
the Corporation all Confidential Materials and all copies
thereof in his possession or under his control and shall not
retain any copies of Confidential Materials.
33
11. NON-COMPETITION
(a) The Executive agrees that he shall not, so long
as he shall be employed by the Corporation in any capacity
(whether pursuant to this Agreement or otherwise), without the
express written consent of the Corporation, directly or
indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control or be employed by
or connected in any manner including as a consultant, with any
business which is or may be in competition, directly or
indirectly, with the business of the Corporation or any
subsidiary, affiliate or division of the Corporation.
(b) The Executive agrees that for a period of thirty
(30) months, commencing on the effective date of the
termination of his employment, whether such termination is
pursuant to the terms of this Agreement or otherwise, he shall
not, without the express written consent of the Corporation,
directly or indirectly, own, manage, operate, control, or
participate in the ownership, management, operation or control,
or be employed by or connected in any manner including as a
consultant, with any business, firm or corporation which is
engaged in any business activity competitive with the business
of the Corporation and its subsidiaries, affiliates and
divisions as such business is conducted during the period of
his employment by the Corporation (whether pursuant to this
Agreement or otherwise and at the termination thereof).
(c) Anything to the contrary herein notwithstanding,
the provisions of this section shall not be deemed violated by
the purchase and/or ownership by the Executive of shares of any
class of equity securities (or options, warrants or rights to
acquire such securities, or any securities convertible into
such securities) representing (together with any securities
which would be acquired upon the exercise of any such options,
warrants or rights or upon the conversion of any other security
convertible into such securities) 1% or less of the outstanding
shares of any such class of equity securities of any issuer
whose securities are listed on a national securities exchange
or traded on NASDAQ, the National Quotation Bureau Incorporated
or any similar organization; provided, however, that the
Executive shall not be otherwise connected with or active in
the business of the issuers described in this subsection 11(c).
34
12. REMEDY FOR BREACH
The Executive hereby acknowledges that in the event of
any breach or threatened breach by him of any of the provisions
of sections 8, 9, 10 or 11 of this Agreement, the Corporation
would have no adequate remedy at law and could suffer
substantial and irreparable damage. Accordingly, the Executive
hereby agrees that, in such event, the Corporation shall be
entitled, without the necessity of proving damages, and
notwithstanding any election by the Corporation to claim
damages, to obtain a temporary and/or permanent injunction to
restrain any such breach or threatened breach or to obtain
specific performance of any of such provisions, all without
prejudice to any and all other remedies which the Corporation
may have at law or in equity.
13. TERMINATION
(a) This Agreement and the employment of the Executive
by the Corporation shall terminate upon the earliest of the
dates specified below:
(i) the close of business on the date as of
which the term of the Executive's employment hereunder has
terminated as provided in section 3 hereof; provided, however,
that such term is not extended by any other agreement between
the Executive and the Corporation; or
(ii) the close of business on the date of death
of the Executive; or
(iii) the close of business on the effective
date of the voluntary termination by the Executive of
his employment with the Corporation; or
(iv) the close of business on the day
following the date on which the Corporation shall have
given to the Executive written notice of the election
of its Board of Directors to terminate his employment
for "cause" (as defined in subsection (b) of this
section 13).
(b) For purposes of this Agreement, the term "cause"
shall mean a determination by vote of a majority of the members
of the Board of Directors of the Corporation then holding
35
office (other than the Executive if he shall then be a
director) that one of the following conditions exists or one of
the following events has occurred;
(i) conviction of the Executive for a felony
offense; or
(ii) the refusal by the Executive to perform such
service as may reasonably be delegated or assigned to him,
consistent with his position, by the Chief Executive Officer of
the Corporation; continued neglect by the Executive of his
duties hereunder; or willful misconduct or gross negligence on
his part in connection with the performance of such duties.
14. NO CONFLICTING AGREEMENTS
In order to induce the Corporation to enter into this
Agreement and to employ the Executive on the terms and
conditions set forth herein, the Executive hereby represents
and warrants that he is not a party to or bound by any
agreement, arrangement or understanding, written or otherwise,
which prohibits or in any manner restricts his ability to enter
into and fulfill his obligations under this Agreement, to be
employed by and serve as an executive of the Corporation. This
Agreement supersedes the Prior Employment Agreement in all
respects.
15. MISCELLANEOUS
(a) This Agreement shall become effective as of the
date hereof and, from and after that time, shall extend to and
be binding upon the Executive, his personal representative or
representatives and testate or intestate distributees, and upon
the Corporation, its successors and assigns; and the term
"Corporation", as used herein, shall include successors and
assigns.
(b) Nothing contained in this Agreement shall be deemed
to involve the creation by the Corporation of a trust for the
benefit of, or the establishment by the Corporation of any
other form of fiduciary relationship with the Executive, his
beneficiaries or any of their respective legal representatives
or distributees. To the extent that any person shall acquire
the right to receive any payments from the Corporation
hereunder, such right shall be no greater than the right of any
36
unsecured general creditor of the Corporation.
(c) Any notice required or permitted by this Agreement
shall be given by registered or certified mail, return receipt
requested, addressed to the Corporation at its then principal
office or to the Executive at his residence address, or to
either party at such other address or addresses as it or he may
from time to time specify for the purpose in a notice similarly
given to the other party.
(d) This Agreement shall be construed and enforced in
accordance with the laws of the State of New York. In this
connection, Executive hereby consents to the jurisdiction of
the courts of the State of New York to resolve any disputes
arising out of the interpretation or administration of this
Agreement.
(e) This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and there
are no agreements, representations or warranties not herein set
forth. No modification of this Agreement shall be valid unless
in writing and signed by the Corporation and the Executive. A
waiver of the breach of any term or condition of this Agreement
shall not be deemed to constitute a waiver or any subsequent
breach of the same or any other term or condition.
(f) If any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provisions
of this Agreement not held so invalid, and all other such
provisions shall remain in full force and effect to the full
extent consistent with the law.
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement as of the day and year
first above written.
SYMBOL TECHNOLOGIES, INC.
By: ________________________
ATTEST: By: ________________________
37
EXHIBIT 10.19
38
CREDIT AGREEMENT
Dated as of December 21, 1998
among
SYMBOL TECHNOLOGIES, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent,
and
Letter of Credit Issuing Bank,
THE CHASE MANHATTAN BANK,
as Documentation Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
______________________________________________________
NationsBanc Montgomery Securities LLC,
Lead Arranger
39
TABLE OF CONTENTS
Section
ARTICLE I DEFINITIONS
1.01 Certain Defined Terms
1.02 Other Interpretive Provisions.
1.03 Accounting Principles.
ARTICLE II THE CREDITS
2.01 Amounts and Terms of Commitments.
2.02 Loan Accounts.
2.03 Procedure for Committed Borrowing.
2.04 Conversion and Continuation Elections
for Committed Borrowings.
2.05 Bid Borrowings
2.06 Procedure for Bid Borrowings.
2.07 Increase in Commitments
2.08 Voluntary Termination or Reduction of Commitments
2.09 Optional Prepayments.
2.10 Mandatory Cash Collateralization of Letters
of Credit; Mandatory Prepayments of Loans
2.11 Repayment.
2.12 Interest.
2.13 Fees
(a) Arrangement, Administrative Fees
(b) Commitment Fees
(b) Utilization Fees
2.14 Computation of Fees and Interest.
2.15 Payments by the Company.
2.16 Payments by the Banks to the Agent.
2.17 Sharing of Payments, Etc.
2.18 Guaranty.
ARTICLE III THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
3.03 Risk Participations, Drawings and Reimbursements.
3.04 Repayment of Participations.
3.05 Role of the Issuing Bank.
3.06 Obligations Absolute
3.07 Cash Collateral Pledge
3.08 Letter of Credit Fees.
3.09 Uniform Customs and Practice
40
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
4.02 Illegality.
4.03 Increased Costs and Reduction of Return.
4.04 Funding Losses
4.05 Inability to Determine Rates
4.06 Reserves on Offshore Rate Loans
4.07 Certificates of Banks
4.08 Substitution of Banks
4.09 Survival
ARTICLE V CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions
(a) Credit Agreement, Guaranty and Notes
(b) Resolutions; Incumbency
(c) Organization Documents; Good Standing
(d) Legal Opinions
(e) Payment of Fees
(f) Other Documents
5.02 Conditions to All Credit Extensions
(a) Notice, Application
(b) Continuation of Representations and Warranties
(c) No Existing Default
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.01 Corporate Existence and Power
6.02 Corporate Authorization; No Contravention
6.03 Binding Effect
6.04 Litigation
6.05 No Default
6.06 ERISA Compliance
6.07 Use of Proceeds; Margin Regulations
6.08 Title to Properties
6.09 Taxes
6.10 Financial Condition.
6.11 Environmental Matters
6.12 Regulated Entities
6.13 No Burdensome Restrictions
6.14 Copyrights, Patents, Trademarks and Licenses, Etc.
6.15 Subsidiaries
6.16 Insurance
6.17 Swap Obligations
6.18 Year 2000
6.19 Full Disclosure
41
ARTICLE VII AFFIRMATIVE COVENANTS
7.01 Financial Statements
7.02 Certificates; Other Information
7.03 Notices
7.04 Preservation of Corporate Existence, Etc.
7.05 Maintenance of Property
7.06 Insurance
7.07 Payment of Obligations
7.08 Compliance with Laws
7.09 Compliance with ERISA
7.10 Inspection of Property and Books and Records
7.11 Use of Proceeds
7.12 Additional Guarantors
ARTICLE VIII NEGATIVE COVENANTS
8.01 Limitation on Liens
8.02 Disposition of Assets
8.03 Consolidations and Mergers
8.04 Loans and Investments
8.05 Limitation on Indebtedness
8.06 Transactions with Affiliates
8.07 Use of Proceeds.
8.08 Swap Obligations
8.09 Capital Expenditures
8.10 Restricted Payments
8.11 ERISA
8.12 Change in Business
8.13 Accounting Changes
8.14 Subordinated Debt.
8.15 Leverage Ratio
8.16 Fixed Charge Coverage Ratio
8.17 Tangible Net Worth
ARTICLE IX EVENTS OF DEFAULT
9.01 Event of Default
(a) Non-Payment
(b) Representation or Warranty
(c) Specific Defaults
(d) Other Defaults
(e) Cross-Default
(f) Insolvency; Voluntary Proceedings
(g) Involuntary Proceedings
(h) ERISA
(i) Monetary Judgments
(j) Change of Control
42
(k) Invalidity of Subordination Provisions
(l) Guaranty Events
9.02 Remedies
9.03 Rights Not Exclusive
ARTICLE X THE AGENT
10.01 Appointment and Authorization; "Agent".
10.02 Delegation of Duties
10.03 Liability of Agent
10.04 Reliance by Agent.
10.05 Notice of Default
10.06 Credit Decision
10.07 Indemnification of Agent
10.08 Agent in Individual Capacity
10.09 Successor Agent
10.10 Withholding Tax.
10.11 Documentation Agent
ARTICLE XI MISCELLANEOUS
11.01 Amendments and Waivers
11.02 Notices.
11.03 No Waiver; Cumulative Remedies
11.04 Costs and Expenses
11.05 Company Indemnification
11.06 Payments Set Aside
11.07 Successors and Assigns
11.08 Assignments, Participations, Etc.
11.09 Confidentiality
11.10 Set-off
11.11 Notification of Addresses, Lending Offices, Etc.
11.12 Counterparts
11.13 Severability
11.14 No Third Parties Benefited
11.15 Governing Law and Jurisdiction.
11.16 Waiver of Jury Trial
11.17 Entire Agreement
43
ANNEX I
Pricing Grid
SCHEDULES
Schedule 2.01 Commitments
Schedule 6.04 Litigation
Schedule 6.06 ERISA
Schedule 6.10 Permitted Liabilities
Schedule 6.11 Environmental Matters
Schedule 6.15 Subsidiaries (Including Domestic and Material
Subsidiaries)
Schedule 6.16 Insurance Matters
Schedule 8.01 Permitted Liens
Schedule 8.05 Permitted Indebtedness
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinions of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F-1 Form of Committed Loan Note
Exhibit F-2 Form of Bid Loan Note
Exhibit G Form of Guaranty
Exhibit H Form of Competitive Bid Request
Exhibit I Form of Invitation for Competitive Bids
Exhibit J Form of Competitive Bid
Exhibit K Form of Notice of Prepayment
44
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of December 21,
1998, among Symbol Technologies, Inc., a Delaware corporation
(the "Company"), the several financial institutions from time to
time party to this Agreement, Bank of America National Trust and
Savings Association, as letter of credit issuing bank and as
agent for the Banks.
WHEREAS, the Banks have agreed to make available to the
Company a revolving credit facility with letter of credit
subfacility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as
follows:
ARTICLE i
DEFINITIONS
1.01 Certain Defined Terms. . The following terms have
the following meanings:
"Absolute Rate" has the meaning specified in
subsection 2.06(c).
"Absolute Rate Auction" means a solicitation of
Competitive Bids setting forth Absolute Rates pursuant to
Section 2.06.
"Absolute Rate Bid Loan" means a Bid Loan that bears interest
at a rate determined with reference to the Absolute Rate.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or
indirectly, in (a) the acquisition of all or substantially all of
the assets of a Person, or of any business or division of a
Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of
any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Acquisition Charges" means any charges against income in
respect of any Acquisition permitted hereunder which is
consummated by the Company or any Subsidiary after the date
hereof, to the extent that such amounts are charged against
income within two fiscal quarters of the quarter in which the
relevant Acquisition is consummated.
"Affiliate" means, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled
by, or
45
is under common control with, such Person. A Person shall be
deemed to control another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of the other Person,
whether through the ownership of voting securities, membership
interests, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 10.09 and any successor letter of credit
issuing bank hereunder, together with their respective Affiliates
(including, in the case of BofA, the Lead Arranger), and the
officers, directors, employees, agents and attorneys-in-fact of
such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 11.02 or such other address as the Agent may
from time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Amount" means, with respect to the fees set forth
in subsections 2.13 (b) and 3.08(a) and all Offshore Rate
Committed Loans and Base Rate Committed Loans, the amount set
forth opposite the indicated Level in the chart set forth on
Annex I in accordance with the parameters for calculations of
such amounts also set forth on Annex I.
"Approved Subordinated Indebtedness" means indebtedness of
the Company which is subordinated to the Obligations and the
terms and conditions of which have been approved (in their sole
discretion) in writing by the Agent and the Majority Banks. As
of the Closing Date, there is no Approved Subordinated
Indebtedness.
"Assignee" has the meaning specified in
subsection 11.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the
reasonable allocated cost of internal legal services and all
reasonable disbursements of internal counsel.
"Bank" means each lender from time to time party hereto.
References to the "Banks" shall include BofA, including in its
capacity as Issuing Bank; for purposes of clarification only, to
the extent that BofA may have any rights or obligations in
addition to those of the Banks due to its status as Issuing Bank,
its status as such will be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50%
per annum above the latest Federal Funds Rate; and (b) the rate
46
of interest in effect for such day as publicly announced from
time to time by BofA in San Francisco, California, as its
"reference rate." (The "reference rate" is a rate set by BofA
based upon various factors including BofA's costs and desired
return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in
the public announcement of such change.
"Base Rate Committed Loan" means a Committed Loan, or an L/C
Advance, that bears interest based on the Base Rate.
"Bid Borrowing" means a Borrowing hereunder consisting of
one or more Bid Loans made to the Company on the same day by one
or more Bid Loan Lenders.
"Bid Loan" means a Loan by a Bank to the Company under
Section 2.05, which may be a LIBOR Bid Loan or an Absolute Rate
Bid Loan.
"Bid Loan Lender" means, in respect of any Bid Loan, the
Bank making such Bid Loan to the Company.
"Bid Loan Note" has the meaning specified in Section 2.02.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans
of the same Type made to the Company on the same day by the Banks
under Article II, and may be a Committed Borrowing or a Bid
Borrowing and, other than in the case of Base Rate Committed
Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in New York City or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means
such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request
or directive of any central bank or other Governmental Authority,
or any other law, rule or regulation, whether or not having the
force of law, in each case, regarding capital adequacy of any
bank or of any corporation controlling a bank.
"Capital Expenditures" means expenditures by a Person
(whether by leasing, the acquisition of securities of another
Person, or otherwise) in respect of the purchase or other
acquisition of fixed or capital assets (excluding any such asset
acquired (a) in connection with normal replacement and
47
maintenance programs properly charged to current operations, (b)
with the proceeds of casualty insurance and (c) pursuant to an
Acquisition not prohibited hereunder).
"Cash Collateralize" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the Issuing
Bank and the Banks, as collateral for the L/C Obligations, cash
or deposit account balances pursuant to documentation in form and
substance satisfactory to the Agent and the Issuing Bank (which
documents are hereby consented to by the Banks). Derivatives of
such term shall have corresponding meaning.
"Closing Date" means the date on which all conditions
precedent set forth in Section 5.01 are satisfied or waived in
accordance with the provisions of Section 11.01 (or, in the case
of subsection 5.01(e), waived by the Person entitled to receive
such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.01.
"Committed Borrowing" means a Borrowing hereunder consisting
of Committed Loans made on the same day by the Banks ratably
according to their respective Pro Rata Shares and, in the case of
Offshore Rate Committed Loans, having the same Interest Periods.
"Committed Loan" means a Loan by a Bank to the Company under
Section 2.01, and may be an Offshore Rate Committed Loan or a
Base Rate Committed Loan (each, a "Type" of Committed Loan).
"Committed Loan Note" has the meaning specified in
Section 2.02.
"Competitive Bid" means an offer by a Bank to make a Bid
Loan in accordance with subsection 2.06(b).
"Competitive Bid Request" has the meaning specified in
subsection 2.06(a).
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C.
"Consolidated Capital Expenditures" means, for any period,
the Capital Expenditures of the Company and its Subsidiaries,
determined on a consolidated basis.
"Consolidated Fixed Charges" means, for any period, the sum,
without duplication, of (i) the consolidated cash interest
expense of the Company and its Subsidiaries, determined on a
consolidated basis, plus (ii) Consolidated Lease Expense plus
(iii) the required amortization of Indebtedness for the Company
and its Subsidiaries, determined on a consolidated basis, for the
period involved and discount or premium relating to any such
48
Indebtedness for any period involved, whether expensed or
capitalized. For purposes of clarification, required prepayments
of Indebtedness under revolving credit facilities shall not
constitute amortization thereof unless required to be accompanied
by a reduction of the related credit commitment.
"Consolidated Lease Expense" means, for any period, the
aggregate amount of fixed and contingent rentals payable by the
Company and its Subsidiaries for such period, determined on a
consolidated basis, with respect to leases of real and personal
property.
