UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ending September 27, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to _________
Commission file number: 1-7221
MOTOROLA, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-1115800
(State of Incorporation) (I.R.S. Employer Identification No.)
1303 E. Algonquin Road, Schaumburg, Illinois 60196
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 576-5000
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 [ ]
The number of shares outstanding of each of the issuer's classes of
common stock as of the close of business on September 27, 1997:
Class Number of Shares
Common Stock; $3 Par Value 596,948,687
Motorola, Inc. and Consolidated Subsidiaries
Index
Part I
Financial Information Page
Item 1 Financial Statements
Statements of Consolidated Earnings
Three-Month and Nine-Month Periods ended
September 27, 1997 and September 28, 1996 3
Condensed Consolidated Balance Sheets at
September 27, 1997 and December 31, 1996 4
Statements of Condensed Consolidated Cash Flows
Nine-Month Periods ended
September 27, 1997 and September 28, 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II
Other Information
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 16
Part I - Financial Information
Motorola, Inc. and Consolidated Subsidiaries
Statements of Consolidated Earnings
(Unaudited)
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
Net sales $ 7,353 $ 6,498 $21,516 $20,288
Costs and expenses
Manufacturing and other
costs of sales 4,986 4,489 14,389 13,792
Selling, general and
administrative expenses 1,332 1,041 3,975 3,239
Depreciation expense 595 609 1,732 1,708
Interest expense, net 30 42 98 140
Total costs and expenses 6,943 6,181 20,194 18,879
Earnings before income taxes 410 317 1,322 1,409
Income taxes provided on earnings 144 111 463 493
Net earnings $ 266 $ 206 $ 859 $916
Net earnings per common and common equivalent share (1)
Fully diluted:
Net earnings per common and
common equivalent share $ .44 $ .34 $ 1.41 $ 1.51
Average common and common
equivalent shares outstanding,
fully diluted (in millions) 613.6 609.1 613.6 609.1
Dividends paid per share $ .12 $ .12 $ .36 $ .32
(1) Average primary common and common equivalent shares outstanding
for the three months and nine months ended September 27, 1997 and
September 28, 1996 were 613.3 million and 609.0 million, respectively.
Primary earnings per common and common equivalent share were the same as
fully diluted for the three months ended September 27, 1997 and
September 28, 1996, respectively and the same as fully diluted for the
nine months ended September 27, 1997 and September 28, 1996.
See accompanying notes to condensed consolidated financial statements.
Motorola, Inc. and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
Sept. 27, December 31,
1997 1996
Assets
Cash and cash equivalents $ 1,768 $ 1,513
Short-term investments 291 298
Accounts receivable, less allowance for
doubtful accounts (1997, $171; 1996, $137) 4,547 4,035
Inventories 3,979 3,220
Other current assets 2,312 2,253
Total current assets 12,897 11,319
Property, plant and equipment, less
accumulated depreciation
(1997, $11,052; 1996, $9,830) 9,545 9,768
Other assets (1) 4,200 2,989
Total Assets $26,642 $24,076
Liabilities and Stockholders' Equity
Notes payable and current portion of
long-term debt $ 1,379 $ 1,382
Accounts payable 2,071 2,050
Accrued liabilities 5,202 4,563
Total current liabilities 8,652 7,995
Long-term debt 1,905 1,931
Other liabilities (1) 2,997 2,355
Stockholders' equity (1) 13,088 11,795
Total liabilities and stockholders' equity $26,642 $24,076
(1) SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" requires the carrying value of certain investments to
be adjusted to their fair value which resulted in the Company recording
an increase to stockholders' equity, other assets and deferred taxes of
$624 million, $1,032 million and $408 million as of September 27, 1997;
and a decrease to stockholders' equity, other assets and deferred taxes
of $26 million, $43 million, and $17 million as of December 31, 1996.
See accompanying notes to condensed consolidated financial statements.
Motorola, Inc. and Consolidated Subsidiaries
Statements of Condensed Consolidated Cash Flows
(Unaudited)
(In millions)
Nine Months Ended
Sept. 27, Sept. 28,
1997 1996
Net cash provided by operations $ 1,930 $ 2,541
Investing
Payments for property, plant and equipment (1,883) (2,138)
Decrease in short-term investments 6 25
(Increase) decrease in other investing
activities 343 (203)
Net cash used for investing activities (1,534) (2,316)
Financing
Net increase (decrease) in commercial paper
and short-term borrowings (3) 213
Proceeds from issuance of debt 1 23
Repayment of debt (21) (33)
Payment of dividends to stockholders (214) (190)
Other financing activities 96 219
Net cash provided by (used for) (141) 232
financing activities
Net increase in cash and
cash equivalents $ 255 $ 457
Cash and cash equivalents, beginning of year $ 1,513 $ 725
Cash and cash equivalents, end of period $ 1,768 $ 1,182
See accompanying notes to condensed consolidated financial statements.
Motorola, Inc. and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The Condensed Consolidated Balance Sheet as of September 27, 1997, the
Statements of Consolidated Earnings for the three-month and nine-month
periods ended September 27, 1997 and September 28, 1996, and the
Statements of Condensed Consolidated Cash Flows for the nine-month
periods ended September 27, 1997 and September 28, 1996 have been
prepared by the Company. In the opinion of management, all adjustments
(which include reclassifications and normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 27, 1997 and for all periods
presented, have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Form 10-K/A for the year ending December 31, 1996. The
results of operations for the three and nine-month periods ended
September 27, 1997, are not necessarily indicative of the operating
results for the full year.
2. Inventories
Inventories consist of the following (in millions):
Sept. 27, Dec. 31,
1997 1996
Finished goods $ 1,119 $ 830
Work in process and production materials 2,860 2,390
Inventories $3,979 $ 3,220
3. Income Taxes
The Internal Revenue Service (IRS) has examined the federal income tax
returns for Motorola, Inc. through 1991 and has settled the respective
returns through 1985. The IRS has completed its field audit of the
years 1986 and 1987. In connection with the 1986 and 1987 tax years,
the Company settled the returns for adjustments agreed to at the field
level. Certain adjustments were referred to the Appeals level of the
IRS and are expected to result in a net refund. With regard to the
1988-1991 tax years, the IRS has proposed certain adjustments to the
Company's income and tax credits for those years, which would result in
substantial additional tax. The Company disagrees with most of the
proposed adjustments and is contesting them. In the opinion of the
Company's management, the final disposition of these matters, and
proposed adjustments from other tax authorities, will not have a
material adverse effect on the consolidated financial position,
liquidity or results of operations of the Company.
4. Supplemental Cash Flows Information
Cash payments for income taxes were $425 million during the first nine
months of 1997 and $355 million for the same period a year earlier.
Cash payments for interest expense (net of amount capitalized) were $180
million and $173 million for the first nine-month periods of 1997 and
1996, respectively.
5. Recent Accounting Pronouncements
The Company has evaluated the proforma effects of the recent accounting
pronouncement, SFAS No. 128 "Earnings Per Share" which will be effective
for fiscal years ending after December 15, 1997. Based on this
evaluation, the proforma effects are not material to the Company's
consolidated financial position, liquidity or results of operations.
The Financial Accounting Standards Board has recently issued two new
accounting standards, Statement 130, "Reporting Comprehensive Income"
and Statement 131, "Disclosures about Segments of an Enterprise and
Related Information". These statements will affect the disclosure
requirements for the 1998 annual financial statements. Currently, the
Company is evaluating the effects of these new statements.
6. Restatement of Financial Statements
After discussions with the Securities and Exchange Commission regarding
the 1995 sale of its U.S. 800 megahertz Specialized Mobile Radio
business, systems and licenses to Nextel Communications, Inc. for shares
of Nextel stock, the Company has restated its 1995 historical financial
statements and has made resulting reclassifications to the December 31,
1996 Consolidated Balance Sheet. As a result, the Company has amended
its Form 10-K for the year ending December 31, 1996 originally filed on
March 25, 1997, to reflect the restatement and reclassifications. These
condensed consolidated financial statements should be read in
conjunction with the Company's Form 10-K/A for the year ending December
31, 1996.
7. Reorganization of Businesses
On September 11, 1997, the Company announced its decision to exit the
MacOS(R)-compatible computer systems business. The Company's third
quarter financial results were negatively impacted as a result of this
decision and the associated special charge of $95 million before taxes,
equivalent to 10 cents per share after taxes. Excluding this special
charge, earnings for the three months ended September 30, 1997 would
have been $328 million, or 54 cents per share.
On July 1, 1997, the Company announced its decision to phase out its
participation in the dynamic random access memory (DRAM) market. The
Company's second quarter financial results were negatively impacted as a
result of this decision and the associated charge against pre-tax
earnings of $170 million or 18 cents per share. The charge related
primarily to the write down of both technology development costs and
manufacturing equipment.
The 1997 nine-month results include special charges totaling $265
million before taxes, equivalent to 28 cents per share after taxes, due
to the events noted in the two paragraphs above. Excluding these
special charges, nine-month 1997 earnings would have been $1.0 billion,
or $1.69 per share.
Motorola, Inc. and Consolidated Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
This commentary should be read in conjunction with the sections of the
following documents for a full understanding of Motorola's financial
condition and results of operations: from Motorola, Inc.'s 1996 Summary
Annual Report to Stockholders, the Letter to Stockholders on page 2; and
from the Company's form 10-K/A, Management's Discussion and Analysis of
Financial Condition and Results of Operations, contained in Item 7, and
the Consolidated Financial Statements and Footnotes to the Consolidated
Financial Statements, contained in Item 8; and from Motorola, Inc.'s
Quarterly Report on Form 10-Q for the period ending September 27, 1997,
of which this commentary is a part, the Condensed Consolidated Financial
Statements and Notes to the Condensed Consolidated Financial Statements,
pages 3 through 7.
Results of Operations:
Sales were $7.4 billion in the third quarter of 1997, up 13 percent from
$6.5 billion a year earlier. In the first nine months, sales rose 6
percent to $21.5 billion from $20.3 billion in the first nine months of
1996.
Third quarter earnings were $266 million, or 44 cents per share,
compared with $206 million, or 34 cents per share in the third quarter
of 1996. The 1997 third quarter results include a special charge of $95
million before taxes, equivalent to 10 cents per share after taxes, as a
result of Motorola's decision in September to exit the
MacOS(R)-compatible computer systems business. Excluding the special
charge, earnings would have been $328 million, or 54 cents per share.
Earnings in the first nine months of 1997 were $859 million, or $1.41
per share, compared with $916 million, or $1.51 per share, a year
earlier. The 1997 nine-month results include special charges of $265
million before taxes, equivalent to 28 cents per share after taxes, as a
result of the decision to phase out of the dynamic random access memory
(DRAM) business, as well as the third quarter charge noted above.
Excluding these special charges, nine-month 1997 earnings would have
been $1.0 billion, or $1.69 per share. The per-share comparisons are on
a fully diluted basis per common and common equivalent share.
Net margin on sales was 3.6 percent in the third quarter, compared with
3.2 percent a year ago, while the first nine months, net margin was 4.0
percent against 4.5 percent in the year-earlier period. Excluding
special charges, these margins in 1997 would have been 4.5 percent in
the third quarter and 4.8 percent in the first nine months.
Cellular Products Segment sales increased 12 percent to $2.8 billion and
orders increased 13 percent. Operating profits were unchanged, but
would have declined except for a gain that resulted from the sale of an
investment. The segment includes results of the Cellular Subscriber
Sector (CSS), the Cellular Infrastructure Group (CIG) and the Network
Management Group.
CSS sales and orders increased, led by higher sales and orders in Pan
America and Europe, while sales and orders declined in the Asia-Pacific
region and Japan. Sales and orders for digital products for Global
System for Mobile Communications (GSM) continued to grow at a very
significant rate. Demand for StarTAC(TM) wearable cellular phones also
continued to grow at a very significant rate. CSS is currently capacity
constrained in both analog and GSM digital versions of the StarTAC
phone, as strong demand for these products has exceeded the presently
available supply of certain key semiconductor components.
CIG sales increased, as higher sales in the Pan American and
Asia-Pacific regions were largely offset by lower sales in Europe and
Japan. Orders were flat, led by increases in the Pan American and
Asia-Pacific regions, while they declined in Europe and Japan. Sales
and orders were lower in Japan due to the migration from existing
technology to Code Division Multiple Access (CDMA), in which CIG
announced a major award for a nationwide system in the first quarter of
1997.
Semiconductor Products Segment sales increased 12 percent to $2.1
billion, and orders rose 35 percent. The segment reported an operating
profit versus break-even results a year ago. The highest order growth
region was Asia Pacific, followed by Europe, the Americas and Japan. By
end markets, the computer/peripherals, distribution and communications
areas showed the highest growth. Consumer electronics orders and
automotive showed modest growth, while industrial orders and personal
computing orders declined.
Land Mobile Products Segment sales rose 37 percent to $1.3 billion.
