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FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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 1-7534
STORAGE TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 84-0593263
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One StorageTek Drive, Louisville, 80028-4309
Colorado
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, including area code: (303) 673-5151
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on which Registered
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<S> <C>
Common Stock ($.10 par value), including
related preferred stock purchase rights New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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. [X] YES [ ] 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 or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $682,764,323 based on the last reported sale price of the common
stock of the registrant on the New York Stock Exchange's consolidated
transactions reporting system on February 29, 2000. For purposes of this
disclosure, shares of common stock held by persons who hold more than 5% of the
outstanding common stock and common stock held by executive officers and
directors of the registrant have been excluded in that such persons may be
deemed to be "affiliates" as that term is defined under the rules and
regulations promulgated under the Securities Act of 1933. This determination is
not necessarily conclusive for other purposes.
As of February 29, 2000, there were 100,729,814 shares of common stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement pursuant to
Regulation 14A under the Securities Exchange Act of 1934 within 120 days of its
fiscal year ended December 31, 1999. Portions of the registrant's definitive
proxy statement for its annual meeting of stockholders to be held on May 18,
2000, are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
ALL ASSUMPTIONS, ANTICIPATIONS, EXPECTATIONS AND FORECASTS CONTAINED IN THE
FOLLOWING DISCUSSION REGARDING THE COMPANY'S FUTURE PRODUCT AND BUSINESS PLANS,
FINANCIAL RESULTS, PERFORMANCE AND EVENTS ARE FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES REFORM ACT OF 1995. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY BECAUSE OF A NUMBER OF RISKS AND UNCERTAINTIES.
SOME OF THESE RISKS ARE DETAILED IN PART II, ITEM 7, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FACTORS THAT
MAY AFFECT FUTURE RESULTS" AND ELSEWHERE IN THIS FORM 10-K. THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN REPRESENT A GOOD-FAITH ASSESSMENT OF THE COMPANY'S
FUTURE PERFORMANCE FOR WHICH MANAGEMENT BELIEVES THERE IS A REASONABLE BASIS.
THE COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE INFORMATION ON FORECASTS
CONTAINED HEREIN, EXCEPT AS MAY BE OTHERWISE REQUIRED BY LAW.
HISTORICAL STATEMENTS MADE HEREIN ARE ACCURATE ONLY AS OF THE DATE OF FILING
THIS FORM 10-K WITH THE SECURITIES AND EXCHANGE COMMISSION AND MAY BE RELIED
UPON ONLY AS OF THAT DATE.
GENERAL
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Storage Technology Corporation ("StorageTek" or the "Company") designs,
manufactures, markets and maintains information storage products, storage
services and storage management software. The Company provides customers with a
broad range of storage products and services, including tape, disk and network
products; storage services, including maintenance and professional services; and
storage management software.
The Company's products are used by a range of customers that include large
multinational companies, small businesses, and governmental agencies,
encompassing a wide range of industry sectors, including financial, retail,
telecommunications, transportation, manufacturing and services, as well as
educational, scientific and medical institutions located around the world. The
Company markets its products and services through its direct sales organization
and indirect sales channels, including original equipment manufacturer (OEM),
value-added distributor (VAD), value-added reseller (VAR) and other distribution
arrangements.
StorageTek's strategy is focused on providing information-centric solutions that
allow the customer to collect, move, store, share and protect digital
information. The Company's strategy of delivering solutions to customers is
founded on a virtual, intelligent storage architecture (VISTA) technology model,
which is grounded in an industry standard that permits storage management that
is compatible with a wide range of types and manufacturers of computers. The
VISTA model encompasses: (i) systems administration; (ii) applications; (iii)
storage management; (iv) storage administration; (v) storage access; and (vi)
physical storage.
The key features of the Company's VISTA model include open storage solutions
that allow the customer to mix-and-match products from a number of vendors;
intelligent storage solutions that contain embedded intelligence apart from the
server; and integrated storage solutions that provide customers with a complete,
scalable product hierarchy and storage management. StorageTek provides many of
the components in the VISTA model and has created alliances with other
manufacturers, developers, distributors and suppliers to provide customers with
total information-centric storage solutions. As a result, it is possible for
other companies to be at various times collaborators, customers and competitors
in different markets.
The Company was incorporated in Delaware in 1969. Its principal executive
offices are located at One StorageTek Drive, Louisville, Colorado 80028,
telephone (303) 673-5151.
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REVENUE AND GROSS PROFIT BY BUSINESS SEGMENT
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REVENUE AND GROSS PROFIT BY BUSINESS SEGMENT
(IN THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER
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1999 1998 1997
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<S> <C> <C> <C>
Revenue
Storage products $1,465,216 $1,520,647 $1,495,038
Storage services 718,844 633,821 584,016
Storage management software 184,171 103,754 65,602
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Total revenue $2,368,231 $2,258,222 $2,144,656
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Gross profit
Storage products $ 592,822 $ 688,050 $ 669,914
Storage services 221,669 273,662 265,521
Storage management software 128,493 78,698 37,691
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Total gross profit $ 942,984 $1,040,410 $ 973,126
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</TABLE>
Additional information concerning revenue and profit attributable to each of the
Company's business segments and geographic areas is found in Part II, Item 7,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," and in Part IV, Note 14, of "NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS," of this Form 10-K, which information is incorporated by reference
into this Part I, Item 1.
PRINCIPAL PRODUCTS
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StorageTek is currently organized into three reportable business segments:
storage products; storage services; and storage management software. The
Company's storage product offerings include tape, disk and network products.
Storage services offerings include maintenance services for StorageTek and
third-party storage products, and storage consulting and integration services.
The storage management software segment sells and licenses software tools and
applications for improving storage product performance and simplifying
information storage management.
STORAGE PRODUCTS
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The Company's storage products, which accounted for 62% of total revenue in
1999, include a range of tape, disk and network products that serve as
components of the Company's VISTA model. The Company's storage products are
designed for the mainframe and client-server markets, including the developing
storage area network (SAN) market.
TAPE PRODUCTS
The Company's tape products historically have generated significant revenue for
the Company and are engineered to provide reliable, cost-effective storage of
digital information. The Company experienced a shift in its tape customer base
during 1999 from the mainframe to the client-server marketplace. Sales of
client-server tape automation products grew 75% during 1999 with the fourth
quarter of 1999 representing the first quarter in which sales of client-server
tape products exceeded sales of mainframe tape products. In December 1998, the
Company announced the availability of its 9840 product, a high-performance,
high-capacity tape drive. The 9840 addresses both the mainframe and
client-server markets. The TimberWolf automated tape library product family, a
low cost, reliable storage solution for the client-server market, first became
available in 1996. The
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Company also offers TimberLine, a high-performance 36-track cartridge subsystem
which first became available in the fourth quarter of 1994, and PowderHorn 9310
Automated Cartridge System (ACS), a high-performance, high-capacity cartridge
library which became available in 1993, and other earlier generation tape
products targeted for the mainframe marketplace.
The Company is currently developing new tape products and enhancements, all of
which are in the design, preliminary engineering or engineering validation
testing phase and no availability dates have been announced. See Part II, Item
7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- FACTORS THAT MAY AFFECT FUTURE RESULTS -- New Products, Services
and Software; Emerging Markets," which is incorporated by reference into this
Part I, Item 1, for a discussion of certain risks associated with the
development and introduction of new products that may affect future results.
DISK PRODUCTS
The Company's disk product offerings include a family of disk systems that offer
a spectrum of capacity, performance, connectivity and price. The Company's disk
product offerings include the 9393 Shared Virtual Array (SVA), which utilizes
virtual disk technology and is currently targeted for the mainframe and
client-server markets. The 9393 is designed to provide high-performance,
scalability and continuous online data availability and first became available
in 1999. In February 2000, the Company announced the availability of the 9500
SVA, the next generation of SVA disk products, targeted for the client-server
marketplace.
In addition, the Company also offers the OPENstorage Disk product family, which
is designed for the client-server disk market. The OPENstorage products are
designed to provide high-performance, high-availability, scalable physical
storage, and first became available in the third quarter of 1996. The
OPENstorage Disk products are distributed by the Company's direct sales force
and through indirect channels. From the third quarter of 1996 through 1999, the
Company's disk products were principally sold through a worldwide, non-exclusive
OEM agreement with International Business Machines Corporation (IBM). In 1999,
the Company focused on shifting its sales activities from its OEM relationship
with IBM to the direct sales channel. The Company does not anticipate any
significant sales revenue from IBM in 2000. Under the OEM arrangement with IBM,
the Company developed new disk technology, some of which is owned by IBM, and
IBM has granted the Company both royalty-bearing and royalty-free licenses to
use this technology. There can be no assurances that the Company will be
successful in developing, introducing, or marketing new disk products and
enhancements, or establishing cost-effective, high-volume distribution channels
for its disk products.
NETWORK PRODUCTS
A key element of the Company's VISTA model is the Company's SAN strategy. A SAN
allows the sharing of information and storage devices across a network. The
Company's network products are designed to provide device interface and host
interface with the physical storage and the connectivity infrastructure
necessary to enable the integration of network-based storage management
functions. The Company's principal network products include the StorageNet
family of products, which are designed to provide high-performance, high-speed
connectivity between local and wide-area networks and serve as the foundation of
StorageTek's SAN infrastructure. The first StorageNet products became available
in 1996.
The Company is currently developing new network products and enhancements
intended to address the developing SANs marketplace. All of these products and
enhancements are in the design, preliminary engineering or engineering
validation testing phase and no availability dates have been announced. See Part
II, Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- FACTORS THAT MAY AFFECT FUTURE RESULTS -- New Products,
Services and Software; Emerging Markets," which is incorporated by
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reference into this Part I, Item 1, for a discussion of certain risks associated
with the development and introduction of new products that may affect future
results, as well as risks associated with the developing SANs market.
STORAGE SERVICES
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The Company's storage services include maintenance services, integration
services, storage consulting and managed storage services. The Company provides
maintenance services for both StorageTek storage products and third-party
equipment around the world, using a combination of service engineers, remote
diagnostic tools, online and telephone assistance, and contractual agreements
with third-party service providers. In 1999, the Company's storage services
revenue accounted for approximately 30% of total revenue.
In the past, the Company's maintenance services had been the principal source of
service revenue. The Company generally warrants its products for a specified
period of time, after which it services products for a fee under maintenance
agreements. As a result of competitive pressures, many of the Company's products
may include extended warranty periods. Extending warranty periods may reduce
future maintenance revenue and put downward pressure on profit margins. The
Company's maintenance revenue also may be adversely affected by the shift in the
Company's customer base from the mainframe to the client-server marketplace, as
well as the Company's increasing reliance on indirect distribution channels for
its products, as some indirect distributors provide service for the products
that they sell.
The Company invested significant resources in 1998, and the first three quarters
of 1999, in programs designed to expand its service business. These programs
included a broad range of consulting and integration service offerings,
developing pre-packaged solutions customized to specific customer application
needs, and managed storage service offerings. However, certain of these programs
did not meet the Company's expectations regarding profitability. The Company
intends to limit its consulting and integration service offerings to supporting
sales of SAN virtual products and software in the future. The Company is
currently completing its open commitments with respect to its consulting
integration services which will not be continued. While the Company anticipates
service revenue will decline in 2000 as it reduces its investments in or
eliminates these service offerings, these changes are expected to improve
profitability as these business activities have generated lower gross margins.
With respect to its managed storage service business, the Company anticipates
that it will seek some type of alliance, joint-venture or other structure
through which it can gain access to capital in return for, among other
possibilities, equity participation or a contract to supply certain hardware and
software used in this business. There can be no assurances that the Company will
be successful in its initiative to enter into some type of alliance,
joint-venture or other structure through which it can gain access to the capital
necessary to provide, directly or indirectly, managed storage services.
STORAGE MANAGEMENT SOFTWARE
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The Company's storage management software segment sells and licenses software
tools and applications for improving storage product performance and simplifying
information storage management. Storage management is a fundamental layer of the
VISTA model and the Company believes that its storage management software will
be important to its competitiveness in the SAN market. The Company's approach is
based on delivering open, intelligent and integrated storage solutions, which
will require a comprehensive storage management strategy. The Company intends to
continue to develop software tools and will work with other software vendors to
enable it to deliver a total solution. In 1999, storage management software
accounted for approximately 8% of total revenue.
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The Company offers the Virtual Storage Manager (VSM), a software-driven data
storage management solution designed to improve performance, cartridge
utilization and overall storage management using StorageTek's storage products.
VSM is engineered to support the demands created by data center consolidation,
electronic commerce, data warehousing and enterprise resource planning. VSM
first became available in December 1998.
The Company also offers SnapShot, software designed to provide virtual
duplication and significantly reduce central processing unit (CPU) and channel
utilization costs associated with data movement. The Company's SnapShot software
is designed solely to operate with its SVA product family. SnapShot software
currently operates with the 9393 SVA and on February 15, 2000, the Company
announced the availability of SnapShot for its 9500 SVA. The Company anticipates
that the SnapShot software will be compatible with any SVA that the Company
develops in the future. The SnapShot product was first released in 1996. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- FACTORS THAT MIGHT AFFECT FUTURE RESULTS -- New Products, Services
and Software; Emerging Markets," for a discussion of certain risks associated
with the development and introduction of new software that may affect future
results.
BACKLOG
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As of December 31, 1999, the storage product order backlog was approximately $48
million, compared to year-end amounts of approximately $42 million in 1998, and
$27 million in 1997. In addition to the backlog amount, the Company had
approximately $61 million of storage product inventory held by customers on
evaluation as of December 31, 1999, compared to $64 million as of December 25,
1998, and $51 million on December 26, 1997. The order backlog for storage
management software products on December 31, 1999, was approximately $8.5
million, and at year-end 1998 and 1997 was $4.5 million and $0.2 million,
respectively. In addition to the backlog amount, the Company had approximately
$10.5 million of storage software inventory held by customers on evaluation as
of December 31, 1999.
Backlog amounts are calculated on an "if sold" basis and include orders from
end-users, OEMs, VADs, VARs and distributors for products that StorageTek
expects to deliver during the following 12 months. Product units held by
customers on evaluation or covered by letters of intent are not included in
backlog amounts. Unfilled orders and orders with respect to inventory held by
customers on evaluation may be canceled by the customer. Accordingly, backlog
levels and inventory held by customers on evaluation are not reliable indicators
of future results. There can be no assurance that orders in backlog and
inventory held by customers on evaluation will ultimately be recognized as
revenue. See Note 1 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" of this Form
10-K for a discussion of the Company's revenue recognition accounting policy.
MARKETING AND DISTRIBUTION
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StorageTek markets its products and services globally, through a combination of
a direct sales organization and indirect sales channels. The Company maintains a
presence, directly or indirectly, in most major cities in the world. The Company
operates sales and service offices throughout the United States and Europe, as
well as Australia, Brazil, Canada, China, Hong Kong, Japan, Korea, Malaysia,
Mexico, Singapore and New Zealand, and sells its products and services through
independent distributors, sometimes in tandem with direct sales and service
operations, located in Africa, Asia, Europe, South America and New Zealand.
The Company's direct sales organization includes sales representatives, service
engineers, system engineers, system integrators, and administrative support
staff. The Company's direct sales outside the United States are generally made
by foreign sales subsidiaries. The Company's indirect channels include OEMs,
VARs, master resellers who supply product and services to VARs, VADs, system
integrators that integrate StorageTek products with other hardware and software
and
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independently provide marketing and maintenance services to customers, and
independent distributors. Indirect channel sales account for a significant
portion of the Company's product sales revenue. In 1998 and 1999, the Company's
indirect distribution channel accounted for approximately 49% and 43%,
respectively, of the Company's total product and software revenue. Excluding the
Company's OEM relationship with IBM for both years; however, revenue from
indirect distribution channels increased from 22% in 1998 to 30% in 1999 of the
Company's total product and software revenue. As previously discussed under
"Principal Products -- Disk Products," the Company does not anticipate any
significant sales revenue from IBM in 2000. Some of the OEM alliances currently
in place for the sale of the Company's products include Bull Alliance Compagnie,
Dell Computer Corporation, Hewlett-Packard Company, NEC Corporation, NCR
Corporation, Siemens Nixdorf, SGI, Sun Microsystems, Inc. and Unisys
Corporation. The Company's accounting policies with respect to revenue
recognition for indirect distribution channels differs from that used for direct
sales. See Note 1 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" of this Form
10-K for a discussion of the Company's revenue recognition policies.
In connection with its current restructuring activities, the Company is
implementing changes to its sales model for the United States and Canada that
the Company expects will improve market penetration, increase sales
productivity, reduce marketing expense, and expand the use of the indirect sales
channel. This new sales model is intended to provide better coverage for new and
existing end-user customers as well as enhancing reseller, distributor and OEM
partnerships. The Company has recently established new field sales geographies
to better serve Fortune 500 customers with enterprise-level product and service
requirements. A newly formed Growth Markets sales unit is intended to address
the needs of small and medium-sized customers, with particular emphasis on
internet and e-commerce businesses.
There can be no assurance that the Company will be successful in its efforts to
implement its new sales model within the United States and Canada during the
year 2000 or that the new emphasis on indirect sales channels will result in
increased sales or profitability over the longer term. Further, the Company may
experience disruptions to its sales as it implements this new sales model and
compensation structure. See Part II, Item 7, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FACTORS THAT MIGHT
AFFECT FUTURE RESULTS -- Changes in Sales Model for the United States and
Canada," for a discussion of certain risks associated with the implementation of
the Company's new sales model.
Revenue from outside the United States accounted for approximately 41% of total
revenue in 1999, 37% in 1998, and 34% in 1997, which includes sales to
end-users, resellers and distributors. In each of these three fiscal periods,
over two-thirds of the Company's revenue originating outside the United States
was derived from Europe, with the majority of the balance coming from Japan,
Australia and Canada. The Company is subject to various risks associated with
conducting business outside the U.S. See Part II, Item 7, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- International Operations and Market Risk Management/Foreign
Currency Exchange Risk," for a discussion of risks associated with operations in
foreign countries.
MANUFACTURING AND MATERIALS
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The Company's primary manufacturing and assembly facilities are located in
Puerto Rico and Colorado. The Company also performs limited manufacturing in
Toulouse, France. All of the Company's manufacturing facilities are currently in
compliance with the ISO 9001 or 9002 international quality standards.
StorageTek manufactures certain key components for its products. In addition, a
substantial portion of the Company's production costs is related to the purchase
of subassemblies, parts and components for its products from vendors located
within and outside the United States. The balance of the Company's production
costs relates to in-house manufacturing, assembly and testing. In
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particular, the Company performs certain critical steps in the manufacture of
its read/write heads for the 9840 tape drive product. The successful manufacture
of these read/write heads gives the Company a competitive edge in that the
Company has developed key proprietary design and manufacturing technologies. The
sophisticated nature of the exacting manufacturing process steps requires tight
physical, electrical and chemical tolerances. The Company relies upon its
skilled personnel and makes significant capital investments in order to
successfully manufacture these read/write heads. Even within a cleanroom
environment, minor equipment malfunctions in any one of the many manufacturing
process steps due to factors such as extraneous chemical contaminants, ambient
particulates, power surges, optical misalignments, timing or temperature
variations could halt production for an indeterminate period of time.
Certain of the parts and components included in the Company's products are
obtained from a single source or a limited group of suppliers. In particular,
IBM, Imation, Sumitomo and Herald Datanetics have been identified as single
source suppliers of the Company. Dependence upon single or limited source
vendors involves a number of risks, including the possibility of a shortage of
key components, longer lead times, and reduced control over production and
delivery schedules.
The Company has long-term supply contracts with certain vendors and suppliers;
the remaining parts and components are obtained by delivering purchase orders to
vendors specifying the required components. These vendors are not obligated to
supply products for an extended period at specific quantities and prices. See
Part II, Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- FACTORS THAT MAY AFFECT FUTURE RESULTS -- Sole
Source Suppliers," of this Form 10-K for a discussion of factors that may affect
the Company's ability to obtain materials from sole source suppliers, which
information is incorporated by reference into this Part I, Item 1.
COMPETITION
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The markets for the Company's products, services and software are intensely
competitive and are subject to continuous, rapid technological change, frequent
product performance improvements, short product life cycles and aggressive
pricing. The Company competes in a number of markets that include a broad
spectrum of customers primarily on the basis of technology, product
availability, performance, quality, applications and industry solutions,
reliability, price, distribution and customer service. The Company believes that
its ability to compete depends on a number of factors, both within and outside
of its control. These factors include the price and cost of the Company's and
its competitors' product offerings, the timing and success of new products and
applications, product introductions by the Company's competitors, and general
economic and business conditions within and outside the United States. Strong
competition has resulted in price reductions in the past and the Company expects
this trend to continue.
The Company expects that the markets for its products, services and software,
and its competitors within such markets, will continue to change in response to
shifting customer storage requirements and technological advances. The Company's
competitors include, among others, Compaq Computer Corporation, EMC Corporation,
Hewlett-Packard Company, Hitachi Ltd., IBM, Quantum Corporation, and Sun
Microsystems, Inc. A number of the Company's competitors have significantly
greater financial resources than the Company.
The Company is focusing significant resources on product offerings for the
client-server market. Competition in the client-server market is aggressive and
is based primarily upon performance, quality, system scalability, price, service
and name recognition. The client-server market includes a wide range of
customers including customers outside of the Company's traditional customer
base. Many of the Company's potential customers in the client-server market
purchase their storage requirements as part of a bundled product, which may
provide a competitive advantage to the Company's rivals. The Company expects to
address these competitive factors through its SAN strategy, as well as through
the delivery of storage solutions which provide customers with superior
function, performance and quality. The Company anticipates that the competition
in the SAN market
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will intensify in the future as its competitors aggressively seek to position
themselves to take advantage of the shift in customer demands. The SAN market is
characterized by various alliances formed to promote industry standards and
deliver tested, interoperable SAN technology. The Company is a member of several
associations, which also include the Company's competitors. In addition, a
number of the Company's competitors in the product, services and software
markets have formed alliances with the stated objective of developing
interoperable SAN solutions. For example, 3Com Corporation, Legato Systems, Inc.
and MTI Technology Corporation have formed an alliance to deliver tested SAN
solutions. In the storage management software market, the Company competes with
vendors with which it has established relationships, including Legato Systems,
Inc. and VERITAS Software Corporation.
NEW PRODUCT DEVELOPMENT
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StorageTek invests substantial resources to develop new products, software and
enhancements. In 1999, 1998 and 1997, the Company incurred research and
development costs for product and software development activities of
approximately $278 million, $235 million and $210 million, respectively. In
order to expand the Company's access to new technologies and reduce the amount
of time necessary to bring new products to market, the Company in the past has
acquired other companies and has entered into joint development and other
similar relationships. In 1999 and 1998, the Company received approximately $10
million and $50 million, respectively, of research and product development
funding from third parties.
As of December 31, 1999, approximately 1,200 employees were engaged on a
full-time basis in engineering and product development activities, primarily at
several facilities located in the United States and at facilities located in
France and Australia. For further discussion of risk factors concerning product
development, see Part II, Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FACTORS THAT MAY AFFECT FUTURE
RESULTS -- New Products, Services and Software; Emerging Markets," of this Form
10-K, which information is incorporated by reference into the Part I, Item 1.
PATENTS AND LICENSES
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StorageTek's ability to compete is affected by its ability to protect its
proprietary information. StorageTek protects its proprietary rights through a
combination of patents, trademarks, copyrights, confidentiality procedures,
trade secret laws and licensing arrangements. The Company's policy is to apply
for patents, or other appropriate proprietary or statutory protection, in both
the United States and selected foreign countries to establish its proprietary
rights in new or improved technology. StorageTek currently holds approximately
450 United States patents, as well as foreign counterparts to many of these
patents in selected countries, covering various aspects of its products. These
patents will expire from 2000 through 2015. The Company also has pending in the
United States numerous patent applications, including several that have been
allowed and are expected to be formally issued, as well as pending foreign
counterparts to many of these applications. In addition, StorageTek has licenses
to use patents held by others. Taken as a whole, these assets are material to
the Company's business. However, no individual patent, license or other item of
proprietary information is singularly material to the Company's business.
The Company has ongoing legal proceedings relating to certain of its patents.
For a discussion of certain legal proceedings relating to the Company's patents,
see Part I, Item 3, "Legal Proceedings" of this Form 10-K, which information is
incorporated by reference into this Part I, Item 1.
ENVIRONMENT
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Compliance with the provisions of federal, state and local laws regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had a material adverse effect on the
financial results and operations of the Company. The Company did
9
<PAGE> 10
not have any material expenditures for environmental control facilities in 1999.
The Company does not currently have pending and has not budgeted any material
estimated expenditures for environmental control facilities during 2000.
However, potential liability under environmental legislation is ongoing,
regardless of whether or not the Company has complied with existing governmental
guidelines. The Company has received notice from the State of Florida and the
United States Environmental Protection Agency regarding a potential matter
involving ground water contamination and remediation activities at a property
located in Palm Bay/Melbourne, Florida, a site that the Company sold in January,
2000. The Company is currently not able to predict the outcome or potential
expenditures associated with this matter but does not expect that it will have a
material adverse effect on the financial results and operations of the Company.
Governmental regulation in the United States of the environment and related
compliance costs have increased in recent years. The Company cannot predict the
nature or scope of future environmental laws or regulations, how they will be
administered, or whether compliance will require substantial expenditures. Based
upon currently available information, the Company expects future compliance with
existing environmental regulations will have no material effect on the financial
results and operations of the Company.
RISKS ASSOCIATED WITH THE YEAR 2000
- ---------------------------------------------------
The Company is not currently aware of any significant problems among its
customers as a result of the failure of the Company's products to differentiate
between years in the 1900s and years in the 2000s. In addition, the Company did
not experience any serious problems among the various computer systems used by
the Company and, to the best of the Company's knowledge, none of its significant
suppliers experienced any serious problems among the various computer systems
used by such suppliers.
EMPLOYEES
- ---------------
The Company employed approximately 8,700 persons on a full-time basis worldwide
as of December 31, 1999, including approximately 240 persons who had received
notice of their future termination in connection with the Company's
restructuring activities, but were still employees of the Company as of the end
of the year. The Company currently anticipates there will be a reduction of an
additional 500 to 600 positions during 2000 through a combination of
terminations and attrition. See Part II, Item 7, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Restructuring" and
"FACTORS THAT MAY AFFECT FUTURE RESULTS -- Significant Personnel Changes."
RESTRUCTURING
- ---------------------
The Company is currently engaged in a broad restructuring program intended to
return the Company to profitability. Key elements of the restructuring include:
(i) an anticipated reduction of approximately 1,200 to 1,400 positions, with
approximately 550 positions eliminated during fiscal year 1999 and the majority
of the remaining reductions projected to be completed by the end of the second
quarter of 2000; (ii) a reduction in investment in certain businesses, including
consulting and integration services and managed storage services; (iii) a
recommitment to the Company's core strengths of tape automation, virtual storage
and storage area networks (including related maintenance and professional
services); (iv) modifications to the sales model for the United States and
Canada intended to improve productivity and increase account coverage and
growth; and (v) other organizational and operational changes intended to improve
efficiency and competitiveness. Additional information concerning the Company's
restructuring is found in Part II, Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Restructuring," and in Part
IV, Note 9 of "NOTES TO
10
<PAGE> 11
CONSOLIDATED FINANCIAL STATEMENTS," of this Form 10-K, which information is
incorporated by reference into this Part I, Item 1.
OTHER MATTERS
- ---------------------
The Company's results historically have experienced seasonality, with increased
revenue in the Company's fourth quarter compared to other quarters as customers
tend to make purchase decisions near the end of the calendar year. There can be
no assurance that this historical trend will continue in 2000 and that revenue
during the fourth quarter will be higher than any other quarter.
No single customer accounted for 10% or more if the Company's total revenue in
1999. No material portion of the Company's business is subject to contract
termination at the election of the United States government.
Reference is made to the following "NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS" set forth in Part IV, Item 14, of this Form 10-K for certain
additional information, which information is incorporated by reference herein:
Note 5 Description of the Company's credit facilities, debt and lease
obligations.
Note 13 Description of the Company's financial instruments and
off-balance-sheet risks.
Note 14 Information on the operations of business segments and geographic
areas. See also Part II, Item 7, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- International Operations and Market Risk
Management/Foreign Currency Exchange Risk," for further discussion
of the risks associated with the Company's foreign operations.
Reference is also made to Part II, Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," of this Form 10-K, for
information regarding liquidity, working capital and risk factors that may
affect future results.
SUBSEQUENT EVENTS -- MANAGEMENT CHANGES
- ----------------------------------------------------------------
On February 3, 2000, the Company announced that David E. Weiss, its Chairman of
the Board, President and Chief Executive Officer has recommended to the
Company's Board of Directors that he resign from all such positions. At the
request of the Company's Board of Directors, Mr. Weiss will continue in all such
offices until a successor has been selected and any transition is completed. The
Board has appointed a search committee and has engaged an executive search firm
to assist the committee in identifying a successor. The Board elected Richard C.
Steadman, a current independent director of the Company, as Lead Independent
Director. The Company is unable to predict when a successor for Mr. Weiss will
be elected. The Company also announced on February 3, 2000, that Victor Perez,
the Company's Chief Operating Officer, would leave the Company at the end of the
first quarter of 2000. See Part II, Item 7, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FACTORS THAT MAY
AFFECT FUTURE RESULTS -- Significant Personnel Changes," for a discussion of
risks associated with recent personnel changes.
ITEM 2. PROPERTIES
StorageTek conducts its operations worldwide and occupies both leased and owned
facilities. At the present time, such facilities are adequate for the Company's
purposes.
Colorado. StorageTek occupies facilities in nine separate buildings in Boulder
County, Colorado, comprising approximately 1.8 million square feet. These
facilities include StorageTek's executive offices, as well as manufacturing,
research and development, and spare parts storage facilities. A
11
<PAGE> 12
majority of the Company's owned facilities in Boulder County are fully utilized.
The Company anticipates that certain manufacturing functions will be shifted to
its Puerto Rico facilities. Thereafter, utilization of the Company's owned
facilities in Boulder County are expected to be reduced. The Company also leases
approximately 400,000 square feet of office and storage space in Colorado.
Other United States Properties. The Company owns 195,000 square feet of research
and development, and administrative facilities in the Minneapolis, Minnesota
area, which is approximately 80% utilized. The Company occupies manufacturing
facilities in Puerto Rico, of which approximately 83,000 square feet are owned
and 73,500 square feet are leased. The facilities in Puerto Rico are fully
utilized. The Company also leases office and customer service facilities
throughout the United States at approximately 130 locations comprising
approximately 730,000 square feet.
International Properties. StorageTek leases approximately 200,000 square feet of
engineering, consulting integration and marketing facilities in Toulouse,
France, which are approximately 87% utilized. In addition, StorageTek leases
facilities at locations throughout the world, primarily for sales and customer
service activities, spare parts storage, and limited research and product
development activities. The Company leases offices in 20 locations in Canada
comprising approximately 100,000 square feet, leases four offices in Latin
America comprising approximately 20,000 square feet, leases approximately 60
offices in Europe comprising approximately 400,000 square feet, and 16 offices
in the Asia/Pacific region comprising approximately 90,000 square feet. Many of
the Company's leases throughout the world contain renewal rights, cancellation
rights and rights of first refusal on contiguous expansion space.
ITEM 3. LEGAL PROCEEDINGS
Litigation expense recognized during 1999 consists of the following (in
thousands of dollars):
<TABLE>
<S> <C>
Odetics, Inc. settlement $ 97,794
ADEA/ERISA settlement 5,000
Other settlements 788
--------
$103,582
--------
--------
</TABLE>
On October 8, 1999, the Company and Odetics, Inc. (Odetics) entered into a
settlement agreement regarding two patent infringement suits originally filed
against the Company by Odetics on June 29, 1995, and December 8, 1995, alleging
infringement of various claims in U.S. Patent No. 4,779,151 (the "151 Patent").
The Company agreed to pay $100.0 million to Odetics for a fully paid up license
to the 151 Patent; $80.0 million of which was paid at the time of the settlement
and the remainder to be paid in equal annual installments of $10.0 million in
September 2000 and September 2001. The Company recognized a pre-tax expense of
$97.8 million to reflect the present value of the final settlement payments.
On December 15, 1999, at a preliminary fairness hearing, the Company and
plaintiffs, representing certain former employees of the Company, presented the
United States District Court for the District of Colorado (the Court) with a
proposed settlement agreement, which would result in the Company paying $5.0
million for the settlement of litigation alleging the Company violated the Age
Discrimination in Employment Act of 1967, as amended (ADEA) and the Employee
Retirement Income Security Act of 1974 (ERISA), between the period of April 13,
1993, and December 21, 1996. Final approval of this proposed settlement
agreement was received from the Court on March 8, 2000. The settlement agreement
states that it shall not be construed as an admission by the Company that it
violated any law. The Company funded the settlement with a $5.0 million payment
into an escrow account in December 1999. A pre-tax expense of $5.0 million was
recognized in connection with the proposed settlement during 1999.
12
<PAGE> 13
In January 1994, Stuff Technology Partners II, a Colorado Limited Partnership
(Stuff), filed suit in Boulder County, Colorado, District Court against the
Company and certain subsidiaries. The suit alleged that the Company breached a
1990 settlement agreement that had resolved earlier litigation between the
parties concerning an optical disk drive storage development project entered
into in 1981 which was unsuccessful and terminated in 1985. The suit sought
injunctive relief and damages in the amount of $2.4 billion. On December 28,
1995, the court granted the Company's motion for summary judgment and dismissed
the complaint. Stuff appealed the dismissal to the Colorado Court of Appeals. In
March 1997, the Court of Appeals reversed the District Court's judgment and
remanded the case to the District Court for further proceedings. On July 15,
1999, the District Court dismissed with prejudice all of Stuff's material claims
against the Company. On August 30, 1999, Stuff filed a notice of appeal with the
Colorado Court of Appeals seeking to overturn the decision of the District
Court. The parties are in the process of filing various appellate briefs and the
Company anticipates that the final briefs will be filed in April 2000. No oral
argument date has been set. The Company continues to believe that Stuff's claims
are wholly without merit and intends to defend vigorously any further actions
arising from this complaint.
In August 1999, the Company filed suit in the United States District Court,
Western District against Cisco Systems, Inc. (Cisco) in Case No. 99C 782 S,
alleging that Cisco infringed upon a certain patent of the Company used in its
products. The Company filed an amended complaint on December 30, 1999, in which
the Company alleged that Cisco had infringed upon a second patent of the Company
used in its products. Cisco filed an answer denying the Company's claims and
asserting that a microchip used in one of the Company's network security product
infringed upon one of Cisco's patents. Cisco is seeking unspecified compensatory
damages which it asserts should be trebled, along with injunctive relief. The
Company purchases the alleged infringing microchip from a subsidiary of Intel
Corporation. The Company intends to add as third party defendants the subsidiary
of Intel, along with the microchip distributor and the manufacturer of the
circuit boards that utilize the microchip. The Company believes that it has
valid claims against Cisco and valid defenses against Cisco's counterclaim.
The Company is also involved in various other less significant legal actions.
While the Company currently believes that the amount of any ultimate potential
loss would not be material to the Company's financial position, the outcome of
these actions is inherently difficult to predict. In the event of an adverse
outcome, the ultimate potential loss could have a material adverse effect on the
Company's financial position or reported results of operations in a particular
quarter. An unfavorable decision, particularly in patent litigation, could
require material changes in production processes and products or result in the
Company's inability to ship products or components found to have violated
third-party patent rights.
Information concerning certain of these legal proceedings is also contained in
Note 7 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS," included in Part IV,
Item 14, of this Form 10-K.
13
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during its
fourth quarter of the fiscal year ended December 31, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were serving as executive officers of the Company as of
December 31, 1999.
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY AGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gary Anderson Corporate Vice President, World Wide Operations Technology 52
Roger D. Archibald Vice President and General Manager, Enterprise Business
Group 47
Thomas G. Arnold Vice President and Corporate Controller 38
Susan W. Bailey Corporate Vice President, U.S./Canada Sales and Service and
Global Channels 39
Jeffrey M. Dumas Corporate Vice President, General Counsel and Secretary 54
Gary D. Francis Vice President, Corporate Strategy 52
Robert S. Kocol Corporate Vice President and Chief Financial Officer 43
Karen Niparko Corporate Vice President and Chief Administrative Officer 44
Jean Reiczyk Corporate Vice President and General Manager, Solutions
Business Group 50
David E. Weiss Chairman of the Board, President and Chief Executive Officer 55
</TABLE>
Mr. Anderson was appointed Corporate Vice President, World Wide Operations
Technology, in January 2000. From July 1996 to January 2000 he served as
Corporate Vice President World Wide Sourcing/Logistics/Systems. Mr. Anderson
served as Corporate Vice President, Sourcing and Logistics from November 1995 to
July 1996. Mr. Anderson has been employed by StorageTek in various other
capacities since 1981.
Mr. Archibald was appointed Vice President and General Manager, Enterprise
Business Group in February 2000. From July 1998 until this appointment, he
served as Vice President and General Manager, Enterprise Disk Business Group.
Prior to joining StorageTek, Mr. Archibald served in various management
positions at Hewlett-Packard Company, a computer and imaging products company.
Most recently, from 1993 to 1998, Mr. Archibald served as Information Storage
Group, Worldwide Marketing Manager at Hewlett-Packard.
Mr. Arnold was appointed Vice President and Corporate Controller in April 1997.
From November 1995 to April 1997, he served as Director of Worldwide
Consolidation and Reporting. Mr. Arnold served as Manager of External Reporting
from April 1991 to November 1994. Mr. Arnold has been employed by StorageTek in
various other capacities since 1989.
Ms. Bailey joined StorageTek in August 1999 as Corporate Vice President,
U.S./Canada Sales and Service and Global Channels. From 1997 until August 1999,
she was President of EnPoint Technologies, a value-added reseller/systems
integrator. From 1996 until 1997, Ms. Bailey served as Senior Vice President,
Sales, Marketing and Services of Intelligent Electronics, a distributor of
computer hardware, software, peripherals and services. From 1982 until 1986, Ms.
Bailey worked at IBM in a number of sales, marketing and management positions.
14
<PAGE> 15
Mr. Dumas was appointed Corporate Vice President, General Counsel and Secretary
in September 1999. He joined the Company in August 1998 as Corporate Vice
President and General Counsel. From April 1995 to August 1998, Mr. Dumas served
as Vice President and General Counsel of Symbios, Inc. He served as Group
Counsel-Work Stations Division at Silicon Graphics, Inc., a computer products
company, from 1992 to 1994.
Mr. Francis was appointed Vice President, Corporate Strategy in February 2000.
From February 1997 until February 2000, he was Vice President and General
Manger, Enterprise Nearline Business Group. From September 1993 to February
1997, Mr. Francis served as Vice President of the Nearline Business. Mr. Francis
has been employed by StorageTek since 1976 in various other capacities.
Mr. Kocol was appointed Corporate Vice President and Chief Financial Officer in
December 1998. Prior to this appointment, from 1996 to 1998, he served as Vice
President of Financial Planning and Operations. In 1991, Mr. Kocol joined the
Company's financial group as Director of Financial Operations and was
subsequently promoted to Director of Worldwide Field Operations Finance and
Administration. Mr. Kocol has been employed by StorageTek in various other
capacities since 1980.
Karen Niparko was appointed Corporate Vice President and Chief Administrative
Officer in July 1999. From April, 1997 to January, 1999, she was Vice President,
Human Resources Development, Worldwide Field Operations. Since August, 1999, Ms.
Niparko has also served as President of the StorageTek Foundation, a non-profit
organization created to award the Company's charitable contributions to
community organizations. Prior to joining StorageTek, Ms. Niparko was Vice
President, Operations at Auto-Trol Technology Corporation, a high-end graphics
software and information management company located in Denver, from 1993 until
1997.
Mr. Reiczyk was elected Corporate Vice President and General Manager, Solutions
Business Group in February 1999 and served as the Company's Vice President and
General Manager, Solutions Business Group from September 1997 to January 1999.
Prior to joining StorageTek, Mr. Reiczyk served as Senior Vice President and
Corporate Quality Officer at Global One, from March 1997 to September 1997. From
1994 to February 1997, he served as Vice President, Value Added Services, at
AT&T Europe, a unit of AT&T, a telecommunications company.
Mr. Weiss has served as Chairman of the Board, President and Chief Executive
Officer since May 1996. He served as Chief Operating Officer of the Company from
March 1995 to May 1996; Executive Vice President of Systems Development from
January 1993 to March 1995; Senior Vice President of Marketing and Program
Management Process from June 1992 to January 1993; and Corporate Vice President
of Market Planning from August 1991 to June 1992. Mr. Weiss joined StorageTek in
February 1991 as Staff Vice President. In February 2000, StorageTek announced
that Mr. Weiss would relinquish his positions as Chairman, Director and Chief
Executive Officer, but would remain in office until his successor has been
elected.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of Storage Technology Corporation is traded on the New York
Stock Exchange under the symbol STK. The table below reflects the high and low
closing sales prices of the common stock on the New York Stock Exchange
composite tape as reported by The Wall Street Journal during each fiscal quarter
of 1999 and 1998. The amounts shown reflect adjustments for the 2-for-1 stock
split effected in the form of a 100% stock dividend that was completed on June
26, 1998. On December 31, 1999, there were 11,332 record holders of common stock
of StorageTek.
<TABLE>
<CAPTION>
1999 High Low
- --------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $40.000 $25.750
Second Quarter 29.188 17.250
Third Quarter 26.000 18.875
Fourth Quarter 21.000 14.625
</TABLE>
<TABLE>
<CAPTION>
1998 High Low
- --------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $37.750 $28.657
Second Quarter 43.938 37.719
Third Quarter 50.188 21.750
Fourth Quarter 39.625 21.625
</TABLE>
Dividends
- ---------
StorageTek has never paid cash dividends on its common stock. The Company
currently plans to continue to retain future earnings for use in its business.
The Company's credit facilities contain provisions restricting the payment of
cash dividends.
16
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The following data, insofar as it relates to the three fiscal years 1997 through
1999 (except for the 1997 Balance Sheet Data) has been derived from the
consolidated financial statements appearing elsewhere herein, including the
Consolidated Balance Sheet as of December 31, 1999, and December 25, 1998, and
the related Consolidated Statement of Operations for each of the three years in
the period ended December 31, 1999, and notes thereto. The data, insofar as it
relates to the Balance Sheet Data as of December 26, 1997, December 27, 1996,
and December 29, 1995, and the Statement of Operations Data for the fiscal years
1996 and 1995, has been derived from the historical financial statements of the
Company for such periods.
The following table data (in thousands of dollars, except per share amounts)
should be read in conjunction with the consolidated financial statements and
notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
--------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue $2,368,231 $2,258,222 $2,144,656 $2,039,550 $1,929,485
Cost of revenue 1,425,247 1,217,812 1,171,530 1,192,777 1,217,622
---------- ---------- ---------- ---------- ----------
Gross profit 942,984 1,040,410 973,126 846,773 711,863
Research and product development
costs 277,770 234,677 209,526 176,422 187,275
Selling, general, administrative and
other income and expense, net 615,616 492,928 472,839 444,870 445,889
Litigation, restructuring and other
charges 146,834(b) 212,207(c)
---------- ---------- ---------- ---------- ----------
Operating profit (loss) (97,236) 312,805 290,761 225,481 (133,508)
Interest income (expense), net (19,214) 6,943 25,356 1,211 8,978
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes
and extraordinary item (116,450) 319,748 316,117 226,692 (124,530)
Benefit (provision) for income taxes 41,900 (121,500) (84,300) (55,900) (17,800)
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
item (74,550) 198,248 231,817 170,792 (142,330)
Extraordinary gain, net of taxes 9,535
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (74,550) $ 198,248 $ 231,817 $ 180,327 $ (142,330)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Basic earnings (loss) per common
share: (a)
Income (loss) before extraordinary
item $ (0.75) $ 1.91 $ 1.93 $ 1.52 $ (1.46)
Net income (loss) (0.75) 1.91 1.93 1.61 (1.46)
Diluted earnings (loss) per common
share: (a)
Income (loss) before extraordinary
item $ (0.75) $ 1.86 $ 1.89 $ 1.43 $ (1.46)
Net income (loss) (0.75) 1.86 1.89 1.50 (1.46)
BALANCE SHEET DATA
Working capital $ 440,763 $ 538,331 $ 661,206 $ 724,171 $ 425,351
Total assets 1,735,475 1,842,944 1,740,017 1,884,276 1,888,629
Total debt 329,048 295,655 22,391 155,257 449,222
Stockholders' equity 919,199 999,576 1,112,503 1,180,983 962,833
</TABLE>
- ---------------
(a) Earnings per share data has been restated to reflect the effect of the
2-for-1 stock split in the form of a stock dividend on June 26, 1998.
(b) In 1999, the Company recognized litigation expense of $103,582,000 and
restructuring expense of $43,252,000.
(c) In 1995, the Company recognized restructuring expense of $167,175,000,
litigation settlement expense of $30,680,000, and merger and consolidation
expense of $14,352,000.
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ALL ASSUMPTIONS, ANTICIPATIONS, EXPECTATIONS AND FORECASTS CONTAINED IN THE
FOLLOWING DISCUSSION REGARDING THE COMPANY'S FUTURE PRODUCT AND BUSINESS PLANS,
FINANCIAL RESULTS, PERFORMANCE AND EVENTS ARE FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES REFORM ACT OF 1995. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY BECAUSE OF A NUMBER OF RISKS AND UNCERTAINTIES.
SOME OF THESE RISKS ARE DETAILED BELOW IN "FACTORS THAT MAY AFFECT FUTURE
RESULTS" AND ELSEWHERE IN THIS FORM 10-K. THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN REPRESENT A GOOD-FAITH ASSESSMENT OF THE COMPANY'S FUTURE
PERFORMANCE FOR WHICH MANAGEMENT BELIEVES THERE IS A REASONABLE BASIS. THE
COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE INFORMATION ON FORECASTS CONTAINED
HEREIN, EXCEPT AS MAY BE OTHERWISE REQUIRED BY LAW.
HISTORICAL STATEMENTS MADE HEREIN ARE ACCURATE ONLY AS OF THE DATE OF FILING
THIS FORM 10-K WITH THE SECURITIES AND EXCHANGE COMMISSION AND MAY BE RELIED
UPON ONLY AS OF THAT DATE.
GENERAL
- -----------
The Company reported a net loss for the year ended December 31, 1999, of $74.6
million on revenue of $2.37 billion, compared to net income for the year ended
December 25, 1998, of $198.2 million on revenue of $2.26 billion and net income
for the year ended December 26, 1997, of $231.8 million on revenue of $2.14
billion. The Company's reported results for 1999 include one-time pre-tax
litigation expenses of $103.6 million, restructuring expenses of $43.3 million,
and other related restructuring expenses of $12.5 million. Excluding these
one-time expenses, net of tax, the Company reported net income of $27.4 million
during 1999.
Revenue increased 5% in 1999, compared to 1998, due to increases in revenue from
storage services and storage management software. Revenue from storage products
decreased in 1999, compared to 1998. Gross profit margins decreased to 40% in
1999 compared to 46% in 1998, due to decreased profit margins in all of the
Company's business segments.
Revenue increased 5% in 1998, compared to 1997, primarily due to increases in
revenue from storage services and storage management software. Gross profit
margins increased to 46% in 1998, compared to 45% in 1997, primarily due to
increased sales of higher-margin storage management software. The increased
margins from storage management software were partially offset by decreased
margins from storage services.
Many of the Company's customers undertake detailed procedures relating to the
evaluation, testing, implementation and acceptance of the Company's products,
software and services. This evaluation process results in a variable sales
cycle, and makes it difficult to predict if or when revenue will be earned.
Further, gross margins may be adversely impacted in an effort to complete the
sales cycle. Revenue and operating profits during 1999 fell significantly short
of the Company's expectations due principally to shortfalls in revenue and gross
margins in North America and Europe. While revenue in North America and Europe
increased in 1999 compared to 1998, gross margins declined in terms of both
gross margin dollars and as a percentage of revenue. The Company believes a
portion of this shortfall was due to some customers delaying purchasing
decisions in anticipation of possible issues associated with the year 2000,
particularly with respect to tape products and Virtual Storage Manager(TM)(VSM)
targeted for the mainframe market. Delays in the introduction and market
acceptance of these new products also impacted the Company's financial results
during the first half of 1999.
The Company's financial results may continue to be adversely impacted by its
variable sales cycle, particularly in the first half of 2000, as it implements
changes to the sales model in the United States and Canada. Future financial
results are also dependent upon the Company's ability to manage its costs and
operating expenses in line with revenue; the timely development, manufacture and
introduction of new products, software and services; successfully managing the
development of
18
<PAGE> 19
new direct and indirect sales channels; the implementation of its storage area
network (SAN) strategy; and the execution of its ongoing restructuring
activities. For the discussion of these and other risk factors, see "Factors
That May Affect Future Results," below.
In April 1999, the Company announced plans to restructure its business. In
October 1999, the Company announced additional restructuring plans. These
restructuring activities are intended to return the Company to profitability. As
the Company's restructuring activities are on-going, the amount and timing of
restructuring expenses which will be incurred during 2000 cannot be clearly
determined at this time, however, these restructuring expenses are expected to
materially affect the Company's reported financial results during 2000. The
Company's sales revenue in the first half of 2000 may be adversely effected by
disruptions to its sales organizations and customers associated with its
restructuring activities. The Company estimates annual savings of approximately
$40 million were realized in connection with the April 1999 restructuring. The
Company expects the activities associated with the October 1999 restructuring to
be completed by the end of the second quarter of 2000 and the October 1999
restructuring is expected to yield annualized savings of approximately $150
million. There can be no assurance that the restructuring activities described
above will be successful or sufficient to allow the Company to realize the
expected annualized savings or return the Company to profitability. See
"Restructuring," below for further discussion of the restructuring activities.
On October 15, 1999, the Company announced that it had engaged an investment
banking firm to assist the Company in its on-going analysis, evaluation and
consideration of various strategic alternatives. These strategic alternatives
could have included financial restructurings, acquisitions, divestitures,
spin-offs, joint ventures, and business combinations including sales, mergers,
or partnerships. On February 3, 2000, the Company announced that the board of
directors had concluded that the Company was most likely to maximize shareholder
value by continuing to operate as an independent entity and by executing the
current restructuring activities.
The Company's cash balance decreased $16.6 million in 1999 due primarily to
litigation payments of $85.8 million and restructuring payments of $34.4
million. See Notes 7 and 9 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" for
further discussion of litigation and restructuring, respectively. Excluding the
effects of these one-time payments, the Company's operating activities provided
cash of $245.6 million in 1999, compared to cash of $88.1 million generated from
operations in 1998. The increase in cash generated from operations in 1999,
compared to 1998, was primarily the result of progress in the Company's efforts
to more effectively manage working capital. See "Liquidity and Capital
Resources -- Working Capital" for additional discussion of operating cash flows.
Cash used in investing activities of $102.4 million was primarily due to
property, plant and equipment purchases of $100.8 million. Cash used in
financing activities of $2.1 million was mainly the result of cash payments of
$35.2 million associated with repurchases of common stock largely offset by cash
receipts of $25.4 million from employee stock plans.
19
<PAGE> 20
The following table, stated as a percentage of total revenue, presents
Consolidated Statement of Operations information and revenue by segment.
<TABLE>
<CAPTION>
Year Ended December
---------------------------------------
1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
Storage products:
Tape products 44.3% 43.1% 45.0%
Disk products 13.9 20.6 20.6
Network products 3.7 3.6 4.1
----- ----- -----
Total storage products 61.9 67.3 69.7
Storage services 30.3 28.1 27.2
Storage management software 7.8 4.6 3.1
----- ----- -----
Total revenue 100.0 100.0 100.0
Cost of revenue 60.2 53.9 54.6
----- ----- -----
Gross profit 39.8 46.1 45.4
Research and product development costs 11.7 10.4 9.8
Selling, general, administrative and other income
and expense, net 26.0 21.8 22.0
Litigation expense 4.4
Restructuring expense 1.8
----- ----- -----
Operating profit (loss) (4.1) 13.9 13.6
Interest income (expense), net (0.8) 0.3 1.1
----- ----- -----
Income (loss) before income taxes (4.9) 14.2 14.7
Benefit (provision) for income taxes 1.8 (5.4) (3.9)
----- ----- -----
Net income (loss) (3.1)% 8.8% 10.8%
----- ----- -----
----- ----- -----
</TABLE>
REVENUE
- -----------
STORAGE PRODUCTS
The Company's storage products revenue includes sales of tape, disk, and network
products for the mainframe and client-server marketplaces. Revenue generated
from storage products decreased 4% in 1999, compared to 1998, and increased 2%
in 1998, compared to 1997.
TAPE PRODUCTS
Tape product revenue increased 8% in 1999, compared to 1998, primarily due to
increased sales of the 9840 high-performance tape drive, increased sales of the
TimberWolf(TM) family of automated tape products designed for the client-server
market, and sale of 9840 tape media. Sales of the Company's client-server tape
automation products grew 75% during 1999 with the fourth quarter of 1999
representing the first quarter in which sales of client-server tape products
exceeded sales of mainframe tape products. Revenue from TimberLine(R) 9490, a
36-track cartridge subsystem; PowderHorn(R) 9310, an automated cartridge system
library; and other earlier generation mainframe tape products declined during
1999, compared to 1998, reflecting both lower selling prices and decreases in
the number of units sold. These revenue declines reflect the continued shift in
the marketplace from mainframe to client-server tape products. The Company
believes that the sales of tape products designed for the mainframe market have
also been adversely impacted in 1999 due to customers delaying testing and
purchasing decisions in anticipation of the year 2000.
Tape product revenue increased 1% in 1998, compared to 1997. Revenue from
TimberWolf and PowderHorn 9310 increased in 1998, compared to 1997, but was
offset by decreased revenue from TimberLine 9490 and other earlier generation
tape products. The decrease in TimberLine revenue was primarily the result of an
increase in pricing pressure and delays during the second half of 1998
20
<PAGE> 21
in customer purchase decisions associated with the evaluation of the Company's
9840 tape drive. The 9840 tape drive became generally available and provided
initial revenue contribution in December 1998.
DISK PRODUCTS
Disk product revenue decreased 29% in 1999, compared to 1998, due to a decrease
in OEM sales of disk storage products designed for the mainframe market to
International Business Machines Corporation (IBM). The Company does not
anticipate any significant sales revenue from IBM in 2000. The decline in sales
of disk products to IBM were partially offset by an increase in direct sales of
the 9393 Shared Virtual Array (SVA). Revenue from the OPENstorage(TM)Disk
products increased in 1999, compared to 1998. Sales of both the 9393 SVA and
OPENstorage Disk products did not meet the Company's expectations in 1999 due
primarily to issues associated with establishing an effective direct sales
channel for these products. In 1999, the Company announced plans to sell Sun
Microsystems, Inc.'s open enterprise disk products under a worldwide OEM sales
and marketing agreement; however, these new products are currently not
available. In February 2000, the Company announced the availability of the 9500
SVA, the next generation of SVA disk products. There can be no assurance that
the Company will not continue to experience decreased sales of disk products as
a result of continuing issues associated with sales channels or a lack of market
acceptance for its disk products.
Disk product revenue increased 5% in 1998, compared to 1997, primarily due to
increased revenue from the OPENstorage Disk subsystem. A significant portion of
the Company's total revenue in 1998 was derived from sales of disk products to
IBM. While unit sales of disk storage products for the mainframe market
increased in 1998 compared to 1997, revenue remained unchanged due to price
decreases provided for under the terms of an OEM agreement with IBM.
NETWORK PRODUCTS
Network product revenue increased 5% in 1999, compared to 1998, primarily due to
increased sales of network products designed for the SAN market. The increase in
sales of SAN network products during 1999 was offset by decreased revenue from
the earlier generation connectivity products. Network product revenue decreased
5% in 1998, compared to 1997, primarily due to reduced revenue from the earlier
generation connectivity products.
The Company's storage products revenue may be adversely impacted by its variable
sales cycles and by disruptions to its sales organization and customers
associated with restructuring activities currently underway, particularly in the
first half of 2000. Future revenue growth in the Company's storage products
segment is significantly dependent upon the continued demand for its
client-server tape automation products, successfully replacing OEM sales of disk
products to IBM with direct sales of disk products, and gaining greater market
acceptance of the Company's SAN network products. There can be no assurances
that the Company will be successful in these endeavors. See "Factors That May
Affect Future Results -- New Products, Markets and Distribution Channels;
Emerging Markets," for a discussion of the risks associated with the
introduction and manufacture of new products and distribution channels.
STORAGE SERVICES
Storage services includes revenue associated with the maintenance of the
Company's and third-party storage products, as well as integration service
revenue associated with new applications, storage consulting and managed storage
services. Storage services revenue increased 13% in 1999, compared to 1998, due
to growth in storage consulting and integration services. Revenue associated
with maintenance services decreased in 1999, compared to 1998, but still
represented approximately 82% of total storage services revenue in 1999. The
decrease in maintenance revenue during 1999 was partially due to the shift in
the Company's customer base from the mainframe to the
21
<PAGE> 22
client-server marketplace, as well as the increasing reliance on indirect
distribution channels for its products, as some indirect distributors provide
service for the products they sell. Storage services revenue increased 9% in
1998, compared to 1997, primarily due to an increase in storage products under
maintenance contracts and growth in the multi-vendor support services area.
In connection with the restructuring activities announced in October 1999, the
Company anticipates decreased revenue from its storage services segment in 2000
as it reduces its investments in, or eliminates, certain lower-margin storage
consulting, integration and managed storage service offerings. There can be no
assurance that maintenance revenue will not also continue to decline in 2000 as
the customer base continues to shift to the client-server marketplace and the
Company places increased emphasis on indirect distribution channels. Maintenance
revenue may also be adversely affected in future periods to the extent older
products currently under maintenance contracts are replaced by newer products
with extended warranties.
STORAGE MANAGEMENT SOFTWARE
Storage management software revenue increased 78% in 1999, compared to 1998,
primarily due to increased revenue from VSM. VSM is a data storage software
solution designed to improve performance, cartridge utilization, and overall
storage management. While revenue from VSM increased during 1999, sales of VSM
did not meet the Company's expectations. The Company believes sales of VSM
during 1999 were adversely impacted due to customers delaying purchase decisions
in anticipation of the year 2000. Revenues from VSM during the first half of
1999 were also adversely impacted by delays in the introduction and market
acceptance of VSM. Revenue from SnapShot, which is designed for use with the
Company's SVA disk products, decreased in 1999, compared to 1998, due to a
decrease in OEM sales to IBM.
Storage management software revenue increased 58% in 1998, compared to 1997,
primarily due to increased revenue from SnapShot and VSM. The increase in
SnapShot revenue in 1998 compared to 1997 was primarily due to increased OEM
sales to IBM.
Future revenue growth from storage management software is dependent upon
increasing market acceptance for VSM. Because VSM is a complex system, it is
difficult to predict the timing and extent that VSM will gain acceptance. There
can be no assurances that the Company will be successful in increasing market
acceptance for VSM. A significant portion of the Company's storage management
software revenue has been derived from sales of SnapShot to IBM. The Company
does not anticipate any sales of SnapShot to IBM in 2000. The Company has
recently introduced SnapShot capabilities for its 9500 SVA disk products
targeted for the client-server marketplace. Future revenue growth from Snapshot
is dependent upon market acceptance of the SnapShot software and the related SVA
disk products, and successfully addressing issues associated with direct sales
of its SVA products.
GROSS PROFIT
- ------------------
The following table sets forth the gross profit percentages for each segment
calculated as gross profit for the segment divided by revenue for the segment.
<TABLE>
<CAPTION>
Year Ended December
----------------------------------------
1999 1998 1997
----------------------------------------
<S> <C> <C> <C> <C>
Total gross profit 39.8% 46.1% 45.4%
Storage products 40.5% 45.2% 44.8%
Storage services 30.8% 43.2% 45.5%
Storage management software 69.8% 75.9% 57.5%
</TABLE>
Gross profit margins decreased to 40% in 1999, compared to 46% in 1998. The
gross profit margins decreased in all of the Company's business segments during
1999. Gross margins for the Company's products have been adversely affected by
efforts to shorten sales cycles; increased
22
<PAGE> 23
sales of 9840 tape cartridges and third-party products which have lower profit
margins; a decline in the selling prices for disk products and earlier
generation tape products; and unfavorable manufacturing variances associated
with excess manufacturing capacity. Gross margins associated with the services
segment have decreased principally as a result of increased revenue contribution
from lower-margin consulting, integration, and managed storage service
offerings. Storage service margins have also been adversely impacted by
increased pricing pressures associated with the maintenance of storage products
in the client-server market and increased maintenance costs associated with
certain tape products. Gross margins associated with software declined in 1999
as the mix of revenue contribution shifted from higher-margin SnapShot sales to
lower-margin VSM sales.
Gross profit margins increased to 46% in 1998, compared to 45% in 1997,
primarily due to the increased sales of higher-margin storage management
software and improved efficiencies associated with the manufacture of storage
products. This increase in gross profit was partially offset by reduced margins
associated with storage services. The decrease in storage service margins was
due primarily to increased pricing pressures associated with maintenance of
storage products in the client-server market and reduced margins associated with
the Company's consulting services.
The markets for the Company's products and services are subject to intense price
competition. The Company anticipates that price competition for its products and
services will continue to have a significant impact on the Company's gross
profit margins. The Company's ability to sustain or improve gross margins is
significantly dependent upon the timing of discontinuing the storage consulting
and integration service offerings, which have generated lower gross margins, the
timing of implementing pricing controls and gaining other operational
efficiencies in connection with the restructuring activities, and achieving cost
improvements associated with the sourcing of production materials. Storage
product and storage management software gross margins may be affected in future
periods by inventory reserves and writedowns resulting from rapid technological
changes or delays in gaining market acceptance for products.
RESEARCH AND PRODUCT DEVELOPMENT
- ----------------------------------------------------
Research and product development expenses increased 18% in 1999, compared to
1998. The Company received approximately $40 million less research and product
development funding from third-parties in 1999, compared to 1998. Excluding the
effects of the reduced third-party funding, research and product development
expense decreased as a percentage of revenue in 1999 as compared to 1998, due to
the elimination of several lower priority research and product development
programs in connection with the restructuring activities. See "Restructuring,"
below, for discussion of the restructuring activities.
Research and product development expenditures increased 12% in 1998, compared to
1997. The increased investment in new development activities during 1998 was
partially offset by the receipt of approximately $50 million of research and
product development funding from third-parties.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER
- --------------------------------------------------------------
Selling, general, administrative and other income and expense (SG&A) increased
25% in 1999, compared to 1998, primarily due to increased selling expenses. The
increase in selling expense reflects an increase in commission and bonus rates,
the addition of application sales specialists associated with storage services,
an increase in the Company's worldwide sales force, and an increase in marketing
expenditures. The Company has implemented significant changes to its field
organization and the bonus and commission plans for its United States field
organization in connection with the restructuring. These changes are intended to
improve sales productivity and reduce selling expenses as a percentage of
revenue. There can be no assurance that these changes
23
<PAGE> 24
will be effective or that the Company will not encounter disruptions which
adversely affect sales during the implementation of these changes.
SG&A increased 4% in 1998, compared to 1997, primarily as a result of spending
on internal business and financial information systems, selling expenses
associated with the Company's storage product sales, and spending on branding
initiatives. The increase was partially offset by reduced accruals for employee
bonus and profit-sharing payments in 1998, compared to 1997, as the Company did
not attain financial goals in 1998.
Gains and losses associated with foreign currency transactions and translation
adjustments, net of associated hedging results, are included in SG&A and
aggregated a net gain of $1.3 million for 1999, compared to a net loss of $0.4
million for 1998 and a net gain of $0.5 million in 1997. See "International
Operations" and "Market Risk Management/Foreign Currency Exchange Risk" for
further discussion of the foreign exchange risks associated with the Company's
international operations and the related foreign currency hedging activities.
LITIGATION
- --------------
Litigation expense recognized during 1999 consists of the following (in
thousands of dollars):
<TABLE>
<S> <C>
Odetics, Inc. settlement $ 97,794
ADEA/ERISA settlement 5,000
Other settlements 788
--------
$103,582
--------
--------
</TABLE>
On October 8, 1999, the Company and Odetics, Inc. (Odetics) entered into a
settlement agreement regarding two patent infringement suits originally filed
against the Company by Odetics on June 29, 1995, and December 8, 1995, alleging
infringement of various claims in U.S. Patent No. 4,779,151 (the "151 Patent").
The Company agreed to pay $100.0 million to Odetics for a fully paid up license
to the 151 Patent; $80.0 million of which was paid at the time of the settlement
and the remainder to be paid in equal annual installments of $10.0 million in
September 2000 and September 2001. The Company recognized a pre-tax expense of
$97.8 million to reflect the present value of the final settlement payments.
On December 15, 1999, at a preliminary fairness hearing, the Company and
plaintiffs, representing certain former employees of the Company, presented the
United States District Court for the District of Colorado (the Court) with a
proposed settlement agreement, which would result in the Company paying $5.0
million for the settlement of litigation alleging the Company violated the Age
Discrimination in Employment Act of 1967, as amended (ADEA) and the Employee
Retirement Income Security Act of 1974 (ERISA), between the period of April 13,
1993, and December 21, 1996. Final approval of this proposed settlement
agreement was received from the Court on March 8, 2000. The settlement agreement
states that it shall not be construed as an admission by the Company that it
violated any law. The Company funded the settlement with a $5.0 million payment
into an escrow account in December 1999. A pre-tax expense of $5.0 million was
recognized in connection with the proposed settlement during 1999.
In January 1994, Stuff Technology Partners II, a Colorado Limited Partnership
(Stuff), filed suit in Boulder County, Colorado, District Court against the
Company and certain subsidiaries. The suit alleged that the Company breached a
1990 settlement agreement that had resolved earlier litigation between the
parties concerning an optical disk drive storage development project entered
into in 1981 which was unsuccessful and terminated in 1985. The suit sought
injunctive relief and damages in the amount of $2.4 billion. On December 28,
1995, the court granted the Company's motion for summary judgment and dismissed
the complaint. Stuff appealed the dismissal to the Colorado Court of Appeals. In
March 1997, the Court of Appeals reversed the District Court's judgment and
remanded the case to the District Court for further proceedings. On July 15,
1999, the District Court
24
<PAGE> 25
dismissed with prejudice all of Stuff's material claims against the Company. On
August 30, 1999, Stuff filed a notice of appeal with the Colorado Court of
Appeals seeking to overturn the decision of the District Court. The parties are
in the process of filing various appellate briefs and the Company anticipates
that the final briefs will be filed in April 2000. No oral argument date has
been set. The Company continues to believe that Stuff's claims are wholly
without merit and intends to defend vigorously any further actions arising from
this complaint.
The Company is also involved in various other less significant legal actions.
While the Company currently believes that the amount of any ultimate potential
loss would not be material to the Company's financial position, the outcome of
these actions is inherently difficult to predict. In the event of an adverse
outcome, the ultimate potential loss could have a material adverse effect on the
Company's financial position or reported results of operations in a particular
quarter. An unfavorable decision, particularly in patent litigation, could
require material changes in production processes and products or result in the
Company's inability to ship products or components found to have violated
third-party patent rights.
RESTRUCTURING
- -------------
On April 15, 1999, the Company announced plans to restructure certain aspects of
its business. The elements of the April restructuring included a voluntary
reduction in headcount as well as the elimination of certain lower priority
research and product development projects. The headcount reductions were
targeted in the areas of research and product development, administration and
manufacturing.
On October 28, 1999, the Company's board of directors approved a broad
restructuring program intended to return the Company to profitability. Key
elements of the restructuring plan include:
- - an anticipated reduction of approximately 1,200 to 1,400 positions, with
approximately 550 positions eliminated during fiscal year 1999 and the
majority of the remaining reductions projected to be completed by the end of
the second quarter of 2000;
- - a reduction in investment in certain businesses, including consulting and
integration services and managed storage services;
- - a recommitment to the Company's core strengths of tape automation, virtual
storage and storage area networks (including related maintenance and
professional services);
- - modifications to the sales model for the United States and Canada intended to
improve productivity and increase account coverage and growth;
- - other organizational and operational changes intended to improve efficiency
and competitiveness.
The elements of the October restructuring included an involuntary reduction in
headcount, the elimination of a significant number of temporary employee
positions, and managing the replacement of terminating employees due to normal
attrition. The headcount reductions were targeted in all areas of the Company.
The following table summarizes the reserves in connection with 1999
restructuring activities (in thousands of dollars):
<TABLE>
<CAPTION>
Employee Asset Other Exit
Severance Writedowns Costs Total
----------------------------------------------
<S> <C> <C> <C> <C>
Restructuring expense $ 32,719 $ 4,941 $ 5,592 $ 43,252
Cash payments (28,802) (5,592) (34,394)
Asset writedowns (4,941) (4,941)
-------- --------- --------- --------
Balances, December 31, 1999 $ 3,917 $ 0 $ 0 $ 3,917
-------- --------- --------- --------
-------- --------- --------- --------
</TABLE>
25
<PAGE> 26
Employee severance expense of $32.7 million was recognized during 1999 in
connection with the April and October restructurings. This expense includes
$25.9 of separation charges related to approximately 680 employees who elected
voluntary severance in connection with the April restructuring; $6.2 million of
separation charges related to the fixed and determinable severance payments owed
to approximately 280 employees who were involuntarily terminated in connection
with the October restructuring; and $564,000 of employee outplacement costs. The
Company also eliminated approximately 270 temporary and contractor positions in
connection with the October restructuring for which there was no associated
restructuring charge. Substantially all of the $3.9 million of severance charges
incurred, but not paid, as of December 31, 1999, relate to severance payments
associated with the October restructuring and are expected to be paid within the
next three months.
Asset writedowns of $4.9 million, net of adjustments, were recognized during
1999 in connection with the April restructuring. Asset writedowns of $6.7
million were recognized during the second and third quarters of 1999 related to
engineering assets that were to be disposed of in connection with discontinued
research and development projects. An adjustment of $1.7 million was recognized
during the fourth quarter of 1999 as a reduction of restructuring expense to
reflect the redeployment of engineering assets to other research and development
projects and the salvage value of other engineering assets which was greater
than originally estimated.
Other exit costs of $5.6 million were recognized during 1999 principally related
to the termination of contractual future purchase obligations associated with
discontinuing certain product lines as part of the April restructuring.
The Company currently anticipates it will incur restructuring charges of
approximately $25 million to $30 million during the first half of 2000
associated with the elimination of between 500 and 600 positions. The majority
of these charges are expected to relate to cash payments to employees. Depending
on the outcome of the disposition of the Company's managed storage services
business, additional cash and non-cash restructuring charges may be incurred
during 2000.
The Company estimates annual savings of approximately $40 million were realized
in connection with the April 1999 restructuring. The Company anticipates annual
savings of approximately $150 million will result from the restructuring
activities initiated in October 1999. The majority of the restructuring
activities are not expected to be complete until the end of the second quarter
of 2000. Because the majority of the restructuring activities are not expected
to be completed until the second quarter, the Company anticipates it will incur
an operating loss during the first quarter of 2000 and that the anticipated
savings realized for the year 2000 will be slightly in excess of $100 million.
Based on the restructuring activities completed to date and the currently
planned restructuring activities, the Company does not anticipate any material
incremental operating expenses will be incurred on an on-going basis as a result
of the restructuring.
Restructuring activities which must be successfully completed in order to
achieve the anticipated savings include achieving targeted headcount reductions
associated with exiting certain consulting and service business activities and
the consolidation of internal business units and various engineering,
manufacturing, sourcing and logistics activities; restructuring the United
States and Canada sales and service organization in order to obtain operational
efficiencies; modifying the Company's bonus and commission plans to better align
the sales organization with driving operating profits and implementing operating
improvements which emphasize the efficient management of working capital.
