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 3, 2003
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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
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(State or other jurisdiction of incorporation or organization)
94-2802192
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(I.R.S. Employer Identification No.)
645 North Mary Avenue, Sunnyvale, CA 94085
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(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
Preferred Share Purchase Rights
(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 Common Stock held by non-affiliates of
the registrant, based upon the last sale price of the Common Stock reported on
the Nasdaq National Market on June 28, 2002 was approximately $455 million.
There were 29,350,366 shares of the registrant's Common Stock issued and
outstanding as of March 5, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of Trimble Navigation Limited's Proxy Statement relating to
the annual meeting of stockholders to be held on May 20, 2003 (the "Proxy
Statement") are incorporated by reference into Part III of this Annual Report on
Form 10-K.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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, which are subject to the "safe harbor" created
by those sections. The forward-looking statements regarding future events and
the future results of Trimble Navigation Limited ("Trimble" or " The Company" or
"We" or "Our" or "Us") are based on current expectations, estimates, forecasts,
and projections about the industries in which Trimble operates and the beliefs
and assumptions of the management of Trimble. Discussions containing such
forward-looking statements may be found in "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In some cases,
forward-looking statements can be identified by terminology such as "may,"
"will," "should," "could," "predicts," "potential," "continue," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates," and
similar expressions. These forward-looking statements involve certain risks and
uncertainties that could cause actual results, levels of activity, performance,
achievements and events to differ materially from those implied by such
forward-looking statements, but are not limited to those discussed in this
Report under the section entitled "Other Risk Factors" and elsewhere, and in
other reports Trimble files with the Securities and Exchange Commission ("SEC"),
specifically the most recent reports on Form 8-K and Form 10-Q, each as it may
be amended from time to time. These forward-looking statements are made as of
the date of this Annual Report on Form 10-K. We reserve the right to update
these statements for any reason, including the occurrence of material events.
The risks and uncertainties under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Risks and
Uncertainties" contained herein, among other things, should be considered in
evaluating our prospects and future financial performance. We have attempted to
identify forward-looking statements in this report by placing an asterisk (*)
before paragraphs containing such material.
TRIMBLE NAVIGATION LIMITED
2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1 Business..............................................................5
Item 2 Properties...........................................................17
Item 3 Legal Proceedings....................................................17
Item 4 Submission of Matters to a Vote of Security Holders..................18
PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters..................................................19
Item 6 Selected Financial Data..............................................20
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................23
Item 7A Quantitative and Qualitative Disclosures about Market Risk...........52
Item 8 Financial Statements and Supplementary Data..........................56
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................94
PART III
Item 10 Directors and Executive Officers of the Registrant...................94
Item 11 Executive Compensation...............................................94
Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters..........................................94
Item 13 Certain Relationships and Related Transactions.......................94
Item 14 Controls and Procedures..............................................94
PART IV
Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K..95-108
TRADEMARKS
Trimble, SiteVision, GeoExplorer, AgGPS, Thunderbolt, FirstGPS, and
CrossCheck are trademarks of Trimble Navigation Limited registered in the United
States Patent and Trademark Office. Spectra Precision, Lassen, Force, Galaxy,
EZ-Guide, Placer, Trimble Toolbox and Telvisant are trademarks of Trimble
Navigation Limited. All other trademarks are the property of their respective
owners.
PART I
Item 1 Business Overview
Trimble Navigation Limited, a California corporation ("Trimble" or " the
Company" or "we" or "our" or "us"), provides advanced positioning products and
solutions to industrial, commercial, governmental entities, and professional
customers in a number of markets including surveying, construction, agriculture,
urban and resource management, military, transportation, and telecommunications.
Customer benefits resulting from our products typically include cost savings or
avoidance, improved quality, higher productivity, and increased efficiency.
Examples of our products and solutions include guidance for earthmoving
operations, surveying instrumentation, fleet management for specialized trucks
such as concrete mixers, positioning technology for vehicle navigation and
telematics products, tractor guidance for farming, field data collection
equipment, and timing technology for synchronization of wireless networks.
Our expertise is focused in positioning, communication, and information
technologies, which form the core of our products. Positioning technologies used
include the Global Positioning System (GPS), laser, optical, and inertial, while
communication techniques include both public networks such as cellular, and
private networks such as business band radio. The unique nature of many of our
products and solutions is created through information technologies - both
firmware that enables the positioning solution and applications software that
allows the customer to make use of the positioning information.
We design and market our own products. Assembly and manufacturing for many
of our products are subcontracted to third parties. We conduct our business
globally with major operations in the United States, Sweden, Germany, New
Zealand, and the Netherlands. Products are sold through dealers,
representatives, partners, and other channels throughout the world. Products are
supported by sales offices in 22 countries.
We began operations in 1978 and incorporated in California in 1981. Our
common stock has been publicly traded on Nasdaq since 1990 under the symbol
TRMB.
Technology Overview
A major portion of our revenues is derived from applying GPS to terrestrial
applications. GPS is a system of 24 orbiting satellites and associated ground
control that is funded and maintained by the U. S. Government and is available
worldwide free of charge. GPS positioning is based on a technique that precisely
measures distances from four or more satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic clocks. A
GPS receiver measures distances from the satellites in view by determining the
travel time of a signal from the satellite to the receiver, and then uses those
distances to compute its position. 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 approximately 10 meters, 24 hours a day.
Much better accuracies are possible through a technique called "differential
GPS." In addition, GPS provides extremely accurate time measurement.
The usefulness of GPS is dependent upon the locations of the receiver and
the GPS satellites that are above the horizon at any given time. Reception of
GPS signals requires line-of-sight visibility between the satellites and the
receiver, which can be blocked by buildings, hills, and dense foliage. The
receiver must have a line of sight to at least four satellites to determine its
latitude, longitude, altitude, and time. 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.
Selective Availability, which was the largest component of GPS distortion, is
controlled by the U.S. Department of Defense and was deactivated on May 1, 2000.
Our GPS products are based on proprietary receiver technology. The
convergence of positioning, wireless, and information technologies enables
significant new value to be added to positioning systems, thereby creating a
more robust solution for the user. In addition, recent developments in wireless
technology and deployments of wireless networks have enabled less expensive
wireless communications. These developments allow for the efficient transfer of
position data to locations away from the positioning field device, allowing the
data to be accessed by more users and thereby increasing productivity.
Our laser and optical products measure distances and angles accurately
using light. We generally use commercially available laser diodes to create
light beams for distance measurement. In addition, our proprietary precision
mechanics and software algorithms in these products combine to give robust,
accurate distance and angle measurements for a variety of agricultural,
surveying, and construction applications.
Business Strategy
Our business strategy leverages our expertise in positioning to provide
solutions for our customers, built around several key initiatives:
o Focus on attractive markets - We focus on markets that offer potential for
revenue growth, profitability, and market leadership.
o Create innovative solutions that provide significant economic benefits to
our customers - We seek to apply our technology to applications for which
position data has a high value. We anticipate that further advances in
positioning, wireless, and information technologies will enable new classes
of solutions to emerge that will create new opportunities.
o Develop distribution channels to best access our markets - We utilize a
range of distribution channels to best serve the needs of individual
markets. These channels can include independent dealers, direct sales, OEM
sales, and distribution alliances with key partners. In addition, we will
continue to extend our international distribution.
Business Segments and Markets
We are organized into four main operating segments encompassing our various
applications and product lines: Engineering and Construction, Field Solutions,
Component Technologies, and Mobile Solutions. We also operate in smaller
business areas, primarily Military and Advanced Systems, and Tripod Data
Systems, which aggregate into the Portfolio Business segment. Our segments are
distinguished by the markets they serve. Each division is responsible for
product development, marketing, sales, strategy, financial performance, and is
headed by a general manager.
Segment Realignment
In the first fiscal quarter of 2002, we realigned two of our reportable
segments. The Agriculture segment was combined with the Mapping and Geographic
Information Systems (GIS) business to form Field Solutions. Mapping and GIS were
previously part of Fleet and Asset Management. The Mobile Positioning business
that was part of Fleet and Asset Management is now Mobile Solutions.
We began breaking out Mobile Solutions as a separate reporting segment
during the first quarter of 2002 to address the growing importance of the mobile
asset management business and its impact on our profitability. At the same time,
we combined our GIS and Agriculture businesses to create a new segment called
Field Solutions in order to recognize the synergies and similar product
requirements between the two businesses.
Engineering and Construction
We employ GPS, optical, lasers, communications, and information technology
to pursue the opportunities in the Engineering and Construction industry
segment. Products in this segment increase productivity and accuracy for the
entire construction process including the initial survey, planning, design,
earthmoving, and building phases. These products are aimed at making each
individual task more efficient, as well as speeding up the entire process by
improving information flow from one step to the next, and facilitating faster
redesign when needed.
For example, our GPS and robotic optical technology allows surveying tasks
to be completed faster and with a smaller crew. Similarly, construction machine
guidance products allow the operator to achieve the desired landform by
eliminating stakeout and reducing rework. These steps in the operation can be
readily linked together with data collection modules and software to minimize
the time and effort required to get the job done accurately.
We sell and distribute our products from this segment through a global
network of independent dealers and our sales staff. This channel is supplemented
by relationships that create additional channel breadth including our joint
venture with Caterpillar and private branding arrangements with other companies.
Competition in this segment comes from companies that provide optical,
laser, or GPS positioning products. Our principal competitors are Topcon
Corporation and Leica Geosystems. Price points in this segment range from less
than $1,000 for certain laser systems to approximately $125,000 for a high-
precision, three-dimensional, machine control system.
Representative products sold in this segment include:
5800 RTK Rover - This is an integrated unit that allows the surveyor to
make centimeter-level measurements or do construction stakeout with only one
person. Wireless technology eliminates cables that could otherwise snag on
foliage and structures. The rover weighs 3.5kg for an entire system on a pole
including batteries.
5600 Total Station - This optical total station series provides a choice of
increasing levels of automation that allow the surveyor to choose a system that
will best suit his work. Depending on the job, these configurations enable
one-person stakeout and survey. The included Attachable Control Unit (ACU) also
works with the 5800 RTK Rover providing complete measurement compatibility
regardless of the technology used.
SiteVision(R) GPS System - SiteVision GPS is a machine-mounted, positioning
system that guides the operator by comparing the actual position of the blade
with the digitized design that resides in a computer on the machine. The use of
this system enables faster machine speed, eliminates the need for placing
stakes, and lowers the number of passes needed to get the desired grade.
Applications include road construction and site preparation.
Spectra Precision(TM) Laser GL 700 Series - This laser product provides
grade control capability for heavy equipment on a construction site. The level
surface of the laser light can be precisely controlled, and machines with a
laser receiver can be controlled to establish a precise and uniform grade over
the desired area. Applications include trenching, pipe laying, machine control
grading, and road construction applications.
Field Solutions
Our Field Solutions division addresses the two business areas of
Agriculture and Geographical Information System (GIS). Products and solutions
from the GIS business area are targeted at collecting feature and attribute
information in the field to be used within GIS databases and providing
position-related information directly to a person working in the field in the
mobile GIS market. The manner in which information is presented or collected is
of key importance to the customer, as well as the applicability and value of the
information itself.
In the agricultural market, our products provide navigation guidance for
tractors and other farm equipment used in spraying, planting, cultivation, and
harvesting applications. The benefits to the farmer include faster machine
operation, higher yields, and lower consumption of chemicals. We also provide
positioning solutions for leveling agricultural fields in irrigation
applications and aligning drainage systems to better manage water flow in
fields.
Our distribution to the agricultural market is through multiple channels.
Revenue is generated through independent dealers and through partners such as
CNH Global. Competitors in this market are either vertically integrated
implement companies such as John Deere, or agricultural instrumentation
suppliers such as Raven, CSI Wireless, and Integrinautics.
The other principle market within Field Solutions is GIS. Our products
enable the efficient acquisition of features, attributes, and positions of fixed
infrastructure and natural resource assets. An example of the type of data being
collected would be that of a utility company performing a survey of its
transmission poles including the age and condition of each telephone pole. Our
handheld unit enables this data to be collected and automatically stored while
confirming the location of the asset. The collected data can then be downloaded
into a GIS database. This stored data could later be used to navigate back to
any individual asset or item for maintenance or data update.
Distribution for GIS applications is primarily through a network of
independent dealers and business partners, supported by an internal sales staff.
Competitors in this market are typically either survey instrument companies
having GPS technology and/or consumer GPS companies. Two examples are Leica
Geosystems and Garmin.
Approximate price points in this segment range from $2,500 for a handheld
unit to $35,000 for a fully automated, farm equipment control system.
Representative products sold within this segment include:
GeoExplorer(R) CE Series - Combines a GPS receiver in a rugged handheld
unit running Microsoft's Windows CE operating system that makes it easy to
collect and maintain data about objects in the field.
AgGPS(R) Autopilot System - A GPS-enabled, agricultural navigation system
that connects to a tractor's steering system and automatically steers the
tractor along a precise path to within three centimeters or less. This enables
both higher machine productivity and more precise application of seed and
chemicals, thereby reducing costs to the farmer.
AgGPS(R) EZ-Guide(TM) System - A GPS-enabled, manual guidance system that
provides the tractor operator with steering visual corrections required to stay
on course to within 25 centimeters. This system reduces the overlap or gap in
spraying, fertilizing, and other field applications.
Component Technologies
Our Component Technologies segment provides components for applications
that require embedded position or time, primarily based on GPS technology. Our
largest markets are in the telecommunications and automotive industries where we
supply modules, boards, custom integrated circuits and software, or single
application IP licenses to the customer according to the needs of the
application. Sales are made directly to original equipment manufacturers (OEMs)
and system integrators who incorporate our component into a sub-system or a
complete system-level product.
In the telecommunication infrastructure market, we provide timing modules
that keep wireless networks synchronized and on frequency. For example, CDMA
cellular telephone networks require a high level of both short-term and
long-term frequency stability for proper operation (synchronization of
information/voice flow to avoid dropped calls). Our timing modules meet these
needs at a much lower cost than the atomic standards or other specially prepared
components that would otherwise be required. Customers include wireless
infrastructure companies such as Nortel, Samsung, UTStarcom, and Grayson
Wireless.
In the automotive market, we provide a GPS component that is embedded into
in-vehicle navigation systems. Our focus on high reliability, continuous
improvement, and low cost has earned us supplier awards and continuing business
in this market. Customers include IVN system manufacturers and integrators such
as Siemens VDO Automotive AG, Blaupunkt, and Magnetti Marelli.
* The declining size and power requirements for GPS components, coupled
with improving capabilities, allow GPS to potentially be used in a new class of
applications such as position-aware cellular telephones or other wireless
handheld devices. We expect our strength in GPS technology will expand our
participation in this market.
Competitors in the telecommunication infrastructure market include
Symmetricom. Competitors in the automotive market are typically component
companies with GPS capability including Japan Radio Corporation, Motorola, and
SiRF.
Representative products sold by this segment include:
Thunderbolt(R) GPS Disciplined Clock - The Thunderbolt Clock is used as a
time source for the synchronization of wireless networks. By combining a GPS
receiver with a high-quality quartz oscillator, the Thunderbolt achieves the
performance of an atomic standard with much higher reliability and much lower
price.
FirstGPS(R) Technology - We license our FirstGPS Technology, which is a
host-based, GPS system available as two integrated circuits and associated
software. The software runs on a customer's existing microprocessor system
complementing the work done by the integrated circuit to generate position,
velocity, and time. This low-power technology is particularly suitable for
small, mobile, battery-operated applications.
Lassen(TM) SQ Module - Our new Lassen SQ module adds complete GPS
functionality to a mobile product in a postage stamp-sized footprint with
ultra-low power consumption, consuming less than 100mW at 3.3V. This module is
designed for portable handheld, battery-powered applications such as cell
phones, pagers, PDAs, digital cameras, and many others.
Mobile Solutions
Our Mobile Solutions segment addresses the market for fleet management by
providing a bundled solution including both hardware and software needed to run
the application. In almost all cases, the software solution is provided to the
user through Internet-enabled access for a monthly service fee. The bundled
solution enables the fleet owner to dispatch, track, and monitor the conditions
of vehicles in the fleet on a real-time basis. A vehicle-mounted unit consists
of a single module including a GPS receiver, sensor interface, and a cellular
modem. Our solution includes the communication service from the vehicle to our
data center and access over the Internet to the application software, relieving
the user of the need to maintain extensive computer operations.
Our agreement with McNeilus Companies, Inc., a major manufacturer of trucks
for the ready mix concrete and waste management industries, facilitates the
delivery of a complete management solution when a new fleet is acquired.
McNeilus' sales team will market our solution, which includes our GPS-enabled
hardware and hosted software provided for a monthly service fee to its customers
as a retrofit for trucks already in the field, or as a factory-installed option.
Our Mobile Solutions segment maintains multiple distribution channels
including independent dealers, key accounts and strategic partners such as
McNeilus. Approximate prices for the hardware fall in the range of $300 to
$3000, while the monthly software service fees range from approximately $20 to
approximately $55, depending on the customer service level. Competition comes
largely from service-oriented businesses such as @Road, @Track, Aether Systems,
and Minorplanet.
Representative products sold by this division include:
Telvisant(TM) System - Our fleet management service offering, Telvisant
provides different levels of service that run from snapshots of fleet activity
to real-time fleet dispatch capability. Telvisant includes truck communication
service and computer backbone support of the software. Variations of Telvisant
are tailored for specific industry applications.
CrossCheck(R) Module - This hardware, mounted on the vehicle, provides
location and information through its built-in cellular interface. This module
also includes GPS positioning, sensor interfaces for vehicle conditions, and
built-in intelligence for distributed decision-making.
Portfolio Business
Our Portfolio Business segment includes various operations that each equal
less than 10 percent of our total operating revenue. The products in this
segment are data collection products as well as navigation modules and embedded
sensors that are used in avionics, flight, and military applications. The two
most significant components in this segment are Tripod Data Systems (TDS), and
Military and Advanced Systems (MAS).
TDS designs and markets handheld data collectors and data collection
software for field use by surveyors and other professionals. Products are sold
directly, through dealers, and other survey manufacturers. Competitors in this
portion of the business are small and geographically diverse.
Our MAS business supplies GPS modules that use the military's GPS Precise
Positioning Service. These modules are most often used in aviation or
ground-based military equipment. Military products are sold directly by our
sales force to either the U.S. Government or a contractor. Sales are also made
to foreign governments, with the sales of the encrypted components taking place
through the U.S. Government. Competitors in this market include Rockwell, L3,
Raytheon, and Thales.
Representative products sold by this segment include:
TDS Ranger(TM) Series - The TDS Ranger device is a handheld data collector
supporting Microsoft's Windows CE operating system. Running TDS survey software,
this unit can control and collect data from all major brands of optical and GPS
surveying instruments. The operator can also run his or her own application
programs for the Microsoft Windows CE operating system on the platform.
Force(TM) 5 Module - The Force 5 GPS Receiver Application Module (GRAM) is
a dual-frequency, GPS module that is used in a variety of military GPS signal
embedded airborne and ground applications.
Acquisitions and Joint Ventures
The markets in which we compete require a wide variety of technologies,
products, and capabilities. Through acquisitions, investments, and joint
development agreements or alliances, we are able to deliver products and
services to customers in target markets. We employ the following strategies to
satisfy the need for new or enhanced products and solutions: develop new
technologies and products internally; enter into joint ventures with strategic
partners; resell another company's product; or acquire all or part of another
company.