"Contingent Obligation" means, as to any Person, any direct
or indirect liability of that Person, whether or not contingent,
with or without recourse, (a) with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the
payment or discharge of any such primary obligation, or to
maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency or any balance
sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure
or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation");
(b) with respect to any Surety Instrument issued for the account
of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the
services of, another Person if the relevant contract or other
related document or obligation requires that payment for such
materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such
services are ever performed or tendered; (d) in respect of any
Swap Contract; or (e) in respect of any synthetic leases (also
known as "off balance sheet" leases). The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations,
be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty Obligation
is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and in the
case of other Contingent Obligations
49
other than in respect of Swap Contracts or synthetic leases,
shall be equal to the maximum reasonably anticipated liability in
respect thereof and, in the case of Contingent Obligations in
respect of Swap Contracts, shall be equal to the Swap Termination
Value and, in the case of Contingent Obligations in respect of
synthetic leases, shall be determined by discounting such
obligations to present value at the interest rate implicit in
each such lease in effect at any date of determination.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of
trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which,
under Section 2.04, the Company (a) converts Committed Loans of
one Type to another Type, or (b) continues as Committed Loans of
the same Type, but with a new Interest Period, Committed Loans
having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any
Committed Loans or Bid Loans hereunder, and (b) the Issuance of
any Letters of Credit hereunder.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured
or otherwise remedied during such time) constitute an Event of
Default.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Domestic Subsidiary" means a Subsidiary organized under the
laws of the United States.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, the sum of (a) Operating
Income for such period plus (b) all amounts treated as expenses
for depreciation and the amortization of intangibles of any kind
to the extent included in the determination of Operating Income
for such period.
"Effective Amount" means (i) with respect to any Committed
Loans and Bid Loans on any date, the aggregate outstanding
principal amount thereof after giving effect to any Borrowings
and prepayments or repayments of such Loans occurring on such
date; and (ii) with respect to any outstanding L/C Obligations on
any date, the amount of such L/C Obligations on such date after
giving effect to any Issuances of Letters of Credit occurring on
such date and any other changes in the aggregate amount of the
L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings
50
under any Letters of Credit or any reductions in the maximum
amount available for drawing under Letters of Credit taking
effect on such date.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $500,000,000;
(b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political
subdivision of any such country, and having a combined capital
and surplus of at least $500,000,000, provided that such bank is
acting through a branch or agency located in the United States;
and (c) a Person that is primarily engaged in the business of
originating or holding performing commercial loans and that is
(i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of
which a Bank is a Subsidiary, or (iii) a Person of which a Bank
is a Subsidiary.
"Environmental Claims" means all claims, however asserted,
by any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental
Law, or for release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with the Company within
the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA) or a cessation of
operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by
the Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization;
(d) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A
51
of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under
Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any
ERISA Affiliate.
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934,
and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of
New York (including any such successor, "H.15(519)") on the
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such
day will be the arithmetic mean as determined by the Agent of the
rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
"Fee Letter" has the meaning specified in
subsection 2.13(a).
"Fixed Charge Coverage Ratio" means, as of the end of any
fiscal quarter, the ratio of (i) EBITDA plus Consolidated Lease
Expense less Consolidated Capital Expenditures to (ii)
Consolidated Fixed Charges, in each case calculated on a four
quarter rolling basis for such fiscal quarter and the three
immediately preceding fiscal quarters.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges (including, without limitation,
net income taxes and franchise taxes), and all liabilities with
respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"GAAP" means generally accepted accounting principles in
7 52
the United States as in effect from time to time, except that for
purposes of Sections 8.15, 8.16 and 8.17, GAAP shall be
determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the
most recent audited financial statements referenced in Section
6.10. In the event that any "Accounting Change" (as defined
below) shall occur and such change results in a change in the
method of calculation of financial covenants, standards or terms
in this Agreement, then the Company and the Agent agree to enter
into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with
the desired result that the criteria for evaluating the Company's
financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. Until
such time as such an amendment shall have been executed and
delivered by the Company, the Agent and the Majority Banks, all
financial covenants, standards and terms in this Agreement shall
continue to be calculated or construed as if such Accounting
Changes had not occurred. "Accounting Changes" refers to changes
in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board(or of the American Institute of
Certified Public Accountants or, if applicable, the SEC.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantor" means each current and future, direct and
indirect, Domestic Subsidiary of the Company which is a Wholly-
Owned Subsidiary.
"Guaranty" means a Guaranty of the Guarantors in favor of
the Agent and the Banks, substantially in the form of Exhibit G.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Honor Date" has the meaning specified in
subsection 3.03(b).
"Indebtedness" of any Person means, without duplication,
(a) all indebtedness for borrowed money; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in
the ordinary course of business on ordinary terms); (c) all non-
53
contingent reimbursement or payment obligations with respect to
Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or
arising under any conditional sale or other title retention
agreement; (f) all obligations with respect to capital leases;
(g) all unpaid obligations under Swap Contracts after the
termination thereof (including by virtue of the occurrence of an
Early Termination Date, as defined in each such Swap Contract);
(h) all Indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any
Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness;
and (i) all Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a)
through (g) above. For purposes of this Agreement, the amount of
any Indebtedness described in clause (h) above (to the extent
that such Person has not assumed or become liable for the payment
of such Indebtedness) shall be deemed to be the lesser of (i) the
amount of such Indebtedness or (ii) the book value of the
property which is or may be subject to such Lien.
For all purposes of this Agreement, the Indebtedness of any
Person shall include all Indebtedness of any partnership or joint
venture or limited liability company in which such Person is a
general partner or a joint venturer or a member to the extent of
the lesser of (a) the recourse to such Person on account thereof
and (b) the book value of the assets of such Person.
"Indemnified Liabilities" has the meaning specified in
Section 11.05.
"Indemnified Person" has the meaning specified in
Section 11.05.
"Independent Auditor" has the meaning specified in
subsection 7.01(a).
"Insolvency Proceeding" means, with respect to any Person,
(a) any case, action or proceeding with respect to such Person
before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or
(b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any
54
substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Intangibles" means, at any date of determination, any
goodwill, licensing agreements, patents, trademarks, trade names,
organization expenses, treasury stock, unamortized debt discount
and premium, deferred charges and other like intangibles;
provided, however, that any such intangible assets which are
acquired by the Company and its consolidated Subsidiaries on or
after September 30, 1998 in Acquisitions not prohibited hereunder
shall be deemed not to constitute "Intangibles" and shall be
counted (at book value) as assets of the Company and its
consolidated Subsidiaries for purposes of determining Tangible
Net Worth.
"Interest Payment Date" means, as to any Offshore Rate Loan,
the last day of each Interest Period applicable to such Loan and,
as to any Base Rate Committed Loan, the last Business Day of each
calendar quarter and the Revolving Termination Date, provided,
however, that (a) if any Interest Period for an Offshore Rate
Committed Loan exceeds three months, the date that falls three
months (as the case may be) after the beginning of such Interest
Period and after each Interest Payment Date thereafter is also an
Interest Payment Date, and (b) as to any Bid Loan, such
intervening dates prior to the maturity thereof as may be
specified by the Company and agreed to by the applicable Bid Loan
Lender in the applicable Competitive Bid shall also be Interest
Payment Dates.
"Interest Period" means, (a) as to any Offshore Rate Loan,
the period commencing on the date such Loan is disbursed, or (in
the case of any Offshore Rate Committed Loan) on the Conversion /
Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Committed Loan, and ending on the
date one, two, three or six or (if available to all of the Banks
in the given instance) nine or 12 months thereafter as selected
by the Company in its Notice of Borrowing, Notice of Conversion /
Continuation or Notice of Bid Request, as the case may be; and
(b) as to any Absolute Rate Bid Loan, a period of not less than
14 days and not more than 365 days as selected by the Company in
the applicable Competitive Bid Request;
provided that:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of an
Offshore Rate Loan, the result of such extension would be to
carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business
Day;
55
(ii) any Interest Period pertaining to an Offshore Rate
Loan that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period) shall end
on the last Business Day of the calendar month at the end of such
Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond
the date set forth in clause (a) of the definition of "Revolving
Termination Date."
"Invitation for Competitive Bids" means a solicitation for
Competitive Bids, substantially in the form of Exhibit I.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Issuance Date" has the meaning specified in
subsection 3.01(a).
"Issue" means, with respect to any Letter of Credit, to
issue or to extend the expiry of, or to renew or increase the
amount of, such Letter of Credit; and the terms "Issued,"
"Issuing" and "Issuance" have corresponding meanings.
"Issuing Bank" means BofA in its capacity as issuer of one
or more Letters of Credit hereunder, together with any
replacement letter of credit issuer arising under
subsection 10.01(b) or Section 10.09.
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or other
similar legal arrangement (whether created by contract or
conducted through a separate legal entity) now or hereafter
formed by the Company or any of its Subsidiaries with another
Person in order to conduct a common venture or enterprise with
such Person.
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for
amendment of outstanding standby letters of credit as shall at
any time be in use at the Issuing Bank, as the Issuing Bank shall
request.
"L/C Application" means an application form for issuances of
standby letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from
a drawing under any Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing
of Committed Loans under subsection 3.03(b).
"L/C Commitment" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to
56
participate in, Letters of Credit from time to time Issued or
outstanding under Article III, in an aggregate amount not to
exceed on any date the amount of $50,000,000, as the same shall
be reduced as a result of a reduction in the L/C Commitment
pursuant to Section 2.08; provided that the L/C Commitment is a
part of the combined Commitments, rather than a separate,
independent commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then
outstanding, plus (b) the amount of all unreimbursed drawings
under all Letters of Credit, including all outstanding L/C
Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other
document relating to any Letter of Credit, including any of the
Issuing Bank's standard form documents for letter of credit
issuances.
"Lead Arranger" means NationsBanc Montgomery Securities LLC,
a Delaware limited liability company.
"Lending Office" means, as to any Bank, the office or
offices of such Bank specified as its "Lending Office" or
"Domestic Lending Office" or "Offshore Lending Office", as the
case may be, on Schedule 11.02, or such other office or offices
as such Bank may from time to time notify the Company and the
Agent.
"Letters of Credit" means any standby letters of credit
Issued by the Issuing Bank pursuant to Article III.
"Leverage Ratio" means, as of the end of any fiscal quarter,
the ratio of (i) the consolidated Leverage Ratio Indebtedness of
the Company and its Subsidiaries plus, without duplication, all
Contingent Obligations of the Company and its Subsidiaries on a
consolidated basis, to (ii) EBITDA, calculated on a four quarter
rolling basis for such fiscal quarter and the three immediately
preceding fiscal quarters.
"Leverage Ratio Indebtedness" of any Person means, without
duplication, (a) all indebtedness for borrowed money; (b) all
non-contingent reimbursement or payment obligations with respect
to Surety Instruments; (c) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of
property, assets or businesses; (d) all indebtedness created or
arising under any conditional sale or other title retention
agreement; (e) all obligations with respect to capital leases;
(f) all unpaid obligations under Swap Contracts after the
termination thereof (including by virtue of the occurrence of an
Early Termination Date, as defined in each such Swap Contract);
57
(g) all Indebtedness referred to in clauses (a) through (f)
above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness;
and (h) all Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a)
through (f) above. For purposes of this Agreement, the amount of
any Indebtedness described in clause (g) above (to the extent
that such Person has not assumed or become liable for the payment
of such Indebtedness) shall be deemed to be to the lesser of (i)
the amount of such Indebtedness or (ii) the book value of the
property which is or may be subject to such Lien.
For all purposes of this Agreement, the Indebtedness of any
Person shall include all Indebtedness of any partnership or joint
venture or limited liability company in which such Person is a
general partner or a joint venturer or a member to the extent of
the lesser of (a) the recourse to such Person on account thereof
and (b) the book value of the assets of such Person.
"LIBO Rate" means, for any Interest Period with respect to a
LIBOR Bid Loan or Offshore Rate Committed Loan, the rate of
interest per annum determined by the Agent as the rate for
deposits in Dollars in the approximate amount of the requested
Loan for a period equal to the applicable Interest Period which
appears on the display designated at page 3750 on the Telerate
System (also known as Dow Jones Markets), or such other display
on the Telerate System as may replace such page displaying the
London Interbank offered rates, as of 11:00 a.m. (London time) on
the day that is two Business Days prior to the commencement of
such Interest Period. If the Agent is unable to obtain any
quotation as provided above, LIBOR shall be the rate of interest
per annum determined by the Agent to be the rate at which Dollar
deposits in the approximate amount of the amount of, in the case
of LIBOR Bid Loans, the LIBOR Bid Loans to be borrowed in such
Bid Loan Borrowing, and, in the case of Offshore Rate Committed
Loans, the Offshore Rate Committed Loan to be made or continued
as, or converted into, an Offshore Rate Committed Loan by BofA
and having a maturity comparable to such Interest Period would be
offered by BofA to major banks in the London inter bank market at
their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
58
"LIBOR Auction" means a solicitation of Competitive Bids
setting forth a LIBOR Bid Margin pursuant to Section 2.06.
"LIBOR Bid Loan" means any Bid Loan that bears interest at a
rate based upon the LIBO Rate.
"LIBOR Bid Margin" has the meaning specified in
subsection 2.06(c)(ii)(C).
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential
arrangement of any kind or nature whatsoever in respect of any
property (including those created by, arising under or evidenced
by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease
having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the
owner of the asset to which such lien relates as debtor, under
the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing,
but not including the interest of a lessor under an operating
lease (regardless of whether a financing statement has been filed
with respect thereto).
"Loan" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of a Committed Loan,
Bid Loan or L/C Advance.
"Loan Documents" means this Agreement, the Guaranty, any
Notes, the Fee Letters, the L/C-Related Documents, and all other
documents delivered to the Agent or any Bank in connection
herewith.
"Majority Banks" means (a) at any time prior to the
Revolving Termination Date, or after the Revolving Termination
Date if no Loans are then outstanding, Banks then holding more
than 50% of the Commitments, and (b) otherwise, Banks then
holding more than 50% of the then aggregate unpaid principal
amount of the Loans.
"Margin Stock" means "margin stock" as such term is defined
in Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the business,
assets, liabilities (actual or contingent), operations or
condition (financial or otherwise) of the Company or the Company
and its Subsidiaries taken as a whole; or (b) a material adverse
effect upon the legality, validity, binding effect or
enforceability against the Company or any Subsidiary of any Loan
Document.
"Material Subsidiary" means any current or future, direct or
indirect, Subsidiary that has (a) total assets or that has
59
one or more Subsidiaries that, in the aggregate, have total
assets, equal to or greater than 5% of the consolidated total
assets of the Company and its Subsidiaries or (b) total revenues
or that has one or more Subsidiaries that, in the aggregate, have
total revenues, equal to or greater than 10% of the consolidated
total revenues of the Company and its Subsidiaries, such revenues
determined on a four quarter rolling basis for the most recently
ended fiscal quarter and the three immediately preceding fiscal
quarters, in each case based upon the Company's most recent
financial statements delivered under Section 7.01.
"Multiemployer Plan" means a "multiemployer plan", within
the meaning of Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has
made, or been obligated to make, contributions.
"Net Issuance Proceeds" means, in respect of any issuance of
equity (other than pursuant to the exercise of stock options
issued to directors, employees and officers pursuant to stock
compensation or benefit plans) by the Company or any Subsidiary
on or after October 1, 1998, the amount equal to (a) the cash
proceeds and the fair market value of non-cash proceeds received
or receivable in connection therewith minus (b) the reasonable
out-of-pocket costs and expenses paid or incurred in connection
therewith.
"Notes" means the Committed Loan Notes and the Bid Loan
Notes.
"Notice of Borrowing" means a notice in substantially the
form of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Notice of Prepayment" means a notice in substantially the
form of Exhibit K.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by the Company to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"Offshore Rate Committed Loan" means any Committed Loan that
bears interest based on the LIBO Rate.
"Offshore Rate Loan" means any LIBOR Bid Loan or any
Offshore Rate Committed Loan.
"Operating Income" means, for any period, for the Company
and its Subsidiaries on a consolidated basis, earnings (or loss)
from operations, calculated in accordance with the methodology
used for calculating "Earnings from Operations" in the financial
statements referenced in Section 6.10.
60
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any
certificate of determination or instrument relating to the rights
of preferred shareholders of such corporation, any shareholder
rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or
from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Participant" has the meaning specified in
subsection 11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal
functions under ERISA.
"Pension Plan" means a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA which the
Company sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five
(5) plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Permitted Swap Obligations" means all obligations
(contingent or otherwise) of the Company or any Subsidiary
existing or arising under Swap Contracts, provided that each of
the following criteria is satisfied: (a) such obligations are
(or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated
with liabilities, commitments or assets held by such Person, or
changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or
taking a "market view;" and (b) such Swap Contracts do not
contain any provision ("walk-away" provision) exonerating the
non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture or Governmental
Authority.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Company sponsors or maintains
61
or to which the Company makes, is making, or is obligated to make
contributions and includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of such Bank's Commitment
divided by the combined Commitments of all Banks.
"Replacement Bank" has the meaning specified in
Section 4.08.
"Reportable Event" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its
property or to which the Person or any of its property is
subject.
"Responsible Officer" means the chief executive officer, the
president, the chief financial officer, the treasurer or the
controller of the Company, or any other officer having
substantially the same authority and responsibility.
"Revolving Termination Date" means the earlier to occur of:
(a) January 2, 2004; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal
functions.
"Strategic Investor Transaction" means the consummation by
the Company and its Subsidiaries of:
(a) the sale by the Company and its Subsidiaries of capital
stock of the Company to either (i) a strategic investor who is
purchasing such capital stock as a component of a partnership,
joint venture or similar arrangement between the Company and such
investor or (ii) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) who acquire such shares other than through a
registered, public offering; and
(b) the repurchase by the Company and its Subsidiaries of
capital stock of the Company in order to reduce or eliminate the
dilution which would otherwise be caused by the transaction
described in clause (a) above.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other
business entity of which more than 50% of the
62
voting stock , membership interests or other equity interests (in
the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more
of the Subsidiaries of the Person, or a combination thereof.
Unless the context otherwise clearly requires, references herein
to a "Subsidiary" refer to a Subsidiary of the Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap or option, bond, note or bill option,
interest rate option, forward foreign exchange transaction, cap,
collar or floor transaction, currency swap, cross-currency rate
swap, swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise
clearly requires, any master agreement relating to or governing
any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or
more Swap Contracts, after taking into account the effect of any
legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap
Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s),
and (b) for any date prior to the date referenced in clause (a),
the amount(s) determined as the mark-to-market value(s) for such
Swap Contracts, as determined in good faith by the Company based
upon one or more mid-market or other readily available quotations
provided by any recognized dealer in such Swap Contracts (which
may include any Bank).