In addition to targeted headcount reductions associated with the elimination of
permanent positions, the Company is also limiting the replacement of terminating
employees due to normal attrition and eliminating certain contractors, temporary
employees and other non-permanent positions. The number of future involuntary
terminations associated with the Company's managed storage services business and
the timing of these terminations is dependent upon efforts to find strategic
alternatives for this business.
26
<PAGE> 27
The complexity of the Company's restructuring activities, the uncertainties
associated with the targeted headcount reductions, and the rapidly changing
business environment in which the Company operates make it difficult to predict
the amount and timing of restructuring charges which will be incurred, and the
amount and timing of anticipated benefits which will be realized. The Company's
sales revenue in the first half of 2000 may be adversely effected by disruptions
to its sales organization and customers associated with its restructuring
activities.
The Company has restructured its business in the past in order to re-align its
business with its products and market strategies, or establish a more cost
efficient business structure. There can be no assurance that the restructuring
activities described above will be successful or sufficient to allow the Company
to generate improved operating results in future periods. It is possible that
additional changes in the Company's business or in its industry may necessitate
additional restructuring expense in the future. The necessity for additional
restructuring activities may result in expenses that adversely affect reported
results of operations in the period the restructuring plan is adopted, and
require incremental cash payments.
INTEREST INCOME AND EXPENSE
- -----------------------------------------
Interest expense increased $15.0 million in 1999, compared to 1998, due to
increased borrowings under the Company's credit facilities, as well as an
increase in the interest rates the Company borrowed under during 1999. Interest
income decreased $11.2 million in 1999, compared to 1998, primarily as a result
of a decrease in cash available for investment.
Interest expense increased $3.6 million in 1998, compared to 1997, due to
borrowings under the Company's unsecured credit facilities. Interest income
decreased $14.8 million in 1998, compared to 1997, primarily as a result of a
decrease in cash available for investment. See "Liquidity and Capital
Resources -- Available Financing Lines," for further discussion of the Company's
credit facilities.
INCOME TAXES
- -------------------
The Company's effective tax rate decreased from 38% in 1998 to 36% in 1999.
Statement of Financial Accounting Standards (SFAS) No. 109 requires that
deferred income tax assets be recognized to the extent realization of such
assets is more likely than not. Based on the currently available information,
management has determined that the Company will more likely than not realize
$165.5 million of deferred income tax assets as of December 31, 1999. The
Company's valuation allowance of approximately $14.9 million as of December 31,
1999, relates principally to net deductible temporary differences, tax credit
carryforwards and net operating loss carryforwards associated with the Company's
foreign subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------
WORKING CAPITAL
The Company's cash balance decreased $16.6 million in 1999 due primarily to
litigation payments of $85.8 million and restructuring payments of $34.4
million. See Notes 7 and 9 of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" for
further discussion of litigation and restructuring, respectively. Excluding the
effects of these one-time payments, the Company's operating activities provided
cash of $245.6 million in 1999, compared to cash of $88.1 million generated from
operations in 1998. The increase in cash generated from operations in 1999,
compared to 1998, was primarily the result of progress in the Company's efforts
to more effectively manage working capital. Cash used in investing activities of
$102.4 million was primarily due to property, plant and equipment purchases of
$100.8 million. Cash used in financing activities of $2.1 million was mainly the
result of cash payments of $35.2 million associated with repurchases of common
stock largely offset by cash receipts of $25.4 million from employee stock
plans.
27
<PAGE> 28
The Company's cash and short-term investments balances decreased $101.6 million
in 1998 due primarily to cash payments of $359.4 million associated with the
Company's common stock repurchase programs and net investments in property,
plant and equipment of $116.9 million. These payments were partially funded by
net borrowings under the Company's credit facilities of $273.2 million, cash
generated from operating activities of $88.1 million, and a reduction in short-
term investments of $77.3 million. Cash generated from operating activities
decreased to $88.1 million in 1998, compared to $446.7 million in 1997,
primarily as a result of increased cash paid to suppliers and employees. The
increased cash paid to suppliers and employees was primarily a result of cash
paid for additional inventory on hand as of December 25, 1998, for new product
ramp-up, and cash payments in 1998 to reduce accrued liabilities outstanding as
of December 26, 1997. The accrued liabilities as of December 26, 1997, were
higher than as of December 25, 1998, primarily as a result of employee bonus and
profit sharing, and restructuring accruals.
AVAILABLE FINANCING LINES
Borrowings under credit facilities consists of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Primary Revolver $205,000 $195,000
Promissory notes denominated in foreign currencies 81,152 81,673
----------- -----------
$286,152 $276,673
----------- -----------
----------- -----------
</TABLE>
The Company has a revolving credit facility (the Primary Revolver) which expires
in October 2001. The credit limit available under the Primary Revolver ($287.5
million as of December 31, 1999) is reduced by $12.5 million on the last day of
each calendar quarter. The terms of the Primary Revolver were amended in January
2000 to be secured by the Company's U.S. accounts receivable and U.S. inventory.
The interest rates under the Primary Revolver depend upon the repayment period
of the advance selected and the Company's Total Debt to Earnings before
Interest, Taxes, Depreciation and Amortization (EBITDA) ratio. The rate may
range from LIBOR plus 2.00% to 2.50% or the agent bank's base rate plus 0.00% to
0.50%. The weighted average interest rate on the advances as of December 31,
1999, was 7.88%. The Company had borrowings of $205 million and issued letters
of credit for approximately $50,000 under the Primary Revolver as of December
31, 1999. The remaining available credit under the Primary Revolver as of
December 31, 1999, was approximately $82.5 million. The Primary Revolver
contains certain financial and other covenants, including restrictions on
payment of cash dividends on the Company's common stock.
In January 2000, the Company entered into a new $150 million revolving credit
facility (the Supplemental Revolver) which expires in January 2001. The
Supplemental Revolver is secured by the Company's U.S. accounts receivable and
U.S. inventory. The Supplemental Revolver replaced a $150 million revolving
credit facility which expired in January 2000 and for which no borrowings were
outstanding as of December 31, 1999. The interest rates under the Supplemental
Revolver depend upon the repayment period of the advance selected and the
Company's EBITDA ratio. The rate may range from LIBOR plus 2.00% to 2.50% or the
agent bank's base rate plus 0.00% to 0.50%. The Supplemental Revolver contains
certain financial and other covenants, including restrictions on the payment of
cash dividends on the Company's common stock.
The Company has a financing agreement with a bank that provides for the sale of
promissory notes in the principal amount of up to $140 million at any one time.
This financing agreement was amended in January 2000 to provide for the sale of
promissory notes in the principal amount of up to $120 million at any one time.
The agreement, which expires in January 2001, provides for commitments by the
bank to purchase promissory notes denominated in a number of foreign currencies.
As of December 31, 1999, the Company had promissory notes of $81.2 million
outstanding under this financing agreement and had committed to borrowings
between January
28
<PAGE> 29
2000 and January 2001 in the cumulative principal amount of approximately $339.5
million. The notes must be repaid only to the extent of future revenue.
Obligations under the agreement are not cancelable by the Company or the bank.
Gains and losses associated with changes in the underlying foreign currencies
are deferred during the commitment period and recognized as an adjustment to the
revenue supporting the note repayment at the time the bank purchases the
promissory notes. The promissory notes, together with accrued interest, are
payable in U.S. dollars within 40 days from the date of issuance. The weighted
average interest rate associated with the promissory notes outstanding as of
December 31, 1999, was 7.65%. Under the terms of the agreement, the Company is
required to comply with certain covenants and, under certain circumstances, may
be required to maintain a collateral account, including cash and qualifying
investments, in an amount up to the outstanding balance of the promissory notes.
The Company believes it has adequate working capital and financing capabilities
to meet its anticipated operating and capital requirements for the next 12
months. Over the longer term, the Company may choose to fund these activities
through the issuance of additional equity or debt financing. The issuance of
equity or convertible debt securities could result in dilution to the Company's
stockholders. There can be no assurance that any additional long-term financing,
if required, can be completed on terms acceptable to the Company.
TOTAL DEBT-TO-TOTAL CAPITALIZATION
The Company's total debt-to-capitalization ratio increased from 23% as of
December 25, 1998, to 26% as of December 31, 1999, primarily due to a net
increase in borrowings of $9.5 million under the Company's credit facilities.
See "Working Capital," above, for discussion of cash sources and uses.
INTERNATIONAL OPERATIONS
- -------------------------------------
During 1999, 1998, and 1997, approximately 41%, 37%, and 34%, respectively, of
the Company's revenue was generated by its international operations. The Company
also sells products and software through domestic indirect distribution channels
that have end-user customers located outside the United States. The Company
expects that it will continue to generate a significant portion of its revenue
from international operations in the future. The majority of the Company's
international operations involve transactions denominated in the local
currencies of countries within Western Europe, principally Germany, France and
the United Kingdom; Japan; Canada and Australia. An increase in the exchange
value of the United States dollar reduces the value of revenue and profits
generated by the Company's international operations. As a result, the Company's
operating and financial results can be materially affected by fluctuations in
foreign currency exchange rates. In an attempt to mitigate the impact of foreign
currency fluctuations, the Company employs a foreign currency hedging program.
See "Market Risk Management/Foreign Currency Exchange Risk," below.
The Company's international business may be affected by changes in demand
resulting from global and localized economic, business and political conditions.
The Company is subject to the risks of conducting business outside the United
States, including changes in, or impositions of, legislative or regulatory
requirements, tariffs, quotas, difficulty in obtaining export licenses,
potentially adverse taxes, the burdens of complying with a variety of foreign
laws, and other factors outside the Company's control. There can be no
assurances these factors will not have a material adverse effect on the
Company's business or financial results in the future.
MARKET RISK MANAGEMENT/FOREIGN CURRENCY EXCHANGE RISK
- --------------------------------------------------------------------------------
The market risk inherent in the Company's financial instruments relates
primarily to changes in foreign currency exchange rates. To mitigate the impact
of foreign currency fluctuations, the Company seeks opportunities to reduce
exposures through financing activities. Foreign currency options and forward
exchange contracts are also used to reduce foreign currency exposures. All
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<PAGE> 30
foreign currency options and forward exchange contracts are authorized and
executed pursuant to the Company's policies. Foreign currency options and
forward exchange contracts that are designated as and qualify as hedging
transactions are subject to hedge accounting treatment. The Company does not
hold or issue derivatives or any other financial instruments for trading
purposes. See Note 13 to the "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" for
further discussion of the Company's financial instruments and off-balance-sheet
risks.
The Company has a financing agreement with a bank that provides for commitments
by the bank to purchase promissory notes denominated in a number of foreign
currencies. Gains and losses associated with changes in the underlying foreign
currencies are deferred during the commitment period and recognized as an
adjustment to the revenue supporting the note repayment at the time the bank
purchases the promissory notes. See "Liquidity and Capital
Resources -- Available Financing Lines" for a description of the financing
agreement.
The Company periodically utilizes foreign currency options, generally with
maturities of less than one year, to hedge a portion of its exposure to
exchange-rate fluctuations in connection with anticipated revenue from its
international operations. Gains and losses associated with the options are
deferred and recognized as an adjustment to the underlying revenue transactions.
To the extent an option is terminated or ceases to be effective as a hedge, any
gains and losses as of that date are deferred and recognized as an adjustment to
the underlying revenue transaction.
The Company also utilizes forward exchange contracts, generally with maturities
of less than two months, to hedge its exposure to exchange-rate fluctuations
associated with monetary assets and liabilities held in foreign currencies and
anticipated revenue from its international operations. The carrying amounts of
these forward exchange contracts equal their fair values as the contracts are
adjusted at each balance sheet date for changes in exchange rates. Gains and
losses on the forward exchange contracts used to hedge monetary assets and
liabilities are recognized as incurred within SG&A on the Consolidated Statement
of Operations as adjustments to the foreign exchange gains and losses on the
translation of net monetary assets. Gains and losses on the forward contracts
used to hedge anticipated revenue are recognized as incurred as adjustments to
revenue.
A hypothetical 10% adverse movement in foreign exchange rates applied to the
Company's foreign currency exchange rate sensitive instruments held as of
December 31, 1999, and as of December 25, 1998, would result in a hypothetical
loss of approximately $54.9 million and $59.2 million, respectively. The
decrease in the hypothetical loss for 1999 is primarily due to a decrease in
outstanding foreign currency options. These hypothetical losses do not take into
consideration the Company's underlying international operations. The Company
anticipates that any hypothetical loss associated with the Company's foreign
currency exchange rate sensitive instruments would be offset by gains associated
with its underlying international operations.
The Company had outstanding borrowings under its Primary Revolver as of December
31, 1999. The interest rate on these borrowings is dependent on the LIBOR which
is sensitive to interest rate changes. A hypothetical 10% adverse movement in
the LIBOR applied to the borrowings would not have a material adverse effect on
the Company's results of operations, cash flows, or financial position in 2000.
FACTORS THAT MAY AFFECT FUTURE RESULTS
- -----------------------------------------------------------
NEW PRODUCTS, SERVICES AND SOFTWARE; EMERGING MARKETS
The Company's results of operations and competitive strength depend upon its
ability to successfully develop, manufacture and market innovative new products,
services, and software. Short product life cycles are inherent in the
high-technology market. The Company must devote significant resources to
research and product development projects and effectively manage the risks
inherent in new product transitions. Developing new technology, products,
services and
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<PAGE> 31
software is complex and involves uncertainties. Delays in product development,
manufacturing, or in customer evaluation and purchasing decisions may make
product transitions difficult. The manufacture of new products involves
integrating complex designs and processes, collaborating with sole source
suppliers for key components, and increasing manufacturing capacities to
accommodate demand. A design flaw, the failure to obtain sufficient quantities
of key components, or manufacturing constraints could adversely affect the
Company's operating and financial results. The Company has experienced product
development delays in the past that adversely affected the Company's financial
results and competitive position. There can be no assurances that the Company
will be able to manage successfully the development and introduction of new
products, services, and software in the future.
The Company's future financial results are significantly dependent upon
successfully competing in the rapidly growing emerging client-server and SANs
markets and replacing its earlier generation products in the mainframe
environment with new technology. The Company currently is making significant
investments in developing new products and software for these markets,
particularly in products directed towards the internet and e-commerce
businesses. There can be no assurances that the Company will be successful in
these activities. The SANs market is a new market and is rapidly evolving. The
Company's operating and financial results may be adversely impacted in the event
the SANs market develops slower than expected or the Company's products fail to
gain acceptance in this market. The Company's traditional maintenance revenue
base may be adversely impacted as a result of the shift from mainframe to the
client-server marketplace.
COMPETITION
The markets for the Company's products, software and services are intensely
competitive and are subject to continuous, rapid technological change, frequent
product performance improvements, short product life cycles, and aggressive
pricing. The Company believes that its ability to remain competitive involves
factors such as price and cost of the Company's and its competitors' product
offerings, the timing and success of new products and offerings, new product
introductions by competitors, and the ability to establish more effective
distribution channels. This competitive environment gives rise to aggressive
pricing strategies and puts pressure on gross profit margins. The Company's
competitors include, among others, Compaq Computer Corporation, EMC Corporation,
Hewlett-Packard Company, Hitachi Ltd., IBM, Quantum Corporation, and Sun
Microsystems, Inc. A number of the Company's competitors have significantly
greater name recognition and financial resources than the Company. In the highly
competitive client-server market, a number of the Company's competitors are able
to offer customers a bundled server and storage product, which may provide them
with a competitive advantage. The Company expects to address these competitive
issues, in part, through its SAN strategy.
From time-to-time, two or more of the Company's competitors may form business
alliances that compete with the Company. For example, in the first quarter of
1999, IBM and EMC Corporation announced that they have entered into a strategic
business and technology alliance. In addition, during the third quarter of 1999,
EMC Corporation acquired Data General, the supplier of the Company's OPENstorage
Disk products. The alliance of two of the Company's major competitors could
adversely affect the Company's ability to compete. A number of the Company's
competitors have formed alliances with the stated objective of developing
interoperable SAN solutions. In the storage management software market, the
Company competes with vendors with which it has established relationships,
including Legato Systems, Inc. and VERITAS Software Corporation. The Company
also anticipates that it will continue to establish distribution alliances with
other equipment manufacturers, software vendors and service providers to address
competitive factors. There can be no assurances that the Company will be able to
compete successfully against other companies in these markets.
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SIGNIFICANT PERSONNEL CHANGES
During 1999, the Company has experienced significant changes in its management
team, including the hiring, resignation and retirement of members of its
executive sales and marketing management. The Company announced in February 2000
that David E. Weiss, the Company's Chairman of the Board of Directors, President
and Chief Executive Officer, would resign from the Company once the Board of
Directors located a successor. The search for a successor to Mr. Weiss is
currently underway and the Company is unable to predict when a successor will be
elected. In February 2000, the Company also announced significant changes to its
operating management, including the planned departure of Victor Perez, the
Company's Chief Operating Officer, at the end of the first quarter of 2000.
Further, the Company may experience a delay between the time the management team
is formed and the time the team becomes fully productive.
The Company has also experienced changes in the remainder of its employee base
during 1999 and early 2000 as a result of the voluntary and involuntary
severance programs implemented in connection with its restructuring activities,
as well as increased levels of employee attrition. The future success of the
Company depends in large part on its ability to attract, retain and motivate
highly skilled employees. The Company faces significant competition for
individuals with the skills required to deliver the products and services
offered to its customers. An inability to successfully deliver products and
services required by its customers, or an inability to implement the
restructuring activities while the Company completes the significant personnel
changes currently underway, would have an adverse effect on future operating
results.
CHANGES IN SALES MODEL FOR THE UNITED STATES AND CANADA
The Company historically has emphasized the use of its direct sales force in the
United States and Canada, complemented by indirect distribution channels, such
as OEMs, value-added resellers and value-added distributors. In connection with
its current restructuring activities, the Company is implementing changes to its
sales model for the United States and Canada that the Company expects will
improve market penetration, increase sales profitability, reduce marketing
expense, and expand the use of the indirect sales channel. This new sales model
is intended to provide better coverage for new and existing end user customers,
as well as enhancing reseller, distributor and OEM partnerships. The Company is
currently reorganizing its field sales organization with the objective of better
serving Fortune 500 customers with enterprise-level product and service
requirements. A new sales organization is also being formed to address the needs
of small and medium-sized customers with particular emphasis on internet and
e-commerce businesses. There is no assurance that the Company will not encounter
short term disruptions to its sales as it implements this new sales model or
that the new emphasis on indirect sales channels will result in increased sales
or profitability over the long-term. The Company's operating and financial
results may be adversely affected by reduced margins on sales typically
experienced in indirect sales channels.
DECLINE IN MAINFRAME REVENUE; VARIABLE SALES CYCLE
The Company historically has generated a significant portion of its revenue and
operating profits from the mainframe market. The Company's revenue from the
mainframe market declined during 1999, primarily due to the transition of
customers' purchase patterns to the client-server environment, the decline in
disk product and software sales to IBM, and significant price competition. In
addition, the Company believes its revenue has been adversely impacted in 1999
as some customers have delayed testing and purchasing decisions in anticipation
of the year 2000, particularly with respect to tape products and software
targeted for the mainframe market. Because of the multiple dynamics within the
mainframe marketplace, it is difficult to predict future demand for the
Company's mainframe products. The demand for the Company's products,
particularly in the mainframe market, will be adversely affected to the extent
these patterns continue.
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Many of the Company's customers undertake significant procedures relating to the
evaluation, testing, implementation and acceptance of the Company's products,
software and services. This evaluation process results in a variable sales
cycle, and makes it difficult to predict if or when revenue will be earned.
ABILITY TO DEVELOP AND PROTECT INTELLECTUAL PROPERTY RIGHTS
The Company relies heavily upon its ability to develop new intellectual property
rights that do not infringe upon the rights of others in order to remain
competitive and develop and manufacture products that are competitive in terms
of technology and cost. There is no assurance that the Company will continue to
be able to develop such new intellectual property.
The Company relies upon a combination of United States patent, copyright,
trademark and trade secret laws to protect its intellectual property rights.
With respect to certain of the Company's international operations, the Company
does file patent applications with foreign government. However, many foreign
countries do not have as well-developed laws as the United States in protecting
intellectual property. The Company enters into confidentiality agreements
relating to its intellectual property with its employees and consultants. In
addition, the Company includes confidentiality provisions in license and
non-exclusive sales agreements with its indirect distributors and its customers.
Despite all of the Company's efforts to protect its intellectual property
rights, unauthorized parties may attempt to copy or otherwise obtain or use the
Company's intellectual property. Monitoring the unauthorized use of the
Company's intellectual property rights is difficult, particularly in foreign
countries. There is no assurance that the Company will be able to protect its
intellectual property rights, particularly in foreign countries.
SOLE SOURCE SUPPLIERS
The Company generally uses standard parts and components for its products and
believes that, in most cases, there are a number of alternative, competent
vendors for most of those parts and components. Many non-standard parts are
obtained from a single source or a limited group of suppliers; however, there
are other vendors who could produce these in satisfactory quantities after a
period of pre-qualification and product ramping. Certain key components and
products are purchased from single source suppliers that the Company believes
are currently the only manufacturers of the particular components that meet the
Company's qualification requirements and other specifications or for which
alternative sources of supply are not readily available. Imation Corporation is
a single source supplier for the 9840 tape cartridges and the Company is
dependent on Imation to economically produce large volumes of high-quality tape
cartridges for the 9840 product at a price acceptable to the Company and its
customers. Sumitomo is a single source supplier for a key component used in
certain tape products. IBM is a single source supplier for the disk drives used
in the Company's SVA disk product.
Certain suppliers have experienced occasional technical, financial or other
problems in the past that have delayed deliveries, but without significant
effect on the Company. An unanticipated failure of any sole source supplier to
meet the Company's requirements for an extended period, or the inability to
secure comparable components in a timely manner, could result in a shortage of
key components, longer lead times, and reduced control over production and
delivery schedules. These factors could have a material adverse effect on
revenue and operating results. In the event a sole source supplier was unable or
unwilling to continue to supply components, the Company would have to identify
and qualify other acceptable suppliers. This process could take an extended
period, and no assurance can be given that any additional source would become
available or would be able to satisfy production requirements on a timely basis
or at a price acceptable to the Company.
The Company is dependent upon a sole sub contractor, Herald Datanetics LTD.
(HDL), to manufacture a key component used in certain tape products. HDL is
located in the People's
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Republic of China (PRC). To date, the Company has not experienced any material
problems with HDL, however, HDL is subject to additional risks beyond those
associated with other sole suppliers, including the lack of a well-established
court system or acceptance of the rule of law in the PRC, the degree to which
the PRC permits economic reform policies to continue, the political relationship
between the PRC and the United States and broader political and economic
factors, such as whether the PRC is admitted to the World Trade Organization.
MANUFACTURING
A significant portion of the Company's products are manufactured in facilities
located in Puerto Rico. The Company's ability to manufacture product may be
impacted by weather related risks beyond the control of the Company. If the
Puerto Rico manufacturing facility were impacted by such an event, the Company
may not have an alternative source to meet the demand for its products without
substantial delays and disruption to its operations. The Company carries
interruption insurance to mitigate some of the risk. There is no assurance that
the Company could obtain sufficient alternate manufacturing sources or repair
the facilities in a timely manner to satisfy the demand for its products.
Failure to fulfill manufacture demands could adversely affect the Company's
operating and financial results in the future.
INFORMATION SYSTEMS AND BUSINESS PROCESS TRANSITIONS
The Company replaced many of its internal information systems outside the United
States during 1999 with new, integrated information systems. The Company also
introduced significant new business processes in conjunction with these new
systems, particularly within its European operations. The implementation of
these information systems and business processes has been complex and has
affected numerous operational, transactional, financial, and reporting
processes. The establishment of processes and training associated with these
information systems are continuing and involve a number of risks and
uncertainties. The Company must successfully manage the business process changes
and employee training programs. There can be no assurance that the transition to
the new information systems and business processes will not cause delays or
interruptions in the Company's business. Failure to successfully manage the
transition could adversely affect the Company's operating and financial results
in the future.
VOLATILITY OF STOCK PRICE/EARNINGS FLUCTUATIONS
The Company's common stock is subject to significant fluctuations in trading
price. The Company's stock price may be impacted if the Company's revenue or
earnings fail to meet the expectations of the investment community. The
Company's stock price may also be affected by broad economic and market trends,
which are unrelated to the Company's performance.
The Company's financial and operating results may fluctuate from quarter to
quarter due to a number of reasons. In the past, the Company's results have
followed a seasonal pattern, which reflects the tendency of customers to make
their purchase decisions at the end of a calendar year. During any fiscal
quarter, a disproportionately large portion of the total product sales is
recognized in the last weeks and days of the quarter. These factors make the
forecasting of revenue inherently difficult. Because the Company plans its
operating expenses on expected revenue, a shortfall in revenue may cause
earnings to be below expectations in that period. A number of factors may cause
revenue to fall below expectations, such as product and technology transitions
announced by the Company or its competitors; delays in the availability of new
products; changes in the purchasing patterns of the Company's customers and
distribution partners; the timing of customers' acceptance of products; rapid
price erosion; or adverse global economic conditions. The mix of sales among the
Company's business segments and sales concentration in particular geographic
regions may carry different gross profit margins and may cause the Company's
operating margins to fluctuate and impact earnings.
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RISKS ASSOCIATED WITH THE YEAR 2000
The Company's product lines include information storage products and software
which collect, move, store, share, and protect data. In order to process data
properly, the Company's products must successfully manage and manipulate data
that includes both 20th and 21st century dates (Year 2000 Ready).
The Company is not currently aware of any significant problems among its
customers as a result of any failure of the Company's products to be Year 2000
Ready. In addition, the Company did not experience any serious problems among
the various computer systems used by the Company and, to the best of the
Company's knowledge, none of its significant suppliers experienced any serious
problems among the various computer systems used by such suppliers. The Company
generally believes that it is not legally responsible for costs incurred by its
customers to achieve their year 2000 readiness. Since the year 2000
complications are not fully known and potential liability issues are uncertain,
the effect of the year 2000 on the Company's warranty costs, product liability
costs, potential litigation expenses, and financial results are not known at
this time, but could be material in any given quarter.
The costs incurred through December 31, 1999, directly related to the Company's
remediation activities were approximately $3 million and no future costs related
to the remediation activities are expected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required under this Item 7A is included in the section above
entitled "Market Risk Management/Foreign Currency Exchange Rate."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in the Index to
Consolidated Financial Statements at Item 14 of this Form 10-K are incorporated
by reference into this Item 8 of Part II of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There have been no disagreements with the Company's independent accountants on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure or any reportable events.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference from the information set forth under the caption
"Proposal 1 -- Election of Directors" in the Company's definitive Proxy
Statement concerning the Annual Meeting of Stockholders to be held May 18, 2000
(the "2000 Proxy Statement"). The information concerning the Company's executive
officers required by this Item is incorporated by reference to the information
set forth under the caption "Executive Officers of the Registrant," in Part I of
this Annual Report on Form 10-K.
The information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, required by this Item is incorporated by
reference to the information set forth under the caption "Compensation of
Executive Officers -- Section 16(a) Beneficial Ownership Reporting Compliance"
in the 2000 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
information under the captions "Compensation of Executive Officers" and
"Director Compensation" in the 2000 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
information under the caption "Voting Securities of the Company -- Security
Ownership" in the 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
information under the captions "Director Compensation" and "Compensation of
Executive Officers" in the 2000 Proxy Statement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Financial Statements:
---------------------
Consolidated Balance Sheet at December 31, 1999, and
December 25, 1998 F-1
Consolidated Statement of Operations for the Years Ended
December 31, 1999, December 25, 1998, and December 26,
1997 F-2
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, December 25, 1998, and December 26,
1997 F-3
Consolidated Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 1999, December 25, 1998,
and December 26, 1997 F-4
Notes to Consolidated Financial Statements F-5
Report of Independent Accountants F-23
2. Financial Statement Schedules:
------------------------------
Schedule II -- Valuation and Qualifying Accounts and
Reserves F-24
</TABLE>
All other schedules are omitted because they are not applicable, or the
required information is included in the consolidated financial statements or
notes thereto.
3. Exhibits:
---------
The exhibits listed below are filed as part of this Annual Report on Form
10-K or are incorporated by reference into this Annual Report on Form 10-K:
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of Storage Technology
Corporation dated July 28, 1987 (filed as Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 25, 1987, and as Exhibit 3.1(ii) to the
Company's Quarterly Report on Form 10-Q, for the quarter
ended September 29, 1995, filed on November 13, 1995, and
incorporated herein by reference)
3.2 Certificate of Amendment dated May 22, 1989, to the Restated
Certificate of Incorporation dated July 28, 1987 (filed as
Exhibit (c)(1) to the Company's Current Report on Form 8-K
dated June 2, 1989, and incorporated herein by reference)
3.3 Certificate of Second Amendment dated June 2, 1992, to the
Restated Certificate of Incorporation dated July 28, 1987
(filed as Exhibit 3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 26, 1992, and
incorporated herein by reference)
3.4 Restated Bylaws of Storage Technology Corporation, as
amended through November 11, 1998 (filed as Exhibit 3.1 to
the Company's Current Report on Form 8-K dated November 19,
1998, and incorporated herein by reference)
4.1 Specimen Certificate of Common Stock, $0.10 par value of
Registrant (filed as Exhibit (c)(2) as to the Company's
Current Report on Form 8-K dated June 2, 1989, and
incorporated herein by reference)
4.2 Rights Agreement dated as of August 20, 1990, between
Storage Technology Corporation and First Fidelity Bank,
N.A., New Jersey, Rights Agent (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated August 20, 1990,
and incorporated herein by reference)
</TABLE>
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<TABLE>
<S> <C>
4.3 Certificate of Designations of Series B Junior Participating
Preferred Stock (filed as Exhibit A to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated August 8, 1990,
and incorporated herein by reference)
10.1(1) 1987 Employee Stock Purchase Plan, as amended (filed as part
of the Company's Registration Statement on Form S-8 filed
September 8, 1994, File No. 33-42818, and incorporated
herein by reference)
10.2(1) 1995 Equity Participation Plan (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, filed on August 11, 1995, and
incorporated herein by reference)
10.3(1) Storage Technology Corporation MBO Plan (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1994, filed on August 12, 1994, and
incorporated herein by reference)
10.4(1) Storage Technology Corporation Amended and Restated Stock
Option Plan for Non-Employee Directors (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 28, 1996, filed on August 12, 1996, and
incorporated herein by reference)
10.5(1) Employment Agreement between the Company and David E. Weiss
(filed as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ending June 25, 1999, filed on
August 9, 1999 and incorporate herein by reference)
10.6(1/2) Storage Technology Corporation Amended and Restated 1987
Employee Stock Purchase Plan, dated September 16, 1999.
10.7(1) Agreement between the Company and Gary Francis, dated August
19, 1997 (filed as Exhibit 10.25 to the Company's Annual
Report on Form 10-K for the year ended December 26, 1997,
and incorporated herein by reference)
10.8(1/2) Form of Executive Officer Employment Agreement between the
Company and Each Executive Officer Named in Exhibit 10.10
hereto, dated October 1999.
10.9(1/2) Schedule of Differences in Terms and Conditions of Executive
Officer Employment Agreement
10.10(1/2) Offer Letter, dated May 3, 1999, from the Company to James
Bartlett
10.11(1/2) Offer Letter, dated August 11, 1999, from the Company to
Susan Bailey
10.12(1/2) Termination Agreement, dated December 31, 1999, between the
Company and James Bartlett
10.13() Credit Agreement dated as of October 23, 1997, among the
Company and Bank of America National Trust and Savings
Association, as Agent, Swingline Bank, and Letter of Credit
Issuing Bank, and the other financial institutions party
thereto (filed as Exhibit 10.28 to the Company's Annual
Report on Form 10-K for the year ended December 26, 1997,
and incorporated herein by reference)
10.14(2) Amended and Restated Credit Agreement, dated as of January
13, 2000, among the Company, Bank of American, N.A., as
Administrative Agent, Swingline Bank and Letter of Credit
Issuing Bank and the other financial institutions party
thereto
10.15(2) Credit Agreement, dated as of January 13, 2000, among the
Company, Bank of America, N.A. and the other financial
institutions party thereto
</TABLE>
- ------------------------
1 Contract or compensatory plan or arrangement in which directors and/or
officers participate.
2 Indicates exhibits filed with this Annual Report on Form 10-K.
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<TABLE>
<S> <C>
10.16(2) Security Agreement, dated as of January 13, 2000, by and
among the Company, Bank of America, N.A., as Collateral
Agent for itself and other Secured Parties referred to
therein
10.17 Contingent Multicurrency Note Purchase Commitment Agreement
dated as of December 12, 1996, between the Company and Bank
of America National Trust and Savings Association (filed as
Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 27, 1996, and incorporated
herein by reference)
10.18 Second Amendment to Second Amended and Restated Contingent
Multicurrency Note Purchase Commitment Agreement dated
November 20, 1998, between Bank of America National Trust
and Savings Association and the Company. (filed as Exhibit
10.19 to the Company's Annual Report on Form 10-K for the
year ended December 25,1998 and incorporated herein by
reference)
10.19(2) Third Amendment to Second Amended and Restated Contingent
Multicurrency Note Purchase Commitment Agreement dated
August 13, 1999, between Bank of America National Trust and
Savings Association and the Company
10.20(2) Fourth Amendment to Second Amended and Restated Contingent
Multicurrency Note Purchase Commitment Agreement dated
January 5, 2000, between the Company and Bank of America,
N.A
21.0(2) Subsidiaries of Registrant
23.1(2) Consent of PricewaterhouseCoopers LLP
24.0(2) Powers of Attorney
27.0(2) Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
--------------------
Current Report on Form 8-K, filed on December 23, 1999, relating to an Item
5, Other Matter, Proposed Settlement of Certain Legal Proceedings involving,
among other things, a class action suit alleging ERISA violations.
Current Report on Form 8-K, filed on February 3, 2000, relating to an Item
5, Other Matter, consisting of two press releases, one relating to the Board
of Directors of the Company commencing the search process for a new
Chairman, President and CEO, and the other relating to an update of the
Company's restructuring and a pre-announcement of earnings for the Company's
fourth Fiscal Quarter ending December 31, 1999.
(c) Exhibits.
---------
The Exhibits listed in Item 14(a)(3) hereof are filed as part of this Annual
Report on Form 10-K.
(d) Financial Statement Schedules.
------------------------------
See Item 14(a)(2) above.
- ------------------------
2 Indicates exhibits filed with this Annual Report on Form 10-K.
39
<PAGE> 40
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.
Dated: March 10, 2000 STORAGE TECHNOLOGY CORPORATION
By: /s/ Thomas G. Arnold,
Attorney-in-Fact
----------------------------------
David E. Weiss*
Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Thomas G. Arnold, Attorney-in-Fact Chairman of the Board, March 10, 2000
- ----------------------------------------------------- President and Chief Executive
David E. Weiss* Officer (Principal Executive
Officer)
/s/ Thomas G. Arnold, Attorney-in-Fact Corporate Vice President and March 10, 2000
- ----------------------------------------------------- Chief Financial Officer
Robert S. Kocol* (Principal
Financial Officer)
/s/ Thomas G. Arnold Vice President and Corporate March 10, 2000
- ----------------------------------------------------- Controller (Principal
Thomas G. Arnold Accounting
Officer)
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
James R. Adams*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
William L. Armstrong*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
J. Harold Chandler*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
Maurice F. Holmes*
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
William R. Hoover*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
William T. Kerr*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
Robert E. La Blanc*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
Robert E. Lee*
/s/ Thomas G. Arnold, Attorney-in-Fact Director March 10, 2000
- -----------------------------------------------------
Richard C. Steadman*
</TABLE>
*Thomas G. Arnold, by signing his name hereto, does hereby sign this document
for himself and on behalf of the persons named above after whose printed name an
asterisk appears, pursuant to the Powers of Attorney duly executed by each such
person and filed herewith as Exhibit 24.0.
41
<PAGE> 42
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash, including cash equivalents of $100,825 at 1999 and
$190,925 at 1998 $ 215,421 $ 231,985
Accounts receivable, net of allowance for doubtful
accounts of $19,492 at 1999 and $20,424 at 1998 627,435 755,931
Inventories (Note 2) 260,642 261,808
Deferred income tax assets (Note 3) 124,588 114,715
------------ ------------
Total current assets 1,228,086 1,364,439
Property, plant and equipment, at cost net of accumulated
depreciation (Note 4) 322,061 320,946
Spare parts for maintenance, at cost net of accumulated
amortization of $64,086 at 1999 and $57,387 at 1998 41,995 33,395
Deferred income tax assets (Note 3) 40,882 15,875
Other assets 102,451 108,289
------------ ------------
$1,735,475 $1,842,944
------------ ------------
------------ ------------
LIABILITIES
Current liabilities:
Credit facilities (Note 5) $ 286,152 $ 276,673
Current portion of long-term debt (Note 5) 13,943 1,722
Accounts payable 111,253 136,555
Accrued liabilities (Note 6) 303,110 332,758
Income taxes payable (Note 3) 72,865 78,400
------------ ------------
Total current liabilities 787,323 826,108
Long-term debt (Note 5) 28,953 17,260
------------ ------------
Total liabilities 816,276 843,368
------------ ------------
Commitments and contingencies (Notes 5 and 7)
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 300,000,000 shares authorized;
100,825,390 shares issued at 1999, and 100,338,353 shares
issued at 1998 (Note 8) 10,083 10,034
Capital in excess of par value 830,780 834,778
Retained earnings 84,704 159,254
Treasury stock of 113,774 shares at 1999 and 117,271 shares
at 1998, at cost (2,334) (2,409)
Unearned compensation (4,034) (2,081)
------------ ------------
Total stockholders' equity 919,199 999,576
------------ ------------
$1,735,475 $1,842,944
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-1
<PAGE> 43
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Revenue $2,368,231 $2,258,222 $2,144,656
Cost of revenue 1,425,247 1,217,812 1,171,530
------------ ------------ ------------
Gross profit 942,984 1,040,410 973,126
Research and product development costs 277,770 234,677 209,526
Selling, general, administrative and other
income and expense, net 615,616 492,928 472,839
Litigation expense (Note 7) 103,582
Restructuring expense (Note 9) 43,252
------------ ------------ ------------
Operating profit (loss) (97,236) 312,805 290,761
Interest expense (23,316) (8,331) (4,709)
Interest income 4,102 15,274 30,065
------------ ------------ ------------
Income (loss) before income taxes (116,450) 319,748 316,117
Benefit (provision) for income taxes (Note 3) 41,900 (121,500) (84,300)
------------ ------------ ------------
Net income (loss) $ (74,550) $ 198,248 $ 231,817
------------ ------------ ------------
------------ ------------ ------------
EARNINGS (LOSS) PER COMMON SHARE (Note 10)
Basic earnings (loss) per common share $ (0.75) $ 1.91 $ 1.93
------------ ------------ ------------
------------ ------------ ------------
Weighted-average shares 99,900 103,868 120,265
------------ ------------ ------------
------------ ------------ ------------
Diluted earnings (loss) per common share $ (0.75) $ 1.86 $ 1.89
------------ ------------ ------------
------------ ------------ ------------
Weighted-average and dilutive potential
shares 99,900 106,497 122,513
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 44
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Cash received from customers $ 2,456,222 $ 2,124,070 $ 2,110,587
Cash paid to suppliers and employees (2,199,744) (1,926,451) (1,606,791)
Cash paid for settlement of litigation (Note 7) (85,788)
Cash paid for restructuring activities (Note 9) (34,394) (8,845)
Interest paid (21,395) (6,657) (3,640)
Interest received 4,102 15,274 29,103
Income tax refunded (paid), net 6,407 (118,131) (73,754)
----------- ----------- -----------
Net cash provided by operating activities 125,410 88,105 446,660
----------- ----------- -----------
INVESTING ACTIVITIES
Short-term investments, net 77,275 (48,099)
Purchase of property, plant and equipment, net (100,751) (116,903) (65,893)
Other assets, net (1,633) (21,008) 8,366
----------- ----------- -----------
Net cash used in investing activities (102,384) (60,636) (105,626)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from credit facilities, net 9,479 273,211
Repayments of other debt, net (1,754) (4,936) (5,245)
Repurchases of common stock (Note 8) (35,226) (359,395) (484,996)
Proceeds from employee stock plans 25,383 36,924 29,790
----------- ----------- -----------
Net cash used in financing activities (2,118) (54,196) (460,451)
----------- ----------- -----------
Effect of exchange rate changes on cash (37,472) 2,393 (12,665)
----------- ----------- -----------
Decrease in cash and cash equivalents (16,564) (24,334) (132,082)
Cash and cash equivalents -- beginning of
the year 231,985 256,319 388,401
----------- ----------- -----------
Cash and cash equivalents -- end of the year $ 215,421 $ 231,985 $ 256,319
----------- ----------- -----------
----------- ----------- -----------
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net income (loss) $ (74,550) $ 198,248 $ 231,817
Depreciation and amortization expense 143,010 122,864 112,317
Non-cash litigation and restructuring expense 26,652
Translation (gain) loss 38,841 (7,773) 17,793
Other non-cash adjustments to income (4,299) 19,124 32,862
(Increase) decrease in accounts receivable 96,091 (137,940) (67,955)
(Increase) decrease in inventories, net 3,738 (49,961) 83,499
(Increase) decrease in spare parts (33,113) (22,737) (9,300)
(Increase) decrease in net deferred income tax
assets, net (38,866) 9,679 (13,635)
Increase (decrease) in accounts payable (22,541) 31,792 22,889
Increase (decrease) in accrued liabilities (10,567) (58,305) 20,219
Increase (decrease) in income taxes payable 1,014 (16,886) 16,154
----------- ----------- -----------
Net cash provided by operating activities $ 125,410 $ 88,105 $ 446,660
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 45
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Retained
Capital in Earnings
Common Excess of (Accumulated Treasury Unearned
Stock Par Value Deficit) Stock Compensation Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 27, 1996 $11,636 $1,444,939 $(271,252) $ (790) $(3,550) $1,180,983
8% Convertible Subordinated Debentures
exchanged for stock (7,106,408 shares) 710 123,560 124,270
Shares issued under stock purchase plan, and
for exercises of options (2,146,788
shares, including 1,106,540 shares issued
from treasury) 104 37,409 22,681 60,194
Repurchases of common stock (18,349,000
shares) (Note 8) (1,646) (443,447) (40,726) (485,819)
Net income 231,817 231,817
Other (4) (464) 418 (39) 1,147 1,058
------- ---------- ----------- -------- --------- ----------
Balances, December 26, 1997 10,800 1,161,997 (39,017) (18,874) (2,403) 1,112,503
Shares issued under stock purchase plan, and
for exercises of options (1,997,451
shares, including 808,254 shares issued
from treasury) 119 31,459 16,601 48,179
Repurchases of common stock (8,822,500
shares) (Note 8) (882) (271,528) (272,410)
Final price adjustment for common stock
repurchased in October 1997 (Note 8) (87,030) (87,030)
Net income 198,248 198,248
Other (3) (120) 23 (136) 322 86
------- ---------- ----------- -------- --------- ----------
Balances, December 25, 1998 10,034 834,778 159,254 (2,409) (2,081) 999,576
Shares issued under stock purchase plan, and
for exercises of options (1,718,419
shares) 172 27,672 27,844
Repurchases of common stock (1,350,000
shares) (Note 8) (135) (35,091) (35,226)
Net loss (74,550) (74,550)
Other 12 3,421 75 (1,953) 1,555
------- ---------- ----------- -------- --------- ----------
Balances, December 31, 1999 $10,083 $ 830,780 $ 84,704 $ (2,334) $(4,034) $ 919,199
------- ---------- ----------- -------- --------- ----------
------- ---------- ----------- -------- --------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 46
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Storage Technology Corporation and its wholly owned subsidiaries (collectively
hereinafter referred to as StorageTek or the Company). All intercompany accounts
and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS
StorageTek designs, manufactures, markets and maintains information storage
products, storage services and storage management software for end-user
customers, original equipment manufacturers (OEMs), value-added resellers (VARs)
and value-added distributors (VADs). The principal markets for the Company's
products and services are located in the United States and Europe.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the financial statements,
and the reported amounts of revenue and expenses during the periods. Significant
estimates have been made by management in several areas including the
realizability of deferred tax assets (see Note 3), and the future obligations
associated with the Company's litigation (see note 7) and restructuring
activities (see Note 9). Actual results could differ materially from these
estimates making it reasonably possible that a change in these estimates could
occur in the near term.
REVENUE RECOGNITION
The revenue recognition policy for product and software sales depends on the
sales channel utilized by the Company. Revenue for product and software sales to
end-user customers is recognized when all of the following criteria have been
met: (a) evidence of an agreement exists, (b) delivery to and acceptance by the
customer has occurred, (c) the price to the customer is fixed and determinable,
and (d) collectibility is assured. Product and software is deemed to be accepted
by the customer at the time of installation at the customer site or upon receipt
of written acceptance. Revenue for product and software sales to OEMs, VARs and
VADs is recognized at the time of shipment, together with a reserve for
estimated product returns. Estimated product warranty costs are accrued at the
time of revenue recognition.
Revenue from maintenance, storage consulting and integration services is
recognized as earned and the associated costs are expensed as incurred. Where
extended warranty or maintenance services are bundled with the sale of product,
the Company unbundles and defers the recognition of revenue for the services at
the time the sales revenue is recognized based upon the fair value of the
service element.
RESTRUCTURING
Restructuring activities are accounted for in accordance with the guidance
provided in the consensus opinion of the Emerging Issues Task Force (EITF) in
connection with EITF Issue No. 94-3 (EITF 94-3). EITF 94-3 generally requires,
with respect to the recognition of severance
F-5
<PAGE> 47
expenses, management approval of the restructuring plan, the determination of
the employees to be terminated, and communication of benefit arrangements to
employees.
CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments that are both readily
convertible to cash and have original maturities of three months or less at the
time of acquisition. The carrying value of the Company's cash equivalents
approximates fair value.
CAPITALIZED SOFTWARE COSTS
The Company capitalized costs associated with acquiring and developing software
products to be licensed to customers of $3,256,000 in 1999, $12,764,000 in 1998,
and $616,000 in 1997. Other assets as shown on the Consolidated Balance Sheet
include unamortized software costs of $11,264,000 as of December 31, 1999, and
$14,498,000 as of December 25, 1998. Amortization expense is recognized over the
estimated useful lives of the related products, generally four years.
Amortization expense associated with capitalized software costs was $6,490,000
in 1999, $12,173,000 in 1998, and $20,697,000 in 1997. The Company evaluates the
realizability of the carrying value of the capitalized software based upon
estimates of the associated future revenue.
DEPRECIATION AND GOODWILL AMORTIZATION
Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the related assets.
Depreciation expense was $101,003,000 in 1999, $85,974,000 in 1998, and
$66,902,000 in 1997. Other assets as shown on the Consolidated Balance Sheet
include unamortized goodwill of $25,618,000 as of December 31, 1999, and
$17,530,000 as of December 25, 1998. Amortization of goodwill is calculated on a
straight-line basis over a period not exceeding 10 years. Amortization expense
associated with goodwill and other amortization was $10,504,000 in 1999,
$5,310,000 in 1998, and $12,150,000 in 1997. The Company evaluates the
realizability of the carrying value of goodwill based upon estimated future cash
flows calculated on an undiscounted basis.
LONG-LIVED ASSETS
The Company continually evaluates the recoverability of its long-lived assets
based on estimated fair values or undiscounted future cash flows, whichever is
more readily determinable. The Company records an impairment charge whenever
significant events or changes in circumstances occur which indicate the carrying
amounts may not be recoverable. Impairment charges are recorded based on an
estimate of discounted future cash flows.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency for StorageTek's foreign subsidiaries is the U.S.
dollar, reflecting the significant volume of intercompany transactions and
associated cash flows that result from the fact that the majority of the
Company's storage products sold worldwide are manufactured in the United States.
Accordingly, monetary assets and liabilities are translated at year-end exchange
rates, while non-monetary items are translated at historical exchange rates.
Revenue and expenses are translated at the average exchange rates in effect
during the year, except for cost of revenue, depreciation, and amortization
which are translated at historical exchange rates. See Note 13 for information
with respect to the Company's accounting policies for financial instruments
utilized in its foreign currency hedging program.
F-6
<PAGE> 48
STOCK-BASED COMPENSATION PLANS
Stock-based compensation plans are accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees."
ADVERTISING COSTS
Advertising costs are recognized as incurred. Advertising costs were $9,099,000
in 1999, $9,343,000 in 1998, and $7,881,000 in 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be
recognized as either assets or liabilities on the Consolidated Balance Sheet at
their fair value. The corresponding change in fair value of the derivative
instrument will be recognized either in the Consolidated Statement of
Operations, net of any change in fair value of the related hedged item, or as a
component of comprehensive income depending upon the intended use and
designation.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133 -- an amendment of FASB Statement No. 133." SFAS No. 137 has
the effect of delaying the required adoption date of SFAS No. 133 for the
Company until January 2001. The Company continues to evaluate the impact of SFAS
No. 133 and its associated interpretations on its financial statements and its
plans for adopting the new accounting standard.
NOTE 2 -- INVENTORIES
Inventories include material, labor and factory overhead and are accounted for
at the lower of cost (first-in, first-out method) or market value. The Company
evaluates the need for reserves associated with obsolete, slow-moving and
nonsalable inventory by reviewing market values on a quarterly basis. The
components of inventories, net of the associated reserves, are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Raw materials $ 59,141 $ 46,672
Work-in-process 45,717 76,839
Finished goods 155,784 138,297
----------- -----------
$260,642 $261,808
----------- -----------
----------- -----------
</TABLE>
NOTE 3 -- INCOME TAXES
Income (loss) before income taxes consists of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
United States $(160,610) $345,314 $339,346
International 44,160 (25,566) (23,229)
------------ ----------- -----------
$(116,450) $319,748 $316,117
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
F-7
<PAGE> 49
The benefit (provision) for income taxes attributable to the amounts shown above
consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Current tax benefit (provision):
U.S. federal $ 21,700 $ (84,700) $(102,900)
International (15,300) (8,200) (5,700)
State 3,000 (13,600) (10,600)
----------- ------------ ------------
9,400 (106,500) (119,200)
----------- ------------ ------------
Deferred tax benefit (provision):
U.S. federal 26,400 (9,600) 32,400
International (600) (4,000) (7,500)
State 6,700 (1,400) 10,000
----------- ------------ ------------
32,500 (15,000) 34,900
----------- ------------ ------------
$ 41,900 $(121,500) $ (84,300)
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
The benefit (provision) for income taxes attributable to income before income
taxes includes benefits of $7,114,000 in 1999, $860,000 in 1998, and $5,590,000
in 1997 from the utilization of net operating loss carryforwards.
The deferred income tax balances on the Consolidated Balance Sheet consist of
the following (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Deferred income tax assets, net of valuation
allowance:
Current $124,588 $114,715
Non-current 40,882 15,875
----------- -----------
Net deferred income tax asset $165,470 $130,590
----------- -----------
----------- -----------
</TABLE>
The Company's net deferred income tax asset consists of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Gross deferred income tax assets:
Net operating loss carryforwards $ 18,321 $ 19,074
Tax credit carryforwards 25,277 204
Restructuring accruals 1,436 1,778
Other accrued liabilities and reserves 63,948 61,935
Capitalized inventory costs 28,343 30,010
Deferred intercompany profit 11,260 18,402
Other 35,756 31,318
----------- -----------
184,341 162,721
Less: Valuation allowance (14,868) (25,916)
----------- -----------
169,473 136,805
----------- -----------
Gross deferred income tax liabilities (4,003) (6,215)
----------- -----------
Net deferred income tax asset $165,470 $130,590
----------- -----------
----------- -----------
</TABLE>
F-8
<PAGE> 50
The net change in the valuation allowance for deferred income tax assets was a
decrease of $11,048,000 in 1999 and an increase of $3,404,000 in 1998. The
valuation allowance relates primarily to net deductible temporary differences,
tax credit carryforwards and net operating loss carryforwards associated with
the Company's foreign subsidiaries. The Company evaluates a variety of factors
in determining the amount of the deferred income tax assets to be recognized
pursuant to SFAS No. 109, "Accounting for Income Taxes," including the Company's
earnings history, the number of years the Company's operating loss and tax
credits can be carried forward, the existence of taxable temporary differences,
near-term earnings expectations and the highly competitive nature of the
high-technology market.
StorageTek has not provided for income taxes on the cumulative undistributed
earnings of its foreign subsidiaries to the extent they are considered to be
reinvested indefinitely (approximately $40,117,000 as of December 31, 1999). It
is not currently practicable to estimate the tax liability that might be payable
on the repatriation of these foreign earnings.
The benefit (provision) for income taxes differs from the amount computed by
applying the U.S. federal income tax rate of 35% to income before income taxes
for the following reasons (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
U.S. federal income tax benefit
(provision) at statutory rate $ 40,758 $(111,912) $(110,641)
(Increase) decrease in income taxes
resulting from:
Recognized net operating losses,
future deductions and credits 5,739 1,781 54,198
Utilization of tax credits 5,359 7,000 2,555
Foreign tax rate and exchange rate
differentials (10,906) (5,308) (17,340)
Nondeductible items (12,572) (10,901) (7,095)
State income taxes, net of federal
benefits 6,522 (11,789) (9,867)
Effect of Puerto Rico operations 7,000 9,629 4,530
Other, net (640)
----------- ------------ ------------
Benefit (provision) for income taxes $ 41,900 $(121,500) $ (84,300)
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
------------ ------------
<S> <C> <C>
Machinery and equipment $ 687,679 $ 644,902
Buildings and building improvements 167,689 168,322
Land and land improvements 20,882 17,837
------------ ------------
876,250 831,061
Less: Accumulated depreciation (554,189) (510,115)
------------ ------------
$ 322,061 $ 320,946
------------ ------------
------------ ------------
</TABLE>
F-9
<PAGE> 51
Machinery and equipment includes capitalized leases of $19,186,000 as of
December 31, 1999, and $24,644,000 as of December 25, 1998. Accumulated
depreciation includes accumulated amortization on capitalized leases of
$5,144,000 as of December 31, 1999, and $7,758,000 as of December 25, 1998.
NOTE 5 -- CREDIT FACILITIES, DEBT AND LEASE OBLIGATIONS
Borrowings under credit facilities consists of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Primary Revolver $205,000 $195,000
Promissory notes denominated in foreign currencies 81,152 81,673
----------- -----------
$286,152 $276,673
----------- -----------
----------- -----------
</TABLE>
The Company has a revolving credit facility (the Primary Revolver) which expires
in October 2001. The credit limit available under the Primary Revolver
($287,500,000 as of December 31, 1999) is reduced by $12,500,000 on the last day
of each calendar quarter. The terms of the Primary Revolver were amended in
January 2000 to be secured by the Company's U.S. accounts receivable and U.S.
inventory. The interest rates under the Primary Revolver depend upon the
repayment period of the advance selected and the Company's Total Debt to
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) ratio.
The rate may range from LIBOR plus 2.00% to 2.50% or the agent bank's base rate
plus 0.00% to 0.50%. The weighted average interest rate on the advances as of
December 31, 1999, was 7.88%. The Company had borrowings of $205,000,000 and
issued letters of credit for approximately $50,000 under the Primary Revolver as
of December 31, 1999. The remaining available credit under the Primary Revolver
as of December 31, 1999, was approximately $82,450,000. The Primary Revolver
contains certain financial and other covenants, including restrictions on
payment of cash dividends on the Company's common stock.
In January 2000, the Company entered into a new $150,000,000 revolving credit
facility (the Supplemental Revolver) which expires in January 2001. The
Supplemental Revolver is secured by the Company's U.S. accounts receivable and
U.S. inventory. The Supplemental Revolver replaced a $150,000,000 revolving
credit facility which expired in January 2000 and for which no borrowings were
outstanding as of December 31, 1999. The interest rates under the Supplemental
Revolver depend upon the repayment period of the advance selected and the
Company's EBITDA ratio. The rate may range from LIBOR plus 2.00% to 2.50% or the
agent bank's base rate plus 0.00% to 0.50%. The Supplemental Revolver contains
certain financial and other covenants, including restrictions on the payment of
cash dividends on the Company's common stock.
The Company has a financing agreement with a bank that provides for the sale of
promissory notes in the principal amount of up to $140,000,000 at any one time.
This financing agreement was amended in January 2000 to provide for the sale of
promissory notes in the principal amount of up to $120,000,000 at any one time.
The agreement, which expires in January 2001, provides for commitments by the
bank to purchase promissory notes denominated in a number of foreign currencies.
As of December 31, 1999, the Company had promissory notes of $81,152,000
outstanding under this financing agreement and had committed to borrowings
between January 2000 and January 2001 in the cumulative principal amount of
approximately $339,471,000. The notes must be repaid only to the extent of
future revenue. Obligations under the agreement are not cancelable by the
Company or the bank. Gains and losses associated with changes in the underlying
foreign currencies are deferred during the commitment period and recognized as
an adjustment to the revenue supporting the note repayment at the time the bank
purchases the promissory notes. The promissory notes, together with accrued
interest, are payable in U.S. dollars within 40 days from the date of issuance.
The weighted average interest rate associated with the promissory notes
outstanding as of December 31, 1999, was 7.65%. Under the terms of the
agreement, the Company
F-10
<PAGE> 52
is required to comply with certain covenants and, under certain circumstances,
may be required to maintain a collateral account, including cash and qualifying
investments, in an amount up to the outstanding balance of the promissory notes.
Long-term debt, including capitalized lease obligations, consists of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Capitalized lease obligations $15,157 $18,135
Promissory notes 27,494
Other 245 847
---------- ----------
42,896 18,982
Less: Current portion (13,943) (1,722)
---------- ----------
$28,953 $17,260
---------- ----------
---------- ----------
</TABLE>
SCHEDULED DEBT MATURITIES AND OPERATING LEASE OBLIGATIONS
Scheduled maturities of debt and operating lease obligations as of December 31,
1999, are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Capitalized Noncancellable
Credit lease Promissory Other Total debt operating lease
facilities obligations notes debt commitments commitments
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 $286,152 $ 2,677 $13,259 $302,088 $ 41,214
2001 2,931 14,235 $245 17,411 30,125
2002 1,621 1,621 17,916
2003 1,568 1,568 11,539
2004 1,560 1,560 7,638
Thereafter 12,480 12,480 14,893
--------- -------- -------- ---- ---------- ------------
$286,152 22,837 $27,494 $245 $336,728 $123,325
--------- -------- -------- ---- ---------- ------------
--------- -------- -------- ---- ---------- ------------
Less: Amount
representing
interest (7,680)
--------
Present value of
capitalized lease
obligations
(including $684
classified as
current) $15,157
--------
--------
</TABLE>
Rent expense associated with operating leases was $57,710,000 in 1999,
$53,332,000 in 1998, and $41,200,000 in 1997.
F-11
<PAGE> 53
NOTE 6 -- ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
---------------------------
<S> <C> <C>
Deferred revenue $ 55,168 $ 79,097
Accrued commissions 36,292 15,652
Accrued payroll 33,564 38,531
Accrued warranty reserve 23,926 18,073
Other 154,160 181,405
----------- -----------
$303,110 $332,758
----------- -----------
----------- -----------
</TABLE>
Other accrued liabilities consist of items that are individually less than 5% of
accrued liabilities.
NOTE 7 -- LITIGATION
Litigation expense recognized during 1999 consists of the following (in
thousands of dollars):
<TABLE>
<S> <C>
Odetics, Inc. settlement $ 97,794
ADEA/ERISA settlement 5,000
Other settlements 788
--------
$103,582
--------
--------
</TABLE>
On October 8, 1999, the Company and Odetics, Inc. (Odetics) entered into a
settlement agreement regarding two patent infringement suits originally filed
against the Company by Odetics on June 29, 1995, and December 8, 1995, alleging
infringement of various claims in U.S. Patent No. 4,779,151 (the "151 Patent").
The Company agreed to pay $100,000,000 to Odetics for a fully paid up license to
the 151 Patent; $80,000,000 of which was paid at the time of the settlement and
the remainder to be paid in equal annual installments of $10,000,000 in
September 2000 and September 2001. The Company recognized a pre-tax expense of
$97,794,000 to reflect the present value of the final settlement payments.
On December 15, 1999, at a preliminary fairness hearing, the Company and
plaintiffs, representing certain former employees of the Company, presented the
United States District Court for the District of Colorado (the Court) with a
proposed settlement agreement, which would result in the Company paying
$5,000,000 for the settlement of litigation alleging the Company violated the
Age Discrimination in Employment Act of 1967, as amended (ADEA) and the Employee
Retirement Income Security Act of 1974 (ERISA), between the period of April 13,
1993, and December 21, 1996. Final approval of this proposed settlement was
received from the Court on March 8, 2000. The settlement agreement states that
it shall not be construed as an admission by the Company that it violated any
law. The Company funded the settlement with a $5,000,000 payment into an escrow
account in December 1999. A pre-tax expense of $5,000,000 was recognized in
connection with the proposed settlement during 1999.
In January 1994, Stuff Technology Partners II, a Colorado Limited Partnership
(Stuff), filed suit in Boulder County, Colorado, District Court against the
Company and certain subsidiaries. The suit alleged that the Company breached a
1990 settlement agreement that had resolved earlier litigation between the
parties concerning an optical disk drive storage development project entered
into in 1981 which was unsuccessful and terminated in 1985. The suit sought
injunctive relief and damages in the amount of $2,400,000,000. On December 28,
1995, the court granted the Company's motion for summary judgment and dismissed
the complaint. Stuff appealed the dismissal to the Colorado Court of Appeals. In
March 1997, the Court of Appeals reversed the District Court's judgment and
F-12
<PAGE> 54
remanded the case to the District Court for further proceedings. On July 15,
1999, the District Court dismissed with prejudice all of Stuff's material claims
against the Company. On August 30, 1999, Stuff filed a notice of appeal with the
Colorado Court of Appeals seeking to overturn the decision of the District
Court. The parties are in the process of filing various appellate briefs and the
Company anticipates that the final briefs will be filed in April 2000. No oral
argument date has been set. The Company continues to believe that Stuff's claims
are wholly without merit and intends to defend vigorously any further actions
arising from this complaint.
The Company is also involved in various other less significant legal actions.
While the Company currently believes that the amount of any ultimate potential
loss would not be material to the Company's financial position, the outcome of
these actions is inherently difficult to predict. In the event of an adverse
outcome, the ultimate potential loss could have a material adverse effect on the
Company's financial position or reported results of operations in a particular
quarter. An unfavorable decision, particularly in patent litigation, could
require material changes in production processes and products or result in the
Company's inability to ship products or components found to have violated
third-party patent rights.
NOTE 8 -- COMMON STOCK
In May 1998, the Company declared a two-for-one stock split effected in the form
of a 100% stock dividend paid at the close of business June 26, 1998, to
shareholders of record as of June 5, 1998. All earnings per common share
amounts, references to common stock, and stockholders' equity amounts have been
restated as if the stock dividend had occurred as of the earliest period
presented.
In February 1997, the Company announced a program to repurchase up to 3,000,000
shares of common stock on an annual basis. The intent of this repurchase program
is to offset dilution associated with the Company's employee stock purchase and
stock option plans. In October 1997, the Company announced a program to
repurchase an additional number of shares of its common stock up to
$800,000,000. Under these programs, the Company repurchased and retired an
aggregate of 1,350,000, 8,822,500 and 18,349,000 shares of common stock during
1999, 1998 and 1997, respectively, through a combination of privately negotiated
and open market repurchase transactions. The aggregate purchase price of these
shares was $35,226,000, $272,365,000 and $572,026,000 during 1999, 1998, and
1997, respectively, after considering the effects of all purchase price
adjustments.
NOTE 9 -- RESTRUCTURING
On April 15, 1999, the Company announced plans to restructure certain aspects of
its business. The elements of the April restructuring included a voluntary
reduction in headcount as well as the elimination of certain lower priority
research and product development projects. The headcount reductions were
targeted in the areas of research and product development, administration and
manufacturing.
On October 28, 1999, the Company's board of directors approved a broad
restructuring program intended to return the Company to profitability. Key
elements of the restructuring plan include:
- - an anticipated reduction of approximately 1,200 to 1,400 positions, with
approximately 550 positions eliminated during fiscal year 1999 and the
majority of the remaining reductions projected to be completed by the end of
the second quarter of 2000;
- - a reduction in investment in certain businesses, including consulting and
integration services and managed storage services;
- - a recommitment to the Company's core strengths of tape automation, virtual
storage and storage area networks (including related maintenance and
professional services);
F-13
<PAGE> 55
- - modifications to the sales model for the United States and Canada intended to
improve productivity and increase account coverage and growth;
- - other organizational and operational changes intended to improve efficiency
and competitiveness.
The elements of the October restructuring included an involuntary reduction in
headcount, the elimination of a significant number of temporary employee
positions, and managing the replacement of terminating employees due to normal
attrition. The headcount reductions were targeted in all areas of the Company.
The following table summarizes the reserves in connection with 1999
restructuring activities (in thousands of dollars):
<TABLE>
<CAPTION>
Employee Asset Other Exit
Severance Writedowns Costs Total
--------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Restructuring expense $ 32,719 $ 4,941 $ 5,592 $ 43,252
Cash payments (28,802) (5,592) (34,394)
Asset writedowns (4,941) (4,941)
-------- --------- --------- --------
Balances, December 31, 1999 $ 3,917 $ 0 $ 0 $ 3,917
-------- --------- --------- --------
-------- --------- --------- --------
</TABLE>
Employee severance expense of $32,719,000 was recognized during 1999 in
connection with the April and October restructurings. This expense includes
$25,919,000 of separation charges related to approximately 680 employees who
elected voluntary severance in connection with the April restructuring;
$6,236,000 of separation charges related to the fixed and determinable severance
payments owed to approximately 280 employees who were involuntarily terminated
in connection with the October restructuring; and $564,000 of employee
outplacement costs. The Company also eliminated approximately 270 temporary and
contractor positions in connection with the October restructuring for which
there was no associated restructuring charge. Substantially all of the
$3,917,000 of severance charges incurred, but not paid, as of December 31, 1999,
relate to severance payments associated with the October restructuring and are
expected to be paid within the next three months.
Asset writedowns of $4,941,000, net of adjustments, were recognized during 1999
in connection with the April restructuring. Asset writedowns of $6,680,000 were
recognized during the second and third quarters of 1999 related to engineering
assets that were to be disposed of in connection with discontinued research and
development projects. An adjustment of $1,739,000 was recognized during the
fourth quarter of 1999 as a reduction of restructuring expense to reflect the
redeployment of engineering assets to other research and development projects
and the salvage value of other engineering assets which was greater than
originally estimated.
Other exit costs of $5,592,000 were recognized during 1999 principally related
to the termination of contractual future purchase obligations associated with
discontinuing certain product lines as part of the April restructuring.
NOTE 10 -- EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share (EPS) is computed using SFAS No. 128, "Earnings
Per Share." Basic EPS is computed by dividing net income by the weighted-average
number of common shares outstanding during the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common shares.
F-14
<PAGE> 56
The following is a reconciliation between basic and diluted EPS (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------------------------------------
December 31, 1999 December 25, 1998 December 26,1997
-------------------------- ---------------------------- ----------------------------
Net Net Net
Loss EPS Shares Income EPS Shares Income EPS Shares
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS $(74,550) $(0.75) 99,900 $198,248 $1.91 103,868 $231,817 $1.93 120,265
Effects of dilutive securities:
Common stock equivalents 2,629 1,959
Convertible debentures 255 289
------- ------ -------- ------- -------- -------
Diluted EPS $(74,550) $(0.75) 99,900 $198,248 $1.86 106,497 $232,072 $1.89 122,513
------- ------ -------- ------- -------- -------
------- ------ -------- ------- -------- -------
</TABLE>
Options to purchase 12,354,593 shares of common stock were outstanding as of
December 31, 1999, but not included as common stock equivalents in the
computation of diluted EPS, as these options are antidilutive as a result of the
net loss incurred during 1999.
NOTE 11 -- EMPLOYEE BENEFIT PLANS AND OPTIONS
EMPLOYEE STOCK PURCHASE PLAN
Under the Company's 1987 Employee Stock Purchase Plan (Purchase Plan), as
amended, employees may be offered the right to collectively purchase shares of
StorageTek common stock, plus any remaining shares from earlier offering
periods, in consecutive six-month offering periods. As of December 31, 1999, the
Company had an aggregate of 3,101,303 common shares reserved for issuance under
the Purchase Plan. Eligible employees may contribute up to 10% of their pay
toward the purchase of StorageTek common stock at a price equal to 85% of the
lower of the fair market price on the first or the last day of each offering
period. Proceeds received from the issuance of shares are credited to
stockholders' equity in the fiscal year the shares are issued.
Under the Purchase Plan, the Company issued the following shares of common stock
with the weighted average fair value of the shares calculated using the
Black-Scholes option pricing model:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Shares issued 1,320,097 631,728 937,994
Weighted average fair value per
share $ 8.24 $ 10.90 $ 5.32
Fair value assumptions:
Dividend yield 0.00% 0.00% 0.00%
Volatility 59.54% 49.59% 36.40%
Risk-free interest rate 4.89% 5.00% 5.65%
Expected life (in months) 6 6 6
</TABLE>
STOCK OPTION AND RESTRICTED STOCK PLANS
As of December 31, 1999, the Company had an aggregate of 12,827,411 common
shares reserved for issuance under its equity plans (Equity Plans). These plans
provide for the issuance of common shares pursuant to stock option exercises,
restricted stock awards and other equity based awards. There were 1,078,818
shares available for grant under the Equity Plans as of December 31, 1999.
The Company also has a Nonemployee Director Stock Option Plan (Director Plan)
under which the Company grants stock options to nonemployee directors for the
purchase of an aggregate maximum of 1,560,000 shares of common stock. Stock
options are granted with an exercise price equal to the fair market value of the
common stock on the date of grant. There were
F-15
<PAGE> 57
1,074,668 shares reserved for issuance and 468,668 shares available for grant
under the Director Plan as of December 31, 1999.
Stock options are granted under the Equity and Director Plans with an exercise
price equal to the fair market value of the common stock on the date of grant
and generally vest over a period of between three and six years. Options granted
under the Equity and Director Plans have a maximum term of 10 years from the
date of grant. Options granted to corporate officers under the Equity Plan and
to directors under the Director Plan provide for accelerated vesting upon
certain events, including a change in control of the Company or the involuntary
termination of a corporate officer.
The following summarizes information with respect to options granted under the
Company's Equity and Director Plans:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE
------------------------------------
<S> <C> <C>
Outstanding, December 27, 1996 5,581,656 $14.91
Granted 1,378,994 23.34
Exercised (1,208,794) 13.63
Forfeited or expired (264,276) 14.82
--------------- ------------
Outstanding, December 26, 1997 5,487,580 17.31
Granted 1,851,117 30.37
Exercised (1,365,723) 15.19
Forfeited or expired (437,765) 21.51
--------------- ------------
Outstanding, December 25, 1998 5,535,209 21.87
Granted 8,093,911 22.61
Exercised (398,322) 15.47
Forfeited or expired (876,205) 25.03
--------------- ------------
Outstanding, December 31, 1999 12,354,593 $22.33
--------------- ------------
--------------- ------------
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life in Years Price Exercisable Price
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0 - $15 1,298,484 4.54 $12.52 1,193,477 $12.44
15 - 25 9,405,657 9.13 21.36 1,461,648 21.61
25 - 35 631,078 8.09 30.39 195,077 30.16
35 - 45 1,019,374 8.90 38.79 104,415 42.54
---------- ----------
12,354,593 8.58 $22.33 2,954,617 $19.21
---------- ----------
---------- ----------
</TABLE>
Restricted stock grants of the Company's common stock are made pursuant to its
Equity Plans. These restricted stock grants are generally issued at no cost to
the employee and vest over a period of one to six years. Unearned compensation,
which is determined based on the fair market value of the Company's common stock
on the date of the award, is charged to stockholders' equity and amortized to
expense over the vesting period of the stock. Restricted stock granted to
corporate officers provides for accelerated vesting upon certain events,
including a change in control of the Company and the involuntary termination of
a corporate officer. The following summarizes
F-16
<PAGE> 58
information with respect to restricted stock granted under the Company's Equity
Plans. The weighted average fair value of awards is calculated using the
Black-Scholes option pricing model:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Outstanding, beginning of year 260,921 320,762 451,620
Awarded 206,362 13,355 3,038
Vested (43,114) (24,358) (94,918)
Forfeited (84,489) (48,838) (38,978)
----------- ----------- -----------
Outstanding, end of year 339,680 260,921 320,762
----------- ----------- -----------
----------- ----------- -----------
Weighted average fair value of
awards $ 21.52 $ 35.40 $ 24.65
Compensation expense, net (in
thousands) 834 330 592
</TABLE>
EMPLOYEE PROFIT SHARING AND THRIFT PLAN
StorageTek has a Profit Sharing and Thrift Plan whereby employee participants
may contribute a portion of their compensation, subject to limits under the
Internal Revenue Code. The plan provides for a matching contribution by the
Company equal to 50% of the first 6% of the participant's contributions.
