UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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 1-4085
POLAROID CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1734655
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
549 Technology Square, 02139
Cambridge, Mass. ----------
------------------------------- (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number,
including area code: (617) 386-2000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------------------ -----------------------
Common Stock, par value $1 per New York Stock Exchange
share Pacific Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Participating Cumulative Pacific Stock Exchange
Preferred Stock
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ______
-------
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this 10-K
or any amendment to this Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates as of
February 3,1995: $1,416,070,204
Common Stock outstanding as of February 3, 1995: 45,864,622 shares
Documents incorporated by reference:
Polaroid Corporation Annual Report to Stockholders for 1994 -- Parts
I, II and IV
Polaroid Corporation 1995 Proxy Statement, dated March 21, 1995 --
Part III
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Part I
Item 1. Business
General
Polaroid Corporation, a Delaware corporation founded in 1937, and its
subsidiaries (the "Company") comprise a worldwide enterprise with 1994
sales of $2.3 billion. The Company designs, manufactures and markets a
variety of products primarily in instant image recording fields. The
Company's products are used in amateur and professional photography,
business, industry, science, medicine and education.
Products
The Company designs, manufactures and markets worldwide a variety of
products, including more than 50 different types of film and over 100
types of photographic equipment including cameras, camera backs, film
holders and specialized equipment designed for a broad range of
applications in photographic imaging. These include instant photographic
cameras and films, videotapes, conventional films, and light polarizing
filters and lenses. Major instant camera lines consist of the Polaroid
Captiva, Spectra and OneStep cameras. Instant films include both integral
and peel-apart films. In addition, the Company is expanding its role in
the market for digital imaging products. Digital imaging products
primarily include digital dry-process laser imaging products for medical,
graphic arts and other business applications. Digital imaging products
also include products for consumer digital imaging and desktop
publishing.
The Company's new Helios 1417 Laser Imaging System was demonstrated at
the Radiological Society of North America convention held in Chicago in
November 1994. The Helios 1417 is currently in clinical evaluation and is
expected to be available for sale in 1995. This 12-bit digital dry-
process laser imaging system produces diagnostic quality, 14x17 inch
transparencies and eliminates conventional silver halide film and its
need for proper disposal of toxic chemicals. The Company expects major
applications will include computed tomography, magnetic resonance
imaging and digital X-ray. The Helios 1417 is a complement to Polaroid's
8x10 inch Helios format, introduced in 1993.
In 1994, the Company introduced its most advanced electronic
identification system, the ID-4000, which electronically captures and
stores photos, signatures and other data for customized tamper proof
identification cards with additional security features. The Company
announced it was awarded a four year extension to an existing contract to
provide drivers' licenses for the Republic of the Philippines that will
utilize the ID-4000 system beginning in 1995. In 1994, the states of
Colorado and Texas awarded the Company five year contracts, beginning in
1994 and 1995, respectively, to provide a digital imaging drivers license
program using the Polaroid ID-3000.
In June 1994, the Polaroid SprintScan 35 was introduced. This 35 mm
color slide scanner automatically corrects color and sharpens the scanned
image, digitizing color slides 5 to 15 times faster than comparably
priced slide scanners. The SprintScan 35 is designed for desktop
publishers, graphic art professionals and pre-press service bureaus.
The Company introduced the Captiva Date:+ camera, in the U.S. , in 1994.
Designed with the date/time option and wireless remote control, this new
Captiva generated interest among consumers and business users. The
Company also introduced the OneStep Talking Camera in Europe during 1994
and in the U.S. during 1995. The OneStep Talking Camera allows users to
record their own eight-second message and play it, or one of three four-
second prerecorded messages, while taking photos.
Distribution
Worldwide sales of imaging products are made by the Company to
photographic stores, retail, food, drug, discount and department stores,
wholesalers, hospitals, original equipment manufacturers, independent
agents and distributors. The Company's distributors include unrelated
distributors and subsidiaries of the Company.
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Competition
The worldwide market for imaging products is highly competitive in price,
quality, service and product performance. The Company has competitors
worldwide, ranging from large corporations to smaller and more
specialized companies.
Raw Materials and Supplies
Sufficient raw materials and supplies were available in 1994 to maintain
operations of all manufacturing plants.
Research, Engineering and Development
The Company continues to place great emphasis on research, engineering
and development. The amount expended for research, engineering and
development included in marketing, research, engineering and
administrative expenses was $165.7 million in 1994, compared with $160.8
million in 1993 and $154.7 million in 1992. In 1994, approximately two-
thirds of the $165.7 million spent by the Company on research and
engineering was allocated to digital imaging products.
Patents and Trademarks
The Company continued to obtain patents in 1994. In the judgment of the
Company, its patents are important to its business. The Company also owns
a number of valuable trademarks, including "Polaroid", which are
important to its business.
Environmental Compliance
Approximately 12% of the Company's capital spending in 1995 will be for
environmental improvement projects.
The Company, together with other parties, is currently designated a
Potentially Responsible Party (PRP) by the United States Environmental
Protection Agency and certain state agencies with respect to the response
costs for environmental remediation at several sites. The Company
believes that its potential liability with respect to any site and with
respect to all sites in the aggregate will not have a materially adverse
effect on the financial condition or operating results of the Company.
Due to a wide range of estimates with regard to response costs at those
sites and various other uncertainties, the Company cannot firmly
establish its ultimate liability concerning those sites. In each case in
which the Company is able to determine the likely exposure, such amount
has been included in the Company's reserve for environmental liabilities.
Where a range of comparably likely exposures exists, the Company has
included in its reserve the minimum amount of the range. The Company's
aggregate reserve for these liabilities as of December 31, 1994 was $5.5
million, the majority of which the Company currently expects to be
payable over the next two to three years. The Company's analysis of data
which underlies its establishment of this reserve is undertaken on a
quarterly basis. The reserve for such liability does not provide for
associated litigation costs, which, if any, are expected to be
inconsequential in comparison with the amount of the reserve. The
Company will continue to accrue in its reserve appropriate amounts from
time to time as circumstances warrant. This reserve does not take into
account potential recoveries from third parties.
The Company reviews its recurring internal expenditures on environmental
matters, as well as capital expenditures related to environmental
compliance, on a monthly basis, and reviews its third-party expenditures
on environmental matters on a quarterly basis. The Company believes that
these expenditures have not had and will not have a materially adverse
effect on the financial condition or operating results of the Company.
Federal law provides that PRPs may be held jointly and severally liable
for response costs. Based on current estimates of those costs and after
consideration of the potential estimated liabilities of other PRPs with
respect to those sites and their respective estimated levels of financial
responsibility, the Company does not believe its potential liability will
be materially enlarged by the fact that liability is joint and several.
Employees
The Company had 12,104 and 12,048 employees at December 31,
1994 and 1993, respectively. These figures included approximately 380
worldwide temporary employees in 1994 and approximately 250 in 1993. In
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addition, the Company had non-employee temporary workers in the U.S. of
approximately 1,000 and 1,500 at December 31, 1994 and 1993,
respectively. In January 1995, the Company adopted a plan to reduce its
workforce by about 400 to 600 employees, or approximately 5% of its
worldwide workforce, through an early retirement and severance program.
Information About Foreign and Domestic Operations and Significant
Customers
Please see note 13, "Segments of Business", on pages 42 and 43 of the
Polaroid Corporation Annual Report to Stockholders for 1994 (the "Annual
Report"). During 1994, 1993 and 1992, sales to one customer, Wal-Mart
Stores, Inc., amounted to 13.7% , 11.6% and 10.5%, respectively, of the
Company's total sales.
Item 2. Properties
The Company's worldwide corporate headquarters is located in Cambridge,
Massachusetts, along with administrative offices, marketing, research and
engineering functions. The Cambridge properties consist of approximately
1,153,000 square feet of space, which includes space owned in fee and
leased premises, under leases expiring between 1995 and 2003.*
* All lease expiration dates are at the end of the current term for
leases not containing a renewal option and the end of the last
renewal term for leases containing renewal options.
Over 90% of the Company's space in the United States is located in
Eastern Massachusetts (Waltham, Norwood, New Bedford, Needham, Newton,
Freetown and Bedford). These communities contain sites which house
essentially all of the Company's principal U.S. manufacturing facilities
plus additional research and engineering functions and warehousing
operations. Following is a summary description of such facilities:
Approximate Space
Location (Square Feet)
-------- -----------------
Waltham 1,666,000
Norwood 788,000
New Bedford 739,000
Needham 598,000
Newton 165,000
Freetown 137,000
Bedford 125,000
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4,218,000
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Approximately 91% of these U.S. manufacturing and warehousing facilities
and the land they occupy are owned by the Company. The Newton and Bedford
facilities are 100% leased and 54,000 square feet of the Waltham site and
51,000 square feet of the Needham site are leased.
The Company also currently maintains a network of three marketing and
distribution centers (Atlanta, Chicago and Santa Ana) and nineteen
regional sales offices in other locations throughout the U.S..
Principal manufacturing facilities outside the U.S. are located in
Enschede, The Netherlands; Dumbarton, Scotland and Queretaro, Mexico.
Following is a summary description of such facilities:
Location Approximate Space
-------- (Square Feet)
-----------------
The Netherlands 520,000
Scotland 484,000
Mexico 253,000
---------
1,257,000
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Approximately 86% of these facilities are owned by the Company. This
space also houses certain administrative and marketing activities. In
addition, the Company manufactures cameras and printed circuit boards for
cameras at locations in China and Russia.
Marketing subsidiaries or sales offices are located in England, France,
Germany, Italy, Russia and nine other European countries. Additional
marketing and distribution facilities are established in four other
regions in the Western Hemisphere (Brazil, Canada, Mexico and Puerto
Rico) and in twenty-one locations in the Asia Pacific region (Japan --
ten locations, Australia -- five locations, Hong Kong -- three locations,
China, Korea and Malaysia).
During 1994, manufacturing facilities operated at reasonable levels of
production capacity, with the exception of the Company's new coating
facility which was brought on line in 1994. The capacity of the
facilities is sufficient to meet current demand for the Company's
products.
All the Company's premises are in good repair and its machinery and
equipment are maintained in good operating condition. The facilities are
suitable for the production of the Company's products.
The Company does not anticipate any difficulty in renewing outstanding
leases or in finding satisfactory alternative premises.
Item 3. Legal Proceedings
Please see note 14, "Contingencies", on page 44 of the Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders
None in the fourth quarter of 1994.
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Please see the table entitled "Quarterly Financial Data" on page 47 of
the Annual Report.
Item 6. Selected Financial Data
Please see the table entitled "Ten Year Financial Summary" on pages 48
and 49, inclusive, of the Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Please see the section entitled "Management's Discussion and Analysis of
Operations" on pages 21 to 26, inclusive, of the Annual Report.
Item 8. Financial Statements and Supplementary Data
Please see the section entitled "Independent Auditors' Report" on page
27, the sections entitled "Financial Statements" and "Notes to
Consolidated Financial Statements" on pages 28 to 46, inclusive, and the
section entitled "Supplementary Financial Information" on pages 46 to 49,
inclusive, of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
a) Directors - Please see the section entitled "Election of Directors"
on pages 3 to 6, inclusive, of the Polaroid Corporation 1995 Proxy
Statement (the "Proxy Statement").
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b) Executive Officers of the Registrant - Listed below are the
executive officers of the Company. Officers are elected annually by
the Board of Directors. No family relationship exists between any of
the officers.
Name Office Age
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I. MacAllister Booth Chairman of the Board, President and
Chief Executive Officer 63
Enrico I. Ancona Executive Vice President 49
Bruce B. Henry Executive Vice President 55
Joseph R. Oldfield Executive Vice President 54
William J. O'Neill, Jr. Executive Vice President and Chief
Financial Officer 52
Satish C. Agrawal Vice President 51
Graham M. Brown, Jr. Vice President and Treasurer 59
Richard F. deLima Vice President, Secretary and General
Counsel 64
James A. Ionson Vice President and Director of
Research 44
Joseph G. Parham, Jr. Vice President 45
Mr. Booth joined the Company in 1958. He was elected Assistant Vice
President and Assistant to the President in 1975, Vice President and
Assistant to the President in 1976, Senior Vice President in 1977,
Executive Vice President in 1980, Executive Vice President and Chief
Operating Officer in 1982, President, Chief Operating Officer and
Director in 1983, and to his present position as President, Chief
Executive Officer and Director in 1986. Mr. Booth was elected Chairman of
the Board in 1991.
Mr. Ancona joined the Company in May 1994 as Executive Vice President.
Prior to joining the Company, he had spent 21 years at Digital Equipment
Corporation, the last eight years as a vice president.
Mr. Henry joined the Company in 1967. He was elected Vice President in
1987. He held the position of Chief Financial Officer from 1988 to 1990,
and was elected to his present position as Executive Vice President in
1992. He intends to retire in April 1995.
Mr. Oldfield joined the Company in 1966. He was elected Vice President in
1987, and to his present position as Executive Vice President in 1992.
Mr. O'Neill joined the Company in 1969. He was elected Corporate
Controller in 1980, Vice President and Controller in 1982, Group Vice
President in 1984, Group Vice President and Chief Financial Officer in
1990, and to his present position as Executive Vice President and Chief
Financial Officer in 1992.
Mr. Agrawal joined the Company in 1971. He was elected to his present
position as Vice President in 1992.
Mr. Brown joined the Company in 1969. He was elected Corporate Controller
in 1984, Vice President and Controller in 1985, and to his present
position as Vice President and Treasurer in 1989.
Mr. deLima joined the Company as Secretary and Chief Resident Counsel in
1972. He was elected Vice President and Secretary in 1975, and to his
present positions as Vice President, Secretary and General Counsel in
1989.
Dr. Ionson joined the Company in 1991 as Vice President and Director of
Research. Prior to joining the Company, he was the director of the
Strategic Defense Initiative Organization's Office of Innovative Science,
and subsequent to this owned an advanced technology management consulting
company, JDC, Inc. He has submitted his resignation, effective March 31,
1995.
Mr. Parham joined the Company in 1973. He was elected to his present
position as Vice President in March 1994.
c) Compliance With Section 16(a) of the Securities Exchange Act of 1934
- Form 4 Reporting Obligation
Please see the section entitled "Compliance With Section 16(a) of
the Securities Exchange Act of 1934 - Form 4 Reporting Obligation"
on page 15 of the Proxy Statement.
Item 11. Executive Compensation
Please see the section entitled "Executive Compensation" on pages 11 to
16, inclusive, of the Proxy Statement.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
Please see the section entitled "Beneficial Ownership of Shares" on pages
6 to 8, inclusive and the section entitled "Election of Directors" on
pages 3 to 6, inclusive, of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Please see the section entitled "Election of Directors" on pages 3 to 6,
inclusive, of the Proxy Statement.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Page
Reports on Form 8-K No.
a) 1. Financial Statements
Independent Auditors' Report 27*
Consolidated Statement of Earnings
for the years ended December 31, 1994, 1993
and 1992 28*
Consolidated Balance Sheet - December 31, 1994
and 1993 29*
Consolidated Statement of Cash Flows
for the years ended December 31, 1994, 1993
and 1992 30*
Consolidated Statement of Changes in Common
Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992 31*
Notes to Consolidated Financial Statements 32-46*
Supplementary Financial Information (Unaudited) 46-49*
a) 2. Financial Statement Schedule
Independent Auditors' Report 12
Schedule II - Valuation and Qualifying Accounts 13
All other schedules are omitted inasmuch as they are either not required
or not applicable.
* Page references are to the Annual Report, which pages are
incorporated herein by reference. Except for such pages and other
information in the Annual Report specifically incorporated in this
report by reference, the Annual Report is not to be deemed filed
as part of this report.
a) 3. Exhibits
3.1(a) Restated Certificate of Incorporation of Polaroid Corporation
as of August 20, 1973. (The Restated Certificate of Incorporation
included as Exhibit 3.2(a) to Polaroid Corporation Form 10-K for the
year ended December 31, 1988 as filed on March 31, 1989 is hereby
incorporated herein by reference.)
3.1(b) Amendments to the Restated Certificate of Incorporation of
Polaroid Corporation as of May 12, 1987. (The Amendments to the
Restated Certificate of Incorporation included as Exhibit 3.1 to
Polaroid Corporation Form 10-Q for the quarter ended June 28, 1987
as filed on August 12, 1987 are hereby incorporated herein by
reference.)
3.1(c) Amendments to Polaroid Corporation Restated Certificate of
Incorporation (Certificates of Designation of Series B Cumulative
Convertible Preferred Stock and Series C Cumulative Convertible
Pay-in-Kind Preferred Stock) as of January 30, 1989. (The Amendments
to the Restated Certificate of Incorporation included as Exhibit
3.2(c) to Polaroid Corporation Form 10-K for the year ended December
31, 1988 as filed on March 31, 1989 are hereby incorporated herein
by reference.)
3.1(d) Amendment to Polaroid Corporation Restated Certificate of
Incorporation as of June 2, 1989. (The Amendment to the Restated
Certificate of Incorporation included as Exhibit 3.1 to Polaroid
Corporation Form 10-Q for the quarter ended July 2, 1989 as filed on
August 13, 1989 is hereby incorporated herein by reference.)
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3.1(e) Amendment to Polaroid Corporation Restated Certificate of
Incorporation (Certificate of Designation of Series D Cumulative
Convertible Preferred Stock) as of October 31, 1991. (The Amendment
to the Restated Certificate of Incorporation included as Exhibit
3.2(e) to Polaroid Corporation Form 10-K for the year ended December
31, 1991 as filed on March 27, 1992 is hereby incorporated herein by
reference.)
3.1(f) Amendment to Polaroid Corporation Restated Certificate of
Incorporation (Certificates of Elimination of Series B Cumulative
Convertible Preferred Stock and Series C Cumulative Convertible
Pay-In-Kind Preferred Stock) as of October 31, 1991. (The Amendment
to the Restated Certificate of Incorporation included as Exhibit
3.2(f) to Polaroid Corporation Form 10-K for the year ended December
31, 1991 as filed on March 27, 1992 is hereby incorporated herein by
reference.)
3.2 By-Laws of Polaroid Corporation amended and restated as of
February 1, 1994. (The By-Laws amended and restated included as
Exhibit 3.1 to Polaroid Corporation Form 10-K for the year ended
December 31, 1993 as filed on March 30, 1994 are hereby incorporated
herein by reference.)
4.1 Rights Agreement dated as of September 9, 1986 between Polaroid
Corporation and Morgan Shareholder Services Trust Company, as Rights
Agent. (The Rights Agreement included as Exhibit 1 to Polaroid
Corporation Form 8-A as filed on September 15, 1986 is hereby
incorporated herein by reference.)
4.2 First Amendment dated as of August 16, 1988 to Rights Agreement
dated as of September 9, 1986 between Polaroid Corporation and
Morgan Shareholder Services Trust Company, as Rights Agent. (The
First Amendment included as Exhibit 4 to Polaroid Corporation Form 8
(Amendment No. 1 to Form 8-A filed on September 15, 1986) as filed
on August 18, 1988 is hereby incorporated herein by reference.)
4.3 Second Amendment dated as of September 14, 1988 to Rights
Agreement dated as of September 9, 1986 between Polaroid Corporation
and Morgan Shareholder Services Trust Company, as Rights Agent.
(The Second Amendment included as Exhibit 5 to Polaroid Corporation
Form 8 (Amendment No. 2 to the Form 8-A filed on September 15, 1986)
as filed on September 15, 1988 is hereby incorporated herein by
reference.)
4.4 Supplemental Rights Agreement and Third Amendment dated as of
January 30, 1989 to Rights Agreement dated as of September 9, 1986
between Polaroid Corporation and Morgan Shareholder Services Trust
Company, as Rights Agent. (The Supplemental Rights Agreement and
Third Amendment included as Exhibit 6 to Polaroid Corporation Form 8
(Amendment No. 3 to the Form 8-A filed on September 15, 1986) as
filed on January 30, 1989 is hereby incorporated herein by
reference.)
4.5 Fourth Amendment dated as of February 21, 1989 to Rights
Agreement dated as of September 9, 1986 between Polaroid Corporation
and Morgan Shareholder Services Trust Company, as Rights Agent. (The
Fourth Amendment included as Exhibit 7 to Polaroid Corporation Form
8 (Amendment No. 4 to the Form 8-A filed on September 15, 1986) as
filed on February 21, 1989 is hereby incorporated herein by
reference.)
4.6 Fifth Amendment dated as of October 7, 1991 to the Rights
Agreement dated as of September 9, 1986 between Polaroid Corporation
and First Chicago Trust Company (as successor to Morgan Shareholder
Services Trust Company), as Rights Agent. (The Fifth Amendment
included as Exhibit 8 to Polaroid Corporation Form 8 (Amendment No.
5 to the Form 8-A filed on September 15, 1986) as filed on October
21, 1991 is hereby incorporated herein by reference).
4.7 Indenture dated as of December 15, 1991 between Polaroid
Corporation and The First National Bank of Boston, as Trustee,
including form of Note. (Indenture included as Exhibit 4.8 to
Polaroid Corporation Form 10-K for the year ended December 31, 1991
as filed on March 27, 1992 is hereby incorporated herein by
reference.)
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10.1 Stock Purchase Agreement dated July 12, 1988 between Polaroid
Corporation and Boston Safe Deposit and Trust Company, as Trustee
under the Polaroid Stock Equity Plan. (The Stock Purchase Agreement
included as Exhibit 10(c) to Polaroid Corporation Form 8-K as filed
on July 22, 1988 is hereby incorporated herein by reference.)
10.2* Credit Agreement (Working Capital) dated as of August 24, 1994
among Polaroid Corporation, Morgan Guaranty Trust Company of New
York, as Agent, and Banks listed therein.
10.3 Credit Agreement (ESOP Loan) as of June 30, 1992 among Polaroid
Corporation, Morgan Guaranty Trust Company of New York, as Agent,
and the Co-Agent and Banks named therein. (The Agreement included as
Exhibit 10.3 to Polaroid Corporation Form 10-K for the year ended
December 31, 1992 as filed on March 23, 1993 is hereby incorporated
by reference.)
10.4 Amendment No. 1 dated as of December 18, 1992 to the Credit
Agreement (ESOP Loan) dated as of June 30, 1992. (The Amendment
included as Exhibit 10.4 to Polaroid Corporation Form 10-K for the
year ended December 31, 1992 as filed on March 23, 1993 is hereby
incorporated by reference.)
10.5* Amended and Restated Credit Agreement (ESOP Loan) dated as of
November 29, 1994 among Polaroid Corporation, Morgan Guaranty Trust
Company of New York, as Agent, ABN AMRO Bank N.V. as Co-Agent and
Banks listed therein.
10.6 Trust Agreement dated April 28, 1992 between Polaroid
Corporation and Boston Safe Deposit and Trust Company, as Trustee
under the Polaroid Pension Plan. (The Agreement included as Exhibit
10.5 to Polaroid Corporation Form 10-K for the year ended December
31, 1992 as filed on March 23, 1993 is hereby incorporated by
reference.)
10.7* Polaroid Executive Incentive Compensation Plan, effective
January 1, 1994, as amended May 5, 1994.
10.8* Polaroid Executive Equalization Retirement Plan, effective
January 1, 1994, as amended December 21, 1994.
10.9* Polaroid Officer's Compensation Exchange Plan, effective
January 1, 1994, as amended December 21, 1994.
10.10 Polaroid Stock Incentive Plan, effective January 1, 1992, as
amended October 19, 1992. (The Plan included as Exhibit 10.10 to
Polaroid Corporation Form 10-K for the year ended December 31, 1992
as filed on March 23, 1993 is hereby incorporated by reference.)
10.11 The 1993 Polaroid Stock Incentive Plan, effective May 11, 1993,
as amended June 1, 1993. (The Plan included as Exhibit 10.10 to
Polaroid Corporation Form 10-K for the year ended December 31, 1993
as filed on March 30, 1994 is hereby incorporated herein by
reference.)
10.12 Polaroid Board of Directors Stock Option Plan, executed
February 28, 1990, effective April 1, 1990. (The Plan included as
Exhibit 10.13 to Polaroid Corporation Form 10-K for the year ended
December 31, 1989 as filed on March 30, 1990 is hereby incorporated
herein by reference.)
10.13 Polaroid Board of Directors Retirement Plan, effective January
1, 1991 as amended June 13, 1991. (The Plan included as Exhibit
10.11 to Polaroid Corporation Form 10-K for the year ended December
31, 1991 as filed on March 27, 1992 is hereby incorporated herein by
reference.)
10.14 Exchange Agreement dated as of October 7, 1991 between Polaroid
Corporation and Corporate Partners, L.P., Corporate Offshore
Partners, L.P., and State Board of Administration of Florida. (This
Agreement included as Exhibit 2 to Polaroid Corporation Form 8-K as
filed on October 21, 1991 is hereby incorporated herein by
reference).
10.15 Amendment dated October 31, 1991 between Polaroid Corporation
and Corporate Partners, L.P., Corporate Offshore Partners, L.P., and
State Board of Administration of Florida, to an Exchange Agreement
dated as of October 7, 1991, between the same parties. (The
Amendment included as Exhibit 1 to Polaroid Corporation Form 8-K as
filed on November 7, 1991 is hereby incorporated herein by
reference).
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10.16* Employment Agreement dated May 6, 1994 with Enrico I. Ancona.
10.17* Consulting Agreement dated February 17, 1995 with Bruce B.
Henry.
10.18 Retirement and Severance Agreement dated March 31, 1993 with
Sheldon A. Buckler. (The Agreement included as Exhibit 10.15 to
Polaroid Corporation Form 10-K for the year ended December 31, 1993
as filed on March 30, 1994 is hereby incorporated herein by
reference.)
11* Computation of earnings per share.
13* Annual Report to Stockholders for 1994. (The Annual Report to
Stockholders for 1994, except for the portions thereof which are
specifically incorporated by reference in this report on Form 10-K,
is furnished for the information of the Securities and Exchange
Commission and is not to be deemed "filed" as part of this report on
Form 10-K).
21* Subsidiaries.
23* Consent of KPMG Peat Marwick LLP.
27* Financial Data Schedule
----------------------------------
*Filed herewith.
Exhibits are not included in copies of this Form 10-K except those
copies filed with the Securities and Exchange Commission. A copy of
these exhibits will be furnished to stockholders upon written request.
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1994.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
POLAROID CORPORATION
(Registrant)
By I. MACALLISTER BOOTH
----------------------------------------
I. MACALLISTER BOOTH, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Chairman of the Board, President
I. MACALLISTER BOOTH and Chief Executive Officer; Director March 28, 1995
------------------------
I. MACALLISTER BOOTH
Executive Vice President and Chief
WILLIAM J. O'NEILL, JR. Financial Officer March 28, 1995
------------------------
WILLIAM J. O'NEILL, JR.
RALPH M. NORWOOD Vice President and Controller March 28, 1995
------------------------
RALPH M. NORWOOD
YEN-TSAI FENG Director March 28, 1995
------------------------
YEN-TSAI FENG
RALPH E. GOMORY Director March 28, 1995
------------------------
RALPH E. GOMORY
FRANK S. JONES Director March 28, 1995
------------------------
FRANK S. JONES
JOHN W. LOOSE Director March 28, 1995
------------------------
JOHN W. LOOSE
JAMES D. MAHONEY Director March 28, 1995
------------------------
JAMES D. MAHONEY
ALBIN F. MOSCHNER Director March 28, 1995
------------------------
ALBIN F. MOSCHNER
HENRY NECARSULMER Director March 28, 1995
------------------------
HENRY NECARSULMER
KENNETH H. OLSEN Director March 28, 1995
------------------------
KENNETH H. OLSEN
LESTER POLLACK Director March 28, 1995
------------------------
LESTER POLLACK
CHARLES P. SLICHTER Director March 28, 1995
------------------------
CHARLES P. SLICHTER
RALPH Z. SORENSON Director March 28, 1995
------------------------
RALPH Z. SORENSON
DELBERT C. STALEY Director March 28, 1995
------------------------
DELBERT C. STALEY
ALFRED M. ZEIEN Director March 28, 1995
------------------------
ALFRED M. ZEIEN
-11-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
POLAROID CORPORATION:
Under the date of January 31, 1995, we reported on the consolidated
balance sheet of Polaroid Corporation and subsidiary companies as of
December 31, 1994 and 1993, and the related consolidated statements of
earnings, cash flows, and changes in common stockholders' equity for each
of the years in the three-year period ended December 31, 1994, as
contained in the 1994 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference
in the annual report on Form 10-K for the year 1994. In connection with
our audits of the aforementioned consolidated financial statements, we
also have audited the related financial statement schedule as listed in
Item 14(a)2 of this Report. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
As discussed in Notes 4 and 11 in the consolidated financial statements,
in 1993 the Company changed its method of accounting for income taxes and
for certain postretirement and postemployment benefits
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 31, 1995
-12-
<PAGE>
Polaroid Corporation and Subsidiary Companies
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
(In millions)
Additions
----------------------
Balance at Charged to Charged to Deductions Balance at
Description Beginning Costs and Other Charged to End of
of Period Expenses Accounts Reserves Period
---------------------------------------------------------------------------
1994
Doubtful accounts $15.7 $ 8.6 $ -- $ (7.5) $16.8
Cash discounts 7.6 -- 30.0 (29.9) 7.7
===========================================================================
1993
Doubtful accounts $11.6 $11.7 $ -- $ (7.6) $15.7
Cash discounts 6.6 -- 29.5 (28.5) 7.6
==========================================================================
1992
Doubtful accounts $10.4 $ 7.3 $ -- $ (6.1) $11.6
Cash discounts 7.0 -- 28.9 (29.3) 6.6
==========================================================================
-13-
Exhibit 10.2
CONFORMED COPY
$150,000,000
CREDIT AGREEMENT
dated as of
August 24, 1994
among
Polaroid Corporation
Morgan Guaranty Trust Company of New York,
as Agent
and
The Banks Listed Herein
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.......................... 1
1.02 Accounting Terms and Determinations.. 15
1.03 Types of Borrowings.................. 16
1.04 Types of Loans...... ................ 16
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend.................. 17
2.02 Notice of Committed Borrowings....... 17
2.03 Money Market Borrowings.............. 18
2.04 Interest Rate Elections.............. 24
2.05 Interest Rates....................... 25
2.06 Fees................................. 29
2.07 Optional Termination or
Reduction of Commitments........... 30
2.08 Mandatory Termination of
Commitments; Maturity of Loans..... 30
2.09 Optional Prepayments................. 30
2.10 General Provisions as
to Payments........................ 30
2.11 Funding Losses....................... 31
2.12 Computation of Interest and Fees..... 32
2.13 Notes................................ 32
2.14 Withholding Tax Exemption............ 33
2.15 Judgment Currency.................... 33
2.16 Foreign Withholding Taxes
and Other Costs.................... 34
2.17 Eligible Subsidiaries................ 35
i
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness........................ 35
3.02 Borrowings........................... 37
3.03 First Borrowing by Each
Eligible Subsidiary................ 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Corporate Existence and Power........ 38
4.02 Corporate and Governmental
Authorization; No Contravention.... 38
4.03 Binding Effect....................... 38
4.04 Financial Information................ 38
4.05 Litigation........................... 39
4.06 Compliance with ERISA................ 40
4.07 Taxes................................ 40
4.08 Subsidiaries......................... 40
4.09 Not an Investment Company............ 40
4.10 Compliance with Laws................. 41
4.11 No Defaults.......................... 41
4.12 Possession of Franchises,
Licenses, etc...................... 41
4.13 Full Disclosure...................... 41
4.14 Environmental Matters................ 42
ARTICLE V
COVENANTS
SECTION 5.01 Information.......................... 42
5.02 Payment of Obligations............... 45
5.03 Maintenance of Property; Insurance... 45
5.04 Conduct of Business and
Maintenance of Existence........... 46
5.05 Compliance with Laws................. 46
5.06 Inspection of Property,
Books and Records.................. 46
5.07 Interest Coverage Ratio.............. 47
5.08 Leverage Ratio....................... 47
5.09 Minimum Consolidated
Adjusted Net Worth................. 47
5.10 Subsidiary Debt...................... 47
5.11 Negative Pledge...................... 48
ii
5.12 Consolidations, Mergers and
Sales of Assets.................... 50
5.13 Fiscal Year.......................... 50
5.14 Use of Proceeds...................... 50
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default.................... 50
6.02 Notice of Default.................... 53
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization........ 53
7.02 Agent and Affiliates................. 54
7.03 Action by Agent...................... 54
7.04 Consultation with Experts............ 54
7.05 Liability of Agent................... 54
7.06 Indemnification...................... 55
7.07 Credit Decision...................... 55
7.08 Successor Agent; Resignations........ 55
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair.......... 56
8.02 Illegality........................... 56
8.03 Increased Cost and Reduced Return.... 57
8.04 Base Rate Loans Substituted for
Affected Fixed Rate Loans.......... 59
8.05 Substitution of Bank................. 60
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
SECTION 9.01 Corporate Existence and Power........ 60
9.02 Corporate and Governmental
Authorization; No Contravention.... 61
9.03 Binding Effect....................... 61
9.04 Taxes................................ 61
iii
ARTICLE X
GUARANTY
SECTION 10.01 The Guaranty......................... 61
10.02 Guaranty Unconditional............... 61
10.03 Discharge Only Upon Payment
In Full; Reinstatement In
Certain Circumstances.............. 63
10.04 Waiver by the Company................ 63
10.05 Subrogation.......................... 63
10.06 Stay of Acceleration................. 63
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices.............................. 64
11.02 No Waivers........................... 64
11.03 Expenses; Documentary Taxes;
Indemnification.................... 64
11.04 Sharing of Set-Offs.................. 65
11.05 Amendments and Waivers............... 65
11.06 Successors and Assigns............... 66
11.07 Margin Stock Collateral.............. 67
11.08 WAIVER OF TRIAL BY JURY.............. 67
11.09 Submission To Jurisdiction........... 68
11.10 New York Law......................... 68
11.11 Confidentiality...................... 68
11.12 Counterparts......................... 68
Pricing Schedule
Exhibit A - Note
Exhibit B - Form of Money Market Quote
Request
Exhibit C - Form of Invitation for Money
Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E1 - Opinion of Cravath, Swaine & Moore,
Special Counsel for the Company
Exhibit E2 - Opinion of Richard F. deLima,
General Counsel of the Company
iv
Exhibit F - Opinion of Davis Polk & Wardwell,
Special Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I - Opinion of Counsel for the Borrower
(Borrowings by Eligible Subsidiaries)
Exhibit J - Assignment and Assumption Agreement
v
CREDIT AGREEMENT
AGREEMENT dated as of August 24, 1994 among POLAROID
CORPORATION, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent, and
the BANKS listed on the signature pages hereof.
WITNESSETH:
WHEREAS, Polaroid Corporation is presently a party to the
Existing Credit Agreement (as defined below) and desires to cancel the
commitments of the banks thereunder and to replace the Existing Credit
Agreement with this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section
2.03.
"Additional Equity" means any capital stock (or options,
rights or warrants therefor) issued by the Company after July 3, 1994.
"Adjusted CD Rate" has the meaning set forth in Section
2.05(b).
"Adjusted Consolidated Net Income" means, for any period
referred to in Section 5.09, Consolidated Net Income for such period
plus 60% of the amount by which the pre-tax consolidated operating
income of the Company and its Consolidated Subsidiaries for such period
is reduced (or minus 60% of the amount by which it is increased) on a
cumulative basis after July 3, 1994 as a result of the effects (other
than the initial effect) of the Company's adoption of Statement of
Financial Accounting Standards No. 106.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.05(c).
"Administrative Questionnaire" means, with respect to each
Bank, the administrative questionnaire in the form submitted to such
Bank by the Agent and submitted to the Agent (with a copy to the
Company) duly completed by such Bank.
"Affiliate" means any Person (other than a Subsidiary)
directly or indirectly controlling, controlled by or under common
control with the Company. As used in this definition of "Affiliate",
the term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in
its capacity as agent for the Banks hereunder, and its successors in
such capacity.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending Office,
(ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office and (iii) in the case of its Money Market Loans, its Money
Market Lending Office.
"Assessment Rate" has the meaning set forth in Section
2.05(b).
"Assignee" has the meaning set forth in Section 11.06(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 11.06(c), and
their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1%
plus the Federal Funds Rate for such day.
"Base Rate Loan" means at any time a Committed Loan
outstanding hereunder which bears interest at such time at a rate based
on the Base Rate pursuant to a Notice of Committed Borrowing or Notice
of Interest Rate Election or pursuant to the provisions of Article
VIII.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or
a Multiemployer Plan and which is maintained or otherwise contributed
to by any member of the ERISA Group.
2
"Borrower" means the Company or any Eligible Subsidiary, as
the context may require, and their respective successors, and
"Borrowers" means all of the foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.05(b).
"CD Loan" means at any time a Committed Loan outstanding
hereunder which bears interest at such time at a rate based on the
Adjusted CD Rate pursuant to a Notice of Committed Borrowing or Notice
of Interest Rate Election.
"CD Margin" has the meaning set forth in Section 2.05(b).
"CD Reference Banks" means The First National Bank of
Chicago, First National Bank of Boston and Morgan Guaranty Trust
Company of New York.
"Change in Control" means
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 35% or more of the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors, but excluding, for this purpose, any such acquisition
by (i) the Company or any of its subsidiaries, (ii) any other
Person of voting power pursuant to a revocable proxy, or (iii) any
corporation with respect to which, following such acquisition,
more than 65% of the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by individuals and entities who were the beneficial
owners of voting securities of the Company immediately prior to
such acquisition, in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors;
or
(b) individuals who, as of January 1, 1994, constituted the
Board of Directors of the Company (as of January 1, 1994, the
3
"Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that any individual becoming a
director subsequent to January 1, 1994, whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(c) approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all the individuals and
entities who were the respective beneficial owners of the voting
securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 65% of the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such reorganization, merger or consolidation; or
(d) the sale or other disposition of all or substantially
all the assets of the Company in one transaction or series of
related transactions.
"Code" means the Internal Revenue Code of 1986, as amended,
or any successor statute.
"Commitment" means, as to any Bank, the obligation of such
Bank to make loans to the Company and its Eligible Subsidiaries
pursuant to Section 2.01 in an aggregate principal amount at any one
time outstanding not exceeding the amount set forth opposite such
Bank's name on the signature pages hereof, as such amount may be
reduced from time to time pursuant to Section 2.07.
"Committed Loan" means (i) a Base Rate Loan, (ii) a CD Loan
or (iii) a Euro-Dollar Loan.
"Company" means Polaroid Corporation, a Delaware corporation,
and its successors.
4
"Company's 1993 Form 10-K" means the Company's annual report
on Form 10-K for Fiscal Year 1993, as filed with the Securities and
Exchange Commission pursuant to the Exchange Act.
"Company's First Quarter 1994 Form 10-Q" means the Company's
quarterly report on Form 10-Q for the Fiscal Quarter ended April 3,
1994, as filed with the Securities and Exchange Commission pursuant to
the Exchange Act.
"Consolidated Adjusted Net Worth" means, at any date, the sum
of (i) Consolidated Stockholders' Equity as of such date, minus (ii)
all write-ups (other than write-ups resulting from foreign currency
translations) after July 3, 1994 in the book value of any asset owned
by the Company or a Consolidated Subsidiary, minus (iii) the carrying
value of all Investments in Unconsolidated Joint Ventures carried as
assets on the Company's consolidated balance sheet as of such date, to
the extent that the carrying value of such Investments as of such date
exceeds $25,000,000, minus (iv) an amount equal to the cumulative net
increase (or plus an amount equal to the cumulative net decrease) in
Consolidated Net Income after July 3, 1994 attributable to the tax
effect of foreign currency translations, plus (v) 60% of the amount by
which the pre-tax consolidated operating income of the Company and its
Consolidated Subsidiaries is reduced (or minus 60% of the amount by
which it is increased) on a cumulative basis after July 3, 1994 as a
result of the effects (other than the initial effect) of the Company's
adoption of Statement of Financial Accounting Standards No. 106.
"Consolidated Debt" means, at any date, the Debt of the
Company and its Consolidated Subsidiaries, determined on a consolidated
basis as of such date; provided that "Consolidated Debt" shall exclude
Debt incurred by Foreign Subsidiaries for bona fide hedging purposes as
permitted by Section 5.10(a)(iii), to the extent that such hedging Debt
is not Guaranteed by the Company or any Domestic Subsidiary and in the
aggregate does not exceed 90% of the aggregate amount of the cash
deposits and Temporary Cash Investments of the Foreign Subsidiaries.
"Consolidated EBIT" means, for any period, the sum of (i)
Consolidated Net Income for such period (excluding any extraordinary
item of gain or loss and any gain or loss attributable to the tax
impact of foreign currency translations), plus (ii) to the extent
deducted in determining Consolidated Net Income for such period,
interest expense and federal, state and foreign income taxes, plus
(iii) the amount by which the pre-tax consolidated operating income of
5
the Company and its Consolidated Subsidiaries for such period is
reduced (or minus the amount by which it is increased) as a result of
the effects (other than the initial effect) of the Company's adoption
of Statement of Financial Accounting Standards No. 106.
"Consolidated Interest Expense" means, for any period, the
consolidated interest expense of the Company and its Consolidated
Subsidiaries for such period.
"Consolidated Net Income" means, for any period, the
consolidated net income of the Company and its Consolidated
Subsidiaries for such period.
"Consolidated Stockholders' Equity" means, at any date, the
consolidated stockholders' equity of the Company and its Consolidated
Subsidiaries as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of
the Company in its consolidated financial statements if such statements
were prepared as of such date.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all
non-contingent obligations of such Person to reimburse or repay any
bank or other Person in respect of amounts paid under a letter of
credit, banker's acceptance or similar instrument (excluding any such
obligations which do not arise from a repayment of Debt and are repaid
within three Euro-Dollar Business Days after the date incurred), (vi)
all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person (but excluding any
such Debt in excess of the book value of such asset, unless such Debt
is assumed by such Person) and (vii) all Debt of others Guaranteed by
such Person.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or
both would, unless cured or waived, become an Event of Default.
6
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are
authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office as such Bank may hereafter
designate as its Domestic Lending Office by notice to the Company and
the Agent; provided that any Bank may so designate separate Domestic
Lending Offices for its Base Rate Loans, on the one hand, and its CD
Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.05(b).
"Domestic Subsidiary" means any Subsidiary which is not a
Foreign Subsidiary.
"Effective Date" has the meaning set forth in Section 3.01.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit G hereto.
"Election to Terminate" means an Election to Terminate
substantially in the form of Exhibit H hereto.
"Eligible Subsidiary" means any Wholly-Owned Consolidated
Subsidiary as to which an Election to Participate shall have been
delivered to the Agent and as to which an Election to Terminate shall
not have been delivered to the Agent.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees or permits relating to
the environment or to emissions, discharges or releases of pollutants,
contaminants, hazardous substances, materials or wastes into the
environment or otherwise relating to the treatment, storage or disposal
of hazardous substances, materials or wastes or to the remediation
thereof.
7
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all
members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which,
together with the Company or any Subsidiary, are treated as a single
employer under Section 414(b), (c) or (m) of the Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including
dealings in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative
Questionnaire as its Euro-Dollar Lending Office) or such other office,
branch or affiliate of such Bank as it may hereafter designate as its
Euro-Dollar Lending Office by notice to the Company and the Agent.
"Euro-Dollar Loan" means at any time a Committed Loan
outstanding hereunder which bears interest at such time at a rate based
on the Adjusted London Interbank Offered Rate pursuant to a Notice of
Committed Borrowing or Notice of Interest Rate Election.
"Euro-Dollar Margin" has the meaning set forth in Section
2.05(c).
"Euro-Dollar Reference Banks" means the principal London
offices of ABN AMRO Bank N.V., The First National Bank of Chicago and
Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Credit Agreement" means the $150,000,000 Credit
Agreement dated as of June 30, 1992 among the Company, the Agent, and
the banks listed therein.
8
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Domestic Business Day next succeeding such day,
provided that (i) if such day is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent
(for its own account) on such day on such transactions as determined by
the Agent.
"Fiscal Quarter" means a fiscal quarter of the Company.
"Fiscal Year" means a fiscal year of the Company.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or
Money Market Loans (excluding Money Market LIBOR Loans bearing interest
at the Base Rate pursuant to Section 8.01(a)) or any combination of the
foregoing.
"Foreign Subsidiary" means any Subsidiary which is organized
under the laws of a jurisdiction other than the United States of
America or any state thereof and no more than 20% of the sales,
earnings or assets (determined on a consolidated basis) of which are
located or derived from operations in the United States of America.
"Funding Date" means, with respect to any Borrowing to be
made pursuant to Section 2.01 or 2.03, the date on which the Loans
comprising such Borrowing are to be made by the Banks participating
therein, as specified by the Borrower in the related Notice of
Borrowing.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any
Debt of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for
the purpose of assuring in any other manner the obligee of such Debt of
the payment
9
thereof or to protect such obligee against loss in respect thereof (in
whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding
meaning.
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date specified in
the applicable Notice of Committed Borrowing or Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as
specified in such Notice; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in
which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the
date specified in the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election and ending 30, 60, 90 or 180 days
thereafter, as specified in such Notice; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would
otherwise end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding Euro-Dollar
Business Day; and
(b) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on
the date specified in the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election and ending 30 days thereafter;
provided that
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would
otherwise end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding Euro-Dollar
Business Day; and
10
(b) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date specified in the applicable Notice of Money
Market Borrowing and ending such whole number of months thereafter as
is specified in such Notice in accordance with Section 2.03; provided
that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in
which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date;
(5) with respect to each Money Market Absolute Rate Borrowing, the
period commencing on the date specified in the applicable Notice of
Money Market Borrowing and ending such number of days thereafter (but
not less than 15 days) as is specified in such Notice in accordance
with Section 2.03; provided that:
11
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or
otherwise; provided that the term "Investment" shall not include any
securities of or claims with respect to any account debtor received in
any compromise or settlement of any account receivable.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank
Offered Rate pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset. For the purposes of this Agreement, the Company or any
Subsidiary shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or
Money Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $10,000,000.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d)(ii)(D).
"Money Market Absolute Rate Loan" means a loan made or to be
made by a Bank pursuant to an Absolute Rate Auction.
12
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Money Market Lending
Office by notice to the Company and the Agent; provided that any Bank
may from time to time by notice to the Company and the Agent designate
separate Money Market Lending offices for its Money Market LIBOR Loans,
on the one hand, and its Money Market Absolute Rate Loans, on the other
hand, in which case all references herein to the Money Market Lending
Office of such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by
a Bank pursuant to a LIBOR Auction (including such a loan bearing
interest at the Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a
Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d)(ii)(C).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which
any member of the ERISA Group is then making or accruing an obligation
to make contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to
be a member of the ERISA Group during such five year period.
"Notes" means promissory notes of any Borrower, substantially
in the form of Exhibit A hereto, evidencing the obligation of such
Borrower to repay the Loans made to it, and "Note" means any one of
such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing
(as defined in Section 2.02) or a Notice of Money Market Borrowing (as
defined in Section 2.03(f)).
"Notice of Interest Rate Election" has the meaning set forth
in Section 2.04.
13
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the
Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii)
has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the
ERISA Group for employees of any Person which was at such time a member
of the ERISA Group.
"Pricing Schedule" means the Pricing Schedule attached
hereto.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to
time as its Prime Rate.
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require, and "Reference
Bank" means any one of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least
66 2/3% of the aggregate amount of the Commitments or, if the
Commitments shall have been terminated, holding Notes evidencing at
least 66 2/3% of the aggregate unpaid principal amount of the Loans.
"S&P" means Standard & Poor's Corporation and its successors.
14
"Subsidiary" means any corporation or other entity (except an
Unconsolidated Joint Venture) of which securities or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Company.
"Substitute Bank" has the meaning set forth in Section 8.05.
"Temporary Cash Investment" means any Investment in (i)
direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, (ii)
commercial paper rated A1 or higher by S&P and P1 or higher by Moody's,
(iii) demand or time deposits with, including certificates of deposit
and bankers' acceptances issued by, any Qualifying Bank (as defined
below), (iv) repurchase agreements with respect to securities described
in clause (i) above entered into with any Qualifying Bank (or, to the
extent that the party making such Investment has a perfected security
interest in the securities subject to such repurchase agreements, with
securities broker-dealers of nationally recognized standing), (v) debt
securities rated in one of the two highest categories by a nationally
recognized credit rating agency and (vi) in the case of Investments
made by any Foreign Subsidiary, obligations, deposits and repurchase
agreements comparable to those specified in clauses (i), (iii) and (iv)
above (except that such obligations may be issued or guaranteed by the
country in which such Foreign Subsidiary is located and such deposits
and repurchase agreements may be made with comparable banks and trust
companies located in such countries), provided in each case that such
Investment matures (or permits the holder thereof at its option to
require repayment or repurchase thereof) within two years from the date
of acquisition thereof by the Company or a Subsidiary. As used in this
definition, "Qualifying Bank" means (i) any office located in the
United States of any Bank or (ii) any office located in the United
States of any other bank or trust company (A) whose long-term debt
securities are rated in one of the two highest categories by a
nationally recognized credit rating agency or (B) which is organized
under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least
$500,000,000.
"Termination Date" means August 24, 1999, or, if such day is
not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business
Day.
"Type" has the meaning set forth in Section 1.04.
15
"Unconsolidated Joint Venture" means at any time any Person
in which the Company or one or more of its Consolidated Subsidiaries
has an equity investment which, if material, would be accounted for
under the equity accounting method on the financial statements of the
Company and its Consolidated Subsidiaries, if such statements were
prepared as of such time.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan based on the assumptions used for purposes
of determining required contributions to the Plan, as determined in the
Plan's most recent actuarial valuation, exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, as determined as
of the then most recent valuation date for such Plan.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership
interests of which (except qualifying shares) are at the time directly
or indirectly owned by the Company.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be
prepared in accordance with generally accepted accounting principles as
in effect in the United States from time to time, applied on a basis
consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Company
notifies the Agent that the Company wishes to amend any covenant
contained in Article V to eliminate the effect of any change in
generally accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Company that the Required Banks
wish to amend any such covenant for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before
the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Company and the Required Banks.
SECTION 1.03. Types of Borrowings. (a) When used with
respect to a Funding Date, the term "Borrowing" refers to the borrowing
16
by a specific Borrower on such Funding Date of Loans of a specific Type
for a specific Interest Period pursuant to Section 2.01 or 2.03. When
used with respect to Loans outstanding at any time, the term
"Borrowing" refers to the portion of the aggregate principal amount of
the Loans outstanding to a specific Borrower which bears interest of a
specific Type and for a specific Interest Period at such time pursuant
to a Notice of Borrowing or Notice of Interest Rate Election. Each
Bank's share (if any) of each Borrowing is referred to herein as a
separate "Loan".
(b) Borrowings are classified for purposes of this Agreement
either by reference to the pricing of Loans comprising such Borrowing
(e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans, while a "Money Market LIBOR Borrowing" is a
Borrowing comprised of Money Market LIBOR Loans) or by reference to how
the Banks' participation therein is or was determined (i.e., a
"Committed Borrowing" is a Borrowing comprised of Committed Loans made
by the Banks in proportion to their respective Commitments, while a
"Money Market Borrowing" is a Borrowing under Section 2.03 in which the
Bank participants are determined on the basis of their respective
bids).
SECTION 1.04. Types of Loans. Loans hereunder are
distinguished by Type. The "Type" of a Loan refers to whether such
Loan is a Base Rate Loan, a CD Loan, a Euro-Dollar Loan or a Money
Market Loan.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally
agrees, on the terms and conditions set forth in this Agreement, to
make loans to the Company or any Eligible Subsidiary pursuant to this
Section from time to time prior to the Termination Date; provided that
the aggregate principal amount of Committed Loans by such Bank at any
one time outstanding to all Borrowers shall not exceed the amount of
its Commitment. Each Borrowing under this Section shall be in an
aggregate principal amount of $10,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the aggregate
amount available in accordance with Section 3.02(b)) and shall be made
from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, a Borrower may borrow under
this Section, repay or (to the extent permitted by Section 2.09) prepay
loans made under this Section and reborrow at any time prior to the
Termination Date under this Section.
17
SECTION 2.02. Notice of Committed Borrowings. (a) The
Borrower shall give the Agent notice (a "Notice of Committed
Borrowing") not later than 10:00 A.M. (New York City time) on (x) the
Funding Date for each Base Rate Borrowing, (y) the second Domestic
Business Day before the Funding Date for each CD Borrowing and (z) the
third Euro-Dollar Business Day before the Funding Date for each
Euro-Dollar Borrowing, specifying:
(i) the Funding Date for such Borrowing, which shall be
a Domestic Business Day in the case of a Domestic Borrowing
or a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(ii) whether the Loans comprising such Borrowing are to
be Base Rate Loans, CD Loans or Euro-Dollar Loans,
(iii) the aggregate amount of such Borrowing, which shall
be $10,000,000 or a larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.02(b)), and
(iv) in the case of a Fixed Rate Borrowing, the duration
of the initial Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Committed Borrowing, the
Agent shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of the Loans to be made on the Funding Date
for such Borrowing and such Notice of Committed Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than 12:00 noon (New York City time) on the
Funding Date for each Committed Borrowing, each Bank shall make
available its ratable share of the Loans comprising such Borrowing, in
Federal or other funds immediately available in New York City, to the
Agent at its address specified in or pursuant to Section 11.01. Unless
the Agent determines that any applicable condition specified in Article
III has not been satisfied, the Agent will make the funds so received
from the Banks available to the Borrower at the Agent's aforesaid
address.
