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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 29, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12696
PLANTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0207692
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
337 ENCINAL STREET, P.O. BOX 1802
SANTA CRUZ, CALIFORNIA 95061-1802
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (408) 426-6060
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of $45 3/8 for shares of the
registrant's Common Stock on June 3, 1997 as reported by the New York Stock
Exchange, was approximately $229,187,854.50. In calculating such aggregate
market value, shares of Common Stock owned of record or beneficially by
officers, directors, and persons known to the registrant to own more than five
percent of the registrant's voting securities (other than such persons of whom
the Company became aware only through the filing of a Schedule 13G filed with
the Securities and Exchange Commission) were excluded because such persons may
be deemed to be affiliates. The registrant disclaims the existence of control or
any admission thereof for any other purpose.
Number of shares of Common Stock outstanding as of June 3, 1997: 8,203,224.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in Parts I, II, III
and IV of this Annual Report on Form 10-K: (1) portions of registrant's annual
report to security holders for the fiscal year ended March 29, 1997 (Parts I, II
and IV) and (2) portions of registrant's proxy statement for its annual meeting
of stockholders to be held on July 30, 1997 (Part III).
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PLANTRONICS, INC.
1997 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
Item 1. Business................................................................ 1
Item 2. Properties.............................................................. 9
Item 3. Legal Proceedings....................................................... 9
Item 4. Submission of Matters to a Vote of Security-Holders..................... 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.... 10
Item 6. Selected Financial Data................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 10
Item 8. Financial Statements and Supplementary Data............................. 10
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 10
PART III
Item 10. Directors and Executive Officers of the Registrant...................... 11
Item 11. Executive Compensation.................................................. 11
Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 11
Item 13. Certain Relationships and Related Transactions.......................... 11
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........ 12
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Supra, StarSet, Mirage, Clarity and SoundGuard are registered trademarks of
Plantronics, Inc. AirSet, Personal Paging System, FreeHand, CAT-72, Supra NC,
StarSet NC, Mirage NC, Encore, TriStar, Sound-Guard Plus, CT-460, CLA132,
CHS132, Headset Switcher and Starbase are trademarks of Plantronics, Inc.
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PART I
ITEM 1. BUSINESS
GENERAL
Plantronics, Inc. (the "Company" or "Registrant") is a leading designer,
manufacturer and marketer of lightweight communication headsets and headset
accessories and services. In addition, the Company manufactures and markets
specialty telephone products, such as amplified telephone handsets and specialty
telephones for hearing-impaired users, and noise-canceling handsets for use in
high-noise environments.
The Company's headsets, which can be worn over the head or on either ear,
are recognized in the industry for their safety, quality and reliability. The
Company has well-developed distribution channels in North America and Europe,
where growth of telemarketing activities and deregulation of the telephone
companies have led to more widespread use of telephone headsets. The Company's
headsets are also becoming more widely used in the Middle East, Africa,
Australia, the Far East and Latin America.
The Company's headset products are used worldwide by call center users,
such as telemarketing personnel, reservation agents, telephone operators and air
traffic controllers, whose occupations involve the constant use of a telephone
or communications console. In North America and Europe, the number of call
center users has grown significantly over the last 10 years. The use of headsets
by call center users has become an industry standard. While the Company believes
that the number of call center users in these geographic markets will continue
to grow, it expects that the primary source of future sales growth in such
markets will result from repeat sales to existing customers, including the
replacement of products presently in use with new and improved products.
The Company believes that the demand for headsets in the rest of the world
offers more significant growth opportunities for the Company. To date, the
Company's most significant penetration of foreign market segments has been the
call center user market segment in Europe. The potential for growth in the
foreign market segments is the result of such developments as the rapid
expansion of the telecommunications infrastructure and increasing worldwide use
of telemarketing techniques.
The Company also sells headsets in the business and home office user market
segment, which the Company has identified as an area of long-term growth
potential. Users in this market segment consist of business executives, agents,
brokers, lawyers, accountants, home office business people and other
professionals whose occupations may require intensive (but not constant) use of
a telephone. The business and home office user market segment can be divided
into users who attach their headsets to telephones, cellular telephones or to
computers. The use of headsets for mobile communications and as computer
peripherals is a significant growth area for headset sales. Potential
applications in this market segment include mobile communications, personal
computer conferencing, computer telephony integration ("CTI"), voice recognition
and multimedia applications.
The Company sells its headsets to a broad and diverse group of end-user
customers worldwide, including regional telephone operating companies, operators
of private telephone networks, and governmental agencies. The Company
distributes its products through large electronics wholesalers, specialized
headset distributors, directly to original equipment manufacturers ("OEMs"), and
through retail channels, such as office supply and consumer electronics stores,
mail order catalogs, warehouse clubs and office supply distributors.
PRODUCTS
The Company's product line consists of communication headsets, headset
accessories and services, and specialty telephone products. None of the
Company's products or business is considered seasonal.
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HEADSETS
Communication headsets allow users who must perform other tasks while using
a telephone to work more effectively, efficiently and comfortably than with a
telephone handset, while providing greater communications clarity and security
than a speaker phone.
Headsets consist of two distinct units. The "top," which is the portion
that the user wears and which is comprised of the receiver capsule and voice
tube, and the "bottom," or adapter which interfaces with the telephone or other
equipment. Both units are currently required in most applications. In some
circumstances, however, the interface is built into the telephone, computer or
other equipment with which the headset is being used, allowing use of the "top"
alone.
There are four basic headset "top" styles:
- Headsets that rest in the outer portion of the ear. The FreeHand headset,
introduced during fiscal year 1995, offers a functional and lightweight
design that allows it to be easily and quickly placed on or removed from
its position in the outer portion of the ear with one hand. Its adjustable
microphone boom may be rotated for optimum transmit performance. The CAT-72
miniature headset, introduced during fiscal year 1994 for use with personal
computers, is lightweight, unobtrusive and different in appearance from
other models with its small solid shape containing both a receiver and a
microphone without a separate voice tube. It is the Company's smallest
headset, weighing less than 6 grams and measuring only 2-1/2 inches in
length.
- Over-the-head headsets with ear cushions. The Supra headset is an
over-the-head model available with sound reception in one or both ears, and
the unit's dual ear cushions help block out background noise. The Company
introduced a new product in this category in fiscal year 1996, the Encore
headset, with a design developed from data in the Company's human factors
database. The Encore headset features all of the qualities of the Supra
headset, plus user-controllable tone adjustment.
- Behind-the-ear headsets with an ear tip. The StarSet headset is the
distinctive Plantronics headset that uses a small capsule that fits behind
and in the outer portion of the ear. Sound is delivered to the ear by an
acoustic ear tip. The headset is extremely lightweight, requiring no
headband, and the ear tip's acoustic coupling provides exceptional sound
quality. The TriStar headset, the industry's lightest commercial headset,
was introduced during fiscal year 1996. This product features maximum user
adjustments for excellent stability, comfort and sound quality.
- Behind-the-ear headsets with a receiver that rests on either ear. The
Mirage headset uses a miniaturized behind-the-ear capsule. Attached to it
is a small disc-shaped receiver that rotates to fit against either ear. The
receiver rests gently on the ear, not in it.
All basic telephone-based headset tops are designed for use with the
multitude of different phone systems currently available. Basic models offer
features such as user volume control, a mute switch and quick-disconnect, which
allows users to leave the phone without removing their headsets or disconnecting
the line. Supra NC, StarSet NC, Mirage NC, TriStar NC and Encore NC headset tops
are special versions of the Supra, StarSet, Mirage, TriStar and Encore headsets
featuring boom-mounted noise-canceling microphones instead of voice tubes.
The Company's Vista headset bottoms feature a universal modular adapter and
interchangeable headset tops. The universal adapter eliminates compatibility
problems with almost all telephones and incorporates the SoundGuard Plus system,
which provides volume control for improved audio comfort and clarity. The
interchangeability feature of the Vista product allows a user to connect any one
of the available Plantronics headset tops to any telephone or console equipped
with the Vista adapter or the Company's Starbase headset telephone.
In fiscal year 1997, the Company introduced a new bottom or adapter called
the Headset Switcher adapter for use with a telephone and a computer equipped
with a soundcard. The Headset Switcher allows the user to switch back and forth
from the telephone and computer audio applications by simply flipping a switch.
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In addition to its traditional corded products, the Company introduced
during fiscal year 1996 the CT-460, a cordless headset telephone aimed at the
home office market segment. This product is comprised of a headset and remote
transceiver/dial pack, and a base unit which plugs into a wall jack. The product
is sold principally through retail channels. In fiscal year 1997 the Company
introduced the CHS132 and CLA132 products specifically designed for the mobile
telephone market segment. The CHS132 is a lightweight corded headset which is
designed to be used with some of the largest mobile telephone manufacturers'
products which incorporate a telephone headset port. The CLA132 is a CHS132
product with a cigarette lighter adapter which allows a headset to be used with
mobile telephones which do not have a telephone headset port.
HEADSET ACCESSORIES AND SERVICES
The Company offers a complete line of headset accessories, including voice
tubes, ear cushions, ear tips and background noise suppressors. The Company's
Service Center provides customers with a sophisticated service and refurbishment
program including headset repair and remanufacturing.
SPECIALTY TELEPHONE PRODUCTS
The Company's Walker Equipment Division (the "Walker Division") is a
designer and distributor of specialty telephone products. Specialty telephone
products sold under the Walker Division name include amplified handsets,
amplified telephones and telephone amplifier accessories for the
hearing-impaired user. The Walker Division Clarity telephone is a full-featured
single-line telephone designed for hearing-impaired users and was redesigned in
fiscal year 1996. It features volume control circuitry, oversized buttons, a
ringer volume control and a light that flashes when the phone rings. In
addition, the Walker Division sells special noise-canceling handsets for
high-noise environments, as well as for entry and elevator phones. The Walker
Division also offers a device that will amplify the receive volume of
conventional handsets and recently introduced a portable version of that
product. The Walker Division products are currently distributed through the same
commercial and retail distribution channels as the Company's products.
In fiscal year 1997, the Walker Division introduced a new product for home
use, the Personal Paging System. This is a personal notification system that
alerts people to important sounds, such as the telephone, doorbell or crying
baby, when the remote unit vibrates to alert the individual.
In Europe, where modular telephone handsets are not currently the norm, the
Company developed the Starbase headset telephone, which is a full-featured
single-line telephone to which nearly all of the Company's headsets may be
attached. This product enables many more businesses to use headsets for
non-operator functions.
In addition, the specialty telephone products operation provides headsets
for special applications that are not served by the Company's standard product
lines.
PRODUCT DEVELOPMENT
Since the introduction of the original lightweight headset in 1962, the
user has been the primary focus of the Company's design efforts. The Company's
concern for "human engineering" and its efforts to "design-in" comfort and
safety have resulted in such product innovations as a behind-the-ear capsule
(containing both microphone and receiver) designed to fit all users comfortably
and the SoundGuard Plus system, which provides volume control and improved audio
comfort and quality.
The Company has a number of product development programs currently
underway, including a new generation of headset systems, computer and mobile
products, a wireless product family and several core technology programs. The
Company supplements its in-house engineering capabilities through selected
outside contracting arrangements.
Research, development and engineering expenditures were $11.6 million,
$13.7 million, and $14.5 million for the fiscal years ended April 1, 1995, March
30, 1996, and March 29, 1997, respectively. The Company's management believes
that substantial investment in research and development is important for the
Company
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to maintain its position in the industry and, therefore, intends to increase its
spending for research, development and engineering in subsequent fiscal years.
Historically, substantially all of the Company's product development
efforts have primarily been directed toward incremental enhancements of existing
products. In the future, the Company intends both to enhance its existing
products and to develop new products that capitalize on its core technology and
expand the Company's product offerings to new user market segments. The success
of new product introductions is dependent on several factors, including proper
new product selection, timely completion and introduction of new product
designs, quality of new products and market acceptance. Although the Company has
attempted to determine the specific needs of the telephone, mobile telephone and
computer segments of the business and home office user segments of the market,
there can be no assurance that the market niches identified will in fact
materialize or that the Company's existing and future products designed for
these market segments will gain substantial market acceptance.
The technology of telephone headsets, both "tops" and "bottoms," has
traditionally evolved slowly. Products are currently exhibiting life cycles of
three to five years before introduction of the next generation of products,
which usually include stylistic changes and quality improvements but are based
on similar technology. The Company believes that future changes in technology
may come at a faster pace, particularly in the telephone, cellular telephone and
computer segments of the business and home office user parts of the market. The
Company's future success will be dependent in part on its ability to develop
products that utilize new technologies and to introduce them to the marketplace
successfully. In addition, in order to avoid product obsolescence, the Company
will have to monitor technological changes in telephony, as well as users'
demands for new technologies. Failure by the Company to keep pace with future
technological changes could materially adversely affect the Company's revenues
and operating results.
SALES AND DISTRIBUTION
The Company distributes its products worldwide through large electronics
wholesalers, specialized headset distributors, OEMs, and retail channels.
Electronics wholesalers, which are often national organizations offering
hundreds of products, including headsets, to both resellers and end users,
represent the single largest channel of distribution for the Company's products.
The Company's products are currently sold in North America through electronics
distributors, including Graybar Electric Company, Anixter Brothers and Sprint
North Supply. Additional distributors handle the Company's products in overseas
market segments.
Specialized headset distributors represent a second major distribution
channel for the Company's products. These distributors, which sell on a national
basis, are generally smaller companies with total annual revenues of under $10
million, the majority of which are generated by their sales of headsets.
OEMs supply automatic call distributor systems and other telecommunications
and computer equipment that utilize headsets. Depending on their marketing
strategies, OEMs may purchase the Company's headsets on a private label basis.
The Company believes that it is currently the predominant supplier of headsets
to Lucent Technologies (formerly part of AT&T). For the computer segment of the
business and home office user part of the market, the Company supplies products
to Intel Corporation and other OEMs for use in their personal computer systems.
Retail channels, including office supply and consumer electronics
retailers, warehouse clubs, consumer products and office supply distributors,
and catalog and mail order companies. These retailers sell headsets to many
small businesses, small offices and home offices.
Direct sales are made in a limited number of cases by the Company to
government agencies, including NASA, the FAA, and under the Company's General
Service Administration schedule contract. Direct sales tend to be more customary
in Europe than in North America.
Financial Information about Industry Segments and Foreign Operations. The
Company operates in one industry segment. Financial information about foreign
and domestic operations and export sales, included in
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Note 9 to the Company's Consolidated Financial Statements, appearing at page 13
of the Company's 1997 Annual Report to Stockholders is incorporated herein by
this reference.
Approximately 30.5%, 26.8%, and 24.5% of the Company's net sales in fiscal
1997, fiscal 1996 and fiscal 1995, respectively, were derived from sales to
foreign customers. Sales to foreign customers are generally subject to such
risks as increased tariffs and the imposition of other trade barriers. Although
the Company generally transacts business internationally in United States
currency, declines in the values of local currencies relative to the United
States dollar in countries in which the Company does business could adversely
affect the Company by resulting in less competitive pricing for the Company's
products. The Company does not currently engage in any hedging activities to
mitigate exchange rate risks and to date has not been adversely affected by
fluctuating currencies. To the extent that the Company is successful in
increasing its sales to foreign customers, or to the extent that the Company
increases its transactions in foreign currencies, the Company's results of
operations could be adversely affected by exchange rate fluctuations.
In fiscal 1996, the Company established a new wholly-owned subsidiary in
the Netherlands. The new subsidiary serves as a strategic logistics center as
well as the headquarters for international administration.
BACKLOG
The Company's backlog of unfilled orders was $17.0 million on March 29,
1997, compared to $11.8 million on March 30, 1996. The Company includes in
backlog all purchase orders scheduled for delivery over the next 12 months. As
part of its commitment to customer service, however, the Company generally ships
products within two to four weeks from receipt of an order. The Company's
backlog is generally subject to cancellation or rescheduling by the customer on
short notice with little or no penalty. While the Company has not experienced
any significant cancellations in the past, the Company's backlog as of any
particular date may not be indicative of actual sales for any future period and
therefore should not be used as a measure of future revenue.
COMPETITION
The Company believes the principal competitive factors in its business are
product reliability, product features, customer service and support, reputation,
distribution, ability to meet delivery schedules, warranty terms, product life
and price. The Company believes that its brand name recognition, distribution
network, large user base and large number of product variations, together with
its extensive experience in designing safe and reliable products, dealing with
regulatory agencies and servicing and repairing headsets, are the key factors
for the Company to maintain its position as a leading supplier of lightweight
communication headsets.
In the call center user segment of the market, the Company faces different
competitors depending on the channel of distribution and the geographic
location. The Company anticipates that it may face additional indirect
competition in this market segment from technological advances such as
interactive voice response systems which require no human interface for certain
applications, such as account balance inquiries or airplane arrival and
departure schedules. The Company believes that this trend will be more than
offset by the expansion of telemarketing and catalog sales.
In the business and home office user segment of the market, the same
competitors who are the Company's competitors in the call center user market
currently sell headsets to users within the telephone, cellular telephone and
computer segments of the business and home office user part of the market,
primarily through commercial distribution channels. As the Company develops new
generations of products and enters new market segments, including the developing
business and home office user segment of the market, the Company anticipates
that it may face additional competition from companies which currently do not
offer communication headsets. Such companies may be larger, offer broader
product lines and have substantially greater financial and other resources than
the Company. Such competition could negatively affect pricing and gross margins.
Although the Company has historically competed very successfully in the call
center user segment of the market, there can be no assurance that it will be
able to continue its leadership position in that segment of the market or that
the Company will be able to compete successfully in new market segments.
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MANUFACTURING
Production of the Company's headsets and other products consists of light
manufacturing and assembly operations conducted in California, Georgia, Mexico
(the predominant manufacturing site) and the United Kingdom. A few of the
Company's other products are manufactured in whole or in part on a contract
basis by third parties.
The Company purchases the components for its headset products, including
proprietary semi-custom integrated circuits, amplifier boards and other
electrical components, from suppliers in the United States, Mexico, Asia and
Europe. Although most components and subassemblies used in the Company's
manufacturing operations are obtained, or are reasonably available, from
numerous sources, certain of its products and components are currently procured
only from single suppliers in order to obtain volume pricing. In the past, the
Company has experienced only minor interruptions in the supply of these
components, none of which has adversely affected its operations. However, an
interruption in supply from any of the Company's single source suppliers in the
future could temporarily result in the Company's inability to deliver products
on a timely basis, which in turn could adversely affect its operations. In
addition, manufacturing and assembly of the Company's products could be
adversely affected by political or economic conditions in the United States or
abroad.
In order to meet the requirements of its customers for timely delivery of
products, the Company manufactures finished goods to meet forecasted customer
requirements. Since such manufacturing occurs prior to the receipt of purchase
orders, the Company maintains an inventory of finished goods in addition to raw
materials, work in process and subassemblies. Inventories were valued at $20.0
million as of March 29, 1997.
In fiscal 1996, the Company began the implementation of a new worldwide
management information system and is training its personnel to operate such
system to improve service to its customers, to control its assets and to enhance
management information. Any difficulty in the operation of such new systems or
the training of personnel, or any disruptions in the transition to such new
systems, could adversely affect the Company's ability to accurately forecast
sales demand and calibrate manufacturing to such demand, to calibrate purchasing
levels, to accurately record and control inventory levels, and to record and
report financial and management information on a timely and accurate basis. The
occurrence of any of these events in the future could have a material adverse
effect on the Company's business, financial condition and results of operations.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local and foreign
environmental laws and regulations, including those governing the use, discharge
and disposal of hazardous substances in the ordinary course of its manufacturing
process. Although management believes that its current manufacturing operations
comply in all material respects with applicable environmental laws and
regulations, environmental legislation has been enacted and in the future may be
enacted or interpreted to create environmental liability with respect to the
Company's facilities or operations. The Company has included in its financial
statements a reserve of $1.0 million for possible environmental remediation
related to one of its discontinued businesses. While no claims have been
asserted against the Company in connection with this matter, there can be no
assurance that such claims will not be asserted in the future or that any
resulting liability will not exceed the amount of the reserve.
PATENTS AND TRADEMARKS
The Company maintains a program of seeking patent protection for its
technology. Significant product features for which the Company has, or is
currently seeking, patent protection include the Company's StarSet II capsule
design, SoundGuard receiver gain compression integrated circuit, Mirage headset,
Clarity frequency enhancing telephone, battery-powered in-line amplifier with an
automatic by-pass feature to provide continuous receive signal when battery
power gets low, integrated circuit implementation for an audio amplifier
operating at extremely low power with an expander function for noise reduction
in telephony applications, headset receiver mechanical-acoustical tone control
devices, earbud receiver positioning mecha-
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nisms, voice tube assemblies and various other products, features including
certain wireless technology and electronic components. The existing patents
expire from 2000 to 2013.
The Company's success will depend in part on its ability to obtain patents
and preserve other intellectual property rights covering the design and
operation of its products. The Company intends to continue to seek patents on
its inventions when appropriate. The process of seeking patent protection can be
lengthy and expensive, and there can be no assurance that patents will issue
from currently pending or future applications or that the Company's existing
patents or any new patents issued will be of sufficient scope or strength or
provide meaningful protection or any commercial advantage to the Company. The
Company may be subjected to, or may initiate, litigation or patent office
interference proceedings, which may require significant financial and management
resources. The failure to obtain necessary licenses or other rights or the
advent of litigation arising out of any such claims could have a material
adverse effect on the Company's operations.
The Company owns registered trademarks with respect to many of its
products, including its StarSet, Supra and Mirage products and currently has
several trademark applications pending in connection with new products. The
Company also attempts to protect its trade secrets and other proprietary
information through comprehensive security measures, including agreements with
customers and suppliers, and proprietary information agreements with employees
and consultants.
EMPLOYEES
On March 29, 1997, there were 1,515 persons employed by the Company. No
employees are currently covered by collective bargaining agreements or are
members of any labor organization as far as the Company is aware. The Company
has not experienced any work stoppages and believes that its employee relations
are good.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
the Company and their ages as of June 3, 1997.
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Robert S. Cecil 62 Chairman of the Board of Directors, President and Chief
Executive Officer
C. Donald Cooper 52 Senior Vice President -- Business Development, Marketing and
Quality and Chief Strategy Officer
Donald S. Houston 43 Vice President -- Sales
David Huddart 47 Vice President -- Engineering and Technology
S. Kenneth Kannappan 37 Senior Vice President
John A. Knutson 51 Vice President -- Legal, Senior General Counsel and
Secretary
Barbara V. Scherer 41 Vice President -- Finance & Administration and Chief
Financial Officer
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MR. CECIL joined the Company in March 1992 as President, Chief Executive
Officer and Director, and in September 1993 he was elected Chairman of the Board
of Directors. From 1984 to December 1991, Mr. Cecil held a number of positions
with LIN Broadcasting Corporation, a subsidiary of McCaw Cellular
Communications, Inc. that provides cellular services in North America, including
President of its Cellular Group. From 1977 to 1984, he held various positions
with Motorola, Inc., including Vice President and Corporate Director of
Marketing. Prior to that he held various senior sales and marketing management
positions with IBM Corporation. Mr. Cecil also serves on the Board of Directors
of Toll Free Cellular, Inc., a private cellular company; TAB Products Co., which
manufactures and markets a broad range of filing systems and supplies, systems
furniture, computer-related products and forms processing equipment; Heartland
Wireless Communications, Inc., a wireless cable television company; and Xylan
Corporation, a provider of high bandwidth
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switching systems that enhance the performance of existing local area networks
and facilitate migration to networking technologies.
MR. COOPER joined the Company in February 1997 as Vice
President -- Business Development and was recently promoted to Senior Vice
President -- Business Development, Marketing and Quality and Chief Strategy
Officer. Mr. Cooper has over 14 years of experience in senior level executive
roles. From 1989 to 1996, Mr. Cooper held a number of positions with AT&T
Paradyne, a $500 million unit of AT&T, engaged in the business of data
networking, including most recently President and General Manager. Mr. Cooper
earned a Bachelor of Science degree in Electrical Engineering from the
University of Missouri and a Master of Business Administration degree in
Marketing from the University of Houston. Mr. Cooper reports directly to the
Chief Executive Officer and President.
MR. HOUSTON joined the Company in November 1996 as Vice President -- Sales.
From February 1995 through November 1996, Mr. Houston served as Vice
President -- Worldwide Sales for Proxima Corporation, a designer, developer,
manufacturer and marketer of multimedia projection products. From 1985 until
January of 1995, Mr. Houston held a number of positions at Calcomp, Inc.,
engaged in the business of manufacturing computer peripherals for the CAD and
graphic market, including Regional Sales Manager and most recently Vice
President of Sales, Service and Marketing. Prior to 1985, Mr. Houston held
various sales and marketing management positions with IBM Corporation. Mr.
Houston is a graduate of the University of Arizona with a Bachelor of Science
degree in Business/Marketing. He reports directly to the Chief Executive Officer
and President.
MR. HUDDART was appointed Vice President -- Engineering and Technology in
April 1996. He joined Plantronics Limited in September 1994 as Engineering
Manager. Prior to joining Plantronics Limited, he was the Technical Marketing
and Sales Director for IST Laboratories Ltd., a developer of electronic
substrate interconnections, from May 1991 through April 1994. From October 1986
through May 1991, he was employed by Tunstall Group plc and its subsidiaries,
and held various positions, including Group Technical Director of Tunstall Group
plc, and Marketing Director and Technical Director of Tunstall Telecom. From
1972 until June of 1986, he was employed by TMC Philips Ltd. as an engineer in
positions with increasing levels of responsibility.
MR. KANNAPPAN joined Plantronics in February 1995 as Vice
President -- Sales, responsible for OEM Sales and International Markets for
Plantronics, Inc. He was promoted to Managing Director -- Plantronics, Limited
in England in March 1996. In March 1997, Mr. Kannappan returned from England and
was promoted to Senior Vice President responsible for Plantronics' Worldwide
Operations. Also reporting to him are Plantronics, Ltd., Plantronics B.V. and
Walker Division. Prior to joining Plantronics, Mr. Kannappan was Senior Vice
President of Investment Banking for Kidder, Peabody & Co., Inc. from August 1985
through January 1995.
MR. KNUTSON has served as Vice President -- Legal, Senior General Counsel
and Secretary since March 1994. Mr. Knutson was Managing Partner of the law firm
of Kenney, Burd, Knutson & Markowitz, San Francisco, California, from January
1991 until shortly before joining the Company. From August 1979 until December
1990, he practiced law with the law firm of Fisher & Hurst, San Francisco,
California, as a partner from April 1982 to December 1986, and as Managing
Partner from January 1987 to December 1990. After being admitted to the
California Bar in 1974, Mr. Knutson practiced law in San Francisco with the Law
Offices of Garrett McEnerney until August 1979.
MS. SCHERER recently joined Plantronics and in April 1997 was named Vice
President -- Finance & Administration and Chief Financial Officer. Ms. Scherer
was most recently Senior Vice President and Chief Financial Officer at
StreamLogic Corporation, a developer of video delivery, digital media storage,
networking RAID and data management products, from October 1996 until March
1997; before that she was Senior Vice President of Operations from April 1996
until October 1996. Prior to that she held various positions spanning a nine
year career with Micropolis Corporation, a disk drive manufacturer, including,
from 1995 until April 1996, Vice President Finance, Chief Financial Officer and
Treasurer, and from 1993 until 1994, Vice President, Treasurer and Video Systems
Division Controller. Ms. Scherer is a graduate of the University of
8
<PAGE> 11
California at Santa Barbara and received her Masters from Yale School of
Organization and Management. She reports directly to the Chief Executive
Officer.
Executive officers serve at the discretion of the Board of Directors. There
are no family relationships between any of the directors and executive officers
of the Company.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located in Santa Cruz,
California. The Company owns or leases a total of approximately 300,000 square
feet of manufacturing, administrative, engineering and office facilities,
including: (i) approximately 160,000 square feet of manufacturing and
administrative facilities owned by the Company in Santa Cruz, California,
approximately 35,000 square feet of which are leased to third parties as office
and warehouse space; (ii) approximately 12,000 square feet of manufacturing and
administrative facilities related to operations in Ringgold, Georgia under a
lease expiring in 1998; (iii) approximately 93,600 square feet for assembly and
related operations in Tijuana, Mexico, under a lease expiring in 1999; (iv)
approximately 23,000 square feet for assembly operations, sales and
administration in Wootton Bassett, England under a lease expiring in 2015; (v)
approximately 4,000 square feet for administrative facilities in Hoofddorp, The
Netherlands, expiring in 1999; and (vi) smaller facilities in Singapore, Tokyo
and Hong Kong. The Company believes that its existing properties are generally
suitable and adequate for its business with excess capacity available for
expansion.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company, nor any of its subsidiaries, is a party to any
litigation, other than non-material litigation incidental to the Company's
business.
In May, 1996, the Company received notice from the Bureau of Competition of
the Federal Trade Commission ("FTC") that the FTC staff was conducting a
non-public investigation to determine whether certain manufacturers of
lightweight telephone headsets may be engaged in anticompetitive practices in
violation of Section 5 of the Federal Trade Commission Act. The Company
subsequently complied fully with requests from the FTC for submission of
documents related to the investigation. In March, 1997, after receipt of such
documentation, the FTC gave notice to the Company that it was discontinuing its
investigation as to the Company and that no further action would be taken.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year ended March 29, 1997.
9
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is publicly traded on the New York Stock
Exchange. Information included in the Corporate Directory appearing inside the
back cover of the Company's 1997 Annual Report to Stockholders concerning the
market price of and cash dividends declared on the Company's Common Stock for
each quarterly period within the two most recent fiscal years is incorporated
herein by reference. As of June 3, 1997 there were 89 holders of record of the
Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Selected Financial Data"
appearing at page 1 of the Company's 1997 Annual Report to Stockholders is
incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis" appearing at pages 17 through 20 of the Company's 1997 Annual Report
to Stockholders is incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not yet applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information appearing in the Company's 1997 Annual Report to
Stockholders is incorporated herein by this reference:
Consolidated Balance Sheets -- March 29, 1997 and March 30, 1996
Consolidated Financial Statements for fiscal years ended March 29, 1997,
March 30, 1996 and April 1, 1995:
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity (Deficit)
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated April 18, 1997
With the exception of the information mentioned in Items 5, 6, 7 and 8, the
Company's 1997 Annual Report to Stockholders is not to be deemed filed as part
of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with accountants on any matter of
accounting principles and practices or financial disclosure.
10
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the identification and business experience of the
Company's directors under the caption "Nominees" under the main caption
"Proposal One -- Election of Directors" in the Company's definitive 1997 Proxy
Statement for the annual meeting of stockholders to be held, as filed with the
Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year ended March 29, 1997, is incorporated herein by this
reference. For information regarding the identification and business experience
of the Company's executive officers, see "Executive Officers" at the end of Item
1 in Part I of this Annual Report on Form 10-K. Information concerning filing
requirements applicable to the Company's executive officers and directors under
the caption "Compliance With Section 16(a) of the Exchange Act" in the Company's
1997 Proxy Statement is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation" and
"Compensation of Directors" in the Company's 1997 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Principal
Stockholders and Management" under the main caption "Additional Information" in
the 1997 Proxy Statement is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in the 1997 Proxy
Statement is incorporated herein by this reference.
With the exception of the information specifically incorporated by
reference from the 1997 Proxy Statement in Part III of this Annual Report on
Form 10-K, the 1997 Proxy Statement shall not be deemed to be filed as part of
this Report. Without limiting the foregoing, the information under the captions
"Report of the Compensation Committee of the Board of Directors" and "Company's
Stock Performance" under the main caption "Additional Information" in the 1997
Proxy Statement is not incorporated by reference in this Annual Report on Form
10-K.
11
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Incorporation by Reference. The following documents are filed as part
of, or incorporated by reference into, this Annual Report on Form 10-K:
(1) Financial Statements. The consolidated financial statements of the
Company (including the notes thereto) are incorporated by reference from
the Company's 1997 Annual Report to Stockholders as indicated in Item 8 of
this report.
(2) Financial Statement Schedules. All financial statement schedules
have been omitted because the required information is not applicable or not
present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
(3) Exhibits. The exhibits listed under Item 14(c) hereof are filed
with, or incorporated by reference into, this Annual Report on Form 10-K.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant
during the fourth quarter of the fiscal year ended March 29, 1997.
(c) Exhibits. The following exhibits are filed as part of, or incorporated
by reference into, this Annual Report on Form 10-K:
<TABLE>
<S> <C>
3.1 Amended and Restated By-Laws of the Registrant (incorporated herein by reference
to Exhibit (3.4) to the Registrant's Registration Statement on Form S-1 (as
amended), No. 33-70744, filed on October 20, 1993).
3.2 Restated Certificate of Incorporation of the Registrant filed with the Secretary
of State of Delaware on January 19, 1994 (incorporated herein by reference to
Exhibit (3.1) to the Registrant's Quarterly Report on Form 10-Q, SEC File Number
1-12696, for the fiscal quarter ended December 25, 1993, filed on March 4, 1994).
3.3 Certificate of Retirement and Elimination of Preferred Stock and Common Stock of
the Registrant filed with the Secretary of State of Delaware on January 11, 1996
(incorporated herein by reference to Exhibit (3.3) of the Registrant's Annual
Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30,
1996, filed on June 27, 1996).
4.1 Indenture between Registrant, as issuer, and First National Bank of Boston, as
Trustee dated as of January 15, 1994 (including the form of Senior Notes)
relating to Registrant's 10% Senior Notes Due 2001 (incorporated herein by
reference to Exhibit (4.1) to the Registrant's Quarterly Report on Form 10-Q, SEC
File Number 1-12696, for the fiscal quarter ended December 25, 1993, filed on
March 4, 1994).
10.1 Quarterly Profit Sharing Plan (as amended) (incorporated herein by reference to
Exhibit (10.2) to Registrant's predecessor, Plantronics, Inc.'s Report on Form
10-K, SEC File Number 1-6642, for the fiscal year ended May 29, 1982, filed on
August 27, 1982).
10.2 Form of Agreement For Restricted Property in connection with Target Benefit Plan;
and Schedule of Other Documents Omitted, (incorporated herein by reference to
Exhibit (10.19) to PI Holdings Inc.'s Transitional Report on Form 10-K for the
transition period ended April 1, 1989, SEC file number 33-26770, filed on August
21, 1989).
10.3 Form of Indemnification Agreement between the Registrant and certain directors
and executives and Schedule of Other Documents Omitted (incorporated herein by
reference to Exhibit (10.1) to PI Holdings Inc.'s Quarterly Report on Form 10-Q
for the fiscal quarter ended December 26, 1992, SEC File Number 33-26770, filed
February 9, 1993).
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C>
10.4 Form of Employment Agreement, Addendum to Employment Agreement and Second
Addendum to Employment Agreement between the Registrant and certain executives;
and Schedule of Other Documents Omitted (incorporated herein by reference to
Exhibit (10.2) to PI Holdings Inc.'s Quarterly Report on Form 10-Q for the fiscal
quarter ended December 26, 1992, SEC File Number 33-26770, filed February 9,
1993).
10.5 Executive Bonus Plan (incorporated herein by reference to Exhibit (10.4) to the
Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed
on October 20, 1993).
10.6 Board Designation Agreement dated as of October 22, 1993 between the Registrant
and Citicorp Venture Capital, Ltd. (incorporated herein by reference to Exhibit
(10.21) to the Registrant's Registration Statement on Form S-1 (as amended), No.
33-70744, filed October 20, 1993).
10.7 Lease Agreement dated July 1993 between Inmobiliara Mexhong S.A. de C.V. and
Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in
Tijuana, Mexico (translation from Spanish original) (incorporated herein by
reference to Exhibit (10.30) to the Registrant's Registration Statement on Form
S-1 (as amended), No. 33-70744, filed on October 20, 1993).
10.8 Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics
Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett,
England (incorporated herein by reference to Exhibit (10.32) to the Registrant's
Registration Statement on Form S-1 (as amended), No.33-70744, filed on October
20, 1993).
10.9 1993 Stock Plan (incorporated herein by reference to Exhibit (10.1) to the
Registrant's Registration Statement on Form S-1 (as amended), SEC File Number
33-70744, filed on October 20, 1993).
10.10 1993 Director Stock Option Plan (incorporated herein by reference to Exhibit
(10.29) to the Registrant's Registration Statement on Form S-1 (as amended), SEC
File Number 33-70744, filed on October 20, 1993).
10.11 Employment Agreement between the Registrant and Robert S. Cecil dated January 4,
1994 (supersedes Employment Agreement between Plantronics and Robert S. Cecil
dated January 20, 1993) (incorporated herein by reference to Exhibit (10.16) to
the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744,
filed on October 20, 1993).
Amendment Number One to Employment Agreement between the Registrant and Robert S.
Cecil entered into as of January 4, 1995 (incorporated herein by reference to
Exhibit (10.6) of the Registrant's Annual Report on Form 10-K, SEC File Number
1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996).
Letter agreement between Registrant and Robert S. Cecil dated April 10, 1996
(incorporated herein by reference to Exhibit (10.6) of the Registrant's Annual
Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30,
1996, filed on June 27, 1996).
10.12 Amendment effective as of April 23, 1996 to the 1993 Stock Plan (incorporated
herein by reference to Exhibit (4.2) to the Registrant's Registration Statement
on Form S-8, SEC File Number 333-14833, filed on October 25, 1996).
10.13 Amendment Effective as of April 23, 1996 to the 1993 Director Stock Option Plan
(incorporated herein by reference to Exhibit (4.4) to the Registrant's
Registration Statement on Form S-8, SEC File Number 333-14833, filed on October
25, 1996).
10.14 1996 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit
(4.5) to the Registrant's Registration Statement on Form S-8, SEC File Number
333-14833, filed on October 25, 1996).
10.15 Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (incorporated
herein by reference to Exhibit (4.1) to the Registrant's Registration Statement
on Form S-8, SEC File Number 333-19351, filed on January 7, 1997).
</TABLE>
13
<PAGE> 16
<TABLE>
<S> <C>
10.16 Amendment Number One to the Plantronics, Inc. Annual Profit Sharing/Individual
Savings Plan (incorporated herein by reference to Exhibit (4.2) to the
Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed
on January 7, 1997).
10.17 Trust Agreement Establishing the Plantronics, Inc. Annual Profit
Sharing/Individual Savings Plan Trust (incorporated herein by reference to
Exhibit (4.3) to the Registrant's Registration Statement on Form S-8, SEC File
Number 333-19351, filed on January 7, 1997).