Effective January 1, 2000, the Company will make a matching contribution equal
to 100% of the first 3% of each participant's contributions and a 50% match of
the next 4% of each participant's contributions. Company contributions in excess
of the matching contribution are contingent upon realization of profits by the
Company which, at the sole discretion of the Board of Directors, are adequate to
justify a corporate contribution.
The following contributions were made or authorized by the Company to the Profit
Sharing and Thrift Plan (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Matching contributions $9,374 $8,987 $ 7,772
Additional contributions 11,100
--------- --------- ----------
$9,374 $8,987 $18,872
--------- --------- ----------
--------- --------- ----------
</TABLE>
F-17
<PAGE> 59
SFAS NO. 123
The Company applies the intrinsic value method set forth in APB No. 25 in
accounting for its stock-based compensation plans. Net income (loss) and EPS as
reported and as calculated pursuant to SFAS No. 123 to reflect the fair value
method of accounting for stock-based compensation plans were as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Net income (loss):
As reported $(74,550) $198,248 $231,817
SFAS No. 123 (95,649) 186,957 221,976
Basic EPS:
As reported $ (0.75) $ 1.91 $ 1.93
SFAS No. 123 (0.96) 1.80 1.85
Diluted EPS:
As reported $ (0.75) $ 1.86 $ 1.89
SFAS No. 123 (0.96) 1.78 1.83
</TABLE>
Compensation expense for the options granted is computed based on the actual
option forfeitures during the year.
The following summarizes the weighted average fair value of options granted
using the Black-Scholes option pricing model:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Weighted average fair value
options granted $10.68 $12.61 $ 9.89
Fair value assumptions:
Dividend yield 0% 0% 0%
Volatility 51.44% 44.41% 42.15%
Risk-free interest rate 5.83% 5.12% 6.25%
Expected life (in years) 4.2 4.0 4.3
</TABLE>
NOTE 12 -- STOCKHOLDER RIGHTS PLAN
In 1990, the Board of Directors adopted a Stockholder Rights Plan (Rights Plan).
The Rights Plan is designed to deter coercive or unfair takeover tactics and to
prevent an acquiring entity from gaining control of the Company without offering
a fair price to all of the Company's shareholders.
Each right would entitle the holder of the Company's common stock to purchase
one one-hundredth of a share of Series B Junior Participating Preferred Stock at
an exercise price of $150, subject to adjustment to prevent dilution. The rights
are evidenced by the common stock certificates and will not separate from the
common stock until the earlier of (i) 20 days following the date on which any
person or entity acquires beneficial ownership of 15% or more of the common
stock (an Acquiring Person) and the right of redemption has not been reinstated;
or (ii) 10 days after a public announcement of a tender or exchange offer by any
person or entity if upon consummation such person would be an Acquiring Person.
Further, upon the occurrence of certain events described below, the rights
generally entitle each right holder (except the Acquiring Person) to purchase
that number of shares of the Company's common stock which equals the $150
exercise price of the right divided by one-half of the current market price of
the common stock. Those events generally include (i) 20 days after any person or
entity becomes an Acquiring Person; and (ii) if any person or entity
F-18
<PAGE> 60
becomes an Acquiring Person and thereafter, (a) the Company is merged with or
into an Acquiring Person and the Company's common stock is changed, converted or
exchanged; or (b) 50% or more of the Company's assets or earning power is sold;
or (c) an Acquiring Person engages in one or more "self-dealing" transactions as
described in the Rights Agreement.
The Company is generally entitled to redeem the rights for $.01 per right at any
time prior to the earlier of the date on which any person or entity becomes an
Acquiring Person or August 31, 2000. The rights will expire on August 31, 2000,
unless redeemed or exchanged earlier by the Company pursuant to the Rights Plan.
NOTE 13 -- FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISKS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, accounts receivable, accounts
payable, accrued liabilities, credit facilities and long-term debt. Except for
the long-term debt, the carrying amounts of these financial instruments
approximate fair value due to their short maturities and variable rates of
interest. The carrying amounts of long-term debt approximate their fair values
based upon current rates available for similar types of instruments. The
carrying/commitment value and fair value of other financial instruments held by
the Company as of December 31, 1999, were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Carrying/
Commitment Fair Unrealized
Value Value Gain
----------------------------------------
<S> <C> <C> <C>
Foreign currency options $ -- $ -- $ --
Foreign currency forward contracts -- -- --
Outstanding commitments associated with
promissory notes denominated in
foreign currencies 339,471 333,928 5,543
</TABLE>
See below for further discussion of foreign currency options and forward
contracts. See Note 5 for further discussion of promissory notes denominated in
foreign currencies.
FOREIGN CURRENCY OPTIONS AND FORWARD EXCHANGE CONTRACTS
A significant portion of the Company's revenue is generated by its international
operations. As a result, the Company's operations and financial results can be
materially affected by changes in foreign currency exchange rates. In an attempt
to mitigate the impact of foreign currency fluctuations, the Company employs a
hedging program which utilizes foreign currency options and forward exchange
contracts. The Company does not hold or issue foreign currency options or
forward exchange contracts for trading purposes.
The Company periodically utilizes foreign currency options, generally with
maturities of less than one year, to hedge a portion of its exposure to
exchange-rate fluctuations in connection with anticipated revenue from its
international operations. The Company utilizes hedge accounting for its foreign
currency options with gains and losses associated with the options deferred and
recognized as an adjustment to the underlying revenue transactions. The Company
held no foreign currency options as of December 31, 1999. Purchased foreign
currency options with a face value of approximately $220,954,000 were held as of
December 25, 1998. The fair value of any options held is estimated based on
quotes received from the respective counterparty. To the extent an option is
terminated or ceases to be effective as a hedge, any gains or losses as of that
date are deferred and recognized as an adjustment to the underlying revenue
transaction. Deferred realized and unrealized gains and losses associated with
any options held are subsequently recognized as an adjustment to the associated
revenue in the Consolidated Statement of Operations.
F-19
<PAGE> 61
The Company also utilizes forward exchange contracts, generally with maturities
of less than two months, to hedge its exposure to exchange-rate fluctuations in
connection with anticipated monetary assets and liabilities held in foreign
currencies and anticipated revenue from its international operations. The
Company held forward foreign exchange contracts with a face value of
approximately $188,501,000 as of December 31, 1999, and $140,732,000 as of
December 25, 1998. The carrying amounts of these forward foreign exchange
contracts equal their fair value as the contracts are adjusted at each balance
sheet date for changes in exchange rates. Gains and losses on the forward
contracts used to hedge monetary assets and liabilities are recognized as
incurred within selling, general, administrative and other income and expense on
the Consolidated Statement of Operations as adjustments to the foreign exchange
gains and losses on the translation of net monetary assets. Gains and losses on
the forward contracts used to hedge anticipated revenue are recognized as
incurred as adjustments to revenue.
The forward exchange contracts and foreign currency options do not subject the
Company to risk due to exchange rate movements, as gains and losses on the
contracts offset gains and losses on the transactions being hedged. The foreign
currency hedging instruments utilized by StorageTek are generally traded over
the counter. The Company does not believe there is significant credit risk
associated with these contracts, as the counterparties consist of major
international financial institutions, and the Company monitors the amount of the
contracts it enters into with any one party.
Gains associated with foreign currency translation adjustments and foreign
currency transactions, net of associated hedging results, aggregated $1,298,000
in 1999, compared to a loss of $391,000 in 1998, and a gain of $482,000 in 1997.
CONCENTRATIONS OF CREDIT RISK
Other financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments, trade
receivables, and outstanding letters of credit under the Company's credit
facilities. The Company has a cash investment policy which restricts investments
to ensure preservation of principal and maintenance of liquidity. Substantially
all trade receivable balances are unsecured. The concentration of credit risk
with respect to trade receivables is limited due to the large number of
customers comprising the Company's customer base, and their dispersion across
different industries and geographic areas.
NOTE 14 -- OPERATIONS OF BUSINESS SEGMENTS AND IN GEOGRAPHIC AREAS
SIGNIFICANT CUSTOMERS
Revenue from sales of storage products and software to IBM accounted for less
than 10% of total revenue in 1999, as compared to 20% in 1998, and 19% in 1997,
respectively.
BUSINESS SEGMENTS
The Company was organized into three reportable segments during 1999 based on
the definitions of segments provided under SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information:" storage products, storage
services and storage management software. The storage products segment includes
sales of tape, disk and network products for the mainframe and client-server
computing environments. The storage services segment provides support services
for the Company's and third-party products, integration services, storage
consulting and managed storage services. The storage management software segment
sells and licenses software tools and applications for improving storage product
performance and simplifying information storage management.
The accounting policies utilized in reporting these segments are the same as
those described in Note 1, "Summary of Significant Accounting Policies." The
Company does not have any intersegment revenue and segment operating performance
is evaluated based on gross profit. The
F-20
<PAGE> 62
segment gross profit equals the consolidated gross profit and the Company does
not allocate research and product development costs; selling, general,
administrative and other income and expense; interest income; interest expense;
or benefit (provision) for income taxes to the segments. The revenue and gross
profit by segment is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Revenue:
Storage products $1,465,216 $1,520,647 $1,495,038
Storage services 718,844 633,821 584,016
Storage management software 184,171 103,754 65,602
------------ ------------ ------------
Total revenue $2,368,231 $2,258,222 $2,144,656
------------ ------------ ------------
------------ ------------ ------------
Gross profit:
Storage products $ 592,822 $ 688,050 $ 669,914
Storage services 221,669 273,662 265,521
Storage management software 128,493 78,698 37,691
------------ ------------ ------------
Total gross profit $ 942,984 $1,040,410 $ 973,126
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
All of the Company's assets are retained and analyzed at the corporate level and
are not allocated to the individual segments. Amortization of spare parts
associated with the storage services segment was $25,013,000, $19,407,000, and
$12,568,000 for 1999, 1998, and 1997, respectively. See Note 1 for information
regarding the amortization of capitalized software associated with the storage
management software segment. Depreciation on fixed assets, and amortization of
goodwill and other amortization, which aggregated $111,507,000, $91,284,000, and
$79,052,000 in 1999, 1998, and 1997, respectively, is associated with corporate
assets and is not separately identifiable within the reportable segments.
GEOGRAPHIC AREAS
Revenue and long-lived assets by geographic area are based on the country in
which the subsidiary is legally domiciled. Revenue and long-lived assets for
Europe are reported in aggregate as there are no individual subsidiaries with
revenue or long-lived assets which exceed 10% of the consolidated amounts.
Geographic areas other than the United States and Europe account for less than
10% of the consolidated revenue and identifiable assets, and are combined and
shown in the table below as "Other." Unconsolidated revenue and long-lived
assets for each geographic area are shown below (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 31, December 25, December 26,
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Revenue:
United States(1) $1,493,870 $1,502,992 $1,478,796
Europe 644,641 577,635 499,297
Other 229,720 177,595 166,563
------------ ------------ ------------
Total revenue $2,368,231 $2,258,222 $2,144,656
------------ ------------ ------------
------------ ------------ ------------
Long-lived assets:
United States $ 301,474 $ 302,692 $ 285,890
Europe 38,843 45,438 51,991
Other 18,569 4,844 4,348
------------ ------------ ------------
Total long-lived assets $ 358,886 $ 352,974 $ 342,229
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ---------------
(1) U.S. revenue from unaffiliated customers includes international export sales
to customers of $99,533,000 in 1999, $88,654,000 in 1998, and $59,359,000 in
1997.
F-21
<PAGE> 63
NOTE 15 -- QUARTERLY INFORMATION (UNAUDITED)
The consolidated results of operations on a quarterly basis were as follows (in
thousands of dollars, except per share amounts):
<TABLE>
<CAPTION>
Quarter Ended 1999
----------------------------------------------------
March 26 June 25 September 24 December 31
----------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $517,503 $654,402 $573,730 $622,596
Cost of revenue 294,086 383,960 343,409 403,792
-------- -------- ----------- -----------
Gross profit 223,417 270,442 230,321 218,804
Operating expenses 211,335 224,326 216,957 240,768
Litigation expense 82,308 16,274 5,000
Restructuring expense 20,246 16,082 6,924
-------- -------- ----------- -----------
Operating profit (loss) 12,082 (56,438) (18,992) (33,888)
Interest expense, net (2,969) (3,642) (6,053) (6,550)
-------- -------- ----------- -----------
Income (loss) before
income taxes 9,113 (60,080) (25,045) (40,438)
Benefit (provision) for
income taxes (3,300) 21,600 9,000 14,600
-------- -------- ----------- -----------
Net income (loss) $ 5,813 $(38,480) $(16,045) $(25,838)
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Earnings (loss) per common
share:
Basic $ 0.06 $ (0.38) $ (0.16) $ (0.26)
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Diluted $ 0.06 $ (0.38) $ (0.16) $ (0.26)
-------- -------- ----------- -----------
-------- -------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended 1998
----------------------------------------------------
March 27 June 26 September 25 December 25
----------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $484,891 $542,306 $571,060 $659,965
Cost of revenue 253,389 284,746 304,788 374,889
-------- -------- ----------- -----------
Gross profit 231,502 257,560 266,272 285,076
Operating expenses 170,795 172,988 183,835 199,987
-------- -------- ----------- -----------
Operating profit 60,707 84,572 82,437 85,089
Interest income (expense),
net 4,663 3,258 (714) (264)
-------- -------- ----------- -----------
Income before income
taxes 65,370 87,830 81,723 84,825
Provision for income taxes (24,800) (33,400) (31,100) (32,200)
-------- -------- ----------- -----------
Net income $ 40,570 $ 54,430 $ 50,623 $ 52,625
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Earnings per common share:
Basic $ 0.38 $ 0.51 $ 0.50 $ 0.53
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Diluted $ 0.37 $ 0.50 $ 0.48 $ 0.52
-------- -------- ----------- -----------
-------- -------- ----------- -----------
</TABLE>
F-22
<PAGE> 64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
Storage Technology Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index appearing under Item 14.(a)1. and 2. on page 37 present fairly, in all
material respects, the financial position of Storage Technology Corporation and
its subsidiaries at December 31, 1999 and December 25, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards generally accepted in the
United States 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.
PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
March 8, 2000
F-23
<PAGE> 65
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Deductions
Accounts
Additions Receivable
Balance Charged to Written Off
Beginning Other Net of Balance
of Year Expenses Recoveries End of Year
--------------------------------------------------
<S> <C> <C> <C> <C>
Accounts for doubtful accounts on
accounts receivable:
December 31, 1999 $20,424 $7,344 $8,276 $19,492
-------- -------- --------- ---------
-------- -------- --------- ---------
December 25, 1998 $17,924 $6,664 $4,164 $20,424
-------- -------- --------- ---------
-------- -------- --------- ---------
December 26, 1997 $12,907 $7,625 $2,608 $17,924
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Additions
Balance Charged to
Beginning Cost of Reductions Balance
of Year Revenue Write-offs End of Year
--------------------------------------------------
<S> <C> <C> <C> <C>
Inventory reserves:
December 31, 1999 $39,904 $47,545 $31,576 $55,873
-------- --------- --------- ---------
-------- --------- --------- ---------
December 25, 1998 $45,862 $26,209 $32,167 $39,904
-------- --------- --------- ---------
-------- --------- --------- ---------
December 26, 1997 $51,338 $40,915 $46,391 $45,862
-------- --------- --------- ---------
-------- --------- --------- ---------
</TABLE>
F-24
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Storage Technology
Corporation dated July 28, 1987 (filed as Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 25, 1987, and as Exhibit 3.1(ii) to the
Company's Quarterly Report on Form 10-Q, for the quarter
ended September 29, 1995, filed on November 13, 1995, and
incorporated herein by reference)
3.2 Certificate of Amendment dated May 22, 1989, to the Restated
Certificate of Incorporation dated July 28, 1987 (filed as
Exhibit (c)(1) to the Company's Current Report on Form 8-K
dated June 2, 1989, and incorporated herein by reference)
3.3 Certificate of Second Amendment dated June 2, 1992, to the
Restated Certificate of Incorporation dated July 28, 1987
(filed as Exhibit 3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 26, 1992, and
incorporated herein by reference)
3.4 Restated Bylaws of Storage Technology Corporation, as
amended through November 11, 1998 (filed as Exhibit 3.1 to
the Company's Current Report on Form 8-K dated November 19,
1998, and incorporated herein by reference)
4.1 Specimen Certificate of Common Stock, $0.10 par value of
Registrant (filed as Exhibit (c)(2) as to the Company's
Current Report on Form 8-K dated June 2, 1989, and
incorporated herein by reference)
4.2 Rights Agreement dated as of August 20, 1990, between
Storage Technology Corporation and First Fidelity Bank,
N.A., New Jersey, Rights Agent (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated August 20, 1990,
and incorporated herein by reference)
4.3 Certificate of Designations of Series B Junior Participating
Preferred Stock (filed as Exhibit A to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated August 8, 1990,
and incorporated herein by reference)
10.1(1) 1987 Employee Stock Purchase Plan, as amended (filed as part
of the Company's Registration Statement on Form S-8 filed
September 8, 1994, File No. 33-42818, and incorporated
herein by reference)
10.2(1) 1995 Equity Participation Plan (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, filed on August 11, 1995, and
incorporated herein by reference)
10.3(1) Storage Technology Corporation MBO Plan (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1994, filed on August 12, 1994, and
incorporated herein by reference)
10.4(1) Storage Technology Corporation Amended and Restated Stock
Option Plan for Non-Employee Directors (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 28, 1996, filed on August 12, 1996, and
incorporated herein by reference)
10.5(1) Employment Agreement between the Company and David E. Weiss
(filed as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ending June 25, 1999, filed on
August 9, 1999 and incorporate herein by reference)
10.6(1/2) Storage Technology Corporation Amended and Restated 1987
Employee Stock Purchase Plan, dated September 16, 1999.
</TABLE>
- ------------------------
1 Contract or compensatory plan or arrangement in which directors and/or
officers participate.
2 Indicates exhibits filed with this Annual Report on Form 10-K.
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.7(1) Agreement between the Company and Gary Francis, dated August
19, 1997 (filed as Exhibit 10.25 to the Company's Annual
Report on Form 10-K for the year ended December 26, 1997,
and incorporated herein by reference)
10.8(1/2) Form of Executive Officer Employment Agreement between the
Company and Each Executive Officer Named in Exhibit 10.10
hereto, dated October 1999.
10.9(1/2) Schedule of Differences in Terms and Conditions of Executive
Officer Employment Agreement
10.10(1/2) Offer Letter, dated May 3, 1999, from the Company to James
Bartlett
10.11(1/2) Offer Letter, dated August 11, 1999, from the Company to
Susan Bailey
10.12(1/2) Termination Agreement, dated December 31, 1999, between the
Company and James Bartlett
10.13() Credit Agreement dated as of October 23, 1997, among the
Company and Bank of America National Trust and Savings
Association, as Agent, Swingline Bank, and Letter of Credit
Issuing Bank, and the other financial institutions party
thereto (filed as Exhibit 10.28 to the Company's Annual
Report on Form 10-K for the year ended December 26, 1997,
and incorporated herein by reference)
10.14(2) Amended and Restated Credit Agreement, dated as of January
13, 2000, among the Company, Bank of American, N.A., as
Administrative Agent, Swingline Bank and Letter of Credit
Issuing Bank and the other financial institutions party
thereto
10.15(2) Credit Agreement, dated as of January 13, 2000, among the
Company, Bank of America, N.A. and the other financial
institutions party thereto
10.16(2) Security Agreement, dated as of January 13, 2000, by and
among the Company, Bank of America, N.A., as Collateral
Agent for itself and other Secured Parties referred to
therein
10.17 Contingent Multicurrency Note Purchase Commitment Agreement
dated as of December 12, 1996, between the Company and Bank
of America National Trust and Savings Association (filed as
Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 27, 1996, and incorporated
herein by reference)
10.18 Second Amendment to Second Amended and Restated Contingent
Multicurrency Note Purchase Commitment Agreement dated
November 20, 1998, between Bank of America National Trust
and Savings Association and the Company. (filed as Exhibit
10.19 to the Company's Annual Report on Form 10-K for the
year ended December 25,1998 and incorporated herein by
reference)
10.19(2) Third Amendment to Second Amended and Restated Contingent
Multicurrency Note Purchase Commitment Agreement dated
August 13, 1999, between Bank of America National Trust and
Savings Association and the Company
10.20(2) Fourth Amendment to Second Amended and Restated Contingent
Multicurrency Note Purchase Commitment Agreement dated
January 5, 2000, between the Company and Bank of America,
N.A
21.0(2) Subsidiaries of Registrant
23.1(2) Consent of PricewaterhouseCoopers LLP
24.0(2) Powers of Attorney
27.0(2) Financial Data Schedule
</TABLE>
- ------------------------
1 Contract or compensatory plan or arrangement in which directors and/or
officers participate.
2 Indicates exhibits filed with this Annual Report on Form 10-K.
<PAGE> 1
EXHIBIT 10.6
STORAGE TECHNOLOGY CORPORATION
AMENDED AND RESTATED
1987 EMPLOYEE STOCK PURCHASE PLAN
AMENDED AS OF SEPTEMBER 16, 1999
1. Recitals. On February 2, 1982, Storage Technology Corporation, a
Delaware corporation (together with its Subsidiary Corporations, hereinafter
referred to, unless the context otherwise requires, as the "Company"),
established the Storage Technology Corporation 1982 Employee Stock Purchase
Plan. Such plan was subsequently amended and restated by the Board of Directors
(the "Board") on June 15, 1987 and renamed the Storage Technology Corporation
1987 Employee Stock Purchase Plan. Under the provisions of Paragraph 19, the
Company reserved the power, through its Board of Directors, to amend the plan
from time to time, subject in certain instances to approval of the Company's
stockholders. Pursuant to that power, the plan was amended and restated in its
entirety on December 14, 1995 and was approved by the stockholders of the
Company on May 30, 1996. The plan was further amended on September 23, 1997 and
December 19, 1997, and these amendments were approved by the stockholders of the
Company on May 21, 1998. The plan was further amended on September 16, 1999, and
is effective as of that date. (Shareholder approval was not required for the
September 16, 1999 amendments.) The Storage Technology Corporation 1987 Employee
Stock Purchase Plan, as amended and restated through September 16, 1999, is
referred to as the "1987 Plan or the "Plan".
2. Purposes. The 1987 Plan is intended to provide a method whereby
employees of the Company will have an opportunity to acquire a proprietary
interest in the Company through the purchase of shares of the $.10 par value
voting Common Stock of the Company (the "Common Stock"). It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code"). The provisions of the Plan shall, accordingly, be construed so as
to extend and limit participation in a manner consistent with the requirements
of that section of the Code.
3. Definitions.
(a) "Account" means an Employee's interest in the Segregated
Account based on the contributions made thereto and the interest earned thereon.
(b) "Base Pay" means, at the Employee's election, either: (i)
an Employee's rate of base salary (before deduction for contributions to plans
maintained pursuant to Sections 401(k) and 125 of the Code) in effect during the
Offering Period, but EXCLUDING payments for overtime, shift premium, incentive
compensation, bonuses, and other similar
-1
<PAGE> 2
payments; or (ii) Employee's rate of base salary (before deduction for
contributions to plans maintained pursuant to Sections 401(k) and 125 of the
Code) in effect during the Offering Period, EXCLUDING payments for overtime,
shift premium, incentive compensation, bonuses, and other similar payments, but
INCLUDING all payments for bonuses, incentive compensation and various forms of
commissions. Base Pay shall also include payments for short-term disability.
(c) "Committee" means the Compensation Committee of the
Company's Board of Directors or such other committee as is designated by the
Board of Directors to administer the Plan.
(d) "Employee" means any person who is a Regular Employee (per
CP-3-3-14) customarily employed for more than 20 hours per week and more than
five months in a calendar year by Storage Technology Corporation or any
Subsidiary Corporation.
(e) "Offering Commencement Date" shall mean January 1, 1991
and each following November 1 and May 1 thereafter, unless otherwise specified
by the Committee.
(f) "Offering Periods" shall mean the period commencing
January 1, 1991 and ending October 31, 1991 and thereafter the periods
commencing each November 1 and May 1 and ending on the next following April 30
and October 31, respectively. The duration of Offering Periods may be changed
pursuant to Paragraphs 5 and 21 of this Plan.
(g) "Offering Termination Date" shall mean October 31, 1991
and each following April 30 and October 31 thereafter, unless otherwise
specified by the Committee.
(h) "Segregated Accounts" shall mean the depository accounts
established by the Company and by Subsidiary Corporations for collection of
Employee contributions to the Plan.
(i) "Subsidiary Corporation" shall mean any present or future
corporation which (i) would be a subsidiary corporation with respect to the
Company as that term is defined in Section 425 of the Code, and (ii) is
designated as a participant in the Plan by the Committee described in Paragraph
14.
4. Eligibility
(a) Participation in the Plan is completely voluntary. An
Employee will be eligible to become a participant in each Offering Period if
employed by the Company on or before 15 days prior to the applicable Offering
Commencement Date.
-2
<PAGE> 3
(b) Any provision of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan:
(i) if, immediately after the grant, such Employee
would own stock, and/or hold outstanding options to purchase stock,
possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company or of any Subsidiary Corporation
(for purposes of this Paragraph the rules of Section 425(d) of the Code
shall apply in determining stock ownership of any Employee); or
(ii) if such option would permit his or her rights to
purchase stock under all employee stock purchase plans of the Company
and its Subsidiary Corporations to accrue at a rate that exceeds
$25,000 of the fair market value of the stock (determined at the time
each option is granted) for each calendar year in which such option is
outstanding; or
(iii) for shares in excess of 25,000 in respect of
any Offering Period, provided that this limitation is subject to
increase or decrease by the Committee prior to the commencement of any
Offering Period in respect of such Offering Period.
5. Plan Offerings.
(a) The Plan is authorized to issue a total of 12,200,000
shares of Common Stock.
(b) The Plan will be implemented by consecutive Offering
Periods, with a new Offering Period commencing on each Offering Commencement
Date and ending on the next Offering Termination Date, or on such other dates as
the Committee shall determine prior to the commencement of the relevant Offering
Period, and continuing until terminated in accordance with Paragraph 19 hereof.
The Committee shall have the power to change the duration of Offering Periods
(including the commencement and termination dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected.
(c) The Committee may determine in its sole discretion from
time to time to fix a maximum number of shares of Common Stock of the Company,
including any unsold balances from earlier Offering Periods (subject to
adjustment upon changes in the capitalization of the Company in accordance with
Paragraph 18 hereof) that shall be issued during any one Offering Period. If the
Committee fixes a maximum number of shares per Offering Period, the maximum
number of shares to be issued in respect of any Offering
-3
<PAGE> 4
Period may from time to time be increased or decreased by the Committee prior to
the commencement of the affected Offering Period within the limits of the total
shares then available under the Plan.
(d) Participation in any Offering Period under the Plan shall
neither limit, nor require, participation in any other Offering Period (except
as set forth in paragraphs 4(b)(i) and 4(b)(ii) hereof).
6. Participation.
(a) An eligible Employee may become a participant by enrolling
and authorizing payroll deductions on an Interactive Voice Response system
("IVR") in such manner as is prescribed by the Company or, if such Employee does
not have access to IVR, by completing an authorization for payroll deduction on
the form provided by the Company and filing it with the department designated by
the Company or the designated country coordinator by the deadline established by
the Company, which must precede the first day of the Offering Period for which
the participant enrolls.
(b) Payroll deductions for a participant shall commence on the
applicable Offering Commencement Date when an authorization for a payroll
deduction becomes effective and shall end on the Offering Termination Date of
the Offering Period to which such authorization is applicable unless sooner
terminated by the participant as provided in Paragraph 11.
7. Payroll Deductions.
(a) At the time a participant enrolls and authorizes payroll
deductions, the participant shall elect to have deductions made from his or her
Base Pay and deposited in a Segregated Account during the time the Employee is a
participant in an Offering Period. Deductions can be made at the rate of 1, 2,
3, 4, 5, 6, 7, 8, 9, or 10% of Base Pay.
(b) All payroll deductions made for a participant shall be
transferred to a Segregated Account as soon as practicable. For administrative
convenience, the Company may offset amounts advanced by the Company to pay
participant withdrawals pursuant to Paragraph 11 against amounts of payroll
deductions otherwise payable into the Segregated Account. A participant may not
make any separate cash payments into the Segregated Account. The Company shall
maintain appropriate accounting records to reflect at all times the interest and
total deductions of all participants in the Segregated Account.
(c) A participant may discontinue participation in the Plan as
provided in Paragraph 11, but no other change can be made during an Offering
Period and, specifically, a participant may not alter the rate of payroll
deductions for that Offering Period.
-4
<PAGE> 5
8. Terms and Conditions of Options.
(a) On the applicable Offering Commencement Date, when a
participant's authorization for a payroll deduction becomes effective, the
participant shall be deemed to have been granted an option to purchase a maximum
number of shares of Common Stock, subject to the limitations pursuant to
Paragraph 4(b) above, equal to the lesser of: (a) the Option Price (as defined
below) divided into the Employee's total deductions under the Plan in respect of
the Offering Period or (b) the Employee's pro-rata share of all shares available
for issuance under the Plan for that Offering Period, determined pursuant to
Paragraph 13, below.
(b) The option price per share (hereinafter "Option Price") of
Common Stock purchased with payroll deductions made during each Offering Period
shall be the lesser of:
(i) 85% of the closing price per share of the Common
Stock as quoted in The Wall Street Journal for the applicable Offering
Commencement Date (or on the next business date on which shares of the
Common Stock shall be traded on the New York Stock Exchange in the
event that no shares of the Common Stock shall have been traded on the
Offering Commencement Date); or
(ii) 85% of the closing price per share of the Common
Stock as quoted in The Wall Street Journal for the applicable Offering
Termination Date (or for the next preceding business date on which
shares of the Common Stock shall be traded on the New York Stock
Exchange in the event that no shares of the Common Stock shall have
been traded on the Offering Termination Date).
(c) The Committee may determine in its sole discretion from
time to time to issue fractional shares under the Plan. If the Committee
determines not to issue fractional shares, any accumulated payroll deductions
that would have been used to purchase fractional shares shall be (i)
automatically credited to each participant's Account and applied towards his or
her option to purchase shares in the next successive Offering Period, or (ii)
returned to each participant promptly following the termination of the Offering
Period, as may be determined by the Committee. Any accumulated payroll
deductions that are in excess of the limitations of Paragraph 8(a), together
with any net income of the Segregated Account allocable to each participant, and
the amount referenced in item (ii) above, shall be returned to each participant
promptly following the termination of an Offering Period.
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9. Exercise of Option. Unless a participant withdraws in accordance
with Paragraph 11, his or her option to purchase Common Stock with payroll
deductions made during any Offering Period will be deemed to have been exercised
automatically on the applicable Offering Termination Date, for the purchase of
the number of full shares of Common Stock that the accumulated payroll
deductions will purchase at the applicable Option Price (but not in excess of
the number of shares for which options have been granted to the participant
pursuant to Paragraph 8(a)), and any excess in his or her Account at that time
will be returned to the participant, together with any net income of the
Segregated Account allocable to his or her Account, as provided in Paragraph 13.
10. Delivery. As promptly as practicable after the Offering Termination
Date of each Offering Period, the Company will deliver to a broker designated by
the Committee to hold shares for the benefit of the participants the shares of
Common Stock purchased upon the exercise of the participant's option. As may be
determined by the Committee in its sole discretion from time to time, such
shares shall be delivered by physical certificates or by means of a book entry
system. A participant may instruct any such designated broker to sell shares
purchased upon exercise of the participant's option at any time, subject to
applicable securities laws; provided, that the Committee (i) may restrict a
participant's right to transfer shares to another brokerage, institution, or any
other person (including the participant) during the initial 24 months following
the Offering Commencement Date in which the shares were purchased, and (ii) may
determine that, for purposes of Section 423(b)(8)(B) of the Internal Revenue
Code, the shares were sold if a participant transfers shares to another
brokerage or financial institution, or any other person (including the
participant) during the initial 24 months following the Offering Commencement
Date in which shares were purchased.
11. Withdrawal and Termination.
(a) Prior to the 15th day of the month before the applicable
Offering Termination Date, any participant may withdraw payroll deductions and
net earnings thereon credited to the participant by following the procedures
specified by the Company for effecting a withdrawal on the IVR system or, if the
participant does not have access to IVR, by giving written notice of withdrawal
to the department designated by the Company or the designated country
coordinator. As promptly as practical after the participant's withdrawal, the
payment to the participant of all the participant's payroll deductions credited
to his or her account, together with any net earnings of the Segregated Account
allocable to the participant's Account shall be made. No further payroll
deductions for such participant will be made during such Offering Period. The
Company may, for administrative convenience, elect to pay to participants (or
beneficiaries) the amount of any withdrawals and earnings thereon and may then
offset the amount of any such payments against payroll deductions otherwise
payable to the Segregated Account. The Company may, at its option, treat any
attempt to borrow by a participant on the security of the accumulated payroll
deductions allocated to the participant's Account as an election under this
Paragraph 11(a) to withdraw such amounts from the Segregated Account.
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(b) A participant's withdrawal from any Offering Period will
not have any effect upon eligibility to participate in any subsequent Offering
Period or in any similar plan that may hereafter be adopted by the Company.
(c) Upon termination of the participant's employment with the
Company for any reason (including retirement but excluding death or, in certain
cases, disability while in the employ of the Company) on or prior to the last
day of the last full payroll period immediately preceding an Offering
Termination Date, the payroll deductions credited to the participant, together
with any net earnings of the Segregated Account allocable to his or her Account,
will be returned to the participant, or, in the case of a participant's death
subsequent to the termination of employment, to the person or persons entitled
thereto under Paragraph 15. For purposes of the Plan, a participant shall be
considered disabled if the Company determines that the participant is unable to
perform the usual and customary requirements of his or her job with the Company
and will be unable to do so for at least six months; provided, however, that
such determination is subject to review by the Committee at its discretion.
(d) Upon termination of the participant's employment because
of death or disability prior to the Offering Termination Date, the participant
or the participant's beneficiary (as defined in Paragraph 15) shall have the
right to elect, by written notice given to the Company's General Counsel prior
to the expiration of the period of 90 days commencing on the date of death or
disability of the participant, and prior to the Offering Termination Date,
either
(i) to withdraw all of the payroll deductions
credited to the participant, together with any net earnings of the
Segregated Account allocable to his or her Account, or
(ii) to exercise the participant's option to purchase
of Common Stock for the then current Offering Period on the Offering
Termination Date for the purchase of the number of full shares of
Common Stock that the amount allocated to the participant's Account at
the date of the participant's death or disability will purchase at the
applicable Option Price, and any excess credited to such Account will
be returned to said participant or his or her beneficiary.
In the event that no such written notice of election shall be duly
received by the office of the Company's General Counsel within the required time
period, the participant or beneficiary shall automatically be deemed to have
elected to withdraw the payroll deductions credited to the participant, together
with the net earnings of the Segregated Account allocable
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to his or her Account at the date of the participant's death or disability, and
the same will be paid promptly to said participant or beneficiary.
Notwithstanding the foregoing, if a participant's employment with the Company
and any Subsidiary Corporation terminates because of disability more than three
months prior to the Offering Termination Date, the provisions of this Paragraph
11(d) shall not apply and the provisions of Paragraph 11(c) shall apply to such
participant.
12. Income and Accounting.
(a) Separate accounts shall not be established by the Company
for Employees who participate in the Plan. The Employee's payroll deductions
shall be transferred to the Segregated Account as soon as practical after each
pay period and credited to the participant.
(b) Each participant shall share proportionately in the income
and expense of the Segregated Account and any net income shall be taxable to the
participant, who shall be responsible for paying any income or other taxes
applicable thereto.
13. Stock.
(a) If the Committee, in its sole discretion, fixes a maximum
number of shares that shall be made available for sale under the Plan during any
Offering Period, such number of shares may be adjusted if less than the number
of shares that may be specified by the Committee with respect to any Offering
Period are purchased during any Offering Period. In such event, the number of
shares not purchased in the Offering Period may be carried over and made
available for sale under the Plan during any subsequent Offering Period. If the
total number of shares subject to options that would otherwise be exercised on
any Offering Termination Date in accordance with Paragraph 9 exceeds the maximum
number of shares available for sale, subject to adjustment as aforesaid, the
Company shall make a pro rata allocation of the shares available for delivery
and distribution in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable, and the balance of payroll deductions credited
to each participant, together with the net earnings of the Segregated Account
allocable thereto, shall be returned to him or her as promptly as possible.
(b) A participant will have no interest in Common Stock
covered by the participant's option until such option has been exercised.
Participants in the Plan shall have no rights as stockholders with respect to
any shares covered by the Plan until the date of issue of a stock certificate to
him or her for such shares. Except as otherwise expressly provided in the Plan
or in the corporate action relating to such event, no adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
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(c) Common Stock to be delivered to a participant under the
Plan will be registered in the name of the participant.
(d) The Board of Directors may, in its discretion, require as
conditions to the exercise of any option that the shares of Common Stock
reserved for issuance upon the exercise of the option shall have been duly
listed, upon official notice of issuance, upon the New York Stock Exchange, and
that either
(i) a Registration Statement under the Securities Act
of 1933, as amended, with respect to said shares shall have become
effective, or
(ii) the participant shall have represented in form
and substance satisfactory to the Company that it is the participant's
intention to purchase for investment the shares being purchased under
such option.
14. Administration. The Plan shall be administered by the Committee.
The interpretation and construction of any provision of the Plan or any
Segregated Account agreement and the adoption of rules and regulations for
administering the Plan shall be made by the Committee, subject, however, at all
times to the final concurrence of the Board of Directors of the Company.
Determinations made by the Committee and approved by the Board of Directors with
respect to any matter or provision contained in the Plan shall be final,
conclusive and binding upon the Company and upon all participants, their heirs
or legal representatives. Any rules, regulations or interpretations adopted by
the Committee shall remain in full force and effect unless and until altered,
amended, or repealed by the Committee or the Board of Directors.
15. Designation of Beneficiary. A participant may file with the
Company, pursuant to rules adopted by the Committee, a written designation of a
beneficiary who is to receive any Common Stock and/or cash pursuant to the
provisions of the Plan in the event of the participant's death. Such designation
of beneficiary may be changed by the participant at any time by written notice.
Upon the death of a participant and upon receipt by the Company of proof of the
identity and existence at the participant's death of a beneficiary validly
designated by him under the Plan, the Company shall deliver such Common Stock to
such beneficiary and/or pay any cash in the participant's Account in the
Segregated Account to the beneficiary, as may be required under the provisions
of Paragraph 11(d). In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time
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of such participant's death, the Company shall cause such cash to be paid to the
person or persons or the entity duly designated by the participant, as shown on
the Company's records, as his or her beneficiary for the proceeds of Company
paid life insurance. In the absence of such a beneficiary who is living at the
time of the participant's death, the Company shall cause such cash to be paid to
the executor or administrator of the estate of the participant, or if no such
executor or administrator of the estate has been appointed (to the knowledge of
the Company), the Company, in its discretion, may cause such cash to be paid to
the spouse or to any one or more dependents of the participant as the Company
may designate. No beneficiary shall, prior to the death of the participant by
whom he or she has been designated, acquire any interest in the Common Stock or
in amounts credited to the participant's Account.
16. Transferability. Neither payroll deductions credited to a
participant, nor earnings thereon, nor any rights with regard to the exercise of
an option or to receive Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by the participant
otherwise than by will or the laws of descent and distribution. Any such
attempted assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Paragraph 11.
17. Ownership of ESPP Assets. All contributions paid into Segregated
Accounts shall be the property of the respective participants in the Plan and
the Company shall have no interest in such amounts while held in the Segregated
Account.
18. Effect of Changes in Capital Structure. If the outstanding shares
of Common Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of any recapitalization,
reclassification, stock split, stock dividend, combination, or subdivision, or
if the Company takes any other action of a similar nature affecting such Common
Stock (excluding, however, any reorganization under the United States Bankruptcy
Code), then the number and class of shares of Common Stock that may thereafter
be optioned, or the rights assigned thereto (in the aggregate and to any
participant), shall be adjusted accordingly and, in the case of each option
outstanding at the time of any such action, the number and class of shares that
may thereafter be purchased pursuant to such option and the Option Price shall
be adjusted, in each case to such extent and in such manner, if at all, as may
be determined by the Board upon the recommendations of the Committee, with the
approval of independent public accountants and counsel, to be necessary to
preserve unimpaired the rights of the holder of such option.
19. Amendment or Termination. The Board of Directors of the Company may
at any time terminate or amend the Plan. No such termination can affect options
previously granted, nor may an amendment make any change in any option
theretofore granted without prior approval of the stockholders of the Company if
such approval is required under the laws or regulations administered by the U.S.
Treasury (including Section 423 of the Code), the Securities and Exchange
Commission (including Rule 16b-3), any other agency of the U.S. Government, or
the New York Stock Exchange, or any other exchange or system on which the
Company's stock is then registered or traded.
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20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received by the General Counsel of the Company.
21. Dissolution, Merger or Asset Sale.
(a) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(b) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Offering Termination Date (the "New Offering Termination Date") or
to cancel each outstanding right to purchase and refund all sums collected from
participants during the Offering Period then in progress. If the Board shortens
the Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify each participant
in writing, at least ten (10) business days prior to the New Termination Date,
that the Offering Termination Date for the option held by the participant has
been changed to the New Offering Termination Date and that such option shall be
exercised automatically on the New Offering Termination Date, unless prior to
such date the participant has withdrawn from the Offering Period as provided in
Paragraph 10 hereof. For purposes of this paragraph, an option granted under the
Plan shall be deemed to be assumed if, following the sale of assets or merger,
the option confers the right to purchase, for each share of option stock subject
to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
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22. Effective Date of Offering Periods. Offerings may commence under
the Plan prior to approval by the stockholders of any amendments or restatements
under Paragraph 19 above, but no Common Stock requiring stockholder approval may
be purchased hereunder unless and until the requisite stockholder approval has
been received.
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EXHIBIT 10.8
STORAGE TECHNOLOGY CORPORATION
EMPLOYMENT AGREEMENT
, 2000
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<PAGE> 2
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of ______________
(the "Effective Date") by and between Storage Technology Corporation (the
"Company"), a Delaware corporation, and __________________ (hereinafter, "you"
or "your") and sets forth the terms and conditions of your employment with the
Company. Previously, you and the Company entered into a letter agreement dated
______________ concerning your employment with the Company. This Agreement shall
replace and supersede such agreement and all prior agreements between you and
the Company concerning your employment with the Company. In consideration of
your employment by the Company on the terms and conditions set forth below, and
the mutual covenants and agreements contained herein, you and the Company agree
as follows:
1. Position. You will be employed full-time by the Company in the
position of ______________________________ of the Company, which is an executive
and management level position, reporting to ______________________, the
___________________________of the Company. During your employment, you shall
devote your entire working time, attention and energies to the business of the
Company and shall be bound by the Company's Corporate Policies and Practices
from time to time in effect. You shall not engage in any other business or
personal activity or activities that require services by you that may conflict
with the proper performance of your duties hereunder.
2. Certain Defined Terms.
a. Cause. "Cause" means any of the following: (i) willful
failure to perform your duties and responsibilities as an officer of the
Company; (ii) your willful breach of any provision of this Agreement; (iii) your
willful breach of any other written agreement between you and the Company; (iv)
gross negligence or dishonesty in the performance of your duties hereunder; (v)
your willful violation of any of the Corporate Policies and Practices as in
effect
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from time to time; (vi) your engaging in conduct or activities that materially
conflict with the interests of or injure the Company, or materially interfere
with your duties owed to the Company; (vii) your refusal to comply with or
material neglect of instructions received from your manager; and (viii) your
conviction (including any plea of guilty or nolo contendere) for a felony.
b. Change of Control. "Change of Control" means the occurrence
of any of the following events:
(i) The acquisition by any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company, of the
"beneficial ownership" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing twenty-five percent (25%)
or more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity [including the parent corporation
of such surviving entity]) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
approval by the stockholders of the Company of a plan of complete liquidation of
the Company, or the sale or disposition by the Company of all or substantially
all the Company's assets.
c. Disability. "Disability" means that you have been unable to
substantially perform your duties under this Agreement as the result of your
incapacity due to physical or mental illness for a period of twenty-six weeks,
consecutive or otherwise, after its commencement. This definition is for
purposes of this agreement only and does not address company short term or long
term benefit policies.
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d. Involuntary Termination. "Involuntary Termination" means
any of the following: (i) termination of your employment by the Company which is
not effected for Cause; (ii) termination of your employment with the Company by
reason of your death or Disability; (iii) during the twenty-four month period
following a Change of Control, termination of your employment for any reason
other than for Cause; (iv) the failure of the Company to obtain the assumption
of this Agreement by any successors contemplated in Section 10 below; (v)
without your express written consent, your relocation to a facility or a
location more than 50 miles from your present office location; (vi) without your
express written consent, a material reduction in your Base Salary and Target
Bonus opportunity, stated as a percentage of your Base Salary, as defined below,
as in effect immediately prior to such reduction, where a material reduction
shall be deemed to be a cumulative reduction of greater than fifteen percent
(15%), except as provided in Section 4 below; or (vii) without your written
consent, a significant reduction of your duties, authority, responsibilities or
change in reporting relationship relative to that which was in effect
immediately prior to such reduction or change.
e. Termination Date. "Termination Date" means any of the
following: (i) the date on which the Company delivers to you a written notice of
termination or such later date, not to exceed ninety days, specified in the
notice of termination; (ii) in the event employment ends by reason of your death
or Disability, the date of death or determination of Disability; and (iii) in
the event this Agreement is terminated by you, the date on which you deliver a
written notice of termination to the Company. Any notice of termination shall
specify the provision(s) in this Agreement claimed to provide a basis for
termination.
3. Base Compensation. For your services during your employment, the
Company will pay you a base salary at the annualized rate equal to $__________.
Such salary shall be paid periodically in accordance with the normal payroll
practices of the Company in effect from time to time, less any withholding taxes
as set forth below. The amount of your base salary may be
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increased from time to time during your employment, and may be reduced,
consistent with Section 2.d, above, if the Board of Directors of the Company
("Board") requires a decrease in base salary for all corporate officers and
business unit managers, or as may be mutually agreed upon by you and the Company
(such annualized base salary as may be adjusted from time to time is referred to
in this Agreement as "Base Salary").
4. Incentive Bonuses. The Company currently maintains a Management By
Objective Bonus Program (the "MBO Program") as may be modified from time to
time. During your employment, you shall be eligible to receive bonuses under the
terms and conditions of the MBO Program approved by the Board and/or the Human
Resources and Compensation Committee of the Board, based upon the achievement of
pre-established financial and other performance goals. In particular, you are
specifically eligible to receive a bonus under the MBO Program equal to ____% of
your Base Salary at the target level of performance. The amount of your target
bonus opportunity, stated as a percentage of your Base Salary, may be increased
from time to time during your employment, and may be reduced if the Board
requires a decrease in the target bonus opportunity for all corporate officers
and business unit managers, or as may be mutually agreed upon by you and the
Company (such annualized target bonus as may be adjusted from time to time is
referred to in this Agreement as "Target Bonus"). Any payments under the MBO
Program shall be made in accordance with the provisions of, and under the
conditions contained in, the MBO Program, and may be subject to achieving
pre-established individual performance goals. Failure to achieve your individual
performance goals may result in a reduced payment or no Target Bonus payment.
5. Termination of Employment; Severance Benefits.
a. Involuntary Termination. If your employment terminates as a
result of an Involuntary Termination other than for Cause, you shall be entitled
to receive a severance payment equal to the sum of (i) one times your Base
Salary for the fiscal year then in effect, plus (ii) one times your Target Bonus
for the fiscal year then in effect, whether or not such
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bonus would otherwise be payable (or, if no Target Bonus is in effect for such
year, the highest Target Bonus in the three preceding fiscal years); provided,
that in the event of an Involuntary Termination upon a Change of Control, you
shall be entitled to receive a severance payment equal to the sum of (x) two
times your Base Salary for the fiscal year then in effect, plus (y) two times
your Target Bonus, whether or not such bonus would otherwise be payable (or, if
no Target Bonus is in effect for such year, the highest Target Bonus in the
three preceding fiscal years). Any severance payments to which you become
entitled pursuant to this Section shall be paid to you (or your estate or
beneficiary in the event of your death) in a lump sum within thirty calendar
days of your Termination Date and shall be paid contingent upon your execution
and delivery to the Company of a Settlement and Release Agreement substantially
in the form attached hereto as Exhibit A.
b. Voluntary Resignation; Termination For Cause. If you
voluntarily resign from the Company (other than as an Involuntary Termination),
or if the Company terminates your employment for Cause, then you shall not be
entitled to receive any severance or other benefits except for those benefits,
if any, as may then be established under then existing benefits plans at the
time of your resignation or termination.
c. Restricted Stock and Stock Options. In the event you are
entitled to receive severance pursuant to this Section, then, in addition to
such severance, all unvested stock options granted to you under the Company's
stock option plans (or under any successor company's stock option plans) on or
after the Effective Date shall vest and become exercisable in full, and the
Company's right to repurchase any shares of restricted stock purchased under any
of the Company's stock plans on or after the Effective Date shall terminate and
all such stock shall become fully vested.
d. Notice of Termination. Any termination (of your employment
with the Company other than by reason of your Death or Disability) shall be
communicated by a notice of termination given to the other in accordance with
the Notice Provisions of this Agreement.
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Such notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the Termination Date.
6. Employee Benefit Programs.
a. You shall be eligible to participate in the employee and
executive benefit programs maintained by the Company, including (without
limitation) any qualified or non-qualified retirement plans or programs, savings
and profit-sharing plans, stock option, restricted stock and other equity plans,
bonus plans, deferred compensation plans, life, short-term and long-term
disability, medical, accident and other insurance programs, paid vacations in
accordance with the policy for executive officers as may be in effect from time
to time, and similar plans or programs, subject in each case to the generally
applicable terms and conditions of any such plan or program and to the sole
determination of the Board, or any committee of the Board, or other committee
administering such plan or program. During your employment, the Company shall
provide you with (i) an annual reimbursement for financial and tax and estate
planning expenses incurred by you in an amount not to exceed 1% of your Base
Salary; and (ii) the various executive officer perquisites to the extent the
Company continues to offer them from time to time.
b. Stock option, restricted stock or other equity benefits, if
any, shall be awarded by the Board pursuant to the terms and conditions of the
Company's equity plans for employees, as may be in effect from time to time. The
Company's 1995 Equity Participation Plan, as amended, provides that stock option
and stock appreciation rights may be subject to forfeiture and any option gain
may be payable by you to the Company during a period specified in the plan in
the event you may engage in activities that are in competition with the Company
following your termination. You are encouraged to carefully review the terms of
the plan and any other equity plans that may be in effect from time to time, and
any stock option agreements in their entirety.
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7. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to you (i) would
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section, would be subject to the excise tax imposed by Section 4999 of the Code,
then such severance and other benefits shall be either (i) delivered in full, or
(ii) delivered as to such lesser extent which would result in no portion of such
severance and other benefits being subject to excise tax under Section 4999 of
the Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by you on an after-tax basis, of the greatest
amount of benefits, notwithstanding that all or some portion of such benefits
may be taxable under Section 4999 of the Code. Unless you and the Company agree
otherwise in writing, any determination required under this Section shall be
made in writing by the Company's independent public accountants (the
"Accountants"). Such determination shall be conclusive and binding upon you and
the Company for all purposes. For purposes of making the calculations required
by this Section, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. You and the Company shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.
8. Non-Compete; Non-Solicit.
a. Each of the parties hereto recognize that your services are
special and unique and that the level of compensation and the other provisions
herein for compensation and benefits are partly in consideration of and
conditioned upon your agreement not to compete with the Company, and that your
covenant not to compete or solicit as set forth in this Section
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during and after your employment with the Company is essential to protect the
business and good will of the Company.
b. You agree that during your employment with the Company and
for a period ending twelve months following the Termination Date, you will not
either directly or indirectly, engage in any activity in competition with any
product, service or other activity of the Company (said competing products,
services or activities to be determined and identified at the Company's
reasonable discretion at the Termination Date, which may include businesses or
markets that the Company has expressed its intent to enter), or harmful or
contrary to the interests of the Company, including, but not limited to:
accepting employment with or serving as a consultant or advisor or director to
any employer that is in competition with the Company or acting against the
interests of the Company; or disclosing or misusing any confidential,
proprietary or material information concerning the Company (such information
includes, without limitation, information regarding the Company's operations,
its products and services, product designs, business plans, strategic plans,
marketing and distribution plans and arrangements, customers, and financial
statements, budgets and forecasts, and employee names, titles, compensation,
skills and performance); or participating in any hostile takeover attempt of the
Company.
c. You agree that for a period of twenty four months you will
not, either directly or indirectly: (i) induce or attempt to influence any
employee of the Company to leave his/her employ with the Company; (ii) solicit
or encourage then-current employees of the Company to apply for employment with
any person or entity with which you are employed or with which you intend to
become employed, or in which you have or intend to have a financial interest, as
a consultant, recruiter, independent contractor or otherwise, or in which you
have a substantial financial or equity interest; or (iii) provide to any other
person or entity the names of any employee who is employed by the Company on the
Termination Date. For purposes of this Section, the term "Company" shall mean
and include the Company, any subsidiary or affiliate of the Company, any
successor to the business of the Company (by merger,
- --------------------------------------------------------------------------------
page 8 STORAGE TEK PROTECTED
<PAGE> 10
consolidation, sale of assets or stock or otherwise) and any other corporation
or entity for which you may serve as a director, officer or employee at the
request of the Company or any successor of the Company.
d. You agree that if you breach the covenants contained in
this Section, you will forfeit your right to receive any severance benefits
under this Agreement. Further, you agree that if any severance payments have
been paid to you, the total amount of such payments shall be returned and paid
to the Company promptly upon the Company notifying you of such breach. Nothing
contained in this paragraph (d) shall preclude injunctive relief.
e. You agree that the Company would suffer an irreparable
injury if you were to breach the covenants contained in this Section and that
the Company would by reason of such breach or threatened breach be entitled to
injunctive relief in a court of appropriate jurisdiction and you hereby
stipulate to the entering of such injunctive relief prohibiting you from
engaging in such breach.
f. If any of the restrictions contained in this Section shall
be deemed to be unenforceable by reason of the extent, duration or geographical
scope or other provisions thereof, then the parties hereto contemplate that the
court shall reduce such extent, duration, geographical scope or other provision
hereof and enforce this Section 8 in its reduced form for all purposes in the
manner contemplated hereby.
9. Successors.
a. Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and assets shall assume the obligations under this Agreement and agree expressly
to perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such
- --------------------------------------------------------------------------------
page 9 STORAGE TEK PROTECTED
<PAGE> 11
obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this Section or which becomes bound by the terms of this Agreement
by operation of law.
b. Employee's Successors. The terms of this Agreement and all
your rights hereunder shall inure to the benefit of, and be enforceable by, your
personal or legal representatives, executors, administrators, successors, heirs,
devisees and legatees.
10. Miscellaneous Provisions.
a. Withholding. All payments to you pursuant to this Agreement
shall be subject to withholding of all amounts required to be withheld by
applicable Internal Revenue Service and State tax authorities by the Company and
shall be conditioned upon your submission of all information or execution of all
instruments necessary to enable the Company to comply with such withholding
requirements.
b. Confidentiality Agreement. As a condition of your
employment, you have executed the Company's standard form Proprietary Rights
Agreement or any other confidential inventions and trade secrets agreement. You
hereby reaffirm that during your employment with the Company and thereafter you
will comply with all provisions of such agreement and agree that you will enter
into such modifications or amendments thereof as the Company may reasonably
request from time to time.
c. Stock Ownership Guidelines. During your employment with the
Company, you agree to comply with the corporate officer stock ownership
guidelines approved by the Board or any committee of the Board, as may be
amended from time to time.
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page 10 STORAGE TEK PROTECTED
<PAGE> 12
d. Notice. Any notice required to be given under this
Agreement shall be given in writing, either by personal delivery or by causing
such written notice to be mailed, first class postage prepaid, in the United
States mail, to the parties at the addresses set forth below, or at such other
address for a party as shall be specified by like notice, provided that notices
of change of address shall be effective only upon receipt thereof.
Company: Storage Technology Corporation
One StorageTek Drive
Louisville, Colorado 80028
Attention: General Counsel
Executive: ------------------------------
------------------------------
------------------------------
e. Amendment or Modification. This Agreement may not be
amended or modified and no provision shall be waived unless agreed to in writing
and signed by you and the Company. No waiver by either party of any breach of
this Agreement shall be deemed a waiver of any other provision or condition at
another time.
f. Assignment. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Section shall be void. The Company
may assign its rights under this Agreement to an affiliate.
- --------------------------------------------------------------------------------
page 11 STORAGE TEK PROTECTED
<PAGE> 13
g. Governing Law. This Agreement is entered into in accordance
with, and shall be interpreted pursuant to the provisions of, the laws of the
State of Colorado.
h. Arbitration. Any controversy or claim arising between you
and the Company including, without limitation, any claims, demands or causes of
action alleging wrongful discharge; unlawful discrimination based on sex, age,
race, national origin, disability, religion or other unlawful basis; breach of
contract; or any claims seeking damages under any federal, state or local law,
rule, regulation or common law theory; but excluding any claims by you for
worker's compensation or unemployment compensation, and excluding any claims by
the Company for injunctive relief (for instance, for breach of confidentiality,
breach of a covenant not to compete, violation of trade secrets, or unfair
competition), shall be resolved by final and binding arbitration. By signing
below, you voluntarily waive any right to submit claims to a judge or jury in
either state or federal court. The arbitration shall be held in Denver,
Colorado, or elsewhere by mutual agreement. The selection of the arbitrator and
procedure shall be governed by the Employment Arbitration Rules of the American
Arbitration Association, as amended. The arbitrator shall be someone with a
minimum seven years of employment law background and from the AAA Commercial
Arbitration Panel or, if both parties agree, the Judicial Arbiters Group. The
arbitrator shall apply the applicable substantive law to any claim; for any
state law claim or damages issues, the law of Colorado shall govern, including
but not limited to the provisions of C.R.S. Sections 13-21-102(5). Judgment upon
an award rendered by an arbitration may be entered by any court having
jurisdiction. The Company will pay the cost normally associated with the
arbitration, including the arbitrator's fee and any fee for a hearing facility.
Following resolution of all claims between the parties in an arbitration
proceeding, if the arbitrator so determines, the Company shall reimburse you for
all reasonable legal fees and expenses that you incurred in connection with a
successful claim to enforce your rights under this Agreement.
- --------------------------------------------------------------------------------
page 12 STORAGE TEK PROTECTED
<PAGE> 14
i. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect or impair the validity or enforceability of the remaining provisions
of this Agreement, which shall remain in full force and effect in accordance
with their terms.
j. Entire Agreement. This Agreement, together with the other
agreements referenced herein, embody the entire agreement between the parties
relating to the subject matter hereof, and supersede all previous agreements or
understandings, whether oral or written.
k. Knowledge and Representation. By signing below, you
acknowledge that the terms of this Agreement have been fully explained to you,
that you understand the nature and extent of the rights and obligations provided
under this Agreement, and that you have been encouraged to and have had an
opportunity to consult legal counsel prior to signing this Agreement.
- --------------------------------------------------------------------------------
page 13 STORAGE TEK PROTECTED
<PAGE> 15
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer or representative, as of
the day and year first above written.
STORAGE TECHNOLOGY CORPORATION
By:
------------------------------------
Title:
---------------------------------
EXECUTIVE:
- ---------------------------------------
- --------------------------------------------------------------------------------
page 14 STORAGE TEK PROTECTED
<PAGE> 16
EXHIBIT A
SETTLEMENT AND RELEASE
1. In exchange for payment of salary (in the amount of ________) and bonus
(in the amount of _________) to ___________ ("Employee"), by Storage
Technology Corporation ("Company") and other good and valuable
consideration, Employee hereby irrevocably and unconditionally releases
and discharges the Company, its past and present subsidiaries,
divisions, officers, directors, agents, employees, successors, and
assigns (separately and collectively, "releasees") jointly and
individually, from any and all claims, known or unknown, which he/she,
his/her heirs, successors or assigns have or may have against releasees
and any and all liability which releasees may have to him/her whether
denominated claims, demands, causes of action, obligations, damages, or
liabilities arising from any and all bases, however denominated,
including but not limited to, any claims of discrimination under the Age
Discrimination in Employment Act ("ADEA"), the Older Workers Benefit
Protection Act, the Rehabilitation Act, the Family Medical Leave Act,
the Americans with Disabilities Act, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991 or any federal or state civil
rights act, claims for wrongful discharge, breach of contract, or for
damages under any other federal, state or local law, rule or regulation,
or common law under any theory; provided, however, that this release
does not affect (1) any claims for benefits which have vested or shall
vest on or before the effective date of this Settlement and Release
("Release") under any of the Company's benefit plans; (2) any claims for
indemnification for acts of Employee which have occurred or may occur as
an officer or employee of the Company; or (3) any claims which may arise
after the execution of this Release. This release specifically excepts
any claim Employee may wish to make for unemployment compensation, and
the Company agrees not to contest any claim made by Employee for
unemployment compensation. This release is for any relief, no matter how
denominated, including, but not limited to, back pay, front pay,
compensatory damages, punitive damages, or damages for pain and
suffering. Employee further agrees that he/she will not file or permit
to be filed on his/her behalf any such claim, will not permit
himself/herself to be a member of any class seeking relief against the
releasees and will not counsel or assist in the prosecution of claims
against the releasees, whether those claims are on behalf of
himself/herself or others, unless he/she is under a court order to do
so.
2. Employee agrees that by signing this Release, he/she is giving up the
right to sue for age discrimination, and that under this Release
Employee shall receive consideration to which he/she is not otherwise
entitled, and would not receive but for his/her release of rights under
the ADEA. Employee has up to twenty-one (21) days after
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page 15 STORAGE TEK PROTECTED
<PAGE> 17
delivery of this Release to consider whether to sign this Release.
Employee agrees that, after he/she has signed and delivered this Release
to the Company, this Release will not be effective or enforceable until
the end of a seven (7) day revocation period beginning the day after the
Employee signs this Release, and that Employee will not receive the
severance payment due under the Employment Agreement until this
seven-day period has expired. During this seven-day period, Employee may
revoke this Release, without reason and in his/her sole judgment, but
he/she may do so only by delivering a written statement of revocation to
the Company to the attention of General Counsel. If the Company does not
receive a written statement of revocation from Employee by the end of
the revocation period, then this Release will become legally enforceable
and Employee may not thereafter revoke this Release.
3. Employee agrees that this Release shall be governed by federal law and
the internal laws of the State of Colorado, irrespective of the choice
of law rules of any state.
ACKNOWLEDGMENT:
Employee's signature below acknowledges that he/she has read this document
fully, that he/she understands and agrees to its contents, that he/she
understands that it is a legally binding document, and that he/she has been
advised to consult a lawyer of his/her choosing before signing this Release, and
has had the opportunity to do so.
- -------------------------- -----------------------------------
Date EMPLOYEE
This Release presented to Employee on .
--------------------------
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page 16 STORAGE TEK PROTECTED
<PAGE> 1
EXHIBIT 10.9
Differences in Terms and Conditions of Executive Officer Employment Agreements
<TABLE>
<CAPTION>
Annual Target Bonus
Name of Position Base (as % of Annual
Executive of Executive Salary Base Salary)
- --------- ------------ ------ ------------
<S> <C> <C> <C>
Gary Anderson Corporate Vice President, $270,000 50%
Worldwide Operations
Technology
Susan Bailey Corporate Vice President, $350,000 60%
U.S/Canada Sales
and Service
James Bartlet Corporate Vice President $225,000 40%
and Chief Marketing Officer
Jeffrey Dumas Corporate Vice President $245,000 45%
General Counsel
Karen Niparko Corporate Vice President $220,000 45%
Chief Administrative Officer
Robert Kocol Corporate Vice President $290,000 50%
and Chief Financial Officer
Victor Perez Executive Vice President $460,000 75%
and Chief Operating Officer
Jean Reiczyk Corporate Vice President $315,000 45%
Solutions Business Group
</TABLE>
<PAGE> 1
EXHIBIT 10.10
May 3, 1999
Mr. James L. Bartlett
709 Sandown Place
Raleigh, North Carolina 27615
Dear Jim,
This letter is to extend to you the position of Corporate Vice President and
Chief Marketing Officer for Storage Technology Corporation, reporting directly
to Victor Perez, Executive Vice President and Chief Operating Officer. This
assignment is an officer position. The compensation and benefit package being
offered with this corporate officer position is outlined below. It is subject to
approval of the Board of Directors.
Your annual base salary will be $225,000. You will be considered for a merit
increase effective January 2000. You will be eligible to participate in the
StorageTek MBO Plan. For 1999, your MBO target incentive will be 40% of your
base salary at the target level of performance, 80% at the stretch level, and
100% at the ultra stretch level. This MBO incentive plan is measured on
corporate performance and achievement of the MBO goals shared by all the
corporate officers. The MBO plan has, in addition, a shareholder value add (SVA)
component which, if achieved, will add another 50% of the incentive amount
already earned from the basic MBO plan. A portion, 25%, of any MBO bonus will be
paid in the form of equity, including shares of common stock, or common stock
equivalents, as will the entire SVA component. The details of this plan are
contained in a separate MBO document. For 1999, you will be guaranteed a bonus
at the target level of performance. The annual target amount of $100,000 will be
prorated from your start date.
In the event that your current employer does not allow you to exercise vested
stock, which you have not exercised, StorageTek will provide you with a loan in
the principal amount of up to $500,000 to cover the lost value of these shares.
StorageTek will forgive this loan plus imputed interest income on the third
anniversary date of your employment. The imputed interest income will be grossed
up for the tax on the interest. If you leave StorageTek voluntarily, or
StorageTek terminates your employment for cause, at any time during the term of
the loan, you will be responsible for repayment of the loan.
Also subject to the approval of the Board of Directors, you will receive an
additional 2,500 shares of restricted stock at par value, $0.10 per share, at
the next meeting following your date of employment. The restrictions on these
2,500 shares will lapse in increments of 55%, 35%, and 10% on each of the first
three anniversaries of the date of grant.
Further, subject to the approval of the Board of Directors, StorageTek will
grant to you an option to purchase 30,200 shares of StorageTek common stock, at
a price to be determined on the day the option is granted. The option will be
granted pursuant to the terms and conditions of the Company's 1995 Equity
Participation Plan. The option will vest shares in increments of 55%, 35%, and
10% on the first through the third anniversaries of the grant. The 1995 plan
includes provisions that require the employee to
Revised May 25, 1999
<PAGE> 2
Mr. Jim Bartlett
Offer Letter
May 3, 1999
Page 2
surrender certain stock and gains realized upon the sale of stock during a
period covering six months prior to or after termination.
Subject to the approval of the Board of Directors and then current market
conditions, you may participate in the annual Long-Term Incentive Stock Option
Plan. The current allocation model projects an annual options grant, to be
allocated in February, 2000, of approximately 28,000 shares.
As a corporate officer, you are expected to comply with the Corporate Officer
Ownership Guideline for corporate vice presidents, which is 2,500 shares. You
have three (3) years to accumulate the shares. You need to retain ownership of
2,500 shares or common stock equivalent, during the course of your employment to
comply with the Corporate Officer Ownership Guideline.
StorageTek offers a deferred compensation program. Under this program you may
defer up to 50% of your base salary and 75% of your bonus amount. Your deferred
income is credited with an interest rate equal to the ten-year T-Bill rate plus
2.5 points. You will be provided further information regarding this program.
You are also eligible to participate in the StorageTek Profit Sharing and Thrift
Plan (401(k) plan), which includes a corporate match of up to 3% of your base
salary and a provision for profit sharing up to 3.5% of base salary. The profit
share contribution is contingent on StorageTek's net income performance. Any
excess from the match and profit share above the ERISA limits will be made to
the deferred compensation program, should you so elect. This 3% match is made as
50% of the first 6% of employee contributions.
Also, the Executive Life Insurance plan provides universal life insurance
coverage at approximately three times your annual base salary less $50,000 group
term life ($400,000 face value total). You own the universal life policy and the
cash surrender value.
As a corporate vice president, you are eligible to receive severance benefits.
These benefits provide for a severance payment in an amount equal to 100% of
your annual base salary plus an amount equal to your incentive plan bonus
potential at the target level, in the event of an involuntary termination
without cause".
In addition, the following executive perquisites are currently in effect for
corporate officers:
o First class air travel domestically, business class internationally.
o Financial and tax consulting expenses up to 1% of your base pay annually.
o Car allowance for a leased vehicle of $550.00 per month, plus reimbursement
for maintenance and insurance.
o Executive vacation program allowing vacation as business conditions dictate.
There is no defined limit, and therefore, no vacation accrual.
o Supplemental executive health insurance program which will reimburse qualified
health and welfare expenses for you and your family which are not covered by
our standard plan. This has an annual limitation of $5,000.00
Revised May 25, 1999
<PAGE> 3
Mr. Jim Bartlett
Offer Letter
May 3, 1999
Page 3
The offer is being extended with the understanding that within 12 months of your
date of hire, your primary work location will be in Colorado. Under this
relocation program StorageTek will pay or reimburse you for the following
expenses:
o Shipment of household goods to Colorado plus initial storage. This item will
be billed directly to StorageTek.
o Temporary living in Colorado for you and/or your family up to sixty (60) days.
o Travel, meals and lodging enroute to Colorado for you and/or your family.
o House-hunting with your spouse in Colorado for a maximum period of five days.
o Reasonable and standard closing costs associated with the purchase of a home
in Colorado, if purchased within eighteen months of your hire date.
o Realtor fees and closing costs on the sale of your current residence within
eighteen months of your hire date.
o A one-time relocation allowance of 3% of your annual base salary.
Should you accept this offer of employment, you will receive a signing bonus.
The gross amount of this bonus is $50,000. This bonus is subject to normal
federal and local income tax provisions. If you voluntarily terminate your
employment with StorageTek within 18 months of the relocation, you will be
required to reimburse your hiring bonus and any relocation expenses on a
prorated basis.
This offer is contingent upon your signing Storage Technology Corporation's
proprietary rights agreement and identification of pre-employment commitments
form which are enclosed for your review. These enclosures define your
obligations to StorageTek with regard to disclosure and dissemination of
confidential information, ownership of intellectual property, disclosure of
existing obligations and commitments, and non-raiding obligations.
As a condition of employment, you must successfully complete the StorageTek
pre-employment drug screen test administered by the company. Once you have
accepted StorageTek's offer and have chosen a start date, we will process your
paperwork for new hire orientation and will advise you of the orientation
meeting date and location.