18
(d) Unless the Agent shall have received notice from a Bank
prior to the Funding Date for any Committed Borrowing that such Bank
will not make available to the Agent such Bank's share of the Loans
comprising such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on such Funding Date in accordance
with subsection (c) of this Section and the Agent may, in reliance upon
such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not
have so made such share available to the Agent, the Agent shall be
entitled to recover from either such Bank or the Borrower (each of
which agrees to pay such amount forthwith on demand) such corresponding
amount together with interest thereon, for each day from the date such
amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, a rate per
annum equal to the higher of the Federal Funds Rate and the interest
rate applicable to such Borrowing pursuant to Section 2.05 or (ii) in
the case of such Bank, the Federal Funds Rate. If such Bank shall
repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Loan included in such Borrowing for
purposes of this Agreement. Any amounts paid by the Borrower to the
Agent pursuant to this subsection (d) shall not relieve the defaulting
Bank from any liability that such Bank may otherwise have to the
Borrower with respect to its failure to fund.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed
Borrowings pursuant to Section 2.01, any Borrower may, as set forth in
this Section, request the Banks from time to time prior to the
Termination Date to make offers to make Money Market Loans to the
Borrower. The Banks may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no obligation to, accept
any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When a Borrower wishes to
request offers to make Money Market Loans under this Section, it shall
transmit to the Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit B hereto so as to be
received no later than 10:00 A.M. (New York City time) on (x) the fifth
Euro-Dollar Business Day prior to the Funding Date for the Borrowing
proposed therein, in the case of a LIBOR Auction, or (y) the Domestic
Business Day next preceding the Funding Date for the Borrowing proposed
19
therein, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Company and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the
date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective),
specifying:
(i) the proposed Funding Date for such Borrowing, which
shall be a Euro-Dollar Business Day in the case of a LIBOR
Auction or a Domestic Business Day in the case of an Absolute
Rate Auction,
(ii) the aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
Interest Period, and
(iv) whether the Money Market Quotes requested are to
set forth a Money Market Margin or a Money Market Absolute
Rate.
The Borrower may request offers to make Money Market Loans for more
than one Interest Period in a single Money Market Quote Request. No
Money Market Quote Request shall be given within five Euro-Dollar
Business Days (or such other number of days as the Company and the
Agent may agree) of any other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Agent shall send to the
Banks by telex or facsimile transmission an Invitation for Money Market
Quotes substantially in the form of Exhibit C hereto, which shall
constitute an invitation by the Borrower to each Bank to submit Money
Market Quotes offering to make the Money Market Loans to which such
Money Market Quote Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i)
Each Bank may submit a Money Market Quote containing an offer or offers
to make Money Market Loans in response to any Invitation for Money
Market Quotes. Each Money Market Quote must comply with the
requirements of this subsection (d) and must be submitted to the Agent
by telex or facsimile transmission at its offices specified in or
pursuant to Section 11.01 not later than (x) 2:00 P.M. (New York City
time) on the fourth Euro-Dollar Business Day prior to the proposed
20
Funding Date, in the case of a LIBOR Auction, or (y) 9:00 A.M. (New
York City time) on the proposed Funding Date, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as
the Company and the Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective); provided that Money Market Quotes
submitted by the Agent (or any affiliate of the Agent) in the capacity
of a Bank may be
submitted, and may only be submitted, if the Agent or such affiliate
notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other
Banks, in the case of a LIBOR Auction, or (y) 15 minutes prior to the
deadline for the other Banks, in the case of an Absolute Rate Auction.
Subject to Articles III and VI, any Money Market Quote so made shall be
irrevocable except with the written consent of the Agent given on the
instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed Funding Date,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount
(w) may be greater than or less than the Commitment of the
quoting Bank, (x) must be $5,000,000 or a larger multiple of
$1,000,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal amount
of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the
"Money Market Margin") offered for each such Money Market
Loan, expressed as a percentage (rounded to the nearest
1/10,000th of 1%) to be added to or subtracted from such base
rate,
(D) in the case of an Absolute Rate Auction, the rate
of interest per annum (rounded to the nearest 1/10,000th of
1%) (the "Money Market Absolute Rate") offered for each such
Money Market Loan, and
21
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by
subsection (d)(ii) of this Section;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market
Quotes; or
(D) arrives after the time set forth in subsection
(d)(i) of this Section.
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms (x) of any Money Market Quote submitted by a Bank
that is in accordance with subsection (d) of this Section and (y) of
any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank
with respect to the same Money Market Quote Request. Any such
subsequent Money Market Quote shall be disregarded by the Agent unless
such subsequent Money Market Quote is submitted solely to correct a
manifest error in such former Money Market Quote. The Agent's notice
to the Borrower shall specify (A) the aggregate principal amount of
Money Market Loans for which offers have been received for each
Interest Period specified in the related Money Market Quote Request,
(B) the respective principal amounts and Money Market Margins or Money
Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money
Market Loans for which offers in any single Money Market Quote may be
accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:00
A.M. (New York City time) on (x) the third Euro-Dollar Business Day
prior to the proposed Funding Date, in the case of a LIBOR Auction, or
(y) the proposed Funding Date, in the case of an Absolute Rate Auction
22
(or, in either case, such other time or date as the Company and the
Agent shall have mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective), the Borrower shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection
(e) of this Section. In the case of acceptance, such notice (a "Notice
of Money Market Borrowing") shall specify the aggregate principal
amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part,
provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in
the related Money Market Quote Request,
(ii) the principal amount of each Money Market
Borrowing must be $10,000,000 or a larger multiple of
$1,000,000,
(iii) acceptance of offers may only be made on the basis
of ascending Money Market Margins or Money Market Absolute
Rates, as the case may be, and
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) of this Section or that
otherwise fails to comply with the requirements of this
Agreement.
(g) Allocation by Agent; Notice to Banks. (i) If offers
are made by two or more Banks with the same Money Market Margins or
Money Market Absolute Rates, as the case may be, for a greater
aggregate principal amount than the amount in respect of which such
offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Agent among such Banks as nearly as
possible (in such multiples, not greater than $1,000,000, as the Agent
may deem appropriate) in proportion to the aggregate principal amounts
of such offers. Determinations by the Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
(ii) Upon receipt of a Notice of Money Market Borrowing, the
Agent shall promptly notify each Bank of the contents thereof and of
such Bank's share (if any) of the Loans to be made on the Funding Date
for such Borrowing and such Notice of Money Market Borrowing shall not
thereafter be revocable by the Borrower.
23
(h) Funding of Money Market Loans. (i) Not later than
11:00 A.M. (New York City time) on the Funding Date for each Money
Market Borrowing, each Bank participating in such Borrowing shall make
available its ratable share of the Loans comprising such Borrowing, in
Federal or other funds immediately available in New York City, to the
Agent at its address specified in or pursuant to Section 11.01. Unless
the Agent determines that any applicable condition specified in Article
III has not been satisfied, the Agent will make the funds so received
from such Banks available to the Borrower at the Agent's aforesaid
address.
(ii) Unless the Agent shall have received notice from a Bank
prior to the Funding Date for any Money Market Borrowing that such Bank
will not make available to the Agent such Bank's share of the Loans
comprising such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on such Funding Date in accordance
with subsection (h)(i) of this Section and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not
have so made such share available to the Agent, the Agent shall be
entitled to recover from either such Bank or the Borrower (each of
which agrees to pay such amount forthwith on demand) such corresponding
amount together with interest thereon, for each day from the date such
amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (A) in the case of the Borrower, a rate per
annum equal to the higher of the Federal Funds Rate and the interest
rate applicable to such Borrowing pursuant to Section 2.05 or (B) in
the case of such Bank, the Federal Funds Rate. If such Bank shall
repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Loan included in such Borrowing for
purposes of this Agreement. Any amounts paid by the Borrower to the
Agent pursuant to this subsection (h)(ii) shall not relieve the
defaulting Bank from any liability that such Bank may otherwise have to
the Borrower with respect to its failure to fund.
SECTION 2.04. Interest Rate Elections. (a) The initial
Type of Loans comprising each Committed Borrowing, and the duration of
the initial Interest Period applicable thereto if they are initially CD
Loans or Euro-Dollar Loans, shall be as specified in the applicable
Notice of Committed Borrowing. Thereafter, the relevant Borrower may
from time to time elect to change or continue the Type of, or the
duration of the Interest Period applicable to, the Loans included in
any Committed Borrowing (excluding overdue Loans and subject in each
case to the provisions of the definition of Interest Period and Article
VIII), as follows:
24
(i) if such Loans are Base Rate Loans, such Borrower
may elect to designate such Loans as CD Loans or Euro-Dollar
Loans, may elect to continue such Loans as Base Rate Loans
for an additional Interest Period, or may elect to designate
such Loans as any combination of Base Rate Loans, CD Loans
and Euro-Dollar Loans;
(ii) if such Loans are CD Loans, such Borrower may
elect to designate such Loans as Base Rate Loans or
Euro-Dollar Loans, may elect to continue such Loans as CD
Loans for an additional Interest Period, or may elect to
designate such Loans as any combination of Base Rate Loans,
CD Loans and Euro-Dollar Loans; and
(iii) if such Loans are Euro-Dollar Loans, such Borrower
may elect to designate such Loans as Base Rate Loans or CD
Loans, may elect to continue such Loans as Euro-Dollar Loans
for an additional Interest Period, or may elect to designate
such Loans as any combination of Base Rate Loans, CD Loans
and Euro-Dollar Loans.
Notwithstanding the foregoing, no Borrower may elect an Interest Period
for CD Loans or Euro-Dollar Loans unless the aggregate outstanding
principal amount of such Loans (including any such Loans made pursuant
to Section 2.01 on the date that such Interest Period is to begin) to
which such Interest Period will apply is at least $10,000,000.
(b) Any election permitted by subsection (a) of this Section
may become effective on any Euro-Dollar Business Day specified by the
Borrower (the "Election Date"). Each such election shall be made by
the Borrower by delivering a notice (a "Notice of Interest Rate
Election") to the Agent not later than 11:00 A.M. (New York City time)
on (x) the Election Date, if all the resulting Loans will be Base Rate
Loans, (y) the second Domestic Business Day before the Election Date,
if the resulting Loans will include CD Loans but not Euro-Dollar Loans,
and (z) the third Euro-Dollar Business Day before the Election Date, if
the resulting Loans will include Euro-Dollar Loans. Each Notice of
Interest Rate Election shall specify with respect to the outstanding
Loans to which such notice applies:
(i) the Election Date;
25
(ii) if the Type of Loan is to be changed, the new Type
of Loan and, if such new Type is a CD Loan or Euro-Dollar
Loan, the duration of the first Interest Period applicable
thereto;
(iii) if such Loans are CD Loans or Euro-Dollar Loans and
the Type of such Loans is to be continued for an additional
or different Interest Period, the duration of such additional
or different Interest Period; and
(iv) if such Loans are to be designated as a combination
of Base Rate Loans, CD Loans and Euro-Dollar Loans, the
information specified in clauses (i) through (iii) above as
to each resulting Borrowing and the aggregate amount of each
such Borrowing.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period
and the last sentence of subsection (a) of this Section.
(c) Upon receipt of a Notice of Interest Rate Election, the
Agent shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of such Borrowing, and such notice shall not
thereafter be revocable by the Borrower.
(d) If the Borrower (i) fails to deliver a timely Notice of
Interest Rate Election to the Agent electing to continue or change the
Type of, or the duration of the Interest Period applicable to, the
Loans included in any Borrowing as provided in this Section and (ii)
has not theretofore delivered a notice of prepayment relating to such
Loans, then the Borrower shall be deemed to have given the Agent a
Notice of Interest Rate Election electing to change the Type of such
Loans to (or continue the Type thereof as) Base Rate Loans, with an
Interest Period commencing on the last day of the then current Interest
Period.
SECTION 2.05. Interest Rates. (a) Each Base Rate Loan
shall bear interest on the outstanding principal amount thereof, for
each day from the date such Loan is made (or is changed to a Base Rate
Loan) until it becomes due (or is changed to a different Type of
Committed Loan), at a rate per annum equal to the Base Rate for such
day. Such interest shall be payable for each Interest Period on the
last day thereof.
26
(b) Each CD Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period
applicable thereto, at a rate per annum equal to the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to such
Interest Period; provided that if any CD Loan shall, as a result of
clause (2)(b) of the definition of Interest Period, have an Interest
Period of less than 30 days, such CD Loan shall bear interest for each
day during such Interest Period at the Base Rate for such day. Such
interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, 90 days
after the first day thereof.
"CD Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period
means a rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upwards, if
necessary, to the next higher 1/100 of 1%.
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing
rates per annum bid at 10:00 A.M. (New York City time) (or as soon
thereafter as practicable) on the first day of such Interest Period by
two or more New York certificate of deposit dealers of recognized
standing for the purchase at face value from each CD Reference Bank of
its certificates of deposit in an amount comparable to the principal
amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement
27
(including without limitation any basic, supplemental or emergency
reserves) for a member bank of the Federal Reserve System in New York
City with deposits exceeding five billion dollars in respect of new
non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of
$100,000 or more. The Adjusted CD Rate shall be adjusted automatically
on and as of the effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual assessment
rate in effect on such day which is payable by a member of the Bank
Insurance Fund classified as adequately capitalized and within
supervisory subgroup "A" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. 327.3(e) (or any
successor provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's) insuring
time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during each Interest
Period applicable thereto, at a rate per annum equal to the sum of the
Euro-Dollar Margin for such day plus the Adjusted London Interbank
Offered Rate applicable to such Interest Period. Such interest shall
be payable for each Interest Period on the last day thereof and, if
such Interest Period is longer than three months, three months after
the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to
any Interest Period means a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the next higher 1/100 of
1%) by dividing (i) the applicable London Interbank Offered Rate by
(ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Interest Period means the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which
deposits in dollars are offered to each of the Euro-Dollar Reference
Banks in the London interbank market at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal
amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
28
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement for a
member bank of the Federal Reserve System in New York City with
deposits exceeding five billion dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit
or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank
Offered Rate shall be adjusted automatically on and as of the effective
date of any change in the Euro-Dollar Reserve Percentage.
(d) Subject to Section 8.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for
the Interest Period applicable thereto, at a rate per annum equal to
the sum of the London Interbank Offered Rate for such Interest Period
(determined in accordance with subsection (c) of this Section as if the
related Money Market LIBOR Borrowing were a Committed Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by the Bank
making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Absolute Rate quoted by the Bank
making such Loan in accordance with Section 2.03. Such interest shall
be payable for each Interest Period on the last day thereof and, if
such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
(e) Any overdue principal of and interest on any Loan of any
Bank shall bear interest, payable on demand, for each day from and
including the date payment thereof was due to but excluding the date of
actual payment, at a rate per annum equal to the sum of 2% plus the
Base Rate for such day.
(f) The Agent shall determine each interest rate applicable
to the Loans hereunder. The Agent shall give prompt notice to the
Borrower and the relevant Banks by telex, facsimile or cable of each
rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
29
(g) Each Reference Bank agrees to use its best efforts to
furnish quotations to the Agent as contemplated hereby. If any
Reference Bank does not furnish a timely quotation, the Agent shall
determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if
none of such quotations is available on a timely basis, the provisions
of Section 8.01 shall apply.
SECTION 2.06. Fees.
(a) Commitment Fees. The Company shall pay to the Agent,
for the account of the Banks ratably in accordance with their
Commitments, a commitment fee at the Commitment Fee Rate, determined
for each day in accordance with the Pricing Schedule, on the amount by
which the aggregate amount of the Commitments at the close of business
on such day exceeds the aggregate principal amount of the Loans
outstanding at the close of business on such day. Such commitment fees
shall accrue from and including the Effective Date to but excluding the
Termination Date, and shall be payable quarterly on each March 31, June
30, September 30 and December 31 and upon any termination of the
Commitments in their entirety.
(b) Facility Fees. The Company shall pay to the Agent, for
the account of the Banks ratably in accordance with their Commitments,
a facility fee at the Facility Fee Rate, determined for each day in
accordance with the Pricing Schedule. Such facility fees shall accrue
(i) for each day from and including the Effective Date to but excluding
the Termination Date (or any earlier date on which the Commitments
terminate in their entirety) on the aggregate amount of the Commitments
(whether used or unused) at the close of business on such day and (ii)
for each day from and including the Termination Date (or any earlier
date on which the Commitments terminate in their entirety) to but
excluding the date the Loans shall be repaid in their entirety, on the
aggregate principal amount of the Loans outstanding on the close of
business on such day. Facility fees accrued under this subsection (b)
shall be payable quarterly on each March 31, June 30, September 30 and
December 31 and upon any termination of the Commitments in their
entirety.
(c) Agent's Fee. The Company shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon
between the Company and the Agent.
30
SECTION 2.07. Optional Termination or Reduction of
Commitments. The Company may, upon at least three Domestic Business
Days' notice to the Agent, (i) terminate the Commitments at any time,
if no Loans are outstanding at such time or (ii) proportionately reduce
from time to time, by an aggregate amount of at least $10,000,000, the
aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.08. Mandatory Termination of Commitments; Maturity
of Loans. The Commitments shall terminate on the Termination Date, and
any Committed Loans then outstanding (together with accrued interest
thereon) shall be due and payable on such date. Each Money Market Loan
shall mature, and the principal amount thereof (together with accrued
interest thereon) shall be due and payable, on the last day of the
Interest Period applicable thereto.
SECTION 2.09. Optional Prepayments. (a) The Borrower may,
upon notice to the Agent given not later than 11:00 A.M. (New York City
time) on (i) the date of prepayment of any Base Rate Borrowing (or any
Money Market Borrowing bearing interest at the Base Rate pursuant to
Section 8.01(a)), (ii) the second Domestic Business Day prior to the
date of prepayment of any CD Borrowing and (iii) the third Euro-Dollar
Business Day prior to the date of prepayment of any Euro-Dollar
Borrowing, prepay any such Borrowing in whole at any time, or from time
to time in part in amounts aggregating $10,000,000 or a larger multiple
of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such
notice of prepayment shall specify which outstanding Borrowing is to be
prepaid in connection therewith. Each such optional prepayment shall
be applied to prepay ratably the Loans of the several Banks included in
such Borrowing.
(b) No Borrower may prepay all or any portion of the
principal amount of any Money Market Loan (except a Money Market LIBOR
Loan bearing interest at the Base Rate pursuant to Section 8.01(a))
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share (if any) of such prepayment
and such notice shall not thereafter be revocable by the Borrower.
31
SECTION 2.10. General Provisions as to Payments. (a) The
relevant Borrower shall make each payment of principal of, and interest
on, the Loans and of fees hereunder, not later than 12:00 noon (New
York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Agent at its address
referred to in Section 11.01. The Agent will promptly distribute to
each relevant Bank its ratable share of each such payment received by
the Agent for the account of the relevant Banks. Whenever any payment
of principal of, or interest on, the Domestic Loans or of fees shall be
due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar
Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any
payment of principal of, or interest on, the Money Market Loans shall
be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for
such extended time.
(b) Unless the Agent shall have received notice from a
Borrower prior to the date on which any payment is due from such
Borrower to the Banks hereunder that such Borrower will not make such
payment in full, the Agent may assume that such Borrower has made such
payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and
to the extent that such Borrower shall not have so made such payment,
each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.11. Funding Losses. If (i) a Borrower makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to
Article II, VI or VIII or otherwise) on any day other than the last day
of an Interest Period applicable thereto, (ii) the Type of any CD Loan
or Euro-Dollar Loan or the Interest Period applicable to any such Loan
32
is changed pursuant to Section 2.04 or Article VIII on any day other
than the last day of an Interest Period applicable to such Loan, (iii)
a Borrower fails to borrow any Fixed Rate Loan after notice of such
borrowing has been given to any Bank in accordance with Section 2.02(b)
or 2.03(g), (iv) a Borrower prepays any Loan after a Notice of Interest
Rate Election electing to continue such Loan as, or to change it to, a
CD Loan or Euro-Dollar Loan has been given to any Bank in accordance
with Section 2.04 but before the Interest Period specified therein
begins, or (v) the Company requires a Bank to assign its rights with
respect to any CD Loan or Euro-Dollar Loan to a Substitute Bank
pursuant to Section 8.05 on any day other than the last day of an
Interest Period applicable to such Loan, the Company shall reimburse
each Bank within 15 days after demand for any resulting loss or expense
incurred by it (or by any existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment, change,
failure to borrow or assignment, provided that such Bank shall have
delivered to the Company a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.12. Computation of Interest and Fees. Interest
and fees shall be computed on the basis of a year of 360 days (except
that interest on any Loan which bears interest during any period at the
Prime Rate shall be computed on the basis of a year of 365 or 366 days,
as the case may be) and paid for the actual number of days elapsed
(including the first day but excluding the last day).
SECTION 2.13. Notes. (a) The Loans of each Bank to each
Borrower shall be evidenced by a single Note of such Borrower payable
to the order of such Bank for the account of its Applicable Lending
Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent,
direct that its Loans of a particular Type be evidenced by a separate
Note of such Borrower in an amount equal to the aggregate unpaid
principal amount of such Loans. Each such Note shall be substantially
in the form of Exhibit A hereto with appropriate modifications to
reflect the fact that it evidences solely Loans of the relevant Type.
Each reference in this Agreement to the "Note" of such Bank shall be
deemed to refer to and include any or all of such Notes, as the context
may require.
33
(c) Upon receipt of each Bank's Note pursuant to Section
3.01(b) or 3.03(a), the Agent shall send such Note to such Bank. Each
Bank shall record the date and amount (and, in the case of a Money
Market Loan, the maturity) of each Loan made by it to each Borrower and
the date and amount of each payment of principal made with respect
thereto, and prior to any transfer of any of its Notes shall endorse on
the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each Loan made by it to such
Borrower then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the
obligations of any Borrower hereunder or under the Notes. Each Bank is
hereby irrevocably authorized by each Borrower so to endorse its Notes
and to attach to and make a part of its Notes a continuation of any
such schedule as and when required.
SECTION 2.14. Withholding Tax Exemption. Each Bank that is
not incorporated under the laws of the United States of America or a
state thereof agrees that it will deliver to each of the Company and
the Agent, at least one Domestic Business Day before interest or fees
first become payable hereunder for the account of such Bank, two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, in either case certifying that such Bank is entitled to receive
payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each Bank which
so delivers a Form 1001 or 4224 further undertakes to deliver to each
of the Company and the Agent two additional copies of such form (or a
successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by the
Company or the Agent, in each case certifying that such Bank is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises the
Company and the Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income
tax.
SECTION 2.15. Judgment Currency. If for the purpose of
obtaining judgment in any court it is necessary to convert a sum due
from any Borrower hereunder or under any of the Notes in United States
34
dollars ("dollars") into another currency, the parties hereto agree, to
the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Agent could purchase dollars with such other currency at
the Agent's New York office on the Domestic Business Day preceding that
on which final judgment is given. The obligations of each Borrower in
respect of any sum due to any Bank or the Agent hereunder or under any
Note shall, notwithstanding any judgment in a currency other than
dollars, be discharged only to the extent that, on the Domestic
Business Day following receipt by such Bank or the Agent (as the case
may be) of any sum adjudged to be so due in such other currency, such
Bank or the Agent (as the case may be) may in accordance with normal
banking procedures purchase dollars with such other currency; if the
amount of dollars so purchased is less than the sum originally due to
such Bank or the Agent, as the case may be, in dollars, each Borrower
agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify
such Bank or the Agent, as the case may be, against such loss, and if
the amount of dollars so purchased exceeds (a) the sum originally due
to any Bank or the Agent, as the case may be, and (b) any amounts
shared with other Banks as a result of allocations of such excess as a
disproportionate payment to such Bank under Section 11.04, such Bank or
the Agent, as the case may be, agrees to remit such excess to the
appropriate Borrower.
SECTION 2.16. Foreign Withholding Taxes and Other Costs.
(a) All payments by an Eligible Subsidiary of principal of and
interest on its Notes and of all other amounts payable under this
Agreement are intended to be payable without deduction for or on
account of any present or future taxes, duties or other charges levied
or imposed by the government of any jurisdiction outside the United
States of America or by any political subdivision or taxing authority
thereof or therein through withholding or deduction with respect to any
such payments. If any such taxes, duties or other charges are so
levied or imposed, such Eligible Subsidiary will pay additional
interest or will make additional payments in such amounts that every
net payment of principal of and interest on its Notes and of all other
amounts payable by it under this Agreement, after withholding or
deduction for or on account of any such present or future taxes, duties
or other charges, will not be less than the amount provided for herein.
Such Eligible Subsidiary shall furnish promptly to the Agent official
receipts evidencing payment of the taxes so withheld or deducted.
35
(b) If the cost to any Bank of making or maintaining any
Loan to an Eligible Subsidiary is increased, or the amount of any sum
received or receivable by any Bank (or its Applicable Lending Office)
is reduced by an amount deemed by such Bank to be material, by reason
of the fact that such Eligible Subsidiary is incorporated in, or
conducts business in, a jurisdiction outside the United States of
America, such Eligible Subsidiary shall indemnify such Bank for such
increased cost or reduction within 15 days after demand by such Bank
(with a copy to the Company and the Agent). A certificate of such Bank
claiming compensation under this subsection (b) and setting forth the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error.
(c) Each Bank will promptly notify the Company and the Agent
of any event of which it has knowledge that will entitle such Bank to
additional interest or payments pursuant to subsection (b) of this
Section and will designate a different Applicable Lending Office if, in
the judgment of such Bank, such designation will avoid the need for, or
reduce the amount of, such compensation and will not be otherwise
disadvantageous to such Bank.
SECTION 2.17. Eligible Subsidiaries. The Company may from
time to time cause any Wholly-Owned Consolidated Subsidiary to become
eligible to borrow under Sections 2.01 and 2.03 by delivering to the
Agent an Election to Participate with respect to such Subsidiary. The
eligibility of any such Subsidiary to borrow under said Sections shall
terminate when the Agent receives a Notice of Termination with respect
to such Subsidiary. Each Election to Participate delivered to the
Agent shall be duly executed on behalf of the relevant Subsidiary and
the Company, and each Election to Terminate delivered to the Agent
shall be duly executed on behalf of the Company, in such number of
copies as the Agent may request. The delivery of an Election to
Terminate shall not affect any obligation of the relevant Subsidiary
theretofore incurred. The Agent shall promptly give notice to the
Banks of its receipt of any Election to Participate or Election to
Terminate.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become
effective on the date (the "Effective Date"), which shall not be later
than September 1, 1994, on which all of the following conditions shall
have been satisfied (or waived in accordance with Section 11.05):
36
(a) receipt by the Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any party
as to which an executed counterpart shall not have been
received, receipt by the Agent in form satisfactory to it of
telegraphic, telex, facsimile or other written confirmation
from such party of execution of a counterpart hereof by such
party);
(b) receipt by the Agent for the account of each Bank
of a duly executed Note of the Company, dated on or before
the Effective Date, complying with the provisions of Section
2.13;
(c) receipt by the Agent of opinions of Cravath, Swaine
& Moore, special counsel for the Company, and Richard F.
deLima, Vice President, Secretary and General Counsel of the
Company, collectively to the effect and substantially in the
form of Exhibit E hereto and covering such additional matters
relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Agent, substantially in the
form of Exhibit F hereto and covering such additional matters
relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(e) receipt by the Agent of a certificate signed by the
Vice President and Treasurer and the Vice President and
General Counsel of the Company to the effect set forth in
clauses (c) and (d) of Section 3.02;
(f) receipt by the Agent of a notice from the Company
pursuant to Section 2.07 of the Existing Credit Agreement
terminating the commitments of the banks thereunder on the
Effective Date;
(g) receipt by the Agent of evidence satisfactory to it that
all accrued but unpaid fees payable and all principal of and
accrued but unpaid interest on any Loans made under the Existing
Credit Agreement shall have been paid in full; and
37
(h) receipt by the Agent of all documents it may
reasonably request relating to the existence of the Company,
the corporate authority for and the validity of this
Agreement and the Notes, and any other matters relevant
hereto, all in form and substance satisfactory to the Agent.
The opinions and certificates referred to in clauses (c), (d) and (e)
of this Section shall be dated the Effective Date. The Company
instructs each of the counsel referred to in clause (c) of this Section
to prepare the opinions referred to in clause (c) and deliver them to
the Agent for the benefit of the Agent and the Banks. The Agent shall
promptly notify the other parties hereto of the Effective Date, and
such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to
make a Loan on the Funding Date for any Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after the Borrowing
hereunder on such Funding Date, the aggregate outstanding
principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) the fact that, immediately after the Borrowing
hereunder on such Funding Date, no Default shall have
occurred and be continuing; and
(d) the fact that the representations and warranties of
the Company contained in this Agreement shall be true on and
as of such Funding Date.
Each such Borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower on the Funding Date as to the facts
specified in clauses (b), (c) and (d) of this Section, except as
otherwise disclosed in writing by the Company to the Banks.
SECTION 3.03. First Borrowing by Each Eligible Subsidiary.
The obligation of each Bank to make a Loan on the Funding Date for the
first Borrowing by each Eligible Subsidiary is subject to the
satisfaction of the following further conditions:
38
(a) receipt by the Agent for the account of each Bank
of a duly executed Note of such Eligible Subsidiary, dated on
or before such Funding Date, complying with the provisions of
Section 2.13;
(b) receipt by the Agent of one or more opinions of
counsel for such Eligible Subsidiary acceptable to the Agent,
which taken together cover the matters set forth in Exhibit I
hereto and cover such additional matters relating to the
transactions contemplated hereby as the Required Banks may
reasonably request; and
(c) receipt by the Agent of all documents which it may
reasonably request relating to the existence of such Eligible
Subsidiary, the corporate authority for and the validity of
the Election to Participate of such Eligible Subsidiary, this
Agreement and the Notes of such Eligible Subsidiary, and any
other matters relevant thereto, all in form and substance
satisfactory to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is
a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and has all corporate powers
and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution and delivery by the Company of this
Agreement and its Notes and the performance of its obligations
hereunder and thereunder (i) are within the Company's corporate powers
and have been duly authorized by all necessary corporate action, (ii)
require no action by or in respect of, or filing with, any governmental
body, agency or official, and (iii) do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Company or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or imposition of any
Lien on any asset of the Company or any of its Subsidiaries.
39
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Company and the Company's Notes,
when executed and delivered in accordance with this Agreement, will
constitute valid and binding obligations of the Company.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of December 31, 1993 and the related
consolidated statements of earnings, cash flows and changes in common
stockholders' equity for the Fiscal Year then ended, reported on by
KPMG Peat Marwick and set forth in the Company's 1993 Form 10-K, a copy
of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles, the
consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of April 3, 1994 and the related
unaudited consolidated statements of earnings, cash flows and changes
in common stockholders' equity for the three months then ended, set
forth in the Company's First Quarter 1994 Form 10-Q, a copy of which
has been delivered to each of the Banks, fairly present, in conformity
with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a)
of this Section, the consolidated financial position of the Company and
its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such three-month period
(subject to normal year-end adjustments).
(c) Since April 3, 1994 there has been no material adverse
change in the business, financial position or results of operations of
the Company and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. (a) Except as disclosed in the
Company's 1993 Form 10-K and the Company's First Quarter 1994 Form 10-
Q, there is no (i) injunction, stay, decree or order issued by any
court or arbitrator or any governmental body, agency or official or
(ii) action, suit or proceeding pending against, or to the knowledge of
the Company threatened against or affecting, the Company or any of its
40
Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an
adverse decision, in either case (A) which could materially adversely
affect the
business, financial position or results of operations of the Company
and its Consolidated Subsidiaries, considered as a whole, or (B) which
could materially adversely affect the ability of the Company to perform
any of its obligations under this Agreement or its Notes.
(b) There is no (i) injunction, stay, decree or order issued
by any court or arbitrator or any governmental body, agency or official
or (ii) action, suit or proceeding pending against, or to the knowledge
of the Company threatened against or affecting, the Company or any of
its Subsidiaries before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility of
an adverse decision, in either case which in any manner draws into
question the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the
ERISA Group has fulfilled its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Code with respect to each Plan. No member
of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to
any Plan or Benefit Arrangement, which has resulted or could result in
the imposition of a Lien under Section 412(n) of the Code
or the posting of a bond or other security under Section 401(a)(29) of
the Code (including, in the case of both Section 412(n) and 401(a)(29)
of the Code, the similar subsections of Section 302 and 307 of ERISA)
or (iii) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA that has
not been paid or satisfied prior to the date hereof.
SECTION 4.07. Taxes. United States Federal income tax
returns of the Company and its Subsidiaries (other than Foreign
Subsidiaries) have been examined and closed through the Fiscal Year
ended December 31, 1988. The Company and its Subsidiaries have filed
all United States Federal income tax returns and all other material tax
41
returns which are required to be filed by them and have paid all taxes
due pursuant to such returns or pursuant to any assessment received by
the Company or any Subsidiary, except to the extent that such
assessment is being contested by the Company or any Subsidiary in good
faith by appropriate proceedings. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of taxes or
other governmental charges are, in the opinion of the Company adequate.
SECTION 4.08. Subsidiaries. Each of the Company's corporate
Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation,
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.09. Not an Investment Company. The Company is not
an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
SECTION 4.10. Compliance with Laws. The Company and each of
its Subsidiaries is in compliance in all material respects with all
applicable laws, rules and regulations, other than laws, rules or
regulations (i) the validity or applicability of which the Company or
such Subsidiary is contesting in good faith or (ii) the failure to
comply with which cannot reasonably be expected to have consequences
which would materially adversely affect the business, financial
position or results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole.
SECTION 4.11. No Defaults. Neither the Company nor any of
its Subsidiaries is in violation of, or in default under, any term or
provision of any charter, by-law, mortgage, indenture, agreement,
instrument, statute, rule, regulation, judgment, decree, order, writ or
injunction applicable to it, such that such violations and defaults in
the aggregate could reasonably be expected to materially adversely
affect the business, financial position or results of operations of the
Company and its Consolidated Subsidiaries, considered as a whole, or
the ability of the Company to perform in any material respect its
obligations under this Agreement or its Notes.
SECTION 4.12. Possession of Franchises, Licenses, etc. The
Company and its Subsidiaries own or possess all franchises, patents,
trademarks, service marks, trade names, copyrights, licenses and other
rights that are necessary in any material respect for the ownership and
operation of their respective properties and businesses, and neither
the Company nor any of its Subsidiaries is in violation of any
42
provision thereof in any respect that could reasonably be expected to
have a materially adverse effect on the business, financial position or
results of operations of the Company and its Consolidated Subsidiaries,
considered as a whole.
SECTION 4.13. Full Disclosure. All information heretofore
furnished by the Company or any Subsidiary to the Agent or any Bank for
purposes of or in connection with this Agreement or any transaction
contemplated hereby was, and all such information hereafter furnished
by the Company or any Subsidiary to the Agent or any Bank will be, true
and accurate in all material respects or based on reasonable estimates
on the date as of which such information is stated or certified. The
Company has disclosed to the Banks in writing any and all facts known
to any officer of the Company which materially and adversely affect or
may materially and adversely affect (to the extent the Company can now
reasonably foresee) the business, financial position or results of
operations of the Company and its Consolidated Subsidiaries, considered
as a whole.
SECTION 4.14. Environmental Matters. Except with respect to
any matter disclosed under the heading "Environmental Compliance" in
the Company's 1993 Form 10-K, the Company reasonably believes the costs
of compliance with Environmental Laws, and associated liabilities, are
unlikely to have a material adverse effect on the business, financial
condition or results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole, provided that the inclusion of
such exception does not indicate that any such matter will have such a
material adverse effect.
ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains
unpaid:
SECTION 5.01. Information. The Company will deliver to each
of the Banks:
(a) as soon as available and in any event within 90
days after the end of each Fiscal Year, a consolidated
balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such Fiscal Year and the
43
related consolidated statements of earnings, cash flows and
changes in common stockholders' equity for such Fiscal Year,
setting forth in each case in comparative form the figures
for the previous Fiscal Year, all in reasonable detail and
reported on (in a manner acceptable to the Securities and
Exchange Commission for use in filings under the Exchange
Act) by KPMG Peat Marwick or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45
days after the end of each of the first three Fiscal Quarters
of each Fiscal Year, a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of
such Fiscal Quarter and the related consolidated statements
of earnings, cash flows and changes in common stockholders'
equity for such Fiscal Quarter and for the portion of such
Fiscal Year ended at the end of such Fiscal Quarter, setting
forth in each case in comparative form the figures for the
corresponding Fiscal Quarter in, and the corresponding
portion of, the previous Fiscal Year, all certified (subject
to normal year-end adjustments) as to fairness of
presentation and consistency by the chief financial officer
or the chief accounting officer of the Company;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) of
this Section, a certificate of the chief financial officer or
the chief accounting officer of the Company (i) setting forth
in reasonable detail such calculations as are required to
establish whether the Company was in compliance with the
requirements of Sections 5.07 through 5.11, inclusive, on the
date of such financial statements, (ii) stating whether, to
the knowledge of such officer, any Default exists on the date
of such certificate and, if any Default then exists, setting
forth the details thereof and the action that the Company is
taking or proposes to take with respect thereto, (iii)
stating whether, to the knowledge of such officer, since the
date of the most recent previous delivery of financial
statements pursuant to clause (a) or (b) of this Section,
there has been any material adverse change in the business,
financial position or results of operations of the Company
and its Consolidated Subsidiaries, considered as a whole,
44
and, if so, the nature of such material adverse change, and
(iv) stating whether, since the date of the most recent
financial statements previously delivered pursuant to clause
(a) or (b) of this Section, there has been a material change
in the generally accepted accounting principles applied in
preparing the financial statements being delivered and, if
so, describing such change and the effect thereof;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) of this
Section, a statement of the firm of independent public
accountants which reported on such statements (i) stating
that its audit examination has included a review of the terms
of this Agreement as they relate to financial or accounting
matters, (ii) stating whether anything has come to its
attention to cause it to believe that any Default existed on
the date of such statements and (iii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) of this
Section;
(e) within five days after any executive officer of the
Company obtains knowledge of any Default, if such Default is
then continuing, a certificate of the chief financial officer
or the chief accounting officer of the Company setting forth
the details thereof and the action which the Company is
taking or proposes to take with respect thereto;
(f) promptly upon any change in the rating by S&P or Moody's
of the Company's senior unsecured long-term debt securities
(without third-party credit enhancement), a certificate of the
chief financial officer, chief accounting officer or treasurer of
the Company reporting such change and stating the date on which
such change was publicly announced by the relevant rating agency;
(g) promptly upon the mailing thereof to the
shareholders of the Company generally, copies of all
financial statements, reports and proxy statements so mailed;
(h) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and
any registration statements on Form S-8 or its equivalent)
and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Company shall have filed with the
Securities and Exchange Commission;
45
(i) if and when any member of the ERISA Group (i) gives
or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of
such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of
such reportable event that was given or that should have been
given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or
notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under title IV of ERISA
of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such
notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Code, a copy of such
application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a
copy of such notice; (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement which has resulted or could result in
the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth
details as to such occurrence and action, if any, which the
Borrower or applicable member of the ERISA Group is required
or proposes to take or (viii) receives a completed actuarial
valuation report relating to any Plan or Plans a copy of such
report (but only if and to the extent that delivery of copies
thereof is requested by the Agent); and
(j) from time to time such additional information
regarding the business, financial position or results of
operations of the Company or any of its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
46
SECTION 5.02. Payment of Obligations. The Company will pay
and discharge, and will cause each Subsidiary to pay and discharge, at
or before maturity, all their respective material obligations and
liabilities, including, without limitation, tax liabilities, except
where the same may be contested in good faith by appropriate
proceedings, and will maintain, and will cause each Subsidiary to
maintain, in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The
Company will keep, and will cause each Subsidiary to keep, all property
useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Company will maintain, and will cause each
Subsidiary to maintain, (i) physical damage insurance on all real and
personal property covering the repair and replacement cost of all such
property and consequential loss coverage for business interruption and
extra expense, (ii) public liability insurance (including
products/completed operations liability coverage) in an amount not less
than $80,000,000, and (iii) such other insurance coverage in such
amounts and with respect to such risks as the Required Banks may
reasonably request; provided that the Company shall not be required to
maintain insurance specified in this subsection (A) if an independent
insurance broker, agent or other representative reasonably satisfactory
to the Required Banks shall certify to the Banks that such requirement
with respect to such insurance cannot be complied with in a recognized
insurance market of the United States or of any other country by reason
of (x) the unavailability to companies of established repute engaged in
the same or a similar business of insurance with respect to one or more
risks so required to be insured against or (y) the amount of insurance
so required to be maintained, or (B) with respect to any assets sold by
the Company, for events occurring after the sale of such assets. All
such insurance shall be provided by insurers having an A.M. Best
policyholders rating of not less than B+ or such other insurers as the
Required Banks may approve in writing. The Company will deliver to the
Banks upon request of any Bank through the Agent from time to time full
information as to the insurance carried.
47
SECTION 5.04. Conduct of Business and Maintenance of
Existence. The Company will continue, and will cause each Subsidiary
to continue, to engage in business of the same general type as now
conducted by the Company and its Subsidiaries, and will preserve, renew
and keep in full force and effect, and will cause each Subsidiary to
preserve, renew and keep in full force and effect, their respective
corporate existence (except as permitted under Section 5.12 and except
for the liquidation of any Subsidiary) and their respective rights,
privileges and franchises necessary or desirable in the normal conduct
of business.
SECTION 5.05. Compliance with Laws. The Company will
comply, and cause each Subsidiary to comply, in all material respects
with all applicable laws, ordinances, rules, regulations and
requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder), except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or where
noncompliance would not have a material adverse effect on the Company
and its Subsidiaries, considered as a whole.
SECTION 5.06. Inspection of Property, Books and Records.
The Company will keep, and will cause each Subsidiary to keep, proper
books of record and account in which full, true and correct entries
shall be made of all dealings and transactions relating to its business
and activities; and will permit, and will cause each Subsidiary to
permit, representatives of any Bank at such Bank's expense to visit and
inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 5.07. Interest Coverage Ratio. At the end of each
Fiscal Quarter, the ratio of (i) Consolidated EBIT to (ii) Consolidated
Interest Expense, in each case for the four consecutive Fiscal Quarters
then ended, will not be less than 3.00 to 1.
SECTION 5.08. Leverage Ratio. The ratio of (i) Consolidated
Debt to (ii) Consolidated Adjusted Net Worth will not exceed 1.15 to 1
at any time.
SECTION 5.09. Minimum Consolidated Adjusted Net Worth. (a)
At no time will Consolidated Adjusted Net Worth be less than Minimum
Consolidated Adjusted Net Worth. "Minimum Consolidated Adjusted Net
Worth" means $625,000,000 as such amount is adjusted from time to time
pursuant to subsection (b) of this Section.
48
(b) Minimum Consolidated Adjusted Net Worth shall be
adjusted from time to time as follows:
(i) at the end of each Fiscal Quarter ending after July
3, 1994, permanently increased (but not decreased) by the
amount (if any) necessary so that cumulative increases
pursuant to this clause (i) equal 50% of Adjusted
Consolidated Net Income for the period beginning on July 4,
1994 and ending at the end of such Fiscal Quarter;
(ii) increased on the date of any determination of Minimum
Consolidated Adjusted Net Worth (for purposes of such
determination only) by the amount (if any) by which $50,000,000
exceeds the sum of all payments made by the Company, after July 3,
1994 and on or before such date of determination, to purchase its
common stock; and
(iii) permanently increased, on the date of any issuance of
Additional Equity after July 3, 1994, by an amount equal to 50% of
any increase in Consolidated Adjusted Net Worth attributable to
such issuance of Additional Equity.
SECTION 5.10. Subsidiary Debt. (a) The Company will not
permit any of its Subsidiaries to incur or at any time be liable with
respect to any Debt except:
(i) Debt outstanding under this Agreement and the
Notes;
(ii) Debt owing to the Company or to a Subsidiary;
(iii) Debt incurred by any Foreign Subsidiary for bona
fide hedging purposes in an aggregate principal amount at any
one time outstanding for all Foreign Subsidiaries not
exceeding $250,000,000;
(iv) Guarantees by Foreign Subsidiaries of Debt
specified in clause (iii) above;
(v) Debt incurred by any Foreign Subsidiary, the proceeds of
which are used to pay amounts owing to the Company, in an
aggregate principal amount at any one time outstanding for all
Foreign Subsidiaries not exceeding $35,000,000; and
49
(vi) additional Debt, not otherwise permitted under this
Section, in an aggregate principal or face amount outstanding
at any time not exceeding $10,000,000.
(b) The Company will not permit any of its Subsidiaries to
issue or permit to be outstanding any preferred stock of such
Subsidiary other than preferred stock owned by the Company or by a
Wholly-Owned Consolidated Subsidiary.
SECTION 5.11. Negative Pledge. Neither the Company nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by it (other than treasury stock of the
Company), except:
(a) Liens on any asset of a Foreign Subsidiary securing
(i) Debt described in Section 5.10(a)(iii) or (ii) Guarantees
described in Section 5.10(a)(iv);
(b) any Lien existing on any asset of any corporation
at the time such corporation becomes a Subsidiary and not
created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed solely for the purpose of financing all or any part
of the cost of acquiring or improving such asset (including
any Lien on any asset deemed to exist by reason of the second
sentence of the definition of Lien); provided that such Lien
attaches (or is so deemed to attach) to such asset
concurrently with or within 90 days after the acquisition or
completion of the improvement thereof;
(d) any Lien on any asset of any corporation existing
at the time such corporation is merged or consolidated with
or into the Company or a Subsidiary and not created in
contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Company or a Subsidiary and not
created in contemplation of such acquisition;
50
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing clauses of this Section,
provided that such Debt is not increased and is not secured
by any additional assets;
(g) Liens for taxes not delinquent or being contested
in good faith and by appropriate proceedings;
(h) deposits or pledges to secure obligations under
workers' compensation, social security or similar laws, or
under unemployment insurance;
(i) mechanics', workers', materialmen's or other like
Liens arising in the ordinary course of business with respect
to obligations which are not due or which are being contested
in good faith;
(j) Liens arising in the ordinary course of its
business which (i) do not secure Debt, (ii) do not secure any
monetary obligation in an amount exceeding $50,000,000 and
(iii) do not in the aggregate materially detract from the
value of its assets or materially impair the use thereof in
the operation of its business; and
(k) Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate
principal amount at any time outstanding not to exceed the
higher of (i) $30,000,000 and (ii) 5% of Consolidated
Adjusted Net Worth.
SECTION 5.12. Consolidations, Mergers and Sales of Assets.
(a) The Company will not (i) consolidate with or merge with or into
any other Person (other than in a transaction in which the Company is
the surviving corporation provided that immediately after giving effect
to such consolidation or merger, no Default shall have occurred and be
continuing) or (ii) sell, assign, lease, transfer or otherwise dispose
of, directly or indirectly, all or substantially all of its assets to
any other Person. The Company will not permit any of its Subsidiaries
to consolidate with or merge with or into any Person unless the
Company or a Subsidiary is the corporation surviving such consolidation
or merger.
51
(b) The Company will not, and will not permit any of its
Subsidiaries to, sell, assign, lease, transfer or otherwise dispose of
any assets if the consideration received for such assets is less than
the fair market value thereof.
SECTION 5.13. Fiscal Year. The Company will not change its
Fiscal Year from the calendar year.
SECTION 5.14. Use of Proceeds. The proceeds of the Loans
will be used by the Borrowers for working capital and other general
corporate purposes. None of such proceeds will be used in violation of
any applicable law or regulation.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be
continuing:
(a) any principal of any Loan shall not be paid when
due or any interest on any Loan, any fee or any other amount
payable hereunder shall not be paid within three Domestic
Business Days after the due date thereof;
(b) the Company shall fail to observe or perform any
covenant contained in Section 5.01(e) or Sections 5.07 to
5.14, inclusive;
(c) the Company shall fail to perform any covenant
contained in Section 5.01(a) or (b) and such failure shall
continue for five days;
(d) any Borrower or any Subsidiary shall fail to
observe or perform any covenant or agreement on its part
contained in this Agreement (other than those covered by
clause (a), (b) or (c) above) for 30 days after written
notice thereof has been given to the Company by the Agent at
the request of any Bank;
(e) any representation, warranty, certification or
statement made by any Borrower or any Subsidiary in this
Agreement or in any certificate, financial statement or other
document delivered pursuant hereto shall prove to have been
incorrect in any material respect when made (or deemed made);
52
(f) the Company or any Subsidiary shall fail to make
any payment in respect of any Debt (other than the Notes)
when due and such failure shall continue for more than any
expressly applicable period of grace with respect thereto,
and the aggregate principal amount of such Debt and any Debt
referred to in clause (g) below is at least $10,000,000;
(g) the Company or any Subsidiary shall fail to observe
or perform any term, covenant or agreement contained in any
agreement or instrument (other than this Agreement or the
Notes) by which it is bound evidencing or securing or
relating to any Debt or any other condition or event shall
occur, if the effect thereof is to accelerate the maturity
thereof or to permit the holder or holders of such Debt or a
trustee or other representative acting on their behalf to
cause or declare acceleration of the maturity thereof, and
the aggregate principal amount of such Debt and any Debt
referred to in clause (f) above is at least $10,000,000;
(h) the Company or any Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or (except in the case of a
Foreign Subsidiary being liquidated for reasons other than
insolvency) seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action
to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be
commenced against the Company or any Subsidiary seeking
liquidation, reorganization or other relief with respect to
53
it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the Company or
any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(j) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of
$10,000,000 which it shall have become liable to pay under
Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed
to administer any Material Plan; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multi-
employer Plans which could cause one or more members of the
ERISA Group to incur a payment obligation payable in the
current year in excess of $10,000,000;
(k) a final and unappealable judgment or order for the
payment of money in excess of $10,000,000 (excluding any
portion thereof covered by insurance and as to which the
insurance company has admitted liability) shall be rendered
against the Company or any Subsidiary and such judgment or
order shall continue unsatisfied and unstayed for a period of
30 days; provided that, if such judgment or order permits
amounts to be paid over a greater period of time, such
judgment or order may continue unsatisfied as to such amounts
for such greater period; or
(l) a Change in Control shall have occurred;
54
then, and in every such event, the Agent shall (i) if requested by
Banks having more than 50% in aggregate amount of the Commitments, by
notice to the Company terminate the Commitments and they shall
thereupon terminate, and (ii) if requested by Banks holding Notes
evidencing more than 50% in aggregate outstanding principal amount of
the Loans, by notice to the Company declare the Notes (together with
accrued interest thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by each
Borrower; provided that if any Event of Default specified in clause (h)
or (i) above occurs with respect to the Company, then, without any
notice to any Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes (together with
accrued interest thereon) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by each Borrower; and provided further that
if any Event of Default specified in clause (h) or (i) above occurs
with respect to any Eligible Subsidiary, then, without any notice to
such Eligible Subsidiary or any other act by the Agent or the Banks,
the eligibility of such Eligible Subsidiary to borrow hereunder shall
thereupon terminate and the Notes of such Eligible Subsidiary (together
with accrued interest thereon) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by each Eligible Subsidiary.
SECTION 6.02. Notice of Default. The Agent shall, promptly
upon being requested to do so by any Bank, give notice to the Company
under Section 6.01(d) and thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement
and the Notes as are delegated to it by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this
Agreement as any other Bank and may exercise or refrain from exercising
55
the same as though it were not the Agent, and Morgan Guaranty Trust
Company of New York and its affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with the Company
or any Subsidiary or Affiliate as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting
the generality of the foregoing, the Agent shall not be required to
take any action with respect to any Default, except as expressly
provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may
consult with legal counsel (who may be counsel for the Company),
independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it
in good faith in accordance with the advice of such counsel,
accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any
action taken or not taken by it in connection herewith (i) with the
consent or at the request or direction of the Required Banks or (ii) in
the absence of its own gross negligence or willful misconduct. Neither
the Agent nor any of its directors, officers, agents or employees shall
be responsible for or have any duty to ascertain, inquire into or
verify (i) any statement, warranty or representation made in connection
with this Agreement or any borrowing hereunder; (ii) the performance or
observance of any of the covenants or agreements of the Company or any
Subsidiary; (iii) the satisfaction of any condition specified in
Article III, except, in the case of the Agent, receipt of items
required to be delivered to the Agent; or (iv) the validity,
effectiveness or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank
wire, telex, facsimile or similar writing) reasonably believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent (to the extent not
reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or
liability (collectively, "Liabilities") that the Agent may suffer or
56
incur in connection with this Agreement or any action taken or omitted
by it hereunder, except any Liability resulting from its gross
negligence or willful misconduct.
SECTION 7.07. Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank,
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
SECTION 7.08. Successor Agent; Resignations. (a) The Agent
may resign at any time (effective upon acceptance of its appointment by
a successor Agent) by giving written notice thereof to the Banks and
the Company. Upon any such resignation, the Required Banks shall have
the right to appoint a successor Agent, with the consent of the Company
(if no Default shall have occurred and be continuing), which consent
shall not be unreasonably withheld. If no successor Agent shall have
been so appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a Bank, if a Bank is able and
willing to serve as Agent, or, if no Bank is able and willing to serve
as Agent, a commercial bank organized or licensed under the laws of the
United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder.
(b) After any retiring Agent resigns hereunder, the
provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) the Agent is advised by the Reference Banks that
deposits in U.S. dollars (in the applicable amounts) are not
being offered to the Reference Banks in the relevant market
for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having
50% or more of the aggregate principal amount of the
Commitments advise the Agent that the Adjusted CD Rate or the
Adjusted London Interbank Offered Rate, as the case may be,
as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or
Euro-Dollar Loans as the case may be, for such Interest
Period,
the Agent shall forthwith give notice thereof to the Company and the
Banks, whereupon until the Agent notifies the Company that the
circumstances giving rise to such suspension no longer exist, (i) the
right of any Borrower to elect to have Loans bear interest at a rate
based on the Adjusted CD Rate or the Adjusted London Interbank Offered
Rate, as the case may be, shall be suspended and (ii) each outstanding
Loan of the relevant Type shall begin bearing interest at the rate
applicable to Base Rate Loans on the last day of the then current
Interest Period applicable thereto, notwithstanding any prior election
by any Borrower to the contrary. Thereafter, unless the Borrower
notifies the Agent at least two Domestic Business Days before the date
of any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, (i) if
such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing
shall instead be made as a Base Rate Borrowing and (ii) if such Fixed
Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market
LIBOR Loans comprising such Borrowing shall bear interest for each day
from and including the first day to but excluding the last day of the
Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or
58
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office)
with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank (or its Euro-Dollar Lending Office)
to make, maintain or fund its Euro-Dollar Loans to any Borrower and
such Bank shall so notify the Agent, the Agent shall forthwith give
notice thereof to the other Banks and the Company, whereupon until such
Bank notifies such Borrower and the Agent that the circumstances giving
rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans to such Borrower shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank
shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank.
If such notice is given, all Euro-Dollar Loans of such Bank to such
Borrower then outstanding shall begin bearing interest at the rate
applicable to Base Rate Loans, notwithstanding any prior election by
such Borrower to the contrary, either (a) on the last day of the then
current Interest Period applicable to such Euro-Dollar Loans if such
Bank may lawfully continue to maintain and fund such Loans at the rate
applicable to Euro-Dollar Loans to such day or (b) immediately if such
Bank may not lawfully continue to maintain and fund such Loans at the
rate applicable to Euro-Dollar Loans to such day (in which case such
Borrower shall reimburse such Bank for any resulting loss or expense as
provided in Section 2.11).