10.18 Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive
Stock Purchase Plan (incorporated herein by reference to Exhibit (4.4) to the
Registrant's Registration Statement on Form S-8 (as amended), SEC File Number
333-19351, filed on March 25, 1997).
10.19 Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996
(incorporated herein by reference to Exhibit (4.5) to the Registrant's
Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed
on March 25, 1997).
10.20 Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation
Plan (incorporated herein by reference to Exhibit (4.6) to the Registrant's
Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed
on March 25, 1997).
10.21 Plantronics, Inc. Basic Deferred Compensation Plan Participant Election
(incorporated herein by reference to Exhibit (4.7) to the Registrant's
Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed
on March 25, 1997).
10.22 Credit Agreement dated as of February 19, 1997 between Registrant and Bank of
America National Trust and Savings Association; First Amendment to Credit
Agreement, dated as of May 15, 1997.
13 1997 Annual Report to Stockholders pursuant to Item 601, Regulation S-K. Such
Annual Report, except for those portions that are expressly incorporated by
reference, is furnished for the information of the Commission and is not deemed
filed as part of this report on Form 10-K.
21 Subsidiaries of the Registrant.
23 Consent of Price Waterhouse LLP, Independent Accountants.
27 Financial Data Schedule.
</TABLE>
14
<PAGE> 17
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.
PLANTRONICS, INC.
Dated: June 25, 1997 By: /s/ ROBERT S. CECIL
------------------------------------
Robert S. Cecil, President
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 date indicated.
<TABLE>
<S> <C> <C>
/s/ ROBERT S. CECIL Chairman of the Board, Chief June 25, 1997
- --------------------------------------------- Executive Officer, President
(Robert S. Cecil) and Director (Principal
Executive Officer)
/s/ BARBARA V. SCHERER Vice President, Chief Financial June 25, 1997
- --------------------------------------------- Officer (Principal Financial
(Barbara V. Scherer) Officer, Principal Accounting
Officer)
/s/ ROBERT F.B. LOGAN Director June 25, 1997
- ---------------------------------------------
(Robert F.B. Logan)
/s/ M. SALEEM MUQADDAM Director June 25, 1997
- ---------------------------------------------
(M. Saleem Muqaddam)
/s/ JOHN MOWBRAY O'MARA Director June 25, 1997
- ---------------------------------------------
(John Mowbray O'Mara)
/s/ TRUDE C. TAYLOR Director June 25, 1997
- ---------------------------------------------
(Trude C. Taylor)
/s/ J. SIDNEY WEBB Director June 25, 1997
- ---------------------------------------------
(J. Sidney Webb)
/s/ DAVID A. WEGMANN Director June 25, 1997
- ---------------------------------------------
(David A. Wegmann)
</TABLE>
15
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
NO. DESCRIPTION SYSTEM
- ------ -------------------------------------------------------------------------- ---------
<S> <C> <C>
3.1 Amended and Restated By-Laws of the Registrant (incorporated herein by
reference to Exhibit (3.4) to the Registrant's Registration Statement on
Form S-1 (as amended), No. 33-70744, filed on October 20, 1993)...........
3.2 Restated Certificate of Incorporation of the Registrant filed with the
Secretary of State of Delaware on January 19, 1994 (incorporated herein by
reference to Exhibit (3.1) to the Registrant's Quarterly Report on Form
10-Q, SEC File Number 1-12696, for the fiscal quarter ended December 25,
1993, filed on March 4, 1994).............................................
3.3 Certificate of Retirement and Elimination of Preferred Stock and Common
Stock of the Registrant filed with the Secretary of State of Delaware on
January 11, 1996 (incorporated herein by reference to Exhibit (3.3) of the
Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the
fiscal year ended March 30, 1996, filed on June 27, 1996).................
4.1 Indenture between Registrant, as issuer, and First National Bank of
Boston, as Trustee dated as of January 15, 1994 (including the form of
Senior Notes) relating to Registrant's 10% Senior Notes Due 2001
(incorporated herein by reference to Exhibit (4.1) to the Registrant's
Quarterly Report on Form 10-Q, SEC File Number 1-12696, for the fiscal
quarter ended December 25, 1993, filed on March 4, 1994)..................
10.1 Quarterly Profit Sharing Plan (as amended) (incorporated herein by
reference to Exhibit (10.2) to Registrant's predecessor, Plantronics,
Inc.'s Report on Form 10-K, SEC File Number 1-6642, for the fiscal year
ended May 29, 1982, filed on August 27, 1982).............................
10.2 Form of Agreement For Restricted Property in connection with Target
Benefit Plan; and Schedule of Other Documents Omitted, (incorporated
herein by reference to Exhibit (10.19) to PI Holdings Inc.'s Transitional
Report on Form 10-K for the transition period ended April 1, 1989, SEC
File Number 33-26770, filed on August 21, 1989)...........................
10.3 Form of Indemnification Agreement between the Registrant and certain
directors and executives and Schedule of Other Documents Omitted
(incorporated herein by reference to Exhibit (10.1) to PI Holdings Inc.'s
Quarterly Report on Form 10-Q for the fiscal quarter ended December 26,
1992, SEC File Number 33-26770, filed February 9, 1993)...................
10.4 Form of Employment Agreement, Addendum to Employment Agreement and Second
Addendum to Employment Agreement between the Registrant and certain
executives; and Schedule of Other Documents Omitted (incorporated herein
by reference to Exhibit (10.2) to PI Holdings Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended December 26, 1992, SEC File Number
33-26770, filed February 9, 1993).........................................
10.5 Executive Bonus Plan (incorporated herein by reference to Exhibit (10.4)
to the Registrant's Registration Statement on Form S-1 (as amended), No.
33-70744, filed on October 20, 1993)......................................
10.6 Board Designation Agreement dated as of October 22, 1993 between the
Registrant and Citicorp Venture Capital, Ltd. (incorporated herein by
reference to Exhibit (10.21) to the Registrant's Registration Statement on
Form S-1 (as amended), No. 33-70744, filed October 20, 1993)..............
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
NO. DESCRIPTION SYSTEM
- ------ -------------------------------------------------------------------------- ---------
<S> <C> <C>
10.7 Lease Agreement dated July 1993 between Inmobiliara Mexhong S.A. de C.V.
and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises
located in Tijuana, Mexico (translation from Spanish original)
(incorporated herein by reference to Exhibit (10.30) to the Registrant's
Registration Statement on Form S-1 (as amended), No. 33-70744, filed on
October 20, 1993).........................................................
10.8 Lease dated December 7, 1990 between Canyge Bicknell Limited and
Plantronics Limited, a subsidiary of the Registrant, for premises located
in Wootton Bassett, England (incorporated herein by reference to Exhibit
(10.32) to the Registrant's Registration Statement on Form S-1 (as
amended), No. 33-70744, filed on October 20, 1993)........................
10.9 1993 Stock Plan (incorporated herein by reference to Exhibit (10.1) to the
Registrant's Registration Statement on Form S-1 (as amended), SEC File
Number 33-70744, filed on October 20, 1993)...............................
10.10 1993 Director Stock Option Plan (incorporated herein by reference to
Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as
amended), SEC File Number 33-70744, filed on October 20, 1993)............
10.11 Employment Agreement between the Registrant and Robert S. Cecil dated
January 4, 1994 (supersedes Employment Agreement between Plantronics and
Robert S. Cecil dated January 20, 1993) (incorporated herein by reference
to Exhibit (10.16) to the Registrant's Registration Statement on Form S-1
(as amended), No. 33-70744, filed on October 20, 1993)....................
Amendment Number One to Employment Agreement between the Registrant and
Robert S. Cecil entered into as of January 4, 1995 (incorporated herein by
reference to Exhibit (10.6) of the Registrant's Annual Report on Form
10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996,
filed on June 27, 1996)...................................................
Letter agreement between Registrant and Robert S. Cecil dated April 10,
1996 (incorporated herein by reference to Exhibit (10.6) of the
Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the
fiscal year ended March 30, 1996, filed on June 27, 1996).................
10.12 Amendment effective as of April 23, 1996 to the 1993 Stock Plan
(incorporated herein by reference to Exhibit (4.2) to the Registrant's
Registration Statement on Form S-8, SEC File Number 333-14833, filed on
October 25, 1996).........................................................
10.13 Amendment Effective as of April 23, 1996 to the 1993 Director Stock Option
Plan (incorporated herein by reference to Exhibit (4.4) to the
Registrant's Registration Statement on Form S-8, SEC File Number
333-14833, filed on October 25, 1996).....................................
10.14 1996 Employee Stock Purchase Plan (incorporated herein by reference to
Exhibit (4.5) to the Registrant's Registration Statement on Form S-8, SEC
File Number 333-14833, filed on October 25, 1996).........................
10.15 Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan
(incorporated herein by reference to Exhibit (4.1) to the Registrant's
Registration Statement on Form S-8, SEC File Number 333-19351, filed on
January 7, 1997)..........................................................
10.16 Amendment Number One to the Plantronics, Inc. Annual Profit
Sharing/Individual Savings Plan (incorporated herein by reference to
Exhibit (4.2) to the Registrant's Registration Statement on Form S-8, SEC
File Number 333-19351, filed on January 7, 1997)..........................
</TABLE>
17
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<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
NO. DESCRIPTION SYSTEM
- ------ -------------------------------------------------------------------------- ---------
<S> <C> <C>
10.17 Trust Agreement Establishing the Plantronics, Inc. Annual Profit
Sharing/Individual Savings Plan Trust (incorporated herein by reference to
Exhibit (4.3) to the Registrant's Registration Statement on Form S-8, SEC
File Number 333-19351, filed on January 7, 1997)..........................
10.18 Resolutions of the Board of Directors of Plantronics, Inc. Concerning
Executive Stock Purchase Plan (incorporated herein by reference to Exhibit
(4.4) to the Registrant's Registration Statement on Form S-8 (as amended),
SEC File Number 333-19351, filed on March 25, 1997).......................
10.19 Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8,
1996 (incorporated herein by reference to Exhibit (4.5) to the
Registrant's Registration Statement on Form S-8 (as amended), SEC File
Number 333-19351, filed on March 25, 1997)................................
10.20 Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock
Compensation Plan (incorporated herein by reference to Exhibit (4.6) to
the Registrant's Registration Statement on Form S-8 (as amended), SEC File
Number 333-19351, filed on March 25, 1997)................................
10.21 Plantronics, Inc. Basic Deferred Compensation Plan Participant Election
(incorporated herein by reference to Exhibit (4.7) to the Registrant's
Registration Statement on Form S-8 (as amended), SEC File Number
333-19351, filed on March 25, 1997).......................................
10.22 Credit Agreement dated as of February 19, 1997 between Registrant and Bank
of America National Trust and Savings Association; First Amendment to
Credit Agreement, dated as of May 15, 1997................................
13 1997 Annual Report to Stockholders pursuant to Item 601, Regulation S-K.
Such Annual Report, except for those portions that are expressly
incorporated by reference, is furnished for the information of the
Commission and is not deemed filed as part of this report on Form 10-K....
21 Subsidiaries of the Registrant............................................
23 Consent of Price Waterhouse LLP, Independent Accountants..................
27 Financial Data Schedule...................................................
</TABLE>
18
<PAGE> 1
Exhibit 10.22
================================================================================
CREDIT AGREEMENT
DATED AS OF FEBRUARY 19, 1997
BETWEEN
PLANTRONICS, INC.
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Section Page
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ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Certain Common Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Performance; Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Independence of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE II
THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . 29
2.01 Amounts and Terms of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.02 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.03 Procedure for Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.04 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.05 Voluntary Termination or Reduction of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.06 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.07 Mandatory Prepayments; Mandatory Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.08 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.09 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.10 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.11 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.12 Payments by the . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
THE LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . 35
3.01 The Letter of Credit Subfacility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.02 Issuance, Amendment and Renewal of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.03 Drawings and Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.04 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.05 Cash Collateral Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.06 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.07 Uniform Customs and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . . . . 40
4.01 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.03 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.04 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.05 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.06 Certificate of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 44
5.01 Conditions of Effectiveness of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Articles of Incorporation; By-laws and Good Standing . . . . . . . . . . . . . . . . . . . . . 44
(d) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(e) Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(f) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) Prior Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.02 Conditions to All Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Continuation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 46
6.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.02 Corporate Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.03 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.04 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.06 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.07 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.08 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.10 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.12 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.13 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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6.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.18 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 52
7.01 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.02 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.04 Preservation of Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.05 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.06 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.07 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.08 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.09 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.10 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.12 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.13 Internal Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.14 Board Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 58
8.01 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.02 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.03 Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.04 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.05 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.06 Limitation on Indebtedness; Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.07 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.08 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.09 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.10 Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.11 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.12 Net Funded Debt to EBITDA Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.13 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.14 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.15 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.16 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.17 Amendments to Senior Note Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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ARTICLE IX
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 72
9.01 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(b) Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(e) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(f) Insolvency; Voluntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(g) Involuntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(i) Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(j) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(k) Invalidity of Company Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.03 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 76
10.01 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.03 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.05 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
(a) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
(b) Survival; Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.06 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.07 Assignments, Participations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.08 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.09 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.12 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.13 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.14 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.15 Arbitration; Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
(a) Mandatory Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
(b) Judicial Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
(c) Provisional Remedies and Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.16 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
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SCHEDULES
Schedule 6.05 Litigation
Schedule 6.06 ERISA Matters
Schedule 6.10 Permitted Liabilities
Schedule 6.15 Intellectual Property Matters
Schedule 6.16 Subsidiaries and Equity Investments
Schedule 8.01 Permitted Liens
Schedule 8.04 Permitted Investments
Schedule 8.06 Permitted Indebtedness and Contingent Obligations
EXHIBITS
Exhibit A Notice of Borrowing
Exhibit B Notice of Conversion/Continuation
Exhibit C Compliance Certificate
Exhibit D Form of Legal Opinion
Exhibit E Form of L/C Applications
Exhibit F Form of L/C Amendment Applications
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CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of February 19, 1997, between
Plantronics, Inc., a Delaware corporation (the "Company") and Bank of America
National Trust and Savings Association (the "Bank").
WHEREAS, the Bank has agreed to make available to the Company a
revolving credit facility with a letter of credit subfacility upon the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Defined Terms. In addition to the terms defined elsewhere in
this Agreement, the following terms have the following meanings:
"Acquired Indebtedness" means Indebtedness of a Person (a)
assumed in connection with an Acquisition from such Person, or (b)
existing at the time such Person becomes a Subsidiary of any other
Person.
"Acquiree" has the meaning specified in subsection 8.05.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person (other than a Person that is a Subsidiary of the Company), or
of any business or division of a Person (other than a Person that is a
Subsidiary of the Company), (b) the acquisition, of in excess of 50%
of the capital stock, partnership interests or equity of any Person
(other than a Person that is a Subsidiary of the Company) or otherwise
causing any such Person to become a Subsidiary of the Company, or (c)
a merger or consolidation or any other combination with another Person
(other than a Person that is a Subsidiary of the Company) provided
that the Company or the Company's Subsidiary is the surviving entity
or the surviving or
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<PAGE> 8
resulting entity is under the control of, or under common control
with, the Company.
"Adjusted EBITDA" means, for any period, for the Company and
its Subsidiaries on a consolidated basis, determined in accordance
with GAAP, EBITDA for such period less Capital Expenditures incurred
in such period.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, as amended,
supplemented or modified from time to time.
"Applicable Rate" means, for any day, with respect to any
Offshore Rate Loan, CD Rate Loan or Base Rate Loan and the commitment
and standby letter of credit fees payable hereunder, as the case may
be, the applicable rate per annum set forth in the chart below under
the caption "Offshore Rate Margin," "CD Rate Margin," "Base Rate
Margin," "Commitment Fee," and "Standby Letter of Credit Fee," as the
case may be, based upon the respective Performance Levels in effect on
such day as set forth below.
<TABLE>
<CAPTION>
CD Rate Offshore Base Rate Commit- Standby Letter
Margin Rate Margin Margin ment Fee of Credit Fee
<S> <C> <C> <C> <C> <C>
Performance Level 1 0.6250% 0.5000% 0.0000% 0.1250% 0.5000%
-------------------
Net Funded Debt to EBITDA
Ratio
< 1.50 to 1.00
Performance Level 2 0.7500% 0.6250% 0.0000% 0.1500% 0.6250%
-------------------
Net Funded Debt to EBITDA
Ratio
< 2.00 to 1.00 but
> 1.50 to 1.00
-
Performance Level 3 1.1250% 1.0000% 0.0000% 0.2000% 1.0000%
-------------------
Net Funded Debt to EBITDA
Ratio
< 2.50 to 1.00 but
> 2.00 to 1.00
-
</TABLE>
2
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C>
Performance Level 4 1.3750% 1.2500% 0.2500% 0.3000% 1.2500%
-------------------
Net Funded Debt to EBITDA
Ratio
> 2.50 to 1.00
-
</TABLE>
The applicable Performance Level as of any day shall be
determined by reference to the Net Funded Debt to EBITDA Ratio as of
the last day of the fiscal quarter most recently ended on or prior to
such day, and any change in the Performance Level shall become
effective upon the delivery to the Bank of the Compliance Certificate
required to accompany the financial statements delivered pursuant to
Section 7.01 upon which such change is based, which Compliance
Certificate shall set forth in reasonable detail the calculation of
the Net Funded Debt to EBITDA Ratio.
Each change in the Applicable Rate shall apply during the
period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such
change. Notwithstanding the foregoing, at any time prior to the time
the first delivery of financial statements under Section 7.01 after
the Closing Date, the Applicable Rate shall be determined as if the
Net Funded Debt to EBITDA Ratio were at Performance Level 1.
"Approved Replacement Director" means (i) any director of the
Company that has been approved by two-thirds of the Board of Directors
as constituted at the beginning of any relevant period or by a
Permitted Holder or (ii) any director of the Company that has been
approved by two-thirds of those members of the Board of Directors, as
constituted at the beginning of any relevant period, entitled pursuant
to the Organization Documents of the Company to vote for such
director, together with any directors referred to in the preceding
clause (i) or previously approved in accordance with this clause (ii),
or by a Permitted Holder.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease or other disposition to any Person other than the
Company or a Subsidiary of the Company, in one transaction or a series
of related transactions, of (i) any Capital Stock of any Subsidiary of
the Company or (ii) any other Property of the Company or any
Subsidiary of the Company other than sales of inventory or other
assets in the Ordinary Course of Business and other than isolated
transactions which do not exceed $250,000, individually, or $500,000,
in the aggregate. For purposes of this definition, as used in Section
8.02, the term "Asset Sale" shall not include (x) any disposition of
the Property
3
<PAGE> 10
of the Company or any Subsidiary of the Company that is governed under
and complies with Section 8.03 or any disposition of Investments of
the type described in subsections 8.04 (b), (c), (e) (f) and (l); or
(y) any issuance by the Company of its Capital Stock.
"Assignee" has the meaning specified in subsection 10.07(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" means Bank of America National Trust and Savings
Association, a national banking association.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Bank's Payment Office" means the address for payments set
forth on the signature page hereto in relation to the Bank or such
other address as the Bank may from time to time specify in accordance
with Section 10.02.
"Base Rate" means, for any day, the higher of:
(a) the rate of interest in effect for such day as
publicly announced from time to time by the Bank in San
Francisco, California, as its "reference rate." It is a rate
set by the Bank based upon various factors including the Bank's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced
rate; and
(b) 0.50% per annum above the latest Federal Funds
Rate.
Any change in the reference rate announced by the Bank shall
take effect at the opening of business on the day specified in the
public announcement of such change.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco
are authorized or required by law to close and, if the applicable
Business Day relates to any
4
<PAGE> 11
Offshore Rate Loan, means such a day on which dealings are carried on in
the applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capital Expenditures" means, for any period, the expenditures
(whether paid in cash or accrued as a liability, including the portion
of Capital Leases that is capitalized on the consolidated balance sheet
of the Company and its Subsidiaries, but excluding capitalized interest
and items paid in cash that had been accrued and counted as a Capital
Expenditure in a prior period) by the Company and its Subsidiaries
during that period that are or should be included in "capital
expenditures", "additions to property, plant or equipment" or comparable
items, determined in accordance with GAAP in the statement of cash flow
of the Company and its Subsidiaries.
"Capital Lease" has the meaning specified in the definition of
"Capital Lease Obligations."
"Capital Lease Obligations" means all monetary obligations of
the Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital
lease ("Capital Lease"), and, for the purpose of this Agreement, the
amount of such obligations at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents
(however designated and whether voting or non-voting) of, such Person's
capital stock (including any partnership interest), whether outstanding
on the Closing Date or issued after the Closing Date, and any and all
rights, warrants or options exchangeable for or convertible into such
capital stock.
"Cash Collateralize" means to pledge and deposit with or deliver
to the Bank as collateral for the Obligations, cash or deposit account
balances pursuant to documentation in form and substance satisfactory to
the Bank. Derivatives of such term shall have corresponding meaning.
The Company hereby grants the Bank a security interest in all such cash
5
<PAGE> 12
and deposit account balances. Cash collateral shall be maintained in
blocked, non-interest-bearing deposit accounts at the Bank.
"Cash Equivalents" means:
(a) any evidence of Indebtedness with a maturity of 365
days or less issued or directly and fully guaranteed or insured
by the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof);
(b) certificates of deposit or acceptances with a
maturity of 365 days or less of any financial institution that
is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than
$100,000,000;
(c) commercial paper with a maturity of 365 days or
less issued by a corporation (other than an Affiliate of the
Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors
Services, Inc.;
(d) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States government or
issued by any agency thereof and backed by the full faith and
credit of the United States government, in each case maturing
within one year from the date of acquisition, provided that the
terms of such agreements comply with the guidelines set forth in
the Federal Financial Agreements of Depository Institutions with
Securities and Others, as adopted by the Comptroller of the
Currency of the United States;
(e) deposit accounts maintained with financial
institutions referred to in the preceding clause (b); and
(f) investments in mutual funds which invest
exclusively in items described in the preceding clauses (a)
through (e) above.
"Cash Interest Expense" means, for any period, on a consolidated
basis, total interest expense for the period (including all commissions,
discounts, fees and other charges in connection with standby letters of
credit and
6
<PAGE> 13
similar instruments) for the Company and its Subsidiaries, less non-cash
items included in such interest expense (including any amortization of
discount or interest expense not payable in cash).
"CD Rate" means, for each Interest Period in respect of any CD
Rate Loans, the rate of interest (rounded upward to the nearest 1/100th
of 1%) determined pursuant to the following formula:
CD Rate = Certificate of Deposit Rate + Assessment
1.00 - Reserve Percentage Rate
Where:
"Assessment Rate" means for any day of any Interest
Period for CD Rate Loans, the rate determined by the Bank as
equal to the annual assessment rate in effect on such day that
is payable to the FDIC by a member of the Bank Insurance Fund
that is classified as adequately capitalized and within
supervisory subgroup "A" (or a comparable successor assessment
risk classification within the meaning of 12 C.F.R. Section
327.3) for insuring time deposits at offices of such member in
the United States, or, in the event that the FDIC shall at any
time hereafter cease to assess time deposits based upon such
classifications or successor classifications, equal to the
maximum annual assessment rate in effect on such day that is
payable to the FDIC by commercial banks (whether or not
applicable to the Bank) for insuring time deposits at offices of
such banks in the United States.
"Certificate of Deposit Rate" means for any Interest
Period for CD Rate Loans the rate of interest per annum
determined by the Bank to be the arithmetic mean (rounded upward
to the nearest 1/100th of 1%) of the rates notified to the Bank
as the rates of interest bid by two or more certificate of
deposit dealers of recognized standing selected by the Bank for
the purchase at face value of dollar certificates of deposit
issued by major United States banks, for a maturity comparable
to such Interest Period and in the approximate amount of the CD
Rate Loans to be made, at the time selected by the Bank on the
first day of such Interest Period.
"Reserve Percentage" means for any day for any Interest
Period for CD Rate Loans the maximum reserve
7
<PAGE> 14
percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%), as determined by the Bank, in effect on
such day (including any ordinary, marginal, emergency,
supplemental, special and other reserve percentages) prescribed
by the Federal Reserve Board for determining the maximum
reserves to be maintained by member banks of the Federal Reserve
System with deposits exceeding $1,000,000,000 for new
non-personal time deposits for a period comparable to such
Interest Period and in an amount of $100,000 or more.
"CD Rate Loan" means a Loan that bears interest based on the CD
Rate.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws."
"Change of Control" means the occurrence, after the date of this
Agreement, of any of the following: (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole, to any
Person or group of Persons acting in concert as a partnership or other
group (a "group of persons"), other than a Permitted Holder; (ii) the
merger or consolidation of the Company with or into another corporation
with the effect that a Person or group of persons (such Person or group
of persons, the "Acquiring Persons"), other than Permitted Holders, has
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the surviving Person of such merger or
consolidation or the corporation resulting from such merger or
consolidation representing 35% or more of the combined voting power of
the then outstanding securities of such surviving or resulting Person,
as the case may be, ordinarily (and apart from rights arising under
special circumstances) having the right to vote in the election of
directors, provided that such a merger or consolidation shall not be a
Change of Control if, after giving effect to such merger or
consolidation, Permitted Holders are then the beneficial owner of
securities of such surviving Person representing combined voting power
in excess of the combined voting power of such securities as to which
the Acquiring Persons have become the beneficial owner; (iii) after
giving effect to the changes in the composition of the Board of
Directors of the Company contemplated by the Restructure (such changes,
the "Contemplated Change"), a further change to the composition of such
Board of Directors, over a two-year period (or such shorter period as
may then have elapsed following the Contemplated Change), such that the
directors
8
<PAGE> 15
who constituted such Board of Directors at the beginning of such period,
together with all Approved Replacement Directors elected since the
beginning of such period, shall cease to constitute a majority of such
Board of Directors; and (iv) a Person or group of persons (such Person
or group of persons, the "Purchasers"), other than Permitted Holders,
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing 35% or more of the combined
voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances)
having the right to vote in the election of directors, provided that
such a change of ownership shall not be a Change of Control if, after
giving effect to such change, Permitted Holders are then the beneficial
owner of securities of the Company representing combined voting power in
excess of the combined voting power of such securities as to which the
Purchasers have become the beneficial owner.
"Closing Date" means the date on which all conditions precedent
set forth in Section 5.01 are satisfied or waived by the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
"Commitment" has the meaning specified in subsection 2.01(a).
"Company Documents" means this Agreement, the L/C- Related
Documents and any other consents, waivers and other agreements and
instruments entered into by the Company with (or in favor of) the Bank
pursuant to the requirements of this Agreement or the L/C-Related
Documents.
"Compliance Certificate" means a certificate, substantially in
the form of Exhibit C, executed and delivered on behalf of the Company
by a Responsible Officer.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person for any period, the ratio of the aggregate amount of
Adjusted EBITDA plus Capital Expenditures incurred in such period of
such Person for the four full fiscal quarters for which financial
information in respect thereof is available immediately preceding the
date of the transaction (the "Transaction Date") giving rise to
9
<PAGE> 16
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such
four full fiscal quarter period being referred to herein as the "Four
Quarter Period") to the aggregate amount of Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Adjusted
EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation
to, without duplication, (a) any incurrences, and permanent repayments
out of the proceeds of such incurrences, of Indebtedness of such Person
or any of its Subsidiaries occurring during the period commencing on the
first day of the Four Quarter Period to and including the Transaction
Date (the "Reference Period"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such
calculation, as if such incurrence or repayment, as the case may be,
occurred on the first day of the Reference Period, but excluding
Indebtedness incurred or repaid under any revolving credit or similar
facility pursuant to which amounts incurred may be repaid and reborrowed
for working capital purposes (it being understood that such incurrences
and repayments referred to in this exclusion are included in the
calculation of the "Consolidated Fixed Charge Coverage Ratio" on an
actual basis), unless a permanent reduction in the commitments is
effected by such repayment and (b) any Asset Sales or Acquisitions
(including, without limitation, any Acquisition giving rise to the need
to make such calculation as a result of such person or one of its
Subsidiaries (including any person who becomes a Subsidiary as a result
of the Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness) occurring during the Reference Period, as if such
Asset Sale or Acquisition occurred on the first day of the Reference
Period. Without limiting the generality of the foregoing, in making any
calculation of the Consolidated Fixed Charge Coverage Ratio for any
period commencing prior to January 26, 1994, the recapitalization which
took effect on such date shall be deemed to have occurred on the first
day of the Reference Period. Furthermore, in calculating "Consolidated
Interest Expense" and "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (ii) if
interest on any Indebtedness actually incurred on the Transaction Date
may optionally be
10
<PAGE> 17
determined at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Reference Period; and (iii) notwithstanding
clause (i) and (ii) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Rate Protection Obligations, shall be deemed to
have accrued at the rate per annum resulting after giving effect to such
agreements. If such Person or any of its Subsidiaries directly or
indirectly enters into a Guaranty Obligation with respect to
Indebtedness of a third person (other than Indebtedness of a
consolidated Subsidiary of such person or with respect to a consolidated
Subsidiary of the Company other than Indebtedness of the Company), the
above clause shall give effect to the incurrence of such Guaranty
Obligation as if such person or such Subsidiary had directly incurred or
otherwise assumed such Guaranty Obligation.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the amounts for such period of (i) Consolidated Interest
Expense and (ii) the aggregate amount of dividends and other
distributions paid or accrued during such period in respect of
Disqualified Capital Stock of such Person and its Subsidiaries on a
consolidated basis; provided that if, during such period, such Person or
any of its Subsidiaries shall have made any Asset Sales or Acquisitions,
Consolidated Fixed Charges for such Person and its Subsidiaries for such
period shall be adjusted to give pro forma effect to the Consolidated
Fixed Charges directly attributable to the assets which are the subject
of such Asset Sales or Acquisitions during such period.
"Consolidated Interest Expense" means, with respect to any
Person for any period, without duplication, the sum of (i) the interest
expense of such Person and its Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, including,
without limitation, (a) any amortization of debt discount, (b) the net
cost under Interest Rate Protection Obligations (including any
amortization of discounts), (c) the interest portion of any deferred
payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and (e) all accrued interest, (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid
or accrued by such person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP and (iii)
one-third of the amount of all lease
11
<PAGE> 18
payments (other than Capitalized Lease Obligations) paid, accrued and/or
scheduled to be paid or accrued by such person and its Subsidiaries
during such period as determined on a consolidated basis in accordance
with GAAP.
"Contingent Obligation" means, as to any Person, (a) any
Guaranty Obligation of that Person; and (b) any direct or indirect
obligation or liability, contingent or otherwise, of that Person, (i) in
respect of any Surety Instrument issued for the account of that Person
or as to which that Person is otherwise liable for reimbursement of
drawings or payments; provided, that the amount in respect thereto to be
included as a Contingent Obligation shall mean only that portion of such
obligation or liability as is contingent, (ii) to purchase any
materials, supplies or other Property from, or to obtain the services
of, another Person if the relevant contract or other related document or
obligation requires that payment for such materials, supplies or other
Property, or for such services, shall be made regardless of whether
delivery of such materials, supplies or other Property is ever made or
tendered, or such services are ever performed or tendered, or (iii) in
respect of any Interest Rate Protection Obligation that is not entered
into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent
Obligation shall (subject, in the case of Guaranty Obligations, to the
last sentence of the definition of "Guaranty Obligation") be deemed
equal to the maximum reasonably anticipated liability in respect
thereof, and shall, with respect to item (b)(iii) of this definition, be
marked to market on a current basis.
"Contractual Obligations" means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or
any of its Property is bound.
"Conversion Date" means any date on which the Company converts a
Base Rate Loan to an Offshore Rate Loan or a CD Rate Loan; a CD Rate
Loan to an Offshore Rate Loan or a Base Rate Loan; or an Offshore Rate
Loan to a CD Rate Loan or a Base Rate Loan.
"Credit Extension" means and includes (a) the making of any Loan
hereunder, and (b) the Issuance of any Letter of Credit hereunder.
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<PAGE> 19
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Company or any of its Subsidiaries against
fluctuations in currency value.
"Default" means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would (if not cured or otherwise
remedied) constitute an Event of Default.
"Disqualified Capital Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is exchangeable
for Indebtedness, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the Revolving Termination Date.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Domestic Subsidiary" means any Subsidiary that is organized
under the laws of the United States or any state thereof.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) the net income (or net loss) for such period, plus
(b) all amounts treated as expenses for depreciation and interest and
the amortization of intangibles of any kind to the extent included in
the determination of such net income (or loss), plus (c) all accrued
taxes on or measured by income to the extent included in the
determination of such net income (or loss), plus (d) all non-cash
expenses or charges for management stock compensation to the extent
included in the determination of such net income (or loss), provided,
however, that net income (or loss) shall be computed for these purposes
without giving effect to extraordinary losses or extraordinary gains.
"Effective Amount" means (i) with respect to any Loans on any
date, the aggregate outstanding principal amount thereof after giving
effect to any Loans made and prepayments or repayments of Loans
occurring on such date, and (ii) with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such date
after giving effect to any Issuances of Letters of Credit
13
<PAGE> 20
occurring on such date and any other changes in the aggregate amount of
the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for
damages (punitive or otherwise), cleanup, removal, remedial or response
costs, restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden,
accidental or non-accidental, placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from
Property, whether or not owned by the Company.
"Environmental Laws" means all federal, state or local laws,
statutes, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental matters; including
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act, the California
Hazardous Waste Control Law, the California Solid Waste Management,
Resource, Recovery and Recycling Act, the California Water Code and the
California Health and Safety Code.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and regulations promulgated
thereunder.
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in
14
<PAGE> 21
Section 4001(a)(2) of ERISA) or a cessation of operations which is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) the
filing of a notice of intent to terminate, the treatment of a plan
amendment as a termination under Section 4041 or 4041A of ERISA or the
commencement of proceedings by the PBGC to terminate a Pension Plan
subject to Title IV of ERISA; (d) a failure by the Company to make
required contributions to a Pension Plan or other Plan subject to
Section 412 of the Code; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer,
any Pension Plan; (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Company; or (g) an application for a funding
waiver or an extension of any amortization period pursuant to Section
412 of the Code with respect to any Pension Plan.
"Eurodollar Reserve Percentage" has the meaning specified in the
definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities and Exchange Act of 1934,
and the rules and regulations promulgated thereunder.
"Fair Market Value" means, with respect to any Property, the
price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Company
acting in good faith; provided that, in the case of any transaction in
excess of $500,000, Fair Market Value shall be determined by the Board
of Directors of the Company acting in good faith and shall be evidenced
by a certified copy of a resolution of such Board of Directors delivered
to the Bank.
"FDIC" means the Federal Deposit Insurance Corporation, or any
entity succeeding to any of its principal functions.
"Federal Funds Rate" means, for any period, the rate per annum
set forth in the weekly statistical release designated as H.15(519), or
any successor publication, published by the Federal Reserve Board
(including any such successor, "H.15(519)") for such day opposite the
caption "Federal Funds (Effective)". If on any relevant day such rate
is not yet published in H.15(519), the rate for such
15
<PAGE> 22
day will be the rate set forth in the daily statistical release
designated as the Composite 3:30 p.m. Quotations for U.S. Government
Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite
3:30 p.m. Quotation") for such day under the caption "Federal Funds
Effective Rate". If on any relevant day the appropriate rate for such
previous day is not yet published in either H.15(519) or the Composite
3:30 p.m. Quotations, the rate for such day will be the arithmetic mean
as determined by the Bank of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York time) on
that day by each of three leading brokers of Federal funds transactions
in New York City selected by the Bank.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any entity succeeding to any of its principal
functions.
"FDIC" means the Federal Deposit Insurance Corporation, or any
entity succeeding to any of its principal functions.
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person that is not a Domestic Subsidiary of such
Person.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or
in such other statements by such other entity as may be in general use
by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by
any of the foregoing.
"Guaranty Obligation" means, as applied to any Person, any
obligation of that Person guaranteeing or intending to
16
<PAGE> 23
guarantee any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect
security therefor, or (b) to advance or provide funds (i) for the
payment or discharge of any such primary obligation, or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (d) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof; in each case (a), (b), (c) or (d),
including arrangements wherein the rights and remedies of the holder of
the primary obligation are limited to repossession or sale of certain
Property of such Person ("Non-Recourse Guarantees"). The amount of any
Guaranty Obligation shall be deemed equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof (the "Guaranty
Amount"); provided that the amount of any Guaranty Obligation which is a
Non-Recourse Guarantee shall be the lesser of the Guaranty Amount of
such Guaranty Obligation or the Fair Market Value of the Property
subject to such Non-Recourse Guaranty.
"Hazardous Materials" means all those substances which are
regulated by, or which may form the basis of liability under, any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance, hazardous
material, or toxic substance, or petroleum or petroleum derived
substance or waste.
"Indebtedness" of any Person means without duplication, (a) all
indebtedness of such Person for borrowed money; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property
or services; (c) all non-contingent reimbursement or payment obligations
with respect to Surety Instruments; (d) all obligations evidenced by
notes, bonds, debentures or similar instruments issued by such Person,
including obligations so evidenced incurred in connection with the
acquisition of property, assets or
17
<PAGE> 24
businesses; (e) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by such
Person (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or
sale of such property); (f) all Capital Lease Obligations of such
Person; (g) all net obligations with respect to Interest Rate Protection
Obligations and Currency Agreements of such Person; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person (but only to the
extent of the lesser of such Indebtedness or the fair market value of
the Property subject to such Lien, where such Lien secures a second
person's indebtedness), even though such Person has not assumed or
become liable for the payment of such Indebtedness; and (i) all Guaranty
Obligations of such Person in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above;
provided, that Indebtedness shall not include trade payables and accrued
expenses (including those between the Company and its Subsidiaries), in
each case arising in the Ordinary Course of Business.
"Indemnified Person" has the meaning specified in subsection
10.05(a).
"Indemnified Liabilities" has the meaning specified in
subsection 10.05(a).
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; in each case (a) and (b)
undertaken under U.S. Federal, State or foreign law, including the
Bankruptcy Code.
"Interest Coverage Ratio" means, as of any date of
determination, in respect of the Company and its Subsidiaries on a
consolidated basis, (a) Adjusted EBITDA divided by (b) Cash Interest
Expense, said amounts being calculated on a rolling four-quarter basis
(all to and
18
<PAGE> 25
including the then-most recent quarter end for which the Company has
delivered to the Bank a Compliance Certificate).