Please review and sign the enclosed documents, and return them along with a
signed acceptance copy of this letter in the enclosed self-addressed stamped
envelope.
Upon acceptance of your offer letter, you will be asked to sign an officer
agreement that will further define benefits and responsibilities.
Revised May 25, 1999
<PAGE> 4
Mr. Jim Bartlett
Offer Letter
May 3, 1999
Page 4
If you have any questions regarding the conditions of this offer, please do not
hesitate to contact me at 303-673-3132. This offer is valid through May 11,
1999.
I look forward to working with you as a key member of the StorageTek team!
Very truly yours,
Victor Perez
Executive Vice President, and Chief Operating Officer
Enclosures:
Acceptance Copy
Proprietary Rights Agreement
Identification of pre-Employment Commitment
Employment Eligibility Verification Form
I accept the offer as outlined above and understand that my acceptance does not
create an employment contract for a definite term or alter at-will employment.
- -----------------------------------------------------
James Bartlett Date
Revised May 25, 1999
<PAGE> 5
James Bartlett
May 4, 1999
Offer Letter
Page 5
APPROVALS:
- --------------------------------- ----------------------------------
Victor Perez
Executive Vice President, and Chief Operating Officer
- --------------------------------- ----------------------------------
David Weiss Date Karen Niparko Date
Chairman, Chief Executive Officer Chief Administrative Officer
and President
Revised May 25, 1999
<PAGE> 1
EXHIBIT 10.11
August 11, 1999
Ms. Susan Bailey
5415 Preserve Drive
Greenwood Village, CO 80121
Dear Susan,
This revised offer letter supersedes our original offer letter to you dated July
19, 1999.
I am pleased to extend to you the position of Corporate Vice President,
U.S./Canada Sales and Service for Storage Technology Corporation, reporting
directly to Dave Weiss, Chairman, Chief Executive Officer and President. The
compensation and benefit package being offered with this corporate officer
position is outlined below, and is subject to approval of the Board of
Directors.
Your annual base salary will be $350,000, and you will be considered for a merit
increase effective January 2000. You will be eligible to participate in the
StorageTek MBO Plan. For 1999, your MBO target incentive will be 60% of your
base salary at the target level of performance, 120% at the stretch level, and
150% at the ultra stretch level. This MBO incentive plan is measured on
corporate performance and achievement of the MBO goals shared by all the
corporate officers. In addition, the MBO plan has a shareholder value add (SVA)
component which, if achieved, will add another 50% of the incentive amount
already earned from the basic MBO plan. A portion, 25%, of any MBO bonus will be
paid in the form of equity, including shares of common stock, or common stock
equivalents, as well the entire SVA component. The details of this plan are
contained in a separate MBO document. The 1999 MBO target will be guaranteed. It
will be prorated from your date of hire and paid on the normal payment schedule
in February 2000.
Also, subject to the approval of the Board of Directors, on your date of hire
you will receive 7,500 shares of StorageTek restricted common stock at par
value, $0.10 per share. These 7,500 shares will vest six years from the date of
grant, unless accelerated. The vesting can accelerate to the first, second, and
third anniversaries of the grant date through accomplishment of certain
objectives through the year. You and I will jointly define the performance
criteria for these restricted shares.
Further, subject to the approval of the Board of Directors, on your date of
hire, StorageTek will grant to you a stock option to purchase 500,000 shares of
StorageTek common stock, at a price to be determined on your hire date. The
option will be granted pursuant to the terms and conditions of the Company's
1995 Equity Participation Plan. 300,000 of the stock options will vest in
increments of 33%, 33%, and 34% on the first through the third anniversaries of
the grant. 200,000 of the stock options will vest on the sixth anniversary of
the date of grant; however, the vesting schedule for these options may be
accelerated based upon the appreciation of the StorageTek stock price. A portion
of the shares, 100,000 shares, will vest if the closing price of a share of
StorageTek common stock on the NYSE, for 20 consecutive trading days, equals or
exceeds 150% of the closing price of the stock on your date of hire, as reported
in The Wall Street Journal; and the remaining 100,000 shares will be accelerated
if the closing price of a share, for 20 consecutive trading days, equals or
exceeds 200% of the closing price of the stock on your date of hire.
<PAGE> 2
Ms. Susan Bailey
Offer Letter
August 11, 1999
Page 2
The 1995 Equity Plan includes provisions that require the employee to surrender
certain stock and gains realized upon the sale of stock during a period covering
six months prior to or after voluntary termination.
Subject to the approval of the Board of Directors and then current market
conditions, you may participate in the annual Long-Term Incentive Stock Option
Plan. The current allocation model projects an annual options grant of
approximately 50,000 shares to be allocated in February, 2000. The actual amount
will be based upon current methodology at the time of the grant.
Under the terms of the StorageTek employment agreement for corporate officers,
which will be negotiated with you following your hire, all unvested stock
options granted to you under the StorageTek option plans and shares of
restricted stock that you purchase will vest upon an involuntary termination as
defined in the draft StorageTek Corporation Employment Agreement for Corporate
Officers submitted for your review. This provision will be triggered by way of
example but not of limitation in the event of a change of control or, without
your consent, your relocation, a material reduction in your salary and bonus, or
a significant reduction of your duties.
As a corporate officer, you are expected to comply with the Corporate Officer
Ownership Guideline for corporate vice presidents, which is currently 2,500
shares. You have three (3) years to accumulate the shares. You need to retain
ownership of 2,500 shares or common stock equivalent, during the course of your
employment to comply with the Corporate Officer Ownership Guideline as amended
from time to time.
StorageTek offers a deferred compensation program. Under this program you may
defer up to 50% of your base salary and 75% of your bonus amount. Your deferred
income is credited with an interest rate equal to the ten-year T-Bill rate plus
2.5 points. You will be provided further information regarding this program.
You are also eligible to participate in the StorageTek Profit Sharing and Thrift
Plan (401(k) plan), which includes a corporate match of up to 3% of your base
salary and a provision for profit sharing up to 3.5% of base salary. The profit
share contribution is contingent on StorageTek's net income performance. Any
excess from the match and profit share above the ERISA limits will be made to
the deferred compensation program, should you so elect. This 3% match is made as
50% of the first 6% of employee contributions.
You will receive life insurance coverage in the amount of $1,050,000, or three
times your initial base salary. At the beginning of the next quarter after your
hire date, $1,000,000 of this coverage will be provided through an individually
owned life insurance coverage with the premium paid by the Company. Your group
term life insurance coverage will be $50,000. The individually owned policy is a
universal life policy that you own and that earns cash surrender value. A member
of StorageTek's compensation team will contact you regarding enrollment after
your employment date.
As a corporate vice president, you are eligible to receive severance benefits.
These benefits provide for a severance payment in an amount equal to 100% of
your annual base salary plus an amount equal to your incentive plan bonus
potential at the target level whether the Bonus would have been earned or not,
in the event of an involuntary termination other than for cause.
<PAGE> 3
Ms. Susan Bailey
Offer Letter
August 11, 1999
Page 3
In addition, the following executive perquisites are currently in effect for
corporate officers:
o First class air travel domestically, business class internationally.
o Financial and tax consulting expenses up to 1% of your base pay annually.
o Car allowance for a leased-quality vehicle of $550.00 per month, plus
reimbursement for maintenance and insurance.
o Executive vacation program allowing vacation as business conditions
dictate. There is no defined limit, and therefore, no vacation accrual.
o Supplemental executive health insurance program which will reimburse
qualified health and welfare expenses for you and your family which are not
covered by our standard plan. This has an annual limitation of $5,000.00.
o Should you at sometime during your employment elect to pursue your advanced
degree (MBA) on a part-time or "executive" program basis, StorageTek agrees
to provide for the expenses of the program, as you and your management
agree to the structure or schedule of the program.
Should you accept this offer of employment, you will receive a signing bonus.
The gross amount of this bonus is $100,000 and is subject to normal federal and
local income tax provisions, it will be paid on your first or second regular
paycheck. If you voluntarily resign from StorageTek within 18 months of your
date of hire you agree to pay back the signing bonus in full and authorize the
Company to deduct this amount from your final paycheck.
This offer is contingent upon your signing StorageTek's proprietary rights
agreement and identification of pre-employment commitments form which are
enclosed for your review. These enclosures define your obligations to StorageTek
with regard to disclosure and dissemination of confidential information,
ownership of intellectual property, disclosure of existing obligations and
commitments, and non-raiding obligations.
As a condition of employment, you must successfully complete the StorageTek
pre-employment drug screen test administered by the company. Once you have
accepted StorageTek's offer and have chosen a date of hire, we will process your
paperwork for new hire orientation and will advise you of the orientation
meeting date and location.
Please review and sign the enclosed documents, and return them along with a
signed acceptance copy of this letter in the enclosed self-addressed stamped
envelope.
Upon acceptance of your offer letter, you will be asked to sign an Employment
Agreement for Corporate Officers that will further define benefits and
responsibilities which will include all of the terms and conditions contained in
the offer letter.
If you have any questions regarding the conditions of this offer, please do not
hesitate to contact me at 303-673-7199 or Karen Niparko at 303-673-3460. This
offer is valid through August 11, 1999. If you accept this offer, your date of
hire, as we discussed, will be August 13, 1999 and you will begin on a full-time
basis on September 7, 1999.
<PAGE> 4
Ms. Susan Bailey
Offer Letter
August 11, 1999
Page 4
I look forward to working with you as a key member of the StorageTek team!
Very truly yours,
David Weiss
Chairman, Chief Executive Officer and President
Enclosures:
Acceptance Copy
Proprietary Rights Agreement
Identification of pre-Employment Commitment
Employment Eligibility Verification Form
<PAGE> 5
Ms. Susan Bailey
Offer Letter
August 11, 1999
Page 5
I accept the offer as outlined above and understand that my acceptance does not
create an employment contract for a definite term or alter at-will employment.
- ------------------------------------------------
Susan Bailey Date
<PAGE> 6
Susan Bailey
Offer Letter
August 11, 1999
Page 6
APPROVALS:
- -------------------------------------- ----------------------------------
David Weiss Date Karen Niparko Date
Chairman, Chief Executive Officer Chief Administrative Officer
and President
<PAGE> 1
EXHIBIT 10.12
December 31, 1999
Mr. James D. Bartlett
6408 Willow Springs Drive
Morrison, CO 80465
RE: SEPARATION AGREEMENT
Dear Jim:
It is acknowledged that you will be involuntarily terminated from StorageTek
effective December 31, 1999 ("Termination Date"). This letter will confirm our
agreement concerning the termination of your employment with Storage Technology
Corporation ("StorageTek" or the "Company") as Corporate Vice President, and
Chief Marketing Officer. In that regard, this letter will define the terms of
your severance under this Separation Agreement (the "Separation Agreement").
This Separation Agreement supersedes all previous oral and written agreements
regarding your employment with StorageTek, provided however that the terms and
conditions of your Corporate Officer Employment Agreement dated October 13, 1999
(the "Employment Agreement"), to the degree that they do not conflict with the
terms and conditions of this Separation Agreement, shall remain in full force
and effect.
SEPARATION: The Company will pay, within 30 days of the Termination
Date, a separation payment equal to the amounts set forth in Sections
5(a) and 5(c) of the Employment Agreement, including: one year's salary
($225,000.00), and one year's target MBO bonus for 1999 ($100,000.00).
Your stock options will vest upon termination and the Company's right
of repurchase on restricted stock will be void. Pursuant to the terms
of StorageTek's Stock Option Plan, you will have 90 days from the
Termination Date to exercise these options.
In addition to the consideration recited above, the Company will (1)
forgive all moneys that may be owed under the terms of your relocation
package and sign-on bonus, and (2) the Promissory Note dated June 10,
1999 including the gross up of any imputed interest accrued through the
Termination Date. The payments recited in this Separation Agreement are
contingent upon your execution and delivery to the Company a Settlement
and Release Agreement substantially in the form attached as Exhibit A
to your Employment Agreement.
<PAGE> 2
James D. Bartlett
December 31, 1999
Page -2-
NO ADVERSE COMMENT: You agree that during your employment with the
Company through the Termination Date and for at least one year
following the Termination Date, you will not, except as specifically
required by law or court process or consented to in writing by the
Company, (a) communicate to any person or entity any adverse
information, written or oral, concerning the Company, its officers,
directors, employees, attorneys, agents or advisers (including any
communication concerning information that related to the business,
operations, prospects or affairs of the Company or any of its
subsidiaries or affiliates) under the circumstances in which there is a
reasonable possibility that such information might be publicly reported
or disclosed or otherwise made available to third parties (regardless
of whether the communication of such information is intended to have or
cause that result is within your control), or (b) provide to any person
(other than your attorney or accountant) or entity any information that
concerns or related to the negotiations or circumstances leading to the
execution of this Separation Agreement.
NON-SOLICITATION: Per the terms of Section 8 of your Employment
Agreement, you confirm that during the two-year period commencing with
the Termination Date, you will not, directly, or indirectly, hire,
solicit, or encourage any then-current Company employees to apply for
employment with any person or entity (a) with which you are (or intend
to be) employed, (b) by whom you or an entity in which you are employed
or have a financial interest is engaged as a consultant, recruited,
independent contractor or otherwise, or (c) in which you further
covenant and agree that you will not provide to any other person or
entity the names of or references on any person who is then employed by
the Company.
NON-COMPETE: Per the terms of Section 8 of your Employment Agreement,
you confirm that for a period of one year from the Termination Date
that you will not, either directly or indirectly, engage in any
activity in competition with any product or service of the Company
(said competitive activities to be determined and identified at the
reasonable discretion of the Company), or harmful or contrary to the
best interest of the Company, including accepting employment with or
serving as a consultant to any entity that is in competition with the
Company. In particular, you agree that competitor companies include,
ATL/Quantum, Breece Hill, EMC, Hewlett-Packard, Sun Microsystems and
IBM. However, with regard to IBM and HP, you may seek employment with
those companies in their: (i) PC business units, (ii) consumer sales
activities, (iii) printer operations, or (iv) such similar product
areas or business units as StorageTek shall approve in writing, such
approval not to be unreasonably withheld or delayed.
COMPANY RELEASE: The Company hereby irrevocably and unconditionally
releases and discharges you and your heirs, successors, and assigns
(separately and collectively, "releasees"), jointly and individually,
from any and all claims, known or unknown, which it, its past and
present subsidiaries, divisions, officers, directors, agents,
employees, successors, and assigns have or may have against releasees
and any and all liability which releasees may have to it, whether
denominated claims,
<PAGE> 3
James D. Bartlett
December 31, 1999
Page -3-
demands, causes of action, obligations, damages or liabilities arising
from any and all bases, however denominated, provided, however, that
this release does not affect any claims which are based on releasees'
willful acts, gross negligence or dishonesty in the performance of
duties as an employee of the Company, nor any claims which may arise
after the execution of this Agreement. The Company further agrees that
it will not file or permit to be filed on its behalf any claim against
you which is released hereby.
NONDISCLOSURE: Unless otherwise required to do so by law, subpoena or
court order, neither party will in any way communicate or discuss the
terms of this Separation Agreement or the circumstances of your
termination with any person, other than your attorneys. You understand
that this nondisclosure provision applies particularly to current and
former employees of the Company and the Company's customers, clients
and vendors.
This Separation Agreement, shall be deemed for purposes of the Older Workers
Benefits Protection Act to have been delivered to you for your consideration on
January 12, 2000. You have 21 days from that date to decide whether or not to
accept this agreement. If you accept this agreement, you will then have seven
days from the date you sign this agreement and deliver an executed copy to the
Company during seven day period you may revoke your acceptance by notifying the
Company in writing of your desire to do so. No amounts otherwise due to you
under this Separation Agreement will be paid to you until the expiration of that
seven day revocation period.
Please sign both copies of this letter below, and the attached Settlement and
Release, indicating your acceptance, and return one copy for our files.
Accepted and Agreed: Very truly yours,
STORAGE TECHNOLOGY CORP.
- -------------------------- ------------------------------
JAMES D. BARTLETT Victor Perez
Executive Vice President,
Chief Operating Officer
<PAGE> 4
EXHIBIT A
SETTLEMENT AND RELEASE
1. In exchange for payment of salary (in the amount of $225,000.00) and
bonus (in the amount of $100,000.00) to James D. Bartlett ("Employee"),
by Storage Technology Corporation ("Company") and other good and
valuable consideration, including but not limited to, forgiveness for
advances for relocation, sign-on bonus and cancellation of the
Promissory Note of June 10, 1999, Employee hereby irrevocably and
unconditionally releases and discharges the Company, its past and
present subsidiaries, divisions, officers, directors, agents, employees,
successors, and assigns (separately and collectively, "releasees")
jointly and individually, from any and all claims, known or unknown,
which he/she, his/her heirs, successors or assigns have or may have
against releasees and any and all liability which releasees may have to
him/her whether denominated claims, demands, causes of action,
obligations, damages, or liabilities arising from any and all bases,
however denominated, including but not limited to, any claims of
discrimination under the Age Discrimination in Employment Act ("ADEA"),
the Older Workers Benefit Protection Act, the Rehabilitation Act, the
Family Medical Leave Act, the Americans with Disabilities Act, Title VII
of the Civil Rights Act of 1964, the Civil Rights Act of 1991 or any
federal or state civil rights act, claims for wrongful discharge, breach
of contract, or for damages under any other federal, state or local law,
rule or regulation, or common law under any theory; provided, however,
that this release does not affect (1) any claims for benefits which have
vested or shall vest on or before the effective date of this Settlement
and Release ("Release") under any of the Company's benefit plans; (2)
any claims for indemnification for acts of Employee which have occurred
or may occur as an officer or employee of the Company; or (3) any claims
which may arise after the execution of this Release. This release
specifically excepts any claim Employee may wish to make for
unemployment compensation, and the Company agrees not to contest any
claim made by Employee for unemployment compensation. This release is
for any relief, no matter how denominated, including, but not limited
to, back pay, front pay, compensatory damages, punitive damages, or
damages for pain and suffering. Employee further agrees that he will not
file or permit to be filed on his behalf any such claim, will not permit
himself to be a member of any class seeking relief against the releasees
and will not counsel or assist in the prosecution of claims against the
releasees, whether those claims are on behalf of himself or others,
unless he is under a court order to do so.
2. Employee agrees that by signing this Release, he is giving up the right
to sue for age discrimination, and that under this Release Employee
shall receive consideration to which he is not otherwise entitled, and
would not receive but for his release of rights under the ADEA. Employee
has up to twenty-one (21) days after delivery of this Release to
consider whether to sign this Release. Employee agrees that, after he
has signed and delivered this Release to the Company, this Release will
not be effective or enforceable until the end of a seven (7) day
revocation period beginning the day after the Employee signs this
Release, and that Employee will not receive the severance payment due
under the Employment Agreement until this seven-day period has expired.
During this seven-day period, Employee may revoke this Release, without
reason and in his sole judgment, but he may do so only by delivering a
written statement of revocation to the Company to the attention of
General Counsel. If the Company does
<PAGE> 5
not receive a written statement of revocation from Employee by the end
of the revocation period, then this Release will become legally
enforceable and Employee may not thereafter revoke this Release.
3. Employee agrees that this Release shall be governed by federal law and
the internal laws of the State of Colorado, irrespective of the choice
of law rules of any state.
ACKNOWLEDGMENT:
Employee's signature below acknowledges that he has read this document fully,
that he understands and agrees to its contents, that he understands that it is a
legally binding document, and that he has been advised to consult a lawyer of
his choosing before signing this Release, and has had the opportunity to do so.
- -------------------------- -----------------------------------
Date JAMES D. BARTLETT
This Release presented to Employee on .
--------------------------
<PAGE> 1
EXHIBIT 10.14
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JANUARY 13, 2000
AMONG
STORAGE TECHNOLOGY CORPORATION,
BANK OF AMERICA, N.A.,
AS ADMINISTRATIVE AGENT,
SWINGLINE BANK,
AND
LETTER OF CREDIT ISSUING BANK
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
BANC OF AMERICA SECURITIES LLC,
SOLE LEAD ARRANGER AND
SOLE BOOK MANAGER
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE I DEFINITIONS.............................................................................................1
1.1 Certain Defined Terms...........................................................................1
1.2 Other Interpretive Provisions..................................................................18
1.3 Accounting Principles..........................................................................19
ARTICLE II THE CREDITS...........................................................................................19
2.1 Amounts and Terms of Commitment................................................................19
2.2 Loan Accounts..................................................................................20
2.3 Procedure for Borrowing........................................................................20
2.4 Conversion and Continuation Elections..........................................................21
2.5 Voluntary Termination or Reduction of Commitments..............................................23
2.6 Optional Prepayments...........................................................................23
2.7 Mandatory Prepayments of Loans; Mandatory Commitment Reductions................................24
2.8 Repayment......................................................................................24
2.9 Interest.......................................................................................24
2.10 Swingline Loans................................................................................25
2.11 Fees...........................................................................................27
2.12 Computation of Fees and Interest...............................................................28
2.13 Payments by the Borrower.......................................................................28
2.14 Payments by the Banks to the Agent.............................................................29
2.15 Sharing of Payments, Etc.......................................................................29
2.16 Security.......................................................................................30
ARTICLE III THE LETTERS OF CREDIT................................................................................30
3.1 The Letter of Credit Subfacility...............................................................30
3.2 Issuance, Amendment and Renewal of Letters of Credit...........................................31
3.3 Existing BofA Letters of Credit; Risk Participations, Drawings and Reimbursements..............33
3.4 Repayment of Participations....................................................................35
3.5 Role of the Issuing Bank.......................................................................35
3.6 Obligations Absolute...........................................................................36
3.7 Cash Collateral Pledge.........................................................................37
3.8 Letter of Credit Fees..........................................................................37
3.9 Uniform Customs and Practice...................................................................38
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY................................................................38
4.1 Taxes..........................................................................................38
4.2 Illegality.....................................................................................40
</TABLE>
i.
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
4.3 Increased Costs and Reduction of Return........................................................40
4.4 Funding Losses.................................................................................41
4.5 Inability to Determine Rates...................................................................41
4.6 Survival.......................................................................................42
4.7 Notice of Claims...............................................................................42
ARTICLE V CONDITIONS PRECEDENT...................................................................................42
5.1 Conditions to Agreement........................................................................42
5.2 Conditions to All Credit Extensions............................................................44
ARTICLE VI REPRESENTATIONS AND WARRANTIES........................................................................45
6.1 Corporate Existence and Power..................................................................45
6.2 Corporate Authorization; No Contravention......................................................45
6.3 Governmental Authorization.....................................................................46
6.4 Binding Effect.................................................................................46
6.5 Litigation.....................................................................................46
6.6 No Default.....................................................................................46
6.7 ERISA Compliance...............................................................................46
6.8 Use of Proceeds; Margin Regulations............................................................47
6.9 Title to Properties; Liens.....................................................................47
6.10 Taxes..........................................................................................47
6.11 Financial Condition............................................................................47
6.12 Environmental Matters..........................................................................48
6.13 Collateral Documents...........................................................................48
6.14 Regulated Entities.............................................................................48
6.15 Copyrights, Patents, Trademarks and Licenses, Etc..............................................48
6.16 Subsidiaries...................................................................................49
6.17 Insurance......................................................................................49
6.18 Full Disclosure................................................................................49
6.19 Projections....................................................................................49
ARTICLE VII AFFIRMATIVE COVENANTS................................................................................49
7.1 Financial Statements...........................................................................50
7.2 Certificates; Other Information................................................................50
7.3 Notices........................................................................................50
7.4 Preservation of Corporate Existence, Etc.......................................................51
7.5 Maintenance of Property........................................................................51
7.6 Insurance......................................................................................52
7.7 Payment of Obligations.........................................................................52
7.8 Compliance with Laws...........................................................................52
7.9 Compliance with ERISA..........................................................................52
7.10 Inspection of Property and Books and Records...................................................52
7.11 Use of Proceeds................................................................................53
7.12 Disclosure; Further Assurances.................................................................53
</TABLE>
ii.
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
7.13 Financial Covenants............................................................................53
7.14 Patents and Permits............................................................................55
ARTICLE VIII NEGATIVE COVENANTS..................................................................................55
8.1 Limitation on Liens............................................................................55
8.2 Disposition of Assets..........................................................................57
8.3 Consolidations and Mergers.....................................................................58
8.4 Loans and Investments..........................................................................58
8.5 Transactions with Affiliates...................................................................59
8.6 Use of Proceeds................................................................................59
8.7 Contingent Obligations.........................................................................60
8.8 Restricted Payments............................................................................60
8.9 ERISA..........................................................................................60
8.10 Change in Business.............................................................................60
8.11 Accounting Changes.............................................................................61
ARTICLE IX EVENTS OF DEFAULT.....................................................................................61
9.1 Event of Default...............................................................................61
9.2 Remedies.......................................................................................63
9.3 Rights Not Exclusive...........................................................................63
9.4 Certain Financial Covenant Defaults............................................................63
ARTICLE X THE AGENT..............................................................................................64
10.1 Appointment and Authorization; "Agent".........................................................64
10.2 Delegation of Duties...........................................................................64
10.3 Liability of Agent.............................................................................64
10.4 Reliance by Agent..............................................................................65
10.5 Notice of Default..............................................................................65
10.6 Credit Decision................................................................................66
10.7 Indemnification of Agent.......................................................................66
10.8 Agent in Individual Capacity...................................................................66
10.9 Successor Agent................................................................................67
10.10 Withholding Tax................................................................................67
10.11 Collateral Matters.............................................................................69
10.12 Co-Agents......................................................................................69
ARTICLE XI MISCELLANEOUS.........................................................................................70
11.1 Amendments and Waivers.........................................................................70
11.2 Notices........................................................................................70
11.3 No Waiver; Cumulative Remedies.................................................................71
11.4 Costs and Expenses.............................................................................71
11.5 Borrower's Indemnification.....................................................................72
11.6 Marshalling; Payments Set Aside................................................................72
11.7 Successors and Assigns.........................................................................73
</TABLE>
iii.
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
11.8 Assignments, Participations, Etc...............................................................73
11.9 Confidentiality................................................................................74
11.10 Set-off........................................................................................75
11.11 Automatic Debits of Fees.......................................................................75
11.12 Notification of Addresses, Lending Offices, Etc................................................75
11.13 Counterparts...................................................................................76
11.14 Severability...................................................................................76
11.15 No Third Parties Benefited.....................................................................76
11.16 Governing Law and Jurisdiction.................................................................76
11.17 Waiver of Jury Trial...........................................................................76
11.18 Entire Agreement...............................................................................77
</TABLE>
iv.
<PAGE> 6
SCHEDULES
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 2.9(e) Applicable Margin and Commitment Fees
Schedule 6.5 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 6.17 Insurance Matters
Schedule 8.1(i) Permitted Liens
Schedule 8.2 Permitted Dispositions
Schedule 8.4(f) Permitted Investments
Schedule 8.7(d) Contingent Obligations
Schedule 11.2 Addresses for Notices; Lending Offices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Shearman & Sterling
Exhibit D-2 Form of Legal Opinion of Internal Borrower's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Security Agreement
v.
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
January 13, 2000, among Storage Technology Corporation, a Delaware corporation
("the Borrower"), the several financial institutions from time to time party to
this Credit Agreement (individually, a "Bank"; collectively, the "Banks"), and
Bank of America, N.A., as swingline bank, letter of credit issuing bank and sole
administrative agent for the Banks.
WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement dated as of October 23, 1997, as amended (as amended prior to the date
hereof, the "Prior Credit Agreement");
WHEREAS, the Borrower has requested that the Required Banks agree to
certain amendments to the Prior Credit Agreement;
WHEREAS, the Borrower, the Required Banks and the Agent desire to
amend and restate the Prior Credit Agreement as 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
1.1 Certain Defined Terms. The following terms have the following
meanings:
"364-Day Credit Agreement" means that certain Credit Agreement of even
date herewith by and among the Borrower, the financial institutions from time to
time party thereto and BofA, as agent for such financial institutions, as
amended, restated, modified, supplemented or extended from time to time.
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of
any business or division of a Person, (b) the acquisition of in excess of
50% of the capital stock, partnership interests, membership interests or
equity of any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other combination with
another Person (other than a Person that is a Subsidiary) provided that the
Borrower or its Subsidiary is the surviving entity.
"Adjusted Quick Ratio" means, for any Person for any period, the ratio
that (i) Current Liquid Assets of such Person bears to (ii) Current
Liabilities of such Person.
"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
1
<PAGE> 8
the other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise.
"Agent" means BofA in its capacity as administrative agent for the
Banks hereunder, and any successor agent arising under Section 10.9.
"Agent-Related Persons" means BofA and any successor agent arising
under Section 10.9 and any successor letter of credit issuing bank
hereunder, together with their respective Affiliates (including, in the
case of BofA, the Lead Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
Schedule 11.2 or such other address as the Agent may from time to time
specify.
"Agreement" means this Credit Agreement.
"Applicable Fee Amount" means with respect to the commitment fee
payable hereunder, the amount set forth opposite the indicated level below
the heading "Commitment Fee" in the pricing grid set forth on Schedule
2.9(e) in accordance with the parameters for calculations of such amount
set forth in Section 2.11(a).
"Applicable Margin" means the amount set forth opposite the indicated
level below the heading "Base Rate Spread" or "Offshore Rate Spread," as
appropriate, in the pricing grid set forth in Schedule 2.9(e) in accordance
with the parameters for calculations of such amount also set forth in
Section 2.9(e).
"Assignee" has the meaning specified in subsection 11.8(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" has the meaning specified in the introductory clause hereto.
References to the "Banks" shall include BofA, including in its capacity as
Issuing Bank and Swingline Bank; for purposes of clarification only, to the
extent that BofA may have any rights or obligations in addition to those of
the Banks due to its status as Issuing Bank and Swingline Bank, its status
as such will be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C.ss.101, et seq.)
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in effect
for such day as publicly announced from time to time by BofA, as its "prime
rate." (The "prime rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate.)
2
<PAGE> 9
Any change in the prime rate announced by BofA shall take effect at
the opening of business on the day specified in the public announcement of
such change.
"Base Rate Loan" means a Revolving Loan, a Swingline Loan or an L/C
Advance, that bears interest based on the Base Rate.
"BofA" means Bank of America, N.A., a national banking association.
"Borrower" has the meaning specified in the introductory clause of
this Agreement.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans
of the same Type made to the Borrower on the same day by the Banks under
Article II, or Swingline Loans of the same Type made to the Borrower on the
same day by the Swingline Bank under Article II and, in each case, other
than for Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.3.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or San Francisco are
authorized or required by law to close and, if the applicable Business Day
relates to any Offshore Rate Loan, means such a day on which dealings are
carried on in the applicable offshore Dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
"Capital Lease" means, for any Person, any lease of property (whether
real, personal or mixed) which, in accordance with GAAP, would, at the time
a determination is made, be required to be recorded as a capital lease in
respect of which such Person is liable as lessee.
"Cash Collateralize" means, as provided in Section 3.7 hereof, to
pledge and deposit with or deliver to the Agent, for the benefit of the
Agent, the Issuing Bank, the Swingline Bank and the Banks, as collateral
for the Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Agent, the
Swingline Bank and the Issuing Bank (which documents are hereby consented
to by the Banks). Derivatives of such term shall have corresponding
meanings.
"Change of Control" means the occurrence, after the date of this
Agreement, of any of the following: (a) any Person or two or more Persons
acting in concert acquiring beneficial ownership (within the meaning of
Rule 13d-3 of the SEC under the Exchange Act), directly or indirectly, of
securities of the Borrower (or other securities convertible into such
securities) representing 30% or more of the combined voting power of all
3
<PAGE> 10
securities of the Borrower entitled to vote in the election of directors;
or (b) during any period of up to 12 consecutive months, commencing after
the Closing Date, individuals who at the beginning of such 12-month period
were directors of the Borrower ceasing for any reason to constitute a
majority of the Board of Directors of the Borrower unless the Persons
replacing such individuals were nominated by the Board of Directors of the
Borrower; or (c) any Person or two or more Persons acting in concert
acquiring by contract or otherwise, or entering into a contract or
arrangement which upon consummation will result in its or their acquisition
of, or control over, securities of the Borrower (or other securities
convertible into such securities) representing 30% or more of the combined
voting power of all securities of the Borrower entitled to vote in the
election of directors.
"Closing Date" means the date on or prior to January 13, 2000, on
which all conditions precedent set forth in Section 5.1 are satisfied or
waived by all Banks (or, in the case of subsection 5.1(e), waived by the
Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Borrower in or upon which a
Lien now or hereafter exists in favor of the Banks, or the Collateral Agent
on behalf of the Banks or the Secured Parties, as the case may be, whether
under this Agreement or under any other Collateral Documents.
"Collateral Agency Agreement" means that certain Collateral Agency
Agreement of even date herewith by and among the Collateral Agent, the
Banks and the lenders party to the 364-Day Credit Agreement.
"Collateral Agent" means BofA, in its capacity as collateral agent for
the Banks and the other Secured Parties.
"Collateral Documents" means, collectively, (i) the Security Agreement
and all other security agreements and other similar agreements between the
Borrower and the Banks, or the Collateral Agent for the benefit of the
Banks and the other Secured Parties, now or hereafter delivered to the
Banks or the Collateral Agent pursuant to or in connection with the
transactions contemplated hereby, and all financing statements (or
comparable documents now or hereafter filed in accordance with the Uniform
Commercial Code or comparable law) against the Borrower as debtor in favor
of the Banks, or the Collateral Agent for the benefit of the Banks and the
other Secured Parties, as secured party and (ii) any amendments,
supplements, modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"Commitment," as to each Bank, has the meaning specified in Section
2.1.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C.
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<PAGE> 11
"Consolidated" and any derivative thereof each means, with reference
to the accounts or financial reports of any Person, the consolidated
accounts or financial reports of such Person and each Subsidiary of such
Person determined in accordance with GAAP.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease, dividend,
letter of credit or other obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of that Person (i)
to purchase, repurchase or otherwise acquire such primary obligations or
any security therefor, (ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net
worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation or otherwise to assure or hold harmless the holder
of any such primary obligation against loss in respect thereof; (b) with
respect to primary obligations of a primary obligor in connection with any
synthetic lease or similar off balance sheet lease transaction or
securitization transaction (each of (a) and (b) a "Guaranty Obligation"),
(c) with respect to any Surety Instrument issued for the account of that
Person or as to which that Person is otherwise liable for reimbursement of
drawings or payments; (d) to purchase any materials, supplies or other
property from, or to obtain the services of, another Person if the primary
purpose of the 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 (e) in respect of any Swap Contract. The
amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty Obligation is made or,
if not stated or if indeterminable, the maximum reasonably anticipated
liability in respect thereof, and in the case of other Contingent
Obligations, shall be equal to the maximum reasonably anticipated liability
in respect thereof.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its
property is bound.
"Conversion/Continuation Date" means any date on which, under Section
2.4, the Borrower (a) converts Loans of one Type to another Type, or (b)
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
"Credit Extension" means and includes the making of any Revolving
Loans or Swingline Loans hereunder, and (b) the Issuance of any Letters of
Credit hereunder (including the Existing BofA Letters of Credit).
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<PAGE> 12
"Current Liabilities" of any Person means, as of any date of
determination, all liabilities of such Person (including estimated accrued
taxes, all Revolving Loans outstanding hereunder and any Indebtedness
outstanding under the 364-Day Credit Agreement but excluding any
obligations under the Multicurrency Note Purchase Facility which are fully
cash collateralized) which in accordance with GAAP should be classified as
current liabilities of such Person, including the amount of any redeemable
preferred stock of such Person that is redeemable for cash at the option of
the holder thereof or that is mandatorily redeemable by such Person within
one year of such date of determination, valued at the applicable redemption
price, plus accrued and unpaid dividends payable in respect of such
redeemable preferred stock.
"Current Liquid Assets" of any Person means, as of any date of
determination, all cash, short-term investments and accounts receivable, in
each case as shown on the most recent balance sheet of such Person and
determined in accordance with GAAP (but excluding any such assets deposited
to collateralize any obligations under the Multicurrency Note Purchase
Facility).
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Directing Banks" has the meaning specified in the Security Agreement.
"Dollars," "dollars" and "$" each mean lawful money of the United
States.
"EBITDA" means, for any period, for the Borrower 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, interest and the amortization of intangibles
of any kind to the extent included in the determination of such Net Income
(or Net Loss), plus (c) all accrued taxes on or measured by income to the
extent included in the determination of such Net Income (or Net Loss), plus
(d) all restructuring and litigation charges recorded in fiscal 1999, the
first fiscal quarter 2000 and the second fiscal quarter 2000 to the extent
included in the determination of such Net Income (or Net Loss).
"Effective Amount" means with respect to any Revolving Loans or
Swingline Loans, as the case may be, on any date, the aggregate outstanding
principal amount thereof after giving effect to any Borrowings and
prepayments or repayments of Revolving Loans or Swingline Loans occurring
on such date; and (b) with respect to any outstanding L/C Obligations on
any date, the amount of such L/C Obligations on such date after giving
effect to any Issuances of Letters of Credit occurring on such date and any
other changes in the aggregate amount of the L/C Obligations as of such
date, including as a result of any reimbursements of outstanding unpaid
drawings under any Letters of Credit or any reductions in the maximum
amount available for drawing under Letters of Credit taking effect on such
date.
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<PAGE> 13
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $200,000,000; (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $200,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (c) a Person
that is primarily engaged in the business of commercial banking and that is
(i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank
is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA)
or a cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the
Borrower or any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (d) the filing of a notice
of intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by
the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Borrower or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the
definition of "Offshore Rate."
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<PAGE> 14
"Event of Default" means any of the events or circumstances specified
in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934.
"Existing BofA Letters of Credit" means the letters of credit issued
by BofA for the account of the Borrower and outstanding under the Prior
Credit Agreement on the Closing Date.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York with respect
to the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published
with respect to any such preceding Business Day, the rate for such day will
be the arithmetic mean as determined by the Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal
funds transactions in New York City selected by the Agent.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
"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 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" has the meaning specified in the definition of
"Contingent Obligation."
"Honor Date" means each date that any amount is paid by the Issuing
Bank under any Letter of Credit.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the
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<PAGE> 15
ordinary course of business on ordinary terms); (c) all reimbursement or
payment obligations (contingent or otherwise) with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect
to property acquired by the 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 obligations with respect
to Capital Leases; (g) all indebtedness referred to in clauses (a) through
(f) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including accounts and contracts rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses
(a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section 11.5.
"Indemnified Person" has the meaning specified in Section 11.5.
"Independent Auditor" has the meaning specified in subsection 7.1(a).
"Insolvency Proceeding" means, with respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or
other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial
portion of its creditors; in either case undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, (a) as to any Loan other than a Base
Rate Loan, the last day of each Interest Period applicable to such Loan and
(b) as to any Base Rate Loan other than a Swingline Loan, the last Business
Day of each calendar quarter, and (c) as to any Base Rate Loans which are
Swingline Loans, the Business Day agreed upon by the Borrower and the
Swingline Bank which shall not be later than the seventh Business Day
following the Borrowing Date thereof; provided, however, that if any
Interest Period for an Offshore Rate Loan exceeds three months, the date
that falls three months after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an Interest Payment
Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two, three
or six months thereafter as selected by the Borrower in its Notice of
Borrowing or Notice of Conversion/Continuation; provided that:
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<PAGE> 16
(a) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(b) any Interest Period 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
(c) no Interest Period for any Loan shall extend beyond the
Revolving Termination Date.
"Investments" has the meaning specified in Section 8.4.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection 3.1(a).
"Issue" means, with respect to any Letter of Credit, to incorporate
the Existing BofA Letters of Credit into this Agreement, or to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" means BofA in its capacity as issuer of one or more
Letters of Credit hereunder, together with any replacement letter of credit
issuer arising under subsection 10.1(b) or Section 10.9.
"Joint Venture" means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal arrangement
(whether created by contract or conducted through a separate legal entity)
now or hereafter formed by the Borrower or any of its Subsidiaries with
another Person in order to conduct a common venture or enterprise with such
Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
accordance with its Pro Rata Share.
"L/C Amendment Application" means an application for amendment of
outstanding standby or commercial documentary letters of credit, in the
form as shall at any time be in use at the Issuing Bank, as the Issuing
Bank shall reasonably request.
"L/C Application" means an application for issuances of standby or
commercial documentary letters of credit, in the form as shall at any time
be in use at the Issuing Bank, as the Issuing Bank shall reasonably
request.
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<PAGE> 17
"L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date
when made nor converted into a Borrowing of Revolving Loans under
subsection 3.3(c).
"L/C Commitment" means the commitment of the Issuing Bank to Issue,
and the commitment of the Banks severally to participate in, Letters of
Credit (including the Existing BofA Letters of Credit) from time to time
Issued or outstanding under Article III, in an aggregate amount not to
exceed on any date the amount of $75,000,000, as the same shall be reduced
as a result of a reduction in the L/C Commitment pursuant to Section 2.5;
provided that the L/C Commitment is a part of the combined Commitments,
rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit, including
all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"Lead Arranger" means Banc of America Securities LLC, a Delaware
limited liability company, in its capacity as Sole Lead Arranger and Sole
Book Manager.
"Lending Office" means, as to any Bank, the office or offices of such
Bank specified as its "Lending Office" on Schedule 11.2, or such other
office or offices as such Bank may from time to time notify the Borrower
and the Agent.
"Letters of Credit" means any letters of credit (whether standby
letters of credit or commercial documentary letters of credit) Issued by
the Issuing Bank pursuant to Article III and, as of the Closing Date, the
Existing BofA Letters of Credit.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease, any financing
lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the Uniform Commercial
Code or any comparable law) and any contingent or other agreement to
provide any of the foregoing, but not including the interest of a lessor
under an Operating Lease.
"Loan" means an extension of credit by a Bank or the Swingline Bank to
the Borrower under Article II or Article III in the form of a Revolving
Loan, Swingline Loan or L/C Advance.
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<PAGE> 18
"Loan Documents" means this Agreement, any Notes, the L/C Related
Documents, the Collateral Documents, the Fee Letter and all other documents
delivered by or on behalf of the Borrower to the Agent or any Bank in
connection with the transactions contemplated by this Agreement.
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of
the Borrower to perform under any Loan Document and to avoid any Event of
Default; or (c) a material adverse effect upon (i) the legality, validity,
binding effect or enforceability against the Borrower of any Loan Document
or (ii) the perfection or priority of any Lien on any material portion of
the Collateral granted under any of the Collateral Documents.
"Material Subsidiary" means any Subsidiary that at any time either (a)
owns or holds title to 5% or more of the Consolidated assets of the
Borrower and its Consolidated Subsidiaries or (b) accounts for 5% or more
of the Consolidated revenue of the Borrower and its Consolidated
Subsidiaries, in each case as determined in accordance with GAAP.
"Multicurrency Note Purchase Facility" means the facility pursuant to
the Second Amended and Restated Contingent Multicurrency Note Purchase
Commitment Agreement dated as of January 15, 1998 (as amended, restated,
modified or supplemented from time to time) between Borrower and BofA,
whereby BofA has agreed to purchase certain notes of the Borrower subject,
in certain cases, to collateralization in cash and other investments or any
similar facility designed to accomplish the same objectives.
"Multiemployer Plan" means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate makes, is making, or is obligated to make contributions or,
during the preceding three calendar years, has made, or been obligated to
make, contributions.
"Net Income" means, with respect to any Person for any period, net
income of such Person, as determined by such Person in accordance with
GAAP.
"Net Loss" means, with respect to any Person for any period, negative
Net Income of such Person, as determined by such Person in accordance with
GAAP.
"Note" means a promissory note executed by the Borrower in favor of a
Bank pursuant to subsection 2.2(b), in substantially the form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice in substantially
the form of Exhibit B.
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<PAGE> 19
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Borrower
to any Bank, the Issuing Bank, the Swingline Bank, the Agent, the
Collateral Agent or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.
"Offshore Rate": For any Interest Period, with respect to Offshore
Rate Loans comprising part of the same Borrowing, the rate equal to (A) (i)
the rate of interest per annum determined by the Agent to be the rate of
interest per annum appearing on Dow Jones Page 3750 (as defined below) for
Dollar deposits in an amount substantially equal to the proposed Offshore
Rate Loan to be made, continued or converted by BofA, and having a maturity
comparable to such Interest Period, at approximately 11:00 a.m. (London
time) two Business Days prior to the commencement of such Interest Period,
subject to clause (ii) below; or (ii) if for any reason the rate is not
available as provided in the preceding clause (i) of this definition, the
"Offshore Rate" instead means the rate of interest per annum determined by
the Agent (rounded to the next higher 1/16 of 1%) to be the rate at which
deposits in Dollars are offered to prime banks by the principal office of
BofA in the London interbank market, at approximately 11:00 a.m. (London
time), two Business Days before the first day of such Interest Period, in
the approximate amount of the Offshore Rate Loan to be made by BofA and for
a period of time comparable to such Interest Period; divided by (B) a
number equal to 1.00 minus the aggregate (but without duplication) of the
rate (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two Business Days prior to the commencement of such
Interest Period (including basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having jurisdiction with
respect thereto, as in effect at the time BofA quotes its rate to the
Agent) for Eurocurrency funding of domestic assets (currently referred to
as "Eurocurrency liabilities" in Regulation D of such Board) that are
required to be maintained by a member bank of such System. The
determination of the Offshore Rate by the Agent shall be conclusive in the
absence of manifest error. As used in this definition, "Dow Jones Page
3750" means the display designated as "3750" on the Dow Jones Market
Service (formerly known as the Telerate Service) or any replacement page
thereof or successor thereto.
"Offshore Rate Loan" means a Loan that bears interest based on the
Offshore Rate.
"Operating Lease" means, for any Person, any lease of any property of
any kind by that Person as lessee which is not a Capital Lease.
"Operating Loss" of any Person means, as of the date of determination,
operating losses as calculated in accordance with GAAP.
"Organization Documents" means, for any Person, 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,
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<PAGE> 20
any other applicable organizational or constitutional documents and all
applicable resolutions of the board of directors (or any committee thereof)
of such Person.
"Participant" has the meaning specified in subsection 11.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or
in the case of a multiple employer plan (as described in Section 4064(a) of
ERISA) has made contributions at any time during the immediately preceding
five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.1.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Borrower or any Subsidiary existing or arising under Swap
Contracts, provided that such obligations are (or were) entered into in
connection with a bona fide hedging operation that provides offsetting
benefits to such Person.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or any
other entity of whatever nature.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower sponsors or maintains or to which the Borrower
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"Prior Credit Agreement" has the meaning specified in the recitals
hereof.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at
such time of such Bank's Commitment divided by the combined Commitments of
all Banks (or, if all Commitments have been terminated, the aggregate
principal amount of such Bank's Loans divided by the aggregate principal
amount of the Loans then held by all Banks). The initial Pro Rata Share of
each Bank is set forth opposite such Bank's name in Schedule 2.1 under the
heading Pro Rata Share.
"Receivable" means any right to payment from an account receivable
obligor, arising from the sale of goods or services or the licensing of
intellectual property rights by the Borrower in the ordinary course of its
business.
"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.
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<PAGE> 21
"Required Banks" means at any time Banks then holding at least 51% of
the aggregate amount of the Commitments or, if no Commitments are
outstanding, Banks then having at least 51% of the then aggregate unpaid
principal amount of the Loans (including the Swingline Loans).
"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, with respect to the Borrower, the chief
executive officer, the president, any vice president, the treasurer, chief
operating officer or chief financial officer, assistant treasurer, or the
secretary of the Borrower, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer, assistant treasurer or
the treasurer of the Borrower, or any other officer having substantially
the same authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.1, and may be
a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of Revolving
Loan).
"Revolving Termination Date" means the earlier to occur of:
(a) October 23, 2001; and
(b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Secured Parties" has the meaning specified in the Security Agreement.
"Security Agreement" means a Security Agreement between the Borrower,
as debtor, in favor of the Collateral Agent, as secured party, in
substantially the form of Exhibit G.
"Senior Funded Debt" means, as of any date of determination, any
indebtedness for borrowed money then outstanding and (without duplication)
any contingent or non-contingent reimbursement obligations in respect of
any Letter of Credit then outstanding hereunder, but excluding any
Indebtedness then outstanding incurred by the Borrower pursuant to the
Multicurrency Note Purchase Facility.
"Subordinated Indebtedness" means Indebtedness which is expressly
subordinated to the Obligations on terms consented to in writing by the
Required Banks.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture, trust or other
business entity of which more than 50% of
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<PAGE> 22
the voting stock, membership interests or other equity interests (in the
case of Persons other than corporations), is owned or controlled directly
or indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof. Unless the context otherwise clearly
requires, references herein to a "Subsidiary" refer to a Subsidiary of the
Borrower.
"Surety Instruments" means all letters of credit (including standby
and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or
any combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swingline Bank" means BofA.
"Swingline Commitment" has the meaning specified in Section 2.10(a).
"Swingline Loan" has the meaning specified in Section 2.10(a).
"Tangible Net Worth" means, with respect to any Person as of any date
of determination, Total Assets of such Person as of such date minus Total
Liabilities of such Person as of such date and minus the carrying value of
(a) goodwill, organizational expenses, patents, patent applications,
trademarks, trademark applications, trade names, service marks, service
mark applications, copyrights, designs and other intellectual property and
licenses therefor and rights therein, and other similar intangibles, (b)
all amortizing debt issuance expenses carried as an asset, (c) all reserves
carried and not deducted from assets or not reflected as a liability, and
(d) cash held in a sinking or other analogous fund established for the
purpose of redemption, retirement or prepayment of any capital stock or any
Indebtedness or Contingent Obligation, if no offsetting liability exists
with respect to such Indebtedness or Contingent Obligation on the balance
sheet of such Person.
"Taxes" means any and all present or future taxes (including any taxes
on any additional amounts required to be paid to the Agent or the Banks),
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges, and all liabilities with respect thereto, excluding, in
the case of each Bank and the Agent, respectively, (a) taxes imposed on its
income by the United States and taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction under the laws of which such Bank
or the Agent (as the case may be) is organized or any political subdivision
thereof, and (b) taxes imposed on its income, and franchise taxes imposed
on it, by the jurisdiction of such Bank's Lending Office, or any political
subdivision thereof.
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<PAGE> 23
"Total Assets" of any Person means all property, whether real,
personal, tangible, intangible or otherwise, which, in accordance with
GAAP, should be included in determining total assets as shown on the assets
portion of a balance sheet of such Person.
"Total Capital" of any Person means the sum of the Consolidated
Tangible Net Worth of such Person plus Consolidated Total Debt of such
Person.
"Total Commitment Amount" means the total amount of Commitments
available hereunder during the following periods:
<TABLE>
<CAPTION>
TOTAL COMMITMENT AMOUNT
PERIOD NOT TO EXCEED
<S> <C> <C>
1) To December 31, 1998 $ 350,000,000
2) December 31, 1998 to March 31, 1999 $ 337,500,000
3) March 31, 1999 to June 30, 1999 $ 325,000,000
4) June 30, 1999 to September 30, 1999 $ 312,500,000
5) September 30, 1999 to December 31, 1999 $ 300,000,000
6) December 31, 1999 to March 31, 2000 $ 287,500,000
7) March 31, 2000 to June 30, 2000 $ 275,000,000
8) June 30, 2000 to September 29, 2000 $ 262,500,000
9) September 29, 2000 to December 29, 2000 $ 250,000,000
10) December 29, 2000 to March 30, 2001 $ 237,500,000
11) March 30, 2001 to June 29, 2001 $ 225,000,000
12) June 29, 2001 to September 28, 2001 $ 212,500,000
13) September 28, 2001 to Revolving Termination Date $ 200,000,000
14) Revolving Termination Date $ 0
</TABLE>
"Total Debt" means, with respect to any Person, all Indebtedness of
such person incurred for borrowed money plus, without duplication, all
reimbursement obligations in respect of letters of credit plus all
obligations outstanding pursuant to the Multicurrency Note Purchase
Facility.
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<PAGE> 24
"Total Leverage Ratio" means, with respect to any Person, the ratio
that (i) Consolidated Total Debt bears to (ii) Total Capital of such
Person.
"Total Liabilities" of any Person means all obligations, including,
without limitation, all Indebtedness (other than Guaranty Obligations) of
such Person, which, in accordance with GAAP, should be included in
determining total liabilities as shown on the liabilities portion of a
balance sheet of such Person.
"Type" has the meaning specified in the definition of "Revolving
Loan."
"UCC" means the Uniform Commercial Code as in effect in the State of
California.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"United States" and "U.S." each means the United States of America.
"U.S. Subsidiary" means any Subsidiary incorporated, or otherwise
formed or organized, in the United States or any jurisdiction thereof.
"Wholly Owned Subsidiary" means any corporation in which 100% of the
capital stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case, at the time as of which
any determination is being made, is owned, beneficially and of record, by
the Borrower, or by one or more of the other Wholly Owned Subsidiaries, or
both; provided that, as to foreign Subsidiaries this definition means any
corporation in which at least 99% of the capital stock of each class having
ordinary voting power and at least 99% of the capital stock of every other
class, at the time as of which any determination is made, in each case is
owned beneficially and of record by the Borrower or one or more of the
other Wholly Owned Subsidiaries or both.
1.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof," "herein," "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
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<PAGE> 25
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(iv) The term "property" includes any kind of property or
asset, real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent, the Issuing Bank, the
Swingline Bank or the Banks by way of consent, approval or waiver shall be
deemed modified by the phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among the Agent, the Issuing Bank, the Swingline Bank and the
Borrower and the other parties, have been reviewed by counsel to the Agent, the
Borrower and such other parties, and are the product of all parties.
Accordingly, they shall not be construed against the Banks, the Issuing Bank,
the Swingline Bank or the Agent merely because of the Agent's or Banks'
involvement in their preparation.
1.3 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 Borrower.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitment. Each Bank severally agrees, on
the terms and conditions set forth herein, to make loans to the Borrower (each
such loan, a "Revolving Loan") 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
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<PAGE> 26
outstanding the amount set forth on Schedule 2.1 under the heading "Commitment"
(such amount, inclusive of such Bank's L/C Commitment and, in the case of BofA,
its Swingline Commitment, as the same may be reduced under Section 2.5 or
Section 2.7 or reduced or increased as a result of one or more assignments under
Section 11.8, the Bank's "Commitment"); provided, however, that, after giving
effect to any Borrowing of Revolving Loans, (i) the Effective Amount of all
outstanding Revolving Loans, the Effective Amount of all Swingline Loans and the
Effective Amount of all L/C Obligations shall not at any time exceed the Total
Commitment Amount; and (ii) the Effective Amount of the Revolving Loans of any
Bank plus the participation of such Bank in the Effective Amount of all
Swingline Loans plus the participation of such Bank in the Effective Amount of
all L/C Obligations shall not at any time exceed such Bank's Commitment (except
for BofA, but solely with respect to its Swingline Commitment), as such Bank's
Commitment may be reduced hereunder. Within the limits of each Bank's
Commitment, and subject to the other terms and conditions hereof, the Borrower
may borrow under this Section 2.1, prepay under Section 2.6 and reborrow under
this Section 2.1.
2.2 Loan Accounts(a). (a) The Loans made by each Bank (including the
Swingline Bank) and the Letters of Credit Issued by the Issuing Bank shall be
evidenced by one or more accounts or records maintained by such Bank or Issuing
Bank, as the case may be, in the ordinary course of business. The accounts or
records maintained by the Agent, the Issuing Bank and each Bank (including the
Swingline Bank) shall be conclusive absent manifest error of the amount of the
Loans made by the Banks (including the Swingline Bank) to the Borrower and the
Letters of Credit Issued for the account of the Borrower, 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 Borrower hereunder to
pay any amount owing with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Bank shall endorse on the schedules annexed
to its Notes the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Borrower with respect thereto.
Each such Bank is irrevocably authorized by the Borrower to endorse its Notes
and each Bank's record shall be conclusive absent manifest error; provided,
however, that the failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Borrower hereunder or under any such Note to such Bank. Any
Notes delivered by the Borrower to any Bank under this Agreement shall be in
exchange for, but not in payment of, the Notes, if any, held by such Bank under
the Prior Credit Agreement.
2.3 Procedure for Borrowing. (a) Each Borrowing of Revolving Loans
shall be made upon the Borrower's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing (which notice must be received by the
Agent prior to 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 (ii) on
the Business Day which is the requested Borrowing Date, in the case of Base Rate
Loans, specifying:
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<PAGE> 27
(A) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $10,000,000 or any integral
multiple of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business
Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to such
Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest
Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be one month.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
9:00 a.m. (San Francisco time) one Business Day before the Closing Date and such
Borrowing will consist of Base Rate Loans only.
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Borrower at the Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Borrower in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Borrower by the
Agent by (i) wire transfer of immediately available funds to the Borrower at,
Harris Trust, ABA No. 071 000 288, Account No. 4191706, for credit to Storage
Technology Corporation or such other account as the Borrower shall specify to
the Agent or (ii) at the option of the Borrower, by crediting the account of the
Borrower on the books of BofA with the aggregate of the amounts made available
to the Agent by the Banks and, in each case, in like funds as received by the
Agent.
(d) After giving effect to any Borrowing, unless the Agent shall
otherwise consent, there may not be more than ten different Interest Periods in
effect.
(e) Any Notice of Borrowing received after the time noted in
subsection 2.3(a) but prior to 5:00 p.m. (San Francisco time) on any Business
Day, shall be deemed to have been received prior to 9:00 a.m. (San Francisco
time) on the next Business Day.
2.4 Conversion and Continuation Elections (a) The Borrower may with
respect to its Loans, upon irrevocable written notice to the Agent in accordance
with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period,
in the case of any other Type of Revolving Loans, to convert any
such Revolving Loans
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<PAGE> 28
(or any part thereof in an amount not less than $10,000,000, or
that is in an integral multiple of $1,000,000 in excess thereof)
into Revolving Loans of any other Type; or
(ii) elect as of the last day of the applicable Interest
Period, to continue any Revolving Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less
than $10,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $10,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrower to continue such Revolving Loans as, and convert such Loans
into, Offshore Rate Loans shall terminate.
(b) The Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 9:00 a.m.
(San Francisco time) with respect to its Revolving Loans at least (i) three
Business Days in advance of the Conversion/Continuation Date, if the Revolving
Loans of the Borrower are to be converted into or continued as Offshore Rate
Loans; and (ii) on the Conversion/Continuation Date, if the Revolving Loans of
the Borrower are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Revolving Loans to be converted
or continued;
(C) the Type of Revolving Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans of the Borrower, the Borrower has failed to select timely a
new Interest Period to be applicable to such Offshore Rate Loans or if any
Default or Event of Default then exists, the Borrower shall be deemed to have
elected to convert such Offshore Rate Loans into Base Rate Loans effective as of
the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Borrower, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Revolving Loans
with respect to which the notice was given held by each Bank.
(e) Unless the Required Banks otherwise consent, during the
existence of a Default or Event of Default, the Borrower may not elect to have
Loans converted into or continued as an Offshore Rate Loans.
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<PAGE> 29
(f) After giving effect to any conversion or continuation of
Revolving Loans, unless the Agent shall otherwise consent, there may not be more
than ten different Interest Periods for all Loans in effect.
2.5 Voluntary Termination or Reduction of Commitments. (a) Termination
or Reduction of Commitments. The Borrower may, upon not less than five Business
Days' prior notice to the Agent, terminate the Commitments, or permanently
reduce the Commitments by an aggregate minimum amount of $10,000,000 or any
integral multiple of $1,000,000 in excess thereof; unless, after giving effect
thereto and to any prepayments of any Loans made on the effective date thereof,
the Effective Amount of all Revolving Loans, Swingline Loans and/L/C Obligations
together would exceed the amount of the combined Commitments then in effect, or
(b) the Effective Amount of all L/C Obligations then outstanding would exceed
the L/C Commitment. Once reduced in accordance with this Section, the
Commitments may not be increased or reinstated. Any reduction of the Commitments
shall be applied to each Bank's Commitment according to its Pro Rata Share. If
and to the extent specified by the Borrower in the notice to the Agent, some or
all of the reduction in the combined Commitments shall be applied to reduce the
L/C Commitment. All accrued commitment and letter of credit fees to, but not
including, the effective date of any termination of Commitments shall be paid on
the effective date of such termination.
(b) Automatic Reduction of Swingline Commitment. At no time shall
the Swingline Commitment exceed the combined amount of all Commitments, and any
reduction of the combined amount of all Commitments which reduces the combined
amount of all Commitments below the then current amount of the Swingline
Commitment shall result in an automatic corresponding reduction of the Swingline
Commitment to the amount of the combined Commitments, as so reduced, without any
action on the part of the Swingline Bank.
2.6 Optional Prepayments. Subject to Section 4.4, the Borrower may, at
any time or from time to time, upon delivery of an irrevocable notice of
prepayment to the Agent prior to 9:00 a.m. (San Francisco time) (a) not less
than three Business Days prior to the date of prepayment in the case of Offshore
Rate Loans, and (b) the same day as the date of prepayment in the case of Base
Rate Loans,
(i) ratably prepay Revolving Loans in whole or in part, in
minimum amounts of $10,000,000 or any integral multiple of
$1,000,000 in excess thereof, and
(ii) prepay in whole or in part Swingline Loans, in amounts
of $1,000,000 or any integral multiple of $100,000 in excess
thereof, or in other amounts with the consent of the Swingline
Bank.
Any notice of prepayment received after 9:00 a.m. (San Francisco time)
on a Business Day but prior to 5:00 p.m. (San Francisco time) on such Business
Day shall be deemed to have been given prior to 9:00 a.m. (San Francisco time)
on the next Business Day. Any such notice of prepayment shall specify the date
and amount of such prepayment and the Type(s) of Loans to be prepaid.
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<PAGE> 30
The Agent will promptly notify each Bank of its receipt of any such
notice, and of such Bank's Pro Rata Share of such prepayment other than for
prepayments of Swingline Loans. If any such notice is given the Borrower 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 4.4.
2.7 Mandatory Prepayments of Loans; Mandatory Commitment Reductions.
(a) If, on any date that the Total Commitment Amount
automatically decreases pursuant to the terms hereof, the amount of Loans
outstanding exceeds the then-permitted Total Commitment Amount, the Borrower
shall immediately pay such excess amount to the Agent for the ratable benefit of
the Banks. As the Total Commitment Amount available hereunder is reduced, each
Bank's Commitment amount hereunder shall be automatically reduced in accordance
with its Pro Rata Share of the Total Commitment Amount.
(b) If on any date on or prior to the Revolving Termination Date
the Effective Amount of L/C Obligations exceeds the L/C Commitment, the Borrower
shall Cash Collateralize on such date the outstanding Letters of Credit in an
amount equal to the excess of the maximum amount then available to be drawn
under the Letters of Credit over the aggregate L/C Commitment. Subject to
Section 4.4, if on any date after giving effect to any Cash Collateralization
made on such date pursuant to the preceding sentence, the Effective Amount of
all Revolving Loans and Swingline Loans then outstanding plus the Effective
Amount of all L/C Obligations exceeds the combined Commitments, the Borrower
shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Revolving Loans, L/C Advances and Swingline Loans (as
necessary) by an amount equal to the applicable excess.
2.8 Repayment. The Borrower agrees to repay to the Banks on the
Revolving Termination Date the aggregate principal amount of the Loans (together
with accrued interest and fees thereon) outstanding on such date. Additionally,
with respect to Swingline Loans, the Borrower agrees to repay to the Swingline
Bank the principal amount of each Swingline Loan (together with accrued interest
and fees thereon) no later than the seventh Business Day after the date each
such Swingline Loan was made.
2.9 Interest(a). (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate as the case may be (provided that
with respect to Swingline Loans interest shall only be at the Base Rate unless
and until the Swingline Bank agrees to a different basis pursuant to Section
2.10(a) and subject also to the Borrower's right to convert Revolving Loans to
other Types of Revolving Loans under Section 2.4), plus the Applicable Margin.
(b) Interest on each Revolving Loan and Swingline Loan of the
Borrower shall be paid by the Borrower in arrears on each Interest Payment Date.
Interest shall also be paid on the date of any prepayment of Loans (other than
Base Rate Loans) under Section 2.6 or 2.7 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 paid on demand of the Agent
at the request or with the consent of the Required Banks.
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<PAGE> 31
(c) Notwithstanding subsection (a) of this Section, while any
Event of Default exists or after acceleration, the Borrower shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Obligations, at a rate per annum
which is determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to an
Applicable Margin, at a fluctuating rate per annum equal to the Base Rate plus
2%; provided, however, that, on and after the expiration of any Interest Period
applicable to any Offshore Rate Loan outstanding on the date of occurrence of
such Event of Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after acceleration, bear
interest at a fluctuating rate per annum equal to the Base Rate plus the
Applicable Margin then in effect for Base Rate Loans plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrower to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Borrower shall pay such Bank interest at the highest rate
permitted by applicable law.
(e) Subject to the effect of subsection 2.9(a), the Applicable
Margin will be determined by the Agent from time to time in accordance with the
pricing grid set forth in Schedule 2.9(e) based on the most recent Compliance
Certificate delivered by the Borrower pursuant hereto. Such determination shall
be based on the calculations as set forth in such Compliance Certificate and
shall apply from the first Business Day after the Agent receives such Compliance
Certificate until and through the Business Day when the Agent receives the
applicable Compliance Certificate for the next fiscal quarter.
The initial Applicable Margin, applicable from the Closing Date to the
date of delivery of the Compliance Certificate hereunder for the fiscal quarter
ending December 31, 1999, shall be as set forth in the footnote to Schedule
2.9(e).
2.10 Swingline Loans(a). (a) Subject to the terms and conditions
hereof, the Swingline Bank severally agrees to make a portion of the combined
Commitments available to the Borrower by making swingline loans (individually, a
"Swingline Loan"; collectively, the "Swingline Loans") to the Borrower on any
Business Day during the period from the Closing Date to the Revolving
Termination Date in accordance with the procedures set forth in this Section in
an aggregate principal amount at any one time outstanding not to exceed
$25,000,000 notwithstanding the fact that such Swingline Loans, when aggregated
with the Swingline Bank's outstanding Revolving Loans, may exceed the Swingline
Bank's Commitment (the amount of such commitment of the Swingline Bank to make
Swingline Loans to the Borrower pursuant to this subsection 2.10(a), as the same
shall be reduced pursuant to subsection 2.5(b) and Section 2.7 or as a result of
any assignment pursuant to Section 11.8, the Swingline Bank's "Swingline
Commitment"); provided, that at no time shall (i) the sum of the Effective
Amount of all Swingline Loans plus the Effective Amount of all Revolving Loans
plus the Effective Amount of all L/C Obligations exceed the total of all
Commitments, or (ii) the Effective Amount of all Swingline Loans exceed the
Swingline Commitment. Additionally, no more than an aggregate
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of three Swingline Loans may be outstanding at any one time, and all Swingline
Loans shall at all times be Base Rate Loans unless otherwise agreed to by the
Swingline Bank in its sole discretion. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Borrower may borrow under this
subsection 2.10(a), prepay pursuant to Section 2.6 and reborrow pursuant to this
subsection 2.10(a).
(b) Each borrowing of a Swingline Loan shall be made upon the
Borrower's irrevocable written notice to the Agent (with a copy to the Swingline
Bank) in the form of a Notice of Borrowing of any Swingline Loan requested
hereunder specifying (i) the amount to be borrowed, and (ii) the requested
Borrowing date, which must be a Business Day (which notice must be received by
the Swingline Bank and the Agent prior to 9:00 a.m. (San Francisco time) on the
requested Borrowing date; any notice received by the Swingline Bank after 9:00
a.m. (San Francisco time) on a Business Day but before 5:00 p.m. (San Francisco
time) on such Business Day shall be deemed to be received by 9:00 a.m. (San
Francisco time) on the next Business Day).
Upon receipt of the Notice of Borrowing, the Swingline Bank will
immediately confirm with the Agent (by telephone or in writing) that the Agent
has received a copy of the Notice of Borrowing from the Borrower and, if not,
the Swingline Bank will provide the Agent with a copy thereof.
Unless the Swingline Bank has received notice prior to 11:30 a.m. on
such Borrowing date from the Agent or any Bank (A) directing the Swingline Bank
not to make the requested Swingline Loan as a result of the limitations set
forth in the proviso set forth in the first sentence of subsection 2.10(a); or
(B) that one or more conditions specified in Article V are not then satisfied;
then, subject to the terms and conditions hereof, the Swingline Bank will, not
later than 12:30 p.m. (San Francisco time) on the Borrowing date specified in
such Notice, make the amount of its Swingline Loan available to the Agent for
the account of the Borrower at the Agent's Payment Office in funds immediately
available to the Agent. The proceeds of such Swingline Loan will then be made
available to the Borrower by (i) wire transfer of immediately available funds to
the Borrower at, Harris Trust, ABA No. 071 000 288, Account No. 4191706, for
credit to Storage Technology Corporation or such other account as the Borrower
shall specify to the Agent or (ii) at the option of the Borrower by the Agent
crediting the account of the Borrower on the books of BofA with the aggregate of
the amounts made available to the Agent by the Swingline Bank and in like funds
as received by the Agent. Each Borrowing pursuant to this Section shall be in an
aggregate principal amount equal to $1,000,000 or an integral multiple of
$100,000 in excess thereof, unless otherwise agreed by the Swingline Bank.
(c) The Borrower agrees to repay any Swingline Loan to the
Swingline Bank when required by Section 2.8.
(d) For one Business Day during each successive seven Business
Day period the aggregate principal amount of Swingline Loans shall be $0 (a
"Clean-Up Day"). The Borrower shall prepay the outstanding principal amount of
the Swingline Loans in whole to the extent required so that a Clean-Up Day may
occur in each such seven Business Day period as provided in this subsection
2.10(d) (which Swingline Loans may not be reborrowed until such Clean-Up Day has
ended).
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(e) If (i) any Swingline Loans shall remain outstanding at 4:00
p.m. (San Francisco time) on the Business Day immediately prior to a Clean-Up
Day and by such time on such Business Day the Agent shall have received neither:
(A) a Notice of Borrowing delivered pursuant to Section 2.3 requesting that
Revolving Loans be made pursuant to Section 2.1 on the Clean-Up Day in an amount
at least equal to the aggregate principal amount of such Swingline Loans; nor
(B) any other notice indicating the Borrower's intent to repay such Swingline
Loans with funds obtained from other sources; or (ii) any Swingline Loans shall
remain outstanding during the existence of a Default or Event of Default and the
Swingline Bank shall in its sole discretion notify the Agent that the Swingline
Bank desires that such Swingline Loans be converted into Revolving Loans; then
the Agent shall be deemed to have received a Notice of Borrowing from the
Borrower pursuant to Section 2.3 requesting that Base Rate Loans be made
pursuant to Section 2.1 on such Clean-Up Day (in the case of the circumstances
described in clause (i) above) or on the first Business Day subsequent to the
date of such notice from the Swingline Bank (in the case of the circumstances
described in clause (ii) above) in an amount equal to the aggregate amount of
such Swingline Loans, and the procedures set forth in subsections 2.3(b) and
2.3(c) shall be followed in making such Base Rate Loans; provided, that such
Base Rate Loans shall be made notwithstanding the Borrower's failure to comply
with Section 5.2; and provided, further, that if a Borrowing of Revolving Loans
becomes legally impracticable and if so required by the Swingline Bank at the
time such Revolving Loans are required to be made by the Banks in accordance
with this subsection 2.10(e), each Bank agrees that in lieu of making Revolving
Loans as described in this subsection 2.10(e), such Bank shall purchase a
participation from the Swingline Bank in the applicable Swingline Loans in an
amount equal to such Bank's Pro Rata Share of such Swingline Loans, and the
procedures set forth in subsections 2.3(b) and 2.3(c) shall be followed in
connection with the purchases of such participations. Upon such purchases of
participations the prepayment requirements of subsection 2.10(d) shall be deemed
waived with respect to such Swingline Loans. The proceeds of such Base Rate
Loans, or participations purchased, shall be applied to repay such Swingline
Loans.