SECTION 8.03. Increased Cost and Reduced Return. (a) If on
or after (x) the date hereof, in the case of any Committed Loan or any
obligation to make Committed Loans, or (y) the date of the related
Money Market Quote, in the case of any Money Market Loan, the adoption
of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank
(or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central
bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending
Office) to any tax, duty or other charge with respect to its
Fixed Rate Loans, its Notes or its obligation to make Fixed
59
Rate Loans, or shall change the basis of taxation of payments
to any Bank (or its Applicable Lending Office) of the
principal of or interest on its Fixed Rate Loans or any
other amounts due under this Agreement in respect of its Fixed
Rate Loans or its obligation to make Fixed Rate Loans (except
for changes in the rate of tax on the overall net income of
such Bank or its Applicable Lending Office imposed by the
jurisdiction in which such Bank's principal executive office
or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding (A)
with respect to any CD Loan any such requirement included in
an applicable Domestic Reserve Percentage and (B) with
respect to any Euro-Dollar Loan any such requirement included
in an applicable Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or
shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or
the London interbank market any other condition affecting its
Fixed Rate Loans, its Notes or its obligation to make Fixed
Rate Loans;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any
Fixed Rate Loan to any Borrower, or to reduce the amount of any sum
received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after
demand by such Bank (with a copy to the Agent), such Borrower shall pay
to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
60
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations hereunder to a
level below that which such Bank (or its Parent) could have achieved
but for such adoption, change or compliance with any such request or
directive
(taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to
the Agent), the Company shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its Parent) for such
reduction.
(c) Each Bank will promptly notify the Company and the Agent
of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, such Bank may
use any reasonable averaging and attribution methods. No Borrower
shall be obligated to compensate any Bank pursuant to this Section for
increased costs or reduced return accruing prior to the date which is
18 months before such Bank requests compensation; provided that if any
law, rule or regulation, or interpretation or administration thereof,
or any request or directive giving rise to increased costs or reduced
returns has retroactive effect, such Bank shall be entitled to claim
compensation hereunder for the period commencing on such date of
retroactive effect through the date of adoption or change or
promulgation thereof without regard to the foregoing limitation.
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed
Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar
Loans to any Borrower has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation from any Borrower under Section
8.03(a) and such Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that
61
the provisions of this Section shall apply to such Bank, then, unless
and until such Bank notifies the Company that the circumstances giving
rise to such suspension or demand for compensation no longer apply, all
Loans of such Bank to such Borrower which would otherwise bear interest
at the rate applicable to CD Loans or Euro-Dollar Loans, as the case
may be, shall instead bear interest at the rate applicable to Base Rate
Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), notwithstanding any prior election by such Borrower to the
contrary.
SECTION 8.05. Substitution of Bank. (a) If (i) the
obligation of any Bank to make or maintain Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank (or any Participant
in its Loans) has demanded compensation under Section 2.16(b) or 8.03,
the Company shall have the right to seek a bank or banks ("Substitute
Banks"), which may be one or more of the Banks or one or more other
banks satisfactory to the Agent, to purchase the Notes and assume the
Commitment of such Bank (the "Affected Bank") and, if the Company
locates a Substitute Bank, the Affected Bank shall, upon payment to it
of the purchase price agreed between it and the Substitute Bank (or,
failing such agreement, a purchase price in the amount of the
outstanding principal amount of its Loans and accrued interest thereon
to the date of payment) plus any amount (other than principal and
interest) then due to it or accrued for its account hereunder, assign
all its rights and obligations under this Agreement and the Notes
(including its Commitment) to the Substitute Bank, and the Substitute
Bank shall assume such rights and obligations, whereupon the Substitute
Bank shall be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank with a Commitment equal to the
Commitment so assigned and assumed.
(b) Notwithstanding the provisions of subsection (a) above,
if an Affected Bank shall have outstanding Money Market Loans at the
time it is required to assign its rights and obligations under this
Agreement and its Note or Notes to a Substitute Bank, such Affected
Bank shall not be obligated to so assign its rights with respect to
such Money Market Loans prior to the maturity date thereof and shall
not be obligated to deliver its Note or Notes to the Substitute Bank
until it shall have received a new Note or Notes from the relevant
Borrowers to evidence such Money Market Loans.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall, by signing and delivering its
Election to Participate, represent and warrant as of the date thereof
that:
SECTION 9.01. Corporate Existence and Power. It is a
corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and is, and upon
each borrowing by it hereunder will be, a Wholly-Owned Consolidated
Subsidiary of the Company.
SECTION 9.02. Corporate and Governmental Authorization; No
Contravention. The execution and delivery by it of its Election to
Participate and its Notes, and the performance by it of this Agreement
and its Notes, are within its corporate powers, have been duly
authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or
official (other than such actions or filings, if any, as have been duly
taken or made) and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of its certificate or
incorporation or by-laws or of any agreement, judgment, injunction,
order, decree or other instrument binding upon the Company or such
Eligible Subsidiary or result in the creation or imposition of any Lien
on any asset of the Company or any of its Subsidiaries.
SECTION 9.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of such Eligible Subsidiary and its Notes,
when executed and delivered in accordance with this Agreement, will
constitute valid and binding obligations of such Eligible Subsidiary.
SECTION 9.04. Taxes. Except as disclosed in its Election to
Participate, there is no income, stamp or other tax of any country, or
any taxing authority thereof or therein, imposed by or in the nature of
withholding or otherwise, which is imposed on any payment to be made by
such Eligible Subsidiary pursuant hereto or on its Notes, or is imposed
on or by virtue of the execution, delivery or enforcement of its
Election to Participate or of its Notes.
63
ARTICLE X
GUARANTY
SECTION 10.01. The Guaranty. The Company hereby
unconditionally guarantees the full and punctual payment (whether at
stated maturity, upon acceleration or otherwise) of the principal of
and interest on each Note issued by any Eligible Subsidiary pursuant to
this Agreement, and the full and punctual payment of all other amounts
payable by any Eligible Subsidiary under this Agreement. Upon failure
by any Eligible Subsidiary to pay punctually any such amount, the
Company shall forthwith on demand pay the amount not so paid at the
place and in the manner specified in this Agreement.
SECTION 10.02. Guaranty Unconditional. The obligations of
the Company hereunder shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of any
Eligible Subsidiary under this Agreement or any Note, by
operation of law or otherwise;
(ii) any modification or amendment of or supplement to
this Agreement or any Note;
(iii) any release, non-perfection or invalidity of any
direct or indirect security for any obligation of any
Eligible Subsidiary under this Agreement or any Note;
(iv) any change in the corporate existence, structure or
ownership of any Eligible Subsidiary, or any insolvency,
bankruptcy, reorganization or other similar proceeding
affecting any Eligible Subsidiary or its assets or any
resulting release or discharge of any obligation of any
Eligible Subsidiary contained in this Agreement or any Note;
(v) the existence of any claim, set-off or other rights
which the Company may have at any time against any Eligible
Subsidiary, the Agent, any Bank or any other Person, whether
in connection herewith or any unrelated transaction, provided
that nothing herein shall prevent the assertion of any such
claim by separate suit or compulsory counterclaim;
64
(vi) any invalidity or unenforceability relating to or
against any Eligible Subsidiary for any reason of this
Agreement or any Note, or any provision of applicable law or
regulation purporting to prohibit the payment by any Eligible
Subsidiary of the principal of or interest on any Note or any
other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any
kind by any Eligible Subsidiary, the Agent, any Bank or any
other Person or any other circumstance whatsoever which
might, but for the provisions of this clause (vii),
constitute a legal or equitable discharge of the Company's
obligations hereunder.
SECTION 10.03. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances. The Company's obligations
under this Article X shall remain in full force and effect until the
Commitments shall have terminated and the principal of and interest on
the Notes of each Eligible Subsidiary and all other amounts payable by
each Eligible Subsidiary under this Agreement shall have been paid in
full. If at any time any payment of the principal of or interest on
any Note of any Eligible Subsidiary or any other amount payable by any
Eligible Subsidiary under this Agreement is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Eligible Subsidiary or otherwise, the Company's
obligations under this Article X with respect to such payment shall be
reinstated at such time as though such payment had been due but not
made at such time.
SECTION 10.04. Waiver by the Company. The Company
irrevocably waives acceptance hereof, presentment, demand, protest and
any notice not provided for herein, as well as any requirement that at
any time any action be taken by any Person against any Eligible
Subsidiary or any other Person.
SECTION 10.05. Subrogation. The Company irrevocably waives
any and all rights to which it may be entitled, by operation of law or
otherwise, upon making any payment pursuant to this Article X, to be
subrogated to the rights of the payee against the relevant Eligible
Subsidiary with respect to such payment or otherwise to be reimbursed,
indemnified or exonerated by the relevant Eligible Subsidiary in
65
respect thereof, but only to the extent that such rights would cause
the Company to be a "creditor" of the relevant Eligible Subsidiary for
purposes of Title 11 of the United States Code, as now or hereafter
amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law.
SECTION 10.06. Stay of Acceleration. If acceleration of the
time for payment of any amount payable by any Eligible Subsidiary under
this Agreement or its Notes is stayed upon insolvency, bankruptcy or
reorganization of such Eligible Subsidiary, all such amounts otherwise
subject to acceleration under the terms of this Agreement shall
nonetheless be payable by the Company hereunder forthwith on demand by
the Agent made at the request of the Required Banks.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
bank wire, telex, facsimile transmission or similar writing) and shall
be given to such party: (x) in the case of any Borrower or the Agent,
at its address or telex or telecopy number set forth on the signature
pages hereof (or, in the case of an Eligible Subsidiary, in its
Election to Participate), (y) in the case of any Bank, at its address
or telex or telecopy number set forth in its Administrative
Questionnaire or (z) in the case of any party, at such other address or
telex or telecopy number as such party may hereafter specify for the
purpose by notice to the Agent and the Company. Each such notice,
request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in
this Section and the appropriate answerback is received, (ii) if given
by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iii) if
given by any other means, when delivered at the address or received at
the telecopy number specified in this Section; provided that notices to
the Agent under Article II or Article VIII shall not be effective until
received.
SECTION 11.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder or
under any Note shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise
66
thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 11.03. Expenses; Documentary Taxes; Indemnification.
(a) The Company shall pay (i) all reasonable out-of-pocket expenses of
the Agent, including fees and disbursements of special counsel for the
Agent, in connection with the preparation of this Agreement, any waiver
or consent hereunder or any amendment hereof or any Default or alleged
Default hereunder and (ii) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Agent or any Bank, including
fees and disbursements of counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom. The Company shall indemnify the Agent
and each Bank against any transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of
the execution and delivery of this Agreement and the Notes.
(b) The Company agrees to indemnify the Agent and each Bank,
and hold each of them harmless, from and against any and all
liabilities, losses, damages, costs and expenses of any kind,
including, without limitation, reasonable fees and disbursements of
counsel, which may be incurred by such Bank (or by the Agent) in
connection with any investigative, administrative or judicial
proceeding (whether or not it shall be designated a party thereto)
relating to or arising out of this Agreement or any actual or proposed
use of proceeds of Loans hereunder; provided that neither any Bank nor
the Agent shall have the right to be indemnified hereunder for its own
gross negligence or willful misconduct as determined by a court of
competent jurisdiction.
SECTION 11.04. Sharing of Set-Offs. Each Bank agrees that
if (i) it shall, by exercising any right of set-off or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount of
principal and interest due with respect to any Note held by it which is
greater than the proportion received by any other Bank in respect of
the aggregate amount of principal and interest due with respect to any
Note held by such other Bank and (ii) such inequality shall have
continued for more than 15 days, the Bank receiving such
proportionately greater payment shall purchase such participations in
the Notes held by the other Banks, and such other adjustments shall be
made from time to time, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks
shall be shared by the Banks pro rata; provided that nothing in this
67
Section shall impair the right of any Bank to exercise any right of
set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of a Borrower other than
its indebtedness hereunder. Each
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether
or not acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a
direct creditor of the maker of such Note in the amount of such
participation.
SECTION 11.05. Amendments and Waivers. Any provision of
this Agreement or the Notes may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed or otherwise
approved in writing by the Company and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent),
provided that no such amendment or waiver shall, unless signed or
otherwise approved in writing by all the Banks, (i) increase or
decrease any Commitment of any Bank or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest
on any Loan or any fee hereunder, (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder,
(iv) amend any provisions of Sections 10.01 through 10.04 and Section
10.06 or (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks,
which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement.
SECTION 11.06. Successors and Assigns. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that
no Borrower may assign or otherwise transfer any of its rights under
this Agreement without the prior written consent of all the Banks.
(b) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in
its Commitments or its Loans. In the event of any such grant by a Bank
of a participating interest to a Participant, whether or not upon
notice to the Borrowers and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the
Borrowers and the Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under
this Agreement. Any agreement pursuant to which any Bank may grant
such a participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of the
Borrowers hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide that
such Bank will not, without the consent of the Participant, agree to
any modification,
amendment or waiver of this Agreement (x) described in clause (ii) or
(iii) of Section 11.05 or (y) that would change the requirement that
all the Banks must sign or approve any amendment or waiver described in
clause (ii) or (iii) of Section 11.05. Subject to subsection (e)
below, the Borrowers agree that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of
Article VIII with respect to its participating interest. An assignment
or other transfer which is not permitted by subsection (c) or (d) below
shall be given effect for purposes of this Agreement only to the extent
of a participating interest granted in accordance with this subsection
(b).
68
(c) Any Bank may at any time, upon prior notice to the
Borrowers and the Agent, assign to one or more banks or other
institutions ("Assignees") a proportionate part of its rights and
obligations under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit J hereto
executed by such Assignee and such transferor Bank with (and subject
to) the subscribed consent of the Company which consent shall not be
unreasonably withheld and the Agent; and provided, that such assignment
may, but need not, include rights of the transferor Bank in respect of
outstanding Money Market Loans. Upon execution and delivery of such an
instrument, payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank
and such Assignee, delivery to the Agent and the Company of an executed
copy of such instrument and payment by such Assignee to the Agent of a
processing fee of $2,000, such Assignee shall be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank with
a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party
shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Agent and the Borrowers
shall make appropriate arrangements so that, if required, new Notes are
issued to the Assignee.
(d) Any Bank may at any time assign all or any portion of
its rights under this Agreement and its Notes to a Federal Reserve
Bank. No such assignment shall release the transferor Bank from its
obligations hereunder.
69
(e) No Assignee, Participant or other transferee of any
Bank's rights shall be entitled to receive any greater payment under
Section 8.03 than such Bank would have been entitled to receive with
respect to the rights transferred, unless such transfer is made with
the Company's prior written consent or pursuant to Section 8.05 or by
reason of the provisions of Section 8.02 or 8.03 requiring such Bank to
designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 11.07. Margin Stock Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it in good
faith is not relying upon any "margin stock" (as defined in Regulation
U) as collateral in the extension or maintenance of the credit provided
for in this Agreement.
SECTION 11.08. WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 11.09. Submission to Jurisdiction. Each Borrower
hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any New
York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought
in such a court has been brought in an inconvenient forum.
SECTION 11.10. New York Law. This Agreement and each Note
shall be construed in accordance with and governed by the law of the
State of New York.
SECTION 11.11. Confidentiality. Any information disclosed
by the Company to the Agent or any of the Banks, which was designated
proprietary or confidential at the time of receipt thereof by the Agent
or such Bank, shall be used solely for purposes of this Agreement and
not in any other manner detrimental to the Company and, if such
70
information is not otherwise in the public domain, shall not be
disclosed by the Agent or such Bank to any other Person except (i) to
its independent accountants and legal counsel (it being understood that
the Persons to whom such disclosure is made will be informed of the
confidential nature of such information and instructed to keep such
information confidential), (ii) pursuant to statutory and regulatory
requirements, (iii) pursuant to any mandatory court order, subpoena or
other legal process, (iv) to the Agent or any other Bank, (v) pursuant
to any agreement heretofore or hereafter made between such Bank and the
Company which permits such disclosure, (vi) in connection with the
exercise of any remedy under this Agreement or (vii) subject to an
agreement containing provisions substantially the same as those of this
Section, to any participant in or assignee of, or prospective
participant in or assignee of, any Loan or Commitment (it being
understood that prior to any such disclosures contemplated by clauses
(ii) and (iii) above, the Agent or such Bank shall, if practicable,
give the Company prior written notice of such disclosure).
SECTION 11.12. Counterparts. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the
same instrument.
71
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.
POLAROID CORPORATION
By /s/ Graham M. Brown, Jr.
--------------------------------
Title: Vice President and
Treasurer
549 Technology Square
Cambridge, Massachusetts 02139
Attention: Treasurer
Telex number: 921 482
Telecopy number: 617-386-6615
Commitments
-----------
$25,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Adam J. Silver
--------------------------------
Title: Associate
$22,500,000 ABN AMRO BANK N.V.
By /s/ Elliott O. May
--------------------------------
Title: Group Vice President
By /s/ David C. Ekberg
--------------------------------
Title: Senior Vice President
and Branch Manager
$22,500,000 THE FIRST NATIONAL BANK
OF BOSTON
By /s/ Carol A. Lovell
--------------------------------
Title: Director
72
$20,000,000 THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ Thomas M. Harkless
--------------------------------
Title: Vice President
$20,000,000 THE MITSUBISHI BANK, LIMITED
(acting through its New York
Branch)
By /s/ Monica Sheehan
--------------------------------
Title: Vice President
$20,000,000 NATIONSBANK OF NORTH CAROLINA,
N.A.
By /s/ Scott A. Jackson
--------------------------------
Title: Vice President
$20,000,000 WACHOVIA BANK OF GEORGIA,
N.A.
By /s/ Linda M. Harris
--------------------------------
Title: Senior Vice President
_________________
Total Commitments
$150,000,000
================= MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Adam J. Silver
--------------------------------
Title: Associate
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Telex number: 177615 MGT UT
Telecopy number: 212-648-5014
73
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin", "Commitment Fee Rate"
and "Facility Fee Rate" for any day are the respective rates per annum
set forth below in the applicable row in the column corresponding to
the Pricing Level that applies on such day:
Level I Level II Level III Level IV
========================================================================
Euro-Dollar
Margin .250% .300% .325% .425%
-------------------------------------------------------------------------
CD Margin .375% .425% .450% .550%
-------------------------------------------------------------------------
Commitment Fee Rate .000% .025% .0375% .050%
-------------------------------------------------------------------------
Facility Fee Rate .125% .125% .150% .250%
-------------------------------------------------------------------------
For purposes of this Pricing Schedule, the following terms
have the following meanings:
"Level I Pricing" applies on any day if, on such day, the
Borrower's long-term debt is rated (i) A- or higher by S&P and Baa1 or
higher by Moody's or (ii) BBB+ by S&P and A3 or higher by Moody's.
"Level II Pricing" applies on any day if, on such day, the
Borrower's long-term debt is rated BBB+ by S&P and Baa1 by Moody's.
"Level III Pricing" applies on any day if, on such day, the
Borrower's long-term debt is rated BBB by S&P or Baa2 by Moody's.
"Level IV Pricing" applies on any day if, on such day, no
other Pricing Level applies.
"Moody's" means Moody's Investors Service, Inc.
"Pricing Level" means any one of the four pricing levels
represented by Level I Pricing, Level II Pricing, Level III Pricing and
Level IV Pricing.
"S&P" means Standard & Poor's Corporation.
The ratings to be utilized for purposes of this Pricing Schedule are
those assigned to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement, and any rating
assigned to any other debt security of the Borrower shall be
disregarded. The rating in effect on any day is the rating in effect
at the close of business on such day.
2
EXHIBIT A
NOTE
New York, New York
, 19
For value received, [NAME OF BORROWER], a ________
corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the
unpaid principal amount of all Loans made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below, such principal
amount to be payable on the Termination Date. The Borrower promises to
pay interest on the unpaid principal amount of such Loans on the dates
and at the rate or rates provided for in the Credit Agreement. All
such payments of principal and interest shall be made in lawful money
of the United States in Federal or other immediately available funds at
the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any
transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding shall be
endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof;
provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder
or under the Credit Agreement.
This note is one of the Notes referred to in the Credit
Agreement dated as of August 24, 1994 among Polaroid Corporation, the
banks listed on the signature pages thereof and Morgan Guaranty Trust
Company of New York, as Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement
are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
[BORROWER]
By____________________
Title:
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: [Name of Borrower]
Re: Credit Agreement dated as of August 24, 1994
(as amended from time to time, the "Credit
Agreement") among Polaroid Corporation, the Banks
party thereto and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following
proposed Money Market Borrowing(s):
Funding Date of Borrowing: __________________
Principal Amount /1/ Interest Period /2/
----------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank
Offered Rate.]
_________________________
/1/ Amount must be $10,000,000 or a larger multiple of $1,000,000.
/2/ Not less than one month (LIBOR Auction) or not less
than 15 days (Absolute Rate Auction), subject to the provisions
of the definition of Interest Period.
Terms used herein have the meanings assigned to them in the
Credit Agreement.
[NAME OF BORROWER]
By________________________
Title:
2
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to [Name of Borrower] (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of
August 24, 1994 among Polaroid Corporation, the Banks party thereto and
the undersigned, as Agent, we are pleased on behalf of the Borrower to
invite you to submit Money Market Quotes to the Borrower for the
following proposed Money Market Borrowing(s):
Funding Date of Borrowing: __________________
Principal Amount Interest Period
---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank
Offered Rate.]
Please respond to this invitation by no later than [2:00
P.M.] [9:00 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
EXHIBIT D
FORM OF MONEY MARKET QUOTE
--------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
60 Wall Street
New York, New York 10260
Attention:
Re: Money Market Quote to
[Name of Borrower] (the "Borrower")
In response to your invitation on behalf of the Borrower
dated _____________, 19__, we hereby make the following Money Market
Quote on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Funding Date of Borrowing: ____________________/1/
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
------------------
/1/ As specified in the related Invitation
Principal Interest Money Market
Amount /2/ Period /3/ [Margin] /4/ [Absolute Rate] /5/
--------- --------- -------------------------------
$
$
[Provided, that the aggregate principal amount of Money
Market Loans for which the above offers may be accepted shall not
exceed $____________.] /2/
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in
the Credit Agreement dated as of August 24, 1994 among Polaroid
Corporation, the Banks party thereto and yourselves, as Agent,
irrevocably obligates us to make the Money Market Loan(s) for which any
offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
_______________________
/2/ Principal amount bid for each Interest Period may not exceed
principal amount requested. Specify aggregate limitation if the sum of
the individual offers exceeds the amount the Bank is willing to lend.
Bids must be made for $5,000,000 or a larger multiple of $1,000,000.
/3/ Not less than one month or not less than 15 days, as specified in the
related Invitation. No more than five bids are permitted for each
Interest Period.
/4/ Margin over or under the London Interbank Offered Rate
determined for the applicable Interest Period. Specify
percentage (rounded to the nearest 1/10,000 of 1%) and
specify whether "PLUS" or "MINUS".
/5/ Specify rate of interest per annum (rounded to the
nearest 1/10,000 of 1%).
2
EXHIBIT E1
OPINION OF CRAVATH, SWAINE & MOORE,
SPECIAL COUNSEL FOR THE COMPANY
-----------------------------------
[Dated as provided in
Section 3.01 of the
Credit Agreement]
Dear Sirs:
We have acted as special counsel for Polaroid Corporation, a
Delaware corporation (the "Company"), in connection with the Credit
Agreement dated as of August 24, 1994 (the "Credit Agreement") among
the Company and you. Capitalized terms defined in the Credit Agreement
are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have
conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
Based upon the foregoing, we are of opinion as follows:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes (i) are within the Company's
corporate powers and have been duly authorized by all necessary
corporate action, (ii) require no action by or in respect of, or filing
with, any governmental body, agency or official under the laws of the
State of New York, the General Corporation Law of the State of Delaware
or the Federal laws of the United States of America and (iii) do not
contravene any provision of applicable law or regulation of the State
of New York, the General Corporation Law of the State of Delaware or
the Federal laws of the United States of America or of the Restated
Certificate of Incorporation or By-laws of the Company.
3. The Credit Agreement constitutes a valid and binding
agreement of the Company and the Notes constitute valid and binding
obligations of the Company, in each case enforceable in accordance with
its terms, except that (i) the foregoing is subject to applicable
bankruptcy, reorganization, insolvency, fraudulent transfer, moratorium
or other similar laws affecting creditors' rights generally from time
to time in effect, (ii) the enforceability thereof is also subject to
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law), (iii) insofar as
provisions contained in the Credit Agreement provide for
indemnification, the enforcement thereof may be limited by public
policy considerations, (iv) we express no opinion as to Section 11.04
of the Credit Agreement insofar as it provides that any Bank purchasing
a participation from another Bank pursuant thereto may exercise set-off
or similar rights with respect to such participation, and (v) we
express no opinion as to the effect of the law of any jurisdiction
other than the State of New York wherein any Bank may be located or
wherein enforcement of the Credit Agreement or the Notes issued
thereunder may be sought which limits the rates of interest legally
chargeable or collectible.
We are members of the bar of the State of New York and do not
express any opinion as to any laws other than the laws of the State of
New York, the General Corporation Law of the State of Delaware and the
Federal laws of the United States of America.
This opinion is delivered to you pursuant to the instruction
of the Company and is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written
consent.
Very truly yours,
Morgan Guaranty Trust Company
of New York, as Agent
The Banks Listed in the Credit Agreement
Referred to Above
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
2
EXHIBIT E2
OPINION OF RICHARD F. deLIMA,
GENERAL COUNSEL OF THE COMPANY
------------------------------
[Dated as provided in
Section 3.01 of the
Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
As Vice President, Secretary and General Counsel of Polaroid
Corporation, a Delaware Corporation (the "Company"), I am familiar with
the Credit Agreement dated as of August 24, 1994 (the "Credit
Agreement") among the Company, Morgan Guaranty Trust Company of New
York, as Agent, and the Banks listed on the signature pages thereof.
Capitalized terms defined in the Credit Agreement are used herein as
therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have
conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware,
and has all corporate powers and, to the best of my knowledge, all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, the absence of
which would have a material adverse effect on the business, financial
position
or results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole.
2. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes (i) are within the Company's
corporate powers and have been duly authorized by all necessary
corporate action, (ii) require no action by or in respect of, or filing
with, any governmental body, agency or official under the laws of the
Commonwealth of Massachusetts and (iii) do not contravene, or
constitute a default under, any provision of applicable law or
regulation or of the Restated Certificate of Incorporation or By-laws
of the Company or, to the best of my knowledge, of any agreement,
judgment, injunction, order, decree or other instrument binding upon
the Company or, to the best of my knowledge, result in the creation or
imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
3. To the best of my knowledge, neither the Company nor any
of its Subsidiaries is in violation of, or in default under, any term
or provision of any charter, by-law, mortgage, indenture, agreement,
instrument, statute, rule, regulation, judgment, decree, order, writ or
injunction applicable to it, such that such violations and defaults in
the aggregate could reasonably be expected to materially adversely
affect the business, financial position or results of operations of the
Company and its Consolidated Subsidiaries, considered as a whole, or
the ability of the Company to perform in any material respect its
obligations under the Credit Agreement or the Notes.
4. Except as disclosed in the Company's 1993 Form 10-K and
the Company's First Quarter 1994 Form 10-Q, to the best of my knowledge
there is no (i) injunction, stay, decree or order issued by any court
or arbitrator or any governmental body, agency or official or
(ii) action, suit or proceeding pending or threatened against or
affecting, the Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there
is a reasonable likelihood of an adverse decision, in either case (y)
which could materially adversely affect the business, financial
position or results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole, or (z) which could materially
adversely affect the ability of the Company to perform any of its
obligations under the Credit Agreement or the Notes.
5. To the best of my knowledge there is no (i) injunction,
stay, decree or order issued by any court or arbitrator or any
governmental body, agency or official or (ii) action, suit or
proceeding
2
pending or threatened against or affecting, the Company or any of its
Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable likelihood of an
adverse decision, in either case which in any manner draws into
question the validity of the Credit Agreement or the Notes.
I am a member of the bar of the State of New York and do not
express any opinion as to any laws other than the laws of the State of
New York, the General Corporation Law of the State of Delaware and the
Federal laws of the United States of America. In rendering the opinion
set forth in paragraph 2 above, I have relied, without independent
investigation, as to all matters governed by the Commonwealth of
Massachusetts upon the opinion, dated the date hereof, of Gerald R.
Dicker, Esq., Vice President and Assistant Secretary of the Company, a
copy of which has been delivered to you.
This opinion is delivered to you pursuant to the instruction
of the Company and is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written
consent.
Very truly yours,
3
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Dated as provided in
Section 3.01 of the
Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit
Agreement dated as of August 24, 1994 (the "Credit Agreement") among
Polaroid Corporation, a Delaware corporation (the "Company"), Morgan
Guaranty Trust Company of New York, as Agent (the "Agent"), and the
banks listed on the signature pages thereof (the "Banks"). We have
acted as special counsel for the Agent for the purpose of rendering
this opinion pursuant to Section 3.01(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have
conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution and delivery and performance by the Company
of the Credit Agreement and the Notes are within the Company's
corporate powers and have been duly authorized by all necessary
corporate action.
2. The Credit Agreement constitutes a valid and binding
agreement of the Company and the Notes constitute valid and binding
obligations of the Company.
We are members of the bar of the State of New York only. We
express no opinion as to any laws other than the laws of the State of
New York, the General Corporation Law of the State of Delaware and the
Federal laws of the United States of America. In giving the foregoing
opinion, we express no opinion as to the effect (if any) of any law of
any jurisdiction (except the State of New York) in which any Bank is
located which limits the rate of interest that such Bank may charge or
collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written
consent.
Very truly yours,
2
EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
-------------------------------
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
for the Banks named in the Credit Agreement
dated as of August 24, 1994 (as amended from
time to time, the "Credit Agreement") among
Polaroid Corporation, such Banks and such Agent
Dear Sirs:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement have
for the purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a
[jurisdiction of incorporation] corporation, elects to be an Eligible
Subsidiary for purposes of the Credit Agreement, effective from the
date hereof until an Election to Terminate shall have been delivered on
behalf of the undersigned in accordance with the Credit Agreement. The
undersigned confirms that the representations and warranties set forth
in Articles IV and IX of the Credit Agreement are true and correct as
to the undersigned as of the date hereof, and the undersigned agrees to
perform all the obligations of an Eligible Subsidiary under, and to be
bound in all respects by the terms of, the Credit Agreement, including
without limitation Section 11.09 thereof, as if the undersigned were a
signatory party thereto.
The address to which all notices to the undersigned under the
Credit Agreement should be directed is: . This instrument
shall be construed in accordance with and governed by the laws of the
State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By____________________________
Title:
The undersigned confirms that [name of Eligible Subsidiary]
is an Eligible Subsidiary for purposes of the Credit Agreement
described above.
POLAROID CORPORATION
By____________________________
Title:
Receipt of the above Election to Participate is acknowledged
on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By____________________________
2
EXHIBIT H
FORM OF ELECTION TO TERMINATE
-----------------------------
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
for the Banks named in the Credit Agreement
dated as of August __, 1994 (as amended from
time to time, the "Credit Agreement") among
Polaroid Corporation, such Banks and such Agent
Dear Sirs:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement have
for the purposes hereof the meaning provided therein.
The undersigned, Polaroid Corporation, a Delaware
corporation, elects to terminate the status of [name of Eligible
Subsidiary], a [jurisdiction of incorporation] corporation (the
"Designated Subsidiary"), as an Eligible Subsidiary for purposes of the
Credit Agreement, effective as of the date hereof. The undersigned
represents and warrants that all principal and interest on all Notes of
the Designated Subsidiary and all other amounts payable by such
Designated Subsidiary pursuant to the Credit Agreement have been paid
in full on or prior to the date hereof. Notwithstanding the foregoing,
this Election to Terminate shall not affect any obligation of the
Designated Subsidiary under the Credit Agreement or under any of its
Notes heretofore incurred.
This instrument shall be construed in accordance with and
governed by the laws of the State of New York.
Very truly yours,
POLAROID CORPORATION
By_______________________
Title:
Receipt of the above Election to Terminate is hereby
acknowledged on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By______________________
Title:
2
EXHIBIT I
OPINION OF COUNSEL FOR THE BORROWER
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
-------------------------------------
[Dated as provided in
Section 3.03 of the
Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am counsel to [name of Eligible Subsidiary, jurisdiction of
incorporation] (the "Borrower") and give this opinion pursuant to
Section 3.03(b) of the Credit Agreement dated as of August 24, 1994 (as
heretofore amended, the "Credit Agreement") among Polaroid Corporation
(the "Company"), the banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent. Terms defined in
the Credit Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have
conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of [jurisdiction of
incorporation], and is a Wholly-Owned Consolidated Subsidiary of the
Company.
2. The execution and delivery by the Borrower of its
Election to Participate and its Notes and the performance by the
Borrower of the Credit Agreement and its Notes are within the
Borrower's
corporate powers, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with, any
governmental body, agency or official (except actions or filings that
have been duly taken or made) and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Borrower or, to the best
of my knowledge, of any agreement, judgment, injunction, order, decree
or other instrument binding upon the Company or the Borrower or, to the
best of my knowledge, result in the creation or imposition of any Lien
on any asset of the Company or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding
agreement of the Borrower and its Notes constitute valid and binding
obligations of the Borrower.
4. Except as disclosed in the Borrower's Election to
Participate, there is no income, stamp or other tax of [jurisdiction of
incorporation and, if different, principal place of business], or any
taxing authority thereof or therein, imposed by or in the nature of
withholding or otherwise, which is imposed on any payment to be made by
the Borrower pursuant to the Credit Agreement or its Notes, or is
imposed on or by virtue of the execution, delivery or enforcement of
its Election to Participate or of its Notes.
Very truly yours,
2
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
AGREEMENT dated as of _________, 19__ between [ASSIGNOR] (the
"Assignor") and [ASSIGNEE] (the "Assignee"),
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of August 24,
1994 among Polaroid Corporation (the "Company"), the Assignor and the
other Banks party thereto, as Banks, and Morgan Guaranty Trust Company
of New York, as Agent (as the same may be amended from time to time,
the "Credit Agreement");
[WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans to the Company and its Eligible
Subsidiaries in an aggregate principal amount at any time outstanding
not to exceed $__________;]
[WHEREAS, Loans made to the Company and its Eligible
Subsidiaries by the Assignor under the Credit Agreement are outstanding
at the date hereof in an aggregate principal amount of $__________;]
and
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in respect of
a portion of its Commitment thereunder in an amount equal to
$__________ (the "Assigned Amount"), and the Assignee proposes to
accept assignment of such rights and assume the corresponding
obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as
follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and
sells to the Assignee all of the rights of the Assignor under the
Credit Agreement and its Notes to the extent of the Assigned Amount,
and the Assignee hereby accepts such assignment from the Assignor and
assumes
all of the obligations of the Assignor under the Credit Agreement to
the extent of the Assigned Amount. Upon (i) the execution and delivery
by the Assignor and the Assignee, and the acknowledgement and
acceptance by the Company and the Agent, of this Agreement and (ii) the
payment by the Assignee of the amounts specified in Section 3 of this
Agreement required to be paid on the date hereof and the processing fee
specified in Section 12.06(c) of the Credit Agreement, (A) the Assignee
shall, as of the date hereof, succeed to the rights and be obligated to
perform the obligations of a Bank under the Credit Agreement to the
extent of the Assigned Amount and (B) the Assignor shall be released
from its obligations under the Credit Agreement to the extent such
obligations have been so assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment
and sale contemplated in Section 2 hereof, the Assignee shall pay to
the Assignor on the date hereof in Federal funds an amount equal to
$_________, being the sum of (i) the aggregate principal amount of the
outstanding Loans so assigned, (ii) interest accrued thereon up to but
excluding the date hereof and (iii) commitment and/or facility fees
accrued in respect thereof up to but excluding the date hereof. It is
understood that commitment and/or facility fees accrued to the date
hereof are for the account of the Assignor and such fees accruing from
and including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives
any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such
other party to the extent of such other party's interest therein and
shall promptly pay the same to such other party.
SECTION 4. Consent of the Company and the Agent. This
Agreement is conditioned upon the consent of the Company (which consent
shall, as provided by the Credit Agreement, not be unreasonably
withheld) and the Agent pursuant to the Credit Agreement. The
acknowledgement of receipt of this Agreement by the Company and the
Agent is evidence of this consent.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Company, or the validity and enforceability of the
obligations of any Borrower in respect of the Credit Agreement or any
2
Note. The Assignee acknowledges that it has, independently and without
reliance on the Assignor, and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and
financial condition of the Company.
SECTION 6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the
same instrument.
3
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the
date first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
Acknowledged and accepted
as of the date first
above written.
POLAROID CORPORATION
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By__________________________
Title:
4
EXHIBIT 10.5
[CONFORMED COPY]
$130,022,336
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
November 29, 1994
among
Polaroid Corporation
Morgan Guaranty Trust Company of New York,
as Agent
ABN AMRO Bank N.V.
as Co-Agent
and
The Banks Listed Herein
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions 1
1.02 Accounting Terms and Determinations 14
1.03 Types of Borrowings 15
ARTICLE II
THE CREDITS
SECTION 2.01 Existing Loans 15
2.02 Interest Rate Elections 15
2.03 Interest Rates 17
2.04 Optional Prepayments 21
2.05 Prepayments 22
2.06 General Provisions as
to Payments 22
2.07 Funding Losses 23
2.08 Computation of Interest 24
2.09 Notes 24
2.10 Withholding Tax Exemption 24
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness 25
3.02 Certain Consequences of Effectiveness 27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE Company
SECTION 4.01 Corporate Existence and Power 27
4.02 Corporate and Governmental
Authorization; No Contravention 27
4.03 Binding Effect 28
4.04 Financial Information 28
4.05 Litigation 29
4.06 Compliance with ERISA 29
4.07 Taxes 30
i
<PAGE>
4.08 Subsidiaries 30
4.09 Not an Investment Company 30
4.10 Compliance with Laws 30
4.11 No Defaults 30
4.12 Possession of Franchises,
Licenses, etc 31
4.13 Full Disclosure 31
4.14 Environmental Matters 31
ARTICLE V
COVENANTS
SECTION 5.01 Information 32
5.02 Payment of Obligations 35
5.03 Maintenance of Property; Insurance 35
5.04 Conduct of Business and
Maintenance of Existence 36
5.05 Compliance with Laws 36
5.06 Inspection of Property,
Books and Records 36
5.07 Interest Coverage Ratio 37
5.08 Leverage Ratio 37
5.09 Minimum Consolidated
Adjusted Net Worth 37
5.10 Subsidiary Debt 37
5.11 Negative Pledge 38
5.12 Consolidations, Mergers and
Sales of Assets 40
5.13 Fiscal Year 40
5.14 Use of Proceeds 40
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default 40
6.02 Notice of Default 43
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization 43
7.02 Agent and Affiliates 43
7.03 Action by Agent 44
7.04 Consultation with Experts 44
7.05 Liability of Agent 44
ii
<PAGE>
7.06 Indemnification 44
7.07 Credit Decision 45
7.08 Successor Agent; Resignations 45
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair 46
8.02 Illegality 46
8.03 Increased Cost and Reduced Return 47
8.04 Base Rate Loans Substituted for
Affected Fixed Rate Loans 49
8.05 Substitution of Bank 49
ARTICLE IX
INCOME TAXATION
SECTION 9.01 Additional Payments 50
9.02 Supplemental Payments 51
9.03 Payment Dates 51
9.04 Right of Company to Contest 52
9.05 Refunds 55
9.06 Request for Qualifying Opinion
of Counsel 55
9.07 Related Definitions 56
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Notices 59
10.02 No Waivers 59
10.03 Expenses; Documentary Taxes;
Indemnification 60
10.04 Sharing of Set-Offs 60
10.05 Amendments and Waivers 61
10.06 Successors and Assigns 61
10.07 Margin Stock Collateral 63
10.08 WAIVER OF TRIAL BY JURY 63
10.09 Submission To Jurisdiction 63
10.10 New York Law 63
10.11 Confidentiality 63
10.12 Counterparts 64
iii
<PAGE>
Pricing Schedule
Schedule 1 - Scheduled Prepayments
Exhibit A - Note
Exhibit B1 - Opinion of Cravath, Swaine & Moore,
Special Counsel for the Company
Exhibit B2 - Opinion of Cravath, Swaine & Moore,
Special Tax Counsel for the Company
Exhibit B3 - Opinion of Richard F. deLima,
General Counsel of the Company
Exhibit C - Opinion of Davis Polk & Wardwell,
Special Counsel for the Agent
Exhibit D - Assignment and Assumption Agreement
iv
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
AMENDED AND RESTATED AGREEMENT dated as of
November 29, 1994 among POLAROID CORPORATION, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent, ABN AMRO Bank
N.V., as Co-Agent and the BANKS listed on the signature
pages hereof.
WITNESSETH:
WHEREAS, Polaroid Corporation is presently a party
to the Existing Credit Agreement (as defined below) under
which Loans (as defined in the Existing Credit Agreement) in
the aggregate principal amount of $130,022,336 are
outstanding on the date hereof;
WHEREAS, said Loans are securities acquisition
loans under Section 133(b)(5) of the Code (as defined
below); and
WHEREAS, Polaroid Corporation desires to amend and
restate the Existing Credit Agreement as set forth herein;
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms,
as used herein, have the following meanings:
"Additional Equity" means any capital stock (or
options, rights or warrants therefor) issued by the Company
after July 3, 1994.
"Adjusted CD Rate" has the meaning set forth in
Section 2.03(b).
"Adjusted Consolidated Net Income" means, for any
period referred to in Section 5.09, Consolidated Net Income
for such period plus 60% of the amount by which the pre-tax
consolidated operating income of the Company and its
Consolidated Subsidiaries for such period is reduced (or
minus 60% of the amount by which it is increased) on a
cumulative basis after July 3, 1994 as a result of the
effects (other than the initial effect) of the Company's
adoption of Statement of Financial Accounting Standards No.
106.
<PAGE>
"Adjusted London Interbank Offered Rate" has the
meaning set forth in Section 2.03(c).
"Administrative Questionnaire" means, with respect
to each Bank, the administrative questionnaire in the form
submitted to such Bank by the Agent and submitted to the
Agent (with a copy to the Company) duly completed by such
Bank.
"Affiliate" means any Person (other than a
Subsidiary) directly or indirectly controlling, controlled
by or under common control with the Company. As used in
this definition of "Affiliate", the term "control" means the
possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by
contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New
York in its capacity as agent for the Banks hereunder, and
its successors in such capacity.
"Amendment Effective Date" means the date upon
which all of the conditions to effectiveness set forth in
Section 3.01 are satisfied.
"Applicable Lending Office" means, with respect to
any Bank, (i) in the case of its Domestic Loans, its
Domestic Lending Office and (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assessment Rate" has the meaning set forth in
Section 2.03(b).
"Assignee" has the meaning set forth in Section
10.06(c).
"Bank" means each bank listed on the signature
pages hereof, each Assignee which becomes a Bank pursuant to
Section 10.06(c), and their respective successors.
"Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate for such day and
(ii) the sum of 1/2 of 1% plus the Federal Funds Rate for
such day.
"Base Rate Loan" means at any time a Loan
outstanding hereunder which bears interest at such time at a
rate based on the Base Rate pursuant to the applicable
Notice of Interest Rate Election or pursuant to the
provisions of Article VIII.
2
<PAGE>
"Benefit Arrangement" means at any time an
employee benefit plan within the meaning of Section 3(3) of
ERISA which is not a Plan or a Multiemployer Plan and which
is maintained or otherwise contributed to by any member of
the ERISA Group.
"Borrowing" has the meaning set forth in Section
1.03.
"CD Base Rate" has the meaning set forth in
Section 2.03(b).
"CD Loan" means at any time a Loan outstanding
hereunder which bears interest at such time at a rate based
on the Adjusted CD Rate pursuant to the applicable Notice of
Interest Rate Election.
"CD Reference Banks" means Fleet Bank of
Massachusetts, N.A., PNC Bank, National Association and
Morgan Guaranty Trust Company of New York.
"Change in Control" means
(a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 35% or more of the combined voting
power of the then outstanding voting securities of the
Company entitled to vote generally in the election of
directors, but excluding, for this purpose, any such
acquisition by (i) the Company or any of its
subsidiaries, (ii) any other Person of voting power
pursuant to a revocable proxy, or (iii) any corporation
with respect to which, following such acquisition, more
than 65% of the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by
individuals and entities who were the beneficial owners
of voting securities of the Company immediately prior
to such acquisition, in substantially the same
proportion as their ownership, immediately prior to
such acquisition, of the combined voting power of the
then outstanding voting securities of the Company
entitled to vote generally in the election of
directors; or
3
<PAGE>
(b) individuals who, as of January 1, 1994,
constituted the Board of Directors of the Company (as
of January 1, 1994, the "Incumbent Board") cease for
any reason to constitute at least a majority of such
Board; provided that any individual becoming a director
subsequent to January 1, 1994, whose election, or
nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office
is in connection with an actual or threatened election
contest relating to the election of the directors of
the Company (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) approval by the stockholders of the Company
of a reorganization, merger or consolidation, in each
case, with respect to which all or substantially all
the individuals and entities who were the respective
beneficial owners of the voting securities of the
Company immediately prior to such reorganization,
merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 65% of the
combined voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors of the corporation resulting from such
reorganization, merger or consolidation; or
(d) the sale or other disposition of all or
substantially all the assets of the Company in one
transaction or series of related transactions.
"Co-Agent" means ABN AMRO Bank N.V. in its
capacity as Co-Agent hereunder.
"Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Company" means Polaroid Corporation, a Delaware
corporation, and its successors.
"Company's 1993 Form 10-K" means the Company's
annual report on Form 10-K for Fiscal Year 1993, as filed
with the Securities and Exchange Commission pursuant to the
Exchange Act.
"Company's Second Quarter 1994 Form 10-Q" means
the Company's quarterly report on Form 10-Q for the Fiscal
Quarter ended July 3, 1994, as filed with the Securities and
Exchange Commission pursuant to the Exchange Act.
4
<PAGE>
"Consolidated Adjusted Net Worth" means, at any
date, the sum of (i) Consolidated Stockholders' Equity as of
such date, minus (ii) all write-ups (other than write-ups
resulting from foreign currency translations) after July 3,
1994 in the book value of any asset owned by the Company or
a Consolidated Subsidiary, minus (iii) the carrying value of
all Investments in Unconsolidated Joint Ventures carried as
assets on the Company's consolidated balance sheet as of
such date, to the extent that the carrying value of such
Investments as of such date exceeds $25,000,000, minus (iv)
an amount equal to the cumulative net increase (or plus an
amount equal to the cumulative net decrease) in Consolidated
Net Income after July 3, 1994 attributable to the tax effect
of foreign currency translations, plus (v) 60% of the amount
by which the pre-tax consolidated operating income of the
Company and its Consolidated Subsidiaries is reduced (or
minus 60% of the amount by which it is increased) on a
cumulative basis after July 3, 1994 as a result of the
effects (other than the initial effect) of the Company's
adoption of Statement of Financial Accounting Standards No.
106.
"Consolidated Debt" means, at any date, the Debt
of the Company and its Consolidated Subsidiaries, determined
on a consolidated basis as of such date; provided that
"Consolidated Debt" shall exclude Debt incurred by Foreign
Subsidiaries for bona fide hedging purposes as permitted by
Section 5.10(a)(iii), to the extent that such hedging Debt
is not Guaranteed by the Company or any Domestic Subsidiary
and in the aggregate does not exceed 90% of the aggregate
cash deposits and Temporary Cash Investments of the Foreign
Subsidiaries.
"Consolidated EBIT" means, for any period, the sum
of (i) Consolidated Net Income for such period (excluding
any extraordinary item of gain or loss and any gain or loss
attributable to the tax impact of foreign currency
translations), plus (ii) to the extent deducted in
determining Consolidated Net Income for such period,
interest expense and federal, state and foreign income
taxes, plus (iii) the amount by which the pre-tax
consolidated operating income of the Company and its
Consolidated Subsidiaries for such period is reduced (or
minus the amount by which it is increased) as a result of
the effects (other than the initial effect) of the Company's
adoption of Statement of Financial Accounting Standards No.
106.
5
<PAGE>
"Consolidated Interest Expense" means, for any
period, the consolidated interest expense of the Company and
its Consolidated Subsidiaries for such period.
"Consolidated Net Income" means, for any period,
the consolidated net income of the Company and its
Consolidated Subsidiaries for such period.
"Consolidated Stockholders' Equity" means, at any
date, the consolidated stockholders' equity of the Company
and its Consolidated Subsidiaries as of such date.
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would be
consolidated with those of the Company in its consolidated
financial statements if such statements were prepared as of
such date.
"Credit Agreement" has the meaning set forth in
Section 3.02.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized
in accordance with generally accepted accounting principles,
(v) all non-contingent obligations of such Person to
reimburse or repay any bank or other Person in respect of
amounts paid under a letter of credit, banker's acceptance
or similar instrument (excluding any such obligations which
do not arise from a repayment of Debt and are repaid within
three Euro-Dollar Business Days after the date incurred),
(vi) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such
Person (but excluding any such Debt in excess of the book
value of such asset, unless such Debt is assumed by such
Person) and (vii) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
New York City are authorized by law to close.
6
<PAGE>
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its
Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as
its Domestic Lending Office by notice to the Company and the
Agent; provided that any Bank may so designate separate
Domestic Lending Offices for its Base Rate Loans, on the one
hand, and its CD Loans, on the other hand, in which case all
references herein to the Domestic Lending Office of such
Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate
Loans or both.
"Domestic Reserve Percentage" has the meaning set
forth in Section 2.03(b).
"Domestic Subsidiary" means any Subsidiary which
is not a Foreign Subsidiary.
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees
or permits relating to the environment or to emissions,
discharges or releases of pollutants, contaminants,
hazardous substances, materials or wastes into the
environment or otherwise relating to the treatment, storage
or disposal of hazardous substances, materials or wastes or
to the remediation thereof.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended or any successor statute.
"ERISA Group" means the Company, any Subsidiary
and all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section
414(b), (c) or (m) of the Code.
"ESOP" means the Polaroid Stock Equity Plan and
the trust forming a part thereof.
"ESOP Specific Tax Factor" has the meaning set
forth in Section 2.03(d).
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
7
<PAGE>
"Euro-Dollar Lending Office" means, as to each
Bank, its office, branch or affiliate located at its address
set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Euro-Dollar
Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Company and the Agent.
"Euro-Dollar Loan" means at any time a Loan
outstanding hereunder which bears interest at such time at a
rate based on the Adjusted London Offered Rate pursuant to
the applicable Notice of Interest Rate Election.
"Euro-Dollar Reference Banks" means the principal
London offices of ABN AMRO Bank N.V., PNC Bank, National
Association and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning
set forth in Section 2.03(c).
"Event of Default" has the meaning set forth in
Section 6.01.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Existing Credit Agreement" means the $195,197,149
Credit Agreement dated as of June 30, 1992, as heretofore
amended, among the Company, the Agent, the Co-Agent and the
banks listed therein.
"Existing Loans" means the Loans made under the
Existing Credit Agreement and remaining outstanding on the
date hereof.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New
York on the Domestic Business Day next succeeding such day,
provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business
Day, and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to the Agent (for
its own account) on such day on such transactions as
determined by the Agent.
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"Fiscal Quarter" means a fiscal quarter of the
Company.
"Fiscal Year" means a fiscal year of the Company.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or both.
"Foreign Subsidiary" means any Subsidiary which is
organized under the laws of a jurisdiction other than the
United States of America or any state thereof and no more
than 20% of the sales, earnings or assets (determined on a
consolidated basis) of which are located or derived from
operations in the United States of America.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such
Debt of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date
specified in the applicable Notice of Interest Rate Election
and ending one, two, three or six months thereafter, as
specified in such Notice; provided that:
(a) any Interest Period which would
otherwise end on a day which is not a Euro-Dollar
Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall
end on the next preceding Euro-Dollar Business
Day;
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<PAGE>
(b) any Interest Period which begins on the
last Euro-Dollar Business Day of a calendar month
(or on a day for which there is no numerically
corresponding day in the calendar month at the end
of such Interest Period) shall, subject to clause
(c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) if any Interest Period includes a Scheduled
Amortization Date but does not begin or end on such
date, (i) the principal amount (if any) of each Euro-
Dollar Loan required to be repaid on such date shall
have an Interest Period ending on such date and (ii)
the remainder (if any) of each Euro-Dollar Loan shall
have an Interest Period as set forth above;
(2) with respect to each CD Borrowing, the period commencing
on the date specified in the applicable Notice of Interest
Rate Election and ending 30, 60, 90 or 180 days thereafter,
as specified in such Notice; provided that:
(a) any Interest Period (other than an
Interest Period determined pursuant to clause (b)
below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day;
and
(b) if any Interest Period includes a Scheduled
Amortization Date but does not begin or end on such
date, (i) the principal amount (if any) of each CD Loan
required to be repaid on such date shall have an
Interest Period ending on such date and (ii) the
remainder (if any) of each CD loan shall have an
Interest Period as set forth above;
(3) with respect to each Base Rate Borrowing, the period
commencing on the date specified in the applicable Notice of
Interest Rate Election and ending 30 days thereafter;
provided that
(a) any Interest Period (other than an
Interest Period determined pursuant to clause (b)
below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day;
and
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<PAGE>
(b) if any Interest Period includes a Scheduled
Amortization Date but does not begin or end on such
date, (i) the principal amount (if any) of each Base
Rate Loan required to be repaid on such date shall have
an Interest Period ending on such date and (ii) the
remainder (if any) of each Base Rate Loan shall have an
Interest Period as set forth above.
"Investment" means any investment in any Person,
whether by means of share purchase, capital contribution,
loan, time deposit or otherwise; provided that the term
"Investment" shall not include any securities of or claims
with respect to any account debtor received in any
compromise or settlement of any account receivable.
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, the Company or any Subsidiary
shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan
and "Loans" means Domestic Loans or Euro-Dollar Loans or
both.
"London Interbank Offered Rate" has the meaning
set forth in Section 2.03(c).
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of
$10,000,000.
"Moody's" means Moody's Investors Service, Inc.
and its successors.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section
4001(a)(3) of ERISA to which any member of the ERISA Group
is then making or accruing an obligation to make
contributions or has within the preceding five plan years
made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such
five year period.