"Tangible Net Worth" means, as of the date of determination,
the amount equal to (a) the gross book value of the assets of the
Company and its consolidated Subsidiaries minus (b) the sum of
(i) all applicable reserves and liabilities (including accrued
and deferred income taxes and all liabilities whether or not by
their terms they are subordinated liabilities) and (ii) the book
value of all Intangibles.
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or
similar charges, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, respectively,
taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the
laws of which such Bank or the Agent, as the case may be, is
organized or maintains a lending office.
63
"Type" has the meaning specified in the definition of
"Committed Loan."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance
with the assumptions used for funding the Pension Plan pursuant
to Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares required by law) 100% of
the capital stock of each class having ordinary voting power, and
100% of the capital stock of every other class, in each case, at
the time as of which any determination is being made, is owned,
beneficially and of record, by the Company, or by one or more of
the other Wholly-Owned Subsidiaries, or both.
"Year 2000 problem" means the inability of computers, as
well as embedded microchips in non-computing devices, to perform
properly date-sensitive functions with respect to certain dates
prior to and after December 31, 1999.Other Interpretive
Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, Section, Article,
Annex, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and
other writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments
and other modifications thereto, but only to the extent such
amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
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(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements
are cumulative and shall each be performed in accordance with
their terms. Unless otherwise expressly provided, any reference
to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in
its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the
Agent, the Company and the other parties, and are the products of
all parties. Accordingly, they shall not be construed against
the Banks or the Agent merely because of the Agent's or Banks'
involvement in their preparation. Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement
shall be made, in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 AMOUNTS AND TERMS OF COMMITMENTS.
Each Bank severally agrees, on the terms and conditions
set forth herein, to make Committed Loans to the Company from
time to time on any Business Day during the period from the
Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding the amount set forth
on Schedule 2.01 (such amount, as the same may be increased under
Section 2.07, reduced under Section 2.08 or increased or reduced
as a result of one or more assignments under Section 11.08, the
Bank's "Commitment"); provided, however, that, after giving
effect to any Committed Borrowing, the Effective Amount of all
outstanding Committed Loans and Bid Loans and the Effective
Amount of all L/C Obligations, shall not at any time exceed the
combined Commitments; and provided further, that the Effective
Amount of the Committed Loans of any Bank plus the participation
of such Bank in the Effective Amount of all L/C Obligations shall
not at any time exceed such Bank's Commitment. Within the limits
of each Bank's Commitment, and subject to the other terms and
conditions hereof, the Company may borrow under this
Section 2.01, prepay under Section 2.09 and reborrow under this
Section 2.01.
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2.02 Loan Accounts.
(a) The Loans made by each Bank and the Letters of
Credit Issued by the Issuing Bank shall be evidenced by one or
more accounts or records maintained by such Bank or Issuing Bank,
as the case may be, in the ordinary course of business. The
accounts or records maintained by the Agent, the Issuing Bank and
each Bank shall be conclusive absent manifest error of the amount
of the Loans made by the Banks to the Company and the Letters of
Credit Issued for the account of the Company, and the interest
and payments thereon. Any failure so to record or any error in
doing so shall not, however, limit or otherwise affect the
obligation of the Company hereunder or under any other Loan
Document to pay any amount owing with respect to the Loans or any
Letter of Credit.
(b) Upon the request of any Bank made through the
Agent, the Committed Loans made by such Bank may be evidenced by
one or more notes in the form of Exhibit F-1 (a "Committed Loan
Note"), and the Bid Loans made by such bank may be evidenced by
one or more notes in the form of Exhibit F-2 (a "Bid Loan Note"),
in each case instead of or in addition to loan accounts. Each
such Bank shall endorse on the schedules annexed to its Note(s)
the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with
respect thereto. Each such Bank is irrevocably authorized by the
Company to endorse its Note(s) and each Bank's record shall be
conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Company hereunder or under any such
Note to such Bank or under any other Loan Document.
2.03 Procedure for Committed Borrowing.
(a) Each Committed Borrowing shall be made upon the
Company's irrevocable written notice delivered to the Agent in
the form of a Notice of Borrowing, which notice must be received
by the Agent prior to (i) 9:00 a.m. (San Francisco time) three
Business Days prior to the requested Borrowing Date, in the case
of Offshore Rate Committed Loans; and (ii) 8:00 a.m. (San
Francisco time) on the requested Borrowing Date, in the case of
Base Rate Committed Loans, specifying:
(A) the amount of the Committed Borrowing, which shall be
in an aggregate minimum amount of $5,000,000 or any integral
multiple of $1,000,000 in excess thereof;
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(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Committed Borrowing;
and
(D) the duration of the Interest Period applicable to such
Committed Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest Period
for any Committed Borrowing comprised Offshore Rate Loans, such
Interest Period shall be three months.
(b) The Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such
Bank's Pro Rata Share of that Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata
Share of each Committed Borrowing available to the Agent for the
account of the Company at the Agent's Payment Office by
11:00 a.m. (San Francisco time) on the Borrowing Date requested
by the Company in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the
Company by the Agent at such office by crediting the account of
the Company on the books of BofA with the aggregate of the
amounts made available to the Agent by the Banks and in like
funds as received by the Agent or by wire transfer in accordance
with written instructions provided to the Agent by the Company of
like funds as received by the Agent.
(d) After giving effect to any Committed Borrowing,
unless the Agent shall otherwise consent, there may not be more
than 10 different Interest Periods in effect for Committed Loans
and Bid Loans then outstanding.
2.04 Conversion and Continuation Elections for Committed
Borrowings.
(a) The Company may, upon irrevocable written notice
to the Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of Base Rate
Committed Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Committed Loans, to convert
any such Loans (or any part thereof in an amount not less than
$5,000,000, or that is in an integral multiple of $1,000,000 in
excess thereof) into Loans of the other Type; or
(ii) elect as of the last day of the applicable Interest Period,
to continue any Offshore Rate Committed Loans having Interest
Periods expiring on such day (or any part thereof in an amount
not less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore
Rate Committed Loans in respect of any Committed Borrowing is
reduced, by payment, prepayment, or conversion of part thereof
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to be less than $5,000,000, such Offshore Rate Committed Loans
shall automatically convert into Base Rate Committed Loans, and
on and after such date the right of the Company to continue such
Offshore Rate Committed Loans as Offshore Rate Committed Loans
shall terminate.
(b) The Company shall deliver a Notice of Conversion /
Continuation to be received by the Agent not later than (i) 9:00
a.m. (San Francisco time) at least three Business Days in advance
of the Conversion / Continuation Date, if the Committed Loans are
to be converted into or continued as Offshore Rate Committed
Loans; and (ii) 8:00 a.m. (San Francisco time) on the
Conversion / Continuation Date, if the Committed Loans are to be
converted into Base Rate Committed Loans, specifying:
(A) the proposed Conversion / Continuation Date;
(B) the aggregate amount of Committed Loans to be converted or
continued;
(C) the Type of Committed Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Committed Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Committed Loans, the Company has
failed to select timely a new Interest Period to be applicable to
such Offshore Rate Committed Loans, or if any Default or Event of
Default then exists and the Agent or the Majority Banks so
require, the Company shall be deemed to have elected to convert
such Offshore Rate Committed Loans into Base Rate Committed Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt
of a Notice of Conversion / Continuation, or, if no timely notice
is provided by the Company, the Agent will promptly notify each
Bank of the details of any automatic conversion. All conversions
and continuations shall be made ratably according to the
respective outstanding principal amounts of the Committed Loans
with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the
existence of a Default or Event of Default, the Company may not
elect to have a Committed Loan converted into or continued as an
Offshore Rate Committed Loan.
(f) After giving effect to any conversion or continuation
of Committed Loans, unless the Agent shall otherwise consent,
there may not be more than 10 different Interest Periods in
effect for Committed Loans and Bid Loans then outstanding.
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2.05 Bid Borrowings. In addition to Committed
Borrowings pursuant to Section 2.03, each Bank severally agrees
that the Company may, as set forth in Section 2.06, from time to
time request the Banks prior to the Revolving Termination Date to
submit offers to make Bid Loans to the Company; provided,
however, that the Banks may, but shall have no obligation to,
submit such offers and the Company may, but shall have no
obligation to, accept any such offers; and provided, further,
that at no time shall (a) the Effective Amount of all outstanding
Committed Loans and Bid Loans and the Effective Amount of all L/C
Obligations exceed the combined Commitments; or (b) unless the
Agent shall otherwise consent, the number of Interest Periods for
Bid Loans then outstanding plus the number of Interest Periods
for Committed Loans then outstanding exceed ten.
2.06 Procedure for Bid Borrowings.
(a) When the Company wishes to request the Banks to
submit offers to make Bid Loans hereunder, it shall transmit to
the Agent by telephone call followed promptly by facsimile
transmission a notice in substantially the form of Exhibit H (a
"Competitive Bid Request") so as to be received no later than
7:00 a.m. (San Francisco time) (x) four Business Days prior to
the date of a proposed Bid Borrowing in the case of a LIBOR
Auction, or (y) one Business Day prior to the date of a proposed
Bid Borrowing in the case of an Absolute Rate Auction,
specifying:
(i) the date of such Bid Borrowing, which shall
be a Business Day;
(ii) the aggregate amount of such Bid Borrowing,
which shall be a minimum amount of $5,000,000 or in integral
multiples of $1,000,000 in excess thereof;
(iii) whether the Competitive Bids requested are
to be for LIBOR Bid Loans or Absolute Rate Bid Loans or
both; and
(iv) the duration of the Interest Period
applicable thereto, subject to the provisions of the
definition of "Interest Period" herein.
Subject to subsection 2.06(c), the Company may not request
Competitive Bids for more than three Interest Periods in a single
Competitive Bid Request and may not request Competitive Bids more
than once in any period of five Business Days.
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(b) Upon receipt of a Competitive Bid Request, the
Agent will promptly send to the Banks by facsimile transmission
an Invitation for Competitive Bids, which shall constitute an
invitation by the Company to each Bank to submit Competitive Bids
offering to make the Bid Loans to which such Competitive Bid
Request relates in accordance with this Section 2.06.
(c) (i) Each Bank may at its discretion submit a
Competitive Bid containing an offer or offers to make Bid
Loans in response to any Invitation for Competitive Bids.
Each Competitive Bid must comply with the requirements of
this subsection 2.06(c) and must be submitted to the Agent
by facsimile transmission at the Agent's office for notices
set forth on the signature pages hereto not later than
(1) 6:30 a.m. (San Francisco time) three Business Days prior
to the proposed date of Borrowing, in the case of a LIBOR
Auction or (2) 6:30 a.m. (San Francisco time) on the
proposed date of Borrowing, in the case of an Absolute Rate
Auction; provided that Competitive Bids submitted by the
Agent (or any Affiliate of the Agent) in the capacity of a
Bank may be submitted, and may only be submitted, if the
Agent or such Affiliate notifies the Company of the terms of
the offer or offers contained therein not later than
(A) 6:15 a.m. (San Francisco time) three Business Days prior
to the proposed date of Borrowing, in the case of a LIBOR
Auction or (B) 6:15 a.m. (San Francisco time) on the
proposed date of Borrowing, in the case of an Absolute Rate
Auction.
(ii) Each Competitive Bid shall be in
substantially the form of Exhibit J, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which
principal amount (x) may be equal to, greater than or
less than the Commitment of the quoting Bank, (y) must
be $5,000,000 or an integral multiple of $1,000,000 in
excess thereof, and (z) may not exceed the principal
amount of Bid Loans for which Competitive Bids were
requested;
(C) in case the Company elects a LIBOR
Auction, the margin above or below LIBOR (the "LIBOR
Bid Margin") offered for each such Bid Loan, expressed
in multiples of 1/1000th of one basis point to be added
to or subtracted from the applicable LIBOR and the
Interest Period applicable thereto;
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(D) in case the Company elects an Absolute
Rate Auction, the rate of interest per annum expressed
in multiples of 1/1000th of one basis point (the
"Absolute Rate") offered for each such Bid Loan; and
(E) the identity of the quoting Bank.
A Competitive Bid may contain up to three separate offers by
the quoting Bank with respect to each Interest Period
specified in the related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded
if it:
(A) is not substantially in conformity with
Exhibit J or does not specify all of the information
required by subsection (c)(ii) of this Section;
(B) contains qualifying, conditional or
similar language;
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
(D) arrives after the time set forth in
subsection (c)(i).
(d) Promptly on receipt and not later than 7:00 a.m.
(San Francisco time) three Business Days prior to the proposed
date of Borrowing in the case of a LIBOR Auction, or 7:00 a.m.
(San Francisco time) on the proposed date of Borrowing, in the
case of an Absolute Rate Auction, the Agent will notify the
Company of the terms (i) of any Competitive Bid submitted by a
Bank that is in accordance with subsection 2.06(c), and (ii) of
any Competitive Bid that amends, modifies or is otherwise
inconsistent with a previous Competitive Bid submitted by such
Bank with respect to the same Competitive Bid Request. Any such
subsequent Competitive Bid shall be disregarded by the Agent
unless such subsequent Competitive Bid is submitted solely to
correct a manifest error in such former Competitive Bid and only
if received within the times set forth in subsection 2.06(c).
The Agent's notice to the Company shall specify (1) the aggregate
principal amount of Bid Loans for which offers have been received
for each Interest Period specified in the related Competitive Bid
Request; and (2) the respective principal amounts and LIBOR Bid
Margins or Absolute Rates, as the case may be, so offered.
Subject only to the provisions of Sections 4.02, 4.05 and 5.02
and the provisions of this subsection (d), any Competitive Bid
shall be irrevocable except with the written consent of the Agent
given on the written instructions of the Company.
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(e) Not later than 7:30 a.m. (San Francisco time)
three Business Days prior to the proposed date of Borrowing, in
the case of a LIBOR Auction, or 7:30 a.m. (San Francisco time) on
the proposed date of Borrowing, in the case of an Absolute Rate
Auction, the Company shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to
subsection 2.06(d). The Company shall be under no obligation to
accept any offer and may choose to reject all offers. In the
case of acceptance, such notice shall specify the aggregate
principal amount of offers for each Interest Period that is
accepted. The Company may accept any Competitive Bid in whole or
in part; provided that:
(i) the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in
the related Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing
must be $5,000,000 or in any integral multiple of $1,000,000
in excess thereof;
(iii) acceptance of offers may only be made on
the basis of ascending LIBOR Bid Margins or Absolute Rates
within each Interest Period, as the case may be; and
(iv) the Company may not accept any offer that is
described in subsection 2.06(c)(iii) or that otherwise fails
to comply with the requirements of this Agreement.
(f) If offers are made by two or more Banks with the
same LIBOR Bid Margins or Absolute Rates, as the case may be, for
a greater aggregate principal amount than the amount in respect
of which such offers are accepted for the related Interest
Period, the principal amount of Bid Loans in respect of which
such offers are accepted shall be allocated by the Agent among
such Banks as nearly as possible (in such integral multiples, not
less than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers.
Determination by the Agent of the amounts of Bid Loans shall be
conclusive in the absence of manifest error.
(g) (i) The Agent will promptly notify each Bank
having submitted a Competitive Bid if its offer has been
accepted and, if its offer has been accepted, of the amount
of the Bid Loan or Bid Loans to be made by it on the date of
the Bid Borrowing.
(ii) Each Bank which has received notice pursuant
to subsection 2.06(g)(i) that its Competitive Bid has been
accepted shall make the amounts of such Bid Loans available
to the Agent for the account of the Company at the Agent's
Payment Office, by 11:00 a.m. (San Francisco time) in the
case of Absolute Rate Bid Loans, and by
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11:00 a.m. (San Francisco time) in the case of LIBOR Bid
Loans, on such date of Bid Borrowing, in funds immediately
available to the Agent for the account of the Company at the
Agent's Payment Office.
(iii) Promptly following each Bid Borrowing,
the Agent shall notify each Bank of the ranges of bids
submitted and the highest and lowest Bids accepted for each
Interest Period requested by the Company and the aggregate
amount borrowed pursuant to such Bid Borrowing.
(iv) From time to time, the Company and the Banks
shall furnish such information to the Agent as the Agent may
request relating to the making of Bid Loans, including the
amounts, interest rates, dates of borrowings and maturities
thereof, for purposes of the allocation of amounts received
from the Company for payment of all amounts owing hereunder.
(h) If, on or prior to the proposed date of Borrowing,
the Commitments have not been terminated and if, on such proposed
date of Borrowing all applicable conditions to funding referenced
in Sections 4.02, 4.05 and 5.02 are satisfied, the Banks whose
offers the Company has accepted will fund each Bid Loan so
accepted. Nothing in this Section 2.06 shall be construed as a
right of first offer in favor of the Banks or to otherwise limit
the ability of the Company to request and accept credit
facilities from any Person (including any of the Banks), provided
that no Default or Event of Default would otherwise arise or
exist as a result of the Company executing, delivering or
performing under such credit facilities.
2.07 Increase in Commitments. (a) The Company shall
have the right at any time and from time to time (provided, that
such right may not be exercised by the Company more than twice)
prior to the date which is two years after the Closing Date to
increase the aggregate Commitments hereunder by a cumulative,
aggregate amount which is less than or equal to $150,000,000 by
(i) requesting (which request may be agreed to or declined by
such Bank in its sole discretion) that one or more Banks (each,
an "Increasing Bank") increase its respective Commitment or (ii)
by adding to this Agreement one or more financial institutions
(each such Person, an "Additional Bank"), provided, however, that
each Additional Bank shall be an Eligible Assignee and shall be
approved by the Agent, such approval not to be unreasonably
withheld. Such increase shall be effectuated pursuant to an
agreement with such Increasing Bank or Additional Bank in form
and substance
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satisfactory to the Company and the Agent pursuant to which (x)
in the case of an Additional Bank, such Additional Bank shall
undertake a Commitment, which Commitment shall be in an amount at
least equal to $10,000,000 or any integral multiple of $1,000,000
in excess thereof, (y) in the case of an Increasing Bank, such
Increasing Bank shall increase its Commitment, which increase in
its Commitment shall be at least equal to $5,000,000 or in
integral multiple of $1,000,000 in excess thereof, and (z) in
each case, such Person shall purchase from the Issuing Bank a
risk participation in the amount necessary to cause it to hold a
risk participation in its Pro Rata Share of each outstanding
Letter of Credit in accordance with the provisions of subsection
3.03(a). Upon the effectiveness of any such agreement and its
acknowledgement by the Agent (the date of such effectiveness and
acknowledgement, the "Increased Commitment Date"), such
Additional Bank shall thereupon become a "Bank" for all purposes
of this Agreement with a Commitment in the amount set forth in
such agreement or, as applicable, the Commitment of such
Increasing Bank shall be increased in the amount set forth in
such agreement, and this Agreement (including Schedule 2.01)
shall be deemed amended to the extent, but only to the extent,
necessary to reflect the addition of such Additional Bank or the
increased Commitment of such Increasing Bank, the resulting
adjustment of the Commitments arising therefrom and the
adjustments described in subsection 2.07(d).