Acquisitions
* We have acquired a number of companies in the past and we expect to make
acquisitions in the future. Mergers and acquisitions of high-technology
companies are inherently risky. No assurance can be given that our previous or
future acquisitions will be successful or will not materially adversely affect
our financial condition or operating results. The risks associated with
acquisitions are more fully discussed in the "Risks and Uncertainties" section
contained in Part II, Item 7 of this Report.
LeveLite - On August 15, 2002, we acquired LeveLite Technology, Inc. This
was a strategic acquisition for us, as it not only extended the product
portfolio of our commercial construction business in the entry-level market for
laser-levels, but it also strengthened our presence in certain distribution
channels, such as the construction supply houses and power tool manufacturers.
Caterpillar Joint Venture
On April 1, 2002, Trimble and Caterpillar established and began operations
of a joint venture called Caterpillar Trimble Control Technologies, LLC, in
which each company has a 50% ownership stake and have equal voting rights. The
purpose of this joint venture is to develop the next generation of machine
control products for the construction and mining markets.
* Today, we sell construction machine control products to contractors
through our dealer channel, for installation on bulldozers, motorgraders, and
excavators that are already in the field (the "after-market"). However, both
companies believe that this "after-market" solution will spur future demand for
a machine control product that can be integrated into the design of new
Caterpillar machines, while also still being available for "after-market"
installation.
Patents, Licenses and Intellectual Property
We hold 582 U.S. patents and 114 foreign patents, the majority of which
cover GPS technology and applications, and over 100 of which cover optical and
laser technology and applications.
We prefer to own the intellectual property used in our products, either
directly or though subsidiaries. Although this is not a significant factor in
our business, from time to time we license technology from third parties.
There are 74 trademarks registered to Trimble and its subsidiaries.
Specifically, "Trimble" with the sextant logo, "AgGPS", "GeoExplorer," and "GPS
Total Station," are examples of trademarks of Trimble Navigation Limited
registered in the United States and other countries. Additional trademarks are
pending registration.
Although we believe that our patents and trademarks have value, we cannot
be sure that those patents and trademarks, or any additional patents and
trademarks that may be obtained in the future, will provide meaningful
protection from competition. We actively develop and protect our intellectual
property through a program of patenting, enforcement, and licensing.
We do not believe that any of our products infringe patent or other
proprietary rights of third parties, but we cannot be certain that they do not
do so. (See Note 20 of the Notes to the 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 our profitability.
Sales and Marketing
We currently have regional sales offices throughout North America and
Europe. Offices serving the rest of the world include Australia, China, Japan,
Philippines, New Zealand, Singapore, and United Arab Emirates. We tailor the
distribution channel to the needs of the product and regional market. Therefore,
we have a number of forms of sales channel solutions around the world.
North America
We sell our products in the United States and Canada primarily through
dealers, distributors, and authorized representatives. This channel is
supplemented and supported by our employees who provide additional sales
support. In some cases, where third party distribution is not available, we
utilize a direct sales force. We also utilize distribution alliances and OEM
relationships with other companies as a means to serve selected markets.
International
We market to end-users through a network of 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.
We occasionally grant exclusive rights to market certain products within
specified countries.
Sales to unaffiliated customers outside the United States comprised
approximately 49% in 2002, 50% in 2001, and 52% in 2000. During the 2002 fiscal
year, North and South America represented 55%, and Europe, the Middle East and
Africa represented 32%, and Asia represented 13%. In fiscal 2002, the United
States comprised approximately 51% and Germany 16% of sales to unaffiliated
customers.
Support and Warranty
The warranty periods for our products are generally between one and three
years from date of shipment. Selected military programs may require extended
warranty periods, and certain products sold by our TDS subsidiary have a 90-day
warranty period. We support our GPS products through a circuit board replacement
program from locations in the United Kingdom, Germany, Japan, and the United
States. The repair and calibration of our non-GPS products are available from
company-owned or authorized facilities. We reimburse dealers and distributors
for all authorized warranty repairs they perform.
While we engage in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of component suppliers,
our warranty obligation is affected by product failure rates, material usage,
and service delivery costs incurred in correcting a product failure. Should
actual product failure rates, material usage, or service delivery costs differ
from the estimates, revisions to the estimated warranty accrual and related
costs may be required.
Seasonality of Business
* Our revenues are affected by seasonal buying patterns in some of our
business areas. Over half of our total revenue comes from our Engineering and
Construction business, which has the biggest seasonal impact on our total
revenue. This business, and therefore our total revenue, is seasonally strongest
during the second quarter due to the start of the construction buying season in
the northern hemisphere in spring. Typically, we expect the first and fourth
quarters to be the seasonal lows due to the lack of construction and farming
during the winter months. If other factors such as economic conditions or
underlying growth in the business are removed, the historical variability in our
total quarterly revenue from seasonality has generally been less than 10
percent.
Working Capital
Our working capital needs are typically for inventories, accounts
receivable, and short-term debt. As the business is generally dependent upon a
steady stream of new products, some amount of working capital is devoted to the
ramp up and ramp down of product volumes as new products get introduced and
older models are taken out of production.
Backlog
In most of our markets, the time between order placement and shipment is
short. Therefore, we believe that backlog is not a reliable indicator of present
or future business conditions.
Manufacturing
Manufacturing for most of our GPS products is subcontracted to Solectron
Corporation. Solectron is responsible for substantially all material
procurement, assembly, and testing. We continue to manage product design up
through pilot production for the subcontracted products, and we are directly
involved in qualifying suppliers and key components used in all our products.
During the fourth quarter of 2002, Solectron began assembling some of our
Component Technologies products in China. Our current contract with Solectron is
due to expire in August 2003.
We manufacture laser and optics-based products at our plants in Dayton,
Ohio; Danderyd, Sweden; and Jena and Kaiserslautern, Germany. Some of these
products or portions of these products are also subcontracted to third parties
for assembly.
Most of the components used in our products are standard parts readily
available from more than one supplier. A few components are from sole suppliers
or are custom parts unique to our company. While custom parts make our products
hard to imitate, they also represent a manufacturing risk due to the lack of
alternative suppliers. If these parts became unavailable, redesign or
modification of our products could be required. In addition, suppliers may cease
manufacturing common components, replacing them with newer parts, which require
requalification. These risks could cause an interruption in our ability to
provide a steady stream of products to our customers.
Research and Development
We believe that our competitive position is maintained through the
development and introduction of new products having improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.
Recent developments have produced small, low-power, OEM GPS receivers,
accurate and versatile rotating lasers for construction use, and light weight
and compact GPS surveying rovers.
Our research and development expenditure, net of reimbursed amounts was
$61.2 million for fiscal 2002, $62.9 million for fiscal 2001, and $46.5 million
for fiscal 2000.
* We expect to continue investing in research and development with the goal
of maintaining or improving our competitive position, as well as the goal of
entering new markets and satisfying new needs for positioning related solutions.
There can be no assurance that we will succeed in doing so.
Employment
As of January 3, 2003, we employed a total of 2,050 employees, including
686 in sales and marketing, 631 in manufacturing, 505 in engineering, and 228 in
general and administrative positions. Of these employees, 607 were located in
Europe and in the Middle East (primarily in Germany and Sweden), 252 were
situated in the Asia Pacific region (primarily in New Zealand), and 1,191
employed in the Americas (primarily in the United States).
Our employees are not represented by unions except for those in Sweden and
Germany. We also employ temporary and contract personnel that are not included
in the above headcount numbers. We have not experienced work stoppages or
similar labor actions.
Available Information
Our Internet address is www.trimble.com. Information contained on our
website is not part of this annual report on Form 10-K. We make available free
of charge on www.trimble.com, our annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the SEC.
In addition, you may request a copy of these filings (excluding exhibits)
at no cost by writing or telephoning us at the following address or telephone
number:
Trimble Navigation Limited
645 North Mary Avenue, Sunnyvale, CA 94088
Attention: Investor Relations
Telephone: 408-481-8000
Executive Officers
The names, ages, and positions of the Company's executive officers as of
March 5, 2003 are as follows:
Name Age Position
- -------------------------------------------------------------------------
Steven W. Berglund.......51 President and Chief Executive Officer
Mary Ellen P. Genovese...43 Chief Financial Officer
William C. Burgess.......56 Vice President, Human Resources
Joseph F. Denniston, Jr..42 Vice President, Operations
Bryn A. Fosburgh.........40 Vice President and General Manager,
Geomatics and Engineering
John E. Huey.............53 Treasurer
Irwin L. Kwatek..........63 Vice President and General Counsel
Michael W. Lesyna........42 Vice President and General Manager,
Mobile Solutions
Bruce E. Peetz...........51 Vice President, Advanced Technology and Systems
Christopher J. Shephard..40 Vice President and General Manager,
Construction Instruments
Anup V. Singh............32 Corporate Controller
Alan R. Townsend.........54 Vice President and General Manager,
Field Solutions
Dennis L. Workman........57 Vice President and General Manager,
Component Technologies
Steven W. Berglund - Steven Berglund joined Trimble as president and chief
executive officer in March 1999. Prior to joining Trimble, Mr. Berglund was
president of Spectra Precision, Inc., a pioneer in the development of laser
systems. He spent 14 years at Spectra Precision in a variety of senior
leadership positions. In the early 1980s, Mr. Berglund spent a number of years
at Varian Associates in Palo Alto, where he held a variety of planning and
manufacturing roles. Mr. Berglund began his career as a process engineer at
Eastman Kodak in Rochester, New York. He attended the University of Oslo and the
University of Minnesota where he received a B.S. in chemical engineering in
1974. He later received his M.B.A. from the University of Rochester in New York
in 1977.
Mary Ellen Genovese - Mary Ellen Genovese, chief financial officer, has been
responsible for the overall financial activities of Trimble since September
2000. Ms. Genovese was vice president of finance and corporate controller from
1997 to September 2000. From 1994 to 1997, Ms. Genovese served as business unit
controller for Software and Component Technologies, and Tracking and
Communications. She joined Trimble as controller of manufacturing operations in
December 1992. Prior to joining Trimble, Ms. Genovese was chief financial
officer for Minton Co., a distributing company to the commercial building
market, from 1991 to 1992. Prior to 1991, she worked for 10 years with General
Signal Corp. in several management positions. Ms. Genovese is a certified public
accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.
William C. Burgess - William Burgess joined Trimble in August of 2000 as vice
president of Human Resources, with global responsibility for Human Resources.
Prior to joining Trimble, Mr. Burgess was vice president of Human Resources and
Management Information Systems for Sonoma West Holdings, Inc. From 1993 to 1997,
he served as vice president of Human Resources for Optical Coating Laboratory,
from 1990 to 1993, he established and managed the human resources function at
Teknekron Communications Systems, and from 1985 to 1990 he was vice president of
Human Resources for a $25 billion, 35,000-employee segment of Asea Brown Boveri
(ABB), a global technology company. Mr. Burgess received a B.S. from the
University of Nebraska and an M.S. in organizational development from Pepperdine
University.
Joseph F. Denniston, Jr. - Joseph Denniston joined Trimble as vice president of
operations in April 2001, responsible for worldwide manufacturing, distribution
and logistics strategy. Prior to Trimble, Denniston worked for 3Com Corporation.
During his 14-year tenure, he served as vice president of supply chain
management for the Americas and held several positions in test engineering,
manufacturing engineering and operations. Previously at Sentry Schlumberger, he
held several positions including production engineering, production management
and test engineering over six years. Mr. Denniston received a B.S. in electrical
engineering technology from the Missouri Institute of Technology in 1981 and an
M.S. in computer science engineering from Santa Clara University in 1990.
Bryn A. Fosburgh - Bryn Fosburgh was appointed vice president and general
manager of the Geomatics and Engineering (G&E) business area in July 2002, with
responsibility for all the division-level activities associated with survey,
construction, and infrastructure solutions. From October 1999 to July 2002, Mr.
Fosburgh served as division vice president of survey and infrastructure. In
1997, Mr. Fosburgh was appointed director of development for the Company's land
survey business unit where he oversaw the development of field and office
software that enabled the interoperability of Trimble survey products. Mr.
Fosburgh joined Trimble in 1994 as technical service manager for surveying,
mining, and construction. Prior to Trimble, Mr. Fosburgh was a civil engineer
with the Wisconsin Department of Transportation where he was responsible for
coordinating the planning, data acquisition, and data analysis for statewide GPS
surveying projects in support of transportation improvement projects. He has
also held various engineering, research and operational positions for the U.S.
Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S.
in geology from the University of Wisconsin in Green Bay in 1985 and an M.S. in
civil engineering from Purdue University in 1989.
John E. Huey - John Huey joined Trimble in 1993 as director corporate credit and
collections, and was promoted to assistant treasurer in 1995 and treasurer in
1996. Past experience includes two years with ENTEX Information Services, five
years with National Refractories and Minerals Corporation (formerly Kaiser
Refractories), and thirteen years with Kaiser Aluminum and 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.
Irwin L. Kwatek - Irwin Kwatek has served as vice president and general counsel
of Trimble since November 2000. Prior to joining Trimble, Mr. Kwatek was vice
president and general counsel of Tickets.com, a ticketing service provider, from
May 1999 to November 2000. Prior to Tickets.com, he was engaged in the private
practice of law for more than six years. During his career, he has served as
vice president and general counsel to several publicly held high-tech companies
including Emulex Corporation, Western Digital Corporation and General
Automation, Inc. Mr. Kwatek received his B.B.A. from Adelphi College in Garden
City, New York and an M.B.A. from the University of Michigan in Ann Arbor. He
received his J.D. from Fordham University in New York City in 1968.
Michael W. Lesyna - Michael Lesyna has been vice president and general manager
of the Mobile Solutions business area since September 2000. Prior to Trimble,
Mr. Lesyna spent six years at Booz Allen & Hamilton where he most recently
served as a principal in the operations management group. Prior to Booz Allen &
Hamilton, Mr. Lesyna held a variety of engineering positions at Allied Signal
Aerospace. Mr. Lesyna received his M.B.A., as well as an M.S. and B.S. in
mechanical engineering from Stanford University.
Bruce E. Peetz - Bruce Peetz has served as vice president of Advanced Technology
and Systems since 1998 and has been with Trimble for 15 years. From 1996 to
1998, Mr. Peetz served as general manager of the Survey Business. Prior to
joining Trimble, Mr. Peetz was a research and development manager at
Hewlett-Packard for 10 years. Mr. Peetz received his B.S. in electrical
engineering from Massachusetts Institute of Technology in Cambridge,
Massachusetts in 1973.
Anup V. Singh - Anup Singh has served as corporate controller since joining
Trimble in December 2001. Prior to joining Trimble, Mr. Singh was with
Excite@Home from July 1999 to December 2001. During his tenure at Excite@Home,
he held the positions of senior director of Corporate Financial Planning and
Analysis, and International Controller. Before Excite@Home, Mr. Singh also
worked for 3Com Corporation from December 1997 to July 1999, and Ernst & Young
LLP in San Jose, California and London, England. Mr. Singh received his B.A. in
1991 and M.A. in 1995 in economics and management science from Cambridge
University in England. He is also a chartered accountant and was admitted as a
member of the Institute of Chartered Accountants in England and Wales in 1994.
Christopher J. Shephard - Chris Shephard was appointed vice president and
general manager of the Construction Instruments (CI) business area in July 2002
after serving as division vice president of operations for Engineering and
Construction since Trimble's acquisition of Spectra Precision Group in July
2000. Prior to Trimble, Mr. Shephard served from 1998 to 2000 as Spectra
Precision's chief financial officer. Mr. Shephard also worked for more than
eight years at Booz Allen & Hamilton. Prior to Booz Allen & Hamilton, Mr.
Shephard spent three years at Copeland Corporation, a division of Emerson, in
their management-training program. Mr. Shephard received a B.A. in business
studies from Manchester Polytechnic in England in 1985 and an M.M. from the J.L.
Kellogg Graduate School of Management at Northwestern University, Evanston,
Illinois in 1990.
Alan R. Townsend - Alan Townsend has served as vice president and general
manager of the Field Solutions business area since November 2001. He also serves
as the managing director of Trimble Navigation New Zealand Ltd. for which he has
overall site responsibility. From 1995 to 2001, Mr. Townsend was general manager
of Mapping and GIS. Mr. Townsend joined Trimble in 1991 as the manager of
Trimble Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend held a
variety of technical and senior management roles within the Datacomm group of
companies in New Zealand including Managing Director of Datacomm Software
Research Ltd. from 1986 to 1991. In addition, Mr. Townsend is a director of IT
Capital Ltd., a venture capital company based in Auckland, New Zealand. He is
also a fellow of the New Zealand Institute of Management and a past president of
the New Zealand Software Exporters Association. Mr. Townsend received a B.S.c in
economics from the University of Canterbury in 1970.
Dennis L. Workman - Dennis Workman has served as vice president and general
manager of Trimble's Component Technologies business area since September 1999.
From 1998 to 1999, Mr. Workman was senior director and chief technical officer
of the newly formed Mobile and Timing Technologies (MTT) business group, also
serving as general manager of Trimble's Automotive and Timing group. In 1997, he
was director of engineering for Software & Component Technologies. Mr. Workman
joined Trimble in 1995 as director of the newly created Timing vertical market.
Prior to Trimble, Mr. Workman held various senior-level technical positions at
Datum Inc. During his 9-year tenure at Datum, he held the position of CTO. Mr.
Workman received a B.S. in mathematics and physics from St. Marys College in
1967 and an M.S. in electrical engineering from the Massachusetts Institute of
Technology in 1969.
Item 2 Properties
The following table sets forth the significant real property that we own or
lease:
Location Size in Segment(s) served Commitment
sq. feet
Sunnyvale, California; 309,400 All Leased, expiring 2003 - 2005;
14 buildings approximately 100,000 sq. ft. subleased
Corvallis, Oregon 20,000 Engineering & Construction Owned, encumbered by $1.8M mortgage
Chandler, Arizona 12,500 Mobile Solutions Leased, expiring 2003
Westminster, Colorado; 73,000 Engineering & Construction, Leased, expiring 2006;
2 buildings Field Solutions 44,000 sq. ft. vacant
Huber Heights (Dayton), 150,000 Engineering & Construction, Owned, no encumbrances
Ohio
57,200 Field Solutions Leased, expiring in 2011
32,800 Distribution Leased, month to month
Danderyd, Sweden 93,900 Engineering & Construction Leased, expiring 2005, 24 month
notice, auto renewal for 3 years
Jena, Germany 28,700 Engineering & Construction Leased, no expiration date,
12 month notice
Kaiserslautern, Germany 26,000 Engineering & Construction Leased, expiring 2005
Raunheim, Germany 28,700 Sales Leased, expiring 2011
Christchurch, New 65,000 Engineering & Construction, Leased, expiring 2005 - 2010
Zealand; 2 buildings Mobile Solutions, Field
Solutions
- --------------------------------------------------------------------------------
In addition, we lease a number of smaller offices around the world
primarily for sales.
* We believe that our facilities are adequate to support current and
near-term operations.
Item 3 Legal Proceedings
In January of 2001, Philip M. Clegg instituted a lawsuit in the United
States District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. On January 29, 2003, we settled this patent infringement lawsuit with
Mr. Clegg whereby we have purchased a fully paid-up, non-exclusive license under
U.S. Patent No. 4,807,131 from Mr. Clegg.