"Notes" means promissory notes of the Company,
substantially in the form of Exhibit A hereto, evidencing
the obligation of the Company to repay the Loans made to it,
and "Note" means any one of such promissory notes
outstanding on the Amendment Effective Date or subsequently
issued hereunder.
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<PAGE>
"Notice of Interest Rate Election" has the meaning
set forth in Section 2.02(b).
"Parent" means, with respect to any Bank, any
Person controlling such Bank.
"Participant" has the meaning set forth in Section
10.06(b).
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"Percentage Share" means with respect to each
Bank, the percentage determined by dividing the principal
amount of Loans set forth opposite its name on the signature
pages hereof by $130,022,336; provided that the Percentage
Share of a Bank that is a Substitute Bank referred to in
Section 8.05 or an Assignee referred to in Section 10.06(c)
shall be a proportionate part of the Percentage Share of the
relevant Affected Bank or transferor Bank equal to the
proportion of its outstanding Loans acquired by such
Substitute Bank or Assignee, as the case may be.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and either
(i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group
or (ii) has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at
such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.
"Pricing Schedule" means the Pricing Schedule
attached hereto.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in
New York City from time to time as its Prime Rate.
12
<PAGE>
"Reference Banks" means the CD Reference Banks or
the Euro-Dollar Reference Banks, as the context may require,
and "Reference Bank" means any one of such Reference Banks.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Required Banks" means at any time Banks holding
Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"S&P" means Standard & Poor's Corporation and its
successors.
"Scheduled Amortization Date" means a date on
which the Loans are scheduled to be prepaid pursuant to
Section 2.05(a).
"Subsidiary" means any corporation or other entity
(except an Unconsolidated Joint Venture) of which securities
or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons
performing similar functions are at the time directly or
indirectly owned by the Company.
"Substitute Bank" has the meaning set forth in
Section 8.05.
"Temporary Cash Investment" means any Investment
in (i) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or
any agency thereof, (ii) commercial paper rated A1 or higher
by S&P and P1 or higher by Moody's, (iii) demand or time
deposits with, including certificates of deposit and
bankers' acceptances issued by, any Qualifying Bank (as
defined below), (iv) repurchase agreements with respect to
securities described in clause (i) above entered into with
any Qualifying Bank (or, to the extent that the party making
such Investment has a perfected security interest in the
securities subject to such repurchase agreements, with
securities broker-dealers of nationally recognized
standing), (v) debt securities rated in one of the two
highest categories by a nationally recognized credit rating
agency and (vi) in the case of Investments made by any
Foreign Subsidiary, obligations, deposits and repurchase
agreements comparable to those specified in clauses (i),
(iii) and (iv) above (except that such obligations may be
issued or guaranteed by the country in which such Foreign
Subsidiary is located and such deposits and repurchase
agreements may be made with comparable banks and trust
13
<PAGE>
companies located in such countries), provided in each case
that such Investment matures (or permits the holder thereof
at its option to require repayment or repurchase thereof)
within two years from the date of acquisition thereof by the
Company or a Subsidiary. As used in this definition,
"Qualifying Bank" means (i) any office located in the United
States of any Bank or (ii) any office located in the United
States of any other bank or trust company (A) whose long-
term debt securities are rated in one of the two highest
categories by a nationally recognized credit rating agency
or (B) which is organized under the laws of the United
States or any state thereof and has capital, surplus and
undivided profits aggregating at least $500,000,000.
"Termination Date" means June 30, 1997, or, if
such day is not a Euro-Dollar Business Day, the next
preceding Euro-Dollar Business Day.
"Type" means, with respect to any Loan, whether
such Loan is a Base Rate Loan, a CD Loan or a Euro-Dollar
Loan.
"Unconsolidated Joint Venture" means at any time
any Person in which the Company or one or more of its
Consolidated Subsidiaries has an equity investment which, if
material, would be accounted for under the equity accounting
method on the financial statements of the Company and its
Consolidated Subsidiaries, if such statements were prepared
as of such time.
"Unfunded Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the
present value of all benefit liabilities under such Plan
based on the assumptions used for purposes of determining
required contributions to the Plan, as determined in the
Plan's most recent actuarial valuation, exceeds (ii) the
fair market value of all Plan assets allocable to such
benefits, as determined as of the then most recent valuation
date for such Plan.
"Wholly-Owned Consolidated Subsidiary" means any
Consolidated Subsidiary all of the shares of capital stock
or other ownership interests of which (except qualifying
shares) are at the time directly or indirectly owned by the
Company.
SECTION 1.02. Accounting Terms and
Determinations. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder
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<PAGE>
shall be prepared in accordance with generally accepted
accounting principles as in effect in the United States from
time to time, applied on a basis consistent (except for
changes concurred in by the Company's independent public
accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the
Company notifies the Agent that the Company wishes to amend
any covenant contained in Article V to eliminate the effect
of any change in generally accepted accounting principles on
the operation of such covenant (or if the Agent notifies the
Company that the Required Banks wish to amend any such
covenant for such purpose), then the Company's compliance
with such covenant shall be determined on the basis of
generally accepted accounting principles in effect
immediately before the relevant change in generally accepted
accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner
satisfactory to the Company and the Required Banks.
SECTION 1.03. Types of Borrowings. (a) When used
with respect to Loans outstanding at any time, the term
"Borrowing" refers to the portion of the aggregate principal
amount of the Loans then outstanding which bear interest of
a specific Type for a specific Interest Period pursuant to a
Notice of Interest Rate Election. Each Bank's share of each
Borrowing is referred to herein as a separate "Loan."
(b) Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans
comprising such Borrowing (e.g., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans, while a Base
Rate Borrowing is a Borrowing comprised of Base Rate Loans).
ARTICLE II
THE CREDITS
SECTION 2.01. Existing Loans. The Borrower and
each Bank, severally, agree that such Bank has Existing
Loans outstanding to the Borrower on the date of this
Amended and Restated Agreement in the principal amount set
forth opposite such Bank's name on the signature pages of
this Amended and Restated Agreement.
SECTION 2.02. Interest Rate Elections. (a) The
Company may from time to time elect to change or continue
the Type of, or the duration of the Interest Period
applicable to, the Loans included in any Borrowing
(excluding overdue Loans and subject in each case to the
provisions of the definition of Interest Period and Article
VIII), as follows:
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<PAGE>
(i) if such Loans are Base Rate Loans, the
Company may elect to designate such Loans as CD
Loans or Euro-Dollar Loans, may elect to continue
such Loans as Base Rate Loans for an additional
Interest Period, or may elect to designate such
Loans as any combination of Base Rate Loans, CD
Loans and Euro-Dollar Loans;
(ii) if such Loans are CD Loans, the Company
may elect to designate such Loans as Base Rate
Loans or Euro-Dollar Loans, may elect to continue
such Loans as CD Loans for an additional Interest
Period, or may elect to designate such Loans as
any combination of Base Rate Loans, CD Loans and
Euro-Dollar Loans; and
(iii) if such Loans are Euro-Dollar Loans, the
Company may elect to designate such Loans as Base
Rate Loans or CD Loans, may elect to continue such
Loans as Euro-Dollar Loans for an additional
Interest Period, or may elect to designate such
Loans as any combination of Base Rate Loans, CD
Loans and Euro-Dollar Loans.
Notwithstanding the foregoing, the Company may not elect an
Interest Period for CD Loans or Euro-Dollar Loans unless the
aggregate outstanding principal amount of such Loans to
which such Interest Period will apply is at least
$10,000,000.
(b) Any election permitted by subsection (a) of
this Section may become effective on any Euro-Dollar
Business Day specified by the Company (the "Election Date").
Each such election shall be made by the Company by
delivering a notice (a "Notice of Interest Rate Election")
to the Agent not later than 10:00 A.M. (New York City time)
on (x) the Election Date, if all the resulting Loans will be
Base Rate Loans, (y) the second Domestic Business Day before
the Election Date, if the resulting Loans will include CD
Loans but not Euro-Dollar Loans, and (z) the third
Euro-Dollar Business Day before the Election Date, if the
resulting Loans will include Euro-Dollar Loans. Each Notice
of Interest Rate Election shall specify with respect to the
outstanding Loans to which such notice applies:
(i) the Election Date;
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<PAGE>
(ii) if the Type of Loan is to be changed,
the new Type of Loan and, if such new Type is a CD
Loan or Euro-Dollar Loan, the duration of the
first Interest Period applicable thereto;
(iii) if such Loans are CD Loans or
Euro-Dollar Loans and the Type of such Loans is to
be continued for an additional or different
Interest Period, the duration of such additional
or different Interest Period; and
(iv) if such Loans are to be designated as a
combination of Base Rate Loans, CD Loans and
Euro-Dollar Loans, the information specified in
clauses (i) through (iii) above as to each
resulting Borrowing and the aggregate amount of
each such Borrowing.
Each Interest Period specified in a Notice of Interest Rate
Election shall comply with the provisions of the definition
of Interest Period and the last sentence of subsection (a)
of this Section.
(c) Upon receipt of a Notice of Interest Rate
Election, the Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share of each
Borrowing specified therein, and such notice shall not
thereafter be revocable by the Company.
(d) If the Company (i) fails to deliver a timely
Notice of Interest Rate Election to the Agent electing to
continue or change the Type of, or the duration of the
Interest Period applicable to, the Loans included in any
Borrowing as provided in this Section and (ii) has not
theretofore delivered a notice of prepayment relating to
such Loans, then the Company shall be deemed to have given
the Agent a Notice of Interest Rate Election electing to
change the Type of such Loans to (or continue the Type
thereof as) Base Rate Loans, with an Interest Period
commencing on the last day of the then current Interest
Period.
SECTION 2.03. Interest Rates. (a) Each Base
Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is
changed to a Base Rate Loan until it becomes due (or is
changed to a different type of Loan), at a rate per annum
equal to the product of (i) the ESOP Specific Tax Factor in
effect for such day multiplied by (ii) the Base Rate for
such day. Such interest shall be payable for each Interest
Period on the last day thereof.
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(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for each day during
each Interest Period applicable thereto, at a rate per annum
equal to the product of (i) the ESOP Specific Tax Factor in
effect for such day multiplied by (ii) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to
such Interest Period; provided that if any CD Loan shall, as
a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such
CD Loan shall bear interest for each day during such
Interest Period at the Base Rate for such day. Such
interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than
90 days, 90 days after the first day thereof.
"CD Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upwards, if
necessary, to the next higher 1/100 of 1%.
The "CD Base Rate" applicable to any Interest
Period is the rate of interest determined by the Agent to be
the average (rounded upward, if necessary, to the next
higher 1/100 of 1%) of the prevailing rates per annum bid at
10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two
or more New York certificate of deposit dealers of
recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an
amount comparable to the principal amount of the CD Loan of
such CD Reference Bank to which such Interest Period applies
and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the
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Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves)
for a member bank of the Federal Reserve System in New York
City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York
City having a maturity comparable to the related Interest
Period and in an amount of $100,000 or more. The Adjusted
CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as adequately
capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within
the meaning of 12 C.F.R. 327.3(e) (or any successor
provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change
in the Assessment Rate.
(c) Subject to Section 3.02(c), each Euro-Dollar
Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the product of (i) the
ESOP Specific Tax Factor in effect for such day multiplied
by (ii) the sum of the Euro-Dollar Margin for such day plus
the Adjusted London Interbank Offered Rate applicable to
such Interest Period. Such interest shall be payable for
each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, three months
after the first day thereof.
"Euro-Dollar Margin" means a rate per annum
determined in accordance with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate"
applicable to any Interest Period means a rate per annum
equal to the quotient obtained (rounded upwards, if
necessary, to the next higher 1/100 of 1%) by dividing (i)
the applicable London Interbank Offered Rate by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to
any Interest Period means the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which deposits in dollars are offered to
19
<PAGE>
each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time)
two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar
Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which
the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which
includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank
Offered Rate shall be adjusted automatically on and as of
the effective date of any change in the Euro-Dollar Reserve
Percentage.
(d) For purposes of calculating interest rates
pursuant to this Section 2.03, the term "ESOP Specific Tax
Factor" means the percentage determined pursuant to the
following formula:
100% - TR
-------------------------
100% - [TR x (100% - ER)]
For purposes of the foregoing formula:
"ER" means 50% as of the date hereof and, as
of any relevant date hereafter, a percentage equal to
the percentage of interest with respect to a securities
acquisition loan, within the meaning of Section 133(b)
of the Code, that would be excludable at such time from
Federal Gross Income by a recipient that is listed on
the signature pages hereof and is an entity described
in Section 133(a) of the Code.
"TR" means 35% as of the date hereof and, as
of any relevant date hereafter, the maximum marginal
rate of tax generally applicable to corporations with
respect to their Federal Gross Income.
The ESOP Specific Tax Factor will be rounded to the nearest
one-tenth of 1% (with five-tenths to be rounded up). The
parties agree that the ESOP Specific Tax Factor is 78.8% as
of the Amendment Effective Date.
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(e) Any overdue principal of and interest on any
Loan of any Bank shall bear interest, payable on demand, for
each day from and including the date payment thereof was due
to but excluding the date of actual payment, at a rate per
annum equal to the sum of (i) 2% plus (ii) the product of
the ESOP Specific Tax Factor in effect for such day
multiplied by the Base Rate for such day.
(f) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give
prompt notice to the Company and the relevant Banks by
telex, facsimile or cable of each rate of interest so
determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Agent as contemplated
hereby. If any Reference Bank does not furnish a timely
quotation, the Agent shall determine the relevant interest
rate on the basis of the quotation or quotations furnished
by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of
Section 8.01 shall apply.
SECTION 2.04. Optional Prepayments. (a) The
Company may, upon notice to the Agent given not later than
10:00 A.M. (New York City time) on (i) the date of
prepayment of any Base Rate Borrowing, (ii) the second
Domestic Business Day prior to the date of prepayment of any
CD Borrowing and (iii) the third Euro-Dollar Business Day
prior to the date of prepayment of any Euro-Dollar
Borrowing, prepay any such Borrowing in whole at any time,
or from time to time in part in amounts aggregating
$10,000,000 or a larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such
notice of prepayment shall specify which outstanding
Borrowing is to be prepaid in connection therewith; provided
that, if any such optional prepayment is to be made on the
same day as a mandatory prepayment required by Section
2.05(a) hereof, the amount of such optional prepayment may
be any amount specified by the Company in the applicable
notice of prepayment.
(b) Any optional prepayment of the Loans pursuant
to this Section shall be applied pro rata to reduce the
amount of each subsequent scheduled prepayment of the Loans;
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<PAGE>
provided that the Company may elect, by so specifying in the
notice of any such prepayment, to apply such prepayment
either (A) first, to reduce the amount of the next scheduled
prepayment of the Loans, until reduced to zero, and second,
to reduce the amount of all subsequent scheduled prepayments
of the Loans pro rata or (B) first, to reduce the amount of
the final scheduled prepayment of the Loans, until reduced
to zero, and second, to reduce the amount of all other
unpaid scheduled prepayments of the Loans pro rata.
(c) Upon receipt of a notice of prepayment
pursuant to this Section, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's ratable
share of such prepayment and such notice shall not
thereafter be revocable by the Company. Each such optional
prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Borrowing.
SECTION 2.05. Prepayments. (a) On each of the
applicable dates listed in Schedule 1 hereto, the Company
shall prepay the Loans in the applicable aggregate principal
amount set forth opposite such date in Schedule 1, as
adjusted pursuant to subsection (b) of Section 2.04.
(b) On the date of each prepayment of Loans
pursuant to this Section or to Section 2.04, the Company
shall pay interest accrued on the principal amount prepaid
to the date of prepayment.
(c) Prior to the date of each mandatory prepayment
pursuant to this Section or each optional prepayment
pursuant to Section 2.04, the Company shall, by notice to
the Agent given not later than 10:00 A.M. (New York City
time) on (i) the date of prepayment of any Base Rate
Borrowing, (ii) the second Domestic Business Day prior to
the date of prepayment of any CD Borrowing and (iii) the
third Euro-Dollar Business Day prior to the date of
prepayment of any Euro-Dollar Borrowing, select which
outstanding Borrowings are to be prepaid. Upon receipt of
such notice, the Agent shall promptly notify each Bank of
the contents thereof and of such Bank's ratable share of
such prepayment, and such notice shall not thereafter be
revocable by the Company. Each such prepayment shall be
applied to prepay ratably the respective Loans included in
the Borrowings so selected.
SECTION 2.06. General Provisions as to Payments.
(a) The Company shall make each payment of principal of,
and interest on, the Loans and of fees hereunder, not later
than 12 noon (New York City time) on the date when due, in
Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section
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10.01. The Agent will promptly distribute to each Bank its
ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal
of, or interest on, the Domestic Loans or of fees shall be
due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal
of, or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar
Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(b) Unless the Agent shall have received notice
from the Company prior to the date on which any payment is
due from the Company to the Banks hereunder that the Company
will not make such payment in full, the Agent may assume
that the Company has made such payment in full to the Agent
on such date and the Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If
and to the extent that the Company shall not have so made
such payment, each Bank shall repay to the Agent forthwith
on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.07. Funding Losses. If (i) the Company
makes any payment of principal with respect to any Fixed
Rate Loan (pursuant to Article II, VI or VIII or otherwise)
on any day other than the last day of an Interest Period
applicable thereto, (ii) the Type of any CD Loan or
Euro-Dollar Loan or the Interest Period applicable to any
such Loan is changed pursuant to Section 2.02 or Article
VIII on any day other than the last day of an Interest
Period applicable to such Loan, (iii) the Company prepays
any Loan after a Notice of Interest Rate Election electing
to continue such Loan as, or to change it to, a CD Loan or
Euro-Dollar Loan has been given to any Bank in accordance
with Section 2.02 but before the Interest Period specified
therein begins, or (iv) the Company requires a Bank to
assign its rights with respect to any CD Loan or Euro-Dollar
Loan to a Substitute Bank pursuant to Section 8.05 on any
day other than the last day of an Interest Period applicable
to such Loan, the Company shall reimburse each Bank within
15 days after demand for any resulting loss or expense
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incurred by it (or by any existing or prospective
Participant in the related Loan), including (without
limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of
margin for the period after any such payment, change,
failure to borrow or assignment, provided that such Bank
shall have delivered to the Company a certificate as to the
amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
SECTION 2.08. Computation of Interest. Interest
shall be computed on the basis of a year of 360 days (except
that interest on any Loan which bears interest during any
period at the Prime Rate shall be computed on the basis of a
year of 365 or 366 days, as the case may be) and paid for
the actual number of days elapsed (including the first day
but excluding the last day).
SECTION 2.09. Notes. (a) The Loans of each Bank
shall be evidenced by a single Note payable to the order of
such Bank for the account of its Applicable Lending Office
in an amount equal to the aggregate unpaid principal amount
of such Bank's Loans.
(b) Each Bank may, by notice to the Company and
the Agent, direct that its Loans of a particular Type be
evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Each such
Note shall be substantially in the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant Type. Each reference
in this Agreement to the "Note" of such Bank shall be deemed
to refer to and include any or all of such Notes, as the
context may require.
(c) Each Bank shall record the date and amount of
each Loan made by it and the date and amount of each payment
of principal made with respect thereto, and prior to any
transfer of its Note shall endorse on the schedule forming a
part thereof appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding;
provided that the failure of any Bank to make any such
recordation or endorsement shall not affect the obligations
of the Company hereunder or under the Notes. Each Bank is
hereby irrevocably authorized by the Company so to endorse
its Notes and to attach to and make a part of its Notes a
continuation of any such schedule as and when required.
SECTION 2.10. Withholding Tax Exemption. Each
Bank that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will
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deliver to each of the Company and the Agent, at least one
Domestic Business Day before interest or fees first become
payable hereunder for the account of such Bank, two duly
completed copies of United States Internal Revenue Service
Form 1001 or 4224, in either case certifying that such Bank
is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States
federal income taxes. Each Bank which so delivers a Form
1001 or 4224 further undertakes to deliver to each of the
Company and the Agent two additional copies of such form (or
a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the
Company or the Agent, in each case certifying that such Bank
is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly
completing and delivering any such form with respect to it
and such Bank advises the Company and the Agent that it is
not capable of receiving payments without any deduction or
withholding of United States federal income tax.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Amended and
Restated Agreement shall become effective on the date (the
"Amendment Effective Date") on which all of the following
conditions shall have been satisfied (or waived in
accordance with Section 10.05):
(a) receipt by the Agent of counterparts of
this Amended and Restated Agreement signed by each
of the parties hereto (or, in the case of any
party as to which an executed counterpart shall
not have been received, receipt by the Agent in
form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such
party of execution of a counterpart hereof by such
party);
(b) receipt by the Agent of opinions of
Cravath, Swaine & Moore, special counsel for the
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Company, and Richard F. deLima, Vice President,
Secretary and General Counsel of the Company,
collectively to the effect and substantially in
the form of Exhibits B-1 and B-3 hereto and
covering such additional matters relating to the
transactions contemplated hereby as the Required
Banks may reasonably request;
(c) receipt by the Agent of an opinion of
Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit C
hereto and covering such additional matters
relating to the transactions contemplated hereby
as the Required Banks may reasonably request;
(d) receipt by the Agent of a certificate
signed by the Vice President and Treasurer and the
Vice President and General Counsel of the Company
to the effect that on and immediately after the
Amendment Effective Date, no Default shall have
occurred and be continuing and that the
representations and warranties of the Company
contained in this Amended and Restated Agreement
are true on and as of the Amendment Effective
Date;
(e) receipt by the Agent of (i) a certificate
signed by the Vice President, Secretary and General
Counsel of the Company to the effect that (A) the ESOP
is an employee stock ownership plan within the meaning
of Section 4975 of the Code and the regulations
thereunder, is qualified under Section 401(a) of the
Code, has been duly adopted and is in full force and
effect, (B) the trust forming part of the ESOP has been
duly constituted in accordance with a valid and binding
trust instrument, is validly existing, is qualified
under Section 401(a) of the Code and is tax-exempt
under Section 501(a) of the Code, (C) the Loans qualify
as securities acquisition loans within the meaning of
Section 133(b) of the Code, (D) the repayment terms of
the Company's loan to the ESOP are "substantially
similar" (within the meaning of Section 133 (b)(3)(A)
of the Code) to the repayment terms of the Loans and
(ii) an opinion of Cravath, Swaine & Moore, special tax
counsel to the Company, substantially in the form of
Exhibit B-2 hereto; and
(f) receipt by the Agent of all documents it
may reasonably request relating to the existence
of the Company, the corporate authority for and
the validity of this Amended and Restated
Agreement and the Notes, and any other matters
relevant hereto, all in form and substance
satisfactory to the Agent.
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The opinions and certificates referred to in clauses (b),
(c), (d) and (e) of this Section shall be dated the
Amendment Effective Date. The Company instructs each of
the counsel referred to in clause (b) and clause (e) of this
Section to prepare the opinions referred to in clauses (b)
and (e) and to deliver them to the Agent for its benefit and
the benefit of the Agent and the Banks. The Agent shall
promptly notify the other parties hereto of the Amendment
Effective Date, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 3.02. Certain Consequences of
Effectiveness. Upon the effectiveness of this Amended and
Restated Agreement on the Amendment Effective Date the
parties hereto agree that:
(a) as used herein and in the Notes the terms
"Credit Agreement", "this Agreement", "hereof", "herein" and
"hereunder" shall refer to the $195,197,149 Credit Agreement
dated as of June 30, 1992 among the Company, the Agent, the
Co-Agent and the banks listed therein, as the same has been
amended and in effect from time to time prior to the
Amendment Effective Date, as the same is amended and
restated by this Amended and Restated Agreement, and as the
same may be amended and in effect from time to time after
the Amendment Effective Date in accordance with Section
10.05;
(b) the Notes already issued and outstanding on
the Amendment Effective Date shall continue to evidence the
Loans made and outstanding under the Credit Agreement; and
(c) such Loans shall bear interest on and after
the Amendment Effective Date at the rates specified in
Section 2.03 of this Amended and Restated Agreement, it
being understood that interest accrued for any period prior
to the Amendment Effective Date shall be payable at the
rates then in effect under the Existing Credit Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE Company
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The
Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of
Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted.
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. The execution and delivery
by the Company of this Agreement and its Notes and the
performance of its obligations hereunder and thereunder (i)
are within the Company's corporate powers and have been duly
authorized by all necessary corporate action, (ii) require
no action by or in respect of, or filing with, any
governmental body, agency or official, and (iii) do not
contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of
incorporation or by-laws of the Company or of any agreement,
judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or
imposition of any Lien on any asset of the Company or any of
its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Company and
the Company's Notes constitute valid and binding obligations
of the Company.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of December 31, 1993
and the related consolidated statements of earnings, cash
flows and changes in common stockholders' equity for the
Fiscal Year then ended, reported on by KPMG Peat Marwick and
set forth in the Company's 1993 Form 10-K, a copy of which
has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles,
the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
Fiscal Year.
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(b) The unaudited consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of July 3,
1994 and the related unaudited consolidated statements of
earnings, cash flows and changes in common stockholders'
equity for the six months then ended, set forth in the
Company's Second Quarter 1994 Form 10-Q, a copy of which has
been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles
applied on a basis consistent with the financial statements
referred to in subsection (a) of this Section, the
consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
six-month period (subject to normal year-end adjustments).
(c) Since July 3, 1994 there has been no material
adverse change in the business, financial position or
results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. (a) Except as
disclosed in the Company's 1993 Form 10-K and the Company's
Second Quarter 1994 Form 10-Q, there is no (i) injunction,
stay, decree or order issued by any court or arbitrator or
any governmental body, agency or official or (ii) action,
suit or proceeding pending against, or to the knowledge of
the Company threatened against or affecting, the Company or
any of its Subsidiaries before any court or arbitrator or
any governmental body, agency or official in which there is
a reasonable possibility of an adverse decision, in either
case (A) which could materially adversely affect the
business, financial position or results of operations of the
Company and its Consolidated Subsidiaries, considered as a
whole, or (B) which could materially adversely affect the
ability of the Company to perform any of its obligations
under this Agreement or its Notes.
(b) There is no (i) injunction, stay, decree or
order issued by any court or arbitrator or any governmental
body, agency or official or (ii) action, suit or proceeding
pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its
Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a
reasonable possibility of an adverse decision, in either
case which in any manner draws into question the validity of
this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member
of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect
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to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the
Code with respect to each Plan. No member of the ERISA
Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any
Plan or Multiemployer Plan or in respect of any Benefit
Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the
imposition of a Lien under Section 412(n) of the Code
or the posting of a bond or other security under Section
401(a)(29) of the Code (including, in the case of both
Section 412(n) and 401(a)(29) of the Code, the similar
subsections of Section 302 and 307 of ERISA) or (iii)
incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of
ERISA that has not been paid or satisfied prior to the date
hereof.
SECTION 4.07. Taxes. United States Federal
income tax returns of the Company and its Subsidiaries
(other than Foreign Subsidiaries) have been examined and
closed through the Fiscal Year ended December 31, 1988. The
Company and its Subsidiaries have filed all United States
Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except
to the extent that such assessment is being contested by the
Company or any Subsidiary in good faith by appropriate
proceedings. The charges, accruals and reserves on the
books of the Company and its Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of
the Company adequate.
SECTION 4.08. Subsidiaries. Each of the
Company's corporate Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on
its business as now conducted.
SECTION 4.09. Not an Investment Company. The
Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
SECTION 4.10. Compliance with Laws. The Company
and each of its Subsidiaries is in compliance in all
material respects with all applicable laws, rules and
regulations, other than laws, rules or regulations (i) the
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validity or applicability of which the Company or such
Subsidiary is contesting in good faith or (ii) the failure
to comply with which cannot reasonably be expected to have
consequences which would materially adversely affect the
business, financial position or results of operations of the
Company and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.11. No Defaults. Neither the Company
nor any of its Subsidiaries is in violation of, or in
default under, any term or provision of any charter, by-law,
mortgage, indenture, agreement, instrument, statute, rule,
regulation, judgment, decree, order, writ or injunction
applicable to it, such that such violations and defaults in
the aggregate could reasonably be expected to materially
adversely affect the business, financial position or results
of operations of the Company and its Consolidated
Subsidiaries, considered as a whole, or the ability of the
Company to perform in any material respect its obligations
under this Agreement or its Notes.
SECTION 4.12. Possession of Franchises, Licenses,
etc. The Company and its Subsidiaries own or possess all
franchises, patents, trademarks, service marks, trade names,
copyrights, licenses and other rights that are necessary in
any material respect for the ownership and operation of
their respective properties and businesses, and neither the
Company nor any of its Subsidiaries is in violation of any
provision thereof in any respect that could reasonably be
expected to have a materially adverse effect on the
business, financial position or results of operations of the
Company and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.13. Full Disclosure. All information
heretofore furnished by the Company or any Subsidiary to the
Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby was, and
all such information hereafter furnished by the Company or
any Subsidiary to the Agent or any Bank will be, true and
accurate in all material respects or based on reasonable
estimates on the date as of which such information is stated
or certified. The Company has disclosed to the Banks in
writing any and all facts known to any officer of the
Company which materially and adversely affect or may
materially and adversely affect (to the extent the Company
can now reasonably foresee) the business, financial position
or results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole.
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SECTION 4.14. Environmental Matters. Except with
respect to any matter disclosed under the heading
"Environmental Compliance" in the Company's 1993 Form 10-K,
the Company reasonably believes the costs of compliance with
Environmental Laws and associated liabilities, are unlikely
to have a material adverse effect on the business, financial
condition or results of operations of the Company and its
Consolidated Subsidiaries, considered as a whole, provided
that the inclusion of such exception does not indicate that
any such matter will have such a material adverse effect.
ARTICLE V
COVENANTS
The Company agrees that, so long as any amount
payable under any Note remains unpaid:
SECTION 5.01. Information. The Company will
deliver to each of the Banks:
(a) as soon as available and in any event
within 90 days after the end of each Fiscal Year,
a consolidated balance sheet of the Company and
its Consolidated Subsidiaries as of the end of
such Fiscal Year and the related consolidated
statements of earnings, cash flows and changes in
common stockholders' equity for such Fiscal Year,
setting forth in each case in comparative form the
figures for the previous Fiscal Year, all in
reasonable detail and reported on (in a manner
acceptable to the Securities and Exchange
Commission for use in filings under the Exchange
Act) by KPMG Peat Marwick or other independent
public accountants of nationally recognized
standing;
(b) as soon as available and in any event
within 45 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of the end of such
Fiscal Quarter and the related consolidated
statements of earnings, cash flows and changes in
common stockholders' equity for such Fiscal
Quarter and for the portion of such Fiscal Year
ended at the end of such Fiscal Quarter, setting
forth in each case in comparative form the figures
for the corresponding Fiscal Quarter in, and the
corresponding portion of, the previous Fiscal
Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and
consistency by the chief financial officer or the
chief accounting officer of the Company;
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(c) simultaneously with the delivery of each
set of financial statements referred to in clauses
(a) and (b) of this Section, a certificate of the
chief financial officer or the chief accounting
officer of the Company (i) setting forth in
reasonable detail such calculations as are
required to establish whether the Company was in
compliance with the requirements of Sections 5.07
through 5.11, inclusive, on the date of such
financial statements, (ii) stating whether, to the
knowledge of such officer, any Default exists on
the date of such certificate and, if any Default
then exists, setting forth the details thereof and
the action that the Company is taking or proposes
to take with respect thereto, (iii) stating
whether, to the knowledge of such officer, since
the date of the most recent previous delivery of
financial statements pursuant to clause (a) or (b)
of this Section, there has been any material
adverse change in the business, financial position
or results of operations of the Company and its
Consolidated Subsidiaries, considered as a whole,
and, if so, the nature of such material adverse
change, and (iv) stating whether, since the date
of the most recent financial statements previously
delivered pursuant to clause (a) or (b) of this
Section, there has been a material change in the
generally accepted accounting principles applied
in preparing the financial statements being
delivered and, if so, describing such change and
the effect thereof;
(d) simultaneously with the delivery of each
set of financial statements referred to in clause
(a) of this Section, a statement of the firm of
independent public accountants which reported on
such statements (i) stating that its audit
examination has included a review of the terms of
this Agreement as they relate to financial or
accounting matters, (ii) stating whether anything
has come to its attention to cause it to believe
that any Default existed on the date of such
statements and (iii) confirming the calculations
set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) of
this Section;
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(e) within five days after any executive
officer of the Company obtains knowledge of any
Default, if such Default is then continuing, a
certificate of the chief financial officer or the
chief accounting officer of the Company setting
forth the details thereof and the action which the
Company is taking or proposes to take with respect
thereto;
(f) promptly upon any change in any relevant
rating described in the Pricing Schedule, a certificate
of the chief financial officer, chief accounting
officer or treasurer of the Company reporting such
change and stating the date on which such change was
publicly announced by the relevant rating agency;
(g) promptly upon the mailing thereof to the
shareholders of the Company generally, copies of
all financial statements, reports and proxy
statements so mailed;
(h) promptly upon the filing thereof, copies
of all registration statements (other than the
exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents)
which the Company shall have filed with the
Securities and Exchange Commission;
(i) if and when any member of the ERISA
Group (i) gives or is required to give notice to
the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given
or is required to give notice of any such
reportable event, a copy of the notice of such
reportable event that was given or that should
have been given to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has
been terminated, a copy of such notice; (iii)
receives notice from the PBGC under title IV of
ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding
standard under Section 412 of the Code, a copy of
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such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA,
a copy of such notice and other information filed
with the PBGC; (vi) gives notice of withdrawal
from any Plan pursuant to Section 4063 of ERISA, a
copy of such notice; (vii) fails to make any
payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting
of a bond or other security, a certificate of the
chief financial officer or the chief accounting
officer of the Company setting forth details as to
such occurrence and action, if any, which the
Company or applicable member of the ERISA Group is
required or proposes to take or (viii) receives a
completed actuarial valuation report relating to
any Plan or Plans a copy of such report (but only
if and to the extent that delivery of copies
thereof is requested by the Agent); and
(j) from time to time such additional
information regarding the business, financial
position or results of operations of the Company
or any of its Subsidiaries as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The
Company will pay and discharge, and will cause each
Subsidiary to pay and discharge, at or before maturity, all
their respective material obligations and liabilities,
including, without limitation, tax liabilities, except where
the same may be contested in good faith by appropriate
proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with generally
accepted accounting principles, appropriate reserves for the
accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance.
(a) The Company will keep, and will cause each Subsidiary
to keep, all property useful and necessary in its business
in good working order and condition, ordinary wear and tear
excepted.
(b) The Company will maintain, and will cause
each Subsidiary to maintain, (i) physical damage insurance
on all real and personal property covering the repair and
replacement cost of all such property and consequential loss
coverage for business interruption and extra expense, (ii)
public liability insurance (including products/completed
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operations liability coverage) in an amount not less than
$80,000,000, and (iii) such other insurance coverage in such
amounts and with respect to such risks as the Required Banks
may reasonably request; provided that the Company shall not
be required to maintain insurance specified in this
subsection (A) if an independent insurance broker, agent or
other representative reasonably satisfactory to the Required
Banks shall certify to the Banks that such requirement with
respect to such insurance cannot be complied with in a
recognized insurance market of the United States or of any
other country by reason of (x) the unavailability to
companies of established repute engaged in the same or a
similar business of insurance with respect to one or more
risks so required to be insured against or (y) the amount of
insurance so required to be maintained, or (B) with respect
to any assets sold by the Company, for events occurring
after the sale of such assets. All such insurance shall be
provided by insurers having an A.M. Best policyholders
rating of not less than B+ or such other insurers as the
Required Banks may approve in writing. The Company will
deliver to the Banks upon request of any Bank through the
Agent from time to time full information as to the insurance
carried.
SECTION 5.04. Conduct of Business and Maintenance
of Existence. The Company will continue, and will cause
each Subsidiary to continue, to engage in business of the
same general type as now conducted by the Company and its
Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each Subsidiary to
preserve, renew and keep in full force and effect, their
respective corporate existence (except as permitted under
Section 5.12 and except for the liquidation of any
Subsidiary) and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of
business.
SECTION 5.05. Compliance with Laws. The Company
will comply, and cause each Subsidiary to comply, in all
material respects with all applicable laws, ordinances,
rules, regulations and requirements of governmental
authorities (including, without limitation, Environmental
Laws and ERISA and the rules and regulations thereunder),
except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or where
noncompliance would not have a material adverse effect on
the Company and its Subsidiaries, considered as a whole.
SECTION 5.06. Inspection of Property, Books and
Records. The Company will keep, and will cause each
Subsidiary to keep, proper books of record and account in
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which full, true and correct entries shall be made of all
dealings and transactions relating to its business and
activities; and will permit, and will cause each Subsidiary
to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective
affairs, finances and accounts with their respective
officers, employees and independent public accountants, all
at such reasonable times and as often as may reasonably be
desired.
SECTION 5.07. Interest Coverage Ratio. At the
end of each Fiscal Quarter, the ratio of (i) Consolidated
EBIT to (ii) Consolidated Interest Expense, in each case for
the four consecutive Fiscal Quarters then ended, will not be
less than 3.00 to 1.
SECTION 5.08. Leverage Ratio. The ratio of (i)
Consolidated Debt to (ii) Consolidated Adjusted Net Worth
will not exceed 1.15 to 1 at any time.
SECTION 5.09. Minimum Consolidated Adjusted Net
Worth. (a) At no time will Consolidated Adjusted Net Worth
be less than Minimum Consolidated Adjusted Net Worth.
"Minimum Consolidated Adjusted Net Worth" means $625,000,000
as such amount is adjusted from time to time pursuant to
subsection (b) of this Section.
(b) Minimum Consolidated Adjusted Net Worth shall
be adjusted from time to time as follows:
(i) at the end of each Fiscal Quarter ending
after July 3, 1994, permanently increased (but not
decreased) by the amount (if any) necessary so
that cumulative increases pursuant to this clause
(i) equal 50% of Adjusted Consolidated Net Income
for the period beginning on July 4, 1994 and
ending at the end of such Fiscal Quarter;
(ii) increased on the date of any determination of
Minimum Consolidated Adjusted Net Worth (for purposes
of such determination only) by the amount (if any) by
which $50,000,000 exceeds the sum of all payments made
by the Company, after July 3, 1994 and on or before
such date of determination, to purchase its common
stock; and
(iii) permanently increased, on the date of any
issuance of Additional Equity after July 3, 1994, by an
amount equal to 50% of any increase in Consolidated
Adjusted Net Worth attributable to such issuance of
Additional Equity.
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SECTION 5.10. Subsidiary Debt. (a) The Company
will not permit any of its Subsidiaries to incur or at any
time be liable with respect to any Debt except:
(i) Debt outstanding under this Agreement
and the Notes;
(ii) Debt owing to the Company or to a
Subsidiary;
(iii) Debt incurred by any Foreign Subsidiary
for bona fide hedging purposes in an aggregate
principal amount at any one time outstanding for
all Foreign Subsidiaries not exceeding
$250,000,000;
(iv) Guarantees by Foreign Subsidiaries of
Debt specified in clause (iii) above;
(v) Debt incurred by any Foreign Subsidiary, the
proceeds of which are used to pay amounts owing to the
Company, in an aggregate principal amount at any one
time outstanding for all Foreign Subsidiaries not
exceeding $35,000,000; and
(vi) additional Debt, not otherwise
permitted under this Section, in an aggregate
principal or face amount outstanding at any time
not exceeding $10,000,000.
(b) The Company will not permit any of its
Subsidiaries to issue or permit to be outstanding any
preferred stock of such Subsidiary other than preferred
stock owned by the Company or by a Wholly-Owned Consolidated
Subsidiary.
SECTION 5.11. Negative Pledge. Neither the
Company nor any Subsidiary will create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired
by it (other than treasury stock of the Company), except:
(a) Liens on any asset of a Foreign
Subsidiary securing (i) Debt described in Section
5.10(a)(iii) or (ii) Guarantees described in
Section 5.10(a)(iv);
(b) any Lien existing on any asset of any
corporation at the time such corporation becomes a
Subsidiary and not created in contemplation of
such event;
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(c) any Lien on any asset securing Debt
incurred or assumed solely for the purpose of
financing all or any part of the cost of acquiring
or improving such asset (including any Lien on any
asset deemed to exist by reason of the second
sentence of the definition of Lien); provided that
such Lien attaches (or is so deemed to attach) to
such asset concurrently with or within 90 days
after the acquisition or completion of the
improvement thereof;
(d) any Lien on any asset of any corporation
existing at the time such corporation is merged or
consolidated with or into the Company or a
Subsidiary and not created in contemplation of
such event;
(e) any Lien existing on any asset prior to
the acquisition thereof by the Company or a
Subsidiary and not created in contemplation of
such acquisition;
(f) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt
secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that
such Debt is not increased and is not secured by
any additional assets;
(g) Liens for taxes not delinquent or being
contested in good faith and by appropriate
proceedings;
(h) deposits or pledges to secure
obligations under workers' compensation, social
security or similar laws, or under unemployment
insurance;
(i) mechanics', workers', materialmen's or
other like Liens arising in the ordinary course of
business with respect to obligations which are not
due or which are being contested in good faith;
(j) Liens arising in the ordinary course of
its business which (i) do not secure Debt, (ii) do
not secure any monetary obligation in an amount
exceeding $50,000,000 and (iii) do not in the
aggregate materially detract from the value of its
assets or materially impair the use thereof in the
operation of its business; and
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(k) Liens not otherwise permitted by the
foregoing clauses of this Section securing Debt in
an aggregate principal amount at any time
outstanding not to exceed the higher of (i)
$30,000,000 and (ii) 5% of Consolidated Adjusted
Net Worth.
SECTION 5.12. Consolidations, Mergers and Sales
of Assets. (a) The Company will not (i) consolidate with
or merge with or into any other Person (other than in a
transaction in which the Company is the surviving
corporation; provided that immediately after giving effect
to such merger or consolidation no Default shall have
occurred and be continuing) or (ii) sell, assign, lease,
transfer or otherwise dispose of, directly or indirectly,
all or substantially all of its assets to any other Person.
The Company will not permit any of its Subsidiaries to
consolidate with or merge with or into any Person unless
the Company or a Subsidiary is the corporation surviving
such consolidation or merger.
(b) The Company will not, and will not permit any
of its Subsidiaries to, sell, assign, lease, transfer or
otherwise dispose of any assets if the consideration
received for such assets is less than the fair market value
thereof.
SECTION 5.13. Fiscal Year. The Company will not
change its Fiscal Year from the calendar year.
SECTION 5.14. Use of Proceeds. The proceeds of
the Loans will be used by the Company for working capital
and other general corporate purposes. None of such proceeds
will be used in violation of any applicable law or
regulation.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more
of the following events ("Events of Default") shall have
occurred and be continuing:
(a) any principal of any Loan shall not be
paid when due or any interest on any Loan, any fee
or any other amount payable hereunder shall not be
paid within three Domestic Business Days after the
due date thereof;
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(b) the Company shall fail to observe or
perform any covenant contained in Section 5.01(e)
or Sections 5.07 to 5.14, inclusive;
(c) the Company shall fail to perform any
covenant contained in Section 5.01(a) or (b) and
such failure shall continue for five days;
(d) the Company or any Subsidiary shall fail
to observe or perform any covenant or agreement on
its part contained in this Agreement (other than
those covered by clause (a), (b) or (c) above) for
30 days after written notice thereof has been
given to the Company by the Agent at the request
of any Bank;
(e) any representation, warranty,
certification or statement made by the Company or
any Subsidiary in this Agreement or in any
certificate, financial statement or other document
delivered pursuant hereto shall prove to have been
incorrect in any material respect when made (or
deemed made);
(f) the Company or any Subsidiary shall fail
to make any payment in respect of any Debt (other
than the Notes) when due and such failure shall
continue for more than any expressly applicable
period of grace with respect thereto, and the
aggregate principal amount of such Debt and any
Debt referred to in clause (g) below is at least
$10,000,000;
(g) the Company or any Subsidiary shall fail
to observe or perform any term, covenant or
agreement contained in any agreement or instrument
(other than this Agreement or the Notes) by which
it is bound evidencing or securing or relating to
any Debt or any other condition or event shall
occur, if the effect thereof is to accelerate the
maturity thereof or to permit the holder or
holders of such Debt or a trustee or other
representative acting on their behalf to cause or
declare acceleration of the maturity thereof, and
the aggregate principal amount of such Debt and
any Debt referred to in clause (f) above is at
least $10,000,000;
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(h) the Company or any Subsidiary shall
commence a voluntary case or other proceeding
seeking liquidation, reorganization or other
relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law
now or hereafter in effect or (except in the case
of a Foreign Subsidiary being liquidated for
reasons other than insolvency) seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, or shall consent
to any such relief or to the appointment of or
taking possession by any such official in an
involuntary case or other proceeding commenced
against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally
to pay its debts as they become due, or shall take
any corporate action to authorize any of the
foregoing;
(i) an involuntary case or other proceeding
shall be commenced against the Company or any
Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such
involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days;
or an order for relief shall be entered against
the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(j) any member of the ERISA Group shall fail
to pay when due an amount or amounts aggregating
in excess of $10,000,000 which it shall have
become liable to pay under Title IV of ERISA; or
notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator
or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of
ERISA to terminate, to impose liability (other
than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed
to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall
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occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5)
of ERISA, with respect to, one or more Multi-
employer Plans which could cause one or more
members of the ERISA Group to incur a payment
obligation payable in the current year in excess
of $10,000,000;
(k) a final and unappealable judgment or
order for the payment of money in excess of
$10,000,000 (excluding any portion thereof covered
by insurance and as to which the insurance company
has admitted liability) shall be rendered against
the Company or any Subsidiary and such judgment or
order shall continue unsatisfied and unstayed for
a period of 30 days; provided that, if such
judgment or order permits amounts to be paid over
a greater period of time, such judgment or order
may continue unsatisfied as to such amounts for
such greater period; or
(l) a Change in Control shall have occurred;
then, and in every such event, the Agent shall, if requested
by Banks holding Notes evidencing more than 50% in aggregate
outstanding principal amount of the Loans, by notice to the
Company declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
waived by the Company; provided that if any Event of Default
specified in clause (h) or (i) above occurs with respect to
the Company, then, without any notice to the Company or any
other act by the Agent or the Banks, the Notes (together
with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Company.
SECTION 6.02. Notice of Default. The Agent
shall, promptly upon being requested to do so by any Bank,
give notice to the Company under Section 6.01(d) and
thereupon notify all the Banks thereof.
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ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization.
Each Bank irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement and the Notes as are delegated
to it by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan
Guaranty Trust Company of New York shall have the same
rights and powers under this Agreement as any other Bank and
may exercise or refrain from exercising the same as though
it were not the Agent, and Morgan Guaranty Trust Company of
New York and its affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with
the Company or any Subsidiary or Affiliate as if it were not
the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations
of the Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action with
respect to any Default, except as expressly provided in
Article VI.
SECTION 7.04. Consultation with Experts. The
Agent may consult with legal counsel (who may be counsel for
the Company), independent public accountants and other
experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Agent. Neither the
Agent nor the Co-Agent nor any of their respective
directors, officers, agents or employees shall be liable for
any action taken or not taken by it in connection herewith
(i) with the consent or at the request or direction of the
Required Banks or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor the
Co-Agent nor any of their respective directors, officers,
agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance
or observance of any of the covenants or agreements of the
Company or any Subsidiary; (iii) the satisfaction of any
condition specified in Article III, except, in the case of
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the Agent, receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Agent shall not incur
any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may
be a bank wire, telex, facsimile or similar writing)
reasonably believed by it to be genuine or to be signed by
the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall,
ratably in accordance with its Percentage Share, indemnify
the Agent and the Co-Agent (to the extent not reimbursed by
the Company) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or
liability (collectively, "Liabilities") that the Agent or
the Co-Agent may suffer or incur in connection with this
Agreement or any action taken or omitted by it hereunder,
except any Liability resulting from its gross negligence or
willful misconduct.
SECTION 7.07. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon the Agent or the Co-Agent or any other Bank, and based
on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Bank also acknowledges that
it will, independently and without reliance upon the Agent,
the Co-Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking any action under this Agreement.
SECTION 7.08. Successor Agent; Resignations. (a)
The Agent may resign at any time (effective upon acceptance
of its appointment by a successor Agent) by giving written
notice thereof to the Banks and the Company. Upon any such
resignation, the Required Banks shall have the right to
appoint a successor Agent, with the consent of the Company
(if no Default shall have occurred and be continuing), which
consent shall not be unreasonably withheld. If no successor
Agent shall have been so appointed by the Required Banks,
and shall have accepted such appointment, within 30 days
after the retiring Agent gives notice of resignation, then
the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a Bank, if a Bank is able
and willing to serve as Agent, or, if no Bank is able and
willing to serve as Agent, a commercial bank organized or
licensed under the laws of the United States of America or
of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of
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its appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties
and obligations hereunder.
(b) The Co-Agent may resign at any time by giving
notice of its resignation to the Banks and the Company.
(c) After any retiring Agent or Co-Agent resigns
hereunder, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken
by it while it was Agent or Co-Agent, as the case may be.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of
any Interest Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference
Banks that deposits in U.S. dollars (in the
applicable amounts) are not being offered to the
Reference Banks in the relevant market for such
Interest Period, or
(b) Banks holding Notes evidencing 50% or
more of the aggregate principal amount of the
outstanding Loans advise the Agent that the
Adjusted CD Rate or the Adjusted London Interbank
Offered Rate, as the case may be, as determined by
the Agent will not adequately and fairly reflect
the cost to such Banks of funding their CD Loans
or Euro-Dollar Loans as the case may be, for such
Interest Period,
the Agent shall forthwith give notice thereof to the Company
and the Banks, whereupon until the Agent notifies the
Company that the circumstances giving rise to such
suspension no longer exist, (i) the right of the Company to
elect to have Loans bear interest at a rate based on the
Adjusted CD Rate or the Adjusted London Interbank Offered
Rate, as the case may be, shall be suspended and (ii) each
outstanding Loan of the relevant Type shall begin bearing
interest at the rate applicable to Base Rate Loans on the
last day of the then current Interest Period applicable
thereto, notwithstanding any prior election by the Company
to the contrary.
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SECTION 8.02. Illegality. If, on or after the
date of this Agreement, the adoption of any applicable law,
rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof,
or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for
any Bank (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans to the Company and
such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the
Company, whereupon until such Bank notifies such Company and
the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans to such Company shall be suspended.
Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank or contrary
to its policies. If such notice is given, all Euro-Dollar
Loans of such Bank to such Company then outstanding shall
begin bearing interest at the rate applicable to Base Rate
Loans, notwithstanding any prior election by such Company to
the contrary, either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loans if such
Bank may lawfully continue to maintain and fund such Loans
at the rate applicable to Euro-Dollar Loans to such day or
(b) immediately if such Bank may not lawfully continue to
maintain and fund such Loans at the rate applicable to
Euro-Dollar Loans to such day (in which case such Company
shall reimburse such Bank for any resulting loss or expense
as provided in Section 2.07).
SECTION 8.03. Increased Cost and Reduced Return.
(a) If on or after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration
thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject any Bank (or its
Applicable Lending Office) to any tax, duty or
other charge with respect to its Fixed Rate Loans,
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its Notes or its obligation to make Fixed Rate
Loans, or shall change the basis of taxation of
payments to any Bank (or its Applicable Lending
Office) of the principal of or interest on its
Fixed Rate Loans or any other amounts due under
this Agreement in respect of its Fixed Rate Loans
or its obligation to make Fixed Rate Loans (except
for changes in the rate of tax on the overall net
income of such Bank or its Applicable Lending
Office imposed by the jurisdiction in which such
Bank's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable
any reserve, special deposit or similar
requirement (including, without limitation, any
such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (A)
with respect to any CD Loan any such requirement
included in an applicable Domestic Reserve
Percentage and (B) with respect to any Euro-Dollar
Loan any such requirement included in an
applicable Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United
States market for certificates of deposit or the
London interbank market any other condition
affecting its Fixed Rate Loans, its Notes or its
obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the
cost to such Bank (or its Applicable Lending Office) of
making or maintaining any Fixed Rate Loan to the Company, or
to reduce the amount of any sum received or receivable by
such Bank (or its Applicable Lending Office) under this
Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15
days after demand by such Bank (with a copy to the Agent),
such Company shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that, after
the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or any request or
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directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent)
as a consequence of such Bank's obligations hereunder to a
level below that which such Bank (or its Parent) could have
achieved but for such adoption, change or compliance with
any such request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time,
within 15 days after demand by such Bank (with a copy to the
Agent), the Company shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its
Parent) for such reduction.
(c) Each Bank will promptly notify the Company
and the Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank or contrary
to its policies. A certificate of any Bank claiming
compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable
averaging and attribution methods. The Company shall not be
obligated to compensate any Bank pursuant to this Section
for increased costs or reduced return accruing prior to the
date which is 18 months before such Bank requests
compensation; provided that if any law, rule or regulation,
or interpretation or administration thereof, or any request
or directive giving rise to increased costs or reduced
returns has retroactive effect, such Bank shall be entitled
to claim compensation hereunder for the period commencing on
such date of retroactive effect through the date of adoption
or change or promulgation thereof without regard to the
foregoing limitation.
SECTION 8.04. Base Rate Loans Substituted for
Affected Fixed Rate Loans. If (i) the obligation of any
Bank to make Euro-Dollar Loans to the Company has been
suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation from the Company under Section 8.03(a)
and such Company shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply
to such Bank, then, unless and until such Bank notifies the
Company that the circumstances giving rise to such
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suspension or demand for compensation no longer apply, all
Loans of such Bank to such Company which would otherwise
bear interest at the rate applicable to CD Loans or
Euro-Dollar Loans, as the case may be, shall instead bear
interest at the rate applicable to Base Rate Loans (on which
interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks),
notwithstanding any prior election by such Company to the
contrary.
SECTION 8.05. Substitution of Bank. If (i) the
obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02 or (ii) any Bank
(or any Participant in its Loans) has demanded compensation
under Section 8.03, the Company shall have the right to seek
a bank or banks ("Substitute Banks"), which may be one or
more of the Banks or one or more other banks satisfactory to
the Agent, to purchase the Notes of such Bank (the "Affected
Bank") and, if the Company locates a Substitute Bank, the
Affected Bank shall, upon payment to it of the purchase
price agreed between it and the Substitute Bank (or, failing
such agreement, a purchase price in the amount of the
outstanding principal amount of its Loans and accrued
interest thereon to the date of payment) plus any amount
(other than principal and interest) then due to it or
accrued for its account hereunder, assign all its rights and
obligations under this Agreement and the Notes to the
Substitute Bank, and the Substitute Bank shall assume such
rights and obligations, whereupon the Substitute Bank shall
be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank with Loans outstanding in
the principal amount so assigned to such Substitute Bank.
