UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 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: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
645 North Mary Avenue
Sunnyvale, CA 94088
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(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. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $180,915,000 as of March 15,
1999, based upon the closing sale price of the common stock on the Nasdaq Stock
Market for that date.
There were 22,266,475 shares of the registrant's Common Stock issued
and outstanding as March 15, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III incorporate information by
reference from the registrant's Proxy Statement for its 1999 Annual Meeting of
Shareholders to be held on June 2, 1999. Except with respect to information
specifically incorporated by reference into this Form 10-K, the Proxy Statement
is not deemed to be filed as a part hereof.
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This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those indicated in the
forward-looking statements as a result of the risk factors set forth in, or
incorporated by reference into, this report. The Company has attempted to
identify forward-looking statements in this report by placing an asterisk (*) in
the left-hand margin of paragraphs containing such material.
PART I
Item 1. Business
General
Trimble Navigation Limited, a California corporation ("Trimble" or "the
Company"), is a leader in designing and developing innovative products enabled
by GPS technology. The Company provides end-user and Original Equipment
Manufacture solutions for diverse applications including surveying, mapping,
marine survey, mining, construction and agriculture, mobile positioning,
commercial avionics, military systems, automotive, timing, and geographic
information systems. Trimble designs, manufactures and markets electronic
products that determine precise geographic location. The Company's principal
products, which utilize substantial amounts of proprietary software and
firmware, are integrated systems for collecting, analyzing and displaying
position data in forms optimized for specific end-user applications.
* The Company has developed or is developing systems for seismology,
machine control, delivery fleets, buses, ships, airplanes, automobiles and
cellular infrastructures. Trimble anticipates that additional markets will
emerge to make use of the highly accurate position data obtainable from GPS.
Background
Precise determination of locations both on and above the earth's
surface is a fundamental requirement for many human activities. For example,
position data is used for navigation on land, sea and air, and to conduct
surveys and draw maps. Previous technologies have limited users to simultaneous
determination of only two dimensions--latitude and longitude--while altitude and
time required separate measurements with different equipment. GPS technology
provides users with all of these measurements, using one instrument. GPS is a
system of 27 orbiting Navstar satellites established and funded by the U.S.
Government. On April 27, 1995, GPS was declared to have achieved Full
Operational Capability by the U.S. Air Force Space Command. The U.S. Government
intends for GPS to complement or replace many other forms of electronic
navigation and position data systems. GPS offers major advantages over previous
technologies in precision and accuracy, with worldwide coverage in three
dimensions, and does so in addition to providing time and velocity measurement
capabilities.
GPS positioning is based on a triangulation technique that precisely
measures distances from three or more Navstar satellites. The satellites
continuously transmit precisely timed radio signals using extremely accurate
atomic clocks. A GPS receiver calculates distances from the satellites in view
by determining the travel time of the satellites' signals. The receiver then
triangulates its position using its known distance from various satellites, and
calculates latitude, longitude and altitude. Under normal circumstances, a
stand-alone GPS receiver is able to calculate its position at any point on
earth, in the earth's atmosphere, or in lower earth orbit, to
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within 100 meters, 24 hours a day. When a GPS receiver is coupled with a
reference receiver with known precise position, accuracies of less than one
centimeter are possible. In addition, GPS provides highly accurate time
measurement.
* The usefulness of GPS is dependent on the number and locations of GPS
satellites that are above the horizon at any given time. The current deployment
of 27 satellites permits three-dimensional worldwide coverage 24 hours a day.
However, reception of GPS signals requires line-of-sight visibility between the
Navstar satellites and the receiver, which can be blocked by buildings, hills
and dense foliage. For the receiver to collect a sufficient signal, each
satellite must be above the horizon, and the receiver must have a line of sight
to at least three satellites in order to determine its location in two
dimensions-latitude and longitude-and at least four satellites to determine its
location in three dimensions-latitude, longitude, and altitude. The accuracy of
GPS may also be limited by distortion of GPS signals from ionospheric and other
atmospheric conditions, and intentional or inadvertent signal interference or
Selective Availability (SA). Selective Availability, which is the largest
component of GPS distortion, is controlled by the Department of Defense and is a
currently activated, intentional system-wide degradation of stand-alone GPS
accuracy from approximately twenty-five to one hundred meters. Selective
Availability may be implemented by the U.S. Department of Defense in order to
deny hostile forces the highly accurate position, time and velocity information
supplied by GPS. In certain military applications, classified devices are
utilized to decode the SA degradation and return accuracies to their original
levels.
By using a technique called "differential GPS" involving two or more
GPS receivers, accuracies can currently be improved to approximately one to five
meters for navigation and one centimeter for survey applications, even with SA
activated. This technique compensates for a number of potential measurement
distortions, including distortions caused by ionospheric and other atmospheric
conditions, as well as distortions intentionally introduced into the satellite
data itself, such as SA. Differential GPS involves placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure distortions in the signal transmission and errors in the
satellite data. At any one time, such distortions and errors are reasonably
constant over large areas, so that one or more remote GPS receivers can use
these measurements to correct their own position calculations. Measurement
corrections can be transmitted either in real time over a suitable communication
link such as radio or telephone, or integrated later with accumulated data, as
is frequently the practice in survey applications.
Each of Trimble's GPS products is based on proprietary GPS receivers.
Trimble's GPS receivers are capable of tracking all satellites in view and
automatically selecting the optimum combination of satellites necessary to
provide the most accurate set of measurements possible. Communications and
computational modules, such as databases, database management systems, radio and
other communication equipment, and various user interfaces, are added to these
receivers to create fully integrated application solutions.
Navstar satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The satellites have design lives of 7.5 years and are subject to
damage by the hostile space environment in which they operate. To repair damaged
or malfunctioning satellites is not economically feasible. If a significant
number of satellites were to become inoperable, there could be a substantial
delay before they are replaced with new satellites. A reduction in the number of
operating satellites would impair the current utility of the GPS system and the
growth of current and additional market opportunities. In addition, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
U.S. Government for the use of GPS without charge will remain unchanged.
However, the 1996 Presidential Decision Directive marks the first time in the
evolution of GPS that access for consumer, civilian and commercial use has a
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solid foundation in law. Because of ever-increasing commercial applications of
GPS, other U.S. Government agencies may become involved in the administration or
the regulation of the use of GPS signals. Any of the foregoing factors could
affect the willingness of buyers of the Company's products to select GPS-based
systems instead of products based on competing technologies. Any resulting
change in market demand for GPS products could have a material adverse effect on
the Company's financial results. In 1995, certain European government
organizations expressed concern regarding the susceptibility of GPS equipment to
intentional or inadvertent signal interference. Such concern could translate
into reduced demand for GPS products in certain geographic regions in the
future.
Business Strategy
The Company sees GPS as an information utility. In order to exploit the
wide range of applications made possible by this information utility, the
Company has implemented the following strategies:
* Targeted Markets. The Company targets a number of specific markets for
its GPS products, based on end-user applications. (See Industry Segments below
for further discussion of the Company's segments). The Company believes that by
adding application-specific features and functionality to its GPS technology, it
can deliver value-added products into its targeted markets. To date, the Company
has identified markets that it believes represent significant economic
opportunities due to the broad range of potential applications for accurate and
cost-effective position velocity and time information. The Company also
continuously seeks to identify new markets into which GPS products and systems
can be introduced. The Company believes that its continued growth will depend in
part on its ability to identify and penetrate new markets for GPS applications.
Differentiated Product Solutions. The Company seeks to establish and
sustain leadership in its targeted markets by offering products that are
differentiated through software, firmware, customized user interfaces and the
Company's service and support. Where feasible, the Company emphasizes
application-specific systems that solve specific sets of problems in its
markets. The Company believes that a substantial portion of the value of its
products is derived from the firmware that is embedded in the product or
software provided to enable superior performance. In addition, the Company
incorporates other technologies into some of its products, such as
communications, computational capabilities and non-GPS positioning technologies
in order to optimize product features for its two segments.
Technology Leverage. The modular design of Trimble's products enables
the Company to create and maintain a broad line of products without necessarily
repeating development efforts or requiring extensive redesigns for product
upgrades. Trimble further believes that its approach of providing many product
software features enables the Company to respond quickly to the needs of rapidly
evolving markets through software upgrades.
Multichannel Distribution. The Company seeks direct communication with
its customers in order to develop and modify its product designs as necessary to
maximize utility and payback to the user. Trimble has built a worldwide sales
and service organization of Company employees, distributors and dealers for each
major market it addresses. In addition, the Company intends to continue to
develop new-and to strengthen existing-alliances and Original Equipment
Manufacture relationships with established foreign and domestic companies as
part of its strategy to penetrate certain targeted markets. The Company has
pursued such alliances with several companies including VDO Car Systems, Pioneer
Electronics Corporation, Delco Electronics, Nortel, British Telecom, American
Mobile Satellite Corporation, E-systems, PRC Public Sector, Honeywell, and Intel
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in the Mobile Timing and Technology segment; Caterpillar, Inc., Topcon, and Case
Corporation in the Precision Positioning segment.
Integration with Communication Technologies. GPS technology is
increasingly being integrated with wireless communication technologies, offering
economic and strategic advantages in areas such as navigation, vehicle fleet
management, long-haul trucking, public safety, and real-time applications for
mining, surveying, and mapping. Accordingly, the Company is currently devoting
research and development efforts to products that integrate the Company's
proprietary GPS receivers with wireless communication technologies.
INDUSTRY SEGMENTS
The Company operates in a single industry segment as a leader in
designing and developing innovative products enabled by GPS technology. The
Company provides end-user and Original Equipment Manufacture solutions for
diverse applications including surveying, mapping, marine survey, mining,
construction and agriculture, mobile positioning, commercial avionics, military
systems, automotive, timing, and geographic information systems. During 1998,
the Company announced that it was discontinuing its participation in General
Aviation. The Company sells its products through a direct-sales force located in
fifteen countries, as well as through a worldwide network of dealers,
distributors and authorized representatives. Research and development activities
are conducted at the Company's facilities in Sunnyvale, California, and
Christchurch, New Zealand. Manufacturing is performed in Sunnyvale, California
and Austin, Texas.
The Company manages its industry segment within two Business Units: the
Precision Positioning Group (PPG) and the Mobile and Timing Technologies (MTT)
Group.
The industry segment is managed in two Business Units to achieve
different distribution, marketing, production, and technology strategies. The
Precision Positioning Group derives its revenues from GPS-based land surveying,
mining, construction and agriculture, geographic information systems mapping,
and marine survey markets. The Mobile and Timing Technologies market derives its
revenues from GPS-based automotive, timing, mobile positioning technologies,
commercial aviation, and military systems markets, and from development of
software licenses and other rights for the use of GPS to third parties.
Although the Company believes that these Business Units have growth
potential for sales of GPS products, there can be no assurance that such
Business Units will continue to develop, particularly given that GPS-based
systems are still in an early stage of adoption in some of these markets. The
Company's future growth will depend on the timely development of the industry
markets in which the Company currently competes, and on the Company's ability to
continue to identify and exploit new markets for its products. Each Business
Unit is managed by a group vice president who has responsibility for strategy,
marketing, product development and financial performance.
Precision Positioning Group
The Precision Positioning Group focuses its efforts in markets where
the distribution chain uses independent distributors or a direct sales force to
sell directly to the end users. The products are system solutions in a high-end,
value-added market.
A key business strategy of PPG is interoperability, which involves the
focus on, and development of systems that integrate sensors utilizing a wide
variety of technologies and communications with GPS. This interoperability
developed by the Company is an extremely important advantage over any of the
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competition. The emphasis is on providing solutions for applications rather than
just GPS technology, and results in a higher real value to the customer. The
concept of interoperability applies to electronic and mechanical accommodations
of other technologies, together with GPS, to solve a problem. Probably the most
important area of interoperability, and often the least recognizable until the
integrated solution is put into use, is in the area of data interchange. In the
Land Surveying product line for example, the Trimble Survey Controller data
collector software and Trimble Survey Office PC software products enable the
seamless collection, processing and use of data from Trimble's Real-time
Kinematic (RTK) GPS surveying products and conventional (optomechanical)
instrument surveys using products of other manufactures.
The Precision Positioning Group consists of four product lines
addressing the following markets: Land Surveying; Marine Surveying; Mapping and
GIS Systems; and Mining, Construction and Agriculture.
Land Surveying. Surveying involves establishing precise points and
boundaries for legal, construction and mining purposes. It consists primarily of
collecting and processing position information. Surveying accuracy is expected
to be within a centimeter. The Company believes that its GPS surveying products
substantially reduce the cost, time, and number of people required to survey and
process precise position information for a given level of accuracy. Many of the
applications which the Company addresses in the surveying market include,
control surveying, construction and engineering surveying, topographic
surveying, property line surveying and geodetic research. The Company addresses
the land surveying market with GPS systems and a recently introduced
conventional (optomechanical) surveying instrument with reflectorless technology
and application software. GPS does not require line-of-sight between land-based
reference points and is unaffected by most adverse weather conditions (as
compared to traditional methods such as optical or laser measurements),
providing advantages in many survey applications. Reflectorless technology
provides the ability to survey in areas where GPS signals are obstructed-for
example, tunnels, parking garages, and dense forests, as well as building
facades or dam faces that are difficult or dangerous to reach. A key competitive
advantage of the land surveying product line is the seamless interchange between
GPS and conventional surveying tools and laser range-finders, with full support
from the office and field software. Additionally, the land surveying products
support two-way data exchange with third-party CAD, design and Geographic
Information Systems (GIS) packages.
For a number of years the Company's GPS surveying products have been
one of the first choices for control surveying applications. Control surveying
is the precise determination of the location of local geodetic reference points
from which further local surveying is based. The Company's GPS surveying systems
have reduced the cost of establishing control points, compared to conventional
techniques, and have led to programs to remeasure previous geodetic control
points to sharply increase precision and eliminate errors. Additionally, GPS has
become a standard tool for geodetic research. Research geodesists have found
that long baseline precisions using GPS are significantly greater than those
obtainable with optical and electronic distance-measuring equipment. This high
degree of precision has also created a significant market for GPS in seismic
research where earth movements of less than one centimeter can now be measured
and monitored. Today GPS is the preferred technology for both control and
geodetic surveying.
The Company's GPS surveying products are also used in large-scale
construction projects in which the position of a large number of points needs to
be cost-effectively established. The Company's products are particularly
efficient for applications in areas where ground-level obstructions to
visibility prevent line-of-sight conventional surveying techniques. The Company
also supplies route surveying applications, which provide a cost- and
time-effective means of precisely locating a large number of points and physical
features along routes and rights-of-way, such as roads, pipelines and telephone
and power lines.
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Real-time Kinematic GPS surveying has made GPS surveying
instrumentation a successful alternative to conventional surveying instruments
for a wide variety of applications. Today, a significant portion of the land
survey business is for applications where conventional instruments could have
been used. This is possible through the use of Real-time Kinematic GPS
surveying. The Company was the first to introduce RTK GPS in 1993. RTK GPS
involves the computation of precise positions in real time, instead of
postprocessing the observed data. Vectors are computed between a precisely known
fixed base station and one or more roving GPS surveying systems. This is done by
transmitting information from the base station to the rovers, using a radio
link. These rovers use the information to calculate a precise position. The data
collector software converts the position from the World Geodetic System 1984
(WGS-84, the worldwide coordinate system used by GPS) to the local coordinate
system used for the area of the survey work. This enables the productive use of
RTK GPS surveying systems by a single surveyor on foot, for construction layout,
topographic mapping, and demarcation and division of large tracts of land.
In 1998 the Company introduced the TTS 500 optical total station with
reflectorless technology as an extension and complementary tool to GPS. A
significant competitive advantage of the TTS 500 is the reflectorless
technology, which allows for the use of non cooperative target technology.
Traditional conventional surveying instruments require a prism target for making
distance measurements in order to precisely survey a site. Reflectorless
technology allows the user to point the telescope of the TTS 500 at virtually
any target within a 250-meter range to make millimeter level distance
measurements.
In the surveying market, the Company faces on going competition from
other GPS vendors, such as Ashtech, Inc. (now part of Magellan via Orbital
Sciences Corp) and NovAtel Inc. The Company also faces competition from vendors
of traditional optical surveying products, such as Carl Zeiss; Leica AG; Sokkia
Company, Ltd.; Spectra Precision; and Topcon Corporation. All have entered the
GPS surveying market and are introducing GPS products of their own.
Marine Surveying. Marine surveying is focused on precise, dynamic
positioning, and precise navigation in marine environments. The applications
cover offshore oil exploration, hydrographic surveys, environmental surveys,
marine construction, cable and pipe laying, dredging, barge positioning and many
others. The Company provides complete solutions that utilize its GPS sensors and
extensive software product capabilities, often in conjunction with other
equipment, for many of these applications. Trimble's marine surveying activities
also include the design and marketing of Differential GPS (DGPS) systems, which
include reference stations, integrity monitors and control stations, used to
establish and monitor the integrity of DGPS and RTK broadcasts.
In marine surveying and marine construction applications, the Company
faces competition from CSI, Sercel, Leica, Ashtech, Inc. (now part of Magellan
via Orbital Sciences Corp) and Coastal Engineering.
Mapping and GIS Systems. For mapping applications, large amounts of
position and attribute data (such as color, size and condition of the object)
must be obtained. Compared to surveying, mapping involves more extensive but
less precise location and plotting of geographical and man-made features.
Mapping applications include large-scale mapping of geographic and man-made
features, data collection for Geographic Information Systems (GIS) databases,
natural resource management and ground contour mapping. Required accuracies are
typically from twenty-five centimeters to three meters.
Currently, large-scale accurate mapping is usually accomplished by
photogrammetric analysis of aerial photographs, a complex and expensive
technique. The Company supplies the mapping market with products enabling the
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user to capture position data while in aircraft, or traversing terrain on foot
or in a vehicle. The Company is also developing additional products for the
mapping market. The Company believes that these products can lower the cost of
position and attribute data collection.
GIS databases are used by federal, state, county, and city governments
and by utility companies for a variety of applications requiring accurate
information on the location of natural resources and municipal infrastructure,
such as utilities and transport networks. Currently, building such a database
requires time-consuming compilation of data from numerous existing maps and
digitized photographs, as well as costly physical surveys. The Company's
products, used in connection with commercially available databases, have the
potential to substantially reduce the cost of constructing GIS databases, and
increasing their accuracy.
In the mapping market, the Company faces competition from Ashtech, Inc.
(now part of Magellan via Orbital Sciences Corp); NovAtel Inc.; CMT, Inc.;
Garmin Corporation; Magellan Corporation (a subsidiary of Orbital Sciences
Corporation); Motorola, Inc.; Sokkia Company, Ltd.; Topcon Corporation; and
others. Competition in the mapping market has increased as competitors have
introduced new products.
Mining, Construction & Agriculture. Trimble's GPS receivers and data
communications products are used on machine-type vehicles to provide real-time
positioning and other key information for the vehicle operator. This information
may be displayed on digital readouts or graphic displays and may be integrated
with other on board electronic information systems to guide and to indicate
machine position and performance in an easily understood manner. As the
availability of highly accurate, cost-effective and robust real-time GPS
solutions has increased, numerous potential machine guidance and control
applications have been identified. Among the emerging applications on large,
mobile field machines are precision farming equipment, mining equipment,
construction machinery and aerial spraying.
Guidance and control of large, mobile field machines has traditionally
been done by the machine operator without the aid of advanced navigation and
positioning technology. Lasers have been used for some applications on a
limited, though increasing, basis. These traditional techniques have frequently
proven less than optimal because they are limited to positioning in elevation,
or have complex methods for horizontal guidance. Lasers, for example, provide
good vertical height information but are not inherently well-suited to
three-dimensional position information and rely on line-of-sight to function
effectively. Because field machinery is very expensive to own and operate,
maximizing efficiency is paramount, and even small productivity gains can have
significant economic returns. GPS has the potential to provide accurate and
robust positioning information. When this information is used in conjunction
with other critical information about the materials being worked on, such as
location of target ores, overall operational efficiency can increase.
Trimble's products, including sensors and systems, are marketed to
Original Equipment Manufacturers (OEMs), systems integrators, and directly to
end-users. Because some mobile machine markets are dominated by a relatively
small number of OEMs, success can be influenced by the ability to maintain
favorable relationships with selected OEMs. Currently, Trimble has established a
relationship with some of these OEMs, including Caterpillar Inc. and Case
Corporation.
* Since the applicability of GPS for these types of applications is still
new, its use and subsequent benefits are not yet widely understood or adopted.
The Company must, therefore, devote significant efforts to educating the market
as to the advantages of GPS in these applications. This can result in a delay in
market development.
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The Company faces competition from traditional GPS manufacturers such
as Ashtech, Inc. (now part of Magellan via Orbital Sciences Corp), Leica AG, and
NovAtel Inc., Topcon, Spectra Precision, as well as from established,
laser-based integrated system providers.
Mobile and Timing Technologies
The Mobile and Timing Technologies Group focuses its efforts in markets
where the majority of its products are sold directly to OEMs or system
integrators. The products are designed to support system solutions in
high-volume applications. In some instances the Business Unit's products are in
the form of software licenses and other rights for the use of GPS by third
parties. This Business Unit focuses on five product lines: automotive, timing,
mobile positioning, air transport systems, and military aerospace systems.
Automotive. The Company's Automotive market has built a leadership
position in the worldwide market for embedded GPS products. Already in its
seventh-generation design, MTT offers products that provide full-function,
high-performance embedded GPS engines for systems integrators. The extensive
range of GPS products is used in such diverse applications as car navigation,
vehicle and high-value cargo tracking, precision agriculture, and mobile
computing.
Trimble's Automotive market has a reputation for providing
high-performance products, high-level technical support, and custom product
engineering. Trimble continues to maintain leadership in the embedded GPS board
market for tracking applications, thus securing a strong position through
partnerships with key customers. In the tracking market, new applications such
as safety, loss prevention, and emergency assistance systems continue to emerge
as a result of the increased availability of smaller-size and lower-power
boards. Trimble's MTT business unit provides key technology for these
applications. Competitors are Motorola, Inc.; Japan Radio Corporation; Rockwell
International Corporation; and others.
Trimble supplies GPS boards, chipsets, and licenses technology to some
of the leading automotive electronics suppliers, including Philips Car Systems,
Pioneer Electronics, Magneti Marelli, VDO Car Communication (a division of the
Mannesmann Group), and Blaupunkt (a wholly owned subsidiary of Robert Bosch
GMBH). Trimble is also part of the reference design for Intel's initiative to
develop in-car Pentium processor-based computing, and Microsoft's Auto PC
platform.
Timing. The growth and expansion of data and wireless communication
networks have increased the need for GPS timing products. Trimble's MTT market
provides technically advanced timing products to major infrastructure providers
who require reliable, precise synchronization of wireless network infrastructure
in this market, such as Nortel and other system integrators. By accessing the
cesium clocks on board the GPS satellites, a GPS receiver can provide atomic
clock accuracy at a fraction of the cost of traditional methods involving the
use of rubidium. Such timing products range from smart antennas and a GPS
receiver combined with an antenna in one enclosure, to a time and frequency
output device.
In the Timing market, the Company faces competition from Hewlett
Packard; Datum; Odetics; and others. Trimble remains the cost and performance
leader in this market.
Mobile Positioning. The Company is an established leader in providing
tracking and communications products in the public safety, long-haul trucking,
and fleet management. These products typically include GPS, combined with
conventional radios, cellular, or satellite communications and application
software for use in the vehicles and at a base station. The Company's software
generally addresses the need for map displays, communications control, vehicle
monitoring, and messaging. These products are used in a variety of fleets, such
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as transit buses, police cars, fire trucks, ambulances, trucking, and ships. In
some instances, the Company provides additional services such as training,
installation, custom features, and program management. More recently, the
Company has introduced similar products for trunked radio and cellular
communications-products that are addressing productivity and security needs in
the commercial fleet markets.
In some instances, Mobile Positioning markets its products directly to
end-users, but the large majority of its products are sold through resellers.
Direct sales to end-users are focused on opportunities in which the Company's
standard products closely match the customer's requirements. Public sector sales
often require significant customization, and the Company uses integrator
partners such as E-Systems, IBM, and Motorola to interface directly with the
end-user. Other tracking and communication products are sold through OEM
integrators and value-added resellers, some of whom address the international
market.
The public sector customers are highly dependent on government funding
for fleet modernization. Capital equipment funding for U.S. public transit
operators comes primarily from congressional appropriations under the Intermodal
Surface Transportation Efficiency Act. Public safety organizations depend
largely on local government funding. Failure of the funding authorities to
appropriate funds for these purposes could have substantial impact on the
Company's future revenue.
* Because the availability of GPS is still new, its use and subsequent
benefits have not been understood by the broad vehicle tracking market. The
Company must therefore devote considerable resources to communicating these GPS
benefits and to educating the market. This market education requirement could
result in a delay in market development and growth.
Air Transport Systems. The Company believes that GPS has significant
advantages in terms of accuracy and coverage over current primary and
supplemental systems for air transportation. During 1994, the U.S. Government
issued statements to the International Civil Aviation Organization (ICAO)
guaranteeing the GPS signal for a minimum of 10 years. In addition, GPS
technology faces competition from more mature and established technologies that
are currently in widespread use and have in place the infrastructure required
for administering these systems.
The Company has recognized the potential of GPS for aviation and, in
addition to airborne navigation and flight management units, is also pursuing
GPS technology in flight trajectory truth systems, tracking systems, sensors and
other aviation applications. During 1995, the Company began an alliance with
Honeywell Incorporated, a major supplier of aviation equipment, to produce
GPS-based equipment for the commercial air transport market.
During 1994, the Federal Aviation Administration (FAA) adopted a policy
establishing GPS as the future standard for aviation navigation, and initiated
the Wide Area Augmented System (WAAS) program to allow the use of GPS for
primary navigation and precision approaches by 1998. This followed the December
1992 FAA publication of certification procedures that allow the use of GPS as a
supplemental source of navigation information for aircraft operating under
Instrument Flight Rules (IFR). In 1995, the FAA published procedures for
approving GPS as a primary means of navigation for oceanic flights.
The Company was the first to certify its equipment under the
regulations as discussed above. The Company also has certified equipment that is
used in conjunction with other FAA certified navigation systems incorporating
Omega and LORAN-C capabilities. Currently, the Company believes it has received
FAA Certification for the Technical Standard Order C-129, covering more products
than any competitor.
10
* Currently, the primary FAA-required navigation system is the VOR/DME
system, a ground-based transmitter network. The Company believes GPS has the
potential to replace VOR/DME as the primary FAA and ICAO-required navigation
system. The range for VOR/DME is limited to fifty to one hundred fifty miles,
line of sight from a transmitter. This leaves large areas of the world
uncovered, including significant portions of the airspace within the United
States. Though VOR/DME accuracy is adequate for two-dimensional navigation, GPS
provides even greater accuracy while also providing precise timing information.
Competition in the Air Transport Systems market comes from
manufacturers of GPS products, as well as traditional navigation and flight
management system manufacturers. Competing manufacturers of GPS products include
Rockwell Collins, AlliedSignal Aerospace (through its Electronics & Avionics
Systems Division), Universal Navigation Corporation, Canadian Marconi Company (a
subsidiary of the General Electric Company plc), Northstar Avionics (a
subsidiary of Canadian Marconi), and IIMorrow, Inc. (a division of United Parcel
Service of America, Inc.). Traditional navigation and flight management system
manufacturers include Honeywell Incorporated, AlliedSignal Aerospace (through
its Air Transport Avionics Division) and Smiths Industries. Competition in the
flight trajectory truth system is from Ashtech, Inc. (now part of Magellan via
Orbital Sciences Corp), and in the tracking system from ARNAV.
Military Aerospace Systems. The Company has been developing GPS
receivers for military applications since 1986. Its approach to the market has
been as a commercial manufacturer of GPS electronics, modified and enhanced for
military use. The Military Aerospace industry market designs and manufactures
GPS equipment capable of utilizing the civilian C/A code, as well as the P(Y)
code reserved for users authorized by the United States Department of Defense.
These Precise Positioning Service receivers provide authorized users with GPS
equipment that removes the effects of Selective Availability (allowing higher
accuracy), and includes anti-spoofing protection and additional immunity from
jamming signals. The Company sells equipment to the United States Department of
Defense, aerospace prime contractors, and foreign military organizations.
Applications of GPS in military markets include ground vehicles,
handheld units, military aircraft, missiles, unmanned air vehicles, and navy
vessels. Military GPS equipment efficiently provides accurate position,
velocity, and timing information to and from battlefield management systems that
coordinate and control the deployment of equipment and personnel.
The Company's Military and Advanced Systems strategy is to build on its
advanced position in GPS technology as the foundation for developing
partnerships with major military manufacturers and to offer complete airborne
and ground-based time-and-positioning solutions for military and aerospace
applications. In these markets, Trimble competes, partners, and subcontracts
with a number of companies, some of which have substantially greater financial
and marketing resources, as well as substantial experience and resources devoted
to military sales. Interstate Electronics (subsidiary of Figgie International),
Magnavox (subsidiary of Hughes), Raytheon, Litton Industries, and Rockwell
International Corp., as well as a number of European companies, manufacture
products that are competitive with the Company's military products.
* Military sales are subject to various uncertainties, including the timing
and availability of funding for U.S. and foreign military contracts, and the
competitive nature of government contracting in general. There can be no
assurance that the Company will be awarded future U.S. military contracts. In
addition, the U.S. government retains the right to impose restrictions on the
sale of GPS products to foreign military organizations at any time.
11
Discontinued Market - General Aviation
On October 2, 1998, the Company adopted a plan to discontinue its
General Aviation division. The decision to discontinue the General Aviation
division was one of the strategies focused on by the Company to return the
business to profitability. Accordingly, the General Aviation division is being
reported as a discontinued operation for all periods presented in these
financial statements. Net assets of the discontinued operation at October 2,
1998, were written off and consisted primarily of inventory, property, plant and
equipment, and intangible assets.
The Company plans to dispose of the discontinued operations through a
closure of the division. The assets of Terra Corporation, which were acquired in
1996 by Trimble, are included in the discontinued operation.
Business Unit Products
The following is a list of the Company's principal products, organized
by its business units:
Precision Positioning Group
Land Surveying Products
4000 Series. Historically one of the Company's most successful product
lines, the 4000 series GPS receivers and their associated GPS antennas are
instruments that provide position information with precisions as good as 5mm.
The Company offers survey grade 4000 series GPS receivers that use the L1
frequency (i.e., single frequency receivers) and both the L1 and L2 frequencies
(i.e., dual frequency receivers) broadcast by the Navstar satellites. Dual
frequency receivers offer users greater productivity and better accuracy,
especially over longer distances. The 4000 GPS receiver is available in two
configurations for high-end control and geodetic research applications. The
products differ from one another in the specific functions that they provide the
user. The systems can be used in either a real-time mode (positions are
generated virtually instantaneously) or in a postprocessing mode (raw satellite
data are collected and stored for subsequent processing on a computer, utilizing
specialized software).
GPS Total Station. In 1994, Trimble introduced the GPS Total Station
surveying system. This complete surveying system consists of two or more survey
grade GPS receivers, GPS antennas, radio modems for transmitting data between
the GPS receivers, a TSC1 data collector running Trimble Survey Controller
software for managing the real-time GPS survey and storing data, plus office
processing software. One receiver is used as a base station and the other as a
"rover" that the user carries around in order to survey individual points. The
system incorporates advanced features that make Real-time Kinematic GPS
surveying practical as an everyday surveying technique. The GPS Total Station
4800, introduced in 1997, is a highly compact system that integrates all of its
rover components onto a single lightweight pole, thereby eliminating the need
for a backpack and any cables strung between the surveyor and the survey pole.
The GPS Total Station 4700, introduced in 1998, is a small, lightweight, modular
system with integrated radio and separated GPS and radio antenna, that offers
logistical advantages over the fully integrated GPS Total Station 4800. The GPS
Total Station 4700 and 4800 are fully compatible, and customers often mix the
systems for complete versatility in the field. The system's advanced handheld
data collector, the TSC1, is designed and manufactured by the Company.
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TTS 500 Total Station. In 1998, Trimble introduced the TTS 500 as an
extension to the GPS Total Station. The revolutionary TTS 500 total station
consists of a single optomechanical surveying instrument with reflectorless
technology and software. Unlike traditional surveying instruments, which require
a target, the TTS 500 utilizes reflectorless technology to make millimeter
measurements off non-cooperative targets. This extends the user's ability to
survey in areas where GPS signals are obstructed, or in locations that are
difficult or dangerous to reach. As with the GPS Total Station, the
reflectorless technology means a single user can survey. Reflectorless
technology removes the need for a second person to hold the prism target that is
required by traditional conventional surveying instruments. In the field, users
can seamlessly interchange between the TTS 500 and the GPS Total Station 4700 or
4800, using the TSC1 data collector running Trimble Survey Controller software.
GPSurvey, Trimble Survey Office and Trimble Survey Controller. GPSurvey
and Trimble Survey Office are PC-based office software suites that provide
surveyors with the tools they need for project planning and processing of their
GPS surveying projects. GPSurvey postprocesses data collected in the field and
provides the user with finished data sets and reports. GPSurvey also includes
network adjustment capabilities. Trimble Survey Office manages data collected by
real-time GPS and conventional optical survey methods, and reduces the data into
finished data sets. Both Trimble Survey Office and GPSurvey provide the
functionality to export data to third-party CAD, design, and GIS packages. The
Trimble Survey Office software also imports and converts design data from design
packages into a suitable format for transfer to Trimble Survey Controller
software running on the TSC1. This data is used for construction and road
stakeout. Trimble Survey Controller software runs on the TSC1 data collector and
is used to control and manage survey and stakeout tasks in the field. All of
these products are sold as part of the land survey product systems. The TSC1
with Trimble Survey Controller is also available as a controller for
conventional surveying instruments from leading manufacturers.
TRIMTALK and TRIMMARK Radios. These radio modems are used for real-time
GPS applications. They provide broadcast and receive functions for VHF, UHF and
900 MHz spread spectrum data transmission, and they operate at baud rates
sufficient to carry the data needed for real-time GPS survey applications. These
products are sold as part of survey product systems.
Marine Surveying Products
NT300D. This product combines the graphics display and navigation
features of a marine GPS receiver with the sub-meter positioning accuracy and
performance of a marine survey grade DGPS receiver. The unit features 12 GPS
channels and 2 MSK channels for reception of DGPS correction data from Marine
Radiobeacons. The NT300D is ideal for many marine surveying applications,
providing-in one product-the ability to both navigate and position.
MS750. This product brings the latest in Real-time Kinematic GPS
technology to the marine environment. With the fast, reliable OTF
initializations and rapid position updates, the product is ideally suited for
the control and docking of high-speed ferries and the positioning of large
marine structures, such as bridge spans for marine construction.
4000RSi/DSi. The 4000 series products provide sub-meter accuracy and
are suited to marine survey applications that do not require the performance of
the MS750 series products. The 4000 series GPS sensors address a broad segment
of the marine survey market, and provide customers with a choice of price and
performance in GPS sensors. The 4000 series products also integrate well with
total solutions, such as Hydro and Target: Structures products, discussed below.
DSM. These products are combined MSK beacon and differential GPS
sensors and reference stations targeted mainly to value-added resellers. They
13
provide sub-meter GPS data in the form of a "black box." The DSM allows for
comprehensive custom solutions developed by third parties.
Hydro. This line of software programs provides total solutions for many
marine survey applications. It provides the capability to integrate the best of
Trimble designed and built GPS sensors with additional equipment, such as depth
sounders, to provide customers with highly customizable solutions to a wide
range of marine survey and construction challenges. The newest program in this
line is HydroPro, which is a Windows 95 and Windows NT software suite.
Target: Structures. This Windows and Windows NT based program provides
for precise positioning of large mobile offshore structures or platforms.
Utilizing real-time GPS receivers such as the MS750, this innovative software
enables barge and crane operators to efficiently and safely guide large
structures to any target location for marine construction.
Beacon Control System. The 4000 series products form the hardware basis
of Trimble's DGPS MSK Reference Station and Integrity Monitoring offerings,
which comply with internationally accepted Radio Technical Committee Marine
(RTCM) standards for broadcast on radio beacon frequencies. Trimble equipment is
in use in more than 30 countries, broadcasting DGPS corrections and monitoring
their integrity. The Beacon Control Software is a Windows-based program that is
often provided as part of the complete system. The software allows complete
control of all hardware components, providing updates and status information.
Mapping and GIS Products
Geoexplorer II. The GeoExplorer II is a self-contained handheld system
providing a few meters of accuracy for mapping and GPS/GIS data collection at a
reduced cost.
Pathfinder Pro Family. The GPS Pathfinder Pro XR/XRS system's
integrated real-time positioning capabilities allow the user to collect,
relocate and update geographic information with an accuracy of better than one
meter. When combined with Trimble's handheld Asset Surveyor or pen
computer-based ASPEN software, the Pro XR/XRS offers a complete system for
real-time mapping and GPS/GIS data collection.
Pathfinder Office. The GPS positions and descriptive information
collected by each of these systems are downloaded to a personal computer using
Trimble's Pathfinder Office software, where the information can be processed,
edited, and plotted-or output into standard GIS, CAD and database formats.
Pathfinder Card. The GPS Pathfinder Card is a GPS receiver, in an
industry-standard PC Card format, that is capable of collecting data with an
accuracy of 1 to 3 meters.
Pathfinder Tools Software Development Kit. Trimble's Pathfinder Tools
SDK is a powerful software development kit (SDK) designed to integrate Trimble
GPS receivers with custom mapping and GIS applications. It includes an extensive
library of software components, including ActiveX controls and programmable
automation objects that can be integrated using standard development languages
such as Microsoft Visual Basic and Visual C++.
Mining, Construction & Agriculture Products
MS750. The rugged MS750 is designed specifically for dynamic machine
guidance and control applications. Centimeter-level position updates are
computed twenty times per second, ensuring the response and accuracy necessary
for precise dynamic applications on moving equipment.
14
Eurocard DSM. The Eurocard DSM is based on Trimble's advanced
low-power, low-noise, high-accuracy chip technology. Advanced carrier-aided
filtering techniques applied to exceptionally low-noise C/A code measurements
are used to generate real-time, sub-meter differential (DGPS) positions at a
maximum rate of 10 Hz, even under challenging conditions.
BenchGuide. The Trimble BenchGuide system provides mining machine
operators with precision GPS-based guidance in locating correct bench or terrain
elevations without using survey stakes. It can be used with Trimble radio
modems, and it provides accurate, low-latency GPS positions in a local
coordinate system. BenchGuide provides numerous benefits over traditional bench
elevation systems. It is maintenance-free and operates in bad weather or under
dusty conditions that limit the range of other systems.
TRIMCOMM 900. The rugged TRIMCOMM 900 is a high-speed data radio link
for real-time differential and Real-time Kinematic GPS solutions, and is ideal
for machine guidance applications. It provides a versatile means of establishing
a wireless broadcast network, supporting up to four repeaters for extended
coverage. A dual port TRIMCOMM 900 makes it possible to maintain two-way
communications throughout the coverage area, allowing real-time machine position
and office design information updates.
TrimFlight. TrimFlight is a sub-meter guidance, logging, and mapping
system for aircraft that provides assurance of proper application of farm
chemicals when used in crop spraying. TrimFlight eliminates the need for human
flaggers, and it generates reports and maps providing flight information and the
exact location of application. TrimFlight's computer interface allows for
integration to other applications, such as photogrammetry and remote sensing.
TrimFlight data is compatible with most major GIS software packages.
AgGPS 122. The AgGPS 122 is a combined MSK beacon and differential GPS
receiver for sub-meter agricultural positioning applications. The system
integrates with other devices such as harvest yield monitors.
AgGPS 132. The AgGPS 132 is a combined MSK beacon and differential GPS
receiver plus an L-band satellite differential receiver, all in one system. The
system integrates with other devices, such as harvest yield monitors, and can
provide sub-meter positions that can be output to yield monitors, variable-rate
planters, application controllers and field computers. A Parallel Swathing
Option further enhances productivity, especially in low-visibility conditions,
and reduces operator fatigue.
Mobile and Timing Technologies Products
Automotive Products
ACE II GPS Module. The newest miniature board product is the ACE II GPS
Module. This powerful 8-channel architecture, with the popular Core Module form
factor, is designed for applications requiring high performance at low cost. ACE
II GPS delivers fast GPS signal acquisition and low power consumption, making it
ideal for mobile and battery-powered applications.
Lassen-SK8. The Lassen-SK8 board, based on the Sierra GPS technology,
is used in the automotive and embedded markets. Just two-thirds the size of a
business card, this miniature 8-channel GPS board provides high performance,
fast acquisition and reacquisition time, low power consumption and two-meter
accuracy.
15
Sierra GPS Chipset. The Sierra GPS Chipset features state-of-the-art
performance, small size, low power consumption and low cost. The chipset
consists of two ASICs, fully developed software and unmatched technical support.
The two ASICs are composed of Trimble's GPS DSP ASIC and RF/IF down-converter
chip.
SveeSix. SVeeSix is a family of GPS boards and assemblies designed for
high-performance embedded GPS applications for tracking. The family includes
SVeeSix and Sveesix-CM3.
Mobile Positioning Products
The Company offers a line of products designed to meet many of the
needs of customers who need to monitor and track mobile assets using wireless
communications. These products include GPS receivers, and GPS receivers
integrated with other technologies such as dead reckoning, industry-specific
applications processors, mobile radio modems, cellular telephones, satellite
communications, mobile data terminals, communications control software, and
automatic vehicle location (AVL) display software.
MTT Antennas. Trimble offers a variety of miniature GPS antennas for
mobile or vehicle applications. These antennas include the Miniature GPS
Antenna, a compact, active micropatch antenna with a 5-meter cable and magnetic
mount; the Hard-mount Antenna, a compact, hard mount, active micropatch antenna
with single-hole 0.75" threaded mount and TNC connector; and the Rooftop
Antenna, consisting of the Bullet II HE antenna with 23-meter cable and SMB
adapter. These antennas are widely used for vehicle tracking, car navigation
systems, and harsh timing environments.
MTT Starter Kits. Trimble offers Starter Kits for developers who want
to evaluate and integrate GPS receivers and antennas. The kits contain all
components required to evaluate the receiver's features and to begin integration
into the user's application. Generally, a starter kit will include a GPS
receiver, a GPS antenna, documentation, and required cables and software.
GPS Receivers. The Company's product line includes the Placer 450
family (receivers configurable for fleet tracking applications) and the Placer
455 a GPS receiver integrated with a gyroscope and an odometer interface for
precise position information.
Integrated GPS and Cellular Phone Products. The Company offers a line
of GPS/cellular products known as GPS Cellular Messenger, targeted at high-value
cargo security, driver compliance, and fleet asset management applications.
Public Sector Services. In some public safety sectors, the Company
provides certain services including training, equipment installations,
integration of third-party radios, and computers and program management. Also,
the Company provides AVL subsystems, consisting of in-vehicle hardware and base
station communications and display software.