* In November of 2001, Qualcomm Inc. filed a lawsuit against us in the
Superior Court of the State of California. The complaint alleges claims for an
unspecified amount of money damages arising out of Qualcomm's perceived lack of
assurances in early 1999 that our products purchased by Qualcomm would work
properly after a scheduled week number rollover event that took place in August
of 1999. Qualcomm is the only customer to make a claim against us based on the
week number rollover event. In the opinion of management, the resolution of this
lawsuit is not expected to have a material adverse effect on our overall
financial position.
* We are also a party to other disputes incidental to our business. We
believe that our ultimate liability as a result of such disputes, if any, would
not be material to our overall financial position, results of operations, or
liquidity.
Item 4 Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 2002.
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters
Our common stock is traded on the Nasdaq National Market under the symbol
"TRMB." The table below sets forth, during the periods indicated, the high and
low per share bid prices for our common stock as reported on the Nasdaq National
Market.
2002 2001
---- ----
High Low High Low
--------------------------------------
First Quarter $17.14 $11.76 $28.50 $16.50
Second Quarter 18.50 14.97 21.25 12.75
Third Quarter 15.00 10.28 19.80 13.06
Fourth Quarter 14.47 8.02 18.41 12.89
As of January 3, 2003, there were approximately 1,132 holders of record of
our common stock. We made no sales of unregistered securities during the
year-ended January 3, 2003.
Dividend Policy
We have not declared or paid any cash dividends on our common stock during
any period for which financial information is provided in this Annual Report on
Form 10-K. At this time, we intend to retain future earnings, if any, to fund
the development and growth of our business and do not anticipate paying any cash
dividends on our common stock in the foreseeable future.
We are currently restricted from paying dividends and are limited as to the
amount of our common stock that we can repurchase under the terms of our credit
facilities. We are allowed to pay dividends and repurchase shares of our common
stock up to 25% of net income in the previous fiscal year.
Equity Compensation Plan Information
The following table sets forth, as of January 3, 2003, the total number of
securities outstanding under our stock option plans, the weighted average
exercise price of such options, and the number of options available for grant
under such plans.
Plan Category Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding options, future issuance under equity
outstanding options, warrants and rights compensation plans (excluding
warrants and rights securities reflected in
column (a))
(a) (b) (c)
Equity compensation
plans approved by 5,126,633 $18.53 1,859,656
security holders.........
Equity compensation
plans not approved by - - -
security holders.......
Total................... 5,126,633 $18.53 1,859,656
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results of
operations and financial condition related to our acquisitions are included in
our consolidated statement of operations and balance sheet data commencing on
those respective acquisition dates, comparisons of our results of operations and
financial condition for periods prior to and subsequent to those acquisitions
are not indicative of future results.
We have significant intangible assets on our balance sheet that include
goodwill and other purchased intangibles related to acquisitions. At the
beginning of fiscal 2002, we adopted Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), Business Combinations, and No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). Application of the non-amortization provisions
of SFAS 142 significantly reduced amortization expense of purchased intangibles
and goodwill to approximately $8.3 million for the fiscal year 2002 from $29.4
million in fiscal year 2001. We reclassified identifiable intangible assets with
indefinite lives, with a net book value of $73.6 million, as defined by SFAS
142, to goodwill at the date of adoption.
For comparative purposes, the pro forma adjusted net income per share
excluding amortization of goodwill, distribution channel, and assembled
workforce is as follows:
January 3, December 28, December 29,
2003 2001 2000
(In thousands)
Net income (loss) $ 10,324 $ (22,879) $ 14,185
Add back SFAS 142 adjustments:
Amortization of goodwill 7,817 3,116
Amortization of distribution channel 11,230 5,176
Amortization of assembled workforce 1,834 1,225
----- ----- -----
Adjusted net income (loss) $ 10,324 $ (1,998) $ 23,702
========== ========== =========
Weighted average shares outstanding
Basic 28,573 24,727 23,601
Diluted 29,052 24,727 25,976
Diluted net income (loss) per share $ 0.36 $ (0.93) $ 0.55
---------- --------- ---------
Pro forma adjusted diluted net income
(loss) per share $ 0.36 $ (0.08) $ 0.92
========== ========== =========
Summary Consolidated Statements of Operations Data
January 3, December 28, December 29, December 31, January 1,
Fiscal Years Ended 2003 2001 2000 1999 1999
(In thousands of dollars, except per
share data)
Revenue $ 466,602 $ 475,292 $ 369,798 $ 271,364 $ 268,323
Cost of revenue 232,170 238,057 173,237 127,117 141,075
------- ------- ------- ------- -------
Gross margin $ 234,432 $ 237,235 $ 196,561 $ 144,247 $ 127,248
Operating expenses
Research and development 61,232 62,881 46,520 36,493 45,763
Sales and marketing 89,344 103,778 79,901 53,543 61,874
General and administrative 40,634 37,407 30,514 33,750 33,245
Restructuring charges 1,099 3,599 -- -- 10,280
Amortization of goodwill and other
purchased intangible assets 8,300 29,389 13,407 -- --
----- ------ ------ ------ ------
Total operating expenses 200,609 237,054 170,342 123,786 151,162
------- ------- ------- ------- -------
Operating income (loss) from
continuing operations 33,823 181 26,219 20,461 (23,914)
Non-operating income (expense), net (19,999) (21,773) (10,459) 274 (2,041)
------- ------- ------- --- ------
Income (loss) before income taxes
from continuing operations 13,824 (21,592) 15,760 20,735 (25,955)
Income tax provision 3,500 1,900 1,575 2,073 1,400
----- ----- ----- ----- -----
Net income (loss) from continuing
operations $ 10,324 $ (23,492) $ 14,185 $ 18,662 $ (27,355)
--------- ---------- --------- ---------- ----------
Loss from discontinued operations
(net of tax) -- -- -- -- (5,760)
Gain (loss) on disposal of
discontinued operations (net of tax) -- 613 -- 2,931 (20,279)
--------- ---------- ---------- ---------- ----------
Net income (loss) $ 10,324 $ (22,879) $ 14,185 $ 21,593 $ (53,394)
========= =========== ========= ========= ===========
Basic earnings (loss) per share from
continuing operations $ 0.36 $ (0.95) $ 0.60 $ 0.83 $ (1.22)
Basic earnings (loss) per share from
discontinued operations -- 0.02 -- 0.13 (1.16)
---- ---- ---- ---- -----
Basic earnings (loss) per share $ 0.36 $ (0.93) $ 0.60 $ 0.96 $ (2.38)
========= =========== ========= ========= ===========
Shares used in calculating basic
earnings per share 28,573 24,727 23,601 22,424 22,470
========= =========== ========= ========= ===========
Diluted earnings (loss) per share
from continuing operations $ 0.36 $ (0.95) $ 0.55 $ 0.82 $ (1.22)
Diluted earnings (loss) per share
from discontinued operations -- 0.02 -- 0.13 (1.16)
--- ---- --- ---- -----
Diluted net income (loss) per share $ 0.36 $ (0.93) $ 0.55 $ 0.95 $ (2.38)
========= =========== ========= ========= ===========
Shares used in calculating diluted
earnings per share 29,052 24,727 25,976 22,852 22,470
========= =========== ========= ========= ===========
Cash dividends per share $ -- $ -- $ -- $ -- $ --
========= =========== ========= ========= ===========
Other Operating Data:
January 3 December 28, December 29, December 31, January 1,
Fiscal Years ended 2003 2001 2000 1999 1999
- ------------------------------------------- ---------------- ---------------- ---------------- -------------- --------------
(In thousand of dollars, except where
shown as a percentage of revenue)
Gross margin percentage 50% 50% 53% 53% 47%
Operating income (loss) percentage 7% 0% 7% 8% (9%)
EBITDA (1) $ 46,025 $ 41,038 $ 49,196 $ 29,345 $(13,637)
EBITDA as a percentage of revenue (1) 10% 9% 13% 11% (5%)
Depreciation and amortization $ 18,150 $ 41,524 $ 23,476 $ 9,073 $ 12,510
Cash provided by operating
activities $ 35,096 $ 25,093 $ 19,835 $ 23,625 $ 6,968
Cash provided (used) by investing
activities $ (5,766) $(11,441) $(167,180) $(17,882) $ 22,484
Cash provided (used) by financing
activities $(31,729) $(23,450) $ 138,957 $ 2,656 $ (8,538)
Selected Consolidated Balance Sheet Data:
January 3, December 28, December 29, December 31, January 1,
As of 2003 2001 2000 1999 1999
- ------------------------------------------- ---------------- ---------------- ---------------- -------------- --------------
(In thousands)
Working capital (deficit) $ 65,044 $ 19,304 $ (10,439) $ 111,808 $ 81,956
Total assets 441,656 419,395 488,628 181,751 156,279
Non-current portion of long-term debt 114,051 131,759 143,553 33,821 31,640
and other liabilities
Shareholders' equity 201,351 138,489 134,943 100,796 74,691
- --------------------------------------------------------------------------------
(1) EBITDA consists of earnings from continuing operations before interest
income, interest expense, income taxes, depreciation and amortization. Our
EBITDA is presented because it is a widely accepted financial indicator.
EBITDA is not a measure of financial performance in accordance with
generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income (loss) as an indicator of our
performance or to cash flows from operating activities as a measure of
liquidity. Our EBITDA may not be comparable to similarly titled measures as
defined by other companies.
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenue:
January 3, December 28, December 29, December 31, January 1,
Fiscal Years ended 2003 2001 2000 1999 1999
Revenue 100% 100% 100% 100% 100%
Cost of revenue 50% 50% 47% 47% 53%
--- --- --- --- ---
Gross margin 50% 50% 53% 53% 47%
Operating expenses:
Research and development 13% 13% 13% 13% 17%
Sales and marketing 19% 22% 22% 21% 23%
General and administrative 9% 8% 8% 12% 12%
Restructuring charges - 1% - - 4%
Amortization of goodwill and
other purchased intangibles 2% 6% 4% 0% 0%
-- -- -- -- --
Total operating expense 43% 50% 46% 46% 56%
--- --- --- --- ---
Operating income (loss) from
continuing operations 7% - 7% 8% (9%)
Non-operating income (expense),
net (4%) (5%) (3%) - (1%)
---- ---- ---- --- ----
Income (loss) before income taxes
from continuing operations 3% (5%) 4% 8% (10%)
Income tax provision 1% - - 1% 1%
-- --- --- -- --
Net income (loss) from
continuing operations 2% 5%) 4% 7% (10%)
-- ---- -- -- -----
Loss from discontinued
operations, (net of tax) - - - - (2%)
Gain (loss) on disposal of
discontinued operations
(net of tax) - - - 1% (8%)
--- --- --- -- ----
Net income (loss) 2% (5%) 4% 8% (20%)
== ==== == == =====
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
consolidated financial statements and the related notes. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks and Uncertainties."
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting estimates and the related assumptions are evaluated
periodically as conditions warrant, and changes to such estimates are recorded
as new information or changed conditions require revision. Application of the
critical accounting policies requires management's judgments, often as the
result of the need to make estimates of matters that are inherently uncertain.
If actual results were to differ materially from the estimates made, the
reported results could be materially affected. For a summary of all of our
significant accounting policies, including critical accounting policies
discussed below, see Note 1 - "Summary of Significant Accounting Policies" of
the Notes to the Consolidated Financial Statements.
Revenue Recognition
Our revenues are recorded in accordance with the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition." Prior to recognizing revenue, we require the following: (i)
execution of a written customer order, (ii) delivery of the product, (iii) a
fixed or determinable fee, and (iv) probable collectibility of the proceeds. We
recognize revenue from product sales when the products are shipped to the
customer, title has transferred, and no significant obligations remain. We defer
revenue if there is uncertainty about customer acceptance. We reduce product
revenue for estimated customer returns and for any discounts that may occur
under programs we have with our customers and partners.
Our shipment terms are either FOB shipping point or FCA shipping point. FOB
(Free on Board) shipping point term means that the seller fulfills the
obligation to deliver when the goods have passed over the ship's rail at the
named port of shipment. This means that the buyer has to bear all costs and
risks of loss of or damage to the goods from that point. The FOB term requires
the seller to clear the goods for export. FCA (Free Carrier) shipping point term
means that the seller fulfills the obligation to deliver when the goods are
handed over, cleared for export, and into the charge of the carrier named by the
buyer at the named place or point. If no precise point is indicated by the
buyer, the seller may choose within the place or range stipulated where the
carrier shall take the goods into carrier's charge.
Our shipment terms for domestic orders are typically FOB shipping point.
International orders fulfilled from our European distribution center are
typically shipped FCA shipping point. Other international orders are shipped FOB
destination, and accordingly these international orders are not recognized as
revenue until the product is delivered and title has transferred.
Revenues from purchased extended warranty and support agreements are
deferred and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
we had no remaining obligations.
Sales to distributors and resellers are recognized upon shipment providing
that there is evidence of such an arrangement through a distribution agreement
or purchase order, title has transferred, no remaining performance obligations
exist, the price and terms of the sale are fixed, and collection is probable.
Distributors and resellers do not have a right of return.
Our software arrangements consist of a license fee and post contract
customer support (PCS). We have established vendor specific objective evidence
(VSOE) of fair value for our PCS contracts based on the price of the renewal
rate. The remaining value of the software arrangement is allocated to the
license fee using the residual method, which revenue is primarily recognized
when the software has been delivered and there are no remaining obligations.
Revenue from PCS is recognized ratably over the period of the PCS agreement.
Allowance for Doubtful Accounts
We evaluate the collectibility of our trade accounts receivable based on a
number of factors. In circumstances where we are aware of a specific customer's
inability to meet its financial obligations to us, a specific allowance for bad
debts is estimated and recorded which reduces the recognized receivable to the
estimated amount we believe will ultimately be collected. In addition to
specific customer identification of potential bad debts, bad debt charges are
recorded based on our recent past loss history and an overall assessment of past
due trade accounts receivable amounts outstanding.
Inventory Valuation
Our inventory is recorded at the lower of cost or market. We use a standard
cost accounting system to value inventory and these standards are reviewed a
minimum of once a year and multiple times a year in our most active
manufacturing plants. We adjust the inventory value for estimated excess and
obsolete inventory based on management's assessment of future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management, additional inventory write-downs may be required.
Deferred Taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when it is determined to be more likely than not that some portion or
all of the deferred tax assets will not be realized. In evaluating the need for
a valuation allowance, we consider future taxable income, resolution of tax
uncertainties and prudent and feasible tax planning strategies. If we determine
that we would not be able to realize all or part of our deferred tax assets in
the future, an adjustment to the carrying value of the deferred tax assets would
be charged to income in the period in which such determination was made.
Goodwill and Other Purchased Intangible Assets
We have significant intangible assets on our balance sheet that include
goodwill and other purchased intangibles related to acquisitions. At the
beginning of fiscal 2002, we adopted Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), Business Combinations, and No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). Application of the non-amortization provisions
of SFAS 142 significantly reduced amortization expense of purchased intangibles
and goodwill to approximately $8.3 million for the fiscal year 2002 from $29.4
million in the prior year. We reclassified identifiable intangible assets with
indefinite lives and net book value of $73.6 million, as defined by SFAS 142, to
goodwill at the date of adoption.
For comparative purposes, the pro forma adjusted net income per share
excluding amortization of goodwill, distribution channel, and assembled
workforce is as follows:
January 3, December 28, December 29,
2003 2001 2000
- ------------------------------------------ ------------ ------------ -----------
(In thousands)
Net income (loss) $ 10,324 $ (22,879) $ 14,185
Add back SFAS 142 adjustments:
Amortization of goodwill 7,817 3,116
Amortization of distribution channel 11,230 5,176
Amortization of assembled workforce 1,834 1,225
----- -----
Adjusted net income (loss) $ 10,324 $ (1,998) $ 23,702
======== ========== =========
Weighted average shares outstanding
Basic 28,573 24,727 23,601
Diluted 29,052 24,727 25,976
Diluted net income (loss) per share $ 0.36 $ (0.93) $ 0.55
Pro forma adjusted diluted net income
(loss) per share $ 0.36 $ (0.08) $ 0.92
======== ========== =========
In assessing the recoverability of goodwill and indefinite life intangible
assets, we must make assumptions about the estimated future cash flows and other
factors to determine the fair value of these assets. Assumptions about future
revenue and cash flows require significant judgment because of the current state
of the economy, the fluctuation of actual revenue, and the timing of expenses.
For goodwill, the annual impairment evaluation includes a comparison of the
carrying value of the reporting unit (including goodwill) to that reporting
unit's fair value. If the reporting unit's estimated fair value exceeds the
reporting unit's carrying value, no impairment of goodwill exists. If the fair
value of the reporting unit does not exceed the unit's carrying value, then an
additional analysis is performed to allocate the fair value of the reporting
unit to all of the assets and liabilities of that unit as if that unit had been
acquired in a business combination and the fair value of the unit was the
purchase price. If the excess of the fair value of the reporting unit over the
fair value of the identifiable assets and liabilities is less than the carrying
value of the unit's goodwill, an impairment charge is recorded for the
difference.
Similarly, the impairment evaluation for indefinite life intangible assets
includes a comparison of the asset's carrying value to the asset's fair value.
When the carrying value exceeds fair value an impairment charge is recorded for
the amount of the difference. An intangible asset is determined to have an
indefinite useful life when there are no legal, regulatory, contractual,
competitive, economic or any other factors that may limit the period over which
the asset is expected to contribute directly or indirectly to the future cash
flows of our company. In each reporting period, we also evaluate the remaining
useful life of an intangible asset that is not being amortized to determine
whether events and circumstances continue to support an indefinite useful life.
If an intangible asset that is not being amortized is determined to have a
finite useful life, the asset will be amortized prospectively over the estimated
remaining useful life and accounted for in the same manner as intangible assets
subject to amortization.
We tested goodwill for impairment using the process prescribed in SFAS No.
142. The first step is a screen for potential impairment, while the second step
measures the amount of the impairment, if any. No impairment charge resulted
from the impairment tests. For comparative purposes that depict the effect of
adopting SFAS No. 141 and 142 above, we have included the pro forma adjusted net
income per share excluding amortization of goodwill, distribution channel, and
assembled workforce.
Accounting for the Long-Lived Assets Including Intangibles Subject to
Amortization
We adopted Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-lived Assets," at the beginning of fiscal
2002. The effect of adopting SFAS 144 did not have a material impact on our
financial position or results of operations.
Depreciation and amortization of our long-lived assets is provided using
accelerated and straight-line methods over their estimated useful lives. Changes
in circumstances such as the passage of new laws or changes in regulations,
technological advances, changes to our business model, or changes in the capital
strategy could result in the actual useful lives differing from initial
estimates. In those cases where we determine that the useful life of a
long-lived asset should be revised, we will depreciate the net book value in
excess of the estimated residual value over its revised remaining useful life.
Factors such as changes in the planned use of equipment, customer attrition,
contractual amendments, or mandated regulatory requirements could result in
shortened useful lives.
Long-lived assets and asset groups are evaluated for impairment whenever
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. The estimated future cash flows are based upon,
among other things, assumptions about expected future operating performance and
may differ from actual cash flows. Long-lived assets evaluated for impairment
are grouped with other assets to the lowest level for which identifiable cash
flows are largely independent of the cash flows of other groups of assets and
liabilities. If the sum of the projected undiscounted cash flows (excluding
interest) is less than the carrying value of the assets, the assets will be
written down to the estimated fair value in the period in which the
determination is made.