A copy of each notice given by the Agent to the Banks pursuant to this
subsection 2.10(e) with respect to the making of Revolving Loans, or the
purchases of participations, shall be promptly delivered by the Agent to the
Borrower. Each Bank's obligation in accordance with this Agreement to make the
Revolving Loans, or purchase the participations, as contemplated by this
subsection 2.10(e), shall be absolute and unconditional and shall not be
affected by any circumstance, including (1) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the
Swingline Bank, the Borrower or any other Person for any reason whatsoever; (2)
the occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (3) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
2.11 Fees.(a) (a) Commitment Fees. In addition to certain fees
described in Section 3.8, the Borrower agrees to pay to the Agent for the
ratable account of each Bank a commitment fee on the actual daily unused portion
of such Bank's Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for that
quarter as calculated by the Agent, equal to the Applicable Fee Amount. For
purposes of calculation of such unused portion of a Bank's Commitment, (i) the
making of any Swingline Loans shall not be considered a use of a portion of the
Swingline Bank's
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Commitment, and (ii) each Bank's Commitment shall be considered used on any date
to the extent of its participation on such date in any Letter of Credit and any
L/C Advance made by it (exclusive of any Swingline Loans).
Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in arrears on
(A) the last Business Day of the period ending on March 31, 2000, (B) on the
last Business Day of each calendar quarter commencing after March 31, 2000 and
(C) on the Revolving Termination Date; provided that, in connection with any
reduction or termination of Commitments under Section 2.5 or 2.7, the accrued
commitment fee calculated for the period ending on such date shall also be paid
on the date of such reduction or termination. The commitment fees provided in
this subsection shall accrue at all times after the above-mentioned commencement
date, including at any time during which one or more conditions in Article V are
not met.
For the period from the Closing Date through the Business Day when the
Agent receives the Borrower's Compliance Certificate for the fiscal quarter
ending December 31, 1999, the Applicable Fee Amount will be 0.50%. Thereafter
the Applicable Fee Amount shall be determined by the Agent from time to time in
accordance with the pricing grid set forth in Schedule 2.9(e) based on the most
recent Compliance Certificate of the Borrower delivered by the Borrower pursuant
hereto. Such determinations shall apply from the first Business Day after the
Agent receives such Compliance Certificate until and through the Business Day
when the Agent receives the applicable Compliance Certificate for the next
fiscal quarter as provided herein.
(b) Amendment Fee. The Borrower will pay to each approving Bank
an amendment fee equal to 0.10% of each such Bank's Commitment.
2.12 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's "prime
rate" shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other computations of fees and interest shall
be made on the basis of a 360-day year and actual days elapsed (which results in
more interest being paid than if computed on the basis of a 365-day year).
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Borrower and the Banks in the absence of manifest
error.
2.13 Payments by the Borrower. (a) All payments to be made by the
Borrower shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrower shall be made
to the Agent for the account of the Banks at the Agent's Payment Office, and
shall be made in Dollars and in immediately available funds, no later than 10:30
a.m. (San Francisco time) on the date specified herein. The Agent will promptly
distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such payment in like funds as received. Any
payment received by the Agent later than 10:30 a.m. (San Francisco time) shall
be deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
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(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Borrower prior to
the date on which any payment is due to the Banks that the Borrower will not
make such payment in full as and when required, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the Borrower has not made
such payment in full to the Agent, each Bank shall repay to the Agent on demand
such amount distributed to such Bank, together with interest thereon at the
Federal Funds Rate for each day from the date such amount is distributed to such
Bank until the date repaid.
2.14 Payments by the Banks to the Agent. (a) Unless the Agent
receives notice from a Bank on or prior to the Closing Date or, with respect to
any Borrowing after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Borrower the amount of
that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank
has made such amount available to the Agent in immediately available funds on
the Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent any Bank shall not have made its full
amount available to the Agent in immediately available funds and the Agent in
such circumstances has made available to the Borrower such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate for
each day during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the Agent
shall constitute such Bank's Loan on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to the Agent on the
Business Day following the Borrowing Date, the Agent will notify the Borrower of
such failure to fund and, upon demand by the Agent, the Borrower shall pay such
amount to the Agent for the Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.15 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made
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by them as shall be necessary to cause such purchasing Bank to share the excess
payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing Bank,
such purchase shall to that extent be rescinded and each other Bank shall repay
to the purchasing Bank the purchase price paid therefor, together with an amount
equal to such paying Bank's ratable share (according to the proportion of (i)
the amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
2.16 Security. All obligations of the Borrower under this Agreement,
the Notes and all other Loan Documents shall be secured in accordance with the
Collateral Documents.
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility. (a) On the terms and
conditions set forth herein (i) the Issuing Bank agrees, (A) from time to time
on any Business Day during the period from the Closing Date to the Revolving
Termination Date to issue Letters of Credit for the account of the Borrower, and
to amend or renew Letters of Credit previously issued by it, in accordance with
subsections 3.2(c) and 3.2(d), and (B) to honor drafts under the Letters of
Credit; and (ii) the Banks severally agree to participate in Letters of Credit
Issued for the account of the Borrower; provided, that the Issuing Bank shall
not Issue, and no Bank shall be obligated to participate in, any Letter of
Credit if as of the date of Issuance of such Letter of Credit (the "Issuance
Date") (1) the Effective Amount of all L/C Obligations plus the Effective Amount
of all Revolving Loans plus the Effective Amount of all Swingline Loans exceeds
the combined Commitments, (2) the participation of any Bank in the Effective
Amount of all L/C Obligations plus the Effective Amount of the Revolving Loans
plus the Effective Amount of all Swingline Loans of such Bank exceeds such
Bank's Commitment, or (3) the Effective Amount of L/C Obligations exceeds the
L/C Commitment. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrower's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Borrower may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit which have expired
or which have been drawn upon and reimbursed.
(b) The Issuing Bank shall not Issue any Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Bank from Issuing such Letter of Credit, or
any Requirement of Law applicable to the Issuing Bank or any
request or directive (whether or
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not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit, or request
that the Issuing Bank refrain from, the Issuance of letters of
credit generally or such Letter of Credit in particular or shall
impose upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which
the Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall otherwise impose upon the
Issuing Bank any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which the Issuing Bank in good
faith deems material to it;
(ii) the Issuing Bank has received written notice from any
Bank (and the Required Banks concur with the determination of
such Bank) or the Agent, on or prior to the Business Day prior to
the requested date of Issuance of such Letter of Credit, that no
further Letters of Credit are to be issued due to a continuing
failure to meet one or more of the applicable conditions
contained in Article V and such notice has not expired or been
withdrawn by the applicable Bank and/or the Agent;
(iii) the expiry date of any requested Letter of Credit is
more than 360 days after the Revolving Termination Date, unless
all of the Banks have approved such expiry date in writing;
(iv) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance reasonably
acceptable to the Issuing Bank, or the Issuance of a Letter of
Credit shall violate any applicable policies of the Issuing Bank
for extensions of credit; or
(v) such Letter of Credit is in a face amount less than
$50,000 or to be denominated in a currency other than Dollars.
3.2 Issuance, Amendment and Renewal of Letters of Credit. (a) Each
Letter of Credit shall be issued upon the irrevocable written request of the
Borrower received by the Issuing Bank (with a copy sent by the Borrower to the
Agent) at least three Business Days (or such shorter time as the Issuing Bank
may agree in a particular instance in its sole discretion) prior to the proposed
date of issuance. Each such request for issuance of a Letter of Credit shall be
by facsimile, confirmed immediately by an original writing in the mail, in the
form of an L/C Application, and shall specify in form and detail satisfactory to
the Issuing Bank: (i) the proposed date of issuance of the Letter of Credit
(which shall be a Business Day); (ii) the face amount of the Letter of Credit;
(iii) the expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof (which beneficiary may be a Bank or an Affiliate of a Bank);
(v) the documents to be presented by the beneficiary of the Letter of Credit in
case of any drawing thereunder; (vi) the full text of any certificate to be
presented by the beneficiary in case of any drawing thereunder; (vii) if such
Letter of Credit will be a standby or commercial documentary Letter of Credit;
and (viii) such other matters as the Issuing Bank may require.
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(b) At least two Business Days prior to the Issuance of any
Letter of Credit, the Issuing Bank will confirm with the Agent (by telephone or
in writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Borrower and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (A) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.1(a) as a result of the limitations set forth
in clauses (1) through (3) thereof or subsection 3.1(b)(ii); or (B) that one or
more conditions specified in Article V are not then satisfied; then, subject to
the terms and conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Borrower in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Borrower received by the Issuing Bank (with a copy sent by the
Borrower to the Agent) at least two Business Days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of amendment, amend any Letter of Credit issued by it. Each
such request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall not amend any Letter of Credit if: (A)
the Issuing Bank would have no obligation at such time to issue such Letter of
Credit in its amended form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed amendment
to the Letter of Credit. The Agent will promptly notify the Banks of the receipt
by it of any L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
and upon the written request of the Borrower received by the Issuing Bank (with
a copy sent by the Borrower to the Agent) at least two Business Days (or such
shorter time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of notification of renewal, the Issuing
Bank shall be entitled to authorize the automatic renewal of any Letter of
Credit issued by it. Each such request for renewal of a Letter of Credit shall
be made by facsimile, confirmed immediately in an original writing, in the form
of an L/C Amendment Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be renewed; (ii)
the proposed date of notification of renewal of the Letter of Credit (which
shall be a Business Day); (iii) the revised expiry date of the Letter of Credit;
and (iv) such other matters as the Issuing Bank may require. The Issuing Bank
shall not renew any Letter of Credit if: (A) the Issuing Bank would have no
obligation at such time to issue or amend such Letter of Credit in its renewed
form under the terms of this Agreement; or (B) the beneficiary of any such
Letter of Credit does not accept the proposed renewal of the Letter of Credit.
If any outstanding Letter of Credit for the account of the Borrower
shall provide that it shall be automatically renewed unless the beneficiary
thereof receives notice from the
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Issuing Bank that such Letter of Credit shall not be renewed, and if at the time
of renewal the Issuing Bank would be entitled to authorize the automatic renewal
of such Letter of Credit in accordance with this subsection 3.2(d) upon the
request of the Borrower but the Issuing Bank shall not have received any L/C
Amendment Application from the Borrower with respect to such renewal or other
written direction by the Borrower with respect thereto, the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and,
notwithstanding anything in this Agreement to the contrary, the Borrower and the
Banks hereby authorize such renewal and, accordingly, the Issuing Bank shall be
deemed to have received an L/C Amendment Application from the Borrower
requesting such renewal; provided, however, that the aggregate principal amount
of all such automatically renewable Letters of Credit shall not exceed
$3,000,000, which amount shall be a sublimit within the L/C Commitment.
(e) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(f) The Issuing Bank will also deliver to the Agent, concurrently
or promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
3.3 Existing BofA Letters of Credit; Risk Participations, Drawings and
Reimbursements. (a) On and after the Closing Date, the Existing BofA Letters
of Credit shall be deemed for all purposes, including for purposes of the fees
to be collected pursuant to subsections 3.8(a) and 3.8(b), and reimbursement of
costs and expenses to the extent provided herein, Letters of Credit outstanding
under this Agreement and entitled to the benefits of this Agreement and the
other Loan Documents, and shall be governed by the applications and agreements
pertaining thereto and by this Agreement. To the extent it has not already done
so under the Prior Credit Agreement, each Bank shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Bank on the
Closing Date a participation in each such Letter of Credit and each drawing
thereunder in an amount equal to the product of (i) such Bank's Pro Rata Share
times (ii) the maximum amount available to be drawn under such Letter of Credit
and the amount of such drawing, respectively. For purposes of Section 2.1 and
subsection 2.11(a), the Existing BofA Letters of Credit shall be deemed to
utilize pro rata the Commitment of each Bank.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.3(a), each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Bank a participation in such Letter of Credit and each drawing thereunder in an
amount equal to the product of (i) the Pro Rata Share of such Bank, times (ii)
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing, respectively. For purposes of Section 2.1, each Issuance
of a Letter of Credit shall be deemed to utilize the Commitment of each Bank by
an amount equal to the amount of such participation.
(c) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank will promptly
notify the Borrower. The Borrower shall reimburse the Issuing Bank in Dollars in
same day funds (i) by no later than 3:30
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p.m. (San Francisco time) on each Honor Date if the Issuing Bank notifies the
Borrower of a request for a drawing prior to 11:00 a.m. (San Francisco time) on
such Honor Date and (ii) by no later than 11:00 a.m. (San Francisco time) on the
day immediately following each Honor Date if the Issuing Bank notifies the
Borrower of a request for drawing after 11:00 a.m. (San Francisco time) on such
Honor Date, in an amount equal to the amount so paid by the Issuing Bank.
In the event that the Issuing Bank notifies the Borrower before 11:00
a.m. (San Francisco time) on the Honor Date and the Borrower fails to reimburse
the Issuing Bank for the full amount of any drawing under any Letter of Credit
by 3:30 p.m. (San Francisco time) on the Honor Date, the Issuing Bank will
promptly notify the Agent, and the Borrower shall be deemed to have requested
that Base Rate Loans be made by the Banks to be disbursed on the Honor Date
under such Letter of Credit, subject to the amount of the unutilized portion of
the Commitments and subject to the conditions set forth in Section 5.2. In the
event that the Borrower receives notice from the Issuing Bank after 11:00 a.m.
(San Francisco time) and does not reimburse by 11:00 a.m. (San Francisco time)
the day immediately following, the Issuing Bank will promptly notify the Agent,
and the Borrower shall be deemed to have requested that Base Rate Loans be made
by the Banks as of the Honor Date under such Letter of Credit, subject to the
amount of the unutilized portion of the Commitments and subject to the
conditions set forth in Section 5.2. The Agent shall promptly notify the Banks
of the occurrence of such Base Rate Loans and the Banks shall thereupon advance
their Pro Rata Shares of such Base Rate Loans.
Any notice given by the Issuing Bank or the Agent pursuant to this
subsection 3.3(c) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(d) Each Bank shall upon any notice pursuant to subsection 3.3(c)
make available to the Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata Share
of the amount of the drawing, and the participating Banks shall (subject to
subsection 3.3(e)) each be deemed to have made a Revolving Loan consisting of a
Base Rate Loan to the Borrower in that amount. Interest shall accrue on each
Bank's obligation to participate in any Base Rate Loan deemed disbursed pursuant
to Section 3.3(c) from the Honor Date to the date such Bank makes payment
pursuant to this Section 3.3(d), at a rate per annum equal to the Federal Funds
Rate in effect from time to time during such period. For the avoidance of doubt,
any Base Rate Loan deemed disbursed under Section 3.3(c) shall for all purposes,
including the obligation of the Banks to participate in such Base Rate Loan, be
deemed made as of the Honor date and not the date of notice of the Agent.
(e) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans to the Borrower in
whole or in part, because of the Borrower's failure to satisfy the conditions
set forth in Section 5.2 or for any other reason, the Borrower shall be deemed
to have incurred from the Issuing Bank an L/C Borrowing in the amount of such
drawing, which L/C Borrowing shall be due and payable on demand (together with
interest) and shall bear interest at a rate per annum equal to the Base Rate
plus the Applicable Margin then in effect for Base Rate Loans plus 2% per annum,
and each Bank's payment to the Issuing Bank pursuant to subsection 3.3(d) shall
be deemed payment in respect of
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its participation in such L/C Borrowing and shall constitute an L/C Advance from
such Bank in satisfaction of its participation obligation under this Section
3.3.
(f) Each Bank's obligation in accordance with this Agreement to
make the Revolving Loans or L/C Advances, as contemplated by this Section 3.3,
as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing Bank, the
Borrower or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, however, that each Bank's obligation
to make Revolving Loans under this Section 3.3 is subject to the conditions set
forth in Section 5.2.
3.4 Repayment of Participations. (a) Upon (and only upon) receipt by
the Agent for the account of the Issuing Bank of immediately available funds
from the Borrower (i) in reimbursement of any payment made by the Issuing Bank
under the Letter of Credit with respect to which any Bank has paid the Agent for
the account of the Issuing Bank for such Bank's participation in the Letter of
Credit pursuant to Section 3.3 or (ii) in payment of interest thereon, the Agent
will pay to each Bank, in the same funds as those received by the Agent for the
account of the Issuing Bank, the amount of such Bank's Pro Rata Share of such
funds, and the Issuing Bank shall receive the amount of the Pro Rata Share of
such funds of any Bank that did not so pay the Agent for the account of the
Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to the Borrower, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Borrower to the Agent for the account of the Issuing Bank pursuant to subsection
3.4(a) in reimbursement of a payment made under the Letter of Credit or interest
or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the
Agent or the Issuing Bank the amount of its Pro Rata Share of any amounts so
returned by the Agent or the Issuing Bank plus interest thereon from the date
such demand is made to the date such amounts are returned by such Bank to the
Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds Rate
in effect from time to time.
3.5 Role of the Issuing Bank. (a) Each Bank and the Borrower agrees
that, in paying any drawing under a Letter of Credit, the Issuing Bank shall not
have any responsibility to obtain any document (other than any sight draft,
certificates or other documents expressly required by the Letter of Credit) or
to ascertain or inquire as to the validity or accuracy of any such document or
the authority of the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable to
any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks (including the Required Banks, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
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(c) The Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrower pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.6; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Borrower may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Borrower which
the Borrower proves were caused by the Issuing Bank's willful misconduct or
gross negligence or the Issuing Bank's willful failure to pay under any Letter
of Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing
Bank may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.6 Obligations Absolute. The obligations of the Borrower under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or enforceability of this Agreement
or any L/C-Related Document;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the obligations of the
Borrower 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 Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any
Person for whom any such beneficiary or any such transferee may
be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated
hereby or by the L/C-Related Documents or any unrelated
transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or
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inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or certificate that does
not strictly comply with the terms of any Letter of Credit; or
any payment made by the Issuing Bank under any Letter of Credit
to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to
any beneficiary or any transferee of any Letter of Credit,
including any arising in connection with any Insolvency
Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent
to departure from any other guarantee, for all or any of the
obligations of the Borrower in respect of any Letter of Credit;
or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any
other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor;
provided, that, notwithstanding the foregoing, the Issuing Bank shall
not be relieved of any liability it may otherwise have as a result of
its gross negligence or willful misconduct.
3.7 Cash Collateral Pledge. (i)(A) Upon the request of the Agent, if
the Issuing Bank has honored any full or partial drawing request on any Letter
of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B)
unless otherwise consented to by the Banks, if, as of the Revolving Termination
Date, any Letter of Credit may for any reason remain outstanding and partially
or wholly undrawn, or (ii) the occurrence of the circumstances described in
Section 2.7 requiring the Borrower to Cash Collateralize Letters of Credit,
then, the Borrower shall immediately Cash Collateralize the Obligations in an
amount equal to such L/C Obligations. The Borrower hereby grants the Agent, for
the benefit of the Agent, the Issuing Bank, the Swingline Bank and the Banks, a
security interest in all such cash and deposit account balances. Cash Collateral
shall be maintained by the Agent in blocked, interest bearing deposit accounts
at BofA. After the Revolving Termination Date the Issuing Bank may exercise a
right of set off with respect to any such Cash Collateral deposits it holds and
may use such funds to satisfy drawings under Letters of Credit. Unless otherwise
agreed to by the Banks, all such Cash Collateral (inclusive of accrued interest
thereon) shall be returned to the Borrower only when the L/C Commitment has
terminated, all Letters of Credit have been cancelled and no L/C Obligations are
outstanding.
3.8 Letter of Credit Fees. (a) The Borrower agrees to pay to the Agent
for the benefit of the Banks Letter of Credit fees. The Letter of Credit fee
shall be equal to (i) the rate per annum determined as being the Applicable
Margin for Offshore Rate Loans from time to
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time multiplied by (ii) the average daily maximum amount available to be drawn
of the outstanding Letters of Credit. The Letter of Credit fees shall be payable
quarterly in arrears on the last Business Day of each calendar quarter, on the
Revolving Termination Date, and on the date when the last Letter of Credit
expires.
(b) The Borrower agrees to pay to the Agent for the benefit of
the Banks an issuance fee for each commercial documentary Letter of Credit
Issued hereunder equal to the greater of (i) $250 and (ii) 0.125% of the face
amount of such commercial documentary Letter of Credit, payable on the date of
Issuance of each such commercial documentary Letter of Credit.
(c) The Borrower shall pay to the Issuing Bank, for its account,
quarterly in arrears on the last Business Day of each calendar quarter, on the
Revolving Termination Date and on the date when the last Letter of Credit
expires, a letter of credit fronting fee for each Letter of Credit Issued by the
Issuing Bank equal to .075% per annum of the average daily maximum amount
available to be drawn of the outstanding Letters of Credit.
(d) The Borrower shall pay to the Issuing Bank from time to time
on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of the Issuing Bank relating to
letters of credit as from time to time in effect.
3.9 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes. (a) Any and all payments by the Borrower to each Bank or
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In addition,
the Borrower shall pay all Taxes.
(b) If the Borrower shall be required by law to deduct or
withhold any Taxes from or in respect of any sum payable hereunder to any Bank
or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable
under this Section), such Bank or the Agent, as the case may be,
receives and retains an amount equal to the sum it would have
received and retained had no such deductions or withholdings been
made;
(ii) the Borrower shall make such deductions and
withholdings; and
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(iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law.
(c) The Borrower agrees to indemnify and hold harmless each Bank
for the full amount of Taxes in the amount (without duplication of other amounts
paid pursuant to this Section 4.1) that the respective Bank specifies as
necessary to preserve the after-tax yield (which after tax yield is intended to
compensate each Bank for Taxes deducted or withheld pursuant to this Section 4.1
and additional Taxes imposed on amounts payable pursuant to this Section 4.1)
the Bank would have received if such Taxes had not been imposed, and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days after
the date the Bank or the Agent makes written demand therefor, which demand shall
specify in reasonable detail the basis for such demand.
(d) Within 30 days after the date of any payment by the Borrower
of Taxes, the Borrower shall furnish to such Bank or the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to such Bank or the Agent.
(e) Without affecting its rights under this Section 4.1 or any
provision of this Agreement, the Agent, each Bank, the Swingline Bank and the
Issuing Bank agree that if any Taxes are imposed and required by law to be paid
or to be withheld from any amount payable to such Bank or its Lending Office,
the Swingline Bank or the Issuing Bank, as the case may be, with respect to
which the Borrower would be obligated pursuant to this Section 4.1 to increase
any amounts payable to such Bank, the Swingline Bank or the Issuing Bank, as the
case may be, or to pay any such Taxes, such Bank shall use reasonable efforts to
select an alternative Lending Office, the Swingline Bank shall use reasonable
efforts to select an alternative office for purposes of making and receiving
payments in respect of Swingline Advances, and the Issuing Bank shall use
reasonable efforts to select an alternative office for purposes of issuing and
receiving payments in respect of Letters of Credit, as the case may be, which
would not result in the imposition of such Taxes; provided, however, that none
of the Agent, the Banks, the Swingline Bank or the Issuing Bank shall be
obligated to select any such alternative office if such Bank, the Swingline Bank
or the Issuing Bank, as the case may be, determines that (i) as a result of such
selection it would be in violation of an applicable law, regulation, or treaty,
or would incur additional costs or expenses or (ii) such selection would be
inadvisable for regulatory reasons or inconsistent with the interests of such
Bank, the Swingline Bank or the Issuing Bank, as the case may be.
(f) So long as no Default or Event of Default shall have occurred
and be continuing, the Borrower may, within the 30 day period commencing on the
day that the Borrower receives a demand for the payment of Taxes from any Bank
pursuant to this Section 4.1, demand that the Bank making such demand be
replaced with a Person that is an Eligible Assignee selected by the Borrower and
subject to consent by the Agent. Upon any such demand by the Borrower, if the
Agent shall have consented to the Eligible Assignee selected by the Borrower
(provided that should such Eligible Assignee be a Bank, such Bank shall also
have consented to such selection), the Bank that made a demand pursuant to this
Section 4.1 shall
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execute and deliver an Assignment and Acceptance to the Agent pursuant to which
such Bank shall assign all of its rights and obligations under this Agreement
and the other Loan Documents to the Eligible Assignee selected by the Borrower.
4.2 Illegality. (a) If any Bank determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or any central bank or other Governmental Authority has asserted that
it is unlawful, for any Bank or its applicable Lending Office to make Offshore
Rate Loans, then, on notice thereof by such Bank to the Borrower through the
Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Borrower that the
circumstances giving rise to such determination no longer exist. Any Bank
notifying the Borrower of such a suspension of its obligation to make Offshore
Rate Loans shall provide to the Borrower reasonable documentation supporting
such obligation.
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Borrower shall, upon its receipt of notice of such fact
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.4, either on the last day
of the Interest Period thereof, if such Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if such Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Borrower is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan. Any Bank making such a demand for prepayment
of Offshore Rate Loans shall provide to the Borrower reasonable documentation
supporting such demand.
4.3 Increased Costs and Reduction of Return. (a) If any Bank
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation by any Governmental Authority having
jurisdiction over the Banks or (ii) the compliance by any Bank with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Loans or participating in Letters of Credit, or, in the case of
the Issuing Bank, any increase in the cost to the Issuing Bank of agreeing to
issue, issuing or maintaining any Letter of Credit or of agreeing to make or
making, funding or maintaining any unpaid drawing under any Letter of Credit,
then the Borrower shall be liable for, and shall from time to time, upon demand
(with a copy of such demand to be sent to the Agent), promptly (and in any event
within 30 days) pay to the Agent for the account of such Bank, additional
amounts as are sufficient to compensate such Bank for such increased costs. Any
Bank making such a demand for payment shall provide to the Borrower reasonable
documentation supporting such demand.
(b) If any 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
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with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank and (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy) determines that the
amount of such capital is increased as a consequence of its Commitments, loans,
credits or obligations under this Agreement, then, upon demand of such Bank to
the Borrower through the Agent, the Borrower shall promptly (and in any event
within 30 days) pay to such Bank, from time to time as specified by such Bank,
additional amounts sufficient to compensate such Bank for such increase. Any
Bank making such a demand for payment shall provide to the Borrower reasonable
documentation supporting such demand.
4.4 Funding Losses. The Borrower shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank sustains or incurs as
a consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(b) the failure of the Borrower to borrow, continue or convert a
Loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Borrower to make any prepayment in
accordance with any notice delivered under Section 2.6;
(d) the prepayment (including pursuant to Section 2.7) or other
payment (including after acceleration thereof) of an Offshore Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) the conversion under Section 2.4 of any Offshore Rate Loan to
a Base Rate Loan on a day that is not the last day of the relevant Interest
Period; including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans or from
fees payable to terminate the deposits from which such funds were obtained.
4.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed borrowing of
Offshore Rate Loans or conversion into or continuation of Offshore Rate Loans,
or that the Offshore Rate applicable pursuant to Section 2.9 for any requested
Interest Period with respect to a proposed borrowing of Offshore Rate Loans or
conversion into or continuation of Offshore Rate Loans does not adequately and
fairly reflect the cost to the Agent or any Bank of funding such Loans, the
Agent will promptly so notify the Borrower and each Bank and will provide such
Persons with reasonable documentation supporting such determination. Thereafter,
the obligation of the Banks to make or maintain Offshore Rate Loans hereunder
shall be suspended until the Agent shall notify the Borrower and the Banks that
the circumstances causing such suspension no longer exist. Upon receipt of such
notice, the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Borrower, in the amount
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specified in the applicable notice submitted by the Borrower, but such Loans
shall be made, converted or continued as Base Rate Loans instead of Offshore
Rate Loans.
4.6 Survival. The agreements and obligations of the Borrower in this
Article IV shall survive the payment of all other Obligations.
4.7 Notice of Claims. The Agent or the appropriate Bank will notify
the Borrower in writing of its claims under Article IV within 180 days after any
officer of the Agent or such Bank having principal responsibility for monitoring
the Borrower's performance of its obligations under the Loan Documents has
actual knowledge of facts giving rise to a claim under Article IV.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Agreement. The effectiveness of this Agreement is
subject to the condition that the Agent shall have received on or before the
Closing Date all of the following, in form and substance satisfactory to the
Agent and the Required Banks, and in sufficient copies for each Bank (other than
the Notes to be delivered pursuant to Section 5.1(a)):
(a) Credit Agreement and Notes. This Agreement and Notes executed
by the Borrower for Banks requesting Notes.
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of
the Borrower authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an Assistant
Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary
of the Borrower certifying as of the Closing Date the names,
titles and true signatures of the officers of the Borrower
authorized to execute, deliver and perform, as applicable, this
Agreement and all other Loan Documents to be delivered by it
hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the
bylaws of the Borrower as in effect on the Closing Date,
certified by the Secretary or Assistant Secretary of the Borrower
as of the Closing Date; and
(ii) a good standing and tax good standing certificate for
the Borrower from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation and a good
standing certificate from the State of Colorado;
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(d) Legal Opinions. Opinions of Shearman & Sterling and internal
counsel to the Borrower addressed to the Collateral Agent, the Agent and the
Banks, substantially in the forms of Exhibit D-1 and Exhibit D-2, respectively.
(e) Payment of Fees. Evidence of payment by the Borrower of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, including any such costs, fees and expenses arising under
or referenced in Sections 2.11 and 11.4, provided that the Borrower shall have
been given reasonably detailed bills for the fees and services of the Agent's
legal counsel at least one Business Day prior to the Closing Date if it is to
pay such fees and expenses on the Closing Date;
(f) Collateral Documents. The Collateral Documents, executed by
the Borrower, in appropriate form for recording, where necessary, together with:
(i) acknowledgment copies of all UCC-l financing statements
filed, registered or recorded to perfect the security interests
of the Collateral Agent for the benefit of the Banks and the
other Secured Parties, or other evidence satisfactory to the
Agent that there has been filed, registered or recorded all
financing statements and other filings, registrations and
recordings necessary and advisable to perfect the Liens of the
Collateral Agent for the benefit of the Banks and the other
Secured Parties in accordance with applicable law;
(ii) written advice relating to such Lien and judgment
searches as the Agent shall have requested, and such termination
statements or other documents as may be necessary to confirm that
the Collateral is subject to no other Liens in favor of any
Persons (other than Permitted Liens);
(iii) funds sufficient to pay any filing or recording tax or
fee in connection with any and all UCC-1 financing statements;
(iv) such consents, estoppels, subordination agreements and
other documents and instruments executed by landlords and tenants
where any Collateral as to which the Collateral Agent shall be
granted a Lien for the benefit of the Banks and the other Secured
Parties is stored, as reasonably requested by the Agent or any
Bank; and
(v) evidence that all other actions necessary or, in the
opinion of the Agent or the Banks, desirable to perfect and
protect the first priority Lien created by the Collateral
Documents, and to enhance the Collateral Agent's ability to
preserve and protect its interests in and access to the
Collateral, have been taken;
(g) Certificate. A certificate signed by a Responsible Officer of
the Borrower, dated as of the Closing Date, stating that:
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(i) the representations and warranties contained in Article
VI are true and correct on and as of such date, as though made on
and as of such date; and
(ii) no Default or Event of Default exists.
(h) Closing of 364-Day Credit Agreement. Evidence satisfactory to
the Agent that the 364-Day Credit Agreement shall have closed in accordance with
the terms thereof.
(i) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may reasonably request.
5.2 Conditions to All Credit Extensions. The obligation of each Bank to
make any Revolving Loan to be made by it (including its initial Revolving Loan)
or to continue or convert any Revolving Loan under Section 2.4 and the
obligation of the Issuing Bank to Issue any Letter of Credit (including the
initial Letter of Credit) is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date or Issuance Date:
(a) Notice. The Agent shall have received a Notice of Borrowing
or a Notice of Conversion/Continuation, as applicable or in the case of any
Issuance of any Letter of Credit, the Issuing Bank and the Agent shall have
received an L/C Application or L/C Amendment Application, as required under
Section 3.2;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date or Issuance Date with the
same effect as if made on and as of such Borrowing Date or
Conversion/Continuation Date or Issuance Date; and
(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or conversion or
Issuance;
(d) Cash Collateral. With regard to any Letter of Credit, such
Letter of Credit has been cash collateralized to the extent required by and in
accordance with this Agreement.
(e) No Material Adverse Effect. There has occurred since
September 24, 1999, no event or circumstance that has resulted or could
reasonably be expected to result in a Material Adverse Effect; and
(f) No Future Advance Notice. Neither the Collateral Agent, the
Agent nor any Bank shall have received from the Borrower any notice that any
Collateral Document will no longer secure on a first priority basis future
advances or future Loans to be made or extended under this Agreement.
(g) Representation and Warranty. Each Notice of Borrowing, Notice
of Conversion/Continuation and L/C Application or L/C Amendment Application
submitted by the
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Borrower hereunder shall constitute a representation and warranty by the
Borrower hereunder, as of the date of each such notice and as of each Borrowing
Date, Conversion/Continuation Date, or Issuance Date, as applicable, that the
conditions in this Section 5.2 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and each Bank that:
6.1 Corporate Existence and Power. The Borrower 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 own its assets, carry on its business
and to execute, deliver, and, in the case of the Borrower, perform its
obligations under the Loan Documents;
(c) is duly qualified, 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 or good
standing; and
(d) is in compliance with all Requirements of Law; except, in
each case referred to in 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.
6.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Borrower of this Agreement and each other Loan Document
to which the Borrower is party, have been duly authorized by all necessary
corporate action, and do not:
(a) contravene the terms of any of the Borrower's Organization
Documents;
(b) conflict with or result in any breach or contravention of any
document evidencing any Contractual Obligation to which the Borrower is a party
or any order, injunction, writ or decree of any Governmental Authority to which
the Borrower or its property is subject, except where such conflict, breach or
contravention would not cause a Material Adverse Effect or render any Loan
Document unenforceable against the Borrower or any other Person;
(c) violate any Requirement of Law except, in each case, where
any such contravention, conflict, breach, or violation would not cause a
Material Adverse Effect or render any Loan Document unenforceable against the
Borrower or any other Person; or
(d) result in the creation of any Lien, except for Liens in favor
of the Collateral Agent arising under the Collateral Documents.
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<PAGE> 52
6.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for filings in connection with the Liens granted
to the Collateral Agent under the Collateral Documents) is necessary or required
in connection with the execution, delivery or performance by, or current
enforcement against, the Borrower or any of its Material Subsidiaries of the
Agreement or any other Loan Document.
6.4 Binding Effect. This Agreement and each other Loan Document to
which the Borrower is a party constitute (or, when duly executed and delivered,
shall constitute) the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with their respective terms and claims
under this Agreement and each Loan Document will rank at least pari passu with
the claims of other unsecured creditors, 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.
6.5 Litigation. Except as specifically disclosed in Schedule 6.5,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Borrower, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against the Borrower, or
its Subsidiaries or any of their respective properties which:
(a) relates to this Agreement or any other Loan Document, or any
of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Borrower or its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or any order of any nature has been issued by
any court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document,
or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.6 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Borrower or from the grant or
perfection of the Liens of the Collateral Agent and the Banks on the Collateral.
Neither the Borrower nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under subsection 9.1(e).
6.7 ERISA Compliance. (a) Each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter from the IRS
and to the best knowledge of the Borrower, nothing has occurred which would
cause the loss of such qualification. The Borrower and each ERISA Affiliate has
made all required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan.
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<PAGE> 53
(b) There are no pending or, to the best knowledge of the
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect, except as specifically
disclosed in Schedule 6.5. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.11
and Section 8.6. Neither the Borrower nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock. To the extent that the Borrower
uses Loan proceeds to acquire shares of its own stock which is Margin Stock, the
Borrower intends to cause such acquired shares to be immediately retired.
6.9 Title to Properties; Liens. The Borrower and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as would not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date the property (real or personal, tangible or intangible) of the
Borrower and its Material Subsidiaries is subject to no Liens, other than
Permitted Liens.
6.10 Taxes. The Borrower and its Subsidiaries have filed or caused to
be filed all federal and other material tax returns and reports required to be
filed, and have paid or caused to be paid all federal and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except (i) those
which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP and (ii) those for
which the failure to pay would not have a Material Adverse Effect. To the
Borrower's knowledge, there is no proposed tax assessment against the Borrower
or any Subsidiary that would, if made, have a Material Adverse Effect.
6.11 Financial Condition. (a) The audited Consolidated financial
statements of the Borrower and its Subsidiaries for the fiscal year ended
December 25, 1998 (as set forth in the Borrower's Form 10-K filing dated March
6, 1999) and the unaudited Consolidated financial statements of the Borrower and
its Subsidiaries for the fiscal quarter ended September 24, 1999 (as set forth
in the Borrower's latest Form 10-Q filing dated November 5, 1999) and, in each
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<PAGE> 54
case, the related Consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as
otherwise expressly noted therein;
(ii) fairly present the financial condition of the Borrower
and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule 6.11,
show all material indebtedness and other liabilities, direct or
contingent, of the Borrower and its Consolidated Subsidiaries as
of the date thereof, including liabilities for taxes, material
commitments and Contingent Obligations.
(b) Since the end of the fiscal quarter ending September 24,
1999 there has been no Material Adverse Effect.
6.12 Environmental Matters. The Borrower conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and as
a result thereof the Borrower has reasonably concluded that, except as
specifically disclosed in Schedule 6.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.13 Collateral Documents. (a) The provisions of each of the
Collateral Documents are effective to create in favor of the Collateral Agent
for the benefit of the Banks and the other Secured Parties, a legal, valid and
enforceable security interest (subject only to Permitted Liens) in all right,
title and interest of the Borrower in the Collateral described therein.
(b) All representations and warranties of the Borrower contained
in the Collateral Documents are true and correct.
6.14 Regulated Entities. Neither the Borrower, nor any Person
controlling the Borrower, nor any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Borrower is not subject
to regulation under the Public Utility Holding Company Act of 1935, the federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other federal or state statute or regulation limiting its ability to incur
Indebtedness.
6.15 Copyrights, Patents, Trademarks and Licenses, Etc. The Borrower
or its Subsidiaries own or are licensed or otherwise have the right to use all
of the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective material businesses, without conflict with the
rights of any other Person. To the best knowledge of the Borrower, no slogan or
other advertising device, product, process, method, substance, part or other
material now
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<PAGE> 55
employed, or now contemplated to be employed, by the Borrower or any Material
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 6.5, no claim or litigation regarding any of
the foregoing is pending or, to the best knowledge of the Borrower, threatened,
and no patent, invention, device, application, principle or any statute, law,
rule, regulation, standard or code is pending or, to the knowledge of the
Borrower, proposed, which, in either case, could reasonably be expected to have
a Material Adverse Effect.
6.16 Subsidiaries. The Borrower (a) has no U.S. Subsidiaries other
than those specifically disclosed in part (a) of Schedule 6.16 hereto as of the
Closing Date and (b) has no equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of Schedule 6.16
except, in each case, for Subsidiaries created and equity investments made after
the Closing Date and otherwise permitted by this Agreement.
6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Borrower and its Material Subsidiaries are insured with, to
the best knowledge of the Borrower, financially sound and reputable insurance
companies not Affiliates of the Borrower, in such amounts, with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the
Borrower or such Material Subsidiary operates.
6.18 Full Disclosure. None of the representations or warranties made
by the Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
written exhibit, report, statement or certificate furnished by or on behalf of
the Borrower or any Subsidiary in connection with the Loan Documents (including
the offering and disclosure materials delivered by or on behalf of the Borrower
to the Banks prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered;
provided that nothing in this Section 6.18 shall apply to any projections,
forward-looking information or other similar or related information furnished by
or on behalf of the Borrower or any Subsidiary in connection with the Loan
Documents.
6.19 Projections. All projections, forward-looking information or
other similar or related information furnished by or on behalf of the Borrower
or any Subsidiary in connection with the Loan Documents were prepared in good
faith on the basis of the assumptions stated therein, which assumptions were
fair in the light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the Borrower or such
Subsidiary's best estimate of its future financial performance, operations and
results.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Banks waive compliance in writing:
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<PAGE> 56
7.1 Financial Statements. The Borrower shall deliver to the Agent, in
form and detail satisfactory to the Agent and the Required Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 120 days after the
end of each fiscal year, a copy of the audited Consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such year and the related
Consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of
PricewaterhouseCoopers LLP or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state that such
Consolidated financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years. Such opinion shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any material
portion of the Borrower's or any Subsidiary's records; and
(b) as soon as available, but not later than 55 days after the
end of each of the first three fiscal quarters of each fiscal year, a copy of
the unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as
of the end of such quarter and the related Consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the results of
operations of the Borrower and the Subsidiaries.
7.2 Certificates; Other Information. The Borrower shall furnish to the
Agent with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(b) promptly, copies of all financial statements and reports that
the Borrower sends to its shareholders, and copies of all financial statements
and regular, periodical or special reports (including Forms 10-K, 10-Q and 8-K)
that the Borrower or any Subsidiary may make to, or file with, the SEC; and
(c) promptly, such additional information regarding the business,
financial or corporate affairs of the Borrower or any Subsidiary as the Agent,
at the request of any Bank, may from time to time reasonably request.
7.3 Notices. The Borrower shall promptly notify the Agent and each
Bank:
(a) after a Responsible Officer of the Borrower knows or has
reason to know of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance for which it is reasonably
foreseeable that such event or circumstance will become a Default or Event of
Default;
(b) after a Responsible Officer of the Borrower or any ERISA
Affiliate knows or has reason to know that any material ERISA Event has
occurred, with a statement of a
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<PAGE> 57
Responsible Officer of the Borrower describing such ERISA Event and the action,
if any, that the Borrower or such ERISA Affiliate proposes to take with respect
thereto;
(c) of any material change in accounting policies or financial
reporting practices by the Borrower or any of its Consolidated Subsidiaries,
except for changes in financial reporting practices mandated by any Governmental
Authority or accounting standards board;
(d) of any matter that has resulted or could reasonably be
expected to result in a Material Adverse Effect, including (i) any breach or
non-performance of, or any default under, any Contractual Obligation of the
Borrower or any of its Subsidiaries which has resulted or could reasonably be
expected to result in a Material Adverse Effect; (ii) any dispute, litigation or
proceeding which may exist at any time between the Borrower or any of its
Subsidiaries and any Governmental Authority which has resulted or could
reasonably be expected to result in a Material Adverse Effect; and (iii) any
investigation or suspension by any Governmental Authority with respect to the
Borrower or any Subsidiary of which the Borrower or such Subsidiary has
knowledge, which investigation or suspension has resulted or could reasonably be
expected to result in a Material Adverse Effect;
(e) of the commencement of, or any material development in, any
litigation or proceeding to which the Borrower or any Subsidiary is a party (i)
which, if adversely determined, would reasonably be expected to have a Material
Adverse Effect, or (ii) in which the relief sought is an injunction or other
stay of the performance of this Agreement or any Loan Document; and
(f) of any other litigation or proceeding affecting the Borrower
or any of its Subsidiaries which the Borrower would be required to report to the
SEC pursuant to the Exchange Act, within four days after reporting the same to
the SEC.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Borrower or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 7.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
7.4 Preservation of Corporate Existence, Etc. The Borrower shall, and
shall cause each Material Subsidiary to preserve and maintain in full force and
effect its corporate existence and good standing under the laws of its state or
jurisdiction of incorporation and preserve and maintain in full force and effect
all governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
(a) if in the reasonable business judgment of the Borrower or such Material
Subsidiary, it is in its best economic interest not to preserve or maintain such
rights, privileges, qualification, permits, licenses or franchises and (b) if no
Material Adverse Effect could reasonably be expected to result.
7.5 Maintenance of Property. The Borrower shall maintain, and shall
cause each Material Subsidiary to maintain, and preserve all its material
property (including, without
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limitation, equipment) which is used or useful in its business in good working
order and condition, ordinary wear and tear excepted and make all necessary
repairs thereto and renewals and replacements thereof except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect. The
Borrower and each Material Subsidiary shall use the standard of care typical in
the industry in the operation and maintenance of its facilities.
7.6 Insurance. In addition to insurance requirements set forth in the
Collateral Documents, the Borrower shall maintain, and shall cause each Material
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business, of such types and in
such amounts as are customarily carried under similar circumstances by such
other Persons.
7.7 Payment of Obligations. The Borrower shall, and shall cause each
Material Subsidiary to, pay and discharge before the same shall become
delinquent:
(a) all 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 in accordance
with GAAP are being maintained by the Borrower or such Material Subsidiary; and
(b) all lawful claims which, if unpaid, would by law become a
Lien upon its property.
7.8 Compliance with Laws. The Borrower shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including Environmental laws and 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.
7.9 Compliance with ERISA. The Borrower shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Borrower shall
maintain and shall cause each Material Subsidiary to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and the
assets and business of the Borrower and such Material Subsidiary. During the
continuance of any Event of Default, the Borrower shall permit, and shall cause
each Subsidiary to permit, representatives and independent contractors of the
Agent or any 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, all at the expense of each the Borrower
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and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to each the Borrower.
7.11 Use of Proceeds. The Borrower shall use the proceeds of the Loans
for working capital and other general corporate purposes (including repurchases
of its own stock) not in contravention of any Requirement of Law or of any Loan
Document.
7.12 Disclosure; Further Assurances. (a) The Borrower shall ensure
that all written information, exhibits and reports furnished to the Agent and
the Banks by or on behalf of the Borrower and concerning the Borrower do not and
will not contain any untrue statement of a material fact and do not and will not
omit to state any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made,
and will promptly disclose to the Agent and the Banks and correct any material
defect or error that may be discovered therein or in any Loan Document or in the
execution, acknowledgement or recordation thereof; provided that nothing in this
Section 7.12(a) shall apply to any projections, forward-looking information or
other similar or related information furnished by or on behalf of the Borrower
or any Subsidiary in connection with the Loan Documents.
(b) The Borrower shall ensure that all projections, forward
- -looking information or other similar or related information furnished by or on
behalf of the Borrower in connection with the Loan Documents are prepared in
good faith on the basis of the assumptions stated therein, which assumptions are
fair in the light of conditions existing at the time of delivery of such
forecasts, and represent, at the time of delivery, the Borrower's or such
Subsidiary's best estimate of its future financial performance, operations and
results.
(c) Promptly upon request by the Collateral Agent, the Agent, the
Required Banks or the Directing Banks, as the case may be, the Borrower shall
do, execute, acknowledge, deliver, record, re-record, file, re-file, register
and re-register, any and all such further acts, security agreements, financing
statements and continuations thereof, termination statements, notices of
security interest, certificates, assurances and other instruments the Collateral
Agent, the Agent or such Banks, as the case may be, may reasonably require from
time to time in order (i) to carry out more effectively the purposes of this
Agreement or any other Loan Document, (ii) to subject to the Liens created by
any of the Collateral Documents any of the properties, rights or interests
covered by any of the Collateral Documents, (iii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and the
Liens intended to be created thereby, and (iv) to better assure, convey, grant,
assign, transfer, preserve, protect and confirm to the Collateral Agent, the
Agent and Banks the rights granted or now or hereafter intended to be granted to
the Collateral Agent, the Agent or the Banks under any Loan Document or under
any other document executed in connection therewith.
(d) The Borrower shall provide such other documentation and
cooperation as the Agent or the Required Banks reasonably request in connection
with the exercise by the Agent and the Banks of their rights and remedies under
the Loan Documents.
7.13 Financial Covenants. The Borrower will, unless the Required Banks
shall otherwise consent in writing:
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(a) Maintenance of Consolidated Tangible Net Worth. Maintain as
at the end of each fiscal quarter a Consolidated Tangible Net Worth of the
Borrower and its Subsidiaries of not less than at any time the amount that is
equal to (A) $800,000,000, plus (B) 75% of Consolidated Net Income (excluding
any Consolidated Net Loss) of the Borrower and its Subsidiaries earned in each
fiscal quarter ended after December 31, 1999, plus (C) 75% of the amount of all
proceeds (net of costs and expenses) received pursuant to the issuance of any
equity securities issued by the Borrower after December 31, 1999 (excluding
proceeds of any issuance made for the purposes of fulfilling a stock purchase
plan or compensatory option plan for the employees or directors of the Borrower
or any Subsidiary), plus (D) 100% of the face amount of any Subordinated
Indebtedness that is converted into stock of the Borrower after December 31,
1999.
(b) Consolidated Net Income. (i) Not permit the Consolidated Net
Loss for any fiscal quarter to be greater than (A) $42,500,000 for the fourth
fiscal quarter 1999, and (B) $35,000,000 for the first fiscal quarter 2000; and
(ii) not permit the Consolidated Net Loss or Consolidated Operating Loss to be
greater than $0 for each fiscal quarter ending thereafter. In determining the
Borrower's compliance with this subsection 7.13(b), cumulative pre-tax non-cash
restructuring charges and write-offs and write-downs of assets classified as
non-cash assets of up to $50,000,000 in the fourth fiscal quarter 1999, first
fiscal quarter 2000 and second fiscal quarter 2000 shall be added back to
Consolidated Net Loss or Consolidated Operating Loss, as the case may be, to the
extent deducted therefrom.
(c) Consolidated Total Leverage Ratio. Not permit the
Consolidated Total Leverage Ratio of the Borrower and its Subsidiaries as
determined at the end of each fiscal quarter during the measurement periods set
forth below to exceed the correlative ratio set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
fiscal year-end 1999 through second fiscal quarter-end 2000 42.5%
third fiscal quarter-end 2000 through fiscal year-end 2000 40.0%
Thereafter 35.0%
</TABLE>
(d) Adjusted Quick Ratio. Maintain a Consolidated Adjusted Quick
Ratio for the Borrower and its Subsidiaries as determined at the end of each
fiscal quarter during each of the measurement periods set forth below at least
equal to the correlative ratio for such period as set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
fiscal year-end 1999 0.90 : 1.00
first fiscal quarter-end 2000 0.80 : 1.00
second fiscal quarter-end 2000 0.85 : 1.00
third fiscal quarter-end 2000 0.90 : 1.00
fiscal year-end 2000 and thereafter 1.00 : 1.00
</TABLE>
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(e) Senior Funded Debt. Not permit the Senior Funded Debt of the
Borrower and its Subsidiaries to exceed (i) $500,000,000 at any time during the
period from the Closing Date through first fiscal quarter-end 2000, (ii)
$475,000,000 at any time during the period from the commencement of the second
fiscal quarter 2000 through third fiscal quarter-end 2000; and (iii)
$450,000,000 at any time thereafter.
7.14 Patents and Permits. The Borrower will, and will cause each of its
Subsidiaries to, (i) maintain all permits, licenses, consents or other approvals
of any Government Authority or any Person and (ii) maintain in full force and
effect and protect patents, trademarks, tradenames or other intellectual
property rights, the failure of which to maintain or protect would result in a
Material Adverse Effect.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Banks waive compliance in writing:
8.1 Limitation on Liens. The Borrower shall not, and shall not suffer
or permit any Material Subsidiary to, directly or indirectly, make, create,
incur, assume or suffer to exist any Lien upon or with respect to any part of
its property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) Liens for taxes, assessments or governmental charges or
levies, and to the extent not past due or to the extent contested, in good
faith, by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;
(b) Liens imposed by law, such as materialman's, mechanic's,
carrier's, workman's, and repairman's Liens and other similar Liens arising in
the ordinary course of business which relate to obligations which are not
overdue for a period of more than 45 days or which are being contested in good
faith, by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;
(c) pledges or deposits in the ordinary course of business to
secure nondelinquent obligations under workman's compensation or unemployment
laws or similar
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legislation or to secure the performance of leases or trade contracts entered
into in the ordinary course of business or of public or nondelinquent statutory
obligations, bids, or appeal bonds;
(d) Liens upon or in any property acquired or held by the
Borrower or any of its Subsidiaries to secure the purchase price or construction
costs (and, to the extent financed, sales and excise taxes, delivery and
installation costs and other related expenses) of such property or to secure
indebtedness incurred solely for the purpose of financing or refinancing the
acquisition or construction of any such property to be subject to such Liens, or
Liens existing on any such property at the time of acquisition, or extensions,
renewals or replacements of any of the foregoing for the same or a lesser
principal amount, provided that no such Lien shall extend to or cover any
property other than the property being acquired or constructed and no such
extension, renewal or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or replaced;
(e) Liens consisting of the interest of a lessor upon any assets
subject to a Capital Lease and securing payment of the obligations arising under
such Capital Lease and provided that such Capital Lease is otherwise permitted
hereunder;
(f) zoning restrictions, easements, licenses, landlord's Liens or
restrictions on the use of any real property occupied by the Borrower or its
Subsidiaries, which do not materially impair the use of such property in the
operation of the business of the Borrower or any of its Subsidiaries or the
value of such property for the purpose of such business;
(g) Liens associated with judgments and awards to the extent such
judgments and awards do not create an Event of Default under subsection 9.1(i)
hereof;
(h) Liens in favor of the issuer of a documentary commercial
letter of credit, provided, that such Liens are limited exclusively to the goods
covered by such letter of credit;
(i) Liens listed on Schedule 8.1(i) securing Indebtedness
outstanding on the Closing Date;
(j) Liens consisting of the interest of a lessor under Operating
Leases made in the ordinary course of business, or existing on property leased
by the Borrower or its Subsidiaries under an Operating Lease in the ordinary
course of business;
(k) Liens securing borrowings by the Borrower against life
insurance policies under which it is the beneficiary in an aggregate amount not
to exceed $40,000,000;
(l) Liens in connection with the Borrower's credit card
processing program in an aggregate amount not to exceed $20,000,000;
(m) Consensual Liens not described in subclauses (a) through (l)
above that: (i) relate to liabilities other than borrowed money debt (including
Liens incurred in connection with sales and leasebacks of the Borrower's assets)
and securing obligations not in excess of $30,000,000 in the aggregate at any
time for all such Liens for the Borrower and its Subsidiaries together, or (ii)
secure obligations not in excess of $15,000,000 in the aggregate at
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any time for all such Liens for the Borrower and its Subsidiaries together;
provided that no Liens otherwise permitted by clauses (i) and (ii) shall be
permitted against Receivables or inventories of the Borrower or its
Subsidiaries; and provided further that the obligations secured by Liens
permitted pursuant to clauses (i) and (ii) shall at no time, in the aggregate,
exceed $30,000,000;
(n) Liens with respect to collateral (whether in cash, letters of
credit or other investments) provided in connection with the Multicurrency Note
Purchase Facility; provided that at no time shall the collateral with respect to
the Multicurrency Note Purchase Facility exceed, in the aggregate, $140,000,000;
(o) Liens on the assets of the Borrower constituting Collateral
securing the obligations of the Borrower under the 364-Day Credit Agreement,
provided that such Liens rank pari passu at all times with the Liens of the
Agent and the Banks on the Collateral; and
(p) Liens arising solely by virtue of any statutory or common law
provision or any depository agreement entered into by the Borrower or any
Subsidiary in the ordinary course of business, in each case 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.
8.2 Disposition of Assets. The Borrower shall not, and shall not suffer
or permit any Material Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out, obsolete or
surplus equipment or other assets not practically usable in the business of the
Borrower, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions of assets in the ordinary course of business by
the Borrower or any of its Subsidiaries to the Borrower or any other of its
Subsidiaries pursuant to reasonable business requirements;
(d) dispositions in connection with a sale/leaseback transaction
involving real or personal property of the Borrower or its Subsidiaries;
provided, that any such sale/leaseback transaction is otherwise permitted under
this Agreement;
(e) dispositions not otherwise permitted hereunder; provided,
that (i) at the time of any disposition, no Event of Default shall exist or
shall result from such disposition, and (ii) the aggregate net book value of all
assets so sold by the Borrower and its Subsidiaries, together, shall not exceed
in any fiscal year an amount equal to 5% of Consolidated Total Assets of the
Borrower for such fiscal year; and
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(f) dispositions listed on Schedule 8.2.
8.3 Consolidations and Mergers. The Borrower shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or acquire all or substantially all of the
assets of, any Person, except:
(a) any Subsidiary may merge with the Borrower, provided that the
Borrower shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, 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;
(b) any Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Borrower or another
Wholly-Owned Subsidiary; and
(c) to the extent permitted by Section 8.2.
Nothing in this Section 8.3 shall prevent the Borrower or any of its
Subsidiaries from merging with, or acquiring all or substantially all of the
assets of any Person if (i) with respect to a merger, the Borrower or such
Subsidiary party to such merger is the surviving entity of such merger, and (ii)
the total assets (including securities and all other assets) so acquired,
together with the total assets for all such transactions occurring after the
Closing Date (in each case as measured on the effective date of such merger or
acquisition), do not exceed in any fiscal year an amount greater than 15% of the
Consolidated Tangible Net Worth of the Borrower and its Subsidiaries for such
fiscal year and do not exceed in the aggregate since October 23, 1997,
$500,000,000, and (iii) the merger or acquisition involves an entity engaged in
a similar business to that of the Borrower or in a business within the
Borrower's strategic plans; and (iv) no Default or Event of Default has occurred
or would occur from such merger or acquisition.
If any Acquisition or Investment is hostile, no proceeds of any Loan
or Letter of Credit may be used, directly or indirectly, therefor ("hostile" for
purposes of this sentence meaning the prior effective written consent of the
board of directors or equivalent governing body of the acquiree is not
obtained).
8.4 Loans and Investments. The Borrower shall not purchase or acquire,
or suffer or permit any Material Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any advance, loan, extension of credit or capital contribution to or any other
investment in, any Person including any Affiliate of the Borrower (together, but
excluding Acquisitions, "Investments"), except for:
(a) Investments held by the Borrower or any Material Subsidiary
in the form of cash equivalents;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
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(c) extensions of credit by the Borrower to any of its
Subsidiaries or by any of its Subsidiaries to another of its Subsidiaries;
(d) (i) Investments in any distributor of the Borrower's products
or any supplier of raw materials or services useful to the business of the
Borrower and its Subsidiaries (other than the acquisition of such Person by the
Borrower or its Subsidiaries), or in any partnership or corporation with others,
(ii) Joint-Ventures and (iii) other Investments, provided, that (A) the book
value (as to the Borrower) of any such Investment or Joint-Venture, together
with such value of all prior Investments or Joint-Ventures described in clauses
(i) through (iii) of this Section 8.4(d) undertaken by the Borrower and its
Subsidiaries since October 23, 1997, shall not exceed at the time of such
Investment or Joint Venture, 15% of Consolidated Tangible Net Worth as
calculated as of the most recent fiscal quarter prior to such Investment or
Joint-Venture, (B) such Investments and Joint-Ventures are undertaken in
accordance with all applicable Requirements of Law and (C) immediately prior to
and after giving effect thereto, no Default or Event of Default shall exist or
be continuing;
(e) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations;
(f) Investments complying with the investment policy for the
Borrower and its Subsidiaries described on Schedule 8.4(f), as such schedule may
be amended from time to time;
(g) contributions, loans or advances to, or guarantees of, the
Borrower or any Subsidiary in connection with the Multicurrency Note Purchase
Facility;
(h) loans to employees of the Borrower or any of its Subsidiaries
(i) not to exceed $20,000,000, exclusive of any loans permitted pursuant to
clause (ii), (valued without regard to any write-down due to uncollectability)
at any one time outstanding for all such loans to all employees of the Borrower
and its Subsidiaries in the aggregate, or (ii) in the ordinary course of
business with respect to travel and relocation expenses; and
(i) repurchases of shares of the Borrower's stock.
8.5 Transactions with Affiliates. The Borrower shall not, and shall
not suffer or permit any Material Subsidiary to, enter into any transaction with
any Affiliate of the Borrower, except (i) transactions upon fair and reasonable
terms no less favorable to the Borrower or such Material Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower or such Material Subsidiary and (ii) transactions
between Material Subsidiaries of the Borrower and transactions between the
Borrower and its Material Subsidiaries on terms fair and reasonable to all
interested parties and undertaken by all such parties in good faith and in the
ordinary course of business.
8.6 Use of Proceeds. The Borrower shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, for any purpose that would require the Agent or
any Bank to deliver or obtain any certification under, or to comply with the
margin requirements or other provisions of, Regulation T, U or X of the FRB.
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8.7 Contingent Obligations. The Borrower shall not, and shall not
suffer or permit any Material Subsidiary to, create, incur, assume or suffer to
exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course
of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations in favor of BofA or any Affiliate of
BofA including, without limitation, in the form of recourse to the Borrower or
guaranties by the Borrower in connection with the Multicurrency Note Purchase
Facility; (d) Contingent Obligations of the Borrower and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.7(d) and any renewals,
extensions or modifications thereof so long as the aggregate amount of such
Contingent Obligations does not increase from the amount existing on the Closing
Date;
(e) Contingent Obligations incurred in the ordinary course of
business and not exceeding at any time $45,000,000 in the aggregate in respect
of the Borrower and its Subsidiaries together;
(f) Contingent Obligations arising under the Loan Documents;
(g) Contingent Obligations arising in connection with
Indebtedness of any Subsidiary of the Borrower, provided, that such Indebtedness
is otherwise permitted by this Credit Agreement; and
(h) Contingent Obligations of the Borrower pursuant to guaranties
in favor of Leasetec Corporation and other leasing partners (or any of their
successors or assigns) so long as the aggregate amount thereof does not exceed
at any time $50,000,000.
8.8 Restricted Payments. The Borrower shall not, and shall not suffer
or permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, except that any
Subsidiary may declare and make dividend payments or other distributions on
account of any shares of any class of its capital stock to another Subsidiary or
to the Borrower and the Borrower may (so long as there is no Default or Event of
Default) declare and make dividend payments or other distributions payable
solely in its common stock.
8.9 ERISA. The Borrower shall not, and shall not suffer or permit any
of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably expected to result in liabilities of the Borrower
in an aggregate amount in excess of $10,000,000; or (b) engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Change in Business. The Borrower shall not make any material
change in the nature of its business as conducted on the Closing Date.
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8.11 Accounting Changes. The Borrower shall not and shall not suffer or
permit any Material Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of each the Borrower or any Material Subsidiary.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Event of Default. Any of the following events shall constitute an
"Event of Default":
(a) Non-Payment. The Borrower fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan or of any L/C
Obligation, or (ii) within two Business Days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or warranty by
the Borrower made or deemed made herein, in any other Loan Document, or which is
contained in any certificate, document or financial or other statement by the
Borrower, or any Responsible Officer, furnished at any time under this
Agreement, or in or under any other Loan Document, is incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Borrower (i) fails to perform or
observe any term, covenant or agreement contained in Sections 7.3, 7.4, 7.11 or
7.13 or in Article VIII; or (ii) fails to perform or observe any term, covenant
or agreement contained in Sections 7.1, 7.2 or 7.9 and such failure shall
continue for five Business Days; or
(d) Other Defaults. The Borrower fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan Document,
and such default shall continue unremedied for a period of 30 days after the
earlier of (i) the date upon which a Responsible Officer knew or reasonably
should have known of such failure or (ii) the date upon which written notice
thereof is given to the Borrower by the Agent or any Bank; or
(e) Cross-Default. The Borrower or any Subsidiary (i) fails to
make any payment in respect of any Indebtedness or Contingent Obligation (other
than Indebtedness or Contingent Obligations hereunder), having an aggregate
principal amount (including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $20,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure shall
continue for five Business Days; 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, if the effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable
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prior to its stated maturity, or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Borrower or any
Material Subsidiary (i) ceases or fails to be solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. Any involuntary Insolvency
Proceeding is commenced or filed against the Borrower or any Material
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Borrower's or any
Material Subsidiary's properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Borrower or any Material Subsidiary
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Borrower or any Material
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business;
or
(h) ERISA. An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Borrower under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $20,000,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $20,000,000; or (iii) the Borrower or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$20,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Borrower or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $20,000,000 or more, and the same shall remain
unvacated and unstayed pending appeal for a period of 30 consecutive days after
the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Borrower or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 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) Change of Control. There occurs any Change of Control; or
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(l) Adverse Change. There occurs a Material Adverse Effect; or
(m) Collateral. (i) any provision of any Collateral Document
shall for any reason cease to be valid and binding on or enforceable against the
Borrower or the Borrower shall so state in writing or bring an action to limit
its obligations or liabilities thereunder; or (ii) any Collateral Document shall
for any reason (other than pursuant to the terms thereof) cease to create a
valid security interest in any material portion of the Collateral purported to
be covered thereby or such security interest shall for any reason cease to be a
perfected and first priority security interest in any material portion of the
Collateral subject only to Permitted Liens.
9.2 Remedies. If any Event of Default occurs and is continuing, the
Agent shall, at the request of, or may, with the consent of, the Required Banks,
(a) declare the obligation of each Bank to make Loans and the
obligation of the Swingline Bank to make Swingline Loans, and any obligation of
the Issuing Bank to Issue Letters of Credit to be terminated, whereupon such
obligations and such Bank's Commitment shall be terminated;
(b) 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, 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 and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 9.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Agent, the Issuing Bank or any Bank.
9.3 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.
9.4 Certain Financial Covenant Defaults. In the event that, after
taking into account any extraordinary charge to earnings taken or to be taken as
of the end of any fiscal period of the Borrower (a "Charge"), and if solely by
virtue of such Charge, there would exist an Event of Default due to the breach
of any of Section 7.13 as of such fiscal period end date, such Event of Default
shall be deemed to arise upon the earlier of (a) the date after such fiscal
period end date on which the Borrower announces publicly it will take, is taking
or has taken such
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Charge (including an announcement in the form of a statement in a report filed
with the SEC) or, if such announcement is made prior to such fiscal period end
date, the date that is such fiscal period end date, and (b) the date the
Borrower delivers to the Agent its audited annual or unaudited quarterly
financial statements in respect of such fiscal period reflecting such Charge as
taken.
ARTICLE X
THE AGENT
10.1 Appointment and Authorization; "Agent". (a) Each Bank hereby
irrevocably (subject to Section 10.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Agent may agree at the
request of the Required Banks to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the benefits and
immunities (i) provided to the Agent in this Article X with respect to any acts
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent", as used in this Article X, included the Issuing Bank with
respect to such acts or omissions, and (ii) as additionally provided in this
Agreement with respect to the Issuing Bank.
10.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
10.3 Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its
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own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Banks for any recital, statement, representation or
warranty made by the Borrower or any Subsidiary or Affiliate of the Borrower, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value of or title to any
Collateral, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
the Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Bank to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of the
Borrower or any of the Borrower's Subsidiaries or Affiliates.
10.4 Reliance by Agent. (a) The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent (or made available) by the Agent to such
Bank for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to such Bank,
unless an officer of the Agent responsible for the transactions contemplated by
the Loan Documents shall have received notice from such Bank prior to the
Closing Date specifying its objection thereto and such objection shall not have
been withdrawn by notice to the Agent to that effect on or prior to the Closing
Date.
10.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Banks in
accordance with Article IX; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such
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action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of the
Banks.
10.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries, the value of and title to any collateral, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the Agent,
the Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of the Borrower
which may come into the possession of any of the Agent-Related Persons.
10.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), in
accordance with the Banks' Pro Rata Shares from and against any and all
Indemnified Liabilities; provided, however, that no Bank shall be liable for the
payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities to the extent that they are found by a final decision of a court of
competent jurisdiction to have resulted solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
10.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Borrower and its
Subsidiaries and Affiliates (including, without limitation, as "Agent" and as a
"Bank" under the 364-Day Credit Agreement and as "Collateral Agent" under the
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Security Agreement) in each case, as though BofA were not the Agent, the
Swingline Bank or the Issuing Bank hereunder and without notice to or consent of
the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its
Affiliates may receive information regarding the Borrower or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Borrower or such Subsidiary) and acknowledge that the Agent shall
be under no obligation to provide such information to them. With respect to its
Loans, BofA shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though it were not the Agent, the
Swingline Bank or the Issuing Bank.
10.9 Successor Agent. The Agent may, and at the request of the
Required Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Required Banks shall appoint from among
the Banks a successor agent for the Banks. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Borrower, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article X and Sections 11.4 and 11.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Banks appoint a successor agent as provided for
above.
Notwithstanding the foregoing, however, BofA may not be removed as the
Agent at the request of the Required Banks unless BofA shall also simultaneously
be replaced as "Issuing Bank" and "Swingline Bank" hereunder pursuant to
documentation in form and substance reasonably satisfactory to BofA (which
documentation, among other things, will deal with replacement and cancellation
of all outstanding Letters of Credit and the payment of all outstanding
Swingline Loans in a manner satisfactory to BofA).
10.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees to deliver to the Agent and the Borrower:
(i) if such Bank claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form W-8BEN before
the payment of any interest or fees in the first calendar year
and before the payment of any interest or fees in each third
succeeding calendar year during which interest or fees may be
paid under this Agreement;
(ii) if such Bank claims that interest or fees paid under
this Agreement is exempt from United States withholding tax
because it is
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effectively connected with a United States trade or business of
such Bank, two properly completed and executed copies of IRS Form
W-8ECI before the payment of any interest or fees is due in the
first taxable year of such Bank and in each succeeding taxable
year of such Bank during which interest or fees may be paid under
this Agreement; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent and the Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Bank sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Borrower owing to such Bank, such Bank
agrees to notify the Agent and the Borrower of the percentage amount in which it
is no longer the beneficial owner of Obligations of the Borrower owing to such
Bank. To the extent of such percentage amount, the Agent and the Borrower will
treat such Bank's IRS Form W-8BEN as no longer valid.
(c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form W-8ECI with the Agent and the Borrower sells, assigns,
grants a participation in, or otherwise transfers all or part of the Obligations
of the Borrower to such Bank, such Bank agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Borrower (or if not withheld by the Borrower the Agent) may
withhold from any interest payment to such Bank, or to the Agent on behalf of
such Bank, an amount equivalent to the applicable withholding tax after taking
into account such reduction. However, if the forms or other documentation
required by subsection (a) of this Section are not delivered to the Agent and
the Borrower, then the Borrower (or the Agent, if not withheld by the Borrower)
may withhold from any interest payment to such Bank, or to the Agent on behalf
of such Bank, not providing such forms or other documentation an amount
equivalent to the applicable withholding tax imposed by Sections 1441 and 1442
of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Borrower or the Agent did
not properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Borrower or the Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify the Borrower
or the Agent fully for all amounts paid, directly or indirectly, by the Borrower
or the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Borrower or the Agent under this Section, together with all costs and expenses
(including Attorney Costs), provided that such Bank shall not be so liable to
the
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Agent or the Borrower, as the case may be, to the extent such otherwise
indemnified amounts result from the Agent's own gross negligence or willful
misconduct (in the case of amounts payable to the Agent under this subsection)
or the Borrower's own gross negligence or willful misconduct (in the case of
amounts payable to the Borrower under this subsection). The obligation of the
Banks under this subsection shall survive the payment of all Obligations and the
resignation or replacement of the Agent.
10.11 Collateral Matters. (a) The Collateral Agent is authorized
on behalf of all the Banks, without the necessity of any notice to or further
consent from the Banks, from time to time to take any action with respect to any
Collateral or the Collateral Documents which may be necessary to perfect and
maintain perfected the security interest in and Liens upon the Collateral
granted pursuant to the Collateral Documents.
(b) The Banks irrevocably authorize the Collateral Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Collateral Agent upon any Collateral (i) upon termination of the Commitments and
payment in full of all Loans and all other Obligations known to the Collateral
Agent and payable under this Agreement or any other Loan Document; (ii)
constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; (iii) constituting property
in which the Borrower owned no interest at the time the Lien was granted or at
any time thereafter; (iv) constituting property leased to the Borrower in a
transaction permitted under this Agreement; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness evidenced
thereby has been paid in full; or (vi) if approved, authorized or ratified in
writing by the Required Banks, the Directing Banks or all the Banks, as the case
may be, as provided in subsection 11.1(f). Upon request by the Collateral Agent
at any time, the Banks will confirm in writing the Collateral Agent's authority
to release particular types or items of Collateral pursuant to this subsection
10.11(b), provided that the absence of any such confirmation for whatever reason
shall not affect the Collateral Agent's rights under this Section 10.11.