(b) Any increase in the aggregate Commitments under
this Section 2.07 shall not be effective unless:
(i) the Company shall have given the Agent notice
of such increase at least 20 Business Days (or such shorter
period as the Agent may agree to in the given instance) prior to
any such proposed Increased Commitment Date;
(ii) no Default or Event of Default shall have
occurred and be continuing as of the date of the notice referred
to in the foregoing clause (i) or on the Increased Commitment
Date; and
(iii) the representations and warranties of the
Company in Article VI and of the Guarantors in the Guaranty shall
be true and correct on and as of the date of the notice referred
to in clause (i) and on and as of the Increased Commitment Date
with the same effect as if made on and as of such notice date or
Increased Commitment Date (except to the extent such
representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such
earlier date).
Each notice given by the Company pursuant to subsection
2.07(b)(i) shall constitute a representation and warranty by the
74
Company hereunder, as of the date of each such notice and as of
each Increased Commitment Date, and after giving effect to the
increase in aggregate Commitments effective thereon, that the
conditions in this subsection 2.07(b) are satisfied.
(c) Effective on the Increased Commitment Date, (i)
the amount of each Bank's risk participation in all outstanding
Letters of Credit shall be deemed to be automatically increased
or decreased, as applicable, to reflect any changes in such
Bank's Pro Rata Share after giving effect to the increase in the
aggregate Commitments effective thereon, and (ii) the amount of
Committed Loans then outstanding and held by each Bank shall be
adjusted to reflect any such changes in such Bank's Pro Rata
Share, subject to Section 4.04. Each Bank having Committed Loans
then outstanding and whose Pro Rata Share has been decreased as a
result of the increase in the aggregate Commitments shall be
deemed to have assigned, without recourse, such portion of such
Committed Loans as shall be necessary to effectuate such
adjustment to the Additional Banks and Increasing Banks. Each
Additional Bank and Increasing Bank shall (x) be deemed to have
assumed such portion of such Committed Loans and (y) fund on the
Increased Commitment Date such assumed amounts to the Agent for
the account of the assigning Bank in accordance with the
provisions hereof.
(b) The Agent shall promptly notify the Banks and the
Company of any increase in the aggregate Commitments under this
Section and of each Bank's Pro Rata Share after giving effect to
any such increase.
2.08 Voluntary Termination or Reduction of Commitments.
The Company may, upon not less than five Business Days' prior
notice to the Agent, terminate the Commitments, or permanently
reduce the Commitments by an aggregate minimum amount of
$5,000,000 or any integral multiple of $1,000,000 in excess
thereof; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, (a) the
Effective Amount of all Committed Loans, Bid Loans and L/C
Obligations together would exceed the amount of the combined
Commitments then in effect, or (b) the Effective Amount of all
L/C Obligations (net of any Cash Collateral provided on account
thereof) then outstanding would exceed the L/C Commitment.
Except to the extent provided in Section 2.07, once reduced in
accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to
each Bank according to its Pro Rata Share. If and to the extent
specified by the Company in the notice to the Agent, some or all
of the reduction in the combined Commitments shall be applied to
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reduce the L/C Commitment. All accrued commitment and letter of
credit fees to, but not including, the effective date of any
termination of Commitments, shall be paid on the effective date
of such termination.
2.09 Optional Prepayments.
(a) Subject to Section 4.04, the Company may, at any
time or from time to time, upon delivering irrevocable written
notice to the Agent in the form of a Notice of Prepayment, which
notice must be received by the Agent prior to (i) 8:00 a.m. (San
Francisco time) on the requested prepayment date in the case of a
prepayment of Base Rate Committed Loans and (ii) 9:00 a.m. (San
Francisco time) three Business Days' prior to the requested
prepayment date in the case of a prepayment of Offshore Rate
Committed Loans, ratably prepay Committed Loans in whole or in
part, in minimum amounts of $5,000,000 or any integral multiple
of $1,000,000 in excess thereof. Such notice of prepayment shall
specify the date and amount of such prepayment and the Type(s) of
Committed Loans to be prepaid. The Agent will promptly notify
each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by
the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable
on the date specified therein, together with accrued interest to
each such date on the amount of Offshore Rate Committed Loans
prepaid and any amounts required pursuant to Section 4.04.
(b) Bid Loans may not be voluntarily prepaid other
than with the consent of the applicable Bid Loan Lender.
2.10 Mandatory Cash Collateralization of Letters of
Credit; Mandatory Prepayments of Loans. If on any date the
Effective Amount of L/C Obligations exceeds the L/C Commitment,
the Company shall Cash Collateralize on such date the outstanding
Letters of Credit in an amount equal to the excess of the maximum
amount then available to be drawn under the Letters of Credit
over the Aggregate L/C Commitment. Subject to Section 4.04, if
on any date after giving effect to any Cash Collateralization
made on such date pursuant to the preceding sentence, the
Effective Amount of all Committed Loans and Bid Loans then
outstanding plus the Effective Amount of all L/C Obligations
exceeds the combined Commitments, the Company shall immediately,
and without notice or demand, prepay the outstanding principal
amount of the Committed Loans and L/C Advances by an amount equal
to the applicable excess.
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2.11 Repayment.
The Company shall repay each Bid Loan on the last day
of the relevant Interest Period, and shall repay in full on the
Revolving Termination Date the aggregate principal amount of
Loans outstanding on such date.
2.12 Interest.
(a) Each Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable
Borrowing Date at a rate per annum equal to the LIBO Rate or the
Base Rate, as the case may be (and subject to the Company's right
to convert to other Types of Loans under Section 2.04), plus the
Applicable Amount. Each Bid Loan shall bear interest on the
outstanding principal amount thereof from the relevant Borrowing
Date at a rate per annum equal to the LIBO Rate plus (or minus)
the LIBOR Bid Margin, or at the Absolute Rate, as the case may
be.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the
date of any prepayment of Offshore Rate Committed Loans under
Section 2.09 for the portion of the Offshore Rate Committed Loans
so prepaid and upon payment (including prepayment) in full
thereof and, during the existence of any Event of Default,
interest shall be paid on demand of the Agent at the request or
with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section,
while any Event of Default exists or after acceleration, the
Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal
amount of all outstanding Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Amount
then in effect for such Loans and, in the case of Obligations not
subject to an Applicable Amount, at a rate per annum equal to the
Base Rate plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base
Rate plus 2%.
(d) Anything herein to the contrary notwithstanding,
the obligations of the Company to any Bank hereunder shall be
subject to the limitation that payments of interest shall not be
required for any period for which interest is computed hereunder,
to the extent (but only to the extent) that contracting for or
receiving such payment by such Bank would be contrary to the
provisions of any law applicable to such Bank
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limiting the highest rate of interest that may be lawfully
contracted for, charged or received by such Bank, and in such
event the Company shall pay such Bank interest at the highest
rate permitted by applicable law.
2.13 Fees. In addition to certain fees described in
Section 3.08:
(a) Arrangement, Administrative Fees. The Company
shall pay certain arrangement fees to the Lead Arranger for the
Lead Arranger's own account, and shall pay certain administrative
fees to the Agent for the Agent's own account, as required by the
letter agreement ("Fee Letter") between the Company and the Lead
Arranger and Agent dated October 27, 1998.
(b) Commitment Fees. The Company shall pay to the
Agent for the account of each Bank a commitment fee on the actual
daily unused portion of such Bank's Commitment, computed on a
quarterly basis in arrears on the last Business Day of each
calendar quarter based upon the daily utilization for that
quarter as calculated by the Agent, at a per annum rate equal to
the Applicable Amount. For purposes of calculating utilization
under this subsection, the Commitments shall be deemed used to
the extent of the Effective Amount of Committed Loans then
outstanding, plus the Effective Amount of L/C Obligations then
outstanding. Such commitment fee shall accrue from the Closing
Date to the Revolving Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each
calendar quarter (commencing on March 31, 1999) through the
Revolving Termination Date, with the final payment to be made on
the Revolving Termination Date. The commitment fees provided in
this subsection shall accrue at all times after the above-
mentioned commencement date, including at any time during which
one or more conditions in Article V are not met.
(c) Utilization Fees The Company shall pay to the
Agent for the account of each Bank a utilization fee on the
actual daily Effective Amount of such Bank's Committed and Bid
Loans and Pro Rata Share of the Effective Amount of L/C
Obligations outstanding hereunder with respect to each day on
which the Effective Amount of Committed Loans, Bid Loans and L/C
Obligations then outstanding exceed 50% of the combined
Commitments (each such day, a "Utilization Fee Day". Such fee
shall be computed with respect to each Utilization Fee Day at a
rate equal to 0.10% per annum, and shall accrue with respect to
each Utilization Fee Day occurring on and after the Closing Date
to the later to occur of (i) the Revolving Termination Date and
(ii) the date on which all Loans and L/C Obligations and interest
thereon are paid in full, and, to the extent accrued
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during such period, shall be due and payable quarterly in arrears
on the last Business Day of each calendar quarter (commencing on
March 31, 1999) through the later to occur of (x) the Revolving
Termination Date and (y) the date on which all Loans and L/C
Obligations and interest thereon are paid in full, with the final
payment to be made on the latest to occur of such dates.
2.14 Computation of Fees and Interest.
(a) All computations of interest for Base Rate
Committed Loans when the Base Rate is determined by BofA's
"reference rate" shall be made on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day
year). Interest and fees shall accrue during each period during
which interest or such fees are computed from the first day
thereof to the last day thereof.
(b) Each determination of an interest rate by the
Agent shall be conclusive and binding on the Company and the
Banks in the absence of manifest error. The Agent will, at the
request of the Company or any Bank, deliver to the Company or the
Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting
interest rate.
2.15 Payments by the Company.
(a) All payments to be made by the Company shall be
made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company
shall be made to the Agent for the account of the Banks at the
Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 11:00 a.m. (San
Francisco time) on the date specified herein. The Agent will
promptly distribute to each Bank its Pro Rata Share (or other
applicable share as expressly provided herein) of such payment in
like funds as received. Any payment received by the Agent later
than 11:00 a.m. (San Francisco time) shall (unless the Agent
shall otherwise agree) be deemed to have been received on the
following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is
due on a day other than a Business Day, such payment shall be
made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or
fees, as the case may be.
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(c) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Banks that
the Company will not make such payment in full as and when
required, the Agent may assume that the Company has made such
payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Bank on such
due date an amount equal to the amount then due such Bank. If
and to the extent the Company has not made such payment in full
to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon
at the Federal Funds Rate for each day from the date such amount
is distributed to such Bank until the date repaid.
2.15 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or
prior to the Closing Date or, with respect to any Borrowing after
the Closing Date, no later than (i) one Business Day prior to the
date of such Borrowing, in the case of a Borrowing of Offshore
Rate Committed Loans or (ii) 10:00 a.m. (San Francisco time) on
the requested date of Borrowing, in the case of a Borrowing of
any other type of Loans, that such Bank will not make available
as and when required hereunder to the Agent for the account of
the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such
amount available to the Agent in immediately available funds on
the Borrowing Date and the Agent may (but shall not be so
required), in reliance upon such assumption, make available to
the Company on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to
the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount, that
Bank shall on the Business Day following such Borrowing Date make
such amount available to the Agent, together with interest at the
Federal Funds Rate for each day during such period. A notice of
the Agent submitted to any Bank with respect to amounts owing
under this subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the
Agent shall constitute such Bank's Loan on the date of Borrowing
for all purposes of this Agreement. If such amount is not made
available to the Agent on the Business Day following the
Borrowing Date, the Agent will notify the Company of such failure
to fund and, upon demand by the Agent, the Company shall pay such
amount to the Agent for the Agent's account, together with
interest thereon for each day
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elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation
hereunder to make a Loan on such Borrowing Date, but no Bank
shall be responsible for the failure of any other Bank to make
the Loan to be made by such other Bank on any Borrowing Date.
2.17 Sharing of Payments, Etc. If, other than as
expressly provided elsewhere herein, any Bank shall obtain on
account of the Loans made by it any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify
the Agent of such fact, and (b) purchase from the other Banks
such participations in the Loans made by them as shall be
necessary to cause such purchasing Bank to share the excess
payment pro rata with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered
from the purchasing Bank, such purchase shall to that extent be
rescinded and each other Bank shall repay to the purchasing Bank
the purchase price paid therefor, together with an amount equal
to such paying Bank's ratable share (according to the proportion
of (i) the amount of such paying Bank's required repayment to
(ii) the total amount so recovered from the purchasing Bank) of
any interest or other amount paid or payable by the purchasing
Bank in respect of the total amount so recovered. The Company
agrees that any Bank so purchasing a participation from another
Bank may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off, but
subject to Section 11.10) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in
the amount of such participation. The Agent will keep records
(which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in
each case notify the Banks and the Company following any such
purchases or repayments.
2.18 Guaranty. The Obligations shall be
unconditionally and irrevocably guaranteed by the Guarantors
pursuant to the Guaranty.
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article iii
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein
(i) the Issuing Bank agrees, (A) from time to time on any
Business Day during the period from the Closing Date to the
Revolving Termination Date to issue Letters of Credit for the
account of the Company, and to amend or renew Letters of Credit
previously issued by it, in accordance with subsections 3.02(c)
and 3.02(d), and (B) to honor drafts under the Letters of Credit;
and (ii) the Banks severally agree to participate in Letters of
Credit Issued for the account of the Company; provided, that the
Issuing Bank shall not be obligated to Issue, and no Bank shall
be obligated to participate in, any Letter of Credit if as of the
date of Issuance of such Letter of Credit (the "Issuance Date")
(1) the Effective Amount of all L/C Obligations plus the
Effective Amount of all Committed Loans and Bid Loans exceeds the
combined Commitments, (2) the participation of any Bank in the
Effective Amount of all L/C Obligations plus the Effective Amount
of the Committed Loans of such Bank exceeds such Bank's
Commitment, or (3) the Effective Amount of L/C Obligations
exceeds the L/C Commitment. Within the foregoing limits, and
subject to the other terms and conditions hereof, the Company's
ability to obtain Letters of Credit shall be fully revolving,
and, accordingly, the Company may, during the foregoing period,
obtain Letters of Credit to replace Letters of Credit which have
expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue
any Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms
purport to enjoin or restrain the Issuing Bank from
Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive
(whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing
Bank shall prohibit, or request that the Issuing Bank
refrain from, the Issuance of letters of credit generally
or such Letter of Credit in particular or shall impose
upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement
(for which the Issuing Bank is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall
impose upon the Issuing Bank any unreimbursed loss, cost
or expense which was not applicable on the Closing Date
and which the Issuing Bank in good faith deems material to
it;
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(ii) the Issuing Bank has received written notice
from any Bank, the Agent or the Company, on or prior to the
Business Day prior to the requested date of Issuance of such
Letter of Credit, that one or more of the applicable
conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of
Credit is (A) more than one year after the date of Issuance,
unless the Majority Banks have approved such expiry date in
writing, or (B) after the Revolving Termination Date, unless
all of the Banks have approved such expiry date in writing;
(iv) unless agreed to by the Issuing Bank in the
given instance, the expiry date of any requested Letter of
Credit is prior to the maturity date of any financial
obligation to be supported by the requested Letter of
Credit;
(v) any requested Letter of Credit does not
provide for drafts, or is not otherwise in form and
substance acceptable to the Issuing Bank, or the Issuance of
a Letter of Credit shall violate any applicable policies of
general application of the Issuing Bank;
(vi) unless agreed to by the Issuing Bank in the
given instance, any standby Letter of Credit is for the
purpose of supporting the issuance of any letter of credit
by any other Person; or
(vii) such Letter of Credit is in a face
amount less than $2,500,000 or to be denominated in a
currency other than Dollars.
3.02 Issuance, Amendment and Renewal of Letters of
Credit.
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Company received by the Issuing Bank (with
a copy sent by the Company to the Agent) at least four days (or
such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of
issuance. Each such request for issuance of a Letter of Credit
shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to the Issuing Bank: (i) the
proposed date of issuance of the Letter of Credit (which shall be
a Business Day); (ii) the face amount of the Letter of Credit;
(iii) the expiry date of the Letter of Credit; (iv) the name and
address of the beneficiary
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thereof; (v) the documents to be presented by the
beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented
by the beneficiary in case of any drawing thereunder; and
(vii) such other matters as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance
of any Letter of Credit, the Issuing Bank will confirm with the
Agent (by telephone or in writing) that the Agent has received a
copy of the L/C Application or L/C Amendment Application from the
Company and, if not, the Issuing Bank will provide the Agent with
a copy thereof. Unless the Issuing Bank has received notice on
or before the Business Day immediately preceding the date the
Issuing Bank is to issue a requested Letter of Credit from the
Agent (A) directing the Issuing Bank not to issue such Letter of
Credit because such issuance is not then permitted under
subsection 3.01(a) as a result of the limitations set forth in
clauses (1) through (3) thereof or subsection 3.01(b)(ii); or
(B) that one or more conditions specified in Article V are not
then satisfied; then, subject to the terms and conditions hereof,
the Issuing Bank shall, on the requested date, issue a Letter of
Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the
Issuing Bank will, upon the written request of the Company
received by the Issuing Bank (with a copy sent by the Company to
the Agent) at least four days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any
Letter of Credit issued by it. Each such request for amendment
of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be
amended; (ii) the proposed date of amendment of the Letter of
Credit (which shall be a Business Day); (iii) the nature of the
proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation
to amend any Letter of Credit if: (A) the Issuing Bank would
have no obligation at such time to issue such Letter of Credit in
its amended form under the terms of this Agreement; or (B) the
beneficiary of any such letter of Credit does not accept the
proposed amendment to the Letter of Credit. The Agent will
promptly notify the Banks of the receipt by it of any L/C
Application or L/C Amendment Application.