"Interest Rate Protection Obligations" means the obligations of
any Person pursuant to any arrangement with any other Person whereby,
directly or indirectly, such Person is entitled to receive from time to
time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such person calculated by applying a fixed or
floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars and
similar agreements.
"Interest Payment Date" means, with respect to any CD Rate Loan
or Offshore Rate Loan, the last day of each Interest Period applicable
to such Loan and, with respect to Base Rate Loans, the last Business Day
of each calendar quarter and each date a Base Rate Loan is converted
into an Offshore Rate Loan or a CD Rate Loan; provided, however, that if
any Interest Period for a CD Rate Loan or Offshore Rate Loan exceeds 90
days or three months, respectively, the date which falls 90 days or
three months (as the case may be) after the beginning of such Interest
Period and after each Interest Payment Date thereafter shall also be an
Interest Payment Date.
"Interest Period" means, (a) with respect to any Offshore Rate
Loan, the period commencing on the Business Day the Loan is disbursed or
continued or on the Conversion Date on which the Loan is converted to
the Offshore Rate Loan and ending on the date one, two, three or six
months thereafter, as selected by the Company in its Notice of Borrowing
or Notice of Conversion/Continuation; and (b) with respect to any CD
Rate Loan, the period commencing on the Business Day the CD Rate Loan is
disbursed or continued or on the Conversion Date on which a Loan is
converted to the CD Rate Loan and ending 30, 60, 90 or 180 days
thereafter, as selected by the Company in its Notice of Borrowing or
Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period pertaining to an
Offshore Rate Loan or CD Rate Loan would otherwise end on a day
which is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless, in the case
of an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
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<PAGE> 26
which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the date
set forth in clause (a) of the definition of "Revolving
Termination Date".
"Issue" means, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "Issued", "Issuing" and "Issuance" have
corresponding meanings.
"Joint Venture" means a single-purpose corporation, partnership,
joint venture or other similar legal arrangement (whether created
pursuant to contract in the case of a partnership or joint venture or
conducted through a separate legal entity) now or hereafter formed by
the Company or any of its Subsidiaries with another Person in order to
conduct a common venture or enterprise with such Person.
"L/C Amendment Application" means an application in
substantially the form of Exhibit F, or such other application form for
amendment of outstanding commercial or standby letters of credit as
shall at any time be in use by the Bank, as the Bank shall request.
"L/C Application" means an application in substantially the form
of Exhibit E, or such other application form for issuance of commercial
or standby letters of credit as shall at any time be in use by the Bank,
as the Bank shall request.
"L/C Commitment" means the commitment of the Bank to issue
Letters of Credit to the Company in an aggregate amount outstanding not
to exceed on any date $10,000,000, which commitment is a component of
(and not an addition to) the Commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then
20
<PAGE> 27
outstanding, plus (b) the amount of all unreimbursed drawings under all
Letters of Credit.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit.
"Lending Office" means the office or offices of the Bank
specified on the signature page hereto, or such other office or offices
of the Bank as it may from time to time specify to the Company.
"Letter of Credit" means any commercial or standby letter of
credit issued by the Bank pursuant to subsection 2.01(b).
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory
or other) or other similar preferential arrangement, all of the
foregoing for security purposes, of any kind or nature whatsoever
(including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease, any financing lease having substantially
the same economic effect as any of the foregoing, or the filing of any
financing statement with respect to any of the foregoing naming the
owner of the asset to which such lien relates as debtor, under the UCC
or any comparable law) and any contingent or other agreement to provide
any of the foregoing, but not including the interest of a lessor under
an Operating Lease.
"Loan" means an extension of credit by the Bank to the Company
pursuant to subsection 2.01(a), and may be a Base Rate Loan, CD Rate
Loan or an Offshore Rate Loan.
"Loan Documents" means this Agreement, the L/C-Related Documents
and any and all other consents, waivers, agreements, instruments and
certificates delivered to the Bank in connection herewith or therewith.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, any of the operations, business,
properties or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole; (b) a material impairment of the ability
of the
21
<PAGE> 28
Company to perform its payment obligations under any of the Company
Documents; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability of any Company Document.
"Material Subsidiary" means, with respect to any Person, a
Subsidiary of such Person that would, on a pro forma basis after giving
effect to any Transfer permitted hereunder, constitute a "significant
subsidiary" as such term is defined under Rule 1.02(v) of Regulation S-X
of the SEC.
"Net Funded Debt" means, as of any date of determination, (i)
Indebtedness (other than the types described in clause (i) of the
definition thereof) and, without duplication, all Guaranty Obligations
with respect to any such Indebtedness of another Person less (ii) cash
and Cash Equivalents, to the extent not subject to any Lien, and to the
extent exceeding in aggregate the amount of $5,000,000, in each case on
a consolidated basis for the Company and its Subsidiaries.
"Net Funded Debt to EBITDA Ratio" means, as of any date of
determination, the ratio of Net Funded Debt to EBITDA, calculated on a
rolling four-quarter basis (to and including the then-most recent
quarter end for which the Company has delivered to the Bank a Compliance
Certificate).
"Net Proceeds" means, in the case of any sale, lease, conveyance
or other disposition of Property (including a sale/leaseback), the gross
consideration received in cash, checks or other cash equivalent
financial instruments (including Cash Equivalents) as and when received
by the Person making the disposition from such disposition (other than
liabilities assumed directly or indirectly by the buyer), less (i) the
amount of actual liabilities for taxes reasonably anticipated by the
Company to be attributable to such disposition; (ii) the amount of any
reserves against any liabilities associated with such disposition
required to be retained by the Person making such disposition after the
disposition in conformity with GAAP (but only for the period required to
be retained as a reserve); (iii) the amount of Indebtedness required to
be repaid or defeased under the terms thereof or under the terms of the
disposition in connection with the disposition; and (iv) the amount of
fees and commissions payable to Persons other than the Person making the
disposition and other costs and expenses related to the disposition that
are to be paid in cash, in each case only to the extent customarily
borne by a seller in an arm's-length transaction; provided that gross
consideration
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<PAGE> 29
shall not include the amount of intercompany indebtedness forgiven in
connection with the disposition.
"Notice of Borrowing" means a notice given by the Company to the
Bank pursuant to Section 2.03, in substantially the form of Exhibit A.
"Notice of Conversion/Continuation" means a notice given by the
Company to the Bank pursuant to Section 2.04, in substantially the form
of Exhibit B.
"Notice of Lien" means any "notice of lien" or similar document
intended to be filed or recorded with any court, registry, recorder's
office, central filing office or other Governmental Authority for the
purpose of evidencing, creating, perfecting or preserving the priority
of a Lien securing obligations owing to a Governmental Authority.
"Obligations" means all Loans, L/C Obligations of the type
described in clause (b) of the definition thereof, advances, debts,
liabilities, and other payment obligations (including any obligation to
Cash Collateralize), owing by the Company to the Bank or any other
Person required to be indemnified under any Loan Document, that arises
under any Loan Document, whether arising by reason of an extension of
credit, loan, guaranty, indemnification or in any other manner, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
however acquired.
"Offshore Rate" means, for each Interest Period in respect of
any Offshore Rate Loan, an interest rate per annum (rounded upward to
the nearest 1/16th of 1%) determined pursuant to the following formula:
Offshore Rate = IBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed as
a decimal, rounded upward to the nearest 1/100th of 1%) in
effect such day (whether or not applicable to the Bank) under
regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding
23
<PAGE> 30
(currently referred to as "Eurocurrency liabilities") having a
term comparable to such Interest Period; and
"IBOR" means the rate of interest per annum determined
by the Bank as the rate at which dollar deposits in the
approximate amount of the Offshore Rate Loan and having a
maturity comparable to such Interest Period would be offered by
the Bank's Grand Cayman Branch, Grand Cayman B.W.I. (or such
other office as may be designated for such purpose by the Bank),
to major banks in the offshore dollar interbank market upon
request of such banks at approximately 11:00 a.m. (New York City
time) two Business Days prior to the commencement of such
Interest Period.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Operating Lease" means, as applied to any Person, any lease of
Property which is not a Capital Lease.
"Ordinary Course of Business" means, in respect of any
transaction involving the Company or any Subsidiary of the Company, the
ordinary course of such Person's business, as undertaken by such Person
in good faith and not for the specific purpose of evading any covenant
or restriction in any Company Document.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Other Senior Debt" means Indebtedness evidenced by notes issued
pursuant to the Senior Note Indenture and other Indebtedness of the
Company ranking pari passu in right of payment with the Obligations and
which contains provisions requiring that the Net Proceeds of any Asset
Sale be used to offer to purchase or repay such Indebtedness when
Obligations are required to be repaid so long as such provisions are not
inconsistent with this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any of its principal functions under ERISA.
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<PAGE> 31
"PBV" means Plantronics B.V., a Netherlands corporation, and a
Wholly-Owned Subsidiary of the Company.
"Participant" has the meaning specified in subsection 10.07(b).
"Pension Plan" means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA which the Company sponsors or
maintains, or to which it makes, is making, or is obligated to make,
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five plan years.
"Permitted Holders" means Citicorp Venture Capital Ltd. and its
Affiliates.
"Permitted Liens" has the meaning specified in Section 8.01.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make, contributions and
includes any Pension Plan.
"Plantronics UK" means Plantronics Limited, a United Kingdom
corporation, and a Wholly-Owned Subsidiary of the Company.
"Plantronics Germany" means Plantronics Gmbh, a German
Corporation, and a Wholly-Owned Subsidiary of the Company.
"Prior Credit" means all credit extended by the Bank under the
Prior Facility.
"Prior Facility" means the Amended and Restated Credit Agreement
among the Bank, the Company and Walker Equipment Corporation dated as of
August 25, 1994, effective as of July 5, 1994, as amended.
"Property" means any estate or interest in any kind of property
or asset, whether real, personal or mixed, and whether tangible or
intangible.
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<PAGE> 32
"Purchase Money Indebtedness" means any Indebtedness incurred in
the Ordinary Course of Business by a Person to finance the cost
(including the cost of construction) of an item of Property, the
principal amount of which Indebtedness does not exceed the sum of (i)
100% of such cost and (ii) reasonable fees and expenses of the Company
incurred in connection therewith.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of
its property is subject.
"Responsible Officer" means the chief executive officer, the
president, or the chief financial officer (or, if at the relevant time
there is no chief financial officer, the Senior General Counsel and
Secretary) of the Company, or any other officer having substantially the
same authority and responsibility or, with respect to compliance with
financial covenants, the chief financial officer (or, if at the relevant
time there is no chief financial officer, the Senior General Counsel and
Secretary) or the treasurer of the Company, or any other officer having
substantially the same authority and responsibility.
"Revolving Termination Date" means the earlier to occur of:
(a) February 18, 1998; and
(b) the date on which the Commitment shall terminate
in accordance with the provisions of this Agreement.
"Santa Cruz Property" means those certain three buildings
containing an aggregate of approximately 160,000 square feet owned by
the Company and located in Santa Cruz, California.
"SEC" means the Securities and Exchange Commission, or any
entity succeeding to any of its principal functions.
26
<PAGE> 33
"Senior Note Indenture" means that certain Indenture dated as of
January 15, 1994 between the Company, as issuer, and State Street Bank
and Trust Company of California, N.A., as trustee, pursuant to which the
Company has issued its 10.00% Senior Notes Due January 15, 2001 in the
original aggregate principal amount of $85,000,000, with an outstanding
aggregate principal amount as of the Closing Date of $65,050,000.
"Solvent" means, as to any Person at any time, that (a) the fair
value of the Property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(31) of the Bankruptcy Code and, in the
alternative, for purposes of the California Uniform Fraudulent Transfer
Act; (b) the present fair saleable value of the Property of such Person
is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its Property and pay
its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of
business; and (d) such Person is not engaged in business or a
transaction for which such Person's property would constitute
unreasonably small capital.
"Subordinated Indebtedness" means any Indebtedness of the
Company which is by its terms subordinated in any manner in right of
payment to the Obligations.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
50% of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside
bonds, surety bonds and similar instruments.
"Tangible Net Worth" means, as of the date of determination, the
gross book value of the assets of the Company and its consolidated
Subsidiaries (exclusive of goodwill, licensing agreements, patents,
trademarks, trade names, organization expenses, treasury stock,
unamortized debt discount and premium, deferred charges and other like
27
<PAGE> 34
intangibles) less all applicable reserves and liabilities (including
accrued and deferred income taxes and all liabilities whether or not by
their terms they are subordinated liabilities).
"UCC" means the Uniform Commercial Code as in effect in the
State of California.
"Unfunded Pension Liability" means the excess of a Pension
Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Pension Plan's assets, determined in accordance
with the assumptions used by the Plan's actuaries for funding the
Pension Plan pursuant to section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the fifty states and the
District of Columbia comprising the United States of America.
"Wholly-Owned Domestic Subsidiary" means a Domestic Subsidiary
that is a Wholly-Owned Subsidiary.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company,
100% of the Capital Stock of each class having ordinary voting power of
which, and 100% of the Capital Stock of every other class of which, in
each case (other than shares of Capital Stock representing any
director's qualifying shares or investments by foreign nationals
mandated by applicable law) is owned, beneficially and of record, at the
time as of which any determination is being made, by the Company, or by
one or more of the other Wholly-Owned Subsidiaries, or by a combination
thereof.
1.02 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. Terms (including uncapitalized
terms) not otherwise defined herein and that are defined in the UCC shall have
the meanings therein described.
(b) The Agreement. The words "hereof", "herein",
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection,
28
<PAGE> 35
schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(d) Performance; Time. Whenever any performance obligation
hereunder (other than a payment obligation) shall be stated to be due or
required to be satisfied on a day other than a Business Day, such performance
shall be made or satisfied on the next succeeding Business Day. In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and including." If
any provision of this Agreement refers to any action taken or to be taken by
any Person, or which such Person is prohibited from taking, such provision
shall be interpreted to encompass any and all means, direct or indirect, of
taking, or not taking, such action.
(e) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
(f) Laws. Unless otherwise expressly provided herein,
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending or replacing the
statute or regulation.
(g) Captions. The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation
of this Agreement.
(h) Independence of Provisions. The parties acknowledge
that this Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters, and
that such limitations, tests and measurements are cumulative and must each be
performed, except as expressly stated to the contrary in this Agreement.
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(i) Interpretation. This Agreement is the result of
negotiations among and has been reviewed by counsel to the Bank and the
Company, and is the product of all parties hereto. Accordingly, this Agreement
and the other Loan Documents shall not be construed against the Bank merely
because of the Banks' involvement in the preparation of such documents and
agreements.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitment.
(a) The Bank agrees, on the terms and conditions set forth
herein, to make Loans to the Company from time to time on any Business Day
during the period from the Closing Date to the Revolving Termination Date, in
an aggregate amount not to exceed at any time outstanding the amount of
$20,000,000 (such amount as the same may be reduced pursuant to Section 2.05 or
Section 2.07 or as a result of one or more assignments pursuant to Section
10.07, the "Commitment"); provided, however, that after giving effect to any
Loan, the Effective Amount of all Loans and all L/C Obligations shall not
exceed at any time the Commitment. Within the limits of the foregoing, and
subject to the other terms and conditions hereof, the Company may borrow under
this subsection 2.01(a), prepay pursuant to Section 2.06 and reborrow pursuant
to this subsection 2.01(a).
(b) The Bank agrees to provide a revolving letter of credit
subfacility to the Company within the Commitment, in accordance with the terms
and conditions of Article III and as otherwise provided herein.
(c) As of the Closing Date, all Prior Credit shall be deemed to
be credit extended hereunder (i.e. loans thereunder shall be deemed to be Loans
hereunder and letters of credit issued thereunder shall be deemed to be Letters
of Credit issued
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<PAGE> 37
hereunder) and shall be subject to the terms and conditions of this Agreement
and shall be a utilization of the Commitment.
2.02 Loan Accounts. The Loans and the L/C Obligations shall be
evidenced by one or more accounts maintained by the Bank in the ordinary course
of business. The accounts or records maintained by the Bank shall be prima
facie evidence of the amount of the Loans and L/C Obligations made by the Bank
to or for the account of the Company and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount
owing with respect to the Loans or L/C Obligations.
2.03 Procedure for Borrowing.
(a) Each Loan shall be made upon the irrevocable written
notice of the Company in the form of a Notice of Borrowing (which notice must
be received by the Bank prior to 9:00 a.m. (San Francisco time) (i) three
Business Days prior to the requested Borrowing date, in the case of Offshore
Rate Loans and CD Rate Loans, and (ii) on the requested Borrowing date, in the
case of Base Rate Loans, specifying:
(A) the amount of the Loan, which shall be in
an aggregate minimum principal amount of $500,000, in the case
of Offshore Rate Loans and CD Rate Loans, or $100,000 for Base
Rate Loans (provided that if there shall have been a partial
assignment to an Assignee pursuant to Section 10.07, the minimum
principal amount for Base Rate Loans shall be $500,000), or any
integral multiple of $100,000 in excess thereof;
(B) the requested Borrowing date, which shall
be a Business Day;
(C) whether the Loan is to be an Offshore Rate
Loan, a Base Rate Loan or a CD Rate Loan; and
(D) the duration of the Interest Period
applicable to the Loan included in such notice. If the Notice
of Borrowing shall fail to specify the duration of the Interest
Period for any CD Rate Loan or Offshore Rate Loan, such Interest
Period shall be 90 days or three months, respectively;
(b) After giving effect to any Loan, there shall not be
more than five different Interest Periods in effect.
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2.04 Conversion and Continuation Elections.
(a) The Company may upon irrevocable written notice to the
Bank in accordance with subsection 2.04(b):
(i) elect to convert on any Business Day, any Base
Rate Loan or Loans (or any part thereof in an aggregate amount not less
than $500,000, or that is in an integral multiple of $100,000 in excess
thereof) into an Offshore Rate Loan or CD Rate Loan or;
(ii) elect to convert on the last day of the
applicable Interest Period any Offshore Rate Loan or CD Rate Loan having
an Interest Period maturing on such day (or any part thereof in an
amount not less than $100,000, or that is in an integral multiple of
$100,000 in excess thereof) into a Base Rate Loan; provided that if
there shall have been a partial assignment to an Assignee pursuant to
Section 10.07, the minimum principal amount which may be converted into
Base Rate Loans shall be $500,000 or any integral multiple of $100,000
in excess thereof; and provided, further, that after giving effect to
any partial conversion of an Offshore Rate Loan or CD Rate Loan into a
Base Rate Loan, the principal balance of such Offshore Rate Loan or CD
Rate Loan not so converted shall be not less than $500,000; or
(iii) elect to renew on the last day of the applicable
Interest Period any Offshore Rate Loan or CD Rate Loan having an
Interest Period maturing on such day (or any part thereof in an amount
not less than $500,000, or that is in an integral multiple of $100,000
in excess thereof);
provided, that if the amount of any CD Rate Loan or Offshore Rate Loan shall
have been reduced by payment, prepayment, or conversion of part thereof to be
less than $500,000, such CD Rate Loan or Offshore Rate Loan shall automatically
convert into a Base Rate Loan, and on and after such date the right of the
Company to convert such Loan into, an Offshore Rate Loan or a CD Rate Loan, as
the case may be, shall terminate.
(b) The Company shall deliver in writing a Notice of
Conversion/Continuation to be received by the Bank not later than 9:00 a.m.
(San Francisco time) at least (i) three Business Days in advance of the
Conversion Date or continuation date, if the Loans are to be converted into or
continued as Offshore Rate Loans or CD Rate Loans; and (ii) on the Conversion
Date or continuation date, if the Loans are to be converted into or renewed as
Base Rate Loans, specifying:
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<PAGE> 39
(A) the proposed Conversion Date or
continuation date;
(B) the aggregate amount of Loans to be
converted or renewed;
(C) the nature of the proposed conversion
or continuation; and
(D) the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to any CD Rate Loan or Offshore Rate Loan, the Company has failed to
select timely a new Interest Period to be applicable to such CD Rate Loan or
Offshore Rate Loan, as the case may be, or if any Default or Event of Default
shall then exist, the Company shall be deemed to have elected to convert such
CD Rate Loan or Offshore Rate Loan into a Base Rate Loan effective as of the
expiration date of such current Interest Period.
(d) Unless the Bank shall otherwise agree, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued beyond the end of the applicable Interest
Period as an Offshore Rate Loan or a CD Rate Loan.
(e) Notwithstanding any other provision contained in this
Agreement, after giving effect to any conversion or continuation of any Loans,
there shall not be more than five different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitment. The Company
may, upon not less than five Business Days' prior written notice to the Bank,
terminate the Commitment or permanently reduce the Commitment by an aggregate
minimum amount of $1,000,000 or any multiple of $100,000 in excess thereof (or
of the balance of the Commitment, if less); provided that no such reduction or
termination shall be permitted if, after giving effect thereto and to any
prepayments of the Loans made on the effective date thereof, the (i)
then-Effective Amount of the Loans plus L/C Obligations would exceed the amount
of the Commitment then in effect; or (ii) then-Effective Amount in respect of
L/C Obligations would exceed the L/C Commitment; provided, further, that once
reduced in accordance with this Section 2.05, the Commitment may not be
increased. All accrued commitment fees to, but not including the effective
date of any reduction or termination of Commitment with respect to the portion
thereof being so reduced or terminated, shall be paid on
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<PAGE> 40
the effective date of such reduction or termination. Any notice of commitment
reduction or termination shall specify to what extent (if any) to which any
such reduction shall be applied to reduce as well the L/C Commitment. Any
termination of all of the Commitment shall terminate as well the L/C
Commitment.
2.06 Optional Prepayments. Subject to Section 4.04, the Company may, at
any time or from time to time, upon at least three Business Days' written
notice to the Bank in the case of Offshore Rate Loans or CD Rate Loans, or
notice given no later than 10:00 a.m. on the date of prepayment in the case of
Base Rate Loans, prepay Loans in whole or in part, in amounts of $500,000 or
any multiple of $100,000 in excess thereof in the case of Offshore Rate Loans
or CD Rate Loans, or in amounts of $100,000 or any multiple in excess of
$100,000 thereof in the case of Base Rate Loans. Such notice of prepayment
shall specify the date and amount of such prepayment and whether such
prepayment is of Base Rate Loans, CD Rate Loans or Offshore Rate Loans, or any
combination thereof. Such notice shall not thereafter be revocable by the
Company. If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to each
such date on the amount prepaid and any amounts required pursuant to Section
4.04.
2.07 Mandatory Prepayments; Mandatory Reductions.
(a) Change of Control. No later than 45 days after the
Bank has received notice of a Change of Control pursuant to subsection 7.03(i)
(or upon and at any time after the occurrence of any Change of Control if the
Company is in default of its obligations to deliver such a notice), the Bank
may by notice to such effect to the Company (i) declare the Commitment
(including the L/C Commitment) to be terminated, whereupon the Commitment shall
forthwith be terminated, and (ii) declare an amount equal to the maximum
aggregate amount that is or at any time thereafter may become available for
drawing under any outstanding Letters of Credit (whether or not any beneficiary
shall have presented, or shall be entitled at such time to present, the drafts
or other documents required to draw under such Letters of Credit) to be
immediately due and payable, or demand that the Company Cash Collateralize the
L/C Obligations to the extent of outstanding and wholly or partially undrawn
Letters of Credit, whereupon the Company shall so Cash Collateralize the L/C
Obligations; and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due
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<PAGE> 41
and payable; without presentment, demand or protest, all of which are hereby
expressly waived by the Company.
(b) General. Any prepayments pursuant to this Section 2.07
shall be applied first to any Base Rate Loans then outstanding and then to CD
Rate Loans and Offshore Rate Loans with the shortest Interest Periods
remaining. All prepayments of Loans pursuant to this Section 2.07 shall be
made together with accrued interest to the date of such payment on the
principal amount repaid, together with any amounts payable under Section 4.04;
provided, that if any such prepayment would cause the Company to incur
Obligations pursuant to Section 4.04 with respect to CD Rate Loans or Offshore
Rate Loans, the Company may Cash Collateralize such CD Rate Loans or Offshore
Rate Loans until the last day of the Interest Period related thereto, at which
time such Cash Collateral shall be applied by the Bank to pay such Loans.
2.08 Repayment. The Company shall repay to the Bank in full on the
Revolving Termination Date the aggregate principal amount of the Loans
outstanding on such date.
2.09 Interest.
(a) Subject to subsection 2.09(c), each Loan shall bear
interest on the outstanding principal amount thereof from the date when made at
a rate per annum equal to the Offshore Rate, the Base Rate or the CD Rate, as
the case may be, plus the Applicable Rate.
(b) Interest on each Loan shall be payable in arrears on
each Interest Payment Date. Interest shall also be payable on the date of any
prepayment of Loans pursuant to Section 2.06 or 2.07 for the portion of the
Loans so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be payable on
demand.
(c) While any Event of Default exists or after
acceleration, the Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount of all
Obligations due and unpaid, at a rate per annum which is determined by adding
2% per annum to the Applicable Rate then in effect for such Loans and, in the
case of Obligations not subject to an Applicable Rate, at a rate per annum
equal to the Base Rate plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate Loan or CD
Rate Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of
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<PAGE> 42
such Event of Default or after acceleration, bear interest at a rate per annum
equal to the Base Rate plus 2%.
2.10 Commitment Fee. The Company shall pay to the Bank a commitment
fee equal to the Applicable Rate per annum times the average daily unused
amount of the Commitment. Such fee shall accrue from the Closing Date to the
later of (i) the Revolving Termination Date or (ii) the date that all Loans and
L/C Obligations outstanding on the Revolving Termination Date are paid in full,
and shall be due and payable quarterly in arrears on the last Business Day of
each calendar quarter commencing on the last day of the calendar quarter within
which the Closing Date occurs through the later of the dates referred to in
clauses (i) and (ii) above, with the final payment to be made on the later of
such dates.
2.11 Computation of Fees and Interest.
(a) All computations of interest payable in respect of Base
Rate Loans at all times as the Base Rate is determined by the Bank's "reference
rate" shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other computations of fees and interest under
this Agreement shall be made on the basis of a 360-day year and actual days
elapsed, which results in more interest being paid than if computed on the
basis of a 365-day year. Interest and fees shall accrue during each period
during which interest or such fees are computed from the first day thereof to
the last day thereof.
(b) Any change in the interest rate on a Loan resulting
from a change in the Applicable Rate, Reserve Percentage, Eurocurrency Reserve
Percentage, or the Assessment Rate shall become effective as of the opening of
business on the day on which such change in the Applicable Rate, Reserve
Percentage, Eurocurrency Reserve Percentage, or the Assessment Rate becomes
effective.
(c) Each determination of an interest rate by the Bank
pursuant to any provision of this Agreement shall be conclusive and binding on
the Company in the absence of manifest error.
2.12 Payments by the Company.
(a) All payments (including prepayments) to be made by the
Company on account of principal, interest, fees and other amounts required
hereunder shall be made without set-off or counterclaim; shall, except as
otherwise expressly provided herein, be made to the Bank at the Bank's Payment
Office, and shall be made in dollars and in immediately available funds, no
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<PAGE> 43
later than 11:00 a.m. (San Francisco time) on the date specified herein. Any
payment which is received by the Bank later than 11:00 a.m. (San Francisco
time) shall be deemed to have been received on the immediately succeeding
Business Day and any applicable interest or fee shall continue to accrue.
(b) Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall instead be due and
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, as the case may
be; subject to the provisions set forth in the definition of "Interest Period"
herein.
ARTICLE III
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein, the Bank
agrees (i) from time to time on any Business Day during the period from the
Closing Date to the Revolving Termination Date to issue Letters of Credit for
the account of the Company (or for the account of any Subsidiary of the
Company, provided, that the applicable L/C Application shall be submitted
jointly and severally by the Company and its Subsidiary and the Company shall
be liable for all L/C Obligations with respect to such Letter of Credit, which
shall be deemed for all purposes hereof to be a Letter of Credit issued for the
account of such Company), and to amend or renew Letters of Credit previously
issued by it, in accordance with subsection 3.02(b), and (ii) to honor drafts
under the Letters of Credit; provided, that the Bank shall not be obligated to
Issue any Letter of Credit if as of the date of Issuance of such Letter of
Credit (A) the Effective Amount of all L/C Obligations plus the Effective
Amount of all Loans shall exceed the Commitment, or (B) the Effective Amount of
all L/C Obligations shall exceed the L/C Commitment. Within the foregoing
limits, and subject to the other terms and conditions hereof, the Company's
ability to obtain Letters of Credit shall be fully revolving, and, accordingly,
the Company may, during the foregoing period, obtain Letters of Credit to
replace Letters of Credit which have expired or which have been drawn upon and
reimbursed.
(b) The Bank shall be under no obligation to Issue any
Letter of Credit if:
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(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
the Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with
jurisdiction over the Bank shall prohibit, or request that the Bank
refrain from, the Issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement
(for which the Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Bank any
unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Bank in good faith deems material to it;
(ii) the expiry date of any requested Letter of Credit
is (A) more than 360 days after the date of Issuance, or (B) more than
180 days after the Revolving Termination Date; provided, that any such
Letter of Credit may contain an automatic renewal clause satisfactory to
the Bank in its sole discretion;
(iii) any requested Letter of Credit does not provide
for drafts, or is not otherwise in form and substance acceptable to the
Bank, or the Issuance of a Letter of Credit shall violate any applicable
policies of the Bank; or
(iv) any Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person or
for the purpose of supporting any borrowed money debt.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the
irrevocable written request of the Company received by the Bank at least three
Business Days prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be by facsimile, confirmed promptly in an
original writing, in the form of an L/C Application, and shall specify in form
and detail satisfactory to the Bank: (i) the proposed date of issuance of the
Letter of Credit (which shall be a Business Day); (ii) the face amount of the
Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name
and address of the beneficiary thereof; (v) the documents to be presented by
the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi)
the full text of any certificate to be
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presented by the beneficiary in case of any drawing thereunder; and (vii) such
other matters relating to such Letter of Credit as the Bank may reasonably
require.
(b) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the Bank will, upon
the written request of the Company received by the Bank at least three Business
Days prior to the proposed date of amendment, amend any Letter of Credit issued
by it. Each such request for amendment of a Letter of Credit shall be made by
facsimile, confirmed promptly in an original writing, made in the form of an
L/C Amendment Application and shall specify in form and detail satisfactory to
the Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters relating to such
proposed amendment as the Bank may reasonably require. The Bank shall be under
no obligation to amend any Letter of Credit if: (A) the Bank would have no
obligation at such time to issue such Letter of Credit in its amended form
under the terms of this Agreement; or (B) the beneficiary of any such Letter of
Credit does not accept the proposed amendment to the Letter of Credit.
(c) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of Credit).
3.03 Drawings and Reimbursements. In the event of any request for a
drawing under a Letter of Credit by the beneficiary or transferee thereof, the
Bank will promptly notify the Company. The Company may, subject to
satisfaction of all conditions to borrowing set forth in this Agreement,
convert the amount of each drawing into Loans consisting of Base Rate Loans
(which conversion shall be deemed to be a new Credit Extension) in accordance
with the procedures for borrowing set forth in Section 2.03. With respect to
any unreimbursed drawing which is not converted into Loans consisting of Base
Rate Loans to the Company in whole or in part, because of the Company's failure
to satisfy the conditions set forth in Section 5.03 or for any other reason,
the Company shall reimburse the Bank prior to 11:00 a.m. (San Francisco time),
on each date that any amount is paid by the Bank under any Letter of Credit, in
an amount equal to the amount so paid by the Bank. Such reimbursement
obligations in respect of drawings, if not paid when due, shall accrue interest
at the Base Rate plus 2%.
3.04 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Bank for a drawing
under a Letter of Credit, shall be
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unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Company or any Subsidiary of the Company in respect of any Letter of
Credit or any other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or
other right that the Company or any Subsidiary of the Company may have
at any time against any beneficiary or any transferee of any Letter of
Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or
by the L/C-Related Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate or inaccurate in any respect; or any loss or delay
in the transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit;
(v) any payment by the Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit (provided that the
foregoing shall not limit any affirmative claim the Company may have
against the Bank due to the Bank's gross negligence or willful
misconduct); or any payment made by the Bank under any Letter of Credit
to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or
any transferee of any Letter of Credit, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or
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any of the obligations of the Company or any Subsidiary of the Company
in respect of any Letter of Credit; or
(vii) to the extent permitted by applicable law, any
other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the
Company or a guarantor.
3.05 Cash Collateral Pledge. Upon (i) the request of the Bank, if, as
of the Revolving Termination Date, any Letters of Credit may for any reason
remain outstanding and partially or wholly undrawn, or (ii) the occurrence of
the circumstances described in Section 2.07 requiring the Company to Cash
Collateralize Letters of Credit, then, the Company shall immediately Cash
Collateralize the L/C Obligations.
3.06 Letter of Credit Fees.
(a) The Company shall pay to the Bank a letter of credit fee
with respect to standby Letters of Credit equal to the Applicable Rate per
annum of the average daily maximum amount available to be drawn on the
outstanding standby Letters of Credit, computed on a quarterly basis in arrears
on the last Business Day of each calendar quarter based upon standby Letters of
Credit outstanding for that quarter, as calculated by the Bank. Such letter of
credit fee shall be due and payable quarterly in arrears on the last Business
Day of each calendar quarter during which standby Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after the
Closing Date, through the Revolving Termination Date (or such later date upon
which the outstanding standby Letters of Credit shall expire), with the final
payment to be made on the Revolving Termination Date (or such later expiration
date).
(b) The Company shall pay to the Bank upon the issuance of each
commercial Letter of Credit or such other times as the Bank may advise, such
fees as the Bank may customarily impose with respect to commercial letters of
credit similar to such commercial Letter of Credit.
(c) The Company shall pay to the Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Bank relating to letters of credit
as from time to time in effect.
3.07 Uniform Customs and Practice. The Uniform Customs and Practice
for Documentary Credits as published by the International Chamber of Commerce
most recently at the time of
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issuance of any Letter of Credit shall (unless otherwise expressly provided in
the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
(a) (i) If any taxes (other than taxes on net income (A)
imposed by the country or any subdivision of the country in which the
Bank's principal office or actual lending office is located and (B)
measured by the United States taxable income the Bank would have
received if all payments under or in respect of this Agreement and any
instrument or agreement required hereunder were exempt from taxes levied
by the Company's country) are at any time after the Closing Date imposed
on any payments under or in respect of this Agreement or any instrument
or agreement required hereunder including, but not limited to, payments
made pursuant to this Section 4.01, the Company shall pay all such taxes
and shall also pay to the Bank, at the time interest is paid, all
additional amounts which the Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such taxes had not been
imposed.
(ii) The additional amounts necessary to preserve the
after-tax yield the Bank would have received if such taxes had not been
imposed shall be calculated pursuant to the formula:
(w)(t)(i)
y = ----------------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to Bank
w = withholding tax rate levied by foreign government
t = the Bank's combined Federal and state tax rate
i = stated interest to be paid on credit (base rate
plus quoted spread)
1 = one
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(b) The Company will provide the Bank with original tax receipts,
notarized copies of tax receipts, or such other documentation as will prove
payment of tax in a court of law applying the United States Federal Rules of
Evidence, for all taxes paid by the Company pursuant to subsection 4.01(a)
above. The Company will deliver receipts to the Bank within 30 days after the
due date for the related tax.
(c) If the Company is required to pay additional amounts to the Bank
pursuant to subsection 4.01(a), then the Bank shall use its reasonable best
efforts (consistent with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue if such change in the
judgment of the Bank is not otherwise disadvantageous to the Bank.
4.02 Illegality.
(a) If the Bank shall determine that the introduction of
any Requirement of Law, or any change after the Closing Date in any Requirement
of Law or in the interpretation or administration thereof, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for the Bank or its Lending Office to make Offshore Rate
Loans, then, on notice thereof by the Bank to the Company, the obligation of
the Bank to make Offshore Rate Loans shall be suspended until the Bank shall
have notified the Company that the circumstances giving rise to such
determination no longer exists.
(b) If the Bank shall determine that it is unlawful to
maintain any Offshore Rate Loan, the Company shall prepay in full all Offshore
Rate Loans of the Bank then outstanding, together with interest accrued
thereon, either on the last day of the Interest Period thereof if the Bank may
lawfully continue to maintain such Offshore Rate Loans to such day, or
immediately, if the Bank may not lawfully continue to maintain such Offshore
Rate Loans, together with any amounts required to be paid in connection
therewith pursuant to Section 4.04.
4.03 Increased Costs and Reduction of Return.
(a) If the Bank shall determine that, due to either (i) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the CD Rate or
the Offshore Rate) in or in the interpretation of any law or regulation after
the Closing Date or (ii) the compliance with any guideline or request from any
central bank or other Governmental Authority
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after the Closing Date (whether or not having the force of law), there shall be
any increase in the cost to the Bank of agreeing to make or making, funding or
maintaining any Offshore Rate Loans or CD Rate Loans, then the Company shall be
liable for, and shall from time to time, upon demand therefor by the Bank pay
to the Bank additional amounts as are sufficient to compensate the Bank for
such increased costs, not later than 30 days following demand therefor.
(b) If the Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank, with any Capital Adequacy Regulation, in each case, after the Closing
Date; affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and (taking into
consideration the Bank's or such corporation's policies with respect to capital
adequacy and the Bank's desired return on capital) determines that the amount
of such capital is increased as a consequence of its loans, credits or
obligations under this Agreement, then, upon demand of the Bank the Company
shall upon demand pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase, not
later than 30 days following demand therefor.
4.04 Funding Losses. The Company agrees to reimburse the Bank and to
hold the Bank harmless from any actual loss or expense which the Bank may
sustain or incur as a consequence of:
(a) the failure of the Company to make any payment or
mandatory prepayment of principal of any Offshore Rate Loan or CD Rate Loan
(including payments made after any acceleration thereof);
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment after
the Company has given a notice in accordance with Section 2.06 or 2.07;
(d) the prepayment (including pursuant to Section 2.07) by
the Company of an Offshore Rate Loan or a CD
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Rate Loan on a day which is not the last day of the Interest Period with
respect thereto; or
(e) the conversion by the Company pursuant to Section 2.04
of any Offshore Rate Loan or CD Rate Loan to a Base Rate Loan on a day that is
not the last day of the respective Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or CD Rate Loans
hereunder or from fees payable to terminate the deposits from which such funds
were obtained. Solely for purposes of calculating amounts payable by the
Company to the Bank under this Section 4.04 and under subsection 4.03(a), (i)
each Offshore Rate Loan (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the IBOR used
in determining the Offshore Rate for such Offshore Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Offshore Rate Loan is
in fact so funded, and (ii) each CD Rate Loan made (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed to have
been funded at the Certificate of Deposit Rate used in determining the CD Rate
for such CD Rate Loan by the issuance of its certificate of deposit in a
comparable amount and for a comparable period, whether or not such CD Rate Loan
is in fact so funded.