Galaxy Inmarsat-C/GPS. Galaxy is the first system to combine Inmarsat-C
with GPS to provide rapid digital global communication with precise global
positioning. Inmarsat-C provides worldwide, two-way store-and-forward text
communication via Packet Switched Data Network (PSDN) or Public Switched
Telephone Network, and fax delivery of inbound messages. Galaxy is designed for
use by truck, rail and other land applications, as well as merchant ships,
commercial fishing boats, yachts and other vessels requiring cost-effective
two-way communication links plus precise position information for emergency,
safety, navigation and tracking needs.
16
Timing Products
MTT Timing Products. The newest generation of GPS synchronization
devices is the Company's Thunderbolt GPS disciplined clock. This clock combines
an 8-channel GPS receiver, control circuitry and a high-quality ovenized
oscillator on a single board. This level of integration provides superior
performance to precise timing applications, such as CDMA wireless
infrastructure, Enhanced 911 (E911) positioning, and wireless local loop.
Smart Antennas. Trimble's family of smart antennas includes Palisade
and AcutimeII. Smart antennas combine a GPS receiver and an antenna in one
package. They provide OEMs and system integrators with a "plug-in" GPS module,
allowing them to quickly and easily add GPS capability to their product lines.
AcutimeII offers integrators a stand-alone GPS time source with one
microsecond-level accuracy at a fraction of the cost of other time sources with
similar performance. Palisade, based on Trimble's Sierra GPS technology, is an
8-channel receiver designed to provide accurate synchronization for wireless
voice and data networks.
Commercial Air Transport Products
Trimble 8100. This product family is an IFR-certified C129-A1 aviation
navigation system and provides GPS position, velocity and course data, plus
flight management information for the business, commercial and air transport
markets. It incorporates an electronically replaceable navigation database. The
system is capable of extensive interface with other compatible aircraft systems
to drive flight and other instruments. The Trimble 8100 is approved for Primary
Oceanic Navigation and nonprecision IFR Approaches.
Honeywell/Trimble HT9100/HT9000. These products are developed and
marketed in partnership with Honeywell Incorporated and are true GPS FMS
systems, that enable air transport customers to upgrade existing analog air
transport and commercial aircraft to modern GPS navigation. Used by many of the
world's leading airlines, these products are in continuous service around the
world on a daily basis. The HT9100 is uniquely capable of interfacing to both
analog and digital Flight Instruments and Autopilot Systems. The system also
meets the requirement of TSO C-129 for GPS Navigation, as well as, Oceanic and
Remote Primary Means Operations to FAA notice 8110.60.
Military Aerospace Systems Products
ForceTM GPS Module Series. The Force series of GPS modules has been
developed for embedded integration into high-performance land, sea, aircraft and
missile applications. A variety of standard and custom form factors are
available, including VME and SEM. Both Standard Positioning Service (SPS) and
Precise Positioning Service (PPS) models are available, with the PPS models
correcting for Selective Availability (SA) and using Anti-Spoof (A-S) augmented
with Receiver Autonomous Integrity Monitoring (RAIM) to protect against
satellite or system anomalies and signal spoofing. The newest models in this
family are designed in accordance with the GPS Joint Program Office (GPS JPO)
GPS Receiver Application Module (GRAM) Guidelines for military avionics
platforms.
TA-1. This 12-channel, all-in-view, Precise Positioning Service (PPS)
receiver is currently under review by the Federal Aviation Administration for
certification under FAA TSO C-129a. It has state-of-the-art technology and
shares a common architecture with other Trimble GPS PPS receivers. The TA-12
receiver was designed and developed for military and commercial aviation
applications requiring a robust GPS receiver for integration with existing or
new Flight Management Systems that required IFR certified operations and/or GPS
capabilities.
17
Cargo Utility GPS Receiver (CUGR). Introduced in 1997, this product is
a Dzus-mount (P)Y GPS navigational system for worldwide military aviation
operations. It provides U.S. military helicopter pilots Precise Positioning
Service GPS navigation capabilities, and meets the performance standards for
Instrument Flight Rules for en route, terminal and non-precision approach phases
of flight.
TRIMPACK and Centurion. These are portable, ruggedized, handheld GPS
products that are approximately the size of a pair of binoculars (120 cubic
inches). Position information is displayed on a four-line, 20
character-per-line, backlit LCD screen. Troops deployed in Operation Desert
Storm used TRIMPACK units to determine their location in the featureless desert.
The Centurion is an upgraded PPS receiver that provides full Selective
Availability and Anti-Spoof performance.
TANS Series. The Trimble Advanced Navigation System (TANS) series of
products includes a ruggedized sensor consisting of the basic GPS receiver, an
antenna, and a digital interface to transmit GPS information to various other
devices; a further ruggedized version with enhanced tolerance for vibration; and
a version that is upgradable to PPS. The TANS series has been sold primarily to
the military as a remote mounted GPS navigation sensor and for vehicles piloted
from a remote station.
Sales and Marketing
The Company currently has nine regional sales offices in the United
States and six in Europe, as well as offices in Australia, Canada, China, Japan,
Mexico, New Zealand, Russia and Singapore. The Company has substantial variation
in the needs of its sales and distribution channels, which are rapidly changing.
Domestic. The Company sells its products in the United States primarily
through dealers, distributors and authorized representatives, supplemented and
supported by the Company's direct sales force. The Company has also pursued
alliances and OEM relationships with established foreign and domestic companies
to assist it in penetrating certain markets.
International. Trimble markets to end-users through a network of more
than 100 dealers and distributors in more than 85 countries. Distributors carry
one or more product lines and are generally limited to selling either in one
country or in a portion of a country. Trimble occasionally grants exclusive
rights to market certain products within specified countries.
Sales to unaffiliated customers in foreign locations represented
approximately 46%, 46%, and 47% of Trimble's total revenue in fiscal years 1998,
1997 and 1996, respectively. Sales to unaffiliated customers in Europe
represented 25%, 22%, and 21% of net revenue in such periods, and sales to
unaffiliated customers in the Far East represented 13%, 15%, and 19% of total
revenue in such periods, respectively.
Support. The Company's general terms and conditions for sale of its
products include a one-year warranty. Air Transport products, however, are
generally sold with a basic three year warranty period with an additional two
year warranty sold with some units, while select military programs may require
extended warranty periods. The Company supports its products on a board
replacement level from locations in the United Kingdom, Singapore, Japan, and
New Zealand, as well as Sunnyvale, California. The Company's dealers and
distributors also provide factory-trained third-party maintenance, including
warranty and nonwarranty repairs. The Company reimburses dealers and
distributors for all authorized warranty repairs they perform. The Company does
not derive a significant portion of its revenues from support activities.
18
Competition
* In the markets currently being addressed by the Company, competition is
intense. Within each of its markets, the Company has encountered direct
competition from both foreign and domestic GPS suppliers, and expects that
competition will continue to intensify. Indirect competition is also beginning
to emerge, particularly from semiconductor and consumer electronic manufacturers
that are anticipating the emergence of high-volume consumer-orientated GPS
applications. Specific competitors in each of the markets the Company currently
addresses are mentioned in the section "Industry Segments." Due to competitive
pressure, prices of certain of the Company's products have declined
substantially since their introduction, and increased competition is likely to
result in further price reduction and loss of market share, which could
adversely affect the Company's net revenue.
A number of these markets are also served primarily by non-GPS
technologies, many of which are currently more accepted and less expensive than
GPS-based systems. The success of GPS-based systems against these competing
technologies depends in part on whether GPS systems can offer significant
improvements in productivity, accuracy, and reliability in a cost-effective
manner, as well as continued market education about such products.
The principal competitive factors in the markets that the Company
addresses include ease of use, physical characteristics (including size, weight,
and power consumption), product features (including differential GPS), product
performance, product reliability, price, size of installed base, vendor
reputation and financial resources. The Company believes that its products
currently compete favorably with other products on most of the foregoing
factors, though the Company may be at a competitive disadvantage against other
companies having greater financial, marketing, service and support resources.
* The Company believes that its ability to compete successfully in the
future against existing and additional competitors will depend largely on its
ability to provide systems and products having significantly differentiated
features and improved cost-benefit ratios over those provided by competitors.
There can be no assurances that the Company will be able to implement this
strategy successfully, or that the Company's competitors, many of whom have
substantially greater resources than the Company, will not apply those resources
to compete successfully against the Company on the basis of systems and product
features as well as cost-benefit ratios of their products.
Research and Development
The Company's leadership position in commercial GPS technology is the
result, in large part, of its strong commitment to research and development. The
Company invests heavily in developing GPS technology, including the design of
proprietary software and integrated circuits for GPS receivers. Moreover,
Trimble develops substantial systems expertise and user interfaces for a variety
of applications. Below is a table of Trimble's expenditures on research and
development over the last three years.
19
January 1, January 2, December 31,
Years ended 1999 1998 1996
- ------------------------------------------------------------------------------
(In thousands)
Research and development $ 44,826 $ 37,097 $ 32,716
Often a new product is developed initially for an individual customer
who is willing to purchase development-stage products. The Company has used
feedback from such initial customers as a primary source of information in
designing and refining its products-and in defining, with greater precision,
customer needs in emerging market areas. During 1996, the Company established an
advanced technology laboratory where it devotes a portion of its corporate
research and development expenditures to advance core GPS technology and its
integration into synergistic technologies such as communications, sensors, and
computing technologies. These technological advances are sometimes supported
financially through strategic alliances and partnerships.
* The Company expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, the Company's
future success depends in part on its ability to continue to develop and
manufacture new competitive products with timely market introduction. Advances
in product technology will require continued substantial investment in research
and development in order to maintain and enhance the Company's market position
and achieve high gross profit margins. Development and manufacturing schedules
for technology products are difficult to predict, and there can be no assurance
that the Company will achieve timely initial customer sales of new products. The
timely availability of these products in volume, and their acceptance by
customers, are important to the future success of the Company. In addition,
certain of the Company's products are subject to governmental and similar
certifications before they can be sold. For example, FAA certification is
required for all aviation products. An inability or delay in obtaining such
certifications could have an adverse effect on the Company's operating results.
Manufacturing
The Company seeks to be a low-cost producer and to serve the growth in
demand for GPS-based products and systems through flexible automation of
assembly lines, semiconductor integration, and the design of products around a
common core of receivers.
The Company's manufacturing operations consist primarily of assembly and
testing of products, material and procurement management, quality assurance and
manufacturing engineering. The Company operates surface mount technolgy (SMT)
assembly equipment in its manufacturing facility.
The Company maintains quality control procedures for its products,
including testing during design, prototype, and pilot stages of production,
inspection of incoming raw materials and subassemblies, and testing of finished
products using automated test equipment in strife chambers.
20
The Company has historically manufactured its products in relatively small
quantities. However, the Company must successfully transition to higher volume
manufacturing. The Company is currently negotiating to commence contract
manufacturing with respect to certain of its products.
The Company takes a modular and upgradable approach to its products,
building around a common core of GPS receivers with customized software and
hardware systems to analyze and present position data. The Company's core
receiver technology has evolved since the development of its first GPS receiver
product in 1984, as the Company has worked to reduce the size, weight, power
consumption and cost of the basic GPS receiver. In this process, the Company has
designed its own semi-custom, single-chip GPS processor. When possible, though,
the Company attempts to utilize standard parts and components, including RAM and
ROM devices that are available from multiple vendors.
Backlog
The Company believes that due to the volume of products delivered from
shelf inventories and the shortening of product delivery schedules, backlog is
not a meaningful indicator of future business prospects. Therefore, the Company
believes that backlog information is not material to an understanding of its
business.
Patents, Trademarks, and Licenses
The Company currently holds 215 U.S. patents and 18 related foreign
patents that expire at various dates no earlier than 2005. It also has over 180
U.S. and foreign patent applications pending. The Company currently licenses
certain peripheral aspects of its technology from Spectrum Information
Technologies and GeoResearch.
Although the Company believes that its patents and trademarks may have
value, there can be no assurance that those patents and trademarks, or any
additional patents and trademarks that may be obtained in the future, will
provide meaningful protection from competition. The Company actively develops
and protects its intellectual property through a program of patenting,
enforcement, and licensing.
The Company does not believe that any of its products infringe patent
or other proprietary rights of third parties, but it cannot be certain that they
do not do so. (See Note 15 to Consolidated Financial Statements.) If
infringement is alleged, legal defense costs could be material, and there can be
no assurance that the necessary licenses could be obtained on terms or
conditions that would not have a material adverse effect on the Company.
In the second quarter of 1997, the Company expanded a prior license
agreement with Pioneer Electronic Corporation for certain of the technology
contained in its TANS product for inclusion in in-vehicle navigation products
sold in Japan and received a $2,222,000 licensing fee in consideration for the
expansion of the original license.
The Company expects that it will enter into other licensing
arrangements relating to its technologies.
"Trimble" with the sextant logo, "TrimbleNavigation," "GeoExplorer,"
"Flightmate," "GPS Total Station," "Scout GPS," and "Aspen" are trademarks of
Trimble Navigation Limited, registered in the United States and other countries.
Additional trademarks are pending. Trimble Navigation Limited acknowledges the
trademarks of other organizations for their respective products or services
mentioned in this document.
21
Employees
As of January 1, 1999, the Company employed 1,291 persons: 346 in
research and product development, 346 in sales and marketing, 423 in
manufacturing, and 176 in administration and finance. Of these, 73 were located
in Europe, 173 in New Zealand, 16 in Japan, 12 in Singapore, 2 in Australia, and
1,015 in the United States. The Company also currently employs temporary and
contract personnel. Use of temporary and contract personnel has decreased over
the last year, and is not included in the above headcount numbers. Competition
in recruiting personnel is intense. The Company believes that its continued
ability to attract and retain highly skilled management, marketing, and
technical personnel is essential to its future growth and success. None of the
Company's employees is represented by a labor union, and the Company has
experienced no work stoppages.
The Company's success depends in part on the continued contribution and
long-term effectiveness of its other executive officers and key technical,
sales, marketing, support, research and development, manufacturing, and
administrative personnel, many of whom would be difficult to replace.
22
Executive Officers of the Registrant
The names, ages, and positions of the Company's executive officers as of March
26, 1999 are as follows:
Name Age Position
- ----------------------------------- --- ----------------------------------
Steven W. Berglund............... 47 President, Chief Executive Officer
Bradford W. Parkinson............ 64 Current Director, served as
President and Cheif Executive
Officer from August 1998 to March
1999
Mary Ellen P. Genovese........... 39 Vice President, Finance, Chief
Financial Officer and Corporate
Controller
Charles E. Armiger, Jr........... 44 Vice President, Worldwide Sales
David M. Hall.................... 50 Group Vice President, Mobile and
Timing Technologies
Patrick J. Hehir................. 37 Senior Vice President, Chief
Manufacturing Officer
John E. Huey..................... 49 Treasurer
Ronald C. Hyatt.................. 58 Group Vice President,
Precision Positioning
Bruce E. Peetz................... 47 Vice President, Advance Technology
and Systems
All officers serve at the discretion of the Board of Directors. There
are no family relationships between any of the directors or executive officers
of the Company.
Steven W. Berglund joined Trimble as President and Chief Executive
Officer in March 1999. Mr. Berglund has a diverse background with experience in
engineering, manufacturing, finance and global operations. Most recently,
Berglund was president of Spectra Precision, Inc. Spectra Precision, with global
sales of approximately $200 million, develops and manufactures surveying
instruments, laser based construction alignment instruments, and construction
machine control systems. Spectra Precision is a subsidiary of Spectra-Physics
AB. During his fourteen years within Spectra-Physics, which was an early Silicon
Valley pioneer in the development of laser systems, Mr. Berglund held a variety
of positions that included 4 years based in Europe. Prior to Spectra Precision,
Mr. Berglund spent a number of years in the early 1980's at Varian Associates in
Palo Alto where he held a number of planning and manufacturing roles. Varian is
a technology company specializing in microwave communications, semiconductor
manufacturing equipment, analytical instruments, and medical diagnostic
equipment. Mr. Berglund began his career as a process engineer at Eastman Kodak
in Rochester, New York. He attended the University of Oslo and University of
Minnesota where he received a B.S. in chemical engineering in 1974. He received
his MBA from the University of Rochester in 1977.
Bradford W. Parkinson has been a member of Trimble's Board of Directors
since 1984 and has served as a consultant to the Company since 1982. Dr.
Parkinson is currently a professor at Stanford University and holds the Edward
C. Wells Endowed Chair in the Department of Aeronautics and Astronautics. He was
on leave of absence from Stanford while serving as Trimble's President and CEO
from August 1998 to March 1999. Prior to joining Trimble, Dr. Parkinson served
23
as an Air Force colonel. He created and ran the NavStar GPS Joint Program Office
from 1972 through 1978, during which time he received the Defense Department
Superior Performance Award as the best program director in the Air Force. As the
program director, he led the definition, development, launch, and test of GPS,
including five types of user equipment. After retiring from the Air Force, he
became a professor of mechanical engineering at Colorado State University in
1978 for one year. Beginning in 1979, Parkinson served as group vice president
for Rockwell International. There he directed business development and a
300-person advanced engineering organization. From 1980 to 1984 he was a group
vice president and general manager for Intermetrics, where he directed five
divisions. He also was president of the industrial subsidiary, Plantstar, which
sold productivity monitoring equipment. Dr. Parkinson is a distinguished
graduate of the U.S. Naval Academy and has an M.S. degree in aeronautics and
astronautics from Massachusetts Institute of Technology (MIT) and a Ph.D. in
aeronautics and astronautics from Stanford University. He is a distinguished
graduate of the U.S. Naval War College; was head of the department of
astronautics and computer science at the U.S. Air Force Academy; and was an
academic instructor for the USAF Test Pilot School.
Mary Ellen P. Genovese joined Trimble as controller of manufacturing
operations in December 1992. From 1994 to 1997 she served as business unit
controller for software and component technologies, and for the tracking and
communications business unit. She was appointed corporate controller in October
1997 and vice president of finance and corporate controller in February 1998.
Currently, she is the interim chief financial officer. Prior to joining Trimble,
Mrs. Genovese was chief financial officer and president for Minton Co., a
distributing company to the commercial building market, from 1991 to 1992. In
her position as chief financial officer she was responsible for the accounting,
management reporting and bank and investor financing for the company. In March
of 1992, the board of directors asked her to assume the role of president to
reorganize the company, including the divestiture of the manufacturing
operations. Prior to 1991, she worked for 10 years with General Signal
Corporation. She was appointed European financial controller in July 1990, where
she was responsible for the company's three European operations, Germany, France
and the United Kingdom. From 1988 to 1990 she served as unit financial officer,
for General Signal's Semiconductor Systems Division. She held several other
management positions including materials manager, controller of manufacturing
operation and international projects controller for General Signal's Ultratech
Stepper Division from 1984 to 1988. Mrs. Genovese is a Certified Public
Accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.
Charles E. Armiger, Jr. joined Trimble in January 1989 as Sales and
Marketing Manager for aviation products. From January 1991 to December 1993, he
served as Director of U.S. Domestic Sales. Mr. Armiger held the post of Director
of Sales for North American West from January 1993 to November 1994. Then in
December 1994 he moved to Trimble's European office in Hook, England, to serve
as Director of Sales for Europe, the Middle East and Africa. In September 1996,
he was appointed to serve as Vice President for Commercial Systems Sales. In
September 1998, Mr. Armiger was appointed Vice President of Worldwide Sales.
Prior to joining Trimble, he was Director of Sales and Marketing for ARNAV
Systems, Inc. He received a B.S. degree in Business from the University of the
State of New York, Regents College, in 1996.
David M. Hall joined Trimble in February 1994 as Managing Director, OEM
products. In November 1996 he was appointed Vice President and General Manager
of the Software and Component Technologies business unit, focusing on
application and operating system software, component board level, and chipset
volume aspects of the GPS business. In November 1998 he was appointed Group Vice
President of the Mobile and Timing Technologies business unit, managing mobile
positioning and communications, timing, automotive, military, and commercial
aviation businesses. Previously, he worked for Raychem Corporation for
twenty-one years in a variety of positions and divisions. He served as Director
of Sales and Marketing for the Automotive Division, National Distribution
Manager for the Electronics Sector, and Director of Marketing and Product
24
Management for the Interconnect Systems Division, as well as District Sales
Manager, Area Sales Manager, and Operations Manager. Mr. Hall received his B.S.
degree in Industrial Technology in 1971 and his MBA in Marketing and Finance in
1973 from the California Polytechnic State University in San Luis Obispo,
California.
Patrick J. Hehir joined Trimble in February 1999 as senior vice
president and chief manufacturing officer. Prior to Trimble, Hehir worked for
Dovatron International where he held several positions during his eight year
tenure including, quality/program manager, director of operations, executive
director of operations and vice president of worldwide business development.
Dovatron, a $1 billion international manufacturing company with offices in
Ireland, Mexico, Asia, Eastern Europe and the U.S., serves clients such as
Hewlett-Packard, Hughes Corporation, I.B.M., and Lucent Technologies. Prior to
Dovatron, he worked for Western Digital in several positions including,
process/quality engineer, quality improvement process coordinator, senior
quality engineer and quality manager. Hehir also held process engineering,
production and quality positions at Pulse Engineering in Ireland. Hehir has a
broad range of educational qualifications from technical colleges and
universities in Ireland and the United Kingdom. He graduated from Galway's
Institute of Technology with an electronic engineering certificate in 1981. He
received a quality assurance post-graduate diploma from the Galway's University
College in 1984. In 1987, Hehir received a production and operations management
certificate from the United Kingdom's Institute of Industrial Engineering, and a
post-graduate diploma in health, safety and social welfare from Cork's
University College in 1993. Hehir also served on Ireland's technical committee
for the development of the environmental system standard, ISO 14000, published
by the International Standards Organization.
John E. Huey joined Trimble in 1993 as Director Corporate Credit and
Collections, promoted to Assistant Treasurer in 1995 and Treasurer in 1996. Past
experience includes two years with ENTEX Information Services, five years with
National Refractories & Minerals Corporation (formerly Kaiser Refractories), and
thirteen years with Kaiser Aluminum & Chemical Sales, Inc. He has held positions
in Credit Management, Market Research, Inventory Control, Sales and as an
Assistant Controller. Mr. Huey received his B.A. degree in Business
Administration in 1971 from Thiel College in Greenville, Pennsylvania and an MBA
in 1972 from West Virginia University in Morgantown, West Virginia.
Ronald C. Hyatt joined Trimble in August 1983 as Director of
Instrumentation Products. In 1985, he was appointed Vice President for Surveying
and Mapping Products, managing the marketing and application software
development aspects of the business until February 1993. In January 1997 he
returned to the Company as Senior Vice President of Trimble Labs, focusing on
next-generation ASIC developments. In November 1998, Mr. Hyatt was promoted to
Group Vice President of Precision Positioning. He is responsible for managing
land survey, marine, marine survey, mapping/GIS, and mining, construction, and
agricultural applications. Prior to joining Trimble, Mr. Hyatt worked for
Hewlett-Packard from 1964 to 1983 in various engineering and management
positions, focusing on precision frequency and time instrumentation. Mr. Hyatt
received his B.S. degree in electrical engineering from Texas Tech University in
1962 and his M.S. degree in electrical engineering from Stanford University in
1963.
Bruce E. Peetz joined Trimble in June 1988 as Program Manager for GPS
Systems. From January 1990 to January 1994 he served as Development Manager for
commercial dual-frequency products, and from January 1993 to December 1995 he
served as Engineering Manager for Surveying and Core Engineering. In January
1996 he was appointed General Manager of the Land Surveying unit, and from
February 1998 started the Advanced Systems division as General Manager. In
October 1998 he was named Vice President of Advanced Technology and Systems,
consolidating Systems and Trimble Laboratories. Prior to joining Trimble, Mr.
Peetz served in a variety of engineering and management positions during eleven
25
years at Hewlett Packard. Mr. Peetz received his BSEE from the Massachusetts
Institute of Technology (MIT) in 1973, and did graduate work at UCLA.
Item 2. Properties
The Company currently leases and occupies sixteen buildings in
Sunnyvale, California, totaling approximately 396,000 square feet. The leases on
these buildings expire at various dates through 2003. In addition, the Company
leases and occupies three buildings in Austin, Texas, totaling approximately
50,600 square feet, to manufacture GPS-based aviation products; the leases
expire at various dates through 2001. The Company also leases a
45,000-square-foot facility in Christchurch, New Zealand, for software
development. The Company's two largest international sales offices are those in
the United Kingdom (13,700 square feet) and Japan (5,900 square feet). In
addition, the Company leases sales offices in Australia, Brazil, China, France,
Germany, Mexico, Spain, Singapore, and Russia, and in various cities throughout
the United States. The Company's international office leases expire at various
dates through 2005. Certain of the leases have renewal options. The Company
believes that its facilities are adequate to support its current and anticipated
near-term future operations.
Item 3. Legal Proceedings
The information with respect to legal proceedings required by this item
is included in Part II, Item 8, Note 15 to the Consolidated Financial
Statements, hereof under the caption "Pending Matters."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
26
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol TRMB. The following table sets forth, for the quarters
indicated, the range of high and low closing sales prices for the Company's
Common Stock on the Nasdaq National Market:
High Low
1998:
Fourth 10 1/4 7
Third 16 3/8 9 1/4
Second 19 13/16 13 7/8
First 24 3/8 17 1/4
1997:
Fourth 24 5/16 18 1/8
Third 21 5/8 16 1/2
Second 19 10 7/8
First 14 3/4 11 1/4
The Company had 1,664 shareholders of record as of March 15, 1999.
The Company's stock price is subject to significant volatility. If
revenues or earnings fail to meet the expectations of the investment community,
there could be an immediate and significant impact on the trading price for the
Company's stock. Due to stock market forces that are beyond the Company's
control, and due also to the nature of the Company's business, such shortfalls
can be sudden.
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain earnings to finance the development of the
Company's business, and does not presently intend to declare any cash dividends
in the foreseeable future. Under the Company's current $50,000,000 revolving
line of credit agreement, the Company is restricted from paying dividends
without the lender's consent. Under the Company's Note Purchase Agreement,
pursuant to which the Company issued $30,000,000 of its subordinated promissory
notes in June 1994, the Company is also restricted from paying dividends. See
Notes 5 and 7 to the Consolidated Financial Statements contained in Item 8.
27
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
Summary Consolidated Statements of Operations Data
January 1, January 2, December 31, December 31, December 31,
Years ended 1999 1998 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 260,279 $ 258,894 $ 221,924 $ 221,236 $ 159,264
--------------------------------------------------------------------------
Operating expenses
Cost of sales 134,723 118,903 104,881 93,544 60,193
Research and development 44,826 37,097 32,716 29,869 22,772
Sales and marketing 61,227 56,457 60,358 59,317 48,241
General and administrative 32,403 26,592 28,452 22,141 10,872
Restructuring charges 10,280 - 2,134 - -
--------------------------------------------------------------------------
Total operating expenses 283,459 239,049 228,541 204,871 142,078
--------------------------------------------------------------------------
Operating income (loss) from continuing
operations (23,180) 19,845 (6,617) 16,365 17,186
Nonoperating income (expense), net (2,041) 1,172 706 773 (3,057)
--------------------------------------------------------------------------
Income (loss) before income taxes from
continuing operations (25,221) 21,017 (5,911) 17,138 14,129
Income tax provision (benefit) 1,400 2,496 (300) 3,121 2,391
--------------------------------------------------------------------------
Net income (loss) from continuing operations $ (26,621) $ 18,521 $ (5,611) $ 14,017 $ 11,738
--------------------------------------------------------------------------
Loss from discontinued operations (net of tax) ($6,911) ($9,242) ($5,691) ($2,756) ($1,714)
Estimated loss on disposal of discontinued operations
(net of tax) ($19,862) - - - -
==========================================================================
Net income (loss) $ (53,394) $ 9,279 (11,302) $ 11,261 $ 10,024
==========================================================================
Basic net income (loss) per share from
continuing operations $ (1.19) $ 0.83 $ (0.25) $ 0.70 $ 0.64
Basic net income (loss) per share from
discontinued operations (1.19) (0.41) (0.26) (0.14) (0.09)
==========================================================================
Basic net income (loss) per share $ (2.38) $ 0.42 $ (0.51) $ 0.56 $ 0.55
==========================================================================
Shares used in calculating basic earnings per share 22,470 22,293 22,005 19,949 18,340
==========================================================================
Diluted net income (loss) per share from
continuing operations $ (1.19) $ 0.80 $ (0.25) $ 0.66 $ 0.62
Diluted net income (loss) per share from
discontinued operations (1.19) (0.40) (0.26) (0.13) (0.09)
==========================================================================
Diluted net income (loss) per share $ (2.38) $ 0.40 $ (0.51) $ 0.53 $ 0.53
==========================================================================
Shares used in calculating diluted earnings per share 22,470 22,947 22,005 21,318 19,053
==========================================================================
Cash dividends per share $ - $ - $ - $ - $ -
==========================================================================
Selected Consolidated Balance Sheet Data
January 1, January 2, December 31, December 31, December 31,
As of 1999 1998 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Working capital $ 81,956 $ 131,272 $ 121,026 $ 134,602 $ 68,486
Total assets 156,279 207,663 189,841 196,763 109,363
Noncurrent portion of long-term debt 31,640 30,697 30,938 29,739 31,736
Shareholders' equity $ 74,691 $ 139,483 $ 124,045 $ 129,937 $ 53,574
28
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management Changes and Subsequent Events
Charles R. Trimble, the Company's founder, resigned as President and Chief
Executive Officer in August of 1998. Mr. Trimble remains on the Company's Board
of Directors and serves as a consultant to the Company. Dr. Bradford W.
Parkinson, a member of the Board of Directors since 1984 and a consultant to the
Company since 1982, assumed the role of President and CEO while the Company
conducted a search for a permanent replacement. On March 17, 1999, subsequent to
the financial statement date Steven W. Berglund joined the Company as President
and CEO. Dr. Robert S. Cooper, a member of the Company's Board of Directors
since 1989, was appointed to serve as the Chairman of the Board of Directors in
August of 1998.
During the third quarter of fiscal 1998, the Board of Directors
performed an intensive investigation and review of each of the individual
business lines of the Company. Under the direction of Dr. Parkinson, the Company
has undertaken actions that focus on the review, restructuring and elimination
of unprofitable businesses, the implementation of stronger cost controls, the
reorganization of business units and the improvement of manufacturing
efficiencies. As part of the changes taken to strengthen the Company's
competitive position in the marketplace, a decision was made to discontinue the
Company's General Aviation Division, located in Austin, Texas. In the third
quarter of 1998, the Company incurred a charge of $19.9 million related to the
discontinued operation. (See Note 3 of the Consolidated Financial Statements).
In the third quarter and continuing in the fourth quarter of fiscal
1998, Trimble realigned its management structure, reduced its worldwide
workforce by approximately 8 percent, reduced its facilities and wrote down
certain assets. (See note 6 of the Consolidated Financial Statements). The
Company took steps to further strengthen and improve employee relationships and
incentives by extending the period of exercisability for all current outstanding
employee stock options from five years and three months to ten years, effective
as of November 3, 1998. The Company is evaluating further cost reduction
programs to improve its overall cost structure.
The realignment of the management structure is expected to strengthen
the relationships between the Company's businesses and product lines and to
provide the Company with a better focus on the markets it serves. The Company
realigned its Business Units, consolidated its worldwide sales team and created
an international business development function.
The Company's restructuring included renaming its Business Units. The
Commercial Systems Group has been renamed Precision Positioning Group (PPG). The
Software and Component Technologies group has been renamed Mobile and Timing
Technologies (MTT). The Aerospace Group no longer exists as a separate unit and
the General Aviation Division has been discontinued. (See Note 3 of the
Consolidated Financial Statements). Mobile Positioning products previously
reported under the Commercial System Group are now managed by MTT. Air transport
systems and military systems products previously managed by the Aerospace Group
are now managed by MTT. PPG continues to be responsible for the management of
Land Surveying, Mapping and GIS, Marine Surveying and Mining, Construction and
Agriculture (previously referred to as Precise Positioning). MTT continues to be
responsible for the management of Automotive and Timing. The discussions
throughout this document are based on the management structure that existed at
the end of the year.
29
The Board of Directors has declared a dividend distribution of Preferred
shares Purchase Rights to shareholders of record on March 1, 1999.
The Rights are designed to protect and maximize the value of your interest
in the Company. We believe that the Rights Plan, while not intending to prevent
a takeover, will provide protection to you, our shareholders, from the abusive
and coercive tactics that often occur in takeover attempts.
The Rights contain provisions to protect shareholders in the event of an
unsolicited takeover attempt through such methods as a gradual accumulation of
shares in of 15% or more of the outstanding stock followed by a two-tier tender
offer or other tactics that do not treat all shareholders equally. These tactics
may unfairly pressure shareholders, deprive them of the full value of their
shares, or squeeze them out of their investment without giving them any real
choice. With over 2,000 companies having established rights plans to protect
shareholders, we consider the Rights Plan to be the best available means of
protecting the full value of your investment in the Company, while not
preventing a fair acquisition offer for the Company.
The Rights will initially trade with shares of the Company's Common Stock
and have no impact on the way in which you can presently trade the Company's
shares. As explained in detail in the attached Summary of Rights, the Rights are
not exercisable until ten days after a person or group announces acquisition of
15% or more of the Company's outstanding Common Stock or the commencement of a
tender offer which would result in ownership of the person or group of 15% or
more of the outstanding stock.
During fiscal year 1997, and effective as of the Company's 1997 fiscal
year-end, the Company changed from a calendar fiscal year-end and adopted a
52-53 week fiscal year ending on the Friday nearest to December 31, which for
fiscal 1998 was January 1, 1999. The Company does not expect the effects of any
differences due to the change of fiscal years to have a material impact on the
Company's financial position, results of operations, or cash flows. The Company
has not restated or adjusted its prior financial statements on this new fiscal
year basis. (See Note 1 of the Consolidated Financial Statements).
RESULTS OF CONTINUING OPERATIONS
In 1998, the Company's annual revenues from continuing operations
increased slightly to $260.3 million from $258.9 million in 1997. In 1998, the
Company had a net loss from continuing operations of $26.6 million, or ($1.18)
diluted loss per share, compared to net income from continuing operations of
$18.5 million, or $0.81 diluted earnings per share, in 1997. The total net loss
for fiscal 1998, including discontinued operations, was $53.4 million, or
($2.38) diluted loss per share.
30
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenue:
January 1, January 2, December 31,
Years ended 1999 1998 1996
- --------------------------------------------------------------------------------------------------------------
Revenue 100% 100% 100%
------------ ----------- ------------
Operating expenses:
Cost of sales 52% 46% 47%
Research and development 17% 14% 15%
Sales and marketing 24% 22% 27%
General and administrative 12% 10% 13%
Restructuring charges 4% - 1%
------------ ----------- ------------
Total operating expenses 109% 92% 103%
------------ ----------- ------------
Operating income (loss) from continuing operations (9%) 8% (3%)
Nonoperating income (expense), net (1%) - -
------------ ----------- ------------
Income (loss) before income taxes from continuing operations (10%) 8% (3%)
Income tax provision 1% 1% 0%
------------ ----------- ------------
Net income (loss) from continuing operations (10%) 7% (3%)
------------ ----------- ------------
Loss from discontinued operations (net of tax) (3%) (4%) (2%)
Estimated loss on disposal of discontiued operations (net of tax) (8%) - -
============ =========== ============
Net income (loss) (21%) 4% (5%)
============ =========== ============
Revenue. In 1998, total revenue increased to $260.3 million from $258.9
million in 1997, which represents a percentage increase of less than 1%. Total
revenue increased in 1997 to $258.9 million from $221.9 million in 1996, which
represents a percentage increase of 17%. The following table breaks out the
Company's revenues by industry market:
January 1, % Total January 2, % Total December 31, % Total
1999 Revenue 1998 Revenue 1996 Revenue
- -----------------------------------------------------------------------------------------------------------------------------
(In thousands)
Precision Positioning Group $ 165,951 64% $ 142,449 55% $ 140,934 64%
Mobile and Timing Technologies 94,328 36% 116,445 45% 80,990 36%
-------------- ----------- --------------- ----------- ------------------ -----------
Total revenue $ 260,279 100% $ 258,894 100% $ 221,924 100%
-------------- ----------- --------------- ----------- ------------------ -----------
Precision Positioning Group
The Precision Positioning Group revenues had a growth rate of 16% in
1998 over 1997. The 1998 increase compared to 1997 is primarily from revenues in
the land surveying, marine surveying, mapping and GIS systems, and mining,
construction, and agriculture markets. The increase in land surveying was due to
the continued strong customer acceptance of the Company's GPS Total Station 4800
and 4700 products. Also, the increase in marine survey, mapping and GIS and
mining, construction and agriculture reflects increased demand for these
products.
In the fourth quarter of 1998, the FCC suspended the processing of
certain Real-time Kinematic product line license applications pending a
resolution of certain frequency interference issues which it has reviewed with
the Company. The FCC has recently reinstated the processing of these license
applications, based upon the Company providing certain upgrades at its cost to
purchasers of earlier products, making certain product modifications intended to
decrease the likelihood of any radio frequency interference and providing
31
guidance to users of its equipment in avoiding the interference with these users
of the frequency spectrum and the agreement to help teach customers to be good
radio citizens.
The Precision Positioning Group revenues had a growth rate of 1% in
1997 over 1996. The 1997 increase, compared to 1996, was primarily in mapping
and GIS systems, as well as mining, agriculture and construction markets. The
increase in mapping and GIS systems market came from strong sales of the
Pathfinder product line, and mining, construction, and agriculture products
continued to grow from 1996.
Mobile and Timing Technologies
The Mobile and Timing Technologies revenues decreased 19% in 1998 from
1997. The 1998 decrease is primarily in automotive, commercial air transport and
military aerospace systems. The softness in the automotive market was due to the
financial difficulties of a major customer and a delay in new product
introductions. The commercial air transport decrease was due to less than
anticipated demand from Honeywell and the military aerospace system decrease was
due to the large dollar shipment on the CUGR contract in the fourth quarter of
1997, which was not repeated in 1998.
* Military sales are highly dependent on contracts that are subject to
government approval and are, therefore, expected to continue to fluctuate from
period to period. The Company believes that opportunities in this market have
been substantially reduced by cutbacks in U.S. and foreign military spending.
The Mobile and Timing Technologies revenues had a growth rate of 44% in
1997 over 1996. The increase was primarily in the mobile positioning, commercial
air transport, and military aerospace systems.
The Mobile and Timing Technologies increase in 1997 was due primarily
to the Company recognizing $1.8 million in revenues from a development agreement
in connection with an irrevocable nonrefundable, nonrecurring engineering fee
recorded in the third quarter of 1997 and a nonrecurring one-time $2.2 million
technology license fee recorded in the second quarter of 1997 from Pioneer
Electronic Corporation in connection with expansion of its prior license for
in-car navigation. Mobile and Timing Technologies revenues also increased in
1997 compared to 1996 due to the resumption of shipments in 1997 to American
Mobile Satellite Corporation (AMSC), a company based in Reston, Virginia, that
provides a variety of voice and data services via satellite. In March 1995, the
Company signed a large contract for the supply of Galaxy/GPS land mobile
satellite terminals to AMSC. Late in 1995, AMSC requested that the Company cease
delivery, due in part to delays in AMSC's completion of software. Shipments
under the original contract were halted in the fourth quarter of 1995, and the
contract was amended. Mobile and Timing Technologies revenues in 1997 included
$6,400,000 in sales to AMSC. A total of $4,200,000 for product revenues shutdown
fees and contract renegotiation fees was recognized in 1996.
The increase in commercial air transport and military aerospace systems
in 1997 from 1996 was primarily due to shipments to the government under the
CUGR program, as well as strong sales for the Honeywell-Trimble product (HT9100)
and strong sales for military aerospace products.
32
Export Sales
* Export sales from domestic operations, as a percentage of total revenue,
were 34% in 1998, 28% in 1997, and 25% in 1996. Sales to unaffiliated customers
in foreign locations, as a percentage of total revenue, were 46% in 1998, 46% in
1997, and 47% in 1996. The Company anticipates that export revenue and sales
made by its subsidiaries in locations outside the U.S. will continue to account
for a significant portion of its revenue. For this reason, the Company is
subject to the risks inherent in these sales, including unexpected changes in
regulatory requirements, exchange rates, governmental approval, and tariffs or
other barriers. Even though the U.S. government announced on March 29, 1996,
that it would support and maintain the GPS system, as well as eliminate the use
of Selective Availability (S/A)-a method of degrading GPS accuracy, there may be
a reluctance in certain foreign markets to purchase products based on GPS
technology, given the control of GPS by the U.S. Government. The Company's
results of operations could be adversely affected if the Company were unable to
continue to generate significant sales in locations outside the U.S.
No single customer, including the U.S. Government and its agencies,
accounted for 10% or more of the Company's total revenues in 1998, 1997 or 1996.
It is possible, however, that in future periods the failure of one or more large
customers to purchase products in quantities anticipated by the Company may
adversely affect the results of operations.
* Gross Margin. Gross margin varies due to a number of factors, including
product mix, domestic versus international sales, customer type, the effects of
production volumes and fixed manufacturing costs on unit product costs, and new
product start-up costs. In 1998, the gross margin percentage on product sales
was 48%, compared with 54% in 1997 and 53% in 1996. The decrease in the gross
margin percentages primarily reflects increased labor costs from new product
introductions, expediting fees, inventory write-downs, and unabsorbed fixed
overhead due to lower than expected volumes. The 1997 margins were enhanced by
the positive impact of nonproduct revenues of $2.2 million recognized from
Pioneer Electronic Corporation and from a development agreement in connection
with an irrevocable nonrefundable, nonrecurring engineering fee of $1.8 million.
In 1996, the Company also recorded nonrecurring fees from AMSC of $2.5 million;
however, there can be no assurance that similar items will recur in the future.
In addition, because of product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, and other factors, positive future gross margins cannot be
assured. While Precision Positioning segment products have the highest gross
margins of all the Company's products, their margins have decreased, primarily
in response to competition. The Company expects competition to increase in its
Precision Positioning segment, and it is therefore likely that further price
erosion will occur, with consequent lower gross margin percentages.
* The Company expects that in the future a higher percentage of its
business will be conducted through alliances with strategic partners such as
Honeywell and Caterpillar. As a result of volume pricing and the assumption of
certain operating costs by the partner, margins on this business are likely to
be lower than sales directly to end-users.
33
Operating Expenses. The following table shows operating expenses for the
periods indicated. It should be read in conjunction with the narrative
descriptions of those operating expenses below:
January 1, January 2, December 31,
Years ended 1999 1998 1996
- -----------------------------------------------------------------------------
(In thousands)
Research and development $ 44,826 $ 37,097 $ 32,716
Sales and marketing 61,227 56,457 60,358
General and administrative 32,403 26,592 28,452
Restructuring charges 10,280 - 2,134
------------- ------------- --------------
Total $ 148,736 $ 120,146 $ 123,660
------------- ------------- --------------
Research and Development. Research and development spending increased
in absolute dollars during 1998, representing 17% of revenue, compared with 14%
in 1997 and 15% in 1996. The higher research and development expenses in 1998
are due to the Company receiving fewer funds from cost reimbursement projects in
1998 as compared with 1997.