Warranties
We provide for the estimated cost of product warranties at the time revenue
is recognized. While we engage in extensive product quality programs and
processes, including actively monitoring and evaluating the quality of our
component suppliers, our warranty obligation is affected by product failure
rates, material usage, and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage, or service
delivery costs differ from our estimates, revisions to the estimated warranty
accrual and related costs may be required.
Stock Compensation
As permitted by the provisions of Statement of Financial Accounting
Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition
and Disclosure," and Statement of Financial Accounting Standards ("SFAS 123")
No. 123, "Accounting for Stock-Based Compensation," we apply Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for our stock option plans and
stock purchase plan. Accordingly, we do not recognize compensation cost for
stock options granted at a price equal to fair market value. Note 14 of the
Notes to the Consolidated Financial Statements describes the plans we operate,
and Note 1 of the Notes to the Consolidated Financial Statements contains a
summary of the pro forma effects to reported net income (loss) and earnings
(loss) per share for fiscal 2002, 2001, and 2000 as if we had elected to
recognize compensation cost based on the fair value of the options granted at
grant date, as prescribed by SFAS No. 123.
Investment in the Caterpillar Trimble Control Technologies LLC (CTCT or "Joint
Venture")
We have adopted the equity method of accounting for our investment in the
Joint Venture. This requires that we record our share of the Joint Venture
profits or losses in a given fiscal period. During fiscal year 2002, the Joint
Venture reported a loss of $0.4 million of which our share is $0.2 million,
which was recorded as a Non-operating expense under the heading of "Expense for
affiliated operations, net," but which was offset by the amortization of an
equal amount of the original deferred gain on the sale of technology to the
Joint Venture.
We have elected to treat the cash distribution of $11.0 million as a
deferred gain, being amortized to the extent that losses are attributable from
the Joint Venture under the equity method described above. When and if the Joint
Venture is profitable on a sustainable basis and future operating losses are not
anticipated, then we will recognize as a gain, the portion of the $11.0 million,
which is un-amortized. To the extent that it is possible that we will have any
future-funding obligation relating to the Joint Venture, then the relevant
amount of the $11.0 million will be deferred until such time, the funding
obligation no longer exists. Both our share of profits (losses) under the equity
method and the amortization of our $11.0 million deferred gain are recorded
under the heading of "Expense for affiliated operations, net" in Non-operating
income (expense).
For further information, see `Recent Business Developments - Caterpillar
Joint Venture' section of Item 7 in this Report.
RECENT BUSINESS DEVELOPMENTS
Caterpillar Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC, a Joint
Venture formed by Trimble and Caterpillar, began operations. The Joint Venture,
50 percent owned by Trimble and 50 percent owned by Caterpillar, with equal
voting rights, is developing and marketing next generation advanced electronic
guidance and control products for earthmoving machines in the construction,
mining, and waste industries. The Joint Venture is based in Dayton, Ohio. Under
the terms of the joint venture agreement, Caterpillar contributed $11.0 million
cash plus selected technology, for a total contributed value of $14.5 million,
and we contributed selected existing machine control product technologies valued
at $25.5 million. Additionally, both companies have licensed patents and other
intellectual property from their portfolios to the Joint Venture. During the
first fiscal quarter of 2002, we received a special cash distribution of $11.0
million from the Joint Venture.
During fiscal year 2002, we recorded approximately $4.0 million of expenses
under the heading of "Expense for affiliated operations, net" in Non-operating
income (expense) related to certain transactions between the Joint Venture and
us. This was comprised of approximately $4.9 million of incremental costs
incurred by us as a result of purchasing products from the Joint Venture at a
higher transfer price than our original manufacturing costs, offset by
approximately $0.9 million of contract manufacturing fees charged to the Joint
Venture by us. Due to the nature of the transfer price agreements between
Trimble and the Joint Venture, a related party, the impact of these agreements
is classified under Non-operating income (expense).
In addition, during fiscal year 2002, we recorded lower operating expenses
of approximately $4.2 million due to the transfer of employee-related expenses
for research and development ($2.8 million), and sales, marketing and
administrative functions ($1.4 million) to the Joint Venture. These employees
are devoted to the Joint Venture and are primarily engaged in developing next
generation products and technology for that entity.
Acquisition of LeveLite Technology, Inc
On August 15, 2002, we acquired LeveLite Technology, Inc. ("LeveLite"), a
California corporation, for approximately $5.7 million. This strategic
acquisition complements our entry-level construction instrument product line.
The purchase price consisted of 437,084 shares of our common stock. The merger
agreement provides for Trimble to make additional earn-out payments not to
exceed $3.9 million (in common stock and cash payment) based on future revenues
derived from existing product sales to a certain customer. On January 22, 2003,
we issued the first earn-out payment (stock and cash combination) with a fair
market value of approximately $0.4 million, related to the earn-out for the
quarter ended January 3, 2003. Also, if we receive any proceeds from a pending
litigation, a portion will be paid to the former shareholders of LeveLite. The
additional payments, if earned, will result in additional goodwill.
RESULTS FROM CONTINUING OPERATIONS EXCLUDING INFREQUENT, AND ACQUISITION RELATED
ADJUSTMENTS
Income (loss) from continuing operations include certain infrequent and
acquisition-related charges that management believes are not reflective of
on-going operations. The following table, which does not purport to present the
results of continuing operations in accordance with generally accepted
accounting principles, reflects results of operations to exclude the effects of
such items as follows (in thousands):
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ---------------------------------------------------------------------------------------------------------
Income (loss) before income taxes from continuing
operations $ 13,824 $(21,592) $ 15,760
Infrequent and acquisition-related charges:
Loss on sale of business (other income and
expense) -- 113 --
Amortization of goodwill and other purchased
intangibles 8,300 29,389 13,407
Restructuring charges 1,099 3,599 --
Gain on sale of minority investment
(other income and expense) (165) (270) (1,274)
Inventory purchase accounting adjustment
(cost of sales) -- -- 4,600
Debt extinguishment costs (interest
income and expense) -- -- 1,185
Write down of investment
(other income and expense) 1,453 136 --
Facility relocation costs - Boulder, Colorado
(general and administrative) -- -- 917
--- --- ---
Total infrequent and acquisition-related charges 10,687 32,967 18,835
------ ------ ------
Adjusted income before income taxes from
continuing operations 24,511 11,375 34,595
Income tax provision 3,500 1,900 3,460
----- ----- -----
Adjusted net income $ 21,011 $ 9,475 $ 31,135
========= ========= ========
RESULTS OF CONTINUING OPERATIONS
Our annual revenues from continuing operations decreased from $475.3
million in fiscal 2001 to $466.6 million in fiscal 2002. In fiscal 2001, our
annual revenues from continuing operations increased to $475.3 million from
$369.8 million in fiscal 2000. In fiscal 2002, we had net income from continuing
operations of $10.3 million, or $0.36 diluted earnings per share, compared to a
net loss of $23.5 million, or $0.95 loss per share, in fiscal 2001, and a net
income from continuing operations of $14.2 million, or $0.55 diluted earnings
per share, in fiscal 2000. The total net income for fiscal 2002, including
discontinued operations, was $10.3 million, or $0.36 diluted earnings per share,
compared to a total net loss for 2001, including discontinued operations of
$22.9 million, or $0.93 loss per share, and a total net income for fiscal 2000,
including discontinued operations of $14.2 million, or $0.55 diluted earnings
per share. A summary of financial data by business segment is as follows.
The following table shows revenue and operating income by segment for the
periods indicated and should be read in conjunction with the narrative
descriptions below. Operating income by segment excludes unallocated corporate
expenses, which are comprised primarily of general and administrative costs,
amortization of goodwill and other purchased intangibles, as well as other items
not controlled by the business segment.
In the first fiscal quarter of fiscal 2002, we realigned two of our
reportable segments and therefore the following table shows restated revenue and
operating income by segment to reflect this realignment. The Agriculture segment
was combined with the Mapping and GIS business to form Field Solutions. Mapping
and GIS were previously part of Fleet and Asset Management. The Mobile
Positioning business that was part of Fleet and Asset Management is now Mobile
Solutions.
We began breaking out Mobile Solutions as a separate reporting segment
during the first quarter of 2002 to address the growing importance of the mobile
asset management business and its impact on our profitability. At the same time,
we combined our GIS and Agriculture businesses to create a new segment called
Field Solutions in order to recognize the synergies and similar product
requirements between the two businesses.
% of % of % of
January 3, Total December 28, Total December 29, Total
Fiscal Years Ended 2003 Revenue 2001 Revenue 2000 Revenue
- ------------------------------------ ------------- --------- ------------- --------- ------------ ---------
(Dollars in thousands)
Engineering and Construction
Revenue $ 305,490 66% $ 303,944 64% $ 195,150 53%
Segment operating income
from continuing operations 54,931 51,625 43,937
Segment operating income
as a percent of segment 18% 17% 23%
revenue
Field Solutions
Revenue 67,259 14% 68,519 14% 70,652 19%
Segment operating income
from continuing 12,395 13,652 19,834
operations
Segment operating income
(loss) as a percent of
segment revenue 18% 20% 28%
Mobile Solutions
Revenue 8,486 2% 13,791 3% 20,471 6%
Segment operating loss
from continuing operations (10,830) (8,966) (369)
Segment operating loss
as a percent of segment
revenue (128%) (65%) (2%)
Component Technologies
Revenue 59,755 13% 58,083 12% 60,230 16%
Segment operating income
from continuing operations 11,290 10,882 14,850
Segment operating income
as a percent of segment
revenue 19% 19% 25%
Portfolio Technologies
Revenue 25,612 5% 30,955 7% 23,295 6%
Segment operating income
from continuing operations 5,072 4,037 965
Segment operating income
as a percent of segment
revenue 20% 13% 4%
-- --- --
Total Revenue $ 466,602 $ 475,292 $ 369,798
Total Segment operating
income from continuing
operations $ 72,858 $ 71,230 $ 79,217
A reconciliation of our consolidated segment operating income from
continuing operations to consolidated income (loss) before income taxes from
continuing operations follows:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ------------------------------------------------------- ------------- -------------- -------------
(In thousands)
Consolidated segment operating income from
continuing operations $ 72,858 $ 71,230 $ 79,217
Unallocated corporate expense (29,636) (38,061) (39,591)
Amortization of goodwill and other purchased
intangible assets (8,300) (29,389) (13,407)
Restructuring charges (1,099) (3,599) -
Non-operating expense, net (19,999) (21,773) (10,459)
------- -------- --------
Income (loss) from continuing operations before
income taxes $ 13,824 $(21,592) $ 15,760
========= ========= =========
Basis of Presentation
We have a 52-53 week fiscal year, ending on the Friday nearest to December
31, which for fiscal 2002 was January 3, 2003. Fiscal 2002 was a 53-week year
and as a result, we recorded an extra week of revenues, costs, and related
financial activities.
Therefore, the financial results of fiscal year 2002, having the extra
week, will not be exactly comparable to the prior and subsequent 52-week fiscal
years. Thus, due to the inherent nature of adopting a 52-53 week fiscal year,
Trimble, analysts, shareholders, investors and others will have to make
appropriate adjustments to any analysis performed when comparing our activities
and results in fiscal years that contain 53 weeks, to those that contain the
standard 52 weeks. Fiscal years 2001 and 2000 were both comprised of 52-weeks.
Revenue
In fiscal 2002, total revenue decreased by $8.7 million or 1.8% to $466.6
million from $475.3 million in fiscal 2001. The decrease in fiscal 2002 was
primarily due to the reduction of revenue in Mobile Solutions and Portfolio
Technologies. Total revenue in fiscal 2001 increased by $105.5 million or 28.5%
to $475.3 million from $369.8 million in fiscal 2000, primarily due to the
full-year revenue effect of the Spectra Precision Group, acquired in July 2000.
Engineering and Construction
Revenue
Engineering and Construction revenues increased by $1.5 million or 0.5%
during fiscal 2002 as compared to fiscal 2001 due to the following:
o Revenues increased due to the LeveLite acquisition by $3.6 million;
o Strong performance by our machine control product offering as we continue
to penetrate the after-market for machine guidance on earthmoving
equipment;
o Increased revenues were partially offset by a reduction in revenues in
several other product areas due to continued difficult global economic
conditions.
Engineering and Construction revenues increased by $108.8 million or 56% in
fiscal 2001 over fiscal 2000 due to the following:
o In fiscal 2001, we recorded a full year of revenues generated from the
Spectra Precision Group compared to approximately half-year results in
fiscal 2000, which accounted for approximately $85.0 million;
o Strong demand for our land survey product line primarily due to the
introduction of the Trimble Toolbox(TM) in the first fiscal quarter of
2001;
o Higher demand for GPS machine guidance equipment.
Operating Income
Engineering and Construction operating income increased by $3.3 million or
6.4% in fiscal 2002 over fiscal 2001 due to the following:
o A reduction of $4.2 million of operating expenses, due to the transfer of
employee-related expenses to Caterpillar Trimble Control Technologies;
o Higher revenues and lower operating expenses were partially offset by a
reduction in gross margin as a result of product sales mix during fiscal
2002.
Engineering and Construction operating income increased by $7.7 million or
17% in fiscal 2001 over fiscal 2000 due to the following:
o Fiscal 2001 included a full year of revenue from the Spectra Precision
Group acquisition and the benefits of the consolidation of product lines in
the Engineering and Construction business areas;
o The worldwide cost reduction program, implemented as part of Trimble and
the Spectra Precision Group integration, also favorably impacted operating
income.
Field Solutions
Revenue
Field Solutions experienced a revenue decline in fiscal 2002 of $1.3
million or 1.9% compared with fiscal 2001 due to the following:
o Overall revenue decreased during the year due to the decline in the United
States federal, state, and local government spending and a delay in the
release of the new GeoExplorer(R) CE Series due to component supply issues;
o This decrease was partially offset by the increased demand for both the
manual and auto guidance product lines.
Field Solutions revenue decreased by $2.1 million or 3% in fiscal 2001 over
fiscal 2000 due to the following:
o Small decrease in GIS revenues due to lower demand in the second half of
fiscal 2001;
o Significant decrease in price points in the Agriculture market on flat
demand.
Operating Income
Field Solutions operating income decreased by $1.3 million or 9.2% in
fiscal 2002 over fiscal 2001 due to the following:
o Lower revenues primarily from the decrease in government spending described
above;
o Lower gross margin due to product sales mix, which was more weighted toward
the relatively lower margin Agricultural business area.
Field Solutions operating income decreased by $6.2 million or 31.2% in
fiscal 2001 over fiscal 2000 due to the following:
o A product mix shift toward lower-priced products with a general reduction
in prices;
o Overall weak demand in the agricultural market in fiscal 2001;
o The startup development, selling, and support costs associated with the
ramp up of the Autopilot product line.
Mobile Solutions
Revenue
Mobile Solutions revenues decreased by $5.3 million or 39% in fiscal 2002
over fiscal 2001 due to the following:
o Revenue reduction of approximately $3 million in our satellite
communications business as a result of our decision to discontinue the
Galaxy(TM) Inmarsat-C product line in early 2001;
o Slow down in system integration projects due to reduced spending at
municipalities;
o Reduced sales of wireless products of $0.9 million due to a transition from
a sensor provider to a fully integrated service provider;
o Sales of some product lines were down as a result of the economic slow down
and the shift of technology from analog to digital.
Mobile Solutions revenues decreased by $6.7 million or 33% in fiscal 2001
over fiscal 2000 due to the following:
o A reduction of approximately $3.7 million in our GalaxyT Inmarsat-C line
due to the announcement of our intention to discontinue certain of these
product lines in early 2001, Mexico's satellite communications systems
capacity limitations, and the general economic slow-down;
o Sales of the CrossCheck and Placer(TM) receiver product lines were down by
approximately $3.0 million as a result of the economic slow down.
Operating Loss
Mobile Solutions operating loss increased by $1.9 million or 21% in fiscal
2002 over fiscal 2001 due to the following:
o Lower revenues as described above;
o Increased costs incurred in the development and marketing of a service
platform to enable a range of asset management solutions.
Mobile Solutions operating loss increased by $8.6 million in fiscal 2001
over fiscal 2000 due to the following:
o Lower revenues as described above;
o Decrease in margins due to the sell-off of existing Satcom inventory at
reduced prices;
o Significant costs incurred in the development of a service platform to
enable a range of asset management solutions including an Internet
delivered, cellular-based solution for vehicle fleet management.
Component Technologies
Revenue
Component Technologies revenues increased by $1.7 million or 3% in fiscal
2002 over fiscal 2001 due to the following:
o Timing revenue increased $4.6 million in fiscal 2002 over fiscal 2001 due
to significant demand during the second half of fiscal 2002 from new and
existing wireless infrastructure customers;
o In-vehicle navigation revenue decreased $1.0 million in fiscal 2002 over
fiscal 2001 as average selling prices declined by more than 9%;
o License revenue decreased $1.7 million in fiscal 2002 over fiscal 2001 due
to an expired license contract.
Component Technologies revenues decreased by $2.1 million or 4% in fiscal
2001 over fiscal 2000 due to the following:
o Embedded product lines were down approximately $2.7 million due to the
economic slowdown;
o Timing product lines were down by $1.5 million due to reduced spending in
the telecommunications market;
o In-vehicle navigation sales increased by approximately $0.9 million. Volume
grew by 29%, which was offset by a decrease of 19% in an average selling
price of these products during the year.
Operating Income
Component Technologies operating income increased by $0.4 million or 4% in
fiscal 2002 over fiscal 2001 due to the following factors:
o Higher gross margins resulting from higher revenues and favorable product
mix;
o This increase was partially offset by higher operating expenses, primarily
in research & development and marketing.
Component Technologies operating income decreased by $4.0 million or 27% in
fiscal 2001 over fiscal 2000 due to the following:
o Lower revenue as described above;
o Higher expenses primarily due to new product development and channel
development.
Portfolio Technologies
Revenue
Portfolio Technologies revenues decreased by $5.3 million or 17 % in fiscal
2002 over fiscal 2001 due to the following:
o Reduction of $4.4 million due to the sale of our air transport product line
to Honeywell in fiscal 2001;
o Revenues from the military business declined by $1.1 million.
Portfolio Technologies revenues increased by $7.7 million or 33% in fiscal
2001 over fiscal 2000 due to the following:
o In fiscal 2001, Trimble experienced a full year of revenues generated from
the purchase of Tripod Data Systems as compared to one and one-half months
in fiscal 2000, which accounted for an increase of approximately $12.2
million;
o The above increase was partially offset by a $4.5 million reduction in our
commercial aviation product line during fiscal 2001. The sale of the air
transport product line to Honeywell was completed in March 2001.
Operating Income
Portfolio Technologies operating income increased by $1 million or 26% in
fiscal 2002 over fiscal 2001 due to the following:
o Increased operating performance from Tripod Data Systems business.
Portfolio Technologies operating income increased by $3.1 million or 318%
in fiscal 2001 over fiscal 2000 primarily due to the following:
o An incremental increase resulting from a full years operating results of
Tripod Data Systems acquired on November 14, 2000.