4.05 Inability to Determine Rates. If the Bank shall have determined
that for any reason adequate and reasonable means do not exist for ascertaining
the Offshore Rate or the CD Rate for any requested Interest Period with respect
to a proposed Offshore Rate Loan or CD Rate Loan or that the Offshore Rate or
the CD Rate applicable pursuant to subsection 2.09(a) for any requested
Interest Period with respect to a proposed Offshore Rate Loan or CD Rate Loan
does not adequately and fairly reflect the cost to the Bank of funding such
Loan, the Bank will forthwith give notice of such determination to the Company.
Thereafter, the obligation of the Bank to make or maintain CD Rate Loans or
Offshore Rate Loans, as the case may be, hereunder shall be suspended until the
Bank revokes such notice in writing. Upon receipt of such notice, the Company
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such notice, the Bank shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Loans instead of CD Rate
Loans or Offshore Rate Loans, as the case may be.
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4.06 Certificate of Bank. The Bank, if claiming reimbursement or
compensation pursuant to this Article IV, shall deliver to the Company a
certificate setting forth in reasonable detail the amount payable to the Bank
hereunder and such certificate shall be prima facie evidence of such amount.
If the Bank fails to notify the Company that the Bank intends to claim any such
reimbursement or compensation within one year after the Bank has knowledge of
its claim therefor, the Company shall not be obligated to compensate the Bank
for the amount of the Bank's claim accruing prior to the date which is one year
before the date on which the Bank first notifies the Company that it intends to
make such claim; it being understood that the calculation of the actual amounts
may not be possible within such period and the Bank may provide such
calculation as soon as reasonably practicable thereafter without affecting or
limiting the Company's payment obligations hereunder.
4.07 Survival. The agreements and obligations of the Company in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Effectiveness of Agreement. The effectiveness of
this Agreement is subject to satisfaction or waiver of the condition that the
Bank shall have received on or before the Closing Date all of the following, in
form and substance satisfactory to the Bank and its counsel:
(a) Credit Agreement. This Agreement, executed by the
Company;
(b) Incumbency. A certificate of the Secretary or
Assistant Secretary of the Company certifying as of the Closing Date the names
and true signatures of the officers of the Company authorized to execute and
deliver, as applicable, this Agreement, and all other Loan Documents to be
delivered hereunder;
(c) Articles of Incorporation; By-laws and Good Standing.
Each of the following documents:
(i) the articles or certificate of incorporation and
the bylaws of the Company, each as in effect on the Closing Date,
certified by the Secretary or Assistant
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Secretary of the Company as of the Closing Date as being in effect on
such date; and
(ii) good standing and tax good standing
certificates for the Company from the Secretary of State (or similar,
applicable Governmental Authority) of its state of incorporation and
each state where the Company is qualified to do business as a foreign
corporation as of a recent date;
(d) Payment of Fees. The Company shall have paid all
costs, accrued and unpaid fees and expenses incurred by the Bank, to the extent
then due and payable on the Closing Date.
(e) Certificate. Certificates signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained in
Article VI are true and correct in all material respects on and as of
such date, as though made on and as of such date (except to the extent
such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct in all material
respects as of such earlier date);
(ii) no Default or Event of Default exists or would
result from the execution and delivery of the Company Documents; and
(iii) there has occurred since March 30, 1996, no
Material Adverse Effect.
(f) Legal Opinion. An opinion of Wilson, Sonsini,
Goodrich & Rosati, P.C., counsel to the Company, addressed to the Bank,
substantially in the form of Exhibit D, dated as of the Closing Date;
(g) Prior Credit. The Company shall have paid all
interest and fees due under the Prior Facility, the parties agreeing that upon
the Closing Date hereunder, the Bank shall have no further commitment to extend
credit or other obligations under the Prior Facility; and
(h) Other Documents. Such other approvals, opinions or
documents as the Bank may reasonably request.
5.02 Conditions to All Credit Extensions. The obligation of the Bank
to make any Credit Extension (including the initial Credit Extension) is
subject to the satisfaction of the following conditions precedent on the
relevant borrowing date:
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(a) Documentation. The Bank shall have received, in
respect of any Borrowing, a Notice of Borrowing, and in respect of any Issuance
of any Letter of Credit, the L/C Application or the L/C Amendment Application,
as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties made by the Company contained in Article VI
shall be true and correct in all material respects on and as of such borrowing
date with the same effect as if made on and as of such borrowing date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct in all material respects as
of such earlier date);
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Credit Extension; and
(d) No Adverse Change. There shall not have occurred a
Material Adverse Effect.
Each Notice of Borrowing, L/C Application or L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice or
application and as of the date of each Credit Extension, that the conditions in
Section 5.02 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants, as to itself and each of its
Subsidiaries, to the Bank that:
6.01 Corporate Existence and Power. The Company and each of its
Material Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to (i) own its assets and
carry on its business as presently conducted and (ii) execute, deliver, and
perform its obligations under, the Loan Documents;
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(c) is duly qualified as a foreign corporation, and
licensed and in good standing, under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (b)(i), clause (c) or clause (d), to
the extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement, and any other
Company Document to which the Company is party, have been duly authorized by
all necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which the Company is a party or any order,
injunction, writ or decree of any Governmental Authority to which the Company
or its Property is subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
the Agreement or any other Company Document to which the Company is a party.
6.04 Binding Effect. This Agreement and each other Company Document
to which the Company is a party constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.05 Litigation. Except as specifically disclosed in Schedule 6.05,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened, at law, in equity, in arbitration or
before any
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Governmental Authority, against the Company or its Subsidiaries or any of their
respective Properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) could reasonably be expected to have a Material
Adverse Effect. No injunction, writ, temporary restraining order or any order
of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any other Loan Document, or directing that the transactions
provided for herein or therein not be consummated as herein or therein
provided.
6.06 ERISA Compliance.
(a) Except as specifically disclosed in Schedule 6.06,
each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law. Each Plan which
is intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS, except to the extent the
requirements for qualification may be satisfied by adopting retroactive
amendments under Section 401(b) of the Code and the regulations thereunder or
under Section 1140 of the Tax Reform Act of 1986, and to the best knowledge of
the Company, nothing has occurred which would cause the loss of such
qualification.
(b) There are no pending, or to the best knowledge of the
Company, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which have resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or other violation of the fiduciary responsibility rule with
respect to any Plan which could reasonably be expected to result in a Material
Adverse Effect.
(c) Except as specifically disclosed in Schedule 6.06, to
the best of the Company's knowledge, no ERISA Event has occurred or is
reasonably expected to occur with respect to any Pension Plan.
(d) Except as specifically disclosed in Schedule 6.06, no
Pension Plan has any Unfunded Pension Liability. The aggregate unfunded
Pension Liability for all Pension Plans does not exceed $500,000.
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(e) Except as specifically disclosed in Schedule 6.06,
the Company has not incurred, nor reasonably expects to incur, any liability in
excess of $250,000 under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA).
(f) Except as specifically disclosed in Schedule 6.06,
the Company has not transferred any Unfunded Pension Liability to any person or
otherwise engaged in a transaction that could be subject to Section 4069 of
ERISA.
(g) No trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 414(b),
(c), (m) or (o)) maintains or contributes to any Pension Plan or other Plan
subject to Section 412 of the Code. Neither the Company nor entity under
common control with the Company as described in the preceding sentence has ever
contributed to any multiemployer plan within the meaning of Section 4001(a)(3)
of ERISA.
6.07 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are intended to be and shall be used solely for the purposes set forth in and
permitted by Section 7.11, and are intended to be and shall be used in
compliance with Section 8.08. Neither the Company nor any of its Subsidiaries
is generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
6.08 Title to Properties. The Company and each of its Subsidiaries
have good record and marketable title in fee simple to, or valid leasehold
interests in, all real Property necessary in the ordinary conduct of their
businesses, except for such defects in title as could not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect. As of
the Closing Date, the Property of the Company and its Subsidiaries is subject
to no Liens, other than Permitted Liens.
6.09 Taxes. The Company and its Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their Properties, income or assets in
accordance with such returns and reports, except those which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided to the extent required under GAAP and no Notice of
Lien has been filed or recorded. The Company has received no notice from any
Governmental Authority of any deficiency in respect of any such
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return or report in an amount which, if assessed or required to be paid, would
have a Material Adverse Effect.
6.10 Financial Condition.
(a) The audited consolidated financial statements of
financial condition of the Company dated March 30, 1996 and the unaudited
consolidated financial statements of financial condition of the Company dated
December 28, 1996 for the nine months then ended, and the related consolidated
statements of income or operations, shareholders' equity and cash flows for the
fiscal year or quarter, respectively, ended on each such date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein;
(ii) fairly present in all material respects the
consolidated financial condition of the Company as of the date thereof
and the consolidated results of operations for the period covered
thereby, respectively (subject, in the case of the foregoing clauses
(i) and (ii) as they relate to the financial statements at, or for the
period ended, December 28, 1996, to the absence of footnotes and
normal year-end adjustments); and
(iii) except as specifically disclosed in Schedule
6.10, show all material Indebtedness and material Operating Leases of
the Company and its consolidated Subsidiaries as of the date thereof.
(b) Since March 30, 1996, there has been no Material
Adverse Effect of the type described in clause (a) of the definition thereof.
6.11 Environmental Matters.
(a) The on-going operations of the Company and each of its
Subsidiaries comply in all respects with all Environmental Laws, except such
non-compliance which could not be reasonably expected to result in a Material
Adverse Effect.
(b) The Company and each of its Subsidiaries have
obtained all licenses, permits, authorizations and registrations required under
any Environmental Law ("Environmental Permits") and necessary for their
respective ordinary course operations, all such Environmental Permits are in
good standing, and the Company and each of its Subsidiaries are in compliance
with all material terms and conditions of such Environmental Permits,
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except where the failure to obtain such Environmental Permits, maintain any
such Environmental Permits in good standing or comply with such Environmental
Permits could not be reasonably expected to result in a Material Adverse
Effect.
(c) None of the Company nor any of its Subsidiaries has
received any notice that any of them or any of their respective present
Property or operations is subject to any outstanding written order from or
agreement with any Governmental Authority, nor subject to any judicial or
docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material, except any such notice that could
not be reasonably expected to result in a Material Adverse Effect.
(d) There are no Hazardous Materials or other conditions
or circumstances existing with respect to any Property, or arising from
operations prior to the Closing Date, of the Company or any of its Subsidiaries
that could reasonably be expected to result in a Material Adverse Effect. In
addition, (i) neither the Company nor any of its Subsidiaries has any
underground storage tanks (x) that are not properly registered or permitted
under applicable Environmental Laws, or (y) that are leaking or disposing of
Hazardous Materials off-site, except where such failure to register or obtain
permits, or such leakage or disposal could not be reasonably expected to result
in a Material Adverse Effect, and (ii) the Company and its Subsidiaries have
notified all of their employees of the existence, if any, of any health hazard
arising from the conditions of their employment and have met all notification
requirements under Title III of CERCLA and all other Environmental Laws, except
where the failure to give such notice and meet such notification requirements
could not be reasonably expected to have a Material Adverse Effect.
6.12 Regulated Entities. None of the Company, any Person controlling
the Company or any Subsidiary of the Company is (a) an "Investment Company"
within the meaning of the Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or, to
the knowledge of such Company, any other Federal or state statute or regulation
limiting its ability to incur Indebtedness, the conditions to which the Company
has not satisfied.
6.13 Solvency. The Company is Solvent, and, as of the Closing Date
(i) the Company does not intend to, and does not believe that it will, incur
debts beyond the Company's ability to pay as such debts mature, and (ii) the
Company is not about
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to engage in a transaction, after giving effect to which the Company's
remaining property would constitute unreasonably small capital for the business
conducted or transactions engaged in by the Company.
6.14 Labor Relations. There are no strikes, lockouts or other labor
disputes against the Company or any of its Subsidiaries, or , to the best of
the Company's knowledge, threatened against or affecting the Company or any of
its Subsidiaries, and no significant unfair labor practice complaint is pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against any of them before any Governmental Authority
which, in the case of any of the foregoing, could reasonably be expected to
have a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc. Except as
specifically disclosed in Schedule 6.15, the Company or its Subsidiaries own or
are licensed or otherwise have the right to use (or could obtain ownership of,
licenses to use or other rights to use on terms not materially adverse to the
Company and its Subsidiaries and under circumstances which could not be
reasonably expected to have a Material Adverse Effect) all of the patents,
trademarks, service marks, trade names, copyrights, and other intellectual
property rights and licenses to the foregoing that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person, except where such conflict could not be reasonably
expected to have a Material Adverse Effect. Except as specifically disclosed
in Schedule 6.05, no claim or litigation regarding any of the foregoing is
pending or, to the Company's knowledge, threatened, and, to the knowledge of
the Company, no patent, invention, device, application, principle is pending or
proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
6.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.16 and has no equity investments in any other corporation or entity
constituting in excess of 5% of the outstanding equity of such Person other
than those specifically disclosed in part (b) of Schedule 6.16. As of the
Closing Date, the Material Subsidiaries of the Company are as listed in part
(c) of Schedule 6.16.
6.17 Insurance. The Properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar
businesses
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and owning similar Properties in localities where the Company or such
Subsidiary operates.
6.18 Full Disclosure. The documents, certificates and written
statements furnished by any Responsible Officer to the Bank pursuant to any
provision of this Agreement, taken together with all such documents,
certificates and written statements, do not contain any untrue statement of a
material fact or omit any material fact necessary to make the statements made
therein, taken together, in light of the circumstances under which they were
made, not misleading. It is recognized by the Bank that projections and
forecasts provided by or on behalf of the Company, although reflecting the
Company's good faith projections or forecasts based on methods and data which
the Company believes to be reasonable and accurate, are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections and forecasts may (and are likely to) differ from the projected or
forecasted results.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as the Bank shall have
any Commitment hereunder, or any Loan, Letter of Credit (other than a Letter of
Credit that has been fully Cash Collateralized) or other payment Obligation
shall remain outstanding, unless the Bank waives compliance in writing:
7.01 Financial Statements. The Company shall deliver to the Bank,
in form and detail satisfactory to the Bank:
(a) as soon as available, but not later than 90 days
after the end of each fiscal year, a copy of the audited consolidated balance
sheet of the Company as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and cash flows for
such fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Price
Waterhouse or another nationally-recognized independent public accounting firm
which report shall state that such consolidated financial statements present
fairly in all material respects the consolidated financial position for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years, except as noted therein; and
(b) as soon as available, but not later than 45 days
after the end of each fiscal quarter of each year (other than
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the last fiscal quarter of each fiscal year), a copy of the unaudited
consolidated balance sheet of the Company as of the end of such quarter and the
related consolidated statements of income, shareholders' equity and cash flows
for the period commencing on the first day and ending on the last day of such
quarter, and certified by an appropriate Responsible Officer as being complete
and correct in all material respects and fairly presenting in all material
respects, in accordance with GAAP, the consolidated financial position as at
the dates indicated and the consolidated results of operations of the Company,
for the periods indicated, subject to changes resulting from normal year-end
adjustments and the absence of footnotes.
7.02 Certificates; Other Information. The Company shall furnish to
the Bank:
(i) so long as (and to the extent) not contrary to the
then current recommendations of the American Institute of Public Accountants,
concurrently with the delivery of the financial statements referred to in
subsection 7.01(a) above, a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or
Event of Default solely arising by virtue of a breach of Sections 8.01, 8.02,
8.03, 8.04, 8.05, 8.06, 8.10, 8.11, 8.12, 8.13, 8.14 and 8.16, except as
specified in such certificate, and stating that the Bank may rely on such
certificate;
(ii) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b) above, a Compliance
Certificate;
(iii) promptly after the same are sent, copies of all
financial statements and reports which the Company sends to its shareholders
generally; and promptly after the same are filed, copies of all final
registration statements on Form S-1 and Form S-3 (without exhibits unless
specifically requested) or their successor forms relating to offerings of debt
or equity by the Company and copies of all reports on Form 10-K, Form 10-Q and
Form 8-K or their successor forms (without exhibits unless specifically
requested) which the Company may make to, or file with, the SEC or any
successor or similar Governmental Authority; and
(iv) promptly, such additional business, financial, corporate
affairs and other information as the Bank may from time to time reasonably
request, subject to the second proviso of Section 7.09.
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7.03 Notices. The Company shall promptly notify the Bank:
(a) promptly after any Responsible Officer becomes aware
thereof, of the occurrence of any Default or Event of Default;
(b) promptly after any Responsible Officer becomes aware
thereof, of (i) any breach or non-performance of, or any default under, any
Contractual Obligation of the Company or any of its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect; and (ii) any
dispute, litigation, investigation, proceeding or suspension which may exist at
any time between the Company or any of its Subsidiaries and any Governmental
Authority which could reasonably be expected to have a Material Adverse Effect;
(c) promptly after any Responsible Officer becomes aware
thereof, of the commencement of, or any material adverse development in, any
other litigation or proceeding affecting the Company or any Subsidiary (i) in
which the amount of damages claimed and not covered by insurance is $2,000,000
or more (or its equivalent in another currency or currencies), or (ii) in which
injunctive or similar relief is sought and which could reasonably be expected
to have a Material Adverse Effect, or (iii) in which the relief sought is an
injunction or other stay of the performance of this Agreement or any Loan
Document;
(d) promptly after any Responsible Officer becomes aware
thereof, of any of the following if it could reasonably be expected to have a
Material Adverse Effect upon, but in no event later than 10 days after,
becoming aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Company or any of its Subsidiaries or any of their respective Properties
pursuant to any applicable Environmental Laws, (ii) all other Environmental
Claims, and (iii) any environmental or similar condition on any real property
adjoining or in the vicinity of the property of the Company or any Subsidiary
that could reasonably be anticipated to cause such property or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use of such property under any Environmental Laws;
(e) promptly after any Responsible Officer becomes aware
thereof, of any other litigation or proceeding affecting the Company or any of
its Subsidiaries which the Company would be required to report to the SEC
pursuant to the Exchange Act, and in any event within ten days after reporting
the same to the SEC (provided that the notice requirements set forth in this
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subsection 7.03(e) shall be satisfied if the Company furnishes the Bank with a
copy of any such report to the SEC);
(f) promptly after any Responsible Officer becomes aware
thereof, any of the following events affecting the Company, together with a
copy of any notice with respect to such event that may be required to be filed
with a Governmental Authority and any notice delivered by a Governmental
Authority to the Company with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and warranties in
Section 6.06 cease to be true and correct;
(iii) the adoption of any new Pension Plan or other
Plan subject to Section 412 of the Code;
(iv) the adoption of any amendment to a Pension Plan
or other Plan subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded Pension
Liability; or
(v) the commencement of contributions to any Pension
Plan or other Plan subject to Section 412 of the Code;
(g) not later than delivery of the next consolidated
financial statements the Company pursuant to Section 7.01 after the date of any
such change, of any change in accounting policies or financial reporting
practices by the Company or any of its Subsidiaries (provided that this notice
requirement shall be satisfied if the next consolidated financial statements of
the Company delivered to the Bank following any such change (or the Compliance
Certificate delivered in connection therewith pursuant to Section 7.02)
describes any such change in reasonable detail);
(h) promptly after any Responsible Officer becomes aware
thereof, of any labor controversy resulting in or threatening to result in any
strike, work stoppage, boycott, shutdown or other labor disruption against or
involving the Company or any of its Subsidiaries;
(i) promptly after any Responsible Officer becomes aware
thereof, of a Change of Control, or of the execution of an agreement by the
Company providing for a Change of Control; and
(j) promptly after any Responsible Officer becomes aware
thereof, if the Company or any of its Subsidiaries shall
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at any time or from time to time execute an agreement for an Asset Sale
permitted by subsection 8.02(g), of such proposed sale (including the amount of
the estimated Net Proceeds to be received by the Company or such Subsidiary in
respect thereof).
Each notice pursuant to this Section shall be accompanied by a
written statement by a Responsible Officer setting forth reasonable details of
the occurrence referred to therein, and, except for a notice pursuant to
subsection (i) of this Section, stating what action, if any, the Company
proposes to take with respect thereto.
7.04 Preservation of Corporate Existence, Etc. Except as otherwise
permitted by Section 8.02, 8.03 or 8.05, the Company shall, and shall cause
each of its Material Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) use commercially reasonable efforts to preserve and
maintain in full force and effect all rights, privileges, qualifications,
permits, licenses and franchises necessary or material to the normal conduct of
its business, the non-preservation of which could reasonably be expected to
have Material Adverse Effect; and
(c) use commercially reasonable efforts to preserve or
renew all of its registered patents, copyrights, trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
7.05 Maintenance of Property. The Company shall maintain, and shall
cause each of its Subsidiaries to maintain in good working order and condition,
ordinary wear and tear excepted, all its Property which are material to the
conduct of business by the Company or the Company and its Subsidiaries taken as
a whole.
7.06 Insurance. The Company shall maintain, and shall cause each of
its Subsidiaries to maintain, with financially sound and reputable independent
insurers or pursuant to self-insurance plans to the extent standard and
customary for Persons engaged in the same or similar business under similar
circumstances, insurance with respect to its Properties and business against
loss or damage of the kinds customarily insured against by Persons engaged in
the same or similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other Persons;
including workers'
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compensation insurance, public liability and property and casualty insurance.
7.07 Payment of Obligations. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable,
(a) all material tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves to the extent
required under GAAP are being maintained by the Company or such Subsidiary; and
(b) all material lawful claims which, if unpaid, would by law become a Lien
upon its Property;
7.08 Compliance with Laws. The Company shall comply, and shall cause
each of its Subsidiaries to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it
or its business (including the Federal Fair Labor Standards Act), except such
as may be contested in good faith or as to which a bona fide dispute may exist,
or non-compliance could not be reasonably expected to have a Material Adverse
Effect.
7.09 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each of its Subsidiaries to maintain, proper books of
record and account, in which, in all material respects, full, true and correct
entries in conformity with GAAP consistently applied (except as therein noted)
shall be made of all financial transactions and financial matters involving the
assets and business of the Company and such Subsidiaries. The Company shall
permit, and shall cause each of its Subsidiaries to permit, representatives of
the Bank to visit and inspect any of their respective Properties, to examine
their respective corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and
independent public accountants, at such reasonable times during normal business
hours and as often as may be reasonably desired, upon reasonable advance notice
to the Company; provided, however, when an Event of Default exists the Bank may
do any of the foregoing at the expense of the Company at any time during normal
business hours and without advance notice; provided, further, however, that the
Company and its Subsidiaries will not be required to disclose, permit the
inspection, examination, copying or making of extracts of, or discuss, any
document, or any portion thereof, or any information in respect of which and to
the extent that disclosure to the Bank is then prohibited by law or by an
agreement binding on the Company or any of its Subsidiaries entered into by
such Person in good faith and not for the
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specific purpose of evading the provisions of this Section or any other
provision of this Agreement.
7.10 Environmental Laws. Except as otherwise disclosed to the Bank
in writing prior to the date hereof, the Company shall, and shall cause each of
its Subsidiaries to, conduct its operations and keep and maintain its Property
in compliance with all Environmental Laws, except where such non-compliance
could not be reasonably expected to have a Material Adverse Effect.
7.11 Use of Proceeds. The Company shall use, and shall cause its
Subsidiaries to use, the Letters of Credit and shall use the proceeds of the
Loans for working capital and other general corporate purposes (including the
repayment of Indebtedness) not in contravention of any Requirement of Law.
7.12 Solvency. The Company shall at all times be Solvent.
7.13 Internal Controls. The Company will maintain reasonable
internal controls and reporting systems designed to insure that a Responsible
Officer will be promptly informed of all material financial, operational and
compliance matters relevant to compliance with the provisions of the Company
Documents to which it is a party.
7.14 Board Resolutions. The Company shall deliver to the Bank, on or
before May 15, 1997, copies of the resolutions of the board of directors of the
Company approving, authorizing and ratifying the execution, delivery and
performance by the Company of this Agreement and the other Loan Documents to be
delivered by each of them hereunder, and authorizing and ratifying the
borrowing of the Loans and issuance of the Letters of Credit, certified as of
the date of such delivery by the Secretary or an Assistant Secretary of the
Company.
ARTICLE VIII
NEGATIVE COVENANTS
The Company covenants and agrees that, so long as the Bank
shall have any Commitment hereunder, or any Loan, Letter of Credit (other than
a Letter of Credit that has been fully Cash Collateralized) or other payment
Obligation shall remain outstanding, unless the Bank waives compliance in
writing:
8.01 Limitation on Liens. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, directly or
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indirectly, make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its Property, whether now owned or hereafter
acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on the Property of the Company or
its Subsidiaries on the Closing Date and set forth in Schedule 8.01;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section
7.07, provided that no Notice of Lien has been filed or recorded;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's, laborers', suppliers', employees', or other similar
Liens arising in the Ordinary Course of Business which are not delinquent or
remain payable without penalty or which are being contested in good faith and
by appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the Property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the Ordinary Course of Business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the Property of the Company or any of its
Subsidiaries securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other
non-delinquent obligations of a like nature; in each case, incurred in the
Ordinary Course of Business, provided all such Liens in the aggregate could not
reasonably be expected to cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively stayed and
all such Liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $1,000,000;
(h) easements, reservations, licenses, rights-of-way,
restrictions and other similar encumbrances or title defects affecting real
Property which do not in the aggregate materially interfere with the use of
such Property in the ordinary conduct
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of the business of the Company and its Subsidiaries, taken as an entirety;
(i) Liens on assets or property of a Subsidiary of the
Company existing at the time such assets or property (or such Subsidiary) were
acquired by the Company or such Subsidiary and not incurred as a result of (or
in connection with or in anticipation of) such acquisition; provided, that such
Liens do not extend to or cover any property or assets of the Company or any of
its Subsidiaries other than the property or assets so acquired or the property
or assets of the Subsidiary so acquired.
(j) Purchase money security interests on any Property
acquired or held by the Company or its Subsidiaries in the Ordinary Course of
Business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such Property; provided that
(i) such Lien attaches solely to the Property so acquired in such transaction,
(ii) the principal amount of the debt secured thereby does not exceed 100% of
the cost of such Property, plus reasonable fees and expenses incurred in
connection therewith, and (iii) the principal amount of the Indebtedness
secured by any and all such purchase money security interests, together with
Indebtedness permitted under subsection 8.06(f), shall not at any time exceed
$5,000,000;
(k) Liens securing Capital Lease Obligations on assets
subject to such Capital Leases, provided that such Capital Leases are permitted
under subsection 8.06(g);
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is not
a dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the Federal Reserve Board, and (ii) such deposit account is not intended by
the Company or any of its Subsidiaries to provide collateral to the depository
institution;
(m) leases and subleases and licenses and sublicenses of
Property of the Company and its Subsidiaries where the Company or a Subsidiary
of the Company is the lessor or licensor (or sublessor or sublicensor) which,
in the aggregate, do not materially interfere with the ordinary conduct of the
business of the Company and its Subsidiaries, taken as a whole, but excluding
any sale-lease transaction;
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(n) Liens securing or constituting Indebtedness which is
incurred to refinance Indebtedness which has been secured by a Lien permitted
under this Section 8.01 and which is permitted to be refinanced under Section
8.06; provided that such Liens do not extend to or cover any property or assets
of the Company or any of its Subsidiaries not so refinanced;
(o) Liens on insurance policies and the proceeds thereof,
securing the financing of premiums owing by the Company or any Subsidiary with
respect thereto, not to exceed $250,000 in aggregate principal amount
outstanding at any time;
(p) Liens in favor of customs and revenues authorities
arising as a matter of law to secure any payment obligations of the Company and
its Subsidiaries in respect of customs duties in connection with the
importation of goods;
(q) Liens securing the obligations of the Company or any of
its Subsidiaries under documentary letters of credit permitted to be incurred
under Section 8.06; provided that such Liens shall attach only to the goods
covered by such letters of credit, the corresponding documents and the proceeds
thereof;
(r) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Subsidiaries in the Ordinary Course of Business;
(s) Liens incurred or deposits made in the Ordinary Course of
Business to secure the performance of tenders, statutory obligations, surety,
appeal, reclamation, performance or other similar bonds, leases (including
landlord's Liens), contracts, and other similar obligations incurred in the
Ordinary Course of Business (exclusive of obligations in respect of the payment
for borrowed money);
(t) Liens securing Indebtedness and Contingent Obligations of
a Subsidiary of the Company incurred pursuant to and in compliance with clause
(i) or (ii) of subsection 8.06(h);
(u) Liens on funds and other property of employees of the
Company or any of its Subsidiaries which funds and property are held and
invested by the Company for the benefit of such employees for the purpose of
deferred compensation; and
(v) Liens in favor of the Trustee, the Paying Agent and the
Registrar (each as defined in the Senior Note Indenture) pursuant to Section
7.7 of the Senior Note Indenture.
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8.02 Disposition of Assets. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any Property (including accounts and notes receivable,
with or without recourse, and Capital Stock of any Subsidiary) or enter into
any agreement (other than an agreement expressly contingent on obtaining the
consent of the Bank thereto) (collectively, "Transfers") to do any of the
foregoing, except:
(a) Transfers in the Ordinary Course of Business, but
excluding any Transfers of real Property;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment;
(c) Transfers of Property for fair market value where the
Net Proceeds thereof do not exceed $1,000,000 in the aggregate and on a
cumulative basis in each case in any fiscal year;
(d) (i) Transfers from any Subsidiary of the Company to
the Company, (ii) Transfers from any Subsidiary of the Company to any other
Subsidiary of the Company, and (iii) Transfers constituting Investments
permitted by subsections 8.04(j), (n), (o), (p) or (q);
(e) Transfers of equipment to Plamex, S.A. where the net
book value of such equipment does not exceed $5,000,000 in the aggregate and on
a cumulative basis for any one fiscal year;
(f) sales of no more than 100,000 square feet in the
aggregate and on a cumulative basis of the Santa Cruz Property; provided, that
(i) at the time of any such sale, no Event of Default shall exist and be
continuing or shall result from such sale, (ii) the gross sales price from such
sale shall be paid to the Company at least 80% in cash or Cash Equivalents, and
(iii) the price received (as established by independent appraisal satisfactory
to the Bank in the event of a sale to an Affiliate, or as determined in good
faith by the Board of Directors of the Company in the event of a sale to any
other Person) shall be not less than fair market value;
(g) Asset Sales (provided that the provisions of this
subsection 8.02(g) shall apply to Transfers permitted under the foregoing
subsections of this Section 8.02 where such Transfers
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constitute Asset Sales), where (i) the Company or its Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the Property subject to such Asset Sale, (ii) at least
80% of such consideration consists of any combination of (x) cash or Cash
Equivalents or (y) Indebtedness of the Company or such Subsidiary assumed by
the purchaser of the Property subject to such Asset Sale and the Company or
such Subsidiary is unconditionally released from such Indebtedness or (z)
obligations of the purchaser of Property which are by their terms convertible
into, and actually converted into, cash or Cash Equivalents at least equal to
the Fair Market Value of such obligations at the time of the relevant Asset
Sale within 60 days of such Asset Sale and (iii) the Company or any Subsidiary
of the Company shall, within 360 days of such Asset Sale, make an offer to
purchase from, repay to, or Cash Collateralize, as the case may be (an "Asset
Sale Offer") the Bank and all holders of Other Senior Debt, up to a maximum
principal amount (expressed as a multiple of $1,000) of Loans and L/C
Obligations hereunder, and Other Senior Debt, at a purchase price equal to 100%
of the principal amount thereof, plus (without duplication in the case of Other
Senior Debt referred to in the last sentence hereof) accrued and unpaid
interest thereon, if any to the date of purchase, as the case may be (the
"Asset Sale Payment Date"); provided that the Company will not be required to
so apply Net Cash Proceeds received from any Asset Sale if, and only to the
extent that such Net Cash Proceeds are applied to acquire or construct property
or assets in lines of business related to, or representing natural extensions
of, the businesses of the Company and its Subsidiaries within 360 days after
the consummation of such Asset Sale; provided, further, that the Company may
defer the Asset Sale Offer until there is an aggregate unutilized Net Cash
Proceeds from such Asset Sales equal to or in excess of $5,000,000 at which
time the entire unutilized amount from the immediately preceding four fiscal
quarters, and not just the amount in excess of $5,000,000, shall be applied as
required pursuant to this subsection. The Asset Sale Offer, if required to be
made, must be consummated within the 360-day period referred to above.
Notwithstanding the foregoing, this subsection (g) shall not apply to an Asset
Sale or Asset Sales to the extent they involve not in excess of 100,000 square
feet of the Santa Cruz Property, which shall be governed by subsection 8.02(f).
As used in this subsection, "principal amount" means, with respect to any Other
Senior Debt which was issued with original issue discount as of the date of any
Asset Sale Offer, the accreted value thereof at such date;
(h) Transfers on or after April 1, 1996 of existing raw
materials, work in process and finished goods inventory from the Company to
PBV; and
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(i) Non-exclusive licensing (but exclusive as to region) of
technology by the Company to PBV in connection with the research and
development of related technology or the manufacture of inventory by PBV for
sale to the Company and for sale to non-U.S. customers.
8.03 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, merge or consolidate with or
into any Person, except:
(a) any Subsidiary of the Company may merge with the
Company, provided that the Company shall be the continuing or surviving
corporation, or with any one or more Subsidiaries of the Company, provided that
if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary,
the Wholly-Owned Subsidiary shall be the continuing or surviving corporation;
and
(b) mergers pursuant to Acquisitions permitted by Section
8.05.
8.04 Loans and Investments. The Company shall not purchase or
acquire, or suffer or permit any of its Subsidiaries to purchase or acquire, or
make any commitment therefor, any capital stock, equity interest, or any
obligations or other securities of, or any interest in, any Person, or make or
commit to make any Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other investment in, any
Person including any Affiliate of the Company (collectively, "Investments"),
except for:
(a) Investments existing on the Closing Date and listed in
Schedule 8.04;
(b) Investments in cash and Cash Equivalents, and
Investments in operating deposit accounts maintained in the Ordinary Course of
Business for operating fund purposes;
(c) Investments arising from transactions by the Company
or its Subsidiaries with customers or suppliers in the Ordinary Course of
Business, including Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers and suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the Ordinary Course of Business;
(d) Investments accepted in connection with a Transfer
permitted by and in accordance with the terms of subsections 8.02 (c), (f), or
(g);
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(e) Investments consisting of (i) travel advances, employee
relocation loans, and other employee loans and advances in the Ordinary Course
of Business, (ii) loans to employees, officers or directors relating to their
purchase of equity securities of the Company or its Subsidiaries, or (iii)
other loans to officers and employees approved by the Board of Directors of the
Company provided that all of the foregoing do not in an aggregate exceed
$5,000,000 outstanding at any one time;
(f) notes receivable of, or prepaid royalties and other
credit extensions to, customers and suppliers in the Ordinary Course of
Business so long as such notes, prepaid royalties or other credit extensions
are due within one year of the date of acquisition thereof or cover no more
than one year's obligations to such customers or suppliers, as the case may be;
(g) Acquisitions permitted by Section 8.05;
(h) Currency Agreements and Investments with respect to
Interest Rate Protection Obligations not prohibited by Section 8.06;
(i) Investments by Foreign Subsidiaries in the Ordinary
Course of Business or required by local law or regulation;
(j) Investments by the Company in Subsidiaries of the Company
in an aggregate amount for all such Investments not to exceed $15,000,000 at
any time outstanding; provided that for purposes of calculating such amount,
(i) the aggregate amount of (A) all repayments of advances to, dividends paid
to, and Investments made in, and the Fair Market Value of all Property which
has been transferred to, pursuant to a Transfer permitted pursuant to Section
8.02, the Company by all such Subsidiaries and (B) mergers of Subsidiaries with
the Company, pursuant to mergers permitted pursuant to subsection 8.03(a),
shall be subtracted from the amount of such Investments to the extent the
foregoing amounts have not been previously netted against such Investments, and
(ii) the aggregate amount of Guaranty Obligations made pursuant to subsection
8.06(n) shall be added to the amount of such Investments;
(k) Investments in notes issued pursuant to the Senior Note
Indenture to the extent such notes are purchased solely with the proceeds of an
Asset Sale, to be shared pro rata with the Bank, as contemplated by subsection
8.02(g);
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(l) Investments made by the Company for the benefit of
employees of the Company or its Subsidiaries for the purposes of deferred
compensation;
(m) Investments in notes issued pursuant to the Senior Note
Indenture to the extent such notes are not purchased with the proceeds of an
Asset Sale;
(n) Investments by the Company in PBV in the form of
prepayments to PBV for inventory to be purchased from PBV in an aggregate
cumulative amount not to exceed $20,000,000;
(o) Investments in the Company by Plantronics UK and
Plantronics Germany, in each case in the form of intercompany loans from such
Subsidiaries to the Company, in an aggregate cumulative amount not to exceed
$11,000,000;
(p) Investments by the Company or the Company's Wholly-Owned
Subsidiaries in Plantronics UK and Plantronics Germany, in each case in the
form of intercompany loans or capital contributions from the Company or such
Wholly-Owned Subsidiaries, as the case may be, in an aggregate cumulative
amount not to exceed $8,000,000;
(q) Investments by the Company in PBV in the form of deferred
payment obligations by PBV for the transfer on or after April 1, 1996 of title
to PBV of existing raw materials, work in process and finished goods inventory
of the Company; and
(r) other Investments not otherwise permitted under this
Section not exceeding an amount equal to $5,000,000 plus 15% times consolidated
cumulative net income of the Company for the period from and after the Closing
Date (provided, that if such cumulative net income is negative in respect of
such cumulative period, such net income shall be deemed to be zero),
outstanding at any one time.
8.05 Acquisitions. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, enter into or commit to undertake any
Acquisition, unless (a) such Acquisition is undertaken in accordance with all
material applicable Requirements of Law; (b) if any Person or business so
acquired (the "Acquiree") is subject to Section 12 of the Exchange Act or
subject to the requirements of Section 15(d) of such Act, the prior, effective
written consent of the board of directors or equivalent governing body of the
Acquiree is obtained and delivered to the Bank; and (c) immediately after
giving effect to any such Acquisition, there shall exist no Default or Event of
Default.