The dollar increase from 1996 to 1997 is due primarily to an increase
in personnel and the related expenses that accompany such an increase in the
number of employees. There was also an increase in the number of specialized
engineering consultants and temporary employees.
The increase in research and development is part of the Company's
continuing aggressive development of future products.
* Sales and Marketing. Sales and marketing expenses increased during 1998,
representing 24% of revenue, compared with 22% in 1997 and 27% in 1996. The
primary reason for the dollar and percentage increases in expenses from 1997 to
1998 is an increase in personnel and related expenses, that accompany an
increase in the number of employees. In addition, the Company experienced
increases in expenses related to trade shows, advertising, and demo equipment
expenses.
The decrease in sales and marketing expense in 1997 compared to 1996
was due to a decrease in personnel because of the Company's 1996 restructuring
activities and advertising costs.
* The Company's future growth will depend in part on the timely development
and continued viability of the markets in which the Company currently competes,
and on the Company's ability to continue to identify and exploit new markets for
its products. In addition, the Company has encountered significant competition
in selected markets, and expects such competition to intensify as the market for
GPS applications receives acceptance. Several of the Company's competitors are
major corporations with substantially greater financial, technical, marketing
and manufacturing resources. Increased competition may result in reduced market
share and is likely to result in price reductions of GPS-based products, which
could adversely affect the Company's revenues and profitability.
General and Administrative. General and administrative expenses
increased during 1998, representing 12% of revenue, compared with 10% in 1997;
they remained flat as a percentage of revenue compared to 1996 at 12%. The
increase from 1997 to 1998 is due primarily to an increase in personnel and the
34
related expenses, that accompany an increase in the number of employees and
consultants, as well as an increase in outside services related to legal fees
associated with certain litigation matters during 1998.
The 1997 decrease from 1996 in general and administrative expenses was
due primarily to decreases in outside services related to legal fees associated
with certain arbitration and litigation matters during 1996.
Restructuring Charges. As noted in Note 6 to the Consolidated Financial
Statements during the year ended January 1, 1999, the Company recorded a
restructuring charge of $10.3 million classified in operating expenses. These
charges are a result of the Company's reorganization to improve business
processes and to decrease organizational redundancies, to improve management
accountability and to improve the Company's focus on profitable operations. As a
result of the reorganization, the Company has downsized its operations,
including reducing headcount and facilities space usage, and canceled its
enterprise wide information system project and certain research and development
projects. The impact of these decisions is that significant amounts of the
Company's fixed assets, prepaid expenses, and purchased technology have been
impaired and certain liabilities incurred. The Company has written down the
related assets to their net realizable values and made provisions for the
estimated liabilities.
The elements of the charges in 1998 and the amounts remaining at January 1,
1999, on the balance sheet are as follows (in thousands):
Remaining in
Total Amounts paid/ accrued liabilites
charged to written off as of
expense in 1998 January 1, 1999
---------------- -------------- --------------------
Employee termination benefits $ 2,864 $ (1,200) $ 1,664
Facility space reductions 1,061 - 1,061
Enterprise wide information system
abandonment 6,360 (4,895) 1,465
================= ============= ====================
Subtotal $ 10,285 $ (6,095) $ 4,190
================= ============= ====================
The cash expenditures associated with the remaining obligations will
occur primarily in fiscal 1999.
Nonoperating income (expense), net. Nonoperating income (expense), net,
includes interest income and expense, as well as gains and losses on foreign
currency transactions.
Foreign exchange gains were $234,000 in 1998 and 1997, compared with a
loss of $4,000 in 1996. The Company's policy is to hedge its exposure to foreign
currency transactions to minimize the effect of changes in foreign currency
exchange rates on consolidated results of operations. Gains and losses arising
from foreign currency forward contracts offset gains and losses resulting from
the underlying hedged transactions.
Interest income decreased both in 1998 from 1997 and in 1997 from 1996
because of lower interest income received on cash and short-term investments due
to lower average balances for the year over the prior year.
Interest expense decreased slightly in 1998 due to lower fees on unused
lines of credit. Interest expense includes interest on a $30.0 million note
issued in August 1995, and fees on unused lines of credit. (See Notes 5 and 7 to
the Consolidated Financial Statements for details of long-term debt and lines of
credit).
35
Income Tax Provision. The Company's effective tax rates from continuing
operations for fiscal years 1998, 1997 and 1996 are (6%), 12% and 5%,
respectively. The 1998 and 1996 income tax rates differ from the federal
statutory rate of 35% due to foreign taxes and the inability to realize the
benefits of the net operating losses. The 1997 income tax rate is less than the
federal statutory rate primarily due to the realization of previously reserved
deferred tax assets.
Inflation. The effects of inflation on the Company's financial results have
not been significant to date.
LITIGATION
* The Company is involved in a number of legal matters as discussed in Note
15 to the Consolidated Financial Statements. While the Company does not expect
to suffer significant adverse effects from these litigation matters or from
unasserted claims, the nature of litigation is unpredictable and there can be no
assurance that it will not do so.
Liquidity and Capital Resources
* At January 1, 1999, the Company had cash and cash equivalents of $40.9
million and $16.3 million in short-term investments. The Company's cash and cash
equivalents and short-term investments have been reduced from the prior year,
due primarily to the Company's stock repurchase program (see additional
information below) and acquisitions of capital equipment. The Company's
long-term debt consisted primarily of a $30.0 million note obligation due in
2001, and the Company had no debt outstanding under its $50,000,000 unsecured
line of credit. The Company has an amount of $150,000 outstanding under a
separate $5,000,000 line of credit. The Company has relied primarily on cash
provided by operating and financing activities and net sales of short-term
investments to fund capital expenditures, the repurchase of the Company's common
stock (see further explanation below), and other investing activities.
Management believes that its cash, cash equivalents and short-term investment
balances, together with its existing credit line, will be sufficient to meet its
anticipated cash needs for at least the next twelve months.
* In 1998, the cash provided in operating activities was $7.0 million, as
compared to cash used of $2.1 million in the corresponding period in 1997. Cash
provided by operating activities in 1998 arose from decreases in accounts
receivable and inventories and increases in accrued liabilities offset by the
Company's net loss net of non-cash charges. Inventory related to continuing
operations as of January 1, 1999, decreased by $5.2 million from the 1997
year-end levels, primarily due to a focused effort by the Company to reduce
inventory by supply chain synchronization; reduce lead and cycle times;
simplifying product lines; and implementing tighter control over the material
forecasting process. The Company's ability to continue to generate cash from
operations will depend in large part on revenues, the rate of collections of
accounts receivable, and management of inventory levels.
Cash provided by sales of common stock in 1998 represents the proceeds
from purchases made pursuant to the Company's stock option plan and employee
stock purchase plan, and totaled $5.0 million for the year ending January 1,
1999.
In August 1997, the Company entered into a three-year $50,000,000
unsecured revolving credit facility with four banks (the "Credit Agreement").
This credit facility replaced the previous two-year $30,000,000 unsecured line
that expired in August 1997. The Credit Agreement enables the Company to borrow
up to $50,000,000, provided that certain financial and other covenants are met.
Under a separate agreement, the Company has an additional $5,000,000 line of
credit provided only by the lead bank under the Credit Agreement for "Letter of
36
Credit" purposes, and this is also subject to the covenants in the main
facility. The Credit Agreement provides for payment of a commitment fee of 0.25%
and borrowings to bear interest at 1% over LIBOR if the total funded debt to
EBITDA is less than or equal to 1.00 times; 0.3% and borrowings to bear interest
at 1.25% over LIBOR if the ratio is greater than 1.00 times and less than or
equal to 2.00 times; or 0.4% and borrowings to bear interest at 1.75% over LIBOR
if the ratio is greater than 2.00 times. In addition to borrowing at the
specified LIBOR rate, the Company has the right to borrow with interest at the
higher of (i) one of the bank's annual prime rate and (ii) the federal funds
rate plus 0.5%. To date, the Company has not made any borrowings under the
lines. The Company is restricted from paying dividends under the terms of the
Credit Agreement.
As of October 27, 1998, the Agent and Lenders of the $50,000,000
unsecured revolving credit facility granted a limited waiver of the Company's
compliance with various loan covenants as of October 2, 1998, until December 15,
1998. The Agent and Lenders granted a second limited waiver (an extension of the
first limited waiver) for the Company's compliance with various loan covenants
which extended from January 1, 1999, until February 16, 1999. As of February 16,
1999, the Company, the Agent and the Lenders agreed to new covenants which will
be tested by a compliance document as of April 2, 1999, and for the life of the
loan which expires in August of 2000. The $50,000,000 revolving credit facility
was modified to include the $5,000,000 line of credit for Letter of Credit
purposes to simplify the entire arrangement, as less than $150,000 was being
utilized under the separate facility as of January 1, 1999. To date, the Company
has not made any borrowings under the $50,000,000 revolving credit facility.
The Company announced in February 1996 that it had approved a
discretionary program whereby up to 600,000 shares of its common stock could be
repurchased on the open market by the Company to offset the potential dilutive
effects to earnings (loss) per share from the issuance of additional stock
options. In 1998, the Company approved the repurchase of an additional 1.6
million shares under the discretionary program. The Company intends to use
existing cash, cash equivalents and short-term investments to finance any such
stock repurchases under this program. During 1996, the Company purchased 250,000
shares at a cost of $3.5 million. During 1997, the Company purchased 139,500
shares at a cost of $1.8 million. During 1998, the Company purchased 1.08
million shares at a cost of $16.1 million.
* The Company presently expects 1999 capital expenditures to be
approximately $10.0 million, primarily for computer equipment, software, and
leasehold improvements associated with business expansion.
The Company is continually evaluating potential external investments in
technologies related to its business and, to date, has made relatively small
strategic investments in a number of GPS-related technology companies. There can
be no assurance that any such outside investments made to date, or that any
potential future investments, will be successful.
The Company has evaluated the issues raised by the introduction of the
Single European Currency (Euro) for initial implementation as of January 1,
1999, and during the transition period through January 1, 2002. The Company does
not currently believe that the introduction of the Euro will have a material
effect on the Company's foreign exchange and hedging activities. The Company has
also assessed the potential impact the Euro conversion will have in regard to
its internal systems accommodating Euro-denominated transactions. The Company
will continue to evaluate the impact of the Euro introduction over time, based
on currently available information. The Company does not currently anticipate
any adverse impact of the Euro conversion on the Company.
37
YEAR 2000 and GPS WEEK NUMBER ROLLOVER ISSUES
Computers and software, as well as other equipment that relies on only
two digits to identify or represent a year, may be unable to accurately process
or display certain information at or after the Year 2000. This is commonly
referred to as the "Year 2000 issue." The Year 2000 issue may materially affect,
Trimble's vendors, suppliers, internal systems, products and customers. The
Company continues to address the Year 2000 issue to avoid what might otherwise
be a material and adverse effect on the Company's consolidated financial
position, results of operations, or cash flows.
Another date-related issue, known as the "GPS Week Number Roll-Over" or
"WNRO" issue, could also materially affect various Trimble products. The WNRO
issue is unrelated to the Year 2000 issue and is unique to GPS technology. All
GPS satellites, which are operated by the U.S. government, broadcast time in the
form of a "GPS week number" and a time offset into each "GPS week." Week numbers
range from 0 to 1023. Week 0 started on January 6, 1980, and week 1023 will end
on August 21, 1999, at which time the week number broadcast by all U.S. GPS
satellites will roll over, back to 0. Among other potential effects, this
rollover may cause GPS receivers and software that process data obtained by GPS
receivers to erroneously interpret high-week-number, pre-WNRO data as
post-dating later low-week-number, post-WNRO data. This may cause satellite
positions to be miscalculated and produce gross position fix errors. Receivers
that process and display calendar dates based on "weeks since 1980" may generate
date calculation errors. The Company continues to address the WNRO issue to
avoid what might otherwise be a material and adverse effect on the Company's
future consolidated financial position, results of operations, or cash flows.
The Company continues to assess the potential impact of both the Year
2000 and WNRO issues on its vendors, suppliers, internal systems, products, and
customers-and has begun, and in many cases completed, corrective efforts in
these areas.
Year 2000 Remediation Plan
The Company's Board of Directors has adopted a comprehensive Year 2000
Remediation Plan, the goal of which is to minimize business disruptions and risk
exposure that might otherwise arise as a consequence of moving into the
twenty-first century. The plan focuses on achieving Year 2000 readiness across
the Company's entire supply chain, and is designed to deal with the most
critical systems first. Additionally, the Company's Year 2000 remediation plan
calls for the development of contingency plans to address potential problem
areas with internal systems, and with suppliers and other third parties. To
these ends, a Y2K Program Management Office has been established to manage and
coordinate implementation of the plan on a companywide basis. It is expected
that assessment, remediation, and contingency planning activities will be
ongoing throughout 1999, with the objective of appropriately resolving all
material Year 2000 issues before the 21st century rollover.
Information Technology and Other Systems
The Company continues to assess the potential impact of the Year 2000 issue
on its internal systems, including information technology (IT) and non-IT
systems, and has begun corrective efforts in this area, as follows:
o The Company has a plan to upgrade its existing MRP/ERP information
systems to be Year 2000 compliant.
38
o Assessment and remediation efforts in connection with the
Company's other IT and non-IT systems will be undertaken as part
of the Company's general Y2K Remediation Plan.
* The Company currently plans to complete renovation, testing and
implementation of critical systems, or successful execution of contingency
plans, during the third quarter of 1999. There can be no assurance, however,
that there will not be a delay in, or increased costs associated with, such
renovation, testing, implementation or execution, and the Company's inability to
successfully and timely complete these tasks could have a material adverse
effect on future results of operations or financial condition.
Products
* To address and minimize the anticipated impact of both the Year 2000
issue and the WNRO issue on the Company's products, the Company continues to
assess the anticipated impact these issues may have on the performance of its
products, and to resolve various related performance problems of its current
products. In addition, the Company has adopted a formal Year 2000 and GPS Week
Number Rollover Policy to:
o Publish Year 2000- and WNRO-related product performance information
on the Company's public web site,
o Respond to individual customer inquiries regarding the anticipated
performance of particular Company products,
o Furnish upgrades to customers whose Trimble products are upgradable,
and
o Provide information regarding available product alternatives to
customers with noncompliant products.
Assessment of products, resolution of certain products' Year 2000 and
WNRO performance problems, and implementation of the Company's Year 2000 and GPS
Week Number Rollover Policy, are ongoing, and as to many Company products is
complete.
* The Company does not anticipate that the Year 2000 and WNRO issues will
have a material adverse effect on sales of its products. The Company has
incurred-and will continue to incur, through 1999 and thereafter-increased
expenses associated with Year 2000 and WNRO-related product assessment and
resolution of certain products' Year 2000 and WNRO performance problems,
implementation of the Company's Year 2000 and GPS Week Number Rollover Policy,
and fulfillment of Year 2000 and WNRO-related customer support and warranty
obligations, in amounts that management believes has not had and will not have a
material adverse effect on the Company's historical or future results of
operations or financial condition.
Vendors and Suppliers
* For its successful operation, the Company materially relies on goods and
services purchased from certain vendors. If these vendors fail to adequately
address the Year 2000 issue such that their delivery of goods and services to
the Company is materially impaired, it could have a material adverse impact on
the Company's operations and financial results. The Company is preparing to
survey its principal vendors to assess the effect the Year 2000 issue will have
on their ability to supply their goods and services without material
interruption, and at this time the Company cannot determine or predict the
outcome of this effort. Contingency plans will be developed and executed with
respect to vendors who will not be Year 2000 ready in a timely manner where such
lack of readiness is expected to have a material adverse impact on the Company's
39
operations. However, because the Company cannot be certain that its vendors will
be able to supply goods and services without material interruption, and because
the Company cannot be certain that execution of its contingency plans will be
capable of implementation or will result in a continuous and adequate supply of
such goods and services, the Company can give no assurance that these matters
will not have a material adverse effect on the Company's future consolidated
financial position, results of operations, or cash flows.
Customers
* The Company has material relationships with certain customers. If those
customers fail to achieve an adequate state of Year 2000 readiness in their own
operations, or if their Year 2000 readiness efforts consume significant
resources, their ability to purchase the Company's products may be impaired.
This could adversely affect demand for the Company's products and, therefore,
the Company's future revenues. The Company plans to assess the effect the Year
2000 issue will have on its principal customers, and at this time cannot
determine the impact it will have.
Related Costs to the Company
* The Company currently expects that the total cost of Year 2000
remediation efforts will not exceed approximately $1 million. The Company has
been-and will be-expensing these costs as incurred. The total cost estimate does
not include potential costs related to any customer or other claims or the cost
of internal software and hardware replaced in the normal course of business. The
total cost estimate is based on the current assessment of the projects, and is
subject to change as the projects progress.
Overall Impact on the Company
* At the present time, and subject to the cost estimates above, management
does not believe that the Year 2000 issue and WNRO matters discussed above will
have a material adverse impact on the Company's financial condition or overall
trends in results of operation. However, it is uncertain to what extent the
Company may be affected by such matters; therefore, there can be no assurance
that these matters will not have a material adverse effect on the Company's
future consolidated financial position, results of operations, or cash flows.
CERTAIN OTHER RISK FACTORS
The Company's revenue has tended to fluctuate on a quarterly basis due
to the timing of shipments of products under contracts and the sale of licenses.
A significant portion of quarterly revenues occurs from orders received and
immediately shipped to customers in the last few weeks and days of a quarter. If
orders are not received, or if shipments were to be delayed a few days at the
end of a quarter, the operating results and reported earnings per share for that
quarter could be significantly impacted. Future revenues are difficult to
predict, and projections are based primarily on historical models, which are not
necessarily accurate representations of the future.
* The Company has a relatively fixed cost structure in the short term, and
it is determined by the business plans and strategies the Company intends to
implement in the two segments it addresses. This effective leveraging means that
increases or decreases in revenues have more than a proportional impact on net
income or losses. The Company estimates that a change in product revenue of $1
million would change earnings per share by 2 to 3 cents.
* The Mobile and Timing Technologies Business Unit relies on high volumes
and relatively low margin sales. Mobile and Timing Technologies customers are
extremely price-sensitive. As costs decrease through technological advances,
these advances are typically passed on to the customer. To compete, Mobile and
Timing Technologies requires high-volume production and manufacturing
techniques. Customers expect high quality standards with very low defect rates.
Compared to competitors, which have far greater resources in such high-volume
40
manufacturing and associated support activities, the Company is relatively
inexperienced.
The Company's stock price is subject to significant volatility. If
revenues and/or earnings fail to meet the expectations of the investment
community, there could be an immediate and significant impact on the trading
price of the Company's stock.
The value of the Company's products relies substantially on its
technical innovation in fields in which there are many current patent filings.
The Company recognizes that as new patents are issued or are brought to the
Company's attention by the holders of such patents, it may be necessary for the
Company to withdraw products from the market, take a license from such patent
holders, or redesign its products. The Company does not believe that any of its
products infringe any valid claim of any patents or other proprietary rights of
third parties, but cannot be certain that they do not do so. In addition, the
legal costs and engineering time required to safeguard intellectual property or
to defend against litigation could become a significant expense of operations.
Such events could have a material adverse effect on the Company's revenues or
profitability. (See Note 15 to the Consolidated Financial Statements).
The Company is continuously evaluating alliances and external
investments in technologies related to its business, and has already entered
into alliances and made relatively small investments in a number of GPS related
technology companies. Acquisitions of companies, divisions of companies, or
products and alliances entail numerous risks, including (i) the potential
inability to successfully integrate acquired operations and products or to
realize anticipated synergies, economies of scale, or other value; (ii)
diversion of management's attention; and (iii) loss of key employees of acquired
operations. Any such problems could have a material adverse effect on the
Company's business, financial condition, and results of operations. No
assurances can be given that the Company will not incur problems from current or
future alliances, acquisitions, or investments. Furthermore, there can be no
assurance that the Company will realize value from any such alliances,
acquisitions, or investments.
Certain risks are inherent in making the types of changes in senior
management that occurred during the third fiscal quarter of 1998. While the
Company intends to name permanent replacements for such positions as soon as
practicable, there can be no assurance that such changes in senior management
and related uncertainties will not adversely affect the Company's consolidated
operating results and financial condition.
The ability of the Company to maintain its competitive technological
position will depend, in a large part, on its ability to attract, motivate and
retain highly qualified development and managerial personnel. Competition for
qualified employees in the Company's industry is intense, and there can be no
assurance that the Company will be able to attract, motivate and retain enough
qualified employees necessary for the future continued development of the
Company's business and products.
The Company has certain products that are subject to governmental and
similar certifications before they can be sold. For example, FAA certification
is required for all aviation products. Also, the Company's products that use
integrated radio communication technology require an end-user to obtain
licensing from The Federal Communications Commission (FCC) for frequency-band
usage. During the fourth quarter of 1998, the FCC temporarily suspended the
issuance of licenses for certain of the Company's Real-time Kinematic products
because of interference with certain other users of similar radio frequencies.
An inability or delay in obtaining such certifications or FCC's delays could
have an adverse effect on the Company's operating results. The Company's GPS
technology is dependent on the use of radio spectrums. The assignment of the
spectrums is controlled by a worldwide organization, the International
41
Telecomunications Union (ITU). Any reallocation of the radio spectrum could have
an adverse effect on the Company's operating results.
Under the terms of the Company's subordinated promissory notes, the Company
is required to meet a minimum consolidated net worth requirement. The Company is
in the process of obtaining a reduction of this minimum requirement. If the
Company is not successful in obtaining a reduction in the minimum consolidated
net worth requirement and net worth falls below the minimum required level, the
Company would be in default of its loan covenants. Such events could have a
material adverse effect on the Company's operations and liquidity.
Information with respect to GPS Navstar satellite system is included in
Part I of this report, under the caption "Background," paragraph 6.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities." The Standard will require the Company to
record all derivatives held on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings, or recognized in
other comprehensive income until the value related to the ineffective portion of
a hedge, if any, will be immediately recognized in earnings. The Company expects
to adopt SFAS 133 as of the beginning of its fiscal year 2000. The effect of
adopting the Standard is currently being evaluated, but is not expected to have
a material adverse effect on the Company's financial position or results of
operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Following is a discussion of the Company's exposure to market risk
related to changes in interest rates and foreign currency exchange rates. The
Company uses certain derivative financial instruments to manage these risks. The
Company does not use derivative financial instruments for speculative or trading
purposes. All financial instruments are used in accordance with board-approved
polices.
Market Interest Rate Risk
Short-term Investments Owned by the Company. As of January 1, 1999, the
Company had short-term investments of $16.3 million. These short-term
investments consist of highly liquid investments with original maturities at the
date of purchase between three and twelve months. These investments are subject
to interest rate risk and will decrease in value if market interest rates
increase. A hypothetical 10 percent increase in market interest rates from
levels at January 1, 1999, would cause the fair value of these short-term
investments to decline by an immaterial amount. Because the Company has the
ability to hold these investments until maturity the Company would not expect
the value of these investments to be affected to any significant degree by the
effect of a sudden change in market interest rates. Declines in interest rates
over time will, however, reduce the Company's interest income.
Outstanding Debt of the Company. As of January 1, 1999, the Company had
outstanding long-term debt of approximately $30.0 million of subordinated
promissory notes at a fixed interest rate of 10 percent. The interest rate of
42
this instrument is fixed. However, a hypothetical 10 percent decrease in the
interest rates would not have a material impact on the Company. Increases in
interest rates could, however, increase interest expense associated with future
borrowings of the Company, if any. The Company does not currently hedge against
interest rate increases.
Foreign Currency Exchange Rate Risk
The Company hedges risks associated with foreign currency transactions
in order to minimize the impact of changes in foreign currency exchange rates on
earnings. The Company utilizes forward contracts to hedge trade and intercompany
receivables and payables. These contracts reduce the exposure to fluctuations in
exchange rate movements, as the gains and losses associated with foreign
currency balances are generally offset with the gains and losses on the hedge
contracts. All hedge instruments are marked to market through earnings every
period.
The Company does not anticipate any material adverse effect on its
consolidated financial position utilizing the current hedging strategy.
All contracts have a maturity of less than one year, and the Company
does not defer any gains and losses, as they are all accounted for through
earnings every period.
The following table provides information about the Company's foreign
exchange forward contracts outstanding:
Foreign Contract Value Fair Value
Buy/ Currency Amount USD in USD
Currency Sell (in thousands) (in thousands) (in thousands)
- -------------------- --------- --------------------- -------------------- -----------------
YEN Buy 30,000 $ 251 $ 265
YEN Sell 415,900 $ 3,394 $ 3,707
NZD Buy 3,200 $ 1,705 $ 1,686
ECU Sell 1,565 $ 1,838 $ 1,833
STERLING Buy 650 $ 1,096 $ 1,078
DEM Sell 750 $ 444 $ 450
The hypothetical changes and assumptions made above will be different
from what actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by management, should the hypothetical
market changes actually occur over time. As a result, actual earnings effects in
the future will differ from those quantified above.
43
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
January 1, January 2,
1999 1998
- -------------------------------------------------------------------------------------------------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 40,865 $ 19,951
Short-term investments 16,269 53,171
Accounts receivable, less allowance for doubtful
accounts of $2,220 and $2,464 33,431 49,101
Inventories 37,166 42,385
Other current assets 4,173 4,147
-------------- ---------------
Total current assets of continuing operations 131,904 168,755
Property and equipment, at cost less accumulated
depreciation 15,104 19,676
Intangible assets less accumulated amortization 1,320 1,525
Deferred income taxes 405 356
Other assets 7,546 7,426
-------------- ---------------
Total assets of continuing operations 156,279 197,738
Net assets of discontinued operations - 9,925
============== ===============
Total assets $ 156,279 $ 207,663
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,388 $ 44
Accounts payable 13,000 18,724
Accrued compensation and benefits 4,696 5,830
Customer advances 808 830
Accrued liabilities 15,474 5,938
Accrued liabilities related to disposal of
General Aviation 6,743 -
Accrued warranty expense 5,681 3,453
Income taxes payable 2,158 2,664
-------------- ---------------
Total current liabilities 49,948 37,483
Noncurrent portion of long-term debt and other
liabilities 31,640 30,697
-------------- ---------------
Total liabilities 81,588 68,180
-------------- ---------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 3,000 shares
authorized; none outstanding - -
Common stock, no par value; 40,000 shares
authorized; 22,247 and 22,813 outstanding, respectively 121,501 132,655
Common stock warrants 700 700
Retained earnings (accumulated deficit) (46,718) 6,676
Unrealized gain on short-term investments 19 8
Foreign currency translation adjustment (811) (556)
-------------- ---------------
Total shareholders' equity 74,691 139,483
-------------- ---------------
Total liabilities and shareholders' equity $ 156,279 $ 207,663
============== ===============
See accompanying notes to consolidated financial statements.
44
CONSOLIDATED STATEMENTS OF OPERATIONS
Janaury 1, January 2, December 31,
Years ended 1999 1998 1996
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 260,279 $ 258,894 $ 221,924
--------------- --------------- ------------------
Operating expenses:
Cost of sales 134,723 118,903 104,881
Research and development 44,826 37,097 32,716
Sales and marketing 61,227 56,457 60,358
General and administrative 32,403 26,592 28,452
Restructuring charges 10,280 - 2,134
--------------- --------------- ------------------
Total operating expenses 283,459 239,049 228,541
--------------- --------------- ------------------
Operating income (loss) from continuing operations (23,180) 19,845 (6,617)
Nonoperating income (expense):
Interest and investment income 3,588 4,462 4,635
Interest and other expense (5,863) (3,524) (3,925)
Foreign exchange gain (loss) 234 234 (4)
--------------- --------------- ------------------
Total nonoperating income (expense) (2,041) 1,172 706
--------------- --------------- ------------------
Income (loss) before income taxes from continuing operations (25,221) 21,017 (5,911)
Income tax provision (benefit) 1,400 2,496 (300)
--------------- --------------- ------------------
Net income (loss) from continuing operations $ (26,621) $ 18,521 $ (5,611)
--------------- --------------- ------------------
Discontinued Operations:
Loss from discontinued operations (net of income tax
benefit of $176 in 1997 and zero in 1996) $ (6,911) $ (9,242) $ (5,691)
Estimated loss on disposal of discontinued operations (net of tax) $ (19,862) $ - $ -
--------------- --------------- ------------------
Loss on discontinued operations $ (26,773) $ (9,242) $ (5,691)
--------------- --------------- ------------------
Net income (loss) $ (53,394) $ 9,279 $ (11,302)
=============== =============== ==================
Basic net income (loss) per share from continuing operations $ (1.19) $ 0.83 $ (0.25)
Basic net income (loss) per share from discontinued operations $ (1.19) $ (0.41) $ (0.26)
=============== =============== ==================
Basic net income (loss) per share $ (2.38) $ 0.42 $ (0.51)
=============== =============== ==================
Shares used in calculating basic
net income (loss) per share 22,470 22,293 22,005
=============== =============== ==================
Diluted net income (loss) per share from continuing operations $ (1.19) $ 0.80 $ (0.25)
Diluted net income (loss) per share from discontinued operations $ (1.19) $ (0.40) $ (0.26)
=============== =============== ==================
Diluted net income (loss) per share $ (2.38) $ 0.40 $ (0.51)
=============== =============== ==================
Shares used in calculating diluted
net income (loss) per share 22,470 22,947 22,005
=============== =============== ==================
See accompanying notes to consolidated financial statements
45
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock Cumulative
and warrants Retained other Total
-------------------- earnings comprehensive shareholders'
Shares Amount (deficit) income/(loss) equity
- ------------------------------------------------------------------------------------------------------------------------
(In thousands)
Balance at December 31, 1995 21,642 $ 121,149 $ 8,699 $ 89 $ 129,937
Components of comprehensive income (loss):
Net loss (11,302) (11,302)
Unrealized gain (loss) on short-term investments (82) (82)
Currency translation adjustments 406 406
---------
Total comprehensive income (loss) (10,978)
Issuances of stock under employee plans 530 5,774 - - 5,774
Issuance of stock in connection with acquisition 141 2,857 - - 2,857
Repurchases of common stock (250) (3,545) - - (3,545)
--------------------------------------------------------
Balance at December 31, 1996 22,063 126,235 (2,603) 413 124,045
Components of comprehensive income (loss):
Net income 9,279 9,279
Unrealized gain (loss) on short-term investments (12) (12)
Currency translation adjustments (949) (949)
---------
Total comprehensive income 8,318
Issuances of stock under employee plans 890 8,954 - - 8,954
Repurchases of common stock (140) (1,834) - - (1,834)
--------------------------------------------------------
Balance at January 2, 1998 22,813 133,355 6,676 (548) 139,483
Components of comprehensive income (loss):
Net loss (53,394) (53,394)
Unrealized gain (loss) on short-term investments 11 11
Currency translation adjustments (255) (255)
----------
Total comprehensive income (loss) (53,638)
Issuances of stock under employee plans 514 4,977 - - 4,977
Repurchases of common stock (1,080) (16,131) - - (16,131)
======== =========== ========== ============ ===========
Balance at January 1, 1999 22,247 $ 122,201 $ (46,718) $ (792) $ 74,691
======== =========== ========== ============ ===========
See accompanying notes to consolidated financial statements
46
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 1, January 2, December 31,
Years ended 1999 1998 1996
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Cash flow from operating activities of continuing operations:
Net income (loss) from continuing operations $ (26,621) $ 18,521 $ (5,730)
Adjustments to reconcile net income (loss) from continuing
operations to cash flows from operating activities of continuing operations:
Depreciation and amortization expense 12,510 12,208 10,140
Write-down of fixed assets due to restructure 5,343 - -
Other (835) (980) 1,337
Decrease (increase) in assets:
Accounts receivable, net 15,475 (15,042) 4,342
Inventories 5,219 (6,988) (4,885)
Other current and noncurrent assets 1,622 (1,535) (2,567)
Deferred income taxes (49) 27 1,191
Increase (decrease) in liabilities:
Accounts payable (5,724) 4,961 (2,102)
Accrued compensation and benefits (1,134) (722) 807
Customer advances (22) (2,170) 1,920
Accrued liabilities 10,899 (967) 1,608
Income taxes payable (506) 1,795 (2,133)
------------ ------------- --------------
Net cash provided by operating activities of continuing operations 16,177 9,108 3,928
Net cash (used) by operating activities of discontinued operations (9,209) (11,159) (7,796)
------------ ------------- --------------
Net cash provided (used) by operating activities 6,968 (2,051) (3,868)
------------ ------------- --------------
Cash flow from investing activities:
Equity investments (1,548) (1,889) -
Acquisition of property and equipment (11,539) (10,393) (9,777)
Costs of capitalized patents (992) (910) (762)
Purchase of short-term investments (53,854) (63,854) (75,663)
Maturities/Sales of short-term investments 90,756 70,538 83,247
------------ ------------- --------------
Net cash provided (used) by investing activities of continuing operations 22,823 (6,508) (2,955)
Net cash provided (used) by investing activities of discontinued operations (339) (598) (582)
------------ ------------- --------------
Net cash provided (used) by investing activities 22,484 (7,106) (3,537)
------------ ------------- --------------
Cash flow from financing activities:
Issuance of common stock 4,977 8,954 5,774
Repurchase of common stock (16,131) (1,834) (3,545)
(Payment)/collection of notes receivable (219) (504) 66
(Payments)/proceeds on long-term debt and
revolving credit facilities 2,835 (179) (1,930)
------------ ------------- --------------
Net cash provided (used) by financing activities of continuing operations (8,538) 6,437 365
Net cash provided by financing activities of discontinued operations - - -
------------ ------------- --------------
Net cash provided (used) by financing activities (8,538) 6,437 365
------------ ------------- --------------
Increase (decrease) in cash and cash equivalents 20,914 (2,720) (7,040)
Cash and cash equivalents, beginning of period 19,951 22,671 29,711
============ ============= ==============
Cash and cash equivalents, end of period $ 40,865 $ 19,951 $ 22,671
============ ============= ==============
See accompanying notes to consolidated financial statements
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies:
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Due to the inherent nature of those
estimates, actual results could differ from expectations.
Basis of presentation. During fiscal year 1997, the Company changed its
fiscal year from a calendar year ending on December 31 to an annual period that
varies from 52 to 53, weeks and that always ends on the Friday nearest to
December 31, which for fiscal 1998 was January 1, 1999.
The Company's fiscal year will normally consist of four equal quarters
of 13 weeks each, or 52 weeks; however, due to the fact that there are not
exactly 52 weeks in a calendar year and that there is slightly more than one
additional day per year (not including the effects of leap year) in each
calendar year as compared to a 52-week fiscal year, the Company will have a
fiscal year composed of 53 weeks in certain fiscal years, as determined by when
Friday falls closest to December 31 in consecutive calendar years.
In those resulting fiscal years that have 53 weeks, the Company will
record an extra week of revenues, costs and related financial activity.
Therefore, the financial results of those fiscal years, and the associated
quarter, having the extra week, will not be exactly comparable to the prior and
subsequent 52-week fiscal years, and the associated quarters having only 13
weeks. Thus, due to the inherent nature of adopting a 52-53 week fiscal year,
the Company, analysts, shareholders, investors and others will have to make
appropriate adjustments to any analysis performed when comparing the Company's
activities and results in fiscal years that contain 53 weeks, to those that
contain the standard 52 weeks.
Principles of consolidation. The consolidated financial statements
include the accounts of Trimble Navigation Limited (the Company) and its
wholly-owned subsidiaries after elimination of all material intercompany
balances and transactions.
Foreign currency translation. Assets and liabilities of the Company's
foreign subsidiaries are translated into U.S. dollars at year-end exchange
rates, and revenues and expenses are translated at average rates prevailing
during the year. Local currencies are considered to be the functional currencies
for the Company's non-U.S. subsidiaries. Translation adjustments are deferred in
a separate component of shareholders' equity. Foreign currency transaction gains
and losses are included in results of operations as incurred.
Forward foreign currency exchange contracts. The Company's policy is to
hedge its known exposure to foreign currency transactions to minimize the effect
of changes in foreign currency exchange rates on consolidated results of
operations. The Company enters into simple forward foreign exchange contracts to
either buy or sell currency if the net position exceeds $400,000. The forward
foreign exchange contract obligates the Company to exchange predetermined
amounts of specified foreign currencies at specified exchange rates on specified
dates, or to make an equivalent U.S. dollar payment equal to the value of such
exchange. For contracts that are designated and effective as hedges, discounts
or premiums (the difference between the spot exchange rate and the forward
exchange rate at inception of the contract) are accreted or amortized to other
operating expenses over the contract lives, using the straight-line method,
while realized and unrealized gains and losses resulting from changes in the
spot exchange rate (including those from open, matured, and terminated
48
contracts) are included in results of operations. The related amounts due to or
from counterparties are included in other assets or other liabilities. Contract
amounts are marked to market, with changes in market value recorded in earnings
as foreign exchange gains or losses. To date, the Company has entered into
simple forward foreign currency exchange contracts to offset the effects of
changes in exchange rates on foreign-denominated intercompany receivables. At
January 1, 1999, the Company had forward foreign currency exchange contracts to
sell $3,394,000 of Japanese Yen, $1,838,000 of European Currency units, and
$444,000 of German Marks, and to buy $1,705,000 of New Zealand dollars,
$1,096,000 of British Pound Sterling, and $251,000 of Japanese Yen, at
contracted rates that mature over the next five months.
Cash and cash equivalents. Cash and cash equivalents include all cash
and highly liquid investments with original maturities of three months or less.
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of those instruments.
Short-term investments. The Company has classified all its short-term
investments as "available for sale." Available-for-sale securities are carried
at fair value, with the unrealized holding gains and losses, net of tax effects,
reported as a separate component of shareholders' equity. Fair value is based on
quoted market prices. The cost of debt securities in this classification is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization, as well as interest, dividends, and realized gains and
losses, is included in interest and investment income. The cost of securities
sold is based on the specific identification method.
At January 1, 1999, the Company's short-term investments consisted of
municipal securities totaling $16,269,000 at cost, which had unrealized gains of
$19,000 and had original maturities of less than one year from the date of
purchase. At January 2, 1998, the Company's short-term investments in U.S.
Treasury securities had a cost of $53,171,000 and had unrealized gains of
$8,000.
Concentration of credit risk. In entering into forward foreign exchange
contracts, the Company has assumed the risk that might arise from the possible
inability of counterparties to meet the terms of their contracts. The
counterparties to these contracts are major multinational commercial banks, and
the Company does not expect any losses as a result of counterparty defaults. The
Company is also exposed to credit risk in its accounts receivable and performs
ongoing credit evaluations of its customers and generally does not require
collateral. The expenses recorded for doubtful accounts receivable were $195,000
in 1998, $315,000 in 1997, and $1,159,000 in 1996.
Inventories. Inventories are stated at the lower of standard cost or
market. Standard costs approximate average actual costs.
Revenue recognition. The Company recognizes revenue from product sales
at the time of shipment, except as to revenue deferred for extended warranty
obligations. Substantially all technology licenses and research revenue have
consisted of initial license fees and royalties, which were recognized when
earned, when the Company had no remaining obligations.
Product warranty. The Company provides for estimated warranty costs at
the time of sale. The warranty period is generally for one year from date of
shipment, except for air transport products, for which the period is generally a
basic three year warranty period with an additional two year warranty sold with
some units. In addition, select military programs may require extended warranty
periods.
49
Advertising costs. The Company expenses the production costs of
advertising as incurred. Advertising expenses were $6,490,000, $6,328,000, and
$7,587,000 in 1998, 1997 and 1996, respectively.
Stock compensation. In accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," the Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its stock option plans and stock purchase plan. Accordingly,
it does not recognize compensation cost for stock options granted at or above
market. Note 11 to the Consolidated Financial Statements describes the plans
operated by the Company, and contains a summary of the pro forma effects to
reported net income (loss) and earnings (loss) per share for 1998, 1997, and
1996 as if the Company had elected to recognize compensation cost based on the
fair value of the options granted at grant date, as prescribed by SFAS No. 123.
Depreciation and amortization. Depreciation of property and equipment
owned or under capitalized leases is computed using the straight-line method
over the shorter of the estimated useful lives or the lease terms. Useful lives
range from three years for machinery and equipment to five years for furniture
and fixtures. Amortization of intangibles is computed using the straight-line
method over the estimated lives, generally periods of four years or less.
Interest. All interest costs incurred have been charged to interest
expense.
Net income (loss) per share. In 1997, the Financial Accounting and
Standards Board issued Statement No. 128, "Earnings Per Share." Statement 128
replaced the calculation of primary and fully diluted earnings (loss) per share
with basic and diluted earnings (loss) per share. Unlike primary earnings (loss)
per share, basic earnings (loss) per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings (loss) per share
is very similar to the previously reported fully diluted earnings (loss) per
share. All earnings (loss) per share amounts for all periods have been presented
and, where appropriate, restated to conform to the Statement 128 requirements.
Note 2 - The Company, industry segment, geographic, and customer information:
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Statement requires the Company to
report segment financial information consistent with the presentation made to
the Company's management for decision-making purposes. Prior year financial
information disclosures have been restated to be consistent with the
presentation required by SFAS 131 for the fiscal year ended January 1, 1999.
The Company operates in a single industry segment as a leader in
designing and developing innovative products enabled by GPS technology. The
Company provides end-user and Original Equipment Manufacture solutions for
diverse applications including surveying, mapping, marine survey, mining,
construction and agriculture, mobile positioning, commercial avionics, military
systems, automotive, timing, and geographic information systems. During 1998,
the Company announced that it was discontinuing its participation in General
Aviation. The Company sells its products through a direct sales force located in
fifteen countries, as well as through a worldwide network of dealers,
distributors and authorized representatives. Research and development activities
are conducted at the Company's facilities in Sunnyvale, California and
Christchurch, New Zealand. Manufacturing is performed in Sunnyvale, California
and Austin, Texas.
50
The Company manages its industry segment within two Business Units: the
Precision Positioning Group and the Mobile and Timing Technologies (MTT) Group.
Each Business Unit is managed separately because each Business Unit is
subject to different distribution, marketing, production, and technology
strategies. The Precision Positioning Group derives its revenues from GPS-based
land surveying, mining, construction and agriculture, geographic information
systems mapping, and marine survey markets. The Mobile and Timing Technologies
market derives its revenues from GPS-based automotive, timing, mobile
positioning technologies, commercial aviation and military systems markets, and
from development of software licenses and other rights for the use of GPS to
third parties. The Company evaluates these Business Units' performance and
allocates resources based on profit and loss from operations before income
taxes.
The accounting policies applied by each of the markets are the same as
those used by the Company in general.
The table on the following page presents revenues, operating income
(loss), and identifiable assets by the Company's Business Units. There is no
recognition of inter-Business Unit sales or transfers. Operating income (loss)
is net sales less operating expenses, excluding general corporate expenses,
interest income (expense), and income taxes. The identifiable assets the Chief
Operating Decision Maker (CODM) views by industry market are accounts receivable
and inventory. The Company does not report depreciation and amortization or
capital expenditures by industry markets to the CODM.