(c) Each Bank agrees with and in favor of each other (which
agreement shall not be for the benefit of the Borrower or any Subsidiary) that
the Borrower's obligation to such Bank under this Agreement and the other Loan
Documents is not and shall not be secured by any real property collateral now or
hereafter acquired by such Bank.
10.12 Co-Agents. None of the Banks identified in the preamble or
signature pages of this Agreement as a "co-agent" shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the foregoing, none of
the Banks so identified as a "co-agent" or "syndication agent" shall have or be
deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges
that it has not relied, and will not rely, on any of the Banks so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.
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ARTICLE XI
MISCELLANEOUS
11.1 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 Borrower or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Required Banks
(or by the Agent at the written request of the Required Banks) and the Borrower
and acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Banks and the Borrower and acknowledged
by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank or the
Swingline Commitment of the Swingline Bank;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder;
(e) amend this Section, or Section 2.15, or any provision herein
providing for consent or other action by all Banks; or
(f) release all or substantially all of the Collateral except as
otherwise may be provided herein or in the Collateral Documents or except where
the consent of the Required Banks or the Directing Banks only is specifically
provided for; and
provided, further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Required Banks or all
the Banks, as the case may be, affect the rights or duties of the Issuing Bank
under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, and (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Agent in addition to the Required
Banks or all the Banks, as the case may be, affect the rights or duties of the
Agent under this Agreement or any other Loan Document.
11.2 Notices. (a) All notices, requests, consents, approvals,
waivers and other communications shall be in writing (including, unless the
context expressly otherwise provides, by facsimile transmission, provided that
any matter transmitted by the Borrower by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 11.2, and (ii) shall be followed promptly by delivery of a hard copy
original thereof)
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and mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 11.2; or, as directed to the Borrower or the Agent, to such
other address as shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the Borrower and the
Agent. All notices to the Borrower shall be sent to Storage Technology
Corporation, One StorageTek Drive, Louisville, CO 80028-4302, Attention:
Assistant Treasurer, Telecopy No.: (303) 673-2837.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mails, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent shall not be effective
until actually received by the Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing Bank
at the address specified for the "Issuing Bank" on Schedule 11.2.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Borrower. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Borrower to give such notice and the Agent and the Banks shall not have any
liability to the Borrower or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Borrower to repay the Loans and L/C Obligations
shall not be affected in any way or to any extent by any failure by the Agent
and the Banks to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Banks of a confirmation which is at
variance with the terms understood by the Agent and the Banks to be contained in
the telephonic or facsimile notice.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. 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.
11.4 Costs and Expenses. The Borrower shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent within five Business Days after demand
(subject to subsection 5.1(e)) for all costs and expenses incurred by the Agent
in connection with the development, preparation, delivery, ongoing
administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby,
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including reasonable Attorney Costs and search and filing fees and expenses
incurred by the Agent with respect thereto;
(b) pay or reimburse the Agent and the Arranger and each Bank
within five Business Days after demand (subject to subsection 5.1(e)) for all
costs and expenses (including reasonable Attorney Costs and search and filing
fees and expenses provided that the Borrower shall have been given statements
containing reasonably detailed bills for such fees and expenses) incurred by
them in connection with the enforcement or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding); and
(c) during the continuance of any Event of Default, pay or
reimburse the Agent within five 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), incurred or sustained by the Agent in connection with the
matters referred to under subsections (a) and (b) of this Section.
11.5 Borrower's Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Borrower shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Agent or replacement of any Bank)
be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement, the other Loan Documents or any
document contemplated by or referred to herein or therein, or the transactions
contemplated hereby or thereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or Letters of Credit or the use of the proceeds thereof whether or
not any Indemnified Person is a party thereto (all the foregoing, collectively,
the "Indemnified Liabilities"); provided, that the Borrower shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities to the extent they are found by a final decision of a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.
11.6 Marshalling; Payments Set Aside. Neither the Collateral Agent,
the Agent nor the Banks shall be under any obligation to marshal any assets in
favor of the Borrower or any other Person or against or in payment of any or all
of the Obligations. To the extent that the Borrower makes a payment to the
Collateral Agent, the Agent or the Banks, or the Collateral Agent, the Agent or
the Banks exercise their right of set-off, and such payment or the proceeds of
such set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or
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preferential, set aside or required (including pursuant to any settlement
entered into by the Collateral Agent, the Agent or such Bank in its discretion)
to be repaid to a trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred, and (b) each Bank severally agrees to pay to the
Agent or the Collateral Agent, as the case may be, upon demand its pro rata
share of any amount so recovered from or repaid by the Agent or the Collateral
Agent, as the case may be.
11.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
11.8 Assignments, Participations, Etc.(a) (a) Any Bank may, with the
written consent of the Borrower at all times other than during the existence of
an Event of Default, and the Agent and the Issuing Bank, (which consents in each
case shall not be unreasonably withheld), at any time assign and delegate to one
or more Eligible Assignees (provided that no written consent of the Borrower,
the Agent or the Issuing Bank shall be required in connection with any
assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate
of such Bank or that is a Bank then holding a Commitment hereunder) (each an
"Assignee") all, or any ratable part of all, of the Loans, the Commitments, the
L/C Obligations and the other rights and obligations of such Bank hereunder,
provided, that any such assigning Bank either retains a Commitment or Loans of
at least $5,000,000 or disposes of its entire Commitment or Loans and provided
further that any Assignee shall have a Commitment or Loans of at least
$5,000,000; provided, however, that the Borrower and the Agent may continue to
deal solely and directly with such Bank in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Bank and
the Assignee; (ii) such Bank and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in the form of Exhibit E
("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (iii) the assignor Bank or Assignee has paid to the Agent a
processing fee in the amount of $4,000. No Assignee shall be entitled to higher
recoveries or greater rights under Sections 4.1, 4.2 and 4.3 than its assignor.
(b) From and after the date that the Agent notifies the assignor
Bank that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee and
the consent of the Issuing Bank (if required), (i) the Assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Bank under the Loan Documents, (ii) this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments and Loans arising therefrom, and (iii) the assignor Bank shall, to
the extent that rights and obligations hereunder and under the other Loan
Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Documents; provided, however, that the assignor Bank shall not relinquish its
rights under Article IV or
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under Sections 11.4 and 11.5 (and any equivalent provisions of the other Loan
Documents) to the extent such rights relate to the time prior to the effective
date of the Assignment and Acceptance. The Commitment allocated to each Assignee
shall reduce the Commitment of the assigning Bank pro tanto.
(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee and the consent of the Issuing Bank (if required), (and
provided that it consents to such assignment in accordance with subsection
11.8(a)), the Borrower shall execute and deliver to the Agent any new Notes
requested by such Assignee evidencing such Assignee's assigned Loans and
Commitment and, if the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes as requested by the assignor Bank evidencing the
Loans and Commitment retained by such assignor Bank (such Notes to be in
exchange for, but not in payment of, the Notes held by such Bank).
(d) Any Bank may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Borrower (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Borrower, the
Issuing Bank and the Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 11.1. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections 4.1,
4.3 and 11.5 as though it were also a Bank hereunder, and not otherwise have any
rights under this Agreement, or any of the other Loan Documents, and all amounts
payable by the Borrower hereunder shall be determined as if such 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 a Bank under
this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
11.9 Confidentiality. Each Bank and the Agent agrees that it will not
disclose to any third party any written information marked "Confidential,"
"Secret," "Top Security," "Protected" or words of similar import provided to it
by the Borrower or any Subsidiary or any
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oral information which is stated to be confidential and which is confirmed as
such in writing within seven days; provided, however, that the foregoing will
not (i) restrict the ability of the Agent, the Banks and any loan participants
from freely exchanging such information among themselves (and their respective
employees, attorneys, auditors and other professional advisors), (ii) restrict
the ability to disclose such information to a prospective Eligible Assignee or
participants, provided, that such Eligible Assignee or participants execute a
confidentiality agreement with the selling Bank agreeing to be bound by the
terms hereof prior to disclosure of such information to such Eligible Assignee
or participant, or (iii) prohibit the disclosure of such information to the
extent such information (A) becomes publicly available other than through a
breach of this Section 11.9, (B) becomes available through a Person other than
the Borrower or a Subsidiary of the Borrower, (C) is required to be disclosed
pursuant to court order, subpoena, other legal process, regulatory request or
otherwise by law or (D) is disclosed in litigation with the Borrower or any
Subsidiary of the Borrower or in connection with the enforcement of remedies by
the Agent or Banks after acceleration of the Loans or after the Revolving
Termination Date.
11.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Borrower, any such notice being waived by the Borrower to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Borrower against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Borrower and the Agent after any such set-off and application made by
such Bank; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
11.11 Automatic Debits of Fees. With respect to any commitment fee,
letter of credit fee or other fee, or any other cost or expense (including
Attorney Costs) due and payable to the Agent, the Issuing Bank, BofA or the Lead
Arranger under the Loan Documents, the Borrower hereby irrevocably authorizes
BofA to debit any deposit account of the Borrower with BofA in an amount such
that the aggregate amount debited from all such deposit accounts does not exceed
such fee or other cost or expense. 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 BofA's sole
discretion) and such amount not debited shall be deemed to be unpaid. No such
debit under this Section shall be deemed a set-off.
11.12 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
75
<PAGE> 82
11.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.14 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
11.15 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrower, the Banks, the
Agent, the Agent-Related Persons, the Collateral Agent and the Indemnified
Persons, and their permitted successors and assigns, and no other Person shall
be a direct or indirect legal beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Agreement or any of the other
Loan Documents.
11.16 Governing Law and Jurisdiction(a) (a) THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
BORROWER, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
11.17 Waiver of Jury Trial. THE BORROWER, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A
76
<PAGE> 83
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
11.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Borrower,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
[Remainder of this page intentionally left blank.]
77
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in San Francisco by their proper and duly
authorized officers as of the day and year first above written.
STORAGE TECHNOLOGY CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Title:
----------------------------------------
BANK OF AMERICA, N.A.,
as Agent, Swingline Bank, Issuing Bank and as
a Bank
By:
-----------------------------------------
Title: Managing Director
78
<PAGE> 85
BANKBOSTON, N.A.
By:
-----------------------------------------
Title:
----------------------------------------
BANK OF MONTREAL
By:
-----------------------------------------
Title:
----------------------------------------
BANK ONE, NA
By:
-----------------------------------------
Title:
----------------------------------------
FLEET NATIONAL BANK
By:
-----------------------------------------
Title:
----------------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------------------
Title:
----------------------------------------
ROYAL BANK OF CANADA
By:
-----------------------------------------
Title:
----------------------------------------
THE BANK OF NOVA SCOTIA
By:
-----------------------------------------
Title:
----------------------------------------
THE SUMITOMO BANK, LIMITED
By:
-----------------------------------------
Title:
----------------------------------------
U.S. BANK NATIONAL ASSOCIATION
By:
-----------------------------------------
Title:
----------------------------------------
79
<PAGE> 86
SCHEDULE 2.1
COMMITMENT AND PRO RATA SHARES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
BANK COMMITMENT PRO RATA SHARE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank of America, N.A. $61,607,142.89 21.42857144%
------------------------------------------------------------------------------------------------------------
Bank One, NA $47,642,857.15 16.57142857%
------------------------------------------------------------------------------------------------------------
BankBoston N.A. $31,214,285.71 10.85714286%
------------------------------------------------------------------------------------------------------------
Bank of Montreal $31,214,285.71 10.85714286%
------------------------------------------------------------------------------------------------------------
Fleet National Bank $31,214,285.71 10.85714286%
------------------------------------------------------------------------------------------------------------
Royal Bank of Canada $31,214,285.71 10.85714286%
------------------------------------------------------------------------------------------------------------
The Sumitomo Bank, Limited $16,428,571.44 5.71428572%
------------------------------------------------------------------------------------------------------------
KeyBank National Association $12,321,428.56 4.28571428%
------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia $12,321,428.56 4.28571428%
------------------------------------------------------------------------------------------------------------
U.S. Bank National Association $12,321,428.56 4.28571428%
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
TOTAL $287,500,000.00 100%
------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 87
SCHEDULE 2.9(e)
APPLICABLE MARGIN AND COMMITMENT FEE PRICING GRID
<TABLE>
<CAPTION>
Total Debt to
EBITDA Offshore Rate
(rolling 4 quarter) Spread Base Rate Spread Commitment Fee
(x) (%) (%) (%)
-------------------------------------------- ------------- ---------------- --------------
<S> <C> <C> <C>
X less than 1.50 2.000 0 .500
-------------------------------------------- ------------- ---------------- --------------
1.50 less than or equal to X less than 2.00 2.125 0.125 .500
-------------------------------------------- ------------- ---------------- --------------
2.00 less than or equal to X less than 2.50 2.250 0.250 .500
-------------------------------------------- ------------- ---------------- --------------
X greater than or equal to 2.50 2.500 0.500 .500
-------------------------------------------- ------------- ---------------- --------------
</TABLE>
Note:
The initial Applicable Margin as of the Closing Date shall be 2.250% and,
thereafter, commencing on the date on which the Agent receives the Compliance
Certificate required by Section 7.2(a) for the fiscal quarter ending December
31, 1999, the Applicable Margin shall be determined by the above pricing grid.
1
<PAGE> 88
SCHEDULE 11.2
ADDRESSES FOR NOTICES, LENDING OFFICES
STORAGE TECHNOLOGY CORPORATION:
Address for Notices:
Storage Technology Corporation
One StorageTek Drive
Louisville, CO 80028-4302
Attention: Assistant Treasurer
Telephone: (303) 661-2676
Facsimile: (303) 673-2837
BANK OF AMERICA, N.A.,
as Agent:
Domestic and Offshore Lending Office:
Bank of America, N.A.
Agency Services - West #5596
Mail Code: CA4-706-05-09
1850 Gateway Blvd., 5th Floor
Concord, CA 94520-3281
Attention: Michael Costa
Telephone: (925) 675-8439
Facsimile: (925) 969-2806
Address for all Other Notices:
Bank of America, N.A.
High Technology - SF #3697, Credit Products
Mail Code: CA5-705-41-01
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon
Telephone: (415) 622-8088
Facsimile: (415) 622-2385
<PAGE> 89
AGENT'S PAYMENT OFFICE:
Bank of America, N.A.
(ABA 111-000-012)
Attention: Agency Services - West #5596
Dallas, Texas
For credit to Account No. 3750836479
Account Name: Corporate FTA
Ref: Storage Technology Corporation
BANK OF AMERICA, N.A.,
as a Bank
Domestic and Offshore Lending Office:
Bank of America, N.A.
Agency Services - West #5596
Mail Code: CA4-706-05-09
1850 Gateway Blvd., 5th Floor
Concord, CA 94520-3281
Attention: Michael Costa
Telephone: (925) 675-8439
Facsimile: (925) 969-2806
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Bank of America, N.A.
High Technology - SF #3697, Credit Products
Mail Code: CA5-705-41-01
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon
Telephone: (415) 622-8088
Facsimile: (415) 622-2514
3
<PAGE> 90
BANK ONE, NA
Domestic and Offshore Lending Office:
Bank One, NA
1 Bank One Plaza
Chicago, IL 60670
Attention: Latanya Driver
Telephone: (312) 732-1395
Facsimile: (312) 732-4840
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Bank One, NA
777 S. Figueroa Street, 4th Floor
Los Angeles, CA 90017
Attention: Anthony Mathews
Telephone: (213) 683-4957
Facsimile: (213) 683-4999
BANK OF MONTREAL
Domestic and Offshore Lending Office:
Bank of Montreal
115 S. LaSalle - 12W
Chicago, IL 60603
Attention: Craig Reynolds
Telephone: (312) 750-6047
Facsimile: (312) 750-4345
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Bank of Montreal
115 S. LaSalle - 12W
Chicago, IL 60603
Attention: Bruce Pietka
Telephone: (312) 750-6958
Facsimile: (312) 750-6057
4
<PAGE> 91
BANKBOSTON, N.A.
Domestic and Offshore Lending Office:
BankBoston, N.A.
100 Federal Street
Mailstop 01-08-02
Boston, MA 02110
Attention: Anthony Dunn
Telephone: (617) 434-9625
Facsimile: (617) 434-9620
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
BankBoston, N.A.
100 Federal Street
Mailstop 01-08-06
Boston, MA 02110
Attention: Michael S. Barclay
Telephone: (617) 434-5163
Facsimile: (617) 434-0819
FLEET NATIONAL BANK
Domestic and Offshore Lending Office:
Fleet National Bank
100 Federal Street
Mailstop 01-08-06
Boston, MA 02110
Attention: Pauline Kowalczyk
Telephone: (617) 346-0622
Facsimile: (617) 346-0151
5
<PAGE> 92
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Fleet National Bank
100 Federal Street
Mailstop 01-08-06
Boston, MA 02110
Attention: Michael S. Barclay
Telephone: (617) 434-5163
Facsimile: (617) 434-2473
ROYAL BANK OF CANADA
Domestic and Offshore Lending Office:
Royal Bank of Canada
1 Liberty Plaza
165 Broadway - 4th Floor
New York, NY 10006
Attention: Claro Albay
Telephone: (416) 955-6714
Facsimile: (416) 955-6720
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Royal Bank of Canada
1 Liberty Plaza
165 Broadway - 5th Floor
New York, NY 10006
Attention: Stephanie Babich
Telephone: (212) 428-6319
Facsimile: (212) 428-6460
THE SUMITOMO BANK, LIMITED
Domestic and Offshore Lending Office:
The Sumitomo Bank, Limited
277 Park Avenue
New York, NY 10172
Attention: Noel Swift
Telephone: (212) 224-4185
Facsimile: (212) 224-5197
6
<PAGE> 93
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
The Sumitomo Bank, Limited
Seattle Branch
120 103rd Avenue, Suite 5320
Seattle, WA 98101
Attention: Bob Granfelt
Telephone: (206) 223-4050
Facsimile: (206) 623-8551
KEYBANK NATIONAL ASSOCIATION
Domestic and Offshore Lending Office:
KeyBank National Association
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attention: Tony Yee
Telephone: (206) 684-6009
Facsimile: (206) 684-6035
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
KeyBank National Association
P.O. Box 5278
Boise, ID 83705
Attention: Specialty Services
Telephone: (800) 297-5518
Facsimile: (800) 297-5495
THE BANK OF NOVA SCOTIA
Domestic and Offshore Lending Office:
The Bank of Nova Scotia
600 Peachtree Street, Suite 2700
Atlanta, GA 30383
Attention: Kathy Clark
Telephone: (404) 877-1542
Facsimile: (404) 888-8998
7
<PAGE> 94
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Jon Burcken
Telephone: (415) 986-1100
Facsimile: (415) 397-0791
U.S. BANK NATIONAL ASSOCIATION
Domestic and Offshore Lending Office:
U.S. Bank National Association
918 17th Street, 2nd Floor
CNBB0211
Denver, CO 80401
Attention: Bonda Gates
Telephone: (303) 585-6524
Facsimile: (303) 585-4135
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
U.S. Bank National Association
918 17th Street, 2nd Floor
CNBB0211
Denver, CO 80401
Attention: Brian T. McKinney
Telephone: (303) 585-4101
Facsimile: (303) 585-4135
8
<PAGE> 1
EXHIBIT 10.15
================================================================================
CREDIT AGREEMENT
DATED AS OF JANUARY 13, 2000
AMONG
STORAGE TECHNOLOGY CORPORATION,
BANK OF AMERICA, N.A.,
AS ADMINISTRATIVE AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ABN AMRO BANK N.V.,
SYNDICATION AGENT
BANC OF AMERICA SECURITIES LLC,
SOLE LEAD ARRANGER AND
SOLE BOOK MANAGER
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE I DEFINITIONS..................................................................................................1
1.1 Certain Defined Terms.............................................................................1
1.2 Other Interpretive Provisions....................................................................16
1.3 Accounting Principles............................................................................17
ARTICLE II THE CREDITS................................................................................................17
2.1 Amounts and Terms of Commitment..................................................................17
2.2 Loan Accounts....................................................................................17
2.3 Procedure for Borrowing..........................................................................18
2.4 Conversion and Continuation Elections............................................................19
2.5 Voluntary Termination or Reduction of Commitments................................................20
2.6 Optional Prepayments.............................................................................20
2.7 Mandatory Prepayments of Loans; Mandatory Commitment Reductions..................................21
2.8 Repayment........................................................................................21
2.9 Interest.........................................................................................22
2.10 Fees.............................................................................................23
2.11 Computation of Fees and Interest.................................................................23
2.12 Payments by the Borrower.........................................................................23
2.13 Payments by the Banks to the Agent...............................................................24
2.14 Sharing of Payments, Etc.........................................................................25
2.15 Security.........................................................................................25
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY....................................................................25
3.1 Taxes............................................................................................25
3.2 Illegality.......................................................................................27
3.3 Increased Costs and Reduction of Return..........................................................27
3.4 Funding Losses...................................................................................28
3.5 Inability to Determine Rates.....................................................................28
3.6 Survival.........................................................................................28
3.7 Notice of Claims.................................................................................28
ARTICLE IV CONDITIONS PRECEDENT.......................................................................................29
4.1 Conditions to Agreement..........................................................................29
4.2 Conditions to All Credit Extensions..............................................................31
ARTICLE V REPRESENTATIONS AND WARRANTIES..............................................................................32
5.1 Corporate Existence and Power....................................................................32
</TABLE>
i.
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
5.2 Corporate Authorization; No Contravention........................................................32
5.3 Governmental Authorization.......................................................................33
5.4 Binding Effect...................................................................................33
5.5 Litigation.......................................................................................33
5.6 No Default.......................................................................................33
5.7 ERISA Compliance.................................................................................33
5.8 Use of Proceeds; Margin Regulations..............................................................34
5.9 Title to Properties; Liens.......................................................................34
5.10 Taxes............................................................................................34
5.11 Financial Condition..............................................................................34
5.12 Environmental Matters............................................................................35
5.13 Collateral Documents.............................................................................35
5.14 Regulated Entities...............................................................................35
5.15 Copyrights, Patents, Trademarks and Licenses, Etc................................................35
5.16 Subsidiaries.....................................................................................36
5.17 Insurance........................................................................................36
5.18 Full Disclosure..................................................................................36
5.19 Projections......................................................................................36
ARTICLE VI AFFIRMATIVE COVENANTS......................................................................................36
6.1 Financial Statements.............................................................................37
6.2 Certificates; Other Information..................................................................37
6.3 Notices..........................................................................................37
6.4 Preservation of Corporate Existence, Etc.........................................................38
6.5 Maintenance of Property..........................................................................39
6.6 Insurance........................................................................................39
6.7 Payment of Obligations...........................................................................39
6.8 Compliance with Laws.............................................................................39
6.9 Compliance with ERISA............................................................................39
6.10 Inspection of Property and Books and Records.....................................................39
6.11 Use of Proceeds..................................................................................40
6.12 Disclosure; Further Assurances...................................................................40
6.13 Financial Covenants..............................................................................40
6.14 Patents and Permits..............................................................................42
ARTICLE VII NEGATIVE COVENANTS........................................................................................42
7.1 Limitation on Liens..............................................................................42
7.2 Disposition of Assets............................................................................44
7.3 Consolidations and Mergers.......................................................................45
7.4 Loans and Investments............................................................................45
7.5 Transactions with Affiliates.....................................................................46
7.6 Use of Proceeds..................................................................................47
7.7 Contingent Obligations...........................................................................47
7.8 Restricted Payments..............................................................................47
7.9 ERISA............................................................................................47
</TABLE>
ii.
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
7.10 Change in Business...............................................................................48
7.11 Accounting Changes...............................................................................48
ARTICLE VIII EVENTS OF DEFAULT........................................................................................48
8.1 Event of Default.................................................................................48
8.2 Remedies.........................................................................................50
8.3 Rights Not Exclusive.............................................................................50
8.4 Certain Financial Covenant Defaults..............................................................50
ARTICLE IX THE AGENT..................................................................................................51
9.1 Appointment and Authorization; "Agent"...........................................................51
9.2 Delegation of Duties.............................................................................51
9.3 Liability of Agent...............................................................................51
9.4 Reliance by Agent................................................................................52
9.5 Notice of Default................................................................................52
9.6 Credit Decision..................................................................................52
9.7 Indemnification of Agent.........................................................................53
9.8 Agent in Individual Capacity.....................................................................53
9.9 Successor Agent..................................................................................53
9.10 Withholding Tax..................................................................................54
9.11 Collateral Matters...............................................................................55
9.12 Co-Agents........................................................................................56
ARTICLE X MISCELLANEOUS...............................................................................................56
10.1 Amendments and Waivers...........................................................................56
10.2 Notices..........................................................................................57
10.3 No Waiver; Cumulative Remedies...................................................................58
10.4 Costs and Expenses...............................................................................58
10.5 Borrower's Indemnification.......................................................................58
10.6 Marshalling; Payments Set Aside..................................................................59
10.7 Successors and Assigns...........................................................................59
10.8 Assignments, Participations, Etc.................................................................59
10.9 Confidentiality..................................................................................61
10.10 Set-off..........................................................................................61
10.11 Automatic Debits of Fees.........................................................................62
10.12 Notification of Addresses, Lending Offices, Etc..................................................62
10.13 Counterparts.....................................................................................62
10.14 Severability.....................................................................................62
10.15 No Third Parties Benefited.......................................................................62
10.16 Governing Law and Jurisdiction...................................................................62
10.17 Waiver of Jury Trial.............................................................................63
10.18 Entire Agreement.................................................................................63
</TABLE>
iii.
<PAGE> 5
SCHEDULES
- ---------
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 2.9(e) Applicable Margin and Commitment Fees
Schedule 5.5 Litigation
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 7.1(i) Permitted Liens
Schedule 7.2 Permitted Dispositions
Schedule 7.4(f) Permitted Investments
Schedule 7.7(d) Contingent Obligations
Schedule 10.2 Addresses for Notices; Lending Offices
EXHIBITS
- --------
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Shearman & Sterling
Exhibit D-2 Form of Legal Opinion of Internal Borrower's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Security Agreement
iv.
<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of January 13, 2000,
among Storage Technology Corporation, a Delaware corporation ("the Borrower"),
the several financial institutions from time to time party to this Credit
Agreement (individually, a "Bank"; collectively, the "Banks"), ABN AMRO Bank
N.V., as syndication agent, Keybank National Association, as co-agent, and Bank
of America, N.A., as sole administrative agent for the Banks.
The Borrower has requested the Banks to make revolving loans
to the Borrower in an aggregate principal amount of up to $150,000,000 at any
time outstanding. The Banks are willing to make such loans to the Borrower upon
the terms and subject to the conditions set forth in this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the
following meanings:
"$350MM Credit Agreement" means that certain Amended and
Restated Credit Agreement of even date herewith (as amended, restated,
modified, supplemented or renewed from time to time) by and among the
Borrower, the several financial institutions from time to time party
thereto and Bank of America, N.A., as agent for such financial
institutions.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Borrower or its Subsidiary is the
surviving entity.
"Adjusted Quick Ratio" means, for any Person for any period,
the ratio that (i) Current Liquid Assets of such Person bears to (ii)
Current Liabilities of such Person.
"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, membership interests, by contract, or
otherwise.
1
<PAGE> 7
"Agent" means BofA in its capacity as administrative agent for
the Banks hereunder, and any successor agent arising under Section 9.9.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 9.9, together with their respective Affiliates
(including, in the case of BofA, the Lead Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 10.2 or such other address as the Agent may from time
to time specify.
"Agreement" means this Credit Agreement.
"Applicable Fee Amount" means with respect to the commitment
fee payable hereunder, the amount set forth opposite the indicated
level below the heading "Commitment Fee" in the pricing grid set forth
on Schedule 2.9(e) in accordance with the parameters for calculations
of such amount set forth in Section 2.10(a).
"Applicable Margin" means the amount set forth opposite the
indicated level below the heading "Base Rate Spread" or "Offshore Rate
Spread," as appropriate, in the pricing grid set forth in Schedule
2.9(e) in accordance with the parameters for calculations of such
amount set forth in Section 2.9(e).
"Assignee" has the meaning specified in subsection 10.8(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" has the meaning specified in the introductory clause
hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C.ss.101, et seq.)
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA,
as its "prime rate." (The "prime rate" is a rate set by BofA based upon
various factors including BofA's costs and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such
announced rate.)
Any change in the prime rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Revolving Loan, that bears interest
based on the Base Rate.
"BofA" means Bank of America, N.A., a national banking
association.
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<PAGE> 8
"Borrower" has the meaning specified in the introductory
clause of this Agreement.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans of the same Type made to the Borrower on the same day
by the Banks under Article II.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco
are authorized or required by law to close and, if the applicable
Business Day relates to any Offshore Rate Loan, means such a day on
which dealings are carried on in the applicable offshore Dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capital Lease" means, for any Person, any lease of property
(whether real, personal or mixed) which, in accordance with GAAP,
would, at the time a determination is made, be required to be recorded
as a capital lease in respect of which such Person is liable as lessee.
"Change of Control" means the occurrence, after the date of
this Agreement, of any of the following: (a) any Person or two or more
Persons acting in concert acquiring beneficial ownership (within the
meaning of Rule 13d-3 of the SEC under the Exchange Act), directly or
indirectly, of securities of the Borrower (or other securities
convertible into such securities) representing 30% or more of the
combined voting power of all securities of the Borrower entitled to
vote in the election of directors; or (b) during any period of up to 12
consecutive months, commencing after the Closing Date, individuals who
at the beginning of such 12-month period were directors of the Borrower
ceasing for any reason to constitute a majority of the Board of
Directors of the Borrower unless the Persons replacing such individuals
were nominated by the Board of Directors of the Borrower; or (c) any
Person or two or more Persons acting in concert acquiring by contract
or otherwise, or entering into a contract or arrangement which upon
consummation will result in its or their acquisition of, or control
over, securities of the Borrower (or other securities convertible into
such securities) representing 30% or more of the combined voting power
of all securities of the Borrower entitled to vote in the election of
directors.
"Closing Date" means the date on or prior to January 13, 2000,
on which all conditions precedent set forth in Section 4.1 are
satisfied or waived by all Banks (or, in the case of subsection 4.1(e),
waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
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<PAGE> 9
"Collateral" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by the Borrower in or
upon which a Lien now or hereafter exists in favor of the Banks, or the
Collateral Agent on behalf of the Banks or the Secured Parties, as the
case may be, whether under this Agreement or under any other Collateral
Documents.
"Collateral Agency Agreement" means that certain Collateral
Agency Agreement of even date herewith by and among the Collateral
Agent, the Banks and the lenders party to the $350MM Credit Agreement.
"Collateral Agent" means BofA, in its capacity as collateral
agent for the Banks and the other Secured Parties.
"Collateral Documents" means, collectively, (i) the Security
Agreement and all other security agreements and other similar
agreements between the Borrower and the Banks, or the Collateral Agent
for the benefit of the Banks and the other Secured Parties, now or
hereafter delivered to the Banks or the Collateral Agent pursuant to or
in connection with the transactions contemplated hereby, and all
financing statements (or comparable documents now or hereafter filed in
accordance with the Uniform Commercial Code or comparable law) against
the Borrower as debtor in favor of the Banks, or the Collateral Agent
for the benefit of the Banks and the other Secured Parties, as secured
party, and (ii) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of
the foregoing.
"Commitment," as to each Bank, has the meaning specified in
Section 2.1.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Consolidated" and any derivative thereof each means, with
reference to the accounts or financial reports of any Person, the
consolidated accounts or financial reports of such Person and each
Subsidiary of such Person determined in accordance with GAAP.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency
or any balance sheet item, level of income or financial condition of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation or otherwise to assure or hold harmless the
holder of any such primary obligation against loss in respect thereof;
(b) with respect to primary obligations of a
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<PAGE> 10
primary obligor in connection with any synthetic lease or similar off
balance sheet lease transaction or securitization transaction (each of
(a) and (b) a "Guaranty Obligation"), (c) with respect to any Surety
Instrument issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings or payments;
(d) to purchase any materials, supplies or other property from, or to
obtain the services of, another Person if the primary purpose of the
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 (e) in respect of any Swap Contract.
The amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of
the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other
Contingent Obligations, shall be equal to the maximum reasonably
anticipated liability in respect thereof.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.4, the Borrower (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Credit Extension" means and includes the making of any
Revolving Loans.
"Current Liabilities" of any Person means, as of any date of
determination, all liabilities of such Person (including estimated
accrued taxes, all Revolving Loans outstanding hereunder and any
Indebtedness outstanding under the $350MM Credit Agreement but
excluding any obligations under the Multicurrency Note Purchase
Facility which are fully cash collateralized) which in accordance with
GAAP should be classified as current liabilities of such Person,
including the amount of any redeemable preferred stock of such Person
that is redeemable for cash at the option of the holder thereof or that
is mandatorily redeemable by such Person within one year of such date
of determination, valued at the applicable redemption price, plus
accrued and unpaid dividends payable in respect of such redeemable
preferred stock.
"Current Liquid Assets" of any Person means, as of any date of
determination, all cash, short-term investments and accounts
receivable, in each case as shown on the most recent balance sheet of
such Person and determined in accordance with GAAP (but excluding any
such assets deposited to collateralize any obligations under the
Multicurrency Note Purchase Facility).
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<PAGE> 11
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Directing Banks" has the meaning specified in the Security
Agreement.
"Dollars," "dollars" and "$" each mean lawful money of the
United States.
"EBITDA" means, for any period, for the Borrower 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, interest and the
amortization of intangibles of any kind to the extent included in the
determination of such Net Income (or Net Loss), plus (c) all accrued
taxes on or measured by income to the extent included in the
determination of such Net Income (or Net Loss), plus (d) all
restructuring and litigation charges recorded in fiscal 1999, the first
fiscal quarter 2000 and the second fiscal quarter 2000 to the extent
included in the determination of such Net Income (or Net Loss).
"Effective Amount" means with respect to any Revolving Loans,
on any date, the aggregate outstanding principal amount thereof after
giving effect to any Borrowings and prepayments or repayments of
Revolving Loans occurring on such date.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $200,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $200,000,000, provided that such bank
is acting through a branch or agency located in the United States; and
(c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) a Person of which a
Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning
of Section 414(b) or (c) of
6
<PAGE> 12
the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Borrower or any ERISA Affiliate.
"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 8.1.
"Exchange Act" means the Securities Exchange Act of 1934.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York with respect to the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is
not so published with respect to any such preceding Business Day, the
rate for such day will be the arithmetic mean as determined by the
Agent of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each of
three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.10(b).
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"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
7
<PAGE> 13
of the Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within 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" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course
of business on ordinary terms); (c) all reimbursement or payment
obligations (contingent or otherwise) with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e)
all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by the 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
obligations with respect to Capital Leases; (g) all indebtedness
referred to in clauses (a) through (f) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section
10.5.
"Indemnified Person" has the meaning specified in Section
10.5.
"Independent Auditor" has the meaning specified in subsection
7.1(a).
"Insolvency Proceeding" means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; in either case undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy
Code.
8
<PAGE> 14
"Interest Payment Date" means, (a) as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to such
Loan and (b) as to any Base Rate Loan, the last Business Day of each
calendar quarter; provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls three
months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation; provided
that:
(a) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(b) any Interest Period 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
(c) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"Investments" has the meaning specified in Section 7.4.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Borrower or any
of its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
"Lead Arranger" means Banc of America Securities LLC, a
Delaware limited liability company, in its capacity as Sole Lead
Arranger and Sole Book Manager.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" on Schedule 10.2, or
such other office or offices as such Bank may from time to time notify
the Borrower and the Agent.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any
9
<PAGE> 15
property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease, any financing lease having substantially
the same economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
Operating Lease.
"Loan" means an extension of credit by a Bank to the Borrower
under Article II in the form of a Revolving Loan.
"Loan Documents" means this Agreement, any Notes, the
Collateral Documents, the Fee Letter and all other documents delivered
by or on behalf of the Borrower to the Agent or any Bank in connection
with the transactions contemplated by this Agreement.
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Borrower to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse
effect upon (i) the legality, validity, binding effect or
enforceability against the Borrower of any Loan Document or (ii) the
perfection or priority of any Lien on any material portion of the
Collateral granted under any of the Collateral Documents.
"Material Subsidiary" means any Subsidiary that at any time
either (a) owns or holds title to 5% or more of the Consolidated assets
of the Borrower and its Consolidated Subsidiaries or (b) accounts for
5% or more of the Consolidated revenue of the Borrower and its
Consolidated Subsidiaries, in each case as determined in accordance
with GAAP.
"Multicurrency Note Purchase Facility" means the facility
pursuant to the Second Amended and Restated Contingent Multicurrency
Note Purchase Commitment Agreement dated as of January 15, 1998 (as
amended, restated, modified or supplemented from time to time) between
Borrower and BofA, whereby BofA has agreed to purchase certain notes of
the Borrower subject, in certain cases, to collateralization in cash
and other investments or any similar facility designed to accomplish
the same objectives.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Borrower or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"Net Income" means, with respect to any Person for any period,
net income of such Person, as determined by such Person in accordance
with GAAP.
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<PAGE> 16
"Net Issuance Proceeds" means, as to any issuance of debt or
equity by any Person, cash proceeds and non-cash proceeds received or
receivable by such Person in connection therewith, net of out-of-pocket
costs and expenses paid or incurred in connection therewith in favor of
any Person not an Affiliate of such Person.
"Net Loss" means, with respect to any Person for any period,
negative Net Income of such Person, as determined by such Person in
accordance with GAAP.
"Note" means a promissory note executed by the Borrower in
favor of a Bank pursuant to subsection 2.2(b), in substantially the
form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Borrower to any Bank, the Agent, the Collateral Agent or any
Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"Offshore Rate": For any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate
equal to (A) (i) the rate of interest per annum determined by the Agent
to be the rate of interest per annum appearing on Dow Jones Page 3750
(as defined below) for Dollar deposits in an amount substantially equal
to the proposed Offshore Rate Loan to be made, continued or converted
by BofA, and having a maturity comparable to such Interest Period, at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period, subject to clause (ii) below; or
(ii) if for any reason the rate is not available as provided in the
preceding clause (i) of this definition, the "Offshore Rate" instead
means the rate of interest per annum determined by the Agent (rounded
to the next higher 1/16 of 1%) to be the rate at which deposits in
Dollars are offered to prime banks by the principal office of BofA in
the London interbank market, at approximately 11:00 a.m. (London time),
two Business Days before the first day of such Interest Period, in the
approximate amount of the Offshore Rate Loan to be made by BofA and for
a period of time comparable to such Interest Period; divided by (B) a
number equal to 1.00 minus the aggregate (but without duplication) of
the rate (expressed as a decimal fraction) of reserve requirements in
effect on the day which is two Business Days prior to the commencement
of such Interest Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having
jurisdiction with respect thereto, as in effect at the time BofA quotes
its rate to the Agent) for Eurocurrency funding of domestic assets
(currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) that are required to be maintained by a member bank of such
System. The determination of the Offshore Rate by the Agent shall be
conclusive in the absence of manifest error. As used in this
definition, "Dow Jones Page 3750" means the display designated as
"3750" on the Dow
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<PAGE> 17
Jones Market Service (formerly known as the Telerate Service) or any
replacement page thereof or successor thereto.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Operating Lease" means, for any Person, any lease of any
property of any kind by that Person as lessee which is not a Capital
Lease.
"Operating Loss" of any Person means, as of the date of
determination, operating losses as calculated in accordance with GAAP.
"Organization Documents" means, for any Person, 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, any
other applicable organizational or constitutional documents and all
applicable resolutions of the board of directors (or any committee
thereof) of such Person.
"Participant" has the meaning specified in subsection 10.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Borrower
sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.1.
"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Borrower or any Subsidiary existing or arising
under Swap Contracts, provided that such obligations are (or were)
entered into in connection with a bona fide hedging operation that
provides offsetting benefits to such Person.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
any other entity of whatever nature.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Borrower sponsors or maintains or to which the
Borrower makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Prior 364-Day Facility" means the Credit Agreement dated as
of January 14, 1999, by and among the Borrower, the several financial
institutions party thereto and BofA, as administrative agent.
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<PAGE> 18
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks (or, if all Commitments have been
terminated, the aggregate principal amount of such Bank's Loans divided
by the aggregate principal amount of the Loans then held by all Banks).
The initial Pro Rata Share of each Bank is set forth opposite such
Bank's name in Schedule 2.1 under the heading Pro Rata Share.
"Receivable" means any right to payment from an account
receivable obligor, arising from the sale of goods or services or the
licensing of intellectual property rights by the Borrower in the
ordinary course of its business.
"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.
"Required Banks" means at any time Banks then holding at least
51% of the aggregate amount of the Commitments or, if no Commitments
are outstanding, Banks then having at least 51% of the then aggregate
unpaid principal amount of the Loans.
"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, with respect to the Borrower, the
chief executive officer, the president, any vice president, the
treasurer, chief operating officer or chief financial officer,
assistant treasurer, or the secretary of the Borrower, or any other
officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants, the chief
financial officer, assistant treasurer or the treasurer of the
Borrower, or any other officer having substantially the same authority
and responsibility.
"Revolving Loan" has the meaning specified in Section 2.1, and
may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of
Revolving Loan).
"Revolving Termination Date" means the earlier to occur of:
(a) January 11, 2001, unless extended pursuant to
Section 2.8; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Secured Parties" has the meaning specified in the Security
Agreement.
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"Security Agreement" means a Security Agreement between the
Borrower, as debtor, in favor of the Collateral Agent, as secured
party, in substantially the form of Exhibit G.
"Senior Funded Debt" means, as of any date of determination,
any indebtedness for borrowed money then outstanding and (without
duplication) any contingent or non-contingent reimbursement obligations
in respect of any letter of credit then outstanding issued pursuant to
the $350MM Credit Agreement, but excluding any Indebtedness then
outstanding incurred by the Borrower pursuant to the Multicurrency Note
Purchase Facility.
"Subordinated Indebtedness" means Indebtedness which is
expressly subordinated to the Obligations on terms consented to in
writing by the Required Banks.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture, trust or other
business entity of which more than 50% of the voting stock, membership
interests or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Borrower.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option
to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"Tangible Net Worth" means, with respect to any Person as of
any date of determination, Total Assets of such Person as of such date
minus Total Liabilities of such Person as of such date and minus the
carrying value of (a) goodwill, organizational expenses, patents,
patent applications, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, designs and other
intellectual property and licenses therefor and rights therein, and
other similar intangibles, (b) all amortizing debt issuance expenses
carried as an asset, (c) all reserves carried and not deducted from
assets or not reflected as a liability, and (d) cash held in a sinking
or other analogous fund established for the purpose of redemption,
retirement or prepayment of any capital stock or any Indebtedness or
Contingent Obligation, if no offsetting liability exists with respect
to such Indebtedness or Contingent Obligation on the balance sheet of
such Person.
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"Taxes" means any and all present or future taxes (including
any taxes on any additional amounts required to be paid to the Agent or
the Banks), levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with respect
thereto, excluding, in the case of each Bank and the Agent,
respectively, (a) taxes imposed on its income by the United States and
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank or the Agent (as the
case may be) is organized or any political subdivision thereof, and (b)
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Bank's Lending Office, or any political
subdivision thereof.
"Total Assets" of any Person means all property, whether real,
personal, tangible, intangible or otherwise, which, in accordance with
GAAP, should be included in determining total assets as shown on the
assets portion of a balance sheet of such Person.
"Total Capital" of any Person means the sum of the
Consolidated Tangible Net Worth of such Person plus Consolidated Total
Debt of such Person.
"Total Commitment Amount" means the aggregate amount of the
Commitments of the Banks.
"Total Debt" means, with respect to any Person, all
Indebtedness of such person incurred for borrowed money plus, without
duplication, all reimbursement obligations in respect of letters of
credit plus all obligations outstanding pursuant to the Multicurrency
Note Purchase Facility.
"Total Leverage Ratio" means, with respect to any Person, the
ratio that (i) Consolidated Total Debt bears to (ii) Total Capital of
such Person.
"Total Liabilities" of any Person means all obligations,
including, without limitation, all Indebtedness (other than Guaranty
Obligations) of such Person, which, in accordance with GAAP, should be
included in determining total liabilities as shown on the liabilities
portion of a balance sheet of such Person.
"Type" has the meaning specified in the definition of
"Revolving Loan."
"UCC" means the Uniform Commercial Code as in effect in the
State of California.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"U.S. Subsidiary" means any Subsidiary incorporated, or
otherwise formed or organized, in the United States or any jurisdiction
thereof.
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"Wholly Owned Subsidiary" means any corporation in which 100%
of the capital stock of each class having ordinary voting power, and
100% of the capital stock of every other class, in each case, at the
time as of which any determination is being made, is owned,
beneficially and of record, by the Borrower, or by one or more of the
other Wholly Owned Subsidiaries, or both; provided that, as to foreign
Subsidiaries this definition means any corporation in which at least
99% of the capital stock of each class having ordinary voting power and
at least 99% of the capital stock of every other class, at the time as
of which any determination is made, in each case is owned beneficially
and of record by the Borrower or one or more of the other Wholly Owned
Subsidiaries or both.
1.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the
word "from" means "from and including"; the
words "to" and "until" each mean "to but
excluding", and the word "through" means "to
and including."
(iv) The term "property" includes any kind of
property or asset, real, personal or mixed,
tangible or intangible.
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance
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with their terms. Unless otherwise expressly provided, any reference to any
action of the Agent or the Banks by way of consent, approval or waiver shall be
deemed modified by the phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are the
result of negotiations among the Agent and the Borrower and the other parties,
have been reviewed by counsel to the Agent, the Borrower and such other parties,
and are the product of all parties. Accordingly, they shall not be construed
against the Banks or the Agent merely because of the Agent's or Banks'
involvement in their preparation.
1.3 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 Borrower.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitment. Each Bank severally
agrees, on the terms and conditions set forth herein, to make loans to the
Borrower (each such loan, a "Revolving Loan") from time to time on any Business
Day during the period from the Closing Date to the Revolving Termination Date,
in an aggregate amount not to exceed at any time outstanding the amount set
forth on Schedule 2.1 under the heading "Commitment" (such amount, as the same
may be reduced under Section 2.5 or 2.7 or reduced or increased as a result of
one or more assignments under Section 10.8); provided, however, that, after
giving effect to any Borrowing of Revolving Loans, the Effective Amount of all
outstanding Revolving Loans shall not at any time exceed the Total Commitment
Amount. Within the limits of each Bank's Commitment, and subject to the other
terms and conditions hereof, the Borrower may borrow under this Section 2.1,
prepay under Section 2.6 and reborrow under this Section 2.1.
2.2 Loan Accounts. (a) The Loans made by each Bank shall be
evidenced by one or more accounts or records maintained by such Bank in the
ordinary course of business. The accounts or records maintained by the Agent and
each Bank shall be conclusive absent manifest error of the amount of the Loans
made by the Banks to the Borrower, 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 Borrower hereunder to pay any amount
owing with respect to the Loans.
(b) Upon the request of any Bank made through the Agent,
the Loans made by such Bank may be evidenced by one or more Notes, instead of or
in addition to loan accounts. Each such Bank shall endorse on the schedules
annexed to its Notes the date, amount and maturity of each Loan made by it and
the amount of each payment of principal made by the Borrower with respect
thereto. Each such Bank is irrevocably authorized by the Borrower to
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<PAGE> 23
endorse its Notes and each Bank's record shall be conclusive absent manifest
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any such Note to such
Bank.
2.3 Procedure for Borrowing. (a) Each Borrowing of Revolving
Loans shall be made upon the Borrower's irrevocable written notice delivered to
the Agent in the form of a Notice of Borrowing (which notice must be received by
the Agent prior to 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 (ii) on
the Business Day which is the requested Borrowing Date, in the case of Base Rate
Loans, specifying:
(A) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $10,000,000 or any
integral multiple of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to
such Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of
Offshore Rate Loans, such Interest Period shall be
one month.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
9:00 a.m. (San Francisco time) one Business Day before the Closing Date and such
Borrowing will consist of Base Rate Loans only.
(b) The Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata
Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share
of each Borrowing available to the Agent for the account of the Borrower at the
Agent's Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Borrower in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Borrower by the
Agent by (i) wire transfer of immediately available funds to the Borrower at,
Harris Trust, ABA No. 071 000 288, Account No. 4191706, for credit to Storage
Technology Corporation or such other account as the Borrower shall specify to
the Agent or (ii) at the option of the Borrower, by crediting the account of the
Borrower on the books of BofA with the aggregate of the amounts made available
to the Agent by the Banks and, in each case, in like funds as received by the
Agent.
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(d) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than ten different Interest
Periods in effect.
(e) Any Notice of Borrowing received after the time noted
in subsection 2.3(a) but prior to 5:00 p.m. (San Francisco time) on any Business
Day, shall be deemed to have been received prior to 9:00 a.m. (San Francisco
time) on the next Business Day.
2.4 Conversion and Continuation Elections(a) (a) The Borrower
may with respect to its Loans, upon irrevocable written notice to the Agent in
accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case
of Base Rate Loans, or as of the last day of
the applicable Interest Period, in the case
of any other Type of Revolving Loans, to
convert any such Revolving Loans (or any
part thereof in an amount not less than
$10,000,000, or that is in an integral
multiple of $1,000,000 in excess thereof)
into Revolving Loans of any other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue any Revolving
Loans having Interest Periods expiring on
such day (or any part thereof in an amount
not less than $10,000,000, or that is in an
integral multiple of $1,000,000 in excess
thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $10,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrower to continue such Revolving Loans as, and convert such Loans
into, Offshore Rate Loans shall terminate.
(b) The Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 9:00 a.m.
(San Francisco time) with respect to its Revolving Loans at least (i) three
Business Days in advance of the Conversion/Continuation Date, if the Revolving
Loans of the Borrower are to be converted into or continued as Offshore Rate
Loans; and (ii) on the Conversion/Continuation Date, if the Revolving Loans of
the Borrower are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/
Continuation Date;
(B) the aggregate amount of Revolving
Loans to be converted or continued;
(C) the Type of Revolving Loans
resulting from the proposed
conversion or continuation; and
(D) other than in the case of
conversions into Base Rate Loans,
the duration of the requested
Interest Period.
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(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans of the Borrower, the Borrower has failed to
select timely a new Interest Period to be applicable to such Offshore Rate Loans
or if any Default or Event of Default then exists, the Borrower shall be deemed
to have elected to convert such Offshore Rate Loans into Base Rate Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Borrower, the Agent will promptly notify each Bank of the
details of any automatic conversion. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Revolving Loans with respect to which the notice was given held by each Bank.
(e) Unless the Required Banks otherwise consent, during
the existence of a Default or Event of Default, the Borrower may not elect to
have Loans converted into or continued as an Offshore Rate Loans.
(f) After giving effect to any conversion or continuation
of Revolving Loans, unless the Agent shall otherwise consent, there may not be
more than ten different Interest Periods for all Loans in effect.
2.5 Voluntary Termination or Reduction of Commitments. The
Borrower may, upon not less than five Business Days' prior notice to the Agent,
terminate the Commitments, or permanently reduce the Commitments by an aggregate
minimum amount of $10,000,000 or any integral multiple of $1,000,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of any Loans
made on the effective date thereof, the Effective Amount of all Revolving Loans
would exceed the amount of the combined Commitments then in effect. Once reduced
in accordance with this Section, the Commitments may not be increased or
reinstated. Any reduction of the Commitments shall be applied to each Bank's
Commitment according to its Pro Rata Share. All accrued commitment fees to, but
not including, the effective date of any termination of Commitments shall be
paid on the effective date of such termination.
2.6 Optional Prepayments. Subject to Section 3.4, the Borrower
may, at any time or from time to time, upon delivery of an irrevocable notice of
prepayment to the Agent prior to 9:00 a.m. (San Francisco time) (a) not less
than three Business Days prior to the date of prepayment in the case of Offshore
Rate Loans, and (b) the same day as the date of prepayment in the case of Base
Rate Loans, ratably prepay Revolving Loans in whole or in part, in minimum
amounts of $10,000,000 or any integral multiple of $1,000,000 in excess thereof.
Any notice of prepayment received after 9:00 a.m. (San
Francisco time) on a Business Day but prior to 5:00 p.m. (San Francisco time) on
such Business Day shall be deemed to have been given prior to 9:00 a.m. (San
Francisco time) on the next Business Day. Any such notice of prepayment shall
specify the date and amount of such prepayment and the Type(s) of Loans to be
prepaid.
The Agent will promptly notify each Bank of its receipt of any
such notice, and of such Bank's Pro Rata Share of such prepayment. If any such
notice is given the Borrower shall make such prepayment and the payment amount
specified in such notice shall be due and
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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
3.4.
2.7 Mandatory Prepayments of Loans; Mandatory Commitment
Reductions.(a) (a) Equity or Debt Issuance. If the Borrower shall issue (i) new
common or preferred equity (excluding any issuance made for the purposes of
fulfilling a stock purchase plan or compensatory option plan for employees or
directors of the Borrower or any Subsidiary) or (ii) debt securities in a public
offering or private placement, the Borrower shall promptly notify the Agent of
the estimated Net Issuance Proceeds of such issuance to be received by the
Borrower in respect thereof. Promptly upon, and in no event later than one
Business Day after, receipt by the Borrower of Net Issuance Proceeds of such
issuance, the Borrower shall prepay the Loans in an aggregate amount equal to
the amount of such Net Issuance Proceeds.
(b) General. Any prepayments pursuant to this Section 2.7
shall be applied first to any Base Rate Loans then outstanding and then to
Offshore Rate Loans with the shortest Interest Periods remaining; provided,
however, that if the amount of Base Rate Loans then outstanding is not
sufficient to satisfy the entire prepayment requirement, the Borrower may, at
its option, place any amounts which it would otherwise be required to use to
prepay Offshore Rate Loans on a day other than the last day of the Interest
Period therefor in an interest-bearing account pledged to the Agent for the
benefit of the Banks pursuant to documentation acceptable to the Borrower, the
Agent and the Banks until the end of such Interest Period at which time such
pledged amounts will be applied to prepay such Offshore Rate Loans. The Borrower
shall pay, together with each prepayment under this Section 2.7, interest to end
of the applicable Interest Period on the amount of any Offshore Rate Loans
prepaid and additional amounts (if any) required pursuant to Section 3.4.
(c) Reduction of Commitments. Upon the issuance of new
common or preferred equity (excluding any issuance made for the purposes of
fulfilling a stock purchase plan or compensatory option plan for employees or
directors of the Borrower or any Subsidiary) or debt securities in a public
offering or private placement by the Borrower, the Commitment of each Bank shall
automatically be reduced by an amount equal to such Bank's Pro Rata Share
multiplied by the aggregate amount of Net Issuance Proceeds in respect of such
issuance, effective one Business Day after the date on which such Net Issuance
Proceeds are received by the Borrower. All accrued commitment fees to, but not
including the effective date of any reduction or termination of Commitments,
shall be paid on the effective date of such reduction or termination.
2.8 Repayment. The Borrower agrees to repay to the Banks on
the Revolving Termination Date the aggregate principal amount of the Loans
(together with accrued interest and fees thereon) outstanding on such date.
Provided, however, that the Borrower may give written notice to the Banks
(through the Agent) at least 30 days, but not more than 60 days, prior to the
Revolving Termination Date then in effect requesting that the Agent and the
Banks extend the Revolving Termination Date for an additional 364-day period.
The Banks and the Agent may grant or reject such request in their sole
discretion, and the Borrower acknowledges that there is no commitment or
understanding that the Revolving Termination Date will be extended. If such
request is granted by the Agent and all of the Banks, the Revolving Termination
Date then in effect shall be so extended, subject to such changed terms and
payment of such fee (if
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any) as shall have been agreed upon by the Borrower, the Banks and the Agent.
The Agent, on behalf of the Banks, shall notify the Borrower, not later than 30
days after the Agent's receipt of the Borrower's written request that the Agent
and the Banks extend the Revolving Termination Date, whether or not such request
shall be granted.
2.9 Interest. (a) Each Revolving Loan shall bear interest on
the outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate as the case may be
subject to the Borrower's right to convert to other Types of Revolving Loans
under Section 2.4), plus the Applicable Margin.
(b) Interest on each Revolving Loan of the Borrower shall
be paid by the Borrower in arrears on each Interest Payment Date. Interest shall
also be paid on the date of any prepayment of Loans (other than Base Rate Loans)
under Section 2.6 or 2.7 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 paid on demand of the Agent at the request
or with the consent of the Required Banks.
(c) Notwithstanding subsection (a) of this Section, while
any Event of Default exists or after acceleration, the Borrower shall pay
interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Obligations, at a
rate per annum which is determined by adding 2% per annum to the Applicable
Margin then in effect for such Loans and, in the case of Obligations not subject
to an Applicable Margin, at a fluctuating rate per annum equal to the Base Rate
plus 2%; provided, however, that, on and after the expiration of any Interest
Period applicable to any Offshore Rate Loan outstanding on the date of
occurrence of such Event of Default or acceleration, the principal amount of
such Loan shall, during the continuation of such Event of Default or after
acceleration, bear interest at a fluctuating rate per annum equal to the Base
Rate plus the Applicable Margin then in effect for Base Rate Loans plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrower to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Borrower shall pay such Bank interest at the highest rate
permitted by applicable law.
(e) Subject to the effect of subsection 2.9(a), the
Applicable Margin will be determined by the Agent from time to time in
accordance with the pricing grid set forth in Schedule 2.9(e) based on the most
recent Compliance Certificate delivered by the Borrower pursuant hereto. Such
determination shall be based on the calculations as set forth in such Compliance
Certificate and shall apply from the first Business Day after the Agent receives
such Compliance Certificate until and through the Business Day when the Agent
receives the applicable Compliance Certificate for the next fiscal quarter.
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The initial Applicable Margin, applicable from the Closing
Date to the date of delivery of the Compliance Certificate hereunder for the
fiscal quarter ending December 31, 1999, shall be as set forth in the note to
Schedule 2.9(e).
2.10 Fees. (a) Commitment Fees. The Borrower agrees to pay to
the Agent for the ratable account of each Bank a commitment fee on the actual
daily unused portion of such Bank's Commitment, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon the daily
utilization for that quarter as calculated by the Agent, equal to the Applicable
Fee Amount.
Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in arrears on
(A) the last Business Day of the period ending on March 31, 2000, (B) on the
last Business Day of each calendar quarter commencing after March 31, 2000 and
(C) on the Revolving Termination Date; provided that, in connection with any
reduction or termination of Commitments under Section 2.5 or 2.7, the accrued
commitment fee calculated for the period ending on such date shall also be paid
on the date of such reduction or termination. The commitment fees provided in
this subsection shall accrue at all times after the above-mentioned commencement
date, including at any time during which one or more conditions in Article IV
are not met.
For the period from the Closing Date through the Business Day
when the Agent receives the Borrower's Compliance Certificate for the fiscal
quarter ending December 31, 1999, the Applicable Fee Amount will be 0.50%.
Thereafter the Applicable Fee Amount shall be determined by the Agent from time
to time in accordance with the pricing grid set forth in Schedule 2.9(e) based
on the most recent Compliance Certificate of the Borrower delivered by the
Borrower pursuant hereto. Such determinations shall apply from the first
Business Day after the Agent receives such Compliance Certificate until and
through the Business Day when the Agent receives the applicable Compliance
Certificate for the next fiscal quarter as provided herein.
(b) Arrangement Fee. The Borrower will pay the Agent and
Arranger, for its own account and the account of the Banks, as the case may be,
such other fees as are set forth in that certain fee letter dated December 10,
1999 (the "Fee Letter").
2.11 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's "prime
rate" shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other computations of fees and interest shall
be made on the basis of a 360-day year and actual days elapsed (which results in
more interest being paid than if computed on the basis of a 365-day year).
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent
shall be conclusive and binding on the Borrower and the Banks in the absence of
manifest error.
2.12 Payments by the Borrower. (a) All payments to be made by
the Borrower shall be made without set-off, recoupment or counterclaim. Except
as otherwise expressly
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provided herein, all payments by the Borrower shall be made to the Agent for the
account of the Banks at the Agent's Payment Office, and shall be made in Dollars
and in immediately available funds, no later than 10:30 a.m. (San Francisco
time) on the date specified herein. The Agent will promptly distribute to each
Bank its Pro Rata Share (or other applicable share as expressly provided herein)
of such payment in like funds as received. Any payment received by the Agent
later than 10:30 a.m. (San Francisco time) shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Borrower
prior to the date on which any payment is due to the Banks that the Borrower
will not make such payment in full as and when required, the Agent may assume
that the Borrower has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the Borrower
has not made such payment in full to the Agent, each Bank shall repay to the
Agent on demand such amount distributed to such Bank, together with interest
thereon at the Federal Funds Rate for each day from the date such amount is
distributed to such Bank until the date repaid.
2.13 Payments by the Banks to the Agent. (a) Unless the Agent
receives notice from a Bank on or prior to the Closing Date or, with respect to
any Borrowing after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Borrower the amount of
that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank
has made such amount available to the Agent in immediately available funds on
the Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent any Bank shall not have made its full
amount available to the Agent in immediately available funds and the Agent in
such circumstances has made available to the Borrower such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate for
each day during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the Agent
shall constitute such Bank's Loan on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to the Agent on the
Business Day following the Borrowing Date, the Agent will notify the Borrower of
such failure to fund and, upon demand by the Agent, the Borrower shall pay such
amount to the Agent for the Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing
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Date, but no Bank shall be responsible for the failure of any other Bank to make
the Loan to be made by such other Bank on any Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of the Loans made by
it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 10.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
2.15 Security. All obligations of the Borrower under this
Agreement, the Notes and all other Loan Documents shall be secured in accordance
with the Collateral Documents.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by the Borrower to each
Bank or the Agent under this Agreement and any other Loan Document shall be made
free and clear of, and without deduction or withholding for, any Taxes. In
addition, the Borrower shall pay all Taxes.
(b) If the Borrower shall be required by law to deduct or
withhold any Taxes from or in respect of any sum payable hereunder to any Bank
or the Agent, then:
(i) the sum payable shall be increased as
necessary so that, after making all required
deductions and withholdings (including
deductions and withholdings applicable to
additional sums payable under this Section),
such Bank or the Agent, as the case may be,
receives and retains an amount equal to the
sum it would have received and retained had
no such deductions or withholdings been
made;
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(ii) the Borrower shall make such deductions and
withholdings; and
(iii) the Borrower shall pay the full amount
deducted or withheld to the relevant taxing
authority or other authority in accordance
with applicable law.
(c) The Borrower agrees to indemnify and hold harmless
each Bank for the full amount of Taxes in the amount (without duplication of
other amounts paid pursuant to this Section 3.1) that the respective Bank
specifies as necessary to preserve the after-tax yield (which after tax yield is
intended to compensate each Bank for Taxes deducted or withheld pursuant to this
Section 3.1 and additional Taxes imposed on amounts payable pursuant to this
Section 3.1) the Bank would have received if such Taxes had not been imposed,
and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor, which
demand shall specify in reasonable detail the basis for such demand.
(d) Within 30 days after the date of any payment by the
Borrower of Taxes, the Borrower shall furnish to such Bank or the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to such Bank or the Agent.
(e) Without affecting its rights under this Section 3.1 or
any provision of this Agreement, the Agent and each Bank agree that if any Taxes
are imposed and required by law to be paid or to be withheld from any amount
payable to such Bank or its Lending Office with respect to which the Borrower
would be obligated pursuant to this Section 3.1 to increase any amounts payable
to such Bank or to pay any such Taxes, such Bank shall use reasonable efforts to
select an alternative Lending Office, which would not result in the imposition
of such Taxes; provided, however, that neither of the Agent nor the Banks shall
be obligated to select any such alternative office if such Bank determines that
(i) as a result of such selection it would be in violation of an applicable law,
regulation, or treaty, or would incur additional costs or expenses or (ii) such
selection would be inadvisable for regulatory reasons or inconsistent with the
interests of such Bank.
(f) So long as no Default or Event of Default shall have
occurred and be continuing, the Borrower may, within the 30 day period
commencing on the day that the Borrower receives a demand for the payment of
Taxes from any Bank pursuant to this Section 3.1, demand that the Bank making
such demand be replaced with a Person that is an Eligible Assignee selected by
the Borrower and subject to consent by the Agent. Upon any such demand by the
Borrower, if the Agent shall have consented to the Eligible Assignee selected by
the Borrower (provided that should such Eligible Assignee be a Bank, such Bank
shall also have consented to such selection), the Bank that made a demand
pursuant to this Section 3.1 shall execute and deliver an Assignment and
Acceptance to the Agent pursuant to which such Bank shall assign all of its
rights and obligations under this Agreement and the other Loan Documents to the
Eligible Assignee selected by the Borrower.
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3.2 Illegality. (a) If any Bank determines that the
introduction of any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of Law, has made
it unlawful, or any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by such Bank to the Borrower
through the Agent, any obligation of that Bank to make Offshore Rate Loans shall
be suspended until the Bank notifies the Agent and the Borrower that the
circumstances giving rise to such determination no longer exist. Any Bank
notifying the Borrower of such a suspension of its obligation to make Offshore
Rate Loans shall provide to the Borrower reasonable documentation supporting
such obligation.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Borrower shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.4, either on the last day
of the Interest Period thereof, if such Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if such Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Borrower is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan. Any Bank making such a demand for prepayment
of Offshore Rate Loans shall provide to the Borrower reasonable documentation
supporting such demand.
3.3 Increased Costs and Reduction of Return. (a) If any Bank
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation by any Governmental Authority having
jurisdiction over the Banks or (ii) the compliance by any Bank with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Loans, then the Borrower shall be liable for, and shall from time
to time, upon demand (with a copy of such demand to be sent to the Agent),
promptly (and in any event within 30 days) pay to the Agent for the account of
such Bank, additional amounts as are sufficient to compensate such Bank for such
increased costs. Any Bank making such a demand for payment shall provide to the
Borrower reasonable documentation supporting such demand.
(b) If any 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, affects or would affect the
amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy) determines that
the amount of such capital is increased as a consequence of its Commitments,
loans, credits or obligations under this Agreement, then, upon demand of such
Bank to the Borrower through the Agent, the Borrower shall promptly (and in any
event within 30 days) pay to such Bank, from time to time as specified by such
Bank, additional amounts sufficient to
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compensate such Bank for such increase. Any Bank making such a demand for
payment shall provide to the Borrower reasonable documentation supporting such
demand.
3.4 Funding Losses. The Borrower shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank sustains or
incurs as a consequence of:
(a) the failure of the Borrower to make on a timely basis
any payment of principal of any Offshore Rate Loan;
(b) the failure of the Borrower to borrow, continue or
convert a Loan after the Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Borrower to make any prepayment in
accordance with any notice delivered under Section 2.6;
(d) the prepayment or other payment (including after
acceleration thereof) of an Offshore Rate Loan on a day that is not the last day
of the relevant Interest Period; or
(e) the conversion under Section 2.4 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period; including any such loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its Offshore Rate Loans or
from fees payable to terminate the deposits from which such funds were obtained.
3.5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period with respect to a proposed
borrowing of Offshore Rate Loans or conversion into or continuation of Offshore
Rate Loans, or that the Offshore Rate applicable pursuant to Section 2.9 for any
requested Interest Period with respect to a proposed borrowing of Offshore Rate
Loans or conversion into or continuation of Offshore Rate Loans does not
adequately and fairly reflect the cost to the Agent or any Bank of funding such
Loans, the Agent will promptly so notify the Borrower and each Bank and will
provide such Persons with reasonable documentation supporting such
determination. Thereafter, the obligation of the Banks to make or maintain
Offshore Rate Loans hereunder shall be suspended until the Agent shall notify
the Borrower and the Banks that the circumstances causing such suspension no
longer exist. Upon receipt of such notice, the Borrower may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Borrower does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by the Borrower, in the amount specified in the
applicable notice submitted by the Borrower, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans.
3.6 Survival. The agreements and obligations of the Borrower
in this Article III shall survive the payment of all other Obligations.
3.7 Notice of Claims. The Agent or the appropriate Bank will
notify the Borrower in writing of its claims under Article III within 180 days
after any officer of the Agent or
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such Bank having principal responsibility for monitoring the Borrower's
performance of its obligations under the Loan Documents has actual knowledge of
facts giving rise to a claim under Article III.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Agreement. The effectiveness of this
Agreement is subject to the condition that the Agent shall have received on or
before the Closing Date all of the following, in form and substance satisfactory
to the Agent and each Bank, and in sufficient copies for each Bank (other than
the Notes to be delivered pursuant to Section 4.1(a)):
(a) Credit Agreement and Notes. This Agreement and Notes
executed by the Borrower for Banks requesting Notes.
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Borrower authorizing the
transactions contemplated hereby, certified
as of the Closing Date by the Secretary or
an Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Borrower certifying as of
the Closing Date the names, titles and true
signatures of the officers of the Borrower
authorized to execute, deliver and perform,
as applicable, this Agreement and all other
Loan Documents to be delivered by it
hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Borrower as in effect
on the Closing Date, certified by the
Secretary or Assistant Secretary of the
Borrower as of the Closing Date; and
(ii) a good standing and tax good standing
certificate for the Borrower from the
Secretary of State (or similar, applicable
Governmental Authority) of its state of
incorporation and a good standing
certificate from the State of Colorado;
(d) Legal Opinions. Opinions of Shearman & Sterling and
internal counsel to the Borrower addressed to the Collateral Agent, the Agent
and the Banks, substantially in the forms of Exhibit D-1 and Exhibit D-2,
respectively.
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(e) Payment of Fees. Evidence of payment by the Borrower
of all accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, including any such costs, fees and expenses arising
under or referenced in Sections 2.9 and 10.4, provided that the Borrower shall
have been given reasonably detailed bills for the fees and services of the
Agent's legal counsel at least one Business Day prior to the Closing Date if it
is to pay such fees and expenses on the Closing Date;
(f) Collateral Documents. The Collateral Documents,
executed by the Borrower, in appropriate form for recording, where necessary,
together with:
(i) acknowledgment copies of all UCC-l financing
statements filed, registered or recorded to
perfect the security interests of the
Collateral Agent for the benefit of the
Banks and the other Secured Parties, or
other evidence satisfactory to the Agent
that there has been filed, registered or
recorded all financing statements and other
filings, registrations and recordings
necessary and advisable to perfect the Liens
of the Collateral Agent for the benefit of
the Banks and the other Secured Parties in
accordance with applicable law;
(ii) written advice relating to such Lien and
judgment searches as the Agent shall have
requested, and such termination statements
or other documents as may be necessary to
confirm that the Collateral is subject to no
other Liens in favor of any Persons (other
than Permitted Liens);
(iii) funds sufficient to pay any filing or
recording tax or fee in connection with any
and all UCC-1 financing statements;
(iv) such consents, estoppels, subordination
agreements and other documents and
instruments executed by landlords and
tenants where any Collateral as to which the
Collateral Agent shall be granted a Lien for
the benefit of the Banks and the other
Secured Parties is stored, as reasonably
requested by the Agent or any Bank; and
(v) evidence that all other actions necessary
or, in the opinion of the Agent or the
Banks, desirable to perfect and protect the
first priority Lien created by the
Collateral Documents, and to enhance the
Collateral Agent's ability to preserve and
protect its interests in and access to the
Collateral, have been taken;
(g) Certificate. A certificate signed by a Responsible
Officer of the Borrower, dated as of the Closing Date, stating that:
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(i) the representations and warranties contained
in Article V are true and correct on and as
of such date, as though made on and as of
such date; and
(ii) no Default or Event of Default exists.
(h) Termination of Prior 364-Day Facility. Evidence
satisfactory to the Agent that all amounts owing under the Prior 364-Day
Facility shall have been paid in full (or shall be paid in full concurrently
with the initial Borrowing hereunder on the Closing Date) and all commitments to
lend money thereunder terminated.