ARTICLE IX
INCOME TAXATION
SECTION 9.01. Additional Payments. If at any
time (whether before or after payment of the Notes
evidencing the Loans) a Gross-Up Event shall occur with
respect to any Indemnitee, the Company will pay to such
Indemnitee in immediately available funds at the time or
times specified in Section 9.03(a) an amount equal to the
sum of (a) and (b) below:
(a) an amount equal to the excess of
(i) the amount of interest which would have
been payable on the unpaid principal amount of
such Indemnitee's Note during the Additional
Payment Period if such Note had borne interest at
a rate per annum equal to the Taxable Rate, over
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(ii) the amount of interest actually paid or
payable on such Indemnitee's Note during the
Additional Payment Period (excluding any
additional interest on overdue amounts paid or
payable pursuant to Section 2.03(e)); and
(b) the sum of
(i) the amount of any interest and of any
penalties, additions to tax and additional amounts
payable under Chapter 68 of the Code (such
penalties, additions to tax and additional amounts
being referred to as "Additions to Tax") which are
deductible for Federal income tax purposes,
payable to the United States and attributable to
the exclusion of less than the Statutory Exclusion
of the interest referred to in Section 9.01(a)(ii)
from the Federal Gross Income of such Indemnitee;
and
(ii) an amount which, after giving effect to
all taxes attributable to the inclusion of such
amount in the gross income of such Indemnitee
under the laws of any Federal, state or local
governmental or other taxing authority (such taxes
to be calculated at the maximum statutory rate
applicable to such Indemnitee, after taking into
account deductions attributable to imposition of
state and local taxes), shall be equal to the
amount of any interest or Additions to Tax which
are not deductible for Federal income tax purposes
and which are payable to the United States as a
consequence of excluding the Statutory Exclusion
of the interest referred to in Section 9.01(a)(ii)
from the Federal Gross Income of such Indemnitee.
SECTION 9.02. Supplemental Payments. If at any
time (whether before or after payment of the Notes
evidencing the Loans) a Change of Law shall occur with
respect to any Indemnitee, the Company will pay to such
Indemnitee in immediately available funds at the time or
times specified in Section 9.03(b) an amount with respect to
the applicable Supplemental Payment Period which, after
giving effect to all taxes attributable to the inclusion of
such amount in the gross income of such Indemnitee under the
laws of any Federal, state or local governmental or other
taxing authority, shall be equal to any tax related to such
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Indemnitee's Note which arises (and for this purpose tax
arises, or shall be deemed to arise, among other events, as
a result of a reduction in any Tax Allowance) solely as a
result of such Change of Law (all such taxes to be
calculated at the maximum statutory rate applicable to such
Indemnitee after taking into account deductions attributable
to the imposition of state and local taxes).
SECTION 9.03. Payment Dates. (a) Payments under
Section 9.01 attributable to the period for which interest
on an Indemnitee's Note has become due and payable shall be
paid by the Company promptly on demand by an Indemnitee, and
payments under Section 9.01 attributable to any subsequent
period shall be payable on each date thereafter on which
interest on such Indemnitee's Note is due and payable.
(b) If the Company becomes obligated to make
payments to an Indemnitee pursuant to Section 9.02, such
Indemnitee shall notify the Company (i) of the amount that
is payable in respect of such portion of the Supplemental
Payment Period as had elapsed prior to the date such notice
is given, which sum shall be due and payable within 30 days
after the date of such notice, and (ii) at least annually,
of the amount that will be payable on such date or dates
thereafter as set forth in such notice (each of which shall
be at least 30 days after the date of such notice).
(c) The computation of any amount payable under
Section 9.01(b)(ii) or 9.02 shall be made in good faith by
such Indemnitee, conclusive absent manifest error, and
delivered to the Company, and the Company shall have no
right to examine the Federal income tax returns or any other
returns, documents or records of such Indemnitee with
respect thereto. If the Company shall fail to pay any
amount payable under Section 9.01 or 9.02 on the due date
pursuant to this Section, the Company shall also pay, to the
extent lawful, interest on such unpaid amount at a rate per
annum based on the Base Rate plus 2% from such date until
such amount is paid.
SECTION 9.04. Right of Company to Contest. (a)
Each Indemnitee that receives any inquiry from the Internal
Revenue Service (including a revenue agent's report or
notice of proposed adjustments) questioning the exemption
from Federal Gross Income of the Statutory Exclusion of the
interest accrued or received on such Indemnitee's Note shall
promptly notify the Company of such inquiry and shall
provide the Company with all information available to such
Indemnitee with respect to such inquiry. Each Indemnitee
shall afford the Company an opportunity to discuss such
inquiry with the Internal Revenue Service and to make any
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written submissions to the Internal Revenue Service which
the Company deems desirable; provided that, if such
Indemnitee shall, in good faith and in its sole discretion,
determine that the commencement or continuance of any such
discussions or submissions by the Company would extend the
audit or review of such Indemnitee's Federal income tax
return for any taxable year beyond the period such audit or
review would require but for the commencement or continuance
of such discussions or submissions, then, upon receipt of
notice by the Company from such Indemnitee to such effect,
the Company shall have no further right to commence or
continue such discussions or submissions, and such
Indemnitee shall have the right to cause such audit or
review to be closed.
(b) If any Indemnitee receives a notice of
deficiency that allows the exclusion of less than the
Statutory Exclusion of the interest on such Indemnitee's
Note from Federal Gross Income and such Indemnitee
determines in its sole discretion not to pay the deficiency,
it shall promptly notify the Company of its determination
and shall, at the request of the Company, file a petition in
the Tax Court and permit the Company to control the conduct
of the proceeding before the Tax Court insofar as it relates
to the exclusion of less than the Statutory Exclusion of
interest on such Indemnitee's Note from Federal Gross
Income. Such Indemnitee shall have sole discretion to
decide whether to prosecute an appeal from an adverse
determination with respect to the exclusion of less than the
Statutory Exclusion of the interest on such Indemnitee's
Note from Federal Gross Income by the Tax Court or any court
to which a Tax Court decision is appealed; provided that, if
such Indemnitee shall determine to prosecute an appeal with
respect to any other issue, then such Indemnitee shall, at
the request of the Company, also prosecute an appeal with
respect to such adverse determination and shall permit the
Company to control the conduct of the proceeding insofar as
it relates to the exclusion of less than the Statutory
Exclusion of the interest on such Indemnitee's Note from
Federal Gross Income.
(c) If the Company shall make payment to any
Indemnitee pursuant to Section 9.01 hereof as a result of
any event described in clause (i) or (ii) of the definition
of "Gross-Up Event" in Section 9.07, then such Indemnitee
shall, at the request of the Company, either (i) file a
claim for refund with respect to the tax attributable to the
exclusion of less than the Statutory Exclusion of the
interest on such Indemnitee's Note from such Indemnitee's
Federal Gross Income or (ii) if such Indemnitee is unable to
file a claim for refund with respect to such tax because
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such Indemnitee is contesting in deficiency proceedings
other claims not indemnified by the Company with respect to
the taxable year or years as to which the Company has made
such a payment, such Indemnitee will contest such tax (in
the manner provided in subsection (b) of this Section) along
with such other claims. If any such claim shall not be
allowed by the Internal Revenue Service, such Indemnitee
shall, at the request of the Company, promptly commence a
suit for refund (in a forum chosen by such Indemnitee in its
sole discretion). In the event of an adverse determination
in such suit on the exclusion of less than the Statutory
Exclusion of the interest on such Indemnitee's Note from
Federal Gross Income, such Indemnitee shall have sole
discretion to decide whether to prosecute an appeal from
such adverse determination, except that, if (i) the
pleadings in the suit for refund do not involve any issue
other than the exclusion of less than the Statutory
Exclusion of the interest on such Indemnitee's Note from
Federal Gross Income or (ii) the pleadings in the suit for
refund involve one or more issues other than the exclusion
of less than the Statutory Exclusion of the interest on such
Indemnitee's Note from Federal Gross Income and such
Indemnitee determines to prosecute an appeal with respect to
any such other issue, then such Indemnitee shall, at the
request of the Company, prosecute an appeal with respect to
such adverse determination. Such Indemnitee shall permit
the Company to control the conduct of the proceeding insofar
as it relates to the exclusion of less than the Statutory
Exclusion of the interest on such Indemnitee's Note from
Federal Gross Income.
(d) For all purposes of this Section, the right
of the Company to control any proceeding shall mean the
right (subject to the approval of counsel for the
Indemnitee, which approval shall, taking into account the
best interests of the Indemnitee, the timeliness of any
request made by the Company and all other relevant facts and
circumstances, not be unreasonably withheld) to control the
submission and content of documentation, protests, memoranda
of fact and law and briefs, the conduct of oral arguments or
presentations, the selection of witnesses and the
negotiation of stipulations of fact, all as may be
appropriate in proceedings before the Internal Revenue
Service, the Tax Court, a Claims Court, a Federal District
Court or any court of appellate jurisdiction, as the case
may be.
(e) As a condition precedent to the exercise by
the Company of the rights of contest granted to it under
this Section, the Company shall deliver to the Indemnitee an
opinion of counsel satisfactory to such Indemnitee to the
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effect that a meritorious claim exists with respect to the
exemption of the Statutory Exclusion of the interest on such
Indemnitee's Note from Federal Gross Income. In addition,
the Company shall reimburse and hold harmless such
Indemnitee on an after-tax basis for all costs and expenses
incurred in connection with any contest (or appeal at the
Company's request), including, without limitation, all fees
and disbursements of attorneys, accountants and expert
witnesses.
SECTION 9.05. Refunds. (a) If the Company shall
make any payment to an Indemnitee pursuant to Section 9.01
and such Indemnitee shall thereafter receive a refund or
credit of tax pursuant to Section 6402 of the Code for any
taxable year to which such payment related in respect of a
claim that part of the interest on such Indemnitee's Note to
which such payment related was excludable from its Federal
Gross Income (or would have received a refund with respect
to such payment but for a credit of the amount of such
refund against another claim or counterclaim of the Internal
Revenue Service not indemnified by the Company) such
Indemnitee shall pay to the Company the sum of:
(i) an amount equal to the amount previously
paid to such Indemnitee pursuant to Section
9.01(a) with respect to the interest on such
Indemnitee's Note for such taxable year to which
such claim for refund related (the "Disputed
Interest") multiplied by a fraction whose
numerator is the amount of the refund or credit
received for tax paid with respect to the Disputed
Interest and whose denominator is the amount of
tax paid by such Indemnitee with respect to such
Disputed Interest;
(ii) the amount of any refunded or credited
Additions to Tax that had been paid with respect
to such Disputed Interest and with respect to
which such Indemnitee had been paid pursuant to
Section 9.01(b); and
(iii) interest on the amounts described in (i)
and (ii) above at a rate or rates equal to the
rate or rates of interest, if any, received by or
allowed to such Indemnitee in respect of such
amounts.
(b) If the Company shall make any payment to an
Indemnitee pursuant to Section 9.02 and if, in the Federal
income tax return of such Indemnitee or after any adjustment
of such return, the amount of the Tax Allowance or other
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amount by reference to which the amount of the payments made
pursuant thereto is determined differs from the amount used
to compute the amount of such payment, the Company promptly
on written demand shall pay to such Indemnitee any
additional amount computed pursuant to Section 9.02, and the
Indemnitee shall refund to the Company any excess amount
paid pursuant to Section 9.02, attributable to such
difference.
SECTION 9.06. Request for Qualifying Opinion of
Counsel. If any Indemnitee determines, in good faith after
consultation with counsel, that there is a substantial
likelihood for any reason whatsoever (including, without
limitation, a change of law, issuance of temporary, proposed
or final Treasury Regulations, issuance of an Internal
Revenue Service ruling or a court decision) that it might be
required to exclude less than the Statutory Exclusion of the
interest on such Indemnitee's Note from its Federal Gross
Income, such Indemnitee shall be entitled to request a
Qualifying Opinion of Counsel with respect to such interest
for a period commencing with the Initial Borrowing Date or
for any lesser period specified in such Indemnitee's
request.
SECTION 9.07. Related Definitions. The following
terms, as used in this Article IX, have the following
meanings:
"Additional Payment Period" means, as to any
Indemnitee, the period from the earliest date as of which
less than the Statutory Exclusion of the interest on such
Indemnitee's Note is excluded from such Indemnitee's Federal
Gross Income as a result of one or more Gross-Up Events, or,
if a Gross-Up Event occurs as a result of a change in the
Code, the later of (i) the effective date of such change and
(ii) the first day of the calendar year in which such change
in the Code is enacted, until payment in full of the
principal amount of such Indemnitee's Note, together with
accrued interest thereon.
"Change of Law" means, with respect to any
Indemnitee, any amendment to the Code or other statute
enacted by the Congress of the United States of America, or
any temporary, proposed or final regulation promulgated by
the Treasury Department, after the date hereof (or, in the
case of a disallowance of a deduction for any cost of
purchasing or carrying such Indemnitee's Note, at any time)
which, in the opinion of counsel for such Indemnitee, (i)
reduces any Tax Allowance allowable to or (ii) imposes any
Federal tax (including, but not limited to, preference or
excise taxes) upon, extends any such tax to or otherwise
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increases the liability for any such tax of the Indemnitee,
in either case by reason of owning, acquiring or disposing
of obligations the interest on which is partially exempt
from Federal income taxation under Section 133 of the Code
or any similar or successor provision; provided that a
Change of Law shall not include any change in the Statutory
Exclusion.
"Federal Gross Income" means gross income for
Federal income tax purposes.
"Gross-Up Event" means, with respect to any
Indemnitee, a payment of tax or estimated tax by such
Indemnitee, a reduction of such Indemnitee's net operating
loss, an offset against any tax refund or other amount
otherwise due such Indemnitee or a utilization of an amount
otherwise available to such Indemnitee as a credit against
tax attributable to an inclusion in such Indemnitee's
Federal Gross Income of more than the Statutory Exclusion of
the interest received or accrued by such Indemnitee with
respect to any Indemnitee's Note following any of the events
set forth below (other than as a result of a Change of Law):
(i) the failure by such Indemnitee to
receive a Qualifying Opinion of Counsel, requested
pursuant to Section 9.06, within 45 days after the
receipt by the Company of such request;
(ii) the issuance of an IRS Notice to such
Indemnitee, provided that the Company shall have
had the opportunity to exercise any applicable
rights of contest granted to it under Section
9.04(a);
(iii) the occurrence of a final and
unappealable decision, judgment, decree or other
order by the Tax Court or by any other court of
competent jurisdiction (a "Final Determination")
with respect to such Indemnitee or any other
Indemnitee (unless, in the case of a Final
Determination with respect to such other
Indemnitee, the rationale of such Final
Determination clearly would not apply to the
relevant Indemnitee); provided that the Company
shall have had the opportunity to exercise any
applicable rights of contest granted to it under
Section 9.04; or
(iv) the execution of a closing agreement by
such Indemnitee under Section 7121 of the Code to
which the Company has consented in writing;
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"Indemnitee" means any Bank and its successors and
assigns, including any Assignee, Participant or other
transferee of an Indemnitee's interest in a Loan or a Note
evidencing a Loan (whether or not the Indemnitee has an
interest in a Loan or a Note evidencing a Loan at the time
amounts are payable to such Indemnitee hereunder); provided
that the term "Indemnitee" shall include only entities which
are entitled under Section 133 of the Code (as in effect
immediately prior to any amendment or repeal of such section
which results in a Gross-Up Event) to an exclusion from
gross income of interest received with respect to a
securities acquisition loan within the meaning of Section
133(b) of the Code as in effect on the date hereof.
"Indemnitee's Note" means, with respect to any
Indemnitee, any Note evidencing a Loan held by such
Indemnitee at any time (or such Indemnitee's interest
therein, whether by participation, assignment or other
transfer).
"IRS Notice" means, with respect to any
Indemnitee, a revenue agent's report or notice of proposed
adjustment or a notice of deficiency issued by the Internal
Revenue Service to such Indemnitee with respect to the
inclusion in such Indemnitee's Federal Gross Income of more
than the Statutory Exclusion of the interest on such
Indemnitee's Note.
"Qualifying Opinion of Counsel" means a written
opinion of recognized tax counsel, selected by the Company
and reasonably satisfactory to the Indemnitee requesting
such opinion, to the effect that (i) at least the Statutory
Exclusion of each payment of interest on such Indemnitee's
Note is excludable from such Indemnitee's Federal Gross
Income during the applicable period under Section 9.06 or
(ii) while the issue is not free from doubt, if a court were
presented with the issue, it should hold that at least the
Statutory Exclusion of each payment of interest on such
Indemnitee's Note is excludable from such Indemnitee's
Federal Gross Income during the applicable period under
Section 9.06.
"Statutory Exclusion" as of any time means a
percentage equal to the percentage of interest with respect
to a securities acquisition loan, within the meaning of
Section 133(b) of the Code, that is excludable at such time
from Federal Gross Income by a recipient that is an entity
described in Section 133(a) of the Code.
"Supplemental Payment Period" means, as to any
Indemnitee and with respect to any Change of Law, the period
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from the later of (i) the earliest date as of which such
Change of Law is effective with respect to such Indemnitee
and (ii) if such Change of Law constitutes an amendment to
the Code or a statute enacted by the Congress of the United
States, the first day of the calendar year in which such
Change of Law occurs, until payment in full of the principal
amount of such Indemnitee's Note, together with accrued
interest thereon.
"Tax Allowance" means any deduction, credit or
other allowance allowable in computing liability for any
Federal tax.
"Taxable Rate" means (x) with respect to that
portion of any Indemnitee's Note which bears interest for
any day at a rate based on the Base Rate, a rate per annum
equal to the Base Rate, (y) with respect to that portion of
any Indemnitee's Note which bears interest for any day at a
rate based on the Adjusted CD Rate, a rate per annum equal
to the sum of the applicable Adjusted CD Rate plus the CD
Margin for such day, and (z) with respect to that portion of
any Indemnitee's Note which bears interest for any day at a
rate based on the Adjusted London Interbank Offered Rate, a
rate per annum equal to the sum of the applicable Adjusted
London Interbank Offered Rate plus the Euro-Dollar Margin
for such day.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests
and other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission
or similar writing) and shall be given to such party: (x) in
the case of the Company or the Agent, at its address or
telex or telecopy number set forth on the signature pages
hereof, (y) in the case of any Bank, at its address or telex
or telecopy number set forth in its Administrative
Questionnaire or (z) in the case of any party, at such other
address or telex or telecopy number as such party may
hereafter specify for the purpose by notice to the Agent and
the Company. Each such notice, request or other
communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in
this Section and the appropriate answerback is received,
(ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means,
when delivered at the address or received at the telecopy
number specified in this Section; provided that notices to
the Agent under Article II or Article VIII shall not be
effective until received.
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SECTION 10.02. No Waivers. No failure or delay
by the Agent or any Bank in exercising any right, power or
privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 10.03. Expenses; Documentary Taxes;
Indemnification. (a) The Company shall pay (i) all
reasonable out-of-pocket expenses of the Agent, including
fees and disbursements of special counsel for the Agent, in
connection with the preparation of this Amended and Restated
Agreement, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder and (ii)
if an Event of Default occurs, all out-of-pocket expenses
incurred by the Agent or any Bank, including fees and
disbursements of counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom. The Company
shall indemnify the Agent and each Bank against any transfer
taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and
delivery of this Agreement and the Notes.
(b) The Company agrees to indemnify the Agent,
the Co-Agent and each Bank, and hold each of them harmless,
from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without
limitation, reasonable fees and disbursements of counsel,
which may be incurred by such Bank (or by the Agent or the
Co-Agent) in connection with any investigative,
administrative or judicial proceeding (whether or not it
shall be designated a party thereto) relating to or arising
out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Bank, Agent or
Co-Agent shall have the right to be indemnified hereunder
for its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 10.04. Sharing of Set-Offs. Each Bank
agrees that if (i) it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater
than the proportion received by any other Bank in respect of
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the aggregate amount of principal and interest due with
respect to any Note held by such other Bank and (ii) such
inequality shall have continued for more than 15 days, the
Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other
Banks, and such other adjustments shall be made from time to
time, as may be required so that all such payments of
principal and interest with respect to the Notes held by the
Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank
to exercise any right of set-off or counterclaim it may have
and to apply the amount subject to such exercise to the
payment of indebtedness of the Company other than its
indebtedness hereunder. The Company agrees, to the fullest
extent it may effectively do so under applicable law, that
any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such
holder of a participation were a direct creditor of the
maker of such Note in the amount of such participation.
SECTION 10.05. Amendments and Waivers. Any
provision of this Agreement or the Notes may be amended or
waived if, but only if, such amendment or waiver is in
writing and is signed or otherwise approved in writing by
the Company and the Required Banks (and, if the rights or
duties of the Agent are affected thereby, by the Agent),
provided that no such amendment or waiver shall, unless
signed or otherwise approved in writing by all the Banks,
(i) increase or decrease the Percentage Share of any Bank or
subject any Bank to any additional obligation, (ii) reduce
the principal of or rate of interest on any Loan or any fee
hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder
or (iv) change the percentage of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any
action under this Section or any other provision of this
Agreement.
SECTION 10.06. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not
assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all the
Banks.
(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant")
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participating interests in its Loans. In the event of any
such grant by a Bank of a participating interest to a
Participant, whether or not upon notice to the Company and
the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Companies
and the Agent shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to
which any Bank may grant such a participating interest shall
provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Company
hereunder including, without limitation, the right to
approve any amendment, modification or waiver of any
provision of this Agreement; provided that such
participation agreement may provide that such Bank will not,
without the consent of the Participant, agree to any
modification, amendment or waiver of this Agreement (x)
described in clause (ii) or (iii) of Section 10.05 or (y)
that would change the requirement that all the Banks must
sign or approve any amendment or waiver described in clause
(ii) or (iii) of Section 10.05. Subject to subsection (e)
below, the Company agrees that each Participant shall, to
the extent provided in its participation agreement, be
entitled to the benefits of Article VIII with respect to its
participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall
be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may at any time, upon prior notice
to the Company and the Agent, assign to one or more banks or
other institutions ("Assignees") a proportionate part of its
rights and obligations under this Agreement and the Notes,
and such Assignee shall assume such rights and obligations
pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit D hereto executed by
such Assignee and such transferor Bank with (and subject to)
the subscribed consent of the Company which consent shall
not be unreasonably withheld and the Agent. Upon execution
and delivery of such an instrument, payment by such Assignee
to such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such Assignee,
delivery to the Agent and the Company of an executed copy of
such instrument and payment by such Assignee to the Agent of
a processing fee of $2,000, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and
obligations of a Bank with outstanding Loans as set forth in
such instrument of assumption, and the transferor Bank shall
be released from its obligations hereunder to a
corresponding extent, and no further consent or action by
62
<PAGE>
any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (c), the transferor
Bank, the Agent and the Company shall make appropriate
arrangements so that, if required, new Notes are issued to
the Assignee.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Notes to
a Federal Reserve Bank. No such assignment shall release
the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee
of any Bank's rights shall be entitled to receive any
greater payment under Section 8.03 than such Bank would have
been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's
prior written consent or pursuant to Section 8.05 or by
reason of the provisions of Section 8.02 or 8.03 requiring
such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not
exist.
SECTION 10.07. Margin Stock Collateral. Each of
the Banks represents to the Agent and each of the other
Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this
Agreement.
SECTION 10.08. WAIVER OF TRIAL BY JURY. EACH OF
THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.09. Submission to Jurisdiction. The
Company hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District
of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions
contemplated hereby. The Company irrevocably waives, to the
fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in
an inconvenient forum.
63
<PAGE>
SECTION 10.10. New York Law. This Agreement and
each Note shall be construed in accordance with and governed
by the law of the State of New York.
SECTION 10.11. Confidentiality. Any information
disclosed by the Company to the Agent or any of the Banks or
any of their respective holding companies, which was
designated proprietary or confidential at the time of
receipt thereof by the Agent, such Bank or such holding
company, shall be used solely for purposes of this Agreement
and not in any other manner detrimental to the Company and,
if such information is not otherwise in the public domain,
shall not be disclosed by the Agent, such Bank or such
holding company to any other Person except (i) to its
independent accountants and legal counsel (it being
understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such
information and instructed to keep such information
confidential), (ii) pursuant to statutory and regulatory
requirements, (iii) pursuant to any mandatory court order,
subpoena or other legal process, (iv) to the Agent, any
other Bank or such holding company, (v) pursuant to any
agreement heretofore or hereafter made between such Bank or
such holding company and the Company which permits such
disclosure, (vi) in connection with the exercise of any
remedy under this Agreement or (vii) subject to an agreement
containing provisions substantially the same as those of
this Section, to any participant in or assignee of, or
prospective participant in or assignee of, any Loan (it
being understood that prior to any such disclosures
contemplated by clauses (ii) and (iii) above, the Agent,
such Bank or such holding company shall, if practicable,
give the Company prior written notice of such disclosure).
SECTION 10.12. Counterparts. This Amended and
Restated Agreement may be signed in any number of
counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were
upon the same instrument.
64
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Amended and Restated Agreement to be duly executed by
their respective authorized officers as of the day and year
first above written.
POLAROID CORPORATION
By /s/ Graham M. Brown, Jr.
---------------------------
Title: Vice President and
Treasurer
549 Technology Square
Cambridge, Massachusetts 02139
Attention: Treasurer
Telex number: 921 482
Telecopy number: 617-386-6615
65
<PAGE>
Existing Loans
$15,434,398.35 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Adam J. Silver
-----------------------
Title: Associate
$15,434,396.92 ABN AMRO BANK N.V.
By /s/ RE James Hunter
-----------------------
Title: Vice President
By /s/ Monique F. Bazoberry
-------------------------
Title: Corporate Banking
Officer
$15,434,396.92 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Robert Ivosevich
-----------------------------
Title: Senior Vice President
$15,434,396.92 CREDIT SUISSE
By /s/Lynn Allegaert
---------------------------
Title: Member of Senior
Management
By /s/ Kristina Catlin
---------------------------
Title: Associate
$15,434,396.92 PNC BANK, NATIONAL ASSOCIATION
By /s/ Charles Shoemake
---------------------------
Title: Vice President
Assistant Manager
66
<PAGE>
$15,434,396.92 THE TORONTO DOMINION BANK
By /s/ Horace Zona
---------------------------
Title: Director
$15,434,396.92 WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By /s/ Robert G. Brookby
----------------------------
Title: Executive Vice
President
$15,320,478.52 DEUTSCHE BANK AG, NEW YORK BRANCH
By /s/ Christopher S. Hall
----------------------------
Title: Vice President
By /s/ Iain Stewart
----------------------------
Title: Associate
DEUTSCHE BANK AG, CAYMAN ISLANDS
BRANCH
By /s/ Christopher S. Hall
----------------------------
Title: Vice President
By /s/ Iain Stewart
----------------------------
Title: Associate
$ 6,661,077.61 FLEET BANK OF MASSACHUSETTS, N.A.
By /s/ Maryann S. Smith
----------------------------
Title: Vice President
67
<PAGE>
_________________
Total Existing Loans
$130,022,336.00
============ MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Adam J. Silver
----------------------------
Title: Associate
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Telex number: 177615 MGT UT
Telecopy number: 212-648-5014
ABN AMRO BANK N.V.,
as Co-Agent,
By /s/ RE James Hunter
----------------------------
Title: Vice President
By /s/ Monique F. Bazoberry
----------------------------
Title: Corporate Banking
Office
53 State Street
Boston, Massachusetts 02109
Attention: Elliott O. May
Telex number: 216308
68
<PAGE>
PRICING SCHEDULE
The "Euro-Dollar Margin" and "CD Margin" for any
day are the respective rates per annum set forth below in
the applicable row in the column corresponding to the
Pricing Level that applies on such day:
Level I Level II Level III Level IV
------- -------- --------- --------
Euro-Dollar
Margin .40% .45% .50% .70%
CD Margin .525% .575% .625% .825%
For purposes of this Pricing Schedule, the
following terms have the following meanings:
"Level I Pricing" applies on any day if, on such
day, the Borrower's long-term debt is rated (i) A- or higher
by S&P and Baa1 or higher by Moody's or (ii) BBB+ by S&P and
A3 or higher by Moody's.
"Level II Pricing" applies on any day if, on such
day, the Borrower's long-term debt is rated BBB+ by S&P and
Baa1 by Moody's.
"Level III Pricing" applies on any day if, on such
day, the Borrower's long-term debt is rated BBB by S&P or
Baa2 by Moody's.
"Level IV Pricing" applies on any day if, on such
day, no other Pricing Level applies.
"Moody's" means Moody's Investors Service, Inc.
"Pricing Level" means any one of the four pricing
levels represented by Level I Pricing, Level II Pricing,
Level III Pricing and Level IV Pricing.
"S&P" means Standard & Poor's Ratings Group.
The ratings to be utilized for purposes of this Pricing
Schedule are those assigned to the senior unsecured long-
term debt securities of the Borrower without third-party
credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The
rating in effect on any day is the rating in effect at the
close of business on such day.
<PAGE>
SCHEDULE 1
Scheduled Prepayments
---------------------
December 31, 1994 $ 16,677,030
June 30, 1995 $ 17,527,558
December 31, 1995 $ 18,421,464
June 30, 1996 $ 19,360,959
December 31, 1996 $ 20,348,368
June 30, 1997 $ 37,686,957
------------
Total $130,022,336
<PAGE>
EXHIBIT A
NOTE
New York, New York
, 19
For value received, Polaroid Corporation, a
Delaware corporation (the "Borrower"), promises to pay to
the order of
(the "Bank") on June 30, 1997, for the account of its
Applicable Lending Office, the unpaid principal amount of
all Loans made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below. The Borrower promises
to pay interest on the unpaid principal amount of such Loans
on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States
in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, and all prepayments of
the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, appropriate notations to
evidence the foregoing information with respect to each such
Loan then outstanding shall be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such
schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Company
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the
Credit Agreement dated as of June 30, 1992 among Polaroid
Corporation, the banks listed on the signature pages thereof
and Morgan Guaranty Trust Company of New York, as Agent (as
the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the
1
<PAGE>
Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
POLAROID CORPORATION
By____________________
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
____________________________________________________________
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
3
<PAGE>
EXHIBIT B-1
OPINION OF CRAVATH, SWAINE & MOORE,
SPECIAL COUNSEL FOR THE COMPANY
-----------------------------------
[Amendment Effective
Date]
Dear Sirs:
We have acted as special counsel for Polaroid
Corporation, a Delaware corporation (the "Company"), in
connection with the Amended and Restated Credit Agreement
dated as of November 29, 1994 (the "Credit Agreement") among
the Company and you. Capitalized terms defined in the
Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments and have conducted such other
investigations of fact and law as we have deemed necessary
or advisable for purposes of this opinion.
Based upon the foregoing, we are of opinion as
follows:
1. The Company is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware.
2. The execution, delivery and performance by the
Company of the Credit Agreement (i) are within the Company's
corporate powers and have been duly authorized by all
necessary corporate action, (ii) require no action by or in
respect of, or filing with, any governmental body, agency or
official under the laws of the State of New York, the
General Corporation Law of the State of Delaware or the
Federal laws of the United States of America and (iii) do
not contravene any provision of applicable law or regulation
of the State of New York, the General Corporation Law of the
State of Delaware or the Federal laws of the United States
of America or of the Restated Certificate of Incorporation
or By-laws of the Company.
3. The Credit Agreement constitutes a valid and
binding agreement of the Company enforceable in accordance
<PAGE>
with its terms, except that (i) the foregoing is subject to applicable
bankruptcy, reorganization, insolvency, fraudulent transfer,
moratorium or other similar laws affecting creditors' rights
generally from time to time in effect, (ii) the
enforceability thereof is also subject to general principles
of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (iii)
insofar as provisions contained in the Credit Agreement
provide for indemnification, the enforcement thereof may be
limited by public policy considerations, (iv) we express no
opinion as to Section 10.04 of the Credit Agreement insofar
as it provides that any Bank purchasing a participation from
another Bank pursuant thereto may exercise set-off or
similar rights with respect to such participation, and (v)
we express no opinion as to the effect of the law of any
jurisdiction other than the State of New York wherein any
Bank may be located or wherein enforcement of the Credit
Agreement may be sought which limits the rates of interest
legally chargeable or collectible.
We are members of the bar of the State of New York
and do not express any opinion as to any laws other than the
laws of the State of New York, the General Corporation Law
of the State of Delaware and the Federal laws of the United
States of America.
This opinion is delivered to you pursuant to the
instruction of the Company and is rendered solely to you in
connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by
any other person without our prior written consent.
Very truly yours,
Morgan Guaranty Trust Company
of New York, as Agent
ABN-AMRO Bank, as Co-Agent
The Banks Listed in the Credit Agreement
Referred to Above
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
2
<PAGE>
EXHIBIT B-2
OPINION OF CRAVATH, SWAINE & MOORE,
SPECIAL TAX COUNSEL FOR THE COMPANY
-----------------------------------
[Amendment Effective
Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street New York, New York 10260
Dear Sirs:
We have acted as special tax counsel for Polaroid
Corporation (the "Company") in connection with the Amended
and Restated Credit Agreement dated as of November 29, 1994
(the "Credit Agreement") among the Company, the banks listed
on the signature pages thereof, Morgan Guaranty Trust
Company of New York, as Agent ABN-AMRO Bank, N.V., as Co-
Agent. Terms defined in the Credit Agreement are used
herein as therein defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments, including a favorable determination
letter issued by the Internal Revenue Service relating to
the qualification of the ESOP, and we have conducted such
other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of opinion
that:
1. The ESOP is an employee stock ownership plan
within the meaning of Section 4975(e)(7) of the Code,
qualified under Section 401(a) of the Code. The trust
forming a part of the ESOP has been duly constituted in
accordance with a valid and binding trust instrument, is
validly existing, and is qualified under Section 401(a) of
the Code.
2. The execution, delivery and performance by the
Company of the Credit Agreement will not constitute a
violation of, or give rise to any liability under, Title I
of ERISA or Section 4975 of the Code.
<PAGE>
3. Each Loan outstanding on the Amendment
Effective Date is a securities acquisition loan described in
Section 133(b)(5) of the Code, and, therefore, 50% of each
payment of interest on such Loan is excludable from the
Federal Gross Income of an entity described in Section
133(a) of the Code that is the owner of the Loan (or any
portion of such Loan) for Federal income tax purposes.
This opinion is delivered to you pursuant to the
instruction of the Company and is rendered solely to you in
connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by
any other person without our prior written consent.
Very truly yours,
EXHIBIT B-3
2
<PAGE>
OPINION OF RICHARD F. deLIMA,
GENERAL COUNSEL OF THE COMPANY
------------------------------
[Amendment Effective
Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
As Vice President, Secretary and General Counsel
of Polaroid Corporation, a Delaware Corporation (the
"Company"), I am familiar with the Amended and Restated
Credit Agreement dated as of November 29, 1994 (the "Credit
Agreement") among the Company, Morgan Guaranty Trust Company
of New York, as Agent, ABN-AMRO Bank N.V., as Co-Agent and
the Banks listed on the signature pages thereof.
Capitalized terms defined in the Credit Agreement are used
herein as therein defined.
I have examined originals or copies, certified or
otherwise identified to my satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments and have conducted such other
investigations of fact and law as I have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of opinion
that:
1. The Company is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate
powers and, to the best of my knowledge, all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted, the absence of which would have a material
adverse effect on the business, financial position or
<PAGE>
results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole.
2. The execution, delivery and performance by the
Company of the Credit Agreement (i) are within the Company's
corporate powers and have been duly authorized by all
necessary corporate action, (ii) require no action by or in
respect of, or filing with, any governmental body, agency or
official under the laws of the Commonwealth of Massachusetts
and (iii) do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the
Restated Certificate of Incorporation or By-laws of the
Company or, to the best of my knowledge, of any agreement,
judgment, injunction, order, decree or other instrument
binding upon the Company or, to the best of my knowledge,
result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries.
3. To the best of my knowledge, neither the
Company nor any of its Subsidiaries is in violation of, or
in default under, any term or provision of any charter,
by-law, mortgage, indenture, agreement, instrument, statute,
rule, regulation, judgment, decree, order, writ or
injunction applicable to it, such that such violations and
defaults in the aggregate could reasonably be expected to
materially adversely affect the business, financial position
or results of operations of the Company and its Consolidated
Subsidiaries, considered as a whole, or the ability of the
Company to perform in any material respect its obligations
under the Credit Agreement or the Notes.
4. Except as disclosed in the Company's 1993 Form
10-K and the Company's Second Quarter 1994 Form 10-Q, to the
best of my knowledge there is no (i) injunction, stay,
decree or order issued by any court or arbitrator or any
governmental body, agency or official or (ii) action, suit
or proceeding pending or threatened against or affecting,
the Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in
which there is a reasonable likelihood of an adverse
decision, in either case (y) which could materially
adversely affect the business, financial position or results
of operations of the Company and its Consolidated
Subsidiaries, considered as a whole, or (z) which could
materially adversely affect the ability of the Company to
perform any of its obligations under the Credit Agreement or
the Notes.
5. To the best of my knowledge there is no
(i) injunction, stay, decree or order issued by any court or
arbitrator or any governmental body, agency or official or
2
<PAGE>
(ii) action, suit or proceeding pending or threatened
against or affecting, the Company or any of its Subsidiaries
before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable likelihood
of an adverse decision, in either case which in any manner
draws into question the validity of the Credit Agreement or
the Notes.
I am a member of the bar of the State of New York
and do not express any opinion as to any laws other than the
laws of the State of New York, the General Corporation Law
of the State of Delaware and the Federal laws of the United
States of America. In rendering the opinion set forth in
paragraph 2 above, I have relied, without independent
investigation, as to all matters governed by the
Commonwealth of Massachusetts upon the opinion, dated the
date hereof, of Gerald R. Dicker, Esq., Vice President and
Assistant Secretary of the Company, a copy of which has been
delivered to you.
This opinion is delivered to you pursuant to the
instruction of the Company and is rendered solely to you in
connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by
any other person without our prior written consent.
Very truly yours,
3
<PAGE>
EXHIBIT C
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Amendment Effective
Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the
Amended and Restated Credit Agreement dated as of November
29, 1994 (the "Credit Agreement") among Polaroid
Corporation, a Delaware corporation (the "Company"), Morgan
Guaranty Trust Company of New York, as Agent (the "Agent"),
ABN-AMRO Bank N.V., as Co-Agent and the banks listed on the
signature pages thereof (the "Banks"). We have acted as
special counsel for the Agent for the purpose of rendering
this opinion pursuant to Section 3.01(c) of the Credit
Agreement. Terms defined in the Credit Agreement are used
herein as therein defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and
other instruments and have conducted such other
investigations of fact and law as we have deemed necessary
or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the
opinion that:
1. The execution and delivery and performance by
the Company of the Credit Agreement are within the Company's
corporate powers and have been duly authorized by all
necessary corporate action.
2. The Credit Agreement constitutes a valid and
binding agreement of the Company.
<PAGE>
We are members of the bar of the State of New York
only. We express no opinion as to any laws other than the
laws of the State of New York, the General Corporation Law
of the State of Delaware and the Federal laws of the United
States of America. In giving the foregoing opinion, we
express no opinion as to the effect (if any) of any law of
any jurisdiction (except the State of New York) in which any
Bank is located which limits the rate of interest that such
Bank may charge or collect.
This opinion is rendered solely to you in
connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by
any other person without our prior written consent.
Very truly yours,
2
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
AGREEMENT dated as of _________, 19__ between
[ASSIGNOR] (the "Assignor") and [ASSIGNEE] (the "Assignee"),
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement
(the "Agreement") relates to the Amended and Restated Credit
Agreement dated as of November 29, 1994 among Polaroid
Corporation (the "Company"), the Assignor and the other
Banks party thereto, as Banks, ABN AMRO Bank N.V., as Co-
Agent, and Morgan Guaranty Trust Company of New York, as
Agent (as the same may be amended from time to time, the
"Credit Agreement");
WHEREAS, Loans made to the Company by the Assignor
under the Credit Agreement are outstanding at the date
hereof in an aggregate principal amount of $__________; and
WHEREAS, the Assignor proposes to assign to the
Assignee all of the rights of the Assignor under the Credit
Agreement in respect of its outstanding Loans thereunder in
an amount equal to $__________ (the "Assigned Amount"), and
the Assignee proposes to accept assignment of such rights
and assume the corresponding obligations from the Assignor
on such terms;
NOW, THEREFORE, in consideration of the foregoing
and the mutual agreements contained herein, the parties
hereto agree as follows:
SECTION 1. Definitions. All capitalized terms
not otherwise defined herein have the respective meanings
set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby
assigns and sells to the Assignee all of the rights of the
Assignor under the Credit Agreement and its Notes to the
extent of the Assigned Amount, and the Assignee hereby
accepts such assignment from the Assignor and assumes all of
the obligations of the Assignor under the Credit Agreement
to the extent of the Assigned Amount. Upon (i) the
execution and delivery by the Assignor and the Assignee, and
the acknowledgement and acceptance by the Company and the
<PAGE>
Agent, of this Agreement and (ii) the payment by the
Assignee of the amounts specified in Section 3 of this
Agreement
required to be paid on the date hereof and the processing
fee specified in Section 12.06(c) of the Credit Agreement,
(A) the Assignee shall, as of the date hereof, succeed to
the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement to the extent of the
Assigned Amount and (B) the Assignor shall be released from
its obligations under the Credit Agreement to the extent
such obligations have been so assumed by the Assignee. The
assignment provided for herein shall be without recourse to
the Assignor.
SECTION 3. Payments. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in
Federal funds an amount equal to $_________, being the sum
of (i) the aggregate principal amount of the outstanding
Loans so assigned and (ii) interest accrued thereon up to
but excluding the date hereof. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other
party hereto, it shall receive the same for the account of
such other party to the extent of such other party's
interest therein and shall promptly pay the same to such
other party.
SECTION 4. Consent of the Company and the Agent.
This Agreement is conditioned upon the consent of the
Company (which consent shall, as provided by the Credit
Agreement, not be unreasonably withheld) and the Agent
pursuant to the Credit Agreement. The acknowledgement of
receipt of this Agreement by the Company and the Agent is
evidence of this consent.
SECTION 5. Non-Reliance on Assignor. The
Assignor makes no representation or warranty in connection
with, and shall have no responsibility with respect to, the
solvency, financial condition, or statements of the Company,
or the validity and enforceability of the obligations of the
Company in respect of the Credit Agreement or any Note. The
Assignee acknowledges that it has, independently and without
reliance on the Assignor, and based on such documents and
information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement
and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial
condition of the Company.
2
<PAGE>
SECTION 6. Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of
the State of New York.
SECTION 7. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
Acknowledged and accepted
as of the date first
above written.
POLAROID CORPORATION
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By__________________________
Title:
3
Exhibit 10.7
Document Control No.: EXEC #5
POLAROID EXECUTIVE INCENTIVE COMPENSATION PLAN
----------------------------------------------
POLAROID CORPORATION
Cambridge, Massachusetts
Effective January 1, 1994
<PAGE>
POLAROID EXECUTIVE INCENTIVE COMPENSATION PLAN
----------------------------------------------
TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS
1.01 Adjusted PBT - 1 -
1.02 Adjusted PFO - 2 -
1.03 Assets - 2 -
1.04 Average Assets - 2 -
1.05 Award Formula - 2 -
1.06 Board or Board of Directors - 2 -
1.07 Code - 2 -
1.08 Committee - 2 -
1.09 Company - 2 -
1.10 Company Contributions - 3 -
1.11 Corporate Financial Plan - 3 -
1.12 Compensation - 3 -
1.13 Employee - 4 -
1.14 Minimum Profit Target Percent - 4 -
1.15 Option - 4 -
1.16 Participant - 4 -
1.17 Plan - 4 -
1.18 Plan Year - 4 -
1.19 Profit Target - 5 -
1.20 Profit Target Percent - 5 -
1.21 Stock - 5 -
1.22 Subsidiary - 5 -
ARTICLE II ELIGIBILITY
2.01 Eligibility to Participate - 5 -
2.02 Participation - 5 -
ARTICLE III ANNUAL BONUS - CALCULATION AND DISTRIBUTION
3.01 Minimum Profit Target Percent - 6 -
3.02 Continuum of the Profit Target Percents - 6 -
3.03 Bonus Opportunity Percents - 6 -
3.04 Award Formula - 6 -
3.05 Adjustments to the Company Contributions - 6 -
3.06 Minimum Distribution - 7 -
3.07 Additional Distribution - 7 -
3.08 Extraordinary Distributions - 8 -
3.09 Participant Payment - 8 -
3.10 Terminated Participants' Payments - 8 -
3.11 Form of Payment - 9 -
3.12 Payments to Beneficiaries - 9 -
(i)
<PAGE>
ARTICLE IV DIVIDEND EQUIVALENT AWARD
4.01 Dividend Equivalent Award - 9 -
4.02 Timing of Distributions - 9 -
ARTICLE V FINANCING
5.01 Financing - 10 -
5.02 Unsecured Interest - 10 -
ARTICLE VI ADMINISTRATION
6.01 Administrator - 10 -
6.02 Duties of Administrator - 10 -
6.03 Decisions of the Committee - 11 -
ARTICLE VII MISCELLANEOUS PROVISIONS
7.01 Applicable Law - 11 -
7.02 Expenses - 11 -
7.03 Gender and Number - 11 -
7.04 Illegality of a Particular Provision - 12 -
7.05 Indemnification - 12 -
7.06 Limitation of Rights - 12 -
7.07 Non-Assignability - 12 -
7.08 Nontransferability - 12 -
7.09 Taxes - 13 -
7.10 Headings Not Part of the Plan - 13 -
7.11 Other Compensation Plans - 13 -
ARTICLE VIII EFFECTIVE DATE AND RIGHT TO AMEND, MODIFY OR
TERMINATE
8.01 Effective Date - 13 -
8.02 Right to Amend, Modify or Terminate - 13 -
(ii)
<PAGE>
POLAROID EXECUTIVE INCENTIVE COMPENSATION PLAN
----------------------------------------------
PURPOSE
-------
The Polaroid Executive Incentive Compensation Plan is established by
Polaroid Corporation to motivate present executives and other key employees
whose judgement, initiative, leadership and continued effort contribute to
the success of the Company and its Subsidiaries and to attract highly
competent individuals.
This Plan provides an incentive for executives and other key employees
of the Company and its Subsidiaries to maximize the Company's operational
performance. It also provides cash awards which correspond to the dividends
granted shareholders of common stock to those officers and other key
employees of the Company and its Subsidiaries who hold options under the
Polaroid Stock Incentive Plan. By providing periodic reminders of their
outstanding options, the Company believes that this Plan can give an
incentive to executives and key employees to increase revenues and profits.
ARTICLE I
DEFINITIONS
-----------
1.01 Adjusted PBT. Adjusted PBT for any Plan Year shall mean the
total, on a consolidated basis, of the net earnings of the
Company and its Subsidiaries for such year (excluding gains from
the sale, exchange or other disposition of capital or depreciable
assets not in the ordinary course of business), as computed by
the Company's accountants in accordance with standard accounting
practices before the provision for federal income taxes and
excess profits taxes, if any, and before foreign, state and local
taxes on or measured by income and adding back expenses for
Company contributions to this Plan or any other bonus or
incentive compensation plan (excluding sales bonus plans).
Notwithstanding the foregoing, any unusual and significant
expenses incurred (such as the 1989 Special Charges) or unusual
and significant revenues received by the Company may be excluded
from Adjusted PBT if approved by the Board of Directors.
-1-
<PAGE>
1.02 Adjusted PFO. Adjusted PFO for any Plan Year shall mean the
profit from operations as shown in the Company's financial
statements contained in the Company's annual report to
stockholders and adding back expenses for Company contributions
to this Plan or any other bonus or incentive compensation plan
(excluding sales bonus plans).
Notwithstanding the foregoing, any unusual and significant
expenses incurred (such as the 1989 Special Charges) or unusual
and significant revenues received by the Company may be excluded
from Adjusted PFO if approved by the Board of Directors.
1.03 Assets. Assets shall mean the total assets as shown in the
Company's financial statements contained in the Company's
quarterly and/or annual reports to shareholders excluding the
items identified as cash, cash equivalents, short-term
investments, prepaid expenses and deferred tax assets.
1.04 Average Assets. Average Assets shall mean the average of the
Assets as of the end of each of the four quarters in the Plan
Year and as of the end of the immediately preceding Plan Year.
1.05 Award Formula. Award Formula shall have the meaning as provided
in Section 3.04 hereof.
1.06 Board or Board of Directors. Board or Board of Directors shall
mean the Board of Directors of the Company.
1.07 Code. Code shall mean the Internal Revenue Code of 1986, as
amended, and its implementing regulations, unless otherwise
specifically provided herein.
1.08 Committee. Committee shall mean the Committee designated to
administer this Plan pursuant to Article VI hereof.
1.09 Company. Company shall mean Polaroid Corporation, a Delaware
corporation.
-2-
<PAGE>
1.10 Company Contributions. Company Contributions shall mean the
aggregate amount subject to distribution under the Award Formula
for all Participants.
1.11 Corporate Financial Plan. Corporate Financial Plan shall mean
the Company's financial plan which establishes the financial
goals for the Plan Year.
1.12 Compensation. Compensation includes and is limited to:
(a) Primary salary or wages, including any annual contribution
award;
(b) Amounts elected as or deemed to be cash, property or other
taxable benefits under any plan established by the Company
under Code Section 125 as now or hereafter in effect;
(c) Amounts elected as non-taxable benefits under any plan
established by the Company under Code Section 125 as now or
hereafter in effect;
(d) Amounts, other than the Company's matched deferral
contributions, elected as or deemed to be payments to the
Participant directly in cash under any cash or deferral
arrangement established by the Company and qualified under
Code Section 401(k) as now or hereafter in effect;
(e) Amounts, other than the Company's matched deferral
contribution, elected as or deemed to be payments as
contributions to a trust under a profit sharing or stock
bonus plan under any cash or deferral arrangement
established by the Company and qualified under Code Section
401(k) as now or hereafter in effect; and,
(f) Payments made directly or indirectly under the Company's
short-term disability program, as it shall exist from time
to time, including payments made thereunder in lieu of
payments by the Company regardless of their source
(provided, however, that the total of all such payments to a
disabled Employee shall not be in excess of the basic salary
or wages that would have been payable to him had he not been
disabled), earned by and paid to a Participant by the
Company in a Plan Year during which he was a Participant.
-3-
<PAGE>
All compensation or allocations, other than those described in
(a) through (f) above, are excluded from Compensation, such as
but not limited to, overtime pay, shift premiums, schedule change
premiums, special day premiums, tuition refunds, relocation
payments, suggestion or special awards, commissions, fixed and
other bonuses, payments pursuant to any incentive compensation or
profit sharing plan contributions (including the Company's
matched deferral contributions), allocations or benefits pursuant
to any retirement, pension, survivor's benefit, death benefit,
long-term disability, insurance or other plan, severance pay and
premiums, adjustments and allowances on account of foreign
service.
1.13 Employee. Employee shall mean any "full-time permanent" or
"part-time permanent" executive or key employee of Company or of
its Subsidiaries, as defined by the Company in a uniform and
non-discriminatory manner.
1.14 Minimum Profit Target Percent. Minimum Profit Target Percent
shall have the meaning as provided in Section 3.01 of this Plan.
1.15 Option. Option shall mean the number of shares in an Option
granted after January 1, 1994, under the 1993 Polaroid Stock
Incentive Plan.
1.16 Participant. Participant shall mean an Employee selected to
participate in the Plan in accordance with Article II hereof.
1.17 Plan. Plan shall mean this Polaroid Executive Incentive
Compensation Plan as in effect from time to time.
1.18 Plan Year. Plan Year shall mean a calendar year.
-4-
<PAGE>
1.19 Profit Target. Profit Target shall mean the target set by the
Committee prior to the end of the first quarter of the Plan Year
for Adjusted PFO for the Plan Year.
1.20 Profit Target Percent. Profit Target Percent shall mean the
ratio of the actual Adjusted PFO to the Profit Target and for the
Plan Year.
1.21 Stock. Stock shall mean common stock, par value $1 per share,
issued by the Company.
1.22 Subsidiary. Subsidiary shall mean any corporation of which more
than fifty percent (50%) of the outstanding shares of voting
stock are beneficially owned directly or indirectly by the
Company.
ARTICLE II
ELIGIBILITY
-----------
2.01 Eligibility to Participate. Executives and key employees,
whether or not directors of the Company or a Subsidiary, who are
employed in positions of administrative, technical, or managerial
responsibility shall be eligible to participate in the Plan.
Notwithstanding the foregoing, in order to receive a
Dividend Equivalent Award under Article IV, the Participant must
have received an Option grant under the 1993 Polaroid Stock
Incentive Plan after January 1, 1994.
2.02 Participation. Non-officer Employees eligible to participate
under Section 2.01 shall become Participants if selected by the
Committee. Officers of the Company or any Subsidiary eligible to
participate under Section 2.01 shall become Participants if
selected by the Human Resources Committee of the Board of
Directors.
-5-
<PAGE>
ARTICLE III
ANNUAL BONUS - CALCULATION AND DISTRIBUTION
-------------------------------------------
3.01 Minimum Profit Target Percent. The Committee, prior to the end
of the first quarter of a Plan Year, shall establish the lowest
Profit Target Percent for such Plan Year for each classification
of Participants. In order for there to be distributions under
the Award Formula for the Plan Year to such classification, this
Minimum Profit Target Percent must be achieved.
3.02 Continuum of the Profit Target Percents. Prior to the end of the
first quarter of the Plan Year, the Committee shall establish a
series of Profit Target Percents for each classification of
Participants above the Minimum Profit Target Percent which
provides an incremental increase to such classification of
Participants' Bonus Opportunity Percents.
3.03 Bonus Opportunity Percents. Prior to the end of a Plan Year, the
Committee shall establish a series of percents of Compensation
for each classification of Participants for the Plan Year which
shall be used in the Award Formula to determine a Participant's
distribution for such year. Such percents shall be correlated to
the Profit Target Percents achieved for such Plan Year and shall
be called the Participant's Bonus Opportunity Percents.