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(d) The Issuing Bank and the Banks agree that, while a
Letter of Credit is outstanding and prior to the Revolving
Termination Date, at the option of the Company and upon the
written request of the Company received by the Issuing Bank (with
a copy sent by the Company to the Agent) at least four days (or
such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Bank shall be entitled to
authorize the renewal of any Letter of Credit issued by it. Each
such request for renewal of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the
form of an L/C Amendment Application, and shall specify in form
and detail satisfactory to the Issuing Bank: (i) the Letter of
Credit to be renewed; (ii) the proposed date of notification of
renewal of the Letter of Credit (which shall be a Business Day);
(iii) the revised expiry date of the Letter of Credit; and
(iv) such other matters as the Issuing Bank may require. The
Issuing Bank shall be under no obligation so to renew any Letter
of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue or amend such Letter of Credit in its renewed
form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed renewal of
the Letter of Credit. If any outstanding Letter of Credit shall
provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that
such Letter of Credit shall not be renewed, and if at the time of
renewal the Issuing Bank would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with
this subsection 3.02(d) upon the request of the Company but the
Issuing Bank shall not have received any L/C Amendment
Application from the Company with respect to such renewal or
other written direction by the Company with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter
of Credit to renew, and the Company and the Banks hereby
authorize such renewal, and, accordingly, the Issuing Bank shall
be deemed to have received an L/C Amendment Application from the
Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the
Agent at the direction of the Majority Banks), deliver any
notices of termination or other communications to any Letter of
Credit beneficiary or transferee, and take any other action as
necessary or appropriate, at any time and from time to time, in
order to cause the expiry date of such Letter of Credit to be a
date not later than the Revolving Termination Date.
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(f) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of
Credit).
(g) The Issuing Bank will also deliver to the Agent
and the Company, concurrently or promptly following its delivery
of a Letter of Credit, or amendment to or renewal of a Letter of
Credit, to an advising bank or a beneficiary, a true and complete
copy of each such Letter of Credit or amendment to or renewal of
a Letter of Credit.
3.03 Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of
Credit, each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a
participation in such Letter of Credit and each drawing
thereunder in an amount equal to the product of (i) the Pro Rata
Share of such Bank, times (ii) the maximum amount available to be
drawn under such Letter of Credit and the amount of such drawing,
respectively. For purposes of Section 2.01, each Issuance of a
Letter of Credit shall be deemed to utilize the Commitment of
each Bank by an amount equal to the amount of such participation.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank
will promptly notify the Company. The Company shall reimburse
the Issuing Bank prior to 10:00 a.m. (San Francisco time), on
each date that any amount is paid by the Issuing Bank under any
Letter of Credit (each such date, an "Honor Date"), in an amount
equal to the amount so paid by the Issuing Bank. In the event
the Company fails to reimburse the Issuing Bank for the full
amount of any drawing under any Letter of Credit by 10:00 a.m.
(San Francisco time) on the Honor Date, the Issuing Bank will
promptly notify the Agent and the Agent will promptly notify each
Bank thereof, and the Company shall be deemed to have requested
that Base Rate Committed Loans be made by the Banks to be
disbursed on the Honor Date under such Letter of Credit, subject
to the amount of the unutilized portion of the Commitments and
subject to the conditions set forth in Section 5.02. Any notice
given by the Issuing Bank or the Agent pursuant to this
subsection 3.03(b) may be oral if immediately confirmed in
writing (including by facsimile); provided that the lack of such
an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice. The parties acknowledge that the
failure of the Company to timely reimburse the Issuing Bank for
the full amount of the amount of any drawing under any Letter of
Credit shall not constitute a
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Default or Event of Default where such drawing is funded in
accordance with the provisions of this Section 3.03 by the making
of Base Rate Committed Loans.
(c) Each Bank shall upon any notice pursuant to
subsection 3.03(b) make available to the Agent for the account of
the relevant Issuing Bank an amount in Dollars and in immediately
available funds equal to its Pro Rata Share of the amount of the
drawing, whereupon the participating Banks shall (subject to
subsection 3.03(d)) each be deemed to have made a Loan consisting
of a Base Rate Committed Loan to the Company in that amount. If
any Bank so notified fails to make available to the Agent for the
account of the Issuing Bank the amount of such Bank's Pro Rata
Share of the amount of the drawing by no later than 12:00 noon
(San Francisco time) on the Honor Date, then interest shall
accrue on such Bank's obligation to make such payment, from the
Honor Date to the date such Bank makes such payment, at a rate
per annum equal to the Federal Funds Rate in effect from time to
time during such period. The Agent will promptly give notice of
the occurrence of the Honor Date, but failure of the Agent to
give any such notice on the Honor Date or in sufficient time to
enable any Bank to effect such payment on such date shall not
relieve such Bank from its obligations under this Section 3.03.
(d) With respect to any unreimbursed drawing that is
not converted into Loans consisting of Base Rate Committed Loans
to the Company in whole or in part, because of the Company's
failure to satisfy the conditions set forth in Section 5.02 or
for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount of
such drawing, which L/C Borrowing (together with interest
thereon) shall be due and payable by the Company on demand of the
Agent or the Issuing Bank, in each case at the request of or with
the consent of the Majority Banks (provided, that for purposes of
this subsection (d), any Bank which has failed to make payment to
the Issuing Bank pursuant to subsection 3.03(c) shall be
disregarded in the determination of the Majority Banks). Such
L/C Borrowing shall bear interest at a rate per annum equal to
the Base Rate plus 2% per annum, and each Bank's payment to the
Issuing Bank pursuant to subsection 3.03(c) shall be deemed
payment in respect of its participation in such L/C Borrowing and
shall constitute an L/C Advance from such Bank in satisfaction of
its participation obligation under this Section 3.03. The parties
acknowledge that the incurrence of an L/C Borrowing by the
Company and the funding of L/C Advances as a result thereof by
the Banks shall not in itself constitute a Default or Event of
Default.
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(e) Each Bank's obligation in accordance with this
Agreement to make the Committed Loans or L/C Advances, as
contemplated by this Section 3.03, as a result of a drawing under
a Letter of Credit, shall be absolute and unconditional and
without recourse to the Issuing Bank and shall not be affected by
any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have
against the Issuing Bank, the Company or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a
Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided,
however, that each Bank's obligation to make Committed Loans
under this Section 3.03 is subject to the conditions set forth in
Section 5.02.
3.04 Repayment of Participations.
(a) Upon (and only upon) receipt by the Agent for the
account of the Issuing Bank of immediately available funds from
the Company (i) in reimbursement of any payment made by the
Issuing Bank under the Letter of Credit with respect to which any
Bank has paid the Agent for the account of the Issuing Bank for
such Bank's participation in the Letter of Credit pursuant to
Section 3.03 or (ii) in payment of interest thereon, the Agent
will pay to each Bank, in the same funds as those received by the
Agent for the account of the Issuing Bank, the amount of such
Bank's Pro Rata Share of such funds, and the Issuing Bank shall
receive the amount of the Pro Rata Share of such funds of any
Bank that did not so pay the Agent for the account of the Issuing
Bank.
(b) If the Agent or the Issuing Bank is required at
any time to return to the Company, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency
Proceeding, any portion of the payments made by the Company to
the Agent for the account of the Issuing Bank pursuant to
subsection 3.04(a) in reimbursement of a payment made under the
Letter of Credit or interest or fee thereon, each Bank shall, on
demand of the Agent, forthwith return to the Agent or the Issuing
Bank the amount of its Pro Rata Share of any amounts so returned
by the Agent or the Issuing Bank plus interest thereon from the
date such demand is made to the date such amounts are returned by
such Bank to the Agent or the Issuing Bank, at a rate per annum
equal to the Federal Funds Rate in effect from time to time.
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3.05 Role of the Issuing Bank.
(a) Each Bank and the Company agree that, in paying
any drawing under a Letter of Credit, the Issuing Bank shall not
have any responsibility to obtain any document (other than any
sight draft and certificates expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or
delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank
shall be liable to any Bank for: (i) any action taken or omitted
in connection herewith at the request or with the approval of the
Banks (including the Majority Banks, as applicable); (ii) any
action taken or omitted in the absence of gross negligence or
willful misconduct; or (iii) the due execution, effectiveness,
validity or enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts
or omissions of any beneficiary or transferee with respect to its
use of any Letter of Credit; provided, however, that this
assumption is not intended to, and shall not, preclude the
Company's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other
agreement. No Agent-Related Person, nor any of the respective
correspondents, participants or assignees of the Issuing Bank,
shall be liable or responsible for any of the matters described
in clauses (i) through (vii) of Section 3.06; provided, however,
anything in such clauses to the contrary notwithstanding, that
the Company may have a claim against the Issuing Bank, and the
Issuing Bank may be liable to the Company, to the extent, but
only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Company which the Company
proves were caused by the Issuing Bank's willful misconduct or
gross negligence or the Issuing Bank's willful failure to pay
under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly
complying with the terms and conditions of a Letter of Credit.
In furtherance and not in limitation of the foregoing: (i) the
Issuing Bank may accept documents that appear on their face to be
in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and
(ii) the Issuing Bank shall not be responsible for the validity
or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
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3.06 Obligations Absolute. The obligations of the
Company under this Agreement and any L/C-Related Document to
reimburse the Issuing Bank for a drawing under a Letter of
Credit, and to repay any L/C Borrowing and any drawing under a
Letter of Credit converted into Committed Loans, shall be
unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other
L/C-Related Document under all circumstances, including the
following:
(i) any lack of validity or enforceability of
this Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
obligations of the Company in respect of any Letter of
Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off,
defense or other right that the Company may have at any time
against any beneficiary or any transferee of any Letter of
Credit (or any Person for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any
Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of
any Letter of Credit; or any payment made by the Issuing
Bank under any Letter of Credit to any Person purporting to
be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent
to departure from any other guarantee, for all or any of the
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obligations of the Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise constitute
a defense available to, or a discharge of, the Company or a
guarantor.
The foregoing provisions of this Section 3.06 are not
intended to waive any claim the Company may have against the
Issuing Bank as set forth and limited in subsection 3.05(c).
3.07 Cash Collateral Pledge Upon (i) the request of
the Agent, (A) if the Issuing Bank has honored any full or
partial drawing request on any Letter of Credit and such drawing
has resulted in an L/C Borrowing hereunder, or (B) if, as of the
Revolving Termination Date, any Letters of Credit may for any
reason remain outstanding and partially or wholly undrawn, or
(ii) the occurrence of the circumstances described in
Section 2.10 requiring the Company to Cash Collateralize Letters
of Credit, then, the Company shall immediately Cash Collateralize
the L/C Obligations in an amount equal to the L/C Obligations.
3.08 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account
of each of the Banks a letter of credit fee with respect to the
Letters of Credit at a rate per annum equal to the Applicable
Amount times the actual daily maximum amount available to be
drawn of the outstanding Letters of Credit, computed on a
quarterly basis in arrears on the last Business Day of each
calendar quarter based upon Letters of Credit outstanding for
that quarter as calculated by the Agent. Such letter of credit
fees shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter during which Letters of
Credit are outstanding, commencing on March 31, 1999, through the
Revolving Termination Date (or such later date upon which the
outstanding Letters of Credit shall expire), with the final
payment to be made on the Revolving Termination Date (or such
later expiration date).
(b) The Company shall pay to the Issuing Bank a letter
of credit fronting fee for each Letter of Credit Issued by the
Issuing Bank equal to 0.125% of the face amount (or increase in
face amount, as the case may be) of such Letter of Credit. Such
Letter of Credit fronting fee shall be due and payable on each
date of Issuance of a Letter of Credit.
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(c) The Company shall pay to the Issuing Bank from
time to time on demand the normal issuance, presentation,
amendment and other processing fees, and other standard costs and
charges, of the Issuing Bank relating to letters of credit as
from time to time in effect.
3.09 Uniform Customs and Practice. The Uniform Customs
and Practice for Documentary Credits as published by the
International Chamber of Commerce most recently at the time of
issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters
of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
(a) Any and all payments by the Company to each Bank
or the Agent under this Agreement and any other Loan Document
shall be made free and clear of, and without deduction or
withholding for, any Taxes. In addition, the Company shall pay
all Other Taxes.
(b If the Company shall be required by law to deduct
or withhold any Taxes, Other Taxes or Further Taxes from or in
respect of any sum payable hereunder to any Bank or the Agent,
then:
(i) the sum payable shall be increased as
necessary so that, after making all required deductions and
withholdings (including deductions and withholdings
applicable to additional sums payable under this Section),
such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been
made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or
the Agent for the account of such Bank, at the time
interest is paid, Further Taxes in the amount that the
respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank
and the Agent for the full amount of (i) Taxes, (ii) Other Taxes,
and (iii) Further Taxes in the amount that the respective Bank
specifies as necessary to preserve the after-tax yield
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the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes,
Other Taxes or Further Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days
after the date the Bank or the Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment by
the Company of Taxes, Other Taxes or Further Taxes, the Company
shall furnish to each Bank or the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to such Bank or the Agent.
(e)If the Company is required to pay any amount to any
Bank or the Agent pursuant to subsection (a), (b) or (c) of this
Section, then such Bank shall use reasonable efforts (consistent
with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if
such change in the sole judgment of such Bank is not otherwise
disadvantageous to such Bank.
4.02 Illegality.
(a) If any Bank determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of
Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any
Bank or its applicable Lending Office to make Offshore Rate
Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate
Loans (including in respect of any LIBOR Bid Loan as to which the
Company has accepted such Bank's Competitive Bid, but as to which
the disbursement date has not arrived) shall be suspended until
the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to
maintain any Offshore Rate Loan, the Company shall, upon its
receipt of notice of such fact and demand from such Bank (with a
copy to the Agent), convert all such Offshore Rate Loans of that
Bank then outstanding to Base Rate Loans, and shall pay to such
Bank all interest accrued thereon and amounts required under
Section 4.04, either on the last day of the Interest Period
thereof, if the Bank may lawfully continue to maintain such
Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loan.
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4.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction after the date hereof of or any change in or in the
interpretation of any law or regulation or (ii) the compliance by
that Bank with any guideline or request received after the date
hereof from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Committed Loans or
participating in Letters of Credit, or, in the case of the
Issuing Bank, any increase in the cost to the Issuing Bank of
agreeing to issue, issuing or maintaining any Letter of Credit or
of agreeing to make or making, funding or maintaining any unpaid
drawing under any Letter of Credit, then the Company shall be
liable for, and shall from time to time, upon demand (with a copy
of such demand to be sent to the Agent), pay to the Agent for the
account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction after the date hereof of any Capital Adequacy
Regulation, (ii) any change after the date hereof in any Capital
Adequacy Regulation, (iii) any change after the date hereof in
the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by the Bank (or its Lending Office) or any
corporation controlling the Bank with any Capital Adequacy
Regulation promulgated or changed after the date hereof, affects
or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired
return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of such Bank
to the Company through the Agent, the Company shall pay to the
Bank, from time to time as specified by the Bank, additional
amounts sufficient to compensate the Bank for such increase.
4.04 Funding Losses. The Company shall reimburse each
Bank and hold each Bank harmless from any reasonable loss or
expense (other than lost profit) which the Bank may sustain or
incur as a consequence of:
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(a) the failure of the Company to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion /
Continuation;
(c) the failure of the Company to make any prepayment
in accordance with any notice delivered under Section 2.09;
(d) the prepayment (including pursuant to Section 2.10
or Section 4.08 or by reason of a deemed assignment of a portion
of a Committed Loan pursuant to Section 2.07) or other payment
(including after acceleration thereof) of an Offshore Rate Loan
or Absolute Rate Bid Loan on a day that is not the last day of
the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any
Offshore Rate Committed Loan to a Base Rate Committed Loan on a
day that is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its Offshore
Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained.
4.05 Inability to Determine Rates. If the Agent
reasonably determines that for any reason adequate and reasonable
means do not exist for determining the LIBO Rate for any
requested Interest Period with respect to a proposed Offshore
Rate Loan, or that the LIBO Rate applicable pursuant to
subsection 2.12(a) for any requested Interest Period with respect
to a proposed Offshore Rate Loan does not adequately and fairly
reflect the cost to the Banks of funding such Loan, the Agent
will promptly so notify the Company and each Bank. Thereafter,
the obligation of the Banks to make or maintain Offshore Rate
Loans, as the case may be, hereunder shall be suspended until the
Agent revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice
of Conversion / Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make,
convert or continue the Committed Loans, as proposed by the
Company, in the amount specified in the applicable notice
submitted by the Company, but such Committed Loans shall be made,
converted or continued as Base Rate Committed Loans instead of
Offshore Rate Loans.
4.06 Reserves on Offshore Rate Loans. The Company shall
pay to each Bank, as long as such Bank shall be required under
regulations of the FRB to maintain
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reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as
"Eurocurrency liabilities"), additional costs on the unpaid
principal amount of each Offshore Rate Committed Loan equal to
the actual costs of such reserves allocated to such Committed
Loan by the Bank (as determined by the Bank in good faith, which
determination shall be conclusive), payable on each date on which
interest is payable on such Committed Loan, provided the Company
shall have received at least 15 days' prior written notice (with
a copy to the Agent) of such additional interest from the Bank.
If a Bank fails to give notice 15 days prior to the relevant
Interest Payment Date, such additional interest shall be payable
15 days from receipt of such notice.
4.07 Certificates of Banks. Any Bank claiming
reimbursement or compensation under this Article IV shall deliver
to the Company (with a copy to the Agent) a certificate setting
forth in reasonable detail the amount payable to the Bank
hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error. If such Bank fails
to notify the Company that the Bank intends to claim any such
reimbursement or compensation within 180 days after the Bank has
knowledge of its claim therefor, the Company shall not be
obligated to compensate the Bank for the amount of the Bank's
claim accruing prior to the date which is 180 days before the
date on which the Bank first notifies the Company that it intends
to make such claim; it being understood that the calculation of
the actual amounts may not be possible within such period and the
Bank may provide such calculation as soon as reasonably
practicable thereafter without affecting or limiting the
Company's payment obligations hereunder, and that the Company
shall be liable to such Bank therefor notwithstanding the
replacement or termination of such Bank's Commitment pursuant to
Section 4.08.