International Revenues
Sales to unaffiliated customers outside the United States comprised
approximately 49% in 2002, 50% in 2001, and 52% in 2000. During the 2002 fiscal
year, North and South America represented 55%, Europe, the Middle East and
Africa represented 32%, and Asia represented 13%. In fiscal 2002, the United
States comprised approximately 51% and Germany 16% of sales to unaffiliated
customers. We anticipate that sales to international customers will continue to
account for a significant portion of our revenue. For this reason, we are
subject to the risks inherent in these foreign sales, including unexpected
changes in regulatory requirements, exchange rates, governmental approval,
tariffs, or other barriers. Even though the U.S. Government announced on March
29, 1996, that it supports and maintains the GPS system, and on May 1, 2000,
stated that it has no intent to ever again use Selective Availability (SA), a
method of degrading GPS accuracy, there may be reluctance in certain foreign
markets to purchase such products given the control of GPS by the U.S.
Government. Our results of operations could be adversely affected if we were
unable to continue to generate significant sales in locations outside the U.S.
No single customer accounted for 10% or more of our total revenues in
fiscal 2002, 2001, and 2000. It is possible, however, that in future periods the
failure of one or more large customers to purchase products in quantities
anticipated by us may adversely affect the results of operations.
Gross Margin
Gross margin varies due to a number of factors including product mix,
international sales mix, customer type, the effects of production volumes and
fixed manufacturing costs on unit product costs, and new product start-up costs.
Gross margin as a percentage of total revenues was 50.2% in fiscal 2002 and
49.9% in fiscal 2001. The slight increase in gross margin percentage for fiscal
2002, compared with fiscal 2001, was due partially to approximately $3.3 million
of additional charges associated with the write-down of excess and obsolete
inventory in fiscal 2001, related to the rationalization and simplification of
product lines, and partially due to inventories in excess of our forecasted
12-month demand.
Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,
current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate further, gross margin could be further adversely
impacted.
Operating Expenses
The following table shows operating expenses for the periods indicated and
should be read in conjunction with the narrative descriptions of those operating
expenses below:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- --------------------------------------------------------------------------------
(In thousands)
Research and development $ 61,232 $ 62,881 $ 46,520
Sales and marketing 89,344 103,778 79,901
General and administrative 40,634 37,407 30,514
Restructuring charges 1,099 3,599 --
Amortization of goodwill and other
purchased intangible assets 8,300 29,389 13,407
-------------- ------------- -------------
Total $ 200,609 $ 237,054 $ 170,342
============ ============= =============
Research and Development
Research and development spending decreased by $1.6 million during fiscal
2002 and represented 13% of revenue, consistent with 13% in fiscal 2001 due
primarily to:
o The transfer of employee-related expenses to the Caterpillar joint venture
of approximately $2.8 million, partially offset by an increase in
engineering expenses associated with the introduction of new products.
Research and development spending increased by $16.4 million during fiscal
2001, and represented 13% of revenue, consistent with 13% in fiscal 2000 due
primarily to the following:
o In fiscal 2001, we experienced a full year of operations of the Spectra
Precision Group compared with half a year in fiscal 2000, which accounted
for approximately $11.7 million of the increase;
o The increase was also due to approximately $5.0 million related to a full
year of operations of Tripod Data Systems in fiscal 2001 compared with one
and one-half months for fiscal 2000, as well as the inclusion of Grid Data
for approximately nine months in fiscal 2001.
* We believe that the development and introduction of new products are
critical to the Company's future success and expects to continue its active
development of new products.
Sales and Marketing
Sales and marketing expense decreased by $14.4 million in fiscal 2002 and
represents 19% of revenue, compared with 22% in fiscal 2001 due primarily to the
following:
o During fiscal 2001, we sold off many of our direct sales offices, which
decreased sales and marketing expenses by approximately $7.0 million for
fiscal 2002;
o A decrease in overall compensation, travel, advertising, promotional, and
trade show expenses of approximately $7.4 million for fiscal 2002 compared
to the corresponding period in fiscal 2001.
Sales and marketing expense increased by $23.9 million in fiscal 2001 and
represents 22% of revenue, consistent with 22% in fiscal 2000 primarily due to
the following:
o Inclusion of a full year of operations of the Spectra Precision Group as
compared with half a year in fiscal 2000, which accounted for approximately
$23.1 million of the increase.
* Our future growth will depend in part on the timely development and
continued viability of the markets in which we currently compete as well as our
ability to continue to identify and exploit new markets for our products.
General and Administrative
General and administrative expense increased by $3.2 million in fiscal 2002
representing 9% of revenue, compared with 8% in fiscal 2001 primarily due to the
following:
o Increase in bad debt provisions related to customers in an uncertain
economic environment;
o Bad debt expenses for accounts written off during the year due to customer
defaults.
General and administrative expense increased by $6.9 million in fiscal 2001
representing 8% of revenue, consistent with 8% in fiscal 2000 due primarily to
the following:
o In fiscal 2001, we experienced a full year of operations of the Spectra
Precision Group as compared with half a year in fiscal 2000, which
accounted for approximately $5.6 million of the increase;
o The increase was also due to approximately $0.9 million related to a full
year of operations of Tripod Data Systems in fiscal 2001, as compared with
one and one-half months for fiscal 2000.
Restructuring Charges
Restructuring charges of $1.1 million were recorded in fiscal 2002 and $3.6
million were recorded in fiscal 2001, which related to severance costs. As a
result of these actions, our headcount decreased in fiscal 2002 by 49 and in
fiscal 2001 by 207 individuals. As of January 3, 2003, all of the restructuring
charges have been paid.
Amortization of Goodwill, Purchased and Other Intangible Assets:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ------------------ ---- ---- ----
(in thousands)
Amortization of goodwill $ - $ 7,647 $ 3,116
Amortization of purchased intangibles 8,300 21,742 10,291
Amortization of other intangible assets 868 917 930
--- --- ---
Total amortization of goodwill, purchased, and
other intangible assets $ 9,168 $ 30,306 $ 14,337
======= ======== ========
We adopted SFAS No. 142 on January 1, 2002. As a result, goodwill is no
longer amortized and intangible assets with indefinite lives with net book value
of $73.6 million were reclassified to goodwill.
Amortization expense of goodwill, purchased and other intangibles decreased
in fiscal 2002 by approximately $21.1 million representing 2% of revenue,
compared with 6% in fiscal 2001. The decrease was primarily due to the adoption
of FAS 142 that does not require the amortization of goodwill and intangible
assets with indefinite lives.
Amortization expense of goodwill and other purchased intangibles increased
in fiscal 2001 by approximately $16.0 million representing 6% of revenue,
compared with 4% in fiscal 2000. The increase was primarily due to the
acquisition of the Spectra Precision Group in July 2000, which resulted in a
year- over-year increase of approximately $15.0 million in goodwill and
intangibles amortization.
Non-operating Expense, Net
The following table shows Non-operating expenses, net for the periods
indicated and should be read in conjunction with the narrative descriptions of
those expenses below:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- --------------------------------------------------------------------------------
(in thousands)
Interest income $ 659 $ 1,118 $ 4,478
Interest expense (14,710) (22,224) (14,438)
Foreign exchange loss (823) (237) (376)
Expenses for affiliated
operations, net (3,954) - -
Other expense (1,171) (430) (123)
------ ---- ----
Total $(19,999) $(21,773) $(10,459)
======== ======== ========
Non-operating expense, net decreased by $1.8 million during fiscal 2002 as
compared with fiscal 2001. The primary reasons for the decrease were as follows:
o Decrease in net interest expense of $7.1 million due to significant
repayment of debt balances during the year of approximately $52 million,
combined with the effect of lower interest rates;
o This was partially offset by expenses recorded for affiliated operations of
$4.0 million as a result of transfer pricing effects on transactions
between Trimble and CTCT, an increase in foreign exchange loss of $0.6
million, and a write-down of minority investment of $1.5 million.
Non-operating expense, net increased by $11.3 million during fiscal 2001 as
compared with fiscal 2000. The primary reasons for the increase were as follows:
o Increase in interest expenses related to loans and credit facilities
incurred primarily to finance the acquisition of the Spectra Precision
Group accounted for approximately $7.8 million;
o Decreased interest income resulting from the sale and maturities of
short-term investments used to finance the acquisition of the Spectra
Precision Group accounted for approximately $3.4 million.
Income Tax Provision
Our effective income tax rates from continuing operations for fiscal years
2002, 2001, and 2000 were 25%, (9%) and 10%, respectively. The fiscal 2002 and
2001 income tax rates differ from the federal statutory rate of 35%, due
primarily to foreign taxes and the inability to realize the benefit of net
operating losses. The fiscal 2000 income tax rate is less than the federal
statutory rate due primarily to the realization of the benefits from prior net
operating losses and previously reserved deferred tax assets.
Litigation Matters
* In November 2001, Qualcomm Inc. filed a lawsuit against Trimble in the
Superior Court of the State of California. The complaint alleges claims for an
unspecified amount of money damages arising out of Qualcomm's perceived lack of
assurances in early 1999 that our products purchased by Qualcomm would work
properly after a scheduled week number rollover event that took place in August
of 1999. Qualcomm is the only customer to make a claim against us based on the
week number rollover event. In our opinion, the resolution of this lawsuit is
not expected to have a material adverse effect on our overall financial
position.
* We are also a party to other disputes incidental to our business. We
believe that our ultimate liability as a result of such disputes, if any, would
not be material to our overall financial position, results of operations, or
liquidity.
Off-balance Sheet Financings and Liabilities
Other than lease commitments incurred in the normal course of business, we
do not have any off-balance sheet financing arrangements or liabilities. We do
not have any majority-owned subsidiaries that are not included in the
consolidated financial statements. Additionally, we do not have any interest in,
or relationship with, any special purpose entities.
LIQUIDITY AND CAPITAL RESOURCES
January 3, December 28, December 29,
As of and for the year ended 2003 2001 2000
- ------------------------------------------------- ------------ ------------- ------------
(dollars in thousands)
Cash and cash equivalents $ 28,679 $ 31,078 $ 40,876
As a percentage of total assets 6.5% 7.4% 8.4%
Accounts receivable days sales outstanding (DSO) 58 55 57
Inventory turns per year 5.3 4.1 4.2
Cash provided by operating activities $ 35,096 $ 25,093 $ 19,835
Cash used by investing activities $ (5,766) $(11,441) $(167,180)
Cash provided (used) by financing activities $(31,729) $(23,450) $ 138,957
Net decrease in cash and cash equivalents $ (2,399) $ (9,798) $ (8,388)
In fiscal 2002, our cash and cash equivalents decreased by $2.4 million
from fiscal 2001. We repaid $52.1 million of our debt outstanding. This was
financed by the issuance of common stock of approximately $21.4 million and cash
generated from operating activities of approximately $35.1 million. We also used
approximately $7.2 million for capital expenditures.
At January 3, 2003, our debt mainly consisted of $67.6 million outstanding
under senior secured credit facilities, and $69.1 million outstanding under the
subordinated promissory note related to the acquisition of the Spectra Precision
Group. We have relied primarily on cash provided by operating activities to fund
capital expenditures and other investing activities.
On March 20, 2002, we used $21.4 million of net proceeds from our private
placement to retire accrued interest and principal under our subordinated note
with Spectra-Physics Holdings, Inc., a subsidiary of Thermo Electron
Corporation, reducing the outstanding principal amount to $68.7 million. In
addition, we renegotiated the terms of the subordinated note. Under the revised
agreement, the maturity of the note was extended until July 14, 2004, at the
current interest rate of approximately 10.4% per year. In connection with the
amendment, on March 20, 2002 we agreed to issue to Thermo Electron a five-year
warrant to purchase 200,000 shares of our common stock at an exercise price of
$15.11. Under the five-year warrant, the total number of warrants issued will
not exceed 376,233 shares. On a quarterly basis beginning July 14, 2002,
Spectra-Physics' warrant became exercisable for an additional 250 shares of
common stock for every $1 million of principal and interest outstanding until
the note is paid off in full. These shares are purchasable at a price equal to
the average of our stock's closing price for the five days immediately preceding
the last trading day of each quarter. On July 14, 2002 an additional 17,364
shares became exercisable at an exercise price of $14.46 per share. On October
14, 2002 an additional 17,824 shares became exercisable at an exercise price of
$9.18. On January 14, 2003 an additional 18,284 shares became exercisable at an
exercise price of $13.54. These additional shares are exercisable over a 5-year
period. The approximate fair value of the warrants of $1.5 million was
determined using the Black-Scholes pricing model with the following assumptions:
contractual life of 5-year period; risk-free interest rate of 4%; volatility of
65%; and no dividends during the contractual term. The value of the warrants is
amortized to interest expense over the term of the subordinated note.
* In fiscal 2002, cash provided by operating activities was $35.1 million,
as compared to $25.1 million in fiscal 2001. The increase of $10 million was
primarily due to a one-time special cash distribution of $11 million from
Caterpillar Trimble Control Technologies upon its formation in the first quarter
of fiscal 2002. Trimble's ability to continue to generate cash from operations
will depend in large part on revenues, the rate of collections of accounts
receivable, and profitability. Both the inventory turns and accounts receivable
days sales outstanding metrics were similar at the end of fiscal 2002 to the
fiscal 2001 level.
Cash flows used in investing activities were $5.8 million in fiscal 2002 as
compared to $11.4 million in fiscal 2001, mostly due to investment activities
associated with the acquisition of an additional 25 percent equity interest in
Terrasat, a German Corporation, and the acquisition in property and equipment
partially offset by cash acquired through LeveLite acquisition. Cash used in
investing activities in fiscal 2001 included amounts paid for the Grid Data
acquisition.
Cash used in financing activities was $31.7 million in fiscal 2002, as
compared to $23.5 million in fiscal 2001. During fiscal 2002, we made $52.1
million of payments against our debt outstanding. These payments were offset by
proceeds from the issuance of common stock to employees pursuant to our stock
option plan and employee stock purchase plan of $4.1 million, as well as
issuance of common stock under a private equity placement of $17 million.
In July 2000, we obtained $200 million of senior, secured credit facilities
(the "Credit Facilities") from a syndicate of banks to support our acquisition
of the Spectra Precision Group, the Company's ongoing working capital
requirements, and to refinance certain existing debt (see Note 10 of the Notes
to the to the Consolidated Financial Statements). The Credit Facilities
consisted of $100 million available as a term loan and $100 million available
under two revolvers. On January 14, 2003, Trimble executed an Amended and
Restated Credit Agreement, which restructured the $100 million revolver into
four Tranches. Tranches A and C belong to the $50 million U.S. dollar revolver
and Tranches B and D belong to the $50 million multi-currency revolver.
Allocated to Tranche A is $12,500,000 with an expiration date of July 14, 2003
and allocated to Tranche C is $37,500,000 with an expiration date of April 7,
2004. Allocated to Tranche B is $1,500,000 with an expiration date of July 14,
2003 and allocated to Tranche D is $48,500,000 with an expiration date of April
7, 2004. As a result, the $100 million revolver will remain in effect through
July 14, 2003 and be reduced to $86 million for the period starting July 15,
2003 through April 7, 2004. As of January 3, 2003, outstanding balance under the
revolver was $35 million and under the term loan was $32.6 million.
The Credit Facilities are secured by all material assets of our company,
except for assets that are subject to foreign tax considerations. Financial
covenants of the Credit Facilities include leverage, fixed charge, and minimum
net worth tests and all were amended during the third quarter of fiscal 2002. At
January 3, 2003, and as of the date of this report, we are in compliance with
debt covenants. The amounts due under the revolver loans are paid as the loans
mature, and the loan commitment fees are paid on a quarterly basis. Under the
five-year term loan portion of the Credit Facility, we are due to make payments
(excluding interest) of approximately $24 million in fiscal 2003 and the
remaining $8.6 million in fiscal 2004.
* We believe that our cash and cash equivalents, together with our credit
facilities, will be sufficient to meet our anticipated operating cash needs for
at least the next twelve months. At January 3, 2003, we had $28.7 million of
cash and cash equivalents, as well as access to $65 million of cash under the
terms of our revolver loans.
Under the terms of the Credit Facilities, we are currently restricted from
paying dividends and are limited as to the amount of our common stock that we
can repurchase. We are allowed to pay dividends and repurchase shares of our
common stock up to 25% of net income in the previous fiscal year. We have
obligations under non-cancelable operating leases for our office facilities (see
Note 11 of the Notes to the Consolidated Financial Statements). In fiscal 2003,
the payments under these non-cancelable operating leases are expected to be
approximately $12.1 million.
* We expect fiscal 2003 capital expenditures to be approximately $8 million
to $11 million, primarily for computer equipment, software, and leasehold
improvements associated with business expansion. Decisions related to how much
cash is used for investing are influenced by the expected amount of cash to be
provided by operations.
The following table summarizes our future repayment obligations (excluding
interest):
2006 and
January 3, 2003 Total 2003 2004 2005 2006 Beyond
- ----------------------------------------------------------------------------------------------------------
(in thousands)
Credit facilities:
Five year term loan $ 32,600 $ 24,000 $8,600 $ - $ - $ -
U.S. and multi-currency
revolving credit facility 35,000 6,550 28,450 - - -
Subordinated note 69,136 - 69,136 - - -
Promissory note and other 1,789 110 110 110 110 1,349
----- --- --- --- --- -----
Total contractual cash obligations $138,525 $ 30,660 $ 106,296 $ 110 $ 110 $ 1,349
======== ======== ========= ===== ====== ========
Our future minimum payments required under non-cancelable operating leases
are follows:
Operating
Lease Payments
(In thousands)
2003 $ 12,067
2004 7,438
2005 6,958
2006 1,795
2007 1,461
Thereafter 5,115
-----
Total $ 34,834
==========
New Accounting Standards
We adopted Statement of Financial Accounting Standards ("SFAS") No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets,
at the beginning of fiscal 2002. Application of the non-amortization provisions
of SFAS No. 142 significantly reduced amortization expense of purchased
intangibles and goodwill to approximately $8.3 million for the fiscal year 2002
from $29.4 million in the prior year. We reclassified identifiable intangible
assets with indefinite lives with net book value of $73.6 million, as defined by
SFAS No. 142, to goodwill at the date of adoption. We tested goodwill for
impairment using the two-step process prescribed in SFAS No. 142. The first step
is a screen for potential impairment, while the second step measures the amount
of the impairment, if any. No impairment charge resulted from the impairment
tests.
In October of 2001, the FASB issued SFAS No.144, "Accounting for the
Impairment or Disposal of Long-lived Assets," which amends accounting guidance
on asset impairment and provides a single accounting model for long-lived assets
to be disposed of. Among other provisions, the new rules change the criteria for
classifying an asset as held-for-sale. The standard also broadens the scope of
businesses to be disposed of that qualify for reporting as discontinued
operations, and changes the timing of recognizing losses on such operations. We
adopted SFAS No. 144 at the beginning of fiscal 2002. The effect of adopting
SFAS No. 144 did not have a material impact on our financial position or results
of operations.
In July of 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses the
financial accounting and reporting for obligations associated with an exit
activity, including restructuring, or with a disposal of long-lived assets. Exit
activities include, but are not limited to, eliminating or reducing product
lines, terminating employees and contracts, and relocating plant facilities or
personnel. SFAS No. 146 specifies that a company will record a liability for a
cost associated with an exit or disposal activity only when that liability is
incurred and can be measured at fair value. Therefore, commitment to an exit
plan or a plan of disposal expresses only our intended future actions and,
therefore, does not meet the requirement for recognizing a liability and the
related expense. SFAS No. 146 is effective prospectively for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
We do not anticipate that the adoption of SFAS No. 146 will have a material
effect on our financial position or results of operations.