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8.06 Limitation on Indebtedness; Contingent Obligations. The Company
shall not, and shall not suffer or permit any of its Subsidiaries to, create,
incur, assume, suffer to exist, or otherwise become or remain directly or
indirectly liable with respect to, any Indebtedness or Contingent Obligations,
except for the following, each of which will be given independent effect:
(a) Indebtedness incurred pursuant to the Company
Documents;
(b) Indebtedness and Contingent Obligations existing on
the Closing Date and set forth in Schedule 8.06;
(c) Indebtedness and Contingent Obligations of Foreign
Subsidiaries of the Company incurred for working capital purposes; provided the
aggregate outstanding principal amount of Indebtedness and Contingent
Obligations incurred under this subsection (c) at the time of the incurrence
thereof shall not at any time exceed the lesser of (i) $5,000,000 or (ii) the
sum of (x) 85% of the net book value of the accounts receivable of the Foreign
Subsidiaries of the Company and (y) 50% of the net book value of the inventory
of the Foreign Subsidiaries of the Company, in the case of both clause (x) and
(y) calculated in accordance with GAAP at the time of each incurrence;
(d) Indebtedness of the Company under the Senior Note
Indenture and the notes issued pursuant thereto;
(e) Indebtedness and Contingent Obligations of the
Company and its Subsidiaries if, at the time of and after giving pro forma
effect to the incurrence of such Indebtedness and Contingent Obligations
(including the application of the proceeds thereof), the Consolidated Fixed
Charge Coverage Ratio of the Company is equal to or greater than 3:00 to 1:00;
provided that (i) in no event may the aggregate principal amount of
Indebtedness and Contingent Obligations incurred under this subsection (e) by
Subsidiaries of the Company exceed $2,500,000 at any time outstanding and (ii)
Indebtedness and Contingent Obligations incurred by the Company under this
subsection (e) shall not provide for any scheduled principal payment, mandatory
redemption or amortization or sinking fund requirement prior to February 18,
1998, except, in the case of Other Senior Debt, for any such payment,
redemption or amortization to be made solely with the proceeds of an Asset
Sale, to be shared pro rata with the Bank, as contemplated by subsection
8.02(g);
(f) (i) Purchase Money Indebtedness of the Company and
its Subsidiaries and (ii) Indebtedness of the Company or any Subsidiary of the
Company represented by trade letters of credit
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incurred in the ordinary course of business, which are to be repaid in full not
more than one year after which such Indebtedness is originally incurred, to
finance the purchase of goods by the Company or a Subsidiary of the Company
such that the aggregate principal amount at any time outstanding under this
subsection (f) does not exceed $5,000,000;
(g) Capital Lease Obligations of the Company and its
Subsidiaries in an aggregate principal amount (determined in accordance with
GAAP) not to exceed $2,500,000 at any time outstanding under this subsection
(g).
(h) (i) Indebtedness and Contingent Obligations of a
Domestic Subsidiary of the Company owed to the Company or any of its
Wholly-Owned Domestic Subsidiaries so long as, in the case of Indebtedness and
Contingent Obligations owed by a Subsidiary of the Company to the Company, such
Indebtedness or Contingent Obligation is not subordinated in right of payment
to any other Indebtedness of such Subsidiary and (ii) Indebtedness or
Contingent Obligations of a Subsidiary of the Company owed to the Company or a
Subsidiary of the Company (other than Indebtedness or Contingent Obligations
governed by the immediately preceding clause (i)) incurred pursuant to and in
compliance with Section 8.04, and (iii) Subordinated Indebtedness of the
Company owed to a Subsidiary of the Company; provided that in the case of the
sale or disposition of the Capital Stock of any Subsidiary of the Company that
is owed Indebtedness or Contingent Obligations of the Company or another
Subsidiary of the Company referred to in this subsection (h) such that it
ceases to be a Subsidiary of the Company, such Indebtedness shall be deemed to
have been incurred again and subject to this Section 8.06;
(i) any replacements, renewals, refinancing and
extensions of outstanding Indebtedness or Contingent Obligations permitted by
subsections (b) (other than Indebtedness or Contingent Obligations to be repaid
out of the proceeds of the stock and debt offerings described in subsection
5.02(g)), (d) or (e) of this Section 8.06, provided that (i) any such
replacement, renewal, refinancing or extension of Indebtedness or Contingent
Obligations shall not be incurred by a Subsidiary of the Company (except in the
case of a replacement, renewal, refinancing or extension of Indebtedness or
Contingent Obligations of a Subsidiary of the Company referred to in subsection
(c) of this Section 8.06) and (ii) any such replacement, renewal, refinancing
or extension (x) shall not provide for any mandatory redemption, amortization
or sinking fund requirement in an amount greater than or at a time prior to the
amounts and times specified in the Indebtedness or Contingent Obligation being
replaced, renewed, refinanced or
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extended and (y) shall not exceed the sum of (1) the principal amount (plus
accrued interest and an amount equal to the required prepayment premium, if
any) of the Indebtedness or Contingent Obligation being replaced, renewed,
refinanced or extended and (2) the reasonable fees and expenses of the Company
or its Subsidiaries, as the case may be, incurred in connection with such
replacement, renewal, refinancing or extension;
(j) (i) Indebtedness and Contingent Obligations under
Interest Rate Protection Obligations of the Company or any Subsidiary of the
Company; provided that (x) any Indebtedness to which any such Interest Rate
Protection Obligation relates bears interest at fluctuating interest rates and
is otherwise permitted by this Section 8.06 and (y) the notional principal
amount of any such Interest Rate Protection Obligation does not exceed the
principal amount of the Indebtedness or Contingent Obligation to which such
Interest Rate Protection Obligation relates and (ii) Indebtedness under
Currency Agreements of the Company; provided that such Currency Agreements do
not increase the Indebtedness of the Company and its Subsidiaries in aggregate
other than as a result of fluctuations in foreign currency exchange rates;
(k) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the Ordinary Course of Business, provided that such Indebtedness is
extinguished within three Business Days of its incurrence;
(l) (i) Guaranty Obligations of the Company with respect
to Indebtedness of Foreign Subsidiaries of the Company permitted under
subsection 8.06(c), and (ii) Guaranty Obligations of any Subsidiary of the
Company with respect to Indebtedness of the Company permitted hereunder;
(m) endorsements for collection or deposit in the Ordinary
Course of Business;
(n) Guaranty Obligations of the Company with respect to
Indebtedness of any Subsidiary of the Company, to the extent permitted by
Section 8.04(j);
(o) Indebtedness of PBV to the Company in respect of advances
by the Company to PBV for inventory to be purchased from PBV in an aggregate
cumulative amount not to exceed $20,000,000;
(p) Indebtedness of PBV to the Company in the form of
deferred payment obligations by PBV for the transfer on or after
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April 1, 1996 of title to PBV of existing raw materials, work in process and
finished goods inventory of the Company;
(q) Indebtedness of the Company to Plantronics UK and
Plantronics Germany in an aggregate cumulative amount not to exceed $11,000,000
and Indebtedness of Plantronics UK and Plantronics Germany to the Company or
its Wholly-Owned Subsidiaries in an aggregate cumulative amount not to exceed
$8,000,000; and
(r) in addition to the items referred to in subsections (a)
through (q) above, Indebtedness and Contingent Obligations of the Company and
its Subsidiaries in an aggregate principal amount not to exceed $10,000,000 at
any one time outstanding; provided that in no event shall the amount of
Indebtedness and Contingent Obligations incurred by Subsidiaries of the Company
under this subsection (r) exceed $2,000,000 at any one time outstanding.
8.07 Transactions with Affiliates. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, enter into any transaction
with any Affiliate of the Company or of any such Subsidiary, except (a) as
expressly permitted by this Agreement, or (b) not otherwise prohibited by this
Agreement; in each case (a) and (b), upon fair and reasonable terms (when taken
in the light of any related series of transactions of which such transaction is
a part, if any) no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Subsidiary. For purposes of this Section 8.07, the
Company and its Subsidiaries shall not be deemed to be Affiliates of one
another.
8.08 Use of Proceeds. The Company shall not use any portion of the
Loan proceeds, or any Letter of Credit, directly or indirectly, (i) to purchase
or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the
Company or others incurred to purchase or carry Margin Stock, (iii) to extend
credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to
acquire any security in any transaction that is subject to Section 13 or 14 of
the Exchange Act.
8.09 Joint Ventures. The Company shall not and shall not suffer or
permit any of its Subsidiaries to enter into any Joint Venture, other than in
the Ordinary Course of Business (which shall include joint development
agreements for the development of technology or products).
8.10 Lease Obligations. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to, create or
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suffer to exist any obligations under any Operating Leases, except for:
(a) Operating Leases of the Company and its Subsidiaries
in existence on the Closing Date and any renewal, extension or refinancing
thereof;
(b) Operating Leases entered into by the Company or any
of its Subsidiaries after the Closing Date in the Ordinary Course of Business;
provided that the aggregate annual rental payments for all such Operating
Leases shall not exceed $3,000,000 in any fiscal year;
(c) Operating Leases entered into by the Company or any
of its Subsidiaries after the Closing Date, provided, that immediately prior to
giving effect to such lease, the Property subject to such lease was sold by the
Company or any such Subsidiary to the lessor pursuant to a transaction
permitted under Section 8.02.
8.11 Restricted Payments. The Company shall not, and shall not
suffer or permit any of its Subsidiaries (other than Wholly-Owned Subsidiaries)
to, declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities (other than to the Company
or to any Wholly-Owned Subsidiary of the Company) on account of any shares of
any class of its capital stock, or purchase, redeem or otherwise acquire for
value any shares of its capital stock or any warrants, rights or options to
acquire such shares, or purchase, redeem or otherwise acquire for value any
notes issued under the Senior Note Indenture, now or hereafter outstanding;
except that the Company may:
(a) declare and make dividend payments or other
distributions to the extent payable in its common stock;
(b) purchase, redeem or otherwise acquire shares of its
common stock or warrants or options to acquire any such shares with the
proceeds received from the substantially concurrent issue of new shares of its
common stock;
(c) pay, purchase or redeem notes issued under the Senior
Note Indenture in accordance with the terms thereof (including payments,
purchases or redemptions made solely with the proceeds of an Asset Sale, to be
shared pro rata with the Bank, as contemplated by subsection 8.02(g));
(d) declare or pay cash dividends to its common stock
shareholders or repurchase its common stock or pay, purchase or redeem notes
issued under the Senior Note Indenture (to the
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extent not permitted under subsection 8.12(c)), not to exceed as of any date of
declaration or payment 50% of the amount of cumulative consolidated net income
of the Company and its Subsidiaries (net of cumulative losses) for the period
from the Closing Date through such date of declaration or payment;
(e) purchase, redeem or otherwise acquire shares of its
common stock pursuant to any agreement entered into between it, or any
Subsidiary of the Company, and any officer, director, employee or consultant to
the Company or any of its Subsidiaries, entered into in the Ordinary Course of
Business, in which the Company is obligated or has the option to repurchase
from such officer, director, employee or consultant shares of common stock of
the Company upon such Person's termination of employment or services with the
Company or any such Subsidiary, not in excess of $250,000 in the aggregate; and
(f) repay, convert, exchange or redeem any Indebtedness
permitted under Section 8.06 which by its terms is convertible or exchangeable,
or constitutes the right to purchase any shares of any class of Capital Stock.
8.12 Net Funded Debt to EBITDA Ratio. The Company shall not permit
as of the last day of any fiscal quarter the Net Funded Debt to EBITDA Ratio to
be less than 3.00:1.00.
8.13 Tangible Net Worth. The Company shall not permit Tangible Net
Worth on a consolidated basis as of the last day of any fiscal quarter to be
less than the sum of (a) 90% of Tangible Net Worth as of the quarter ended
December 28, 1996 minus (b) the lesser of (i) the amount of its stock
repurchased by the Company after December 28, 1996; provided that such
repurchases are otherwise permitted hereunder, and (ii) $20,000,000 plus (c)
50% of the Company's consolidated net income (but not less any net losses for
any period) earned in each fiscal quarter starting with the quarter ended March
29, 1997 plus (d) 75% of the net proceeds of any equity securities issued after
December 28, 1996 plus (e) 75% of any increase in stockholders' equity
resulting from the conversion of debt securities to equity securities after
December 28, 1996.
8.14 Interest Coverage Ratio. The Company shall not permit the
Interest Coverage Ratio as of the last day of any fiscal quarter to be less
than 3.00:1.00.
8.15 Change in Business. The Company shall not, and shall not permit
any of its Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by it on the
date hereof, except businesses
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contemplated by it as have been disclosed to the Bank in writing prior to the
date hereof.
8.16 Accounting Changes. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required or permitted by GAAP, or
change the fiscal year of the Company or of any of its consolidated
Subsidiaries, except that the Company may change its fiscal year and the fiscal
year of its consolidated Subsidiaries to a calendar year provided it obtains
any required consents of Governmental Authorities in connection therewith.
8.17 Amendments to Senior Note Indenture. The Company shall not (i)
amend, modify, supplement, waive or otherwise modify any provision of, the
Senior Note Indenture, or (ii) take or fail to take any action under the Senior
Note Indenture that, in the case of either clause (i) or (ii), has or is likely
to have a Material Adverse Effect.
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan, or (ii)
within three Business Days after the same shall become due, any interest or fee
payable hereunder, or (iii) any other amount payable hereunder or pursuant to
any other Company Document after the same shall become due within 30 days of
notice by the Bank to such effect; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any of its Subsidiaries made or deemed made herein
or in any Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in Sections 7.01, 7.02, 7.03,
7.11 or 7.12 or Article VIII; or
(d) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or any Company
Document, and such default shall continue
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unremedied for a period of 30 days after the earlier of (i) the date upon which
a Responsible Officer knew of such failure or (ii) the date upon which written
notice thereof is given to the Company by the Bank; or
(e) Cross-Default. The Company or any of its
Subsidiaries (i) fails to make any payment of principal or interest in respect
of any Indebtedness or Contingent Obligation which Indebtedness or Contingent
Obligation has an aggregate principal amount (including amounts owing
thereunder to all creditors under any combined or syndicated credit
arrangement) of more than $5,000,000 outstanding when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure continues after the applicable grace or notice period, if any,
specified in the document relating thereto; or (ii) fails to perform or observe
any other condition or covenant, or any other event shall occur or condition
exist, under any agreement or instrument relating to any such Indebtedness or
Contingent Obligation of more than $5,000,000 outstanding, and such failure
continues after the applicable grace or notice period, if any, specified in the
document relating thereto if the effect of such failure, event or condition is
to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness
to be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof
to be demanded, and such failure shall not have been cured to the satisfaction
of the Bank for a period of 15 days after the earlier of (A) the date on which
a Responsible Officer knew of such default, or (B) the date upon which written
notice thereof is given to the Company by the Bank; or (iii) any such
Indebtedness or such Contingent Obligation shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment) or cash collateralized, prior to the stated maturity
thereof; or
(f) Insolvency; Voluntary Proceedings. The Company or
any of its Material Subsidiaries (i) ceases or fails to be Solvent, or
generally fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any formal action through its Board of Directors or
through a Responsible Officer or comparable officer of such Material Subsidiary
to effectuate or authorize any of the foregoing; or
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(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any Material
Subsidiary of the Company, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a substantial part of
the Company's or any of its Material Subsidiaries' Properties, and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant
of attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) the
Company or any of its Material Subsidiaries admits the material allegations of
a petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any of its Material Subsidiaries acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its Property or business;
(h) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan which has resulted or could reasonably be expected to result
in liability of the Company under Title IV of ERISA to the Pension Plan or PBGC
in an aggregate amount in excess of $1,000,000; (ii) the commencement or
increase of contributions to, or the adoption of or the amendment of a Pension
Plan by the Company which has resulted or could reasonably be expected to
result in an increase in Unfunded Pension Liability among all Pension Plans in
an aggregate amount in excess of $1,000,000; or (iii) any of the following
shall occur which, individually or in combination, has resulted or could
reasonably be expected to result in a Material Adverse Effect: (1) the
representations and warranties contained in Section 6.07 (a) or (b) shall cease
to be true and correct; or (2) the Company shall fail to satisfy its
contribution requirements under Section 412(c)(11) of the Code for a Plan,
whether or not it has sought a waiver under Section 412(d) of the Code.
(i) Monetary Judgments. Any final monetary judgments
orders, or decrees shall be entered against the Company or any of its Material
Subsidiaries involving in the aggregate a liability (excluding amounts covered
by independent third-party insurance to the extent to which such insurer has
not contested coverage) as to any single or related series of transactions,
incidents or conditions, of $1,000,000 or more, and the same shall remain
unpaid, unvacated, unbonded and unstayed for a period of 45 consecutive days
after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree shall be rendered against the Company
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or any of its Material Subsidiaries which does or would reasonably be expected
to have a Material Adverse Effect, and there shall be any period of 45
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(k) Invalidity of Company Documents. Any of the Company
Documents after delivery thereof shall for any reason be revoked or
invalidated, or otherwise cease to be in full force and effect, or the Company
shall contest in any manner the validity or enforceability thereof, or the
Company shall deny that it has any further liability or obligation thereunder.
9.02 Remedies. If any Event of Default occurs and is continuing, the
Bank may:
(a) declare by written notice to the Company its
Commitment to make Loans and Issue Letters of Credit to be terminated,
whereupon such Commitment shall forthwith be terminated;
(b) declare by written notice to the Company the unpaid
principal amount of all outstanding Loans, all interest accrued and unpaid
thereon, and all other amounts owing or payable hereunder or under any other
Company Document to be immediately due and payable; without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company;
(c) declare by written notice to the Company an amount equal
to the maximum aggregate amount that is or at any time thereafter may become
available for drawing under any then-outstanding Letters of Credit (whether or
not any beneficiary shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under such Letters of
Credit) to be immediately due and payable and to demand that the Company Cash
Collateralize the Obligations to the extent of outstanding and wholly or
partially undrawn Letters of Credit issued on its account, whereupon the
Company shall so Cash Collateralize; and
(d) exercise all rights and remedies available to it
under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in paragraph
(f) or (g) of Section 9.01 above with respect to the Company (in the case of
clause (i) of paragraph (g) upon the expiration of the 60-day period mentioned
therein), the obligation of the Bank to make Loans and Issue Letters of Credit
shall automatically terminate and the unpaid principal
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amount of all outstanding Loans and L/C Obligations and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of the Bank.
9.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company therefrom, shall be effective unless
the same shall be in writing and signed by the Bank, and then such waiver shall
be effective only in the specific instance and for the specific purpose for
which given.
10.02 Notices.
(a) All notices, requests and other communications
provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed or delivered, to the
address or number specified for notices on the applicable signature page
hereof; or to such other address as shall be designated by such party in a
written notice to the other parties, and as to each other party, at such other
address as shall be designated by such party in a written notice to the other
party.
(b) All such notices and communications shall, when
transmitted by overnight delivery, telegraphed, telecopied by facsimile,
telexed or cabled, be effective when delivered for overnight delivery or to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, or if delivered, upon delivery;
except that notices pursuant to Article II or Article III shall not be
effective until actually received by the Bank.
(c) The Company acknowledges and agrees that any
agreement of the Bank at Articles II and III herein to receive certain notices
by facsimile is solely for the convenience and
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at the request of the Company. The obligation of the Company to repay the
Loans and L/C Obligations shall not be affected in any way or to any extent by
any failure by the Bank to receive written confirmation of any facsimile notice
or the receipt by the Bank of a confirmation which is at variance with the
terms understood by the Bank to be contained in the facsimile notice.
10.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
10.04 Costs and Expenses. The Company shall, whether or not the
transactions contemplated hereby shall be consummated:
(a) pay or reimburse the Bank within 30 Business Days
after demand for all reasonable costs and expenses incurred by the Bank in
connection with the development, preparation, delivery, and execution of, and
any amendment, supplement, waiver or modification to, this Agreement, any Loan
Document and any other documents prepared in connection herewith or therewith,
and the consummation of the transactions contemplated hereby and thereby,
including the reasonable Attorney Costs incurred by the Bank with respect
thereto; provided, that such costs in connection with the development,
preparation, delivery, execution and closing hereof shall not exceed $15,000;
(b) pay or reimburse the Bank within ten Business Days
after demand for all costs and expenses incurred by it in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
during the existence of an Event of Default (including in connection with any
"workout" or restructuring regarding the Loans) under this Agreement, any other
Loan Document, and any such other documents, including Attorney Costs, incurred
by the Bank; and
(c) pay or reimburse the Bank within ten Business Days
after demand for all appraisal (including the allocated cost of internal
appraisal services), audit, environmental inspection and review (including the
allocated cost of such internal services), search and filing costs, fees and
expenses, incurred or sustained by the Bank in connection with the matters
referred to under paragraphs (a) and (b) of this Section.
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10.05 Indemnity. Whether or not the transactions contemplated hereby
shall be consummated:
(a) General Indemnity. The Company shall pay, indemnify,
and hold the Bank and each of its officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses or disbursements (including
reasonable Attorney Costs) of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and any other Loan Documents, or the transactions contemplated hereby
and thereby, and with respect to any investigation, litigation or proceeding
related to this Agreement or the Loans or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the Company shall
have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of such Indemnified Person.
(b) Survival; Defense. The obligations in this Section
10.05 shall survive payment of all other Obligations. At the election of any
Indemnified Person, the Company shall defend such Indemnified Person using
legal counsel reasonably satisfactory to the Company and such Indemnified
Person, at the sole cost and expense of the Company. All amounts owing under
this Section 10.05 shall be paid within 30 days after demand.
10.06 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that the Company may not
assign or transfer any of its rights or obligations under this Agreement (other
than by operation of law pursuant to any merger or consolidation permitted by
Section 8.03) without the prior written consent of the Bank.
10.07 Assignments, Participations, etc.
(a) The Bank may at any time assign and delegate to one
or more Persons (each an "Assignee") all or any part of the Loans, the L/C
Obligations, the Commitment and the other rights and obligations of the Bank
hereunder in an amount no less than $5,000,000 to each Assignee; provided,
however, that the Company may continue to deal solely and directly with the
Bank in connection with the interest so assigned to an Assignee until written
notice of such assignment, together with payment
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instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company by the Bank and the Assignee; and
provided, further, that any such Assignee shall be (i) a commercial bank
organized under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $100,000,000; or (ii) a commercial
bank organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000, provided that such bank is acting through a
branch or agency located in the United States.
(b) The Bank may at any time sell to one or more Persons
(a "Participant") participating interests in any Loans, L/C Obligations, the
Commitment and the other interests of the Bank hereunder and under the other
Loan Documents; provided, that, the Bank shall not transfer or grant any
participating interest under which the Participant shall have rights to approve
any amendment to, or any consent or waiver with respect to the Company
Documents except to the extent such amendment, consent or waiver would (i)
increase or extend the Commitment or subject the Bank to any additional
obligations; (ii) postpone or delay any date fixed for any payment of
principal, interest, fees or other amounts due under any Company Document;
(iii) reduce the principal of, or the rate of interest specified herein on any
Loan, or of any fees or other amounts payable under any Company Document. In
the case of any such participation, the Participant shall not have any rights
under this Agreement, or any of the other Company Documents, and all amounts
payable by the Company hereunder shall be determined as if the Bank had not
sold such participation, except that if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as the Bank
under this Agreement. The Company shall not be required to incur any expense
in connection with any such participation.
(c) The Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public information provided to it by the Company or any Subsidiary of the
Company in connection with this Agreement or any other Loan Document, and
neither it nor any of its Affiliates shall use any such information for any
purpose or in any manner other than as contemplated by this Agreement; except
to the extent such information (i) was or
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becomes generally available to the public other than as a result of a
disclosure by the Bank, or (ii) was or becomes available on a non-confidential
basis from a source other than the Company, provided that such source is not
bound by a confidentiality agreement with the Company known to the Bank;
provided, that the Bank may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of the Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
Bank's independent auditors and other professional advisors; (E) to the extent
reasonably required in connection with any litigation or proceeding to which
the Bank or any of its Affiliates may be party; and (F) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; and provided, further that in the event of a
disclosure pursuant to clause (B), (C) or (E) of this subsection, the Bank
shall, unless prohibited from doing so by any applicable Requirement of Law,
give notice to the Company prior to any such disclosure and shall use
commercially reasonable efforts to cooperate with the Company (at no cost to
the Bank) to seek a protective order with respect to the information requested
to be disclosed. Notwithstanding the foregoing, the Company authorizes the
Bank to disclose to any Participant or Assignee and to any prospective
Participant or Assignee, such financial and other information in the Bank's
possession concerning the Company or its Subsidiaries which has been delivered
to the Bank pursuant to this Agreement or which has been delivered to the Bank
by the Company in connection with the Bank's credit evaluation of the Company
prior to entering into this Agreement; provided that, unless otherwise agreed
by the Company, such Participant or Transferee agrees in writing to the Bank to
keep such information confidential to the same extent required of the Bank
hereunder.
10.08 Set-off. In addition to any rights and remedies of the Bank
provided by law, if an Event of Default exists, the Bank is authorized at any
time and from time to time, without prior notice to the Company, any such
notice being waived by the Company to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other indebtedness at any time
owing to, the Bank to or for the credit or the account of the Company against
any and all Obligations of the Company owing to the Bank, now or hereafter
existing, irrespective of whether or not the Bank shall have made demand under
this Agreement or any Loan Document. The Bank agrees promptly to notify the
Company after any such set-off and application made by the Bank; provided,
however, that the
84
<PAGE> 91
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section 10.08 are in addition
to the other rights and remedies (including other rights of set-off) which the
Bank may have.
10.09 Automatic Debits of Fees. With respect to any facility fee or
other regularly scheduled fee or cost, due and payable to the Bank hereunder by
the Company, the Company hereby authorizes the Bank, until such authorization
is revoked by the Company in writing, to debit any deposit account of the
Company with the Bank in an amount such that the aggregate amount debited from
all such deposit accounts does not exceed such fee or cost due from the
Company. If there are insufficient funds in such deposit accounts to cover the
amount of the fee or other cost or expense then due, such debits will be
reversed (in whole or in part, in the Bank's sole discretion) and such amount
not debited shall be deemed to be unpaid. No such debit under this Section
10.09 shall be deemed a setoff.
10.10 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.
10.11 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
10.12 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company and the Bank and
their permitted successors and assigns, and no other Person shall be a direct
or indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other Loan
Documents. Neither the Bank nor, except to the extent expressly set forth
herein, the Company (or any of its Subsidiaries) shall have any obligation to
any Person not a party to this Agreement or other Loan Documents.
10.13 Time. Time is of the essence as to each term or provision of
this Agreement and each of the other Loan Documents.
85
<PAGE> 92
10.14 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE BANK
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) SUBJECT TO SECTION 10.15, ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR
THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY AND THE BANK CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE JURISDICTION OF THOSE COURTS. SUBJECT TO SECTION
10.15, EACH OF THE COMPANY AND THE BANK IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY
DOCUMENT RELATED HERETO. THE COMPANY AND THE BANK EACH WAIVE PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY CALIFORNIA LAW.
10.15 Arbitration; Reference.
(a) Mandatory Arbitration. Any controversy or claim
between or among the parties, including but not limited to those arising out of
or relating to this Agreement or any agreements or instruments relating hereto
or delivered in connection herewith and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver
of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial
relief.
(b) Judicial Reference. At the request of any party a
controversy or claim which is not submitted to arbitration as provided and
limited in subsection (a) of this Section shall be determined by a reference in
accordance with California Code of
86
<PAGE> 93
Civil Procedure Section 638 et seq. If such an election is made, the parties
shall designate to the court a referee or referees selected under the auspices
of the AAA in the same manner as arbitrators are selected in AAA-sponsored
proceedings. The presiding referee of the panel, or the referee if there is a
single referee, shall be an active attorney or retired judge. Judgment upon
the award rendered by such referee or referees shall be entered in the court in
which such proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
(c) Provisional Remedies and Setoff. No provision of
this Section shall limit the right of any party to this Agreement to exercise
the right of setoff, or to seek or obtain provisional or ancillary remedies
from a court of competent jurisdiction before, after, or during the pendency of
any arbitration or other proceeding. The exercise of a remedy does not waive
the right of either party to resort to arbitration or reference.
10.16 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding between the Company
and the Bank, and supersedes all prior or contemporaneous Agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
87
<PAGE> 94
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in San Francisco, California by their proper and
duly authorized officers as of the day and year first above written.
PLANTRONICS, INC.
By: /s/John A. Knutson
----------------------------
Name: John A. Knutson
Title: Vice President-Legal,
Senior General Counsel
and Secretary
Address for notices:
337 Encinal Street
Santa Cruz, California 95060
Attention: General Counsel
Facsimile: (408) 426-2965
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Richard E. Bryson
------------------------------
Name: Richard E. Bryson
Title: Managing Director
Address for notices:
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: San Francisco Corporate
Banking #3838
Facsimile: (415) 622-4585
Lending Office:
1850 Gateway Boulevard
Concord, California 94520
Bank's Payment Office:
1850 Gateway Boulevard
Concord, California 94520
88
<PAGE> 95
SCHEDULE 6.05
LITIGATION
1. In May, 1996, the Company received notice from the Bureau of
Competition of the Federal Trade Commission ("FTC") that the FTC staff
is conducting a non-public investigation to determine whether certain
manufacturers of lightweight telephone headsets may be engaged in
anticompetitive practices in violation of Section 5 of the Federal Trade
Commission Act. The Company has not been notified that it is a
particularized subject of the investigation. There can be no assurance
that the Company will not become a particularized subject of the
investigation, that the FTC staff or the FTC itself will not proceed to
a full public investigation in this matter, or that the outcome of any
public investigation will not have a Material Adverse Effect.
SCHEDULE 6.05
Page 1 of 1
<PAGE> 96
SCHEDULE 6.06
ERISA MATTERS
NONE
SCHEDULE 6.06
Page 1 of 1
<PAGE> 97
SCHEDULE 6.10
PERMITTED LIABILITIES
MATERIAL INDEBTEDNESS NOT INCLUDED IN FINANCIAL STATEMENTS:
None.
MATERIAL OPERATING LEASES NOT INCLUDED IN FINANCIAL STATEMENTS:
1. Effective April 1, 1997, Walker Equipment Corporation, a wholly owned
subsidiary of the Company, will merge into the Company. Effective on
that date, the Company will take assignment of and be responsible on the
following Material Operating Lease:
Lessor: Market Place Leasing, Inc.
Lessee: Plantronics, Inc., as assignee of Walker Equipment
Corporation.
Location: Ringgold, GA
Term: Two years, commencing August 1, 1996.
Rent: $52,600.50 per year, through July 31, 1997; $58,445.00 per
year, in period from August 1, 1997, through July 31, 1998.
SCHEDULE 6.10
Page 1 of 1
<PAGE> 98
SCHEDULE 6.15
INTELLECTUAL PROPERTY MATTERS
NONE
SCHEDULE 6.15
Page 1 of 1
<PAGE> 99
SCHEDULE 6.16
SUBSIDIARIES AND OTHER EQUITY INVESTMENTS
(a) Subsidiaries of Plantronics, Inc.
(b) Equity Investments
(c) Material Subsidiaries
SCHEDULE 6.16
Page 1 of 4
<PAGE> 100
SCHEDULE 6.16(a)
SUBSIDIARIES OF PLANTRONICS, INC.
COMPANY NAME JURISDICTION OF
INCORPORATION
Emtel, S.A. Mexico
Frederick Electronics Corporation Maryland
Pacific Plantronics, Inc. California
Plamex, S.A. de C.V. Mexico
Plantronics Acoustics Italia, S.r.l. Italy
Plantronics B.V. Netherlands
Plantronics Canada Limited Canada
Plantronics France S.A.R.L. France
Plantronics Futurecomms, Inc. California
Plantronics GmbH Germany
Plantronics Holdings Limited Canada
Plantronics International do Brasil, Ltda. Brazil
Plantronics K.K. Japan
Plantronics Limited United Kingdom
Plantronics, A.G. Switzerland
Walker Equipment Corporation Georgia
SCHEDULE 6.16
Page 2 of 4
<PAGE> 101
SCHEDULE 6.16(b)
EQUITY INVESTMENTS
NONE
SCHEDULE 6.16
Page 3 of 4
<PAGE> 102
SCHEDULE 6.16(c)
MATERIAL SUBSIDIARIES
Plantronics B.V.
Plantronics Limited
SCHEDULE 6.16
Page 4 of 4
<PAGE> 103
SCHEDULE 8.01
PERMITTED LIENS
1. Financing Statement by and between Walker Equipment Corporation
("Debtor") and Pitney Bowes Credit Corporation ("Secured Party")
recorded January 26, 1989 with the Catoosa County Clerk, Ringgold,
Georgia, File Number 89-4675.
2. Financing Statement by and between Plantronics, Inc. ("Lessee") and AT&T
Credit Corporation ("Lessor") recorded December 21, 1989, with the
Secretary of State of the State of California, File Number 893241742.
3. Financing Statement by and between Plantronics, Inc. ("Lessee") and AT&T
Credit Corporation ("Lessor") recorded October 31, 1991, with the
Secretary of State of the State of California, File Number 91233579.
4. Financing Statement by and between Plantronics, Inc. ("Lessee") and
Advanta Leasing Corp. ("Lessor") recorded October 17, 1994, with the
Secretary of State of the State of California, File Number 9431260783.
SCHEDULE 8.01
Page 1 of 1
<PAGE> 104
SCHEDULE 8.04
PERMITTED INVESTMENTS
<TABLE>
<CAPTION>
NAME OF ENTITY INVESTMENT AMOUNT
<S> <C> <C>
Coastcom Holdings, Inc. 42,500 shares, Series A Preferred $500,013
stock [Cost basis]
Telequest 100 shares, common stock $356
[Cost basis]
Greyhound Lines, Inc. 60 shares, common stock $0
[Cost Basis]
Greyhound Lines, Inc. 10% Senior Note, Due 2001 $1,000
[Estimated,
Cost Basis]
SCEcorp 7,440 shares, common stock $89,272
[Estimated,
Cost Basis]
Continental Airlines, Inc. 17 shares, common stock $0
[Cost Basis]
Plantronics, Inc. 349,475 shares, common stock, $12,822,237.75
repurchased by the Company and [Estimated,
held as Treasury Stock Cost Basis]
</TABLE>
SCHEDULE 8.04
Page 1 of 1
<PAGE> 105
SCHEDULE 8.06
PERMITTED INDEBTEDNESS AND
CONTINGENT LIABILITIES
PROMISSORY NOTES:
1. Promissory Notes in the aggregate principal amount of $65,050,000,
issued under the Senior Note Indenture, as that term is defined in
Section 1.01 of the Credit Agreement.
FOREIGN LINES OF CREDIT:
<TABLE>
<CAPTION>
DATE BORROWER LENDER MAXIMUM
[PURPOSE] AMOUNT
<S> <C> <C> <C>
12/00/95 Plantronics, Ltd. Midland Bank, Plc. L980,000
[Duty deferrals, negotiation
cheques and issuance of
irrevocable documentary
letters of credit]
</TABLE>
CONTINGENT OBLIGATIONS - EXISTING/OPEN LETTERS OF CREDIT:
None except those issued by Bank of America under existing Credit Agreement and
shown upon the February 3, 1997, statement of account of Bank of America and
restated below:
<TABLE>
<CAPTION>
NUMBER DATE - EXP. DATE AMOUNT
<S> <C> <C>
220201 1/20/97-7/15/97 306,805.00(1)
[Stand-by]
222081 11/21/94-12/01/97 200,000.00
1002279 01/30/96-01/30/97 129,477.60
</TABLE>
- ------------
(1) The Company believes the amount should be $164,975.00 to reflect payment
upon the account secured by the subject letter of credit.
SCHEDULE 8.06
Page 1 of 2
<PAGE> 106
CONTINGENT OBLIGATIONS - EXISTING/OPEN LETTERS OF CREDIT [CON'T]:
<TABLE>
<CAPTION>
<S> <C> <C>
1005172 05/13/96-03/31/97 483,293.26
1007532 07/12/96-03/31/97 42,900.00
1012645 10/03/96-02/28/97 968,853.18
1014103 11/08/96-01/31/97 84,757.60
</TABLE>
CONTINGENT OBLIGATIONS - GUARANTEES:
<TABLE>
<CAPTION>
DATE GUARANTOR PRINCIPAL OBLIGOR CREDITOR
[INSTRUMENT OR
TRANSACTION
<S> <C> <C> <C>
07/00/93 Plantronics, Inc. Plamex, S.A. de C.V. Inmobiliaria Mex-
[Guarantee of real Hong, S.A. de C.V.
property lease (Lessor)
obligations]
10/27/95 Plantronics, Inc. Plantronics, Ltd. Midland Bank, Plc.
[Duty deferrals,
negotiation of
cheques and issuance
of irrevocable
documentary letters
of credit]]
</TABLE>
SCHEDULE 8.06
Page 2 of 2
<PAGE> 107
EXHIBIT A
NOTICE OF BORROWING
-------------------
Date: _________________, 199_
To: Bank of America National Trust and Savings Association, relating to the
Credit Agreement dated as of February 19, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement") between
Plantronics, Inc. and Bank of America National Trust and Savings
Association.
Ladies and Gentlemen:
The undersigned, Plantronics, Inc. (the "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of
the Credit Agreement, of the borrowing specified herein:
1. The Business Day of the proposed borrowing is ____________
____________________________, 19__.
2. The aggregate amount of the proposed borrowing is
$_________________.
3. The borrowing is to be comprised of [a Base Rate] [a CD
Rate Loan] [an Offshore Rate] Loan.
4. [If applicable:] The duration of the Interest Period for
the [CD Rate Loan] [Offshore Rate Loan] included in the borrowing shall
be ___________ [months] [days].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representatives and warranties of the Company
contained in Article VI of the Credit Agreement are true and correct in
all material respects as though made on and as of such date (except to
the extent such representations and warranties relate to an earlier
date, in which case they are true and correct in all material respects
as of such date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed borrowing;
(c) there has not occurred a Material Adverse Effect; and
A-1
<PAGE> 108
(d) the proposed borrowing will not cause the Effective Amount
of all Loans and L/C Obligations to exceed the Commitment.