4.08 Substitution of Banks Upon the receipt by the
Company from any Bank (an "Affected Bank") of a claim for
compensation (or notice from such Bank of its intent to make such
a claim) under Section 4.01, Section 4.03 or Section 4.06, the
Company may: (i) request the Affected Bank (at its sole
discretion) to attempt to obtain a replacement bank or financial
institution satisfactory to the Company to acquire and assume all
or a ratable part of all of such Affected Bank's Loans and
Commitment (a "Replacement Bank"); (ii) request one more of the
other Banks (at their sole discretion) to acquire and assume all
or part of such Affected Bank's Commitment and Loans and its Pro
Rata Share of the L/C Obligations pursuant to the procedures set
forth in Section
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11.08; (iii) designate a Replacement Bank; or (iv) provided that
there shall not have occurred and be continuing any Event of
Default, repay in full of all of the Affected Bank's Loans, along
with interest thereon, any fees then accrued and unpaid for the
account of the Affected Bank and any other amounts then due to
the Affected Bank hereunder (including any amounts due under
Section 4.04) and terminate the Affected Bank's Commitment. In
the event of a termination of an Affected Bank's Commitment under
clause (iv), the Company shall notify the Agent of such
termination prior to its effective date, and, on the date of such
termination, this Agreement shall be deemed amended to the
extent, but only to the extent, necessary to reflect the deletion
of such Affected Bank as a Bank party to this Agreement and the
resulting adjustment of the Commitments arising therefrom and the
adjustment described in the next sentence. Effective on the date
of such termination, the amount of each Bank's risk participation
in all outstanding Letters of Credit shall be deemed to be
automatically increased or decreased, as applicable, to reflect
any changes in such Bank's Pro Rata Share after giving effect to
the decrease in the aggregate Commitments effective thereon. The
Agent shall promptly notify the Banks and the Company of any
decrease in the aggregate Commitments under clause (iv) of this
Section and of each Bank's Pro Rata Share after giving effect to
any such decrease. Each Replacement Bank shall be an Eligible
Assignee and shall become a party to this Agreement pursuant to
the procedures set forth in Section 11.08, and any designation of
a Replacement Bank under clause (i) or (iii) shall be subject to
the prior written consent of the Agent (which consent shall not
be unreasonably withheld).
4.09 Survival. The agreements and obligations of the
Company in this Article IV shall survive the termination of the
Commitments and the payment of all other Obligations.
article v
CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions. The
obligation of each Bank to make its initial Credit Extension
hereunder is subject to the condition that the Agent shall have
received on or before the Closing Date all of the following, in
form and substance satisfactory to the Agent and each Bank:
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(a) Credit Agreement, Guaranty and Notes. This
Agreement, the Guaranty and, to the extent requested by any Bank,
the Notes, executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company and each Guarantor authorizing the
transactions contemplated hereby, certified as of the
Closing Date by the Secretary or an Assistant Secretary of
such Person; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company and each Guarantor certifying the
names and true signatures of the officers of each such
Person authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents to
be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of
the following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company and each Guarantor as in
effect on the Closing Date, certified by the Secretary or
Assistant Secretary of such Person as of the Closing Date;
and
(ii) a good standing and, if available, tax good
standing certificate for the Company and each Guarantor from
the Secretary of State (or similar, applicable Governmental
Authority) of its state of incorporation and for the Company
from the Secretary of State (or similar, applicable
Governmental Authority) of New York;
(d) Legal Opinions. An opinion of (i) Simpson Thacher
& Bartlett, counsel to the Company and addressed to the Agent and
the Banks, substantially in the form of Exhibit D-1 and (ii)
Leonard Goldner, General Counsel of the Company and addressed to
the Agent and the Banks, substantially in the form of Exhibit D-
2;
(e) Payment of Fees. Evidence of payment by the
Company of all accrued and unpaid fees, costs and expenses to the
extent then due and payable on the Closing Date, together with
Attorney Costs of BofA to the extent invoiced prior to or on the
Closing Date, including any such costs, fees and expenses arising
under or referenced in Sections 2.13 and 11.04; and
(f) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
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5.01 Conditions to All Credit Extensions The
obligation of each Bank to make any Committed Loan to be made by
it, or any Bid Loan as to which the Company has accepted the
relevant Competitive Bid (including its initial Loan) and the
obligation of the Issuing Bank to Issue any Letter of Credit
(including the initial Letter of Credit) is subject to the
satisfaction of the following conditions precedent on the
relevant disbursement date or Issuance Date:
(a) Notice, Application. As to any Committed Loan,
the Agent shall have received a Notice of Borrowing or in the
case of any Issuance of any Letter of Credit, the Issuing Bank
and the Agent shall have received an L/C Application or L/C
Amendment Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties.
The representations and warranties of the Company in Article VI
and of the Guarantors in the Guaranty shall be true and correct
in all material respects on and as of such borrowing date or
Issuance Date, both before and after giving effect to the
proposed Borrowing or Issuance and to the application of the
proceeds therefrom, with the same effect as if made on and as of
such borrowing date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct in all
material respects as of such earlier date); and
(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing or
Issuance.
Each Notice of Borrowing, Competitive Bid Request and L/C
Application or L/C Amendment Application submitted by the Company
hereunder shall constitute a representation and warranty by the
Company hereunder, as of the date of each such notice or request
and as of each disbursement date or Issuance Date, as applicable,
that, before and after giving effect to the proposed Borrowing or
Issuance and to the application of the proceeds therefrom, the
conditions in this Section 5.02 are satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each
Bank that:
Corporate Existence and Power.
(a) The Company and each of its Material Subsidiaries
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) The Company and each of its Subsidiaries has the
power and authority and all governmental licenses,
authorizations, consents and approvals necessary to (i) own its
assets, (ii) carry on its business and (iii) execute, deliver,
and perform its obligations under the Loan Documents;
(c) The Company and each of its Subsidiaries is duly
qualified as a foreign corporation and is licensed and in good
standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) The Company and each of its Subsidiaries is in
compliance with all Requirements of Law; except, in each case
referred to in clause (b)(i), (b)(ii), (c) or (d), to the extent
that the failure to do so would not reasonably be expected to
have a Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The
execution, delivery and performance by the Company of this
Agreement and the Guarantors and the Company of each other Loan
Document to which such Person is party, have been duly authorized
by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which such Person is a
party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is
subject; or
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(c) violate any Requirement of Law;
except, in each case referred to in clause (b) or (c), to the
extent that the failure to do so would not reasonably be expected
to have a Material Adverse Effect.
6.03 Binding Effect. This Agreement and each other Loan
Document to which the Company and each Guarantor is a party
constitute the legal, valid and binding obligations of the
Company and such Guarantor to the extent it is a party thereto,
enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.04 Litigation. Except as specifically disclosed in
Schedule 6.04 and in the filings of the Company with the SEC
which are publicly available on the date hereof, there are no
actions, suits, proceedings, claims or disputes pending, or to
the best knowledge of the Company, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Subsidiaries or any of
their respective properties which:
(a) purport to affect or directly pertain to this
Agreement or any other Loan Document, or any of the transactions
contemplated hereby or thereby; or
(b) as to which there exists a substantial likelihood
of an adverse determination, which determination would reasonably
be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
6.05 No Default. No Default or Event of Default exists.
As of the Closing Date, neither the Company nor any Subsidiary
is in default under or with respect to any Contractual Obligation
in any respect which, individually or together with all such
defaults, would reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under
subsection 9.01(e).
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6.06 ERISA Compliance. Except as specifically disclosed
in Schedule 6.06:
(a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code (or, in the case of
prototype Plans, the provider thereof) has received a favorable
determination letter from the IRS and to the best knowledge of
the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has
made all required contributions to any Plan subject to
Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 or 4243
of ERISA with respect to a Multiemployer Plan; and (v) neither
the Company nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
6.07 Use of Proceeds; Margin Regulations. The proceeds
of the Loans and the Letters of Credit are to be used solely for
the purposes set forth in and permitted by Section 7.11 and
Section 8.07. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin
Stock or extending credit for the purpose of purchasing or
carrying Margin Stock.
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6.08 Title to Properties. The Company and each
Subsidiary have good record and marketable title in fee simple
to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of their respective businesses,
except for such defects in title and leasehold interests as could
not, individually or in the aggregate, have a Material Adverse
Effect. As of the Closing Date, the property of the Company and
its Subsidiaries is subject to no Liens, other than Permitted
Liens.
6.09 Taxes. The Company and its Subsidiaries have filed
all Federal and other material tax returns and reports required
to be filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise
due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves
have been provided in accordance with GAAP. The Company has not
received notice of any proposed tax assessment against the
Company or any Subsidiary that would, if made, have a Material
Adverse Effect, except any such assessment which is being
contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP.
6.10 Financial Condition.
(a) The audited consolidated financial statements of
the Company and its consolidated Subsidiaries dated December 31,
1997, and the unaudited consolidated financial statements of the
Company and its consolidated Subsidiaries dated September 30,
1998, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal
year ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein and, in the case
of the financial statements dated September 30, 1998,
subject to good faith year-end audit adjustments and the
absence of footnotes;
(ii) fairly present the financial condition of
the Company and its consolidated Subsidiaries as of the date
thereof and results of operations for the period covered
thereby; and
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(iii) except as specifically disclosed in
Schedule 6.10, show all material indebtedness and other
liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent
Obligations.
(b) Since September 30, 1998, there has been no
Material Adverse Effect.
6.11 Environmental Matters. The Company conducts in the
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the
Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.11, such Environmental Laws and
Environmental Claims would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.12 Regulated Entities. None of the Company, any
Person controlling the Company, or any Subsidiary, is an
"Investment Company" within the meaning of the Investment Company
Act of 1940. The Company is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power
Act, the Interstate Commerce Act, any state public utilities
code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
6.13 No Burdensome Restrictions. Neither the Company
nor any Subsidiary is a party to or bound by any Contractual
Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which would reasonably be
expected to have a Material Adverse Effect.
6.14 Copyrights, Patents, Trademarks and Licenses, Etc.
The Company and its Subsidiaries own or are licensed or otherwise
have the right to use all of the patents, trademarks, service
marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict
with the rights of any other Person. Except as specifically
disclosed in Schedule 6.04 and in the filings of the Company with
the SEC which are publicly available on the date hereof, no claim
or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention,
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device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of
the Company, proposed, which, in either case, would reasonably be
expected to have a Material Adverse Effect.
6.15 Subsidiaries. As of the Closing Date, the Company
has no Subsidiaries other than those specifically disclosed in
Schedule 6.15, which identifies as of the Closing Date each
Domestic Subsidiary and each Material Subsidiary as such.
6.16 Insurance. Except as specifically disclosed in
Schedule 6.16, the properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance
companies not Affiliates of the Company, in such amounts, with
such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such
Subsidiary operates.
6.17 Swap Obligations. Neither the Company nor any of
its Subsidiaries has incurred any outstanding obligations under
any Swap Contracts, other than Permitted Swap Obligations.
6.18 Year 2000. On the basis of a comprehensive review
and assessment of the Company's and its Subsidiaries' systems and
equipment and inquiry made of the Company's and its Subsidiaries'
material suppliers, vendors and customers, the Company reasonably
believes that the Year 2000 problem, including costs of
remediation, will not result in a Material Adverse Effect. The
Company and its Subsidiaries have developed and are developing
feasible contingency plans which the Company believes in good
faith to be adequate to ensure uninterrupted and unimpaired
business operation in the event of failure of their own or a
third party's systems or equipment due to the Year 2000 problem,
including those of vendors, customers, and suppliers.
6.19 Full Disclosure
. None of the representations or warranties made by the Company
or any Guarantor in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none
of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Company or any
105
Guarantor pursuant to the Loan Documents, contains any untrue
statement of a material fact or omits any material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made,
not misleading in any material respect as of the time when made
or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the
Majority Banks waive compliance in writing:
7.01 Financial StatementsThe Company shall deliver to
the Agent and each Bank, in form and detail satisfactory to the
Agent and the Majority Banks:
(a) as soon as available, but not later than 100 days
after the end of each fiscal year, a copy of the audited
consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders'
equity and cash flows for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, and
accompanied by the opinion of Deloitte & Touche or another
nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such
consolidated financial statements present fairly the financial
position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion
shall not be qualified as to (i) any limitation in the scope of
the audit, or (ii) possible errors generated by financial
reporting and related systems due to the Year 2000 problem unless
the Independent Auditor has adopted a general policy of
qualifying its opinions with respect thereto for companies in
similar industries as the Company and its Subsidiaries; and
(b) as soon as available, but not later than 55 days
after the end of each of the first three fiscal quarters of each
fiscal year, a copy of the unaudited consolidated balance sheet
of the Company and its consolidated Subsidiaries as of the end of
such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on
the first day and ending on the last day of such
106
quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to good faith year-
end audit adjustments and the absence of footnotes), the
financial position and the results of operations of the Company
and the Subsidiaries.
7.02 Certificates; Other Information. The Company shall
furnish to the Agent and each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b), a
Compliance Certificate executed by a Responsible Officer;
(b) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of
all publicly available financial statements and regular,
periodical or special reports (including Forms 10K, 10Q and 8K)
that the Company or any Subsidiary may make to, or file with, the
SEC; and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any
Subsidiary as the Agent, at the request of any Bank, may from
time to time reasonably request.
7.03 Notices The Company shall promptly notify the
Agent and each Bank:
(a) of the occurrence of any Default or Event of
Default, and of the occurrence or existence of any event or
circumstance that in the reasonable judgment of the Company is
likely to become a Default or Event of Default;
(b) of any matter that has resulted or that in the
reasonable judgment of the Company is likely to result in a
Material Adverse Effect, including, to the extent it has so
resulted or in the reasonable judgment of the Company is likely
to so result, (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary;
(ii) any dispute, litigation, investigation, proceeding or
suspension between the Company or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any
material development in, any litigation or proceeding affecting
the Company or any Subsidiary; including pursuant to any
applicable Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event
more than 10 days after such event), and deliver to the Agent and
each Bank a copy of any notice with respect to such event that is
filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
107
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the
Code by the Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded
Pension Liability; and
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the
Company or any affected Subsidiary proposes to take with respect
thereto and at what time. Each notice under subsection 7.03(a)
shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have
been (or in the reasonable judgment of the Company are likely to
be) breached or violated.
7.04 Preservation of Corporate Existence, Etc. The
Company shall:
(a) and shall cause each Material Subsidiary to,
preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or
jurisdiction of incorporation, except in connection with
transactions permitted by Section 8.03 and sales of assets
permitted by Section 8.02;
(b) and shall cause each Material Subsidiary to,
preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and
franchises necessary for the normal conduct of its business,
except in connection with transactions permitted by Section 8.03
and sales of assets permitted by Section 8.02; and
(c) and shall cause each Subsidiary to, preserve or
renew all of its registered patents, trademarks, trade names and
service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
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7.05 Maintenance of Property The Company shall
maintain, and shall cause each Subsidiary to maintain, and
preserve all its property which is used in its business in good
working order and condition, ordinary wear and tear excepted and
make all necessary repairs thereto and renewals and replacements
thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, except as permitted
by Section 8.02 or Section 8.03.
7.06 Insurance The Company shall maintain, and shall
cause each Material Subsidiary to maintain, with financially
sound and reputable independent insurers, insurance with respect
to its properties and business against loss or damage of the
kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other
Persons.
7.07 Payment of Obligations The Company shall, and
shall cause each Subsidiary to, pay and discharge as the same
shall become due and payable, all their respective obligations
and liabilities, except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect or (b)
to the extent that such obligation or liability is being disputed
or contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP with respect thereto
are being maintained by the Company or such Subsidiary.
7.08 Compliance with Laws The Company shall comply, and
shall cause each Subsidiary to comply, in all material respects
with all Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including the Federal Fair
Labor Standards Act and all Environmental Laws), except such as
may be contested in good faith or as to which a bona fide dispute
may exist or where the failure to so comply would not reasonably
be expected to have a Material Adverse Effect .
7.08 Compliance with ERISA The Company shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law;
(b) cause each Plan which is qualified under Section 401(a) of
the Code to maintain such qualification; and (c) make all
required contributions to any Plan subject to Section 412 of the
Code.
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7.09 Inspection of Property and Books and Records The
Company shall maintain and shall cause each Subsidiary to
maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters involving
the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit,
representatives of the Agent or any Bank (coordinating through
the Agent) to visit and inspect any of their respective
properties, to examine their respective corporate, financial and
operating records, and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and
independent public accountants, at reasonable times during normal
business hours and upon reasonable advance notice to the Company;
provided, however, when an Event of Default exists the Agent or
any Bank may do any of the foregoing at the expense of the
Company.
7.11 Use of Proceeds The Company shall use the proceeds
of the Loans for working capital and other general corporate
purposes (including undertaking Acquisitions, capital
expenditures, and stock repurchases) not in contravention of any
Requirement of Law or of any provision of this Agreement or any
other Loan Document.
7.12 Additional Guarantors If the Company shall, after
the Closing Date, form or acquire any Domestic Subsidiary which
is a Wholly-Owned Subsidiary (or if any Domestic Subsidiary not
previously wholly-owned shall become a Wholly-Owned Subsidiary),
the Company shall cause each such Subsidiary to become a party to
the Guaranty in the manner specified therein and shall deliver or
cause to be delivered such proof of corporate action, incumbency
of officers, opinions of counsel and other documents as are
consistent with those delivered as to each Guarantor pursuant to
Section 5.01 upon the Closing Date as the Agent may request, in
each case in form and substance satisfactory to the Agent.
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ARTICLE viii
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the
Majority Banks waive compliance in writing:
8.01 Limitation on Liens. The Company shall not, and
shall not suffer or permit any Subsidiary to, directly or
indirectly, make, create, incur, assume or suffer to exist any
Lien upon or with respect to any part of its property, whether
now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) any Lien existing on property of the Company or
any Subsidiary on the Closing Date and set forth in Schedule 8.01
securing Indebtedness outstanding on such date or incurred in
connection with the extension, renewal or refinancing of the
Indebtedness secured by such existing Liens; provided that any
extension, renewal or replacement Lien shall be limited to the
property encumbered by the existing Lien and the principal amount
of the Indebtedness being extended, renewed or refinanced does
not increase. For purposes of this clause (a), Indebtedness
shall be deemed to be outstanding on the Closing Date if the
facility under which it is incurred exists on the Closing Date
(even if no amounts are then outstanding under such facility);
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable
without penalty, or to the extent that non-payment thereof is
permitted by Section 7.07, provided that no notice of lien has
been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain
payable without penalty or which are being contested in good
faith and by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens consisting of pledges or deposits required
in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security
legislation;
111
(f) Liens on the property of the Company or its
Subsidiary securing (i) the non-delinquent performance of bids,
trade contracts (other than for borrowed money), leases,
statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of
business;
(g) Liens consisting of judgment or judicial
attachment liens which do not constitute a Default or Event of
Default under subsection 9.01(i);
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct
of the businesses of the Company and its Subsidiaries;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement, provided, however,
that such Liens existed at the time the respective corporations
became Subsidiaries and were not created in anticipation thereof;
(j) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost
of acquiring or improving such property; provided that (i) any
such Lien attaches to such property concurrently with or within
180 days after the acquisition thereof, (ii) such Lien attaches
solely to the property so acquired in such transaction and any
improvements thereto, and (iii) the principal amount of the debt
secured thereby does not exceed 100% of the cost of such
property;
(k) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such
capital leases are otherwise permitted hereunder;
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-
off or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution;
provided that such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations
promulgated by the FRB;
(m) Liens on the Company's headquarters building (located at One
Symbol Plaza, Holtsville, New York), securing Indebtedness in an
aggregate principal amount not to exceed
112
$40,000,000 at any one time outstanding; and Liens not otherwise
permitted hereunder securing Indebtedness and other liabilities
in an aggregate amount not to exceed at any one time outstanding
the amount of 5% of the net book value of the Company and its
Subsidiaries' consolidated assets.