In November of 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires that a
liability be recorded in the guarantor's balance sheet upon issuance of a
guarantee. In addition, FIN No. 45 requires disclosures about the guarantees
that an entity has issued, including a roll-forward of the entity's product
warranty liabilities. We will apply the recognition provisions of FIN No. 45
prospectively to guarantees issued after December 31, 2002.
While we engage in extensive product quality programs and processes
including actively monitoring and evaluating the quality of component suppliers,
our warranty obligation is affected by product failure rates, material usage,
and service delivery costs incurred in correcting a product failure. Should
actual product failure rates, material usage, or service delivery costs differ
from the estimates, revisions to the estimated warranty accrual and related
costs may be required.
Changes in our product warranty liability during the 12 months, ended
January 3, 2003 are as follows:
(in thousands)
--------------
Balance at December 28, 2001 $ 6,827
Warranties accrued 2,821
Warranty claims (3,254)
------
Balance at January 3, 2003 $ 6,394
========
Our product warranty liability is classified as accrued warranty in the
accompanying balance sheet.
In November of 2002, the EITF reached a consensus on Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. We are currently
evaluating the effect that the adoption of EITF Issue No. 00-21 will have on our
results of operations and financial condition.
In December of 2002, FASB issued FASB No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends FASB No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for an entity that changes to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure provisions of SFAS No. 123 to require expanded and more prominent
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation. This disclosure is required in the summary of
significant accounting policies footnote or its equivalent in annual and interim
financial statements. SFAS No. 148 does not amend SFAS No. 123 to require
companies to account for their stock-based employee awards using the fair value
method. As discussed in Note 1 of the Notes to the Consolidated Financial
Statements, for purposes of pro forma disclosures, we amortized the estimated
fair value of the options 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 as well as the stock-based employee
compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value based method had been applied
to all awards. The effects on pro forma disclosure of applying SFAS No. 123 are
not likely to be representative of the effects on pro forma disclosure of future
years.
In January of 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of FIN No. 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15,
2003. We are currently evaluating the provisions of FIN No. 46, however, we do
not believe as of January 3, 2003, the Company has any investments in variable
interest entities.
RISKS AND UNCERTAINTIES
Our Inability to Accurately Predict Orders and Shipments May Affect Our Revenue,
Expenses and Earnings per Share.
We have not been able in the past to consistently predict when our
customers will place orders and request shipments, so that we cannot always
accurately plan our manufacturing requirements. As a result, if orders and
shipments differ from what we predict, we may incur additional expenses and
build excess inventory, which may require additional accruals. Any significant
change in our customers' purchasing patterns could have a material adverse
effect on our operating results and reported earnings per share for a particular
quarter.
Our Operating Results in Each Quarter May Be Affected by Special
Conditions, Such As Seasonality, Late Quarter Purchases, and Other Potential
Issues.
Due, in part, to the buying patterns of our customers, a significant
portion of our quarterly revenues occurs from orders received and immediately
shipped to customers in the last few weeks and days of each quarter, although
our operating expenses tend to remain fairly predictable. Engineering and
construction purchases tend to occur in early spring, and governmental agencies
tend to utilize funds available at the end of the government's fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis, which may cause concentrations of orders at the end of any
fiscal quarter. If for any reason expected sales are deferred, orders are not
received, or shipments are delayed a few days at the end of a quarter, our
operating results and reported earnings per share for that quarter could be
significantly impacted.
We Are Dependent on a Sole Manufacturer and Assembler for Many of Our Products
and on Sole Suppliers of Critical Parts for Our Products.
Since August 1999, we have been substantially dependent upon Solectron
Corporation as the exclusive manufacturing partner for many of our GPS products
previously manufactured out of our Sunnyvale facilities. Under the agreement
with Solectron, we provide to Solectron a twelve-month product forecast and
place purchase orders with Solectron sixty calendar days in advance of the
scheduled delivery of products to our customers. Although purchase orders placed
with Solectron are cancelable, the terms of the agreement would require us to
purchase from Solectron all material inventory not returnable or usable by other
Solectron customers. Accordingly, if we inaccurately forecast demand for our
products, we may be unable to obtain adequate manufacturing capacity from
Solectron to meet customers' delivery requirements or we may accumulate excess
inventories, if such inventories are not usable by other Solectron customers.
Our current contract with Solectron expires in August of 2003.
During the fourth quarter of 2002, Solectron began assembling some of our
Component Technology products in China. Although we believe that this initiative
in China will bring significant cost savings, we cannot predict potential
effects that may result from this program.
In addition, we rely on sole suppliers for a number of our critical
components. We have experienced shortages of components in the past. As an
example, we were affected by the inability of a display supplier to provide
adequate quantities to meet our requirements in the third fiscal calendar
quarter of 2002 that resulted in the deferral of $2.4 million in orders into the
fourth quarter of 2002. Our current reliance on sole or a limited group of
suppliers involves several risks, including a potential inability to obtain an
adequate supply of required components and reduced control over pricing. Any
inability to obtain adequate deliveries or any other circumstance that would
require us to seek alternative sources of supply or to manufacture such
components internally could significantly delay our ability to ship our
products, which could damage relationships with current and prospective
customers and could harm our reputation and brand, which could have a material
adverse effect on our business.
Our Annual and Quarterly Performance May Fluctuate.
Our operating results have fluctuated and can be expected to continue to
fluctuate in the future on a quarterly and annual basis as a result of a number
of factors, many of which are beyond our control. Results in any period could be
affected by:
o changes in market demand,
o competitive market conditions,
o market acceptance of existing or new products, especially in our Mobile
Solutions business
o fluctuations in foreign currency exchange rates,
o the cost and availability of components,
o our ability to manufacture and ship products,
o the mix of our customer base and sales channels,
o the mix of products sold,
o our ability to expand our sales and marketing organization effectively,
o our ability to attract and retain key technical and managerial employees,
o the timing of shipments of products under contracts and sale of licensing
rights, and
o general global economic conditions.
In addition, demand for our products in any quarter or year may vary due to
the seasonal buying patterns of our customers in the agricultural and
engineering and construction industries. Due to the foregoing factors, our
operating results in one or more future periods are expected to be subject to
significant fluctuations. The price of our common stock could decline
substantially in the event such fluctuations result in our financial performance
being below the expectations of public market analysts and investors, which are
based primarily on historical models that are not necessarily accurate
representations of the future.
Our Gross Margin Is Subject to Fluctuation.
Our gross margin is affected by a number of factors, including product mix,
product pricing, cost of components, foreign currency exchange rates and
manufacturing costs. For example, since our Engineering and Construction (E&C)
and Geographic Information Systems (GIS) products generally have higher gross
margins than our Component Technologies (CT) products, absent other factors, a
shift in sales toward E&C and GIS products would lead to a gross margin
improvement. On the other hand, if market conditions in the highly competitive
E&C and GIS market segments forced us to lower unit prices, we would suffer a
decline in gross margin unless we were able to timely offset the price reduction
by a reduction in production costs or by sales of other products with higher
gross margins. A decline in gross margin could negatively impact our earnings
per share.
Our Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism.
Acts of war or acts of terrorism could have a material adverse impact on
our business, operating results, and financial condition. The threat of
terrorism and war and heightened security and military response to this threat,
or any future acts of terrorism, may cause further disruption to our economy and
create further uncertainties. To the extent that such disruptions or
uncertainties result in delays or cancellations of orders, or the manufacture or
shipment of our products, our business, operating results, and financial
condition could be materially and adversely affected.
Our Substantial Indebtedness Could Materially Restrict Our Operations and
Adversely Affect Our Financial Condition.
We now have, and for the foreseeable future expect to have, a significant
level of indebtedness. Our substantial indebtedness could:
o increase our vulnerability to general adverse economic and industry
conditions;
o limit our ability to fund future working capital, capital expenditures,
research and development and other general corporate requirements, or to
make certain investments that could benefit us;
o require us to dedicate a substantial portion of our cash flow to service
interest and principal payments on our debt;
o limit our flexibility to react to changes in our business and the industry
in which we operate; and
o limit our ability to borrow additional funds.
Our Credit Agreement Contains Stringent Financial Covenants.
Two of the financial covenants in our Credit Agreement with The Bank of
Nova Scotia and certain other banks, dated July 14, 2000 as amended (the "Credit
Agreement"), minimum fixed charge coverage and maximum leverage ratio, are
extremely sensitive to changes in earnings before interest, taxes, depreciation
and amortization ("EBITDA"). In turn, EBITDA is highly correlated to revenues
and costs. Due to uncertainties associated with the downturn in the worldwide
economy, our future revenues by quarter are more difficult to forecast and we
have put in place various cost cutting measures, including the consolidation of
service functions and centers, offices, and of redundant product lines and
reductions in staff. If revenues should decline at a faster pace than the rate
of these cost cutting measures, on a quarter-to-quarter basis we may not be in
compliance with the two above-mentioned financial covenants. If we default on
one or more covenants, we will have to obtain either negotiated waivers or
amendments to the Credit Agreement. If we were unable to obtain such waivers or
amendments, the banks would have the right to accelerate the payment of our
outstanding obligations under the Credit Agreement, which would have a material
adverse effect on our financial condition and viability as an operating company.
In addition, a default under one of our debt instruments may also trigger cross
defaults under our other debt instruments. An event of default under any debt
instrument, if not cured or waived, could have a material adverse effect on us.
In September of 2002, we reached an agreement to ease our financial covenants..
These revised covenants will remain in effect through the term of the current
credit facility. On January 14, 2003, Trimble executed an Amended and Restated
Credit Agreement, which restructured the $100 million revolver into four
Tranches. Tranches A & C belong to the $50 million US dollar revolver and
Tranches B & D belong to the $50 million multi-currency revolver. Allocated to
Tranche A is $12,500,000 with an expiration date of July 14, 2003 and allocated
to Tranche C is $37,500,000 with an expiration date of April 07, 2004. Allocated
to Tranche B is $1,500,000 with an expiration date of July 14, 2003 and
allocated to Tranche D is $48,500,000 with an expiration date of April 07, 2004.
As a result, the $100 million revolver will remain in effect through July 14,
2003 and be reduced to $86 million for the period starting July 15, 2003 through
April 7, 2004.
We Are Dependent on Key Customers.
An increasing amount of our revenue is generated from large original
equipment manufacturers such as Siemens VDO Automotive AG, Nortel, McNeilus,
Caterpillar, CNH Global, DeWalt, Hilti, and Blaupunkt. A reduction or loss of
business with these customers could have a material adverse effect on our
financial condition and results of operations. There can be no assurance that we
will be able to continue to realize value from these relationships in the
future.
We Are Dependent on New Products.
Our future revenue stream depends to a large degree on our ability to bring
new products to market on a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products and achieve market acceptance of such
products. We may incur problems in the future in innovating and introducing new
products. Our development stage products may not be successfully completed or,
if developed, may not achieve significant customer acceptance. If we were unable
to successfully define, develop and introduce competitive new products, and
enhance existing products, our future results of operations would be adversely
affected. Development and manufacturing schedules for technology products are
difficult to predict, and we might not achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. A delay in new
product introductions could have a significant impact on our results of
operations.
We Face Risks of Entering Into and Maintaining Alliances.
We believe that in certain emerging markets our success will depend on our
ability to form and maintain alliances with established system providers and
industry leaders. Our failure to form and maintain such alliances, or the
preemption of such alliances by actions of other competitors or us will
adversely affect our ability to penetrate emerging markets. No assurances can be
given that we will not experience problems from current or future alliances or
that we will realize value from any such strategic alliances.
We Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.
Our GPS technology is dependent on the use of the Standard Positioning
Service ("SPS") provided by the U.S. Government's Global Positioning System
(GPS). The GPS SPS operates in radio frequency bands that are globally allocated
for radio navigation satellite services. International allocations of radio
frequency are made by the International Telecommunications Union (ITU), a
specialized technical agency of the United Nations. These allocations are
further governed by radio regulations that have treaty status and which may be
subject to modification every two to three years by the World Radio
Communication Conference.
Any ITU reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. Many of our products use other radio
frequency bands, together with the GPS signal, to provide enhanced GPS
capabilities, such as real-time kinematics precision. The continuing
availability of these non-GPS radio frequencies is essential to provide enhanced
GPS products to our precision survey markets. Any regulatory changes in spectrum
allocation or in allowable operating conditions may materially and adversely
affect the utility and reliability of our products, which would, in turn, cause
a material adverse effect on our operating results.
In addition, unwanted emissions from mobile satellite services and other
equipment operating in adjacent frequency bands or in-band from licensed and
unlicensed devices may materially and adversely affect the utility and
reliability of our products, which could result in a material adverse effect on
our operating results. The FCC continually receives proposals for novel
technologies and services, such as ultra-wideband technologies, which may seek
to operate in, or across, the radio frequency bands currently used by the GPS
SPS and other public safety services. Adverse decisions by the FCC that result
in harmful interference to the delivery of the GPS SPS and other radio frequency
spectrum also used in our products may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain real-time kinematics products, such as our Land Survey
5700, that use integrated radio communication technology requiring access to
available radio frequencies allocated by the FCC. In addition, access to these
frequencies by state agencies is under management by state radio communications
coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states, including the state of
California. An inability to obtain access to these radio frequencies could have
an adverse effect on our operating results.
Many of Our Products Rely on the GPS Satellite System.
The GPS satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of 28 satellites in place, some have already been in
operation for 13 years. To repair damaged or malfunctioning satellites is
currently 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
may 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, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use free of direct
user fees is specifically recognized and supported by Presidential policy. In
addition, Presidential policy has been complemented by corresponding
legislation, signed into 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 our 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 our financial results. For example, European
governments have expressed interest in building an independent satellite
navigation system, known as Galileo. Depending on the as yet undetermined design
and operation of this system, there may be interference to the delivery of the
GPS SPS and may materially and adversely affect the utility and reliability of
our products, which could result in a material adverse effect on our business
and operating results.
We Face Risks in Investing in and Integrating New Acquisitions.
We are continuously evaluating external investments in technologies related
to our business, and have made relatively small strategic equity investments in
a number of GPS-related and laser-related technology companies. Acquisitions of
companies, divisions of companies, or products entail numerous risks, including:
o potential inability to successfully integrate acquired operations and
products or to realize cost savings or other anticipated benefits from
integration;
o diversion of management's attention;
o loss of key employees of acquired operations;
o the difficulty of assimilating geographically dispersed operations and
personnel of the acquired companies;
o the potential disruption of our ongoing business;
o unanticipated expenses related to such integration;
o the correct assessment of the relative percentages of in-process research
and development expense that can be immediately written off as compared to
the amount which must be amortized over the appropriate life of the asset;
o the impairment of relationships with employees and customers of either an
acquired company or our own business;
o the potential unknown liabilities associated with acquired business; and
o inability to recover strategic investments in development stage entities.
As a result of such acquisitions, we have significant assets that include
goodwill and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. Any such problems in integration
or adjustments to the value of the assets acquired could harm our growth
strategy and have a material adverse effect on our business, financial condition
and compliance with debt covenants.
We Face Competition in Our Markets.
Our markets are highly competitive and we expect that both direct and
indirect competition will increase in the future. Our overall competitive
position depends on a number of factors including the price, quality and
performance of our products, the level of customer service, the development of
new technology and our ability to participate in emerging markets. Within each
of our markets, we encounter direct competition from other GPS, optical and
laser suppliers and competition may intensify from various larger domestic and
international competitors and new market entrants, some of which may be our
current customers. The competition in the future, may, in some cases, result in
price reductions, reduced margins or loss of market share, any of which could
materially and adversely affect our business, operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. We may not be
able to implement this strategy successfully, and our products may not be
competitive with other technologies or products that may be developed by our
competitors, many of whom have significantly greater financial, technical,
manufacturing, marketing, sales and other resources than we do.
We Are Dependent on Proprietary Technology.
Our future success and competitive position is dependent upon our
proprietary technology, and we rely on patent, trade secret, trademark and
copyright law to protect our intellectual property. The patents owned or
licensed by us may be invalidated, circumvented, and challenged. The rights
granted under these patents may not provide competitive advantages to us. Any of
our pending or future patent applications may not be issued within the scope of
the claims sought by us, if at all.
Others may develop technologies that are similar or superior to our
technology, duplicate our technology or design around the patents owned by us.
In addition, effective copyright, patent and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries. The steps
taken by us to protect our technology might not prevent the misappropriation of
such technology.
The value of our products relies substantially on our technical innovation
in fields in which there are many current patent filings. We recognize that as
new patents are issued or are brought to our attention by the holders of such
patents, it may be necessary for us to withdraw products from the market, take a
license from such patent holders, or redesign our products. We do not believe
any of our products currently infringe patents or other proprietary rights of
third parties, but we cannot be certain 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 our revenues or
profitability.
We Must Carefully Manage Our Future Growth.
Growth in our sales or continued expansion in the scope of our operations
could strain our current management, financial, manufacturing and other
resources and may require us to implement and improve a variety of operating,
financial and other systems, procedures and controls. Specifically we have
experienced strain in our financial and order management system, as a result of
our acquisitions. We are expanding our sales, accounting, manufacturing, and
other information systems to meet these challenges. These systems, procedures or
controls may not be adequate to support our operations and may not be designed,
implemented or improved in a cost effective and timely manner. Any failure to
implement, improve and expand such systems, procedures and controls in a timely
and efficient manner could harm our growth strategy and adversely affect our
financial condition and ability to achieve our business objectives.
We Are Dependent on Retaining and Attracting Highly Skilled Development and
Managerial Personnel.
Our ability to maintain our competitive technological position will depend,
in a large part, on our ability to attract, motivate, and retain highly
qualified development and managerial personnel. Competition for qualified
employees in our industry and location is intense, and there can be no assurance
that we will be able to attract, motivate and retain enough qualified employees
necessary for the future continued development of our business and products.
We May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated
customers in foreign locations represented approximately 49% of our revenues in
our fiscal year 2002, 50% in our fiscal year 2001 and 52% in our fiscal year
2000. In addition, we have significant international operations, including
manufacturing facilities, sales personnel and customer support operations. Our
international sales organization contains offices in 21 foreign countries. Our
international manufacturing facilities are in Sweden and Germany, and we have a
regional fulfillment center in the Netherlands. Our international presence
exposes us to risks not faced by wholly domestic companies. Specifically, we
have experienced issues relating to integration of foreign operations, greater
difficulty in accounts receivable collection, longer payment cycles and currency
fluctuations. Additionally, we face the following risks, among others:
o unexpected changes in regulatory requirements;
o tariffs and other trade barriers;
o political, legal and economic instability in foreign markets, particularly
in those markets in which we maintain manufacturing and research
facilities;
o difficulties in staffing and management;
o language and cultural barriers; seasonal reductions in business activities
in the summer months in Europe and some other countries;
o war and acts of terrorism; and
o potentially adverse tax consequences.
Although we implemented a program to attempt to manage foreign exchange
risks through hedging and other strategies, there can be no assurance that this
program will be successful and that currency exchange rate fluctuations will not
have a material adverse effect on our results of operations. In addition, in
certain foreign markets, there may be reluctance to purchase products based on
GPS technology, given the control of GPS by the U.S. Government.
We are exposed to fluctuations in Currency Exchange Rates.