Plantronics, Inc.
By:
------------------------------------
Title:
---------------------------------
A-2
<PAGE> 109
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
Date: ______________, 199__
To: Bank of America National Trust and Savings Association relating to the
Credit Agreement dated as of February 19, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement") between
Plantronics, Inc. and Bank of America National Trust and Savings
Association.
Ladies and Gentlemen:
The undersigned, Plantronics, Inc. (the "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of
the Credit Agreement, of the (conversion) (continuation) of the Loans specified
herein, that:
1. The date of the (conversion) (continuation) is
____________, 19__.
2. The aggregate amount of the Loans to be (converted)
(continued) is $___________.
3. The Loans are to be (converted into) (continued as) (CD
Rate) (Offshore Rate) (Base Rate) Loans.
4. (If applicable:) The duration of the Interest Period for the
Loans included in the (conversion) (continuation) shall be (____ days)
(____ months).
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed (conversion)
(continuation), before and after giving effect thereto and to the application
of the proceeds therefrom:
(a) no Default or Event of Default has occurred and is
continuing, or would result from such proposed (conversion)
(continuation); and
B-1
<PAGE> 110
(b) the proposed (conversion) (continuation) will not cause the
Effective Amount of all Loans and all L/C Obligations to exceed the
Commitment.
Plantronics, Inc.
By: ________________________________
Title: _____________________________
B-2
<PAGE> 111
EXHIBIT C
PLANTRONICS, INC.
COMPLIANCE CERTIFICATE
Date: _____________________
Reference is made to that certain Credit Agreement dated as of February
19, 1997 between Plantronics, Inc. (the "Company") and Bank of America National
Trust and Savings Association, a national banking association ("Bank"). Unless
otherwise defined herein, capitalized terms used herein have the respective
meanings assigned to them in the Credit Agreement.
The undersigned Responsible Officer of Plantronics, Inc. hereby
certifies as of the date hereof that he/she is the _____________________________
of the Company, and that, as such, he/she is authorized to execute and deliver
this Certificate to the Bank on the behalf of the Company and its consolidated
Subsidiaries and not as an individual, and that:
(Use the following paragraph if this Certificate is delivered in connection
with the financial statements required by subsection 7.01(a) of the Agreement.)
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
audited consolidated balance sheet of the Company as at the end of the fiscal
year ended __________________, 199__ and (b) the related consolidated statements
of income or operations, shareholders' equity and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, accompanied by the opinion of Price Waterhouse (or another
nationally-recognized certified independent public accounting firm).
or
(Use the following paragraph if this Certificate is delivered in connection
with the financial statements required by subsection 7.01(b) of the Agreement.
1. Attached as Schedule 1 hereto is (a) a true and correct copy of the
unaudited consolidated balance sheet of the Company as of the end of such
quarter ended ________________, 199__, and (b) the related consolidated
statements of income, shareholders' equity and cash flows of the Company and
its consolidated Subsidiaries for the period commencing on the first day and
ending on the last day of such quarter.
C-1
<PAGE> 112
2. The undersigned has reviewed and is familiar with the terms of the
Agreement and has made, or has caused to be made under his/her supervision, a
detailed review of the transactions and conditions (financial or otherwise) of
the Company during the accounting period covered by the attached financial
statements.
3. The attached financial statements are complete and correct in all
material respects, and have been prepared in accordance with GAAP on a basis
consistent with prior periods (subject to changes resulting from normal
year-end adjustments and the absence of footnotes (for financial statements
required by subsection 7.01(b) of the Agreement)).
4. The attached financial statements are certified by a Responsible
Officer of the Company and fairly state the consolidated financial conditions
and results of operations of the Company in all material respects when
considered in relation to the consolidated financial statements of the Company
taken as a whole.
5. To the best of the undersigned's knowledge, the Company during such
period, has observed, performed or satisfied in all material respects all of
its covenants and other agreements, and satisfied in all material respects
every condition in the Agreement to be observed, performed or satisfied by the
Company, and the undersigned has no knowledge of any Default or Event of
Default occurring during and existing at the end of the accounting period
covered by the attached financial statements, which has not been previously
disclosed in writing to the Bank.
6. The following financial covenants analyses and information set
forth on Schedule 2 attached hereto are true and accurate on and as of the date
of this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
______________________, 199__.
PLANTRONICS, INC.
By: _______________________________
Title: ____________________________
C-2
<PAGE> 113
Date: ______________, _____
For the fiscal quarter/year
ended ______________, _____
SCHEDULE 2
to the Compliance Certificate
($ in 000's)1/
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
1. Section 8.12 Net Funded Debt to
EBITDA Ratio.
The ratio of:
A. Net Funded Debt:
the difference of:
(i) Indebtedness2/ __________
plus
(ii) Guaranty Obligations2/ __________
less
(iii) cash and Cash Equivalents3/
__________
(i)+(ii)-(iii) = __________
B. EBITDA4/
the sum of:
(i) net income or loss5/ __________
plus
(ii) depreciation __________
plus
(iii) amortization __________
plus
(iv) interest __________
plus
(v) taxes on income __________
plus
</TABLE>
1/ All items determined on a consolidated basis and in accordance
with GAAP, consistently applied.
2/ See definition of Net Funded Debt for certain items excluded.
3/ Not subject to any Lien, and to extent exceeding $5,000,000.
4/ Calculated on a rolling four-quarter basis.
5/ Without giving effect to extraordinary losses or gains
C-3
<PAGE> 114
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
(vi) non-cash expenses or charges for
management stock compensation
__________
(i)+(ii)+(iii)+(iv)+(v)+(vi) = __________
A
-----
B = Not more than 3.00
==========
2. Section 8.13 Tangible Net Worth.
-------------------------------
Tangible Net Worth: Not to be less than the sum of:
(i) gross book value of assets __________ A. Tangible Net Worth as of
12/28/96:
less
----
(i) gross book value
(ii) goodwill, licensing agreements, patents, of assets __________
trademarks, trade names, organization
expenses, treasury stock, unamortized less
debt discount and premium, deferred ----
charges and other like intangibles
(ii) goodwill, licensing
agreements, patents, trade-
less marks, trade names, organi-
---- zation expenses, treasury
__________ stock, unamortized debt
(iii) reserves applicable to assets (including discount and premium, deferred
reserves for depreciation and charges and other like
amortization) intangibles __________
less
----
less
---------- ----
(iii) reserves applicable
to assets (including reserves
for depreciation and
amortization) __________
(iv) all liabilities (including less
accrued and deferred income taxes and ----
any subordinated
liabilities) (iv) all liabilities
__________ (including accrued and
deferred income taxes and
(i)-(ii)-(iii)-(iv) = subordinated liabilities) __________
==========
(i)-(ii)-(iii)-(iv) = __________
x 90%
------------------
6/
==========
less
----
</TABLE>
- ----------------------------------
6/ Calculation will need to be done for first compliance certificate
only; thereafter, this number will be inserted.
C-4
<PAGE> 115
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
B. Stock repurchases after
12/28/96 (not to exceed
$20,000,000) __________
plus
C. 50% of net income after
income taxes (without
subtracting losses)
earned after 12/28/96 __________
plus
</TABLE>
C-5
<PAGE> 116
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
D. 75% of net proceeds
from any equity
securities issued
after 12/28/96 __________
plus
----
E. 75% of any increase
in stockholder's
equity resulting
from the conversion
of debt securities
to equity securities
after 12/28/96 __________
A - B + C + D + E =
==========
3. Section 8.14 Interest Coverage
Ratio.7/.
The ratio of:
A. Adjusted EBITDA
(i) EBITDA (from 1(B) above) __________
less
----
(ii) Capital Expenditures __________
(i) - (ii) __________
B. Cash Interest Expense
(i) Total interest expense
(including commissions,
discounts, fees and other charges in
connection with standby letters of
credit and similar instruments
__________
less
----
(ii) Non-cash items included in (i)
__________
(i) - (ii) __________
A
-----
B = Not less than 3.00
==========
</TABLE>
- ----------------------------------
7/ Calculated on a rolling four-quarter basis.
-
C-6
<PAGE> 117
EXHIBIT D
FORM OF LEGAL OPINION
(Attached)
D-1
<PAGE> 118
As of February 19, 1997
To Bank of America National Trust
and Savings Association
555 California Street, 41st Floor
San Francisco, CA 94104
RE: PLANTRONICS, INC. CREDIT AGREEMENT
Ladies and Gentlemen:
We have acted as special counsel for Plantronics, Inc., a Delaware
corporation (the "Company"), in connection with the execution and delivery of
(i) the Credit Agreement, dated as of February 19, 1997 (the "Credit
Agreement"), between the Company and Bank of America National Trust and Savings
Association (the "Bank") and (ii) forms of the Application and Agreement for
Commercial Letter of Credit, Application for Amendment to Commercial Letter of
Credit, Application and Agreement for Standby Letter of Credit, and Application
for Amendment to Standby Letter of Credit (collectively, the "L/C
Applications," and, together with the Credit Agreement, the "Loan Documents").
This opinion is provided to the Bank as required pursuant to Section
5.01(f) of the Credit Agreement. Terms defined in the Credit Agreement and
used without other definition herein shall have the respective meanings
assigned, directly or indirectly by reference, to such terms in the Credit
Agreement, and terms used herein and not defined herein or in the Credit
Agreement shall have the respective meanings assigned to such terms in the
Uniform Commercial Code as in effect in the State of California on the date
hereof (the "UCC").
In connection with this opinion, we have examined:
(i) executed copies of the Credit Agreement;
(ii) unexecuted forms of the L/C Applications, excluding the terms
and conditions interlined on the reverse side thereof, as delivered to us for
review;
<PAGE> 119
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 2
(iii) the Certificate of Incorporation and Bylaws of the Company, as
amended to date;
(iv) records of proceedings, consisting of draft minutes of a
meeting of the Board of Directors of the Company, during or by which
resolutions were adopted relating to matters covered by this opinion not yet
approved by the Board;
(v) the respective certificates of the Secretary and certain
officers of the Company as to certain factual matters (copies of which have
been delivered to the Bank pursuant to Sections 5.01(b), (c) and (e) of the
Credit Agreement); and
(vi) each of the agreements listed on Annex A hereto (the "Reviewed
Agreements").
In addition, we have made such other investigations as we have deemed
necessary to enable us to render the opinions hereinafter set forth. We advise
you that, as to all matters of fact, we have relied upon such examination and
investigation, and the representations and warranties of the Company contained
in the aforedescribed certificates, Article VI of the Credit Agreement (but
only to the extent such representations and warranties address factual matters)
and the Certificate appended hereto as Annex B (but only to the extent such
Certificate addresses factual matters). We have assumed (a) the genuineness of
all signatures of persons (other than representatives of the Company) signing
the Loan Documents; (b) the authenticity of all documents submitted to us as
originals (c) the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies, and (d) except
as specifically covered in the opinions set forth below, the due authorization,
execution, and delivery on behalf of the respective parties thereto of
documents referred to herein and the legal, valid and binding effect thereof on
such parties.
As used in this opinion, the expression "to our knowledge" or "known
to us" with reference to matters of fact means that during the course of our
representation of the Company in connection with the Loan Documents no
information has come to the attention of the attorneys of our firm involved in
this engagement which would give the actual knowledge of the existence or
absence of such facts; however, except to the extent expressly set forth
herein, we have made no independent investigation to determine the existence or
absence of such facts, and any limited inquiry undertaken by us during the
preparation of this opinion should not be regarded as such an investigation.
No inference as to our knowledge of the existence or absence of such facts
should be drawn from the fact of our representation of the Company.
Based upon the foregoing, and further subject to the exceptions,
limitations, qualifications and assumptions, set forth below, we hereby advise
you that in our opinion:
<PAGE> 120
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 3
1. The Company has been duly incorporated and is validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has the corporate power and authority to
own and operate (or lease, as the case may be) its properties, to
conduct the business in which it is currently engaged and to execute,
deliver and perform its obligations under the Loan Documents. The
Company is qualified to do business as a foreign corporation in each
jurisdiction wherein the ownership or leasing of properties or the
conduct of its business renders such qualification necessary, except
insofar as the failure to be so qualified would not have a Material
Adverse Effect. The jurisdictions in which the Company is qualified
to do business are listed on Schedule 1 to Annex B hereto.
2. The Loan Documents and the Credit Extensions pursuant
to the Credit Agreement have been duly authorized by the Company and
no further corporate action is required in connection therewith. The
execution and delivery of the Loan Documents by the Company and the
due performance by the Company of its obligations thereunder do not
and will not (i) violate or be in conflict with the Company's Articles
of Incorporation or Bylaws or any law or regulation having
applicability to the Company, or (ii) to our knowledge, violate,
contravene or result in the creation of a Lien upon any of the assets
or properties of the Company under, any material judgment, decree,
injunction, writ or order of any court, or any arbitrator or other
Governmental Authority, having jurisdiction over the Company or its
properties or by which the Company may be bound. No material consent,
approval, authorization, registration or filing with any Governmental
Authority which has not been obtained is required in connection with
the execution, delivery or performance by the Company of the Loan
Documents, except as contemplated thereby.
3. The Loan Documents (except the unexecuted L/C
Applications) have been duly executed and delivered by the Company.
Each of the Loan Documents (other than the unexecuted L/C
Applications) constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with their
respective terms. The unexecuted L/C Applications, when duly executed
and delivered, will constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms.
4. To our knowledge, there are no actions, suits, or
proceedings pending, or, threatened, against the Company before any
court, regulatory agency or administrative agency, at law or in
equity, in arbitration or before any Governmental Authority which seek
to restrain
<PAGE> 121
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 4
the Company's performance of its obligations under the Loan Documents
or which would reasonably be expected to have a Material Adverse
Effect.
5. To our knowledge, there are no governmental licenses,
authorizations, consents or approvals required in order for the
Company to own its assets and carry on its business as presently
conducted, the failure to obtain which would reasonably be expected to
have a Material Adverse Effect, which the Company has not obtained.
6. The Credit Agreement, the Credit Extensions proposed
to be made thereunder, the other Loan Documents and the performance by
the Company of its obligations thereunder do not and will not violate
or conflict with, constitute a default under or result in the
termination of, accelerate the performance required by, or result in
the creation of any Lien upon the assets or properties of the Company
(except as contemplated by the Loan Documents) under, any Reviewed
Agreement.
7. The Company is not (a) an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended,
nor (b) subject to the regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or any California public
utilities code.
8. To our knowledge, the Company does not intend to use
the proceeds of any extension of credit under the Credit Agreement for
the purpose of purchasing "margin stock" within the meaning of
Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System.
The foregoing opinions are subject to the exceptions, limitations,
qualifications and assumptions set forth below.
A. We are admitted to practice law only in the State of
California. We express no opinion as to any matter relating
to laws of any jurisdiction other than the laws of the State
of California, the statutes comprising the General Corporation
Laws of the State of Delaware and the federal laws of the
United States, as such are in effect on the date hereof. For
purposes of our review of the Reviewed Agreements, we have
assumed that the laws governing such Reviewed Agreements
(including the effect and appropriate interpretation thereof)
are identical in all relevant respects to the laws of the
State of California.
<PAGE> 122
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 5
B. We express no opinion as to (i) the effect of any bankruptcy,
insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting the rights of creditors
generally including, without limitation, the effect of
statutory or other laws regarding fraudulent transfers or
conveyances or preferential transfers, or (ii) the effect of
general principles of equity, including without limitation,
concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific
performance, injunctive relief or other equitable relief,
whether considered in a proceeding in equity or at law.
C. We express no opinion (i) regarding the rights or remedies
available to any party for violations or breaches of any
provisions which are immaterial or for violations or breaches
of any provisions the enforcement of which a court determines
would be unreasonable under the then existing circumstances,
(ii) regarding the rights or remedies available to any party
insofar as such party may take discretionary action which is
arbitrary, unreasonable or capricious, or is not taken in good
faith or in a commercially reasonable manner, whether or not
such action is permitted under the Credit Agreement, or (iii)
as to the effect of the exercise of judicial discretion,
whether in a proceeding in equity or at law.
D. We express no opinion as to the legality, validity, binding
nature or enforceability of (i) provisions in any Loan
Document providing for the payment or reimbursement of costs
or expenses or indemnifying a party, to the extent such
provisions may be held to be unreasonable in amount,
unenforceable as contrary to public policy, (ii) provisions
regarding the Bank's ability to collect attorneys' fees and
costs in an action involving any Loan Document, if the Bank is
not the prevailing party in such action (we call your
attention to the effect of Section 1717 of the California
Civil Code, which provides that, where a contract permits one
party thereto to recover attorneys' fees, the prevailing party
in any action to enforce any provision of the contract shall
be entitled to recover its reasonable attorneys' fees) or
(iii) provisions of any Loan Document imposing penalties or
forfeitures, late payment charges or any increase in interest
rate, upon delinquency in payment or the occurrence of a
default to the extent they constitute a penalty or forfeiture
or are otherwise contrary to public policy.
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any vague or broadly
stated waivers including, without limitation, the waivers of
diligence, presentment, demand, protest or notice, (ii) any
waivers or
<PAGE> 123
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 6
consents (whether or not characterized as a waiver or consent
in the relevant Loan Document) relating to the rights of the
Company or duties owing to it existing as a matter of law,
including, without limitation, waivers of the benefits of
statutory or constitutional provisions, to the extent such
waivers or consents are found by California courts to be
against public policy or which are ineffective pursuant to
California statutes and judicial decisions or (iii) any
waivers of any statute of limitations to the extent such
waivers are in excess of four years beyond the statutory
period.
F. We express no opinion as to the effect of judicial decisions
and statutes limiting the enforceability of provisions
requiring payment of additional consideration or a higher rate
of interest upon prepayment, late payment, maturity, default
or a lender's election to accelerate a loan, or as a
consequence of the imposition of governmental charges on a
lender as a result of the taking, or failure to take, of any
action by such lender, particularly in cases where (i) the
additional amount bears no reasonable relation to the damage
suffered by the lender or is otherwise held to be a penalty
(see, e.g., Lazzarechi Inv. Co. v. San Francisco Federal
Savings and Loan Assoc., 22 Cal. App. 3d 303 (1971), and
Hellenbaum v. Lytton Savings & Loan Association, 274 Cal. App.
2d 456 (1969)), or (ii) such increases constitute penalties or
forfeitures or are otherwise contrary to public policy.
G. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of any Loan
Document to the effect that rights or remedies are cumulative
or are not exclusive, that the election of some particular
remedy or remedies does not preclude recourse to one or more
other remedies or that failure to exercise or delay in
exercising rights or remedies will not operate as a waiver of
any such right or remedy.
H. We express no opinion as to any provision of any Loan Document
requiring written amendments or waivers of such documents
insofar as it suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon by
the parties or that the doctrine of promissory estoppel might
not apply.
I. We have assumed that there are no agreements or understandings
between or among the Company, the Bank, or any third parties
which would expand, modify or otherwise affect the terms of
any Loan Document or the respective rights or obligations of
the
<PAGE> 124
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 7
parties thereunder and that each of the Loan Documents
correctly and completely set forth the intent of all parties
thereto.
J. We have assumed that all parties to the Loan Documents have
filed all required franchise tax returns, if any, and paid all
required taxes, if any, under the California Revenue &
Taxation Code.
K. We have assumed that the Credit Agreement has been duly
authorized, executed and delivered by the Bank and that the
Bank has full power, authority and legal right to enter into
and perform the terms and conditions of the Credit Agreement
on its part to be performed and that the Credit Agreement
constitutes the legal, valid and binding obligation of the
Bank, enforceable against it in accordance with its terms.
L. We express no opinion as to the applicability or effect of
compliance or non-compliance by the Bank with any state,
federal or other laws applicable to the Bank or to the
transactions contemplated by the Loan Documents because of the
nature of its business, including its legal or regulatory
status.
M. We have assumed that the Bank is either (i) a "Bank" as
defined in and operating under that certain act known as the
"Bank Act" approved March 1, 1909, as amended, (ii) a bank
created and operating under and pursuant to the laws of the
State of California or of the United States or (iii) a foreign
bank complying with the criteria set forth in Section 1716 of
the California Financial Code, as amended, and is therefore
exempt from the provisions of Article XV of the California
Constitution and related statutes.
N. We express no opinion regarding compliance or non-compliance
(or the effect thereof) with applicable anti-fraud provisions
of federal or state securities laws, or with respect to the
"Blue Sky" laws of any state other than the State of
California.
O. This opinion speaks only at and as of its date and is based
solely on the facts and circumstances existing as of such
date. We express no opinion as to the effect on the Bank's
rights under the Loan Documents of any statute, rule,
regulation or other law which is enacted or becomes effective
after, or of any court decision which changes the law relevant
to such rights which is rendered after, the date of this
opinion or the conduct of the parties following the closing of
the contemplated transaction. In addition, in rendering this
opinion, we assume no obligation to revise or supplement
<PAGE> 125
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 8
this opinion should the present laws of the jurisdictions
mentioned herein be changed by legislative action, judicial
decision or otherwise.
P. We express no opinion as to any provision of any Loan Document
purporting to exculpate from liability an issuing bank which
makes payments against a presentment under any letter of
credit, to the extent the documents presented do not strictly
comply with the terms of such letter of credit.
Q. Without limitation of clause (i) of paragraph B above, we
express no opinion as to the effect of Sections 544 and 548 of
the Bankruptcy Code, Sections 3439 et. seq. of the California
Civil Code, or any other applicable federal or state,
statutory or common law relating to fraudulent transfers.
R. We express no opinion as to the effect of any provision of any
Loan Document purporting to relieve a secured party of any
duty it may have to preserve the value of collateral in its
possession (see California UCC Section 9207; see, also, e.g.
Citibank, N.A. v. Data Lease Financial Corporation 828 F.2d
686 (11th Cir. 1987)).
S. Our opinions set forth in paragraph 2 above is intended to
express our opinion that the execution, delivery and
performance by the Company of the respective Loan Documents to
which each is a party are neither prohibited by, nor subject
to the Company to a fine, penalty or similar sanction that
would be materially adverse to the Company under, any statute
or regulation of the State of California, the statutes
comprising the Delaware Corporation Laws or federal law that a
lawyer exercising customary professional diligence would
reasonably recognize as applicable to the Company or the Loan
Documents and the transactions contemplated thereby.
This opinion is made with the knowledge and understanding that you
(but no other Person) may rely thereon in entering into the Credit Agreement
and is solely for your benefit. This opinion may not be quoted to or relied
upon by any Person other than you without our prior written consent; provided,
that (i) this opinion may be disclosed to bank regulatory authorities having
jurisdiction over you requesting (or requiring) such disclosure and (ii) this
opinion may be disclosed to and relied upon by assignees of the Credit
Extensions if (a) such assignments are permitted under and made in accordance
with the Credit Agreement and (b) such assignees come within paragraph M above;
provided that in no event does this opinion extend to any issue or matter
related to any such assignment or arising from or out of any such assignment
(as distinct from the subject transaction).
<PAGE> 126
Bank of America National Trust
and Savings Association
As of February 19, 1997
Page 9
We would expect any Person to whose receipt hereof we consented, whether
directly or through the exceptions contained in the foregoing proviso, to be
bound by the provisions of this paragraph.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI,
Professional Corporation
<PAGE> 127
ANNEX A
MATERIAL AGREEMENTS
1. Indenture dated as of January 15, 1994, by and between the Company and
State Street Bank & Trust Company of California, N.A. as successor in
interest to The First National Bank of Boston, as Trustee.
<PAGE> 128
ANNEX B
CERTIFICATE AND DECLARATION
As of February 19, 1997
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
RE: CREDIT AGREEMENT WITH BANK OF AMERICA
NATIONAL TRUST & SAVINGS ASSOCIATION
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of the date hereof
(the "Credit Agreement") by and between the undersigned (the "Company"), and
Bank of America National Trust & Savings Association (the "Bank"). We have
requested you to render the legal opinion required by Section 5.01(f) of the
Credit Agreement (the "WSGR Opinion"; capitalized terms defined in the WSGR
Opinion, whether directly or indirectly by reference, and used without
definition herein to have the respective meanings herein assigned to such terms
in the WSGR Opinion). With the understanding you will rely on the statements
of fact contained in this Certificate and Declaration (the "Certificate") in
delivering the WSGR Opinion, after due investigation, the Company hereby
certifies as follows:
1. Representations and Warranties. The Company confirms to
Wilson Sonsini Goodrich & Rosati, P.C. ("WSGR") the accuracy and completeness
of the representations and warranties of the Company contained in Article VI of
the Credit Agreement, and acknowledges and agrees that WSGR is entitled to rely
thereon in connection with the WSGR Opinion.
2. Board Presentation. The material terms and conditions of the
original credit facility refinanced by the Credit Agreement and the other Loan
Documents were fairly and accurately presented to the Board of Directors of the
Company and approved by the Board prior to their execution and delivery in
January 1994. Prior to the approval of the minutes of the January, 1997
meeting of the Board, the Directors will have an opportunity to discuss and
review the terms of the Credit Agreement and the other Loan Documents,
particularly those material terms which have been modified from the prior
credit facility.
Duly Incorporated; Good Standing. The Company has been duly
incorporated and is in good standing under the laws of its jurisdiction of
incorporation, with power and authority
<PAGE> 129
Wilson Sonsini Goodrich & Rosati, P.C.
As of February 9, 1997
Page 2
(corporate and other) to own its properties and carry on its business as
currently conducted. The Company is qualified to do business as a foreign
corporation and is in good standing in every jurisdiction wherein the nature of
its business or property requires such qualification and standing, except where
the failure to obtain such qualification or maintain such standing would not
have a Material Adverse Effect. The jurisdictions in which the Company is so
qualified are listed on Schedule 1 hereto.
3. Use of Proceeds. The Company is not engaged, nor does the
Company propose to become engaged, in the business of extending credit for the
purpose of buying or carrying margin stock (as hereinafter defined) and no part
of the proceeds of any Credit Extension will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing
or carrying margin stock. As used herein, "margin stock" means (a) any equity
security registered or having unlisted trading privileges on a national
securities exchange, (b) any stock traded in the over-the-counter market and
designated as a margin security by the Board of Governors of the Federal
Reserve System, (c) any security designated as qualified for trading in the
National Market System of the National Association of Securities Dealers, Inc.,
(d) any debt security convertible into the foregoing securities or carrying a
warrant or right to subscribe to or purchase the foregoing securities, (e) any
warrant or right to subscribe to or purchase the foregoing securities, or (f)
any security issued by an investment company within the contemplation of the
Investment Company Act of 1940.
4. No Investment Companies. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
("Investment Company"). The Company is not, does not hold itself out as being
or propose to become, engaged primarily in the business of investing,
reinvesting, or trading securities. The Company is not engaged in, nor does
the Company propose to engage in, the business of issuing face-amount
certificates of the installment type, nor does the Company have any such
certificates outstanding. The Company does not own or propose to acquire
investment securities exceeding forty percent (40%) of the Company's total
assets on an unconsolidated basis. "Investment securities" means all
securities other than government securities, securities issued by employees'
securities companies, and securities issued by majority-owned Subsidiaries of
the Company which are not Investment Companies.
5. No Public Utilities. The Company does not directly or
indirectly, own, control, or hold with power to vote, 10 per cent or more of
the outstanding voting securities of a public-utility company (as hereinafter
defined) or of a company which, directly or indirectly, owns, controls, or
holds with power to vote, 10 per cent or more of the outstanding voting
securities of a public-utility holding company (as hereinafter defined). The
Securities and Exchange Commission has not determined that the Company,
directly or indirectly, exercises controlling influence over the management or
policies of any public-utility holding company or any subsidiary of such
public-utility holding company, no public-utility holding company or subsidiary
thereof (i) directly or indirectly owns, controls or holds with power to vote
10 per cent or more of the outstanding voting securities of the Company or (ii)
has been determined by the Securities and Exchange Commission to exercise a
controlling influence, directly or indirectly, over the Company. The Company
is not an affiliate (as hereinafter defined) of a public-utility holding
company or a subsidiary of a public-utility holding
<PAGE> 130
Wilson Sonsini Goodrich & Rosati, P.C.
As of February 9, 1997
Page 3
company. A "public-utility company" means either (i) a company which owns or
operates facilities used for the generation, transmission, or distribution of
electric energy for sale, other than sale to tenants or employees of the
company operating such facilities for their own use and not for resale, or (ii)
a company which owns or operates facilities used for the distribution at retail
(other than distribution only in enclosed portable containers, or distribution
to tenants or employees of the company operating such facilities for their own
use and not for resale) of natural or manufactured gas for heat, light or
power. A "public-utility holding company" means any company which (i) directly
or indirectly, owns, controls or holds with power to vote, 10 per cent or more
of the outstanding voting securities of a public-utility company or of
public-utility holding company or (ii) has been determined by the Securities
and Exchange Commission to, directly or indirectly, exercise controlling
influence over the management and policies of a public-utility company or
public-utility holding company. "Affiliate" of a specified company means, for
the purposes of this paragraph, (i) any person that directly or indirectly
owns, controls or holds with power to vote, 5 per cent or more of the
outstanding voting securities of the specified company, (ii) any company, 5 per
cent or more of whose outstanding voting securities are owned, controlled or
held with power to vote, directly or indirectly, by the specified company,
(iii) any individual who is an officer or director of the specified company or
any company which is an affiliate thereof under clause (i), and (iv) any person
or class of persons determined by the Securities and Exchange Commission to be
an affiliate of the specified company. The Company makes no representation
regarding Citicorp Venture Capital for the purposes of this paragraph.
6. Regulations G, T, U and X. The Company is not engaged, and
does not propose to become engaged, in the business of extending credit for the
purpose of buying or carrying margin stock (as hereinafter defined) and no part
of the proceeds of any Credit Extension will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing
or carrying margin stock. As used herein, "margin stock" means (i) any equity
security registered or having unlisted trading privileges on a national
securities exchange, (ii) any stock traded in the over-the-counter market and
designated as a margin security by the Board of Governors of the Federal
Reserve System, (iii) any security designated as qualified for trading in the
National Market System of the National Association of Securities Dealers, Inc.,
(iv) any debt security convertible into the foregoing securities or carrying a
warrant or right to subscribe to or purchase the foregoing securities, (v) any
warrant or right to subscribe to or purchase the foregoing securities, or (vi)
any security issued by an investment company within the contemplation of the
Investment Company Act of 1940.
7. No Consents. To the Company's knowledge, there are no
governmental licenses, permits, consents or approvals which are required as of
the date hereof for the ownership and operation of their respective properties
and for the conduct of its business the failure to obtain which would
reasonably be expected to have a Material Adverse Effect, which the Company has
not obtained.
8. Chief Executive Offices. The chief executive office of the
Company is located at 337 Encinal Street, Santa Cruz, CA 95060.
<PAGE> 131
Wilson Sonsini Goodrich & Rosati, P.C.
As of February 9, 1997
Page 4
9. Verification. The undersigned has taken all reasonably
necessary steps to verify the information set forth in this Certificate. The
undersigned has examined such corporate records, and has made such inquiries of
officers and executives of the Company, as the undersigned has deemed
reasonable and necessary in order to ensure the accuracy of the representations
set forth herein. To the extent such representations refer to legal
conclusions, as opposed to matters of fact or to matters of fact, the accuracy
of which are dependent upon legal conclusions, the undersigned or another
representative of the Company has had the opportunity to have such
consultations with you as the undersigned or another representative of the
Company has deemed necessary to resolve all known or potential legal matters
based upon each of the undersigned's knowledge of the applicability of matters
of law to the Company, its business activities or agreements or the Loan
Documents and the transactions contemplated thereby and is relying on the
advice so received. Neither the undersigned nor the Company is aware of any
fact or circumstance which would render any conclusion reached in the WSGR
Opinion inaccurate or misleading.
Very truly yours,
PLANTRONICS, INC.
/s/John A. Knutson
------------------------
By: John A. Knutsen
Title: Secretary and
Senior General Counsel
<PAGE> 132
Schedule 1
Foreign Jurisdictions in which Plantronics
is Qualified to do business
California
Maryland
Pennsylvania
<PAGE> 133
EXHIBIT E-1
FORM OF LC APPLICATION FOR STANDBY LETTERS OF CREDIT
(Bank form "Application and Agreement for Standby Letter of Credit" to be used
- -- specimen of version current as of the Closing Date attached. Reverse of form
may be crossed out as indicated on the attached.)
E-1-1
<PAGE> 134
BANK OF AMERICA
=============================================================================
APPLICATION AND AGREEMENT
FOR STANDBY LETTER OF CREDIT
-------------------------------
for Bank Use Only
L/C No. ____________________
-------------------------------
TO: Bank of America National Trust and Savings Association ("Bank")
A. APPLICATION.
______________________ ("Customer") requests Bank to issue an irrevocable
standby letter of credit ("Letter of Credit") as follows:
[ ] Full text teletransmission [ ] Airmail with brief preliminary
teletransmission advice
[ ] Airmail [ ] Courier
For account of In favor of
(Customer Name and Address) (Beneficiary name and Address)
________________________________ ________________________________
________________________________ ________________________________
________________________________ ________________________________
________________________________
Advising Bank ________________________________
________________________________ ________________________________
________________________________ ________________________________
________________________________
Amount_______________(_________ ) Expiration Date: Drafts to be drawn on
In Words and Figures and presented at Bank's issuing unit on
or before:____________________ , 19___
Currency________________________
Available by drafts drawn at sight on Bank's issuing unit when accompanied by
the following documentation:
1. The original standby letter of credit.
2. The signed statement of the beneficiary worded as follows (state
exact wording that is to appear in the statement accompanying the
draft):
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Special Instructions: ________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Customer understands that the risk to Customer is greater if Customer
requests a standby letter of credit which requires only a draft rather than a
standby letter of credit which requires supporting documentation.
Customer understands that the final form of the Letter of Credit may be
subject to such revisions and changes as are deemed necessary or appropriate by
Bank's letter of credit issuing unit and Customer hereby consents to such
revisions and changes.
<PAGE> 135
This Application and Agreement is executed by and is an L/C Application made
Customer on _____________________, 19____/ under that certain Credit
Agreement between Customer and
Bank dated as of February 19,
____________________________________________ 1997, as amended, restated,
(Name of Customer) modified, supplemented,
extended or renewed from
time to time.
By:____________________________________ Title:_________________________________
By:____________________________________ Title:_________________________________
- -------------------------------------------------------------------------------
FOR OFFICE USE ONLY
- -------------------------------------------------------------------------------
FX-149 TO: [ ] International Trade Banking Division--Los Angeles Operations
Center #5655
- -------------------------------------------------------------------------------
COMMISSION [ ] Per MISC-42 [ ] Other_____________________________________
[ ] Charge Branch [ ] Charge directly
[ ] Commissions and Charges only
[ ] Drawings, Commissions and Charges
- -------------------------------------------------------------------------------
FINANCIAL SERVICES OFFICER NAME (Type or Print)
- -------------------------------------------------------------------------------
BANKAMERINET NO.
- -------------------------------------------------------------------------------
CDA/DDA CUSTOMER A/C#
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCIAL SERVICES OFFICER SIGNATURE
- -------------------------------------------------------------------------------
BRANCH/DEPT. NAME
- -------------------------------------------------------------------------------
BRANCH/DEPT. NO.
- -------------------------------------------------------------------------------
<PAGE> 136
EXHIBIT E-2
FORM OF L/C APPLICATION FOR COMMERCIAL LETTERS OF CREDIT
[Bank form "Application and Agreement for Commercial Letter of Credit" to be
used -- specimen of version current as of the Closing Date attached. Reverse of
form may be crossed out as indicated on the attached.]
E-2-1
<PAGE> 137
[logo] BANK OF AMERICA APPLICATION AND AGREEMENT
FOR COMMERCIAL LETTER OF CREDIT
- -------------------------------------------------------------------------------
To: Bank of America National Trust and Savings Association ("Bank")
A. APPLICATION
________________________ ("Customer") requests Bank to issue an irrevocable
commercial letter of credit ("Letter of Credit") as follows:
[ ] Full text teletransmission
[ ] Airmail with brief preliminary teletransmission advice
[ ] Airmail [ ] Courier
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Advising bank and address | 4. For account of (Customer Name and Address)
(if left blank, Bank will reject advising bank) |
|
|
|
|
|
|
|
|
- -----------------------------------------------------------------------|
FOR BANK USE ONLY | 5. In favor of (Beneficiary Name and Address)
- -----------------------------------------------------------------------|
2. L/C No. |
__________________________________ |
_______________________________________________________________________|
3. Expiration Date: Drafts to be drawn and presented to the |
negotiating or paying bank on or before: |___________________________________________________________
|
| 6. Amount: ____________________________________________
_______________________________, 19___ | [____________________________] [In word and figures.]
| Currency ____________________________________________
_______________________________________________________________________|___________________________________________________________
7. Covering ___________% of invoice value. (Full invoice value unless otherwise specified.)
- -----------------------------------------------------------------------------------------------------------------------------------
8. Available by drafts at (Tenor) _____________________ on Bank, Bank's branch or Bank's correspondent, at Bank's option,
or Bank may waive draft requirement.
- -----------------------------------------------------------------------------------------------------------------------------------
9. Partial Shipment | 10. Transhipment (Not applicable to Air Shipments or Combined Transport Shipments.)
[ ] Permitted [ ] Not Permitted | [ ] Permitted [ ] Not Permitted
- -----------------------------------------------------------------------------------------------------------------------------------
11. Shipment/Diagram/Taking in Charge from/At Latest For Transportation to
| |
___________________________________________________|______________________|________________________________________________________
12. Merchandise to be described in invoice as (omit unnecessary details and specify price basis in box 13).
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
13. Price basis (Check one):
[ ] FOB [ ] CFR [ ] CIF [ ] Other: __________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
14. Documents required (Check applicable boxes below):
[ ] Signed commercial invoice in duplicate.
[ ] Marine and war insurance policy or certificate for 110$ Invoice value in duplicate.
Insurance to be effected by: __________________________________________________________________________________________
[ ] Original clean [ ] Air [ ] Truck [ ] Rail transport document.
Consigned to: _________________________________________________________________________________________________________
Notify (if different from consignee): _________________________________________________________________________________
[ ] Full set of originals clean on board vessel marine bill of lading, to order of shipper, blank endorsed, marked:
"Notify _____________________________________________________________________________________________________________."
[ ] Full set of originals clean combined transport bill of lading, to order of shipper, blank endorsed, marked:
"Notify _____________________________________________________________________________________________________________."