51
---------------------------------------
(in thousands) Year ended Janaury 1 ,1999
---------------------------------------
PPG MTT Total
---------------------------------------
External net revenue $ 165,951 $ 94,328 $ 260,279
Operating income/(loss) before corporate allocations 23,905 1,358 25,263
Corporate allocations(1) (15,093) (7,239) (22,332)
---------------------------------------
Operating income/(loss) from continuing operations $ 8,812 $ (5,881) $ 2,931
Assets:
Accounts receivable (2) $ 32,197 $ 14,837 $ 47,034
Inventory 10,042 16,251 26,293
---------------------------------------
Year ended January 2, 1998
---------------------------------------
PPG MTT Total
---------------------------------------
External net revenue $ 142,449 $ 116,445 $ 258,894
Operating income/(loss) before corporate allocations 11,644 19,248 30,892
Corporate allocations (1) (10,872) (6,368) (17,240)
---------------------------------------
Operating income/(loss) from continuing operations $ 772 $ 12,880 $ 13,652
Assets:
Accounts receivable (2) $ 31,301 $ 28,215 $ 59,516
Inventory 13,782 17,499 31,281
---------------------------------------
Year ended December 31, 1996
---------------------------------------
PPG MTT Total
---------------------------------------
External net revenue $ 140,934 $ 80,990 $ 221,924
Operating income/(loss) before corporate allocations 24,483 1,741 26,224
Corporate allocations (1) (15,366) (10,560) (25,926)
---------------------------------------
Operating income/(loss) from continuing operations $ 9,117 $ (8,819) $ 298
Assets:
Accounts receivable (2) $ 21,147 $ 20,527 $ 41,674
Inventory 11,318 16,730 28,048
(1) For the years ended January 1, 1999 and January 2, 1998, the Company
determined the amount of the corporate allocations charged to its Business Units
based on a percentage of the Business Units' monthly inventory balance and gross
profit. Allocation percentages were determined at the beginning of the
respective fiscal year.
(2) The accounts receivable number excludes cash in advance which is not
allocated between business unit segments.
Following are reconciliations corresponding to totals in the
accompanying consolidated financial statements (in thousands):
52
January 1, January 2, December 31,
Years ended 1999 1998 1996
- -------------------------------------------------------------------------------------------------------------------
Revenues:
- ------------------------------------------------------------
Total for reportable markets $ 260,279 $ 258,894 $ 221,924
=============== ================ ===============
Operating income/(loss) from continuing operations:
- ------------------------------------------------------------
Total for reportable markets $ 2,931 $ 13,652 $ 298
Unallocated corporate expenses (26,111) (1) 6,193 (2) (6,915)(3)
=============== ================ ===============
Operating income/(loss) $ (23,180) $ 19,845 $ (6,617)
=============== ================ ===============
Assets:
- ------------------------------------------------------------
Accounts Receivable total for reportable markets $ 47,034 $ 59,516 $ 41,674
Unallocated (4) (13,603) (10,415) (7,300)
=============== ================ ===============
Total $ 33,431 $ 49,101 $ 34,374
=============== ================ ===============
Inventory total for reportable markets $ 26,293 $ 31,281 $ 28,048
Common inventory (5) 10,873 11,104 10,810
=============== ================ ===============
Total net inventory $ 37,166 $ 42,385 $ 38,858
=============== ================ ===============
(1) Includes approximately $10.3 million of restructuring charges.
(2) For the years ended January 1, 1999 and January 2, 1998, the Company
determined the amount of the corporate allocations charged to its Business Units
based on a percentage of the Business Units' monthly inventory balance and gross
profit which percentage was determined at the beginning of the respective fiscal
year. However, due to the lower than expected actual level of corporate expenses
and higher than expected inventory balances in the year ended January 2, 1998,
the Company overallocated corporate expenses to the Business Units. This results
in a negative unallocated corporate expense amount as shown in the
reconciliation of operating profit (loss) from continuing operations for the
reportable segments to the amounts reported in the Company's statement of
operations.
(3) Includes approximately $2.1 million of restructuring charges.
(4) Includes cash in advance and reserves that are not allocated by
segment.
(5) This is inventory that is common between the business unit segments.
Parts can be used by either segment.
The geographic distribution of the Company's revenues and identifiable
assets are summarized in the table below in thousands.
Geographic Area
--------------------------------------------------------------------
Europe/ Other
U.S. Middle East Asia Foreign Countries Eliminations Total
1998
Sales to unaffiliated customers (1) $ 139,807 $ 63,987 $ 34,172 $ 22,314 $ - $ 260,279
Intergeographic transfers 79,416 - 1,153 - (80,569) -
--------------------------------------------------------------------------------------
Total revenue $ 219,223 $ 63,987 $ 35,325 $ 22,314 $ (80,569) $ 260,279
--------------------------------------------------------------------------------------
Identifiable assets $ 134,170 $ 13,384 $ 9,460 $ 28 $ (763) $ 156,279
1997
Sales to unaffiliated customers (1) $ 140,953 $ 56,844 $ 39,093 $ 22,003 $ - $ 258,894
Intergeographic transfers 29,481 2,482 1,198 - (33,161) -
--------------------------------------------------------------------------------------
Total revenue $ 170,434 $ 59,326 $ 40,291 $ 22,003 $ (33,161) $ 258,894
--------------------------------------------------------------------------------------
Identifiable assets $ 185,809 $ 11,897 $ 10,584 $ 39 $ (666) $ 207,663
1996
Sales to unaffiliated customers (1) $ 116,594 $ 47,084 $ 42,251 $ 15,996 $ - $ 221,924
Intergeographic transfers 70,366 - 1,474 - (71,840) -
--------------------------------------------------------------------------------------
Total revenue $ 186,960 $ 47,084 $ 43,725 $ 15,996 $ (71,840) $ 221,924
--------------------------------------------------------------------------------------
Identifiable assets $ 166,400 $ 14,355 $ 10,037 $ 5 $ (956) $ 189,841
(1) Sales attributed to countries based on the location of the customer.
Transfers between U.S. and foreign geographic areas are made at prices
based on total costs and contributions of the supplying geographic area. The
Company's subsidiaries in the Pacific Rim and Asia have derived revenue from
commissions from domestic operations in each of the periods presented. These
commission revenues and expenses are excluded from total revenue and operating
income (loss) in the preceding table. Sales to unaffiliated customers in Japan
are made by the Company's Japanese subsidiary.
53
No single customer accounted for 10% or more of total revenues in
fiscal 1998, 1997 or 1996.
Note 3 - Discontinued Operations:
On October 2, 1998, the Company adopted a plan to discontinue its
General Aviation division. The Company anticipates that the division will be
disposed of by June 30, 1999. Accordingly, the General Aviation division is
being reported as a discontinued operation for all periods presented in these
financial statements. Net assets of the discontinued operation at October 2,
1998, were written off and consisted primarily of inventory, property, plant,
equipment, and intangible assets.
The estimated loss on the disposal of the discontinued operation is
$19.9 million. The estimate includes a write-off of net assets of $12.7 million
and a provision of $7.2 million for costs of disposal, including severance
costs, facility and certain other contractual costs, and anticipated operating
losses through the estimated date of disposal.
The net assets, which have been written off in fiscal 1998, and the net
assets of discontinued operations for fiscal 1997 are summarized as follows:
January 1, January 2,
1999 1998
- ------------------------------------------------------------- --------------
(in thousands)
Inventory $ 7,283 $ 5,388
Other current assets 451 48
Plant and equipment, net 3,241 2,289
Other non-current assets 1,754 2,200
Less write offs (12,729) -
--------------
================ ==============
Net assets of discontinued operations $ - $ 9,925
================ ==============
The provision of $7.2 million consisted of $2.9 million of severance
costs, $1.9 million of facility and certain other contractual costs, and $2.4
million of anticipated operating losses through the estimated date of disposal
of March 31, 1999.
As of January 1, 1999, the Company had incurred expenses of $390,000.
The Company has a remaining provision of $6.7 million for the costs of disposal,
including severance costs, facility and certain other contractual costs, and
anticipated operating losses through the estimated date of disposal.
The net revenues of the discontinued operation are not included in net revenues
of continuing operations in the accompanying statements of operations. The
operating results of the discontinued operation are summarized as follows:
January 1, January 2, December 31,
1999 1998 1996
- -------------------------------------------------------------------------------------------
(in thousands)
Net revenues $ 13,482 $ 13,411 $ 11,736
Income (loss) before tax provision (6,911) (9,418) (5,691)
Income tax provision (benefit) - (176) -
================ ============== ==================
Net loss (6,911) (9,242) (5,691)
================ ============== ==================
Basic net loss per share $ (0.31) $ (0.41) $ (0.26)
Diluted net income loss per share $ (0.31) $ (0.40) $ (0.26)
54
Note 4 - Balance sheet components:
January 1, January 2,
1999 1998
- -----------------------------------------------------------------------------
(In thousands)
Inventories
Raw materials $ 22,480 $ 28,477
Work-in-process 4,033 6,230
Finished goods 10,653 7,678
---------------- ----------------
$ 37,166 $ 42,385
================ ================
Property and equipment
Machinery and equipment $ 59,520 $ 51,350
Furniture and fixtures 5,763 4,514
Leasehold improvements 6,700 6,007
---------------- ----------------
71,983 61,871
Less accumulated depreciation (56,879) (42,195)
---------------- ----------------
$ 15,104 $ 19,676
================ ================
Note 5 - Bank line of credit:
In August 1997, the Company entered into a three-year $50,000,000
unsecured revolving credit facility with four banks (the "Credit Agreement").
This credit facility replaced the previous two-year $30,000,000 unsecured line
that expired in August 1997. The Credit Agreement enables the Company to borrow
up to $50,000,000, provided that certain financial and other covenants are met.
Under a separate agreement the Company has an additional $5,000,000 line of
credit provided only by the lead bank under the Credit Agreement for "Letter of
Credit" purposes, and this is also subject to the covenants in the main
facility. The Credit Agreement provides for payment of a commitment fee of 0.25%
and borrowings to bear interest at 1% over LIBOR if the total funded debt to
EBITDA is less than or equal to 1.00 times, 0.3% and borrowings to bear interest
at 1.25% over LIBOR if the ratio is greater than 1.00 times and less than or
equal to 2.00 times, or 0.4% and borrowings to bear interest at 1.75% over LIBOR
if the ratio is greater than 2.00 times. In addition to borrowing at the
specified LIBOR rate, the Company has the right to borrow with interest at the
higher of (i) one of the bank's annual prime rate and (ii) the federal funds
rate plus 0.5%. To date, the Company has not made any borrowings under the
lines. In addition, the Company is restricted from paying dividends under the
terms of the Credit Agreement.
As of October 27, 1998, the Agent and Lenders of the $50,000,000
unsecured revolving credit facility granted a limited waiver of the Company's
compliance with various loan covenants as of October 2, 1998 until December 15,
1998. The Agent and Lenders granted a second limited waiver (an extension of the
first limited waiver) for the Company's compliance with various loan covenants
that extended from January 1, 1999 through February 16, 1999. As of February 16,
1999 the Company, the Agent and the Lenders agreed to new covenants that will be
tested by a compliance document as of April 2, 1999, and for the life of the
loan which expires in August of 2000. The $50,000,000 revolving credit facility
was modified to include the $5,000,000 line of credit for Letter of Credit
purposes to simplify the entire arrangement as less than $150,000 was being
utilized under the separate facility as of January 1, 1999. To date, the Company
has not made any borrowings under the $50,000,000 revolving credit facility.
Note 6 - Restructuring:
In the third and fourth quarters of fiscal 1998, the Company recorded
restructuring charges totaling $10.3 million classified as operating expenses.
55
These charges are a result of the Company's reorganization to improve business
processes and to decrease organizational redundancies, to improve management
accountability and to improve the Company's focus on profitable operations. As a
result of the reorganization, the Company has downsized its operations,
including reducing headcount and facilities space usage and canceling its
enterprise wide information system project and certain research and development
projects. The impact of these decisions is that significant amounts of the
Company's fixed assets, prepaid expenses, and purchased technology have been
impaired and certain liabilities incurred. The Company has written down the
related assets to their net realizable values and made provisions for the
estimated liabilities.
The elements of the charges in 1998 and the amounts remaining at January 1,
1999, on the balance sheet are as follows (in thousands):
Remaining in
Total Amounts paid/ accrued liabilites
charged to written off as of
expense in 1998 January 1, 1999
---------------- -------------- --------------------
Employee termination benefits $ 2,864 $ (1,200) $ 1,664
Facility space reductions 1,061 - 1,061
Enterprise wide information system
abandonment 6,360 (4,895) 1,465
================= ============= ====================
Subtotal $ 10,285 $ (6,095) $ 4,190
================= ============= ====================
The cash expenditures associated with the remaining obligations will
occur primarily in fiscal 1999.
Note 7 - Long-term debt and other noncurrent liabilities:
Long-term debt consists of the following:
January 1, January 2,
1999 1998
- ---------------------------------------------------------------------------
(In thousands)
Subordinated notes $ 29,703 $ 29,600
Installment loan obligations 2,776 -
Other 549 1,141
------------- -------------
33,028 30,741
Less current portion 1,388 44
------------- -------------
Noncurrent portion $ 31,640 $ 30,697
============= =============
During June 1994, the Company issued $30.0 million of subordinated
promissory notes bearing interest at an annual rate of 10%, with principal due
on June 15, 2001. Interest payments are due monthly in arrears. The notes are
subordinated to the Company's senior debt, which is defined as all pre-existing
indebtedness for borrowed money and certain future indebtedness for borrowed
money (including, subject to certain restrictions, secured bank borrowings and
borrowed money for the acquisition of property and capital equipment) and trade
debt incurred in the ordinary course of business. If the Company prepays any
portion of the principal, it is required to pay additional amounts if U.S.
Treasury obligations of a similar maturity exceed a specified yield. Under the
agreement, the Company is restricted from paying dividends.
The issuance of the notes also included warrants entitling holders to
purchase 400,000 shares of common stock at a price of $10.95 per share at any
time through June 15, 2001. The warrants are included in shareholders' equity at
their appraised fair value of $700,000 at the time of issue. The net proceeds of
56
the notes were $29,348,000 after issuance costs of $652,000. The notes are shown
under noncurrent liabilities, net of appraised fair value attributed to the
warrants. The value of the warrants and the issuance costs are being amortized
and included in interest expense, using the interest rate method over the term
of the subordinated promissory notes. The effective annual interest rate on the
notes is 11.5%. Under the terms of the note, the Company is required to meet a
minimum consolidated net worth requirement. The Company is in the process of
negotiating a reduction of this minimum requirement. If the company is not
successful in negotiating a reduction in the minimum consolidated net worth
requirement and the Company incurs future losses; the accumulated losses may
cause the company to be in default of its loan covenants. Such events could have
a material adverse effect on the Company's profitability.
Other long-term debt represents deferred rent obligations, rental
inducements on certain of the Company's leased facilities, an installment loans
for a fixed asset purchase. There are three installment loans for capitalized
software, which in total, have two annual payments of $1,388,000. The first
installment loan consists of two payments of $129,480.00 due May 30, 1999 and
May 30, 2000. The second installment loan consists of two payments of
$942,800.00 due May 30, 1999 and May 30, 2000. The third installment loan
consists of two payments of 315,912.00 due May 01, 1999 and May 01, 2000. The
lease agreements provide for scheduled increases in lease payments over the
terms of the leases.
Note 8 - Lease obligations and commitments:
The Company's principal facilities in the United States are leased
under noncancelable operating leases that expire at various dates from 1999
through 2003. The Company has options to renew certain of these leases for an
additional five years. The Company's United Kingdom subsidiary leases a facility
under an operating lease that expires in 2015.
Future minimum payments required under noncancelable operating leases
are as follows:
Operating
Leases
- ----------------------------------------------------------------------
(In thousands)
1999 $ 4,991
2000 4,131
2001 1,752
2002 1,372
2003 690
Thereafter 905
================
Total $ 13,841
================
Rent expense under operating leases was $6,287,000 in 1998, $5,472,400 in
1997, and $6,004,800 in 1996.
Note 9 - Fair value of financial instruments:
Statement of Financial Accounting Standard No. 107, "Disclosures about
Fair Value of Financial Instruments" requires disclosure of the following
information about the fair value of certain financial instruments for which it
is practicable to estimate that value. None of the financial instruments are
held or issued for trading purposes. The carrying amounts and fair values of the
Company's financial instruments are as follows:
57
January 1, 1999
--------------------------------
Carrying Fair
(In thousands) Amount Value
- ------------------------------------------------------------------------------
Assets:
Cash and cash equivalents (Note 1) $ 40,865 $ 40,865
Short-term investments (Note 1) 16,269 16,269
Liabilities:
Forward foreign exchange contracts (Note 1) $ 281 $ 281
Subordinated notes (Note 7) 29,703 30,167
The fair value of the subordinated notes has been estimated using an
estimate of the interest rate the Company would have had to pay on issuance of
notes with a similar maturity, and discounting the cash flows at that rate. The
fair values do not give an indication of the amount that the Company would have
to pay to extinguish any of this debt.
The fair value of forward foreign exchange contracts is estimated based
on quoted market prices of comparable contracts, and these contracts are
restated to the fair value at the end of every month.
Note 10 - Income taxes:
The income tax provision (benefit) consists of the following (in
thousands):
January, 1 January 2, December 31,
Years ended 1999 1998 1996
- --------------------------------------------------------------------------------
Federal:
Current $ 233 $ 1,344 $ (2,557)
Deferred - - 1,208
----------- ----------- -----------
233 1,344 (1,349)
----------- ----------- -----------
State:
Current 20 10 5
Deferred - - -
----------- ----------- -----------
20 10 5
----------- ----------- -----------
Foreign:
Current 1,195 1,116 1,060
Deferred (48) 26 (16)
----------- ----------- -----------
1,147 1,142 1,044
----------- ----------- -----------
Income tax provision (benefit) $ 1,400 $ 2,496 $ (300)
=========== =========== ===========
The domestic income (loss) from continuing operations before income
taxes (including royalty income subject to foreign withholding taxes) was
approximately ($26,220,000), $18,800,000, and ($7,615,000) in fiscal years 1998,
1997 and 1996.
The income tax provision (benefit) differs from the amount computed by
applying the statutory federal income tax rate to income before taxes. The
sources and tax effects of the differences are as follows (in thousands):
58
January, 1 January 2, December 31,
Years ended 1999 1998 1996
- --------------------------------------------------------------------------------
Expected tax from continuing operations
at 35% in all years $ (8,827) $ 7,356 $ (2,069)
Tax account valuation adjustments - (4,100) (1,630)
Operating loss not utilized (utilized) 9,178 (1,410) 2,585
Foreign withholding taxes 467 403 170
Foreign tax rate differential 329 (28) 277
Other 253 275 367
----------- ----------- -----------
Income tax provision (benefit) $ 1,400 $ 2,496 $ (300)
=========== =========== ===========
Effective tax rate (6%) 12% 5%
=========== =========== ===========
The components of deferred taxes consist of the following (in
thousands):
January, 1 January 2,
1999 1998
- -----------------------------------------------------------------------------
Deferred tax liabilities:
Goodwill $ - $ 866
Other individually immaterial items 178 290
----------- -----------
Total deferred tax liabilities 178 1,156
----------- -----------
Deferred tax assets:
Inventory valuation differences 10,423 6,480
Expenses not currently deductible 9,907 3,017
Federal credit carryforwards 7,252 6,316
Depreciation 3,689 1,163
State credit carryforwards 3,138 2,099
Federal net operating loss (NOL) carryforward 3,023 -
Warranty 2,090 1,234
Other individually immaterial items 2,660 825
----------- -----------
Total deferred tax assets 42,182 21,134
Valuation allowance (41,599) (19,622)
----------- -----------
Total deferred tax assets 583 1,512
----------- -----------
Total net deferred tax assets $ 405 $ 356
=========== ===========
The NOL and credit carryforwards listed above expire in 1999 through
2018.
The valuation allowance decreased by $300 thousand in 1997.
Approximately $7.2 million of the valuation allowance at January 1, 1999 relates
to the tax benefits of stock option deductions which will be credited to equity
when realized.
Note 11 - Shareholders' equity:
1993 Stock Option Plan. In 1992, the Company's Board of Directors
adopted the 1993 Stock Option Plan (1993 Plan) to replace the Company's 1983
Stock Option Plan, which expired in January 1993. The 1993 Plan, as amended to
date and approved by shareholders, provides for the granting of incentive and
nonstatutory stock options for up to 3,800,000 shares of Common Stock to
59
employees, consultants and directors of the Company. Incentive stock options may
be granted for exercise prices that are not less than 100% of the fair market
value of Common Stock on the date of grant. All employee stock options granted
have 120-month terms, and vest at a rate of 20% at the first anniversary of
grant, and monthly thereafter at an annual rate of 20%, with full vesting
occurring at the fifth anniversary of grant. The exercise price of nonstatutory
stock options issued under the 1993 Plan must be at least 85% of the fair market
value of Common Stock on the date of grant. As of January 1, 1999, options to
purchase 2,867,658 shares were outstanding and 374,211 shares were available for
future grant under the 1993 Stock Option Plan.
1990 Director Stock Option Plan. In December 1990, the Company adopted
a Director Stock Option Plan under which the Company has reserved 380,000 shares
of Common Stock for options to be granted to nonemployee directors. At January
1, 1999, options to purchase 158,333 shares were outstanding and 145,833 shares
were available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan. In 1992 the Company's Board of
Directors approved the 1992 Management Discount Stock Option Plan ("Discount
Plan"). Under the Discount Plan, 300,000 nonstatutory stock options were
reserved for grant to management employees at exercise prices that are
significantly discounted from the fair market value of Common Stock on the dates
of grant. Options are generally exercisable six months from the date of grant.
As of January 1, 1999, there were 129,974 shares available for future grants.
For accounting purposes, compensation cost on these grants is measured by the
excess over the discounted exercise prices of the fair market value of Common
Stock on the dates of option grant. Noncash compensation cost related to options
exercised in 1998, 1997, and 1996 amounted to $0, $275,000, and $48,744,
respectively. As of January 1, 1999, all outstanding options had been exercised.
1988 Employee Stock Purchase Plan. In 1988, the Company established an
employee stock purchase plan under which an aggregate of 2,350,000 shares of
Common Stock have been reserved for issuance to date as approved by the
shareholders. The plan permits full-time employees to purchase Common Stock
through payroll deductions at 85% of the lower of the fair market value of the
Common Stock at the beginning or at the end of each six-month offering period.
In 1998, 332,154 shares were issued under the plan for aggregate proceeds of
$2,827,000. At January 1, 1999, the number of shares reserved for future
purchases was 402,842.
As stated in Note 1, the Company has elected to follow APB 25 and
related Interpretations in accounting for its employee stock options and stock
purchase plans. The alternative fair value accounting provided for under SFAS
123 requires use of option pricing models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123 and has been determined as if the Company had accounted for
its employee stock options and purchases under the Employee Stock Purchase Plan
using the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1998, 1997, and 1996:
January 1, January 2, December 31,
1999 1998 1996
------------------- ---------------- ------------------
Expected dividend yield $ - $ - $ -
Expected stock price volatility 55.65% 58.07% 58.76%
Risk-free interest rate 5.76% 6.36% 6.29%
Expected life of options after vesting 1.20 1.19 0.77
60
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, and the
estimated fair value of purchases under the Employee Stock Purchase Plan is
expensed in the year of purchase. The Company's pro forma information (in
thousands except for per share data) is as follows:
January 1, January 2, December 31,
1999 1998 1996
----------------- ---------------- ---------------
Net income (loss) - as reported $ (53,394) $ 9,279 $ (11,302)
Net income (loss) - pro forma $ (58,661) $ 2,899 $ (15,806)
Basic income (loss) per share - as reported $ (2.38) $ 0.42 $ (0.51)
Basic income (loss) per share - pro forma $ (2.61) $ 0.13 $ (0.72)
Diluted income (loss) per share - as reported $ (2.38) $ 0.40 $ (0.51)
Diluted income (loss) per share - pro forma $ (2.61) $ 0.13 $ (0.72)
Because the fair value method is applicable only to options granted
subsequent to December 31, 1994, pro forma effects will not be fully reflected
until 1998. Accordingly, these figures are unlikely to be representative of the
effects on reported net income for future years.
Exercise prices for options outstanding as of January 1, 1999, ranged
from $8.00 to $29.625. The weighted average remaining contractual life of those
options is 7.59 years. In view of the wide range of exercise prices, the Company
considers it appropriate to provide the following additional information in
respect of options outstanding:
Total Currently exercisable
Number Weighted-average Weighted-average Number Weighted-average
Range (in thousands) exercise price remaining contractul life (in thousands) exercise price
- ------------------------ --------------- ----------------- ------------------------ ----------------- --------------------
$8.0000-$9.5000 305 $8.76 6.13 123 $8.92
$9.6250 -$9.8750 72 $9.63 3.75 60 $9.63
$9.9375-$9.9375 488 $9.94 9.56 1 $9.94
$10.0000-$12.0000 336 $10.78 5.70 208 $10.63
$12.2500-$13.1875 314 $12.80 7.81 135 $12.81
$15.3750-$15.3750 762 $15.38 7.68 306 $15.38
$16.8750-$17.0000 43 $17.00 6.58 26 $17.00
$17.5000-$17.5000 375 $17.50 8.34 103 $17.50
$17.8750-$23.0000 329 $19.35 7.67 146 $19.30
$29.6250-$29.6250 2 $29.63 6.46 1 $26.63
- ------------------------ --------- ----------------- ------------------- ----------------- ----------------------
$8.0000-$29.6250 3,026 $13.64 7.59 1,110 $13.91
Activity during 1998, 1997 and 1996 under the combined plans was as
follows:
61
January 1, January 2, December 31,
1999 1998 1996
-------------------------------- ------------------------------- -----------------------------
Weighted-average Weighted-average Weighted-average
Options exercise price Options exercise price Options exercise price
----------- ------------------- ---------- ------------------ ----------- ----------------
Outstanding at beginning of year 2,696 $15.10 2,577 $13.06 2,525 $13.49
Granted 1,117 11.40 962 16.45 1,522 16.57
Exercised (132) 11.41 (635) 8.78 (316) 9.35
Canceled (655) 16.30 (208) 15.40 (1,154) 19.61
----------- ---------- -----------
Outstanding at end of year 3,026 $13.64 2,696 $15.10 2,577 $13.06
Exercisable at end of year 1,110 $13.91 700 $13.20 886 $9.99
Weighted-average fair value of options
granted during year $5.21 $8.30 $5.24
The Company took steps to further strengthen and improve employee
relationships and incentives by extending the period of exercisability for all
current outstanding employee stock options from five years and three months to
ten years effective as of November 3, 1998.
During 1996, under a program approved by the Board of Directors, all
employees, with the exception of officers, were offered an exchange option to
replace the stock options previously issued to them, with new stock options (at
an exchange ratio of 1 to 1, with a restarted vesting period commencing on the
date of exchange) at a new lower price. Options on 825,456 shares were canceled
(reported above as cancellations) and replaced (reported above as options
granted).
401(k) Plan. Under the Company's 401(k) Plan, U.S. employee
participants may direct the investment of contributions to their accounts among
certain mutual funds and the Trimble Navigation Limited Common Stock Fund. The
Fund purchased 48,302 shares of Common Stock for an aggregate of $650,000 in
1998. The Company, at its discretion, matches individual employee 401(k) Plan
contributions up to $100 per month. The Company's matching contributions to the
401(k) Plan were $1,159,000 in 1998, $1,033,000 in 1997 and $1,031,000 in 1996.
Profit-Sharing Plan. In 1995, the Company introduced an employee
profit-sharing plan in which all employees, excluding executives, participate.
The plan distributes to employees approximately 5% of quarterly income before
taxes. Payments under the plan during 1998, 1997, and 1996 were $138,000,
$549,000, and $43,000, respectively.
Common shares reserved for future issuances. As of January 1, 1999, the
Company has reserved 4,078,851 common shares for issuance upon exercise of
options outstanding and options available for grant under the 1993 Stock Option,
1990 Director Stock Option, and 1992 Management Discount Stock Option plans, and
available for issuance under the 1988 Employee Stock Purchase plan.
Note 12 - Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share." The
Company adopted this standard, as required for its January 2, 1998, Financial
Statements. For the years presented, the Company presents both basic and diluted
earnings (loss) per share.
The following data show the amounts used in computing earnings (loss)
per share and the effect on the weighted-average number of shares of dilutive
potential Common Stock.
62
January 1, January 2, December 31,
1999 1998 1996
- --------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Numerator:
Income available to common shareholders:
Used in basic and diluted income (loss) per share
from continuing operations $ (26,621) $ 18,521 $ (5,611)
Used in basic and diluted income (loss) per share
from discontinued operations (26,773) (9,242) (5,691)
------------ ------------ -------------
Used in basic and diluted income (loss) per share $ (53,394) $ 9,279 $ (11,302)
------------ ------------ -------------
Denominator:
Weighted-average number of common
shares used in basic income (loss) per share 22,470 22,293 22,005
Effect of dilutive securities:
Common stock options - 530 -
Common stock warrants - 124 -
------------ ------------ -------------
Weighted-average number of common
shares and dilutive potential common shares
used in diluted income (loss) per share 22,470 22,947 22,005
============ ============ ==============
Basic income (loss) per share from continuing operations $ (1.19) $ 0.83 $ (0.25)
Basic loss per share from discontinued operations (1.19) (0.41) (0.26)
============ ============ =============
Basic income (loss) per share $ (2.38) $ 0.42 $ (0.51)
============ ============ =============
Diluted income (loss) per share from continuing operations $ (1.19) $ 0.80 $ (0.25)
Diluted loss per share from discontinued operations (1.19) (0.40) (0.26)
============ ============ =============
Diluted income (loss) per share $ (2.38) $ 0.40 $ (0.51)
============ ============ =============
If the Company had reported net income in 1998, an additional 387
common equivalent shares related to outstanding options and warrants would have
been included in the calculation of diluted loss per share.
Note 13 - Comprehensive Income (Loss):
The components of accumulated other comprehensive income (loss), net of
related tax at January 1, 1999 and January 2, 1998 were as follows:
Janaury 1, January 2,
1999 1998
- --------------------------------------------------------------------------------
(in thousands)
Currency translation adjustments ($811) ($556)
Unrealized gain (loss) on short term investments 19 8
============ =============
Accumulated other comprehensive income (loss) ($792) ($548)
============ =============
Note 14 - Statement of cash flows data:
January 1, January 2, December 31,
Years ended 1999 1998 1996
- ------------------------------------------------------------------------------------------------------
(In thousands)
Supplemental schedule of noncash investing activities:
Common stock issued for Terra Corporation $ - $ - $ 2,857
------------ ------------ --------------
Supplemental disclosure of cash flow information:
Interest paid $ 3,377 $ 3,313 $ 3,457
------------ ------------ --------------
Income taxes paid $ 1,585 $ 167 $ 483
------------ ------------ --------------
63
Note 15 - Litigation:
Settled Matters. On May 8, 1998, Satloc, Inc. a Trimble customer and
competitor, filed a lawsuit in the United States District Court for the District
of Arizona, action No. CIV 98-0837 PHX PGR. The complaint alleged
misappropriation of trade secrets and confidential business information,
intentional interference with contractual relations, intentional interference
with prospective contractual relations, unfair competition, and unjust
enrichment, arising from Trimble's hiring of a former Satloc, Inc. sales person.
The complaint seeks injunctive relief, compensatory and punitive damages, an
accounting, and attorney fees. Trimble has answered the complaint. In September
1998, Satloc, Inc. dismissed its claims with prejudice.
In October 1995, an employee who was terminated by the Company in 1992
filed a complaint against the Company, alleging that his incentive stock options
continued to vest subsequent to his termination. He sought damages of
approximately $1,000,000. The Company filed a general denial in answer to the
complaint. The trial was concluded on September 25, 1997, and the jury rendered
its verdict in favor of the Company on all causes of action. The judgment in the
Company's favor is now final and nonappealable.
Pending Matters. On December 6, 1995, two shareholders filed a class action
lawsuit against the Company and certain directors and officers of the Company.
Subsequent to that date, additional lawsuits were filed by other shareholders.
The lawsuits were subsequently amended and consolidated into one complaint,
which was filed on April 5, 1996. The amended consolidated complaint sought to
bring an action as a class action consisting of all persons who purchased the
Common Stock of the Company during the period April 18, 1995, through December
5, 1995 (the "Class Period"). The plaintiffs alleged that the defendants sought
to induce the members of the Class to purchase the Company's Common Stock during
the Class Period at artificially inflated prices. The plaintiffs seek recissory
or compensatory damages with interest thereon, as well as reasonable attorneys'
fees and extraordinary equitable and/or injunctive relief. The Company filed a
motion to dismiss, which was heard by the Court on August 16, 1996. The court
rejected the plaintiffs' lawsuit, but allowed thirty days to resubmit its
complaint. On September 24, 1996, the plaintiffs filed an amended complaint. On
April 28, 1997, the Court granted in part, and denied in part, the Company's
motion to dismiss. The Court further granted the plaintiffs leave to replead
certain dismissed claims. On June 19, 1997, the plaintiffs filed a third amended
and consolidated complaint. The Company has answered the complaint by denying
all liability. The Company does not believe that it is possible to predict the
outcome of this litigation. The parties have executed a Memorandum of
Understanding with respect to settlement of the litigation and anticipate the
negotiation and execution of a definitive agreement in the near term. The
settlement will be subject to approval by the court.
On November 12, 1998, the Company brought suit in district court in San
Jose, California against Silicon RF Technology, Inc. (SiRF) for alleged patent
infringement of three Trimble patents. SiRF has a counter claim. No action by
the Court has taken place yet.
On January 31, 1997, counsel for one Philip M. Clegg wrote to Trimble
asserting that a license under Clegg's U.S. Patent No. 4,807,131, which was
issued February 21, 1989, would be required by Trimble because of a joint
venture Trimble had entered into with Caterpillar Corporation concerning the use
of Trimble GPS products in combination with earth moving equipment. To date, no
infringement action has been initiated on behalf of Mr. Clegg. The Company does
not believe that there will be any adverse consequences to the Company as a
result of this inquiry.
64
Other Matters. Western Atlas, a Houston based supplier to the oil
exploration business, has accused Trimble and other GPS manufactures, suppliers
and users of infringing two U.S. Patents owned by it, namely U.S. Patent Nos.
5,014,066 and 5,619,212. Western Atlas contends that the foregoing patents cover
certain aspects of GPS receiver design. Lawsuits for infringement of these two
patents are currently pending in federal district court in Houston, Texas
against Garmin International Inc. and Rockwell International Corp. Although
Trimble has not been sued by Western Atlas on the foregoing patents, Trimble has
instructed its counsel thoroughly to investigate the infringement threat. At
present Trimble does not expect this threat to have adverse consequences on
Trimble's business.
The Company is also a party to other disputes incidental to its
business. The Company believes the ultimate liability of the Company as a result
of such disputes, if any, would not be material to its overall financial
position, results of operations, or liquidity.
Note 16 - Selected quarterly financial data (unaudited):
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
1998
Total revenue $ 71,656 $ 71,919 $ 57,420 $ 59,284
Gross margin 37,591 36,419 24,828 26,718
Operating income (loss) 4,340 2,434 (13,387) (16,567)
Net income (loss) from continuing operations 4,060 2,631 (15,182) (18,130)
Net income (loss) from discontinued operations (2,145) (2,376) (22,252) -
Net income (loss) 1,915 255 (37,434) (18,130)
Basic net income (loss) per share from continuing operations 0.17 0.11 (0.68) (0.82)
Basic net income (loss) per share from discontinued operations (0.09) (0.10) (1.00) -
============ =========== ============ ============
Basic net income (loss) $ 0.08 $ 0.01 $ (1.68) $ (0.82)
============ =========== ============ ============
Diluted net income (loss) per share from continuing operations 0.17 0.11 (0.68) (0.82)
Diluted net income (loss) per share from discontinued operations (0.09) (0.10) (1.00) -
============ =========== ============ ============
Diluted net income (loss) $ 0.08 $ 0.01 $ (1.68) $ (0.82)
============ =========== ============ ============
1997
Total revenue $ 57,470 $ 65,415 $ 61,806 $ 74,203
Gross margin 30,848 36,286 34,290 38,567
Operating income (loss) 3,647 6,722 4,022 5,452
Net income loss from continuing operations 3,281 6,189 3,997 5,052
Net income loss from discontinued operations (1,852) (2,324) (2,405) (2,659)
Net income (loss) 1,429 3,865 1,592 2,393
Basic net income (loss) per share from continuing operations 0.14 0.29 0.18 0.23
Basic net income (loss) per share from discontinued operations (0.08) (0.11) (0.11) (0.12)
============ =========== ============ ============
Basic net income (loss) $ 0.06 $ 0.18 $ 0.07 $ 0.11
============ =========== ============ ============
Diluted net income (loss) per share from continuing operations 0.14 0.27 0.17 0.21
Diluted net income (loss) per share from discontinued operations (0.08) (0.10) (0.10) (0.11)
============ =========== ============ ============
Diluted net income (loss) $ 0.06 $ 0.17 $ 0.07 $ 0.10
============ =========== ============ ============
Significant quarterly items include the following: (i) in the third
quarter of 1998 the Company recorded a$2,453,000 restructuring charge, (ii) in
the fourth quarter of 1998 the Company recorded a $7,827,000 restructuring
charge, (iii) in the second quarter of 1997 the Company recorded revenue of
$2,222,000 from a technology license; (iv) in the third quarter of 1997 the
Company recorded revenue of $1,800,000 from a development agreement in
connection with an irrevocable nonrefundable nonrecurring engineering fee.
65
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders Trimble Navigation Limited
We have audited the accompanying consolidated balance sheets of Trimble
Navigation Limited as of January 1, 1999 and January 2, 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended January 1, 1999. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above
present fairly, in all material respects, the consolidated financial position of
Trimble Navigation Limited at January 1, 1999 and January 2, 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended January 1, 1999 in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Palo Alto, California
January 26, 1999
66
Item 9. Changes in and Disagreements with Accountants on Accounting Financial
Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The section titled "Nominees" and the section titled "Compliance with
Section 16(a) of the Exchange Act" in the Company's Proxy Statement for its 1999
annual meeting of shareholders to be held on June 2, 1999, (Proxy Statement)
with respect to directors of the Company and compliance of the directors and
executive officers of the Company with Section 16(a) of the Exchange Act
required by this item are incorporated herein by reference.
The information with respect to the executive officers of the Company
required by this item is included in Part I hereof under the caption "Executive
Officers of the Registrant."
Item 11. Executive Compensation
The following sections of the Proxy Statement are incorporated herein
by reference: "Compensation of Executive Officers," "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation," and "Compensation
Committee Report" and "Company Performance."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The section titled "Security Ownership of Certain Beneficial Owners and
Management" of the Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The section titled "Certain Relationships and Related Transactions" of
the Proxy Statement is incorporated herein by reference.
67
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
form 8-K
(a) 1. Financial Statements
The following consolidated financial statements required by
this item are included in Part II Item 8 hereof under the caption "Financial
Statements and Supplementary Data."
Page In This
Annual Report
On Form 10-K
Consolidated Balance Sheets at January 1,
1999 and January 2, 1998.................... 44
Consolidated Statements of Operations for
each of the three fiscal years in the period
ended January 1, 1999........................ 45
Consolidated Statement of Shareholders'
Equity for the three fiscal years
ended January 1, 1999........................ 46
Consolidated Statements of Cash Flows for
each of the three fiscal years in the period
ended January 1, 1999........................ 47
Notes to Consolidated Financial Statements 48-65
2. Financial Statement Schedules
The following financial statement schedule is filed as part of
this report:
Page In This
Annual Report
On Form 10-K
Schedule II - Valuation and Qualifying
Accounts........................... S-1
All other schedules have been omitted as they are either not required
or not applicable, or the required information is included in the consolidated
financial statements or the notes thereto.
68
3. Exhibits
Exhibit
Number
3.1 Restated Articles of Incorporation of the Company filed
June 25, 1986. (18)
3.2 Certificate of Amendment of Articles of Incorporation of the Company
filed October 6, 1988. (18)
3.3 Certificate of Amendment of Articles of Incorporation of the Company
filed July 18, 1990. (18)
3.4 Certificate of Determination of the Company filed
February 19, 1999. (18)
3.8 Amended and Restated Bylaws of the Company. (16)
4.1 Specimen copy of certificate for shares of Common Stock of the
Company. (1)
4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (17)
10.4 Form of Indemnification Agreement between the Company and its officers
and directors. (1)
10.5 Loan Agreement dated December 21, 1984, between the Company and
certain lenders. (1)
10.6 Note Purchase Agreement dated July 7, 1986, between the Company and
certain purchasers. (1)
10.7 Form of Common Stock Purchase Agreement dated March 1989 between the
Company and certain investors. (1)
10.8* Memorandum of Understanding dated March 11, 1988, and License
Agreement dated September 5, 1988, between the Company and AEG
Aktiengesellschaft, with Amendments No. 1, No. 2, and No. 3 thereto,
and Letter Agreement dated December 22, 1989, between Trimble and
Telefunken Systemtechnik GmbH. (1)
10.9 Note Purchase Agreement dated December 6, 1988, between the Company
and AEG Aktiengesellschaft. (1)
10.10 Master Equipment Lease Agreement dated April 26, 1990, between the
Company and MATSCO Financial Corporation, and schedule of lease
extensions. (1)
10.11* Agreement dated February 6, 1989, between the Company and Pioneer
Electronic Corporation. (1)
10.15 International OEM Agreement dated May 30, 1989, between the Company
and Geotronics AB. (1)
69
10.16 Patent License Agreement dated January 18, 1990, between the Company
and the United States Navy.(1)
10.18 Asset Purchase Agreement dated April 19, 1990, between the Company;
TR Navigation Corporation, a subsidiary of the Company; and Tracor
Aerospace, Inc. (1)
10.19 Promissory Note dated April 20, 1990, for the principal amount of
$400,000 issued by TR Navigation Corporation to DAC
International, Inc. (1)
10.20 Guarantee dated April 20, 1990, between the Company and DAC
International, Inc. (1)
10.21 Indemnification Agreement dated April 20, 1990, between the Company;
TR Navigation Corporation, a subsidiary of the Company; DAC
International, Inc.; and Banner Industries, Inc. (1)
10.22 Distributor Agreement dated April 20, 1990, between TR Navigation
Corporation, a subsidiary of the Company, and DAC
International, Inc. (1)
10.23 Distributor Agreement dated December 6, 1989, between the Company
and DAC International, Inc. (1)
10.24 Lease Agreement dated April 26, 1990, between the Company and NCNB
Texas National Bank, Trustee for the Company's offices located at
2105 Donley Drive, Austin, Texas. (1)
10.32 1990 Director Stock Option Plan, as amended, and form of Outside
Director Non statutory Stock Option Agreement. (8)
10.35 Sublease Agreement dated January 2, 1991, between the Company,
Aetna Insurance Company, and Poqet Computer Corporation for
property located at 650 North Mary Avenue, Sunnyvale, California. (2)
10.36 Lease Agreement dated February 20, 1991, between the Company, John
Arrillaga Separate Property Trust, and Richard T. Peery Separate
Property Trust for property located at 880 West Maude, Sunnyvale,
California. (2)
10.37 Share and Asset Purchase Agreement dated February 22, 1991, among
the Company and Datacom Group Limited and Datacom Software Research
Limited. (3)
10.38 License Agreement dated June 29, 1991, between the Company and
Avion Systems, Inc. (3)
10.40 Industrial Lease Agreement dated December 3, 1991, between the
Company and Aetna Life Insurance Company for property located at 585
North Mary Avenue, Sunnyvale, California. (5)
10.41 Industrial Lease Agreement dated December 3, 1991, between the
Company and Aetna Life Insurance Company for property located at 570
Maude Court, Sunnyvale, California. (5)
70
10.42 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 580 Maude
Court, Sunnyvale, California. (5)
10.43 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 490 Potrero
Avenue, Sunnyvale, California. (5)
10.44 Master Lease Agreement dated September 18, 1991, between the Company
and United States Leasing Corporation. (5)
10.45 Equipment Financing Agreement dated May 15, 1991, between the Company
and Corestates Bank, N.A.(5)
10.46+ 1992 Management Discount Stock Option and form of Nonstatutory Stock
Option Agreement (5).