Orders increased 8 percent and operating profits were higher. Orders
for iDEN(TM) equipment for integrated digital enhanced networks were
higher, primarily due to orders received from Nextel Communications,
Inc. for handsets and infrastructure for the continued rollout of its
nationwide network in the U.S. and from Nextel International, Inc. to
build a new iDEN system in Mexico.
Messaging, Information and Media Segment sales declined 13 percent to
$885 million and orders were down 44 percent. Operating profits were
lower. As indicated in September, results were negatively affected by
weakness in the world's two largest markets for paging products. In
China, the paging market experienced a larger-than-normal seasonal
downturn caused by a buildup of pager inventories in distribution
channels in the first half of 1997, as well as developing pricing
pressures. These conditions are expected to weaken further in the
fourth quarter. In the United States, paging operators continued to
control inventories tightly in order to improve their financial
positions and cash flow. The Company is reviewing various business
options related to its low-end modem business based in Huntsville, Ala.
Among the alternatives, it has retained an investment banker to explore
different business models, which could be a form of business combination
or sale.
Automotive, Energy and Components Sector sales increased 20 percent,
orders were up 17 percent, and operating profits were higher. The
sector's results are reported as part of the "Other Products" segment.
The energy products business improved, primarily due to higher orders
for batteries used in Motorola's StarTAC(TM) cellular phones and
iDEN(TM) handsets.
Space and Systems Technology Group sales increased 45 percent and orders
were down 28 percent. The decline in orders is attributable to the fact
that orders in the third quarter of 1996 were unusually high because of
recognition of bookings that had been delayed pending completion of some
of the financing of Iridium LLC. Group operating profits were higher.
The group's results are reported as part of the "Other Products"
segment. Another 22 satellites for the IRIDIUM(R) global communications
system were launched during the quarter, bringing the total number in
orbit to 34. 32 of the satellites are currently operational.
Additional launches for the 66-satellite constellation are scheduled
through May 1998. Initial testing of certain paging and telephony
functions has been successfully accomplished through orbiting
satellites. System testing will continue until the start of commercial
service, expected at the end of September 1998.
Motorola Computer Group sales increased 20 percent and orders were down
3 percent. The group recorded a larger operating loss than a year ago
because of a special charge. The group's results are reported as part
of the "Other Products" segment. The special charge related to the
group's plans to discontinue its MacOS(R)-compatible computer system
business in response to decisions by Apple Computer, Inc. to limit the
introduction of its new technology and phase out future licensing. The
group intends to focus its resources on its profitable embedded and
technical systems business, where it is a market leader. The group
announced an agreement to acquire Pro-Log Corp. of Monterey, Calif., a
manufacturer of industrial-grade single-board embedded computers and
enclosures based on CompactPCI(R) bus architecture. The agreement
strengthens the group's presence in the Intel processor-based CompactPCI
market.
Manufacturing costs during the quarter decreased to 68 percent of sales
versus 69 percent a year ago due largely to improved manufacturing
performance in the Semiconductor Products Segment.
Selling, general and administrative expenses were $1.3 billion, 18.1
percent of sales, versus $1.0 billion, 16.0 percent of sales, during the
year earlier period. The increase is largely attributable to the special
charge taken as a result of the decision to exit the MacOS(R)-compatible
computer systems business. As planned and previously disclosed, the
results also reflect the impact of increased expense in recognition of
Motorola's share of Iridium LLC's net losses, as well as increased
expenses in the commercialization of the flat panel display business.
The combined expenses for these items were $28 million in the quarter
versus $4 million a year ago. In the fourth quarter of 1997, Motorola
expects these expenses to total approximately $42 million.
Depreciation expense decreased 2 percent to $595 million for the third
quarter of 1997 in comparison with $609 million for the year-earlier
period due partly to significant reductions in fixed asset expenditures
in the Semiconductor Products Segment in both 1996 and 1997. Interest
expense declined. The tax rate of 35 percent of pre-tax profits is
identical to a year ago.
Liquidity and Capital Resources:
Inventories at September 27, 1997, increased by 24 percent or $759
million, compared to inventories at December 31, 1996. Property, plant
and equipment, less accumulated depreciation, decreased $223 million
since December 31, 1996.
Motorola's notes payable and current portion of its long-term debt
remained flat at $1.4 billion from the amount at December 31, 1996.
Long-term debt remained flat at $1.9 billion from the amount at December
31, 1996. Net debt (notes payable and current portion of long-term debt
plus long-term debt less short-term investments and cash equivalents) to
net debt plus equity decreased to 10.7 percent at September 27, 1997
from 13.4 percent at December 31, 1996. The Company's total domestic
and foreign credit facilities aggregated $3.9 billion at September 27,
1997, of which $315 million were used and the remaining amount was not
drawn, but was available to back up outstanding commercial paper which
totaled $1.1 billion at September 28, 1997. In October of 1997, Iridium
LLC paid down $205 million of its credit facility guaranteed by
Motorola, reducing the maximum amount available under that facility to
$450 million. As announced earlier in 1997, Motorola agreed in
principle to increase Motorola's guarantee of Iridium LLC bank financing
by an additional $350 million to a total of $800 million.. As
previously reported, Iridium LLC may require additional financing,
possibly by the second quarter of 1998, to continue to make contractual
payments to Motorola. Iridium LLC currently is pursuing funding
options, but there can be no assurances as to the availability to
Iridium LLC of these funding options.
Off-balance sheet commitments to Nextel Communications, Inc. for
equipment financing aggregated approximately $450 million at the end of
the third quarter. Equipment financing commitments represent the
maximum amount available under the Company's arrangements with Nextel
and may not be completely utilized.
As of the end of the reporting period, the Company had no outstanding
interest rate swaps, currency swaps, or options relating to either its
debt instruments or investments.
The Company uses financial instruments to hedge, and therefore attempts
to reduce, its overall exposure to the effects of currency fluctuations
on cash flows. The Company's policy is not to speculate in financial
instruments for profit on the exchange rate price fluctuation, trade in
currencies for which there are no underlying exposures, or enter into
trades for any currency to intentionally increase the underlying
exposure. Instruments used as hedges must be effective at reducing the
risk associated with the exposure being hedged and must be designated as
a hedge at the inception of the contract. Accordingly, changes in
market values of hedge instruments must be highly correlated with
changes in market values of underlying hedged items both at inception of
the hedge and over the life of the hedge contract.
The Company's strategy is to offset the gains or losses of the financial
instruments against losses or gains on the underlying operational cash
flows or investments based on the operating business units' assessment
of risk. Currently, the Company primarily hedges firm commitments. The
Company expects that there could be hedges of anticipated transactions
or investments in foreign subsidiaries in the future.
Many of the Company's non-functional currency receivables and payables
which are denominated in major currencies that can be traded on open
markets are hedged. The Company uses forward contracts and options to
hedge these currency exposures. A portion of the Company's exposure is
to currencies which are not traded on open markets, such as those in
Latin America and China, and these are addressed, to the extent
reasonably possible, through managing net asset positions, product
pricing, and other means, such as component sourcing.
Assets and liabilities which are denominated in non-functional
currencies are translated to the functional currency on a monthly basis
and the resulting gain or loss is recorded within selling, general, and
administrative expenses in the income statement. Gains and losses on
hedges of existing assets or liabilities are marked to market on a
monthly basis and the result is recorded within selling, general, and
administrative expenses in the income statement. Gains and losses on
financial instruments which hedge firm future commitments are deferred
until such time as the underlying transactions are recognized or
recorded immediately when the transaction is no longer expected to
occur. The criteria used to support the election of deferred accounting
is in accordance with FAS 52 and FAS 80. The foreign exchange financial
instruments which hedge various investments in foreign subsidiaries are
marked to market monthly and the results are recorded in the equity
section. Other gains or losses on financial instruments that do not
qualify as hedges and which are terminated are recognized immediately as
income or expense.
As of September 27, 1997 and September 28, 1996, the Company had net
outstanding foreign exchange contracts totaling $1.6 billion and $1.3
billion, respectively. The following schedule shows the five largest
foreign exchange hedge positions as of September 27, 1997 and the
corresponding positions at September 28, 1996:
Millions of U.S. Dollars
Buy (Sell) Sept. 27, Sept. 28,
1997 1996 .
British Pound Sterling (383) (299)
Japanese Yen (359) (344)
German Deutschemark (224) (6)
Italian Lira (163) (98)
Taiwan Dollar (83) (36)
As of September 27, 1997 and September 28, 1996, outstanding foreign
exchange contracts primarily consisted of short-term forward contracts.
Net deferred losses on these forward contracts which hedge designated
firm commitments were immaterial at September 27, 1997.
As of the end of the reporting period, the Company had no derivatives
which hedge the value of its minority-owned equity investments.
However, the Company has entered into arrangements whereby the Company
may increase its percentage interest in certain affiliates at the option
of the other Shareholders or the Company at various dates. The value of
these arrangements was immaterial as of the end of the reporting period.
Motorola's research and development expense was $695 million in the
third quarter of 1997, compared with $617 million in the third quarter
of 1996. Research and development expenditures for the year ended
December 31, 1996 were $2.4 billion. The Company continues to believe
that a strong commitment to research and development drives long-term
growth. At September 27, 1997, the Company's fixed asset expenditures
for the third quarter totaled $831 million, compared with $579 million
in the third quarter of 1996. The Company is currently anticipating
that fixed asset expenditures for 1997 will be flat with the $3 billion
spent in 1996.
Return on average invested capital (net earnings divided by the sum of
stockholders' equity, long-term debt, notes payable and the current
portion of long-term debt, less short-term investments and cash
equivalents) was 7.8 percent based on the performance of the four
preceding fiscal quarters ending September 27, 1997, compared with 8.5
percent based on the performance of the four preceding fiscal quarters
ending September 28, 1996. Motorola's current ratio (the ratio of
current assets to current liabilities) was 1.49 at September 27, 1997,
compared to 1.42 at December 31, 1996.
Outlook:
The Company is continuing the process, which was initiated at the end of
1996, of reviewing businesses and development programs that have not
lived up to expectations while redirecting resources to core
technologies and development programs with the most potential. This
review process is expected to conclude by the end of the year and may
result in additional pre-tax charges of up to $100 million against
earnings in the fourth quarter.
Business Risks:
Statements that are not historical facts are forward-looking and involve
risks and uncertainties. These forward-looking statements include those
in "Outlook" and those about (i) Motorola's review of its businesses and
possible charges resulting therefrom, (ii) the continuation of weakness
in the market for paging products in China, (iii) exploration of
strategic options with regard to the analog modem business, (iv)
deployment and commercialization of IRIDIUM(R) products and services,
(v) the Iridium LLC financing negotiations, (vi) expenses relating to
Iridium LLC and the commercialization of the flat panel display
business, (vii) refocusing resources in connection with the exit from
the MacOS(R)-compatible computer systems business and (viii) fixed asset
expenditures. Motorola wishes to caution the reader that the factors
below along with the factors set forth in Motorola's 1996 Form 10/K-A on
pages 14 and 15 of Item 7 and in Motorola's other SEC filings could
affect, and in some cases have affected, Motorola's actual results
causing results to differ materially from those in any forward-looking
statement. These factors include: (i) the success of strategic
decisions to improve performance, (ii) the ability of Motorola to
contain costs and charges against earnings as a result of any actions
taken to improve performance, (iii) currency stability and the rate of
growth in emerging markets, (iv) unforeseen expenses in connection with
the decision to depart from the MacOS-compatible computer systems
business, (v) pricing of MacOS-compatible computer systems products
during the market exit period, (vi) pricing pressures and demand for
products, (vii) product and technology development and commercialization
risks and uncertainties, including unforeseen expenses, for new digital
technologies, newer messaging services, smartcards, new PowerPC(TM)
architecture, IRIDIUM products and services and flat panel displays;
(viii) the uncertainty of Iridium LLC future financing, (ix) continued
weak demand for paging products in China and North America, (x)
management's ability to integrate newly-acquired entities into
Motorola's overall business strategy, and (xi) the impact of any
strategic decisions relating to the analog modem business.
IRIDIUM(R) is a registered trademark and service mark of Iridium LLC.
MacOS(R) is a registered trademark of Apple Computer, Inc.
PowerPC(TM) is a trademark of IBM Corporation.
(R) Reg. U.S. Pat. & Tm. Off.