[ ] If combined transport bill of lading is required, check: [ ] on board vessel [ ] on board inland carrier.
[ ] Bill of lading marked (select one): [ ] freight prepaid [ ] freight collect.
[ ] Other documents: ______________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
15. Special Instructions to be included in the Letter of Credit: ______________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
Special Instructions to Bank: _____________________________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
Documents must be presented to the negotiating or paying bank no later than _____ days after date of transport document (on board
validation applicable for ocean shipment) but within the validity of the Letter of Credit. All documents to be forwarded in one
cover, by airmail, unless otherwise stated under Special Instructions.
- -----------------------------------------------------------------------------------------------------------------------------------
Customer understands that the final form of the Letter of Credit may be subject to such revisions and changes as are deemed
necessary or appropriate by Bank's letter of credit leasing unit and Customer hereby consents to such revisions and changes.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FX-150 B-91
<PAGE> 138
B. Agreement.
In consideration of Bank issuing for the account of Customer the Letter
of Credit, Customer agrees to the following
7. Customer will obtain, or cause to be obtained, insurance on all
goods described in the Letter of Credit. The insurance will cover fire and
other usual risks, and any additional risks Bank may request. Customer
authorizes and empowers Bank to effect the proceeds of any insurance and apply
such proceeds against any of Customer's obligations to Bank under the
Application and Agreement.
8. Customer represents and warrants to Bank that Customer has obtained
all import and export licences and other governmental approvals required for the
goods and the documents described in the Letter of Credit.
9. All directions and correspondence relating to the Letter of Credit
are to be sent at Customer's risk and expense.
10. (a) Customer hereby grants to Bank a security interest in the
following described property, whether now owned or hereafter acquired by
Customer ("Collateral"):
(i) All goods and documents described in the Letter of
Credit;
(ii) All negotiable and nonnegotiable documents of title
covering any of the above-described property;
(iii) All rights under contracts of insurance covering any of
the above-described property;
(iv) All deposit accounts now or hereafter maintained with
Bank with respect to the Letter of Credit; and
(v) All proceeds of any of the above-described property.
(b) The Collateral securities and will secure all obligations and
liabilities of Customer to Bank under or in respect of this Application
Agreement, whether now existing or thereafter incurred or created, whether due
or to become due, and whether absolute or contingent.
(c) If Customer defaults under any provision of this application and
Agreement, Bank may enforce the security interest granted hereunder pursuant
to the California Uniform Commercial Code or any other applicable law in the
event of any deficiency. Customer will immediately pay the same to Bank.
(d) in the event the Collateral should suffer any decline in
value Customer shall, on demand, deliver to Bank additional Collateral
satisfactory to Bank.
This Application and Agreement is executed by Customer on _______________, 19__
and is an L/C Application made under that Credit Agreement
_______________________________________
(Name of Customer)
By:____________________________________ Title:_________________________________
By:____________________________________ Title:_________________________________
- -------------------------------------------------------------------------------
FOR OFFICE USE ONLY
- -------------------------------------------------------------------------------
FX-150 TO: [ ] TRADE FINANCE SERVICES: Concord #6569
[ ] TRADE FINANCE SERVICES - Los Angeles 5655
- -------------------------------------------------------------------------------
COMMISSION [ ] Per MISC-42 [ ] Other_____________________________________
[ ] Charge Branch [ ] Charge directly
[ ] Commissions and Charges only
[ ] Drawings, Commissions and Charges
- -------------------------------------------------------------------------------
FINANCIAL SERVICES OFFICER NAME (Type or Print)
- -------------------------------------------------------------------------------
BANKAMERINET NO.
- -------------------------------------------------------------------------------
DDA CUSTOMER A/C#
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCIAL SERVICES OFFICER SIGNATURE
- -------------------------------------------------------------------------------
BRANCH/DEPT. NAME
- -------------------------------------------------------------------------------
BRANCH/DEPT NO.
* or that certain Credit Agreement dated as of February 19, 1997 between
Customer and Bank, as amended, restated, modified, supplemented, renewed or
extended from time to time (the "Credit Agreement")
<PAGE> 139
EXHIBIT F-1
FORM OF L/C AMENDMENT APPLICATION FOR STANDBY LETTERS OF CREDIT
[Bank form "Application for Amendment to Standby Letter of Credit" to be used
- -- specimen of version current as of the Closing Date attached.]
F-1-1
<PAGE> 140
[LOGO] BANK OF AMERICA Application for Amendment
to Standby Letter of Credit
- -------------------------------------------------------------------------------
Location: Date:
- -------------------------------------------------------------------------------
TO: Bank of America NT&SA I request you to [ ] Airmail
AMEND by the irrevocable Documentary [ ] Teletransmission
Letter of Credit No.____________________________
- -------------------------------------------------------------------------------
For Account of (Applicant) In Favor of [Beneficiary]
- -------------------------------------------------------------------------------
Please amend the credit as follows:
I understand that this amendment is subject to acceptance by the beneficiary.
All other terms and conditions of the Letter of Credit remain unchanged.
- -------------------------------------------------------------------------------
The bank agrees to the amendment described above. Name of Applicant
Bank of America NT&SA
- -------------------------------------------------------------------------------
By Signature Signature
X
- -------------------------------------------------------------------------------
Name and Title of Signer Name and Title of Signer
- -------------------------------------------------------------------------------
ADMINISTRATION USE OFFICE USE
- -------------------------------------------------------------------------------
Retail Financial Services [ ] Recommend--CR-32/CH115 [ ] Approved--One copy
To: Regional Administration in triplicate attached of CR-32/CR-115 or
Credit No._________________ Forward to Regional/ CR-116 to Credit
Division Credit Review Center
___________________________ Administration [Reporting Only]
World Banking Division _________________________________________________
To: [ ] Division Credit Financial Services Office Name (Type or Print)
Administration
No._________________
[ ] Division Area Office
No._________________
_____________________________ Signature
APPROVAL
X______________________________________________
- -------------------------------------------------------------------------------
Date Branch/AMG Name NO
- -------------------------------------------------------------------------------
Credit Administrator [ ] Credit Amendment Fee Min. $
[ ] Prepayment [UFE attached]
- -------------------------------------------------------------------------------
<PAGE> 141
EXHIBIT F-2
FORM OF L/C AMENDMENT APPLICATION FOR
COMMERCIAL LETTERS OF CREDIT
-------------------------------------
[Bank form "Application for Amendment to Commercial Letter of Credit" to be
used -- specimen of version current as of the Closing Date attached.]
F-2-1
<PAGE> 142
[LOGO] BANK OF AMERICA Application for Amendment
Commercial Letter of Credit
- -------------------------------------------------------------------------------
Location: Date:
- -------------------------------------------------------------------------------
TO: Bank of America NT&SA I request you to [ ] Airmail
AMEND by the irrevocable Documentary [ ] Teletransmission
Letter of Credit No.____________________________
- -------------------------------------------------------------------------------
For Account of Applicant In Favor of [Beneficiary]
- -------------------------------------------------------------------------------
Please amend the credit as follows:
I understand that this amendment is subject to acceptance by the beneficiary.
All other terms and conditions of the Letter of Credit remain unchanged.
- -------------------------------------------------------------------------------
Name of Applicant Signature
X
- --------------------------------------------------------------------------------
Name and Title of Signer
- -------------------------------------------------------------------------------
ADMINISTRATION USE OFFICE USE
- -------------------------------------------------------------------------------
Retail Financial Services [ ] Recommend--CR-32/CH115 [ ] Approved--One copy
To: Regional Administration in triplicate attached of CR-32/CR-115 or
Credit No._________________ Forward to Regional/ CR-116 to Credit
Division Credit Review Center
___________________________ Administration [Reporting Only]
World Banking Division _________________________________________________
To: [ ] Division Credit Financial Services Office Name (Type or Print)
Administration
No._________________
[ ] Division Area Office
No._________________
_____________________________ Signature
APPROVAL
X______________________________________________
- -------------------------------------------------------------------------------
Date Branch/AMG Name NO
- -------------------------------------------------------------------------------
Credit Administrator [ ] Credit Amendment Fee Min. $
[ ] Prepayment [UFE attached]
- -------------------------------------------------------------------------------
<PAGE> 143
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as
of May __, 1997, effective for all purposes as of February 19, 1997, is entered
into by and between PLANTRONICS, INC., a Delaware corporation (the "Company")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank").
RECITALS
A. The Company and the Bank are parties to a Credit Agreement dated
as of February 19, 1997 (the "Credit Agreement") pursuant to which the Bank has
extended certain credit facilities to the Company.
B. The Company and the Bank desire to amend the Credit Agreement to
correct an error therein, subject to the terms and conditions of this
Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 8.12 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
8.12 Net Funded Debt to EBITDA Ratio. The Company shall not
permit as of the last day of any fiscal quarter the Net Funded Debt to
EBITDA Ratio to be more than 3.00:1.00.
(b) Schedule 2 to Exhibit C to the Credit Agreement (the
form of Compliance Certificate) is hereby amended and restated in its entirety
to read as set forth in Schedule 2 attached hereto.
3. Representations and Warranties. The Company hereby represents and
warrants to the Bank that the execution, delivery and performance by the
Company of this Amendment have been duly authorized by all necessary corporate
and other action and do not and will not require any registration with, consent
or approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable.
<PAGE> 144
4. Reservation of Rights. The Company and the Bank acknowledge
and agree that the execution and delivery by the parties of this Amendment
shall not be deemed to create a course of dealing or otherwise obligate the
Bank or the Company to execute similar amendments under the same or similar
circumstances in the future.
5. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment
shall be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
(e) This Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with
reference to the matters discussed herein and therein. This Amendment
supersedes all prior drafts and communications with respect thereto. This
Amendment may not be amended except in accordance with the provisions of
Section 10.01 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be
deemed prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this Amendment or
the Credit Agreement, respectively.
2
<PAGE> 145
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
PLANTRONICS, INC.
By: ___________________________
Name: John A. Knutson
Title: Vice President-Legal,
Senior General Counsel
and Secretary
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: ____________________________
Name: _________________________
Title: Managing Director
3
<PAGE> 146
Date: ______________, _____
For the fiscal quarter/year
ended ______________, _____
SCHEDULE 2
to the Compliance Certificate
($ in 000's)1/
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
1. Section 8.12 Net Funded Debt to
EBITDA Ratio.
The ratio of:
A. Net Funded Debt:
the difference of:
(i) Indebtedness2/ __________
plus
(ii) Guaranty Obligations2/ __________
less
(iii) cash and Cash Equivalents3/
__________
(i)+(ii)-(iii) = __________
B. EBITDA4/
the sum of:
(i) net income or loss5/ __________
plus
(ii) depreciation __________
plus
(iii) amortization __________
plus
(iv) interest __________
plus
(v) taxes on income __________
plus
</TABLE>
1/ All items determined on a consolidated basis and in accordance
with GAAP, consistently applied.
2/ See definition of Net Funded Debt for certain items excluded.
3/ Not subject to any Lien, and to extent exceeding $5,000,000.
4/ Calculated on a rolling four-quarter basis.
5/ Without giving effect to extraordinary losses or gains
4
<PAGE> 147
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
(vi) non-cash expenses or charges for
management stock compensation
__________
(i)+(ii)+(iii)+(iv)+(v)+(vi) = __________
A
-----
B = Not more than 3.00
==========
2. Section 8.13 Tangible Net Worth.
-------------------------------
Tangible Net Worth: Not to be less than the sum of:
(i) gross book value of assets __________ A. Tangible Net Worth as of
12/28/96:
less
----
(i) gross book value
(ii) goodwill, licensing agreements, patents, of assets __________
trademarks, trade names, organization
expenses, treasury stock, unamortized less
debt discount and premium, deferred ----
charges and other like intangibles
(ii) goodwill, licensing
agreements, patents, trade-
less marks, trade names, organi-
---- zation expenses, treasury
__________ stock, unamortized debt
(iii) reserves applicable to assets (including discount and premium, deferred
reserves for depreciation and charges and other like
amortization) intangibles __________
less
----
less
---------- ----
(iii) reserves applicable
to assets (including reserves
for depreciation and
amortization) __________
(iv) all liabilities (including less
accrued and deferred income taxes and ----
any subordinated
liabilities) (iv) all liabilities
__________ (including accrued and
deferred income taxes and
(i)-(ii)-(iii)-(iv) = subordinated liabilities) __________
==========
(i)-(ii)-(iii)-(iv) = __________
x 90%
------------------
6/
==========
less
----
</TABLE>
- ----------------------------------
6/ Calculation will need to be done for first compliance certificate
only; thereafter, this number will be inserted.
5
<PAGE> 148
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
B. Stock repurchases after
12/28/96 (not to exceed
$20,000,000) __________
plus
C. 50% of net income after
income taxes (without
subtracting losses)
earned after 12/28/96 __________
plus
</TABLE>
6
<PAGE> 149
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
D. 75% of net proceeds
from any equity
securities issued
after 12/28/96 __________
plus
----
E. 75% of any increase
in stockholder's
equity resulting
from the conversion
of debt securities
to equity securities
after 12/28/96 __________
A - B + C + D + E =
==========
3. Section 8.14 Interest Coverage
Ratio.7/.
The ratio of:
A. Adjusted EBITDA
(i) EBITDA (from 1(B) above) __________
less
----
(ii) Capital Expenditures __________
(i) - (ii) __________
B. Cash Interest Expense
(i) Total interest expense
(including commissions,
discounts, fees and other charges in
connection with standby letters of
credit and similar instruments
__________
less
----
(ii) Non-cash items included in (i)
__________
(i) - (ii) __________
A
-----
B = Not less than 3.00
==========
</TABLE>
- ----------------------------------
7/ Calculated on a rolling four-quarter basis.
-
7
<PAGE> 1
EXHIBIT 13
PLANTRONICS, INC. INTRODUCED THE FIRST LIGHTWEIGHT COMMUNICATIONS
HEADSET IN 1962 AND IS TODAY THE WORLD'S LEADING DESIGNER, MANUFACTURER AND
MARKETER OF HEADSET PRODUCTS. IN ADDITION, THE COMPANY PRODUCES PRODUCTS FOR THE
COMPUTER AND MOBILE MARKET SEGMENTS, SPECIALTY TELEPHONE PRODUCTS, SUCH AS
AMPLIFIED TELEPHONE HANDSETS, TELEPHONES FOR HEARING-IMPAIRED USERS AND
NOISE-CANCELLING HEADSETS AND HANDSETS FOR USE IN HIGH-NOISE ENVIRONMENTS.
PLANTRONICS SELLS ITS AUDIO-INTERFACE TECHNOLOGY IN ALL REGIONS OF THE WORLD
THROUGH A GLOBAL NETWORK THAT INCLUDES THE INDUSTRY'S LEADING DISTRIBUTORS,
TELEPHONE COMPANIES, RETAILERS AND COMMUNICATIONS SYSTEMS OEMS. THE COMPANY IS
HEADQUARTERED IN SANTA CRUZ, CALIFORNIA, WITH OFFICES IN FOURTEEN COUNTRIES,
INCLUDING MAJOR FACILITIES IN TIJUANA, MEXICO; RINGGOLD, GEORGIA; WOOTTON
BASSETT, ENGLAND AND HOOFDDORP, NETHERLANDS.
AIRSET(TM) CORDLESS ADAPTER It's what our customers asked for: a cordless
telephone adapter with a lightweight, stylish remote unit. Add a Plantronics
headset for true hands-free mobility in the office. Based on infrared
technology, the AirSet Cordless Adapter is ideal for busy professionals in an
enclosed office environment.
<PAGE> 2
Our VISION has made Plantronics the world's leading provider of lightweight
communications headsets, enabling us to anticipate -- and meet -- customers'
ever-changing requirements.
Our comprehensive research and understanding of ERGONOMICS are reflected in
Plantronics products, which are designed for maximum comfort, effectiveness and
reliability.
A focus on continually improving the ACOUSTIC quality of our products keeps
Plantronics on the cutting-edge of communications headset technology.
Providing a wide range of hands-free communication solutions, Plantronics is
leading the way with innovative products for an increasingly WIRELESS world.
<PAGE> 3
As the long-standing global leader in lightweight communications headsets,
Plantronics continued to push the boundaries in 1997 with new offerings for
office, call center, mobile and home environments. Our new AirSet Cordless
Adapter, for example, sets new standards for cordless communications in the
office. The Company's first cordless adapter, the AirSet Cordless Adapter
features a sleek, clip-on design and innovative infrared technology. The AirSet
Cordless Adapter instantly boosts office productivity by allowing users to
talk on the phone while performing other tasks away from their desks. Also new
for the office, the Headset Switcher(TM) Adapter provides advanced computer
telephony integration capabilities that let users effortlessly toggle between
telephone and computer audio applications, further increasing productivity.
Designed for carbon-based telephone systems in large call centers, the new E10
Headset Adapter is extremely lightweight yet fully featured. Its built-in "Rep
Not Available" capability automatically routes calls to available personnel,
significantly improving call center efficiency.
<PAGE> 4
We also delivered innovative offerings for mobile users this year. Our new
CHS132(TM) cellular headset features outstanding sound clarity and award-winning
design. Now the growing number of people who are increasingly on the move can
bring with them the hands-free safety of Plantronics quality, performance and
reliability. For home use, the new Personal Paging System(TM) product is a
personal notification system that alerts people to important sounds -- such
as the telephone, doorbell or crying baby -- within their home environment.
Plantronics' industry-leading lightweight communications headsets combine
advanced technology and innovative design, enabling our customers to better
look, listen, speak and touch. We provide superior acoustics and ergonomics for
personal computer, call center and home environments, as well as for burgeoning
wireless and mobile applications. Plantronics continues to deliver a wide range
of leading-edge products that are improving productivity -- and creating
exciting new possibilities -- for millions of people around the world.
<PAGE> 5
Dear Shareholder:
FOCUS ON GROWTH In fiscal 1997 we grew sales 6.7% to $195.3 million while
earnings outpaced this, growing 16.5% to $29.7 million, our fifth consecutive
record year. The good news is that our major market segments are growing and
should provide a platform for continuing growth well into the future. We have
seen the continued expansion of call centers in the U.S., many of which are
upgrading to our newer products, accelerating international demand, and
increasing requirements from office professionals, the small office/home office
market segment, and the mobile professional market segment. These latter
emerging markets are potentially larger than our core call center business.
THE NEW MARKETS VALUE MOBILITY Therefore, we are focusing our growing R&D effort
on wireless products to serve these market segments. In June we announced the
AirSet(TM) Cordless Adapter - a wireless headset for the office market segment -
which we believe represents a major advancement in acoustics, convenience and
affordability and early market reaction is encouraging. During the past year we
also introduced our first headsets for mobile phones.
PERFORMANCE To grow a successful profitable business, we must deliver value to
our customers. In fiscal 97, a survey of our channel partners ranked Plantronics
#1 in 46 of 51 major business areas, 2nd in the other 5, and 1st overall. In
addition, we were honored by the decisions of Deutsche Telekom and Telstra, the
giant German and Australian telecommunication providers, both of whom selected
Plantronics as their main headset supplier for the first time.
Internal performance is improving as well with gross margin increasing from
52.5% to 53.6% and return on sales increasing from 13.9% to 15.2%. Productivity,
as measured by both revenue per person and operating income per person, also
improved. Based on higher operating income and a 10% improvement in accounts
receivable turnover, Plantronics generated $34.6 million of cash flow from
operations, of which $12.8 million was used to repurchase stock. In total, our
cash position increased by over $15 million to $42.3 million.
For shareholders, both absolute and relative performance are crucial metrics.
Since Plantronics' IPO in January of 1994, the stock price has increased at a
46.5% compound annual rate, exceeding our peer groups. We realize your focus is
the return we have to generate tomorrow and this is ours as well. To spread this
incentive throughout the team, we have implemented an incentive stock purchase
plan for all of our associates worldwide.
Internal growth is not our only avenue for expansion. We recently brought on
board a Senior Vice President of Corporate Development and a new CFO to help us
evaluate other avenues for growth and added capability to achieve our goal of
being a thriving global competitor in the next century. We turn to fiscal 1998
stronger than we were a year ago and are very appreciative of the continuing
support of our customers, distribution partners, suppliers, shareholders, and
associates.
/s/ Robert S. Cecil
Robert S. Cecil
Chairman and Chief Executive Officer
<PAGE> 6
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
fiscal year ended march 31,
(in thousands, except per share data) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sale $195,307 $182,959 $169,923 $133,996 $112,267
Cost of sales 90,567 86,887 84,268 67,293 62,328
Gross profit 104,740 96,072 85,655 66,703 49,939
Nonrecurring write-offs of
intangible assets -- -- -- 39,329 811
Costs of restructuring and
relocation activities -- -- -- 9,337 1,247
Operating expenses 54,401 48,563 42,542 33,987 29,161
Operating income (loss) 50,339 47,509 43,113 (15,950) 18,720
Interest expense 7,104 7,140 7,987 22,403 23,369
Interest income and other
income, net (income) (1,722) (1,385) (146) (621) (47)
Income (loss) before income taxes 44,957 41,754 35,272 (37,732) (4,602)
Income tax expense 15,286 16,284 14,464 2,964 552
Income (loss) from continuing
operations 29,671 25,470 20,808 (40,696) (5,154)
Net loss from discontinued
operations -- -- -- -- (1,500)
Mandatorily redeemable preferred
stock dividends -- -- -- (1,298) (1,388)
Net income (loss) attributable
to holders of common stock $ 29,671 $ 25,470 $ 20,808 $ (41,994) $ (8,042)
Income (loss) from continuing
operations per common
share(1) $ 3.34 $ 2.84 $ 2.38 $ (6.55) $ (1.10)
Loss from discontinued operations
per common share(1) -- -- -- -- (0.25)
Net income (loss) per common
share attributable to
holders of common stock(1) $ 3.34 $ 2.84 $ 2.38 $ (6.55) $ (1.35)
Shares used in per share
calculations 8,896 8,982 8,756 6,415 5,976
</TABLE>
<TABLE>
<CAPTION>
fiscal year ended march 31,
(in thousands, except number
of employees) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets $127,241 $108,661 $ 74,855 $ 67,026 $125,278
Long-term debt 65,050 65,050 65,050 85,000 143,932
Mandatorily redeemable stock -- -- -- -- 9,904
Other data:
Number of employees 1,515 1,365 1,106 1,396 1,093
</TABLE>
(1) See Note 2 of the Notes to Consolidated Financial Statements.
<PAGE> 7
<TABLE>
<CAPTION>
Sales
(dollars in millions)
<S> <C> <C> <C> <C>
93 94 95 96 97
112 134 170 183 195
</TABLE>
<TABLE>
<CAPTION>
Market Capitalization
(dollars in millions)
Market Capitalization =
share price x number shares outstanding
<S> <C> <C> <C> <C>
93 94 95 96 97
103 125 227 317 367
</TABLE>
<TABLE>
<CAPTION>
Operating Income Less
Nonrecurring Expenses
(dollars in millions)
<S> <C> <C> <C> <C>
93 94 95 96 97
21 33 43 48 50
</TABLE>
<TABLE>
<CAPTION>
Investment in Research
& Development
(dollars in millions)
<S> <C> <C> <C> <C>
93 94 95 96 97
4.3 6.9 11.6 13.7 14.5
</TABLE>
<PAGE> 8
BOARD OF DIRECTORS CORPORATE INFORMATION
Robert S. Cecil Corporate Headquarters
Chairman of the Board, 337 Encinal Street
President and Chief Executive Officer Santa Cruz, California 95060
Telephone: 408-426-6060
Robert F.B. Logan Fax: 408-426-6098
Private Investor http://www.plantronics.com
M. Saleem Muqaddam Registrar and Transfer Agent
Vice President Boston EquiServe, L.P.
Citicorp Venture Capital, Ltd. Shareholder Services
MailStop: 45-01-06
John Mowbray O'Mara P.O. Box 644
Management Consultant Boston, Massachusetts 02102-0644
Trude C. Taylor Independent Accountants
Private Investor Price Waterhouse LLP
San Jose, California
J. Sidney Webb
Chairman of the Board Corporate Counsel
The Titan Corporation Wilson, Sonsini, Goodrich & Rosati
Palo Alto, California
David A. Wegmann
Private Investor
EXECUTIVE OFFICERS
Robert S. Cecil
Chairman of the Board,
President and Chief Executive Officer
C. Donald Cooper
Senior Vice President -
Business Development, Marketing &
Quality and Chief Strategy Officer
Donald S. Houston
Vice President - Sales
David Huddart
Vice President -
Engineering and Technology
S. Kenneth Kannappan
Senior Vice President
John A. Knutson
Vice President - Legal, Senior General
Counsel and Secretary
Barbara V. Scherer
Vice President - Finance and
Administration and Chief Financial
Officer
<PAGE> 9
FORM 10-K
A copy of the Annual Report on Form 10-K filed with the Securities and Exchange
Commission that contains additional information about the Company may be
obtained without charge by writing to:
Investor Relations
Plantronics, Inc.
P.O. Box 1802
Santa Cruz, CA 95061-1802
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value, has traded on the New York Stock
Exchange, under the symbol "PLT," since the Company's initial public offering on
January 19, 1994. The initial offering price was $12.50 per share.
The following table sets forth the high and low daily sales prices for the
Common Stock for the Company's 1997 and 1996 fiscal years.
<TABLE>
<CAPTION>
FY 1997 Low High
- ----------------------------------------------------
<S> <C> <C>
First Quarter $353/8 $401/2
Second Quarter $37 $391/2
Third Quarter $365/8 $44
Fourth Quarter $43 $493/4
</TABLE>
<TABLE>
<CAPTION>
FY 1996 Low High
- ----------------------------------------------------
<S> <C> <C>
First Quarter $231/2 $281/2
Second Quarter $26 $377/8
Third Quarter $321/2 $361/2
Fourth Quarter $31 $373/4
</TABLE>
No cash dividends were declared or paid during fiscal 1997 and fiscal
1996, and the Company has no current intention to pay dividends. As of March 31,
1997, there were approximately 85 holders of record of the Company's Common
Stock.
PLANTRONICS WORLDWIDE OPERATIONS
Computer and Mobile Systems
345 Encinal Street
Santa Cruz, California 95060
Telephone: 408-426-6060
Fax: 408-458-7787
Plamex, S.A. de C.V.
Avenida Produccion, #12
Parque Industrial Internacional Tijuana
Mesa de Otay
Tijuana, Baja California 22390
Mexico
Telephone: 011-52-66-822798
Fax: 011-52-66-822796
Plantronics Acoustics Italia S.r.l.
Centro Direzionale Lombardo Palazzo E/2
Via Roma 108
20060 Cassina de' Pecchi
Milano, Italy
Telephone: 011-39-295-11900-1-2
Fax: 011-39-295-11903
Plantronics A.G.
c/o Plantronics Limited
Interface Business Park
Bincknoll Lane
Wootton Bassett, Wiltshire
SN4 8QQ England
Telephone: 011-44-1793-848999
Fax: 011-44-1793-848853
Plantronics B.V.
Antareslaan 9
2132 JE Hoofddorp
Netherlands
Telephone: 011-31-23-5648010
Fax: 011-31-23-5626790
Plantronics Canada Limited
c/o Andrews & Associates
225 Hymus Boulevard, Suite 10
Pointe Claire, Quebec
H9R 1G4 Canada
Telephone: 514-694-3185
Fax: 514-694-7770
<PAGE> 10
Plantronics France S.A.R.L.
Parc Technologique "La Corvette"
142-176 Avenue de Stalingrad
92700 Colombes, France
Telephone: 011-33-1-46-49-83-00
Fax: 011-33-1-46-49-83-09
Plantronics GmbH
Mail: Postfach 71 01
50342 Hurth, (Cologne) Germany
Telephone: 011-49-22-33-932340
Fax: 011-49-22-33-373274
Plantronics Hong Kong
Ste. 1111, Tower II
Silvercord Bldg., 30 Canton Road
Tsim Sha Tsui, Kowloon
Hong Kong
Telephone: 011-852-2375-8480
Fax: 011-852-2377-0573
Plantronics International do Brasil LTDA
Rua Joaquim Floriano 636/131-Itaim
04534-002 Sao Paulo, SP Brazil
Telephone: 011-55-11-822-3396
Fax: 011-55-11-822-3396
Plantronics K.K.
1-22-7, Naka-Cho, Musashino-shi
Tokyo 180, Japan
Telephone: 011-81-422-55-0805
Fax: 011-81-422-55-0806
Plantronics Limited
Interface Business Park
Bincknoll Lane
Wootton Bassett, Wiltshire
SN4 8QQ England
Telephone: 011-44-1793-848999
Fax: 011-44-1793-848853
Plantronics Nordic
Oskarsvagen 10
S-702 14 Orebro
Sweden
Telephone: 011-46-19-121930
Fax: 011-46-19-121933
Plantronics Singapore
391 A Orchard Road
#12-01 Ngee Ann City, Tower A
Singpore 238873
Telephone: 011-65-838-5239
Fax: 011-65-235-1447
Walker Equipment
4009 Cloud Springs Road
Ringgold, Georgia 30736
Telephone: 706-861-2212
Fax: 706-861-5069
<PAGE> 11
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------------------------
STATEMENT OF OPERATIONS DATA 1997 1996 1995 1994 1993
===================================================================================================================================
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 195,307 $ 182,959 $ 169,923 $ 133,996 $ 112,267
Gross profit 104,740 96,072 85,655 66,703 49,939
Income (loss) from continuing operations 29,671 25,470 20,808 (40,696) (5,154)
Net loss from discontinued operations -- -- -- -- (1,500)
Mandatorily redeemable preferred
stock dividends -- -- -- (1,298) (1,388)
-----------------------------------------------------------
Net income (loss) attributable to holders
of common stock $ 29,671 $ 25,470 $ 20,808 $ (41,994) $ (8,042)
===========================================================
Income (loss) from continuing operations
per common share (Note 2) $ 3.34 $ 2.84 $ 2.38 $ (6.55) $ (1.10)
Loss from discontinued operations
per common share (Note 2) -- -- -- -- (0.25)
-----------------------------------------------------------
Net income (loss) per common share
attributable to holders of common stock (Note 2) $ 3.34 $ 2.84 $ 2.38 $ (6.55) $ (1.35)
===========================================================
Shares used in per share calculations 8,896 8,982 8,756 6,415 5,976
===========================================================
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------------------------------
BALANCE SHEET DATA 1997 1996 1995 1994 1993
====================================================================================================================================
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $127,241 $108,661 $ 74,855 $ 67,026 $125,278
Long-term debt 65,050 65,050 65,050 85,000 143,932
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
====================================================================================================
Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30
QUARTERLY DATA 1997 1996 1996 1996 1996 1995 1995 1995
====================================================================================================================================
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $52,294 $50,309 $47,120 $45,584 $47,110 $46,565 $45,175 $44,109
Gross profit 28,146 26,761 25,333 24,500 25,119 24,587 23,553 22,813
Income/(loss) from operations 13,488 13,104 12,230 11,517 12,678 12,287 11,560 10,984
Net income/(loss) 8,051 7,843 7,152 6,625 6,843 6,707 6,237 5,683
Net income/(loss) per share $0.91 $0.89 $0.81 $0.73 $0.76 $0.74 $0.70 $0.64
Weighted average shares 8,868 8,820 8,860 9,036 9,042 9,037 8,950 8,901
</TABLE>
PLANTRONICS, INC. ONE
<PAGE> 12
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
======================
1997 1996
======================
(in thousands, except share and per share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 42,262 $ 26,787
Accounts receivable, net 36,981 38,555
Inventory 20,042 18,007
Deferred tax asset 2,840 5,094
Other current assets 909 1,227
----------------------
Total current assets 103,034 89,670
Property, plant and equipment, net 18,970 13,710
Other assets 5,237 5,281
----------------------
$ 127,241 $ 108,661
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,578 $ 8,384
Accrued liabilities 20,441 20,692
Income taxes payable 9,674 12,040
----------------------
Total current liabilities 39,693 41,116
Deferred tax liability 1,616 1,081
Long-term debt 65,050 65,050
----------------------
Total liabilities 106,359 107,247
----------------------
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock; $0.01 par value, 1,000,000 shares authorized,
no shares issued or outstanding in 1997 or 1996 -- --
Common stock; $0.01 par value; 25,000,000 shares authorized,
8,183,106 and 8,388,956 shares issued and outstanding 85 84
Additional paid-in capital 58,303 55,726
Cumulative translation adjustment (891) (891)
Accumulated deficit (23,834) (53,505)
----------------------
33,663 1,414
Less: Treasury stock; 348,071 shares at cost (12,781) --
----------------------
Total stockholders' equity 20,882 1,414
----------------------
$ 127,241 $ 108,661
======================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PLANTRONICS, INC. TWO
<PAGE> 13
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------
1997 1996 1995
-----------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Net sales $ 195,307 $ 182,959 $ 169,923
Cost of sales 90,567 86,887 84,268
-----------------------------------------
Gross profit 104,740 96,072 85,655
-----------------------------------------
Operating expenses:
Research, development and engineering 14,503 13,718 11,607
Selling, general and administrative 39,898 34,845 30,935
-----------------------------------------
Total operating expenses 54,401 48,563 42,542
-----------------------------------------
Operating income 50,339 47,509 43,113
Interest expense, including amortization of debt issuance
costs of $503,000, $527,000 and $559,000 7,104 7,140 7,987
Interest income and other income, net (1,722) (1,385) (146)
-----------------------------------------
Income before income taxes 44,957 41,754 35,272
Income tax expense 15,286 16,284 14,464
-----------------------------------------
Net income $ 29,671 $ 25,470 $ 20,808
=========================================
Net income per share (Note 2) $ 3.34 $ 2.84 $ 2.38
=========================================
Shares used in per share calculations (Note 2) 8,896 8,982 8,756
=========================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PLANTRONICS, INC. THREE
<PAGE> 14
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
=======================================
1997 1996 1995
=======================================
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 29,671 $ 25,470 $ 20,808
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property and equipment 2,935 2,367 1,789
Deferred income taxes 2,789 (745) (1,764)
Other non-cash charges, net 649 758 841
Changes in assets and liabilities:
Accounts receivable 1,624 (8,310) (9,183)
Provision for doubtful accounts (50) 575 342
Inventory (2,035) (1,150) (2,335)
Other current assets 318 (426) 323
Other assets (459) 471 785
Accounts payable 1,194 2,206 1,935
Accrued liabilities (251) 2,271 1,422
Income taxes payable (1,769) 3,413 2,665
---------------------------------------
Cash provided by operating activities 34,616 26,900 17,628
---------------------------------------
Cash flows from investing activities:
Capital expenditures (8,195) (3,903) (3,575)
---------------------------------------
Cash flows from financing activities:
Purchase of treasury stock, net (12,781) -- --
Repurchase of Senior Notes and repayment of other debt -- -- (19,950)
Proceeds from exercise of stock options 1,835 763 87
---------------------------------------
Cash provided by (used for) financing activities (10,946) 763 (19,863)
---------------------------------------
Effect of exchange rates on cash -- (333) 654
Net increase (decrease) in cash and cash equivalents 15,475 23,427 (5,156)
Cash and cash equivalents at beginning of year 26,787 3,360 8,516
---------------------------------------
Cash and cash equivalents at end of year $ 42,262 $ 26,787 $ 3,360
=======================================
Supplemental disclosures:
Cash paid for:
Interest $ 6,577 $ 6,608 $ 7,352
Income taxes $ 14,192 $ 13,557 $ 13,665
Noncash operating and financing activities:
Income tax benefit associated with stock options $ 597 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PLANTRONICS, INC. FOUR
<PAGE> 15
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL CUMULATIVE ACCUMULATED STOCKHOLDERS'
-------------------- PAID-IN TRANSLATION EQUITY TREASURY EQUITY
SHARES AMOUNT CAPITAL ADJUSTMENT (DEFICIT) STOCK (DEFICIT)
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 8,200,353 $82 $54,365 $(1,212) $(99,783) $ -- $(46,548)
Stock option compensation
amortization -- -- 282 -- -- -- 282
Exercise of stock options 8,968 -- 87 -- -- 87
Foreign currency translation
adjustment -- -- -- 654 -- -- 654
Net income -- -- -- -- 20,808 -- 20,808
------------------------------------------------------------------------------------------
Balance at March 31, 1995 8,209,321 82 54,734 (558) (78,975) -- (24,717)
Stock option compensation
amortization -- -- 231 -- -- -- 231
Exercise of stock options 179,635 2 761 -- -- -- 763
Foreign currency translation
adjustment -- -- -- (333) -- -- (333)
Net income -- -- -- -- 25,470 -- 25,470
------------------------------------------------------------------------------------------
Balance at March 31, 1996 8,388,956 84 55,726 (891) (53,505) -- 1,414
Stock option compensation
amortization -- -- 146 -- -- -- 146
Exercise of stock options 142,221 1 1,834 -- -- -- 1,835
Income tax benefit associated
with stock options -- -- 597 -- -- -- 597
Purchase of treasury stock,
net of re-issuance (348,071) -- -- -- -- (12,781) (12,781)
Net income -- -- -- -- 29,671 -- 29,671
------------------------------------------------------------------------------------------
Balance at March 31, 1997 8,183,106 $85 $58,303 $ (891) $(23,834) $(12,781) $ 20,882
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PLANTRONICS, INC. FIVE
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY:
Plantronics, Inc. (the Company), which introduced the first lightweight headset
in 1962, is the world's largest designer, manufacturer and marketer of
lightweight communications headsets. In addition, Plantronics manufactures and
markets specialty telephone products, such as amplified telephone handsets and
specialty telephones for hearing-impaired users and noise-canceling handsets for
use in high-noise environments.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT'S USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of financial statements and the
reported amounts of sales and expenses during the reporting period. Actual
results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Plantronics and
its subsidiary companies. Intercompany transactions and balances have been
eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year end is the Saturday closest to March 31. For purposes
of presentation, the Company has indicated its accounting year ending on March
31 or the month-end for interim quarterly periods. Results of operations for
fiscal years 1997, 1996 and 1995 each included 52 weeks.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with a maturity of 90 days
or less at the date of purchase to be cash equivalents. Management determines
the appropriate classification of debt and equity securities at the time of
purchase, and reassesses the classification at each reporting date. At March 31,
1997, all of the Company's short-term investments, consisting primarily of fixed
maturity debt securities, have been classified as "held to maturity". Under this
classification, the investments are recorded at amortized cost. At March 31,
1997 the average maturity of the Company's short-term investments was
approximately seven days. The Company's cash and cash equivalents consist of the
following:
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-----------------
(in thousands)
<S> <C> <C>
Cash and money market accounts $33,262 $ 6,762
Auction rate preferred funds 9,000 20,025
------- -------
Cash and cash equivalents $42,262 $26,787
======= =======
</TABLE>
INVENTORY
Inventory is stated at the lower of cost, determined on the first-in, first-out
method, or market.