3.04 Award Formula. The Award Formula for each Participant shall
equal his Compensation for the Plan Year multiplied by the Bonus
Opportunity Percent at the highest achieved Profit Target Percent
(as determined in Sections 3.01 through 3.03 hereof) and
multiplied by the adjustments set forth in Section 3.05 below.
3.05 Adjustments to the Company Contributions. Notwithstanding
anything to the contrary in this Plan, the following adjustments
shall be made, if appropriate:
(a) If Company Contributions to the Polaroid Employee Incentive
Compensation Plan are restricted by the provision which
limits Company Contributions to an amount not to exceed 10%
of Adjusted PBT, the Award Formula for each Participant in
such Plan Year shall be reduced by the ratio of the Company
Contributions actually contributed to the Polaroid Employee
Incentive Compensation Plan to the Company Contributions
which would have been distributed in the absence of such
restriction.
-6-
<PAGE>
(b) If Company Contributions to the Polaroid Employee Incentive
Compensation Plan are reduced or increased because Average
Assets for a Plan Year varied from the Average Assets
planned in the Corporate Financial Plan for such Plan Year,
each Participant's Award Formula shall be reduced or
increased by the ratio of the Company Contributions actually
contributed to the Polaroid Employee Incentive Compensation
Plan to the Company Contributions which would have been
distributed if the Corporate Financial Plan had been
achieved.
3.06 Minimum Distribution. Each Participant eligible to receive a
distribution under the Award Formula as set forth in Section 3.04
above shall receive at least fifty percent (50%) of the amount he
would have received under the Award Formula.
3.07 Additional Distribution. The Committee, in its sole discretion,
may grant a Participant an additional distribution based on the
following:
(a) The available pool of resources shall equal the total of the
Award Formula for all Participants minus the aggregate
Minimum Distributions given to Participants for the Plan
Year;
(b) Each Participant's individual contribution; and,
(c) An overall award limit for any Participant for a Plan Year
which may not exceed the lesser of seventy-five percent
(75%) of his Compensation or one hundred fifty percent
(150%) of the Award Formula.
Additional Distributions granted to members of the Committee
shall be approved by the Compensation Committee of the Board of
Directors. The total available pool of funds, as generated by
the Award Formula, as set forth in Section 3.04, shall be
allocated yearly.
-7-
<PAGE>
3.08 Extraordinary Distributions. If the Minimum Profit Target
Percent is not achieved in a Plan Year for a classification(s) of
Participants:
(a) (1) The Compensation Committee of the Board of Directors,
in its sole discretion, may grant extraordinary
distributions to any officer for his significant
individual contribution; and
(2) The Committee, in its sole discretion, may grant
extraordinary distributions to any non-officer for his
significant individual contribution.
(b) The aggregate amount of funds available for all such
extraordinary distributions in a Plan Year shall be
determined by the Compensation Committee of the Board of
Directors. In no event, shall such aggregate amount exceed
20% of what the Company Contributions would have been had
the actual Profit Target been reached.
(c) Notwithstanding anything to the contrary in this Section, no
Participant shall receive an extraordinary distribution more
than the maximum he could have otherwise received under this
Plan if the actual Profit Target had been reached.
3.09 Participant Payment. Each Participant who is employed by the
Company on the last day of a Plan Year shall be entitled to an
incentive payment under this Plan if his minimum Profit Target
Percent for the Plan Year is met.
3.10 Terminated Participants' Payments. For a Plan Year in which a
Profit Target Percent is met, a Participant who has terminated
during such Plan Year by:
(a) Death;
(b) Retirement;
(c) Layoff;
(d) Long-Term Disability;
(e) Leave of absence (including military leave);
(f) Transfer to a Subsidiary; or,
(g) Any other reason that the Committee, in its sole discretion
determines to be exceptional cause,
shall be entitled to a proportionate incentive payment based upon
the Compensation paid him or her during the Plan Year up to the
date of cessation of participation. A Participant who terminates
during any given Plan Year for any other reason shall not be
entitled to an incentive payment under this Plan.
-8-
<PAGE>
3.11 Form of Payment. Each Participant shall be paid in a lump sum
cash payment.
3.12 Payments to Beneficiaries. If a Participant dies prior to his
receipt of payments under this Plan, the payment shall be made:
(a) To the deceased Participant's spouse;
(b) If there is no living spouse, to the Participant's children,
divided equally; or,
(c) If there are no children, to the deceased Participant's
estate.
ARTICLE IV
DIVIDEND EQUIVALENT AWARD
-------------------------
4.01 Dividend Equivalent Award. A Dividend Equivalent Award shall
equal number of shares on which each Participant has an Option
granted subsequent to January 1, 1994 multiplied by $0.15.
Notwithstanding the foregoing, this Award will not be paid on
Stock which is part of an Option that has been exercised,
terminated or lapsed.
4.02 Timing of Distributions. The Dividend Equivalent Awards shall be
payable at such time as the dividends are issued to the Company's
shareholders of common stock. Notwithstanding the foregoing, a
Dividend Equivalent Award shall be paid only for the portion of
the Option held on the record date for the issuance of dividends
to the Company's shareholders of common stock. An Award will not
be paid on any portion of the Option which has been exercised,
terminated or lapsed.
-9-
<PAGE>
ARTICLE V
FINANCING
---------
5.01 Financing. The benefits under this Plan shall be paid out of the
general assets of the Company.
5.02 Unsecured Interest. No Participant hereunder shall have any
interest whatsoever in any specific asset of the Company. To the
extent that any person acquires a right to receive payments under
this Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
ARTICLE VI
ADMINISTRATION
--------------
6.01 Administrator. The Plan shall be administered by the Committee
designated by the Chief Executive Officer of the Company and
shall consist of not less than three officers of the Company.
Members of the Committee shall not be entitled to any
compensation for services hereunder.
6.02 Duties of Administrator. The Committee shall:
(a) Administer the Plan in accordance with its terms;
(b) Have the exclusive discretionary authority to interpret the
Plan for any questions which may arise, including without
limitation questions relating to eligibility for or the
amount of benefits;
(c) Maintain records of its actions;
(d) Engage and consult with counsel, accountants, specialists
and other persons as the Plan Administrator deems necessary
and desirable;
(e) Make all other determinations and take all other actions
deemed necessary or advisable for the proper administration
of the Plan;
(f) Adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and
proceedings as it shall deem advisable;
(g) Make all determinations it deems advisable for the
administration of the Plan;
(h) Decide all disputes arising in connection with the Plan;
and,
(i) Otherwise supervise the administration of the Plan.
-10-
<PAGE>
6.03 Decisions of the Committee. Committee decisions must be approved
by a majority of the members and may be made by either a vote at
a meeting or in writing (without a meeting). Any member of the
Committee who is a Participant under the Plan shall not vote on
any question relating exclusively to himself. The Human
Resources Committee of the Board of Directors shall approve any
award, decision, rule or interpretation which relates exclusively
to any Participant who is a member of the Committee. Any
determination by the Committee or Human Resources Committee of
the Board of Directors shall be conclusive and binding except as
otherwise provided in this Plan or prohibited by law.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
7.01 Applicable Law. This instrument shall be construed in accordance
with and governed by the laws of the Commonwealth of
Massachusetts to the extent not superseded by the laws of the
United States.
7.02 Expenses. The cost of benefit payments from this Plan and the
expenses of administering the Plan shall be borne by the Company.
7.03 Gender and Number. Unless the context clearly requires
otherwise, the masculine pronoun whenever used shall include the
feminine and neuter pronoun, the singular shall include the
plural, and vice versa.
-11-
<PAGE>
7.04 Illegality of a Particular Provision. The illegality of any
particular provision of this document shall not affect the other
provisions and the document shall be construed in all respects as
if such invalid provision were omitted.
7.05 Indemnification. No member of the Board of Directors or the
Committee shall be liable for any action or determination taken
or made in good faith with respect to this Plan, any Awards
granted or any award distributions under it. Each member of the
Board of Directors and the Committee shall be indemnified by the
Company against any losses incurred in such administration of the
Plan, unless his action constitutes serious and willful
misconduct.
7.06 Limitation of Rights. Neither the adoption and maintenance of
the Plan nor anything contained herein shall with respect to any
present or former Participant or other officer or employee of the
Company or any Subsidiary be deemed to:
(a) Limit the right of the Company or any Subsidiary to
discharge or discipline any such person or otherwise
terminate or modify the terms of his employment; or,
(b) Create any contract or other right or interest under the
Plan or in any funds hereunder other than as specifically
provided herein.
7.07 Non-Assignability. A Participant's interest under this Plan
shall not be subject at any time or in any manner to alienation,
sale, transfer, assignment, pledge, attachment, garnishment or
encumbrance of any kind and any attempt to deliver, sell,
transfer, assign, pledge, attach, garnish or otherwise encumber
such interest shall be void and any interest so encumbered will
terminate.
7.08 Nontransferability. In no event shall the Company make any
payment under this Plan to any assignee or creditor of a
Participant or of a Beneficiary, except as otherwise required by
law. Prior to the time of a payment hereunder, a Participant or
a Beneficiary shall have no rights by way of anticipation or
otherwise to assign or otherwise dispose of any interest under
this Plan, nor shall rights be assigned or transferred by
operation of law.
-12-
<PAGE>
7.09 Taxes. The Company shall have the right to deduct from the award
distributions any federal, state or local taxes required by law
to be withheld with respect to such distribution.
7.10 Headings Not Part of the Plan. Headings of Articles and Sections
are inserted for convenience and reference; they do not
constitute any part of this Plan.
7.11 Other Compensation Plans. The adoption of the Plan shall not
affect any other existing or future incentive or compensation
plans for directors, officers or employees of the Company or its
Subsidiaries. Moreover, the adoption of this Plan shall not
preclude the Company or its Subsidiaries from:
(a) Establishing any other forms of incentive or other
compensation for directors, officers or employees of the
Company or its Subsidiaries; or,
(b) Assuming any forms of incentives or other compensation of
any person or entity in connection with the acquisition of
the business or assets, in whole or in part, of any person
or entity.
ARTICLE VIII
EFFECTIVE DATE AND RIGHT TO
AMEND, MODIFY OR TERMINATE
--------------------------
8.01 Effective Date. This Plan, originally adopted by the Board of
Directors on February 18, 1986, effective as of January 1, 1986,
is hereby amended effective January 1, 1994.
8.02 Right to Amend, Modify or Terminate. The Company reserves the
right to amend, modify or terminate the Plan or payments
thereunder at any time by action of the Board of Directors and
does not intend to submit any amendments or modifications to the
Plan to stockholders of the Company for their approval. However,
without the consent of any Participant or his Beneficiary, if
applicable, no such amendment or termination shall reduce or
diminish such person's right to receive any benefit accrued
hereunder prior to the date of such amendment or termination.
Notwithstanding the foregoing, the Chief Executive Officer of the
Company may adopt any amendments to the Plan that do not
materially and adversely affect the benefits to a Participant
accrued under the Plan and may adopt any amendments to the Plan
that do not materially affect the cost to the Company (excluding
any amendment that relates exclusively to himself).
-13-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed this 5th day of May, 1994, effective January 1, 1994.
Attest: POLAROID CORPORATION
Richard F. deLima By: I. M. Booth
------------------ -------------------------
Secretary Chief Executive Officer
-14-
Exhibit 10.8
Document Control No.: EERP#2
POLAROID EXECUTIVE
EQUALIZATION RETIREMENT PLAN
Originally Effective January 1, 1989
As Amended Effective January 1, 1994
<PAGE>
POLAROID EXECUTIVE
EQUALIZATION RETIREMENT PLAN
TABLE OF CONTENTS
ARTICLE I THE PLAN
1.01 Establishment of the Plan - 1 -
1.02 Purpose - 1 -
1.03 Application of Plan - 1 -
ARTICLE II DEFINITIONS
2.01 Acquiring Person - 1 -
2.02 Affiliate and Associate - 2 -
2.03 Beneficial Owner - 2 -
2.04 Beneficiary - 3 -
2.05 Board of Directors - 4 -
2.06 Change of Control - 4 -
2.07 Code - 5 -
2.08 Company - 5 -
2.09 Disinterested Director - 5 -
2.10 Exchange Act - 5 -
2.11 Participant - 6 -
2.12 Pension Plan - 6 -
2.13 Plan - 6 -
2.14 Plan Administrator - 6 -
2.15 Plan Year - 6 -
2.16 PreRetirement Survivor Annuity - 6 -
2.17 Retirement Parity Plan - 6 -
2.18 Share Acquisition Date - 6 -
2.19 Spouse - 6 -
2.20 Survivor Income Benefit - 7 -
ARTICLE III PARTICIPATION
3.01 Participant - 7 -
3.02 Vesting - 7 -
ARTICLE IV BENEFITS
4.01 Benefit Calculation - 7 -
4.02 Normal Form of Payment - 8 -
4.03 Form of Payment Upon Change of Control - 9 -
4.04 Actuarial Adjustments for Lump Sum Payments - 9 -
4.05 Survivor Benefit - 10 -
ARTICLE V FINANCING
5.01 Financing - 11 -
5.02 Unsecured Interest - 11 -
(i)
<PAGE>
ARTICLE VI ADMINISTRATION
6.01 Administration - 12 -
6.02 Duties of the Plan Administrator - 12 -
ARTICLE VII MISCELLANEOUS PROVISIONS
7.01 Applicable Law - 14 -
7.02 Expenses - 14 -
7.03 Gender and Number - 14 -
7.04 Illegality of a Particular Provision - 14 -
7.05 Indemnification - 14 -
7.06 Limitation of Rights - 15 -
7.07 Non-Assignability - 15 -
7.08 Nontransferability - 16 -
7.09 Taxes - 16 -
ARTICLE VIII REVIEW PROCEDURE
8.01 Claims for Benefits - 16 -
8.02 Review Procedure - 16 -
ARTICLE IX EFFECTIVE DATE AND RIGHT TO AMEND, MODIFY OR
TERMINATE - 17 -
9.01 Effective Date - 17 -
9.02 Right to Amend, Modify or Terminate - 17 -
(ii)
<PAGE>
POLAROID EXECUTIVE
EQUALIZATION RETIREMENT PLAN
ARTICLE I
THE PLAN
1.01 Establishment of the Plan. Polaroid Corporation hereby
establishes an unfunded supplemental executive retirement plan
called the "Polaroid Executive Equalization Retirement Plan" (the
"Plan").
1.02 Purpose. The purpose of this Plan is to supplement Participants'
benefits from the Polaroid Pension Plan in recognition of their
service with the Company and in recognition of the fact that the
Participants are unable to receive their full benefit under the
Pension Plan due to the restructuring of Polaroid in 1988 and the
restrictions imposed by Section 401(a)(17) of the Code.
1.03 Application of Plan. The terms of this Plan are applicable only
to those individuals who are employed by the Company on or after
January 1, 1989 and qualify hereunder.
ARTICLE II
DEFINITIONS
2.01 Acquiring Person. Acquiring Person shall mean any Person who or
which, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of 20% or more of the Common
Shares then outstanding, but does not include any subsidiary of
the Company, any employee benefit plan of the Company or of any
of its Subsidiaries or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan.
<PAGE>
2.02 Affiliate and Associate. Affiliate and Associate, when used with
reference to any Person, shall have the meaning given to such
terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
2.03 Beneficial Owner. A Beneficial Owner shall mean a Person deemed
to "beneficially own", any securities which:
(A) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly; or
(B) such Person or any of such Person's Affiliates or Associates
has:
(1) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (written
or oral), or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or
exchange thereunder;
-2-
<PAGE>
(2) the right to vote pursuant to any agreement,
arrangement or understanding (written or oral);
provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding
(written or oral) to vote such security (i) arises
solely from a revocable proxy given to such Person in
response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable
rules and regulations under the Exchange Act and (ii)
is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report);
or
(3) which are beneficially owned, directly or indirectly,
by any Person with which such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding (written or oral), for the
purpose of acquiring, holding, voting (except pursuant
to a revocable proxy as described in Section 2.03(B)(2)
of this Plan) or disposing of any securities of the
Company.
2.04 Beneficiary. Beneficiary shall mean the person or persons
identified as the Beneficiary under the Pension Plan.
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<PAGE>
2.05 Board of Directors. Board of Directors shall mean the Board of
Directors of the Company.
2.06 Change of Control. Change of Control shall mean:
(A) the date on which a change in control of the Company occurs
of a nature that would be required to be reported (assuming
that the Company's Common Stock was registered under the
Exchange Act) in response to an item (currently Item 6(e))
of Schedule 14A of Regulation 14A promulgated under the
Exchange Act or an item (currently Item 1(a)) of Form 8-K
under the Exchange Act;
(B) the date on which there is an Acquiring Person and change in
the composition of the Board of Directors of the Company
within two years after the Share Acquisition Date with
respect to such Acquiring Person that results in the
Disinterested Directors not constituting a majority of the
Board of Directors;
(C) any day on or after the Share Acquisition Date when,
directly or indirectly, any of the transactions specified in
the following clauses shall occur:
(1) the Company shall consolidate with, or merge with and
into, any other Person;
(2) any Person shall merge with and into the Company;
(3) the Company shall sell, lease, exchange or otherwise
transfer or dispose of (or one or more of its
Subsidiaries shall sell, lease, exchange or otherwise
transfer or dispose of), in one or more transactions,
the major part of the assets of the Company and its
Subsidiaries (taken as a whole) to any other Person or
Persons; or
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<PAGE>
(D) the date when a Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or any of its Subsidiaries or any Person holding
Common Shares for or pursuant to the terms of any such
employee benefit plan) alone or together with all Affiliates
and Associates of such Person, becomes the Beneficial Owner
of 30% or more of the Common Shares then outstanding.
2.07 Code. Code shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations and rulings
thereunder.
2.08 Company. Company shall mean Polaroid Corporation, a Delaware
corporation.
2.09 Disinterested Director. A Disinterested Director shall mean a
member of the Board of Directors as of the Share Acquisition Date
who is not an Employee of the Company.
2.10 Exchange Act. Exchange Act shall mean the Securities Exchange
Act of 1934, as in effect on the date in question, unless
otherwise specifically provided in this Plan.
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<PAGE>
2.11 Participant. Participant shall mean an individual qualified to
participate in the Plan in accordance with Article III hereof.
2.12 Pension Plan. Pension Plan shall mean the Polaroid Pension Plan
as in effect from time to time.
2.13 Plan. Plan shall mean this Polaroid Executive Equalization
Retirement Plan, as in effect from time to time.
2.14 Plan Administrator. Plan Administrator shall mean the
individual(s) so designated, as provided in Article VI hereof.
2.15 Plan Year. Plan Year shall mean a calendar year.
2.16 PreRetirement Survivor Annuity. PreRetirement Survivor Annuity
shall mean the definition as stated in the Pension Plan.
2.17 Retirement Parity Plan. Retirement Parity Plan shall mean the
Polaroid Retirement Parity Plan as in effect from time to time.
2.18 Share Acquisition Date. Share Acquisition Date shall mean the
first date any Person shall become an Acquiring Person.
2.19 Spouse. Spouse shall mean, with respect to a Participant, the
person to whom such Participant is legally married, and with
respect to a deceased Participant, the widow or widower of such
deceased Participant who was legally married to such Participant
on the date of his death and who, if such death was due to
illness rather than accident or other reason, was legally married
to such Participant for not less than six months immediately
preceding such death.
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2.20 Survivor Income Benefit. Survivor Income Benefit shall mean that
definition given in the Pension Plan.
ARTICLE III
PARTICIPATION
3.01 Participant. Each Employee shall be eligible to be a Participant
in the Plan if his vested benefits under the Polaroid Pension
Plan are limited to the restrictions imposed by Section
401(a)(17) of the Code on Compensation.
3.02 Vesting. Subject to the claims of general creditors of the
Company as set forth in Article V, a Participant shall have a
nonforfeitable right to a benefit.
ARTICLE IV
BENEFITS
4.01 Benefit Calculation. The benefit under this Plan shall be a
monthly retirement benefit equal to the difference between the
amount in (A) and the amount in (B) stated below:
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(A) The amount of the monthly retirement benefit for that month
(including benefit increases such as cost-of-living
increases ("COLAs"), if applicable) which would be payable
under the Pension Plan calculated by:
(1) disregarding any limitations on the amount of the
annual Compensation limits imposed by Section
401(a)(17) of the Code; and,
(2) for a Participant who has had a five percent cut in pay
pursuant to Article IV of the Polaroid Officer's
Compensation Exchange Plan, increasing Compensation, as
defined in Section 1.05 of the Pension Plan, by five
(5) percent for the years ending December 31, 1989,
1990, 1991, 1992, 1993, 1994 and 1995; and,
(3) disregarding any limitations on benefits imposed by
Section 415 of the Code.
(B) The amount of the monthly retirement benefit which is
actually paid for the month (including benefit increases
such as COLAs) under the Pension Plan plus amounts paid
under the Retirement Parity Plan.
This benefit, if due, shall be payable as long as a benefit is
paid to the Participant under the Pension Plan.
4.02 Normal Form of Payment. Assets in this Plan will be distributed
in the same manner as the Participant's election under the
Polaroid Pension Plan unless the Participant makes an irrevocable
election to receive a lump sum payment. This irrevocable
election must be made:
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<PAGE>
(A) at least nine months prior to the Participant's Termination
Date; and
(B) in a calendar year preceding the calendar year of the
Participant's Termination Date.
4.03 Form of Payment Upon Change of Control. Assets in this Plan will
be distributed in a lump sum as soon as practicable after
termination if a Participant's termination is within twenty-four
months of a Change of Control.
4.04 Actuarial Adjustments for Lump Sum Payments. Any lump sum
payment under this Plan shall be made using an eight (8) percent
interest rate as adjusted semi-annually based on the guidelines
for single lump sum distributions set forth in Section 767 of the
Retirement Protection Act of 1994 ("Act") amending Section
411(a)(11) of the Code and the mortality tables modified semi-
annually based on the guidelines in the Act. This mortality
table will e applied on a unisex basis. If a unisex basis is
prescribed by the Secretary of Treasury for purposes of
calculation of lump sums under Section 417(e)(3)(c) of the Code
modified by the Act, this unisex version will be used. Until
such time, a weighting of the male and female mortality rules
under the prescribed table will apply. This weighting will be
eighty (80) percent male and twenty (20) percent female.
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<PAGE>
4.05 Survivor Benefit.
(A) Eligibility. If a Participant dies while eligible for a
Survivor Income Benefit under the Pension Plan and/or for a
PreRetirement Survivor Annuity under the Pension Plan, then
the Beneficiary shall be eligible to receive an additional
lump sum benefit under this Plan.
(B) Amount. The Survivor Income Benefit under this Plan shall
be the actuarial equivalent of the difference between the
amount in (1) and the amount in (2) stated below:
(1) The amount of the Survivor Income Benefit and/or
PreRetirement Survivor Annuity benefit under the
Pension Plan which would be payable calculated by:
(a) disregarding any limitations on the amount of the
annual Compensation limits imposed by Section
401(a)(17) of the Code; and,
(b) for a Participant who has had a five percent cut
in pay pursuant to Article IV of the Polaroid
Officer's Compensation Exchange Plan,increasing
Compensation as defined in Section 1.05 of the
Pension Plan by five (5) percent for each year
after December 31, 1988; and,
(c) disregarding any limitations on benefits imposed
by Section 415 of the Code.
(2) The amount of the Survivor Income Benefit or
PreRetirement Survivor Annuity which is actually to be
paid under the Pension Plan plus amounts to be paid
under the Retirement Parity Plan.
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<PAGE>
(C) Commencement of Benefit. The Survivor Income Benefit shall
be paid as soon as practicable upon notification of the
death of the Participant.
(D) Form of Payment. The payment of the Survivor Income Benefit
shall be in a single lump sum unless the Plan Administrator
directs that payment be made in any other manner which is
consistent with the payment of the Survivor Income Benefit
or PreRetirement Survivor Annuity under the Pension Plan.
ARTICLE V
FINANCING
5.01 Financing. The benefits under this Plan shall be paid out of a
grantor's trust established by the Company to hold assets for
liabilities accrued under this Plan and, to the extent assets are
insufficient, from the general assets of the Company.
5.02 Unsecured Interest. No Participant hereunder shall have any
interest whatsoever in any specific asset of the Company. To the
extent that any person acquires a right to receive payments under
this Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
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<PAGE>
ARTICLE VI
ADMINISTRATION
6.01 Administration. The Chief Executive Officer of the Company shall
appoint the Benefits Committee as Plan Administrator. The Plan
Administrator shall be a committee consisting of a Chairman and
at least two other members. Any member of the Plan Administrator
may be removed by the Chief Executive Officer of the Company at
any time with or without cause. A member of the Plan
Administrator may resign at any time by filing written notice
thereof with the Secretary of the Company. Each member of the
Plan Administrator shall serve until such time as he retires,
dies, resigns or is removed. Vacancies in the Plan Administrator
shall be filled by the Chief Executive Officer of the Company.
6.02 Duties of the Plan Administrator. The Plan Administrator shall
have the following responsibilities and powers:
(A) The Plan Administrator shall administer the Plan in
accordance with its terms and shall have all the powers
necessary to carry out the provisions of the Plan. The Plan
Administrator shall interpret the Plan and shall determine
all questions, including questions of eligibility, arising
in the interpretation, administration and application of the
Plan and including all appeals by Employees. Any
determination by the Plan Administrator shall be conclusive
and binding on all persons unless arbitrary or capricious or
otherwise prohibited by law. Any exercise of discretion by
the Plan Administrator shall be exercised in a non-
discriminatory manner.
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(B) The Plan Administrator shall keep a permanent record of its
actions with respect to the Plan which shall be available
for inspection by appropriate parties as provided in the
Code and the Employee Retirement Income Security Act of
1974, as amended from time to time.
(C) The Plan Administrator may engage and consult with counsel,
accountants, specialists and other persons as the Plan
Administrator deems necessary and desirable. Members of the
Plan Administrator shall be indemnified by the Company with
respect to any action taken or omitted by the Plan
Administrator in good faith reliance on the advice of such
persons provided that the Plan Administrator has acted
prudently in selecting or retaining such persons, to which
end the Plan Administrator shall periodically review such
persons' performance.
(D) The members of the Plan Administrator shall not be entitled
to any compensation for services hereunder. Any act
authorized or required of the Plan Administrator may be done
by a majority of the then members of the Plan Administrator.
The action of such majority expressed either by vote at a
meeting or in writing without a meeting shall constitute the
action of the Plan Administrator. Any member of the Plan
Administrator who is a Participant in this Plan shall not
vote on any question relating exclusively to himself.
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<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 Applicable Law. This instrument shall be construed in accordance
with and governed by the laws of the Commonwealth of
Massachusetts to the extent not superseded by the laws of the
United States.
7.02 Expenses. The cost of benefit payments from this Plan and the
expenses of administering the Plan shall be borne by the Company.
7.03 Gender and Number. Unless the context clearly requires
otherwise, the masculine pronoun whenever used shall include the
feminine and neuter pronoun, the singular shall include the
plural, and vice versa.
7.04 Illegality of a Particular Provision. The illegality of any
particular provision of this document shall not affect the other
provisions, and the document shall be construed in all respects
as if such invalid provision were omitted.
7.05 Indemnification. No member of the Board of Directors or the
Plan Administrator shall be liable for any action or
determination taken or made in good faith with respect to this
Plan, or any benefit granted or distributed under this Plan.
Each member of the Board of Directors and the Plan Administrator
shall be indemnified by the Company against any losses incurred
in such administration of the Plan, unless his action constitutes
serious and willful misconduct.
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<PAGE>
7.06 Limitation of Rights. Neither the adoption and maintenance of
the Plan nor anything contained herein shall with respect to any
present or former Participant, or other officer or employee of
Polaroid be deemed to:
(A) limit the right of Polaroid to discharge or discipline any
such person, or otherwise terminate or modify the terms of
his employment, or
(B) create any contract or other right or interest under the
Plan or in any funds hereunder other than as specifically
provided herein.
7.07 Non-Assignability. A Participant's interest under this Plan
shall not be subject at any time or in any manner to alienation,
sale, transfer, assignment, pledge, attachment, garnishment or
encumbrance of any kind and any attempt to deliver, sell,
transfer, assign, pledge, attach, garnish or otherwise encumber
such interest shall be void and any interest so encumbered will
terminate.
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<PAGE>
7.08 Nontransferability. In no event shall the Company make any
payment under this Plan to any assignee or creditor of a
Participant or of a Beneficiary, except as otherwise required by
law. Prior to the time of a payment hereunder, a Participant or
a Beneficiary shall have no rights by way of anticipation or
otherwise to assign or otherwise dispose of any interest under
this Plan, nor shall rights be assigned or transferred by
operation of law.
7.09 Taxes. Polaroid shall have the right to deduct from any
distribution any federal, state or local taxes required by law to
be withheld with respect to such distribution.
ARTICLE VIII
REVIEW PROCEDURE
8.01 Claims for Benefits. All claims for benefits should be made
through the Benefits Office.
8.02 Review Procedure. If a Participant is denied benefits, wholly or
partially under this Plan, the Participant or Beneficiary may
file a written request for review with the Compensation Committee
of the Board of Directors within sixty (60) days following the
date of denial. The Participant or Beneficiary shall have the
right:
(A) to review pertinent documents; and,
(B) to submit written comments.
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ARTICLE IX
EFFECTIVE DATE AND RIGHT TO
AMEND, MODIFY OR TERMINATE
9.01 Effective Date. This Plan was originally adopted by the Board of
Directors on March 28, 1989, effective January 1, 1989, and has
been amended effective January 1, 1994.
9.02 Right to Amend, Modify or Terminate. The Company reserves the
right to amend, modify or terminate the Plan or payments
thereunder at any time by action of the Board of Directors;
provided that the Chief Executive Officer of the Company may
adopt any amendments to the Plan that do not materially affect
the Company's costs of maintaining the Plan and do not relate
exclusively to himself. The Company does not intend to submit
any amendments or modifications to the Plan to stockholders of
the Company for their approval. Notwithstanding the foregoing:
(A) no such amendment or termination shall reduce or diminish
any person's right to receive any benefit accrued hereunder
prior to the date of such amendment or termination; and,
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(B) no amendment or termination following a Change in Control
may alter the Company's obligation to make payment in the
form described in Section 4.03, under the circumstances
described therein.
IN WITNESS WHEREOF, Polaroid has caused this instrument originally
effective January 1, 1989 to be executed this 21st day of December, 1994,
to be effective as amended January 1, 1994.
Attest: POLAROID CORPORATION
Richard F. deLima By: I. M. Booth
------------------ -------------------------
Secretary Chief Executive Officer
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Exhibit 10.9
Document Control No.: OCEP #5
POLAROID CORPORATION
OFFICER'S COMPENSATION EXCHANGE PLAN
------------------------------------
Originally Effective January 1, 1988
As Amended Effective January 1, 1994
<PAGE>
POLAROID CORPORATION
OFFICER'S COMPENSATION EXCHANGE PLAN
------------------------------------
TABLE OF CONTENTS
ARTICLE I THE PLAN
1.01 Establishment of the Plan - 2 -
1.02 Purpose - 2 -
1.03 Application of Plan - 2 -
ARTICLE II DEFINITIONS
2.01 Award - 2 -
2.02 Beneficiary - 2 -
2.03 Board of Directors - 3 -
2.04 Code - 3 -
2.05 Committee - 3 -
2.06 Common Stock - 3 -
2.07 Company - 3 -
2.08 Distribution Date - 3 -
2.09 Election Date - 3 -
2.10 Employee - 4 -
2.11 Estate - 4 -
2.12 Fair Market Value - 4 -
2.13 IRS Limitation Award - 4 -
2.14 Long-Term Disability - 4 -
2.15 Participant - 5 -
2.16 Plan Year - 5 -
2.17 Spouse - 5 -
2.18 Equity Plan - 5 -
2.19 Subsidiary - 5 -
ARTICLE III ALLOCATIONS DUE TO IRS RESTRICTIONS LIMITING
ALLOCATIONS IN THE EQUITY PLAN
3.01 Participant - 5 -
3.02 Allocation Due to IRS Limitations Limiting
Allocations in the Equity Plan - 6 -
3.03 Distribution of the Benefit - 6 -
ARTICLE IV BENEFIT ON EXCHANGE OF COMPENSATION
4.01 Participant - 6 -
4.02 Effect of Termination of Employment - 6 -
4.03 Death of Participant - 7 -
4.04 Award - 7 -
4.05 Special Award - 7 -
4.06 Value of Distribution - 7 -
4.07 Distribution Date - 8 -
(i)
<PAGE>
ARTICLE V FINANCING
5.02 Unsecured Interest - 9 -
ARTICLE VI ADMINISTRATION
6.01 Administrator - 9 -
6.02 Duties of Administrator - 9 -
ARTICLE VII REVIEW PROCEDURE
7.01 Claims for Benefits - 10 -
7.02 Review Procedure - 10 -
7.03 Decision on Review of Claim Denial - 10 -
7.04 Standard of Review - 10 -
ARTICLE VIII MISCELLANEOUS PROVISIONS
8.01 Applicable Law - 11 -
8.02 Expenses - 11 -
8.03 Limitation of Rights - 11 -
8.04 Gender and Number - 11 -
8.05 Illegality of a Particular Provision - 11 -
8.06 Non-Assignability - 12 -
8.07 Nontransferability - 12 -
8.08 Indemnification - 12 -
8.09 Taxes - 12 -
8.10 Stock Split, Special Dividends, etc - 13 -
8.11 Timing of Distribution - 13 -
8.12 Form of Distribution - 13 -
8.13 Vesting - 13 -
8.14 Participant is Not a Shareholder - 13 -
ARTICLE IX EFFECTIVE DATE, AMENDMENT AND
TERMINATION AND LIMITATION OF RIGHTS
9.01 Effective Date - 13 -
9.02 Right to Amend, Modify or Terminate - 14 -
(ii)
<PAGE>
POLAROID CORPORATION
OFFICER'S COMPENSATION EXCHANGE PLAN
------------------------------------
ARTICLE I
THE PLAN
--------
1.01 Establishment of the Plan. Polaroid Corporation hereby
establishes an unfunded deferred compensation plan called the
"Officer's Compensation Exchange Plan" (the "Plan").
1.02 Purpose. The purpose of the Officer's Compensation Exchange
Plan is to promote the interests of Polaroid Corporation (the
"Company") and its stockholders by attracting and retaining
management. The Plan has two parts. Article III provides an
Award to employees who have suffered forfeitures in the
Polaroid Stock Equity Plan ("Equity Plan") due to limitations
established by the Code. Article IV is designed to align the
interests of the Officers participating in the Plan with the
interests of shareholders by exchanging five percent of their
base pay for an Award under this Plan and therefore offering
an incentive compensation vehicle based upon the growth of
shareholders' equity and the value of the Company.
1.03 Application of Plan. The terms of this Plan apply only to
Participants in the current employment of the Company or a
Subsidiary on or after September 1, 1988.
ARTICLE II
DEFINITIONS
-----------
2.01 Award. Award shall mean the benefit allocated each
Allocation Period to a Participant's account as defined in
Section 4.04 hereof.
2.02 Beneficiary. Beneficiary shall mean the person or persons
designated by a Participant to receive any residual benefits
owed the Participant under this Plan upon his death
(identified by filing the proper designation form with the
Company). In the event that the Beneficiary is not
specifically designated, the Spouse shall be the deemed
Beneficiary. If the Participant does not have a Spouse and
has not designated a person to be the Beneficiary, the deemed
Beneficiary shall be the Participant's Estate.
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2.03 Board of Directors. Board of Directors shall mean the Board
of Directors of the Company.
2.04 Code. Code shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations and rulings
thereunder.
2.05 Committee. Committee shall mean the committee selected by
the Chief Executive Officer of the Company which is comprised
of a Chairman and at least two members as defined in Section
6.01 hereof.
2.06 Common Stock. Common Stock shall mean the authorized common
stock of the Company having a par value of $1.00 per share.
2.07 Company. Company shall mean Polaroid Corporation, a Delaware
corporation.
2.08 Distribution Date. Distribution Date shall mean the date
when a Participant shall be entitled to receive his account
as defined in Article III and/or Article IV of this Plan as
applicable.
2.09 Election Date. Election Date shall mean the date on which a
Participant selects a Distribution Date as defined in Article
IV hereof. This election must be made in writing to the
Committee on or before August 31, 1997, and shall be
irrevocable.
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2.10 Employee. Employee shall mean any "Full-Time Permanent"
employee and any "Part-Time Permanent" employee of the
Company, as defined by the Company in a uniform and non-
discriminatory manner.
2.11 Estate. Estate shall mean:
(a) the formal estate of a decedent; or,
(b) any other person or entity designated by the Plan
Administrator of the Stock Equity Plan or a court of
competent jurisdiction to receive benefits to be paid to
the decedent's estate.
2.12 Fair Market Value. Fair Market Value shall mean the higher
of:
(a) the closing price on the New York Stock Exchange for
Common Stock on the trading day immediately preceding
the Distribution Date; or,
(b) the average of the means of the high and low prices of
Common Stock on the New York Stock Exchange for each of
the five trading days immediately preceding the
Distribution Date.
2.13 IRS Limitation Award. IRS Limitation Award shall mean a
additional benefit allocated to a Participant's account due
to forfeitures in the Equity Plan as set forth in Article III
hereof.
2.14 Long-Term Disability. Long-Term Disability shall mean a
physical or mental condition arising after an Employee has
become a Participant which totally prevents, and for an
indefinite period of time will prevent, the Participant from
engaging for remuneration or profit in any occupation or
employment other than an occupation or employment engaged in
for the purpose of rehabilitation and which is not
incompatible with a finding of total disability. The
determination as to whether a Participant is so disabled
shall be made pursuant to the terms of the Equity Plan, and
under the policy adopted thereunder.
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2.15 Participant. Participant shall mean an Employee qualified to
participate in the Plan defined in either Article III and/or
Article IV hereof. It is possible to be a participant under
either Article III or Article IV and not both. A Participant
ceases to be a Participant when all funds which he is
entitled to receive under this Plan have been distributed in
accordance with its terms.
2.16 Plan Year. Plan Year shall mean a calendar year.
2.17 Spouse. Spouse shall mean, with respect to a Participant,
the person to whom such Participant is legally married, and
with respect to a deceased Participant, the widow or widower
of such deceased Participant who was legally married to such
Participant on the date of his death and who, if such death
was due to illness rather than accident or other reason, was
legally married to such Participant for not less than six
months immediately preceding such death.
2.18 Equity Plan. Stock Equity Plan shall mean the Polaroid Stock
Equity Plan, originally effective January 1, 1988 and as
amended from time to time.
2.19 Subsidiary. Subsidiary shall mean any corporation of which
more than fifty percent (50%) of the outstanding shares of
voting stock are beneficially owned, directly or indirectly,
by the Company.
ARTICLE III
ALLOCATIONS DUE TO IRS RESTRICTIONS LIMITING ALLOCATIONS
--------------------------------------------------------
IN THE EQUITY PLAN
------------------
3.01 Participant. An Employee shall be a Participant in this
Article III of the Plan only if he is unable to receive his
full allocation of Common Stock in the Equity Plan using the
allocation formula in such plan because of limitations
imposed by the Code (including but not limited to the Section
415 limits, and the limit on the definition of Compensation
as set forth in Section 401(a)(17) of the Code).
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3.02 Allocation Due to IRS Limitations Limiting Allocations in the
Equity Plan. In the event that a Participant is unable to
receive his full allocation of Common Stock in the Equity
Plan using the allocation formula in such plan because of
limitations imposed by the Code (including but not limited to
the Section 415 limits, and the limit on the definition of
Compensation as set forth in Section 401(a)(17) of the Code),
the Participant shall receive an IRS Limitation Award equal
to the difference between the amount in (a) and the amount in
(b) stated below:
(a) the allocation under the Equity Plan disregarding any
limitations on such allocation imposed by the Code; and,
(b) the amount of the allocation under the Equity Plan which
is actually made.
3.03 Distribution of the Benefit. The Distribution Date for
purposes of this Article III shall be the Participant's
Termination Date. The Benefit for this Article III shall be
calculated by multiplying the units allocated as the result
of the Article III, times the Fair Market Value of the Common
Stock on the Participant's Termination Date.
ARTICLE IV
BENEFIT ON EXCHANGE OF COMPENSATION
-----------------------------------
4.01 Participant. A current Employee designated by the Human
Resources Committee of the Board of Directors, in its sole
discretion, shall become a Participant no later than the date
he has his base pay reduced for the purpose of participation
in this Plan.
4.02 Effect of Termination of Employment. If a Participant's
employment terminates prior to his Distribution Date, he
shall be entitled to an Award for the Allocation Period in
which he terminates only if he is entitled to an allocation
of Common Stock under the Equity Plan. A terminated
Participant shall not be entitled to any further Award.
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<PAGE>
4.03 Death of Participant. If a Participant's Distribution Date
is based on the Participant's death, the Participant's
account balance shall be distributed to his Beneficiary as
soon as practicable after the Committee is notified of his
death.
4.04 Award. Every time there is an allocation based on
Compensation under Section 5.01 of the Equity Plan, a
Participant shall receive an allocation of units equal to
fifty percent (50%) of the Common Stock which would be
allocated to him under the Equity Plan based on the formula
set forth therein and disregarding any limitations of the
Code (including but not limited to the Section 415
limitations and the definition of Compensation imposed by
Section 401(a)(17) of the Code) and presuming the Participant
is a participant in the Equity Plan.
4.05 Special Award.
(a) With the exception of Subsection (b) below, every time
there is a special allocation or distribution of
earnings based upon participant account balances in the
Equity Plan, an equivalent Special Award of units shall
be made under this Plan on the basis of the
Participant's account balance.
(b) Consistent with the special allocation in the Equity
Plan as a result of the 1989 Polaroid Self-Tender, a
Special Award shall be made to each Participant on an
equivalent basis the same as the allocation in the
Equity Plan, using the account balances in this Plan and
assuming for purposes of the calculation of this Special
Award that each Participant tendered.
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<PAGE>
4.06 Value of Distribution. The value of each Participant's
account shall be equal to a Participant's account on the
Distribution Date multiplied by the Fair Market Value on the
Distribution Date.
4.07 Distribution Date.
(a) The Distribution Date shall mean the date selected by a
Participant on his Election Date.
Such Distribution Date must be at least:
1. nine months after the Election Date, however, under
no circumstance can the Distribution Date fall in
the same calendar year as the Election Date;
2. six months after any Award (i.e., Award, Special
Award, or Additional Award) is made; and,
3. for active Participant's, under no circumstance may
such date be prior to August 31, 1998, unless such
date is based on the Participant's death,
retirement, termination or Long-Term Disability.
(b) If the Participant has failed to select a Distribution
Date, the Distribution Date shall be the earlier of:
1. the date of the Participant's retirement from the
Company, and/or any Subsidiary, if applicable;
2. the date six months after the last Award following
the Participant's Termination Date from the
Company, and/or any Subsidiary, if applicable;
3. the date of the Participant's separation of service
from the Company or Subsidiary by reason of Long-
Term Disability;
4. the date of the Participant's death; or,
5. for an allocation which occurs after a
Participant's retirement, death, or separation from
service by reason of Long-Term Disability, the date
of such allocation.
-7-
<PAGE>
ARTICLE V
FINANCING
---------
5.01 Financing. The benefits under this Plan shall be paid out of
a grantor's trust established by the Company to hold assets
for liabilities accrued under this Plan and, to the extent
assets are insufficient from the general assets of the
Company.
5.02 Unsecured Interest. No Participant hereunder shall have any
interest whatsoever in any specific asset of the Company. To
the extent that any person acquires a right to receive
payments under this Plan, such right shall be no greater than
the right of any unsecured general creditor of the Company.
ARTICLE VI
ADMINISTRATION
--------------
6.01 Administrator. The Plan shall be administered by the
Committee designated by the Chief Executive Officer of the
Company and shall consist of not less than a Chairman and at
least two other members.
6.02 Duties of Administrator.
(a) The Committee shall administer the Plan in accordance
with its terms and shall have all the powers necessary
to carry out the provisions of the Plan. The Committee
shall have the exclusive discretionary authority to
interpret the Plan for any questions which may arise,
including without limitation questions relating to
eligibility for or the amount of benefits.
Notwithstanding the foregoing, any member of the
Committee who is a Participant under the Plan shall not
vote on any question relating exclusively to himself.
Any exercise of discretion by the Committee shall be
exercised in a non-discriminatory manner.
(b) The Committee shall keep a permanent record of its
actions with respect to the Plan which shall be
available for inspection by appropriate parties as may
be required by law.
-8-
<PAGE>
(c) The Committee may engage and consult with counsel,
accountants, specialists and other persons as the
Committee deems necessary and desirable. Members of the
Committee shall be indemnified by the Company with
respect to any action taken or omitted by the Committee
in good faith reliance on the advice of such persons
provided that the Committee has acted prudently in
selecting or retaining such persons, to which end the
Committee shall periodically review such persons'
performance.
ARTICLE VII
REVIEW PROCEDURE
----------------
7.01 Claims for Benefits. All claims for benefits should be made
through the Benefits Office.
7.02 Review Procedure. If a Participant is denied benefits,
wholly or partially under this Plan, the Participant or
Beneficiary may file a written request for review with the
Compensation Committee of the Board of Directors within sixty
(60) days following the date of denial. The Participant or
Beneficiary shall have the right:
(a) to review pertinent documents; and,
(b) to submit written comments.
7.03 Decision on Review of Claim Denial. Within sixty (60) days
of receiving a request to review a denial of benefits under
this Plan, the Compensation Committee of the Board of
Directors shall render a decision, unless special
circumstances exist which require an extension of time for
processing the claim. If additional time is necessary, the
Participant or Beneficiary will be notified of the delay
within sixty (60) days and will receive a decision in no
later than 120 days from the day of the initial request.
-9-
<PAGE>
7.04 Standard of Review. The interpretation and construction by
the Compensation Committee of the Board of Directors of any
provisions of this Plan regarding any Awards granted, or any
award distribution pursuant to this Plan, shall be final,
binding and conclusive, unless arbitrary or capricious or
otherwise prohibited by law. Any exercise of discretion by
the Compensation Committee of the Board of Directors shall be
exercised in a non-discriminatory manner.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.01 Applicable Law. This instrument shall be construed in
accordance with and governed by the laws of the Commonwealth
of Massachusetts to the extent not superseded by the laws of
the United States.
8.02 Expenses. The cost of benefit payments from this Plan and
the expenses of administering the Plan shall be borne by the
Company.
8.03 Limitation of Rights. Neither the adoption and maintenance
of the Plan, nor anything contained herein, shall, with
respect to any present or former Participant, or other
officer, Employee or employee of any Subsidiary, be deemed
to:
(a) limit the right of Polaroid or any Subsidiary to
discharge or discipline any such person or otherwise
terminate or modify the terms of his employment; or,
(b) create any contract or other right or interest under the
Plan or in any funds hereunder other than as
specifically provided herein.
8.04 Gender and Number. Unless the context clearly requires
otherwise, the masculine pronoun whenever used shall include
the feminine and neuter pronoun, the singular shall include
the plural, and vice versa.
-10-
<PAGE>
8.05 Illegality of a Particular Provision. The illegality of any
particular provision of this document shall not affect the
other provisions, and the document shall be construed in all
respects as if such invalid provision were omitted.
8.06 Non-Assignability. A Participant's interest under this Plan
shall not be subject at any time or in any manner to
alienation, sale, transfer, assignment, pledge, attachment,
garnishment or encumbrance of any kind and any attempt to
deliver, sell, transfer, assign, pledge, attach, garnish or
otherwise encumber such interest shall be void and any
interest so encumbered will terminate.
8.07 Nontransferability. In no event shall the Company make any
payment under this Plan to any assignee or creditor of a
Participant or of a Beneficiary, except as otherwise required
by law. Prior to the time of a payment hereunder, a
Participant or a Beneficiary shall not have any rights by way
of anticipation or otherwise to assign or otherwise dispose
of any interest under this Plan, nor shall rights be assigned
or transferred by operation of law (other than by laws of
descent and distribution, if applicable).
8.08 Indemnification. Members of the Board of Directors or the
Committee shall not be liable for any action or determination
taken or made in good faith with respect to this Plan, any
Awards granted or any Award distributions under this Plan.
Each member of the Board of Directors and the Committee shall
be indemnified by the Company against any losses incurred in
such administration of the Plan, unless his action
constitutes serious and willful misconduct.
8.09 Taxes. The Company shall have the right to deduct from the
Award distributions any federal, state or local taxes
required by law to be withheld with respect to such
distribution.
-11-
<PAGE>
8.10 Stock Split, Special Dividends, etc. In the event of a
reorganization, recapitalization, stock split, stock
dividend, combination of shares, exchange of shares, merger,
consolidation, rights offering, or any other change in the
corporate structure or shares of Common Stock that effects
the Common Stock in the Equity Plan, the Committee, in its
sole discretion, shall make adjustments to Participants'
Accounts in a manner consistent with the manner Common Stock
is handled in the Equity Plan.
8.11 Timing of Distribution. Payment of a Participant's account
balance shall be made as soon as practicable after the
Distribution Date.
8.12 Form of Distribution. The form of distribution of the
benefits under this Plan shall be in cash.
8.13 Vesting. Subject to claims of general creditors of the
Company, a Participant shall have a nonforfeitable right to
benefits allocated to his account under this Plan.
8.14 Participant is Not a Shareholder. A Participant shall not
have any rights as a stockholder with respect to any benefit
allocated to his account.
ARTICLE IX
EFFECTIVE DATE, AMENDMENT AND
TERMINATION AND LIMITATION OF RIGHTS
------------------------------------
9.01 Effective Date. This Plan, originally adopted by the Board
of Directors on July 25, 1989, effective as of January 1,
1988, is amended effective January 1, 1994.
9.02 Right to Amend, Modify or Terminate. The Company reserves
the right to amend, modify or terminate the Plan or payments
thereunder at any time by action of the Board of Directors;
provided that the Chief Executive Officer of the Company may
adopt any amendments to the Plan that do not materially
affect the Company's costs of maintaining the Plan and do not
relate exclusively to himself. The Company does not intend
to submit any amendments or modifications to the Plan to
stockholders of the Company for their approval.
Notwithstanding the foregoing:
-12-
<PAGE>
(a) no such amendment or termination shall reduce or
diminish any person's right to receive any benefit
accrued hereunder prior to the date of such amendment or
termination; and,
(b) no amendment or termination following a Change in
Control may alter the Company's obligation to make
payment in the form described in Article III or IV, as
applicable, under the circumstances described therein.
(c) Under no circumstance shall this Plan be amended more
than once every six months, other than to comport with
changes in the Code or ERISA.
IN WITNESS WHEREOF, Polaroid has caused this instrument to be
executed this 21st day of December, 1994, to be effective as of January
1, 1994.
ATTEST: POLAROID CORPORATION
Richard F. deLima By: I. M. Booth
------------------ -------------------------
Secretary Chief Executive Officer
-13-
Exhibit 10.16
Polaroid Corporation
Cambridge, Massachusetts 02139
I. M. Booth
Chairman
President and Chief Executive Officer
May 6, 1994
Mr. Enrico Ancona
180 Beacon Street
Boston, MA 02116
Dear Henry:
I am delighted to be able to offer you a Senior Officer
position with Polaroid Corporation. This will serve to confirm
our agreements and arrangements under which you will be joining
us.
Your title will be Executive Vice President, Electronic Imaging
Systems. In that capacity, you will have line responsibility
for, among other things, world-wide sales, marketing,
development and manufacturing (i) of electronic imaging
systems, including peripherals, systems and print media across
consumer, industrial and other markets and (ii) government
identification systems, both electronic and photographic.
You will report to the Chief Executive Officer, currently me.
Your base salary will be $275,000 per year. Your compensation
will be included in the Officer Pay Review held in April of
each year. Your next pay review will be in April of 1995.
Your base salary may be increased but never decreased unless it
is a corporate initiative impacting other Senior Officers.
RETIREMENT PLANS
After one year of employment, you will participate in two
qualified retirement plans, the Polaroid Pension Plan (5 years
vesting) and the Polaroid Profit Sharing Retirement Plan.
Polaroid's Pension Plan is a Company paid benefit plan. We
will provide you the special pension benefits provided on
Exhibit A hereto through an unfunded non-qualified Supplemental
Executive Retirement Plan ("SERP").
ESOP, OCEP
After two years of employment, you will become a participant in
the Polaroid Stock Equity Plan (the ESOP). In addition, you
will participate in the Polaroid Officer's Compensation Exchange
Plan.
<PAGE>
Mr. Enrico Ancona
May 6, 1994
Page 2 of 4
BONUS
Immediately upon joining us, you will be enrolled in the Executive
Bonus Plan which pays you a percentage of your salary if the Company
achieves its financial plan for adjusted profit from operations. You
will be classified as a Senior Officer in this Plan, such that your
Bonus Opportunity Target will be 43% of your 1994 earnings based on
100% attainment of the financial plan. The Bonus Opportunity Target
will not be prorated for 1994 even though you will commence
employment in mid year. In addition you will receive a sign-on bonus
of $75,000 promptly after commencing employment.
OPTIONS
Also, upon joining us, you will be enrolled in the Polaroid Stock
Incentive Plan which enables officers and other key employees to
increase their ownership in the Company. You will be granted 25,000
options on hire which will be vested in accordance with the rules
governing the Polaroid Stock Incentive Plan. You will, in any event,
receive quarterly dividend equivalent payments for each share on
which you have an option until the option is either exercised or
expires. To receive this grant, you will have to return to us a
signed agreement signifying your acceptance of the terms and
conditions of the grant (attached as an Exhibit).
SEVERANCE
If during your initial 60 months of employment, your employment is
terminated:
(A) at Polaroid's initiative for any reason other than deliberate or
gross material misconduct on your part where such misconduct was
the result of actions taken by you neither in good faith nor in
a manner reasonably believed to be in or not opposed to the best
interest of the Corporation, or if criminal in nature, not the
result of actions taken by you which you had no reasonable cause
to believe were unlawful ("Cause"), or
(B) at your initiative on account of your reassignment by Polaroid
to a position of significantly lesser responsibility, relocation
outside of the Boston metropolitan area, the termination or
reduction of your benefits under the Polaroid Supplemental
Benefit Plan, reduction of benefits under the SERP caused by
limitations imposed by the Internal Revenue Code of 1986, as
amended from time to time, or any other limitations under the
law, or breach by the Company of any of its material obligations
hereunder not cured within ten days of written notice thereof
("Good Reason"),
<PAGE>
Mr. Enrico Ancona
May 6, 1994
Page 3 of 4
you will receive as severance 24 months pay at the rate in effect on
the date of termination. If your employment is terminated thereafter
without Cause or for Good Reason, you will receive as severance 12 months pay
at the rate in effect at your termination. All severance will be paid
in a lump sum immediately following termination and will not be subject
to offset for other employment nor shall there be any mitigation obligation.