Motorola, Inc. and Consolidated Subsidiaries
Information by Industry Segment (Unaudited)
Summarized below are the Company's segment sales as defined by industry
segment for the three months and nine months ended September 27, 1997
and September 28, 1996:
Segment Sales
for the Three Months Ended
Sept. 27, Sept. 28,
(Dollars in millions) 1997 1996 % Change
Cellular Products $2,778 $2,474 12
Semiconductor Products 2,074 1,849 12
Messaging, Information and
Media Products 885 1,021 (13)
Land Mobile Products 1,280 935 37
Other Products 1,120 870 29
Adjustments and eliminations (784) (651) 21
Industry segment totals $7,353 $6,498 13
Segment Sales
for the Nine Months Ended
Sept. 27, Sept. 28,
(Dollars in millions) 1997 1996 % Change
Cellular Products $8,315 $7,725 8
Semiconductor Products 5,914 5,975 (1)
Messaging, Information and
Media Products 2,944 3,082 (5)
Land Mobile Products 3,417 2,709 26
Other Products 3,162 2,774 14
Adjustments and eliminations (2,236) (1,977) 13
Industry segment totals $21,516 $20,288 6
Part II - Other Information
Item 1 - Legal Proceedings
Motorola is a named defendant in seven cases arising out of alleged
groundwater, soil and air pollution in Phoenix and Scottsdale, Arizona.
Farr v. Motorola, a personal injury and wrongful death lawsuit based on
allegations of environmental contamination, was settled and dismissed
with prejudice on September 5, 1997. On August 8, 1997, Motorola was
served in Dawson, et al. v. Motorola, et al., a personal injury case
involving 16 plaintiffs and the same multiple defendants named in the
Lofgren, Bentancourt, Ford and Wilkins lawsuits. A portion of the
Lofgren matter has been set for trial on January 5, 1998.
Motorola is a defendant in several cases arising out of Motorola's
manufacture and sale of portable cellular telephones. On August 8, 1997,
Crist v. Motorola and Wright v. Motorola were dismissed without
prejudice.
See Item 3 of the Company's Form 10-K for the fiscal year ended December
31, 1996 and Item 1 of Part II of the Company's Forms 10-Q for the
periods ending March 29, 1997 and June 28, 1997 for additional
disclosures regarding pending cases.
In the opinion of management, the ultimate disposition of these matters
will not have a material adverse effect on the consolidated financial
condition, liquidity or results of operations of Motorola.
Item 2 - Changes in Securities
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5 - Other Information
Sale of 100-Year Debentures.
On October 10, 1997, the Company sold an aggregate face principal amount
of $300 million of 5.22% Debentures due October 1, 2097. The Debentures
were issued at a price to the public of 75.55% of their face value. The
net proceeds to the Company from the issue and sale of the Debentures
were $224,383,500. The Company intends to use the proceeds to reduce
short-term indebtedness and for other general corporate purposes.
Stock Repurchase Program.
The Company has established the Motorola Stakeholders Plan, a worldwide
employee bonus plan that will generally be available to all employees
who are not eligible for the Motorola Executive Incentive Plan or
certain other bonus programs. In connection with the Stakeholders Plan,
which is effective as of January 1, 1997, the Motorola Worldwide RONA
Bonus Plan has been terminated. Pursuant to the Stakeholders Plan, if
the Company and its major business units meet certain financial targets,
the participants will receive an annual bonus paid 50% in cash and 50%
in shares of the Company's common stock (except in jurisdictions where
delivery of stock bonuses is not legally practical, in which
jurisdictions bonuses will be paid 100% in cash). If the financial
targets are met, bonuses will be calculated and paid in the first
quarter of the following year.
In connection with the Stakeholders Plan, the Company will be
implementing a stock repurchase program beginning in the fourth quarter
of 1997. From time to time the Company will purchase shares of its
common stock on the open market and hold those shares in treasury for
potential payment of bonuses under the Stakeholders Plan. The Company's
intent is that all shares obtained pursuant to this repurchase program
will be used in connection with the Stakeholders Plan. The Company
estimates that the number of shares of common stock acquired under the
repurchase program in any year will be less than 1% of the Company's
total number of shares of common stock outstanding.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
1 Underwriting Agreement dated October 7, 1997 by and among
Motorola, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated.
4 Specimen of 5.22% Debenture due October 1, 2097.
11 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully
Diluted Earnings Per Common and Common Equivalent Share for the
Three Months Ended September 27, 1997 and September 28, 1996.
11.1 Motorola, Inc. and Consolidated Subsidiaries Primary and Fully
Diluted Earnings Per Common and Common Equivalent Share for the
Nine Months Ended September 27, 1997 and September 28, 1996.
12 Calculation of Ratio of Earnings to Fixed Charges of the
Company.
27 Financial Data Schedule (filed only electronically with the
SEC).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the third quarter of
1997.
Signature
Pursuant to the requirements 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.
MOTOROLA, INC.
(Registrant)
Date: Nov. 7, 1997 By: /s/ Kenneth J. Johnson
Kenneth J. Johnson
Senior Vice President and Controller
(Chief Accounting Officer and Duly
Authorized Officer of the Registrant)
EXHIBIT INDEX
Number Description of Exhibits
1 Underwriting Agreement dated October 7, 1997 by and among
Motorola, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated.
4 Specimen of 5.22% Debenture due October 1, 2097.
11 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the Three
Months Ended September 27, 1997 and September 28, 1996
11.1 Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per
Common and Common Equivalent Share for the Nine
Months Ended September 27, 1997 and September 28, 1996
12 Calculation of Ratio of Earnings to Fixed Charges of the
Company
27 Financial Data Schedule
(filed only electronically with the SEC)
Exhibit 1
MOTOROLA, INC.
(a Delaware corporation)
Debt Securities
Debt Warrants
Common Stock
Common Stock Warrants
Units
UNDERWRITING AGREEMENT
October 7, 1997
To the Representatives of the
several Underwriters named in
the respective Terms Agreements
hereinafter described
Dear Sirs:
Motorola, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell, at up to an aggregate initial public offering price of
$1,000,000,000, or the equivalent thereof in one or more foreign currencies
or composite securities, including European Currency Units, in one or more
series, its (i) unsecured debt securities (the "Debt Securities") which may
be senior (the "Senior Securities") or subordinated (the "Subordinated
Securities"), (ii) warrants to purchase the Debt Securities (the "Debt
Warrants"), (iii) shares of its common stock, $3 par value per share (the
"Common Stock"), and (iv) warrants to purchase Common Stock (the "Common
Stock Warrants") in one or more offerings on terms determined at the time
of sale. The Debt Securities, Debt Warrants, Common Stock and Common Stock
Warrants may be offered separately or as a part of units consisting of one
or more such securities (the "Units"; and together with the Debt
Securities, Debt Warrants, Common Stock and Common Stock Warrants, the
"Offered Securities"). The Debt Securities and the Units containing the
Debt Securities (collectively, the "Offered Debt Securities") will be
issued under one of several indentures depending upon the particular
issuance. The Senior Securities will be issued under an indenture dated as
of May 1, 1995 between the Company and Harris Trust and Savings Bank, as
Trustee (the "Senior Indenture"). The Subordinated Securities will be
issued under an indenture between the Company and a trustee to be named in
the Terms Agreement (as defined below) relating to any Subordinated
Securities (the "Subordinated Indenture"). The Liquid Yield Option(TM)
Notes (the "LYONs"(TM)) will be issued under an indenture between the
Company and The First National Bank of Chicago, as Trustee (the "LYONs
Indenture"). The Senior Indenture, Subordinated Indenture and LYONs
Indenture are each sometimes referred to as the "Indentures." The Debt
Warrants, Common Stock Warrants and Units containing either of the
foregoing (collectively, the "Warrants") will be issued under one or more
warrant agreements (the "Warrant Agreements") between the Company and the
Warrant Agent identified in such Warrant Agreement. Each issue of the
Offered Debt Securities and Warrants may vary, as applicable, as to the
aggregate principal amount, maturity date or dates, interest rate or rates
and timing of payments thereof, redemption provisions, conversion
provisions, exercise provisions and sinking fund requirements, if any, and
any other variable terms which the applicable Indenture or Warrant
Agreement, as the case may be, contemplates may be set forth in the Offered
Debt Securities and Warrants as issued from time to time.
Whenever the Company determines to make an offering of Offered
Securities, it will enter into an agreement substantially in the form of
Exhibit A hereto (the "Terms Agreement") providing for the sale of such
Offered Securities to, and the purchase and offering thereof by, the
underwriter or underwriters named therein (the "Underwriters" or "you",
which terms shall include the underwriter or underwriters named therein
whether acting alone in the sale of the Offered Securities or as members of
an underwriting syndicate). The Terms Agreement relating to each offering
of the Offered Securities shall specify, where applicable, the principal
amount of the Offered Securities to be issued, the name or names of the
Underwriters participating in such offering (subject to substitution as
provided in Section 9 hereof) and the principal amount of the Offered
Securities which each severally agrees to purchase, the name or names of
the Underwriters acting as manager or co-managers in connection with such
offerings, if any (the "Representatives", which term shall include each
Underwriter in the event that there shall be no manager or co-managers),
the price at which the Offered Securities are to be purchased by the
Underwriters from the Company, the initial public offering price, the date,
time and place of delivery and payment, the number of shares to be issued
in the case of the issuance of the Common Stock, and, to the extent not
otherwise specified in the applicable Indenture or Warrant Agreement in the
case of the issuance of the Offered Debt Securities or Warrants, their
terms. Each offering of the Offered Securities will be governed by this
Agreement, as supplemented by the applicable Terms Agreement, and this
Agreement and such Terms Agreement shall inure to the benefit of and be
binding upon each Underwriter participating in the offering of such Offered
Securities.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-62911) relating
to (i) the Offered Securities and (ii) the Common Stock issuable upon
conversion or exercise of the Offered Securities in the case of the
issuance of Offered Securities convertible into or exercisable for Common
Stock, and the offering thereof from time to time in accordance with Rule
415 under the Securities Act of 1933, as amended (the "1933 Act"), and has
filed such amendments thereto as may have been required to the date hereof.
Such registration statement, as amended, has been declared effective by the
Commission, and the Indentures have been qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act"). Such registration
statement, as amended, and the prospectus relating to the sale of the
Offered Securities by the Company constituting a part thereof, including
all documents incorporated therein by reference, as from time to time
amended or supplemented pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1933 Act or otherwise, are referred to herein
as the "Registration Statement" and the "Prospectus", respectively;
provided, however, that a supplement of the Prospectus contemplated by
Section 3(a)(ix) hereof (a "Prospectus Supplement") shall be deemed to have
supplemented the Prospectus only with respect to the offering of Offered
Securities to which such Prospectus Supplement relates. If the Company
elects to rely on Rule 434 under the rules and regulations of the 1933 Act
(the "1933 Act Regulations"), all references to the Prospectus shall be
deemed to include, without limitation, the form of prospectus and the
abbreviated term sheet, taken together, provided to the Underwriters by the
Company in reliance on Rule 434 of the 1933 Act Regulations (the "Rule 434
Prospectus"). If the Company files a registration statement to register a
portion of the Offered Securities and relies on Rule 462(b) of the 1933 Act
Regulations for such registration statement to become effective upon filing
with the Commission (the "Rule 462 Registration Statement"), then any
reference to "Registration Statement" herein shall be deemed to be to both
the registration statement referred to above (No. 33-62911) and the Rule
462 Registration Statement, as each such registration statement may be
amended pursuant to the 1933 Act.
SECTION 1.
(a) Representations and Warranties. The Company represents and
warrants to each Underwriter as of the date hereof and as of the date of
the applicable Terms Agreement (such latter date being hereinafter referred
to as the "Representation Date") as follows:
(i) The Registration Statement and the Prospectus, at the time the
Registration Statement became effective and as of the applicable
Representation Date, complied in all material respects with the 1933 Act
and the 1933 Act Regulations. The Registration Statement, at the time the
Registration Statement became effective (or, if an amendment to the
Registration Statement or an annual report on Form 10-K has been filed by
the Company with the Commission subsequent to the effectiveness of the
Registration Statement, then at the time of the most recent such filing)
did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, at the time the
Registration Statement became effective and as of the applicable
Representation Date, did not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in
this subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter, or on behalf of any Underwriter by the Representatives,
expressly for use in the Registration Statement or Prospectus.
(ii) The documents incorporated by reference in the Prospectus, at
the time they were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of the 1934 Act
and the rules and regulations of the Commission thereunder (the "1934 Act
Regulations"), and, when read together and with the other information in
the Prospectus, at the time the Registration Statement and any amendments
thereof became or become effective under the 1933 Act and at each
Representation Date, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(iii) The Company and its subsidiaries considered as a whole have not
sustained since the date of the latest financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth,
incorporated by reference or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated or incorporated
therein, there has not been any change in the capital stock (other than
upon exercise of outstanding stock options or upon conversion of
convertible securities outstanding on the date of the most recent balance
sheet included in the Prospectus or pursuant to the Company's employee
stock ownership plan or pursuant to the Company's employee stock purchase
plans or the Company's employee savings and profit sharing plan), any
significant increase in the long-term debt of the Company and its
subsidiaries taken as a whole, or any material adverse change, or any
development which the Company has reasonable cause to believe will involve
a prospective material adverse change, in or affecting the general affairs,
management, consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries considered as a
whole, or, other than the Company's regular quarterly dividend, any
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(iv) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to conduct its business as described in
the Prospectus with only such exceptions as are not material to the
business of the Company and its subsidiaries considered as a whole.