PLANTRONICS, INC. SIX
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment are principally
calculated using the straight-line method over the estimated useful lives of the
respective assets.
DEFERRED DEBT ISSUANCE COSTS
Debt issuance costs are assigned to the various debt instruments and amortized
over the shorter of: the terms of the respective debt agreements or an estimated
period the debt will be outstanding.
REVENUE RECOGNITION
Revenue is recognized when products are shipped. Provision is made for estimated
potential customer returns and warranty costs at the time of shipment.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and trade receivables. The
Company's cash investment policies limit investments to those that are
short-term and low risk. Concentrations of credit risk with respect to trade
receivables are generally limited due to the large number of customers
comprising the Company's customer base, and their dispersion across many
different geographic areas. The Company performs ongoing credit evaluations of
its customers' financial condition and, generally, requires no collateral from
its customers. The Company maintains an allowance for uncollectible accounts
receivable based upon expected collectibility of all accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including cash, cash
equivalents, accounts receivable, accrued expenses and liabilities, approximate
fair value due to their short maturities. The fair value of long-term debt,
including the current portion, was estimated by management based on current
rates offered to the Company for debt of the same remaining maturities. The fair
value of the long-term debt was not materially different from the carrying value
of $65.1 million at March 31, 1997.
INCOME TAXES
The Company accounts for income taxes under the liability method, which
recognizes deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the tax basis of assets and
liabilities and their financial statement reported amounts.
FOREIGN OPERATIONS AND CURRENCY TRANSLATION
The Company has foreign assembly and manufacturing operations in Mexico, light
assembly, research and development and sales and marketing in the United
Kingdom, an international finance, customer service and logistics headquarters
in the Netherlands, and sales offices in Canada, Asia, Europe and South America.
For fiscal 1997, the functional currency of all foreign operations was the US
dollar. For fiscal 1996 and 1995, the functional currency of all foreign
operations was the US dollar, with the exception of the operation located in the
United Kingdom. Accordingly, gains or losses arising from the translation of
foreign currency statements and transactions, except for the operation in the
United Kingdom in fiscal 1996 and 1995, are included in determining consolidated
results of operations. Aggregate exchange gains for fiscal 1997, 1996 and 1995
were $0.4 million, $0.3 million and $0.1 million, respectively. Gains or losses
arising from the translation of the United Kingdom statements prior to fiscal
1997 were recorded as a separate component of stockholders' equity.
PLANTRONICS, INC. SEVEN
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123"), encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans based on
the fair value of options granted. The Company has elected to continue to
account for stock-based compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations, and to provide additional disclosures
with respect to the pro forma effects of adoption had the company recorded
compensation expense as provided in FAS 123, (see Note 10.)
NET INCOME PER COMMON SHARE
Net income per share is computed using the weighted average number of common and
dilutive common equivalent shares outstanding. Common equivalent shares consist
of stock options computed using the treasury stock method.
RECENT ACCOUNTING PRONOUNCEMENT (UNAUDITED)
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." The statement is
effective for the Company's fiscal year ending March 31, 1998. This statement
amends the calculation of earnings per share as prescribed by generally accepted
accounting principles. Under the new standard, primary earnings per share is
replaced by basic earnings per share and fully diluted earnings per share is
replaced by diluted earnings per share.
The following pro-forma information presents per share information as if the
Company had adopted the standard for the fiscal year, ended March 31, 1997 and
1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------
1997 1996
---------- ---------
<S> <C> <C>
Basic earnings per share $ 3.49 $ 3.07
Diluted earnings per share $ 3.34 $ 2.84
</TABLE>
PLANTRONICS, INC. EIGHT
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 -- DETAILS OF CERTAIN BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
MARCH 31,
--------
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Accounts receivable:
Accounts receivable from customers $ 38,278 $ 39,902
Allowance for doubtful accounts (1,297) (1,347)
-------- --------
$ 36,981 $ 38,555
======== ========
Inventory:
Finished goods $ 11,056 $ 6,890
Work in process 1,647 4,631
Purchased parts 7,339 6,486
-------- --------
$ 20,042 $ 18,007
======== ========
Property, plant and equipment:
Land $ 4,693 $ 4,693
Buildings and improvements (useful life 10-30 years) 9,104 8,869
Machinery and equipment (useful life 2-8 years) 25,949 19,850
-------- --------
39,746 33,412
Less accumulated depreciation (20,776) (19,702)
-------- --------
$ 18,970 $ 13,710
======== ========
Accruals:
Interest $ 1,394 $ 1,376
Employee benefits and other 19,047 19,316
-------- --------
$ 20,441 $ 20,692
======== ========
</TABLE>
NOTE 4 -- DEBT:
Long-term debt, consisting of Senior Notes, was $65.1 million at the end of
fiscal 1997, 1996 and 1995. The Senior Notes are general unsecured obligations
of the Company with an original aggregate principal amount of $85.0 million that
bear interest, payable semiannually, at a rate of 10% per annum and will mature
on January 15, 2001. The Senior Notes are redeemable, at the Company's option,
in whole or in part, at any time on or after January 15, 1999. Redemption prior
to January 15, 2001 will be at a premium. During fiscal 1995, the Company
repurchased Senior Notes with face values of $19.9 million in principal for
$19.8 million, resulting in a gain of $0.1 million.
The Senior Note Indenture contains certain covenants that, among other things,
limit the ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, issue preferred stock of subsidiaries, engage in transactions with
affiliates, create liens, engage in mergers and consolidations, or make certain
asset sales and investments. The Senior Note Indenture also provides that
holders of the Senior Notes have the right to require that the Company
repurchase their Senior Notes in the event of a "change in control" and contain
various customary events of default.
During fiscal 1995, the Company expanded its previous $20.0 million revolving
credit facility, including a $4.0 million letter of credit facility, with Bank
of America National Trust and Savings Association ("Bank of America") by $9.0
million to partially fund the repurchase of Senior Notes. The $9.0 million
expanded facility was terminated by the Company in fiscal 1996. The remaining
$20.0 million facility expired in fiscal 1997.
PLANTRONICS, INC. NINE
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Through fiscal 1996, obligations of the Company under the remaining facility
were secured by liens on inventory and accounts receivable of the Company and
certain related assets.
During fiscal 1997, the Company entered into a new, one-year $20.0 million
revolving unsecured credit facility with Bank of America. The facility includes
a $10.0 million letter of credit subfacility. Combined borrowings and
commitments under both facilities cannot exceed $20.0 million. Principal
outstanding bears interest at the Company's choice of the Bank of America base
rate, the offshore rate or a CD rate plus a margin ranging from 0.000% to
1.375%, depending on the rate choice and performance level ratios. There were no
borrowings outstanding under the facility at March 31, 1997, however, at that
date $3.4 million, associated with inventory purchases and other matters, was
committed under the letter of credit subfacility. The new revolving credit
facility includes covenants relating to, among other things, the maintenance of
a maximum net funded debt ratio, a minimum tangible net worth ratio and a
maximum interest coverage ratio. The Company was in compliance with the terms of
the covenants as of March 31, 1997.
The new revolving credit facility also expressly restricts the ability of the
Company to incur additional indebtedness (including contingent liabilities and
guarantees), grant additional liens, redeem stock, dispose of and acquire
assets, incur lease obligations, and make investments, including loans, joint
ventures, and acquisitions of other businesses. The Company is permitted to pay
cash dividends on shares of its capital stock in an amount not to exceed 50% of
the Company's cumulative net income (net of cumulative losses) for the period
commencing February 19, 1997 through the date of declaration.
NOTE 5 -- TREASURY STOCK:
During fiscal 1997 the Company purchased 350,613 shares of its Common Stock in
the open market at a total cost of $12.8 million. The shares were repurchased
primarily to provide shares for the Company's employee stock plans. A total of
2,542 shares were reissued during fiscal 1997.
NOTE 6 -- INCOME TAXES:
Income tax expense for fiscal 1997, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal
Current $ 8,744 $ 13,586 $ 12,565
Deferred 2,789 (827) (1,764)
State 1,854 1,622 1,642
Foreign 1,899 1,903 2,021
-------- -------- --------
$ 15,286 $ 16,284 $ 14,464
======== ======== ========
</TABLE>
Pre-tax earnings of the foreign subsidiaries were $8.2 million, $2.8 million and
$3.3 million for fiscal years 1997, 1996 and 1995, respectively. Cumulative
earnings of foreign subsidiaries which have been permanently reinvested as of
March 31, 1997 totaled $5.5 million.
PLANTRONICS, INC. TEN
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation between statutory federal income taxes and the
total provision for taxes on pre-tax income:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Tax expense at statutory rate $ 15,735 $ 14,614 $12,345
Foreign operations taxed at different rates (971) 910 854
State taxes, net of federal benefit 1,204 1,054 1,067
Other, net (682) (294) 198
-------- -------- -------
$ 15,286 $ 16,284 $14,464
======== ======== =======
</TABLE>
Deferred tax liabilities (assets) represent the tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1997 1996
------- --------
(in thousands)
<S> <C> <C>
Deferred gains on sales of properties $ 2,740 $ 2,809
Other deferred tax liabilities 333 394
------- -------
Gross deferred tax liabilities 3,073 3,203
------- -------
Accruals and other reserves (2,748) (4,885)
Deferred state tax deduction (635) --
Other deferred tax assets (914) (2,331)
------- -------
Gross deferred tax assets (4,297) (7,216)
------- -------
Total net deferred tax assets $(1,224) $(4,013)
======= =======
</TABLE>
NOTE 7 -- EMPLOYEE BENEFIT PLANS:
Subject to eligibility requirements, substantially all domestic employees are
covered by quarterly cash and annual deferred profit sharing plans. Employees
also have the option of participating in a salary deferral plan qualified under
Section 401(k) of the Internal Revenue Service Code. The Quarterly Profit
Sharing Plan benefits are paid on the basis of profitability and the
relationship of each participating employee's base salary as a percent of all
participants' base salaries. The Annual Profit Sharing Plan benefits are based
on 10% of the Company's results of operations before interest and taxes,
adjusted for other items, minus quarterly profit sharing cash distributions and
administrative expenses, and are allocated to employees based on the
relationship of each participating employee's base salary as a percent of all
participants' base salaries. The Annual Profit Sharing Plan distributions
include a cash distribution and a tax deferred distribution made to individual
accounts of participants held in trust. The deferred portion is subject to a two
year vesting schedule. Total annual and quarterly profit sharing contributions
were $5.5 million, $5.4 million and $4.6 million for fiscal 1997, 1996 and 1995,
respectively.
PLANTRONICS, INC. ELEVEN
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
MINIMUM FUTURE RENTAL PAYMENTS
The Company leases certain equipment and facilities under operating leases
expiring in various years through 2000.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of 1 year as of March 31, 1997:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING MARCH 31, AMOUNT
- ---------------------------------------------------
(in thousands)
<S> <C>
1998 $ 850
1999 775
2000 714
2001 508
2002 523
-------
Total minimum future rental payments $ 3,370
=======
</TABLE>
Rent expense for operating leases was approximately $0.7 million in fiscal 1997,
$1.1 million in fiscal 1996 and $1.0 million in fiscal 1995.
EXISTENCE OF RENEWAL OPTIONS
Certain operating leases provide for renewal options for periods from 1 to 3
years. In the normal course of business, operating leases are generally renewed
or replaced by other leases.
CLAIMS AND LITIGATION
In the opinion of management, litigation, contingent liabilities and claims
against the Company arising in the ordinary course of business are not expected
to involve any judgements or settlements which would be material to the
Company's consolidated financial condition or results of operations.
PLANTRONICS, INC. TWELVE
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INDUSTRY SEGMENT AND FOREIGN OPERATIONS DATA:
The Company operates in one industry segment and is engaged in developing,
manufacturing, marketing and servicing telecommunications equipment. One
customer accounted for 8.4%, 9.6% and 12.5% of consolidated sales for the fiscal
1997, 1996 and 1995 respectively.
In geographical reporting, revenues are attributed to the geographical location
of the sales and service organizations, and costs directly and indirectly
incurred in generating revenues are similarly assigned. Intercompany transfers
are at prices sufficient to recover a reasonable profit.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Net revenues from unaffiliated customers:
United States $144,873 $144,838 $133,045
Europe 49,454 33,665 30,752
Other Foreign 980 4,456 6,126
-------- -------- --------
$195,307 $182,959 $169,923
======== ======== ========
Operating results:
United States $ 42,621 $ 44,238 $ 38,580
Europe 7,160 2,854 3,606
Other Foreign 558 417 927
-------- -------- --------
$ 50,339 $ 47,509 $ 43,113
======== ======== ========
Identifiable assets:
United States $ 97,138 $ 91,400 $ 59,841
Europe 27,753 15,015 13,036
Other Foreign 2,350 2,246 1,978
-------- -------- --------
$127,241 $108,661 $ 74,855
======== ======== ========
</TABLE>
Intercompany transfers from the United States $ 20,071 $ 18,057 $ 17,833
Export sales from domestic operations $ 9,195 $ 10,909 $ 4,790
NOTE 10 - CAPITAL STOCK:
STOCK OPTION PLAN
In September 1993, the Board of Directors approved the PI Parent Corporation
1993 Stock Plan (the "1993 Stock Plan"). Under the 1993 Stock Plan, 2,079,621
shares of Common Stock (which number is subject to adjustment in the event of
stock splits, reverse stock splits, recapitalization or certain corporate
reorganizations) are reserved for issuance to employees and consultants of the
Company, as approved from time to time by the Compensation Committee of the
Board of Directors. The reserved shares include 490,000 shares which were
authorized by the Board of Directors and approved by the stockholders for
issuance in 1997. The 1993 Stock Plan, which has a term of ten years, provides
for incentive as well as nonqualified stock options to purchase shares of Common
Stock. The Board of Directors may terminate the 1993 Stock Plan at any time at
its discretion.
Incentive stock options may not be granted at less than 100 percent of the
estimated fair market value, as determined by the Board of Directors, of the
Company's Common Stock at the date of grant and the option term may not exceed
10 years. For holders of 10 percent or more of the total combined voting power
of all classes of the Company's stock, incentive stock options may not be
granted at less than 110 percent of the estimated fair market
PLANTRONICS, INC. THIRTEEN
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
value of the Common Stock at the date of grant and the option term may not
exceed five years. Nonqualified stock options may be granted at less than fair
market value. Options generally vest over 4 years.
In September 1993 the Compensation Committee of the Board of Directors approved
nonqualified options to certain executive officers to purchase 127,896 shares of
Common Stock at an exercise price of $5.47 per share that were granted upon the
completion of the Company's initial public offering. Compensation related to
these options of $0.9 million based on the $12.50 per share offering price is
being charged to expense over a four year-vesting period commencing January 1994
as the options were granted for future services. Options to purchase an
additional 144,626 shares were granted during fiscal 1994 to certain executive
officers at exercise prices ranging from $5.47 and $15.25 per share.
Compensation related to these options of $0.8 million is being charged to
expense over a four-year vesting period. As of March 31, 1997, the unamortized
portion of the total compensation expense, after considering canceled options,
amounted to $0.2 million.
DIRECTORS' STOCK OPTION PLAN
In September 1993, the Board of Directors adopted a Directors' Stock Option Plan
(the "Directors' Option Plan") and reserved 20,000 shares of Common Stock for
issuance to non-employee directors of the Company. An additional 10,000 shares
were authorized for issuance in 1997 under the Directors' Option Plan, pursuant
to Board of Directors' and stockholder approval. The Directors' Option Plan
provides that each non-employee director shall be granted an option to purchase
2,000 shares of Common Stock on the later of the effective date of the Company's
initial public offering or the date on which the person becomes a director.
Accordingly, each of the Company's three current outside directors was granted
an option to purchase 2,000 shares of Common Stock upon the effective date of
the offering. In addition, three additional persons who became directors of the
Company upon completion of this offering were granted options to purchase 2,000
shares of Common Stock. Thereafter, each non-employee director shall be granted
an option to purchase 500 shares of Common Stock each year. At the end of fiscal
1997, options for 21,000 shares of Common Stock were outstanding under the
Directors' Option Plan. All options were granted at fair market value and
accordingly, had no compensatory impact. Options vest generally over a four-year
period.
Stock option activity under the 1993 Stock Plan and the Directors' Stock Option
Plan are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ----------------------------
AVAILABLE WEIGHT AVERAGE
FOR GRANT SHARES PRICE
---------------- - ---------------------
<S> <C> <C> <C>
Balance at March 31, 1994 242,262 1,367,359 $ 3.99
Options Granted (261,205) 261,205 $21.58
Options Exercised (8,968) 9.75
Options Canceled 72,333 (72,333) $ 4.50
--------------------------------------
Balance at March 31, 1995 53,390 1,547,263 $ 6.90
Options Granted (103,410) 103,410 $32.44
Options Exercised (179,635) $ 4.25
Options Canceled 79,397 (79,397) $ 8.70
--------------------------------------
Balance at March 31, 1996 29,377 1,391,641 $ 9.04
Options Authorized 500,000
Options Granted (315,794) 315,794 $39.60
Options Exercised (142,221) $12.90
Options Canceled 55,524 (55,524) $12.98
--------------------------------------
Balance at March 31, 1997 269,107 1,509,690 $14.92
======================================
Exercisable at March 31, 1997 1,006,548
==========
</TABLE>
PLANTRONICS, INC. FOURTEEN
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant option groups outstanding at March 31, 1997 and related weighted
average prices and lives are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------------------------------------------------
Range of Number Weighted Average Weighted Number Weighted
Exercise Price Outstanding Remaining Average Exercisable Average
As of March 31, Contractual Life Exercise Price As of March 31, 1997 Exercise
1997 Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.80 - $1.80 462,474 6.49 $ 1.80 454,882 $ 1.80
5.47 - 8.75 498,610 6.81 5.76 478,805 5.73
12.50 - 28.00 158,732 7.63 23.85 60,016 22.41
33.00 - 48.38 389,874 9.50 38.58 12,845 34.77
- -------------------------------------------------------------------------------------------------------------------
$1.80 - $48.38 1,509,690 7.49 $14.92 1,006,548 $ 5.32
====================================================================================================================
</TABLE>
FAIR VALUE DISCLOSURES
All options in fiscal 1997 and fiscal 1996 were granted at an exercise price
equal to the fair market value of the Company's Common Stock at the date of
grant. The weighted average fair value at date of grant for options granted
during 1997 and 1996 were $12.68 and $10.86 per option, respectively. The fair
value of options at date of grant was estimated using the Black-Scholes model
with the following assumptions:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31
--------------------------
1997 1996
---- ----
<S> <C> <C>
Expected life (years) 5 5
Risk free interest rate 6.6% 5.9%
Volatility 17 24
Dividend yield -- --
</TABLE>
Had compensation expense for the Company's stock-based compensation plans been
determined based on the methods prescribed by SFAS No. 123, the Company's net
income and net income per share would have been as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31
--------------------------
1997 1996
---------- ----------
(in thousands, except
per share amounts
<S> <C> <C>
Net income:
As reported $29,671 $25,470
Pro forma $29,044 $25,390
Net income per share:
As reported $ 3.34 $ 2.84
Pro forma $ 3.26 $ 2.82
</TABLE>
PLANTRONICS, INC. FIFTEEN
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EMPLOYEE STOCK PURCHASE PLAN
On April 23, 1996 the Board of Directors of the Company approved the 1996
Employee Stock Purchase Plan, (the "ESPP") which was approved by the
stockholders on August 6, 1996, to provide certain employees with an opportunity
to purchase Common Stock through payroll deductions. The plan is a qualified
plan under applicable IRS guidelines and highly compensated employees are
excluded from participation. Under the ESPP, the purchase price of the Common
Stock will equal 95% of the market price of the Common Stock immediately before
the beginning of the applicable participation period. Each participation period
is 6 months long. Once purchased the shares are restricted for 6 months. During
1997, 581 shares were issued under the plan. The fair value of the employee's
purchase rights was estimated using the Black-Scholes model with the following
assumptions for 1997; dividend yield of 0%, an expected life of 6 months,
expected volatility of 17%, and risk free interest rates of 5.5%. The
weighted-average fair value of these purchase rights granted in fiscal 1997 was
$2.27.
SENIOR EXECUTIVE STOCK OWNERSHIP PLAN
In November, 1996 the Board of Directors approved a Senior Executive Stock
Purchase Plan, effective January 1, 1997, to encourage ownership of the
company's Common Stock by senior executives. This is a voluntary plan in which
executives are encouraged to participate and achieve a target ownership over a 5
year period in annual increments of 20% or more. The target ownership is equal
to two times the Chief Executive Officer's base salary and one times the
individual Vice Presidents' base salary. To encourage participation, the
Company's Treasury Stock will be sold by the Company to executives under this
voluntary purchase program. The price will be equal to the greater of: 95% of
the price set by the Board of Directors on an annual basis or 85% of the fair
market value of the stock on the date of transaction. The various vehicles that
are available to executives to obtain ownership of the company's stock are as
follows: 401 (K) Plan contributions, personal IRA account purchases, Deferred
Compensation Plan contributions, outright purchase of stock or exercising and
holding vested stock options. The discounted price is not applicable to
exercising and holding of vested stock options.
PLANTRONICS, INC. SIXTEEN
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANNUAL RESULTS OF OPERATIONS
NET SALES. Net sales increased 6.7% to $195.3 million in fiscal 1997 from $183.0
million in fiscal 1996. Net sales for fiscal 1996 had increased 7.7% from $169.9
million in fiscal 1995. Over these periods, there were no significant price
increases. Domestic revenue growth occurred despite an anticipated decline in
total sales to Lucent Technologies (formerly a subsidiary of AT&T). Total sales
in fiscal 1997 to this customer were down $2.0 million from fiscal 1996 levels.
The fiscal 1997 decline reflected the customer's desire to lower its stocking
levels as well as to close certain retail outlets. International revenue grew
22% in fiscal 1997 as compared to fiscal 1996 resulting primarily from expansion
of sales in new geographic markets and investment in customer focused marketing
programs. The Company's net sales to customers outside the United States,
predominantly in Europe, were $59.6 million, $49.0 million and $41.7 million in
fiscal 1997, 1996 and 1995, respectively, and accounted for 30.5%, 26.8% and
24.5%, respectively, of net sales in those periods. Revenue levels in fiscal
1997 were not impacted in either direction by changes in prices or by shipping
levels of Walker Equipment (a division of the Company) specialty products.
GROSS PROFIT. The Company's gross profit increased over the past three years to
$104.7 million in fiscal 1997 from $96.1 million in fiscal 1996 and $85.7
million in fiscal 1995. Gross profit as a percent of net sales was 53.6% in
fiscal 1997, 52.5% in fiscal 1996 and 50.4% in fiscal 1995. The $19.0 million
improvement in gross profit over the three year period primarily reflects the
impact of additional revenues ($25.4 million) with the balance consisting of
benefits from improved manufacturing efficiencies and from material and
logistics cost reduction programs. In addition, the warranty provision as a
percent of revenue has declined since fiscal 1995.
OPERATING EXPENSES. Operating expenses for the Company were $54.4 million or
27.9% of net sales in fiscal 1997, $48.6 million or 26.5% of net sales in fiscal
1996 and $42.5 million or 25.0% of net sales in fiscal 1995. Research,
development and engineering expenses increased $0.8 million in fiscal 1997 as
compared to fiscal 1996 due to the creation of an engineering development team
in Europe. The Company believes it will be better able to develop products for
the European and other international markets with an R&D presence in the United
Kingdom. Sales, general and administrative expenses increased $5.1 million in
fiscal 1997 primarily due to additional staffing in sales and marketing
worldwide and increased spending on international marketing communication
programs.
INTEREST EXPENSE. Interest expense was $7.1 million in fiscal 1997, $7.1 million
in fiscal 1996 and $8.0 million in fiscal 1995. Included in interest expense in
fiscal 1997, fiscal 1996, and fiscal 1995 was $0.5 million , $0.5 million, and
$0.6 million, respectively, in non-cash deferred debt issuance costs related to
the Senior Notes and revolving credit facility. Unamortized deferred debt costs
related to the revolving credit facility and Senior Notes at March 31, 1997 were
$1.4 million which are being amortized over the remaining terms of the debt.
FOREIGN CURRENCY. The Company's cash flows are substantially US dollar
denominated. However, the Company is exposed to certain foreign currency
fluctuations, primarily in Europe and Mexico. The source of currency risk in
Europe is due to receivables denominated in local currency, although this has
been largely offset by payables denominated in local currency. This natural
hedging approach has substantially limited the Company's net exposure to the
effect of currency fluctuations and management believes additional hedging has
not been merited. As the Company's sales in Europe grow, this strategy will
require review and the Company may experience greater exposure to currency
fluctuations as a result of its increasing international activities. In the
fourth quarter of fiscal 1996, the company formed a wholly owned subsidiary
incorporated in the Netherlands. The establishment of Plantronics B.V. entailed,
among other things, a transfer of a substantial number of functions and the
associated positions and expenses from the United Kingdom to the Netherlands.
The Company now incurs local expenses in Dutch guilders and a smaller proportion
of expenses in pound sterling, while recording no revenue in Dutch guilders.
PLANTRONICS, INC. SEVENTEEN
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's peso transaction exposure at its manufacturing subsidiary in
Tijuana, Mexico is limited mostly to payroll. The favorable effects to the
Company on the devaluation of the peso in the years reported was somewhat offset
by local currency pay raises to its employees in Mexico. Because of these
factors, management does not believe the devaluation has had a material effect
on the Company.
In fiscal 1997, the impact of foreign currency on operations was a favorable
$0.4 million compared to a favorable $0.3 million in fiscal 1996.
INCOME TAX EXPENSE. In fiscal 1997, fiscal 1996 and fiscal 1995 income tax
expense was $15.3 million, $16.3 million and $14.5 million, respectively,
representing an effective tax rate of 34%, 39% and 41%, respectively. As a
result of the incorporation of the Netherlands subsidiary, the Company's
effective tax rate was lower in fiscal 1997, compared to the rate in fiscal 1996
and fiscal 1995, and may continue to be reduced. The Netherlands subsidiary was
formed to be a strategic logistics center for international sales and the
headquarters for its international operations.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The statements in the paragraphs captioned "Interest Expense" and "Income Tax
Expense" include forward looking statements which involve risk and
uncertainties. In addition, the Company may from time to time make oral forward
looking statements. The Company's actual results could differ materially from
those anticipated in these forward looking statements as a result of the
following factors and other factors identified in the Company's Securities and
Exchange Commission filings.
NEED TO SUCCESSFULLY DEVELOP NEW PRODUCTS AND MARKETS. The Company's net sales
to date have been derived principally from the sale of lightweight
communications headsets ("tops") and associated bases ("bottoms"). Historically,
a substantial portion of the Company's sales have been made through distributors
to call center users and its product development efforts have primarily been
directed toward incremental enhancements of existing products. In the future,
the Company intends to both enhance its existing products and to develop new
products that capitalize on its core technology and expand the Company's product
offerings to new user market segments. The success of new product introductions
is dependent on several factors, including proper new product selection, timely
completion and introduction of new product designs, quality of new products and
market acceptance. The Company has recently expanded its marketing efforts to
sell lightweight headsets to the business, home office, computer and mobile user
market segments. Although the Company has attempted to determine the specific
needs of these new market segments there can be no assurance that the market
niches identified will in fact materialize or that the Company's existing and
future products designed for these segments will gain substantial market
acceptance.
COMPETITION. As the Company develops new generations of products and enters new
market segments, including the developing business, home office, computer and
mobile user market segments, the Company anticipates that it may face additional
competition from companies which currently do not offer communications headsets.
Such companies may be larger, offer broader product lines and have substantially
greater financial and other resources than the Company. Such competition could
negatively affect pricing and gross margins. Although the Company has
historically competed very successfully in the call center user segment of the
market, there can be no assurance that it will be able to continue its
leadership position in that segment of the market or that the Company will be
able to compete successfully in new market segments.
DEMAND OF CHANGING TECHNOLOGIES. The technology of telephone headsets, both
"tops" and "bottoms," has traditionally evolved slowly. Products are currently
exhibiting life cycles of three to five years before introduction of the next
generation of products. Historically, new product offerings included stylistic
changes and quality improvements but have usually been based on similar
technology.
PLANTRONICS, INC. EIGHTEEN
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company believes that future changes in technology may come at a faster
pace, particularly in the telephone, cellular telephone and computer segments of
the business and home office user portions of the market.The Company's future
success will be dependent in part on its ability to develop products that
utilize new technologies and to introduce them successfully to the marketplace.
In addition, in order to avoid product obsolescence, the Company will have to
monitor technological changes in telephony, as well as users' demands for new
technologies. Failure by the Company to keep pace with future technological
changes could materially adversely affect the Company's revenues and operating
results.
UTILIZATION OF SINGLE SOURCE SUPPLIERS. The Company's manufacturing operations
primarily consist of assembly of components and subassemblies that Plantronics
manufactures or purchases from a variety of sources. Although most components
and subassemblies used in the Company's manufacturing operations are obtained,
or are reasonably available, from numerous sources, certain of its products and
components (including semicustom integrated circuits that are key components of
the Company's products) are currently obtained only from single suppliers. The
Company currently purchases such components on a purchase order basis and has no
present intention to enter into master purchase agreements with any of its
single source suppliers. The Company has to date experienced only minor
interruptions in the supply of these components, none of which has adversely
affected its operations. However, an interruption in supply from any of the
Company's single source suppliers could temporarily result in the Company's
inability to deliver products on a timely basis, which in turn could adversely
affect its operations.
IMPORTANCE OF PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS. The Company's
success will depend in part on its ability to obtain patents and preserve other
intellectual property rights covering the design and operation of its products.
The Company currently holds certain patents and intends to continue to seek
patents on its inventions when appropriate. The process of seeking patent
protection can be lengthy and expensive, and there can be no assurance that
patents will issue from currently pending or future applications or that the
Company's existing patents or any new patents issued will be of sufficient scope
or strength or provide meaningful protection or any commercial advantage to the
Company. The Company may be subjected to, or may initiate, litigation or patent
office interference proceedings, which may require significant financial and
management resources. Any such claims or litigation, unless promptly and
favorably resolved, could have a material adverse effect on the Company's
operations.
RISK ASSOCIATED WITH FOREIGN OPERATIONS AND SALES. Approximately 30.5% of the
Company's net sales in fiscal 1997 were derived from sales to foreign customers.
In addition, the Company conducts approximately 93% of its headset assembly
operations in Mexico, and obtains components from various foreign suppliers.
Manufacturing and sales of the Company's products could be adversely affected by
political or economic conditions in the United States or abroad, particularly in
Mexico. Sales to foreign customers are also generally subject to such risks as
increased tariffs and the imposition of other trade barriers.
The Company transacts business internationally in multiple currencies. Declines
in the values of local currencies relative to the United States dollar in
countries in which the Company does business could adversely affect the Company
by resulting in less competitive pricing for the Company's products. The Company
does not currently engage in any hedging activities to mitigate exchange rate
risks and to date has not been adversely affected by fluctuating currencies. To
the extent that the Company is successful in increasing its sales to foreign
customers, or to the extent that the Company increases its transactions in
foreign currencies, the Company's results of operations could be adversely
affected by exchange rate fluctuations.
DEPENDENCE UPON SENIOR MANAGEMENT. The Company believes that it has benefited
substantially from the leadership of Robert S. Cecil, the Chairman of the Board,
President and Chief Executive Officer of the Company, and the other current
members of senior management, and that the loss of their services could have a
material adverse effect on the Company's business and future operations.
Although the Company has an employment agreement with Mr. Cecil, such agreement
permits him to voluntarily terminate his employment at any time. In addition,
although Mr. Cecil's agreement contains a five-year non-compete covenant which
takes effect upon termination of his employment, such covenants are generally
not enforceable under California law.
PLANTRONICS, INC. NINETEEN
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity in fiscal 1997 was $34.6 million of
cash generated from operating activities. In fiscal 1996, liquidity was provided
by $26.9 million from operating activities. Cash and cash equivalents increased
to $42.3 million at March 31, 1997 from $26.8 million at March 31, 1996.
The Company has a $20.0 million credit facility, including a $10.0 million
letter of credit subfacility, with a major bank. In the quarter ended March 31,
1997, the Company renegotiated the terms of its credit facility so that
borrowings are no longer secured and ongoing fees and costs are substantially
reduced. As of March 31, 1997, the Company had no cash borrowings under the
revolving credit facility and had $3.4 million outstanding under the letter of
credit subfacility.
OPERATING ACTIVITIES. In fiscal 1997 the $34.6 million in net cash generated
from operating activities primarily resulted from $29.7 million in net income.
Also contributing to the increase in net cash were decreases in accounts
receivable and income taxes of $1.6 million and $1.0 million, respectively, and
an increase in accounts payable of $1.2 million, partially offset by an increase
in inventories of $2.0 million, and a decrease in income taxes payable of $1.8
million.
INVESTING ACTIVITIES. Capital expenditures were $8.2 million in fiscal 1997,
$3.9 million in fiscal 1996 and $3.6 million in fiscal 1995. The increase in
fiscal 1997 from fiscal 1996 principally consisted of investment in a
significant upgrade to the Company's business information systems. The Company
expects to invest an additional $1.0 million to $2.0 million in the information
systems upgrade by the middle of fiscal 1998.
FINANCING ACTIVITIES. In fiscal 1997 the Company repurchased 350,613 shares of
its Common Stock for $12.9 million, received $1.8 million in proceeds from the
exercise of stock options, and realized $0.1 million from the sale of 2,542
shares of Treasury Stock. The Company's financing activities during fiscal 1996
were limited to the receipt of $0.8 million in stock option exercise proceeds.
During fiscal 1995, financing activities consisted principally of borrowings
under the revolving credit facility and the repurchases at a discount of the
Company's outstanding 10% Senior Notes due 2001 with face value of $19.9 million
in principal for $19.8 million in cash. Management believed the debt repurchase
at or below par to be an efficient use of cash resources. For fiscal 1997, 1996
and 1995, aggregate interest expense (including current interest payable in
cash, deferred interest payable in cash and amortization of debt issuance costs)
was $7.1 million, $7.1 million and $8.0 million, respectively.
The remaining balance of the Senior Notes that were issued during fiscal 1994 in
the principal amount of $65.1 million bear interest, payable semiannually, at a
rate of 10% per annum and mature on January 15, 2001. The Senior Notes are
redeemable, at the Company's option, in whole or in part, any time after January
15, 1999. The Senior Note Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur
indebtedness, pay dividends, issue preferred stock of subsidiaries, engage in
transactions with affiliates, create liens, engage in mergers and
consolidations, make certain asset sales or make certain investments. The Senior
Note Indenture also provides that holders of the Senior Notes have the right to
require the Company to repurchase their Senior Notes in the event of a "change
in control" and certain various customary events of default.
The Company believes that its current cash balance and cash to be provided by
operations, together with available borrowing capacity under the revolving
credit facility, will be sufficient to make required interest payments under the
Senior Notes and to fund operations at least through the next 12 months. Subject
to the terms and conditions of the 10% Senior Note Indenture and the Company's
revolving credit facility, the Company may use cash for such purposes as
repurchasing Senior Notes, repurchasing the Company's Common Stock or acquiring
complementary businesses, products or technologies.
PLANTRONICS, INC. TWENTY
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Plantronics, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
statements of operations, of cash flows, and of stockholders' equity present
fairly, in all material respects, the financial position of Plantronics, Inc.
and its subsidiaries at March 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Jose, California
April 18, 1997
PLANTRONICS, INC. TWENTY ONE
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARIES OF REGISTRANT INCORPORATION
- ------------------------------------------------------------------------- ------------------
<S> <C>
Plamex, S.A.............................................................. Mexico
Plantronics, A.G......................................................... Cham, Switzerland
Plantronics Holdings Limited*............................................ Canada
Plantronics Canada Limited(1)............................................ Canada
Plantronics GmbH(2)...................................................... Germany
Plantronics, Limited(2).................................................. England
Plantronics Acoustics Italia, S.r.l.(2).................................. Italy
Plantronics France S.A.R.L.(3)........................................... France
Plantronics B.V.(1)...................................................... Netherlands
Plantronics International do Brasil(4)................................... Brazil
Pacific Plantronics, Inc.(1)*............................................ California
Frederick Electronics Corporation*....................................... Maryland
Emtel, S.A.(1)*.......................................................... Mexico
Plantronics K.K.(4)...................................................... Japan
</TABLE>
- ---------------
* Inactive
(1) 100% owned by Plantronics Holdings Limited, except for qualifying shares, if
any.
(2) 100% owned by Plantronics, A.G., except for qualifying shares, if any.
(3) 100% owned by Plantronics Limited, except for qualifying shares, if any.
(4) 99% owned by Plantronics, Inc. and 1% owned by Plantronics B.V.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-19351; 333-14833; and 33-81980) and in the
Prospectus constituting part of the Registration Statement on Form S-3 (No.
33-70744) of Plantronics, Inc. of our report dated April 18, 1997 appearing on
page 21 of the Annual Report to Stockholders which is incorporated in this
Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
June 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> MAR-29-1997
<EXCHANGE-RATE> 1
<CASH> 42,262
<SECURITIES> 0
<RECEIVABLES> 36,981
<ALLOWANCES> 0
<INVENTORY> 20,042
<CURRENT-ASSETS> 103,034
<PP&E> 39,746
<DEPRECIATION> 20,776
<TOTAL-ASSETS> 127,241
<CURRENT-LIABILITIES> 39,693
<BONDS> 65,050
0
0
<COMMON> 85
<OTHER-SE> 20,797
<TOTAL-LIABILITY-AND-EQUITY> 127,241
<SALES> 195,307
<TOTAL-REVENUES> 195,307
<CGS> 90,567
<TOTAL-COSTS> 90,567
<OTHER-EXPENSES> 54,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,104
<INCOME-PRETAX> 44,957
<INCOME-TAX> 15,286
<INCOME-CONTINUING> 29,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,671
<EPS-PRIMARY> 3.49
<EPS-DILUTED> 3.34
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