10.48 Equipment Financing Agreement dated April 27, 1992, with AT&T Systems
Leasing Corporation. (7)
10.49** Memorandum of Understanding dated December 24, 1992, between the
Company and Pioneer Electronics Corporation. (7)
10.51 Revolving Credit Agreement for $15,000,000 dated January 27, 1993,
with Barclays Business Credit, Inc. (7)
10.52 $30,000,000 Note and Warrant Purchase Agreement dated June 13, 1994,
with John Hancock Life Insurance Company. (9)
10.53 Revolving Credit Agreement for $20,000,000 and $10,000,000, dated
August 4, 1995, with the First National Bank of Boston and
Mellon Bank N.A., respectively. (1)
10.54 Revolving Credit Agreement - First Amendment (12)
10.55 Revolving Credit Agreement - Second Amendment (12)
10.56 Revolving Credit Agreement - Third Amendment (13)
10.57 Revolving Credit Agreement - Fourth Amendment (14)
10.58 Revolving Credit Agreement for $50,000,000 dated August 27,
1997, with Fleet National Bank, Bank of Boston N.A., Sanwa
Bank of California, and ABN Amro Bank N.V., respectively. (15)
10.59 1993 Stock Option Plan, as amended (16)
10.60 1988 Employee Stock Purchase Plan, as amended (16)
10.61 Revolving Credit Agreement - Loan - Third Amendment (18)
10.62+ Employment Agreement between the Company and Bradford W. Parkinson
dated September 1, 1998. (18)
71
10.63+ Employment Agreement between the Comany and Robert S. Cooper dated
September 1, 1998. (18)
10.64+ Consulting Agreement between the comapny and Bradford W. Parkinson
dated September 1, 1998. (18)
10.65+ Standby Consulting Agreement between the Comapny and Bradford W.
Parkinson dated September 1, 1998. (18)
10.66+ Consulting Agreement between the Comapny and Robert S. Cooper dated
September 1, 1998. (18)
10.67+ Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (18)
10.68+ Nonqualified deferred Compensation Plan of the Company effective
February 10, 1994. (18)
21.1 Subsidiaries of the Company. (17)
23.1 Consent of Ernst & Young LLP, independent auditors (see page 66).
24.1 Power of Attorney (included on page 75).
27.1 Financial Data Schedule (17)
* Confidential treatment has been previously granted for certain portions
of this exhibit pursuant to an order dated July 11, 1990.
** Confidential treatment has been previously granted for certain portions
of this exhibit pursuant to an order dated March 2, 1995.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) thereof.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became
effective July 19, 1990.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990.
(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 16, "Exhibits and Forms 8-K," of the registrant's
Report on 10-Q for the quarter ended September 30, 1991, as amended on
Form 8, filed February 11, 1992.
(4) Incorporated by reference to Exhibit No. 4.1 filed in response to Item
8, "Exhibits," of the registrant's Registration Statement on Form S-8
(File No. 33-45167), which became effective January 21, 1992.
72
(5) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a) "Exhibits," of the registrant's Registration
Statement on Form S-1 (File No. 33-45990), which was filed February 18,
1992.
(6) Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 filed in
response to Item 8, "Exhibits," of the registrant's Registration
Statement on Form S-8 (File No. 33-57522), which was filed on January
28, 1993.
(7) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
(8) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
(9) Incorporated by reference to identically numbered exhibits filed
in response to Item 6A, "Exhibits," of the registrant's
Annual Report on Form 10-Q for the quarter ended June 30, 1994.
(10) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
(11) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
(12) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's
Annual Report on Form 10-Q for the quarter ended June 30, 1996.
(13) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's
Annual Report on Form 10-Q for the quarter ended September 30, 1996.
(14) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's
Annual Report on Form 10-Q for the quarter ended June 30, 1997.
(15) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's
Annual Report on Form 10-Q for the quarter ended September 30, 1997.
(16) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's
Annual Report on Form 10-Q for the quarter ended April 3, 1998.
73
(17) Incorporated by reference to Exhibit No. 1 to the registrant's
Registration Statement on Form 8-A which was filed on
February 18,1999.
(18) Filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the registrant during the
fourth quarter ended January 1, 1999.
74
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 on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
By:/s/ Steven W. Berglund
Steven W. Berglund,
President and Chief
Executive Officer
March 26, 1999
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Bradford W. Parkinson as his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
75
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:
Signature Capacity in which Signed Date
/s/ Steven W. Berglund President, Chief Executive March 26, 1999
Steven W. Berglund Officer
/s/ Mary Ellen Genoves Vice President Finance, March 26, 1999
Mary Ellen Genovese and Chief Financial Officer
(principal financial and principal
accounting officer)
/s/ Bradford Parkinson Director March 26, 1999
Bradford W. Parkinson
/s/ Robert S. Cooper Director March 25, 1999
Robert S. Cooper
/s/ John B. Goodrich Director March 26, 1999
John B. Goodrich
/s/ William Hart Director March 26, 1999
William Hart
/s/ Charles R. Trimble Director March 24, 1999
Charles R. Trimble
76
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFIYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
Balance at Balance at
beginning of (Reductions) end of
period Additions Write-Offs ** period
---------------- -------------- -------------- ------------
Allowance for doubtful accounts:
Year ended December 31, 1996 $1,074 $1,595 $276 $2,393
Year ended January 2, 1998 2,393 205 134 2,464
Year ended January 1, 1999 2,464 458 702 2,220
Balance at Balance at
beginning of (Reductions) end of
period Additions Write-Offs ** period
---------------- -------------- -------------- ------------
Inventory Reserves:
Year ended December 31, 1996 $5,569 $6,189 $1,876 $9,882
Year ended January 2, 1998 9,882 2,389 2,862 9,409
Year ended January 1, 1999 9,409 7,057 2,347 14,119
- ------------------------------------------
** Net of recoveries
S-1
77
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
3.1 Restated Articles of Incorporation of the
Company filed June 25, 1986. 79-80
3.2 Certificate of Amendment of Articles of
Incorporation of the Company filed
October 6, 1988. 81-82
3.3 Certificate of Amendment of Articles of
Incorporation of the Company filed July 17, 1990. 83
3.4 Certificate of Determination. 84-88
10.61 Revolving Credit Agreement - Loan - Third Amendment 89-102
10.62 Employment Agreement between Registrant and
Bradford W. Parkinson dated September 1, 1998. 103-111
10.63 Employment Agreement between Registrant and
Robert S. Cooper dated September 1, 1998 113-121
10.64 Consulting Agreement between Registrant and
Bradford W. Parkinson dated September 1, 1998. 120-126
10.65 Standby Consulting Agreement between Registrant and
Bradford W. Parkinson dated September 1, 1998. 127-132
10.66 Consulting Agreement between Registrant and
Robert S. Cooper dated September 1, 1998 133-138
10.67 Emploment Agreement between Registrant and
Steven W. Berglund dated March 17, 1999. 139-142
10.68 Nonqualified Deferred Compesation Plan of the
Company effective February 10, 1994. 143-165
21.1 Subsidiaries of the Company 166
23.1 Consent of Ernst & Young LLP,
Independent Auditors 167
27.1 Financial Data Schedule for the years ended
January 1, 1999 and January 2, 1998 168
78
EXHIBIT 3.1
TRIMBLE NAVIGATION LIMITED
RESTATED ARTICLES OF INCORPORATION
Charles R. Trimble and Robert A. Trimble certify that:
1. They are the President and the Secretary, respectively, of Trimble
Navigation Limited, a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read as follows: I
The name of this corporation is Trimble Navigation Limited.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the general
corporation law of California, other than the banking business, the
trust company business, or the practice of a profession permitted to be
incorporated by the California Corporations Code.
III
This corporation is authorized to issue only one class of shares of
stock, designated Common Stock, and the total number of shares that
this corporation is authorized to issue is forty million (40,000,000).
Upon the effective date of this amendment to the Articles of
Incorporation, each outstanding share of Common Stock shall be split up
and converted into four shares of Common Stock.
3. The foregoing amendment and restatement of the Articles of Incorporation has
been duly approved by the Board of Directors of this corporation.
79
4. The foregoing amendment and restatement of the Articles of Incorporation
does not require the approval of the outstanding shares of the corporation
because the amendment only effected a stock split in accordance with Section
902(c) of the California Corporations Code.
The undersigned further declare under penalty of perjury that the
matters set forth in this certificate are true and correct of their own
knowledge.
Executed at Sunnyvale, California, June 24, 1986.
/s/ Charles R. Trimble
Charles R. Trimble, President
/s/ Robert A. Trimble
Robert A. Trimble, Secretary
80
EXHIBIT 3.2
TRIMBLE NAVIGATION LIMITED
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
TRIMBLE NAVIGATION LIMITED
Charles R. Trimble and Robert A. Trimble hereby certify that:
1. They are President and Secretary, respectively, of Trimble Navigation
Limited, a California corporation.
2. The Articles of Incorporation of this corporation are amended to add the
following Article IV:
"IV
Section 1. Limitation of Directors' Liability. The liability of the
directors of this corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents. This corporation is
authorized to provide indemnification of its agents (as defined in Section 317
of the California General Corporation Law) through bylaw provisions agreements
with the agents, vote of shareholders or disinterested directors or otherwise,
in excess of the indemnification otherwise permitted by such Section 317,
subject only to the limits on such excess indemnification set forth in Section
204 of the California General Corporation Law with respect to actions for breach
of duty to the corporation and its shareholders.
Section 3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article IV shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification."
3. The foregoing Certificate of Amendment of Articles of Incorporation has
been duly approved byn the Board of Directors.
4. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the California General Corporation Law. The total number of
outstanding shares of stock of the corporation is 7,270,041 shares of Common
Stock. The number of shares voting in favor of the Certificate of Amendment of
Articles of Incorporation equaled or exceeded the vote required. The percentage
vote required was more than 50% of the total outstanding shares voting together.
81
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in the Certificate of Amendment of
Articles of Incorporation are true of our own knowledge.
Executed at Sunnyvale, California this 7th day of April, 1988.
/s/ Charles R. Trimble
Charles R. Trimble, President
/s/ Robert A. Trimble
Robert A. Trimble, Secretary
82
EXHIBIT 3.3
TRIMBLE NAVIGATION LIMITED
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
TRIMBLE NAVIGATION LIMITED
Charles R. Trimble and James C. Hunt hereby certify that:
1. They are President and Chief Financial Officer, respectively, of Trimble
Navigation Limited, a California corporation.
2. Article III of the Articles of Incorporation of this corporation is
amended and restated to read in its entirety as follows:
"III
This corporation is authorized to issue two classes of shares to be designated
respectively Preferred Stock ("Preferred") and Common Stock ("Common"). The
total number of shares of Preferred this corporation shall have the authority to
issue is 3,000,000 without par value, and the total number of shares of Common
this corporation shall have the authority to issue is 40,000,000 without par
value. The Preferred shares authorized by these Articles of Incorporation may be
issued from time to time in one or more series. The Board of Directors is hereby
authorized to fix or alter the rights, preferences and privileges of any wholly
unissued class or series of Preferred shares, and the number of shares
constituting any such series and the designation thereof, or any of them."
3. This Certificate of Amendment of Articles of Incorporation has been
duly approved by the Board of Directors.
4. This foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the California General Corporation Law. The total number of
outstanding shares of stock of the corporation is 11,653,805 shares of Common
Stock. The number of shares voting in favor of the Certificate of Amendment of
Articles of Incorporation equaled or exceeded the vote required. The percentage
vote required was more than 50% of the total outstanding shares voting together.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this Certificate of Amendment of
Articles of Incorporation are true of our own knowledge.
Executed at Sunnyvale, California this 17th day of July, 1990.
/s/ Charles R. Trimble
Charles R. Trimble, President
/s/ James C. Hunt
James C. Hunt, Chief Financial Officer
83
EXHIBIT 3.4
TRIMBLE NAVIGATION LIMITED
CERTIFICATE OF DETERMINATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF TRIMBLE NAVIGATION LIMITED
The undersigned, Bradford Parkinson and John Goodrich do hereby
certify:
1. That they are the duly elected and acting President and Chief
Executive Officer and Secretary, respectively, of Trimble Navigation Limited, a
California corporation (the "Corporation").
2. That pursuant to the authority conferred upon the Board of Directors
by the Articles of Incorporation of the said Corporation, the said Board of
Directors on February 3, 1999 adopted the following resolution creating a series
of 65,000 shares of Preferred Stock designated as Series A Participating
Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation, to be designated "Series A Participating Preferred Stock," no
par value, initially consisting of 65,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A Participating
Preferred Stock are not stated and expressed in the Articles of Incorporation
does hereby fix and herein state and express the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions of such series of Preferred Stock as follows (all
terms used herein which are defined in the Articles of Incorporation shall be
deemed to have the meanings provided herein):
Section 1 Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preferred Stock," no par value, and the
number of shares constituting such series shall be 65,000.
Section 2 Proportional Adjustment. In the event the Corporation shall
at any time after the issuance of any share or shares of Series A Participating
Preferred Stock (i) declare any dividend on Common Stock of the Corporation
("Common Stock") payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.
Section 3 Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of January, April, July and October, in each year (each such date being referred
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to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Participating Preferred
Stock.
(b) The Corporation shall declare a dividend or distribution
on the Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of
Series A Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 4 Voting Rights. The holders of shares of Series A Participating
Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of the stockholders of the Corporation.
(c) Except as required by law or as required by Section 11,
holders of Series A Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
Section 5 Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make
any distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of Common Stock after the first issuance of a share or
fraction of a share of Series A Participating Preferred Stock unless
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concurrently therewith it shall declare a dividend on the Series A Participating
Preferred Stock as required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Participating
Preferred Stock;
(ii) declare or pay dividends on, make any
other distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating
Preferred Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Participating
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 5, purchase or otherwise acquire such shares at such time and in
such manner.
Section 6 Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Restated Articles of Incorporation, as then amended.
Section 7 Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock unless,
86
prior thereto, the holders of shares of Series A Participating Preferred Stock
shall have received fifty thousand dollars ($50,000) per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation Preference,
no additional distributions shall be made to the holders of shares of Series A
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
(c) below to reflect such events as stock splits, stock dividends and
recapitalization with respect to the Common Stock) (such number in clause (ii)
of this sentence, the "Adjustment Number"). Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Participating Preferred Stock and
Common Stock, respectively, holders of Series A Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the
Rights Dividend Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8 Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Participating Preferred Stock shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 9 No Redemption. The shares of Series A Participating Preferred
Stock shall not be redeemable.
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Section 10 Ranking. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11 Amendment. The Restated Articles of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series A Participating Preferred Stock, voting separately as a class.
Section 12 Fractional Shares. Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
3. That the authorized number of shares of Series A Participating
Preferred Stock of the Corporation is 65,000 and that no shares of Series A
Participating Preferred Stock have been issued.
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Determination are true and correct of our own
knowledge.
Executed at Sunnyvale, California on February 18, 1999.
/s/ Bradford Parkinson
Bradford Parkinson
President and Chief Executive Officer
/s/ John Goodrich
John Goodrich
Secretary
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EXHIBIT 10.61
TRIMBLE NAVIGATION LIMITED
THIRD AMENDMENT
THIS THIRD AMENDMENT (this "Amendment") is entered into as of February
16, 1999 by and among TRIMBLE NAVIGATION LIMITED, a California corporation
having its chief executive office at 645 North Mary Avenue, Sunnyvale,
California 94086 (the "Borrower") and FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States and having a head
office at One Federal Street, Boston, Massachusetts 02110, as the Agent and as a
Lender, BANKBOSTON, N.A., a national banking association, organized under the
laws of the United States and having a head office at One Hundred Federal
Street, Boston, Massachusetts 02110, as the Syndication Agent and as a Lender,
SANWA BANK CALIFORNIA, a banking corporation organized under the laws of the
State of California and having an office at 220 Almaden Boulevard, 2nd Floor,
San Jose, California 95113, as a Lender, and ABN AMRO BANK N.V., a Netherlands
banking corporation having an office at 101 California Street, Suite 4550, San
Francisco, California 94115, as a Lender, under the Loan Agreement (as defined
below), to which reference is made for the definitions of all capitalized terms,
used, but not otherwise defined, herein.
R E C I T A L S
WHEREAS, the parties have entered into a Loan Agreement dated as of
August 27, 1997 among the Borrower, the Agent, the Syndication Agent, and the
lenders from time to time party thereto (the "Lenders"), as amended by a Letter
of Amendment dated December 17, 1997, and a Second Letter of Amendment dated
August 11, 1998 (the "Agreement"), pursuant to which the Lenders issued a
Revolving Credit Loan Commitment to the Borrower in the maximum principal amount
of $50,000,000.00;
WHEREAS, pursuant to a certain Waiver Letter dated October 27, 1998 and
a certain Supplement to Loan Agreement and Additional Waiver Letter dated
December 9, 1998 (the "December 9, 1998 Supplement"), the Borrower was granted a
limited waiver with respect to the Borrower's compliance with certain covenants
contained in the Agreement for the Borrower's fiscal quarters ended October 2,
1998 and January 1, 1999, conditional upon the satisfaction of certain specified
waiver conditions contained therein on or prior to February 16, 1999, including
inter alia the agreement of the Agent and the Lenders to further amend the
Agreement in certain respects;
WHEREAS, the Agent and the Lenders have agreed to amend the Agreement as
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual benefits to be derived
from the parties' continuing relationship under the Agreement and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, the Agent, the Syndication Agent, and the Lenders
hereby agree that the Agreement is hereby amended, effective February 16, 1999
(the "Effective Date"), as follows:
1. The following defined terms appearing in Section 1.1 of the Agreement
are hereby amended in their entirety, respectively, to read as follows:
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"Commitment" means the Lenders' several commitments to make or maintain
the Loans as set forth in Section 2.1 hereof in the maximum outstanding amount
of each Lender's Pro Rata Share of $50,000,000, minus, until the fifth (5th)
Business Day following delivery of the Borrower's quarterly financial statements
pursuant to Section 5.3.3 of the Agreement and the related Officer's Certificate
as required by Section 5.3.4 reflecting Operating Income and Net Income equal to
or greater than one dollar ($1.00), a reserve of $25,000,000, as such amount may
be reduced pursuant to Section 2.6.4.
"Financing Documents" means, collectively, this Agreement, each Note,
the Security Documents, the Side Letter, the Post-Closing Letter, if any, any
Letter of Credit, any Letter of Credit Agreement, any agreement with any Lender
providing any interest rate protection arrangement and each other agreement,
instrument or document now or hereafter executed in connection herewith or
therewith.
"Net Income" means, for any fiscal period, the net after tax income
(loss) of the Borrower and any Subsidiaries for such period, excluding (i) any
extraordinary or other non-recurring gains, and (ii) any gains from the sale or
disposition of assets other than in the ordinary course of business, all as
determined on an accrual and consolidated basis in accordance with GAAP, plus,
to the extent included in the calculation of net income, any amount taken as a
one-time charge against earnings attributable to (i) the settlement of the class
action litigation described in Exhibit A attached hereto, (ii) the closing of
the Borrower's commercial marine division, or (iii) charges resulting from the
reduction in Borrower's employees resulting from the Borrower's switch to
contract manufacturing, provided that the amount of all such charges added to
net income shall not exceed $2,000,000 in the aggregate.
"Security Documents" means any and all documents, instruments and
agreements now or hereafter providing security for the Obligations and any other
Indebtedness of the Borrower or any Subsidiary to any of the Lenders, the
Issuing Lender and/or the Collateral Agent, the Agent or the Syndication Agent,
including without limitation the following documents, instruments and
agreements: any mortgages on and collateral assignments of real property
interests (fee, leasehold and easement) of the Borrower and any Subsidiary
granting Liens thereon; landlord lien waivers and consents as may be reasonably
requested by the Collateral Agent; security agreements granting Liens on all
Borrower's and any Subsidiary's fixtures and tangible and intangible personal
property; collateral assignments of Borrower's and any Subsidiary's contracts,
licenses, permits, easements and leases; collateral assignments of Borrower's
and any Subsidiary's copyrights; conditional assignments of Borrower's and any
Subsidiary's trademarks and patents; any subordination agreement; any software
escrow agreement; any guaranty; any pledge of the capital stock of any
Subsidiary; casualty and liability insurance policies providing coverage to the
Collateral Agent for the benefit of the Lenders; UCC financing statements or
similar filings perfecting the above-referenced security interests, pledges and
assignments, all as executed, delivered to and accepted by the Collateral Agent
and as may be required by this Agreement, as any of the foregoing may be amended
from time to time.
2. Section 1.1 of the Agreement is hereby further amended by the
addition of the following new defined terms to be added alphabetically thereto:
"Collateral Agent" means Fleet National Bank, in its capacity as
collateral agent under the Security Documents.
"Issuing Lender" means Fleet National Bank, in its capacity as the
issuer of Letters of Credit hereunder.
"LC Participant" has the meaning set forth in Section 2.1.1(e).
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"Letter of Credit" has the meaning set forth in Section 2.1.1(a).
"Letter of Credit Agreement" means an application and agreement for a
Standby Letter of Credit, in such form as may at any time be customarily
required by the Issuing Lender for its issuance of Standby Letters of Credit.
"Letter of Credit Fees" means the fee payable by the Borrower in
accordance with Section 2.2.2(b).
"Net Worth" means the excess of the total assets of the Borrower and
its Subsidiaries over total liabilities, as determined on a consolidated basis
in accordance with GAAP.
"Operating Income" means operating income as determined in accordance
with GAAP, plus, to the extent included in the calculation of operating income,
any amount taken as a one-time charge against earnings attributable to (i) the
settlement of the class action litigation described in that certain Disclosure
Letter dated as of February 16, 1999, (ii) the closing of the Borrower's
commercial marine division, or (iii) charges resulting from the reduction in
Borrower's employees resulting from the Borrower's switch to contract
manufacturing, provided that the amount of all such charges added to operating
income shall not exceed $2,000,000 in the aggregate.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued or deemed issued for the account of the Borrower
pursuant to Section 2.1.1 for the purpose of supporting obligations of the
Borrower or incurred in the ordinary course of business with respect to
insurance obligations and workers' compensation, surety bonds and other similar
statutory obligations, and all obligations customarily supported by standby
letters of credit and satisfactory to the Issuing Lender.
"Total Capitalization" means, as of the date of any determination, the
sum of (i) Total Funded Debt, and (ii) Net Worth.
"Total Funded Debt" means, as of the date of any determination, the sum
of (i) the principal amount of all Obligations, including, without limitation,
the Revolving Loans and the Letters of Credit, (ii) the principal amount of all
Subordinated Debt, and (iii) all Capitalized Lease Obligations of the Borrower
and its Subsidiaries.
"Unpaid Drawing" has the meaning set forth in Section 2.1.1(g).
3. The first paragraph of Section 2.1 of the Agreement is hereby amended in
its entirety to read as follows:
Section 2.1. The Revolving Credit Loans. Each of the Lenders severally
agrees, subject to the terms and conditions of this Agreement and provided no
Default or Event of Default has occurred and is continuing, to make Advances of
Revolving Credit Loans to the Borrower from time to time after receipt by the
Agent from time to time prior to the Revolving Credit Repayment Date of, and at
the times provided for in, a Request and an Interest Rate Election from the
Borrower in accordance with this Agreement, during the period commencing on the
Closing Date and ending on the Business Day immediately preceding the Revolving
Credit Repayment Date, in an aggregate principal amount at any one time
outstanding not to exceed the lesser of (i) such Lender's Pro Rata Share of the
Revolving Credit Loan Commitment less (ii) in each case, such Lender's Pro Rata
Share of the aggregate outstanding stated amount of any Letters of Credit or
Letter of Credit Agreements and any Unpaid Drawing; and
4. Section 2.1 of the Agreement is hereby further amended by the
addition of the following new Section 2.1.1 immediately following the last
paragraph thereof:
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Section 2.1.1. The Letters of Credit
(a) Subject to the terms and conditions hereof and provided no
Default or Event of Default has occurred and is continuing, at any time and from
time to time prior to the Revolving Credit Repayment Date, the Borrower may
request that the Issuing Lender issue for the account of the Borrower one or
more irrevocable Letters of Credit denominated in Dollars, and otherwise in a
form customarily used by the Issuing Lender, or in such other form as has been
approved by the Issuing Lender, in support of such obligations of the Borrower
described in the definitions of Standby Letter of Credit and any other
obligations of the Borrower that are reasonably acceptable to the Agent and the
Issuing Lender and otherwise permitted to exist pursuant to this Agreement (each
such letter of credit, a "Letter of Credit").
(b) The Issuing Lender agrees to issue (subject to the terms and
conditions contained herein) following its receipt of a request for a Letter of
Credit for the account of the Borrower one or more Letters of Credit provided
that the Issuing Lender shall be under no obligation to issue any Letter of
Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or restrain the
Issuing Lender from issuing such Letter of Credit or any requirement of law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction
over the Issuing Lender shall prohibit or request that the Issuing Lender
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular, or shall impose upon the Issuing Lender with respect to
such Letter of Credit any restriction or reserve or capital requirement (for
which the Issuing Lender is not otherwise compensated) not in effect on the date
of this Agreement, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to the Issuing Lender as of the date of this
Agreement and which the Issuing Lender in good faith deems material to it; or
(ii) the Issuing Lender shall have received notice from
any other Lender prior to the issuance of such Letter of Credit to the effect
that one or more of the conditions specified in Section 3.1.2 are not then
satisfied, or that the issuance of such Letter of Credit would violate any
provision of this Section 2.1.1.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued if the stated amount of which, when added to the aggregate amount of
all Letters of Credit and any Unpaid Drawing at such time, would exceed the
lesser of (x) $5,000,000, and (y) when added to the aggregate principal amount
of all Revolving Credit Loans then outstanding, an amount equal to the
Commitment; and (ii) each Letter of Credit shall by its terms terminate or be
terminable by the Issuing Lender on such date that would result in all drawings
thereunder, being funded pursuant to the terms thereof prior to the earlier of
(x) the date which occurs twelve (12) months after the date of issuance thereof
(although any such Letter of Credit may be extendable for successive periods of
up to twelve (12) months, but not beyond the sixth Business Day prior to the
Revolving Credit Repayment Date, on terms acceptable to the Issuing Lender), and
(y) the date which is six (6) Business Days prior to the Revolving Credit
Repayment Date.
(d) Each request for a Letter of Credit shall be made by
submission by the Borrower to the Agent of a Letter of Credit Agreement, duly
completed and executed by the Borrower and in effect at such time, no later than
five (5) Business Days prior to the proposed date of issuance of the Letter of
Credit, provided that if the express provisions of any Letter of Credit
Agreement conflict with the express provisions of this Agreement, the provisions
of this agreement shall control to the extent of such conflict. The making of
each request for a Letter of Credit shall be deemed to be a representation and
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warranty by the Borrower that such Letter of Credit may be issued in accordance
with, and will not violate the requirements of, this Section 2.1.1. The Agent
shall promptly notify, and deliver to, the Issuing Lender each such Letter of
Credit Agreement. Upon the issuance of any Letter of Credit, the Issuing Lender
shall promptly notify the Agent and each Lender of such issuance; and
(e) Immediately upon issuance of a Letter of Credit, the Issuing
Lender shall be deemed to have sold and transferred to each Lender, other than
the Issuing Lender (each such Lender, in its capacity under this subsection
2.1.1(e), an "LC Participant") and each LC Participant shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing Lender,
without recourse or warranty, an undivided interest and participation in such
Letter of Credit to the extent of such LC Participant's Pro Rata Share in such
Letter of Credit, each drawing made thereunder and the obligations of the
Borrower with respect thereto, and any security therefor or guaranty pertaining
thereto. Upon any change in the Commitment, or in the Pro Rata Shares of the
Lenders pursuant to Section 9.11 hereof, it is hereby agreed that, with respect
to all outstanding Letters of Credit and any Unpaid Drawing at such time, there
shall be an automatic adjustment to the participations pursuant to this
subsection 2.1.1(e) to reflect the new Pro Rata Shares of any assigning Lender
and its assignee or of all Lenders with respect to the Commitment, as the case
may be;
(f) In determining whether to pay under any Letter of Credit, the
Issuing Lender shall have no obligation relative to the other Lenders other than
to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by the Issuing Lender under or in connection with
any Letter of Credit if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create for the Issuing Lender any resulting
liability to the Borrower, the Guarantors, the Agent or any other Lender.
(g) The Borrower agrees to reimburse the Issuing Lender by making
payment to the Issuing Lender in immediately available funds at the office of
the Issuing Lender specified for such payment by the Issuing Lender for any
payment or disbursement made by the Issuing Lender under any Letter of Credit
(each, an "Unpaid Drawing") immediately after, and, in any event on the date of
such payment or disbursement, with interest on the amount so paid or disbursed
by the Issuing Lender to the extent not reimbursed prior to 2.00 P.M. (Boston
time) on the date of such payment or disbursement, from and including the date
paid or disbursed to but excluding the date the Issuing Lender was reimbursed by
the Borrower therefor at a rate equal to the Default Rate. The Issuing Lender
shall give the Borrower prompt notice of each drawing under any Letter of
Credit, provided that the failure to give any such notice shall in no way
affect, impair or diminish the Borrower's obligations hereunder. The Borrower
hereby authorizes and instructs the Issuing Lender to charge against the
Borrower's accounts with the Issuing Lender on each date on which a payment is
due under a Letter of Credit, and on any subsequent date if and to the extent
any such payment is not made when due, an amount up to the principal, interest
and fees due and payable to the Issuing Lender thereunder and such charge shall
be deemed payment thereunder to the extent that immediately available funds are
then in such accounts. The Issuing Lender shall use reasonable efforts in
accordance with the Issuing Lender's customary procedures to give subsequent
notice of any such charge to the Borrower, but the failure to give such notice
shall not affect the validity of any such charge;
(h) In the event that the Issuing Lender makes any payment under
any Letter of Credit and the Borrower shall have failed to reimburse the Issuing
Lender under any Letter of Credit or Letter of Credit Agreement, and any
outstanding Indebtedness of the Borrower relating thereto, the Issuing Lender
shall promptly notify the Agent, which shall promptly notify each LC Participant
of such failure, and each LC Participant shall promptly pay to the Issuing
Lender in Dollars its Pro Rata Share of such unreimbursed amount in same day
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funds. If the Agent so notifies, prior to 12 P.M. (Boston time) on any Business
Day, each such LC Participant shall make available to the Issuing Lender such
payment on such Business Day, or if such notice is given after 12 P.M. (Boston
time) on any Business Day, on the next succeeding Business Day. If and to the
extent that any such LC Participant shall not have so made such funds available
to the Issuing Lender, such LC Participant agrees to pay to the Issuing Lender
forthwith on demand such amount together with interest thereon, for each day
from the date such amount was due under this subsection 2.1.1(h) until the date
such amount is paid to the Issuing Lender, at the Federal Funds Rate. The
obligations of each LC Participant under this subsection 2.1.1(h) shall be
absolute and unconditional and all payments due from each LC Participant
hereunder shall be made notwithstanding the occurrence or continuation of an
Event of Default or the failure to satisfy any condition set forth in Article 3
of this Agreement;
(i) Whenever the Issuing Lender receives a payment of a
reimbursement obligation as to which it has received any payments from the LC
Participants pursuant to subsection 2.1.1(h) above, the Issuing Lender shall pay
to each LC Participant which has paid its Pro Rata Share thereof, in Dollars and
in same day funds, an amount equal to such LC Participant's share (based upon
the proportionate aggregate amount originally funded by such LC Participant to
the aggregate amount funded by all LC Participants) of the principal amount of
such reimbursement obligation and interest thereon accruing after the purchase
of the respective participations;
(j) The obligation of each LC Participant to make payments to the
Issuing Lender with respect to any Letter of Credit and such LC Participant's
participation therein and the obligation of the Borrower to make payments to the
Issuing Lender, shall not be subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement, including, without limitation, any of the following circumstances:
(i) Any lack of validity or enforceability of this
Agreement or any of the other Financing Documents;
(ii) The existence of any claim, set-off, defense or
other right which the Borrower may have at any time against a beneficiary named
in a Letter of Credit or any transferee or assignee of any Letter of Credit
(or any Person for whom any such transferee or assignee may be acting), the
Issuing Lender, the Agent, any Lender, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between the Borrower or any other Person and the
beneficiary named in any Letter of Credit);
(iii) Any draft, certificate or any other document
presented under the Letter of Credit upon which payment has been made in good
faith and according to its terms proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) The surrender or impairment of any collateral
or any other security for the Obligations or the performance or observance
of any of the terms of any of the Financing Documents;
(v) The occurrence of any Default or Event of Default; or
(vi) The failure to give notice of the issuance of any
Letter of Credit;
provided that, no LC Participant shall be obligated to pay such LC Participant's
Pro Rata Share of any unreimbursed amount arising from any wrongful payment made
by the issuing Lender under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the Issuing
Lender.
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(k) Indemnification. In addition to amounts payable as elsewhere
provided in this Agreement, the Borrower agrees to protect, indemnify, pay and
save the Issuing Lender, the Agent, the Syndication Agent and the LC
Participants harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees) which the Issuing Lender, the Agent or any LC Participant (each, an
"Indemnified Party") may incur or be subject to (other than as a result of acts
or omissions of any such Indemnified Party constituting gross negligence or
willful misconduct as determined by a court of competent jurisdiction) as a
consequence, directly or indirectly, of
(i) the issuance of any Letter of Credit; or
(ii) the failure of the Issuing Lender to honor a
drawing under any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto governmental
authority (all such acts or omissions being hereinafter referred to
collectively as "Government Acts").
(l) As among the Borrower and the Indemnified Parties, the
Borrower assumes all risks of the acts and omissions of, or misuse of any of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, subject to the provisions of
the Letter of Credit Agreements, the Indemnified Parties shall not be
responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any Person in
connection with the application for and issuance of and presentation of drafts
with respect to any of the Letters of Credit, even if it should prove to be, in
any or all respects, invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any 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;
(iii) the failure of any drawing to strictly comply with
the terms of a Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be indecipherable;
(v) errors in interpretation of technical terms other
than those resulting from gross negligence or willful misconduct;
(vi) any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any Letter of Credit
or of the proceeds thereof;
(vii) the non-application or misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or
(viii) any consequences arising from causes beyond the
control of the Issuing Lender, the Agent or any LC Participant, including,
without limitation, any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting of any of the
Indemnified Parties' rights or powers under this Section 2.1.1.
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(m) If, notwithstanding the provisions of Section 2.1.1(c)
hereof, any Letter of Credit is outstanding on the Revolving Credit Repayment
Date (each, a "Post-Termination Letter of Credit"), then on or prior to the
Revolving Credit Payment Date, the Borrower shall, promptly on demand by the
Issuing Lender, deposit with the Issuing Lender, with respect to each
Post-Termination Letter of Credit then outstanding, as the Issuing Lender shall
specify, cash collateral ("Cash Collateral") in an amount necessary to reimburse
the Issuing Lender for payments to be made by the Issuing Lender under any
Post-Termination Letter of Credit. Such Cash Collateral shall be held by the
Issuing Lender, as security for, and to provide for the payment of, the
obligations of the Borrower with respect to the Post-Termination Letters of
Credit. In the event that any amount of Cash Collateral remains after the
expiration of all Post-Termination Letters of Credit, so long as no Obligation
which is then due and payable is outstanding on such date, the Issuing Lender
shall return such amount promptly to the Borrower.
5. Section 2.2.2 of the Agreement is hereby amended by the addition of
the following new Section 2.2.2.4 immediately at the end thereof:
2.2.2.4 Letter of Credit Fees. The Borrower shall pay to the Agent for
the account of the Issuing Lender and each LC Participant for each Letter of
Credit issued by the Lender a per annum fee equal to the product of (x) the
stated amount thereof, and (y) the Applicable Margin then in effect for Libor
Loans, payable annually in advance on the date of issuance and each renewal date
thereof, plus, an additional amount payable on the dates specified by the
Issuing Lender and for the sole account of the Issuing Lender, such standard
fees and costs as the Issuing Lender may from time to time establish for
issuance, transfer, amendment and negotiation of each Letter of Credit and other
customary charges of the Issuing Lender with respect thereto (the "Letter of
Credit Fees").
6. Section 2.6.4 of the Agreement is hereby amended in its entirety to
read as follows:
Section 2.6.4. Permanent Reduction of Commitment. At the
Borrower's option, the Commitment may be permanently and irrevocably reduced in
whole or in part by an amount of at least $500,000 and to the extent in excess
thereof in integral multiples of $100,000 at any time; provided that (i) the
Borrower gives the Agent written notice of the exercise of such option at least
three (3) Business Days prior to the effective date thereof, (ii) the aggregate
outstanding balance of the Revolving Credit Loans plus the aggregate outstanding
amount of any Letters of Credit and any Undrawn Amounts, does not exceed the
Commitment, as so reduced on the effective date of such reduction, and (iii) the
Borrower is not, and after giving effect to such reduction, would not be in
violation of Section 2.6.3. Any such reduction shall concurrently reduce the
Dollar amount of each Lender's Pro Rata Share of the Commitment.
7. Section 2.6 of the Agreement is hereby further amended by the
addition of the following new Section 2.6.5 immediately at the end thereof:
Section 2.6.5. If at any time the aggregate principal amount
of the Revolving Credit Loans plus the aggregate outstanding stated amount of
any Letters of Credit and any Unpaid Drawing shall exceed the Commitment, the
Borrower shall immediately pay to the Agent in immediately available Dollars for
the ratable account of the Lenders the amount of such excess.
8. Section 2.8 of the Agreement is hereby amended in its entirety to
read as follows:
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Section 2.8. Use of Proceeds. The Borrower shall use the proceeds of the
Loans and obtain Letters of Credit solely for Borrower's working capital and for
general corporate purposes.
9. Section 3.1.2 of the Agreement is hereby amended in its entirety to
read as follows:
Section 3.1.2. Conditions Precedent To All Loans. The
Commitment and the obligation of each Lender to make or maintain its Pro Rata
Share of any Advance or Loan and/or the Issuing Lender to consider any request
for a Letter of Credit, are subject to performance by the Borrower of all its
obligations under this Agreement and to the satisfaction of the following
further conditions precedent:
(a) The fact that, immediately prior to and upon the making of
each Loan or issuance of any Letter of Credit, no Event of Default or Default
shall have occurred and be continuing;
(b) The fact that the representations and warranties of the
Borrower contained in Article 4, infra and in each of the other Financing
Documents, are true and correct in all material respects on and as of the date
of each Advance, Loan or Letter of Credit except as altered hereafter by actions
consented to or not prohibited hereunder. The Borrower's delivery of the Notes
to the Lenders and of each Request and Letter of Credit Agreement to the Agent
shall be deemed to be a representation and warranty by the Borrower as of the
date of such Advance, Loan or Letter of Credit as to the facts specified in
Sections 3.1.2(a) and (b);
(c) Receipt by the Agent on or prior to the Business Day
specified in the definition of Interest Rate Election of a written Request
stating the amount requested for the Loan or Advance in question and an Interest
Rate Election for such Loan or Advance, all signed by a duly Authorized
Representative of the Borrower on behalf of the Borrower;
(d) That there exists no law or regulation by any governmental
authority having jurisdiction over the Agent or any of the Lenders which would
make it unlawful in any respect for such Lender to make its Pro Rata Share of
the Loan or Advance, or purchase a participation in any Letter of Credit,
including, without limitation, Regulations U, T, and X of the Board of Governors
of the Federal Reserve System; and
(e) No Material Adverse Effect has occurred.
10. Section 5.1.10 of the Agreement ("Minimum Fixed Charge Coverage
Ratio") is hereby deleted in its entirety and the following new Section 5.1.10
inserted in its stead:
Section 5.1.10. Maximum Ratio of Total Funded Debt to Total
Capitalization. Commencing January 1, 1999, maintain a ratio of (i) Total Funded
Debt to (ii) Total Capitalization of less than .55:1.00.
11. Section 5.1.11 of the Agreement is hereby amended in its entirety
to read as follows:
Section 5.1.11. Minimum Consolidated Tangible Net Worth. (i)
Maintain a Consolidated Tangible Net Worth in an amount not less than the
Borrower's Consolidated Tangible Net Worth as of the end of the Borrower's 1998
fiscal year, minus $5,000,000, and (ii) comply with Section 8K of the Note
Purchase Agreement dated as of June 13, 1994 among the Borrower, John Hancock
Mutual Life and John Hancock Life Insurance, as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time.
97
12. Section 5.1.12 of the Agreement is hereby is hereby deleted in its
entirety and the following new Section 5.1.12 inserted in its stead:
Section 5.1.12. Minimum Cash Balances. Maintain at all times
on and after February 16, 1999 unrestricted cash balances in an amount equal to
or greater than (x) on any date prior to the delivery of the Borrower's
financial statements to the Agent pursuant to Section 5.3.3 and the related
Officer's Certificate as required by Section 5.3.4 reflecting Operating Income
and Net Income equal to or greater than one dollar ($1.00) for two (2)
consecutive fiscal quarters, the sum of (i) $25,000,000, plus fifty percent
(50%) or more of the aggregate principal outstanding amount of all Obligations,
including, without limitation, the Revolving Loans and the Letters of Credit in
one or more accounts maintained by the Borrower with the Agent, plus (ii) the
balance of such Obligations in one or more accounts maintained by the Borrower
with a Lender other than the Agent, and (y) thereafter (i) fifty percent (50%)
or more of the aggregate outstanding principal amount of all Obligations,
including, without limitation, the Revolving Loans and the Letters of Credit,
plus (ii) the balance of the principal amount of such Obligations in one or more
accounts maintained by the Borrower with a Lender other than the Agent.
13. Section 5.1.13 of the Agreement is hereby amended in its entirety
to read as follows:
Section 5.1.13. Minimum Quick Ratio Maintain at the end of
each fiscal quarter of the Borrower a ratio of (i) the sum of (w) cash on hand
or on deposit in any bank or trust company which has not suspended business, (x)
Cash Equivalent Investments (without duplication with clause (w) above), and (y)
net outstanding amount of accounts receivable to (ii) (x) Current Liabilities,
excluding the principal outstanding amount of any Obligations at any time
classified as Current Liabilities, of not less than 1.5:1.0. Each item described
in clauses (i) and (ii) of this Section 5.1.13 shall be calculated as of the
last day of the Borrower fiscal quarter and include only the item(s) in question
of the Borrower and its Subsidiaries on a consolidated basis.