(v) The authorized capitalization is as set forth or incorporated by
reference in the Prospectus and all of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable.
(vi) The execution, delivery and performance of this Agreement, the
applicable Terms Agreement, the applicable Indenture in the case of the
issuance of the Offered Debt Securities, and the applicable Warrant
Agreement in the case of the issuance of the Warrants, and the consummation
of the transactions contemplated herein and therein have been duly
authorized by all necessary corporate action and will not conflict with or
constitute a breach of, or a default under, any material contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company is a party or by which the Company is
bound; nor will such action result in a violation of the provisions of the
Company's Restated Certificate of Incorporation or bylaws of the Company,
as amended, or any applicable law, rule, regulation, judgment, order or
administrative or court decree.
(vii) Other than (a) as set forth, incorporated by reference, or
contemplated in the Prospectus and (b) litigation incident to the kind of
business conducted by the Company and its subsidiaries, which in the case
of those items in (b) individually and in the aggregate is not material to
the Company and its subsidiaries considered as a whole, there are no legal
or governmental proceedings pending to which the Company and its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or its subsidiaries, the Company has reasonable cause to believe
would individually or in the aggregate have a material adverse effect on
the consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries considered as a whole; and,
to the best of the Company's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(viii) No consent, approval or authorization of any court or
governmental authority or agency is necessary in connection with the sale
of the Offered Securities or the consummation of the other transactions
contemplated by this Agreement, the applicable Terms Agreement, the
applicable Warrant Agreement in the case of the issuance of the Warrants,
or the applicable Indenture in the case of the issuance of the Offered Debt
Securities, except as may be required under the 1933 Act or 1933 Act
Regulations, the 1934 Act or 1934 Act Regulations, the 1939 Act or state
securities laws.
(ix) The Company has complied and will comply with the provisions of
Florida H.B. 1771, codified as Section 517.075 of the Florida Statutes,
1987, as amended, and all regulations promulgated thereunder relating to
issuers doing business in Cuba.
(b) In the event the Offered Securities are Offered Debt Securities,
the Company additionally represents and warrants to each Underwriter as of
the Representation Date that the Offered Debt Securities to be issued and
sold pursuant to this Agreement have been duly authorized, and when issued,
authenticated and delivered pursuant to this Agreement, against payment of
the consideration set forth in the Terms Agreement, will have been duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture under which they are to be issued, which will be
substantially in the form included as an exhibit to the Registration
Statement; the applicable Indenture has been duly authorized, and when duly
executed and delivered by the Company and the applicable Trustee, will
constitute a valid and legally binding instrument enforceable against the
Company in accordance with its terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles, and except as enforcement thereof may be limited by (i)
requirements that a claim with respect to any Offered Debt Securities
denominated other than in U.S. dollars (or a foreign currency or currency
unit judgment in respect of such claim) be converted into U.S. dollars at a
rate of exchange prevailing on a date determined pursuant to applicable law
or (ii) governmental authority to limit, delay or prohibit the making of
payments outside the United States; and the Offered Debt Securities and the
applicable Indenture conform in all material respects to the descriptions
thereof in, or incorporated by reference into, the Prospectus and the
applicable Prospectus Supplement.
(c) In the event the Offered Securities are convertible into or
exercisable for Common Stock, the Company makes the following additional
representations and warranties to each Underwriter as of the Representation
Date:
(i) The shares of Common Stock initially issuable upon conversion or
exercise, as the case may be, have been duly authorized and reserved for
issuance, and when issued and delivered, pursuant to the terms of the
Indenture or Warrant Agreement, as the case may be, will be validly issued,
fully paid and non-assessable.
(ii) Holders of Offered Securities receiving shares of Common Stock
issued upon the conversion or exercise of such Offered Securities, as the
case may be, or upon the purchase of Offered Securities by the Company at
the option of holders of such Offered Securities in the case of the
issuance of LYONs with such a purchase feature as Offered Securities, will
also be entitled, to the same extent as will all shares of Common Stock
issuable at such time otherwise than upon the conversion or exercise of
such Offered Securities or upon purchase of Offered Securities by the
Company at the option of the holders in the case of the issuance of LYONs
with such a purchase feature as Offered Securities, to one-quarter
preferred share purchase right (a "Right") in respect of each share of
Common Stock so received; each such one-quarter Right has been duly
authorized, and when issued and delivered in accordance with the terms of
the Rights Agreement, dated as of November 9, 1988, between the Company and
Harris Trust and Savings Bank, as amended, (the "Rights Agreement"), will
have been duly executed, issued and delivered; the Rights Agreement has
been duly authorized, executed and delivered by the Company and Harris
Trust and Savings Bank and is enforceable against the Company in accordance
with its terms, subject, as to enforcement, to general equity principles;
and the Rights and the Rights Agreement conform in all material respects to
the descriptions thereof included in or incorporated by reference into the
Prospectus and the applicable Prospectus Supplement.
(iii) The Common Stock conforms in all material respects to the
description thereof included in or incorporated by reference into the
Prospectus and the applicable Prospectus Supplement and is not subject to
preemptive or other similar rights.
(d) In the event the Offered Securities are Warrants, the Company
additionally represents and warrants to each Underwriter as of the
Representation Date that the Warrants to be issued and sold pursuant to
this Agreement have been duly authorized, and when issued, authenticated
and delivered pursuant to this Agreement, against payment of the
consideration set forth in the Terms Agreement, will have been duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Warrant Agreement under which they are to be issued, which
will be substantially in the form included as an exhibit to the
Registration Statement; the applicable Warrant Agreement has been duly
authorized, and when duly executed and delivered by the Company and the
applicable Warrant Agent, will constitute a valid and legally binding
instrument enforceable in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization or other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Warrants and the applicable Warrant
Agreement conform in all material respects to the descriptions thereof in,
or incorporated by reference into, the Prospectus and the applicable
Prospectus Supplement.
(e) In the event the Offered Securities are shares of Common Stock or
Units containing shares of Common Stock, the Company makes the following
additional representations and warranties to each Underwriter as of the
Representation Date:
(i) The Common Stock to be issued and sold pursuant to this Agreement
has been duly authorized, and when issued and delivered pursuant to this
Agreement, against payment of the consideration set forth in the applicable
Terms Agreement, will be validly issued and fully paid and non-assessable.
(ii) The Offered Securities will be entitled, to the same extent as
all other shares of Common Stock issued or to be issued by the Company, to
one-quarter Right in respect of each share of Common Stock so received;
each such one-quarter Right has been duly authorized, and when issued and
delivered in accordance with the terms of the Rights Agreement will have
been duly executed, issued and delivered; the Rights Agreement has been
duly authorized, executed and delivered by the Company and Harris Trust and
Savings Bank and is enforceable against the Company in accordance with its
terms, subject, as to enforcement, to general equity principles; and the
Rights and the Rights Agreement conform to the descriptions thereof
included in or incorporated by reference into the Prospectus and the
applicable Prospectus Supplement.
(iii) The Common Stock conforms in all material respects to the
description thereof included in or incorporated by reference into the
Prospectus and the applicable Prospectus Supplement and is not subject to
preemptive or other similar rights.
(f) In the event the Offered Securities are Debt Warrants or Units
containing Debt Warrants, the Company makes the following additional
representations and warranties to each Underwriter as of the Representation
Date:
(i) The debt securities initially issuable upon the exercise of such
Offered Securities, have been duly authorized, and, when issued, will be
duly executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the indenture under which they will be issued.
(ii) The debt securities issuable upon exercise of the Debt Warrants
conform in all material respects to the description thereof included in or
incorporated by reference into the Prospectus and the applicable Prospectus
Supplement.
(g) In the event the Offered Securities are Warrants or Offered Debt
Securities convertible into Common Stock, the Company additionally
represents and warrants to each Underwriter as of the Representation Date
that upon issuance and delivery of such Warrants or Debt Securities in
accordance with (i) this Agreement and the applicable Terms Agreement, and
(ii) the applicable Warrant Agreement or Indenture, as the case may be, the
Warrants shall be exercisable at the option of the holder thereof for
shares of Common Stock or debt securities, as the case may be, in
accordance with the terms of the Warrants and the applicable Warrant
Agreement, and such Debt Securities shall be convertible at the option of
the holder thereof for shares of Common Stock in accordance with the terms
of such Debt Securities and the applicable Indenture.
(h) Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with
an offering of Offered Securities shall be deemed a representation and
warranty by the Company as to the matters covered thereby, to each
Underwriter.
SECTION 2. Sale and Delivery to the Underwriters; Closing.
(a) The several commitments of the Underwriters to purchase the Offered
Securities pursuant to any Terms Agreement shall be deemed to have been
made on the basis of the representations and warranties herein contained
and shall be subject to the terms and conditions herein set forth.
(b) Payment of the purchase price for, and delivery of, any Offered
Securities to be purchased by the Underwriters shall be made at the place
set forth in the applicable Terms Agreement, or at such other place as
shall be agreed upon by the Representatives and the Company, on the third
business day (unless postponed in accordance with the provisions of Section
9) following the date of the applicable Terms Agreement, unless the Offered
Securities are priced after 4:30 p.m. New York time in which case such
payment and delivery will be made on the fourth business day following the
date of the applicable Terms Agreement (unless postponed in accordance with
the provisions of Section 9), or such other time not later than ten
business days after such date as shall be agreed upon by the
Representatives and the Company (each such time and date being referred to
as a "Closing Time"). Payment shall be made to the Company by certified or
official bank check or checks drawn in New York Clearing House funds or
similar next day funds payable to the order of the Company, against
delivery to the Representatives for the respective accounts of the
Underwriters of the Offered Securities to be purchased by them.
(c) Certificates for the Offered Securities shall be in such
denominations and registered in such names as the Representatives may
request in writing at least one business day before the applicable Closing
Time. The certificates for the Offered Securities, which may be in
temporary form, will be made available for examination and packaging by the
Representatives in New York City not later than 3:00 p.m. on the last
business day prior to the applicable Closing Time.
SECTION 3. (a) Covenants. The Company covenants with each Underwriter as
follows:
(i) From the date of the applicable Terms Agreement, and for so long
as a Prospectus is required to be delivered in connection with the sale of
the Offered Securities covered by such Terms Agreement, the Company will
notify the Representatives immediately, and confirm the notice in writing,
(A) of the effectiveness of any amendment to the Registration Statement,
(B) of the mailing or the delivery to the Commission for filing of any
supplement to the Prospectus or any document to be filed pursuant to the
1934 Act which will be incorporated by reference into the Registration
Statement or Prospectus, (C) of the receipt of any comments from the
Commission with respect to the Registration Statement, the Prospectus or
any Prospectus Supplement, or the documents incorporated therein, (D) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus, or the
documents incorporated therein, or for additional information, (E) of the
suspension of the qualification of (i) the Offered Securities, or (ii) the
shares of Common Stock (including the Rights associated therewith) issuable
upon conversion or exercise of the Offered Securities in the case of the
issuance of Offered Securities convertible into or exercisable for Common
Stock, or the shares of Common Stock issuable upon the purchase of Offered
Securities by the Company at the option of holders of Offered Securities in
the case of the issuance of LYONs with such a purchase feature as Offered
Securities, for offering or sale in any jurisdiction, or the initiation or
threatening of any proceedings for any such purpose, and (F) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use
of the Prospectus or any preliminary prospectus supplement, or the
initiation of any proceedings for any such purpose. The Company will use
every reasonable effort to prevent the issuance of any stop order or any
order preventing or suspending the use of the Prospectus or any preliminary
prospectus supplement or suspending such qualification, and, in the event
of the issuance of a stop order or any order preventing or suspending the
use of the Prospectus or any preliminary prospectus supplement or
suspending such qualification, to obtain the lifting thereof at the
earliest possible moment.
(ii) From the date of the applicable Terms Agreement, and for so long
as a Prospectus is required to be delivered in connection with the sale of
the Offered Securities covered by such Terms Agreement, the Company will
give the Representatives notice of its intention to file or prepare any
amendment to the Registration Statement (including any post-effective
amendment) or any amendment or supplement to the Prospectus (including any
revised prospectus which the Company proposes for use by you in connection
with the offering of the Offered Securities which differs from the
prospectus on file with the Commission at the time the Registration
Statement became effective, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations,
or any abbreviated term sheet prepared in reliance on Rule 434 of the 1933
Act Regulations) and will furnish them with copies of any such amendment or
supplement or other documents proposed to be filed a reasonable amount of
time prior to such proposed filing or use, as the case may be, and will not
file any such amendment or supplement or use any such prospectus to which
you or your counsel shall reasonably object.
(iii) The Company, during the period when the Prospectus is required
to be delivered under the 1933 Act, will file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the 1934 Act.