(i) Amendment of $350MM Credit Agreement. Evidence
satisfactory to the Agent that the $350MM Credit Agreement shall have been
amended on or prior to the Closing Date in form and substance satisfactory to
the Agent and the Required Banks.
(j) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may reasonably request.
4.2 Conditions to All Credit Extensions. The obligation of
each Bank to make any Revolving Loan to be made by it (including its initial
Revolving Loan) or to continue or convert any Revolving Loan under Section 2.4
is subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date or Conversion/Continuation Date:
(a) Notice. The Agent shall have received (with, in the
case of the initial Revolving Loan only, a copy for each Bank) a Notice of
Borrowing or a Notice of Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date with the same effect as
if made on and as of such Borrowing Date or Conversion/Continuation Date; and
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing or continuation or conversion;
(d) No Material Adverse Effect. There has occurred since
September 24, 1999, no event or circumstance that has resulted or could
reasonably be expected to result in a Material Adverse Effect; and
(e) No Future Advance Notice. Neither the Collateral
Agent, the Agent nor any Bank shall have received from the Borrower any notice
that any Collateral Document will no longer secure on a first priority basis
future advances or future Loans to be made or extended under this Agreement.
(f) Representation and Warranty. Each Notice of Borrowing
and Notice of Conversion/Continuation submitted by the Borrower hereunder shall
constitute a representation and warranty by the Borrower hereunder, as of the
date of each such notice and as
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of each Borrowing Date, Conversion/Continuation Date, as applicable, that the
conditions in this Section 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and each
Bank that:
5.1 Corporate Existence and Power. The Borrower 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 own its assets, carry on its
business and to execute, deliver, and, in the case of the Borrower, perform its
obligations under the Loan Documents;
(c) is duly qualified, 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
or good standing; and
(d) is in compliance with all Requirements of Law; except,
in each case referred to in 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.
5.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Borrower of this Agreement and each other Loan
Document to which the Borrower is party, have been duly authorized by all
necessary corporate action, and do not:
(a) contravene the terms of any of the Borrower's
Organization Documents;
(b) conflict with or result in any breach or contravention
of any document evidencing any Contractual Obligation to which the Borrower is a
party or any order, injunction, writ or decree of any Governmental Authority to
which the Borrower or its property is subject, except where such conflict,
breach or contravention would not cause a Material Adverse Effect or render any
Loan Document unenforceable against the Borrower or any other Person;
(c) violate any Requirement of Law except, in each case,
where any such contravention, conflict, breach, or violation would not cause a
Material Adverse Effect or render any Loan Document unenforceable against the
Borrower or any other Person; or
(d) result in the creation of any Lien, except for Liens
in favor of the Collateral Agent arising under the Collateral Documents.
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5.3 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for filings in connection with the Liens granted
to the Collateral Agent under the Collateral Documents) is necessary or required
in connection with the execution, delivery or performance by, or current
enforcement against, the Borrower or any of its Material Subsidiaries of the
Agreement or any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan
Document to which the Borrower or any of its Subsidiaries is a party constitute
(or, when duly executed and delivered, shall constitute) the legal, valid and
binding obligations of the Borrower, enforceable against it in accordance with
their respective terms and claims under this Agreement and each Loan Document
will rank at least pari passu with the claims of other unsecured creditors,
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.
5.5 Litigation. Except as specifically disclosed in Schedule
5.5, there are no actions, suits, proceedings, claims or disputes pending, or to
the best knowledge of the Borrower, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the
Borrower, or its Subsidiaries or any of their respective properties which:
(a) relates to this Agreement or any other Loan Document,
or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Borrower or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
5.6 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Borrower or from the grant
or perfection of the Liens of the Collateral Agent and the Banks on the
Collateral. Neither the Borrower nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect, or that would, if such default had occurred after the Closing
Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance. (a) Each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter from the IRS
and to the best knowledge of the Borrower, nothing has occurred which would
cause the loss of such qualification. The Borrower and each ERISA Affiliate has
made all required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan.
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(b) There are no pending or, to the best knowledge of the
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect, except as specifically
disclosed in Schedule 5.5. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for the purposes set forth in and permitted by
Section 6.11 and Section 7.6. Neither the Borrower nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock. To the
extent that the Borrower uses Loan proceeds to acquire shares of its own stock
which is Margin Stock, the Borrower intends to cause such acquired shares to be
immediately retired.
5.9 Title to Properties; Liens. The Borrower and each
Subsidiary have good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary
conduct of their respective businesses, except for such defects in title as
would not, individually or in the aggregate, have a Material Adverse Effect. As
of the Closing Date the property (real or personal, tangible or intangible) of
the Borrower and its Material Subsidiaries is subject to no Liens, other than
Permitted Liens.
5.10 Taxes. The Borrower and its Subsidiaries have filed or
caused to be filed all federal and other material tax returns and reports
required to be filed, and have paid or caused to be paid all federal and other
material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except (i) those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP and (ii) those for which the failure to pay would not have a Material
Adverse Effect. To the Borrower's knowledge, there is no proposed tax assessment
against the Borrower or any Subsidiary that would, if made, have a Material
Adverse Effect.
5.11 Financial Condition. (a) The audited Consolidated
financial statements of the Borrower and its Subsidiaries for the fiscal year
ended December 25, 1998 (as set forth in the Borrower's Form 10-K filing dated
March 6, 1999) and the unaudited Consolidated financial statements of the
Borrower and its Subsidiaries for the fiscal quarter ended September 24, 1999
(as set forth in the Borrower's latest Form 10-Q filing dated November 5, 1999)
and, in each
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<PAGE> 40
case, the related Consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period
covered thereby, except as otherwise
expressly noted therein;
(ii) fairly present the financial condition of
the Borrower and its Subsidiaries as of the
date thereof and results of operations for
the period covered thereby; and
(iii) except as specifically disclosed in Schedule
5.11, show all material indebtedness and
other liabilities, direct or contingent, of
the Borrower and its Consolidated
Subsidiaries as of the date thereof,
including liabilities for taxes, material
commitments and Contingent Obligations.
(b) Since the end of the fiscal quarter ending September
24, 1999 there has been no Material Adverse Effect.
5.12 Environmental Matters. The Borrower conducts in the
ordinary course of business a review of the effect of existing Environmental
Laws and existing Environmental Claims on its business, operations and
properties, and as a result thereof the Borrower has reasonably concluded that,
except as specifically disclosed in Schedule 5.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.13 Collateral Documents. (a) The provisions of each of the
Collateral Documents are effective to create in favor of the Collateral Agent
for the benefit of the Banks and the other Secured Parties, a legal, valid and
enforceable security interest (subject only to Permitted Liens) in all right,
title and interest of the Borrower in the Collateral described therein.
(b) All representations and warranties of the Borrower
contained in the Collateral Documents are true and correct.
5.14 Regulated Entities. Neither the Borrower, nor any Person
controlling the Borrower, nor any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Borrower is not subject
to regulation under the Public Utility Holding Company Act of 1935, the federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.15 Copyrights, Patents, Trademarks and Licenses, Etc. The
Borrower or its Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective material businesses, without
conflict with the rights of any other Person. To the best knowledge of the
Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now
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<PAGE> 41
employed, or now contemplated to be employed, by the Borrower or any Material
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 5.5, no claim or litigation regarding any of
the foregoing is pending or, to the best knowledge of the Borrower, threatened,
and no patent, invention, device, application, principle or any statute, law,
rule, regulation, standard or code is pending or, to the knowledge of the
Borrower, proposed, which, in either case, could reasonably be expected to have
a Material Adverse Effect.
5.16 Subsidiaries. The Borrower (a) has no U.S. Subsidiaries
other than those specifically disclosed in part (a) of Schedule 5.16 hereto as
of the Closing Date and (b) has no equity investments in any other corporation
or entity other than those specifically disclosed in part (b) of Schedule 5.16
except, in each case, for Subsidiaries created and equity investments made after
the Closing Date and otherwise permitted by this Agreement.
5.17 Insurance. Except as specifically disclosed in Schedule
5.17, the properties of the Borrower and its Material Subsidiaries are insured
with, to the best knowledge of the Borrower, financially sound and reputable
insurance companies not Affiliates of the Borrower, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Borrower or such Material Subsidiary operates.
5.18 Full Disclosure. None of the representations or
warranties made by the Borrower in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any written exhibit, report, statement or certificate
furnished by or on behalf of the Borrower or any Subsidiary in connection with
the Loan Documents (including the offering and disclosure materials delivered by
or on behalf of the Borrower to the Banks prior to the Closing Date), contains
any untrue statement of a material fact or omits any material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered; provided that nothing in this Section 5.18 shall apply to any
projections, forward-looking information or other similar or related information
furnished by or on behalf of the Borrower or any Subsidiary in connection with
the Loan Documents.
5.19 Projections. All projections, forward-looking information
or other similar or related information furnished by or on behalf of the
Borrower or any Subsidiary in connection with the Loan Documents were prepared
in good faith on the basis of the assumptions stated therein, which assumptions
were fair in the light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the Borrower or such
Subsidiary's best estimate of its future financial performance, operations and
results.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied, unless the
Required Banks waive compliance in writing:
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<PAGE> 42
6.1 Financial Statements. The Borrower shall deliver to the
Agent, in form and detail satisfactory to the Agent and the Required Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 120 days
after the end of each fiscal year, a copy of the audited Consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such year and the
related Consolidated statements of income or operations, shareholders' equity
and cash flows for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the opinion of
PricewaterhouseCoopers LLP or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state that such
Consolidated financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years. Such opinion shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any material
portion of the Borrower's or any Subsidiary's records; and
(b) as soon as available, but not later than 55 days after
the end of each of the first three fiscal quarters of each fiscal year, a copy
of the unaudited Consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such quarter and the related Consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the results of
operations of the Borrower and the Subsidiaries.
6.2 Certificates; Other Information. The Borrower shall
furnish to the Agent with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsections 6.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(b) promptly, copies of all financial statements and
reports that the Borrower sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10-K,
10-Q and 8-K) that the Borrower or any Subsidiary may make to, or file with, the
SEC; and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Borrower or any Subsidiary as
the Agent, at the request of any Bank, may from time to time reasonably request.
6.3 Notices. The Borrower shall promptly notify the Agent and
each Bank:
(a) after a Responsible Officer of the Borrower knows or
has reason to know of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance for which it is
reasonably foreseeable that such event or circumstance will become a Default or
Event of Default;
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<PAGE> 43
(b) after a Responsible Officer of the Borrower or any
ERISA Affiliate knows or has reason to know that any material ERISA Event has
occurred, with a statement of a Responsible Officer of the Borrower describing
such ERISA Event and the action, if any, that the Borrower or such ERISA
Affiliate proposes to take with respect thereto;
(c) of any material change in accounting policies or
financial reporting practices by the Borrower or any of its Consolidated
Subsidiaries, except for changes in financial reporting practices mandated by
any Governmental Authority or accounting standards board;
(d) of any matter that has resulted or could reasonably be
expected to result in a Material Adverse Effect, including (i) any breach or
non-performance of, or any default under, any Contractual Obligation of the
Borrower or any of its Subsidiaries which has resulted or could reasonably be
expected to result in a Material Adverse Effect; (ii) any dispute, litigation or
proceeding which may exist at any time between the Borrower or any of its
Subsidiaries and any Governmental Authority which has resulted or could
reasonably be expected to result in a Material Adverse Effect; and (iii) any
investigation or suspension by any Governmental Authority with respect to the
Borrower or any Subsidiary of which the Borrower or such Subsidiary has
knowledge, which investigation or suspension has resulted or could reasonably be
expected to result in a Material Adverse Effect;
(e) of the commencement of, or any material development
in, any litigation or proceeding to which the Borrower or any Subsidiary is a
party (i) which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect, or (ii) in which the relief sought is an injunction or
other stay of the performance of this Agreement or any Loan Document; and
(f) of any other litigation or proceeding affecting the
Borrower or any of its Subsidiaries which the Borrower would be required to
report to the SEC pursuant to the Exchange Act, within four days after reporting
the same to the SEC.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Borrower or any
affected Subsidiary proposes to take with respect thereto and at what time. Each
notice under subsection 6.3(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Borrower
shall, and shall cause each Material Subsidiary to preserve and maintain in full
force and effect its corporate existence and good standing under the laws of its
state or jurisdiction of incorporation and preserve and maintain in full force
and effect all governmental rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal conduct of its
business except (a) if in the reasonable business judgment of the Borrower or
such Material Subsidiary, it is in its best economic interest not to preserve or
maintain such rights, privileges, qualification, permits, licenses or franchises
and (b) if no Material Adverse Effect could reasonably be expected to result.
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<PAGE> 44
6.5 Maintenance of Property. The Borrower shall maintain, and
shall cause each Material Subsidiary to maintain, and preserve all its material
property (including, without limitation, equipment) which is used or useful in
its business in good working order and condition, ordinary wear and tear
excepted and make all necessary repairs thereto and renewals and replacements
thereof except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect. The Borrower and each Material Subsidiary shall
use the standard of care typical in the industry in the operation and
maintenance of its facilities.
6.6 Insurance. In addition to insurance requirements set forth
in the Collateral Documents, the Borrower shall maintain, and shall cause each
Material Subsidiary to maintain, with financially sound and reputable
independent insurers, insurance 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.
6.7 Payment of Obligations. The Borrower shall, and shall
cause each Material Subsidiary to, pay and discharge before the same shall
become delinquent:
(a) all 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 in
accordance with GAAP are being maintained by the Borrower or such Material
Subsidiary; and
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property.
6.8 Compliance with Laws. The Borrower shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law of any Governmental Authority having jurisdiction over it or its business
(including Environmental laws and 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.
6.9 Compliance with ERISA. The Borrower shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The
Borrower shall maintain and shall cause each Material Subsidiary to maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and the assets and business of the Borrower and such Material
Subsidiary. During the continuance of any Event of Default, the Borrower shall
permit, and shall cause each Subsidiary to permit, representatives and
independent contractors of the Agent or any 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
39
<PAGE> 45
directors, officers, and independent public accountants, all at the expense of
each the Borrower and at such reasonable times during normal business hours and
as often as may be reasonably desired, upon reasonable advance notice to each
the Borrower.
6.11 Use of Proceeds. The Borrower shall use the proceeds of
the Loans for working capital and other general corporate purposes (including
repurchases of its own stock) not in contravention of any Requirement of Law or
of any Loan Document.
6.12 Disclosure; Further Assurances(a) . (a) The Borrower
shall ensure that all written information, exhibits and reports furnished to the
Agent and the Banks by or on behalf of the Borrower and concerning the Borrower
do not and will not contain any untrue statement of a material fact and do not
and will not omit to state any material fact or any fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which made, and will promptly disclose to the Agent and the Banks and correct
any material defect or error that may be discovered therein or in any Loan
Document or in the execution, acknowledgement or recordation thereof; provided
that nothing in this Section 6.12(a) shall apply to any projections,
forward-looking information or other similar or related information furnished by
or on behalf of the Borrower or any Subsidiary in connection with the Loan
Documents.
(b) The Borrower shall ensure that all projections,
forward-looking information or other similar or related information furnished by
or on behalf of the Borrower in connection with the Loan Documents are prepared
in good faith on the basis of the assumptions stated therein, which assumptions
are fair in the light of conditions existing at the time of delivery of such
forecasts, and represent, at the time of delivery, the Borrower's or such
Subsidiary's best estimate of its future financial performance, operations and
results.
(c) Promptly upon request by the Collateral Agent, the
Agent, the Required Banks or the Directing Banks, as the case may be, the
Borrower shall do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register, any and all such further acts, security
agreements, financing statements and continuations thereof, termination
statements, notices of security interest, certificates, assurances and other
instruments the Collateral Agent, the Agent or such Banks, as the case may be,
may reasonably require from time to time in order (i) to carry out more
effectively the purposes of this Agreement or any other Loan Document, (ii) to
subject to the Liens created by any of the Collateral Documents any of the
properties, rights or interests covered by any of the Collateral Documents,
(iii) to perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents and the Liens intended to be created thereby, and (iv)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Collateral Agent, the Agent and Banks the rights granted or now or
hereafter intended to be granted to the Collateral Agent, the Agent or the Banks
under any Loan Document or under any other document executed in connection
therewith.
(d) The Borrower shall provide such other documentation
and cooperation as the Agent or the Required Banks reasonably request in
connection with the exercise by the Agent and the Banks of their rights and
remedies under the Loan Documents.
6.13 Financial Covenants. The Borrower will, unless the
Required Banks shall otherwise consent in writing:
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<PAGE> 46
(a) Maintenance of Consolidated Tangible Net Worth.
Maintain as at the end of each fiscal quarter a Consolidated Tangible Net Worth
of the Borrower and its Subsidiaries of not less than at any time the amount
that is equal to (A) $800,000,000, plus (B) 75% of Consolidated Net Income
(excluding any Consolidated Net Loss) of the Borrower and its Subsidiaries
earned in each fiscal quarter ended after December 31, 1999, plus (C) 75% of the
amount of all proceeds (net of costs and expenses) received pursuant to the
issuance of any equity securities issued by the Borrower after December 31, 1999
(excluding proceeds of any issuance made for the purposes of fulfilling a stock
purchase plan or compensatory option plan for the employees or directors of the
Borrower or any Subsidiary), plus (D) 100% of the face amount of any
Subordinated Indebtedness that is converted into stock of the Borrower after
December 31, 1999.
(b) Consolidated Net Income. (i) Not permit the
Consolidated Net Loss for any fiscal quarter to be greater than (A) $42,500,000
for the fourth fiscal quarter 1999, and (B) $35,000,000 for the first fiscal
quarter 2000; and (ii) not permit the Consolidated Net Loss or Consolidated
Operating Loss to be greater than $0 for each fiscal quarter ending thereafter.
In determining the Borrower's compliance with this subsection 6.13(b),
cumulative pre-tax non-cash restructuring charges and write-offs and write-downs
of assets classified as non-cash assets of up to $50,000,000 in the fourth
fiscal quarter 1999, first fiscal quarter 2000 and second fiscal quarter 2000
shall be added back to Consolidated Net Loss or Consolidated Operating Loss, as
the case may be, to the extent deducted therefrom.
(c) Consolidated Total Leverage Ratio. Not permit the
Consolidated Total Leverage Ratio of the Borrower and its Subsidiaries as
determined at the end of each fiscal quarter during the measurement periods set
forth below to exceed the correlative ratio set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
fiscal year-end 1999 through second fiscal quarter-end 2000 42.5%
third fiscal quarter-end 2000 through fiscal year-end 2000 40.0%
Thereafter 35.0%
</TABLE>
(a) Adjusted Quick Ratio. Maintain a Consolidated Adjusted Quick Ratio for the
Borrower and its Subsidiaries as determined at the end of each fiscal quarter
during each of the measurement periods set forth below at least equal to the
correlative ratio for such period as set forth below:
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<PAGE> 47
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
fiscal year-end 1999 0.90 : 1.00
first fiscal quarter-end 2000 0.80 : 1.00
second fiscal quarter-end 2000 0.85 : 1.00
third fiscal quarter-end 2000 0.90 : 1.00
fiscal year-end 2000 and thereafter 1.00 : 1.00
</TABLE>
(d) Senior Funded Debt. Not permit the Senior Funded Debt
of the Borrower and its Subsidiaries to exceed (i) $500,000,000 at any time
during the period from the Closing Date through first fiscal quarter-end 2000,
(ii) $475,000,000 at any time during the period from the commencement of the
second fiscal quarter 2000 through third fiscal quarter-end 2000; and (iii)
$450,000,000 at any time thereafter.
6.14 Patents and Permits. The Borrower will, and will cause
each of its Subsidiaries to, (i) maintain all permits, licenses, consents or
other approvals of any Government Authority or any Person and (ii) maintain in
full force and effect and protect patents, trademarks, tradenames or other
intellectual property rights, the failure of which to maintain or protect would
result in a Material Adverse Effect.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied, unless the
Required Banks waive compliance in writing:
7.1 Limitation on Liens. The Borrower shall not, and shall not
suffer or permit any Material Subsidiary to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) Liens for taxes, assessments or governmental charges
or levies, and to the extent not past due or to the extent contested, in good
faith, by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;
(b) Liens imposed by law, such as materialman's,
mechanic's, carrier's, workman's, and repairman's Liens and other similar Liens
arising in the ordinary course of business which relate to obligations which are
not overdue for a period of more than 45 days or which are being contested in
good faith, by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;
(c) pledges or deposits in the ordinary course of business
to secure nondelinquent obligations under workman's compensation or unemployment
laws or similar
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<PAGE> 48
legislation or to secure the performance of leases or trade contracts entered
into in the ordinary course of business or of public or nondelinquent statutory
obligations, bids, or appeal bonds;
(d) Liens upon or in any property acquired or held by the
Borrower or any of its Subsidiaries to secure the purchase price or construction
costs (and, to the extent financed, sales and excise taxes, delivery and
installation costs and other related expenses) of such property or to secure
indebtedness incurred solely for the purpose of financing or refinancing the
acquisition or construction of any such property to be subject to such Liens, or
Liens existing on any such property at the time of acquisition, or extensions,
renewals or replacements of any of the foregoing for the same or a lesser
principal amount, provided that no such Lien shall extend to or cover any
property other than the property being acquired or constructed and no such
extension, renewal or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or replaced;
(e) Liens consisting of the interest of a lessor upon any
assets subject to a Capital Lease and securing payment of the obligations
arising under such Capital Lease and provided that such Capital Lease is
otherwise permitted hereunder;
(f) zoning restrictions, easements, licenses, landlord's
Liens or restrictions on the use of any real property occupied by the Borrower
or its Subsidiaries, which do not materially impair the use of such property in
the operation of the business of the Borrower or any of its Subsidiaries or the
value of such property for the purpose of such business;
(g) Liens associated with judgments and awards to the
extent such judgments and awards do not create an Event of Default under
subsection 8.1(i) hereof;
(h) Liens in favor of the issuer of a documentary
commercial letter of credit, provided, that such Liens are limited exclusively
to the goods covered by such letter of credit;
(i) Liens listed on Schedule 7.1(i) securing Indebtedness
outstanding on the Closing Date;
(j) Liens consisting of the interest of a lessor under
Operating Leases made in the ordinary course of business, or existing on
property leased by the Borrower or its Subsidiaries under an Operating Lease in
the ordinary course of business;
(k) Liens securing borrowings by the Borrower against life
insurance policies under which it is the beneficiary in an aggregate amount not
to exceed $40,000,000;
(l) Liens in connection with the Borrower's credit card
processing program in an aggregate amount not to exceed $20,000,000;
(m) consensual Liens not described in subclauses (a)
through (l) above that: (i) relate to liabilities other than borrowed money debt
(including Liens incurred in connection with sales and leasebacks of the
Borrower's assets) and securing obligations not in excess of $30,000,000 in the
aggregate at
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<PAGE> 49
any time for all such Liens for the Borrower and its Subsidiaries together, or
(ii) secure obligations not in excess of $15,000,000 in the aggregate at any
time for all such Liens for the Borrower and its Subsidiaries together; provided
that no Liens otherwise permitted by clauses (i) and (ii) shall be permitted
against Receivables or inventories of the Borrower or its Subsidiaries; and
provided further that the obligations secured by Liens permitted pursuant to
clauses (i) and (ii) shall at no time, in the aggregate, exceed $30,000,000;
(n) Liens with respect to collateral (whether in cash,
letters of credit or other investments) provided in connection with the
Multicurrency Note Purchase Facility; provided that at no time shall the
collateral with respect to the Multicurrency Note Purchase Facility exceed, in
the aggregate, $140,000,000;
(o) Liens on cash collateral granted by the Borrower to
the administrative agent under the $350MM Credit Agreement, for the benefit of
the issuing bank and the lenders party thereto, to secure obligations in respect
of letters of credit issued under the $350MM Credit Agreement;
(p) without limiting the preceding subsection (o), Liens
on the assets of the Borrower constituting Collateral securing the obligations
of the Borrower under the $350MM Credit Agreement, provided that such Liens rank
pari passu at all times with the Liens of the Agent and the Banks on the
Collateral; and
(q) Liens arising solely by virtue of any statutory or
common law provision or any depository agreement entered into by the Borrower or
any Subsidiary in the ordinary course of business, in each case 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.
7.2 Disposition of Assets. The Borrower shall not, and shall
not suffer or permit any Material Subsidiary to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out, obsolete
or surplus equipment or other assets not practically usable in the business of
the Borrower, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment;
(c) dispositions of assets in the ordinary course of
business by the Borrower or any of its Subsidiaries to the Borrower or any other
of its Subsidiaries pursuant to reasonable business requirements;
(d) dispositions in connection with a sale/leaseback
transaction involving real or personal property of the Borrower or its
Subsidiaries; provided, that any such sale/leaseback transaction is otherwise
permitted under this Agreement;
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<PAGE> 50
(e) dispositions not otherwise permitted hereunder;
provided, that (i) at the time of any disposition, no Event of Default shall
exist or shall result from such disposition, and (ii) the aggregate net book
value of all assets so sold by the Borrower and its Subsidiaries, together,
shall not exceed in any fiscal year an amount equal to 5% of Consolidated Total
Assets of the Borrower for such fiscal year; and
(f) dispositions listed on Schedule 7.2.
7.3 Consolidations and Mergers. The Borrower shall not, and
shall not suffer or permit any Subsidiary to, merge, consolidate with or into,
or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or acquire all or substantially all of the
assets of, any Person, except:
(a) any Subsidiary may merge with the Borrower, provided
that the Borrower shall be the continuing or surviving corporation, or with any
one or more Subsidiaries, 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;
(b) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise), to the Borrower or another
Wholly-Owned Subsidiary; and
(c) to the extent permitted by Section 7.2.
Nothing in this Section 7.3 shall prevent the Borrower or any
of its Subsidiaries from merging with, or acquiring all or substantially all of
the assets of any Person if (i) with respect to a merger, the Borrower or such
Subsidiary party to such merger is the surviving entity of such merger, and (ii)
the total assets (including securities and all other assets) so acquired,
together with the total assets for all such transactions occurring after the
Closing Date (in each case as measured on the effective date of such merger or
acquisition), do not exceed in any fiscal year an amount greater than 15% of the
Consolidated Tangible Net Worth of the Borrower and its Subsidiaries for such
fiscal year and do not exceed in the aggregate since October 23, 1997,
$500,000,000, and (iii) the merger or acquisition involves an entity engaged in
a similar business to that of the Borrower or in a business within the
Borrower's strategic plans; and (iv) no Default or Event of Default has occurred
or would occur from such merger or acquisition.
If any Acquisition or Investment is hostile, no proceeds of
any Loan may be used, directly or indirectly, therefor ("hostile" for purposes
of this sentence meaning the prior effective written consent of the board of
directors or equivalent governing body of the acquiree is not obtained).
7.4 Loans and Investments. The Borrower shall not purchase or
acquire, or suffer or permit any Material Subsidiary to purchase or acquire, or
make any commitment therefor, any capital stock, equity interest, or any
obligations or other securities of, or any interest in, any Person, or make or
commit to make any advance, loan, extension of credit or capital contribution to
or any other investment in, any Person including any Affiliate of the Borrower
(together, but excluding Acquisitions, "Investments"), except for:
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(a) Investments held by the Borrower or any Material
Subsidiary in the form of cash equivalents;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(c) extensions of credit by the Borrower to any of its
Subsidiaries or by any of its Subsidiaries to another of its Subsidiaries;
(d) (i) Investments in any distributor of the Borrower's
products or any supplier of raw materials or services useful to the business of
the Borrower and its Subsidiaries (other than the acquisition of such Person by
the Borrower or its Subsidiaries), or in any partnership or corporation with
others, (ii) Joint-Ventures and (iii) other Investments, provided, that (A) the
book value (as to the Borrower) of any such Investment or Joint-Venture,
together with such value of all prior Investments or Joint-Ventures described in
clauses (i) through (iii) of this Section 6.4(d) undertaken by the Borrower and
its Subsidiaries since October 23, 1997, shall not exceed at the time of such
Investment or Joint Venture, 15% of Consolidated Tangible Net Worth as
calculated as of the most recent fiscal quarter prior to such Investment or
Joint-Venture, (B) such Investments and Joint-Ventures are undertaken in
accordance with all applicable Requirements of Law and (C) immediately prior to
and after giving effect thereto, no Default or Event of Default shall exist or
be continuing;
(e) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations;
(f) Investments complying with the investment policy for
the Borrower and its Subsidiaries described on Schedule 7.4(f), as such schedule
may be amended from time to time;
(g) contributions, loans or advances to, or guarantees of,
the Borrower or any Subsidiary in connection with the Multicurrency Note
Purchase Facility;
(h) loans to employees of the Borrower or any of its
Subsidiaries (i) not to exceed $20,000,000, exclusive of any loans permitted
pursuant to clause (ii), (valued without regard to any write-down due to
uncollectability) at any one time outstanding for all such loans to all
employees of the Borrower and its Subsidiaries in the aggregate, or (ii) in the
ordinary course of business with respect to travel and relocation expenses; and
(i) repurchases of shares of the Borrower's stock.
7.5 Transactions with Affiliates. The Borrower shall not, and
shall not suffer or permit any Material Subsidiary to, enter into any
transaction with any Affiliate of the Borrower, except (i) transactions upon
fair and reasonable terms no less favorable to the Borrower or such Material
Subsidiary than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of the Borrower or such Material Subsidiary and (ii)
transactions between Material Subsidiaries of the Borrower and transactions
between the Borrower and its Material Subsidiaries on terms fair and reasonable
to all interested parties and undertaken by all such parties in good faith and
in the ordinary course of business.
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7.6 Use of Proceeds. The Borrower shall not, and shall not
suffer or permit any Subsidiary to, use any portion of the Loan proceeds,
directly or indirectly, for any purpose that would require the Agent or any Bank
to deliver or obtain any certification under, or to comply with the margin
requirements or other provisions of, Regulation T, U or X of the FRB.
7.7 Contingent Obligations. The Borrower shall not, and shall
not suffer or permit any Material Subsidiary to, create, incur, assume or suffer
to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary
course of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations in favor of BofA or any
Affiliate of BofA including, without limitation, in the form of recourse to the
Borrower or guaranties by the Borrower in connection with the Multicurrency Note
Purchase Facility;
(d) Contingent Obligations of the Borrower and its
Subsidiaries existing as of the Closing Date and listed in Schedule 7.7(d) and
any renewals, extensions or modifications thereof so long as the aggregate
amount of such Contingent Obligations does not increase from the amount existing
on the Closing Date;
(e) Contingent Obligations incurred in the ordinary course
of business and not exceeding at any time $45,000,000 in the aggregate in
respect of the Borrower and its Subsidiaries together;
(f) Contingent Obligations arising under the Loan
Documents;
(g) Contingent Obligations arising in connection with
Indebtedness of any Subsidiary of the Borrower, provided, that such Indebtedness
is otherwise permitted by this Credit Agreement; and
(h) Contingent Obligations of the Borrower pursuant to
guaranties in favor of Leasetec Corporation and other leasing partners (or any
of their successors or assigns) so long as the aggregate amount thereof does not
exceed at any time $50,000,000.
7.8 Restricted Payments. The Borrower shall not, and shall not
suffer or permit any Subsidiary to, declare or make any dividend payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock, except
that any Subsidiary may declare and make dividend payments or other
distributions on account of any shares of any class of its capital stock to
another Subsidiary or to the Borrower and the Borrower may (so long as there is
no Default or Event of Default) declare and make dividend payments or other
distributions payable solely in its common stock.
7.9 ERISA. The Borrower shall not, and shall not suffer or
permit any of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably expected to
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result in liabilities of the Borrower in an aggregate amount in excess of
$10,000,000; or (b) engage in a transaction that could be subject to Section
4069 or 4212(c) of ERISA.
7.10 Change in Business. The Borrower shall not make any
material change in the nature of its business as conducted on the Closing Date.
7.11 Accounting Changes. The Borrower shall not and shall not
suffer or permit any Material Subsidiary to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the fiscal year of each the Borrower or any Material Subsidiary.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default. Any of the following events shall
constitute an "Event of Default":
(a) Non-Payment. The Borrower fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan, or (ii)
within two Business Days after the same becomes due, any interest, fee or any
other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Borrower made or deemed made herein, in any other Loan Document,
or which is contained in any certificate, document or financial or other
statement by the Borrower, or any Responsible Officer, furnished at any time
under this Agreement, or in or under any other Loan Document, is incorrect in
any material respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Borrower (i) fails to perform
or observe any term, covenant or agreement contained in Sections 6.3, 6.4, 6.11
or 6.13 or in Article VII; or (ii) fails to perform or observe any term,
covenant or agreement contained in Sections 6.1, 6.2 or 6.9 and such failure
shall continue for five Business Days; or
(d) Other Defaults. The Borrower fails to perform or
observe any other term or covenant contained in this Agreement or any other Loan
Document, and such default shall continue unremedied for a period of 30 days
after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such failure or (ii) the date upon which written
notice thereof is given to the Borrower by the Agent or any Bank; or
(e) Cross-Default. The Borrower or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation (other than Indebtedness or Contingent Obligations hereunder), having
an aggregate principal amount (including undrawn committed or available amounts
and including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $20,000,000 when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure shall continue for five Business Days; 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
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relating to any such Indebtedness or Contingent Obligation, if the effect of
such failure, event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Borrower or any
Material Subsidiary (i) ceases or fails to be solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. Any involuntary Insolvency
Proceeding is commenced or filed against the Borrower or any Material
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Borrower's or any
Material Subsidiary's properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Borrower or any Material Subsidiary
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Borrower or any Material
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business;
or
(h) ERISA. An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Borrower under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$20,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $20,000,000; or (iii) the Borrower or any
ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of $20,000,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Borrower or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $20,000,000 or more, and the same
shall remain unvacated and unstayed pending appeal for a period of 30
consecutive days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Borrower or any Subsidiary which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 30 consecutive days
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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) Change of Control. There occurs any Change of Control;
or
(l) Adverse Change. There occurs a Material Adverse
Effect; or
(m) Collateral. (i) any provision of any Collateral
Document shall for any reason cease to be valid and binding on or enforceable
against the Borrower or the Borrower shall so state in writing or bring an
action to limit its obligations or liabilities thereunder; or (ii) any
Collateral Document shall for any reason (other than pursuant to the terms
thereof) cease to create a valid security interest in any material portion of
the Collateral purported to be covered thereby or such security interest shall
for any reason cease to be a perfected and first priority security interest in
any material portion of the Collateral subject only to Permitted Liens.
8.2 Remedies. If any Event of Default occurs and is
continuing, the Agent shall, at the request of, or may, with the consent of, the
Required Banks,
(a) declare the obligation of each Bank to make Loans to
be terminated, whereupon such obligations and such Bank's Commitment shall be
terminated;
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower; and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 8.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent or any
Bank.
8.3 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.
8.4 Certain Financial Covenant Defaults. In the event that,
after taking into account any extraordinary charge to earnings taken or to be
taken as of the end of any fiscal period of the Borrower (a "Charge"), and if
solely by virtue of such Charge, there would exist an Event of Default due to
the breach of any of Section 6.13 as of such fiscal period end date, such Event
of Default shall be deemed to arise upon the earlier of (a) the date after such
fiscal period end date on which the Borrower announces publicly it will take, is
taking or has taken such
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Charge (including an announcement in the form of a statement in a report filed
with the SEC) or, if such announcement is made prior to such fiscal period end
date, the date that is such fiscal period end date, and (b) the date the
Borrower delivers to the Agent its audited annual or unaudited quarterly
financial statements in respect of such fiscal period reflecting such Charge as
taken.
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization; "Agent". Each Bank hereby
irrevocably (subject to Section 9.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
9.3 Liability of Agent. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the Borrower or any
Subsidiary or Affiliate of the Borrower, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document or
for the value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Borrower or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Bank to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower or any of the Borrower's
Subsidiaries or Affiliates.
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9.4 Reliance by Agent. (a) The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4.1, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent (or made available) by the Agent
to such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
such Bank, unless an officer of the Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Bank
prior to the Closing Date specifying its objection thereto and such objection
shall not have been withdrawn by notice to the Agent to that effect on or prior
to the Closing Date.
9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Banks in
accordance with Article VIII; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
9.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries, the value of and title to any collateral, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
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credit to the Borrower hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the Agent,
the Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of the Borrower
which may come into the possession of any of the Agent-Related Persons.
9.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), in
accordance with the Banks' Pro Rata Shares from and against any and all
Indemnified Liabilities; provided, however, that no Bank shall be liable for the
payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities to the extent that they are found by a final decision of a court of
competent jurisdiction to have resulted from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
9.8 Agent in Individual Capacity. BofA and its Affiliates may
make loans to, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Borrower and its Subsidiaries and Affiliates (including,
without limitation, as "Agent" and as a "Bank" under the $350MM Credit
Agreement) in each case, as though BofA were not the Agent hereunder and without
notice to or consent of the Banks. The Banks acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information regarding the
Borrower or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Borrower or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent.
9.9 Successor Agent. The Agent may, and at the request of the
Required Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Required Banks shall appoint from among
the Banks a successor agent for the Banks. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Borrower, a successor
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agent from among the Banks. Upon the acceptance of its appointment as successor
agent hereunder, such successor agent shall succeed to all the rights, powers
and duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX and Sections 10.4 and 10.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Banks appoint a successor agent as provided for
above.
9.10 Withholding Tax. (a) If any Bank is a "foreign
corporation, partnership or trust" within the meaning of the Code and such Bank
claims exemption from, or a reduction of, U.S. withholding tax under Sections
1441 or 1442 of the Code, such Bank agrees to deliver to the Agent and the
Borrower:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United
States tax treaty, two properly completed
and executed copies of IRS Form W-8BEN
before the payment of any interest or fees
in the first calendar year and before the
payment of any interest or fees in each
third succeeding calendar year during which
interest or fees may be paid under this
Agreement;
(ii) if such Bank claims that interest or fees
paid under this Agreement is exempt from
United States withholding tax because it is
effectively connected with a United States
trade or business of such Bank, two properly
completed and executed copies of IRS Form
W-8ECI before the payment of any interest or
fees is due in the first taxable year of
such Bank and in each succeeding taxable
year of such Bank during which interest or
fees may be paid under this Agreement; and
(iii) such other form or forms as may be required
under the Code or other laws of the United
States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent and the Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Bank sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Borrower owing to such Bank, such Bank
agrees to notify the Agent and the Borrower of the
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percentage amount in which it is no longer the beneficial owner of Obligations
of the Borrower owing to such Bank. To the extent of such percentage amount, the
Agent and the Borrower will treat such Bank's IRS Form W-8BEN as no longer
valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form W-8ECI with the Agent and the Borrower sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Borrower to such Bank, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Borrower (or if not withheld by the Borrower the
Agent) may withhold from any interest payment to such Bank, or to the Agent on
behalf of such Bank, an amount equivalent to the applicable withholding tax
after taking into account such reduction. However, if the forms or other
documentation required by subsection (a) of this Section are not delivered to
the Agent and the Borrower, then the Borrower (or the Agent, if not withheld by
the Borrower) may withhold from any interest payment to such Bank, or to the
Agent on behalf of such Bank, not providing such forms or other documentation an
amount equivalent to the applicable withholding tax imposed by Sections 1441 and
1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Borrower or the
Agent did not properly withhold tax from amounts paid to or for the account of
any Bank (because the appropriate form was not delivered or was not properly
executed, or because such Bank failed to notify the Borrower or the Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall indemnify
the Borrower or the Agent fully for all amounts paid, directly or indirectly, by
the Borrower or the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Borrower or the Agent under this Section, together with all costs and
expenses (including Attorney Costs), provided that such Bank shall not be so
liable to the Agent or the Borrower, as the case may be, to the extent such
otherwise indemnified amounts result from the Agent's own gross negligence or
willful misconduct (in the case of amounts payable to the Agent under this
subsection) or the Borrower's own gross negligence or willful misconduct (in the
case of amounts payable to the Borrower under this subsection). The obligation
of the Banks under this subsection shall survive the payment of all Obligations
and the resignation or replacement of the Agent.
9.11 Collateral Matters. (a) The Collateral Agent is
authorized on behalf of all the Banks, without the necessity of any notice to or
further consent from the Banks, from time to time to take any action with
respect to any Collateral or the Collateral Documents which may be necessary to
perfect and maintain perfected the security interest in and Liens upon the
Collateral granted pursuant to the Collateral Documents.
(b) The Banks irrevocably authorize the Collateral Agent,
at its option and in its discretion, to release any Lien granted to or held by
the Collateral Agent upon any Collateral (i) upon termination of the Commitments
and payment in full of all Loans and all other Obligations known to the
Collateral Agent and payable under this Agreement or any other
55
<PAGE> 61
Loan Document; (ii) constituting property sold or to be sold or disposed of as
part of or in connection with any disposition permitted hereunder; (iii)
constituting property in which the Borrower owned no interest at the time the
Lien was granted or at any time thereafter; (iv) constituting property leased to
the Borrower in a transaction permitted under this Agreement; (v) consisting of
an instrument evidencing Indebtedness or other debt instrument, if the
indebtedness evidenced thereby has been paid in full; or (vi) if approved,
authorized or ratified in writing by the Required Banks, the Directing Banks or
all the Banks, as the case may be, as provided in subsection 10.1(f). Upon
request by the Collateral Agent at any time, the Banks will confirm in writing
the Collateral Agent's authority to release particular types or items of
Collateral pursuant to this subsection 9.11(b), provided that the absence of any
such confirmation for whatever reason shall not affect the Collateral Agent's
rights under this Section 9.11.
(c) Each Bank agrees with and in favor of each other
(which agreement shall not be for the benefit of the Borrower or any Subsidiary)
that the Borrower's obligation to such Bank under this Agreement and the other
Loan Documents is not and shall not be secured by any real property collateral
now or hereafter acquired by such Bank.
9.12 Co-Agents. None of the Banks identified in the preamble
or signature pages of this Agreement as a "co-agent" or "syndication agent"
shall have any right, power, obligation, liability, responsibility or duty under
this Agreement other than those applicable to all Banks as such. Without
limiting the foregoing, none of the Banks so identified as a "co-agent" or
"syndication agent" shall have or be deemed to have any fiduciary relationship
with any Bank. Each Bank acknowledges that it has not relied, and will not rely,
on any of the Banks so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
10.1 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 Borrower or any applicable Subsidiary therefrom,
shall be effective unless the same shall be in writing and signed by the
Required Banks (or by the Agent at the written request of the Required Banks)
and the Borrower and acknowledged by the Agent, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Banks and the Borrower
and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank;
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
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<PAGE> 62
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) amend this Section, Section 2.8 or Section 2.14, or
any provision herein providing for consent or other action by all Banks;
(f) release all or substantially all of the Collateral
except as otherwise may be provided herein or in the Collateral Documents or
except where the consent of the Required Banks or the Directing Banks only is
specifically provided for; and
provided, further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Required Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto; or
10.2 Notices. (a) All notices, requests, consents, approvals,
waivers and other communications shall be in writing (including, unless the
context expressly otherwise provides, by facsimile transmission, provided that
any matter transmitted by the Borrower by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.2, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 10.2; or, as directed to the Borrower
or the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such
other address as shall be designated by such party in a written notice to the
Borrower and the Agent. All notices to the Borrower shall be sent to Storage
Technology Corporation, One StorageTek Drive, Louisville, CO 80028-4302,
Attention: Assistant Treasurer, Telecopy No.: (303) 673-2837.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mails, or if delivered, upon delivery; except that
notices pursuant to Article II or IX to the Agent shall not be effective until
actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Borrower. The Agent and the Banks shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by the
Borrower to give such notice and the Agent and the Banks shall not have any
liability to the Borrower or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Borrower to repay the Loans shall not be affected
in any way or to any extent
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<PAGE> 63
by any failure by the Agent and the Banks to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agent and the Banks of a
confirmation which is at variance with the terms understood by the Agent and the
Banks to be contained in the telephonic or facsimile notice.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. 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.
10.4 Costs and Expenses. The Borrower shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse the Agent within five Business Days after
demand (subject to subsection 4.1(e)) for all costs and expenses incurred by the
Agent in connection with the development, preparation, delivery, ongoing
administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including reasonable Attorney Costs and search and filing fees and
expenses incurred by the Agent with respect thereto;
(b) pay or reimburse the Agent and the Arranger and each
Bank within five Business Days after demand (subject to subsection 4.1(e)) for
all costs and expenses (including reasonable Attorney Costs and search and
filing fees and expenses provided that the Borrower shall have been given
statements containing reasonably detailed bills for such fees and expenses)
incurred by them in connection with the enforcement or preservation of any
rights or remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans (including
in connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding); and
(c) during the continuance of any Event of Default, pay or
reimburse the Agent within five 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), incurred or sustained by the Agent in connection with the
matters referred to under subsections (a) and (b) of this Section.
10.5 Borrower's Indemnification. Whether or not the
transactions contemplated hereby are consummated, the Borrower shall indemnify,
defend and hold the Agent-Related Persons, and each Bank and each of its
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,
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<PAGE> 64
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement, the
other Loan Documents or any document contemplated by or referred to herein or
therein, or the transactions contemplated hereby or thereby, or any action taken
or omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Loans or 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 Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities to
the extent they are found by a final decision of a court of competent
jurisdiction to have resulted solely from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
10.6 Marshalling; Payments Set Aside. Neither the Collateral
Agent, the Agent nor the Banks shall be under any obligation to marshal any
assets in favor of the Borrower or any other Person or against or in payment of
any or all of the Obligations. To the extent that the Borrower makes a payment
to the Collateral Agent, the Agent or the Banks, or the Collateral Agent, the
Agent or the Banks exercise their right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Collateral Agent, the Agent or
such Bank in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred, and (b) each
Bank severally agrees to pay to the Agent or the Collateral Agent, as the case
may be, upon demand its pro rata share of any amount so recovered from or repaid
by the Agent or the Collateral Agent, as the case may be.
10.7 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank.
10.8 Assignments, Participations, Etc. (a) Any Bank may, with
the written consent of the Borrower at all times other than during the existence
of an Event of Default, and the Agent, (which consents shall not be unreasonably
withheld), at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Borrower or the Agent shall be required
in connection with any assignment and delegation by a Bank to an Eligible
Assignee that is an Affiliate of such Bank or that is a Bank then holding a
Commitment hereunder) (each an "Assignee") all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations of such Bank
hereunder, provided, that any such assigning Bank either retains a Commitment or
Loans of at least $5,000,000 or disposes of its entire Commitment or Loans and
provided further that any Assignee shall have a Commitment or Loans of at least
$5,000,000; provided, however, that the Borrower and the Agent may continue
59
<PAGE> 65
to deal solely and directly with such Bank in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Bank and
the Assignee; (ii) such Bank and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in the form of Exhibit E
("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (iii) the assignor Bank or Assignee has paid to the Agent a
processing fee in the amount of $4,000. No Assignee shall be entitled to higher
recoveries or greater rights under Sections 3.1, 3.2 and 3.3 than its assignor.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, (ii) this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments and Loans arising
therefrom, and (iii) the assignor Bank shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents; provided, however, that
the assignor Bank shall not relinquish its rights under Article III or under
Sections 10.4 and 10.5 (and any equivalent provisions of the other Loan
Documents) to the extent such rights relate to the time prior to the effective
date of the Assignment and Acceptance. The Commitment allocated to each Assignee
shall reduce the Commitment of the assigning Bank pro tanto.
(c) Within five Business Days after its receipt of notice
by the Agent that it has received an executed Assignment and Acceptance and
payment of the processing fee, (and provided that it consents to such assignment
in accordance with subsection 10.8(a)), the Borrower shall execute and deliver
to the Agent any new Notes requested by such Assignee evidencing such Assignee's
assigned Loans and Commitment and, if the assignor Bank has retained a portion
of its Loans and its Commitment, replacement Notes as requested by the assignor
Bank evidencing the Loans and Commitment retained by such assignor Bank (such
Notes to be in exchange for, but not in payment of, the Notes held by such
Bank).
(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Borrower (a
"Participant") participating interests in any Loans, the Commitment of that Bank
and the other interests of that Bank (the "originating Bank") hereunder and
under the other Loan Documents; provided, however, that (i) the originating
Bank's obligations under this Agreement shall remain unchanged, (ii) the
originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Borrower and the Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
as described in the first proviso to
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<PAGE> 66
Section 10.1. In the case of any such participation, the Participant shall be
entitled to the benefit of Sections 3.1, 3.3 and 10.5 as though it were also a
Bank hereunder, and not otherwise have any rights under this Agreement, or any
of the other Loan Documents, and all amounts payable by the Borrower hereunder
shall be determined as if such 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 a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement,
any Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 Confidentiality. Each Bank and the Agent agrees that it
will not disclose to any third party any written information marked
"Confidential," "Secret," "Top Security," "Protected" or words of similar import
provided to it by the Borrower or any Subsidiary or any oral information which
is stated to be confidential and which is confirmed as such in writing within
seven days; provided, however, that the foregoing will not (i) restrict the
ability of the Agent, the Banks and any loan participants from freely exchanging
such information among themselves (and their respective employees, attorneys,
auditors and other professional advisors), (ii) restrict the ability to disclose
such information to a prospective Eligible Assignee or participants, provided,
that such Eligible Assignee or participants execute a confidentiality agreement
with the selling Bank agreeing to be bound by the terms hereof prior to
disclosure of such information to such Eligible Assignee or participant, or
(iii) prohibit the disclosure of such information to the extent such information
(A) becomes publicly available other than through a breach of this Section 10.9,
(B) becomes available through a Person other than the Borrower or a Subsidiary
of the Borrower, (C) is required to be disclosed pursuant to court order,
subpoena, other legal process, regulatory request or otherwise by law or (D) is
disclosed in litigation with the Borrower or any Subsidiary of the Borrower or
in connection with the enforcement of remedies by the Agent or Banks after
acceleration of the Loans or after the Termination Date.
10.10 Set-off. In addition to any rights and remedies of the
Banks provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Borrower, any such notice being waived by the Borrower to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Borrower against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Borrower and the Agent after any such set-off and application made by
such Bank; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
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10.11 Automatic Debits of Fees. With respect to any commitment
fee or other fee, or any other cost or expense (including Attorney Costs) due
and payable to the Agent, BofA or the Lead Arranger under the Loan Documents,
the Borrower hereby irrevocably authorizes BofA to debit any deposit account of
the Borrower with BofA in an amount such that the aggregate amount debited from
all such deposit accounts does not exceed such fee or other cost or expense. 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 BofA's sole discretion) and such amount not debited shall be deemed
to be unpaid. No such debit under this Section shall be deemed a set-off.
10.12 Notification of Addresses, Lending Offices, Etc. Each
Bank shall notify the Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
10.13 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument.
10.14 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.
10.15 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of the Borrower, the
Banks, the Agent, the Agent-Related Persons, the Collateral Agent and the
Indemnified Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
10.16 Governing Law and Jurisdiction(a) (a) THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE
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BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER, THE AGENT AND THE BANKS
EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
10.17 Waiver of Jury Trial. THE BORROWER, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
10.18 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and understanding among the
Borrower, the Banks and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in San Francisco by their proper and
duly authorized officers as of the day and year first above written.
STORAGE TECHNOLOGY CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
BANK OF AMERICA, N.A.,
as Agent and as a Bank
By:
----------------------------------------
Title: Managing Director
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<PAGE> 70
ABN AMRO BANK N.V., as syndication
agent and as a Bank
By:
----------------------------------------
Title:
-------------------------------------
KEYBANK NATIONAL ASSOCIATION,
as co-agent and as a Bank
By:
----------------------------------------
Title:
-------------------------------------
BANK ONE, NA
By:
----------------------------------------
Title:
-------------------------------------
FLEET NATIONAL BANK
By:
----------------------------------------
Title:
-------------------------------------
THE FUJI BANK, LIMITED
By:
----------------------------------------
Title:
-------------------------------------
NORWEST BANK COLORADO
By:
----------------------------------------
Title:
-------------------------------------
65
<PAGE> 71
SCHEDULE 2.1
COMMITMENT AND PRO RATA SHARES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
BANK COMMITMENT PRO RATA SHARE
- --------------------------------------------------------------------------
<S> <C> <C>
Bank of America, N.A. $ 35,000,000.00 23.33333333%
- --------------------------------------------------------------------------
ABN AMRO Bank N.V. $ 35,000,000.00 23.33333333%
- --------------------------------------------------------------------------
KeyBank National Association $ 25,000,000.00 16.66666667%
- --------------------------------------------------------------------------
Bank One, NA $ 15,000,000.00 10.00000000%
- --------------------------------------------------------------------------
Fleet National Bank $ 15,000,000.00 10.00000000%
- --------------------------------------------------------------------------
The Fuji Bank, Limited $ 15,000,000.00 10.00000000%
- --------------------------------------------------------------------------
Norwest Bank Colorado $ 10,000,000.00 6.66666667%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
TOTAL $150,000,000.00 100.00000000%
- --------------------------------------------------------------------------
</TABLE>
1
<PAGE> 72
SCHEDULE 2.9(e)
APPLICABLE MARGIN AND COMMITMENT FEE PRICING GRID
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Total Debt to
EBITDA Offshore Rate
(rolling 4 quarter) Spread Base Rate Spread Commitment Fee
(x) (%) (%) (%)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
X less than 1.50 2.000 0 .500
- --------------------------------------------------------------------------------------------------------
1.50 less than or equal to X less than 2.00 2.125 0.125 .500
- --------------------------------------------------------------------------------------------------------
2.00 less than or equal to X less than 2.50 2.250 0.250 .500
- --------------------------------------------------------------------------------------------------------
X greater than or equal to 2.50 2.500 0.500 .500
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note:
The initial Applicable Margin as of the Closing Date shall be 2.250% and,
thereafter, commencing on the date on which the Agent receives the Compliance
Certificate required by Section 6.2(a) for the fiscal quarter ending December
31, 1999, the Applicable Margin shall be determined by the above pricing grid.
1
<PAGE> 73
SCHEDULE 10.2
ADDRESSES FOR NOTICES, LENDING OFFICES
STORAGE TECHNOLOGY CORPORATION
Address for Notices:
Storage Technology Corporation
One StorageTek Drive
Louisville, CO 80028-4302
Attention: Assistant Treasurer
Telephone: (303) 661-2676
Facsimile: (303) 673-2837
BANK OF AMERICA, N.A.,
as Agent:
Domestic and Offshore Lending Office:
Bank of America, N.A.
Agency Services - West #5596
Mail Code: CA4-706-05-09
1850 Gateway Blvd., 5th Floor
Concord, CA 94520-3281
Attention: Michael Costa
Telephone: (925) 675-8439
Facsimile: (925) 969-2806
Address for all Other Notices:
Bank of America, N.A.
High Technology - SF #3697, Credit Products
Mail Code: CA5-705-41-01
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon
Telephone: (415) 622-8088
Facsimile: (415) 622-2385
<PAGE> 74
AGENT'S PAYMENT OFFICE:
Bank of America, N.A.
(ABA 111-000-012)
Attention: Agency Services - West #5596
Dallas, Texas
For credit to Account No. 3750836479
Account Name: Corporate FTA
Ref: Storage Technology Corporation
BANK OF AMERICA, N.A.,
as a Bank
Domestic and Offshore Lending Office:
Bank of America, N.A.
Agency Services - West #5596
Mail Code: CA4-706-05-09
1850 Gateway Blvd., 5th Floor
Concord, CA 94520-3281
Attention: Michael Costa
Telephone: (925) 675-8439
Facsimile: (925) 969-2806
Notices (other than Borrowing Notices and Notices
of Conversion/Continuation):
Bank of America, N.A.
High Technology - SF #3697, Credit Products
Mail Code: CA5-705-41-01
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon
Telephone: (415) 622-8088
Facsimile: (415) 622-2514
ABN AMRO BANK N.V.
Domestic and Offshore Lending Office:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attention: Loan Administration
Telephone: (312) 992-5153
Facsimile: (312) 992-5158
2
<PAGE> 75
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
ABN AMRO Bank N.V.
600 University Street, Suite 2323
Seattle, WA 98101-1129
Attention: Lee-Lee Miao
Telephone: (206) 654-0362
Facsimile: (206) 682-5641
BANK ONE, NA
Domestic and Offshore Lending Office:
Bank One, NA
1 Bank One Plaza
Chicago, IL 60670
Attention: Latanya Driver
Telephone: (312) 732-1395
Facsimile: (312) 732-4840
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank One, NA
777 S. Figueroa Street, 4th Floor
Los Angeles, CA 90017
Attention: Anthony Mathews
Telephone: (213) 683-4957
Facsimile: (213) 683-4999
FLEET NATIONAL BANK
Domestic and Offshore Lending Office:
Fleet National Bank
Mailstop MAOFDO7K
One Federal Street
Boston, MA 02110
Attention: Pauline Kowalczyk
Telephone: (617) 346-0622
Facsimile: (617) 356-0151
3
<PAGE> 76
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Fleet National Bank
Mailstop 01-08-06
100 Federal Street
Boston, MA 02110
Attention: Michael S. Barclay
Telephone: (617) 434-5163
Facsimile: (617) 484-2473
E-mail: [email protected]
KEYBANK NATIONAL ASSOCIATION
Domestic and Offshore Lending Office:
KeyBank N.A.
431 E. Parkcenter Boulevard
Boise, ID 83706
Attention: Specialty Services Team
Telephone: (800) 297-5518
Facsimile: (800) 297-5495
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
KeyBank N.A.
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Attention: Tom Crandell
Telephone: (206) 684-6037
Facsimile: (206) 684-6035
E-mail: [email protected]
NORWEST BANK COLORADO
Domestic and Offshore Lending Office:
Norwest Bank Colorado
1740 Broadway
C7301-031
Denver, CO 80274
Attention: Sandy Baker
Telephone: (303) 863-5060
Facsimile: (303) 863-6670
E-mail: [email protected]
4
<PAGE> 77
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Norwest Bank Colorado
1740 Broadway
C7301-031
Denver, CO 80274
Attention: Darlene A. Evans
Telephone: (303) 863-6213
Facsimile: (303) 863-6670
E-mail: [email protected]
THE FUJI BANK, LIMITED
Domestic and Offshore Lending Office:
The Fuji Bank, Limited
333 South Hope Street, 39th Floor
Los Angeles, CA 90071
Attention: Mindy Tam
Telephone: (213) 253-4139
Facsimile: (213) 253-4178
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
The Fuji Bank, Limited
333 South Hope Street, 39th Floor
Los Angeles, CA 90071
Attention: Richard G. Bushman
Telephone: (213) 253-4182
Facsimile: (213) 253-4178
E-mail: [email protected]
5
<PAGE> 1
EXHIBIT 10.16
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of
January 13, 2000 is made by and among Storage Technology Corporation, a Delaware
corporation (the "Company"), and Bank of America, N.A., as Collateral Agent for
itself and the other Secured Parties referred to below (in such capacity, the
"Collateral Agent").
RECITALS
WHEREAS, the Company, as borrower, certain lending
institutions, as lenders, and Bank of America, N.A., as administrative agent (in
such capacity, "Bank Agent No. 1") are parties to a Credit Agreement dated as of
January 13, 2000 (as amended, restated, modified, renewed or extended from time
to time, the "364-Day Credit Agreement");
WHEREAS, the Company, as borrower, certain lending
institutions, as lenders, and Bank of America, N.A., as administrative agent (in
such capacity, "Bank Agent No. 2") are parties to an Amended and Restated Credit
Agreement dated as of January 13, 2000 (as amended, restated, modified, renewed
or extended from time to time, the "$350MM Credit Agreement");
WHEREAS, it is a condition precedent to the closing of each of
the 364-Day Credit Agreement and the $350MM Credit Agreement that the Company
enter into this Agreement and grant to the Collateral Agent, for itself and for
the ratable benefit of the other Secured Parties, the security interests
hereinafter provided to secure the obligations of the Company described below.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Definitions; Interpretation.
(a) Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"364-Day Secured Obligations" means all indebtedness,
liabilities and other obligations of the Company to the Secured Parties created
under, or arising out of or in connection with, the 364-Day Credit Agreement,
the Notes (as defined in the 364-Day Credit Agreement) or any of the other Loan
Documents (as defined in the 364-Day Credit Agreement), including all unpaid
principal of the Loans (as defined in the 364-Day Credit Agreement), all
interest accrued thereon, all fees due under the 364-Day Credit Agreement and
all other amounts payable by the Company to any Secured Party thereunder or in
connection therewith, whether now existing or hereafter arising, and whether due
or to become due, absolute or contingent, liquidated or unliquidated, determined
or undetermined.
"$350MM Secured Obligations" means all indebtedness,
liabilities and other obligations of the Company to the Secured Parties created
under, or arising out of or in connection with, the $350MM Credit Agreement, the
Notes (as defined in the $350MM Credit Agreement) or any of the other Loan
Documents (as defined in the $350MM Credit Agreement), including all unpaid
principal of the Loans (as defined in the $350MM Credit Agreement), all
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<PAGE> 2
interest accrued thereon, all fees due under the $350MM Credit Agreement and all
other amounts payable by the Company to any Secured Party thereunder or in
connection therewith, whether now existing or hereafter arising, and whether due
or to become due, absolute or contingent, liquidated or unliquidated, determined
or undetermined.
"Accounts" means any and all accounts as such term is defined
in Section 9106 of the UCC, and includes all accounts receivable, contract
rights, rights to payment and other obligations of any kind owed to the Company
by any Domestic Account Obligor arising out of or in connection with the sale or
lease of merchandise, goods, commodities or equipment or the rendering of
services or arising from any other transaction, however evidenced, and all other
forms of obligations owing to the Company by any Domestic Account Obligor, and
whether or not earned by performance, all guaranties, indemnities and security
with respect to the foregoing, and all letters of credit relating thereto, in
each case whether now existing or hereafter acquired or arising; provided that
"Accounts" shall not include Chattel Paper, intercompany obligations and
purchased accounts subject to the Multicurrency Note Purchase Facility.
"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, membership interests, by contract,
or otherwise.
"Aggregate Credit" means, at any time, (a) the aggregate
principal amount of the Loans (as defined in the 364-Day Credit Agreement)
outstanding under the 364-Day Credit Agreement at such time plus the aggregate
principal amount of the Loans (as defined in the $350MM Credit Agreement)
outstanding under the $350MM Credit Agreement at such time, or (b) if no such
Loans are outstanding at such time under either the 364-Day Credit Agreement or
the $350MM Credit Agreement, the aggregate amount of the Commitments (as defined
in the 364-Day Credit Agreement) in effect under the 364-Day Credit Agreement at
such time plus the aggregate amount of the Commitments (as defined in the $350MM
Credit Agreement) in effect under the $350MM Credit Agreement at such time.
"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.
"Banks" means the "Banks" from time to time party to the
364-Day Credit Agreement and the "Banks" from time to time party to the $350MM
Credit Agreement.
"BofA" means Bank of America, N.A., a national banking
association.
"Books" means all books, records and other written, electronic
or other documentation in whatever form maintained now or hereafter by or for
the Company in connection with the ownership of its assets or the conduct of its
business or evidencing or containing information relating to the Collateral,
including: (i) ledgers; (ii) records indicating, summarizing, or evidencing the
Company's assets, business operations or financial condition;
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<PAGE> 3
(iii) computer programs and software; (iv) computer discs, tapes, files, manuals
and spreadsheets; (v) computer printouts and output of whatever kind; (vi) any
other computer prepared or electronically stored, collected or reported
information and equipment of any kind; and (vii) any and all other rights now or
hereafter arising out of any contract or agreement between the Company and any
service bureau, computer or data processing company or other Person charged with
preparing or maintaining any of the Company's books or records or with credit
reporting, including with regard to the Company's Accounts; provided that
"Books" shall not include any books, records, or software sold by the Company to
BofA or any of its Affiliates pursuant to the Multicurrency Note Purchase
Facility.
"Chattel Paper" means all writings of whatever sort which
evidence a monetary obligation of a Domestic Obligor and a security interest in
or lease of specific goods, whether now existing or hereafter arising; provided,
however, that "Chattel Paper" shall not include any interests of the Company in
purchased accounts subject to the Multicurrency Note Purchase Facility.
"Collateral" has the meaning set forth in Section 2.
"Credit Agreements" means the 364-Day Credit Agreement and the
$350MM Credit Agreement.
"Directing Banks" means, at any time, Banks holding more than
50% of the Aggregate Credit at such time.
"Documents" means any and all documents of title, bills of
lading, dock warrants, dock receipts, warehouse receipts and other documents
(other than Chattel Paper) of the Company purporting to cover Inventory, whether
or not negotiable, and includes all other documents which purport to be issued
by a bailee or agent and purport to cover Inventory in any bailee's or agent's
possession which are either identified or are fungible portions of an identified
mass, including such documents of title made available to the Company for the
purpose of ultimate sale or exchange of Inventory or for the purpose of loading,
unloading, storing, shipping, transshipping, manufacturing, processing or
otherwise dealing with Inventory in a manner preliminary to their sale or
exchange, in each case whether now existing or hereafter acquired or arising.
"Domestic Obligor" means any Person obligated on an Account or
other Right to Payment who is a resident of or otherwise located in the United
States.
"Event of Default" means any "Event of Default" under and as
defined in the 364-Day Credit Agreement, the $350MM Credit Agreement or any
other Loan Document
"Financing Statements" has the meaning set forth in Section 3.
"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
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<PAGE> 4
authority within 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.
"Instruments" means any and all negotiable instruments,
certificated securities and every other writing which evidences a right to the
payment of money by a Domestic Obligor, in each case whether now existing or
hereafter acquired and which does not constitute Chattel Paper; provided,
however that "Instruments" shall not include any interests of the Company in its
Subsidiaries.
"Inventory" means any and all of the Company's inventory in
the United States in all of its forms, wherever located, whether now owned or
hereafter acquired, and in any event includes (i) all goods (including goods in
transit) which are held for sale, lease or other disposition, including those
held for display or demonstration or out on lease or consignment or to be
furnished under a contract of services, (ii) spare parts held for use in meeting
the service obligations of the Company, whether or not physically segregated
from parts and components used in the manufacture of finished goods inventory or
identified as such, (iii) raw materials and work in process therefor, finished
goods thereof, materials used or consumed in the manufacture of production
thereof, (iv) goods in which the Company has an interest in mass or a joint or
reversionary or other interest or right of any kind (including goods in which
the Company has an interest as a secured party, lessor or consignee), (v) all
goods that are repossessed, returned, rejected, reclaimed or replevied by or to
the Company, (vi) all parts, supplies, components and other materials used or
usable in connection with the manufacture, production, packing, shipping,
advertising, selling or furnishing of such goods, (vii) all accessions thereto
and products thereof, and (viii) any Document representing or relating to any of
the foregoing at any time.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the 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 Documents" means the Loan Documents (as defined in the
364-Day Credit Agreement) and the Loan Documents (as defined in the $350MM
Credit Agreement).
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or
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<PAGE> 5
prospects of the Company and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Company to perform under any Loan Document and
to avoid any Event of Default; or (c) a material adverse effect upon (i) the
legality, validity, binding effect or enforceability against the Company of any
Loan Document or (ii) the perfection or priority of any Lien on any material
portion of the Collateral granted under any of the Collateral Documents.
"Multicurrency Note Purchase Facility" means the facility
pursuant to the Second Amended and Restated Contingent Multicurrency Note
Purchase Commitment Agreement dated as of January 15, 1998 (as amended,
restated, modified or supplemented from time to time) between the Company and
BofA, whereby BofA has agreed to purchase certain notes of the Company subject,
in certain cases, to collateralization in cash and other investments or any
similar facility designed to accomplish the same objectives.
"Permitted Lien" means a Lien which is a "Permitted Lien"
under both the 364-Day Credit Agreement and the $350MM Credit Agreement.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or any other
entity of whatever nature.
"Proceeds" means whatever is receivable or received from or
upon the sale, lease, license, collection, use, exchange or other disposition,
whether voluntary or involuntary, of any Collateral, including "proceeds" as
defined at UCC Section 9306, any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to or for the account of the Company from time to
time with respect to any of the Collateral, any and all payments (in any form
whatsoever) made or due and payable to the Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral or for or on account of any damage or injury to or conversion of any
Collateral by any Person, any and all other tangible or intangible property
received upon the sale or disposition of Collateral, and all proceeds of
proceeds; provided that "Proceeds" shall not include any purchased accounts
subject to the Multicurrency Note Purchase Facility.
"Proceeds Account" has the meaning specified in subsection
10(c) hereof.
"Rights to Payment" means all Accounts and any and all rights
and claims to the payment or receipt of money or other forms of consideration of
any kind in, to and under all Chattel Paper, Documents, Instruments and
Proceeds.
"Secured Obligations" means the 364-Day Secured Obligations
and the $350MM Secured Obligations, whether now existing or hereafter arising,
and whether due or to become due, absolute or contingent, liquidated or
unliquidated, determined or undetermined.
"Secured Parties" means the Collateral Agent, the Banks, the
Lead Arranger (as defined in the 364-Day Credit Agreement), the Lead Arranger
(as defined in the $350MM Credit Agreement), Bank Agent No. 1, Bank Agent No. 2,
and each of their respective successors, transferees and assigns.
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"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture, trust or other business
entity of which more than 50% of the voting stock, membership interests or other
equity interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of California; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
(b) Terms Defined in UCC. Where applicable and except as
otherwise defined herein, terms used in this Agreement shall have the meanings
assigned to them in the UCC.
(c) Interpretation. (i) The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.
(ii) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(iii) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(iv) The term "including" is not limiting and means
"including without limitation."
(v) 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."
(vi) The term "property" includes any kind of property or
asset, real, personal or mixed, tangible or intangible.
(vii) Unless otherwise expressly provided herein, (A)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (B)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
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<PAGE> 7
(viii) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(ix) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Collateral Agent or the Banks by
way of consent, approval or waiver shall be deemed modified by the phrase "in
its/their sole discretion."
(x) This Agreement is the result of negotiations among the
Collateral Agent, the Company and the other parties, have been reviewed by
counsel to the Collateral Agent, the Company and such other parties, and are the
product of all parties. Accordingly, they shall not be construed against the
Banks or the Collateral Agent merely because of the Collateral Agent's or Banks'
involvement in their preparation.
SECTION 2 Security Interest.
(a) Grant of Security Interest. As security for the payment
and performance of the Secured Obligations, the Company hereby pledges, assigns,
transfers, hypothecates and sets over to the Collateral Agent, for itself and on
behalf of and for the ratable benefit of the other Secured Parties, and hereby
grants to the Collateral Agent, for itself and on behalf of and for the ratable
benefit of the other Secured Parties, a security interest in all of the
Company's right, title and interest in, to and under the following property,
wherever located and whether now existing or owned or hereafter acquired or
arising (including, without limitation, any accounts subject to the
Multicurrency Note Purchase Facility which may hereafter become Collateral
pursuant to the operation of the Loan Documents): (i) all Accounts; (ii) all
Chattel Paper; (iii) all Documents; (iv) all Instruments; (v) all Inventory;
(vi) all Books; and (vii) all products and Proceeds of any and all of the
foregoing (collectively, the "Collateral").
(b) Company Remains Liable. Anything herein to the contrary
notwithstanding, (i) the Company shall remain liable under any contracts,
agreements and other documents included in the Collateral, to the extent set
forth therein, to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise by the
Collateral Agent of any of the rights hereunder shall not release the Company
from any of its duties or obligations under such contracts, agreements and other
documents included in the Collateral, and (iii) the Collateral Agent shall not
have any obligation or liability under any contracts, agreements and other
documents included in the Collateral by reason of this Agreement, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of the
Company thereunder or to take any action to collect or enforce any such
contract, agreement or other document included in the Collateral hereunder.