A significant portion of our business is conducted outside the United
States, and as such, we face exposure to adverse movements in non-U.S. currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial results and
cash flows. Compared to fiscal 2001, in fiscal 2002, the US currency has
weakened against other currencies.
Currently, we hedge only those currency exposures associated with certain
assets and liabilities denominated in nonfunctional currencies and periodically
will hedge anticipated foreign currency cash flows. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations on
certain nonfunctional currency assets and liabilities. Our attempts to hedge
against these risks may not be successful resulting in an adverse impact on our
net income.
The affect of the movement in foreign exchange rates has been reflected in
the Cumulative Translation Adjustment included in the Accumulative Other
Comprehensive Loss under Shareholders' Equity on our Consolidated Balance Sheet
Statement located in this Report.
We Are Subject to the Impact of Governmental and Other Similar Certifications.
We market certain products that are subject to governmental and similar
certifications before they can be sold. For example, CE certification for
radiated emissions is required for most GPS receiver and data communications
products sold in the European Union. An inability to obtain such certifications
in a timely manner could have an adverse effect on our operating results. Also,
our products that use integrated radio communication technology require an
end-user to obtain licensing from the Federal Communications Commission (FCC)
for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. During the fourth quarter of 1998, the FCC temporarily
suspended the issuance of licenses for certain of our real-time kinematics
products because of interference with certain other users of similar radio
frequencies. An inability or delay in obtaining such certifications or changes
to the rules by the FCC could adversely affect our ability to bring our products
to market, which could harm our customer relationships and have a material
adverse effect on our business.
Our Stock Price May Be Volatile.
The price of our common stock can be expected to fluctuate substantially as
it has in the past. The price could react to actual or anticipated quarterly
variations in results of operations, announcements of technological innovations
or new products by us or our competitors, developments related to patents or
other intellectual property rights, developments in our relationship with
customers, suppliers, or strategic partners and other events or factors. In
addition, any shortfall or changes in revenue, gross margins, earnings, or other
financial results from analysts' expectations could cause the price of our
common stock to fluctuate significantly. Additionally, macro-economic factors as
well as market climate for the high-technology sector could also impact the
trading price of our stock.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risk related to changes in interest rates and
foreign currency exchange rates. We use certain derivative financial instruments
to manage these risks. We do not use derivative financial instruments for
speculative or trading purposes. All financial instruments are used in
accordance with policies approved by our board of directors.
Market Interest Rate Risk
We are exposed to market risk due to the possibility of changing interest
rates under our senior secured credit facilities. Our credit facilities are
comprised of a U.S. dollar-only revolver, a multi-currency revolver both
expiring April 7, 2004, and a five-year term loan expiring July 14, 2004.
Borrowings under the credit facility have interest payments based on a floating
rate of LIBOR plus a number of basis points tied to a formula based on our
leverage ratio. As of January 3, 2003, our senior debt to EBITDA (senior
leverage ratio) was approximately 1.41. At this leverage ratio our pricing on
the Credit Facility is LIBOR plus 125 basis points. The U.S. dollar and the
multi-currency revolvers run through April 2004 and have outstanding principal
balances at January 3, 2003 of $25.0 million and $10.0 million, respectively. As
of January 3, 2003, we have borrowed from the Multi-Currency revolver in U.S.
currency only. The term loan expires on July 14, 2004 and has an outstanding
principal balance of $32.6 million at January 3, 2003. The three-month LIBOR
effective rate at January 3, 2003 was 1.38%. A hypothetical 10% increase in
three-month LIBOR rates could result in approximately $93,000 annual increase in
interest expense on the existing principal balances.
In addition, we have a $1.8 million promissory note, of which $110,000 was
classified as a current liability at the end of fiscal 2002. The note is payable
in monthly installments, bearing a variable interest rate of 5.4% as of January
3, 2003. A hypothetical 10% increase in interest rates would not have a material
impact on the results of our operations.
* 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 our 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.
Foreign Currency Exchange Rate Risk
We transact business in various foreign currencies and hedges identified
risks associated with foreign currency transactions in order to minimize the
impact of changes in foreign currency exchange rates on earnings. We utilize
forward contracts to hedge certain trade and inter-company 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. These hedge
instruments are marked to market through earnings every period. From time to
time, we may also utilize forward foreign exchange contracts designated as cash
flow hedges of operational exposures represented by firm backlog orders to
specific accounts over a specific period of time. We record changes in the fair
value of cash flow hedges in accumulated, other comprehensive income (loss),
until the firm backlog transaction ships. Upon recognition of revenue, we
reclassify the gain or loss on the cash flow hedge to the statement of
operations. For the fiscal year ended January 3, 2003, we recorded a gain of
$57,000 reflecting the net change and ending balance in relation to a firm
backlog hedge. The critical terms of the cash flow hedging instruments are the
same as the underlying forecasted transactions. The changes in fair value of the
derivatives are intended to offset changes in the expected cash flow from the
forecasted transactions. All forward contracts have maturity of less than 12
months.
* We do not anticipate any material adverse effect on our consolidated
financial position utilizing our current hedging strategy.
The following table provides information about our foreign exchange forward
contracts outstanding as of January 3, 2003:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
CAD Sell 1,630 $ 1,033 $ 1,039
MXN Sell 5,000 469 475
JPY Sell 751,668 6,259 6,302
EUR Buy (6,200) (6,348) (6,024)
EUR Sell 14,939 14,652 15,534
NZD Buy (2,017) (967) (1,060)
SEK Buy (158,572) (17,099) (17,988)
SEK Sell 19,836 2,126 2,144
$ 125 $ 422
=========== =========
The following table provides information about our foreign exchange forward
contracts outstanding as of December 28, 2001:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
EURO Sell 3,769 $ 3,365 $ 3,332
EURO Buy (800) (716) (712)
STERLING Buy (298) (423) (433)
YEN Sell 225,000 1,903 1,714
YEN Buy (44,000) (363) (335)
$ 3,766 $ 3,566
========== ==========
TRIMBLE NAVIGATION LTD
INDEX TO FINANCIAL STATEMENTS
Page in this
Annual Report
on Form 10-K
Consolidated Balance Sheets at January 3, 2003 and December 28, 2001 56
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 3, 2003 57
Consolidated Statement of Shareholders' Equity for the three fiscal years
in the period ended January 3, 2003 58
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 3, 2003 59
Notes to Consolidated Financial Statements 60-92
Report of Ernst & Young LLP, Independent Auditors 93
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
January 3, December 28,
As at 2003 2001
- --------------------------------------------------------------------- -------------- ------------------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 28,679 $ 31,078
Accounts receivable, less allowance for doubtful accounts of
$9,900 and $8,540, respectively 79,645 71,680
Inventories, net 61,144 51,810
Other current assets 8,477 6,536
----- -----
Total current assets 177,945 161,104
Property and equipment, at cost less accumulated depreciation 22,037 27,542
Goodwill, less accumulated amortization 205,933 120,052
Other intangible assets, less accumulated amortization 23,238 100,252
Deferred income taxes 417 383
Other assets 12,086 10,062
------ ------
Total non-current assets 263,711 258,291
------- -------
Total assets $ 441,656 $ 419,395
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank and other short-term borrowings $ 6,556 $ 40,025
Current portion of long-term debt 24,104 23,443
Accounts payable 30,669 21,494
Accrued compensation and benefits 17,728 13,786
Accrued liabilities 21,000 28,822
Accrued warranty expense 6,394 6,827
Income taxes payable 6,450 7,403
----- -----
Total current liabilities 112,901 141,800
Non-current portion of long-term debt 107,865 127,097
Deferred gain on joint venture 10,792 -
Deferred income tax 2,561 7,347
Other non-current liabilities 6,186 4,662
----- -----
Total liabilities 240,305 280,906
------- -------
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;
29,309, and 26,862 shares outstanding, respectively 225,872 191,224
Accumulated deficit (23,495) (33,819)
Accumulated other comprehensive loss (1,026) (18,916)
------ -------
Total shareholders' equity 201,351 138,489
------- -------
Total liabilities and shareholders' equity $ 441,656 $ 419,395
============ ==========
*See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ---------------------------------------------------- ---------------- ---------------- ------------------
(In thousands, except per share data)
Revenue $ 466,602 $ 475,292 $ 369,798
Cost of revenue 232,170 238,057 173,237
------- ------- -------
Gross margin 234,432 237,235 196,561
Operating expenses
Research and development 61,232 62,881 46,520
Sales and marketing 89,344 103,778 79,901
General and administrative 40,634 37,407 30,514
Restructuring charges 1,099 3,599 --
Amortization of goodwill and other purchased
intangible assets 8,300 29,389 13,407
----- ------ ------
Total operating expenses 200,609 237,054 170,342
------- ------- -------
Operating income from continuing
operations 33,823 181 26,219
Non-operating income (expense), net
Interest income 659 1,118 4,478
Interest expense (14,710) (22,224) (14,438)
Foreign exchange loss (823) (237) (376)
Expenses for affiliated operations, net (3,954) -- --
Other expense (1,171) (430) (123)
------- ----- -----
Total non-operating expense, net (19,999) (21,773) (10,459)
Income (loss) before income taxes from
continuing operations 13,824 (21,592) 15,760
Income tax provision 3,500 1,900 1,575
----- ----- -----
Net income (loss) from continuing operations 10,324 (23,492) 14,185
Gain on disposal of discontinued
operations (net of tax) -- 613 --
---
Net income (loss) $ 10,324 $ (22,879) $ 14,185
========= =========== ==========
Basic earnings (loss) per share from
continuing operations $ 0.36 $ (0.95) $ 0.60
Basic earnings per share from
discontinued operations -- 0.02 --
========= =========== ==========
Basic earnings (loss) per share $ 0.36 $ (0.93) $ 0.60
========= =========== ==========
Shares used in calculating basic
earnings per share 28,573 24,727 23,601
Diluted earnings (loss) per share from
continuing operations $ 0.36 $ (0.95) $ 0.55
Diluted earnings per share from
discontinued operations -- 0.02 --
======== ========== =========
Diluted earnings (loss) per share $ 0.36 $ (0.93) $ 0.55
======== ========= =========
Shares used in calculating diluted
earnings per share 29,052 24,727 25,976
*See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock
and warrants
-------------------------
Accumulative
Retained Other Total
earnings Comprehensive Shareholders'
Shares Amount (deficit) Income/(loss) Equity
- -------------------------------------------------- ---------- ------------ --------------- ---------------- ----------------
(In thousands)
Balance at January 1, 2000 22,742 $126,962 $(25,125) $(1,041) $100,796
Components of comprehensive income (loss):
Net income 14,185 14,185
Unrealized gain on short-term investments 123 123
Foreign currency translation adjustments (8,045) (8,045)
------
Comprehensive income 6,263
Subtotal 107,059
-------
Issuance of stock under employee plans and
exercise of warrants 843 12,043 12,043
Issuance of stock for acquisition 577 14,995 14,995
Issuance of warrants -- 846 846
--- --- --- --- ---
Balance at December 29, 2000 24,162 154,846 (10,940) (8,963) 134,943
Components of comprehensive income (loss):
Net loss (22,879) (22,879)
Loss on interest rate swap (203) (203)
Unrealized gain on investments 16 16
Foreign currency translation adjustments (9,766) (9,766)
------
Comprehensive loss (32,832)
-------
Subtotal 102,111
-------
Issuance of stock under employee plans and
exercise of warrants 917 11,344 11,344
Issuance of stock in private placement 1,783 25,034 25,034
Balance at December 28, 2001 26,862 $191,224 $ (33,819) $(18,916) $ 138,489
------ -------- ---------- -------- ---------
Components of comprehensive income (loss):
Net income 10,324 10,324
Gain on interest rate swap 210 210
Unrealized loss on investments (17) (17)
Foreign currency translation adjustments 17,697 17,697
------
Comprehensive income 28,214
------
Subtotal 166,703
-------
Issuance of stock for 793 12,033 12,033
acquisition
Issuance of stock under employee plans 374 4,091 4,091
Issuance of warrants 1,528 1,528
Issuance of stock in private placement 1,280 16,996 16,996
----- ------ ------
Balance at January 3, 2003 29,309 $225,872 $ (23,495) $(1,026) $ 201,351
====== ======== ========== ======== =========
*See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- --------------------------------------------------------- ----------------- ----------------- -----------------
(In thousands)
Cash flow from operating activities:
Net income (loss) $ 10,324 $ (22,879) $ 14,185
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation expense 9,850 11,218 9,139
Amortization expense 9,168 30,306 14,337
Provision for doubtful accounts 5,443 5,077 1,198
(Gain) loss on sale of fixed assets 423 (135) --
Amortization of deferred gain (1,061) (1,584) (2,555)
Amortization of debt issuance cost 1,197 960 440
Deferred income taxes 1,464 (887) (908)
Other 193 (508) (2,505)
Decrease (increase) in assets:
Accounts receivable, net (10,615) 6,842 (7,289)
Inventories (7,649) 7,442 (5,994)
Other current and non-current assets (3,920) 2,393 (3,743)
Effect of foreign currency translation adjustment 3,218 (4,538) (1,116)
Increase (decrease) in liabilities:
Accounts payable 8,593 (4,954) 7,554
Accrued compensation and benefits 3,452 (3,112) (6,362)
Deferred gain on joint venture 10,792 -- --
Accrued liabilities (4,823) (2,946) 5,595
Income taxes payable (953) 2,398 (2,141)
---- ----- -------
Net cash provided by operating activities 35,096 25,093 19,835
------ ------ -------
Cash flow from investing activities:
Acquisition of property and equipment (7,157) (7,254) (7,555)
Proceeds from sale of assets 1,407 1,177 --
Acquisitions, net of cash acquired 1,718 (4,430) (211,488)
Costs of capitalized patents (1,734) (934) (900)
Purchase of short-term investments -- -- (6,423)
Maturities/sales of short-term investments -- -- 59,186
------ ------ -------
Net cash used by investing activities (5,766) (11,441) (167,180)
====== ======= ========
Cash flow from financing activities:
Issuance of common stock and warrants 21,393 36,378 12,043
(Payment)/collection of notes receivable (1,082) 872 196
Proceeds from long-term debt and revolving credit
lines 18,000 30,062 162,000
Payments on long-term debt and revolving credit
lines (70,040) (90,762) (35,282)
-------- -------- -------
Net cash provided (used) by financing activities (31,729) (23,450) 138,957
-------- -------- -------
Decrease in cash and cash equivalents (2,399) (9,798) (8,388)
Cash and cash equivalents, beginning of period 31,078 40,876 49,264
------ ------ ------
Cash and cash equivalents, end of period $ 28,679 $ 31,078 $ 40,876
========= ========== ===========
*See accompanying Notes to the Consolidated Financial Statements.
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
Trimble has a 52-53 week fiscal year, ending on the Friday nearest to
December 31, which for fiscal 2002 was January 3, 2003. Fiscal 2002 was a
53-week year and as a result, the Company has included an extra week of
revenues, costs and related financial activities.
Therefore, the financial results of those fiscal years (as this fiscal year
2002) having the extra week will not be exactly comparable to the prior and
subsequent 52-week fiscal years. Fiscal years 2001 and 2000 were both comprised
of 52 weeks.
The consolidated financial statements include the results of Trimble and
its subsidiaries. Inter-company accounts and transactions have been eliminated.
Certain amounts from prior years have been reclassified to conform to the
current year presentation. Accrued interest expense and Deferred gain on sale of
assets have been reclassified to Accrued liability in the Consolidated Balance
Sheet at December 28, 2001. Certain previously allocated corporate charges to
the Portfolio Technologies business segment have been reclassified to
unallocated corporate charges in fiscal 2001 and fiscal 2000 to conform to
current year presentation.
Foreign Currency
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 included in shareholders' equity in
the consolidated balance sheet caption "Accumulated other comprehensive income
(loss)." Foreign currency transaction gains and losses are included in results
of operations as incurred, and have not been significant to the Company's
operating results in any fiscal year presented. The effect of foreign currency
rate changes on cash and cash equivalents is not material.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly liquid investments
with insignificant interest rate risk and 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.
Concentration of Risk
In entering into forward foreign exchange contracts, Trimble has assumed
the risk that might arise from the possible inability of counter-parties to meet
the terms of their contracts. The counter-parties to these contracts are major
multinational investment and commercial banks, and the Company does not expect
any losses as a result of counter-party defaults (see Note 6 of the Notes to the
Consolidated Financial Statements). The Company is also exposed to credit risk
in the Company's trade receivables, which are derived from sales to end-user
customers in diversified industries as well as various resellers. Trimble
performs ongoing credit evaluations of its customers' financial condition and
limits the amount of credit extended when deemed necessary but generally does
not require collateral.
With the selection of Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of its GPS products, Trimble became substantially
dependent upon a sole supplier for the manufacture of many of its products. In
addition, the Company relies on sole suppliers for a number of its critical
components.
Many of Trimble's products use GPS as the positioning technology. GPS is a
system of 24 orbiting satellites established and funded by the U.S. Government,
which has been fully operational since March 1995. A significant 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, the U.S. Government may not remain committed to the operation and
maintenance of GPS satellites over a long period, and the policy of the U.S.
Government for the use of GPS without charge may change.
Allowance for Doubtful Accounts
Trimble maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments.
Trimble evaluates the collectibility of its trade accounts receivable based
on a number of factors. In circumstances where the Company is aware of a
specific customer's inability to meet its financial obligations to the Company,
a specific allowance for bad debts is estimated and recorded which reduces the
recognized receivable to the estimated amount Trimble believes will ultimately
be collected. In addition to specific customer identification of potential bad
debts, bad debt charges are recorded based on the Company's recent past loss
history and an overall assessment of past due trade accounts receivable amounts
outstanding. The expenses recorded for doubtful accounts were approximately $5.4
million in fiscal 2002, $5.1 million in fiscal 2001, and $1.2 million in fiscal
2000.
Inventories
Inventories are stated at the lower of standard cost or market (net
realizable value). Standard costs approximate average actual costs. The Company
uses a standard cost accounting system to value inventory and these standards
are reviewed at a minimum of once a year and multiple times a year in the most
active manufacturing plants. The Company provides for the inventory value for
estimated excess and obsolete inventory, based on management's assessment of
future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.
Intangible and Non-Current Assets
Intangible assets include goodwill, assembled workforce, distribution
channels, patents, licenses, technology, and trademarks, which are capitalized
at cost. Intangible assets with definite lives are amortized on the
straight-line basis. Useful lives generally range from 2 to 10 years, with
weighted average useful life of 5.5 years. Prior to January 1, 2002, goodwill
was amortized over 20 years, except for goodwill from the Grid Data purchase,
which was amortized over 5 years.
If facts and circumstances indicate that the goodwill, other intangible
assets or property and equipment may be impaired, an evaluation of continuing
value would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with these assets would be compared to their
carrying amount to determine if a write down to fair market value or discounted
cash flow value is required. Trimble performed an impairment test of goodwill
upon transition to FAS No. 142 on January 1, 2002, and an annual impairment test
on September 30, 2002, and found no impairment. Trimble will continue to
evaluate its goodwill for impairment on an annual basis at the end of each
fiscal third quarter and whenever events and changes in circumstances suggest
that the carrying amount may not be recoverable.
Trimble adopted SFAS No. 142 on January 1, 2002. As a result, goodwill is
no longer amortized and intangible assets with indefinite lives were
reclassified to goodwill.