(iv) The Company will deliver to each of the Representatives two
copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and, if applicable, documents incorporated by reference
into the Prospectus pursuant to Item 12 of Form S-3 under the 1933 Act) and
will also deliver to the Representatives, from time to time during the
period when the Prospectus is required to be delivered under the 1933 Act
or the 1934 Act, as many conformed copies of the Registration Statement as
originally filed and of each amendment thereto (without exhibits) as the
Representatives may reasonably request.
(v) Prior to 1:00 p.m., New York City time, on the business day next
succeeding the date of the applicable Terms Agreement and from time to time
during the period when the Prospectus is required to be delivered under the
1933 Act or the 1934 Act, the Company will furnish to the Representatives
in New York City such number of copies of the Prospectus (as amended or
supplemented) as the Representatives may reasonably request for the
purposes contemplated by the 1933 Act or the 1934 Act or the respective
applicable rules and regulations of the Commission thereunder.
(vi) If at any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of the Offered Securities any
event shall occur as a result of which it is necessary to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
purchaser, the Company will forthwith amend or supplement the Prospectus
(in form and substance satisfactory to your counsel) so that, as so amended
or supplemented, the Prospectus will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances existing at the time
it is delivered to a purchaser, not misleading, and the Company will
furnish to the Representatives a reasonable number of copies of such
amendment or supplement.
(vii) The Company will endeavor, in cooperation with you, to qualify
the Offered Securities and, in the case of the issuance of Offered
Securities convertible into or exercisable for Common Stock, the shares of
Common Stock (including the Rights associated therewith) issuable upon
conversion or exercise, as the case may be, or upon the purchase of the
Offered Securities by the Company at the option of holders of such Offered
Securities in the case of the issuance of LYONs with such a purchase
feature as Offered Securities, for offering and sale under the applicable
securities laws of such states and other jurisdictions as the
Representatives may designate; provided, however, that the Company shall
not be obligated to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified or to file a general consent to service of
process in any jurisdiction. In each jurisdiction in which the Offered
Securities, or in the case of the issuance of Offered Securities
convertible into or exercisable for Common Stock, such shares of Common
Stock (including the Rights associated therewith), have been so qualified,
the Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for so
long as may be required to complete such distribution of such Offered
Securities.
(viii) With respect to each sale of Offered Securities, the Company
agrees that it will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the
period covered thereby, earnings statements (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning, in each case, not later than the first day of the Company's
fiscal quarter next following the "effective date" (as defined in said Rule
158) of the Registration Statement relating to such Offered Securities.
(ix) If the Company elects not to rely on Rule 434 under the 1933 Act
Regulations, immediately following the execution of each Terms Agreement,
the Company will prepare a Prospectus Supplement setting forth, where
applicable, the principal amount or number of shares, as the case may be,
of the Offered Securities covered thereby, the name or names of the
Underwriters (subject to substitution as provided in Section 9 hereof) and
the principal amount or number of shares, as the case may be, of the
Offered Securities which each severally has agreed to purchase, the name or
names of the Representatives, the price at which the Offered Securities are
to be purchased by the Underwriters from the Company, the initial public
offering price, the selling concession and reallowance, if any, the other
terms of the Offered Securities to the extent not otherwise specified in
the applicable Indenture or Warrant Agreement, as the case may be, in the
event the Offered Securities are Offered Debt Securities or Warrants, and
such other information as the Representatives and the Company deem
appropriate in connection with the offering of the Offered Securities. The
Company will promptly transmit copies of the Prospectus Supplement to the
Commission for filing pursuant to Rule 424 of the 1933 Act Regulations and
will furnish to the Underwriters named therein as many copies of the
Prospectus and such Prospectus Supplement as the Representatives shall
reasonably request. If the Company elects to rely on Rule 434 of the 1933
Act Regulations, immediately following the execution of each Terms
Agreement, the Company will (i) prepare an abbreviated term sheet that
complies with the requirements of Rule 434 of the 1933 Act Regulations,
(ii) provide the Underwriters with copies of the form of the Rule 434
Prospectus in such number as the Underwriters may reasonably request and
(iii) file or transmit for filing with the Commission the form of
Prospectus complying with Rule 434(c)(2) of the 1933 Act Regulations in
accordance with Rule 424(b) of the 1933 Act Regulations by the close of
business in New York on the business day immediately succeeding the date of
the Terms Agreement.
(b) In the event the Offered Securities are Offered Debt Securities,
Debt Warrants or Units containing Debt Warrants, the Company additionally
covenants with each Underwriter that the Company will not contract to sell
or announce or make any offering, sale or other disposition of any debt
securities of the Company having a maturity greater than one year during
the period beginning from the date of any Terms Agreement and continuing
through the later of the termination of trading restrictions with respect
to the Offered Securities, as notified to the Company by the
Representatives, or the applicable Closing Time except for (i) proposed
issues of debt securities with respect to which the Company shall have
advised the Representatives in writing prior to the execution hereof and
(ii) except for such other debt securities with respect to which the
Representatives have given their prior written consent.
(c) In the event the Offered Securities are shares of Common Stock,
Units containing shares of Common Stock or are convertible into or
exercisable for Common Stock, the Company additionally covenants with each
Underwriter as follows:
(i) The Company will not contract to sell or announce or make any
offering, sale or other disposition of any shares of Common Stock or any
securities convertible into or exchangeable for shares of Common Stock
(collectively, "Common Equity Securities"), nor will the Company sell or
grant options, rights or warrants with respect to any Common Equity
Securities (except under the Company's stock option and other employee
incentive and benefit plans existing on the date of the applicable Terms
Agreement, except for sales of Common Equity Securities under currently
effective secondary shelf registration statements, [except for no more than
2,700,000 shares of Common Stock issued as consideration for acquisitions]
and except for Common Stock issued upon conversion of outstanding
convertible securities) in each case during a period of 90 days after the
commencement of the public offering of the Offered Securities referenced in
Section 3(c) hereof, except for (a) proposed issues of Common Equity
Securities with respect to which the Company shall have advised the
Representatives in writing prior to the execution hereof and (b) except for
such other Common Equity Securities with respect to which the
Representatives have given their prior written consent.
(ii) The Company will use its best efforts to effect the listing of
(A) Offered Securities that are shares of the Common Stock and (B) shares
of the Common Stock issuable upon the conversion or exercise of the Offered
Securities, as the case may be, or in the case of the issuance of LYONs
with such a purchase feature as Offered Securities, upon purchase of such
Offered Securities at option of the holders of such Offered Securities, on
the New York Stock Exchange (and/or such other exchanges or trading markets
on which the Common Stock is then listed or admitted for trading), and to
cause such Offered Securities to be registered under the 1934 Act.
(iii) In the case of the issuance of Offered Securities convertible
into or exercisable for Common Stock, the Company agrees to reserve and
keep available at all times, free of preemptive rights, shares of Common
Stock for the purpose of enabling the Company to satisfy any obligations to
issue shares of Common Stock upon conversion or exercise of the Offered
Securities, as the case may be.
SECTION 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement and
each Terms Agreement, including (i) the printing and filing of the
Registration Statement as originally filed and of each amendment thereto,
(ii) the copying of this Agreement, each Terms Agreement, the Indentures,
in the case of the issuance of the Offered Debt Securities, and the Warrant
Agreements, in the case of the issuance of the Warrants, (iii) the
preparation, issuance and delivery to the Underwriters of the certificates
for the Offered Securities, (iv) the fees and disbursements of the
Company's counsel and accountants, (v) the qualification of the Offered
Securities and, in the case of the issuance of Offered Securities
convertible into or exercisable for Common Stock, the shares of Common
Stock (including the Rights associated therewith) issuable upon the
conversion or exercise of the Offered Securities, as the case may be, or
upon the purchase of the Offered Securities by the Company at the option of
the holders of such Offered Securities in the case of the issuance of LYONs
with such a purchase feature as Offered Securities, under securities laws
in accordance with the provisions of Section 3(a)(vii), including filing
fees and the fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
survey, (vi) the printing and delivery to the Underwriters of copies of the
Registration Statement as originally filed and of each amendment thereto,
of any preliminary prospectuses and of the Prospectus and any amendments or
supplements (including any preliminary prospectus supplements) thereto,
including, if applicable, the abbreviated term sheet delivered by the
Company pursuant to Rule 434 of the 1933 Act Regulations, (vii) the copying
and delivery to the Underwriters of copies of the Blue Sky survey, (viii)
in the case of the issuance of Offered Debt Securities, the fees and
expenses of the Trustee, including the fees and disbursements of counsel
for the Trustee in connection with the Indentures, (ix) in the case of the
issuance of Warrants, the fees and expenses of the Warrant Agent, including
the fees and disbursements of counsel for the Warrant Agent in connection
with the Warrant Agreements, (x) where applicable, any fees payable in
connection with the rating of the Offered Securities, (xi) where
applicable, the filing fee payable to the National Association of
Securities Dealers, Inc. incident to any required review of the terms of
the sale of the Offered Securities, (xii) where applicable, the fees and
expenses incurred in connection with the listing of the Offered Securities,
and in the case of the issuance of Offered Securities convertible into or
exercisable for Common Stock, the shares of Common Stock issuable upon the
conversion or exercise of the Offered Securities, as the case may be, or in
the case of the issuance of LYONs with such a purchase feature as Offered
Securities, the shares of Common Stock issuable upon purchase of such
Offered Securities at the option of holders of such Offered Securities on
the New York Stock Exchange (and/or such other exchanges or trading markets
on which the Common Stock is then listed or admitted for trading), and
(xiii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in
this Section. Except as provided in this Section and in Sections 6 and 7,
the Underwriters will pay all of their own costs and expenses, including
fees and disbursements of their counsel, stock transfer taxes on resale of
any of the Offered Securities by them, and any advertising expenses which
they may incur.
If a Terms Agreement is terminated by the Representatives in
accordance with the provisions of Section 5, other than solely as the
result of a material adverse change in the financial markets in the United
States as provided for in Section 5(f)(iii), the Company shall reimburse
you for all out-of-pocket expenses, including the reasonable fees and
disbursements of your counsel, reasonably incurred by you in making
preparations for the purchase, sale and delivery of the Offered Securities.
SECTION 5. Conditions of Underwriter's Obligations. The obligations of
the Underwriters to purchase the Offered Securities pursuant to any Terms
Agreement are subject, in the discretion of the Representatives, to the
accuracy of the representations and warranties of the Company herein
contained, to the performance by the Company of its obligations hereunder,
and to the following further conditions:
(a) At the applicable Closing Time, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission; all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
and the Prospectus as amended or supplemented in relation to the applicable
Offered Securities shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for filing
pursuant to the 1933 Act and the 1933 Act Regulations.
(b) At the applicable Closing Time, you shall have received the
favorable opinion, dated as of the applicable Closing Time, of Carol H.
Forsyte, Senior Counsel, of the Law Department of the Company, or another
attorney employed by the Company who is acceptable to the Representatives
(the "Company Attorney's Opinion") (except in the case of item (1)(vii),
where applicable, insofar as it relates to "Certain Tax Aspects", which
opinion shall be delivered by a special outside tax counsel to the
Company), in form and substance satisfactory to your counsel.
(1) The Company Attorney's Opinion shall be to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to conduct its business as
described in the Prospectus.
(ii) The authorized capitalization of the Company is as set
forth or incorporated by reference in the Prospectus and all of the issued
and outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
(iii) This Agreement and the applicable Terms Agreement have
each been duly authorized, executed and delivered by the Company.
(iv) The Registration Statement is effective under the 1933 Act
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued under the 1933
Act or proceedings therefor initiated or threatened by the Commission.
(v) At the time the Registration Statement became effective and
at each Representation Date, the Registration Statement and the Prospectus
(other than the financial statements and other financial data and
supporting schedules included therein and in the documents incorporated by
reference into the Prospectus, as to which no opinion need be rendered)
complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act
and the rules and regulations thereunder and, where applicable, the Rule
434 Prospectus conforms to the requirements of Rule 434 of the 1933 Act
Regulations in all material respects; the documents incorporated by
reference into the Prospectus (other than the financial statements and
other financial data and supporting schedules included therein, as to which
no opinion need be rendered), when they were filed with the Commission,
complied as to form in all material respects with the applicable
requirements of the 1934 Act and the 1934 Act Regulations; and to the best
of such counsel's knowledge and information, there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Prospectus or to be filed as
exhibits to the Registration Statement other than those described or
referred to therein or filed or incorporated by reference thereto and the
descriptions thereof or references thereto are correct.
(vi) To the best of such counsel's knowledge, other than as set
forth, incorporated by reference or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject, other than litigation incident
to the kind of business conducted by the Company and its subsidiaries,
which litigation incident to the Company's business individually and in the
aggregate is not material to the Company and its subsidiaries considered as
a whole; and, to the best of such counsel's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others.
(vii) Where applicable, the information in the Prospectus or
the applicable Prospectus Supplement under "Certain Tax Aspects" (or a
similar heading or headings), to the extent that it constitutes matters of
law or legal conclusions, has been reviewed by such counsel and is correct
in all material respects.