14. Section 5.2.3 of the Agreement is hereby amended in its entirety to
read as follows:
Section 5.2.3. Acquisitions, Dissolution, etc. Acquire, in one
or a series of transactions, any properties or assets (other than the
acquisition of inventory, materials and equipment in the ordinary course of
business) or ownership interests in another Person, or dissolve, liquidate, wind
up, merge or consolidate or combine with another Person (other than mergers,
consolidations or other combinations in which the Borrower is the surviving
entity); (i) on any date prior to the delivery of the Borrower's financial
statements to the Agent pursuant to Section 5.3.3 reflecting operating income,
as determined in accordance with GAAP, and Net Income equal to or greater than
one dollar ($1.00), and (ii) as to which on or before the thirtieth (30th) day
prior to the consummation of any such acquisition, the Borrower has delivered to
the Agent a pro-forma Compliance Certificate on a consolidated basis (including
the to-be-acquired assets and any assumed liabilities or if ownership interests
are acquired, the to-be-acquired Person if such Person is to be a Subsidiary and
if not, the to-be-acquired ownership interests, all measured as set forth below
in this Section 5.2.3), which such pro-forma Compliance Certificate shall
indicate that no Default or Event of Default exists or would exist following
consummation of the permitted transaction and that the Borrower would be in
compliance with (on a consolidated basis including the to-be-acquired assets and
any assumed liabilities or if ownership interests are acquired, the
to-be-acquired Person if such Person is to be a Subsidiary and if not, the
to-be-acquired ownership interests), Sections 5.1.10, 5.1.10A, 5.1.11, 5.1.12
and 5.1.13 and Sections 5.2.8 and 5.2.9 following consummation of the permitted
transaction, including the to-be-acquired assets, Person or ownership interests
and the operating results thereof on the same basis and for the same periods as
the Borrower is measured for each such covenant, respectively.
98
15. Section 5.2.4 of the Agreement is hereby amended in its entirety to
read as follows:
Section 5.2.4. Disposition of Assets. Effect any disposition
of material assets, other than (i) the disposition of assets in the ordinary
course of business, consistent with past practices, (ii) subject to Section
5.2.8, the disposition of assets not to exceed 15% of Consolidated Tangible Net
Worth in the aggregate over the period commencing on the Closing Date and ending
on August 31, 2000, the value of which assets shall be based upon the aggregate
book value of all such assets determined as of the date of the sale thereof and
prior to such disposition, and (iii) in addition to dispositions of assets
permitted under clauses (i) and (ii) of this Section 5.2.4, the disposition of
assets associated with the Borrower's transition to contract manufacturing.
16. Section 5.2.9 of the Agreement is hereby amended in its entirety to
read as follows:
Section 5.2.9. Minimum Operating and Net Income. (i) During
the period beginning with the Borrower's fiscal quarter ending March, 1999 and
ending on the fiscal quarter ending December, 1999, have a negative Operating
Income or a negative Net Income for any two fiscal quarters, and (ii) as of the
end of each fiscal quarter of the Borrower commencing with the Borrower's fiscal
quarter ending in March, 2000, have a negative Operating Income, or a negative
Net Income for the rolling four quarter fiscal period consisting of such fiscal
quarter and the three immediately preceding fiscal quarters.
17. Section 5.2.10 of the Agreement ("Dividends, Payments and
Distributions") is hereby amended by deleting clause (iii) thereof and
substituting in its stead the following new clause (iii):
(iii) on any date following the delivery of the Borrower's
financial statements to the Agent pursuant to Section 5.3.3 and the related
Officer's Certificate as required by Section 5.3.4 reflecting Operating Income
and Net Income equal to or greater than one dollar ($1.00) for three (3)
consecutive fiscal quarters, the Borrower shall be permitted to repurchase
shares of its own capital stock provided that on or before the thirtieth (30th)
day prior to the consummation of any such repurchase, the Borrower has delivered
to the Agent a pro-forma Compliance Certificate on a consolidated basis, which
such pro-forma Compliance Certificate shall indicate that, assuming the
repurchase had occurred on the last day of the most recently ended fiscal
quarter, no Default or Event of Default exists or would exist following
consummation of such repurchase and that, after giving effect thereto, the
Borrower would be in compliance with Sections 5.1.10, 5.1.10A, 5.1.11, 5.1.12
and 5.1.13 and Sections 5.2.8 and 5.2.9.
18. Exhibit 3.1.1.10 to the Agreement (Form of Compliance Certificate)
is hereby deleted and a new Exhibit 3.1.1.10 in the form attached hereto as "
Exhibit 3.1.1.10 " substituted in its stead.
This Amendment shall take effect as of the Effective Date upon
receipt by the Agent of the last item specified below (other than any item
expressly deferred or waived in writing by the Majority Lenders):
(i) this Amendment duly executed by the parties hereto;
(ii) a certificate of the Secretary or an Assistant Secretary
of the Borrower with respect to resolutions of its Board of Directors
authorizing the execution and delivery of this Amendment, and any other
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documents required to be delivered by this Amendment, identifying the officer(s)
authorized to execute, deliver and take all other actions required thereunder;
(iii) a Disclosure Letter executed by the Borrower with
respect to the representations and warranties contained in the Loan Agreement;
(iv) an Escrow Agreement and each of the Security Documents
required by the Agent in connection with the creation and perfection of a Lien
on all assets of the Borrower in favor of the Collateral Agent, for the benefit
of the Agent, the Syndication Agent, the Issuing Lender, and the Lenders as
security for the Obligations duly executed by an authorized officer of the
Borrower, (v) an Opinion of the Borrower's counsel with respect to this
Amendment and the Security Documents and the Escrow Agreement referenced in
clause (iv) above;
(v) payment to the Agent, for the ratable benefit of
the Lenders approving this Amendment, of the amendment fee in the amount of
$50,000; and
(vi) such other documents, and evidence of completion of such
other matters, as the Agent or the Required Lenders reasonably may deem
necessary or desirable.
The Borrower hereby represents and warrants to the Lenders that no
Default or Event of Default exists under the Agreement. Nothing in this Second
Letter of Amendment shall be construed to be an amendment of any other provision
of the Agreement and all of the provisions of the Agreement shall remain in full
force and effect.
This Amendment supersedes the December 9, 1998 Supplement, the terms of
which shall have no further force or effect.
This Amendment is executed as an instrument under seal and shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts without regard to its conflicts of law rules. All parts of the
Agreement not affected by this Amendment are hereby ratified and affirmed in all
respects, provided that if any provision of the Agreement shall conflict or be
inconsistent with this Amendment, the terms of this Amendment shall supersede
and prevail. Upon and after the date of this Amendment all references to the
Agreement in that document, or in any related document, shall mean the Agreement
as amended by this Amendment. Except as expressly provided in this Amendment,
the execution and delivery of this Amendment does not and will not amend, modify
or supplement any provision of, or constitute a consent to or a waiver of any
noncompliance with the provisions of the Agreement, and, except as specifically
provided in this Amendment, the Agreement shall remain in full force and effect.
This Amendment may be executed in one or more counterparts with the same effect
as if the signatures hereto and thereto were upon the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the Borrower, the Agent, the Syndication
Agent, and the Lenders in accordance with Section 9.5 of the Agreement, has
caused this Amendment to be executed and delivered by their respective duly
authorized officers as an instrument under seal as of the Effective Date.
BORROWER:
TRIMBLE NAVIGATION LIMITED
By: /s/ John E. Huey
John E. Huey
Treasurer
AGENT:
FLEET NATIONAL BANK
By:/s/ Mathew M. Glauninger
Mathew M. Glauninger
Vice President and Senior
Relationship Manager
SYNDICATION AGENT:
BANKBOSTON, N.A.
By: /s/ Anthony B. Kwee
Print Name Anthony B. Kwee
Title: Vice President
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LENDERS:
FLEET NATIONAL BANK
By: /s/ Mathew M. Glauninger
Mathew M. Glauninger
Vice President and Senior
Relationship Manager
BANKBOSTON, N.A.
By: /s/ Anthony B. Kwee
Print Name Anthony B. Kwee
Title: Vice President
SANWA BANK CALIFORNIA
By:
Print Name
Title:
ABN AMRO BANK N.V.
By: /s/ Dianne D. Barkley
Print Name Diannie D. Barkley
Title: Group Vice President
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EXHIBIT 10.62
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
September 1, 1998 (the "Effective Date"), between Trimble Navigation Limited, a
California corporation (the "Company"), and Dr. Bradford W. Parkinson (the
"Executive").
WHEREAS, the Company desires to employ the Executive as of the
Effective Date and the Executive desires to accept employment with the Company
on the terms and conditions set forth below;
WHEREAS, simultaneously with the execution hereof, the Company and the
Executive are entering into a Consulting Agreement (the "Consulting Agreement")
pursuant to which Executive will consult to Company immediately following the
Employment Period (as defined in Section 2 below) and are entering a Standby
Consulting Agreement (the "Standby Consulting Agreement");
NOW, THEREFORE, in consideration of the foregoing recitals and the
respective covenants and agreements of the parties contained in this document,
the Company and the Executive agree as follows:
1. Employment and Duties. During the Employment Period (as defined in
Section 2 below), the Executive will serve as President and Chief Executive
Officer of the Company. The duties and responsibilities of the Executive will
include the duties and responsibilities for the Executive's corporate offices
and positions as set forth in the Company's bylaws from time to time in effect
and such other duties and responsibilities as the board of directors of the
Company (the "Board of Directors") may from time to time reasonably assign to
the Executive, in all cases to be consistent with the Executive's corporate
offices and positions. Notwithstanding the foregoing, in the event a successor
is hired to serve as President and/or Chief Executive Officer of the Company,
Executive will continue as an employee of the Company for the Employment Period
(as defined in Section 2 below) and will perform all such tasks as are
reasonably required of him by such President and/or Chief Executive Officer. The
Executive will perform faithfully the executive duties assigned to him to the
best of his ability and in the best interests of the Company. The Executive will
continue to serve as a director of the Company without additional compensation.
2. Employment Period.
(a) Term. The employment period will begin upon the Effective
Date and will continue thereafter until May 31, 1999 (the "Employment Period"),
unless sooner terminated pursuant to the provisions of this Agreement. At the
end of the Employment Period, Executive will continue as a consultant to the
Company pursuant to the Consulting Agreement.
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(b) Early Termination. The Company may terminate the
Executive's employment prior to the end of the Employment Period by giving the
Executive 30 days' advance notice in writing. If the Company terminates the
Executive's employment prior to the end of the Employment Period for any reason
other than Cause or Disability, both as defined below, or if the Executive
terminates his employment for Good Reason, as defined below, the provisions of
Sections 10(a)(i), 10(b) and 10(c) will apply. The Executive may terminate his
employment prior to the end of the Employment Period by giving the Company 30
days' advance written notice. If the Executive terminates his employment prior
to the end of the Employment Period other than for Good Reason, the provisions
of Section 10(a)(ii) will apply. Upon termination of the Executive's employment
with the Company, the Executive's rights under any applicable benefit plans will
be determined under the provisions of those plans.
(c) Death. The Executive's employment will terminate in the
event of his death. The Company will have no obligation to pay or provide any
compensation or benefits under this Agreement on account of the Executive's
death, or for periods following the Executive's death, provided, that the
Company's obligations under Section 10(a)(i) will not be interrupted as a result
of the Executive's death. The Executive's rights under the benefit plans of the
Company in the event of the Executive's death will be determined under the
provisions of those plans.
(d) Cause. During the Employment Period, the Company may
terminate the Executive's employment for cause by giving the Executive 10 days'
advance notice in writing. For all purposes under this Agreement, "Cause" will
mean (i) willful failure by the Executive to substantially perform his duties
hereunder, (ii) a willful act by the Executive which constitutes gross
misconduct and which is injurious to the Company, (iii) a willful breach by the
Executive of a material provision of this Agreement, or (iv) a material and
willful violation of a federal or state law or regulation applicable to the
business of the Company. No act, or failure to act, by the Executive will be
considered "willful" unless committed without a reasonable belief that the act
or omission was in the Company's best interest. No compensation or benefits will
be paid or provided to the Executive under this Agreement on account of a
termination for Cause, or for periods following the date when such a termination
of employment is effective. The Executive's rights under the benefit plans of
the Company will be determined under the provisions of those plans.
(e) Disability. The Company may terminate the Executive's
employment for Disability by giving the Executive 30 days' advance notice in
writing. For all purposes under this Agreement, "Disability" will mean that the
Executive, at the time notice is given, has been unable to substantially perform
his duties under this Agreement for a period of not less than two consecutive
months as the result of his incapacity due to physical or mental illness. In the
event that the Executive resumes the effective performance of substantially all
of his duties hereunder before the termination of his employment under this
Section 2(e) becomes effective, the notice of termination will automatically be
deemed to have been revoked. No compensation or benefits will be paid or
provided to the Executive under this Agreement on account of termination for
Disability, or for periods following the date when such a termination of
employment is effective. The Executive's rights under the benefit plans of the
Company will be determined under the provisions of those plans.
(f) Good Reason. Employment with the Company may be regarded
as having been constructively terminated by the Company, and the Executive may
therefore terminate his employment for Good Reason and thereupon become entitled
to the benefits of Section 10(a)(i) and 10(b) below, if, before the end of the
Employment Period, one or more of the following events will occur (unless such
event(s) applies generally to all senior management of the Company):
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(i) a material reduction by the Company
in the Salary (as defined in Section 4, below) of the Executive as in effect
immediately prior to such reduction;
(ii) a material reduction by the Company in
the kind or level of employee benefits to which the Executive is entitled
immediately prior to such reduction with the result that the Executive's
overall benefits package is significantly reduced;
(iii) the required relocation of the
Executive to a facility or a location more than 25 miles from the Executive's
then present location over Executive's written objection made withing
30 days of such required relocation; (iv) any purported termination of the
Executive's employment by the Company other than for death, Disability or for
Cause, or any purported termination for which the grounds relied upon are not
valid; or
(v) the failure of the Company to obtain
the assumption of this Agreement or the Stock Option (as defined in Section 5)
by any successor.
3. Place of Employment. The Executive's services will be performed at
the Company's principal executive offices at 585 N. Mary Avenue, Sunnyvale,
California. The parties acknowledge, however, that the Executive may be required
to travel in connection with the performance of his duties hereunder.
4. Salary. For all services to be rendered by the Executive pursuant to
this Agreement, the Company agrees to pay the Executive during the Employment
Period a salary (the "Salary") at an monthly rate of not less than $30,000. The
Salary will be paid in periodic installments in accordance with the Company's
regular payroll practices. The Company will be entitled to withhold, or cause to
be withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.
5. Stock Option and Other Benefits .
(a) Stock Option. The Board of Directors has granted, as of
August 19, 1998, the Executive as partial consideration for the performance of
this Agreement a five year option (the "Stock Option") to purchase 100,000
shares of the Company's Common Stock (the "Option Shares") at the fair market
value of the Common Stock of the Company on the date of grant, which is
contingent upon a continuous employment or consulting relationship between
Executive and the Company. Such fair market value is equal to the per share
closing price for the Company's Common Stock on the National Association of
Securities Dealers, National Market System on such date of grant as recorded in
The Wall Street Journal. The Stock Option will vest as described in Section 5(b)
below and will be subject to such other terms and conditions as are described in
Section 5(c) below.
(b) Vesting. Option Shares will vest in equal monthly
installments over the six-month period that begins as of the Effective Date and
ends February 28, 1999.
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(c) Option Provisions. The Stock Option will be granted under
the 1993 Stock Option Plan (the "Stock Plan") and will be subject to the terms
and conditions of the Stock Plan and form of option agreement.
6. Expenses. The Executive will be entitled to prompt reimbursement by
the Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by the Executive during the Employment Period (in
accordance with the policies and procedures established by the Company for its
senior executive officers) in the performance of his duties and responsibilities
under this Agreement; provided, that the Executive will properly account for
such expenses in accordance with Company policies and procedures. The parties
agree that for purposes of this Section, the Executive's air travel will be
coach class domestically and business class internationally.
7. Other Benefits. During the Employment Period, the Company will
reimburse Executive for the cost of maintaining his Stanford University
benefits, in an amount not in excess of $1,000 per month, plus the amount
necessary to gross up that amount for applicable taxes to provide an amount
equal to the cost of such benefits net of Executive's tax cost. The Executive
will not be entitled to participate in any employee benefit plans or programs
which cover health, dental and life insurance. Employee will participate in the
other benefit programs of the Company. Executive will continue to vest those
options received by Executive prior to the date hereof, as though this
employment was continuous employment under these terms.
8. Vacations and Holidays. During the Employment Period, the Executive
will be entitled to paid vacation which will accrue at the rate of one week per
quarter and will also be entitled to Company holidays in accordance with the
Company's policies.
9. Other Activities. During the Employment Period, the Executive will
devote substantially all of his working time and efforts, during the Company's
normal business hours to the business and affairs of the Company and its
subsidiaries and to the diligent and faithful performance of the duties and
responsibilities duly assigned to him pursuant to this Agreement, except for
vacations, holidays and sickness. However, the Executive may devote a reasonable
amount of his time to civic, community, or charitable activities, may continue
his relationship with The Aerospace Corporation, Draper Laboratories,
IntegriNautics Corporation and Stanford University (related to GPS activities)
to the extent that such activities do not conflict with his duty of loyalty to
the Company, and, with the prior written approval of the Board of Directors, to
serve as a director of other corporations and to other types of business or
public activities not expressly mentioned in this Section.
10. Termination Benefits. In the event the Executive's employment
terminates prior to the end of the Employment Period, then the Executive will be
entitled to receive severance and other benefits as follows:
(a) Severance.
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(i) Involuntary Termination. If the
Company terminates the Executive's employment other than for death, Disability
or Cause, or if the Executive terminates his employment for Good Reason,
then, in lieu of any severance benefits to which the Executive may otherwise
be entitled under any Company severance plan or program, the Executive will
be entitled to payment of his Salary on the regular payroll periods of the
Company until the end of the Employment Period or, if earlier, until a
breach by the Executive of his obligations under Sections 11
(Proprietary Information) or 12 (Non-Solicit) hereof.
(ii) Other Termination. In the event
the Executive's employment terminates for death, Disability or Cause, or
the Employee resigns for other than Good Reason, then the Executive will only
be entitled to receive any benefits accrued to date and as may then be
established under the Company's existing benefit plans and policies at the
time of such termination. The Executive will receive only that compensation
provided for herein accrued for periods served prior to the termination
of employment but will not be entitled to any additional amounts under this
Agreement.
(b) Options. In the event the Executive's employment is
terminated by the Company as described in Section 10(a)(i) above, then the
Executive will continue to vest in the unvested portion of the Stock Option
until February 28, 1999 (subject to the term of the Stock Option). If terminated
as described in Section 10(a)(ii), such vesting will terminate as of the date of
such termination.
(c) No Duty to Mitigate. The Executive will not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner).
11. Proprietary Information. During the Employment Period and
thereafter, the Executive will not, without the prior written consent of the
Board of Directors, disclose or use for any purpose (except in the course of his
employment under this Agreement and in furtherance of the business of the
Company or any of its affiliates or subsidiaries) any confidential information
or proprietary data of the Company. As an express condition of the Executive's
employment with the Company, the Executive agrees to execute confidentiality
agreements as requested by the Company, including but not limited to the
Company's form of Employment, Confidential Information, Invention Assignment,
and Arbitration Agreement, which is attached hereto as Exhibit A and
incorporated herein by reference.
12. Non-Solicit. The Executive covenants and agrees with the Company
that during his employment with the Company and for a period expiring one year
after the date of termination of such employment, he will not solicit any of the
Company's then-current employees to terminate their employment with the Company
or to become employed by any firm, company or other business enterprise with
which the Executive may then be connected.
13. Noncompete.
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(a) Scope. Executive agrees that during the period beginning
on the Effective Date and continuing for the term of this Agreement, he will not
enter into the employ of, or render services to, any firm, corporation, or
organization in a capacity that gives him responsibility for that segment of
such entity's business which derives more than 10% of its annual revenues from
sales of products which directly compete with products which are offered by the
Company during the term of the Employment Agreement and the Consultant
Agreement; provided, however, that Executive may continue his relationship with
Draper Labs, the Aerospace Corporation, IntegriNautics Corporation and Stanford
University (related to GPS activities) and any other firm, corporation, or
organization which the Board of Directors approves subject to the duty of
loyalty to the Company.
(b) Geographic Area. The parties acknowledge that the business
of the Company and its subsidiaries is international in scope. The parties agree
that the geographical areas in which the restrictions provided for in this
Agreement apply include all cities, counties and states of the United States of
America. In addition, the parties agree that the geographical areas in which the
restrictions provided for in this Agreement apply include all foreign nations
outside the United States of America in which the Company or any of its
subsidiaries engages in sales, or otherwise conducts business or selling
efforts.
(c) Severability. The parties intend that the covenants
contained in this Section be construed as a series of separate covenants, one
for each county of each state of the United States and each nation. Except for
geographic coverage, each such separate covenant will be deemed identical in
terms of the covenants contained in this Agreement. If, in any judicial
proceeding, a court will refuse to enforce any of the separate covenants (or any
part thereof) deemed included in this Section, then such unenforceable covenant
(or such part) will be deemed eliminated from this Section for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants (or portions thereof) to be enforced. In the event that the provisions
of this Section should ever be deemed to exceed the time or geographic
limitations, or the scope of these covenants, as permitted by applicable law,
then such provisions will be reformed to the maximum time or geographic
limitations, as the case may be, permitted by applicable laws.
14. Right to Advice of Counsel. The Executive acknowledges that he has
had the opportunity to fully review this Agreement and if he so chooses, to
consult with counsel and is fully aware of his rights and obligations under this
Agreement.
15. Successors. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume the
obligations of this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption agreement prior to the
effectiveness of any such succession will entitle the Executive to the benefits
described in Sections 10(a)(i) and 10(b) of this Agreement, subject to the terms
and conditions therein.
16. Arbitration.
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(a) Disputes. Except as provided in Section 16(c) below, the
Company and the Executive agree that, to the extent permitted by applicable law,
any dispute or controversy arising under or in connection with this Agreement
will be settled exclusively by arbitration in San Jose, California, in
accordance with the rules of the American Arbitration Association then in effect
by an arbitrator selected by both parties within ten days after either party has
notified the other in writing that it desires a dispute between them to be
settled by arbitration. In the event the parties cannot agree on such arbitrator
within such ten-day period, each party will select an arbitrator and inform the
other party in writing of such arbitrator's name and address within five days
after the end of such ten-day period and the two arbitrators so selected will
select a third arbitrator within 15 days thereafter; provided, however, that in
the event of a failure by either party to select an arbitrator and notify the
other party of such selection within the time period provided above, the
arbitrator selected by the other party will be the sole arbitrator of the
dispute. The decision of the arbitrator or a majority of the panel of
arbitrators will be binding upon the parties and judgment in accordance with
that decision may be entered in any court having jurisdiction thereover.
Punitive damages will not be awarded.
(b) Consent to Personal Jurisdiction. The arbitrator(s) will
apply California law to the merits of any dispute or claim, without reference to
conflicts of law rules. Executive hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(c) Equitable Relief. The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgment of the powers of the
arbitrator.
(d) Acknowledgment. EXECUTIVE HAS READ AND UNDERSTANDS THIS
AGREEMENT, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING
THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 16(c), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.
17. Absence of Conflict. The Executive represents and warrants that his
employment by the Company as described herein will not conflict with and will
not be constrained by any prior or other employment or consulting agreement or
relationship.
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18. Assignment. This Agreement and all rights under this Agreement will
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees, successors and assigns.
This Agreement is personal in nature, and neither of the parties to this
Agreement will, without the written consent of the other, assign or transfer
this Agreement or any right or obligation under this Agreement to any other
person or entity; except that the rights and obligations of the Company under
this Agreement may be assigned to a corporation which becomes the successor to
the Company as the result of a merger or other corporate reorganization or sale
of substantially all the assets to a successor which continues the business of
the Company or any other subsidiary of the Company, provided, that such
assignment will not relieve the Company of its obligations hereunder. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, will be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
19. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement will be in writing and will be
delivered personally or sent by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company: Trimble Navigation Limited
585 N. Mary Avenue
P.O. Box 3642
Sunnyvale, CA 94088-3642
Attn: Board of Directors
or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this Section. Such notices or other communications will be effective upon
delivery or, if earlier, three days after they have been mailed as provided
above.
20. Integration. This Agreement, the Consulting Agreement and the
Standby Consulting Agreement represent the entire agreement and understanding
between the parties as to the subject matter hereof and supersede all prior
agreements whether written or oral. No waiver, alteration, or modification of
any of the provisions of this Agreement will be binding unless in writing and
signed by the party against whom enforcement of the change or modification is
sought.
21. Waiver. Failure or delay on the part of either party hereto to
enforce any right, power, or privilege hereunder will not be deemed to
constitute a waiver thereof. Additionally, a waiver by either party or a breach
of any promise hereof by the other party will not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.
22. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
23. Applicable Law. This Agreement will be governed by and construed in
accordance with the internal substantive laws, and not the choice of law rules,
of the State of California.
110
24. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed to be an original, and which together will constitute a
single agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
EXECUTIVE: TRIMBLE NAVIGATION LIMITED:
/s/ Bradford W. Parkinson By: /s/ Robert S. Cooper
Dr. Bradford W. Parkinson
Name: Robert S. Cooper
Title: Chairman
111
EXHIBIT 10.63
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of September 1,
1998 (the "Effective Date"), between Trimble Navigation Limited, a California
corporation (the "Company"), and Dr. Robert S. Cooper (the "Executive").
WHEREAS, the Company desires to employ the Executive as of the
Effective Date and the Executive desires to accept employment with the Company
on the terms and conditions set forth below;
WHEREAS, simultaneously with the execution hereof, the Company and
Consultant are entering a Standby Consulting Agreement (the "Standby Consulting
Agreement");
NOW, THEREFORE, in consideration of the foregoing recital and the
respective covenants and agreements of the parties contained in this document,
the Company and the Executive agree as follows:
1. Employment and Duties. During the Employment Period (as defined in
Section 2 below), the Executive will serve as Chairman of the Board of the
Company which position will be deemed an executive officer position. The duties
and responsibilities of the Executive will include the duties and
responsibilities for the Executive's corporate offices and positions as set
forth in the Company's bylaws from time to time in effect and such other duties
and responsibilities as the board of directors of the Company (the "Board of
Directors") may from time to time reasonably assign to the Executive, in all
cases to be consistent with the Executive's corporate offices and positions. The
Executive will perform faithfully the executive duties assigned to him to the
best of his ability and in the best interests of the Company. Executive will
continue to serve as a director of the Company without additional compensation.
2. Employment Period.
(a) Term. The employment period will begin upon the Effective
Date and will continue thereafter until August 31, 1999 (the "Employment
Period"), unless sooner terminated pursuant to the provisions of this Agreement.
Thereafter, Executive's employment will be at will.
(b) Early Termination. The Company may terminate the
Executive's employment prior to the end of the Employment Period by giving the
Executive 30 days' advance notice in writing. If the Company terminates the
Executive's employment prior to the end of the Employment Period for any reason
other than Cause or Disability, both as defined below, or if the Executive
terminates his employment for Good Reason, as defined below, the provisions of
Sections 10(a)(i), 10(b) and 10(c) will apply. The Executive may terminate his
employment prior to the end of the Employment Period by giving the Company 30
days' advance written notice. If the Executive terminates his employment prior
to the end of the Employment Period other than for Good Reason, the provisions
of Section 10(a)(ii) will apply. Upon termination of the Executive's employment
with the Company, the Executive's rights under any applicable benefit plans will
be determined under the provisions of those plans.
112
(c) Death. The Executive's employment will terminate in the
event of his death. The Company will have no obligation to pay or provide any
compensation or benefits under this Agreement on account of the Executive's
death, or for periods following the Executive's death, provided, that the
Company's obligations under Section 10(a)(i) will not be interrupted as a result
of the Executive's death. The Executive's rights under the benefit plans of the
Company in the event of the Executive's death will be determined under the
provisions of those plans.
(d) Cause. During the Employment Period, the Company may
terminate the Executive's employment for cause by giving the Executive ten days'
advance notice in writing. For all purposes under this Agreement, "Cause" will
mean (i) willful failure by the Executive to substantially perform his duties
hereunder, (ii) a willful act by the Executive which is injurious to the
Company, (iii) a willful breach by the Executive of a material provision of this
Agreement, or (iv) a material and willful violation of a federal or state law or
regulation applicable to the business of the Company. No act, or failure to act,
by the Executive will be considered "willful" unless committed without a
reasonable belief that the act or omission was in the Company's best interest.
No compensation or benefits will be paid or provided to the Executive under this
Agreement on account of a termination for Cause, or for periods following the
date when such a termination of employment is effective. The Executive's rights
under the benefit plans of the Company will be determined under the provisions
of those plans.
(e) Disability. The Company may terminate the Executive's
employment for Disability by giving the Executive 30 days' advance notice in
writing. For all purposes under this Agreement, "Disability" will mean that the
Executive, at the time notice is given, has been unable to substantially perform
his duties under this Agreement for a period of not less than two consecutive
months as the result of his incapacity due to physical or mental illness. In the
event that the Executive resumes the performance of substantially all of his
duties hereunder before the termination of his employment under this Section
2(e) becomes effective, the notice of termination will automatically be deemed
to have been revoked. No compensation or benefits will be paid or provided to
the Executive under this Agreement on account of termination for Disability, or
for periods following the date when such a termination of employment is
effective. The Executive's rights under the benefit plans of the Company will be
determined under the provisions of those plans.
(f) Good Reason. Employment with the Company may be regarded
as having been constructively terminated by the Company, and the Executive may
therefore terminate his employment for Good Reason and thereupon become entitled
to the benefits of Sections 10(a)(i) and 10(b) below, if, before the end of the
Employment Period, one or more of the following events will occur (unless such
event(s) applies generally to all senior management of the Company):
(i) a material reduction by the Company in the
Salary of the Executive as in effect immediately prior to such reduction;
(ii) any purported termination of the Executive's
employment by the Company which is not effected for death, Disability or for
Cause, or any purported termination for which the grounds relied upon are not
valid; or
(iii) the failure of the Company to obtain the
assumption of this Agreement or the Stock Option (as defined in Section 5) by
any successor.
113
3. Place of Employment. The Executive's services will be performed at
the Company's principal executive offices at 585 N. Mary Avenue, Sunnyvale,
California. The parties acknowledge, however, that the Executive may be required
to travel in connection with the performance of his duties hereunder.
4. Salary. For all services to be rendered by the Executive pursuant to
this Agreement, the Company agrees to pay the Executive during the Employment
Period a salary (the "Salary") at a monthly rate of not less than $10,000. The
Salary will be paid in periodic installments in accordance with the Company's
regular payroll practices. The Company will be entitled to withhold, or cause to
be withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.
5. Stock Option.
(a) Stock Option. Subject to the approval of the Board of
Directors, the Company will grant the Executive a five year option (the "Stock
Option") to purchase 60,000 shares of the Company's Common Stock (the "Option
Shares") at the fair market value of the Common Stock of the Company on the
Effective Date, which is contingent upon a continuous employment or consulting
relationship between Executive and the Company. Such fair market value will be
equal to the per share closing price for the Company's Common Stock on the
National Association of Securities Dealers, National Market System on such date
of grant as recorded in The Wall Street Journal. The Stock Option will vest as
described in Section 5(b) and will be subject to such other terms and conditions
as are described in Section 5(c).
(b) Vesting. Option Shares will vest monthly over the
twelve-month period that begins as of the Effective Date and ends August 31,
1999.
(c) Option Provisions. The Stock Option will be granted under
the 1993 Stock Option Plan (the "Stock Plan") and will be subject to the terms
and conditions of the Stock Plan and form of option agreement.
6. Expenses. The Executive will be entitled to prompt reimbursement by
the Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by the Executive during the Employment Period (in
accordance with the policies and procedures established by the Company for its
senior executive officers) in the performance of his duties and responsibilities
under this Agreement; provided, that the Executive will properly account for
such expenses in accordance with Company policies and procedures. The parties
agree that for purposes of this Section, the Executive's air travel will be
coach class domestically and business class internationally.
7. Other Benefits. During the Employment Period, the Executive will be
entitled to participate in employee benefit plans or programs of the Company, if
any, to the extent that his position, tenure, salary, age, health and other
qualifications make him eligible to participate, subject to the rules and
regulations applicable thereto.
8. Holidays. The Executive will be entitled to Company holidays in
accordance with the Company's policies in effect from time to time for its
senior executive officers.
114
9. Other Activities. The Executive will devote approximately one third
of his working time and efforts during the Company's normal business hours to
the business and affairs of the Company and its subsidiaries and to the diligent
and faithful performance of the duties and responsibilities duly assigned to him
pursuant to this Agreement. Executive will be free to commence and to continue
his other business relationships without restriction other than with respect to
his duty of loyalty to the Company.
10. Termination Benefits. In the event the Executive's employment
terminates prior to the end of the Employment Period, then the Executive will be
entitled to receive severance and other benefits as follows:
(a) Severance.
(i) Involuntary Termination. If the Company
terminates the Executive's employment other than for death, Disability or
Cause, or if the Executive terminates his employment for Good Reason,
then, in lieu of any severance benefits to which the Executive may
otherwise be entitled under any Company severance plan or program, the Executive
will be entitled to payment of his Salary on the regular payroll periods of the
Company until the end of the Employment Period or, if earlier, until a breach by
the Executive of his obligations under Sections 11 (Proprietary Information) or
12 (Non-Solicit) hereof.
(ii) Other Termination. In the event the
Executive's employment terminates for death, Disability or Cause, or the
Employee resigns for other than Good Reason, then the Executive will be
entitled to receive any benefits accrued to date only as may then be
established under the Company's existing benefit plans and policies at the time
of such termination. The Executive will receive only that compensation provided
for herein accrued for periods served prior to the termination of employment but
will not be entitled to any additional amounts under this Agreement.
(b) Options. In the event the Executive's employment is
terminated by the Company as described in Section 10(a)(i) above, then the
Executive will continue to vest in the unvested portion of the Stock Option
until August 31, 1999 (subject to the term of the Stock Option). If terminated
as described in Section 10(a)(ii), such vesting will terminate as of the date of
such termination.
(c) No Duty to Mitigate. The Executive will not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner).
115
11. Proprietary Information. During the Employment Period and
thereafter, the Executive will not, without the prior written consent of the
Board of Directors, disclose or use for any purpose (except in the course of his
employment under this Agreement and in furtherance of the business of the
Company or any of its affiliates or subsidiaries) any confidential information
or proprietary data of the Company. As an express condition of the Executive's
employment with the Company, the Executive agrees to execute confidentiality
agreements as requested by the Company, including but not limited to the
Company's form of Employment, Confidential Information, Invention Assignment,
and Arbitration Agreement, which is attached hereto as Exhibit A and
incorporated herein by reference.
12. Non-Solicit. The Executive covenants and agrees with the Company
that during his employment with the Company and for a period expiring one year
after the date of termination of such employment, he will not solicit any of the
Company's then-current employees to terminate their employment with the Company
or to become employed by any firm, company or other business enterprise with
which the Executive may then be connected.
13. Right to Advice of Counsel. The Executive acknowledges that he has
had the opportunity to fully review this Agreement and if he so chooses, to
consult with counsel and is fully aware of his rights and obligations under this
Agreement.
14. Successors. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume the
obligations of this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption agreement prior to the
effectiveness of any such succession will entitle the Executive to the benefits
described in Sections 10(a)(i) and 10(b) of this Agreement, subject to the terms
and conditions therein.
15. Arbitration.
(a) Disputes. Except as provided in Section 15(d) below, the
Company and the Executive agree that, to the extent permitted by applicable law,
any dispute or controversy arising under or in connection with this Agreement
will be settled exclusively by arbitration in San Jose, California, in
accordance with the rules of the American Arbitration Association then in effect
by an arbitrator selected by both parties within ten days after either party has
notified the other in writing that it desires a dispute between them to be
settled by arbitration. In the event the parties cannot agree on such arbitrator
within such ten-day period, each party will select an arbitrator and inform the
other party in writing of such arbitrator's name and address within five days
after the end of such ten-day period and the two arbitrators so selected will
select a third arbitrator within 15 days thereafter; provided, however, that in
the event of a failure by either party to select an arbitrator and notify the
other party of such selection within the time period provided above, the
arbitrator selected by the other party will be the sole arbitrator of the
dispute. The decision of the arbitrator or a majority of the panel of
arbitrators will be binding upon the parties and judgment in accordance with
that decision may be entered in any court having jurisdiction thereover.
Punitive damages will not be awarded.
(b) Consent to Personal Jurisdiction. The arbitrator(s) will
apply California law to the merits of any dispute or claim, without reference to
conflicts of law rules. Executive hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
116
(c) Equitable Relief. The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgment of the powers of the
arbitrator.
(d) Acknowledgment. EXECUTIVE HAS READ AND UNDERSTANDS THIS
AGREEMENT, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING
THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 15(c), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.
16. Absence of Conflict. The Executive represents and warrants that his
employment by the Company as described herein will not conflict with and will
not be constrained by any prior or other employment or consulting agreement or
relationship.
17. Assignment. This Agreement and all rights under this Agreement will
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees, successors and assigns.
This Agreement is personal in nature, and neither of the parties to this
Agreement will, without the written consent of the other, assign or transfer
this Agreement or any right or obligation under this Agreement to any other
person or entity; except that the rights and obligations of the Company under
this Agreement may be assigned to a corporation which becomes the successor to
the Company as the result of a merger or other corporate reorganization or sale
of substantially all the assets to a corporation which continues the business of
the Company or any other subsidiary of the Company, provided, that such
assignment will not relieve the Company of its obligations hereunder. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, will be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
18. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement will be in writing and will be
delivered personally or sent by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
117
If to the Company: Trimble Navigation Limited
585 N. Mary Avenue
P.O. Box 3642
Sunnyvale, CA 94088-3642
Attn: Board of Directors
or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this Section. Such notices or other communications will be effective upon
delivery or, if earlier, three days after they have been mailed as provided
above.
19. Integration. This Agreement and the Standby Consulting Agreement
represent the entire agreement and understanding between the parties as to the
subject matter hereof and supersede all prior agreements whether written or
oral. No waiver, alteration, or modification of any of the provisions of this
Agreement will be binding unless in writing and signed by the party against whom
enforcement of the change or modification is sought.
20. Waiver. Failure or delay on the part of either party hereto to
enforce any right, power, or privilege hereunder will not be deemed to
constitute a waiver thereof. Additionally, a waiver by either party or a breach
of any promise hereof by the other party will not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.
21. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
22. Applicable Law. This Agreement will be governed by and construed in
accordance with the internal substantive laws, and not the choice of law rules,
of the State of California.
23. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed to be an original, and which together will constitute a
single agreement.
118
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
EXECUTIVE: TRIMBLE NAVIGATION LIMITED:
/s/ Robert S. Cooper By: /s/ Bradford W. Parkinson
Dr. Robert S. Cooper
Name: Bradford W. Parkinson
Title: President
1119
EXHIBIT 10.64
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is entered into as of
September 1, 1998 (the "Effective Date") by and between Trimble Navigation
Limited, a California corporation (the "Company"), and Dr. Bradford W. Parkinson
("Consultant").
WHEREAS, simultaneously with the execution hereof, the Company and
Consultant are entering an Employment Agreement (the "Employment Agreement") and
a Standby Consulting Agreement (the "Standby Consulting Agreement");
WHEREAS, the Company, immediately following the Employment Period (as
defined in the Employment Agreement), desires to retain Consultant as an
independent contractor to perform consulting services for the Company and
Consultant is willing to perform such services, on terms set forth more fully
below;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Services and Compensation
(a) Services. Consultant will devote approximately eight hours
each week during the Company's normal business hours to the business and affairs
of the Company and its subsidiaries and to the diligent and faithful performance
of the duties and responsibilities duly assigned to him (the "Services") by the
Chief Executive Officer of the Company.
(b) Compensation. The Company will pay Consultant $6,000 per
month during the term of this Agreement; provided, however, that in the event of
Consultant's death or disability during the term of this Agreement, Consultant
will not be entitled to receive such amount.
(c) Expenses. The Company will reimburse Consultant for all
reasonable travel expenses incurred by Consultant in performing Services
pursuant to this Agreement.
2. Confidentiality
(a) Definition. "Confidential Information" means any Company
proprietary information, technical data, trade secrets or know-how, including,
but not limited to, research, product plans, products, services, customers,
customer lists, markets, software, developments, inventions, processes,
formulas, technology, designs, drawings, engineering, hardware configuration
information, marketing, finances or other business information disclosed by the
Company either directly or indirectly in writing, orally or by drawings or
inspection of parts or equipment.
120
(b) Non-Use and Non-Disclosure. Consultant will not, during or
subsequent to the term of this Agreement, use the Company's Confidential
Information for any purpose whatsoever other than the performance of the
Services on behalf of the Company or disclose the Company's Confidential
Information to any third party. It is understood that such Confidential
Information will remain the sole property of the Company. Consultant further
agrees to take all reasonable precautions to prevent any unauthorized disclosure
of such Confidential Information including, but not limited to, having each
employee of Consultant, if any, with access to any Confidential Information,
execute a nondisclosure agreement containing provisions in the Company's favor
identical to Sections 2, 3 and 4 of this Agreement. Confidential Information
does not include information which (i) is known to Consultant at the time of
disclosure to Consultant by the Company as evidenced by written records of
Consultant, (ii) has become publicly known and made generally available through
no wrongful act of Consultant, or (iii) has been rightfully received by
Consultant from a third party who is authorized to make such disclosure. Without
the Company's prior written approval, Consultant will not directly or indirectly
disclose to anyone the existence of this Agreement or the fact that Consultant
has this arrangement with the Company.
(c) Former Employer's Confidential Information. Consultant
agrees that Consultant will not improperly use or disclose any proprietary
information or trade secrets of any former or current employer or other person
or entity with which Consultant has an agreement or duty to keep in confidence
information acquired by Consultant, if any, and that Consultant will not bring
onto the premises of the Company any unpublished document or proprietary
information belonging to such employer, person or entity unless consented to in
writing by such employer, person or entity. Consultant will indemnify the
Company and hold it harmless from and against all claims, liabilities, damages
and expenses, including reasonable attorneys fees and costs of suit, arising out
of or in connection with any violation or claimed violation of a third party's
rights resulting in whole or in part from the Company's use of the work product
of Consultant under this Agreement.
(d) Third Party Confidential Information. Consultant
recognizes that the Company has received and in the future will receive from
third parties their confidential or proprietary information subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. Consultant agrees that Consultant owes
the Company and such third parties, during the term of this Agreement and
thereafter, a duty to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out the Services for
the Company consistent with the Company's agreement with such third party.
(e) Return of Materials. Upon the termination of this
Agreement, or upon Company's earlier request, Consultant will deliver to the
Company all of the Company's property or Confidential Information that
Consultant may have in Consultant's possession or control.