8.02 Disposition of Assets The Company shall not, and
shall not suffer or permit any Subsidiary to, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) any
property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or
surplus property or assets, all in the ordinary course of
business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of
similar replacement equipment, or the proceeds of such sale are
reasonably promptly applied to the purchase price of such
replacement equipment; and
(c) dispositions of property by the Company or any
Subsidiary to the Company or any Subsidiary pursuant to
reasonable business requirements;
(d) the sale of lease receivables; and
(e)dispositions not otherwise permitted hereunder which
are made for fair market value; provided, that (i) at the time of
any disposition, no Event of Default shall exist or shall result
from such disposition, and (ii) the aggregate value of all assets
so sold by the Company and its Subsidiaries, together, shall not
exceed in any fiscal year 10% of Tangible Net Worth as of the end
of the immediately preceding fiscal year.
8.03 Consolidations and Mergers. The Company shall not,
and shall not suffer or permit any Subsidiary to, merge,
consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of related
transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Subsidiary may merge with the Company,
provided that the Company shall be the continuing or surviving
corporation, or with any one or more Subsidiaries; and
113
(b) any Subsidiary may sell, transfer or otherwise
convey all or substantially all of its assets (upon voluntary
liquidation or otherwise), to the Company or another Subsidiary;
and
(c) any Subsidiary may sell, transfer or otherwise
convey all or substantially all of its assets pursuant to one or
more transactions which are not prohibited by Section 8.02.
8.04 Loans and Investments The Company shall not
purchase or acquire, or suffer or permit any Subsidiary to
purchase or acquire, or make any commitment therefor, any capital
stock, equity interest, or any obligations or other securities
of, or any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other
investment in, any Person including any Affiliate of the Company
(together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in
the form of cash equivalents or short term marketable securities;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business;
(c) extensions of credit by the Company to any of its
Subsidiaries or by any of its Subsidiaries to another of its
Subsidiaries or to the Company;
(d) Investments incurred in order to consummate
Acquisitions otherwise permitted herein, provided that (i) the
consideration paid in cash and by assumption of Indebtedness for
such Acquisition, together with such consideration for all prior
Acquisitions undertaken by the Company and its Subsidiaries after
the Closing Date, shall not exceed at the time of such Investment
20% of Tangible Net Worth as calculated immediately prior to such
Acquisition; (ii) such Acquisitions are undertaken in accordance
with all applicable Requirements of Law; and (iii) immediately
after giving effect to any such Acquisition, no Default or Event
of Default would exist and the Company shall be in pro forma
compliance with the covenants set forth in Sections 8.15, 8.16
and 8.17;
(e) Investments in Joint Ventures entered into in the
ordinary course of business; and
(f) Investments constituting Permitted Swap
Obligations or payments or advances under Swap Contracts relating
to Permitted Swap Obligations.
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8.05 Limitation on Indebtedness The Company shall not,
and shall not suffer or permit any Subsidiary to, create, incur,
assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 8.08;
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 8.05 and Indebtedness incurred pursuant to
credit facilities existing on the Closing Date and set forth in
such Schedule or incurred in connection with the extension,
renewal or refinancing of such Indebtedness; provided that the
principal amount of the Indebtedness being extended, renewed or
refinanced does not increase;
(d) Indebtedness secured by Liens permitted by
subsections 8.01(j) and (m);
(e) Approved Subordinated Indebtedness; and
(f) other Indebtedness in an aggregate principal
amount outstanding at any time not to exceed 10% of Tangible Net
Worth as of the end of the immediately preceding fiscal quarter.
8.06 Transactions with Affiliates The Company shall
not, and shall not suffer or permit any Subsidiary to, enter into
any transaction with any Affiliate of the Company, except upon
fair and reasonable terms no less favorable to the Company or
such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate of the Company or such
Subsidiary.
8.07 Use of Proceeds.
The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds or any Letter
of Credit, directly or indirectly:
(a) Except as the same will not result in a violation
of Regulation T, U or X of the FRB or any other applicable
Requirement of Law or any other provision of the Loan Documents,
(i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Company or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the
purpose of purchasing or carrying any Margin Stock, or (iv) to
acquire any security in any transaction that is subject to
Section 13 or 14 of the Exchange Act; or
115
(b) to make any Acquisition unless the prior,
effective written consent or approval to such Acquisition of the
board of directors or equivalent governing body of the acquiree
has been obtained.
8.08 Swap Obligations The Company shall not, and shall
not suffer or permit any Subsidiary to, create, incur, assume or
suffer to exist any outstanding obligations under Swap Contracts,
other than Permitted Swap Obligations and Guaranty Obligations
with respect to Permitted Swap Obligations.
8.09 Capital Expenditures The Company shall not, and
shall not suffer or permit any Subsidiary to, make or commit to
make any Capital Expenditures, except for Capital Expenditures
not exceeding, in the aggregate for the Company and its
Subsidiaries, determined on a consolidated basis, during any
fiscal year, the amount of $125,000,000.
8.10.....Restricted Payments The Company shall not declare
or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of
any shares of any class of its capital stock, or purchase, redeem
or otherwise acquire for value any shares of its capital stock or
any warrants, rights or options to acquire such shares, now or
hereafter outstanding, or make any principal payment or
prepayment on or redemption, defeasance or purchase of any
subordinated Indebtedness or give notice to or deposit any funds
with any trustee to effectuate any such actions; except that the
Company may:
(a) declare and make dividend payments or other
distributions payable solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of
its common stock or warrants or options to acquire any such
shares with the proceeds received from the substantially
concurrent issue of new shares of its common stock; and
(c) declare or pay cash dividends to its stockholders,
purchase, redeem or otherwise acquire shares of its capital stock
or warrants, rights or options to acquire any such shares for
cash; provided, that, immediately after giving effect to such
proposed action, no Default or Event of Default would exist and
the Company shall be in pro forma compliance with the covenants
set forth in Sections 8.15, 8.16 and 8.17.
116
8.11 ERISA The Company shall not, and shall not suffer
or permit any of its ERISA Affiliates to: (a) engage in a
prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted
or could reasonably expected to result in liability of the
Company in an aggregate amount in excess of $10,000,000; or
(b) engage in a transaction that could be subject to Section 4069
or 4212(c) of ERISA.
8.12 Change in Business The Company shall not, and
shall not suffer or permit any Subsidiary to, engage in any
material line of business substantially different from those
lines of business carried on by the Company and its Subsidiaries
on the date hereof.
8.13 Accounting Changes Except to the extent that such
changes are permitted by GAAP and concurred with by the
Independent Auditor and that the Company shall have provided
reasonably detailed reconciliations of the effect of such changes
to the Agent and the Banks, the Company shall not, and shall not
suffer or permit any Subsidiary to, make any significant change
in accounting treatment or reporting practices, except as
required by GAAP, or change the fiscal year of the Company or of
any Subsidiary.
8.14 Subordinated Debt. The Company shall not agree to
or enter into any amendment, waiver or modification of,
supplement to or other change to any document or instrument
evidencing or given in connection with any Approved Subordinated
Indebtedness which would reasonably be expected to be adverse to
the rights or interests of the Banks.
8.15 Leverage Ratio The Company shall not suffer or
permit as of the end of any fiscal quarter the Leverage Ratio to
exceed 2.50 to 1.00.
8.16 Fixed Charge Coverage Ratio The Company shall not
suffer or permit as of the end of any fiscal quarter the Fixed
Charge Coverage Ratio to be less than 2.50 to 1.00.
8.17 Tangible Net Worth The Company shall not permit
its Tangible Net Worth at the last day of any fiscal quarter to
be less than the amount equal to:
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(a) the sum of (i) 75% of Tangible Net Worth as of the
quarter ended September 30, 1998, (ii) 75% of the Company's
consolidated net income (calculated without deduction for any
Acquisition Charges, but not less any net losses for any period)
earned in each fiscal quarter starting with the quarter
commencing October 1, 1998 and (iii) the sum of the Net Issuance
Proceeds from each equity issuance consummated on or after
October 1, 1998; minus
(b) the sum of (i) the aggregate amount paid from and
after October 1, 1998 by the Company and its consolidated
Subsidiaries for the repurchase of capital stock of the Company
and (ii) 100% of any Acquisition Charges arising from and after
October 1, 1998.
Notwithstanding the foregoing:
(x) the maximum amount to be deducted pursuant to
clause (b)(i) above shall not exceed the amount equal to (i)
$60,000,000 for each fiscal year end which will have occurred
from October 1, 1998 through (and including) the last day of the
fiscal year in which the calculation date occurs plus (ii) the
aggregate amount of Net Issuance Proceeds received during the 12
consecutive month period ended on the date of determination; and
(y) in calculating the amount of repurchases of
capital stock for purposes of clause (b)(i) above, and in
addition to amounts permitted to be deducted pursuant to clause
(x) above, the Company may exclude at each calculation date (i)
from and after the date hereof through and including June 30,
1999, up to $50,000,000 of such repurchases, (ii) after June 30,
1999 through and including December 31, 1999, up to $35,000,000
of such repurchases, and (iii) thereafter, up to $25,000,000 of
such repurchases; provided that (A) the failure to exclude such
amounts would cause the Company to be in violation of the
provisions of this Section 8.17 and (B) the Company certifies to
the Agent and each Bank that each repurchase which is so excluded
was a component of a Strategic Investor Transaction which the
Company believes in good faith will be completed within 12 months
of the date of such stock repurchase (it being understood that
such repurchase shall be counted for purposes of clause (b)(i)
from and after the end of such 12-month period and the failure to
complete such Strategic Investor Transaction within the 12-month
period shall not constitute a Default or an Event of Default
hereunder unless the Tangible Net Worth of the Company
immediately after the end of such 12-month period does not comply
with the provisions of this Section 8.17).
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ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default Any of the following shall
constitute an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when
and as required to be paid herein, any amount of principal of any
Loan or of any L/C Obligation or any amount of interest on any
Bid Loan, or (ii) within five Business Days after the same
becomes due, any other interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made
herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the
Company, any Subsidiary, or any Responsible Officer, furnished at
any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company fails to perform
or observe any term, covenant or agreement contained in
Section 7.03 or in Article VIII; or
(d) Other Defaults. The Company or any Subsidiary
party thereto fails to perform or observe any other term or
covenant contained in this Agreement or any other Loan Document,
and such default shall continue unremedied for a period of 30
days after the earlier of (i) the date upon which a Responsible
Officer has actual knowledge of such failure or (ii) the date
upon which written notice thereof is given to the Company by the
Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Material Subsidiary
(A) fails to make any payment in respect of any Indebtedness or
Contingent Obligation (other than in respect of Swap Contracts),
having an aggregate principal amount (including undrawn committed
or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than
$20,000,000 when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure;
or (B) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues
after the applicable
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grace or notice period, if any, specified in the relevant
document on the date of such failure if the effect of such
failure, event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries
of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its
stated maturity, or such Contingent Obligation to become payable
or cash collateral in respect thereof to be demanded; or
(ii) there occurs under any Swap Contract an Early Termination
Date (as defined in such Swap Contract) resulting from any event
of default under such Swap Contract as to which the Company or
any Material Subsidiary is the Defaulting Party (as defined in
such Swap Contract) and the Swap Termination Value owed by the
Company or such Material Subsidiary as a result thereof is
greater than $20,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or
any Material Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any action to effectuate or authorize any
of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company
or any Material Subsidiary, or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied
against a substantial part of the Company's or any Material
Subsidiary's properties, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement, filing
or levy; (ii) the Company or any Material Subsidiary admits the
material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-
U.S. law) is ordered in any Insolvency Proceeding; or (iii) the
Company or any Material Subsidiary acquiesces in the appointment
of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar
Person for itself or a substantial portion of its property or
business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of the Company
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under Title IV of ERISA to the Pension Plan, Multiemployer Plan
or the PBGC in an aggregate amount in excess of $20,000,000; the
aggregate amount of Unfunded Pension Liability among all Pension
Plans at any time exceeds $20,000,000; or (iii) the Company or
any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of $20,000,000; or
(i) Monetary. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration
awards is entered against the Company or any Subsidiary involving
in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $10,000,000 or more,
and the same shall remain unsatisfied, unvacated and unstayed
pending appeal for a period of 60 days after the entry thereof;
or
(j) Change of Control. (i) Any Person or two or more
Persons acting in concert acquires beneficial ownership (within
the meaning of Rule 13d-3 of the SEC under the Exchange Act),
directly or indirectly, of securities of the Company (or other
securities convertible into such securities) representing 30% or
more of the combined voting power of all securities of the
Company entitled to vote in the election of directors; or
(ii) during any period of up to 12 consecutive months,
individuals who at the beginning of such 12-month period were
directors of the Company ceasing for any reason to constitute a
majority of the Board of Directors of the Company unless the
Persons replacing such individuals were nominated by the Board of
Directors of the Company; or (iii) any Person or two or more
Persons acting in concert acquiring by contract or otherwise, or
entering into a contract or arrangement which upon consummation
will result in its or their acquisition of, or control over,
securities of the Company (or other securities convertible into
such securities) representing 30% or more of the combined voting
power of all securities of the Company entitled to vote in the
election of directors; or
(k) Invalidity of Subordination Provisions. The
subordination provisions of any document or instrument given in
connection with or evidencing any Approved Subordinated
Indebtedness shall for any reason be revoked or invalidated, or
otherwise cease to be in full force and effect, or the
Obligations are for any reason subordinated or do not have the
priority contemplated by this Agreement or such subordination
provisions; or
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(l) Guaranty Events. The Guaranty is for any reason
partially (including with respect to future advances or with
respect to less than all of the Guarantors thereunder) or wholly
revoked or invalidated, or otherwise ceases to be in full force
and effect, or any Guarantor denies in writing that it has any
further liability or obligation thereunder.
9.02 Remedies If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, the
Majority Banks, do any or all of the following:
(a) declare the commitment of each Bank to make
Committed Loans and any obligation of the Issuing Bank to Issue
Letters of Credit to be terminated, whereupon such commitments
and obligation shall be terminated;
(b) with respect to any and all undrawn Letters of
Credit, require that the Company Cash Collateralize the L/C
Obligations in an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for
drawing under any outstanding Letters of Credit (whether or not
any beneficiary shall have presented, or shall be entitled at
such time to present, the drafts or other documents required to
draw under such Letters of Credit) in which case the Company
shall immediately Cash Collateralize such amounts, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company;
(c) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; and
(d) exercise on behalf of itself and the Banks all
rights and remedies available to it and the Banks under the Loan
Documents or applicable law;
(e) provided, however, that upon the occurrence of any
event specified in subsection (f) or (g) of Section 9.01 (in the
case of clause (i) of subsection (g) upon the expiration of the
60-day period mentioned therein), the obligation of each Bank to
make Loans and any obligation of the Issuing Bank to Issue
Letters of Credit shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and
other amounts as aforesaid shall automatically become due and
payable without further act of the Agent, the Issuing Bank or any
Bank.
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9.03 Rights Not Exclusive. The rights provided for in
this Agreement and the other Loan Documents are cumulative and
are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter
arising.
ARTICLE x
THE AGENT
10.01 Appointment and Authorization; "Agent".
(a) Each Bank hereby irrevocably (subject to Section 10.09)
appoints, designates and authorizes the Agent to take such action
on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers
as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the
generality of the foregoing sentence, the use of the term "agent"
in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead,
such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship
between independent contracting parties.The Issuing Bank shall
act on behalf of the Banks with respect to any Letters of Credit
Issued by it and the documents associated therewith until such
time and except for so long as the Agent may agree at the request
of the Majority Lenders to act for such Issuing Bank with respect
thereto; provided, however, that the Issuing Bank shall have all
of the benefits and immunities (i) provided to the Agent in this
Article X with respect to any acts taken or omissions suffered by
the Issuing Bank in connection with Letters of Credit Issued by
it or proposed to be Issued by it and the application and
agreements
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for letters of credit pertaining to the Letters of Credit as
fully as if the term "Agent", as used in this Article X, included
the Issuing Bank with respect to such acts or omissions, and
(ii) as additionally provided in this Agreement with respect to
the Issuing Bank.
10.02 Delegation of Duties The Agent may execute any of
its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining
to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
10.03 Liability of Agent.
None of the Agent-Related Persons shall (i) be liable for any
action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Banks for any recital, statement,
representation or warranty made by the Company or any Subsidiary
or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection
with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the
Company or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or
records of the Company or any of the Company's Subsidiaries or
Affiliates.
10.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile,
telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and
upon advice and statements of legal counsel (including
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counsel to the Company), independent accountants and other
experts selected by the Agent. The Agent shall be fully justified
in failing or refusing to take any action under this Agreement or
any other Loan Document unless it shall first receive such advice
or concurrence of the Majority Banks as it deems appropriate and,
if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Banks and such request and any
action taken or failure to act pursuant thereto shall be binding
upon all of the Banks. For purposes of determining compliance
with the conditions specified in Section 5.01, each Bank that has
executed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or
other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to
be consented to or approved by or acceptable or satisfactory to
the Bank.
10.05 Notice of Default The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment
of principal, interest and fees required to be paid to the Agent
for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to
this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent
will notify the Banks of its receipt of any such notice. The
Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Banks in
accordance with Article IX; provided, however, that unless and
until the Agent has received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the
Banks.
10.06 Credit Decision Each Bank acknowledges that none
of the Agent-Related Persons has made any representation or
warranty to it, and that no act by the Agent hereinafter taken,
including any review of the affairs of the Company and its
Subsidiaries, shall be deemed to constitute any representation or
warranty by any Agent-Related
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Person to any Bank. Each Bank represents to the Agent that it
has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation
into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its
Subsidiaries, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the Company
hereunder. Each Bank also represents that it will, independently
and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition
and creditworthiness of the Company and its Subsidiaries. Except
for notices, reports and other documents expressly herein
required to be furnished to the Banks by the Agent, the Agent
shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company or any Subsidiary which may come
into the possession of any of the Agent-Related Persons.