(viii) No consent, approval, authorization, order, registration
or qualification of any court or governmental authority or agency is
required in connection with the issuance and sale of the Offered Securities
or the consummation of the other transactions contemplated by this
Agreement, the applicable Terms Agreement, the applicable Warrant Agreement
in the case of the issuance of the Warrants, or the applicable Indenture in
the case of the issuance of the Offered Debt Securities, except such as
have been obtained or rendered, as the case may be, or such consents,
approvals, authorizations, registrations or qualifications as may be
required under the securities or Blue Sky laws of any jurisdiction in
connection with the purchase and distribution of the Offered Securities by
you, the issuance of shares of Common Stock (including the Rights
associated therewith), upon conversion or exercise of the Offered
Securities, in the case of the issuance of Offered Securities convertible
into or exercisable for Common Stock and the issuance of shares of Common
Stock (including the Rights associated therewith) upon the purchase of the
Offered Securities by the Company at the option of holders of the Offered
Securities, in the case of the issuance of LYONs with such a purchase
feature as Offered Securities.
(ix) The execution and delivery of this Agreement, the
applicable Terms Agreement, the applicable Indenture in the case of the
issuance of the Offered Debt Securities, and the applicable Warrant
Agreement in the case of the issuance of the Warrants, the issuance of the
Offered Securities and the shares of Common Stock (including the Rights
associated therewith) issuable (a) upon conversion or exercise of the
Offered Securities in the case of the issuance of Offered Securities
convertible into or exercisable for Common Stock, and (b) upon the purchase
of the Offered Securities by the Company at the option of holders of the
Offered Securities in the case of the issuance of LYONs with such a
purchase feature as Offered Securities, the compliance by the Company with
all of the provisions of the Offered Securities and the applicable
Indenture and Warrant Agreement in the case of the issuance of Offered Debt
Securities or Warrants, this Agreement and the applicable Terms Agreement
and the consummation of the transactions herein or therein contemplated do
not and will not conflict with or constitute a breach of, or a default
under, (a) the Company's Restated Certificate of Incorporation or bylaws of
the Company, as amended, (b) any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument known to such
counsel to which the Company is a party or by which the Company is bound,
or (c) any applicable law, rule, regulation, judgment, order or
administrative or court decree known to such counsel.
(2) In the event the Offered Securities are Offered Debt
Securities, the Company Attorney's Opinion shall additionally be to the
effect that:
(i) The Offered Debt Securities to be issued and sold by the
Company pursuant to this Agreement and the applicable Terms Agreement have
been duly authorized, executed, authenticated, issued and delivered and
constitute valid and legally binding obligations of the Company entitled to
the benefits provided by the applicable Indenture; the Offered Debt
Securities and the applicable Indenture conform to the descriptions thereof
in, or incorporated by reference into, the Prospectus and the applicable
Prospectus Supplement; and the information in the Prospectus and the
applicable Prospectus Supplement under "Description of Debt Securities,"
and, in the case of the issuance of LYONs as Offered Securities,
"Description of Liquid Yield Option Notes" (or, in each case, a similar
heading or headings), to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is correct in all
material respects.
(ii) The applicable Indenture has been duly authorized,
executed and delivered by the parties thereto and constitutes a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles, and except as enforcement thereof
may be limited by (A) requirements that a claim with respect to any Offered
Debt Securities denominated other than in U.S. dollars (or a foreign
currency or currency unit judgment in respect of such claim) be converted
into U.S. dollars at a rate of exchange prevailing on a date determined
pursuant to applicable law or (B) governmental authority to limit, delay or
prohibit the making of payments outside the United States; and the
applicable Indenture has been duly qualified under the 1939 Act.
(3) In the event the Offered Securities are convertible into or
exercisable for Common Stock, the Company Attorney's Opinion shall
additionally be to the effect that:
(i) Holders of Offered Securities convertible into or
exercisable for Common Stock receiving shares of Common Stock issued upon
the conversion or exercise of such Offered Securities, as the case may be,
or, in the case of the issuance of LYONs with such a purchase feature as
Offered Securities, upon the purchase of such Offered Securities by the
Company at the option of holders of such Offered Securities, will also be
entitled, to the same extent as will all shares of Common Stock issuable at
such time otherwise than upon the conversion or exercise of such Offered
Securities or upon purchase of such Offered Securities by the Company in
the case of the issuance of LYONs with such a purchase feature as Offered
Securities, to one-quarter Right in respect of each share of Common Stock
so received; each such one-quarter Right has been duly authorized, and when
issued and delivered in accordance with the terms of the Rights Agreement,
will have been duly executed, issued and delivered; the Rights Agreement,
as amended, has been duly authorized, executed and delivered by the Company
and Harris Trust and Savings Bank and is enforceable against the Company in
accordance with its terms, subject, as to enforcement, to general equity
principles; and the Rights and the Rights Agreement conform to the
descriptions thereof included in or incorporated by reference into the
Prospectus and the applicable Prospectus Supplement.
(ii) Upon issuance and delivery of Offered Securities
convertible into or exercisable for Common Stock in accordance with this
Agreement and the applicable Terms Agreement, and the applicable Indenture
or Warrant Agreement, as the case may be, such Offered Securities shall be
convertible or exercisable at the option of the holder thereof for shares
of Common Stock in accordance with the terms of such Offered Securities and
the applicable Indenture or Warrant Agreement, as the case may be; and the
shares of Common Stock initially issuable upon conversion or exercise of
such Offered Securities have been duly authorized and reserved for issuance
and, when issued and delivered pursuant to the terms of the applicable
Indenture or Warrant Agreement, as the case may be, will be validly issued,
fully paid and non-assessable.
(iii) The Common Stock conforms to the description thereof in,
or incorporated by reference into, the Prospectus and the applicable
Prospectus Supplement and is not subject to preemptive or other similar
rights; and the information in the Prospectus and the applicable Prospectus
Supplement under "Description of Capital Stock" (or a similar heading or
headings) to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects.
(iv) The shares of Common Stock issuable upon the conversion or
exercise of such Offered Securities, as the case may be, or in the case of
the issuance of LYONs with such a purchase feature as Offered Securities,
upon the purchase of such Offered Securities at the option of holders of
such Offered Securities, have been approved for listing upon notice of
issuance on the New York Stock Exchange (and/or such other exchanges or
trading markets on which the Common Stock is then listed or admitted for
trading).
(4) In the event the Offered Securities are Warrants, the Company
Attorney's Opinion shall additionally be to the effect that:
(i) The Warrants to be issued and sold by the Company pursuant
to this Agreement and the applicable Terms Agreement have been duly
authorized, executed, authenticated, issued and delivered and constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the applicable Warrant Agreement; the Warrants and the
applicable Warrant Agreement conform to the descriptions thereof in, or
incorporated by reference into, the Prospectus and the applicable
Prospectus Supplement; and the information in the Prospectus and the
applicable Prospectus Supplement under "Description of Securities Warrants"
(or a similar heading or headings) to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel and
is correct in all material respects.
(ii) The applicable Warrant Agreement has been duly authorized,
executed and delivered by the parties thereto and constitutes a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(5) In the event the Offered Securities are shares of Common Stock
or Units containing shares of Common Stock, the Company Attorney's Opinion
shall additionally be to the effect that:
(i) The Common Stock conforms to the description thereof in, or
incorporated by reference into, the Prospectus and the applicable
Prospectus Supplement and is not subject to preemptive or other similar
rights; and the information in the Prospectus and the applicable Prospectus
Supplement under "Description of Capital Stock" (or a similar heading or
headings) to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects.
(ii) The Common Stock will be entitled, to the same extent as
any other shares of Common Stock issued or to be issued by the Company, to
one-quarter Right in respect of each share of Common Stock so received;
each such one-quarter Right has been duly authorized, and when issued and
delivered in accordance with the terms of the Rights Agreement will have
been duly executed, issued and delivered; the Rights Agreement has been
duly authorized, executed and delivered by the Company and Harris Trust and
Savings Bank and is enforceable against the Company in accordance with its
terms, subject, as to enforcement, to general equity principles; and the
Rights and the Rights Agreement conform to the descriptions thereof
included in or incorporated by reference into the Prospectus.
(iii) The Common Stock to be issued and sold pursuant to this
Agreement and the applicable Terms Agreement has been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company pursuant to this Agreement against
payment of the consideration set forth in the Terms Agreement, will be
validly issued and fully paid and non-assessable.
(iv) The shares of Common Stock to be issued and sold pursuant
to this Agreement and the applicable Terms Agreement have been approved for
listing upon notice of issuance on the New York Stock Exchange (and/or such
other exchanges or trading markets on which the Common Stock is then listed
or admitted for trading).
(6) In the event the Offered Securities are Debt Warrants or Units
containing Debt Warrants, the Company Attorney's Opinion shall additionally
be to the effect that:
(i) Upon issuance and delivery of Offered Securities
exercisable into debt securities, such Offered Securities shall be
exercisable at the option of the holder thereof for debt securities in
accordance with the terms of such Offered Securities and the applicable
Warrant Agreement; and the debt securities initially issuable upon the
exercise of such Offered Securities, have been duly authorized, and, when
issued, will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the indenture under which they
will be issued.
(ii) The information in the applicable Prospectus Supplement
describing the debt securities issuable upon exercise of the Debt Warrants
has been reviewed by such counsel and is correct in all material respects.
The Company Attorney's Opinion shall additionally state that
nothing has come to his attention that has caused him to believe that the
Registration Statement (other than the financial statements, financial data
and schedules included therein, as to which such counsel need express no
belief), at the time it became effective or at the Representation Date,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (other than the
financial statements, financial data and schedules included therein, as to
which such counsel need express no belief), at the Representation Date
(unless the term "Prospectus" refers to a prospectus which has been
provided to you by the Company for use in connection with the offering of
the Offered Securities which differs from the Prospectus on file at the
Commission at the Representation Date, in which case at the time it is
provided to you for such use) or at Closing Time, included an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) At the applicable Closing Time, you shall have received the
favorable opinion, dated as of the applicable Closing Time, of your
counsel, with respect to the matters set forth in (b)(1)(i) (insofar as it
relates to the existence and good standing of the Company), (b)(1)(iii) -
(v), inclusive (in the case of (v), insofar as it relates to the compliance
of the Registration Statement and Prospectus as to form), (b)(2)(i),
(b)(2)(ii), (b)(3)(ii), (b)(3)(iii) (insofar as it relates to the
description of the Common Stock), (b)(4)(i), (b)(4)(ii), (b)(5)(i),
(b)(5)(iii), (b)(6)(i) and (b)(6)(ii) as well as the last paragraph of
subsection (b) of this Section.
(d) (i) The Company and its subsidiaries considered as a whole shall
have not sustained since the date of the latest financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth,
incorporated by reference or contemplated in the Prospectus, and (ii) since
the respective dates as of which information is given in the Registration
Statement and the Prospectus there shall not have been any change in the
capital stock (other than upon exercise of outstanding stock options or
upon conversion of convertible securities outstanding at the date of the
most recent balance sheet included in the Prospectus or pursuant to the
Company's employee stock ownership plan or pursuant to the Company's
employee stock purchase plans or the Company's employee savings and profit
sharing plan) or any significant increase in long-term debt of the Company
and its subsidiaries considered as a whole or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries considered as
a whole, otherwise than as set forth or incorporated by reference or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Offered Securities on the terms and
in the manner contemplated in the Prospectus.
(e) On or after the date of the applicable Terms Agreement (i) no
downgrading shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization,"
as that term is defined by the Commission for purposes of Rule 436(g)(2)
under the 1933 Act and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities.
(f) On or after the date of the applicable Terms Agreement there shall
not have occurred any of the following: (i) a suspension or material
limitation in trading in the Common Stock or securities generally on the
New York Stock Exchange; (ii) a general moratorium on commercial banking
activities in New York or Illinois declared by either Federal or state
authorities; or (iii) any material adverse change in the financial markets
in the United States or the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in this clause
(iii) in your judgment makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Offered Securities on the
terms and in the manner contemplated in the Prospectus as amended or
supplemented.
(g) You shall have received a certificate of the Vice Chairman and
Chief Executive Officer, the President or another senior officer acceptable
to you of the Company and of the Chief Financial Officer, Controller,
Treasurer or Assistant Treasurer of the Company, dated as of the applicable
Closing Time, to the effect that (i) the Company and its subsidiaries shall
not have sustained any loss or interference with its business of the type
specified in Section 5(d)(i) and there shall not have occurred any change
of the type specified in Section 5(d)(ii), (ii) there shall not have
occurred any downgrading of the type specified in Section 5(e), (iii) the
applicable representations and warranties in Section 1 are true and correct
with the same force and effect as though expressly made at and as of such
Closing Time, (iv) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to such Closing Time, and (v) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or threatened by the
Commission.