3. Ownership
121
(a) Assignment. Consultant agrees that all copyrightable
material, notes, records, drawings, designs, inventions, improvements,
developments, discoveries and trade secrets (collectively, "Inventions")
conceived, made or discovered by Consultant, solely or in collaboration with
others, during the period of this Agreement which relate in any manner to the
business of the Company that Consultant may be directed to undertake,
investigate or experiment with, or which Consultant may become associated with
in work, investigation or experimentation in the line of business of Company in
performing the Services hereunder, are the sole property of the Company.
Consultant further agrees to assign (or cause to be assigned) and does hereby
assign fully to the Company all Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto.
(b) Further Assurances. Consultant agrees to assist Company,
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work rights
or other intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company will deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and exclusive right,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto. Consultant
further agrees that Consultant's obligation to execute or cause to be executed,
when it is in Consultant's power to do so, any such instrument or papers will
continue after the termination of this Agreement.
(c) Pre-Existing Materials. Consultant agrees that if in the
course of performing the Services, Consultant incorporates into any Invention
developed hereunder any invention, improvement, development, concept, discovery
or other proprietary information owned by Consultant or in which Consultant has
an interest, (i) Consultant will inform Company, in writing before incorporating
such invention, improvement, development, concept, discovery or other
proprietary information into any Invention and (ii) the Company is hereby
granted and will have a nonexclusive, royalty-free, perpetual, irrevocable,
worldwide license to make, have made, modify, use and sell such item as part of
or in connection with such Invention. Consultant will not incorporate any
invention, improvement, development, concept, discovery or other proprietary
information owned by any third party into any Invention without Company's prior
written permission.
(d) Attorney in Fact. Consultant agrees that if the Company is
unable because of Consultant's unavailability, dissolution, mental or physical
incapacity, or for any other reason, to secure Consultant's signature to apply
for or to pursue any application for any United States or foreign patents or
mask work or copyright registrations covering the Inventions assigned to the
Company above, then Consultant hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as Consultant's agent and
attorney in fact, to act for and in Consultant's behalf and stead to execute and
file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of patents, copyright and mask work
registrations thereon with the same legal force and effect as if executed by
Consultant.
4. Conflicting Obligations. Consultant certifies that Consultant has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude Consultant from complying
with the provisions hereof, and further certifies that Consultant will not enter
into any such conflicting agreement during the term of this Agreement.
122
5. Non-Solicit. The Consultant covenants and agrees with the Company
that during his consultancy with the Company and for a period expiring one year
after the date of termination of such consultancy, he will not solicit any of
the Company's then-current employees to terminate their employment with the
Company or to become employed by any other firm, company or other business
enterprise with which the Consultant may then be connected.
6. Noncompete.
(1) Scope. Consultant agrees that during the period beginning on the Effective
Date and continuing for the term of this Agreement, he will not enter into the
employ of, or render services to, any firm, corporation, or organization in a
capacity that gives him responsibility for that segment of such entity's
business which derives more than 10% of its annual revenues from sales of
products which directly compete with products which are offered by the Company
during the term of the Employment Agreement and the Consultant Agreement;
provided, however, that Executive may continue his relationship with Draper
Labs, the Aerospace Corporation, IntegriNautics Corporation and Stanford
University (related to GPS activities) and any other firm, corporation, or
organization which the Board of Directors approves subject to the duty of
loyalty to the Company.
(2) Geographic Area. The parties acknowledge that the business of the Company
and its subsidiaries is international in scope. The parties agree that the
geographical areas in which the restrictions provided for in this Agreement
apply include all cities, counties and states of the United States of America.
In addition, the parties agree that the geographical areas in which the
restrictions provided for in this Agreement apply include all foreign nations
outside the United States of America in which the Company or any of its
subsidiaries engages in sales, or otherwise conducts business or selling
efforts.
(3) Severability. The parties intend that the covenants contained in this
Section be construed as a series of separate covenants, one for each county of
each state of the United States and each nation. Except for geographic coverage,
each such separate covenant will be deemed identical in terms of the covenants
contained in this Agreement. If, in any judicial proceeding, a court will refuse
to enforce any of the separate covenants (or any part thereof) deemed included
in this Section, then such unenforceable covenant (or such part) will be deemed
eliminated from this Section for the purpose of those proceedings to the extent
necessary to permit the remaining separate covenants (or portions thereof) to be
enforced. In the event that the provisions of this Section should ever be deemed
to exceed the time or geographic limitations, or the scope of these covenants,
as permitted by applicable law, then such provisions will be reformed to the
maximum time or geographic limitations, as the case may be, permitted by
applicable laws.
7. Term and Termination
(a) Term. This Agreement will commence on June 1, 1999
and will continue until the earlier of (i) June 1, 2002 or (ii) termination as
provided below.
(b) Termination. The Company may terminate this Agreement
immediately and without prior notice if Consultant refuses to or is unable to
perform the Services or is in breach of any material provision of this
Agreement.
123
(c) Survival. Upon such termination all rights and duties of
the parties toward each other will cease except:
(i) that the Company will be obliged to pay,
within 30 days of the effective date of termination, all amounts owing to
Consultant for Services completed and accepted by the Company prior to the
termination date and related expenses, if any, in accordance with the
provisions of Section 1 (Services and Compensation) hereof; and
(ii) Sections 2 (Confidentiality),
3 (Ownership), 5 (Non-Solicit) and 8 (Independent Contractor) will survive
termination of this Agreement.
8. Assignment. Neither this Agreement nor any right hereunder or
interest herein may be assigned or transferred by Consultant without the express
written consent of the Company.
9. Independent Contractor. It is the express intention of the parties
that Consultant is an independent contractor. Nothing in this Agreement will in
any way be construed to constitute Consultant as an agent, employee or
representative of the Company, but Consultant will perform the Services
hereunder as an independent contractor. Consultant acknowledges and agrees that
Consultant is obligated to report as income all compensation received by
Consultant pursuant to this Agreement, and Consultant agrees to and acknowledges
the obligation to pay all self-employment and other taxes thereon. Consultant
further agrees to indemnify and hold harmless the Company and its directors,
officers, and employees from and against all taxes, losses, damages,
liabilities, costs and expenses, including attorney's fees and other legal
expenses, arising directly or indirectly from (i) any negligent, reckless or
intentionally wrongful act of Consultant or Consultant's assistants, employees
or agents, (ii) a determination by a court or agency that the Consultant is not
an independent contractor, or (iii) any breach by the Consultant or Consultant's
assistants, employees or agents of any of the covenants contained in this
Agreement.
10. Benefits. Consultant acknowledges and agrees and it is the intent
of the parties hereto that Consultant receive no Company-sponsored benefits from
the Company either as a Consultant or employee. Such benefits include, but are
not limited to, paid vacation, sick leave, medical insurance, and 401(k)
participation. If Consultant is reclassified by a state or federal agency or
court as an employee, Consultant will become a reclassified employee and will
receive no benefits except those mandated by state or federal law, even if by
the terms of the Company's benefit plans in effect at the time of such
reclassification Consultant would otherwise be eligible for such benefits.
11. Arbitration and Equitable Relief
124
(a) Disputes. Except as provided in Section 11(c) below, the
Company and the Consultant agree that, to the extent permitted by applicable
law, any dispute or controversy arising under or in connection with this
Agreement will be settled exclusively by arbitration in San Jose, California, in
accordance with the rules of the American Arbitration Association then in effect
by an arbitrator selected by both parties within ten days after either party has
notified the other in writing that it desires a dispute between them to be
settled by arbitration. In the event the parties cannot agree on such arbitrator
within such ten-day period, each party will select an arbitrator and inform the
other party in writing of such arbitrator's name and address within five days
after the end of such ten-day period and the two arbitrators so selected will
select a third arbitrator within 15 days thereafter; provided, however, that in
the event of a failure by either party to select an arbitrator and notify the
other party of such selection within the time period provided above, the
arbitrator selected by the other party will be the sole arbitrator of the
dispute. The decision of the arbitrator or a majority of the panel of
arbitrators will be binding upon the parties and judgment in accordance with
that decision may be entered in any court having jurisdiction thereover.
Punitive damages will not be awarded.
(b) Consent to Personal Jurisdiction. The arbitrator(s) will
apply California law to the merits of any dispute or claim, without reference to
conflicts of law rules. Consultant hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(c) Equitable Relief. The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgment of the powers of the
arbitrator.
(d) Acknowledgment. CONSULTANT HAS READ AND UNDERSTANDS THIS
AGREEMENT, WHICH DISCUSSES ARBITRATION. CONSULTANT UNDERSTANDS THAT BY SIGNING
THIS AGREEMENT, CONSULTANT AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 11(c), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF CONSULTANT'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.
12. Governing Law. This Agreement will be governed by the internal
substantive laws, but not the choice of law rules, of the State of California.
13. Entire Agreement. This Agreement, the Employment Agreement and the
Standby Consulting Agreement represent the entire agreement and understanding
between the parties as to the subject matter hereof and supersede all prior
agreements whether written or oral. No waiver, alteration, or modification of
any of the provisions of this Agreement will be binding unless in writing and
signed by the party against whom enforcement of the change or modification is
sought.
14. Attorney's Fees. In any court action at law or equity which is
brought by one of the parties to enforce or interpret the provisions of this
Agreement, the prevailing party will be entitled to reasonable attorney's fees,
in addition to any other relief to which that party may be entitled.
125
15. Severability. The invalidity or unenforceability of any provision
of this Agreement, or any terms thereof, will not affect the validity of this
Agreement as a whole, which will at all times remain in full force and effect.
16. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original, and which together will be a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONSULTANT: TRIMBLE NAVIGATION LIMITED
By:/s/ Bradford W. Parkinson By:/s/ Robert S. Cooper
Dr. Bradford W. Parkinson
Name: Robert S. Cooper
Title: Chairman
Address: 585 N. Mary Avenue
P.O. Box 3642
Sunnyvale, CA 94088-3642
126
EXHIBIT 10.65
STANDBY CONSULTING AGREEMENT
This Standby Consulting Agreement (this "Agreement") is entered into as
of September 1, 1998 (the "Effective Date") by and between Trimble Navigation
Limited, a California corporation (the "Company"), and Dr. Bradford W. Parkinson
("Consultant").
WHEREAS, simultaneously with the execution hereof, the Company and
Consultant are entering an Employment Agreement (the "Employment Agreement") and
a Consulting Agreement (the "Consulting Agreement");
WHEREAS, the Company, immediately following the termination of
Consultant's status as an employee under the Employment Agreement or as a
consultant under the Consulting, the Company desires to retain the ability to
use Consultant as an independent contractor to perform consulting services for
the Company as the need for such services may arise from time to time and
Consultant is willing to perform such services, on terms set forth more fully
below;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Services and Compensation
(a) Services. Consultant will perform consulting services (the
"Services") on as needed basis as determined by the Chief Executive Officer of
the Company in consideration for $1.00 per year.
(b) Compensation. The Company will pay Consultant on an hourly
basis at a rate mutually determined by Consultant and the Chief Executive
Officer of the Company at the time the Services are performed.
(c) Expenses. The Company will reimburse Consultant for all
reasonable travel expenses incurred by Consultant in performing Services
pursuant to this Agreement.
2. Confidentiality
(a) Definition. "Confidential Information" means any Company
proprietary information, technical data, trade secrets or know-how, including,
but not limited to, research, product plans, products, services, customers,
customer lists, markets, software, developments, inventions, processes,
formulas, technology, designs, drawings, engineering, hardware configuration
information, marketing, finances or other business information disclosed by the
Company either directly or indirectly in writing, orally or by drawings or
inspection of parts or equipment.
127
(b) Non-Use and Non-Disclosure. Consultant will not, during or
subsequent to the term of this Agreement, use the Company's Confidential
Information for any purpose whatsoever other than the performance of the
Services on behalf of the Company or disclose the Company's Confidential
Information to any third party. It is understood that such Confidential
Information will remain the sole property of the Company. Consultant further
agrees to take all reasonable precautions to prevent any unauthorized disclosure
of such Confidential Information including, but not limited to, having each
employee of Consultant, if any, with access to any Confidential Information,
execute a nondisclosure agreement containing provisions in the Company's favor
identical to Sections 2, 3 and 4 of this Agreement. Confidential Information
does not include information which (i) is known to Consultant at the time of
disclosure to Consultant by the Company as evidenced by written records of
Consultant, (ii) has become publicly known and made generally available through
no wrongful act of Consultant, or (iii) has been rightfully received by
Consultant from a third party who is authorized to make such disclosure. Without
the Company's prior written approval, Consultant will not directly or indirectly
disclose to anyone the existence of this Agreement or the fact that Consultant
has this arrangement with the Company.
(c) Former Employer's Confidential Information. Consultant
agrees that Consultant will not improperly use or disclose any proprietary
information or trade secrets of any former or current employer or other person
or entity with which Consultant has an agreement or duty to keep in confidence
information acquired by Consultant, if any, and that Consultant will not bring
onto the premises of the Company any unpublished document or proprietary
information belonging to such employer, person or entity unless consented to in
writing by such employer, person or entity. Consultant will indemnify the
Company and hold it harmless from and against all claims, liabilities, damages
and expenses, including reasonable attorneys fees and costs of suit, arising out
of or in connection with any violation or claimed violation of a third party's
rights resulting in whole or in part from the Company's use of the work product
of Consultant under this Agreement.
(d) Third Party Confidential Information. Consultant
recognizes that the Company has received and in the future will receive from
third parties their confidential or proprietary information subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. Consultant agrees that Consultant owes
the Company and such third parties, during the term of this Agreement and
thereafter, a duty to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out the Services for
the Company consistent with the Company's agreement with such third party.
(e) Return of Materials. Upon the termination of this
Agreement, or upon Company's earlier request, Consultant will deliver to the
Company all of the Company's property or Confidential Information that
Consultant may have in Consultant's possession or control.
3. Ownership
128
(a) Assignment. Consultant agrees that all copyrightable
material, notes, records, drawings, designs, inventions, improvements,
developments, discoveries and trade secrets (collectively, "Inventions")
conceived, made or discovered by Consultant, solely or in collaboration with
others, during the period of this Agreement which relate in any manner to the
business of the Company that Consultant may be directed to undertake,
investigate or experiment with, or which Consultant may become associated with
in work, investigation or experimentation in the line of business of Company in
performing the Services hereunder, are the sole property of the Company.
Consultant further agrees to assign (or cause to be assigned) and does hereby
assign fully to the Company all Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto.
(b) Further Assurances. Consultant agrees to assist Company,
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work rights
or other intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company will deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and exclusive right,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto. Consultant
further agrees that Consultant's obligation to execute or cause to be executed,
when it is in Consultant's power to do so, any such instrument or papers will
continue after the termination of this Agreement.
(c) Pre-Existing Materials. Consultant agrees that if in the
course of performing the Services, Consultant incorporates into any Invention
developed hereunder any invention, improvement, development, concept, discovery
or other proprietary information owned by Consultant or in which Consultant has
an interest, (i) Consultant will inform Company, in writing before incorporating
such invention, improvement, development, concept, discovery or other
proprietary information into any Invention and (ii) the Company is hereby
granted and will have a nonexclusive, royalty-free, perpetual, irrevocable,
worldwide license to make, have made, modify, use and sell such item as part of
or in connection with such Invention. Consultant will not incorporate any
invention, improvement, development, concept, discovery or other proprietary
information owned by any third party into any Invention without Company's prior
written permission.
(d) Attorney in Fact. Consultant agrees that if the Company is
unable because of Consultant's unavailability, dissolution, mental or physical
incapacity, or for any other reason, to secure Consultant's signature to apply
for or to pursue any application for any United States or foreign patents or
mask work or copyright registrations covering the Inventions assigned to the
Company above, then Consultant hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as Consultant's agent and
attorney in fact, to act for and in Consultant's behalf and stead to execute and
file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of patents, copyright and mask work
registrations thereon with the same legal force and effect as if executed by
Consultant.
4. Conflicting Obligations. Consultant certifies that Consultant has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude Consultant from complying
with the provisions hereof, and further certifies that Consultant will not enter
into any such conflicting agreement during the term of this Agreement.
129
5. Non-Solicit. The Consultant covenants and agrees with the Company
that during his consultancy with the Company and for a period expiring one year
after the date of termination of such consultancy, he will not solicit any of
the Company's then-current employees to terminate their employment with the
Company or to become employed by any other firm, company or other business
enterprise with which the Consultant may then be connected.
6. Term and Termination
(a) Term. This Agreement will commence immediately following
the termination of Consultant's status as an employee under the Employment
Agreement or as a consultant under the Consulting Agreement (as defined in the
Consulting Agreement) and will continue for a period of five years from the date
of this Agreement.
(b) Termination. The Company may not terminate this Agreement
unless Consultant is in breach of any material provision of this Agreement.
(c) Survival. Upon such termination all rights and duties of
the parties toward each other will cease except:
(i) that the Company will be obliged to pay,
within 30 days of the effective date of termination, all amounts owing to
Consultant for Services completed and accepted by the Company prior to the
termination date and related expenses, if any, in accordance with the
provisions of Section 1 (Services and Compensation) hereof; and
(ii) Sections 2 (Confidentiality),
3 (Ownership), 5 (Non-Solicit) and 8 (Independent Contractor) will survive
termination of this Agreement.
7. Assignment. Neither this Agreement nor any right hereunder or
interest herein may be assigned or transferred by Consultant without the express
written consent of the Company.
8. Independent Contractor. It is the express intention of the parties
that Consultant is an independent contractor. Nothing in this Agreement will in
any way be construed to constitute Consultant as an agent, employee or
representative of the Company, but Consultant will perform the Services
hereunder as an independent contractor. Consultant acknowledges and agrees that
Consultant is obligated to report as income all compensation received by
Consultant pursuant to this Agreement, and Consultant agrees to and acknowledges
the obligation to pay all self-employment and other taxes thereon. Consultant
further agrees to indemnify and hold harmless the Company and its directors,
officers, and employees from and against all taxes, losses, damages,
liabilities, costs and expenses, including attorney's fees and other legal
expenses, arising directly or indirectly from (i) any negligent, reckless or
intentionally wrongful act of Consultant or Consultant's assistants, employees
or agents, (ii) a determination by a court or agency that the Consultant is not
an independent contractor, or (iii) any breach by the Consultant or Consultant's
assistants, employees or agents of any of the covenants contained in this
Agreement.
130
9. Benefits. Consultant acknowledges and agrees and it is the intent of
the parties hereto that Consultant receive no Company-sponsored benefits from
the Company either as a Consultant or employee. Such benefits include, but are
not limited to, paid vacation, sick leave, medical insurance, and 401(k)
participation. If Consultant is reclassified by a state or federal agency or
court as an employee, Consultant will become a reclassified employee and will
receive no benefits except those mandated by state or federal law, even if by
the terms of the Company's benefit plans in effect at the time of such
reclassification Consultant would otherwise be eligible for such benefits.
10. Arbitration and Equitable Relief
(a) Disputes. Except as provided in Section 10(c) below, the
Company and the Consultant agree that, to the extent permitted by applicable
law, any dispute or controversy arising under or in connection with this
Agreement will be settled exclusively by arbitration in San Jose, California, in
accordance with the rules of the American Arbitration Association then in effect
by an arbitrator selected by both parties within ten days after either party has
notified the other in writing that it desires a dispute between them to be
settled by arbitration. In the event the parties cannot agree on such arbitrator
within such ten-day period, each party will select an arbitrator and inform the
other party in writing of such arbitrator's name and address within five days
after the end of such ten-day period and the two arbitrators so selected will
select a third arbitrator within 15 days thereafter; provided, however, that in
the event of a failure by either party to select an arbitrator and notify the
other party of such selection within the time period provided above, the
arbitrator selected by the other party will be the sole arbitrator of the
dispute. The decision of the arbitrator or a majority of the panel of
arbitrators will be binding upon the parties and judgment in accordance with
that decision may be entered in any court having jurisdiction thereover.
Punitive damages will not be awarded.
(b) Consent to Personal Jurisdiction. The arbitrator(s) will
apply California law to the merits of any dispute or claim, without reference to
conflicts of law rules. Consultant hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(c) Equitable Relief. The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgment of the powers of the
arbitrator.
(d) Acknowledgment. CONSULTANT HAS READ AND UNDERSTANDS THIS
AGREEMENT, WHICH DISCUSSES ARBITRATION. CONSULTANT UNDERSTANDS THAT BY SIGNING
THIS AGREEMENT, CONSULTANT AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 10(c), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF CONSULTANT'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.
131
11. Governing Law. This Agreement will be governed by the internal
substantive laws, but not the choice of law rules, of the State of California.
12. Entire Agreement. This Agreement, the Employment Agreement and the
Consulting Agreement represent the entire agreement and understanding between
the parties as to the subject matter hereof and supersede all prior agreements
whether written or oral. No waiver, alteration, or modification of any of the
provisions of this Agreement will be binding unless in writing and signed by the
party against whom enforcement of the change or modification is sought.
13. Attorney's Fees. In any court action at law or equity which is
brought by one of the parties to enforce or interpret the provisions of this
Agreement, the prevailing party will be entitled to reasonable attorney's fees,
in addition to any other relief to which that party may be entitled.
14. Severability. The invalidity or unenforceability of any provision
of this Agreement, or any terms thereof, will not affect the validity of this
Agreement as a whole, which will at all times remain in full force and effect.
15. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original, and which together will be a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONSULTANT: TRIMBLE NAVIGATION LIMITED
By:/s/ Bradford W. Parkinson By: /s/ Robert S. Cooper
Dr. Bradford W. Parkinson
Name: Robert S. Cooper
Title: Chairman
Address: 585 N. Mary Avenue
P.O. Box 3642
Sunnyvale, CA 94088-3642
132
EXHIBIT 10.66
STANDBY CONSULTING AGREEMENT
This Standby Consulting Agreement (this "Agreement") is entered into as
of September 1, 1998 (the "Effective Date") by and between Trimble Navigation
Limited, a California corporation (the "Company"), and Dr. Robert S. Cooper
("Consultant").
WHEREAS, simultaneously with the execution hereof, the Company and
Consultant are entering an Employment Agreement (the "Employment Agreement");
WHEREAS, the Company, immediately following the termination of
Consultant's status as an employee under the Employment Agreement, the Company
desires to retain the ability to use Consultant as an independent contractor to
perform consulting services for the Company as the need for such services may
arise from time to time and Consultant is willing to perform such services, on
terms set forth more fully below;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Services and Compensation
(a) Services. Consultant will perform consulting services (the
"Services") on as needed basis as determined by the Chief Executive Officer of
the Company in consideration for $1.00 per year.
(b) Compensation. The Company will pay Consultant on an hourly
basis at a rate mutually determined by Consultant and the Chief Executive
Officer of the Company at the time the Services are performed.
(c) Expenses. The Company will reimburse Consultant for all
reasonable travel expenses incurred by Consultant in performing Services
pursuant to this Agreement.
2. Confidentiality
(a) Definition. "Confidential Information" means any Company
proprietary information, technical data, trade secrets or know-how, including,
but not limited to, research, product plans, products, services, customers,
customer lists, markets, software, developments, inventions, processes,
formulas, technology, designs, drawings, engineering, hardware configuration
information, marketing, finances or other business information disclosed by the
Company either directly or indirectly in writing, orally or by drawings or
inspection of parts or equipment.
133
(b) Non-Use and Non-Disclosure. Consultant will not, during or
subsequent to the term of this Agreement, use the Company's Confidential
Information for any purpose whatsoever other than the performance of the
Services on behalf of the Company or disclose the Company's Confidential
Information to any third party. It is understood that such Confidential
Information will remain the sole property of the Company. Consultant further
agrees to take all reasonable precautions to prevent any unauthorized disclosure
of such Confidential Information including, but not limited to, having each
employee of Consultant, if any, with access to any Confidential Information,
execute a nondisclosure agreement containing provisions in the Company's favor
identical to Sections 2, 3 and 4 of this Agreement. Confidential Information
does not include information which (i) is known to Consultant at the time of
disclosure to Consultant by the Company as evidenced by written records of
Consultant, (ii) has become publicly known and made generally available through
no wrongful act of Consultant, or (iii) has been rightfully received by
Consultant from a third party who is authorized to make such disclosure. Without
the Company's prior written approval, Consultant will not directly or indirectly
disclose to anyone the existence of this Agreement or the fact that Consultant
has this arrangement with the Company.
(c) Former Employer's Confidential Information. Consultant
agrees that Consultant will not improperly use or disclose any proprietary
information or trade secrets of any former or current employer or other person
or entity with which Consultant has an agreement or duty to keep in confidence
information acquired by Consultant, if any, and that Consultant will not bring
onto the premises of the Company any unpublished document or proprietary
information belonging to such employer, person or entity unless consented to in
writing by such employer, person or entity. Consultant will indemnify the
Company and hold it harmless from and against all claims, liabilities, damages
and expenses, including reasonable attorneys fees and costs of suit, arising out
of or in connection with any violation or claimed violation of a third party's
rights resulting in whole or in part from the Company's use of the work product
of Consultant under this Agreement.
(d) Third Party Confidential Information. Consultant
recognizes that the Company has received and in the future will receive from
third parties their confidential or proprietary information subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. Consultant agrees that Consultant owes
the Company and such third parties, during the term of this Agreement and
thereafter, a duty to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out the Services for
the Company consistent with the Company's agreement with such third party.
(e) Return of Materials. Upon the termination of this
Agreement, or upon Company's earlier request, Consultant will deliver to the
Company all of the Company's property or Confidential Information that
Consultant may have in Consultant's possession or control.
3. Ownership
134
(a) Assignment. Consultant agrees that all copyrightable
material, notes, records, drawings, designs, inventions, improvements,
developments, discoveries and trade secrets (collectively, "Inventions")
conceived, made or discovered by Consultant, solely or in collaboration with
others, during the period of this Agreement which relate in any manner to the
business of the Company that Consultant may be directed to undertake,
investigate or experiment with, or which Consultant may become associated with
in work, investigation or experimentation in the line of business of Company in
performing the Services hereunder, are the sole property of the Company.
Consultant further agrees to assign (or cause to be assigned) and does hereby
assign fully to the Company all Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto.
(b) Further Assurances. Consultant agrees to assist Company,
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work rights
or other intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company will deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and exclusive right,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto. Consultant
further agrees that Consultant's obligation to execute or cause to be executed,
when it is in Consultant's power to do so, any such instrument or papers will
continue after the termination of this Agreement.
(c) Pre-Existing Materials. Consultant agrees that if in the
course of performing the Services, Consultant incorporates into any Invention
developed hereunder any invention, improvement, development, concept, discovery
or other proprietary information owned by Consultant or in which Consultant has
an interest, (i) Consultant will inform Company, in writing before incorporating
such invention, improvement, development, concept, discovery or other
proprietary information into any Invention and (ii) the Company is hereby
granted and will have a nonexclusive, royalty-free, perpetual, irrevocable,
worldwide license to make, have made, modify, use and sell such item as part of
or in connection with such Invention. Consultant will not incorporate any
invention, improvement, development, concept, discovery or other proprietary
information owned by any third party into any Invention without Company's prior
written permission.
(d) Attorney in Fact. Consultant agrees that if the Company is
unable because of Consultant's unavailability, dissolution, mental or physical
incapacity, or for any other reason, to secure Consultant's signature to apply
for or to pursue any application for any United States or foreign patents or
mask work or copyright registrations covering the Inventions assigned to the
Company above, then Consultant hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as Consultant's agent and
attorney in fact, to act for and in Consultant's behalf and stead to execute and
file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of patents, copyright and mask work
registrations thereon with the same legal force and effect as if executed by
Consultant.
4. Conflicting Obligations. Consultant certifies that Consultant has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude Consultant from complying
with the provisions hereof, and further certifies that Consultant will not enter
into any such conflicting agreement during the term of this Agreement.
135
5. Non-Solicit. The Consultant covenants and agrees with the Company
that during his consultancy with the Company and for a period expiring one year
after the date of termination of such consultancy, he will not solicit any of
the Company's then-current employees to terminate their employment with the
Company or to become employed by any other firm, company or other business
enterprise with which the Consultant may then be connected.
6. Term and Termination
(a) Term. This Agreement will commence immediately following
the termination of Consultant's status as an employee under the Employment
Agreement or as a consultant under the Consulting Agreement (as defined in the
Consulting Agreement) and will continue for a period of five years from the date
of this Agreement.
(b) Termination. The Company may not terminate this Agreement
unless Consultant is in breach of any material provision of this Agreement.
(c) Survival. Upon such termination all rights and duties of
the parties toward each other will cease except:
(i) that the Company will be obliged to pay,
within 30 days of the effective date of termination, all amounts owing to
Consultant for Services completed and accepted by the Company prior to the
termination date and related expenses, if any, in accordance with the
provisions of Section 1 (Services and Compensation) hereof; and
(ii) Sections 2 (Confidentiality),
3 (Ownership), 5 (Non-Solicit) and 8 (Independent Contractor) will survive
termination of this Agreement.
7. Assignment. Neither this Agreement nor any right hereunder or
interest herein may be assigned or transferred by Consultant without the express
written consent of the Company.
8. Independent Contractor. It is the express intention of the parties
that Consultant is an independent contractor. Nothing in this Agreement will in
any way be construed to constitute Consultant as an agent, employee or
representative of the Company, but Consultant will perform the Services
hereunder as an independent contractor. Consultant acknowledges and agrees that
Consultant is obligated to report as income all compensation received by
Consultant pursuant to this Agreement, and Consultant agrees to and acknowledges
the obligation to pay all self-employment and other taxes thereon. Consultant
further agrees to indemnify and hold harmless the Company and its directors,
officers, and employees from and against all taxes, losses, damages,
liabilities, costs and expenses, including attorney's fees and other legal
expenses, arising directly or indirectly from (i) any negligent, reckless or
intentionally wrongful act of Consultant or Consultant's assistants, employees
or agents, (ii) a determination by a court or agency that the Consultant is not
an independent contractor, or (iii) any breach by the Consultant or Consultant's
assistants, employees or agents of any of the covenants contained in this
Agreement.
136
9. Benefits. Consultant acknowledges and agrees and it is the intent of
the parties hereto that Consultant receive no Company-sponsored benefits from
the Company either as a Consultant or employee. Such benefits include, but are
not limited to, paid vacation, sick leave, medical insurance, and 401(k)
participation. If Consultant is reclassified by a state or federal agency or
court as an employee, Consultant will become a reclassified employee and will
receive no benefits except those mandated by state or federal law, even if by
the terms of the Company's benefit plans in effect at the time of such
reclassification Consultant would otherwise be eligible for such benefits.
10. Arbitration and Equitable Relief
(a) Disputes. Except as provided in Section 10(c) below, the
Company and the Consultant agree that, to the extent permitted by applicable
law, any dispute or controversy arising under or in connection with this
Agreement will be settled exclusively by arbitration in San Jose, California, in
accordance with the rules of the American Arbitration Association then in effect
by an arbitrator selected by both parties within ten days after either party has
notified the other in writing that it desires a dispute between them to be
settled by arbitration. In the event the parties cannot agree on such arbitrator
within such ten-day period, each party will select an arbitrator and inform the
other party in writing of such arbitrator's name and address within five days
after the end of such ten-day period and the two arbitrators so selected will
select a third arbitrator within 15 days thereafter; provided, however, that in
the event of a failure by either party to select an arbitrator and notify the
other party of such selection within the time period provided above, the
arbitrator selected by the other party will be the sole arbitrator of the
dispute. The decision of the arbitrator or a majority of the panel of
arbitrators will be binding upon the parties and judgment in accordance with
that decision may be entered in any court having jurisdiction thereover.
Punitive damages will not be awarded.
(b) Consent to Personal Jurisdiction. The arbitrator(s) will
apply California law to the merits of any dispute or claim, without reference to
conflicts of law rules. Consultant hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(c) Equitable Relief. The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgment of the powers of the
arbitrator.
(d) Acknowledgment. CONSULTANT HAS READ AND UNDERSTANDS THIS
AGREEMENT, WHICH DISCUSSES ARBITRATION. CONSULTANT UNDERSTANDS THAT BY SIGNING
THIS AGREEMENT, CONSULTANT AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 10(c), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF CONSULTANT'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.
137
11. Governing Law. This Agreement will be governed by the internal
substantive laws, but not the choice of law rules, of the State of California.
12. Entire Agreement. This Agreement and the Employment Agreement
represent the entire agreement and understanding between the parties as to the
subject matter hereof and supersede all prior agreements whether written or
oral. No waiver, alteration, or modification of any of the provisions of this
Agreement will be binding unless in writing and signed by the party against whom
enforcement of the change or modification is sought.
13. Attorney's Fees. In any court action at law or equity which is
brought by one of the parties to enforce or interpret the provisions of this
Agreement, the prevailing party will be entitled to reasonable attorney's fees,
in addition to any other relief to which that party may be entitled.
14. Severability. The invalidity or unenforceability of any provision
of this Agreement, or any terms thereof, will not affect the validity of this
Agreement as a whole, which will at all times remain in full force and effect.
15. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original, and which together will be a single
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONSULTANT: TRIMBLE NAVIGATION LIMITED
By: /s/ Robert S. Cooper By: Bradford W. Parkinson
Dr. Robert S. Cooper
Name: Bradford W. Parkinson
Title: President
Address: 585 N. Mary Avenue
P.O. Box 3642
Sunnyvale, CA 94088-3642
138
EXHIBIT 10.67
March 17, 1999
Mr. Steve Berglund
Subject: Revised offer of employment
Dear Steve:
The Board of Directors is pleased to extend to you this offer of employment to
serve as Chief Executive Officer and to be appointed as a member of the board
for Trimble Navigation Limited. We believe you are uniquely suited to the TNL
position in light of your background and experience and the nature of our
company's markets and opportunities.
Your base salary compensation would be $33,333 per month, payable on the regular
payroll period of the company, commencing on your first day of employment. The
board offers a bonus opportunity of up to 50% of your compensation base, pro
rata at the end of our 1999 fiscal year, with half of this amount guaranteed for
1999. For the year 2000, you will be eligible for a 50% bonus with criteria as
negotiated with the board.
You would be awarded options to purchase 400,000 shares of stock which would
vest 20% at the first anniversary and monthly thereafter for five years from the
date of grant. The option exercise price would be the fair market value of the
stock on your employment start date. We anticipate that your presence may have
an impact on the stock price so that it might be wise for your employment start
date to occur upon your date of agreement to serve as the CEO, which we would be
required to announce immediately.
In the event of a Change of Control of the company (as defined on Exhibit A
hereto), you would receive an additional 12 months of vesting of your shares. If
the Change of Control occurred during your first 12 months of service, you would
receive ratable vesting for the first year plus the year of accelerated vesting.
You are eligible for the Trimble Executive Non-qualified Deferred Compensation
Plan. Under this plan, you may defer up to 100% of future salary and up to 100%
of any future bonus. Details to be provided under separate cover.
139
Trimble will assist you in your relocation to Sunnyvale. This will include:
o Mortgage assistance: Recognizing the exceptional housing market in this
area, we are willing to lend you, at your election, up to $400,000, to be
secured by a second deed of trust on the real property, at the lending rate
at which the company borrows as adjusted from time to time, which loan
would be forgiven ratably over a five-year period so long as you continue
to be employed. If your employment relationship ends during that period,
the remaining obligation would be due on the anniversary of such
separation. We will add the yearly interest to your compensation.
o Six months of interim housing at $3,000/month.
o Cost reimbursement for movement of household goods from your primary home
to Sunnyvale, including up to two automobiles if required. Trimble will
determine the carrier.
o The reasonable cost of two house-hunting trips (5 days in length per trip)
for you and your family, including transportation, lodging, and meals.
o Provision for an automobile for two weeks, or until your shipped auto
arrives, up to a maximum of four weeks. Payment of fuel will be your
responsibility.
o Reimbursement of reasonable travel, meals, and lodging incurred in travel
by the most direct route, for you and your family, by rail, air or personal
car to Sunnyvale. Receipts must be provided.
o Storage for your household goods (excluding auto)for a maximum of 90 days,
if required. o A relocation allowance of $10,000 to offset miscellaneous
expenses related to your relocation.
o 165% of the cost of a real estate commission which you incur on the sale of
your present principle residence within one year from your employment start
date.
All relocation reimbursements and company paid expenses will be reflected on
your W-2 tax form. As some expenses are considered tax deductible, we recommend
that you consult with a tax consultant.
Upon an Involuntary Termination or a termination other than for "Cause" (as both
terms are defined on Exhibit A) or as a result of your disability, the company
would provide you with 12 months severance. The amount of the severance would be
equal to your current base salary plus one half of your annual bonus accrued to
the date of separation. If separation occurred prior to January 1, 2000, the
"annual" bonus amount (accrued ratably from your start date to December 31,
1999) would be treated as fully guaranteed and thus would be equal to 25% of
your base salary accrued to the date of separation and would be added to the
severance payments ratably over the following 12 months. If separation occurred
after December 31, 1999, the bonus amount would be calculated at the end of the
fiscal year in which severance occurred and you would be paid an amount equal to
one half of the pro-rated bonus amount based on the percentage of that year
prior to separation.
140
Trimble has an attractive benefits package for employees, including medical,
dental, life, short and long-term disability insurance, and a Savings and
Retirement Plan (401k) with a company match, and Employee Stock Purchase Plan.
Details of other benefits, such as paid time off and holidays, will be given
during your employee orientation.
The board members and I are enthusiastic in making this offer to you and believe
that between inherent value of the company and your management skills there is
the opportunity to achieve very substantial growth in the value of the
shareholder investment.
Sincerely,
/s/ Bradford W. Parkinson
Bradford W. Parkinson
President and CEO
BWP:rb
I accept the above offer of employment and will begin work as an employee of
Trimble Navigation Limited on March 17, 1999.
/s/ Steven W. Berglund _______________________________
Steve Berglund
141
EXHIBIT A
Definition of Terms. The following terms referred to in this Letter shall have
the following meanings:
"Cause" means (i) your being convicted of a felony, (ii) a willful act by you
which constitutes gross misconduct and which is injurious to the Corporation and
which is not cured by you within 30 days after written notice of such breach is
given to you by the Board of Directors or (iii) continued and repeated refusals
to abide by the reasonable directions of the board of directors.
"Change of Control" means the occurrence of any of the following events: (i) the
direct or indirect sale, lease, exchange or other transfer of all or
substantially all (50% or more) of the assets of the Corporation to any person
or entity or group of persons or entities acting in concert as a partnership or
other group (a "Group of Persons"), (ii) the merger, consolidation or other
business combination of the Corporation with or into another corporation with
the effect that the shareholders of the Corporation immediately before the
merger, consolidation or other business combination, hold, immediately after any
such transaction, 50% or less of the combined voting power of the then
outstanding securities of the surviving corporation of such merger,
consolidation or other business combination ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors of such surviving entity, or (iii) a person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities of the Corporation representing 50% or more of the
combined voting power of the then outstanding securities of such corporation
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors.
"Involuntary Termination" means (i) without your consent, your assignment to any
duties or the significant reduction of your duties, either of which is
inconsistent with your position or title with the Corporation and
responsibilities in effect immediately prior to such assignment, or your removal
from such position and responsibility, or a reduction in your title; (ii) a
greater than 10% reduction by the Corporation in your base compensation as in
effect immediately prior to such reduction; provided, however, that such
reduction shall not apply if substantially all executive officers of the
Corporation agree to a similar reduction in base compensation; or (iii) any
purported termination of you by the Corporation (other than a voluntary
termination initiated by you) which is not effected for disability or for Cause.
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EXHIBIT 10.68
TRIMBLE NAVIGATION LIMITED
NONQUALIFIED DEFERRED COMPENSATION PLAN
PLAN AND TRUST AGREEMENT
(EFFECTIVE FEBRUARY 10, 1994)
143
TRIMBLE NAVIGATION LIMITED
NONQUALIFIED DEFERRED COMPENSATION PLAN AND TRUST
THIS PLAN AND TRUST AGREEMENT, effective as of February 1, 1994 (the
"Effective Date"), is made and entered into by and between Trimble Navigation
Limited (the "Company"), acting on behalf of itself and any subsidiaries, and
John H. Barnet as trustee (the "Trustee"). Throughout, Company shall include
wherever relevant any entity that is directly or indirectly controlled by the
Company or any entity in which the Company has a significant equity or
investment interest, as determined by the Company.
RECITALS:
1........The Company wishes to establish a supplemental employee retirement
plan for the benefit of a select group of highly compensated employees
designated by the Company, and in its sole discretion, as eligible executives
("Executives").
2........The Company wishes to provide that the plan to be established
under this plan or agreement shall be designated as the Trimble Navigation
Limited Nonqualified Deferred Compensation Plan (the "Plan").
3........The Company wishes to provide under the Plan for the payment of
vested accrued benefits to the Executives and their beneficiary or beneficiaries
("Trust Beneficiaries").
4........The Company wishes to provide under the Plan that the Company
shall pay all of the accrued benefits from its general assets.
5........The Company wishes to establish two irrevocable trusts
(individually, a "Trust," and together, the "Trusts") to set aside contributions
by the Company to meet its obligations under the Plan.
6........The Company wishes to make contributions to the Trusts and
that such contributions be held by the Trustee and invested, reinvested and
distributed, all in accordance with the provisions of this Plan.
7........The Company intends that amounts allocated to the Trusts and
the earnings thereon shall be used by the Trustee to satisfy the liabilities of
the Company under the Plan with respect to each Executive for whom an Account
has been established and such utilization shall be in accordance with the
procedures set forth herein.
8........The Company intends that the Trusts be "grantor trusts" with the
corpus and income of the Trusts treated as assets and income of the Company for
federal and state income tax purposes.
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9........The Company intends that the assets of the Trusts shall at all
times be subject to the claims of the general creditors of the Company as
provided in Article XI.
10.......The Company intends that the existence of the Trusts shall not
alter the characterization of the Plan as "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and shall
not be construed to provide income to the Executives under the Plan prior to
actual payment of the vested accrued benefits thereunder.
NOW THEREFORE, the Company does hereby establish the Plan and Trusts as
follows and does also hereby agree that the Plan and Trusts shall be structured,
held and disposed of as follows:
ARTICLE I
PLAN ADMINISTRATION
A........The Plan shall be administered by John H. Barnet (the
"Administrator"). Subject to the provisions in the Plan and to the specific
duties delegated by the Board of Directors to such Administrator, the
Administrator shall be responsible for the general administration and
interpretation of the Plan and for carrying out its provisions. The
Administrator shall have such powers as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, the following powers and
duties:
(1) discretionary authority to construe and interpret the
terms of the Plan, and to determine eligibility and the amount, manner
and time of payment of any benefits hereunder;
(2) to prescribe procedures to be followed by Executives for
purposes of Plan participation and distribution of benefits; and
(3) to take such other action as may be necessary and
appropriate for the proper administration of the Plan.
B........The Administrator may adopt such rules, regulations and bylaws
and may make such decisions as it deems necessary or desirable for the proper
administration of the Plan. Any rule or decision that is not inconsistent with
the provisions of the Plan shall be conclusive and binding upon all persons
affected by it, and there shall be no appeal from any ruling by the
Administrator that is within its authority, except as otherwise provided herein.