In addition, you will receive any accrued but unpaid bonuses, including
a prorated bonus, for the year of termination.
Immediately upon joining the Company you will become a participant in
the Polaroid Extended Severance Plan, which provides certain benefits
for employees who are adversely affected following a significant
change in ownership or control of the Company. If you become
entitled to Extended Severance Payment as provided in Article III of
the Plan, such entitlement shall be separate from any entitlement you
may have under the arrangements described here; and similarly, your
entitlement to payment under this arrangement shall not provide any
offset against the entitlement you would otherwise have under the
Plan. A copy of the Polaroid Extended Severance Plan is included for
your information.
Should you become entitled to severance pay for any of the reasons
discussed, you will also be entitled to continued participation in
all group life, disability, and medical insurance plans with
continued Company contribution at the contribution rate in effect on
the date of your separation for a period equal to the severance
period (i.e., 24 months or 12 months), except that this coverage will
cease if and when you become re-employed at an earlier date with
comparable coverage. To the extent that greater benefits become
available under Article V, Section 5.02 of the Polaroid Extended
Severance Plan, if applicable, you would, of course, be entitled to
those greater benefits.
If at any time you voluntarily resign (except as provided under the
Polaroid Extended Severance Plan or for Good Reason above), you will
have no severance entitlement or benefit continuation entitlement,
except as may be required by law and you will receive any accrued but
unpaid salary and vacation. Bonuses will be paid in accordance with
the provisions of the Plan.
VACATION/BENEFITS
You will be entitled to four weeks vacation each year starting in
1994. Of course, you will participate in all other health, medical,
dental, life, and disability benefit programs and receive employment
perquisites on a basis consistent with other Polaroid Senior
Officers.
<PAGE>
Mr. Enrico Ancona
May 6, 1994
Page 4 of 4
OTHER
We will pay your reasonable legal fees incurred in negotiating this
agreement. If we have any dispute as to or in connection with this
agreement, such dispute shall be resolved by arbitration in Boston
before the American Arbitration Association pursuant to its rules.
The determination of the arbitrator shall be final and binding
on the parties hereto and may be entered in any court having
jurisdiction. Neither we nor you may assign this agreement or the
obligations hereunder. This is the entire agreement between us with
regard to the subject matter hereof and it may not be amended or
terminated orally, but only by a writing signed by the party to be
charged.
Henry, we are all extremely impressed with you personally and
professionally. I feel certain that you will be a valuable addition
to Polaroid Corporation and look forward to you joining us.
If these terms are acceptable to you, please sign the duplicate copy
and return it to me.
Sincerely,
I. M. Booth
I. M. Booth
Chairman, President and
Chief Executive Officer
I accept the terms and conditions as outlined in this letter.
Enrico I. Ancona May 6, '94
___________________________________________________________________
Enrico Ancona Date
EXHIBIT 10.17
AGREEMENT
Agreement between POLAROID CORPORATION (hereinafter called
"Polaroid"), a corporation organized under the laws of the State
of Delaware and having an office and place of business in
Cambridge, Massachusetts, and HENRY ADVISORY GROUP, INC., having
an office at 36 Barrett Hill Road, Wilton, New Hampshire 03086
(hereinafter the "Contractor").
WITNESSETH:
WHEREAS, Polaroid and its subsidiaries are engaged in
the development, manufacture and/or sale of photographic,
optical, magnetic, and other materials, products, apparatus and
instruments, and in connection therewith are engaged in the
business of research and development and of making various
inventions, discoveries, improvements and developments in various
scientific fields, and more specifically in the fields of applied
physics, chemistry, optics, magnetics, and electronics, including
electronic imaging and in the exploitation and development of
processes, computer programs, designs, apparatus and devices for
use in said fields; and
WHEREAS, Polaroid and its subsidiaries may from time to
time become engaged in the manufacture and sale of other and
different products or commodities; and
WHEREAS, Polaroid and its subsidiaries own or control
patented and secret methods, processes and formulae and they may
acquire or develop others; and
WHEREAS, in connection with the study of the problems
relating to such development, manufacture, sale and research, and
the discovery, improvement and perfection of inventions for
Polaroid, consultants for Polaroid, whether or not directly
engaged in such development, manufacture, sale or research, are
by reason of the nature of their duties informed with respect to
such Polaroid inventions and are from time to time enabled to
contribute new inventions or improvements on those already
existing; and
<PAGE>
WHEREAS, the named Contractor, party to this agreement,
desires to enter into a consulting agreement with Polaroid and,
to such extent as may be possible, to cooperate in the
improvement and/or marketing of the Polaroid inventions and those
of its subsidiaries;
NOW, THEREFORE, in consideration of the retention by
Polaroid of consulting services of the Contractor, and of other
good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. The Contractor agrees that during a term
(hereinafter, the "Term") beginning with the effective date of
this Agreement and ending seven months thereafter, it will
provide advisory and consulting services to Polaroid, such
services being of a commercial, manufacturing and technical
nature and relating to any imaging issues. In addition, the
parties may at any time during the term of this Agreement
designate in writing other project area to be considered by the
parties as areas in which services may be rendered by the
Contractor under the terms and conditions of this Agreement.
2. In furtherance of the objectives of the consulting
arrangement defined by the terms of this Agreement, the
Contractor agrees that it will (i) upon reasonable notice, make
its services available to Polaroid by attendance at and
participation in meetings conducted at Polaroid facilities; (ii)
provide suggestions, comments, proposals and recommendations in
connection with the Polaroid's programs, products, investigations
and approaches relating to Helios Medical Imaging or such other
projects as agreed to by the parties; (iii) direct its efforts
relating to the priorities set and instructions given by
Polaroid's primary contact person Mr. I. M. Booth or its
designee; (iv) devote such additional attention to the work of at
the Contractor's offices or such other places as Polaroid shall
specify, as may be needed to the objectives of Polaroid's
programs; and (v) at all such times as it is engaged in any of
the aforesaid activities, exercise its best efforts in pursuance
thereof.
-2-
<PAGE>
3. Polaroid agrees to compensate the Contractor in the
amount of two hundred and seventy-five thousand dollars
($275,000) for consulting services provided to Polaroid during
the Term. Payment for such services shall be made in the
following manner:
a) $137,000 shall be paid on April 1, 1995, the beginning
of the Consulting Agreement;
b) $69,000 shall be paid on July 1, 1995; and,
c) $69,000 shall be paid on October 31, 1995.
Notwithstanding anything to the contrary, should this Agreement
be terminated for any reason prior to October 31, 1995, the
Contractor shall be paid a termination fee which shall equal all
amounts which have not been paid under this Agreement at the time
of termination.
4. Polaroid Corporation agrees to reimburse the
Contractor for reasonable out-of-pocket expenses in the
performance of this Agreement. All reimbursements shall be
contingent submission of appropriate documentation of such
expenses.
5. All Polaroid commercial and technical information,
including any information related to Polaroid's programs,
products, technology platforms and areas of investigation
(including those areas identified in paragraph 1 hereof) and any
of Polaroid's business plans and intentions in respect thereof,
of which the Contractor shall become aware as a direct or
indirect result of its performing services for Polaroid,
including the work performed by him for Polaroid, shall be deemed
by the Contractor to be confidential information, shall be
disclosed by the Contractor to no other person or party and shall
be maintained in confidence at all times hereafter unless and
until such information is publicly available through no fault of
the Contractor.
-3-
<PAGE>
6. The Contractor agrees that it will maintain in
confidence at all times and not disclose to any other person or
party outside of Polaroid any confidential information of which
it shall become aware as a direct of indirect result of its
contact with third parties outside of Polaroid in the course of
its performance of services for Polaroid pursuant to this
Agreement.
7. The Contractor agrees that it will not accept any
confidential information from any party on behalf of Polaroid
unless it verifies that Polaroid has executed an agreement with
that party setting forth the terms and conditions under which
Polaroid has agreed to protect such confidential information and
it fully understands and accepts its obligations to abide by such
terms and conditions.
8. The Contractor agrees to make full disclosure
promptly to Polaroid of all designs, know-how, technical
information, inventions, discoveries, improvements, ideas,
trademarks, copyrights, mask works and other works of authorship
(including but not limited to computer programs files, data bases
and documentation) which the Contractor conceives, makes or
acquires during the term of this Agreement and within one (1)
year following the termination of the Agreement, which arise from
the performance of services for Polaroid under this Agreement.
-4-
<PAGE>
9. The Contractor agrees to assign, and hereby does
assign, to Polaroid without further monetary consideration all
right, title and interest in and to designs, know-how, technical
information, inventions, discoveries, improvements, ideas,
trademarks, copyrights, mask works and other works of authorship
referred to in Paragraph 10 above, including the right to file
applications for patents and registrations for copyrights, mask
works and trademarks anywhere in the world. The Contractor
further agrees, at Polaroid's expense, to provide full and prompt
assistance to Polaroid, as required, to effectuate, maintain and
enforce patent and/or copyright and/or mask work and/or trademark
protection sought and acquired by Polaroid on any designs,
inventions, discoveries, improvements, computer programs and
other works of authorship referred to in that paragraph; however,
Polaroid shall obtain no rights under this Agreement in any
designs, inventions, discoveries, improvements, computer programs
and other works of authorship (i) conceived or made by the
Contractor prior to the effective date of this Agreement and (ii)
otherwise not subject to an obligation of assignment by reason of
a prior written agreement between Polaroid and any officer,
director or employee of the Contractor.
10. Inasmuch as the Contractor will acquire from
Polaroid confidential information of both a technical and
commercial nature, and inasmuch as such confidential information
has a substantial value, and should be protected against
unauthorized exploitation, the Contractor agrees that during the
term of this Agreement and for a period of one (1) year after the
termination of this Agreement, it will not without written
permission of Polaroid assist in the design or marketing of any
processes or equipment in respect of which the Contractor helped
to design for Polaroid, or concerning the design of which it
acquired knowledge or information while consulting for Polaroid.
-5-
<PAGE>
11. The Contractor represents that it has no
agreements with, or obligations to, others which are inconsistent
with its availability to act as a consultant to Polaroid in
accordance with this Agreement. The Contractor further agrees
that in performing such consulting services it will not disclose
to Polaroid any information which it is obligated to keep in
confidence as the result of an agreement between it and any third
party.
12. The Contractor agrees promptly to deliver to
Polaroid at the termination of its relationship with Polaroid and
at any other time as Polaroid may request, all memoranda, notes,
records, schedules, plans or other documents, made or compiled by
or delivered to the Contractor or possessed by him, concerning
any product, apparatus or process manufactured, used, developed
or investigated by Polaroid; such memoranda, notes, records,
schedules, plans or other documents shall at all times be the
property of Polaroid.
13. This Agreement shall inure to the benefit of
Polaroid, its successors and assigns, and shall be binding upon
the parties hereto and their successors and assigns.
14. Polaroid Corporation agrees to pay Contractor the
fees set forth in paragraph 3 and also agrees to cover all costs,
including legal expenses, which the Contractor incurs in
collecting these fees.
15. The Contractor agrees not to use Polaroid's name
in connection with any advertising or promotion related to the
work performed under this Agreement without Polaroid's written
consent.
-6-
<PAGE>
16. The relationship between the Contractor and
Polaroid shall, at all times, remain that of independent
contractor and nothing in this Agreement shall be construed as
creating in any respect or for any purpose the relationship of
employer and employee between Polaroid and the Contractor or any
officer, director of employee thereof.
17. This Agreement shall be construed under the laws
of the Commonwealth of Massachusetts, U.S.A., as such laws are
applied to agreements entered into and to be performed entirely
within the Commonwealth of Massachusetts by Massachusetts
residents.
18. This Agreement shall be effective as of April 1,
1995 (Effective Date) and shall terminate automatically seven (7)
months after the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate.
HENRY ADVISORY GROUP, INC. POLAROID CORPORATION
By Bruce Henry By I. M. Booth
--------------------- -------------------
Bruce Henry I. M. Booth
Date 2/17/95 Date 2/17/95
----------- ------------
-7-
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
_______________________________________________
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1994
PRIMARY COMPUTATION
Net earnings per statement of earnings $ 57.3
======
Weighted average number of common
shares outstanding 46.2
Weighted average number of common
stock equivalents .4
------
Weighted average number of common
shares, as adjusted 46.6
======
Primary earnings per common share $ 1.23
======
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1994
FULLY DILUTED COMPUTATION
-------------------------
Net earnings per statement of earnings $ 57.3
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 1.7
------
Net earnings, as adjusted $ 59.0
======
Weighted average number of common
shares outstanding 46.2
Weighted average number of common
stock equivalents .4
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
------
Weighted average number of common
shares, as adjusted 50.9
======
Fully diluted earnings per common share $ 1.16
======
(A) Assumes conversion of $140 million 8% convertible debentures at a
price of $32.50 per common share in accordance with the convertible
debenture exchange agreement.
2
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1994
PRIMARY COMPUTATION
-------------------
Net earnings per statement of earnings $ 117.2
=======
Weighted average number of common
shares outstanding 46.6
Weighted average number of common
stock equivalents .4
-------
Weighted average number of common
shares, as adjusted 47.0
=======
Primary earnings per common share $ 2.49
=======
3
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1994
FULLY DILUTED COMPUTATION
-------------------------
Net earnings per statement of earnings $ 117.2
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 6.8
--------
Net earnings, as adjusted $ 124.0
========
Weighted average number of common
shares outstanding 46.6
Weighted average number of common
stock equivalents .4
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
--------
Weighted average number of common shares, as
adjusted 51.3
========
Fully diluted earnings per common share $ 2.42
(A) Assumes conversion of $140 million 8% convertible debentures at a price
of $32.50 per common share in accordance with the convertible debenture
exchange agreement.
4
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1993
PRIMARY COMPUTATION
-------------------
Net earnings per statement of earnings $ 39.2
=======
Weighted average number of common
shares outstanding 46.8
Weighted average number of common
stock equivalents .5
Weighted average number of common
shares, as adjusted 47.3
======
Primary earnings per common share $ .83
======
5
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1993
FULLY DILUTED COMPUTATION
-------------------------
Net earnings per statement of earnings $ 39.2
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 1.7
------
Net earnings, as adjusted $ 40.9
======
Weighted average number of common
shares outstanding used for primary computation 46.8
Weighted average number of common
stock equivalents .5
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
------
Weighted average number of common shares
outstanding, as adjusted 51.6
======
Fully diluted earnings per common share $ .79
======
(A) Assumes conversion of $140 million 8% convertible debentures at a price
of $32.50 per common share in accordance with the convertible debenture
exchange agreement.
6
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1993
PRIMARY COMPUTATION
-------------------
Earnings before cumulative effect of changes in
accounting principle $ 67.9
Cumulative effect to January 1, 1993 of changes
in accounting principle for:
FAS 106 "Employers Accounting for Post-
retirement Benefits Other Than Pensions", net
of taxes of $85.0 million (132.9)
FAS 109 "Accounting for Income Taxes" 33.6
FAS 112 "Employers Accounting for Postemployment
Benefits", net of taxes of $12.7 million (19.9)
--------
Net loss per statement of earnings $ (51.3)
========
Weighted average number of common shares outstanding 46.7
========
Primary loss per common share $ (1.10)
========
7
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1993
FULLY DILUTED COMPUTATION
-------------------------
Earnings before cumulative effect of changes
in accounting principle $ 67.9
Cumulative effect to January 1, 1993 of changes
in accounting principle for:
FAS 106 "Employers Accounting for Post-
retirement Benefits Other Than Pensions", net
of taxes of $85.0 million (132.9)
FAS 109 "Accounting for Income Taxes" 33.6
FAS 112 "Employers Accounting for Postemployment
Benefits", net of taxes of $12.7 million (19.9)
---------
Net loss per statement of earnings (51.3)
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 6.8
---------
Net loss, as adjusted $ (44.5)
=========
Weighted average number of common
shares outstanding used for primary computation 46.7
Weighted average number of common
stock equivalents .5
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
--------
Weighted average number of common shares
outstanding, as adjusted 51.5
========
Fully diluted loss per common share $ (.86) (B)
========
(A) Assumes conversion of $140 million 8% convertible debentures at a price
of $32.50 per common share in accordance with the convertible debenture
exchange agreement.
(B) This computation is submitted as an exhibit to the Company's Form 10-K
in accordance with Regulation S-K item 601(b)(11), although presenting
the computation is not in accord with paragraph 40 of APB Opinion 15
because the computation produces an antidilutive result.
8
<PAGE>
<PAGE>
Financial Review:
Polaroid Corporation and Subsidiary Companies
21 Management's Discussion and Analysis of Operations
27 Independent Auditors' Report
27 Management's Report
Financial Statements:
28 Consolidated Statement of Earnings
29 Consolidated Balance Sheet
30 Consolidated Statement of Cash Flows
31 Consolidated Statement of Changes in
Common Stockholders' Equity
Notes to Consolidated Financial Statements:
32 1. Summary of Significant Accounting Policies
33 2. Supplemental Information
33 3. Financial Instruments
34 4. Income Taxes
36 5. Inventories
36 6. Short-term Debt
37 7. Payables and Accruals
37 8. Long-term Debt
38 9. Common Stockholders' Equity
38 10. Incentive Compensation and Stock Incentive Plans
39 11. Benefit Plans
42 12. Rental Expense and Lease Commitments
42 13. Segments of Business
44 14. Contingencies
45 15. Subsequent Events
46 16. Supplementary Financial Information
Supplementary Financial Information:
47 Quarterly Financial Data
48 Ten-Year Financial Summary
20
<PAGE>
Management's Discussion and Analysis of Operations
The following table summarizes the relation to net sales of income and expense
items included in the Consolidated Statement of Earnings for 1994, 1993 and 1992
and the changes in those items from the respective prior years.
<TABLE>
<CAPTION>
Income and Expense Items Percent Increase/(Decrease)
as a Percent of Net Sales 1993 1992 1991
to to to
1994 1993 1992 Income and Expense Items 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
Net Sales:
50% 53% 53% United States (2)% 3% 3%
50 47 47 International 8 6 5
----------------------------------------------------------------------------------------------------------------------------------
100 100 100 Total net sales 3 4 4
57 58 55 Cost of goods sold 2 10 9
34 34 35 Marketing, research, engineering and administrative expenses 3 - 3
- 2 - Early retirement and other expenses (100) 100 -
----------------------------------------------------------------------------------------------------------------------------------
9 6 10 Profit from operations 42 (34) (13)
----------------------------------------------------------------------------------------------------------------------------------
- - - Litigation settlement, net of employee incentives - - (100)
- 1 1 Other income (15) 5 (67)
2 2 3 Interest expense (3) (18) -
----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect of changes
7 5 8 in accounting principle 58 (38) (85)
2 2 3 Federal, state and foreign income taxes 29 (47) (84)
----------------------------------------------------------------------------------------------------------------------------------
5% 3% 5% Earnings before cumulative effect of changes in accounting principle 73% (31)% (86)%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company often uses the following qualitative descriptors to explain its
results of operations: "flat" indicates fluctuations of zero-to-one percent;
"slight" is in the two-to-three percent range; "moderate" means four-to-ten
percent; "significant" is in the eleven-to-twenty percent range; and
"substantial" represents fluctuations greater than twenty percent.
1994 Worldwide Results Compared with 1993
Worldwide sales of Polaroid Corporation and its subsidiaries increased 3% to
$2.31 billion in 1994 compared with $2.24 billion in 1993. In 1994, sales in
the United States were $1.16 billion, a decrease of 2% compared with 1993 and
international sales were $1.15 billion, an increase of 8% compared with 1993.
In 1994, the Company sold 6.4 million cameras compared with 4.9 million
cameras in 1993, a 31% increase. Instant film shipments rose modestly for the
full year 1994 compared to 1993. This increase reflects healthy growth in
integral film sales, partly offset by an expected decline in peel-apart
products, primarily as a result of the completion of the Mexican voter
registration program which had contributed to 1993 sales. The growth in
instant film shipments was largely due to the substantial growth in the
Russian market, offset by a decline in Western European markets and a
relatively flat U.S. market. Worldwide shipments of conventional film and
video cassettes in 1994 were significantly lower than in 1993. Helios Medical
Imaging System shipments in 1994 were substantially higher than shipments in
1993.
In 1994, sales in the European region increased 18% to $705 million compared
with $598 million in 1993 as a result of increased sales in Russia. Sales in
Russia accounted for 13% of total international sales in 1994 compared to 2%
in 1993. While the Company believes that emerging markets present
particularly attractive opportunities, as evidenced by the remarkable growth
in the market for instant photographic products in Russia, such markets tend
to be significantly less stable than more established markets. There can be
no assurance that emerging markets will continue to produce favorable
results. In 1994, sales in the Asia Pacific/Western Hemisphere regions
decreased 4% to $448 million compared with $468 million in 1993. Increased
sales in the Asia Pacific region were more than offset by a decrease in sales
in the Western Hemisphere region, resulting from the Mexican voter
registration program which was completed in 1993.
Gross margins as a percent of sales were 43% for 1994 and 42% for 1993. The
increase in the gross margin in 1994 was attributable to a reduction in
manufacturing costs for new products, substantial growth in sales of high
margin instant film in Russia, and the positive effects of foreign currency
translation. In addition, gross margins in 1994 were negatively impacted by
costs associated with ramping up the capacity of the Company's new coating
facility.
Marketing, research, engineering and administrative expenses in 1994 were
$788 million compared with $763 million in 1993, which includes research and
engineering expenses of
21
<PAGE>
$166 million in 1994 and $161 million in 1993. In 1994, approximately
two-thirds of the $166 million spent by the Company on research and
engineering was allocated to digital imaging products. Digital imaging
products primarily include digital dry-process laser imaging products for
medical, graphic arts and other business applications. Digital imaging
products also include products for consumer digital imaging and desktop
publishing. Marketing and administrative expenses related to digital imaging
products increased substantially in 1994 compared with 1993.
Profit from operations for 1994 was $200 million, an increase of 8% compared
with $185 million in 1993, which excludes the special charge for the early
retirement and severance program and the write down of certain non-strategic
assets. Operating profit for 1993 including these special items was $141
million.
Other income was $7 million in 1994 compared with $8 million in 1993.
Included in other income was a foreign currency exchange loss of $8 million
in 1994 and $3 million in 1993 resulting from balance sheet translation.
Interest expense decreased to $47 million in 1994 from $48 million in 1993.
This decrease reflected lower overall interest costs offset by lower amounts
of interest capitalized on certain qualifying assets. Lower interest costs in
1994 were primarily attributable to lower interest rates on short-term
borrowings and a reduction in short-term borrowings.
Income tax expense in 1994 was $44 million compared with $34 million in 1993.
The worldwide effective tax rate was 27% in 1994 and 33% in 1993. The
decrease in the effective tax rate was primarily a result of the beneficial
effect of the weakening U.S. dollar on the international tax rate. The net
after-tax foreign currency exchange loss from balance sheet translation in
both 1994 and 1993 amounted to $1 million.
Net earnings for 1994 were $117 million, or $2.49 primary earnings per common
share compared with a loss of $51 million for 1993, or $1.10 primary loss per
common share. The 1993 full year results included a special charge for an
early retirement and severance program, the write down of certain
non-strategic assets, and the cumulative effect of changes in accounting
principle required by the Financial Accounting Standards Board. Excluding these
items, 1993 primary earnings per common share would have been approximately
$2.00 per share. Fully diluted earnings per common share were $2.42 for the full
year 1994, and were not reported for the full year 1993 because they were
greater than primary earnings per common share.
1994 Fourth Quarter Results
Worldwide sales in the fourth quarter of 1994 were $686 million, a 2%
increase compared with sales of $673 million in the same period a year ago.
Sales in the United States decreased 10% to $347 million in the fourth
quarter of 1994, compared with the same period last year, as revenues from
all photographic product lines declined. Although U.S. shipments of integral
film decreased, retail sales remained level as dealer inventories declined.
International sales increased 18% to $339 million in the fourth quarter of
1994, compared with the same period last year. Sales of instant cameras and
film in Russia accounted for 17% of international sales in the fourth quarter
of 1994 compared with 5% in the fourth quarter of 1993.
Gross margins as a percent of sales were 43% for the fourth quarter of 1994
and 42% for the fourth quarter of 1993. The gross margin in the fourth
quarter of 1994 was affected by the positive effects of foreign currency
translation, lower manufacturing costs for new products, and increased
business in Russia, offset by lower instant film sales in Western Europe and
the United States. Marketing, research, engineering and administrative
expenses were $214 million in the 1994 fourth quarter compared with $205
million in the 1993 fourth quarter. Profit from operations for the 1994
fourth quarter was $84 million, compared with $77 million in the same
period last year.
The 1994 fourth quarter included other income of $2 million compared to other
expenses of $2 million in the 1993 fourth quarter. The increase in other
income in the 1994 fourth quarter was primarily due to interest income earned
on higher cash balances. Interest expense increased to $13 million in the
fourth quarter of 1994 from $12 million in the fourth quarter of 1993. This
increase was primarily a result of lower amounts of interest capitalized on
certain qualifying assets partly offset by lower interest rates on short-term
borrowings and a reduction in short-term borrowings.
22
<PAGE>
Income tax expense for the fourth quarter of 1994 was $15 million compared
with $24 million in same period last year. The worldwide effective tax rate
for the fourth quarter was 21% in 1994 and 38% in 1993. The decrease in the
effective tax rate was primarily a result of the beneficial effect of the
weakening U.S. dollar on the international tax rate. The net after-tax
foreign currency exchange loss from balance sheet translation in the fourth
quarter of both 1994 and 1993 amounted to $4 million.
Net earnings for the fourth quarter of 1994 were $57 million compared to $39
million in the same period of 1993. Primary earnings per common share were
$1.23 for the fourth quarter of 1994 compared with $.83 in the same period of
1993. Fully diluted earnings per common share were $1.16 and $.79 in the
fourth quarter of 1994 and 1993, respectively.
1993 Worldwide Results Compared with 1992
Worldwide sales of Polaroid Corporation and its subsidiaries increased 4% to
$2.24 billion in 1993 compared with $2.15 billion in 1992. Sales in the
United States increased 3% and international sales increased 6%.
The new instant camera system, called Captiva in the U.S., was an important
contributor to the 4.9 million cameras shipped worldwide in 1993, a 23%
increase over the previous year. Worldwide, 1993 instant film sales were up
slightly reflecting healthy growth in integral film sales partly offset by a
continuing decline in sales of the older peel-apart pack film. In 1993, sales
in the European region decreased 6% to $598 million. Contributing to this
decrease was a weak economy in Western Europe which offset strong sales in
Eastern Europe, including Russia, and the negative effects of foreign
currency translation, which could not be completely offset by price
increases. Sales in the Asia/Pacific and Western Hemisphere regions
increased 25% to $468 million in 1993. The increase is primarily attributable
to the Mexican voter registration program and positive effects of foreign
currency translation.
Gross margins as a percent of sales were 42% for 1993 and 45% for 1992. The
gross margin decline was primarily the result of planned higher manufacturing
costs for new products (the new instant camera and film system and the Helios
medical laser imaging system), including planned start-up expenditures, and
product mix related to the new instant camera system. The 1993 gross margin was
also impacted by approximately $10 million of the $20 million recurring
incremental charge for Financial Accounting Standards Board Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" (FAS
106), and approximately $2 million of the $4 million recurring incremental
charge for Financial Accounting Standards Board Statement No. 112, "Employers'
Accounting for Postemployment Benefits" (FAS 112).
The balance of the FAS 106 and FAS 112 charges are recorded in marketing,
research, engineering and administrative expenses which were $763 million in
1993 and $761 million in 1992. Higher marketing and launch costs for new
products were offset by tight control of other overhead costs, which in many
cases, were reduced. Research and engineering expenses were $161 million in
1993 and $155 million in 1992, while manufacturing development costs
(previously called "start-up costs") for major new products included in cost
of sales were approximately $30 million in 1993 and $40 million in 1992. In
1993, the Company offered an early retirement program and a severance program
to employees. The programs resulted in the departure of approximately 450
employees at a cost to the Company of $40 million, which was recorded in
1993. The Company also recorded a charge of $4 million for the write down of
some non-strategic assets, in 1993. Profit from operations including these
charges was $141 million as compared with $214 million in 1992. Without these
charges, the operating profit for 1993 would have been $185 million.
Other income was $8 million in both 1993 and 1992. Interest expense decreased
to $48 million in 1993 from $58 million in 1992 due to lower interest rates
and a reduction in short-term borrowings.
Income tax expense in 1993 was $34 million compared with $64 million in 1992.
The worldwide effective tax rate was 33% in 1993 (before cumulative
accounting adjustments) and 39% in 1992. The decrease in the effective tax
rate was due primarily to the increase of prepaid tax assets related to the
increase in the U.S. statutory tax rate from 34% to 35% and the beneficial
effect of foreign currency
23
<PAGE>
exchange in 1993. There were net after-tax losses of $1 million and $3 million
in 1993 and 1992, respectively, on the translation of the balance sheet from
foreign currencies to U.S. dollars.
As of January 1, 1993, the Company adopted FAS 106 and elected immediate
recognition of the accumulated liability. FAS 106 requires the expensing on
an accrual basis, of all medical and life insurance benefits the Company
provides to its retirees and their dependents. Previous to 1993, the Company
recognized these costs on a pay-as-you-go basis. This resulted in a one-time,
after-tax charge at adoption of $133 million (net of income taxes of $85
million). After recognition of the cumulative liability at adoption, the
effect of this change in accounting principle on 1993 operating results was a
pre-tax expense of $29 million, approximately $20 million more than the
previous pay-as-you-go method of accounting. There was no cash flow impact
associated with the adoption of FAS 106.
As of January 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" (FAS 109). The
favorable cumulative adjustment of $34 million in 1993 was the result of
recognizing the tax benefit of future deductions based upon a "more likely
than not" criterion, instead of the more stringent criteria of Financial
Accounting Standards Board Statement No. 96, "Accounting for Income Taxes",
the Company's previous standard of accounting for income taxes. Financial
statements prior to 1993 were not restated to apply the provisions of FAS 109.
In the fourth quarter of 1993, the Company also adopted FAS 112 retroactive
to January 1, 1993. This standard requires the expensing, on an accrual
basis, of all benefits provided to former or inactive employees, their
beneficiaries and covered dependents, after employment but before retirement.
Previous to 1993, the Company recognized these disability and
survivor-related benefits on a pay-as-you-go basis. The cumulative effect of
this change in accounting resulted in a one-time after-tax charge at adoption
of $20 million (net of income taxes of $13 million.) After recognition of the
cumulative liability at adoption, the effect of FAS 112 on 1993 operating
results was a pre-tax charge of $6 million, approximately $4 million more
than the previous pay-as-you-go method of accounting. There was no cash flow
impact associated with the adoption of FAS 112.
The Company recorded a net loss for 1993 of $51 million or $1.10 primary loss
per common share, compared to net earnings in 1992 of $99 million or $2.06
primary earnings per common share. Excluding the early retirement and
severance charges, the asset write-down, and the cumulative effect of changes
in accounting principle required by the Financial Accounting Standards Board,
1993 primary earnings per common share would have been approximately $2.00
per share. Fully diluted earnings per common share were not presented for
1993 because they were greater than primary earnings per common share. Fully
diluted earnings per common share were $2.02 in 1992.
Financial Liquidity and Capital Resources
At December 31, 1994, the Company's cash and cash equivalents and short-term
investments amounted to $229 million, compared to $139 million at December
31, 1993. In addition, working capital increased to $887 million at December
31, 1994 from $834 million at December 31, 1993. The primary source of cash
for both 1994 and 1993 was profitable operations, which more than offset cash
used in investing and financing activities in both years. Capital spending
during 1994 was $147 million and depreciation expense was $118 million.
Capital spending during 1993 was $166 million and depreciation expense was
$100 million. Capital expenditures in both 1994 and 1993 were primarily
related to ongoing capital programs, environmental improvements and the
Company's new coating facility. In addition, 1993 capital expenditures
included continuing expenditures for the new Captiva instant camera system.
Capital expenditures in 1995 are expected to be approximately $165 million.
During 1994, the Company expended cash to reduce borrowings, to purchase $31
million of treasury stock, and to pay $28 million of dividends to common
stockholders. During 1993, the Company expended cash to reduce borrowings, to
make cash payments under the 1993 severance program, and to pay $28 million
of dividends to common stockholders.
24
<PAGE>
During 1994, the Company replaced its previous three-year $150 million
domestic working capital line of credit with a five-year $150 million
domestic working capital line of credit. There were no amounts outstanding
under these agreements at December 31, 1994 or 1993. The Company maintains
unsecured, uncommitted lines of credit for its international operations which
amounted to $161 million at both December 31, 1994 and 1993. Cash balances of
$1.8 million at December 31, 1993 were required to support international
borrowings and no such cash balances were required at December 31, 1994. The
Company also has $100 million of unsold debt securities remaining from its
existing shelf registration, filed in January 1992, available for general
corporate purposes. The Company's total borrowing capacity is limited by
certain debt covenants.
As of December 31, 1994, a cumulative total of 4.4 million shares had been
repurchased for approximately $125 million under the Company's $150 million
common stock repurchase program, $31 million of which was expended during
1994, leaving an unexpended balance of approximately $25 million. During
1993, the Company did not repurchase any shares of common stock. In January
1995, the Board of Directors approved a program to repurchase an additional
$100 million of the Company's common stock on the open market, in privately
negotiated transactions or otherwise (which may include transactions with
Polaroid stock option plans and retirement plans, including the employee
stock ownership plan). This repurchase program represented approximately 7%
of the Company's market value. The timing and amounts of any future purchases
under these programs depend upon many factors, including market conditions as
well as the Company's business and financial condition.
The Company believes that its borrowing capacity and other existing corporate
resources are adequate for at least the next twelve months to meet working
capital needs, to fund planned capital expenditures, to pursue future growth
opportunities, and to fund other corporate requirements.
Foreign Currency Exchange
The Company generates a substantial portion of its revenues in international
markets, which subjects its operations to the exposure of foreign currency
fluctuations. The impact of currency fluctuations can be positive or negative
in any given period. The Company's ability to counteract foreign currency
exchange movement is primarily dependent on pricing.
To minimize the adverse impact of foreign currency fluctuations on its
foreign currency-denominated net assets, the Company may engage in foreign
currency-denominated borrowings. The Company determines the aggregate amount
of such borrowings based on its forecast of the Company's net asset position
and the relative strength of the U.S. dollar as compared to foreign
currencies. These borrowings create foreign currency-denominated liabilities
that hedge the Company's foreign currency-denominated net assets. Upon receipt
of the borrowed foreign currency-denominated funds, the Company converts those
funds to U.S. dollars at the spot exchange rate. Exchange gains and losses on
the foreign currency-denominated borrowings are recognized in earnings as
incurred. At December 31, 1994 and 1993, the amount of the Company's outstanding
short-term foreign currency-denominated borrowings were $117 million and $106
million, respectively.
From time to time, the Company may use over-the-counter foreign exchange
swaps to reduce the interest expense incurred through the borrowings
described above and to replace the hedge created by those borrowings. When a
foreign exchange swap is used to replace a hedge, the currency received by
the Company in the spot market component of the foreign exchange swap is used
to close out the borrowings and simultaneously, the hedge is reinstituted
through a forward contract (not exceeding six months). The net interest value
of the foreign exchange swap contract is amortized to earnings over the life
of the contract. Exchange gains or losses on the foreign currency obligation
component of the forward contract are recognized in earnings as incurred in
each accounting period. The Company does not enter into foreign exchange
swaps for trading purposes. The aggregate notional value of these short-term
foreign exchange swap contracts outstanding at December 31, 1994 and 1993,
was $22 million and $42 million, respectively.
When the Company may not have sufficient flexibility to change prices, the
Company may, from time to time, also purchase U.S. dollar call options. The
term of these call options typically does not exceed one year. The Company's
purchase of call options allows it to protect a portion of its expected
foreign currency-denominated revenues from adverse foreign currency exchange
movement. The Company does not buy call options which can be exercised prior
to the expiration date, nor does it write options or purchase call options
for trading purposes. The Company defers premiums and any gains for its call
options activity until the option exercise date. At December 31, 1994, option
contracts with a notional value of $177 million were outstanding. At December
31, 1993, no option contracts were outstanding.
The Company maintains a Monetary Control Center (the MCC), which operates
under written policies and procedures defining day-to-day operating
guidelines, including exposure limits, to contract for the foreign
currency-denominated borrowings, foreign exchange swaps and call options
described above. The MCC is subject to random independent audits and reports
to a supervisory committee comprised of members of the Company's management.
The MCC publishes monthly reports to the Company's management detailing the
foreign currency activities it has engaged in for the prior month.
25
<PAGE>
Impact of Inflation
Inflation continues to be a factor in many countries in which the Company
does business. The Company's pricing strategy has offset to a considerable
degree inflation and normal cost increases. The overall inflationary impact
on earnings has been immaterial.
Recent Developments
In January 1995, the Company adopted a plan of action to enhance
profitability through greater emphasis on sales in newly emerging markets, a
reduction in operating costs and various measures to improve efficiency. The
five-step plan is as follows:
The Company intends to accelerate entry into new global markets including
China, India, and other developing nations. In China, the Company plans to
add three new regional offices, expand its sales force and add distribution
capability to reach customers throughout the country.
In the first quarter of 1995, the Company began to implement a dealer
inventory adjustment program. The focus of this program is to enable the
Company to exercise better control over its distribution channels, strengthen
retail sales of integral film by increasing consumer promotions, and sharply
reduce the "gray market" for Polaroid products. The Company expects to incur
an operating loss (loss before interest and tax), excluding the restructuring
charge discussed below, of approximately $20 million in the first quarter of
1995, primarily as a result of the inventory adjustment program.
The Company plans to sell approximately $50 million of real estate, primarily
in the U.S., over the next 24 months.
The Company is implementing various measures to improve efficiency, including
consolidation of manufacturing facilities; re-prioritizing of product
development activities; enhancement of distribution, customer fulfillment and
manufacturing processes; and realignment of employees.
The Company is currently in the process of reducing its workforce by about
400 to 600 employees, or approximately 5% of its worldwide workforce, through
an early retirement and severance program. The Company expects to record a
one-time restructuring charge of $40 million to $60 million in the first
quarter of 1995 for these programs. On an annualized basis, this workforce
reduction and the various measures to improve efficiency are expected to
result in a $25 million to $35 million savings in operating costs.
In addition to these steps, the Board of Directors approved in January 1995 a
program to repurchase an additional $100 million of the Company's common
shares on the open market, in privately negotiated transactions or otherwise
(which may include transactions with Polaroid stock option plans and
retirement plans, including the employee stock ownership plan). This program
is in addition to the approximately $25 million remaining at December 31,
1994 from the Company's previously authorized $150 million stock repurchase
program.
In 1994, a Search Committee of the Board of Directors was established to
undertake the process of naming the Company's next chief executive officer in
order to comply with the Company's policy of not re-appointing an officer
after he or she attains 65 years of age. This process is currently expected
to be completed by December 1996.
Other Matters
The Company, together with other parties, is currently designated a
Potentially Responsible Party by the United States Environmental Protection
Agency and certain state agencies with respect to the costs of investigation
and remediation of pollution at several sites. In each case in which the
Company is able to determine the likely exposure, such amount has been
included in the Company's reserve. Where a range of comparably likely
exposures exists, the Company has included in its reserve the minimum amount
of the range. The Company's aggregate reserve for these liabilities was $6
million as of both December 31, 1994 and 1993. The Company currently
estimates that the majority of the $6 million amount reserved for
environmental liabilities at December 31, 1994 will be payable over the next
two to three years.
The Company reviews its recurring internal expenditures on environmental
matters, as well as capital expenditures related to environmental compliance,
on a monthly basis, and reviews its third-party expenditures on environmental
matters on a quarterly basis. The Company believes that these expenditures
have not had and will not have a materially adverse effect on the financial
condition or operating results of the Company.
26
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Polaroid Corporation:
We have audited the accompanying consolidated balance sheet of Polaroid
Corporation and subsidiary companies as of December 31, 1994 and 1993, and
the related consolidated statements of earnings, cash flows and changes in
common stockholders' equity for each of the years in the three-year period
ended December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Polaroid
Corporation and subsidiary companies at December 31, 1994 and 1993, and the
results of their operations and cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 4 and 11 to the consolidated financial statements, in
1993 the Company changed its method of accounting for income taxes and for
certain postretirement and postemployment benefits.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
January 31, 1995
Management's Report
Financial Reporting and Controls
The financial statements presented in this report were prepared in accordance
with generally accepted accounting principles. The Company maintains a number
of measures to assure the accuracy of its financial information. To that end,
a system of internal accounting controls and procedures has been developed to
provide reasonable assurance that assets are safeguarded and that
transactions are recorded and reported properly. The Company also maintains
financial policies and procedures, and a program of internal audits,
management reviews and careful selection and training of qualified personnel.
The Audit Committee is composed entirely of outside directors. As such, it is
in a position to provide additional, independent reviews of the adequacy of
internal controls and the quality of financial reporting.
/s/ I. MacAllister Booth
I. MacAllister Booth
Chairman, President and
Chief Executive Officer
/s/ William J. O'Neill, Jr.
William J. O'Neill, Jr.
Executive Vice President and
Chief Financial Officer
27
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Consolidated Statement of Earnings
Polaroid Corporation and Subsidiary Companies Years ended December 31,
(In millions, except per share data) 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $1,160.3 $1,178.8 $1,145.7
International 1,152.2 1,066.1 1,006.6
-------- -------- --------
Total net sales 2,312.5 2,244.9 2,152.3
-------- -------- --------
Cost of goods sold 1,324.2 1,296.5 1,178.0
Marketing, research, engineering and administrative expenses (Note 2) 788.0 763.0 760.5
Early retirement and other (Note 11) - 44.0 -
-------- -------- --------
Total costs 2,112.2 2,103.5 1,938.5
-------- -------- --------
Profit from operations 200.3 141.4 213.8
-------- -------- --------
Other income/(expense):
Interest income 9.7 7.7 15.9
Other (2.7) .5 (8.1)
-------- -------- --------
Total other income 7.0 8.2 7.8
Interest expense 46.6 47.9 58.5
-------- -------- --------
Earnings before income taxes and cumulative effect of changes in accounting principle 160.7 101.7 163.1
Federal, state and foreign income taxes (Note 4) 43.5 33.8 64.1
-------- -------- --------
Earnings before cumulative effect of changes in accounting principle 117.2 67.9 99.0
Cumulative effect to January 1, 1993 of changes in accounting principle for:
Postretirement benefits, other than pensions, net of taxes of $85.0 (Note 11) - (132.9) -
Income taxes (Note 4) - 33.6 -
Postemployment benefits, net of taxes of $12.7 (Note 11) - (19.9) -
-------- -------- --------
Net earnings/(loss) $ 117.2 $ (51.3) $ 99.0
======== ======== ========
Primary earnings/(loss) per common share: (Note 1)
Earnings before cumulative effect of changes in accounting principle $ 2.49 $ 1.45 $ 2.06
Cumulative effect to January 1, 1993 of changes in accounting principle for:
Postretirement benefits other than pensions - (2.84) -
Income taxes - 0.72 -
Postemployment benefits - (0.43) -
-------- -------- --------
Net earnings/(loss) $ 2.49 $ (1.10) $ 2.06
Fully diluted earnings per common share (Note 1) $ 2.42 - $ 2.02
Cash dividends per common share $ .60 $ .60 $ .60
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
Consolidated Balance Sheet
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
December 31,
(In millions) 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents (Note 6) $ 143.3 $ 114.4
Short-term investments (Note 1) 85.6 24.5
Receivables, less allowances of $24.5 in 1994 and $23.3 in 1993 541.0 557.6
Inventories (Note 5) 577.4 578.2
Prepaid expenses and other assets (Note 4) 141.4 139.0
-------- --------
Total current assets 1,488.7 1,413.7
-------- --------
Property, plant and equipment
Land 34.7 32.5
Buildings 332.3 309.0
Machinery and equipment 1,561.7 1,338.8
Construction in process 114.7 227.5
-------- --------
Total property, plant and equipment 2,043.4 1,907.8
Less accumulated depreciation 1,296.1 1,189.6
-------- --------
Net property, plant and equipment 747.3 718.2
Prepaid taxes--non-current (Note 4) 80.7 80.4
-------- --------
Total assets $2,316.7 $2,212.3
======== ========
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Liabilities and stockholders' equity
<S> <C> <C>
Current liabilities
Short-term debt (Note 6) $ 117.1 $ 106.2
Current portion of long-term debt (Note 8) 35.9 32.6
Payables and accruals (Note 7) 275.7 243.5
Compensation and benefits (Notes 10 and 11) 121.4 118.3
Federal, state and foreign income taxes (Note 4) 51.8 79.5
-------- --------
Total current liabilities 601.9 580.1
-------- --------
Long-term debt (Note 8) 566.0 602.3
Accrued postretirement benefits (Note 11) 247.2 229.1
Accrued postemployment benefits (Note 11) 37.2 33.5
-------- --------
Total liabilities 1,452.3 1,445.0
-------- --------
Preferred stock, Series A and Series D, $1 par value, authorized 20,000,000
shares; all shares unissued - -
-------- --------
Common stockholders' equity (Note 9)
Common stock, $1 par value, authorized 150,000,000 shares 75.4 75.4
Additional paid-in capital 387.2 385.6
Retained earnings 1,692.1 1,602.0
Less: Treasury stock, at cost 1,174.5 1,145.5
Deferred compensation 115.8 150.2
-------- --------
Total common stockholders' equity 864.4 767.3
-------- --------
Total liabilities and stockholders' equity $2,316.7 $2,212.3
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
Consolidated Statement of Cash Flows
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Years ended December 31,
(In millions) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings/(loss) $ 117.2 $(51.3) $ 99.0
Cumulative effect of changes in accounting principle - 119.2 -
Depreciation of property, plant and equipment 118.2 100.3 89.1
(Increase)/decrease in receivables 30.5 (83.6) (54.0)
(Increase)/decrease in inventories .8 8.0 (62.0)
(Increase)/decrease in prepaids and other assets (1.5) (2.8) 7.2
Increase in payables and accruals 22.4 15.3 29.6
Increase/(decrease) in compensation and benefits (8.2) 2.1 (22.5)
Increase/(decrease) in federal, state, and foreign income taxes payable (28.2) 27.4 (38.7)
Other non-cash items 71.4 46.0 32.4
------- ------ ------
Net cash provided by operating activities 322.6 180.6 80.1
------- ------ ------
Cash flows from investing activities
(Increase)/decrease in short-term investments (60.5) 55.3 1.2
Additions to property, plant and equipment (146.7) (165.6) (201.5)
Proceeds from sale of fixed assets .2 1.4 -
------- ------ ------
Net cash used by investing activities (207.0) (108.9) (200.3)
------- ------ ------
Cash flows from financing activities
Net increase/(decrease) in short-term debt (maturities 90 days or less) 1.4 (8.7) 19.7
Short-term debt (maturities over 90 days):
Proceeds 8.9 - 68.7
Payments (8.9) - (88.2)
Proceeds from issuances of long-term debt (Note 8) - - 347.1
Repayments of long-term debt (31.2) (26.8) (173.1)
Cash dividends paid (27.9) (28.0) (29.0)
Purchases of treasury stock (30.6) - (67.5)
Proceeds from issuance of stock in connection with stock incentive plan 3.2 3.3 .1
------- ------ ------
Net cash provided by/(used by) financing activities (85.1) (60.2) 77.8
------- ------ ------
Effect of exchange rate changes on cash (1.6) (6.2) (11.4)
------- ------ ------
Net increase/(decrease) in cash and cash equivalents 28.9 5.3 (53.8)
Cash and cash equivalents at beginning of year 114.4 109.1 162.9
------- ------ ------
Cash and cash equivalents at end of year $ 143.3 $114.4 $109.1
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Years ended December 31,
(In millions, except number of shares) 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at January 1 (75,427,550 shares in 1994, 1993 and 1992) $ 75.4 $ 75.4 $ 75.4
-------- -------- --------
Balance at December 31 75.4 75.4 75.4
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Balance at January 1 385.6 379.5 379.5
Stock options--1993 (Note 10) - 4.1 -
Stock options exercised 1.6 1.7 -
Stock options exercised--tax benefit - .3 -
-------- -------- --------
Balance at December 31 387.2 385.6 379.5
-------- -------- --------
RETAINED EARNINGS
Balance at January 1 1,602.0 1,680.3 1,609.9
Net earnings/(loss) 117.2 (51.3) 99.0
Dividends declared--common stock (27.9) (28.0) (28.6)
ESOP dividend tax benefit received on unallocated shares .8 1.0 -
-------- -------- --------
Balance at December 31 1,692.1 1,602.0 1,680.3
-------- -------- --------
LESS:
TREASURY STOCK
Balance at January 1 (28,621,405 shares in 1994, 28,759,335 shares in 1993,
and 26,508,489 shares in 1992) 1,145.5 1,147.1 1,083.7
Repurchase of shares (941,300 shares in 1994 and 2,257,911 shares in 1992) 30.6 - 63.5
Issuance of shares in connection with stock incentive plan (132,777 shares
in 1994, 137,930 shares in 1993, and 7,065 shares in 1992) (1.6) (1.6) (.1)
-------- -------- --------
Balance at December 31 (29,429,928 shares in 1994, 28,621,405 shares in 1993,
and 28,759,335 shares in 1992) 1,174.5 1,145.5 1,147.1
-------- -------- --------
DEFERRED COMPENSATION
Balance at January 1 150.2 179.2 208.2
Stock options--1993 (Note 10) (1.0) 3.5 -
Loan repayments from ESOP Trust (33.4) (32.5) (29.0)
-------- -------- --------
Balance at December 31 115.8 150.2 179.2
-------- -------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY $ 864.4 $ 767.3 $ 808.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Polaroid Corporation and Subsidiary Companies
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company's
domestic and foreign subsidiaries, all of which are either wholly owned or
majority owned. Intercompany accounts and transactions are eliminated.
Cash Equivalents:
The Company considers all highly liquid securities with maturities of three
months or less when purchased to be cash equivalents.
Short-term Investments:
Short-term investments consist primarily of commercial paper and some bank time
deposits. The Company adopted Financial Accounting Standards Board Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities" (FAS
115) as of January 1, 1994 and it had no impact on the Company's financial
position or results of operations. Under FAS 115, the Company classifies its
securities as held-to-maturity. Held-to-maturity securities are those
investments which the Company has the ability and intent to hold until maturity.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization of premiums and discounts which approximates market value. As of
December 31, 1994, the average remaining maturity dates of the Company's short-
term investments in commercial paper and bank time deposits were less than two
months and less than eight months, respectively.
Derivatives:
Gains on the Company's purchase of call options related to qualifying hedges
of anticipated transactions are deferred and are recognized in income when
the hedged transaction occurs.
Inventories:
Inventories are valued on a first-in, first-out basis at the lower of cost or
market value. Market value is determined by replacement cost or net
realizable value.
Income Taxes:
Amounts in the financial statements related to income taxes are calculated
using the principles of Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes" (FAS 109). Under FAS 109, prepaid and
deferred taxes reflect the impact of temporary differences between the
amounts of assets and liabilities recognized for financial reporting purposes
and the amounts recognized for tax purposes. These deferred taxes are
measured by applying currently enacted tax rates. A valuation allowance
reduces deferred tax assets when it is "more likely than not" that some
portion or all of the deferred tax assets will not be recognized.
Provision for U.S. income taxes on the undistributed earnings of foreign
subsidiaries is made only on those amounts in excess of the funds considered
to be permanently reinvested.
Property, Plant and Equipment:
The cost of buildings, machinery and equipment is depreciated, primarily by
accelerated depreciation methods, over the estimated useful lives of such
assets as follows: buildings, 20-40 years; machinery and equipment, 3-15
years.
Foreign Currency Translation:
The Company's foreign operations are measured by reflecting financial results
of these operations as if they had taken place within a U.S. dollar based
economic environment. Inventory, property, plant and equipment, cost of goods
sold and depreciation are remeasured from foreign currencies to U.S. dollars
at historical exchange rates. All other accounts are translated at current
exchange rates. Gains and losses resulting from remeasurement are included in
income.
Patents and Trademarks:
Patents and trademarks are valued at $1.
Product Warranty:
Estimated product warranty costs are accrued at the time the products are
sold.
Earnings Per Common Share:
Primary earnings per common share are computed by dividing net income
available to common stockholders by the weighted average number of common
shares and dilutive common stock equivalents outstanding for the period. All
shares held in the Company's employee stock ownership plan (ESOP) Trust (see
Note 9) are considered outstanding for both primary and fully diluted
earnings per share calculations. Stock options are considered to be common
stock equivalents. The number of shares used to compute primary earnings per
common share were (in thousands) 46,992 in 1994, 46,737 in 1993, and 48,021
in 1992.
32
<PAGE>
Fully diluted earnings per common share reflect the maximum dilution that
would have resulted from the exercise of stock options and the convertible
debentures (see Note 8). Fully diluted earnings per common share are computed
by dividing net income, after adding back the after-tax interest on the
convertible debentures, by the weighted average number of common shares and
all dilutive securities. Fully diluted earnings per common share were $2.42
and $2.02 in 1994 and 1992, respectively, and were not reported in 1993
because they were greater than primary earnings per common share. The number
of shares used to compute fully diluted earnings per common share were (in
thousands) 51,299 in 1994 and 52,419 in 1992.
2. SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising $ 88.3 $ 97.2 $103.4
Research, engineering and
development 165.7 160.8 154.7
</TABLE>
Manufacturing Development Costs:
In addition to the research, engineering and development costs included in
marketing, research, engineering and administrative expenses, there were
planned manufacturing development costs (previously called "start-up costs"
in 1992) for major new products included in costs of sales of approximately
$30 million in both 1994 and 1993, and $40 million in 1992.
Interest Capitalization:
The Company has capitalized interest costs relating to certain qualifying
assets. In 1994, 1993 and 1992, the amounts of interest costs capitalized
were $9.7 million, $12.6 million, and $10.0 million, respectively.
Cash Flow Information:
Cash payments for interest and income taxes were:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $53.9 $58.0 $57.6
Income taxes 78.0 52.0 85.3
</TABLE>
Certain prior year information has been reclassified to conform with current
year presentation of data.