(h) At the time of the execution of each Terms Agreement, you shall
have received from KPMG Peat Marwick a letter dated such date, in form and
substance satisfactory to you, to the effect that (i) they are independent
public accountants with respect to the Company and its subsidiaries within
the meaning of the 1933 Act and the 1933 Act Regulations; (ii) it is their
opinion that the financial statements and supporting schedules included in
or incorporated by reference into the Registration Statement or the
Prospectus and covered by their opinions therein comply as to form in all
material respects with the applicable accounting requirements of the 1933
Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations; (iii) based upon limited procedures set forth in detail in
such letter, nothing has come to their attention which causes them to
believe that (A) the unaudited financial statements and supporting
schedules of the Company and its subsidiaries included in or incorporated
by reference into the Registration Statement or the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations or the 1934 Act
and the 1934 Act Regulations, as the case may be, or are not presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in or incorporated by reference into the Registration Statement or
the Prospectus or (B) at a specified date not more than three days prior to
the date of the applicable Terms Agreement, there has been any change in
the capital stock of the Company (other than upon exercise of outstanding
stock options or upon conversion of convertible securities outstanding on
the date of the most recent balance sheet included in or incorporated by
reference into the Prospectus or pursuant to the Company's employee stock
ownership plan or pursuant to the Company's stock purchase plans or the
Company's employee savings and profit sharing plan) or any increase in the
consolidated long term debt of the Company and its subsidiaries or any
decrease in consolidated net current assets or net assets as compared with
the amounts shown in the most recent balance sheet included in or
incorporated by reference into the Prospectus or, during the period from
the date of the most recent financial statements included in or
incorporated by reference into the Prospectus to a specified date not more
than three days prior to the date of such Terms Agreement, there were any
decreases, as compared with the corresponding period in the preceding year,
in consolidated net sales, net earnings or net earnings per share of the
Company and its subsidiaries, except in all instances for changes,
increases or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur; and (iv) in addition to the
examination referred to in their opinions and the limited procedures
referred to in clause (iii) above, they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and financial information which are included in or incorporated
by reference into the Registration Statement and Prospectus and which are
specified by you, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company and its subsidiaries identified in such
letter.
(i) At each Closing Time, your counsel shall have been furnished with
such documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Offered Securities, as
contemplated herein, and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Offered Securities
and with respect to the shares of Common Stock (including the Rights
associated therewith) issuable upon the purchase of the Offered Securities
by the Company at the option of holders of the Offered Securities, in the
case of the issuance of LYONs with such a purchase feature as Offered
Securities, and debt securities or shares of Common Stock (including the
Rights associated therewith) issuable upon conversion or exercise of the
Offered Securities, in the case of the issuance of Offered Securities
convertible into Common Stock or exercisable for Common Stock or debt
securities, as the case may be, as herein contemplated, shall be
satisfactory in form and substance to you and your counsel.
(j) In the case of the issuance of shares of Common Stock, Units
containing shares of Common Stock or Offered Securities convertible into or
exercisable for Common Stock, at each Closing Time, you shall have received
the written agreement of each of the persons specified in the applicable
Terms Agreement, if any, to the effect that each such person will not
contract to sell or announce or make any offering, sale or other
disposition of any shares of Common Stock, nor sell or grant any options,
rights or warrants with respect to any shares of Common Stock, in each case
during a period of 90 days after the commencement of the public offering of
the Offered Securities, without your prior written consent.
(k) The Company shall have complied with the provisions of Section
3(a)(v) hereof.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement and the
applicable Terms Agreement may be terminated by the Representatives by
notice to the Company at any time at or prior to the applicable Closing
Time, and such termination shall be without liability of any party to any
other party except as provided in Section 4.
SECTION 6. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement, including any
preliminary prospectus supplement, thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the fees and disbursements of counsel
chosen by you), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company by any Underwriter through the Representatives expressly for
use in the Registration Statement (or any amendment thereto) or any
preliminary prospectus or the Prospectus (or any amendment or supplement,
including any preliminary prospectus supplement, thereto); and further
provided that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense arising out of any untrue statement or
omission or alleged untrue statement or omission made in a preliminary
prospectus or preliminary prospectus supplement, as the case may be, but
eliminated or remedied in the Prospectus if a copy of the Prospectus
(excluding documents incorporated therein by reference) was not delivered
by you to the person asserting the claim arising from such untrue statement
or omission or such alleged untrue statement or omission, at or prior to
the time required by the 1933 Act.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of the Company's officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or any
preliminary prospectus or the Prospectus (or any amendment or supplement,
including any preliminary prospectus supplement, thereto) in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement, including any
preliminary prospectus supplement, thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this indemnity
agreement. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances.
SECTION 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in Section 6 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and
you shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and you, as incurred, in such proportions that you
are responsible for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the Prospectus bears
to the initial public offering price appearing thereon and the Company is
responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section,
each person, if any, who controls you within the meaning of Section 15 of
the 1933 Act shall have the same right to contribution as you, and each
director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act shall have the same rights
to contribution as the Company.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
and the applicable Terms Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall remain operative
and in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person, or by or on behalf of the Company,
and shall survive delivery of the Offered Securities to the Underwriters.
SECTION 9. Default. If one or more of the Underwriters shall fail at the
applicable Closing Time to purchase the Offered Securities which it or they
are obligated to purchase under the applicable Terms Agreement (the
"Defaulted Securities"), then the Representatives shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth. If, however, during
such 24 hours the Representatives shall not have completed such
arrangements for the purchase of all of the Defaulted Securities, then:
(a) if the aggregate initial public offering price of the Defaulted
Securities does not exceed 10% of the aggregate initial public offering
price of the Offered Securities to be purchased pursuant to such Terms
Agreement, the non-defaulting Underwriters shall be obligated to purchase
the full amount thereof in the proportions that their respective
underwriting obligations under the applicable Terms Agreement (including
this Agreement as incorporated by reference therein) bear to the
underwriting obligations of all such non-defaulting Underwriters; or
(b) if the aggregate initial public offering price of the Defaulted
Securities exceeds 10% of the aggregate initial public offering price of
the Offered Securities to be purchased pursuant to such Terms Agreement,
such Terms Agreement (including this Agreement as incorporated by reference
therein) shall terminate, without any liability on the part of any
non-defaulting Underwriter or the Company.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter
under the applicable Terms Agreement or this Agreement.
In the event of a default by any Underwriter or Underwriters as set forth
in this Section, either the Representatives or the Company shall have the
right to postpone the applicable Closing Time for a period not exceeding
seven days in order that any required changes in the Registration
Statement, Prospectus or applicable Prospectus Supplement, or in any other
documents or arrangements, may be effected.
SECTION 10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to you as provided in the applicable Terms
Agreement; notices to the Company shall be directed to it at 1303 East
Algonquin Road, Schaumburg, Illinois 60196; Attention: Treasurer.
SECTION 11. Parties. This Agreement and the applicable Terms Agreement
shall each inure to the benefit of and be binding upon you, the Company and
your and the Company's respective successors. Nothing expressed or
mentioned in this Agreement or the applicable Terms Agreement is intended
or shall be construed to give any person, firm or corporation, other than
you, the Company and your and the Company's respective successors and the
controlling persons and officers and directors referred to in Sections 6, 7
and 8 and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or the
applicable Terms Agreement or any provision herein or therein contained.
This Agreement and the applicable Terms Agreement and all conditions and
provisions hereof and thereof are intended to be for the sole and exclusive
benefit of you, the Company and your and the Company's respective
successors, and said controlling persons and officers and directors and
their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of the Offered Securities from
you shall be deemed to be a successor by reason merely of such purchase.
SECTION 12. Governing Law and Time. This Agreement and each Terms
Agreement shall be governed by and construed in accordance with the laws of
the State of New York applicable to agreements made and to be performed in
said State. Specified times of day refer to New York City time.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement
between you and the Company in accordance with its terms.
Very truly yours,
MOTOROLA, INC.
By: /s/ Garth L. Milne .
Title: Senior Vice President & Treasurer
CONFIRMED AND ACCEPTED,
as of the date first above written:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
By: Merrill Lynch, Pierce, Fenner
& Smith Incorporated
By: /s/ Robert Schmiedeler .
Title: Vice President .
Exhibit 4
FORM OF DEBENTURE
MOTOROLA, INC.
5.22% Debenture due October 1, 2097
Unless and until this certificate is exchanged in whole or in part for
Debentures in definitive registered form, this Debenture may not be
transferred except as a whole by The Depository Trust Company, a New York
corporation ("DTC" or the "Depositary"), to its nominee or by its nominee
to DTC or another nominee of DTC or by DTC or any such nominee to a
successor depository or a nominee of such successor depository. Any
certificate issued in exchange herefor shall be registered in the name of
Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment in respect hereof shall be made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC).
MOTOROLA, INC., a Delaware corporation (the "Issuer", which term
includes any successor corporation under the Senior Indenture hereafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, at the office or agency of the Issuer in the Borough of
Manhattan, The City of New York, or at such other locations as the Issuer
may from time to time designate, the principal sum of THREE HUNDRED MILLION
DOLLARS on October 1, 2097 (subject to adjustment as set forth on the
reverse of this Debenture), in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment
of public and private debts, and to pay interest, semi-annually on April 1
and October 1 of each year, commencing April 1, 1998, on the original
principal amount hereof at said office or agency, in like coin or currency,
at the rate per annum specified in the title of this Debenture, from the
April 1 or the October 1, as the case may be, next preceding the date of
this Debenture to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly provided
for, in which case from the date of this Debenture, or unless no interest
has been paid on the Debentures (as defined below) or duly provided for, in
which case from October 10, 1997, until payment of the principal amount
hereof has been made or duly provided for; provided, that payment of
interest may be made at the option of the Issuer by check mailed by first
class mail to the address of the person entitled thereto as such address
shall appear on the Security register. Notwithstanding the foregoing, if
the date hereof is after March 15 or September 15 as the case may be, and
before the following April 1 or October 1, this Debenture shall bear
interest from such April 1 or October 1; provided, that if the Issuer shall
default in the payment of interest due on such April 1 or October 1, then
this Debenture shall bear interest from the next preceding April 1 or
October 1, to which interest has been paid or duly provided for or, if no
interest has been paid on the Debentures or duly provided for, from October
10, 1997. The interest so payable on any April 1 or October 1, will,
subject to certain exceptions provided in the Senior Indenture referred to
on the reverse hereof, be paid to the person in whose name this Debenture
(or one or more predecessor Debentures) is registered at the close of
business on the March 15 or September 15 (whether or not a Business Day),
as the case may be, next preceding such April 1 or October 1. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Reference is made to the further provisions of this Debenture set
forth on the reverse hereof. Such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been executed by
the Trustee under the Senior Indenture referred to on the reverse hereof by
manual signature.
IN WITNESS WHEREOF, Motorola, Inc. has caused this instrument to be
signed by facsimile by one of its duly authorized officers and has caused a
facsimile of its corporate seal to be affixed hereunto or imprinted hereon.
MOTOROLA, INC.
By:_____________________________
Its:____________________________
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in
the within-mentioned Senior Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:___________________
Its:___________________
[REVERSE OF DEBENTURE]
MOTOROLA, INC.
5.22% Debenture due October 1, 2097
This Debenture is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Issuer (hereinafter called
the "Securities") of the series hereinafter specified, all issued or to be
issued under and pursuant to a Senior Indenture dated as of May 1, 1995
(herein called the "Senior Indenture"), duly executed and delivered by the
Issuer to Harris Trust and Savings Bank, as Trustee (herein called the
"Trustee"), to which Senior Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Issuer and the Holders of the Securities. The Securities may
be issued in one or more series, which different series may be issued in
various aggregate principal amounts, may mature at different times, may
bear interest (if any) at different rates, may be subject to different
redemption provisions (if any) and may otherwise vary as provided in the
Senior Indenture. This Debenture is one of a series designated as the
5.22% Debentures due October 1, 2097 (the "Debentures") of the Issuer,
limited in aggregate principal amount at maturity to $300,000,000.
Except as otherwise provided in the Senior Indenture, this Debenture
will be issued in global form only registered in the name of the depositary
or its nominee. This Debenture will not be issued in definitive form,
except as otherwise provided in the Senior Indenture, and ownership of this
Debenture shall be maintained in book-entry form by the Depositary for the
accounts of participating organizations of the Depositary.
In case an Event of Default with respect to the Debentures shall have
occurred and be continuing, the principal hereof may be declared, and upon
such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Senior Indenture.