10.07 Indemnification of Agent Whether or not the
transactions contemplated hereby are consummated, the Banks shall
indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from
and against any and all Indemnified Liabilities; provided,
however, that no Bank shall be liable for the payment to the
Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document,
or any document contemplated by or referred to herein, to the
extent that the Agent is not
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reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the termination of the
Commitments, the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
10.08 Agent in Individual Capacity BofA and its
Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent or
the Issuing Bank hereunder and without notice to or consent of
the Banks. The Banks acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information
regarding the Company, its Subsidiaries or its Affiliates
(including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary or
Affiliate) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to
its Loans, BofA shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though
it were not the Agent or the Issuing Bank.
10.09 Successor Agent The Agent may resign as Agent
upon 30 days' notice to the Banks. If the Agent resigns under
this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks, which successor agent
shall be approved by the Company. If no successor agent is
appointed prior to the effective date of the resignation of the
Agent, the Agent may appoint, after consulting with the Banks and
the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such
successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article X
and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the
Banks shall perform all of the duties of the Agent hereunder
until such time, if any, as the Majority Banks appoint a
successor agent as provided for above.
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10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership
or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code, such Bank agrees with and in
favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, two properly completed and executed copies of IRS
Form 1001 before the payment of any interest in the first
calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be
paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States
trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) Such other form or forms as may be required
under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing
IRS Form 1001 and such Bank sells, assigns, grants a
participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such
Bank. To the extent of such percentage amount, the Agent will
treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells,
assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Company to such Bank, such Bank
agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of
the Code.
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(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
interest payment to such Bank an amount equivalent to the
applicable withholding tax after taking into account such
reduction. However, if the forms or other documentation required
by subsection (a) of this Section are not delivered to the Agent,
then the Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction. If the IRS
or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not
properly executed, or because such Bank failed to notify the
Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any
other reason) such Bank shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or
otherwise, including penalties and interest, and including any
taxes imposed by any jurisdiction on the amounts payable to the
Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under
this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
10.11 Documentation Agent The Bank identified on the
facing page or signature pages of this Agreement or elsewhere
herein or in the other Loan Documents as the "documentation
agent" shall not have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing,
the Bank so identified as a "documentation agent" shall not have
or be deemed to have any fiduciary relationship with any Bank.
Each Bank acknowledges that it has not relied, and will not rely,
on the Bank so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder or under
any other Loan Document.
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article xi
MISCELLANEOUS
11.01 Amendments and Waivers No amendment or waiver of
any provision of this Agreement or any other Loan Document, and
no consent with respect to any departure by the Company or any
applicable Subsidiary therefrom, shall be effective unless the
same shall be in writing and signed by the Majority Banks (or by
the Agent at the written request of the Majority Banks) and the
Company and acknowledged by the Agent, and then any such waiver
or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing
and signed by each Bank directly affected thereby and the Company
and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement
or any other Loan Document for any payment of principal,
interest, fees or other amounts due to the Banks (or any of them)
hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (iii) below)
any fees or other amounts payable hereunder or under any other
Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required
for the Banks or any of them to take any action hereunder;
(e) amend this Section or Section 2.17, or any
provision herein providing for consent or other action by all
Banks or by each Bank directly affected thereby; or
(f) terminate the Guaranty or release all or
substantially all of the Guarantors from their obligations under
the Guaranty;
(g) and, provided further, that (i) no amendment, waiver or
consent shall, unless in writing and signed by all of the Banks
and the Company and acknowledged by the Agent increase (x) the
aggregate amount of the Commitments, except as contemplated by
and subject to the provisions of Section 2.07 or (y) the
aggregate amount set forth in Section 2.07 by which the Company
has the option to increase the Commitments, (ii) no amendment,
waiver or consent shall, unless in writing and signed by the
Issuing Bank in addition to the Majority Banks or each
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Bank directly affected thereby or all Banks, as the case may be,
affect the rights or duties of the Issuing Bank under this
Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (iii) no amendment, waiver
or consent shall, unless in writing and signed by the Agent in
addition to the Majority Banks or each Bank directly affected
thereby or all Banks, as the case may be, affect the rights or
duties of the Agent under this Agreement or any other Loan
Document, and (iv) the Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed by the
parties thereto.
11.02 Notices.
(a) All notices, requests, consents, approvals,
waivers and other communications shall be in writing (including,
unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Company
by facsimile (i) shall be immediately confirmed by a telephone
call to the recipient at the number specified on Schedule 11.02,
and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address
or facsimile number specified for notices on Schedule 11.02; or,
as directed to the Company or the Agent, to such other address as
shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice
to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in
legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the
U.S. mail, or if delivered, upon delivery; except that notices
pursuant to Article II, III or X to the Agent shall not be
effective until actually received by the Agent, and notices
pursuant to Article III to the Issuing Bank shall not be
effective until actually received by the Issuing Bank at the
address specified for the "Issuing Bank" on the applicable
signature page hereof. Any agreement of the Agent and the Banks
herein to receive certain notices by telephone or facsimile is
solely for the convenience and at the request of the Company.
The Agent and the Banks shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by
the Company to give such notice and the Agent and the Banks shall
not have any liability to the Company or other Person on account
of any action taken or not taken by the Agent
131
or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Loans and L/C
Obligations shall not be affected in any way or to any extent by
any failure by the Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt
by the Agent and the Banks of a confirmation which is at variance
with the terms understood by the Agent and the Banks to be
contained in the telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies No failure to
exercise and no delay in exercising, on the part of the Agent or
any Bank, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
11.04 Costs and Expenses The Company shall:
(a) whether or not the transactions contemplated
hereby are consummated, pay or reimburse BofA (including in its
capacity as Agent and Issuing Bank) promptly (subject to
subsection 5.01(e)) for all reasonable costs and expenses
incurred by BofA (including in its capacity as Agent and Issuing
Bank) in connection with the development, preparation, delivery,
administration and execution of (subject to any limits on such
costs and expenses agreed to by BofA and the Company in the
commitment letter dated October 27, 1998), and any amendment,
supplement, waiver or modification to (in each case, whether or
not consummated), this Agreement, any Loan Document and any other
documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby,
including Attorney Costs incurred by BofA (including in its
capacity as Agent and Issuing Bank) with respect thereto; andpay
or reimburse the Agent, the Lead Arranger and each Bank within 10
Business Days after demand (subject to subsection 5.01(e)) for
all reasonable costs and expenses (including Attorney Costs)
incurred by them in connection with the enforcement or
preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of
Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate
proceeding). The agreements in this Section shall survive the
termination of the Commitments and the payment of all other
Obligations.
132
11.05 Company Indemnification Whether or not the
transactions contemplated hereby are consummated, the Company
shall indemnify, defend and hold the Agent-Related Persons, and
each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments and suits, and any and all reasonable costs, charges,
expenses and disbursements (including Attorney Costs) of any kind
or nature whatsoever which may at any time (including at any time
following repayment of the Loans, the termination of the Letters
of Credit and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or
asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or
any action taken or omitted by any such Person under or in
connection with any of the foregoing, including with respect to
any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or
arising out of this Agreement or the Loans or Letters of Credit
or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the
Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities to the extent
resulting from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive
the termination of the Commitments and the payment of all other
Obligations.
11.06 Payments Set Aside To the extent that the Company
makes a payment to the Agent or the Banks, or the Agent or the
Banks exercise their right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by
the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of
such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such set-off had
not occurred,
133
and (b) each Bank severally agrees to pay to the Agent upon
demand its pro rata share of any amount so recovered from or
repaid by the Agent.
11.06 Successors and Assigns The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
except that the Company may not assign or transfer any of its
rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank.
11.07 Assignments, Participations, Etc.
(a) Any Bank may, with the written consent of the
Company at all times other than during the existence of an Event
of Default and the Agent and the Issuing Bank, which consents
shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no
written consent of the Company, the Agent or the Issuing Bank
shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an Affiliate
of such Bank) (each an "Assignee") all, or any ratable part of
all, of the Loans, the Commitments, the L/C Obligations and the
other rights and obligations of such Bank hereunder, in a minimum
amount of $10,000,000 or, if less, the entire amount of such
Bank's Commitment; provided, however, that the Company and the
Agent may continue to deal solely and directly with such Bank in
connection with the interest so assigned to an Assignee until
(i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to
the Assignee, shall have been given to the Company and the Agent
by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment
and Acceptance in the form of Exhibit E ("Assignment and
Acceptance"), together with any Note or Notes subject to such
assignment and (iii) the assignor Bank, the Assignee or, in the
case of an assignment made pursuant to Section 4.08, the Company,
has paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor
Bank that it has received (and provided its consent with respect
to) an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the
134
rights and obligations of a Bank under the Loan Documents,
(ii) the assignor Bank shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under
the Loan Documents, and (iii) this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to
reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Bank
pro tanto.
(c) Within five Business Days after its receipt of
notice by the Agent that it has received an executed Assignment
and Acceptance and payment of the processing fee (and provided
that it has granted any requisite consent to such assignment in
accordance with subsection 11.08(a)), the Company shall (if so
requested) execute and deliver to the Agent, new Notes evidencing
such Assignee's assigned Loans and Commitment and, if the
assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes in the principal amount of the
Loans retained by the assignor Bank (such Notes to be in exchange
for, but not in payment of, the Notes held by such Bank).
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a
"Participant") participating interests in any Loans, the
Commitment of that Bank and the other interests of that Bank (the
"originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations
under this Agreement shall remain unchanged, (ii) the originating
Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company, the Issuing Bank and the Agent
shall continue to deal solely and directly with the originating
Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents,
and (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of
the Banks as described in the first proviso to Section 11.01. In
the case of any such participation, the Participant shall be
entitled to the benefit of Sections 4.01, 4.03, 4.04, 4.06 and
11.05 as though it were also a Bank hereunder and, if amounts
outstanding under this Agreement are due and unpaid, or shall
have been declared or
135
shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under
this Agreement. Notwithstanding any other provision in this
Agreement, any Bank may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement and the Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
11.09 Confidentiality Each Bank agrees to take and to
cause its Affiliates to take normal and reasonable precautions
and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the
Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither it nor any
of its Affiliates shall use any such information other than in
connection with or in enforcement of this Agreement and the other
Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i) was or
becomes generally available to the public other than as a result
of disclosure by the Bank, or (ii) was or becomes available on a
non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality
agreement with the Company known to the Bank; provided, however,
that any Bank may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to
which the Bank is subject or in connection with an examination of
such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance
with the provisions of any applicable Requirement of Law; (D) to
the extent reasonably required in connection with any litigation
or proceeding to which the Agent, any Bank or their respective
Affiliates may be party; (E) to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and
other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing
136
to keep such information confidential to the same extent required
of the Banks hereunder; (H) as to any Bank or its Affiliate, as
expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Bank or such
Affiliate; and (I) to its Affiliates to the extent necessary for
the administration of such Bank's Loans and other extensions of
credit hereunder. In the event of disclosure pursuant to clauses
(A) through (E) of the immediately preceding proviso (other than
in connection with bank examinations), the Bank shall, if allowed
to do so under applicable Requirements of Law) make commercially
reasonable efforts to notify the Company of the disclosure in
advance thereof and shall (at no cost to the Bank) cooperate to
the extent commercially reasonable with the Company in seeking to
have the materials to be disclosed sealed or otherwise given
confidential treatment by the applicable court or Governmental
Authority.
11.10 Set-off In addition to any rights and remedies of
the Banks provided by law, if the Loans have been accelerated,
each Bank is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived
by the Company to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit
or the account of the Company against any and all Obligations
owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand
under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Company and the Agent after any such set-
off and application made by such Bank; provided, however, that
the failure to give such notice shall not affect the validity of
such set-off and application.
11.11 Notification of Addresses, Lending Offices, Etc.
Each Bank shall notify the Agent in writing of any changes in the
address to which notices to the Bank should be directed, of
addresses of any Lending Office, of payment instructions in
respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably
request.
137
11.12 Counterparts This Agreement may be executed in
any number of separate counterparts, each of which, when so
executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one
and the same instrument.
11.13 Severability The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
11.14 No Third Parties Benefited This Agreement is made
and entered into for the sole protection and legal benefit of the
Company, the Banks, the Agent and the Agent-Related Persons, and
their permitted successors and assigns, and no other Person shall
be a direct or indirect legal beneficiary of, or have any direct
or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
11.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
11.16 Waiver of Jury Trial THE COMPANY, THE BANKS AND
THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS
138
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT
OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
11.17 Entire Agreement This Agreement, together with
the other Loan Documents, embodies the entire agreement and
understanding among the Company, the Banks and the Agent, and
supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
[remainder of page intentionally left blank;
signature pages follow]
139
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
SYMBOL TECHNOLOGIES, INC.
By: ______________________________
Name: ___________________________
Title: ___________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: ______________________________
Name: ___________________________
Title: ___________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank and
as Issuing Bank
By: ______________________________
Name: ___________________________
Title: ___________________________
THE CHASE MANHATTAN BANK, as Documentation Agent and as a Bank
By: ______________________________
Name: ___________________________
Title: ___________________________
BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH
By: ______________________________
Name: ___________________________
Title: ___________________________
By: ______________________________
Name: ___________________________
Title: ___________________________
140
BANK HAPOALIM BM
By: ______________________________
Name: ___________________________
Title: ___________________________
By: ______________________________
Name: ___________________________
Title: ___________________________
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: ______________________________
Name: ___________________________
Title: ___________________________
BANQUE NATIONALE DE PARIS
By: ______________________________
Name: ___________________________
Title: ___________________________
By: ______________________________
Name: ___________________________
Title: ___________________________
COMERICA BANK
By: ______________________________
Name: ___________________________
Title: ___________________________
COMMERZBANK AG, NEW YORK BRANCH
By: ______________________________
Name: ___________________________
Title: ___________________________
By: ______________________________
Name: ___________________________
Title: ___________________________
141
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG, CAYMAN ISLAND BRANCH
By: ______________________________
Name: ___________________________
Title: ___________________________
By: ______________________________
Name: ___________________________
Title: ___________________________
FLEET BANK N.A.
By: ______________________________
Name: ___________________________
Title: ___________________________
MELLON BANK, N.A.
By: ______________________________
Name: ___________________________
Title: ___________________________
THE BANK OF NEW YORK
By: ______________________________
Name: ___________________________
Title: ___________________________
THE BANK OF NOVA SCOTIA
By: ______________________________
Name: ___________________________
Title: ___________________________
WACHOVIA BANK, N.A.
By: ______________________________
Name: ___________________________
Title: ___________________________
142
EXHIBIT 22
143
SYMBOL TECHNOLOGIES, INC
100% owned by Symbol Technologies, Inc.:
Symbol Technologies International, Inc.
One Symbol Plaza
Holtsville, New York 11742
State of Incorporation: New York
Symbol Technologies International, Inc.
One Symbol Plaza
Holtsville, New York 11742
State of Incorporation: Delaware
Symbolease Inc.
One Symbol Plaza
Holtsville, New York 11742
State of Incorporation: Delaware
Symbol Technologies Asia, Inc.
230 Victoria Street
04-05 Bugis Junction Office Tower
Singapore 0718
State of Incorporation: Delaware
Symbolease Canada, Inc.
2540 Matheson Blvd. East
Mississauga, Ontario
Canada L4W 4Z2
State of Incorporation: Delaware
FOREIGN CORPORATIONS
Symbol Technologies UK Limited
One Symbol Place
Winnersh Triangle,
Berkshire, UK RG41 5TP
Country of Incorporation: United Kingdom
Olympus Symbol, Inc.
San-Ei Building, 4F, 1-22-2, Nishi - Shinjuku
Shinjuku-Ku, Tokyo-160, Japan
Country of Incorporation: Japan
Symbol Technologies Mexico, Limited
Blvd. Manuel Avila, Camacho # 88, Piso 3, Col. Lomas de
Chapultapec
C.P. 11000 Mexico, D.F. Mexico
Country of Incorporation: Mexico
144
Symbol Technologies Netherlands, Inc.
Kerkplein 2, 7051 CX, Postbus 24 7050 AA
Varsseveld, Netherlands
Country of Incorporation: The Netherlands
Subsidiaries of Symbol Technologies International, Inc.
(Delaware)
Symbol Technologies Africa, Inc.
Block BZ Rutherford Estate
1 Scott Street
Waverly 209
Republic of South Africa
State of Incorporation: Delaware
Symbol Technologies Pty. Ltd.
9TH Floor
432 Street, Kilda Road
Melbourne, VIC 3004
Australia
Country of Incorporation: Australia
Symbol Technologies GmbH
2 Haus - 5 Stock
Prinz-Eugenstrasse 70
1040 Wein
Austria
Country of Incorporation: Austria
Symbol Technologies Canada, Inc.
2540 Matheson Blvd. East
Mississauga, Ontario, Canada L4W 4Z2
Country of Incorporation: Canada
Symbol Technologies A/S
Gydevang 2,
DK-3450 Allerod
Denmark
Country of Incorporation: Denmark
Symbol Technologies S.A.
Centre d'Affaire d'Anthony
3 Rue de la Renaissance
92184 Antony Cedex, France
Country of Incorporation: France
145
Symbol Technologies GmbH
Waldstrasse 68
6057 Dietzenbach
Germany
Country of Incorporation: Germany
Symbol Technologies S.R.L.
Via Cristoforo Colombo, 49
20090 Trezzano S/L Naviglio,
Milan, Italia
Country of Incorporation: Italy
O.Y. Symbol Technologies AB
Huoneisto A6
Kaupintie 8
FIN-00440 Helsinki,
Finland
Country of Incorporation: Finland
Symbol Technologies AB
Albygatan 109 D Box 1354
SE-171 26 Solna
Stockholm, Sweden
Country of Incorporation: Sweden
Symbol Technologies S.A.
Edificioi la Piovera Azul
C. Peonias, No.2 - Sexta Planta
28042 Madrid
Spain
Country of Incorporation: Spain
Subsidiaries of Symbol Technologies UK Limited
Symbol Technologies Limited
One Symbol Place
Winnersh Triangle,
Berkshire, UK RG41 5TP
Country of Incorporation: United Kingdom
146
EXHIBIT 23
147
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 333-48159, No. 333-26593, No. 333-01769, No.
2-81405, No. 2-94868, No. 2-94876, No. 33-3771, No. 33-13009,
No. 33-18748, No. 33-25509, No. 33-25484, No. 33-25567, No.
33-35821, No. 33-43580, No. 33-48025, No. 35-48026, No.
33-78622, No. 33-78678, No.33-59333 and No. 333-01769 on Form
S-8 and No. 33-18745, No. 33-25432, No. 33-43581, No. 33-43584
and No. 33-45016 on Form S-3 of Symbol Technologies, Inc. of
our report dated February 25, 1999, appearing in this Annual
Report on Form 10-K of Symbol Technologies, Inc. for the year
ended December 31, 1998.
s/Deloitte & Touche LLP
Jericho, New York
February 25, 1999
148
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