3. FINANCIAL INSTRUMENTS
Foreign Exchange Risk Management:
The Company generates a substantial portion of its revenues in international
markets, which subjects its operations to the exposure of foreign currency
fluctuations. The impact of currency fluctuations can be positive or negative
in any given period. The Company's ability to counteract foreign currency
exchange movement is primarily dependent on pricing.
To minimize the adverse impact of foreign currency fluctuations on its
foreign currency-denominated net assets, the Company may engage in foreign
currency-denominated borrowings (see Note 6). The Company determines the
aggregate amount of such borrowings based on its forecast of the Company's
net asset position and the relative strength of the U.S. dollar as compared
to foreign currencies. These borrowings create foreign currency-denominated
liabilities that hedge the Company's foreign currency-denominated net assets.
Upon receipt of the borrowed foreign currency-denominated funds, the Company
converts those funds to U.S. dollars at the spot exchange rate. Exchange
gains and losses on the foreign currency-denominated borrowings are
recognized in earnings as incurred. At December 31, 1994 and 1993, the amount
of the Company's outstanding short-term foreign currency-denominated
borrowings were $117.1 million and $106.2 million, respectively.
From time to time, the Company may use over-the-counter foreign exchange
swaps to reduce the interest expense incurred through the borrowings
described above and to replace the hedge created by those borrowings. When a
foreign exchange swap is used to replace a hedge, the currency received by
the Company in the spot market component of the foreign exchange swap is used
to close out the borrowings and simultaneously, the hedge is reinstituted
through a forward contract (not exceeding six months). The net interest value
of the foreign exchange swap contract is amortized to earnings over the life
of the contract. Exchange gains or losses on the foreign currency obligation
component of the forward contract are recognized in earnings as incurred in
each accounting period. The Company does not enter into foreign exchange
swaps for trading purposes. The aggregate notional value of these short-term
foreign exchange swap contracts outstanding at December 31, 1994 and 1993,
was $21.8 million and $42.1 million, respectively.
When the Company may not have sufficient flexibility to change prices, the
Company may, from time to time, also purchase U.S. dollar call options. The
term of these call options typically does not exceed one year. The Company's
purchase of call options allows it to protect a portion of its expected
foreign currency-denominated revenues from adverse foreign currency exchange
movement. The Company does not buy call options which can be exercised prior
to the expiration date, nor does it write options or purchase call options
for trading purposes. The Company defers premiums and any gains for its call
options activity until the option exercise date. At December 31, 1994, option
contracts with a notional value of $176.7 million were outstanding. At
December 31, 1993, no option contracts were outstanding.
33
<PAGE>
The Company maintains a Monetary Control Center (the MCC), which operates
under written policies and procedures defining day-to-day operating
guidelines, including exposure limits, to contract for the foreign
currency-denominated borrowings, foreign exchange swaps and call options
described above. The MCC is subject to random independent audits and reports
to a supervisory committee comprised of members of the Company's management.
The MCC publishes monthly reports to the Company's management detailing the
foreign currency activities it has engaged in for the prior month.
Fair Value:
The carrying amounts of cash, cash equivalents, short-term investments, trade
receivables, short-term debt and trade payables approximate fair value
because of the short maturity of these financial instruments and are,
therefore, not included in the information presented below. The estimated
carrying amounts included in the consolidated balance sheet and fair value of
the Company's financial instruments as of December 31 were as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
--------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-----------------------------------------
<S> <C> <C> <C> <C>
Other assets:
Call options $ - $ .4 $ - $ -
Foreign exchange swaps $ - $ - $ - $ -
Long-term debt $601.9 $625.8 $634.9 $705.6
</TABLE>
The estimated fair value of the Company's call options and foreign exchange
swaps generally reflects the estimated amounts the Company would receive or
pay to terminate the contracts at the reporting dates, thereby taking into
account the current unrealized gains or losses on open contracts. Dealer
quotes are available for the Company's call options and foreign exchange
swaps. The fair value of the Company's long-term debt is estimated based on
the quoted market prices for the same or similar issues or on the current
rates offered to the Company for debt of the same remaining maturities.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect estimates.
Concentration of Credit Risk:
The Company places its temporary cash investments in highly rated financial
instruments and financial institutions and by policy, limits the amount of
credit exposure to any one financial institution. The Company's investment
policy limits its exposure to concentrations of credit risk.
The Company would be exposed to credit risk if a counterparty to a call
option contract or the forward component of a foreign exchange swap contract
were to fail to meet its contractual obligation, in which situation the
Company would be required to replace the contract at market rate. The Company
believes that the risk of financial loss due to the inability of
counterparties to meet their obligation is remote and that any such loss
would not be material to the results of operations of the Company. The
Company minimizes its risk exposure from foreign exchange swaps and purchased
call options by limiting counterparties to carefully selected major financial
institutions.
The Company markets a substantial portion of its products to customers in the
retail industry, a market in which a number of companies are highly
leveraged. The Company continually evaluates the credit risk of these
customers and believes that its allowances for doubtful accounts relative to
its customer receivables are adequate.
4. INCOME TAXES
As of January 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" (FAS 109). The
favorable cumulative adjustment of $33.6 million in 1993 was the result of
recognizing the tax benefit of future deductions based upon a "more likely
than not" criterion, instead of
34
<PAGE>
the more stringent criteria of Financial Accounting Standards Board Statement
No. 96, "Accounting for Income Taxes" (FAS 96), the Company's previous
standard of accounting for income taxes. Prior years' financial statements
were not restated to apply the provisions of FAS 109.
An analysis of income tax expense follows:
<TABLE>
<CAPTION>
1994 (FAS 109) Current Deferred Total
------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 3.3 $ 2.6 $ 5.9
State 1.7 .5 2.2
Foreign 35.6 (.2) 35.4
----- ------ ------
Total $40.6 $ 2.9 $ 43.5
===== ====== ======
<CAPTION>
1993 (FAS 109)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $(6.0) $ (7.6) $(13.6)
Statutory rate change - (3.3) (3.3)
State .9 (2.6) (1.7)
Foreign 58.2 (5.8) 52.4
----- ------ ------
Total $53.1 $(19.3) $ 33.8
===== ====== ======
<CAPTION>
1992 (FAS 96)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 9.1 $ 2.8 $ 11.9
State 1.3 .6 1.9
Foreign 37.2 13.1 50.3
----- ------ ------
Total $47.6 $ 16.5 $ 64.1
===== ====== ======
</TABLE>
Prepaid income taxes and deferred income taxes result from future tax
benefits and expenses related to the difference between the tax basis of
assets and liabilities and the amounts reported in the financial statements.
These differences predominately relate to U.S. operations. Carryforwards, tax
overpayments and refunds due are also included in prepaid income taxes. The
net of deferred income tax assets and deferred income tax liabilities
reflected on the consolidated balance sheet was a net asset of $156.6 million
and $163.9 million as of December 31, 1994 and 1993, respectively.
Significant components of those amounts shown on the balance sheet as of
December 31 were as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Property, plant and equipment
and trademarks $(35.1) $(27.5)
Inventory 43.0 36.1
Compensation and benefits 23.2 26.4
Postretirement and
postemployment benefits 119.8 109.9
All other 19.1 31.6
------ ------
Subtotal 170.0 176.5
Valuation allowance (7.5) (8.3)
------ ------
Total deferred tax assets $162.5 $168.2
====== ======
Deferred tax liabilities:
Property, plant and equipment
and trademarks $ 2.7 $ 2.3
Compensation and benefits 1.4 1.4
All other 1.8 .6
------ ------
Total deferred tax liability 5.9 4.3
------ ------
Net deferred tax asset $156.6 $163.9
====== ======
</TABLE>
Valuation allowances of $7.5 million and $8.3 million as of December 31, 1994
and 1993, respectively, were established for all of the prepaid taxes related
to a capital loss carryforward and to those temporary differences which most
likely will produce capital losses upon reversal. Capital losses may be used
only to offset capital gains. Capital losses may be carried back three years
and forward five years. As of December 31, 1994, the Company did not believe
it was more likely than not that it would generate sufficient capital gains
within the appropriate time period to offset those capital losses. However,
in January 1995, the Company adopted a plan to sell approximately $50 million
of real estate, primarily in the U.S., within the next 24 months (see Note
15). Therefore, it is possible a significant portion of the benefit related
to the capital loss carryforward will be realized in the next 24 months.
35
<PAGE>
Management believes the Company will obtain the full benefit of deferred tax
assets on the basis of its evaluation of the Company's anticipated
profitability over the period of years that the temporary differences are
expected to become tax deductions. It believes that sufficient book and
taxable income will be generated to realize the benefit of these tax assets.
This assessment of profitability takes into account the Company's present and
anticipated split of domestic and international earnings and the fact that
the deductible temporary differences related to postretirement and other
postemployment benefits reverse over a period of 30 to 40 years.
Management also considered the fact that the Company only had an alternative
minimum tax credit carryforward for regular tax purposes. The alternative
minimum tax credit does not expire. Otherwise, the Company had no credit
carryforward for regular tax purposes and the Company has no history of net
operating losses for tax purposes. Of course, there can be no assurance that
the Company will generate any specific level of continuing earnings or where
earnings will be generated.
An analysis of earnings before income taxes and cumulative effect of changes
in accounting principle follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 44.6 $ 11.2 $ 59.6
Foreign 116.1 90.5 103.5
------ ------ ------
Total $160.7 $101.7 $163.1
====== ====== ======
</TABLE>
A reconciliation of differences between the statutory U.S. federal income tax
rate and the Company's effective tax rate follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 34.0%
State taxes .4 .5 .5
Impact of statutory rate change
on deferred taxes - (3.3) -
Valuation allowance change (.5) (1.6) -
Tax effect resulting from
foreign activities (4.8) 3.9 4.2
Other (3.0) (1.2) .6
------ ------ ------
Effective tax rate 27.1% 33.3% 39.3%
====== ====== ======
</TABLE>
The tax effect resulting from foreign activities includes the effect of
remeasuring foreign currency. The impact on the tax rate for 1994 was a
decrease of 5.2 percentage points; for 1993, an increase of 7.9 percentage
points; and for 1992, an increase of 1.7 percentage points.
At the end of 1994, the Company had an alternative minimum tax credit
carryforward of $2.4 million which does not expire. For alternative minimum
tax purposes, the Company had a foreign tax credit carryforward at the end of
1994 of $69.5 million; $31.7 million expires in 1995, $3.9 million expires in
1996, $6.6 million expires in 1997, $21.5 million expires in 1998, and $5.8
million expires in 1999.
Undistributed earnings of foreign subsidiaries held for reinvestment in
overseas operations amounted to $444.7 million at December 31, 1994.
Additional U.S. income taxes may be due upon remittance of those earnings
(net of foreign tax reductions because of the distribution), but it is
impractical to determine the amount of any such additional taxes. If all
those earnings were distributed as dividends, foreign withholding taxes of
approximately $23.1 million would be payable.
Federal income tax returns of the Company for all years through 1988 have
been closed and all matters have been resolved. The Federal income tax
returns for 1989 through 1991 are currently under audit.
5. INVENTORIES
The classification of inventories at December 31 follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $112.4 $122.9
Work-in-process 231.2 252.5
Finished goods 233.8 202.8
------ ------
Total $577.4 $578.2
====== ======
</TABLE>
6. SHORT-TERM DEBT
Short-term debt includes unsecured notes payable to banks of $117.1 million
and $106.2 million at December 31, 1994 and 1993, respectively, incurred by
the Company's foreign subsidiaries to manage its foreign currency balance
sheet exposure (see Note 3). The weighted average interest rate on short-term
debt outstanding as of December 31, 1994 and 1993 was 5.9% and 7.5%,
respectively.
During 1994, the Company replaced its previous three-year $150 million
domestic working capital line of credit with a five-year $150 million
domestic working capital line of credit (see Note 8). There were no amounts
outstanding under these agreements at December 31, 1994 or 1993. The Company
maintains unsecured,
36
<PAGE>
uncommitted lines of credit for its international operations which amounted
to $161.1 million at both December 31, 1994 and 1993. Cash balances of $1.8
million at December 31, 1993 were required to support international
borrowings and no such cash balances were required at December 31, 1994. The
Company's total borrowing capacity is limited by certain debt covenants.
Interest expense on international short-term borrowings was $8.5 million in
1994, $12.0 million in 1993, and $18.3 million in 1992. The average interest
rates on these borrowings ranged from 5.0% to 6.6% in 1994, from 7.5% to
10.3% in 1993, and from 9.6% to 13.6% in 1992.
7. PAYABLES AND ACCRUALS
The following items are included in payables and accruals at December 31:
<TABLE>
<CAPTION>
(In millions) 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Trade accounts payable $155.8 $133.0
Reserve for marketing programs 50.8 41.2
Other accrued expenses and
current liabilities 69.1 69.3
------ ------
Total $275.7 $243.5
====== ======
</TABLE>
8. LONG-TERM DEBT
Principal amounts of long-term debt outstanding as of December 31 are as
follows:
<TABLE>
<CAPTION>
(In millions)
1994 Long-term Current Total
-------------------------------------------------------------------------------
<S> <C> <C> <C>
ESOP loan $ 77.4 $35.9 $113.3
7 1/4% Notes 149.6 - 149.6
8% Notes 198.9 - 198.9
8% Subordinated Convertible
Debentures 140.0 - 140.0
Other .1 - .1
------ ----- ------
Total $566.0 $35.9 $601.9
====== ===== ======
<CAPTION>
1993 Long-term Current Total
-------------------------------------------------------------------------------
<S> <C> <C> <C>
ESOP loan $114.2 $32.6 $146.8
7 1/4% Notes 149.3 - 149.3
8% Notes 198.6 - 198.6
8% Subordinated Convertible
Debentures 140.0 - 140.0
Other .2 - .2
------ ----- ------
Total $602.3 $32.6 $634.9
====== ===== ======
</TABLE>
At December 31, 1994 and 1993, the Company had a working capital line of
credit (see Note 6), and a long-term ESOP loan. Borrowing costs under these
credit agreements are tied to the Company's long-term public debt ratings.
The interest rates on the loans are based on various alternative interest
indices at the Company's option and will fluctuate over time. The agreements
contain various restrictions, including the ability of the Company to incur
or guarantee debt. The Company is required to maintain a certain net worth
and to meet certain leverage and interest coverage ratios.
Under the ESOP loan, which was used to finance the leveraged Polaroid ESOP
(see Notes 9 and 11), scheduled principal payments will be made semi-annually
in gradually increasing amounts through 1997 when a final payment of $37.7
million is due. Interest expense on the ESOP loan was $6.0 million in 1994,
$6.2 million in 1993, and $8.3 million in 1992. The weighted average interest
rate on this loan was 4.4%, 3.6%, and 4.1% during 1994, 1993 and 1992,
respectively.
The Company's $140 million Subordinated Convertible Debentures (the
Debentures) due in 2001 carry an annual interest rate of 8% and are
convertible to common stock at $32.50 per share. The Debentures are
redeemable by the Company after September 30, 1998, and sooner if the current
market price per share of common stock is greater than or equal to $48.75
(appropriately adjusted for stock splits, combinations, dividends or similar
events) for at least 20 of 30 consecutive trading days, at which time the
Company has the right to redeem the Debentures, in whole or part, at the end of
the 30-day period. The Debentures are redeemable by the Company and by the
holder under certain circumstances. The Debentures are subordinated in right
of payment to all existing debt of the Company.
In January 1992, the Company issued $150 million 7 1/4% Notes (the 7 1/4%
Notes) due January 15, 1997. The 7 1/4% Notes were issued with a discount,
at a price of 99.30% of par with a yield of 7.42%, and may not be redeemed
prior to maturity. The proceeds were used in February 1992 to retire all of
the Company's outstanding $150 million 8 7/8% Notes due April 1, 1993. In
March 1992, the Company issued $200 million 8% Notes (the 8% Notes) due March
15, 1999. The 8% Notes were issued with a discount, at a price of 99.054% of
par with a yield of 8.18%, and may not be redeemed prior to maturity.
The aggregate scheduled repayments on the Company's long-term debt
outstanding at December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995 - $ 35.9 million
1996 - $ 39.7 million
1997 - $187.8 million
1998 - $ 0
1999 - $200.0 million
2000 and thereafter - $140.0 million
</TABLE>
37
<PAGE>
9. COMMON STOCKHOLDERS' EQUITY
As of December 31, 1994, a cumulative total of 4.4 million shares of common
stock had been repurchased for approximately $125 million under the Company's
$150 million stock repurchase program, $30.6 million of which was expended
during 1994. During 1993, the Company did not repurchase any shares of common
stock and during 1992, the Company repurchased 2.3 million shares of common
stock for $63.5 million. The timing and amounts of any future purchases under
these programs depend upon many factors, including market conditions as well
as the Company's business and financial condition.
Deferred Compensation was $115.8 million and $150.2 million at December 31,
1994 and 1993, respectively. Deferred compensation included $113.3 million in
1994 and $146.8 million in 1993 for the ESOP (see Notes 8 and 11) covering
substantially all domestic employees. These amounts which were recorded as
deductions from common stockholders' equity, represent amounts receivable in
the future from the ESOP Trust. Shares held by the Company's ESOP Trust at
December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
-----------------------------------------------------------------------------
<S> <C> <C>
Allocated 6,574 5,700
Suspense (unallocated) 2,994 3,952
----- -----
Total 9,568 9,652
===== =====
</TABLE>
Through 1993, common stock dividends paid to the plan trustee for ESOP-held
shares were used to repay the principal amount outstanding. In 1993 and 1992,
all dividends on shares held by the ESOP Trust used to repay the ESOP loan
were $5.7 million and $5.9 million, respectively. In 1994, $2.3 million in
dividends paid on unallocated ESOP shares were used to repay the ESOP loan.
The remaining dividends on allocated shares held by the Trust were paid to
ESOP participants. Deferred compensation also included $2.5 million and $3.5
million at December 31, 1994 and 1993, respectively, related to the 1993
Polaroid Stock Incentive Plan (See Note 10).
In November 1993, the American Institute of Certified Public Accountants
issued Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans" (SOP 93-6), which became effective for fiscal years
beginning after December 15, 1993. The Company's current ESOP is
grandfathered under the accounting provisions of SOP 93-6. Accordingly, the
Company's accounting policies and procedures as previously disclosed for the
year ended December 31, 1993 have not been affected by SOP 93-6. SOP 93-6
does, however, require additional disclosures regarding the Company's ESOP
which are covered in these financial statements. SOP 93-6 had no impact on
the Company's financial position or results of operations for 1994.
10. INCENTIVE COMPENSATION AND STOCK INCENTIVE PLANS
The Company maintains annual cash incentive plans covering substantially all
domestic employees (Employee Incentive Compensation Plan), employees of
manufacturing subsidiaries in the United Kingdom and the Netherlands
(International Manufacturing Plans) and substantially all executives
(Executive Incentive Compensation Plan).
Amounts charged to operations for incentive compensation plans are as
follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee Incentive Compensation Plan $6.9 $6.2 $8.1
International Manufacturing Plans 1.1 .9 1.2
Executive Incentive Compensation Plan .5 .3 3.6
</TABLE>
In 1990, the Company adopted the Polaroid Stock Incentive Plan (the 1990
Plan) under which officers and other key employees may be granted stock
options, stock appreciation rights and restricted stock as incentives to
increase revenues and profits. Stock options granted may be either
non-qualified or incentive stock options. Up to 3,000,000 shares of the
Company's common stock have been authorized for use under the 1990 Plan.
In May 1993, the Company adopted the 1993 Polaroid Stock Incentive Plan (the
1993 Plan) under which officers and other key employees may be granted awards
in the form of stock options, stock appreciation rights, restricted stock,
and any other form determined by the Board of Directors to be consistent with
the 1993 Plan, as incentives to increase revenues and profits. Stock options
granted may be either non-qualified or incentive stock options. A maximum of
3,000,000 shares of the Company's common stock have been authorized for use
under the 1993 Plan, plus the unissued shares from the 1990 Plan. On June 15,
1993, a committee of non-employee members of the Board of Directors approved
the issuance of 848,122 options at an option price of $32.25 per share. This
reflected the fair market value of the Company's common stock on April 26,
1993 which was the fifth business day after the first quarter earnings
release. That date corresponds to the date on which options have been granted
historically. Since the fair market value on June 15, 1993 was $37.00 per
share, $4.1 million was recorded as deferred compensation, and is being
amortized to compensation expense over the options' four year vesting period.
During 1994 and 1993, $1.0 million and $.6 million, respectively, was
recorded as compensation expense for the 1993 Plan.
A committee of non-employee members of the Board of Directors is the
administrator for the 1990 Plan and the 1993 Plan and, as such, can at the
time of the grant determine the vesting period, the period the option shall
remain exercisable (or a stock shall remain
38
<PAGE>
restricted), and may designate if a dividend equivalent payment (or a
dividend for restricted stock) will be paid on the grant equal to the
dividend payment made on a share of the Company's common stock. The
administrator for the 1990 Plan and the 1993 Plan may waive or amend
conditions of the option grant, such as accelerating vesting terms during an
early retirement and severance program. Data for the 1990 Plan and the 1993
Plan is summarized below:
<TABLE>
<CAPTION>
Number of Exercise Price
Options per Option
-------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1991 1,395,525 $24.375-$43.75
1992 Activity:
Granted 942,500 $25.25
Cancelled (40,665) $24.375-$43.75
Exercised (7,065) $24.375
----------
Outstanding at
December 31, 1992 2,290,295 $24.375-$43.75
1993 Activity:
Granted 848,122 $32.25
Cancelled (54,697) $24.375-$43.75
Exercised (137,930) $24.375-$26.25
----------
Outstanding at
December 31, 1993 2,945,790 $24.375-$43.75
1994 ACTIVITY:
GRANTED 781,365 $31.125-$32.375
CANCELLED (47,041) $24.375-$43.75
EXERCISED (132,777) $24.375-$32.25
----------
OUTSTANDING AT
DECEMBER 31, 1994 3,547,337 $24.375-$43.75
==========
EXERCISABLE AT
DECEMBER 31, 1994 1,658,318 $24.375-$43.75
==========
</TABLE>
Dividend equivalent payments of $1.9 million, $1.7 million, and $1.2 million
were made in 1994, 1993 and 1992, respectively. The number of common shares
reserved for granting of future options was 2,138,074, 2,902,035, and 696,820
at December 31, 1994, 1993 and 1992, respectively.
The options awarded under the 1990 Plan and the 1993 Plan vest ratably each
year over approximately a four year period and are exercisable for
approximately a ten year period from the date of grant, if the holder remains
in the employ of the Company. If the option holder's employment terminates
for reasons other than change of control or retirement, no further vesting
can occur. When an option holder's employment terminates for any reason other
than retirement, death or disability, all vested options must be exercised
within three months from the termination date or approximately ten years from
the date of the grant, whichever is earlier.
In 1990, the Company adopted the Polaroid Board of Directors' Stock Option
Plan (the Directors' Plan), which granted each non-employee director an
option to purchase 3,000 shares of the Company's common stock. For a new
non-employee director, the date of the grant is the date the director joins
the Board.
Under the Directors' Plan, options vest ratably each year over a four year
period from the date the director joins the Board and are exercisable for a
ten year period from the date of grant. Vesting ceases when an individual
terminates as a director, and a former director must exercise his or her
vested options within three years from the date of termination or ten years
from the date of grant, whichever is earlier. Up to 100,000 shares of the
Company's authorized common stock may be issued under the Directors' Plan.
Since 1990, 48,000 options have been issued at prices ranging from $33.125 to
$43.75 under the Directors' Plan. At December 31 of 1994, 1993 and 1992,
36,750, 39,000, and 37,500 options were exercisable, respectively. Of the
options granted to date, none have been exercised and 3,000 have been
cancelled. At December 31, 1994, a total of 52,000 shares of the Company's
authorized common stock were reserved for possible future grants under the
Directors' Plan.
11. BENEFIT PLANS
The Company maintains a qualified noncontributory trusteed pension plan
covering substantially all domestic employees. The benefits are based on
years of service and final average compensation at retirement. The Company's
general policy is to fund the domestic pension trust to the extent such
contributions would be deductible under the funding standards established
under the Internal Revenue Code. Plan assets consist primarily of high
quality corporate and U.S. government bonds, asset-backed securities and
common stocks.
39
<PAGE>
Employees of Polaroid's manufacturing subsidiaries in the United Kingdom and
the Netherlands are covered by trusteed, contributory pension plans. Amounts
are funded in accordance with local laws and economic conditions. Employees
of most other foreign subsidiaries are covered by insured plans. Related
expenses, obligations and assets of these other plans are not material and
therefore are not included in the information below.
Components of the Company's net periodic pension cost/(credit) are as
follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $29.2 $25.4 $23.3
Interest cost 62.5 56.1 53.1
Actual return on assets (5.8) (90.9) (68.1)
Net amortization and deferral (84.6) 5.2 (12.5)
----- ------ ------
Net periodic pension cost/(credit) $ 1.3 $(4.2) $(4.2)
===== ====== ======
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
(In millions) 1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $647.4 $662.0
Non-vested benefit obligation 42.5 43.3
------- -------
Accumulated benefit obligation 689.9 705.3
Effect of projected pay increases 114.1 138.2
------- -------
Projected benefit obligation 804.0 843.5
Plan assets at fair market value 907.4 922.1
------- -------
Plan assets in excess of projected obligations 103.4 78.6
Unrecognized prior service cost 25.7 27.2
Unrecognized net gain (50.8) (18.5)
Unrecognized net assets at transition,
net of amortization (82.4) (92.3)
------- -------
Net pension liability $ (4.1) $ (5.0)
======= =======
</TABLE>
The assumptions used by the Company for pension accounting as of December 31
were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 8.4% 7.5% 8.3%
Weighted average rate of increase
in compensation levels 5.4% 5.4% 5.8%
Expected long-term rate of return
on assets 9.3% 9.3% 9.3%
</TABLE>
In 1988, the Company's Board of Directors approved the Polaroid ESOP
primarily for the benefit of its domestic employees (see Notes 8 and 9). The
number of shares available for allocation to individual accounts in any
period is based on principal and interest payments made on the ESOP loan.
Amounts charged to expense represent the amount of principal repayment on the
ESOP loan less dividends paid for the period on all ESOP held shares through
1993 and less dividends on unallocated shares beginning in 1994. Amounts
charged to expense for this plan were $31.2 million, $26.9 million, and $23.2
million in 1994, 1993 and 1992, respectively.
The Company currently provides certain health and life insurance benefits to
eligible retired employees. Substantially all domestic employees who retire
from the Company, and meet the minimum age and service requirements of 55 and
10 years, respectively, become eligible for these benefits. The plans are
currently unfunded and may be modified in accordance with the terms of the
plan documents. The Company funds these benefits on a pay-as-you-go basis.
Eligible retirees under age 65 are required to contribute to the cost of
their health care benefits. Upon reaching age 65, eligible retirees' health
care benefit coverage is coordinated with Medicare. Eligible retirees are not
required to contribute to the cost of their life insurance benefits.
Employees of most of the Company's subsidiaries outside of the United States
are covered by government programs.
As of January 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (FAS 106). This standard requires the expensing, on an
accrual basis, of all medical and life insurance benefits the Company
provides to its retirees and their dependents. The Company elected immediate
recognition of the accumulated liability at adoption. This resulted in a
one-time, after-tax charge of $132.9 million (net of income taxes of $85.0
million). There was no cash flow impact associated with the adoption of FAS
106. After recognition of the cumulative liability at adoption, the effect of
FAS 106 on 1993 operating results
40
<PAGE>
was a pre-tax expense of $28.8 million, approximately $20 million more than
the previous pay-as-you-go method of accounting. Prior to 1993, the cost of
retiree health care and life insurance benefits was recognized as an expense
as claims were paid. These costs totaled $8.8 million in 1992.
Components of the Company's net periodic postretirement benefit cost are as
follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Service cost $13.1 $11.2
Interest cost 18.3 17.6
Amortization (.6) -
----- -----
Net periodic postretirement benefit cost $30.8 $28.8
===== =====
</TABLE>
The following table sets forth the status of the plan and amounts recognized
in the Company's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
(In millions) 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $104.6 $101.5
Fully eligible active plan participants 69.7 87.4
Other active plan participants 61.7 72.5
-------- --------
Total accumulated postretirement
benefit obligation 236.0 261.4
Plan assets at fair market value - -
-------- --------
Accumulated obligation in excess
of plan assets (236.0) (261.4)
Unrecognized net (gain)/loss (18.0) 22.9
Unrecognized prior service cost (5.2) -
-------- --------
Net postretirement benefit liability $(259.2) $(238.5)
======== ========
</TABLE>
The Accumulated Postretirement Benefit Obligation (APBO) at December 31, 1994
and 1993 was determined using a discount rate of 8.5% and 7.5 %,
respectively. The assumed health care cost trend rate used in measuring the
APBO at December 31, 1994 and 1993 was 12% declining gradually over ten years
to an ultimate rate of 6% in 2003. These trend rates reflect the Company's
current experience and expectation that future rates will decline. If the
health care cost trend rate assumptions were increased by 1% each year, the
APBO as of December 31, 1994 and 1993 would increase by approximately $34.7
million and $34.2 million, respectively. The effect of a 1% change on the
aggregate of service and interest cost for 1994 and 1993 would have been an
increase of approximately $5.5 million and $4.8 million, respectively.
The Company maintains the Polaroid Board of Directors' Retirement Plan (the
Directors' Retirement Plan) which is a non-qualified deferred compensation plan
under which fully vested (at least five complete years of service on the Board)
non-employee members of the Board who retire receive annual lump sum payments
equal to the retainer amount they were paid in the last full year prior to
retirement. A participant or surviving spouse may receive payments under the
Directors' Retirement Plan for the lesser of twenty-five years or the number of
years that the person served as a non-employee member of the Board prior to his
or her seventy-third birthday. The estimated present value of future benefits
under the Directors' Retirement Plan is accrued annually based on credited
service up to the participants' actual retirement dates and is charged to
expense. For 1994, 1993 and 1992, $.3 million, $.1 million, and $.1 million,
respectively, was charged to expense for current years' service.
In the fourth quarter of 1993, the Company adopted Financial Accounting
Standards Board Statement No. 112, "Employer's Accounting for Postemployment
Benefits" (FAS 112) retroactive to January 1, 1993. This standard requires
the expensing, on an accrual basis, of all benefits provided to former or
inactive employees, their beneficiaries and covered dependents after
employment but before retirement. Previous to 1993, the Company recognized
these disability and survivor-related benefits on a pay-as-you-go basis. The
cumulative effect of this change in accounting for postemployment benefits
resulted in a one-time after-tax charge of $19.9 million (net of income taxes
of $12.7 million). The effect of FAS 112 on 1993 operating results was a
pre-tax charge of $6.3 million, approximately $3.8 million more than the
previous pay-as-you-go method of accounting. There was no cash flow impact
associated with the adoption of FAS 112. The pre-tax charge for FAS 112 was
$6.8 million in 1994.
41
<PAGE>
In 1993, the Company offered an early retirement program and a severance
program to employees. The programs resulted in the departure of approximately
450 employees at a cost to the Company of $40 million, which was recorded in
1993. The Company also recorded, in 1993, a charge of $4 million for the
write down of some non-strategic assets.
12. RENTAL EXPENSE AND LEASE COMMITMENTS
Minimum annual rental commitments at December 31, 1994, under noncancellable
leases, principally for real estate, are payable as follows:
<TABLE>
<CAPTION>
(In millions)
-----------------------------------------------------------------------------
<S> <C>
1995 $16.7
1996 12.3
1997 10.1
1998 8.7
1999 4.2
2000 and thereafter 5.2
-----
Total minimum lease payments $57.2
=====
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of $2.8
million due in the future under noncancellable subleases.
Many of the leases contain renewal options and some contain escalation
clauses which require payments of additional rent to the extent of increases
in the related operating costs.
Rental and lease expenses consisted of the following:
<TABLE>
(In millions) 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $25.6 $23.8 $21.6
Contingent rentals 5.3 7.4 5.8
----- ----- -----
Total $30.9 $31.2 $27.4
===== ===== =====
</TABLE>
Sublease income amounted to $1.8 million in 1994, $1.5 million in 1993, and
$2.0 million in 1992.
13. SEGMENTS OF BUSINESS
The Company is engaged primarily in one line of business, the manufacture and
sale of instant imaging products. During 1994, 1993 and 1992, sales to one
customer, Wal-Mart Stores, Inc., amounted to 13.7%, 11.6%, and 10.5%,
respectively, of the Company's total sales.
Intercompany sales between geographic areas are accounted for at prices
representative of unaffiliated party transactions.
The following table shows certain financial information relating to the
Company's operations in various geographic areas:
42
<PAGE>
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
Years ended December 31,
(In millions) 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES
UNITED STATES
Customers $1,160.3 $1,178.8 $1,145.7
Intercompany 496.3 511.8 456.5
-------- -------- --------
1,656.6 1,690.6 1,602.2
-------- -------- --------
EUROPE
Customers 704.6 597.9 632.8
Intercompany 347.1 347.3 312.6
-------- -------- --------
1,051.7 945.2 945.4
-------- -------- --------
ASIA/PACIFIC AND WESTERN HEMISPHERE
Customers 447.6 468.2 373.8
Intercompany 83.5 56.5 79.7
-------- -------- --------
531.1 524.7 453.5
-------- -------- --------
Eliminations (926.9) (915.6) (848.8)
-------- -------- --------
NET SALES $2,312.5 $2,244.9 $2,152.3
======== ======== ========
--------------------------------------------------------------------------------------------------------------------------
PROFITS
United States $ 100.8 $ 44.1 $ 118.7
Europe 81.8 43.7 72.5
Asia/Pacific and Western Hemisphere 45.2 56.8 44.1
General corporate expense (13.0) (12.4) (16.6)
Eliminations (14.5) 9.2 (4.9)
-------- -------- --------
PROFIT FROM OPERATIONS 200.3 141.4 213.8
Other income/(expense) (39.6) (39.7) (50.7)
-------- -------- --------
EARNINGS BEFORE INCOME TAXES $ 160.7 $ 101.7 $ 163.1
======== ======== ========
--------------------------------------------------------------------------------------------------------------------------
ASSETS
United States $1,480.5 $1,532.7 $1,319.9
Europe 613.8 556.0 562.7
Asia/Pacific and Western Hemisphere 248.1 216.9 213.3
Corporate assets
(cash, cash equivalents and short-term investments) 228.9 138.9 189.5
Eliminations (254.6) (232.2) (277.3)
-------- -------- --------
TOTAL ASSETS $2,316.7 $2,212.3 $2,008.1
======== ======== ========
</TABLE>
43
<PAGE>
14. CONTINGENCIES
The Company, together with other parties, is currently designated a
Potentially Responsible Party (PRP) by the United States Environmental
Protection Agency and certain state agencies with respect to the response
costs for environmental remediation at several sites. The Company believes
that its potential liability with respect to any site and with respect to all
sites in the aggregate will not have a materially adverse effect on the
financial condition or operating results of the Company.
Due to a wide range of estimates with regard to response costs at those sites
and various other uncertainties, the Company cannot firmly establish its
ultimate liability concerning those sites. In each case in which the Company
is able to determine the likely exposure, such amount has been included in
the Company's reserve for environmental liabilities. Where a range of
comparably likely exposures exists, the Company has included in its reserve
the minimum amount of the range. The Company's aggregate reserve for these
liabilities as of December 31, 1994 was $5.5 million, the majority of which
the Company currently expects to be payable over the next two to three years.
The Company's analysis of data which underlies its establishment of this
reserve is undertaken on a quarterly basis. The reserve for such liability
does not provide for associated litigation costs, which, if any, are expected
to be inconsequential in comparison with the amount of the reserve. The
Company will continue to accrue in its reserve appropriate amounts from time
to time as circumstances warrant. This reserve does not take into account
potential recoveries from third parties.
The Company reviews its recurring internal expenditures on environmental
matters, as well as capital expenditures related to environmental compliance, on
a monthly basis, and reviews its third-party expenditures on environmental
matters on a quarterly basis. The Company believes that these expenditures have
not had and will not have a materially adverse effect on the financial condition
or operating results of the Company.
Federal law provides that PRPs may be held jointly and severally liable for
response costs. Based on current estimates of those costs and after
consideration of the potential estimated liabilities of other PRPs with
respect to those sites and their respective estimated levels of financial
responsibility, the Company does not believe its potential liability will be
materially enlarged by the fact that the liability is joint and several.
In early 1994, the Company received a letter from Jerome H. Lemelson alleging
that a broad range of the Company's manufacturing equipment and products
infringe a number of patents. The letter proposes that the Company enter into
licensing negotiations to pay substantial past and future royalties under
those patents. The Company has responded to the letter.
The Company is involved in various other legal proceedings and claims arising
in the ordinary course of business. Management believes that the disposition
of these matters would not have a material adverse effect on the consolidated
financial position or results of operations of the Company.
44
<PAGE>
15. SUBSEQUENT EVENTS
In January 1995, the Company adopted a plan of action to enhance
profitability through greater emphasis on sales in newly emerging markets, a
reduction in operating costs and various measures to improve efficiency. The
five-step plan is as follows:
The Company intends to accelerate entry into new global markets including
China, India, and other developing nations. In China, the Company plans to
add three new regional offices, expand its sales force and add distribution
capability to reach customers throughout the country.
In the first quarter of 1995, the Company began to implement a dealer
inventory adjustment program. The focus of this program is to enable the
Company to exercise better control over its distribution channels, strengthen
retail sales of integral film by increasing consumer promotions, and sharply
reduce the "gray market" for Polaroid products. The Company expects to incur
an operating loss (loss before interest and tax), excluding the restructuring
charge discussed below, of approximately $20 million in the first quarter of
1995, primarily as a result of the inventory adjustment program.
The Company plans to sell approximately $50 million of real estate, primarily
in the U.S., over the next 24 months.
The Company is implementing various measures to improve efficiency, including
consolidation of manufacturing facilities; re-prioritizing of product
development activities; enhancement of distribution, customer fulfillment and
manufacturing processes; and realignment of employees.
The Company is currently in the process of reducing its workforce by about
400 to 600 employees, or approximately 5% of its worldwide workforce, through
an early retirement and severance program. The Company expects to record a
one-time restructuring charge of $40 million to $60 million in the first
quarter of 1995 for this program. On an annualized basis, this workforce
reduction and the various measures to improve efficiency are expected to
result in a $25 million to $35 million savings in operating costs.
In addition to these steps, the Board of Directors approved in January 1995 a
program to repurchase an additional $100 million of the Company's common
shares on the open market, in privately negotiated transactions or otherwise
(which may include transactions with Polaroid stock option plans and
retirement plans, including the employee stock ownership plan). This program
is in addition to the approximately $25 million remaining at December 31,
1994 on the Company's previously authorized $150 million stock repurchase
program (see Note 9).
45
<PAGE>
16. SUPPLEMENTARY FINANCIAL INFORMATION
The section on pages 47-49 entitled Supplementary Financial Information has
not been audited by the Company's independent auditors. Those auditors have,
however, made a limited review of the 1994 and 1993 quarterly data on page 47
in accordance with standards established by the American Institute of
Certified Public Accountants and that information is incorporated herein by
reference. Since the Company's independent auditors did not audit the
quarterly data for either year, they express no opinion on such data.
46
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
1994 (In millions, except per share and stock price data) First Second Third Fourth Year
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $462.6 $587.3 $576.7 $685.9 $2,312.5
Profit from operations 6.9 56.8 52.7 83.9 200.3
Net earnings 1.4 29.2 29.3 57.3 117.2
Primary earnings per common share .03 .62 .62 1.23 2.49
Fully diluted earnings per common share ** .60 .60 1.16 2.42
Cash dividends per common share .15 .15 .15 .15 .60
Stock prices***
High 35.75 34.38 35.13 36.38 36.38
Low 30.50 29.63 32.13 30.25 29.63
1993 First* Second* Third* Fourth Year
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 468.5 $569.9 $533.9 $672.6 $2,244.9
Early retirement and other 44.0 - - - 44.0
Profit/(loss) from operations (31.2) 54.0 41.3 77.3 141.4
Earnings/(loss) before cumulative effect of
changes in accounting principle (24.0) 28.1 24.6 39.2 67.9
Cumulative effect to January 1, 1993 of changes in
accounting principle for:
Postretirement benefits other than
pensions, net of taxes of $85 million (132.9) - - - (132.9)
Income taxes 33.6 - - - 33.6
Postemployment benefits, net of
taxes of $12.7 million (19.9) - - - (19.9)
------ ------ ------ ------ ------
Net earnings (loss) (143.2) 28.1 24.6 39.2 (51.3)
Primary earnings/(loss) per common share:
Earnings/(loss) before cumulative effect
of changes in accounting principle (.51) .60 .52 .83 1.45
Cumulative effect to January 1, 1993 of
changes in accounting principle for:
Postretirement benefits other than pensions (2.85) - - - (2.84)
Income taxes .72 - - - .72
Postemployment benefits (.43) - - - (.43)
------ ------ ------ ------ ------
Net earnings/(loss) (3.07) .60 .52 .83 (1.10)
Fully diluted earnings per common share ** .58 .51 .79 **
Cash dividends per common share .15 .15 .15 .15 .60
Stock prices***
High 31.25 38.63 38.75 37.25 38.75
Low 25.75 27.75 33.25 31.50 25.75
Stockholders of record as of February 3, 1995..........12,136
</TABLE>
* Restated for FAS 112.
** Fully diluted earnings per common share are not disclosed because they are
greater than primary earnings per common share.
*** Recorded on the New York Stock Exchange, the principal market for the
Company's common stock.
47
<PAGE>
TEN YEAR FINANCIAL SUMMARY (UNAUDITED)
Polaroid Corporation and Subsidiary Companies
Years ended December 31
<TABLE>
<CAPTION>
(Dollar amounts in millions, except per share data) 1994 1993 1992
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Statement of Earnings
Net sales
United States $1,160.3 $1,178.8 $1,145.7
International 1,152.2 1,066.1 1,006.6
-------- -------- --------
Total net sales 2,312.5 2,244.9 2,152.3
-------- -------- --------
Cost of goods sold 1,324.2 1,296.5 1,178.0
Marketing, research, engineering and
administrative expenses 788.0 763.0 760.5
Restructuring and other expense - 44.0 -
-------- -------- --------
Total costs 2,112.2 2,103.5 1,938.5
-------- -------- --------
Profit from operations 200.3 141.4 213.8
-------- -------- --------
Litigation settlement, net of employee incentives - - -
Other income 7.0 8.2 7.8
Interest expense 46.6 47.9 58.5
-------- -------- --------
Earnings before income taxes 160.7 101.7 163.1
Federal, state and foreign income taxes 43.5 33.8 64.1
-------- -------- --------
Earnings/(loss) before cumulative effect of changes in
accounting principle $ 117.2 $ 67.9 $ 99.0
======== ======== ========
Net earnings/(loss) $ 117.2 $ (51.3) $ 99.0
======== ======== ========
Primary earnings/(loss) per common share before
cumulative effect of changes in accounting principle** $ 2.49 $ 1.45 $ 2.06
Primary earnings/(loss) per common share** $ 2.49 $ (1.10) $ 2.06
Fully diluted earnings per common share*** $ 2.42 - $ 2.02
Cash dividends per common share** $ .60 $ .60 $ .60
Common shares outstanding at end of year
(in thousands)** 45,998 46,806 46,668
Selected Balance Sheet Information
Working capital $ 886.8 $ 833.6 $ 789.0
Net property, plant and equipment 747.3 718.2 657.3
Total assets 2,316.7 2,212.3 2,008.1
Long-term debt 566.0 602.3 637.4
Redeemable preferred stock equity - - -
Common stockholders' equity 864.4 767.3 808.9
Other Statistical Data
Additions to property, plant and equipment $ 146.7 $ 165.6 $ 201.5
Depreciation $ 118.2 $ 100.3 $ 89.1
Payroll and benefits $ 720.6 $ 699.2 $ 670.2
Number of employees, end of year 12,104 12,048 12,359
Return on average common stockholders' equity 14.7% 9.3%**** 12.7%
</TABLE>
*Restated for FAS 96.
**Amounts for years prior to 1987 have been restated to reflect the 1987
two-for-one stock split.
***Fully diluted earnings per common share are not disclosed for 1993 and
years prior to 1991 because they are either greater than primary earnings
per common share or they do not include dilutive securities.
****1993 is shown prior to the cumulative effects of FAS 106, 109 and 112.
48
<PAGE>
<TABLE>
<CAPTION>
(Dollar amounts in millions, except per share data) 1991 1990 1989 1988 1987* 1986* 1985*
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Earnings
Net sales
United States $1,113.6 $1,058.3 $1,091.8 $1,048.3 $1,009.3 $ 964.3 $ 779.3
International 957.0 913.4 812.9 814.6 754.6 664.9 515.9
-------- -------- -------- -------- -------- -------- --------
Total net sales 2,070.6 1,971.7 1,904.7 1,862.9 1,763.9 1,629.2 1,295.2
-------- -------- -------- -------- -------- -------- --------
Cost of goods sold 1,082.5 1,011.8 966.0 1,003.1 956.2 921.7 756.0
Marketing, research, engineering and
administrative expenses 741.5 675.6 634.5 686.0 653.9 571.8 505.6
Restructuring and other expense - - 40.5 151.9 - - -
-------- -------- -------- -------- -------- -------- --------
Total costs 1,824.0 1,687.4 1,641.0 1,841.0 1,610.1 1,493.5 1,261.6
-------- -------- -------- -------- -------- -------- --------
Profit from operations 246.6 284.3 263.7 21.9 153.8 135.7 33.6
-------- -------- -------- -------- -------- -------- --------
Litigation settlement, net of employee incentives 871.6 - - - - - -
Other income 23.4 15.0 35.1 28.0 16.7 18.1 28.9
Interest expense 58.4 81.3 86.2 29.0 15.0 18.6 22.3
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes 1,083.2 218.0 212.6 20.9 155.5 135.2 40.2
Federal, state and foreign income taxes 399.5 67.0 67.6 43.5 30.3 27.0 42.6
-------- -------- -------- -------- -------- -------- --------
Earnings/(loss) before cumulative effect of changes in
accounting principle $ 683.7 $ 151.0 $ 145.0 $ (22.6) $ 125.2 $ 108.2 $ (2.4)
======== ======== ======== ======== ======== ======== ========
Net earnings/(loss) $ 683.7 $ 151.0 $ 145.0 $ (22.6) $ 125.2 $ 108.2 $ (2.4)
======== ======== ======== ======== ======== ======== ========
Primary earnings/(loss) per common share before
cumulative effect of changes in accounting principle** $ 12.54 $ 2.20 $ 1.96 $ (.34) $ 2.02 $ 1.75 $ (.04)
Primary earnings/(loss) per common share** $ 12.54 $ 2.20 $ 1.96 $ (.34) $ 2.02 $ 1.75 $ (.04)
Fully diluted earnings per common share*** $ 10.88 - - - - - -
Cash dividends per common share** $ .60 $ .60 $ .60 $ .60 $ .60 $ .50 $ .50
Common shares outstanding at end of year
(in thousands)** 48,919 50,070 52,110 71,635 61,918 61,918 61,918
Selected Balance Sheet Information
Working capital $ 695.3 $ 609.1 $ 642.0 $ 980.0 $ 652.6 $ 602.4 $ 658.5
Net property, plant and equipment 549.4 461.0 430.9 433.8 395.6 357.7 349.0
Total assets 1,889.3 1,701.3 1,776.7 1,957.2 1,599.4 1,444.6 1,345.4
Long-term debt 471.8 513.8 602.2 402.3 - - 124.6
Redeemable preferred stock equity - 348.6 321.9 - - - -
Common stockholders' equity 772.9 207.7 148.8 1,011.5 1,048.2 960.1 882.9
Other Statistical Data
Additions to property, plant and equipment $ 175.8 $ 120.9 $ 94.5 $ 127.0 $ 166.6 $ 82.9 $ 104.5
Depreciation $ 85.5 $ 87.2 $ 87.4 $ 81.9 $ 75.7 $ 71.2 $ 56.9
Payroll and benefits $ 690.6 $ 587.6 $ 546.7 $ 725.9 $ 585.0 $ 548.2 $ 510.2
Number of employees, end of year 12,003 11,768 11,441 11,613 13,662 14,765 12,932
Return on average common stockholders' equity 148.6% 63.3% 33.5% (2.2)% 12.5% 11.7% (.3)%
</TABLE>
49
Appendix to Annual Report
(Graphic material omitted from electronic filing)
Page Description of information omitted
---- -----------------------------------
22 Two bar graphs showing "Sales by Geographic
Area" and "Profit from Operations" from 1990-1994.
Sales by Geographic Area
------------------------
Asia/Pacific
and
U.S. Europe Western Hemisphere Total
-------- -------- ------------------ --------
1990 $1,058.3 $598.5 $314.9 $1,971.7
1991 $1,113.6 $624.6 $332.4 $2,070.6
1992 $1,145.7 $632.8 $373.8 $2,152.3
1993 $1,178.8 $597.9 $468.2 $2,244.9
1994 $1,160.3 $704.6 $447.6 $2,312.5
Profit from Operations
----------------------
1990 $284.3
1991 $246.6
1992 $213.8
1993 $141.4 *
1994 $200.3
* Includes impact of $44 million of charges from
early retirement and other expenses.
23 Two bar graphs showing "Cash and Cash
Equivalents" and "Capital Expenditures/Depreciation"
from 1990-1994.
Cash and Cash Equivalents
-------------------------
1990 $ 83.8
1991 $162.9
1992 $109.1
1993 $114.4
1994 $143.3
Capital
Expenditures Depreciation
------------------------------------------
1990 $120.9 $ 87.2
1991 $175.8 $ 85.5
1992 $201.5 $ 89.1
1993 $165.6 $100.3
1994 $146.7 $118.2
24 Two bar graphs showing "Primary Earnings per
Common Share" and "Return on Average Common
Stockholders' Equity" from 1990-1994.
Primary Earnings per Common Share
---------------------------------------
1990 $ 2.20
1991 $12.54*
1992 $ 2.06
1993 $ 1.45**
1994 $ 2.49
* Includes impact of Kodak litigation settlement
proceeds of $872 million before taxes.
** Includes impact of $44 million of charges from
early retirement and other expenses, but
excludes the cumulative effect of changes in accounting
principle.
Return on Average Common Stockholders' Equity
---------------------------------------------
1990 63.3%
1991 148.6%*
1992 12.7%
1993 9.3%**
1994 14.7%
* Includes impact of Kodak litigation
settlement proceeds of $872 million before taxes.
** Includes impact of $44 million of charges from
early retirement and other expenses, but
excludes the cumulative effect of changes in accounting
principle.
Exhibit 21
Subsidiaries
Polaroid Corporation
Year ended December 31, 1994
Place of
Name of Subsidiary Incorporation
____________________________________________________________________
Inner City, Inc. Delaware
Polint, Inc. Delaware
PMC, Inc. Massachusetts
Polaroid Caribbean Corporation Delaware
Polaroid Asia Pacific International Inc. Delaware
Polaroid Asia Pacific Limited Delaware
Polaroid of Shanghai Limited China
Polaroid Europe Limited United Kingdom
Polaroid Foundation Delaware
Polaroid Canada Inc. Canada
Polaroid Gesellschaft mit beschrankter Haftung Germany
Polaroid Australia Pty. Limited Australia
Polaroid Gesellschaft m.b.H. Austria
Polaroid Far East Limited Hong Kong
Nippon Polaroid Kabushiki Kaisha Japan
Polaroid (Norge) A/S Norway
Polaroid de Mexico S.A. de C.V. Mexico
Polaroid Aktiebolag Sweden
Polaroid A.G. Switzerland
Polaroid (U.K.) Limited United Kingdom
Polaroid A/S Denmark
Polaroid International B.V. Netherlands
Polaroid (Italia) S.p.A. Italy
Polaroid (France) S.A. France
Polaroid (Belgium) N.V. Belgium
Polaroid (Europa) B.V. Netherlands
Polaroid Nederland B.V. Netherlands
Svetozor Russia
Polaroid Graphics Imaging B.V. Netherlands
Polaroid do Brasil Ltda. Brazil
Polaroid Singapore Private Limited Singapore
Polaroid Oy Finland
Polaroid Espana, S.A. Spain
Polaroid Foreign Sales B.V. Netherlands
Polaroid India, Inc. Delaware
Polaroid Malaysia Limited Delaware
Subsidiaries of subsidiary companies are indented and listed below
the respective companies through which they are controlled.
Exhibit 23
Independent Auditors' Consent
-----------------------------
The Board of Directors
Polaroid Corporation:
We consent to incorporation by reference in the registration
statements No. 33-36384 on Form S-8, No. 33-44661 on Form S-3,
and No.33-51173 on Form S-8 of Polaroid Corporation of our
reports dated January 31, 1995, relating to the consolidated
balance sheet of Polaroid Corporation and subsidiary companies as
of December 31, 1994, and 1993, and the related consolidated
statements of earnings, cash flows, and changes in common
stockholders' equity, and the related financial statement
schedule for each of the years in the three-year period ended
December 31, 1994, which reports appear in the December 31, 1994,
annual report on Form 10-K of Polaroid Corporation.
Our report dated January 31, 1995, contains an explanatory
paragraph that states that in 1993 the Company changed its method of
accounting for income taxes and for certain postretirement and
postemployment benefits.
KPMG PEAT MARWICK LLP
Boston Massachusetts
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
S.E.C. Form 10-K for the year ended December 31, 1994 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 143,300
<SECURITIES> 85,600
<RECEIVABLES> 565,500
<ALLOWANCES> (24,500)
<INVENTORY> 577,400
<CURRENT-ASSETS> 1,488,700
<PP&E> 2,043,400
<DEPRECIATION> (1,296,100)
<TOTAL-ASSETS> 2,316,700
<CURRENT-LIABILITIES> 601,900
<BONDS> 566,000
<COMMON> 75,400
0
0
<OTHER-SE> 789,000
<TOTAL-LIABILITY-AND-EQUITY> 2,316,700
<SALES> 2,312,500
<TOTAL-REVENUES> 2,312,500
<CGS> 1,324,200
<TOTAL-COSTS> 2,112,200
<OTHER-EXPENSES> 2,700
<LOSS-PROVISION> 8,600
<INTEREST-EXPENSE> 46,600
<INCOME-PRETAX> 160,700
<INCOME-TAX> 43,500
<INCOME-CONTINUING> 117,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117,200
<EPS-PRIMARY> 2.49
<EPS-DILUTED> 2.42
</TABLE>