The Senior Indenture contains provisions permitting the Issuer and
the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities of all series issued under
such Senior Indenture then Outstanding and affected, voting as one class,
to add any provisions to, or change in any manner or eliminate any of the
provisions of, such Senior Indenture or modify in any manner the rights of
the Holders of the Securities of each series so affected; provided that the
Issuer and the Trustee may not, without the consent of the Holder of each
Security affected thereby, (i) extend the stated maturity of the principal
of any Security, or reduce the principal amount thereof or reduce the rate
or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or change the currency in which the principal
thereof (including any amount in respect of original issue discount),
premium, if any, or interest thereon is payable or reduce the amount of any
original issue discount security payable upon acceleration or provable in
bankruptcy or impair the right to institute suit for the enforcement of any
payment on any Security when due or (ii) reduce the aforesaid percentage in
principal amount of Securities of any series issued under such Senior
Indenture, the consent of the Holders of which is required for any such
modification. It is also provided in the Senior Indenture that, with
respect to certain defaults or Events of Default regarding the Securities
of any series, prior to any declaration accelerating the maturity of such
Securities, the Holders of a majority in aggregate principal amount
Outstanding of the Securities of such series (or, in the case of certain
defaults or Events of Default, all or certain series of the Securities) may
on behalf of the Holders of all the Securities of such series (or all or
certain series of the Securities, as the case may be) waive any such past
default or Event of Default and its consequences. The preceding sentence
shall not, however, apply to a default in the payment of the principal or
interest on any of the Securities. Any such consent or waiver by the
Holder of this Debenture (unless revoked as provided in the Senior
Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Debenture and any Debentures which may be
issued in exchange or substitution hereof or on registration of transfer
hereof, irrespective of whether or not any notation thereof is made upon
this Debenture or such other Debentures.
No reference herein to the Senior Indenture and no provision of this
Debenture or of the Senior Indenture shall alter or impair the obligation
of the Issuer, which is absolute and unconditional, to pay the principal of
and interest on this Debenture in the manner, at the respective times, at
the rate and in the coin or currency herein prescribed.
The Debentures are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof at the office or
agency of the Issuer in the Borough of Manhattan, The City of New York, or
at such other locations as the Issuer may from time to time designate, and
in the manner and subject to the limitations provided in the Senior
Indenture, but without the payment of any service charge, Debentures may be
exchanged for a like aggregate principal amount of Debentures of other
authorized denominations.
Upon the occurrence of a Tax Event (as defined below), the Issuer
shall have the right to shorten the maturity of the Debentures to the
minimum extent required, in the opinion of nationally recognized
independent tax counsel, such that, after the shortening of the maturity,
interest paid, or original issue discount accrued, on the Debentures will
be deductible for United States federal income tax purposes or, if such
counsel is unable to opine definitively as to such minimum period, the
minimum extent so required as determined in good faith by the Board of
Directors of the Issuer, after receipt of an opinion of such counsel
regarding the applicable legal standards. In the event that the Issuer
elects to exercise its right to shorten the maturity of the Debentures on
the occurrence of a Tax Event, the Issuer shall mail a notice of shortened
maturity to each holder of the Debentures by first-class mail not more than
60 days after the occurrence of such Tax Event, stating the new maturity
date of the Debentures (the "New Maturity Date"). Such notice shall be
effective immediately upon mailing. In addition, in the event that the
maturity of the Debentures is shortened to the minimum extent required, the
principal amount of the Debentures payable on the New Maturity Date shall
change to the New Redemption Amount. The New Redemption Amount will be an
amount equal to the Accreted Value (as defined below), which will be
determined as if the New Maturity Date were the Specified Date (as defined
below).
"Tax Event" means that the Issuer shall have received an opinion of
nationally recognized independent tax counsel to the effect that, as a
result of (a) any amendment to, clarification of or change (including any
announced prospective amendment, clarification or change) in any law, or
any regulation thereunder, of the United States, (b) any judicial decision,
official administrative pronouncement, ruling (including the public release
of any technical advice memorandum or other private letter ruling),
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt or promulgate any ruling, regulatory
procedure or regulation (any of the foregoing, an "Administrative or
Judicial Action"), or (c) any amendment to, clarification of or change in
any official position with respect to, or any interpretation of (including
any position taken in any Internal Revenue Service audit or similar
proceeding, in each event, involving the Issuer), an Administrative or
Judicial Action or a law or regulation of the United States that differs
from the theretofore generally accepted position or interpretation, in each
case, occurring or publicly released on or after October 7, 1997, there is
more than an insubstantial increase in the risk that interest paid by the
Issuer, or original issue discount accrued, on the Debentures is not, or
will not be, deductible, in whole or in part, by the Issuer for United
States federal income tax purposes.
The Debentures shall be redeemable as a whole at any time or in part
from time to time, at the option of the Issuer, on not less than 30 or more
than 60 days' notice mailed to holders thereof, at a redemption price equal
to the greater of (i) 100% of the Accreted Value and (ii) the sum of the
present values of the Remaining Scheduled Payments, discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate plus 15 basis points,
together in either case with accrued interest on the principal amount at
maturity being redeemed to the date of redemption.
In addition, if a Tax Event occurs and in the opinion of nationally
recognized independent tax counsel, there would, notwithstanding any
shortening of the maturity of the Debentures, be more than an insubstantial
risk that interest paid by the Issuer, or original issue discount accrued,
on the Debentures is not, or will not be, deductible, in whole or in part,
by the Issuer for United States federal income tax purposes, the Issuer
will have the right, within 90 days following the occurrence of such Tax
Event, to redeem the Debentures in whole (but not in part), on not less
than 30 or more than 60 days' notice mailed to holders of the Debentures,
at a redemption price equal to the greater of (i) 100% of the Accreted
Value and (ii) the sum of the present values of the Remaining Scheduled
Payments discounted to the redemption date on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Treasury Rate
plus 20 basis points, together in either case with accrued interest on the
principal amount at maturity being redeemed to the date of redemption.
"Accreted Value" as of any date (the "Specified Date") means the sum
of the present values of the Remaining Scheduled Payments, discounted to
the Specified Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at 6.912% per annum.
"Comparable Treasury Issue" means the United States Treasury Security
selected by an Independent Investment Banker that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to
the remaining term of the Debentures. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the Issuer.
"Comparable Treasury Price" means, with respect to any redemption
date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) on the third business day preceding such redemption date, as set
forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
business day, (A) the average of the Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer
than four such Reference Treasury Dealer Quotations, the average of all
such Quotations. "Reference Treasury Dealer Quotations" means, with
respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer as of 3:30 p.m., New York City time on the third business
day preceding such redemption date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman Sachs & Co. and Morgan Stanley & Co.
Incorporated and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Issuer shall
substitute therefor another nationally recognized investment banking firm
that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Debenture
to be redeemed, the remaining scheduled payments of the principal thereof
and interest thereon that would be due after the related redemption date
but for such redemption; provided, however, that, if such redemption date
is not an interest payment date with respect to such Debenture, the amount
of the next succeeding scheduled interest payment thereon will be reduced
by the amount of interest accrued thereon to such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity (computed as
of the second business day immediately preceding such redemption date) of
the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date.
On and after the redemption date, interest will cease to accrue on the
Debentures or any portion thereof called for redemption. On or before any
redemption date, the Issuer shall deposit with a paying agent (or the
Trustee) money sufficient to pay the redemption price of and accrued
interest on the Debentures to be redeemed on such date. If less than all
the Debentures are to be redeemed, the Debentures to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.
The Debentures are not entitled to any sinking fund.
Upon due presentment for registration of transfer of this Debenture at
the office or agency of the Issuer in the Borough of Manhattan, The City of
New York, or at such other locations as the Issuer may from time to time
designate, a new Debenture or Debentures of authorized denominations for an
equal aggregate principal amount will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Senior
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Issuer, the Trustee and any authorized agent of the Issuer or the
Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Debenture (whether or not this Debenture shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, the Trustee or any authorized agent
of the Issuer or the Trustee shall be affected by any notice to the
contrary.
No recourse under or upon any obligation, covenant or agreement of the
Issuer in the Senior Indenture or any indenture supplemental thereto or in
any Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholders, officer or
director, as such, of the Issuer or of any successor corporation, either
directly or through the Issuer or any successor corporation, under any rule
of law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance hereof and
as part of the consideration or the issue hereof.
This Debenture shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.
Terms used herein which are defined in the Senior Indenture shall have
the respective meanings assigned thereto in the Senior Indenture.
* * * *
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
(Please insert social security or other identifying number of assignee)
__________________________________________________________________________
(Please print or type name and address including zip code of assignee)
__________________________________________________________________________
the within Debenture and all rights thereunder, hereby irrevocably
constituting and appointing such person attorney to transfer such debenture
on the books of the Issuer, with full power of substitution in the
premises.
Dated:______________ Signed:_________________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Debenture in every particular without
attention or enlargement or any change whatsoever.
Signature Guarantee:
Exhibit 11
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Three Months Ended September 27, 1997 and September 28, 1996
(In millions, except per share amounts)
Three Months Ended,
Sept. 27, Sept. 28
1997 1996
Net Income $ 266 $ 206
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 1 1
Adjusted net income $ 267 $ 207
Earnings per common and common equivalent
share - Primary:
Weighted average common shares outstanding 595.0 592.2
Common equivalent shares:
Stock options 12.0 10.2
Zero coupon notes due 2009 and 2013 6.3 6.6
Common and common equivalent
shares - primary (in millions) 613.3 609.0
Net earnings per share - primary $ .44 $ .34
Earnings per common and common equivalent
share - Fully Diluted:
Weighted average common shares outstanding 595.0 592.2
Common equivalent shares:
Stock options 12.3 10.3
Zero coupon notes due 2009 and 2013 6.3 6.6
Common and common equivalent
shares - fully diluted (in millions) 613.6 609.1
Net earnings per share - fully diluted $ .44 $ .34
Exhibit 11.1
Motorola, Inc. and Consolidated Subsidiaries
Primary and Fully Diluted Earnings Per Common
and Common Equivalent Share
Nine Months Ended September 27, 1997 and September 28, 1996
(In millions, except per share amounts)
Nine Months Ended
Sept. 27, Sept. 28,
1997 1996
Net Income $ 859 $ 916
Add:
Interest on Zero coupon notes due 2009
and 2013, net of tax and effect of
executive incentive and employee
profit sharing plans 4 3
Adjusted net income $ 863 $ 919
Earnings per common and common equivalent
share - Primary:
Weighted average common shares outstanding 595.0 592.2
Common equivalent shares:
Stock options 12.0 10.2
Zero coupon notes due 2009 and 2013 6.3 6.6
Common and common equivalent
shares - primary (in millions) 613.3 609.0
Net earnings per share - primary $ 1.41 $ 1.51
Earnings per common and common equivalent
share - Fully Diluted:
Weighted average common shares outstanding 595.0 592.2
Common equivalent shares:
Stock options 12.3 10.3
Zero coupon notes due 2009 and 2013 6.3 6.6
Common and common equivalent
shares - fully diluted (in millions) 613.6 609.1
Net earnings per share - fully diluted $ 1.41 $ 1.51
Exhibit 12
Motorola, Inc.
Ratio of Earnings to Fixed Charges
Six Months
Ended Years Ended December 31,
June June
28, 29,
(In Millions) 1997 1996 1996 1995 1994 1993 1992
Pretax Income (1) $948 $1,096 $1,810 $3,195 $2,447 $1,481 $809
Capitalized interest ($1) $0 $0 $0 $0 $0 ($1)
Fixed charges $157 $181 $357 $302 $277 $254 $269
(as calculated below)
Earnings (2) $1,104 $1,277 $2,167 $3,497 $2,724 $1,735 $1,077
Fixed charges:
Interest expense $109 $144 $263 $228 $215 $203 $219
Rent expense $48 $36 $93 $74 $62 $51 $50
interest factor
Total fixed charges (3) $157 $180 $356 $302 $277 $254 $269
Ratio of earnings to
fixed charges 7.0 7.1 6.1 11.6 9.8 6.8 4.0
(1) After adjustments required by Item 503 (d)(3)(ii),(iii) and
(iv) of SEC Regulation S-K.
(2) As defined in Item 503 (d)(3) of SEC Regulation S-K.
(3) As defined in Item 503 (d)(4)(i) of SEC Regulation S-K.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial informantion extracted from the
consolidated Balance Sheet as of 9/27/97 and the Statement of Consolidated
Earnings for the quarter ended 9/27/97 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 1,768
<SECURITIES> 291
<RECEIVABLES> 4,718
<ALLOWANCES> (171)
<INVENTORY> 3,979
<CURRENT-ASSETS> 12,897
<PP&E> 20,597
<DEPRECIATION> (11,052)
<TOTAL-ASSETS> 26,642
<CURRENT-LIABILITIES> 8,652
<BONDS> 1,905
0
0
<COMMON> 1,791
<OTHER-SE> 11,297
<TOTAL-LIABILITY-AND-EQUITY> 26,642
<SALES> 21,516
<TOTAL-REVENUES> 0
<CGS> 14,389
<TOTAL-COSTS> 18,364<F1>
<OTHER-EXPENSES> 1,732<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> 1,322
<INCOME-TAX> 463
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 859
<EPS-PRIMARY> 1.408
<EPS-DILUTED> 1.407
<FN>
<F1>Total Cost Includes: Cost of goods sold, selling and admin expense, total exch
(gain)/loss.
<F2>Other Expense Includes: Depreciations expenses.
</FN>
</TABLE>