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ARTICLE II
ELIGIBILITY, PARTICIPATION AND BENEFICIARY DESIGNATION
A........Eligible Employees. The following categories of employees
("Eligible Employees") shall be eligible to participate in the Plan: (i)
employees who are designated as eligible to participate on the attached Exhibit
A to this Plan; and (ii) any other employee or category of employee that is
designated by the Administrator as eligible to participate in the Plan. The
Administrator reserves the right to modify the definition of eligible employee
at any time. Any Eligible Employee who has commenced participation in the Plan
shall be referred to in this Plan as an "Executive."
B........Participation. Each Executive may elect to commence
participation in the Plan by completing a Trimble Navigation Limited
Nonqualified Deferred Compensation Plan Deferred Compensation Agreement
("Deferred Compensation Agreement") within 30 days following the Effective Date.
Any individual who becomes an Eligible Employee after the Effective Date may
participate in the Plan by filing a Deferred Compensation Agreement within 30
days following the date on which the Administrator gives such individual written
notice that the individual is an Eligible Employee. Any Eligible Employee who
does not execute a Deferred Compensation Agreement within the time periods
described herein may nevertheless participate in the Plan commencing with
Compensation paid in the next succeeding calendar year by filing an executed
Deferred Compensation Agreement with the Administrator before the beginning of
such calendar year.
C........Beneficiary Designation. Each Executive, prior to entering the
Plan, shall designate a beneficiary or beneficiaries to receive the remainder of
any interest of the Executive under the Plan. An Executive may change his or her
beneficiary designation at any time on written notice to the Administrator. Each
beneficiary designation shall be in a form prescribed by the Administrator and
will be effective only when filed with the Administrator during the Executive's
lifetime. Each beneficiary designation filed with the Administrator will cancel
all previously filed beneficiary designations. In the absence of a valid
designation, or if no designated beneficiary survives the Executive, the
Executive's interest shall be distributed to the Executive's estate.
ARTICLE III
PLAN CONTRIBUTIONS AND ALLOCATIONS
146
A........Participant Deferrals. Each Executive participating in the
Plan shall execute a Deferred Compensation Agreement authorizing the Company to
withhold a percentage of the Executive's Compensation which would otherwise be
paid to the Executive with respect to services rendered. Compensation shall be
defined for purposes of the foregoing as the cash compensation payable to the
Executive in connection with the Executive's services to the Company, including
all amounts which an Executive elects to have the Company contribute on his
behalf as a deferral contribution ("Compensation"). The deferral percentage is
applied to Compensation after all other applicable payroll deductions have been
applied. The Administrator may, in its discretion, establish in the Deferred
Compensation Agreement minimum and maximum levels of bonus and non-bonus
compensation that may be deferred pursuant to the Plan. Compensation deferrals
made by an Executive under this Plan shall be held as an asset of the Company
and the Company intends to deposit the amounts deferred into the Trusts.
B........Election Changes. An Executive may, in such form as the
Administrator may prescribe, discontinue deferral of future compensation at any
time; however, no other modifications to the Deferred Compensation Agreement may
be made prior to the commencement of the calendar year following written
notification to the Company of any desired modifications. The Administrator has
the power to establish uniform and nondiscriminatory rules and from time to time
to modify or change such rules governing the manner and method by which
Compensation deferral contributions shall be made, as well as the manner and
method by which Compensation deferral contribution may be changed or
discontinued temporarily or permanently. All Compensation deferral contributions
shall be authorized by the Executive in writing, made by payroll deduction,
deducted from the Executive's Compensation without reduction for any taxes or
withholding (except to the extent required by law or the regulations) and paid
over to the Trusts by the Company. Notwithstanding the foregoing, each Executive
shall remain liable for any and all employment taxes owing with respect to such
Executive's Compensation deferral contributions.
C........Cessation of Eligible Status. In the event an Executive ceases
to be an Eligible Employee while also a participant in the Plan, such employee
may continue to make Compensation deferral contributions under the Plan through
the end of the payroll period in which the employee ceases to be an Eligible
Employee. Thereafter, such employee shall not make any further Compensation
deferral contributions to the Plan unless or until he or she again meets the
eligibility requirements of Article II above.
D........Company Matching Contributions. As of the last day of each
calendar year or such earlier time or times as the Administrator may determine,
the Company may make matching contributions to the Trusts in such amount as the
Board of Directors of the Company shall specify.
E........Company Discretionary Contributions. The Company may, in its
sole discretion, make discretionary contributions to the Accounts of one or more
Executives at such times and in such amounts as the Board of Directors of the
Company shall determine.
F........Allocations. The Compensation deferral contributions and any
Company contributions made under the Plan on behalf of an Executive shall be
credited to the Executive's Account. The Administrator shall establish and
maintain separate subaccounts as it determines to be necessary and appropriate
for the proper administration of the Plan. Each Executive Account consists of
the aggregate interest of the Executive under the Plan (and in the Trust Funds,
as such term is defined in Article V), as reflected in the records maintained by
the Company for such purposes.
147
ARTICLE IV
VESTING
A........Compensation Deferral Contributions. The value of an
Executive's Account attributable to Executives' Compensation deferral
contributions shall always be fully vested and nonforfeitable.
B........Company Contributions. The value of an Executive's Account
attributable to any Company contributions pursuant to Article III.D and E shall
vest in its entirety five (5) years after the date of the Company contribution
to which such value relates, provided the Executive has remained in the
continuous employ of the Company throughout such five-year period. If the
Executive's employment with the Company terminates for any reason prior to the
expiration of such five-year period, no portion of the Executive's Account
attributable to Company contributions occurring within the preceding five-year
period shall be considered vested for purposes of of this Plan. Upon termination
of an Executive's employment with the Company for any reason, any portion of the
Executive's Account that is not then vested (including allocable earnings, as
determined by the Administrator), shall be forfeited.
ARTICLE V
TRUST FUND
A........Trusts. The Company hereby establishes the Trusts with the
Trustee, consisting of such sums of money and other property acceptable to the
Trustee as from time to time shall be paid or delivered to the Trustee. All such
money and other property, all investments and reinvestments made therewith or
proceeds thereof and all earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the "Trust Funds." The Trust
Funds shall at all times be subject to the claims of general creditors of the
Company as provided in Article XI.
B........Grantor Trusts. The Trusts hereby established shall be
irrevocable, but for the issuance by the Internal Revenue Service of unfavorable
tax rulings on the status of the Trusts as grantor trusts. Subject to Article
XI, assets of the Trusts shall be held for the exclusive purpose of providing
vested accrued benefits to the Trust Beneficiaries and defraying expenses of the
Trusts in accordance with the provisions of this Plan. No part of the income or
corpus of the Trust Funds shall be recoverable by or for the Company prior to
the termination of the Trusts and the satisfaction of all liabilities under the
Plans.
C........Assignment. No right or interest to receive accrued benefits from
the Trusts may be assigned, sold, anticipated, ---------- alienated or otherwise
transferred by the Trust Beneficiaries.
148
D........Trustee. The Trustee accepts the Trusts established under this
Plan on the terms and subject to the provisions set forth herein, and it agrees
to discharge and perform fully and faithfully all of the duties and obligations
imposed upon it under this Plan.
E........Trust Assets. The principal of the Trusts and any earnings
thereon shall be held separate and apart from other funds of the Company and
shall be used exclusively for the uses and purposes herein set forth. Neither
the Trust Beneficiaries nor the Plan shall have any preferred claim on, or any
beneficial ownership interest in, any assets of the Trusts prior to the time
such assets are paid to a Trust Beneficiary as vested accrued benefits as
provided in Article IX, and all rights created under the Plan and the Trusts
under this Plan shall be mere unsecured, contractual rights of the Executives
against the Company.
ARTICLE VI
GENERAL DUTIES OF THE ADMINISTRATOR AND THE TRUSTEE
A........Administrator Duties. The Administrator will provide the
Trustee with a copy of any future amendment to this Plan promptly upon its
adoption. The Administrator may from time to time hire outside consultants,
accountants, actuaries, legal counsel or recordkeepers to perform such tasks as
the Administrator may from time to time determine.
B........Trustee Duties. The Trustee shall manage, invest and reinvest
the Trust Funds as provided in Article XII of this Plan. The Trustee shall
collect the income on the Trust Funds, and make distributions therefrom, all as
hereinafter provided.
C........Company Contributions. While the Plan remains in effect, and
prior to a Change in Control, as defined below, the Company shall make
contributions to the Trust Funds at least once each quarter. The amount of any
quarterly contributions shall be at the discretion the Company. At the close of
each calendar year, the Company shall make additional contributions to the Trust
Funds to the extent that previous contributions to the Trust Funds for the
current calendar year are not equal to the total of the Compensation deferrals
made by each Executive plus Company matching contributions and discretionary
contributions, if any, accrued, as of the close of the current calendar year.
The Trustee shall not be liable for any failure by the Company to provide
contributions sufficient to pay all accrued benefits under the Plan in full in
accordance with the terms of this Plan.
D........Department of Labor Determination. In the event that any
Executives are found to be ineligible, that is, not members of a select group of
highly compensated employees, according to a determination made by the
Department of Labor, the Administrator will take whatever steps it deems
necessary, in its sole discretion to equitably protect the interests of the
affected Executives.
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ARTICLE VII
ALLOCATION OF TRUST INCOME OR LOSS
A........Determination of Net Income. As of each Valuation Date (as
defined in Article VII.D below), the Administrator shall determine the net
income or loss of the Trust Funds based on a statement from the Trustee of the
receipts and disbursements of the Trust Funds since the immediately preceding
Valuation Date and of the fair market value of the Trust Funds as of the
Valuation Date. If one or more separate investment funds have been established
as provided in Article XII, each fund shall be valued separately on each
Valuation Date and the net income or loss of each fund shall be allocated to
each Account invested in such investment fund. In addition, self-directed
accounts as defined under Article XII.B shall be valued according to Section C
of this Article.
B........Valuation. As of each Valuation Date and prior to any
allocation of contributions and forfeitures to be made as of such date, the net
income or loss of the Trust Funds since the immediately preceding Valuation
Date, including net appreciation or depreciation and any expenses paid by the
Trusts, shall be allocated to each Account in the ratio that the value, as of
the immediately preceding Valuation Date of each such Account invested in the
Trust Funds bears to the value, as of the immediately preceding Valuation Date,
of all Accounts invested in the Trust Funds. If one or more separate investment
funds have been established, the net income or loss of each fund shall be
allocated to each Account invested in such investment fund in proportion to the
value of each Account invested in such funds as of the immediately preceding
Valuation Date. The Administrator shall adopt suitable procedures to establish a
proportionate crediting of Trust income or loss to those portions of Accounts in
the case of contributions or hardship withdrawals that have occurred in the
interim period since the immediately preceding Valuation Date.
C........Valuation of Segregated Accounts. The portion of any
Executive's Account invested on a segregated basis as provided in Article XII
shall be valued separately on each Valuation Date and the net income or loss
allocated to such Account shall be based on the assets, including income, gain,
loss and/or other change in value of the assets constituting such portion of the
Account.
D........Valuation Dates. The Trust Funds, any separate investment
funds and any segregated account shall be valued as of the last day of each
calendar year and as of any other date the Company directs the Trustee to value
the Trust Funds, as provided in Article VII.E.
E........Special Valuation Dates at Administrator Discretion. The
Administrator may direct the Trustee to determine the fair market value of the
Trust Funds and may make a determination of Trust income or loss as of any date
other than the last day of a calendar year.
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ARTICLE VIII
EXECUTIVES' ACCOUNTS
A........Separate Accounts. The Administrator shall open and maintain a
separate Account for each Executive. Each Executive's Account shall reflect the
amounts allocated thereto and distributed therefrom and such other information
as affects the value of such Account pursuant to this Plan. The Administrator
may maintain records of Accounts to the nearest whole dollar.
B........Statement of Accounts. As soon as practicable after the end of
each calendar year the Administrator shall furnish to each Executive a statement
of his Account, determined as of the end of such calendar year. Upon the
discovery of any error or miscalculation in an Account, the Administrator shall
correct it, to the extent correction is practically feasible; provided, however,
that any such statement of Account shall be considered to reflect accurately the
status of the Executive's Account for all purposes under the Plan unless,
subject to any longer period required by ERISA, the Executive reports a
discrepancy to the Administrator within six (6) months after receipt of the
statement. The Administrator shall have no obligation to make adjustments to an
Executive's Account for any discrepancy reported to the Administrator more than
six (6) months after receipt of the statement, or for a discrepancy caused by
the Executive's error. Statements to Executives are for reporting purposes only,
and no allocation, valuation or statement shall vest any right or title in any
part of the Trust Funds, nor require any segregation of Trust assets, except as
is specifically provided in this Plan.
C........Accounts Which Are Not Segregated. When employment is
terminated and payment is not deferred, the amount of the payment shall be based
on the value of the vested portion of the Executive's Account as of the
Valuation Date immediately preceding his termination date plus any contribution
subsequently credited to such Account and less any distributions subsequently
made from the Account.
D........Segregated Accounts. Payment to an Executive shall be based on
the value of the vested portion of the Executive's segregated Account at the
date of distribution. The value of his or her segregated Account shall be the
current fair market value, including any income or loss, of the property
constituting such segregated Account.
ARTICLE IX
PAYMENTS TO A TRUST BENEFICIARY
151
A........General. Payments of vested accrued benefits to Trust
Beneficiaries from the Trust Funds shall be made in accordance with the Deferred
Compensation Agreement between the Company and the Executive; provided, however,
the Trustee shall make such payments, as directed by the Administrator, only to
the extent the Company is not at such time Insolvent as defined in Article XI.
Except as otherwise expressly provided in the Executive's Deferred Compensation
Agreement, no distribution shall be made or commenced prior to the Executive's
termination of employment or death, or a "Change of Control," whichever occurs
earlier. An Executive who makes an Early Distribution Election (as defined in
the Deferred Compensation Agreement) may, at least one year prior to the
distribution date specified in such Early Distribution Election, revoke such
Election in favor of a subsequent distribution date; provided that an Executive
may revoke an Early Distribution election once only. For purposes of this Plan,
a "Change in Control" shall be deemed to have occurred if any person (including
a "Group" as such term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) acquires shares of the Company either (i) having a
majority of the total number of votes that may be cast for the election of
directors of the Company or (ii) possessing, directly or indirectly, the power
to control the direction of management or policies of the Company; provided,
however, that no Change of Control shall be deemed to occur in the event of a
merger, consolidation or reorganization of the Company where the shareholders of
the Company immediately prior to such merger, consolidation or reorganization
own greater than 50% of the outstanding shares of the Company immediately after
such merger, consolidation or reorganization. The Trustee shall have no
responsibility to determine whether a Change in Control has occurred and shall
be advised of such event by the Company.
B........Cash Distributions. Where the distribution of all or any
portion of an Executive's Account is to be deferred in the form of cash, the
Account shall continue to be held and invested in the Trusts subject to
revaluation as provided in Article VII.
C........In Kind Distributions. In kind distributions shall be (i) made
only in a form of investment that was held on behalf of the Executive as a
segregated investment pursuant to Article XII.B in a separate investment fund
pursuant to Article XII.D immediately preceding the date of distribution, (ii)
limited to the amount of such investment so held, and (iii) based on the fair
market value of the distributable property, as determined by the Trustee at the
time of distribution.
D........Method of Distribution. Payment to any Trust Beneficiary shall
be made pursuant to the Deferred Compensation Agreement executed by the
Executive, in whole or in part. A Trust Beneficiary may specify, at least ninety
(90) days prior to the commencement of any distribution, whether such
distribution shall be made in a lump sum or in installments.
(1) In a lump sum, in cash and/or in kind, or
(2) In annual installments equal to 1/n of the Executive's
vested accrued benefit where n is the number of installments remaining to be
paid.
152
E........Certain Distributions. In case of any distribution to a minor
or to a legally incompetent person, the Administrator may (1) direct the Trustee
to make the distribution to his legal representative, to a designated relative,
or directly to such person for his benefit, or (2) instruct the Trustee to use
the distribution directly for his support, maintenance, or education. The
Trustee shall not be required to oversee the application, by any third party, of
any distributions made pursuant to this Article IX.E.
F........IRS Determination. Notwithstanding any other provisions of
this Plan, if any amounts held in either Trust are found in a "determination"
(within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as
amended (the "Code")) to have been includible in the gross income of any Trust
Beneficiary prior to payment of such amounts from such Trust, the Trustee shall
as soon as practicable pay such amounts to the Trust Beneficiary, as directed by
the Company. For purposes of this Section, the Trustee shall be entitled to
written notice from the Administrator that a determination described in the
preceding sentence has occurred and to receive a copy of such notice. The
Trustee shall have no responsibility until so advised by the Administrator.
G........Limitation on Distributions. Notwithstanding any other
provision of this Plan, the Trustee shall limit each distribution to each
"covered employee" (as such term is defined in Section 162(m) of the Code) of
the Company at the time of each such distribution, such that the sum of (i) the
distributions made to such covered employee and (ii) the other "applicable
employee remuneration" (as such term is defined in Section 162(m) of the Code)
paid to such covered employee, during the fiscal year in which such distribution
is made, does not exceed $1,000,000.
ARTICLE X
HARDSHIP WITHDRAWALS
A........General Rule. At the request of an Executive, the
Administrator shall authorize a withdrawal at any time of the accrued benefit
attributable to the Executive's Compensation deferrals and gains or losses
thereon under the Executive's Account, provided that authorization for such
withdrawal and the amount thereof shall be given only on account of an
unforeseeable emergency. The term "unforeseeable emergency" shall mean severe
financial hardship to the Executive resulting from a sudden and unexpected
illness or accident of the Executive or of a dependent (as defined in Internal
Revenue Code section 152(a)) of the Executive, loss of the Executive's property
due to casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Executive. The
circumstances that will constitute an unforeseeable emergency will depend upon
the facts of each case, but in any case, payment may not be made to the extent
that such hardship is or may be relieved --
(1) hrough reimbursement or compensation by insurance or
otherwise,
(2) By liquidation of the Executive's assets, to the extent
the liquidation of such assets would not itself cause severe financial hardship,
or
153
(3) By cessation of deferrals under the Plan.
The Administrator shall establish reasonable procedures and guidelines uniformly
applied, to determine whether an unforeseeable emergency exists; provided,
however, that no withdrawal request shall be granted if to do so could result in
the inclusion of Trust Funds amounts in the gross income of Trust Beneficiaries
prior to payment of such amounts from the Trust Funds because approval of such
request would be inconsistent with any applicable statute, regulation, notice,
ruling or other pronouncement of the Internal Revenue Service interpreting this
or similar provisions.
ARTICLE XI
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
TRUST BENEFICIARIES WHEN COMPANY INSOLVENT
A........Company Insolvency. The Company shall be considered "Insolvent"
and an "Insolvency" shall be deemed to exist for purposes of this Plan under any
of the following circumstances:
(1) The Company is unable to pay its debts as they
mature, defined as having a weighted average overdue
payables balance in excess of 270 days.
(2) A receiver or trustee is appointed to take
possession of all or substantially all of the
assets of the Company.
(3) There is a general assignment by the Company
for the benefit of creditors.
(4) An action or proceeding is commenced by or against
the Company under any insolvency or bankruptcy act,
or any other statute or regulation having as its
purpose the protection of creditors, and the action
or proceeding is not discharged within 60 days after
the date of commencement.
B........Plan Suspension. Notwithstanding any provision in this Plan to
the contrary, if at any time while either Trust is still in existence the
Company becomes Insolvent, the Trustee shall upon written notice thereof suspend
the payment of all amounts from the existing Trust Funds and shall thereafter
(i) not permit any further elective Compensation deferral contributions by the
Executives and (ii) discontinue all contributions by the Company to the existing
Trusts on behalf of the Executives. The Trustee shall hold the existing Trust
Funds in suspense for the benefit of the Company's creditors until it receives a
court order directing the disposition of the existing Trust Funds; provided,
however, that the Trustee may deduct or continue to deduct its fees and
expenses, including fees of any consultants, actuaries, accountants, legal
counsel or recordkeepers retained by the Company or Trustee to provide services
to the Trusts.
154
C........Notice of Insolvency. By its approval and execution of this
Plan, the Company represents and agrees that its Board of Directors, the
Administrator, and its Chief Executive Officer, as from time to time acting,
shall have the fiduciary duty and responsibility on behalf of the Company's
creditors to give to the Trustee prompt written notice of the Company's
Insolvency and the Trustee shall be entitled to rely thereon to the exclusion of
all directions or claims to pay vested accrued benefits thereafter made. Absent
such notice, the Trustee shall have no responsibility for determining whether or
not the Company has become Insolvent.
D........If after being Insolvent, the Company later becomes solvent
without the entry of a court order concerning the disposition of the Trust
Funds, or if any bankruptcy or insolvency proceedings referred to in Article
XI.A are dismissed, the Company shall by written notice so inform the Trustee
and the Trustee shall thereupon resume all its duties and responsibilities under
this Plan without regard to this Article XI until and unless the Company again
becomes Insolvent as such term is defined herein.
E........If the Trustee discontinues payments from the Trusts pursuant
to this Article XI and subsequently resumes payments, or removes the suspended
status of the Trusts, interest will be added to the Accounts of all Executives,
including those Accounts from which a payment was held in suspense, for the
period of discontinuance at not less than the average rate on 90-Day Treasury
Bills auctioned during the period of discontinuance, to be determined and
calculated by the Company. The Company will not make any other contributions to
the Trusts that otherwise would have been made during the period of
discontinuance.
ARTICLE XII
INVESTMENT AND ADMINISTRATION OF TRUST FUND
A........Investments. The Trustee shall have the power:
(1) To invest and reinvest the Trust Funds; provided,
however, the Trustee may delegate this investment
authority, in whole or in part, and subject to such
terms and conditions and as the Trustee shall
require, to the Administrator, an Investment Manager
who meets the requirements of Section 3(38) of ERISA,
and, in accordance with Sections B through F below,
Executives participating in the Plan (with respect to
their own account), and provided further than in no
event shall the Trust Funds be invested in securities
of Trimble Navigation Limited;
(2) To collect and receive any and all money and
other property due to the Trust Funds and to give
full discharge therefore;
155
(3) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the
Trusts; to commence or defend suits or legal
proceedings to protect any interest of the Trusts;
and to represent the Trusts in all suits or legal
proceedings in any court or before any other body or
tribunal;
(4) Generally to do all acts, whether or not expressly
authorized, which the Trustee may deem necessary or
desirable for the protection of the Trust Funds.
Persons dealing with the Trustee shall be under no obligation
to see to the proper application of any money paid or property delivered to the
Trustee or to inquire into the Trustee's authority as to any transaction.
B........Segregated Investments - Participant Direction Permitted.
Subject to the provisions of Article XII.A. and at the discretion of the
Administrator, Executives may be permitted to direct the Trustee in writing
regarding the investment of funds in their Accounts, in a manner and form
prescribed by the Administrator; provided, however, that such right to direct
shall apply on a nondiscriminatory basis to all Executives who meet the
requirements established by the Administrator. Such directed investment Accounts
shall be segregated and shall be valued separately by the Trustee under the
provisions of Article VII.C. Valuations of such Accounts shall be made at such
times as the Administrator may require, but no less frequently than annually. In
no event, for valuation purposes, shall the property constituting such
segregated Accounts, or the net income or loss thereon, be commingled with other
Executives' Accounts. Such segregated Accounts may be charged with their
proportionate share of any general expenses charged to the Trusts or with the
full share of any expense incurred directly or indirectly in connection with
such Accounts.
C........Participant Direction Subject to Administrator and Trustee
Approval. Neither the Administrator nor the Trustee shall be under any
obligation to approve or disapprove any specific investment medium. Neither the
Company nor the Trustee has any liability for any losses or damage that may
occur or result from (i) the approval of or failure to approve of any specific
investment medium; (ii) the imposition of any administrative rules relating to
the timing of investment elections of any sort; or (iii) any administrative
delay in carrying out or failure to carry out investment elections within a
specified time. The Administrator or the Trustee may disapprove or refuse to
carry out any investment directions which in its opinion would subject the
Company or the Trustee to burdensome administrative responsibilities or which
the Administrator determines to be inappropriate from a legal, financial or
social perspective. Prior to carrying out any investment direction of an
Executive, the Trustee may require releases or any other documents, agreements
or indemnifications as it may consider necessary. The Trustee, in approving any
investment medium or in making investments under this Plan, shall not be
restricted by statutes governing the legal investment of trust funds.
156
D........Separate Investment Funds - Administrator May Establish
Separate Funds. The Administrator may, in its sole discretion, direct the
Trustee to create one or more separate investment funds, having such different
specific investment objectives as the Administrator shall from time to time
determine. The Administrator shall determine and may from time to time
redetermine the number of investment funds and the specific objectives of said
funds and the investments or kinds of investment which shall be authorized
therefor.
Each Participant has the right to instruct the Administrator
to direct the Trustee in writing to invest his Account in one or more separate
investment funds, or in a directed investment, provided, however, that if any
Executive fails to make a direction pursuant to this Article as to all or any
part of such Account, the undirected portion of an Executive's Account shall be
invested by the Trustee.
E........Administrator To Establish Rules. The Administrator may at any
time make such uniform and nondiscriminatory rules as it determines necessary
regarding the administration of the directed investment option. The
Administrator may also develop and maintain rules governing the rights of
Executives to change their investment directions and the frequency with which
such changes can be made.
ARTICLE XIII
ACCOUNTING BY TRUSTEE
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
done, including such specific records as shall be agreed upon in writing between
the Administrator and the Trustee. All such accounts, books and records shall be
open to inspection and audit at all reasonable times by the Administrator, the
Administrator's representatives or agents. Within one hundred and twenty (120)
days following the close of each calendar quarter and within one hundred and
twenty (120) days after the removal or resignation of the Trustee, the Trustee
shall deliver to the Administrator a written account of its administration of
the Trusts during such quarter or during the period from the close of the last
preceding quarter to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other actions effected by it, including
a description of all securities and investments purchased and sold, with the
cost or net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities and other
property held in the Trusts at the end of such quarter or as of the date of such
removal or resignation, as the case may be. The written approval of any
accounting by the Administrator shall be final as to all matters and
transactions stated or shown therein and binding upon the Administrator and all
persons who then shall be or then after shall become interested in the Trusts.
Failure of the Administrator to notify the Trustee within 180 days after receipt
of any accounting of its disapproval of such accounting shall be the equivalent
of written approval.
157
ARTICLE XIV
RESPONSIBILITY OF TRUSTEE
The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use; provided, however, that the
Trustee shall incur no liability to anyone for any action taken pursuant to a
direction, request or approval given by the Administrator or any Executive which
is contemplated by and complies with the terms of this Trust Agreement, and to
that extent the Trustee shall be relieved of the prudent person rule for
investments. The Trustee may hire agents, accountants, actuaries recordkeepers
and financial consultants. Expenses of such persons shall be deemed to be
expenses of management and administration of the Trusts within the meaning of
Article XV.D, below. The Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law unless expressly provided otherwise
herein.
ARTICLE XV
TAXES, EXPENSES AND COMPENSATION OF TRUSTEE
A........Company Assets. It is the intention of the Company to have the
corpus and income of the Trusts established hereunder treated as assets and
income of the Company to be used to satisfy the Company's legal liability under
the Plan in respect of all of the Executives, and the Company agrees that all
income, deductions and credits of the Trust Funds belong to the Company as owner
for income tax purposes and will be included on the Company's income tax
returns.
B........Taxes. The Company shall from time to time pay taxes
(references in this Plan to the payment of taxes shall include interest and
applicable penalties) of any and all kinds whatsoever which at any time are
lawfully levied or upon or become payable in respect of the Trust Funds, the
income or any property forming a part thereof, or any security transaction
pertaining thereto. To the extent that any taxes levied or assessed upon the
Trust Funds are not paid by the Company or contested by the Company pursuant to
the last sentence of this Article, the Trustee shall pay such taxes out of the
Trust Funds, and the Company shall, upon demand by the Trustee, deposit into the
Trust Funds an amount equal to the amount paid from the Trust Funds to satisfy
such tax liability. If requested by the Company, the Trustee shall at the
Company's expense, contest the validity of such taxes in any manner deemed
appropriate by the Company or its counsel, but only if it has received an
indemnity bond or other security satisfactory to it to pay any expenses of such
contest. Alternatively, the Company may itself contest the validity of any such
taxes, but any such contest shall not affect the Company's obligation to
reimburse the Trust Funds for taxes paid from the Trust Funds.
158
C........Withholding. In making payments from the Trusts, the Trustee
shall be liable for federal income tax withholding, and shall withhold the
appropriate amount of tax, if any, as provided by applicable law and regulation,
from any payment made to a Trust Beneficiary, unless the Company does not
provide the Trustee with the necessary information as set forth in regulations,
in which case the Company shall assume all relevant liability.
D........Compensation; Expenses. The Trustee may be paid compensation
by the Company in accordance with any written agreement for this purpose between
them; provided, however, that a Trustee who is an officer, director or employee
of the Company shall serve without compensation. The Trustee shall be reimbursed
by the Company for its reasonable expenses of management and administration of
the Trusts, including reasonable compensation of any agent engaged by the
Trustee to assist it in such management and administration. The Trustee shall be
able to charge the Trust Funds for such compensation and for any reasonable
expenses including counsel, appraisal or accounting fees, and the same may be
deducted from the Trust Funds unless paid by the Company within sixty (60) days
after the Company receives written billing by the Trustee; provided that this
paragraph shall not apply while a dispute over the amount of such charges
exists.
ARTICLE XVI
PROTECTION OF TRUSTEE
A........Certification. The Company shall certify to the Trustee the
name or names of any person or persons authorized to act for the Company. Such
certification shall be signed by the Secretary of the Company duly authorized by
the Board of Directors. Until the Company notifies the Trustee, in a similarly
signed notice, that any such person is no longer authorized to act for the
Company, the Trustee may continue to rely upon the authority of such person. The
Trustee may rely upon any certificate, notice or direction of the Company which
the Trustee reasonably believes to have been signed by a duly authorized officer
or agent of the Company. Notices to the Trustee shall be sent in writing to the
Trustee, c/o Trimble Navigation Limited, 585 N. Mary Avenue, Sunnyvale,
California 94088-3642. No communication shall be binding upon the Trust Funds or
the Trustee until it is received by the Trustee and unless it is in writing and
signed by an authorized person. Notices to the Company shall be sent in writing
attention to the Company's principal office to the Chief Financial Officer, c/o
Trimble Navigation Limited, 585 N. Mary Avenue, Sunnyvale, California
94088-3642, or to such other address as the Company may specify. No notice shall
be binding upon the Company until it is received by the Company.
B........Legal Counsel. The Trustee may consult with any legal counsel
("Legal Counsel"), except as provided in Article XVIII.C, for the purpose of
obtaining advice on topics including but not limited to the construction of this
Plan, its duties hereunder, or any act which it proposes to take or omit, and
shall not be liable for any action taken or omitted in good faith pursuant to
such advice. Expenses of Legal Counsel shall be deemed to be expenses of
management and administration of the Trusts within the meaning of Article XV.D
hereof.
159
C........Trustee Duties. The Trustee shall discharge its duties under
this Plan in a manner consistent with the objectives of this Plan. The Trustee
shall not be liable for any loss sustained by the Trust Funds by reason of the
purchase, retention, sale or exchange of any investment in good faith and in
accordance with the provisions of this Plan. The Trustee shall have no
responsibility or liability for any failure of the Company to make contributions
to the Trust Funds or to pay vested accrued benefits when due. The Trustee's
duties and obligations shall be limited to those expressly imposed upon it under
the provisions of this Plan relating to the Trusts, and the Trustee shall not
have responsibility under the provisions of this Plan relating to the Plan,
notwithstanding any reference to the Plan.
ARTICLE XVII
INDEMNIFICATION OF TRUSTEE
To the fullest extent permitted by law, the Company agrees to
indemnify, to defend, and to hold harmless the Trustee against any liability
whatsoever for any action taken or omitted by such Trustee in good faith in
connection with this Plan or duties hereunder and for any expenses or losses for
which the Trustee may become liable as a result of any such actions or
non-actions unless resultant from gross negligence or willful misconduct.
ARTICLE XVIII
RESIGNATION AND REMOVAL OF TRUSTEE AND LEGAL COUNSEL
A........Resignation. The Trustee may resign upon thirty (30) days'
prior written notice to the Company, except that any such resignation shall not
be effective until a successor trustee has been appointed, and such successor
has accepted the appointment in writing, but in any event no later than ninety
(90) days after such resignation. The Company shall condition its acceptance of
such successor on the obtaining from such successor of a written statement that
the successor has read this Plan and Trust Agreement and understands its
obligations thereunder.
B........Removal. The Company may remove the Trustee upon thirty (30)
days' prior written notice to the Trustee. Any such removal shall not be
effective until the close of such notice period and delivery by the Company to
the Trustee of (i) an instrument in writing appointing a successor trustee, (ii)
an acceptance of such appointment in writing executed by such successor, and
(iii) a written statement by such proposed successor that the successor has read
this Plan and Trust Agreement and understands its obligations thereunder.
160
C........Successor Trustee. Upon the resignation or removal of the
Trustee and appointment of a successor, the Trustee shall transfer and deliver
the Trust Funds to such successor. Following the effective date of the
appointment of the successor, the Trustee's responsibility hereunder shall be
limited to managing the assets in its possession, transferring such assets to
the successor and settling its final account. Neither the Trustee nor the
successor shall be liable for the acts of the other. All of the provisions set
forth herein with respect to the Trustee shall relate to each successor with the
same force and effect as if such successor had been originally named as the
Trustee hereunder.
ARTICLE XIX
DURATION AND TERMINATION OF TRUST AND AMENDMENT
A........Irrevocable. The Trusts are hereby declared to be
irrevocable and shall continue until all vested accrued benefits have been paid.
B........Termination of Trust. If the Trusts terminate under the
provisions of Article XIX.A, the Trustee shall liquidate the Trust Funds and,
after their final accounting has been settled, shall distribute to the Company
the net balance of any assets of the Trust Funds remaining after all vested
accrued benefits and administration expenses have been paid. Upon making such
distribution, the Trustee shall be relieved from all further liability.
C........Plan Amendment. This Plan may be amended, or the Plan
terminated or suspended, by an instrument in writing executed on behalf of the
Company by the President of the Company or the Administrator, or a duly
appointed representative of the Board of Directors and delivered to the Trustee,
provided, however, that (i) no amendment will be made to this Plan which will
cause this Plan, the Trusts or the assets of the Trust Funds to be governed by
or subject to Part 2, 3 or 4 of Title I of ERISA, (ii) no such amendment shall
adversely affect any Trust Beneficiary's accrued benefit, (iii) no such
amendment shall increase the duties or responsibilities of the Trustee unless
the Trustee consents thereto in writing, (iv) no such amendment which would
cause the Trusts to be other than "grantor trusts," or have contributions to the
Trusts by the Company, or income and gains of the Trust Funds, constitute a
taxable event to the Trusts or to the Executives, and (v) no such amendment
shall cause the vested accrued benefit paid to Trust Beneficiaries from the
Trust Fund to become nondeductible to the Company in the year of payment.
ARTICLE XX
MISCELLANEOUS
A........California Law. This Plan and the Trusts hereby created
shall be construed and regulated by the laws of the State of California.
161
B........Headings. The headings of sections in this Plan are used
herein for convenience of reference only and in case of any conflict the
text of this Plan shall control.
C........Successorship. This Plan shall be binding upon and inure to
the benefit of any successor to the Company or its business as the result of
merger, consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto; and any such successor shall be deemed to be the
"Company" under this Plan. In the event of any such merger, consolidation,
reorganization, transfer of assets or other similar transaction, the successor
to the Company or its business or any subsequent successor thereto shall
promptly notify the Trustee in writing of its successorship and furnish the
Trustee with the information specified in Article XVI.A of this Plan. In no
event shall any such transaction described herein suspend or delay the rights of
Trust Beneficiaries to receive their vested accrued benefits hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
TRIMBLE NAVIGATION LIMITED TRUSTEE
By:
John H. Barnet
Title:
Date: Date:
162
TRIMBLE NAVIGATION LIMITED
NONQUALIFIED DEFERRED COMPENSATION PLAN
DEFERRED COMPENSATION AGREEMENT
1. I acknowledge that the terms and conditions of the Trimble Navigation
Limited Nonqualified Deferred Compensation Plan ("Plan") have been
explained to me, including the tax consequences of my decision to
participate in the Plan.
2. I agree to defer all or a portion of my current income, and to have
that income paid to me at a later date pursuant to the terms and
conditions of the Plan, which is incorporated by reference, in its
entirety, in this Agreement.
3. I acknowledge that under the terms of the Plan, no payments can be
made in the event Trimble Navigation Limited is Insolvent (as defined
in the Plan).
4. I understand that this Agreement is not an employment agreement, does
not guarantee that I will receive any predetermined amount of
compensation, and does not guarantee that I will receive any bonus.
5. I understand that any income I defer will be held as an asset of
Trimble Navigation Limited and will remain subject to the claims of
the general creditors of Trimble Navigation Limited.
ELECTION TO DEFER INCOME
I hereby elect to defer
% of my future salary (between 1% and 100%)
% of any future bonus (between 1% and 100%)
I understand that I may discontinue deferral of future Compensation at any time
during the year, but that I may make no other change in the Agreement until the
beginning of the calendar year after I have notified Trimble Navigation Limited
in writing of the change I desire. I also understand that if I discontinue
deferral of future Compensation during the year, I cannot restart deferral until
the beginning of the succeeding calendar year.
DISTRIBUTION
I understand that all vested amounts held for my benefit under the Plan shall
begin to be distributed upon the earlier of my termination of employment with
Trimble Navigation Limited for any reason, including retirement, disability or
death, or upon a change of control or unforeseen emergency as described in the
Plan. In addition, I may elect to commence an early distribution (an "Early
Distribution Election") prior to such dates by making the following election:
Distribution of vested amounts held for my benefit under the Plan should
commence:
3 years after the date of this Agreement
or
5 years after the date of this Agreement
163
I understand that an Early Distribution Election cannot be changed, except to
make a one-time only election to extend the deferral period which must be made
at least one year before the deferral period ends.
METHOD OF PAYMENT (One method must be checked in order for this to be a valid
Agreement)
Subject to the preceding election, if any, I elect that the payment of all
vested amounts due me under this Agreement and the Plan shall be made in the
following manner:
One single lump sum payment paid as soon as administratively possible
following termination of employment or my death.
Annual installments equal to 1/n of the assets on deposit in the trust
credited to my account, where n is the number of installments
remaining to be paid. I hereby elect _____ annual payments (not to
exceed 10 years), with the first payment being made in the year in
which I terminate from employment or die, whichever first occurs.
Annual installments equal to a specified % of the vested assets credited
to my account under the Trust. I hereby elect _____ annual payments
(not to exceed 10 years). Please indicate the installment % by year in
the following space provided:
Year %
1
---------
2
---------
3
---------
4
---------
5
---------
6
---------
7
---------
8
---------
9
---------
10 100%
I understand that my elected method of distribution can be changed up to 90 days
prior to the date of actual distribution.
I understand further that my elected method of distribution may be modified by
Trimble Navigation Limited at any time prior to my termination of employment,
provided that any such modification that impairs my rights under this Agreement
and the Plan shall be subject to my consent.
164
DESIGNATED BENEFICIARY
In the event that I should die before all amounts payable to me under the Plan
have been paid, I designate the following beneficiary to receive the remainder
of my interest under the Plan. I understand that I may change this Designated
Beneficiary at any time on written notice to Trimble Navigation Limited.
Please follow the Beneficiary Election on file for the Trimble Navigation
Limited Savings and Retirement Plan.
or
Name(s) and Relationship:
The foregoing Election is voluntarily made by me after reviewing the terms of
the Plan and with knowledge that this Election is irrevocable until changed in
accordance with the terms of the Plan.
Agreed:
(Signature)
TRIMBLE NAVIGATION LIMITED
(Print Name)
By
(Social Security Number)
(Date) (Date)
165
EXHIBIT 21.1
TRIMBLE NAVIGATION LIMITED
LIST OF SUBSIDIARIES OF REGISTRANT
TR Navigation Corporation Trimble Middle East WLL
(incorporated in California) (organized under the laws of Egypt)
Trimble Specialty Products, Inc. Trimble Brasil Limitada
(incorporated in California) (organized under the laws of Brazil)
Trimble Navigation Europe Limited Trimble Mexico S. de R.L.
(organized under the laws of the (organized under the laws of Mexico)
United Kingdom)
Datacom Software Limited
Trimble Navigation International (incorporated in California)
Foreign Sales Corporation
(organized under the laws of Barbados)
Trimble Navigation International Limited
(incorporated in California)
TNL Flight Services, Inc.
(incorporated in Texas)
Trimble Navigation New Zealand Limited
(organized under the laws of New Zealand)
DataCom Software Research Limited
(organized under the laws of New Zealand)
Trimble Navigation Italia s.r.l.
(organized under the laws of Italy)
Trimble Navigation Deutchland GmbH
(organized under the laws of Germany)
Trimble Navigation France S.A.
(organized under the laws of France)
Trimble Navigation Singapore PTE Limited
(organized under the laws of Singapore)
Trimble Navigation Iberica S.L.
(organized under the laws of Spain)
Trimble Navigation Australia Pty Limited
(organized under the laws of Australia)
Trimble Japan K.K.
(organized under the laws of Japan)
Trimble Export Limited
(incorporated in California)
166
EXHIBIT 23.1
TRIMBLE NAVIGATION LIMITED
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated January 26, 1999 in this Annual
Report (Form 10-K) of Trimble Navigation Limited
for the year ended January 1, 1999.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 Nos. 33-37384, 33-39647, 33-45167, 33-45604, 33-46719,
33-50944, 33-57522, 33-62078, 33-78502, 33-84362, 33-91858, 333-04670, 333-28429
and 333-53703) pertaining to the 1983 Stock Option Plan, the Trimble Navigation
Savings and Retirement Plan, the 1990 Director Stock Option Plan, the "Position
for Us for Progress" 1992 Employee Stock Bonus Plan, the 1992 Management
Discount Stock Option Plan, and the 1993 Stock Option Plan, and the related
Prospectuses, of our report dated January 26, 1999 with respect to the
consolidated financial statements and schedule of Trimble Navigation Limited
included in the Annual Report (Form 10-K) for the year ended January 1, 1999.
/s/ ERNST & YOUNG LLP
Palo Alto, California
March 25, 1999
167
5
1,000
12-MOS 12-MOS
JAN-01-1999 JAN-02-1998
JAN-01-1999 JAN-02-1998
40,865 19,951
16,269 53,171
33,431 49,101
0 0
37,166 42,385
131,904 168,755
15,104 19,676
0 0
156,279 207,663
49,948 37,483
0 0
0 0
0 0
122,201 133,355
(47,510) 6,128
156,279 207,663
260,279 258,894
260,279 258,894
134,723 118,903
134,723 118,903
148,736 120,146
0 0
3,396 3,525
(25,221) 21,017
1,400 2,496
(26,621) 18,521
(26,773) (9,242)
0 0
0 0
(53,394) 9,279
(2.38) 0.42
(2.38) 0.40