(c) Continuing Security Interest. The Company agrees that
this Agreement shall create a continuing security interest in the Collateral
which shall remain in effect until terminated in accordance with Section 22.
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SECTION 3 Perfection Procedures.
(a) Financing Statements. The Company shall execute and
deliver to the Collateral Agent concurrently with the execution of this
Agreement, and at any time and from time to time thereafter, all financing
statements, continuation financing statements, termination statements, security
agreements, assignments, warehouse receipts, documents of title, affidavits,
reports, notices, schedules of account, letters of authority and all other
documents and instruments, in form satisfactory to the Collateral Agent (the
"Financing Statements"), and take all other action, as the Collateral Agent may
request, to perfect and continue perfected, maintain the priority of or provide
notice of the Collateral Agent's security interest in the Collateral and to
accomplish the purposes of this Agreement.
(b) Certain Agents. Any third person at any time and from
time to time holding all or any portion of the Collateral shall be deemed to,
and shall, hold the Collateral as the agent of, and as pledge holder for, the
Collateral Agent. At any time and from time to time, the Collateral Agent may
give notice to any third person holding all or any portion of the Collateral
that such third person is holding the Collateral as the agent of, and as pledge
holder for, the Collateral Agent.
(c) Documents, Etc. The Company shall deliver to the
Collateral Agent, or an agent designated by it, appropriately endorsed or
accompanied by appropriate instruments of transfer or assignment, all Documents
and Chattel Paper, and all other Rights to Payment at any time evidenced by
promissory notes, trade acceptances or other instruments, not already delivered
hereunder pursuant to this Section 3; provided, however, that unless an Event of
Default shall have occurred and be continuing, the Company shall not be required
to deliver any Document, Chattel Paper, promissory note, trade acceptance or
other instrument. Upon the request of the Collateral Agent, the Company shall
mark all Documents, Instruments and Chattel Paper with such legends as the
Collateral Agent shall reasonably specify.
SECTION 4 Representations and Warranties. In addition to the
representations and warranties of the Company set forth in the Credit
Agreements, which are incorporated herein by this reference, the Company
represents and warrants to the Collateral Agent and each other Secured Party
that:
(a) Location of Chief Executive Office and Collateral. The
Company's chief executive office and principal place of business is located at
the address set forth in Schedule 1.
(b) Locations of Books. All locations where Books pertaining
to the Rights to Payment are kept, including all equipment necessary for
accessing such Books and the names and addresses of all service bureaus,
computer or data processing companies and other Persons keeping any Books or
collecting Rights to Payment for the Company, are set forth in Schedule 1.
(c) Trade Names and Trade Styles. All trade names and trade
styles under which the Company presently conducts its business operations are
set forth in Schedule 1, and, except as set forth in Schedule 1, the Company has
not, at any time in the past two years: (i) been known as or used any other
corporate, trade or fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or consolidation; or (iv)
acquired through asset purchase or otherwise any business of any Person with a
purchase price in excess of $25 million.
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(d) Ownership of Collateral. The Company is, and will
continue to be, the sole and complete owner of the Collateral (or, in the case
of after-acquired Collateral, at the time the Company acquires rights in such
Collateral, will be the sole and complete owner thereof), free from any Lien
other than Liens created by or pursuant to the Loan Documents and Permitted
Liens.
(e) Enforceability; Priority of Security Interest. (i) This
Agreement creates a security interest which is enforceable against the
Collateral in which the Company now has rights and will create a security
interest which is enforceable against the Collateral in which the Company
hereafter acquires rights at the time the Company acquires any such rights; and
(ii) upon the filing of Uniform Commercial Code financing statements in the
appropriate filing offices in each jurisdiction identified in Schedule 1 where
Collateral is located and except for Permitted Liens, the Collateral Agent has a
perfected and first priority security interest in the Collateral in which the
Company now has rights, and will have a perfected and first priority security
interest in the Collateral in which the Company hereafter acquires rights at the
time the Company acquires any such rights, in each case securing the payment and
performance of the Secured Obligations.
(f) Other Financing Statements. Other than (i) Financing
Statements disclosed to the Collateral Agent prior to the date hereof and (ii)
Financing Statements in favor of the Collateral Agent on behalf of itself and
the other Secured Parties, no effective Financing Statement naming the Company
as debtor, assignor, grantor, mortgagor, pledgor or the like and covering all or
any part of the Collateral is on file in any filing or recording office in any
jurisdiction.
(g) Rights to Payment.
(i) The Rights to Payment represent valid, binding and
enforceable obligations of the account debtors or other Persons obligated
thereon, representing undisputed, bona fide transactions completed in accordance
with the terms and provisions contained in any documents related thereto, and
are and will be genuine, free from Liens, and not subject to any adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, discounts, retainages,
holdbacks or conditions precedent of any kind or character, in each case
material to the Company and except to the extent reflected by the Company's
reserves for uncollectible Rights to Payment or to the extent, if any, that such
account debtors or other Persons may be entitled to normal and ordinary course
trade discounts, returns, adjustments and allowances in accordance with Section
5(m), or as otherwise disclosed to the Collateral Agent and the Banks in
writing;
(ii) to the best of the Company's knowledge and belief (but
without independent investigation), all account debtors and other obligors on
the Rights to Payment are solvent and generally paying their debts as they come
due (except for Rights to Payment of account obligors for which the Company has
taken adequate reserves in accordance with GAAP);
(iii) all Rights to Payment comply in all material respects
with all applicable laws concerning form, content and manner of preparation and
execution, including where
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applicable any federal or state consumer credit laws if and when taken as a
whole noncompliance therewith could reasonably result in a Material Adverse
Effect;
(iv) the Company has not assigned any of its rights under
the Rights to Payment except as provided in this Agreement or as set forth in or
permitted by the other Loan Documents;
(v) all statements made, all unpaid balances and all other
information in the Books and other documentation relating to the Rights to
Payment are in all material respects true and correct and what they purport to
be; and
(vi) the Company has no knowledge of any fact or
circumstance which would impair in any material respect the validity or
collectibility of any material part of the Rights to Payment.
(h) Inventory. Other than spare parts Inventory located at
customer sites and Inventory in the possession of a subcontractor of the
Company, as of the date hereof, no Inventory is stored with any bailee,
warehouseman or similar Person or on any premises leased to the Company, nor has
any Inventory been consigned to the Company or consigned by the Company to any
Person or is held by the Company for any Person under any "bill and hold" or
other arrangement except as permitted by Section 5(n) and, in each case, except
as set forth in Schedule 1.
(i) Instruments. All Instruments held by the Company are set
forth in Schedule 1.
SECTION 5 Covenants. In addition to the covenants of the
Company set forth in the Credit Agreements, which are incorporated herein by
this reference, so long as any of the Secured Obligations remain unsatisfied or
any Bank shall have any commitment to lend money or otherwise extend credit to
the Company under the Loan Documents, the Company agrees that:
(a) Defense of Collateral. The Company will appear in and
defend any action, suit or proceeding which may affect to a material extent its
title to, or right or interest in, or the Collateral Agent's right or interest
in, the Collateral consistent with customary and prudent business practices.
(b) Preservation of Collateral. The Company will do and
perform all reasonable acts that may be necessary and appropriate to maintain,
preserve and protect the value of the Collateral.
(c) Compliance with Laws, Etc. The Company will comply with
all laws, regulations and ordinances, and all policies of insurance, relating in
a material way to the possession, operation, maintenance and control of the
Collateral if the noncompliance therewith could reasonably result in a Material
Adverse Effect.
(d) Location of Books and Chief Executive Office. The
Company will: (i) keep all Books pertaining to the Rights to Payment at the
locations set forth in Schedule 1; and (ii) give at least 30 days' prior written
notice to the Collateral Agent of (A) any changes in
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any such location where Books pertaining to the Rights to Payment are kept,
including any change of name or address of any service bureau, computer or data
processing company or other Person preparing or maintaining any Books or
collecting Rights to Payment for the Company or (B) any change in the location
of the Company's chief executive office or principal place of business.
(e) Location of Collateral. If any Inventory of the Company
shall be relocated to, or otherwise be located in, a state of the United States
in which a financing statement has not already been filed with respect to such
Inventory, and the aggregate value of such Inventory equals or exceeds
$5,000,000 (as determined by the Company using net book values as determined in
accordance with GAAP), the Company shall give the Collateral Agent prompt notice
thereof (and in any event not later than one Business Day after becoming aware
thereof).
(f) Change in Name, Identity or Structure. The Company will
give at least 30 days' prior written notice to the Collateral Agent of (i) any
change in its name, (ii) any changes in, additions to or other modifications of
its trade names and trade styles set forth in Schedule 1, and (iii) any changes
in its identity or structure in any manner which might make any Financing
Statement filed hereunder incorrect or misleading.
(g) Maintenance of Records . The Company will keep separate,
accurate and complete Books with respect to the Collateral.
(h) Invoicing of Sales. The Company will invoice all of its
sales upon forms customary in the industry and maintain proof of delivery and
customer acceptance of goods.
(i) Disposition of Collateral. The Company will not
surrender or lose possession of (other than to the Collateral Agent), sell,
lease, rent, or otherwise dispose of or transfer any of the Collateral or any
right or interest therein, except to the extent permitted by the Credit
Agreements.
(j) Liens. The Company will keep the Collateral free of all
Liens except Permitted Liens and Liens arising under the Loan Documents.
(k) Expenses. The Company will pay all validly assessed or
incurred expenses of protecting, storing, warehousing, insuring, handling and
shipping the Collateral.
(l) Leased Premises. At the Collateral Agent's request, the
Company will use its best efforts to obtain from each Person from whom the
Company leases any premises at which any Collateral is at any time present such
subordination, waiver, consent and estoppel agreements as the Collateral Agent
may require, in form and substance satisfactory to the Collateral Agent.
(m) Rights to Payment. The Company will:
(i) if requested by the Collateral Agent (but not more
frequently than annually or, if there exists an Event of Default and the
Directing Banks so require, then with such frequency as the Directing Banks may
require), furnish to the Collateral Agent full and
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complete reports, in form and substance satisfactory to the Collateral Agent,
with respect to the Accounts, including information as to concentration, aging,
identity of account debtors, letters of credit securing Accounts, disputed
Accounts and other matters, as the Collateral Agent shall request;
(ii) give only normal discounts, allowances and credits as
to Accounts and other Rights to Payment, in the ordinary course of business,
according to normal trade practices utilized by the Company, and enforce all
Accounts and other Rights to Payment strictly in accordance with their terms,
and take all such action to such end as may from time to time be reasonably
requested by the Collateral Agent, except that the Company may grant any
extension of the time for payment or enter into any agreement to make a rebate
or otherwise to reduce the amount owing on or with respect to, or compromise or
settle for less than the full amount thereof, any Account or other Right to
Payment, in the ordinary course of business, according to normal trade practices
utilized by the Company;
(iii) except to the extent arising in the ordinary course of
business, if any discount, allowance, credit, extension of time for payment,
agreement to make a rebate or otherwise to reduce the amount owing on, or
compromise or settle, an Account or other Right to Payment exists or occurs, or
if, to the knowledge of the Company, any dispute, setoff, claim, counterclaim or
defense exists or has been asserted or threatened with respect to an Account or
other Right to Payment, disclose such fact fully to the Collateral Agent in the
Books relating to such Account or other Right to Payment and in connection with
any invoice or report furnished by the Company to the Collateral Agent relating
to such Account or other Right to Payment;
(iv) in accordance with its sound business judgment perform
and comply in all material respects with its obligations in respect of the
Accounts and other Rights to Payment;
(v) upon the request of the Collateral Agent during the
continuance of any Event of Default, (A) notify all or any designated portion of
the account debtors and other obligors on the Rights to Payment of the security
interest hereunder, and (B) notify the account debtors and other obligors on the
Rights to Payment or any designated portion thereof that payment shall be made
directly to the Collateral Agent or to such other Person or location as the
Collateral Agent shall specify; and
(vi) during the continuance of any Event of Default,
establish such lockbox or similar arrangements for the payment of the Accounts
and other Rights to Payment as the Directing Banks acting through the Collateral
Agent shall require.
(n) Inventory. The Company will:
(i) if requested by the Collateral Agent (but not more
frequently than annually or, if there exists an Event of Default and the
Directing Banks so require, then at such times as the Directing Banks shall
request), prepare and deliver to the Collateral Agent a report of all Inventory,
in form and substance satisfactory to the Collateral Agent;
(ii) (A) other than with respect to any Inventory in the
possession of a subcontractor of the Company, not store any material portion of
Inventory with a bailee, warehouseman or similar Person or on premises leased to
the Company without prior notice to
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the Collateral Agent and (B), except with respect to demonstration models,
Inventory transferred as upgrades to existing customers and Inventory shipped to
customers awaiting customer acceptance, in each instance in the ordinary course
of the Company's business, not dispose of any Inventory on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, consignment or similar
basis, nor acquire any Inventory from any Person on any such basis without in
each case giving the Collateral Agent prior written notice thereof.
(o) Notices, Reports and Information. The Company will (i)
notify the Collateral Agent of any material claim made or asserted against the
Collateral by any Person and of any change in the basic nature of the Collateral
or other event which could materially adversely affect the value of the
Collateral or the Collateral Agent's Lien thereon (other than commodity
fluctuations affecting the Company's industry generally); (ii) furnish to the
Collateral Agent such statements and schedules further identifying and
describing the Collateral and such other reports and other information in
connection with the Collateral as the Collateral Agent (acting on behalf of the
Directing Banks) may reasonably request, all in reasonable detail; and (iii)
upon request of the Collateral Agent make such demands and requests for
information and reports as the Company is entitled to make in respect of the
Collateral.
(p) Insurance. (i) The Company shall carry and maintain in
full force and effect, at the expense of the Company and with financially sound
and reputable insurance companies, insurance with respect to the Inventory in
such amounts, with such deductibles and covering such risks as is customarily
carried by Persons engaged in the same or similar business. Upon the request of
the Collateral Agent or the Directing Banks, and in any event not less often
than annually, the Company shall furnish the Collateral Agent with full
information as to such insurance carried by it and, if so requested, copies of
all such insurance policies. All insurance policies required under this
subsection (r) shall provide that they shall not be terminated or cancelled nor
shall any such policy be materially changed without at least 30 days' prior
written notice to the Company and the Collateral Agent (or 10 days' prior
written notice if the Collateral Agent consents to such shorter notice). Receipt
of notice of termination or cancellation of any such insurance policies or
reduction of coverages or amounts thereunder shall entitle the Collateral Agent
to renew any such policies, cause the coverages and amounts thereof to be
maintained at levels required pursuant to the first sentence of this subsection
(r) or otherwise to obtain similar insurance in place of such policies, in each
case at the expense of the Company.
(ii) If Inventory with a value exceeding $25,000,000 of the
Company shall be materially damaged or destroyed, in whole or in part, by fire
or other casualty, the Company shall give prompt notice thereof to the
Collateral Agent. No settlement on account of any loss on any such Collateral
covered by insurance shall be made for less than insured value without the
consent of the Directing Banks. Any payment exceeding $25,000,000 (but not in
excess of Secured Obligations) at any time made to the Company by any insurer
with respect to a casualty relating to all or any part of the Collateral shall
be paid to the Collateral Agent. If the Company shall receive any insurance
proceeds which are to be paid to the Collateral Agent pursuant to the previous
sentence, the Company shall hold such proceeds in trust for the Collateral
Agent, shall segregate such proceeds from other funds of the Company, and shall
immediately forward such proceeds in the form received to the Collateral Agent
(appropriately indorsed by the Company to the order of the Collateral Agent or
in such other manner as shall be satisfactory to the Collateral Agent). All such
insurance proceeds may be retained by the Collateral Agent as part of
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Collateral hereunder and held in the Proceeds Account, applied by the Collateral
Agent toward payment of all or part of the Secured Obligations in such order as
is provided herein, or released to the Company upon its request with the consent
of the Directing Banks.
(q) Ownership by Subsidiaries. The Company will not permit
the aggregate value of all assets of its Subsidiaries that, if owned directly by
the Company, would constitute Collateral hereunder to exceed $5,000,000 at any
time.
SECTION 6 Collection of Rights to Payment. Until the
Collateral Agent exercises its rights hereunder to collect Rights to Payment,
the Company shall endeavor in the first instance diligently to collect all
amounts due or to become due on or with respect to the Rights to Payment. At the
request of the Collateral Agent, during the continuance of any Event of Default,
all remittances received by the Company shall be held in trust for the
Collateral Agent and, in accordance with the Collateral Agent's instructions
(acting on behalf of the Directing Banks), remitted to the Collateral Agent or
deposited to an account with the Collateral Agent in the form received (with any
necessary endorsements or instruments of assignment or transfer).
SECTION 7 Authorization; Collateral Agent Appointed
Attorney-in-Fact. The Collateral Agent shall have the right to, in the name of
the Company, or in the name of the Collateral Agent or otherwise, without notice
to or assent by the Company, and the Company hereby constitutes and appoints the
Collateral Agent (and any of the Collateral Agent's officers or employees or
Collateral Agents designated by the Collateral Agent) as the Company's true and
lawful attorney-in-fact, with full power and authority to:
(i) sign any of the Financing Statements which must be
executed or filed to perfect or continue perfected, maintain the priority of or
provide notice of the Collateral Agent's security interest in the Collateral;
(ii) take possession of and endorse any notes, acceptances,
checks, drafts, money orders or other forms of payment or security and collect
any Proceeds of any Collateral;
(iii) sign and endorse any invoice or bill of lading
relating to any of the Collateral, warehouse or storage receipts, drafts against
customers or other obligors, assignments, notices of assignment, verifications
and notices to customers or other obligors;
(iv) notify the U.S. Postal Service and other postal
authorities to change the address for delivery of mail addressed to the Company
to such address as the Collateral Agent may designate (provided that, if the
U.S. Postal Service or such other postal authorities agree to do so, and it is
not impractical to do so, only such mail as relates to the Collateral shall be
sent to such address as the Collateral Agent shall designate, and provided
further that the Collateral Agent agrees it will promptly deliver over to the
Company any mail that does not relate to the Collateral); and, without limiting
the generality of the foregoing, establish with any Person lockbox or similar
arrangements for the payment of the Rights to Payment;
(v) receive, open and dispose of all mail addressed to the
Company that purports to be from a Domestic Obligor (provided that the
Collateral Agent agrees it will promptly deliver over to the Company any mail
that does not relate to the Collateral);
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(vi) send requests for verification of Rights to Payment to
the customers or other obligors of the Company;
(vii) contact, or direct the Company to contact, all account
debtors and other obligors on the Rights to Payment and instruct such account
debtors and other obligors to make all payments directly to the Collateral
Agent;
(viii) assert, adjust, sue for, compromise or release any
claims under any policies of insurance in respect of Collateral;
(ix) notify each Person maintaining lockbox or similar
arrangements for the payment of the Rights to Payment to remit all amounts
representing collections on the Rights to Payment directly to the Collateral
Agent;
(x) ask, demand, collect, receive and give acquittances and
receipts for any and all Rights to Payment, enforce payment or any other rights
in respect of the Rights to Payment and other Collateral, grant consents, agree
to any amendments, modifications or waivers of the agreements and documents
governing the Rights to Payment and other Collateral, and otherwise file any
claims, take any action or institute, defend, settle or adjust any actions,
suits or proceedings with respect to the Collateral, as the Collateral Agent may
deem necessary or desirable to maintain, preserve and protect the Collateral, to
collect the Collateral or to enforce the rights of the Collateral Agent with
respect to the Collateral;
(xi) execute any and all endorsements, assignments or other
documents and instruments necessary to sell, lease, assign, convey or otherwise
transfer title in or dispose of the Collateral;
(xii) execute and deliver to any securities intermediary or
other Person any entitlement order, account control agreement or other notice,
document or instrument which the Collateral Agent may deem necessary of
advisable to realize upon the Collateral; and
(xiii) execute any and all such other documents and
instruments, and do any and all acts and things for and on behalf of the
Company, which the Collateral Agent may deem necessary or advisable to (A)
realize upon the Collateral, and (B) maintain, protect and preserve the
Collateral and the Collateral Agent's security interest therein and to
accomplish the purposes of this Agreement.
The Collateral Agent agrees that, except during the continuance of an Event of
Default, it shall not exercise the power of attorney, or any rights granted to
the Collateral Agent, pursuant to clauses (ii) through (xii) and (xii)(A). The
foregoing power of attorney is coupled with an interest and irrevocable so long
as the Banks have any commitments to lend money or otherwise extend credit to
the Company or the Secured Obligations have not been paid and performed in full.
The Company hereby ratifies, to the extent permitted by law, all that the
Collateral Agent shall lawfully and in good faith do or cause to be done by
virtue of and in compliance with this Section 7.
SECTION 8 Collateral Agent Performance of Company
Obligations. The Collateral Agent may perform or pay any obligation which the
Company has agreed to perform
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or pay under or in connection with this Agreement, and the Company shall
reimburse the Collateral Agent on demand for any amounts paid by the Collateral
Agent pursuant to this Section 8.
SECTION 9 Collateral Agent's Duties. Notwithstanding any
provision contained in this Agreement, the Collateral Agent shall have no duty
to exercise any of the rights, privileges or powers afforded to it and shall not
be responsible to the Company or any other Person for any failure to do so or
delay in doing so. Beyond the exercise of reasonable care to assure the safe
custody of Collateral in the Collateral Agent's possession and the accounting
for moneys actually received by the Collateral Agent hereunder, the Collateral
Agent shall have no duty or liability to exercise or preserve any rights,
privileges or powers pertaining to the Collateral.
SECTION 10 Remedies.
(a) Remedies. During the continuance of any Event of
Default, the Collateral Agent shall have, in addition to all other rights and
remedies granted to it in this Agreement or any other Loan Document, all rights
and remedies of a secured party under the UCC and other applicable laws. Without
limiting the generality of the foregoing, the Company agrees that:
(i) The Collateral Agent may peaceably and without notice
enter any premises of the Company, take possession of any Collateral, remove or
dispose of all or part of the Collateral on any premises of the Company or
elsewhere, and otherwise collect, receive, appropriate and realize upon all or
any part of the Collateral, and demand, give receipt for, settle, renew, extend,
exchange, compromise, adjust, or sue for all or any part of the Collateral, as
the Collateral Agent may determine.
(ii) The Collateral Agent may require the Company to
assemble all or any part of the Collateral and make it available to the
Collateral Agent, at any place and time designated by the Collateral Agent.
(iii) The Collateral Agent may secure the appointment of a
receiver of the Collateral or any part thereof (to the extent and in the manner
provided by applicable law).
(iv) The Collateral Agent may sell, resell, lease, use,
assign, transfer or otherwise dispose of any or all of the Collateral in its
then condition or following any commercially reasonable preparation or
processing (utilizing in connection therewith any of the Company's assets,
without charge or liability to the Collateral Agent therefor) at public or
private sale, by one or more contracts, in one or more parcels, at the same or
different times, for cash or credit or for future delivery without assumption of
any credit risk, all as the Collateral Agent deems advisable; provided, however,
that the Company shall be credited with the net proceeds of sale only when such
proceeds are finally collected by the Collateral Agent. The Collateral Agent
shall have the right upon any such public sale, and, to the extent permitted by
law, upon any such private sale, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption, which right or
equity of redemption the Company hereby releases, to the extent permitted by
law. The Company hereby agrees that the sending of notice by ordinary mail,
postage prepaid, to the address of the Company set forth in Section 12, of the
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place and time of any public sale or of the time after which any private sale or
other intended disposition is to be made, shall be deemed reasonable notice
thereof if such notice is sent ten days prior to the date of such sale or other
disposition or the date on or after which such sale or other disposition may
occur, provided that the Collateral Agent may provide the Company shorter notice
or no notice, to the extent permitted by the UCC or other applicable law.
(b) License. For the purpose of enabling the Collateral
Agent to exercise its rights and remedies under this Section 10 or otherwise in
connection with this Agreement and the other Loan Documents, the Company hereby
grants to the Collateral Agent an irrevocable, non-exclusive and assignable
license (exercisable without payment or royalty or other compensation to the
Company) to use, license or sublicense any patents, copyrights, trademarks,
trade styles, trade names and all intellectual property, to enable the
Collateral Agent (among other things) to transfer any of the tangible assets of
the Company that are included in the Collateral.
(c) Proceeds Account. To the extent that any of the Secured
Obligations may be contingent, unmatured or unliquidated (including with respect
to undrawn amounts under any letters of credit outstanding under the $350MM
Credit Agreement) at such time as there may exist an Event of Default, the
Collateral Agent may, at its election, (i) retain the proceeds of any sale,
collection, disposition or other realization upon the Collateral (or any portion
thereof) in a special purpose non-interest-bearing restricted deposit account
(the "Proceeds Account") created and maintained by the Collateral Agent for such
purpose (which shall constitute a Deposit Account included within the Collateral
hereunder) until such time as the Collateral Agent may elect to apply such
proceeds to the Secured Obligations, and the Company agrees that such retention
of such proceeds by the Collateral Agent shall not be deemed strict foreclosure
with respect thereto; (ii) in any manner elected by the Collateral Agent,
estimate the liquidated amount of any such contingent, unmatured or unliquidated
claims and apply the proceeds of the Collateral against such amount; or (iii)
otherwise proceed in any manner permitted by applicable law. The Company agrees
that the Proceeds Account shall be a blocked account and that upon the
irrevocable deposit of funds into the Proceeds Account, the Company shall not
have any right of withdrawal with respect to such funds. Accordingly, the
Company irrevocably waives until the termination of this Agreement in accordance
with Section 22 the right to make any withdrawal from the Proceeds Account and
the right to instruct the Collateral Agent to honor drafts against the Proceeds
Account.
(d) Application of Proceeds. Subject to subsection (c), cash
proceeds actually received from the sale or other disposition or collection of
Collateral, and any other amounts received in respect of the Collateral the
application of which is not otherwise provided for herein, shall be applied
(after payment of any amounts payable to the Collateral Agent pursuant to
Section 8 or Section 14) in whole or in part by the Collateral Agent for the
benefit of the Secured Parties (as their interests may appear) against all or
any part of the Secured Obligations in the following order: (i) first, to any
fees due in respect of the 364-Day Secured Obligations and any fees due in
respect of the $350MM Secured Obligations, on a pro rata basis; (ii) next, to
any interest due in respect of the 364-Day Secured Obligations and any interest
due in respect of the $350MM Secured Obligations, on a pro rata basis; (iii)
next, to any principal due in respect of the 364-Day Secured Obligations and any
principal due in respect of the $350MM Secured Obligations, on a pro rata basis;
and (iv) last, to any other 364-Day Secured Obligations and any
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other $350MM Secured Obligations, on a pro rata basis. Any surplus thereof which
exists after payment and performance in full of the Secured Obligations shall be
promptly paid over to the Company or otherwise disposed of in accordance with
the UCC or other applicable law. The Company shall remain liable to the
Collateral Agent and other Secured Parties for any deficiency which exists after
any sale or other disposition or collection of Collateral.
SECTION 11 Certain Waivers. The Company waives, to the
fullest extent permitted by law, (i) any right of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any, of
marshalling of the Collateral or other collateral or security for the Secured
Obligations; (ii) any right to require the Collateral Agent or the Banks (A) to
proceed against any Person, (B) to exhaust any other collateral or security for
any of the Secured Obligations, (C) to pursue any remedy in the Collateral
Agent's or any of the Banks' power, or (D) to make or give any presentments,
demands for performance, notices of nonperformance, protests, notices of
protests or notices of dishonor in connection with any of the Collateral; and
(iii) all claims, damages, and demands against the Collateral Agent or any Bank
arising out of the repossession, retention, sale or application of the proceeds
of any sale of the Collateral.
SECTION 12 Notices. (a) All notices and other communications
hereunder shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by the
Company by facsimile (i) shall be promptly confirmed by a telephone call to the
recipient at the number specified for such recipient in the 364-Day Credit
Agreement or the $350MM Credit Agreement, as the case may be, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number specified for notices in the
364-Day Credit Agreement or the $350MM Credit Agreement, as the case may be; or,
as directed to the Company or the Collateral Agent, to such other address as
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Collateral Agent. All
notices to the Company shall be sent to Storage Technology Corporation, One
StorageTek Drive, Louisville, CO 80028-4302, Attention: Assistant Treasurer,
Telecopy No.: (303) 673-2837. All notices to the Collateral Agent shall be sent
to Bank of America, N.A., High Technology-SF #3697, Credit Products, Mail Code:
CA5-705-41-01, 555 California Street, 41st Floor, San Francisco, CA 94104,
Attention: Kevin McMahon, Telecopy No.: (415) 622-2385.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mails, or if hand-delivered, upon delivery; except that
notices the Collateral Agent shall not be effective until actually received by
the Collateral Agent.
SECTION 13 No Waiver; Cumulative Remedies. No failure on the
part of the Collateral Agent or any Bank to exercise, and no delay in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
remedy, power or privilege preclude any other or further exercise thereof or the
S-18
<PAGE> 19
exercise of any other right, remedy, power or privilege. The rights and remedies
under this Agreement are cumulative and not exclusive of any rights, remedies,
powers and privileges that may otherwise be available to the Collateral Agent or
any Bank.
SECTION 14 Costs and Expenses; Indemnification; Other
Charges.
(a) Costs and Expenses. The Company agrees to pay or
reimburse on demand:
(i) the reasonable out-of-pocket costs and expenses of the
Collateral Agent (including reasonable Attorney Costs and search, recording and
filing fees and expenses, provided, that the Collateral Agent shall deliver
reasonably detailed statements for such fees and expenses), in connection with
the negotiation, preparation, execution, delivery and administration of this
Agreement, and any amendments, modifications or waivers of the terms thereof,
and the custody of the Collateral;
(ii) upon the occurrence of an Event of Default, all title,
appraisal (including the allocated costs of internal appraisal services,
provided, that the Collateral Agent shall deliver reasonably detailed statements
for such fees and expenses), survey, audit, consulting and similar fees, costs
and expenses incurred or sustained by the Collateral Agent in connection with
this Agreement or the Collateral; and
(iii) all costs and expenses of the Collateral Agent, the
other Secured Parties (including reasonable Attorney Costs and search, recording
and filing fees and expenses, provided, that the Collateral Agent shall deliver
reasonably detailed statements for such fees and expenses), in connection with
the enforcement or attempted enforcement of, and preservation of any rights or
interests under, this Agreement, any out-of-court workout or other refinancing
or restructuring or in any bankruptcy case, and the protection, sale or
collection of, or other realization upon, any of the Collateral, including all
expenses of taking, collecting, holding, sorting, handling, preparing for sale,
selling, or the like, and other such expenses of sales and collections of
Collateral, and any and all losses, costs and expenses sustained by the
Collateral Agent or any Bank as a result of any failure by the Company to
perform or observe its obligations contained herein.
(b) Indemnification. The Company hereby agrees to indemnify
the Collateral Agent and each Bank, and their respective directors, officers,
employees, agents, counsel and other advisors (each an "Indemnified Person")
against, and hold each of them harmless from, any and all liabilities,
obligations, losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including
reasonable Attorney Costs, provided that the Collateral Agent shall deliver
reasonably detailed statements for such fees and expenses), which may be imposed
on, incurred by, or asserted against any Indemnified Person, in any way relating
to or arising out of this Agreement or the transactions contemplated hereby or
any action taken or omitted to be taken by it hereunder (the "Indemnified
Liabilities"); provided that the Company shall not be liable to any Indemnified
Person with respect to Indemnified Liabilities arising from such Indemnified
Person's gross negligence or willful misconduct. If and to the extent that the
foregoing indemnification is for any reason held
S-19
<PAGE> 20
unenforceable, the Company agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
(c) Other Charges. The Company agrees to indemnify the
Collateral Agent and each of the Banks against and hold each of them harmless
from any and all present and future stamp, transfer, documentary and other such
taxes, levies, fees, assessments and other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of this
Agreement.
(d) Interest. During the existence of any Event of Default,
any amounts payable to the Collateral Agent or any Bank under this Section 14 or
otherwise under this Agreement if not paid within two Business Days of demand
shall bear interest from the date of such demand until paid in full, at the rate
of interest per annum equal to the rate of interest publicly announced from time
to time by BofA as its "prime rate" plus 2%.
SECTION 15 Binding Effect. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Company, the Collateral
Agent, each Bank and each Indemnified Person and their respective successors and
assigns.
SECTION 16 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA, EXCEPT
AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN
RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN
CALIFORNIA.
SECTION 17 Entire Agreement; Amendment. This Agreement,
together with the other Loan Documents, embodies the entire agreement and
understanding among the Company, the Banks, the Collateral Agent and the other
Secured Parties, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof and shall not be amended except by the written
agreement of the parties as provided in the Credit Agreement.
SECTION 18 Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under all applicable laws and regulations. If, however, any provision of
this Agreement shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of this Agreement, or the validity or effectiveness of
such provision in any other jurisdiction.
SECTION 19 Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
S-20
<PAGE> 21
SECTION 20 Incorporation of Provisions of the Credit
Agreement. To the extent the Credit Agreements contain provisions of general
applicability to the Loan Documents, such provisions are incorporated herein by
this reference.
SECTION 21 No Inconsistent Requirements. The Company
acknowledges that this Agreement and the other Loan Documents may contain
covenants and other terms and provisions variously stated regarding the same or
similar matters, and agrees that all such covenants, terms and provisions are
cumulative and all shall be performed and satisfied in accordance with their
respective terms.
SECTION 22 Termination. Upon the termination of the
commitments of the Banks to lend money or otherwise extend credit to the Company
under the Loan Documents and payment and performance in full of all Secured
Obligations, this Agreement shall terminate and the Collateral Agent shall
promptly execute and deliver to the Company such documents and instruments
reasonably requested by the Company as shall be necessary to evidence
termination of all security interests given by the Company to the Collateral
Agent hereunder; provided, however, that the obligations of the Company under
Section 14 shall survive such termination.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
THE COMPANY
STORAGE TECHNOLOGY CORPORATION
By:
-------------------------------------
Title:
THE COLLATERAL AGENT
BANK OF AMERICA, N.A., as Collateral Agent
By:
-------------------------------------
Title:
S-21
<PAGE> 1
EXHIBIT 10.19
THIRD AMENDMENT TO THE SECOND AMENDED AND
RESTATED CONTINGENT MULTICURRENCY
NOTE PURCHASE COMMITMENT AGREEMENT
THIS AMENDMENT (this "Amendment"), dated as of August 13, 1999, is made
to the Second Amended and Restated Contingent Multicurrency Note Purchase
Commitment Agreement, dated as of January 15, 1998 (as heretofore or hereafter
amended, modified or supplemented from time to time and in effect, the
("Agreement"), between Storage Technology Corporation ("Borrower") and Bank of
America, N.A. (formerly Bank of America National Trust and Savings Association)
("BofA"). Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms by the Agreement.
WHEREAS, Borrower and BofA desire to amend and supplement the Agreement
as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
AMENDMENTS TO AGREEMENT
Section 1.1 Amendment to Definition of "Scheduled Termination Date".
Section 1.08(a) of the Agreement is hereby amended to change the Scheduled
Termination Date set forth therein to January 10, 2001.
Section 1.2 Amendment to Section 6.01(h)(i)(D). Section 6.01(h)(i)(D)
of the Agreement is hereby amended and restated to read in its entirety as
follows:
"(D) deliver to BofA such consents as may be required under
the Bank Credit Agreement and Bank Revolver (and all other agreements
or instruments affecting the Borrower) to the delivery of such
Collateral Account Agreement and collateral; and"
Section 1.3 Amendment to Section 6.01 (h)(ii)(A). Section 6.01
(h)(ii)(A) of the Agreement is hereby amended and restated to read in its
entirety as follows:
"(A) on such Purchase Date, after giving effect to any payment
of Purchase Price and any payment of principal and interest on any
outstanding Notes on such Purchase Date, the Aggregate Purchase Price
does not exceed $90,000,000;"
Section 1.4 Amendment to Section 6.01(h)(iii)(B). Section
6.01(h)(iii)(B) of the Agreement is hereby amended and restated to read in its
entirety as follows:
<PAGE> 2
"(B) the term "Available Revolver Amount" means, with respect
to the last day of any Fiscal Quarter, the sum, as set forth in the
most recent Compliance Certificate as of such last day which was
delivered pursuant to Section 6.01(g)(vii), of (I) the excess of (x)
the net of all lender commitments under the Bank Credit Agreement as of
the last day of such Fiscal Quarter, over (y) the sum of (1) the
outstanding principal amount of all loans, advances and outstanding
letter of credit reimbursement obligations under the Bank Credit
Agreement as of the last day of such Fiscal Quarter, plus (2) the
aggregate outstanding face amount of all letters of credit under the
Bank Credit Agreement as of the last day of such Fiscal Quarter, and
(II) the excess of (x) the net of all lender commitments under the Bank
Revolver as of the last day of such Fiscal Quarter, over (y) the
outstanding principal amount of all loans, advances and other
extensions of credit to the Borrower under the Bank Revolver as of the
last day of such Fiscal Quarter."
Section 1.5 Amendment to Schedule I. Schedule I to the Agreement is
hereby amended by inserting the following definition in its alphabetically
determined place:
"'Bank Revolver' means the Credit Agreement, dated as of January 14,
1999, among the Borrower, Bank of America National Trust and Savings
Association, as Agent, and the other financial institutions party thereto, as
amended and supplemented or otherwise modified from time to time, and any
restatement, renewal or replacement thereof."
Section 1.6 Amendment to Schedule II. Schedule II to the Agreement is
hereby amended and restated in its entirety to read as set forth on Exhibit A
attached hereto.
Section 1.7 Amendment to Exhibit 5.0l(d) Exhibit 5.01(d) to the
Agreement is hereby amended and restated in its entirety as follows:
"(d) Litigation. There is no action, suit or proceeding pending or, to
the best of Borrower's knowledge, threatened in any court or a governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (i) except as set forth in the most recent report delivered by Borrower
to BofA pursuant to Section 6.01(g)(vi) relating to Borrower or any of its
Subsidiaries or any of the properties of Borrower or any of its Subsidiaries and
that, if adversely determined, could create a Material Adverse Effect, or (ii)
that relates to any aspect of the transactions contemplated by this Agreement"."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties. Borrower hereby represents
and warrants to BofA that:
(a) Representations and Warranties. The representations and
warranties of Borrower contained in the Agreement are true and correct
on and as of the date of this Amendment as though made on and as of
such date, and
2
<PAGE> 3
(b) No Termination Event. Both before and after giving effect
to this Amendment, no event shall exist that constitutes a Termination
Event or an Unmatured Termination Event.
ARTICLE III
MISCELLANEOUS
Section 3.1 Agreement Document Pursuant to Agreement. This Amendment is
an Agreement Document executed pursuant to the Agreement and shall be construed,
administered and applied in accordance with all of the terms and provisions of
the Agreement.
Section 3.2 Successors. Transferees and Assigns. This Amendment shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors, transferees and assigns.
Section 3.3 Execution in Counterparts. This Amendment may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall be taken together as one agreement.
Section 3.4 Governing Law. THIS AMENDMENT SHALL BE A CONTRACT MADE
UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
Section 3.5 Reaffirmation of Agreement. As amended and supplemented by
this Amendment, the Agreement remains in full force and effect and is hereby
reaffirmed, ratified and confirmed in all respects. From and after the date
hereof, all references to the Agreement in any agreement, instrument or document
shall be references to the Agreement as amended and supplemented hereby.
Section 3.6 Headings. The various captions in this Amendment are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Amendment.
Section 3.7 Complete Agreement. The Agreement (including this Amendment
and the Exhibits and Schedules to the Agreement and this Amendment) and the
other Agreement Documents contain the entire understanding of the parties with
respect to the transactions contemplated hereby and thereby and supersedes all
prior arrangements or understandings with respect thereto.
Section 3.8 Severability. Whenever possible, each provision of this
Amendment will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Amendment is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Amendment, except to the extent that such
prohibition or invalidity would constitute a material change in the terms of
this Amendment taken as a whole.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
STORAGE TECHNOLOGY CORPORATION
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
BANK OF AMERICA, N.A. (formerly Bank of
America National Trust and Savings Association)
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
<PAGE> 1
EXHIBIT 10.20
FOURTH AMENDMENT TO THE SECOND AMENDED
AND RESTATED CONTINGENT
MULTICURRENCY NOTE PURCHASE COMMITMENT AGREEMENT
THIS AMENDMENT (this "Amendment"), dated as of January 5, 2000, is made
to the Second Amended and Restated Contingent Multicurrency Note Purchase
Commitment Agreement, dated as of January 15, 1998 (as heretofore or hereafter
amended, modified or supplemented from time to time, the "Agreement"), between
STORAGE TECHNOLOGY CORPORATION ("Borrower") and BANK OF AMERICA, N.A. (formerly
Bank of America National Trust and Savings Association) ("BofA"). Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms by the Agreement.
WHEREAS, Borrower and BofA desire to amend and supplement the Agreement
as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
AMENDMENTS TO AGREEMENT
Section 1.1 Amendment to Section 1.04. Section 1.04 of the Agreement is
hereby amended and restated to read in its entirety as follows:
"Section 1.04 Disbursement of Purchase Price into Collateral
Account; Notice of Collateral Status and Excess Purchase Price Amounts.
The Borrower will notify BofA in writing no later than 10:00 a.m. (San
Francisco time) on each LIBOR Fixing Date (i) whether Borrower will be
in Collateral Status or an Excess Purchase Price Amount will exist, in
either case, on the Purchase Date immediately following such LIBOR
Fixing Date, and (ii) if Borrower will be in Collateral Status or an
Excess Purchase Price Amount will exist, in either case, on such
Purchase Date, the amount to be deposited into the Collateral Account
on such Purchase Date in order to enable the Borrower to meet its
obligations under Section 6.01(h).".
Section 1.2 Amendment to Definition of "Applicable Margin". Section
1.05(f) of the Agreement is hereby amended and restated to read in its entirety
as follows:
<PAGE> 2
"(f) The "Applicable Margin" on each day during the Period to Maturity
of any Note shall be:
(1) if on the Purchase Date of such Note Borrower is in
Collateral Status, 0.350%,
(2) if on the Purchase Date of such Note Borrower is not in
Collateral Status and no Excess Purchase Price Amount exists, the
Applicable Margin will be determined by BofA on such Purchase Date in
accordance with the table set forth below. Such determination shall be
based on the calculations of the ratio of (x) Consolidated Total Debt
on the last day of the most recent Fiscal Quarter of the Borrower and
its Subsidiaries for which a Compliance Certificate shall have been
delivered pursuant to Section 6.01(g)(vii), as shown in such
Compliance Certificate, to (y) the sum of EBITDA of the Borrower and
its Subsidiaries for the period of four Fiscal Quarters ending on such
last day, as shown in such Compliance Certificate.
<TABLE>
<CAPTION>
Consolidated Total Debt
to EBITDA
(rolling four quarter) Applicable Margin
---------------------- -----------------
<S> <C>
If Less than 1.50 +2.000%
If Less than 2.00 but greater than +2.125%
or equal to 1.50
If Less than 2.50 but greater than +2.250%
or equal to 2.00
If Greater than or equal to 2.50 +2.500%
</TABLE>
(iii) if on the Purchase Date of such Note Borrower is not in
Collateral Status, but an Excess Purchase Price Amount exists, the
Applicable Margin will be a percentage, calculated according to the
following formula:
Applicable Margin = EPPA * 0.350% + (APP - EPPA) * AM
------------- -----------------
APP APP
WHERE:
EPPA = the Excess Purchase Price Amount on such
Purchase Date, provided, that, in the event
the Borrower has not deposited, and for so
long (but
<PAGE> 3
only for so long) as Borrower has
not deposited an amount equal to such Excess
Purchase Price Amount into the Collateral
Account on such Purchase Date in accordance
with Section 6.01(h), "EPPA" on such
Purchase Date shall be an amount equal to
the amount on deposit in the Collateral
Account on such Purchase Date;
APP = the aggregate of the Purchase Prices of
all Notes which are outstanding or to be
issued on such Purchase Date (after giving
effect to any Notes which will be repaid on
such Purchase Date); and
AM = the Applicable Margin that would have been
in effect on such Purchase Date pursuant to
Section 1.05(f)(ii) if the Excess Purchase
Price Amount on such Purchase Date had not
been greater than zero.
(iv) Except to the extent provided in the definition of "EPPA"
above, the determination of the Applicable Margin for any Note for
purposes of this Section 1.05(f) shall be made on the Purchase Date of
such Note and such determination shall apply to each day during the
Period to Maturity of such Note.".
Section 1.3 Amendment to Definition of "Applicable Facility Fee Rate".
Section 3.01(b) of the Agreement is hereby amended and restated to read in its
entirety as follows:
"(b) The "Applicable Facility Fee Rate" shall be:
(i) 0.150% on any day when Borrower is in Collateral Status.
(ii) on any day when Borrower is not in Collateral Status and
no Excess Purchase Price Amount exists, the Applicable Facility Fee
Rate will be determined by BofA on such day in accordance with the
table set forth below. Such determination shall be based on the
calculations of (i) the ratio of (x) Consolidated Total Debt on the
last day of the most recent Fiscal Quarter of the Borrower and its
Subsidiaries for which a Compliance Certificate shall have been
delivered pursuant to Section 6.01(g)(vii), as shown in such Compliance
Certificate, to (y) the sum of EBITDA of the Borrower and its
Subsidiaries for the period of four Fiscal Quarters ending on such last
day, as shown in such Compliance Certificate, and (ii) the Leverage
Ratio on such last day, as set forth in such Compliance Certificate.
3
<PAGE> 4
Applicable Facility Fee Rate
<TABLE>
<CAPTION>
Consolidated Total Debt If Leverage Ratio
to EBITDA is less than or If Leverage Ratio
(rolling four quarter) equal to 0.35 is greater than 0.35
---------------------- ------------------ --------------------
<S> <C> <C>
If Less than .50 +0.200% +0.250%
If Less than 1.00 but greater than +0.275% +0.325%
or equal to .50
If Less than 1.50 but greater than +0.325% +0.350%
or equal to 1.00
If Greater than or equal to 1.50 +0.350% +0.375%
</TABLE>
(iii) on any day when Borrower is not in Collateral Status,
but an Excess Purchase Price Amount exists, the Applicable Facility Fee
Rate will be a percentage, calculated according to the following
formula:
Applicable Facility Fee Rate = EPPA * 0.150% + (APP - EPPA) * AF
------------- -----------------
APP APP
WHERE:
EPPA = the Excess Purchase Price Amount on such
day, provided, that, in the event the
Borrower has not deposited, and for so long
(but only for so long) as Borrower has not
deposited an amount equal to such Excess
Purchase Price Amount into the Collateral
Account on such day in accordance with
Section 6.01(h), "EPPA" on such day shall be
an amount equal to the amount on deposit in
the Collateral Account on such day;
APP = the aggregate of the Purchase Prices of
all Notes which are outstanding or, if such
day is a Purchase Date, to be issued on such
Purchase Date (after giving effect to any
Notes which will be repaid on such Purchase
Date); and
AF = the Applicable Facility Fee Rate that
would have been in effect on such day
pursuant to Section 3.01(b)(ii) if the
Excess Purchase Price Amount on such day had
not been greater than zero.
(iv) Except to the extent provided in the definition of "EPPA"
above, the determination of the Applicable Facility Fee Rate for
purposes of this Section 3.01(b) shall be made on each Purchase Date
and such determination shall apply to each day during the period from
such Purchase Date to, but excluding, the next succeeding Purchase
Date.".
Section 1.4 Amendment to Section 4.02(c). Section 4.02(c) of the
Agreement is hereby amended and restated to read in its entirety as follows:
4
<PAGE> 5
"(c) On such Purchase Date (i)(x) the Borrower is not in Collateral
Status, and (y) no Excess Purchase Price Amount will exist, or (ii) the
aggregate amount of cash and Qualifying Investment (or in the case of
Qualifying Investments, principal equivalent amount) contained in the
Collateral Account (including any proceeds of payment of the Purchase
Prices of Notes on such Purchase Date which are to be disbursed into
the Collateral Account pursuant to Section 1.04) shall be not less than
(A) in the event Borrower is in Collateral Status on such Purchase
Date, the aggregate of the Purchase Prices of all Notes purchased on
any Purchase Date on which Borrower was in Collateral Status and which
are outstanding or to be issued on such Purchase Date (after giving
effect to any Notes which will be repaid on such Purchase Date), or (B)
in the event an Excess Purchase Price Amount will exist on such
Purchase Date, such Excess Purchase Price Amount.".
Section 1.5 Amendment to Section 6.01(h). Section 6.01(h) of the
Agreement is hereby amended and restated to read in its entirety as follows:
"(h) Maintenance of Collateral Account.
(i) Borrower agrees to:
(A) as specified in the Collateral Account
Agreement, maintain the Collateral Account at BofA;
(B) execute and deliver to BofA the Collateral
Account Agreement in form and substance satisfactory to BofA
covering all cash, Cash Equivalent Investments and other
investments which are from time to time maintained in the
Collateral Account (which investments shall be in form and
substance approved by BofA at the time such Collateral Account
Agreement is delivered, shall be of the Required Credit
Quality, and shall, if required by BofA, be made in the name
of BofA);
(C) (i) on each Purchase Date, deposit or maintain
cash and other such Qualifying Investments in such Collateral
Account at BofA in an aggregate amount (or, in the case of
Qualifying Investments, principal equivalent amounts) which is
not less than (x) if the Borrower is in Collateral Status on
such Purchase Date, the aggregate of the Purchase Prices of
all Notes purchased on any Purchase Date on which Borrower was
in Collateral Status and which are outstanding or to be issued
on such Purchase Date (after giving effect to any Notes which
will be repaid on such day), and (y) if an Excess Purchase
Price Amount will exist on such Purchase Date, such Excess
Purchase Price Amount, and (ii) not withdraw
5
<PAGE> 6
any amounts or investments from such Collateral Account
except as permitted by the Collateral Account Agreement;
(D) deliver to BofA such consents as may be required
under the Bank Credit Agreement and Bank Revolver (and all
other agreements or instruments affecting Borrower) to the
delivery of such Collateral Account Agreement and collateral;
and
(E) deliver to BofA such resolutions, incumbency
certificates, opinions of counsel and other documents as BofA
may require with respect to authorization, enforceability,
legality, perfection, lack of conflict and other matters
required by BofA with respect to such Collateral Account
Agreement and the collateral covered thereby.
(ii) As used in herein:
(A) "Collateral Status" means any Purchase Date on
which any of the following conditions have not been satisfied:
(I) as of the last day of the immediately
preceding Fiscal Quarter for which a Compliance
Certificate has been delivered pursuant to Section
6.01(g)(vii) (a) if such Fiscal Quarter is the fourth
Fiscal Quarter of 1999 or the first Fiscal Quarter of
2000, the Consolidated Net Loss of the Borrower and
its Subsidiaries, as shown in such Compliance
Certificate, is less than $42,500,000 for such fourth
Fiscal Quarter or $35,000,000 for such first Fiscal
Quarter, and (b) if such Fiscal Quarter is any other
subsequent Fiscal Quarter, the Consolidated Net
Income and Consolidated Operating Income of the
Borrower and its Subsidiaries, as shown in such
Compliance Certificate, is at least zero;
(II) (a) as of the last day of the
immediately preceding Fiscal Quarter, for which a
Compliance Certificate has been delivered pursuant to
Section 6.01(g)(vii), the Available Cash Amount, as
shown in such Compliance Certificate, is greater than
$125,000,000, or (b) as of the last day of the
immediately preceding Fiscal Quarter, for which a
Compliance Certificate has been delivered pursuant to
Section 6.01(g)(vii), the Available Revolver Amount,
as shown in such Compliance Certificate, is greater
than $50,000,000, or
(III) Borrower shall have delivered, prior
to 10:00 a.m. (San Francisco time) on the LIBOR
Fixing Date for such Purchase Date, a Notice
6
<PAGE> 7
of Borrowing pursuant to Section 1.03(b) indicating
that Borrower will not be in Collateral Status as of
such Purchase Date;
(B) "Available Cash Amount" means, with respect to
the last day of any Fiscal Quarter, the U.S. Dollar equivalent
(determined in accordance with GAAP) of all unrestricted cash
and unrestricted Cash Equivalent Investments owned by the
Borrower and its Subsidiaries, all as set forth in the
Compliance Certificate as of such last day which was delivered
pursuant to Section 6.01(g)(vii). It is understood and agreed
that, with respect to this Section 6.01(h)(ii)(B), the
"Available Cash Amount" shall include, without duplication (i)
any unrestricted cash which is received by the Borrower in
respect of the Purchase Price for any outstanding Note
(provided, however, that under no circumstances shall the
"Available Cash Amount" include any cash or Cash Equivalent
Investments deposited into the Cash Collateral Account), and
(ii) any cash or Cash Equivalent Investments for which the
only restriction on such cash or Cash Equivalent Investments
is that they are subject to a lien of the Collateral Agent and
the other Secured Parties as proceeds of the Collateral (as
used in clause (II) of this Section 6.01(h)(ii)(B),
"Collateral Agent," "Secured Parties" and "Collateral" each
have the meanings assigned to such terms in the Bank Credit
Agreement).
(C) "Available Revolver Amount" means, with respect
to the last day of any Fiscal Quarter, the sum, as set forth
in the most recent Compliance Certificate as of such last day
which was delivered pursuant to Section 6.01(g)(vii), of (I)
the excess of (x) the aggregate of the lender commitments
under the Bank Credit Agreement as of the last day of such
Fiscal Quarter, over (y) the sum of (1) the outstanding
principal amount of all loans, advances and outstanding letter
of credit reimbursement obligations under the Bank Credit
Agreement as of the last day of such Fiscal Quarter, plus (2)
the aggregate outstanding face amount of all letters of credit
under the Bank Credit Agreement as of the last day of such
Fiscal Quarter, and (II) the excess of (x) the aggregate of
the lender commitments under the Bank Revolver as of the last
day of such Fiscal Quarter, over (y) the outstanding principal
amount of all loans, advances and other extensions of credit
to the Borrower under the Bank Revolver as of the last day of
such Fiscal Quarter.
(iv) The determination of whether or not Borrower is in
Collateral Status for purposes of this Section 6.01(h) shall be made on
each Purchase Date and such determination shall apply from such
Purchase Date to the next succeeding Purchase Date.
(v) For purposes of determining whether or not Borrower is in
compliance with clauses (I), (II) and (III) of the definition of
Collateral Status, the Consolidated Net Income, Consolidated Net Loss,
Consolidated Operating Income, Consolidated Operating Loss, Available
Cash Amount and Available Revolver Amount shall be calculated as set
forth in
7
<PAGE> 8
this Section 6.01(h) and such calculation shall be used in determining
whether or not Borrower is in Collateral Status from the first
Purchase Date after the delivery of such Compliance Certificate to,
but excluding, the first Purchase Date after which Borrower has
delivered a new Compliance Certificate for the next Fiscal Quarter of
the Borrower as provided herein."
Section 1.6 Amendment to Section 6.02(a). Section 6.02(a) of
the Agreement is hereby amended and restated to read in its entirety as
follows:
"(a) Profitability. Not permit (a) with respect to the fourth
Fiscal Quarter of 1999 and the first Fiscal Quarter of 2000, the
Consolidated Net Loss of the Borrower and its Subsidiaries to be
greater than $42,500,000 for such fourth Fiscal Quarter or $35,000,000
for such first Fiscal Quarter, and (b) with respect to any other
subsequent Fiscal Quarter of the Borrower and its Subsidiaries, the
Consolidated Net Income or Consolidated Operating Income of the
Borrower and its Subsidiaries to be less than zero.".
Section 1.7 Amendment to Definition of Facility Limit. The definition
of Facility Limit in Schedule I to the Agreement is hereby amended and restated
in its entirety as follows:
"`Facility Limit' means $120,000,000, as such amount may be reduced
pursuant to Section 1.07.".
Section 1.8 Amendment to Schedule I. Schedule I to the Agreement is
hereby amended by inserting the following definitions in their alphabetically
determined places, and to the extent any such definition is already defined in
Schedule I, such definitions are amended and restated in their entirety:
"Available Cash Amount" is defined in Section 6.01(h)(ii)(B).
"Available Revolver Amount" is defined in Section 6.01(h)(ii)(C).
"Collateral Status" is defined in Section 6.01(h)(ii)(A).
"EBITDA" means, with respect to any period, for the Borrower and its
Subsidiaries on a consolidated basis, determined in accordance with GAAP, the
sum of (a) Net Income (or Net Loss) for such period determined without giving
effect to the proviso to the definition of Net Income or Net Loss, as the case
may be, plus (b) all amounts treated as expenses for depreciation, interest and
the amortization of intangibles of any kind to the extent included in the
determination of such Net Income (or Net Loss), plus (c) all accrued taxes on or
measured by income to the extent included in the determination of such Net
Income (or Net Loss), plus (d) all restructuring and litigation charges recorded
during any Fiscal Quarter of 1999 and the first and
8
<PAGE> 9
second Fiscal Quarters of 2000 to the extent included in the determination of
such Net Income (or Net Loss).
"Excess Purchase Price Amount" means, with respect to any Purchase
Date, an amount equal to the excess, if any, of (x) the aggregate of the
Purchase Prices of all Notes which are outstanding or to be issued on such
Purchase Date (after giving effect to any Notes which will be repaid on such
Purchase Date), over (y) $50,000,000.
"Leverage Ratio" means, with respect to any Person, the ratio that (i)
Consolidated Total Debt of such Person bears to (ii) the Consolidated Total
Capital of such Person.
"Net Income" means, with respect to any Person for any period, net
income of such Person, as determined by such Person in accordance with GAAP,
provided, that, with respect to the fourth Fiscal Quarter of 1999, the first
Fiscal Quarter of 2000, and the second Fiscal Quarter of 2000, cumulative
pre-tax non-cash restructuring charges, and write-offs and write-downs of assets
classified as non-cash assets, in each case, recognized in accordance with GAAP
during such Fiscal Quarter and in an amount not to exceed $50,000,000 in the
aggregate during such Fiscal Quarters, shall be excluded from the calculation of
the Consolidated Net Income of Borrower and its Subsidiaries for such Fiscal
Quarter.
"Net Loss" means, with respect to any Person for any period, net loss
of such Person, as determined by such Person in accordance with GAAP, provided,
that, with respect to the fourth Fiscal Quarter of 1999, the first Fiscal
Quarter of 2000, and the second Fiscal Quarter of 2000, cumulative pre-tax
non-cash restructuring charges, and write-offs and write-downs of assets
classified as non-cash assets, in each case, recognized in accordance with GAAP
during such Fiscal Quarter and in an amount not to exceed $50,000,000 in the
aggregate during such Fiscal Quarters, shall be excluded from the calculation of
the Consolidated Net Loss of Borrower and its Subsidiaries for such Fiscal
Quarter.
"Operating Income" means, with respect to any Person for any period,
operating income of such Person, as determined by such Person in accordance with
GAAP, provided, that, with respect to the fourth Fiscal Quarter of 1999, the
first Fiscal Quarter of 2000, and the second Fiscal Quarter of 2000, cumulative
pre-tax non-cash restructuring charges, and write-offs and write-downs of assets
classified as non-cash assets, in each case, recognized in accordance with GAAP
during such Fiscal Quarter and in an amount not to exceed $50,000,000 in the
aggregate during such Fiscal Quarters, shall be excluded from the calculation of
the Consolidated Operating Income of Borrower and its Subsidiaries for such
Fiscal Quarter.
"Operating Loss" means, with respect to any Person for any period,
operating loss of such Person, as determined by such Person in accordance with
GAAP, provided, that, with respect to the fourth Fiscal Quarter of 1999, the
first Fiscal Quarter of 2000, and the second Fiscal Quarter of 2000, cumulative
pre-tax non-cash restructuring charges, and write-offs and write-downs of assets
classified as non-cash assets, in each case, recognized in accordance with GAAP
during
9
<PAGE> 10
such Fiscal Quarter and in an amount not to exceed $50,000,000 in the aggregate
during such Fiscal Quarters, shall be excluded from the calculation of the
Consolidated Operating Loss of Borrower and its Subsidiaries for such Fiscal
Quarter.
Section 1.9 Amendment to Exhibit 1.03(b). Exhibit 1.03(b) to the
Agreement is hereby amended and restated to read in its entirety as set forth in
Schedule A attached hereto.
Section 1.10 Amendment to Exhibit 6.01(g)(vii). Annex I to Exhibit
6.01(g)(vii) to the Agreement is hereby amended and restated to read in its
entirety as set forth in Schedule B attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties. Borrower hereby represents
and warrants to BofA that:
(a) Representations and Warranties. The representations and
warranties of Borrower contained in the Agreement are true and correct
on and as of the date of this Amendment as though made on and as of
such date, and
(b) No Termination Event. Both before and after giving effect
to this Amendment, no event shall exist that constitutes a Termination
Event or an Unmatured Termination Event.
ARTICLE III
MISCELLANEOUS
Section 3.1 Agreement Document Pursuant to Agreement. This Amendment is
an Agreement Document executed pursuant to the Agreement and shall be construed,
administered and applied in accordance with all of the terms and provisions of
the Agreement.
Section 3.2 Successors, Transferees and Assigns. This Amendment shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors, transferees and assigns.
Section 3.3 Execution in Counterparts. This Amendment may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall be taken together as one agreement.
10
<PAGE> 11
Section 3.4 Governing Law. THIS AMENDMENT SHALL BE A CONTRACT MADE
UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
Section 3.5 Reaffirmation of Agreement. As amended and supplemented by
this Amendment, the Agreement remains in full force and effect and is hereby
reaffirmed, ratified and confirmed in all respects. From and after the date
hereof, all references to the Agreement in any agreement, instrument or document
shall be references to the Agreement as amended and supplemented hereby.
Section 3.6 Headings. The various captions in this Amendment are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Amendment.
Section 3.7 Complete Agreement. The Agreement (including this Amendment
and the Exhibits and Schedules to the Agreement and this Amendment) and the
other Agreement Documents contain the entire understanding of the parties with
respect to the transactions contemplated hereby and thereby and supersedes all
prior arrangements or understandings with respect thereto.
Section 3.8 Severability. Whenever possible, each provision of this
Amendment will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Amendment is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Amendment, except to the extent that such
prohibition or invalidity would constitute a material change in the terms of
this Amendment taken as a whole.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
STORAGE TECHNOLOGY CORPORATION
By:
------------------------------
Name:
Title:
BANK OF AMERICA, N.A.
(formerly Bank of America National
Trust and Savings Association)
By:
------------------------------
Name:
Title:
S-1
<PAGE> 1
EXHIBIT 21.0
STORAGE TECHNOLOGY CORPORATION
<TABLE>
<CAPTION>
STATE OF
U.S. SUBSIDIARIES INCORPORATION
- ----------------- -------------
<S> <C>
Storage Technology European Trade Corporation Delaware
Storage Technology Optical Disk Development Corporation Delaware
StorageTek Holding Corporation Nevada
StorageTek International Corporation Delaware
StorageTek International Services Corporation Delaware
Vitalink Communications Corporation Delaware
</TABLE>
<TABLE>
<CAPTION>
COUNTRY OF
NON-U.S. SUBSIDIARIES INCORPORATION
- --------------------- -------------
<S> <C>
Network Systems Australasia Pty. Limited Australia
StorageTek New Zealand Pty., Limited Australia
Storage Technology of Australia Pty., Limited Australia
Storage Technology Network Systems GES.mbH Austria
Network Systems Foreign Sales Corp. Barbados
Storage Technology (Belgium) N.V./S.A. Belgium
Storage Technology (Bermuda) Ltd. Bermuda
StorageTek Brasil Ltda Brazil
StorageTek Canada, Inc. Canada
StorageTek A/S Denmark
StorageTek OY Finland
Network Systems France, S.A. France
Storage Technology European Operations, S.A. France
Storage Technology France, S.A. France
Storage Technology Holding France, S.A. France
Storage Technology Formation, SARL France
Bytex GmbH Germany
Storage Technology GmbH Germany
Storage Technology Holding GmbH Germany
StorageTek North Asia Ltd. Hong Kong
Network Systems Italia S.r.l. Italy
Storage Technology Italia, S.p.A. Italy
Network Systems Japan K.K. Japan
Storage Technology Asia/Pacific K.K. Japan
Storage Technology of Japan, Ltd. Japan
StorageTek (Malaysia) Sdn. Bhd. Malaysia
StorageTek de Mexico, S.A. de C.V. Mexico
Storage Technology (The Netherlands) B.V. Netherlands
StorageTek European Holding B.V. Netherlands
StorageTek Global Operations B.V. Netherlands
StorageTek A/S Norway
StorageTek South Asia Pte. Ltd. Singapore
StorageTek Espana, S.A. Spain
NSC Network Systems AB (Sweden) Sweden
Storage Technology Sweden AB Sweden
StorageTek AG Switzerland
Bytex DataCom Ltd. United Kingdom
Storage Technology Holding Limited United Kingdom
Storage Technology Limited United Kingdom
Storage Technology Manufacturing Limited United Kingdom
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-19426, 33-32235, 33-32243, 33-37464, 33-42817,
33-51756, 2-60117, 2-80183, 2-61333, 2-89417, 33-50777, 33-59165, and 33-52197,
333-08116, 333-08497, 333-08118, 333-08495, 333-53973, 333-53995) of Storage
Technology Corporation of our report dated March 8, 2000 appearing on Page
F-23 of this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
March 10, 2000
<PAGE> 1
EXHIBIT 24.0
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, JAMES R. ADAMS, whose
signature appears below, constitutes and appoints David E. Weiss, Jeffrey M.
Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ JAMES R. ADAMS March 10, 2000
- --------------------------------------
JAMES R. ADAMS
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, WILLIAM L. ARMSTRONG,
whose signature appears below, constitutes and appoints David E. Weiss, Jeffrey
M. Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact,
each with the power of substitution, to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, the Annual Report on
Form 10-K for Storage Technology Corporation for the fiscal year ended December
31, 1999 and file the same with the Securities and Exchange Commission, with
exhibits thereto and other documentation therewith and to sign, for and on
behalf of the undersigned, in any and all capacities of the undersigned, any
amendments to such Annual Report on Form 10-K, and file the same with the
Securities and Exchange Commission, with exhibits thereto and other documents in
connection therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ WILLIAM L. ARMSTRONG March 10, 2000
- --------------------------------------
WILLIAM L. ARMSTRONG
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, J. HAROLD CHANDLER,
whose signature appears below, constitutes and appoints David E. Weiss, Jeffrey
M. Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact,
each with the power of substitution, to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, the Annual Report on
Form 10-K for Storage Technology Corporation for the fiscal year ended December
31, 1999 and file the same with the Securities and Exchange Commission, with
exhibits thereto and other documentation therewith and to sign, for and on
behalf of the undersigned, in any and all capacities of the undersigned, any
amendments to such Annual Report on Form 10-K, and file the same with the
Securities and Exchange Commission, with exhibits thereto and other documents in
connection therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ J. HAROLD CHANDLER March 10, 2000
- --------------------------------------
J. HAROLD CHANDLER
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, MAURICE HOLMES, whose
signature appears below, constitutes and appoints David E. Weiss, Jeffrey M.
Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ MAURICE HOLMES March 10, 2000
- --------------------------------------
MAURICE HOLMES
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, WILLIAM R. HOOVER,
whose signature appears below, constitutes and appoints David E. Weiss, Jeffrey
M. Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact,
each with the power of substitution, to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, the Annual Report on
Form 10-K for Storage Technology Corporation for the fiscal year ended December
31, 1999 and file the same with the Securities and Exchange Commission, with
exhibits thereto and other documentation therewith and to sign, for and on
behalf of the undersigned, in any and all capacities of the undersigned, any
amendments to such Annual Report on Form 10-K, and file the same with the
Securities and Exchange Commission, with exhibits thereto and other documents in
connection therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ WILLIAM R. HOOVER March 10, 2000
- --------------------------------------
WILLIAM R. HOOVER
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, WILLIAM KERR, whose
signature appears below, constitutes and appoints David E. Weiss, Jeffrey M.
Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ WILLIAM KERR March 10, 2000
- --------------------------------------
WILLIAM KERR
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, ROBERT E. LABLANC,
whose signature appears below, constitutes and appoints David E. Weiss, Jeffrey
M. Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact,
each with the power of substitution, to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, the Annual Report on
Form 10-K for Storage Technology Corporation for the fiscal year ended December
31, 1999 and file the same with the Securities and Exchange Commission, with
exhibits thereto and other documentation therewith and to sign, for and on
behalf of the undersigned, in any and all capacities of the undersigned, any
amendments to such Annual Report on Form 10-K, and file the same with the
Securities and Exchange Commission, with exhibits thereto and other documents in
connection therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ ROBERT E. LABLANC March 10, 2000
- --------------------------------------
ROBERT E. LABLANC
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, ROBERT E. LEE, whose
signature appears below, constitutes and appoints David E. Weiss, Jeffrey M.
Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ ROBERT E. LEE March 10, 2000
- --------------------------------------
ROBERT E. LEE
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, RICHARD C. STEADMAN,
whose signature appears below, constitutes and appoints David E. Weiss, Jeffrey
M. Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact,
each with the power of substitution, to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, the Annual Report on
Form 10-K for Storage Technology Corporation for the fiscal year ended December
31, 1999 and file the same with the Securities and Exchange Commission, with
exhibits thereto and other documentation therewith and to sign, for and on
behalf of the undersigned, in any and all capacities of the undersigned, any
amendments to such Annual Report on Form 10-K, and file the same with the
Securities and Exchange Commission, with exhibits thereto and other documents in
connection therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ RICHARD C. STEADMAN March 10, 2000
- --------------------------------------
RICHARD C. STEADMAN
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, DAVID E. WEISS, whose
signature appears below, constitutes and appoints Robert S. Kocol, Jeffrey M.
Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ DAVID E. WEISS March 10, 2000
- ------------------------
DAVID E. WEISS
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, ROBERT S. KOCOL, whose
signature appears below, constitutes and appoints David E. Weiss, Jeffrey M.
Dumas and Thomas G. Arnold, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ ROBERT S. KOCOL March 10, 2000
- --------------------------------------
ROBERT S. KOCOL
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, THOMAS G. ARNOLD,
whose signature appears below, constitutes and appoints David E. Weiss, Jeffrey
M. Dumas and Robert S. Kocol, jointly and severally, his attorneys-in-fact, each
with the power of substitution, to sign, for and on behalf of the undersigned,
in any and all capacities of the undersigned, the Annual Report on Form 10-K for
Storage Technology Corporation for the fiscal year ended December 31, 1999 and
file the same with the Securities and Exchange Commission, with exhibits thereto
and other documentation therewith and to sign, for and on behalf of the
undersigned, in any and all capacities of the undersigned, any amendments to
such Annual Report on Form 10-K, and file the same with the Securities and
Exchange Commission, with exhibits thereto and other documents in connection
therewith, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
/s/ THOMAS G. ARNOLD March 10, 2000
- ------------------------
THOMAS G. ARNOLD
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K DATED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000094673
<NAME> STORAGE TECHNOLOGY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 215,421
<SECURITIES> 0
<RECEIVABLES> 646,927
<ALLOWANCES> 19,492
<INVENTORY> 260,642
<CURRENT-ASSETS> 1,228,086
<PP&E> 876,250
<DEPRECIATION> 554,189
<TOTAL-ASSETS> 1,735,475
<CURRENT-LIABILITIES> 787,323
<BONDS> 0
0
0
<COMMON> 10,083
<OTHER-SE> 909,116
<TOTAL-LIABILITY-AND-EQUITY> 1,735,475
<SALES> 1,649,387
<TOTAL-REVENUES> 2,368,231
<CGS> 928,072
<TOTAL-COSTS> 1,425,247
<OTHER-EXPENSES> 277,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,316
<INCOME-PRETAX> (116,450)
<INCOME-TAX> (41,900)
<INCOME-CONTINUING> (74,550)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,550)
<EPS-BASIC> (0.75)
<EPS-DILUTED> (0.75)
</TABLE>