Revenue Recognition
Trimble's revenues are recorded in accordance with the Securities and
Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition." The Company requires the following: (i) execution of a written
customer order, (ii) delivery of the product, (iii) fee is fixed or
determinable, and (iv) collectibility of the proceeds is probable. The Company
recognizes revenue from product sales when the products are shipped to the
customer, title has transferred, and no significant obligations remain. Trimble
defers revenue if there is uncertainty about customer acceptance. Deferred
revenue is included in accrued liabilities on the consolidated balance sheet.
Trimble reduces product revenue for estimated customer returns, and any
discount, which may occur under programs it has with its customers and partners.
The Company's shipment terms are either FOB shipping point or FCA shipping
point. FOB (Free on Board) - shipping point term means that the seller fulfills
the obligation to deliver when the goods have passed over the ship's rail at the
named port of shipment. This means that the buyer has to bear all costs and
risks of loss of or damage to the goods from that point. The FOB term requires
the seller to clear the goods for export. FCA (Free Carrier) shipping point term
means that the seller fulfills the obligation to deliver when the goods are
handed over, cleared for export, and into the charge of the carrier named by the
buyer at the named place or point. If no precise point is indicated by the
buyer, the seller may choose within the place or range stipulated where the
carrier shall take the goods into carrier's charge.
The Company's shipment terms for domestic orders are typically FOB shipping
point. International orders fulfilled from the European distribution center are
typically shipped FCA shipping point. Other international orders are shipped FOB
destination, and accordingly these international orders are not recognized as
revenue until the product is delivered and title has transferred.
Revenues from purchased extended warranty and support agreements are
deferred and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
the Company has no remaining obligations.
Sales to distributors and resellers are recognized upon shipment providing
that there is evidence of the arrangement through a distribution agreement or
purchase order, title has transferred, no remaining performance obligations
exist, the price and terms of the sale are fixed, and collection is probable.
Distributors and resellers do not have a right of return.
Software arrangements consist of a license fee and post contract customer
support (PCS). Trimble has established vendor specific objective evidence (VSOE)
of fair value for its PCS contracts based on the price of the renewal rate. The
remaining value of the software arrangement is allocated to the license fee
using the residual method, under which revenue is primarily recognized when the
software has been delivered and there are no remaining obligations. Revenue from
PCS is recognized ratably over the period of the PCS agreement.
Support and Warranty
The warranty periods for the Company's products are generally between one
and three years from date of shipment. Selected military programs may require
extended warranty periods, and certain products sold by Trimble's TDS business
have a 90-day warranty period. Trimble supports its GPS products through a
circuit board replacement program from locations in the United Kingdom, Germany,
Japan, and the United States. The repair and calibration of Trimble's non-GPS
products are available from company-owned or authorized facilities. The Company
reimburses dealers and distributors for all authorized warranty repairs they
perform.
While the Company engages in extensive product quality programs and
processes, including actively monitoring and evaluating the quality of component
suppliers, its warranty obligation is affected by product failure rates,
material usage, and service delivery costs incurred in correcting a product
failure. Should actual product failure rates, material usage, or service
delivery costs differ from the estimates, revisions to the estimated warranty
accrual and related costs may be required.
Changes in the Company's product warranty liability during the 12 months,
ended January 3, 2003 are as follows:
(in thousands)
-----------------
Balance at December 28, 2001 $6,827
Warranties accrued 2,821
Warranty claims (3,254)
Balance at January 3, 2003 $6,394
The Company's warranty liability is classified as accrued warranty in the
accompanying balance sheet.
Guarantees, Including Indirect Guarantees of Indebtedness of Others
In November of 2002, the FASB issued FIN No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN No. 45 requires that a liability be recorded in the
guarantor's balance sheet upon issuance of a guarantee. In addition, FIN No. 45
requires disclosures about the guarantees that an entity has issued including a
roll-forward of the entity's product warranty liabilities. Trimble will apply
the recognition provisions of FIN No. 45 prospectively to guarantees issued
after December 31, 2002.
Advertising Costs
Trimble's expenses advertising costs as incurred. Advertising expenses were
approximately $6.3 million, $6.8 million, and $7.9 million in fiscal 2002, 2001,
and 2000, respectively.
Research and Development Costs
Research and development costs are charged to expense when incurred.
Trimble received third party funding of approximately $5.3 million, $4.1
million, and $4.8 million in fiscal 2002, 2001, and 2000, respectively. Trimble
offsets research and development expenses with any third party funding received.
The Company retains the rights to any technology developed.
Stock Compensation
In accordance with the provisions of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and
"Statement of Financial Accounting Standards No. 148 ("SFAS 148"), "Accounting
for Stock-Based Compensation - Transition and Disclosure," Trimble 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, the Company does not
recognize compensation cost for stock options granted at fair market value. Note
14 of the Notes to the Consolidated Financial Statements describes the plans
operated by Trimble.
In December of 2002, the Financial Accounting Standards Board issued SFAS
No. 148, which amends SFAS No. 123, to provide alternative methods of transition
for an entity that changes to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure provisions of SFAS No. 123 to require expanded and more prominent
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation.
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 as well as the stock-based employee
compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value based method had been applied
to all awards. The effects on pro forma disclosure of applying SFAS No. 123 are
not likely to be representative of the effects on pro forma disclosure of future
years.
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No. 123 and has been determined as if Trimble had
accounted for its employee stock options and purchases under the employee stock
purchase plan using the fair value method of SFAS No.123. 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 fiscal
2002, 2001, and 2000:
January 3, December 28, December 29,
2003 2001 2000
----------- ------------- -------------
Expected dividend yield - - -
Expected stock price volatility 52.70% 69.59% 66.41%
Risk free interest rate 3.13% 4.15% 6.21%
Expected life of options after vesting 1.18 1.20 1.22
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 Trimble'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.
Trimble's pro forma information is as follows:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- --------------------------------------------------- -------------- --------------- -------------
(dollars in thousands)
Net income (loss) - as reported $10,324 $ (22,879) $14,185
Stock-based employee compensation expense
determined under fair value method based for 11,641 12,718 8,287
all awards, net of related tax effects
Net earnings (loss) - pro forma (1,317) (35,597) 5,898
Basic earnings (loss) per share - as reported 0.36 (0.93) 0.60
Basic earnings (loss) per share - pro forma (0.05) (1.44) 0.25
Diluted earnings (loss) per share - as reported 0.36 (0.93) 0.55
Diluted earnings (loss) per share - pro forma (0.05) (1.44) 0.23
Depreciation
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 include a range from two to four years
for machinery and equipment, four to five years for furniture and fixtures, and
four to five years for leasehold improvements.
Income Taxes
Income taxes are accounted for under the liability method whereby deferred
tax asset or liability account balances are calculated at the balance sheet date
using current tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than
not, that such assets will not be realized.
Earnings (Loss) Per Share
Number of shares used in calculation of basic earnings per share represents
the weighted average common shares outstanding during the period and excludes
any dilutive effects of options, warrants, and convertible securities. The
dilutive effects of options, warrants, and convertible securities are included
in diluted earnings per share.
New Accounting Standards
Trimble adopted SFAS No. 144, at the beginning of fiscal 2002. The effect
of adopting SFAS No. 144 did not have a material impact on the Company's
financial position or results of operations.
Trimble adopted SFAS No. 141, Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets , at the beginning of fiscal 2002.
Application of the non-amortization provisions of SFAS No. 142 significantly
reduced amortization expense of purchased intangibles and goodwill to
approximately $8.3 million for the fiscal year 2002 from $29.4 million in the
prior year. The Company reclassified identifiable intangible assets with
indefinite lives with net book value of $73.6 million, as defined by SFAS No.
142, to goodwill at the date of adoption. The Company tested goodwill for
impairment using the two-step process prescribed in SFAS No. 142. The first step
is a screen for potential impairment, while the second step measures the amount
of the impairment, if any. No impairment charge resulted from the impairment
tests.
In October of 2001, the FASB issued SFAS No.144, "Accounting for the
Impairment or Disposal of Long-lived Assets," which amends accounting guidance
on asset impairment and provides a single accounting model for long-lived assets
to be disposed of. Among other provisions, the new rules change the criteria for
classifying an asset as held-for-sale. The standard also broadens the scope of
businesses to be disposed of that qualify for reporting as discontinued
operations, and changes the timing of recognizing losses on such operations.
In July of 2002, the FASB approved SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses the
financial accounting and reporting for obligations associated with an exit
activity, including restructuring, or with a disposal of long-lived assets. Exit
activities include, but are not limited to, eliminating or reducing product
lines, terminating employees and contracts and relocating plant facilities or
personnel. SFAS No. 146 specifies that a company will record a liability for a
cost associated with an exit or disposal activity only when that liability is
incurred and can be measured at fair value. Therefore, commitment to an exit
plan or a plan of disposal expresses only management's intended future actions
and, therefore, does not meet the requirement for recognizing a liability and
the related expense. SFAS No. 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with earlier adoption
encouraged. The Company does not anticipate that the adoption of SFAS No. 146
will have a material effect on its financial position or results of operations.
In November of 2002, the FASB issued FIN No. 45 "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN No. 45 requires that a liability be recorded in the
guarantor's balance sheet upon issuance of a guarantee. In addition, FIN No. 45
requires disclosures about the guarantees that an entity has issued, including a
roll-forward of the entity's product warranty liabilities. Trimble will apply
the recognition provisions of FIN No. 45 prospectively to guarantees issued
after December 31, 2002. The disclosure provisions of FIN No. 45 are effective
for financial statements of Trimble's fiscal year 2002.
In November of 2002, the EITF reached a consensus on Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. Trimble is currently
evaluating the effect that the adoption of EITF Issue No. 00-21 will have on its
results of operations and financial condition.
In January of 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of FIN No. 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15,
2003. The Company is currently evaluating the provisions of FIN No. 46, however,
it does not believe as at January 3, 2003, that the Company has any investment
in variable interest entities.
Note 2 - Acquisitions:
The following is a summary of acquisitions made by Trimble during fiscal
2002, 2001, and 2000, all of which were accounted for as purchases:
Acquisition Primary Service or Product Acquisition Date
- ------------------------ -------------------------------------------- -----------------
Spectra Precision Group Optical and laser products July 14, 2000
Tripod Data Systems Software for data collection applications November 14, 2000
Grid Data Wireless Application Service Provider April 2, 2001
LeveLite Technology Low-end construction instrument products August 15, 2002
The consolidated financial statements include the results of operations of
acquired companies commencing on the date of acquisition. The total purchase
consideration for each of the above acquisitions was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as of the
date of acquisition. The Grid Data transaction was an asset purchase.
Allocation of Purchase Consideration
The following is a summary of purchase price, acquisition costs and
purchase price allocation of the Spectra Precision Group, Tripod Data Systems,
Grid Data, and LeveLite acquisitions:
Spectra Tripod Data LeveLite
Precision Group Systems Grid Data Technology
----------------- ----------------- --------------- ----------------
(In thousands)
Purchase price $292,700 $14,995 $8,248 $6,031
Acquisition costs 7,719 391 50 144
Restructuring costs 7,851 - - 555
----- ---
Total purchase price $308,270 $15,386 $8,298 $6,730
======== ======= ====== ======
Purchase Price Allocation:
Fair value of tangible net assets acquired 65,913 4,261 (141) 6,115
Deferred tax (9,138) - - -
Identified intangible assets:
Distribution Channel 78,600 - - -
Existing Technology 25,200 - - -
Assembled Workforce 18,300 - - -
Trade names, trade marks, patents, and
other intellectual properties 10,800 - - -
Goodwill 118,595 11,125 8,439 615
------- ------ ----- ---
Total $308,270 $15,386 $8,298 $6,730
======== ======= ===== =====
Spectra Precision Group
Spectra Precision, a group of wholly-owned businesses, formerly owned by
Thermo Electron Corporation, collectively known as the "Spectra Precision
Group," was acquired on July 14, 2000. The acquisition was completed for an
aggregate purchase price, excluding acquisition and restructuring costs, of
approximately $293.8 million. Subsequently, in March 2002, the purchase price
was adjusted by $1.1 million as a result of the completion of final negotiations
with Thermo Electron relating to certain assets and liabilities acquired. This
adjustment subsequently decreased the purchase price to approximately $292.7
million and goodwill to approximately $118.6 million. The acquisition included
100% of the stock of Spectra Precision Inc., a Delaware corporation; Spectra
Precision SRL, an Italian corporation; Spectra Physics Holdings GmbH, a German
corporation; and Spectra Precision BV, a Netherlands corporation. The
acquisition also included certain assets and liabilities of Spectra Precision
AB, a Swedish corporation; including 100% of the shares of Spectra Precision SA,
a French corporation; Spectra Precision Scandinavia AB, a Swedish corporation;
Spectra Precision of Canada Ltd., a Canadian corporation; and Spectra Precision
Handelsges GmbH, an Austrian corporation.
Spectra Precision Group Restructuring Activities
At the time the Company acquired the Spectra Precision Group, the
management formulated a restructuring plan and provided approximately $9.0
million for costs to close certain duplicative office facilities, combine
operations including redundant domestic and foreign legal entities, reduce
workforce in overlapping areas, and relocate certain employees. These costs were
accrued for as part of the allocation of the purchase price. Included in the
total cost was approximately $2.7 million related to the discontinuance of
overlapping product lines, which was included in the accrual for excess and
obsolete inventory. The facility consolidation and employee relocations resulted
primarily from combining certain office facilities and duplicative functions,
including management functions, of the Spectra Precision Group.
In fiscal 2002, the Company used approximately $1.9 million of the accrual,
which consisted of $1.5 million for legal and tax consulting expenses relating
to consolidation of legal entities and, $0.4 million for facilities and direct
sales office closures. As of January 3, 2003, the accrual was fully utilized.
In fiscal 2001, the Company had used approximately $3.3 million of the
accrual, which consisted of $0.9 million for legal and tax consulting expenses
relating to consolidation of legal entities, $1.3 million for severance
expenses, $0.7 million for facilities and direct sales office closures, $0.3
million for an underfunded pension plan, and other costs of $0.1 million. The
Company revised its final estimates for costs to complete the remaining planned
activities and accordingly reduced its restructuring accrual by approximately
$1.1 million, with a corresponding adjustment to goodwill, in the fourth quarter
of fiscal 2001.
The elements of the restructuring accrual, which are included in accrued
liabilities in the balance sheet, are as follows:
Employee Severance Facility Closure, Total
and Relocation Legal and Tax Expense
(In thousands)
Total accrual $ 1,945 $ 4,370 $ 6,315
Amounts paid (1,685) (1,610) (3,295)
Revision to estimates (260) (812) (1,072)
Balance as of December 28, 2001 $ - $ 1,948 $ 1,948
Amounts paid - (1,948) (1,948)
Balance as of January 3, 2003 $ - $ - $ -
Tripod Data Systems
Tripod Data Systems, Inc., an Oregon corporation, was purchased on November
14, 2000 for an aggregate final purchase price of approximately $15.0 million.
The purchase price consisted of 576,726 shares of Trimble's common stock valued
at the average closing price for the five trading days preceding the closing
date.
Grid Data, Inc.
On April 2, 2001, Trimble acquired certain assets of Grid Data, an Arizona
corporation, for approximately $3.5 million in cash and the assumption of
certain liabilities. In addition, the purchase agreement provided for Trimble to
make earn-out payments based upon the completion of certain business milestones.
In June 2002, Trimble issued 268,352 in settlement of all earn-out payments,
which resulted in additional goodwill of $4.8 million, with a final purchase
price of approximately $8.3 million.
LeveLite Technology, Inc.
On August 15, 2002, Trimble acquired LeveLite Technology, Inc.
("LeveLite"), a California corporation, for approximately $5.7 million. This
strategic acquisition complements our entry-level construction instrument
product line. The purchase price consisted of 437,084 shares of our common
stock. The merger agreement provides for Trimble to make additional earn-out
payments not to exceed $3.9 million (in common stock and cash payment) based on
future revenues derived from existing product sales to a certain customer. On
January 22, 2003, Trimble issued the first earn-out payment (stock and cash
combination) with a fair market value of approximately $0.4 million, related to
the earn-out for the quarter ended January 3, 2003. Also, if Trimble receives
any proceeds from a pending litigation, a portion will be paid to the former
shareholders of LeveLite. The additional payments, if earned, will result in
additional goodwill.
Note 3 - Unaudited Pro Forma Information:
The consolidated statements of operations of Trimble presented throughout
this report include the operating results of the acquired companies from the
date of the respective acquisitions. The following pro forma information for
fiscal 2002, 2001, and 2000 presents net revenue, net loss from continuing
operations, and net loss for each of these periods as if the transactions with
Spectra Precision Group were consummated on January 1, 2000. The following pro
forma information does not include Tripod Data Systems, Grid Data, and Levelite,
as these acquisitions were not material to the Company. This unaudited pro forma
data does not purport to represent the Company's actual results of operations
had the Spectra Precision Group acquisition occurred on January 1, 2000, and
should not serve as a forecast of the Company's operating results for any future
periods.
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ----------------------------------------------------------- --------------- ---------------- ----------------
(In thousands, except for per share amounts)
Net revenue $ 466,602 $ 475,292 $ 491,436
Net income (loss) from continuing operations 10,324 (23,492) (1,920)
Net income (loss) 10,324 (22,879) (1,920)
Basic earnings (loss) per share from $ 0.36 $ (0.95) $ (0.08)
continuing operations
Basic earnings per share from discontinued
Operations -- 0.02 --
---------- ---------- ----------
Basic earnings (loss) per share $ 0.36 $ (0.93) $ (0.08)
---------- ---------- ----------
Diluted earnings (loss) per share from continuing $ 0.36 $ (0.95) $ (0.08)
Operations
Diluted earnings per share from discontinued
Operations -- 0.02 --
---------- --------- ---------
Diluted earnings (loss) per share $ 0.36 $ (0.93) $ (0.08)
---------- --------- ---------
Note 4 - Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
January 3, December 28,
2003 2001
(In thousands) Intangible assets:
Intangible assets with indefinite life:
Distribution channel $ - $ 73,363
Assembled workforce - 17,773
------ ------
Total intangible assets with indefinite life - 91,136
Intangible assets with definite life:
Existing technology 25,986 23,907
Trade names, trademarks, patents, and
other intellectual properties 21,594 18,394
------ ------
Total intangible assets with definite life 47,580 42,301
------ ------
Total intangible assets 47,580 $133,437
Less accumulated amortization (24,342) (33,185)
------- -------
Total net intangible assets $ 23,238 $100,252
=========== ========
Goodwill:
Goodwill, Spectra Precision acquisition* 185,277 116,001
Goodwill, other acquisitions* 20,656 14,710
------ ------
Total goodwill 205,933 130,711
Less accumulated amortization * - (10,659)
------ -------
Total net goodwill $ 205,933 $ 120,052
========== =========
- --------------------------------------------------------------------------------
* Goodwill as of January 3, 2003 includes assembled workforce and
distribution channel amounts, which were reclassified to goodwill in accordance
with SFAS 142. Also, January 3, 2003 amounts are shown net of accumulated
depreciation from December 28, 2001.
The intangible asset amortization expense as of January 3, 2003 for the
five years following fiscal 2002 is projected as follows:
Year (In thousands)
---- --------------
2003 $ 7,126
2004 7,084
2005 5,327
2006 1,892
2007 1,116
Thereafter 693
---
Total $ 23,238
==========
Trimble adopted SFAS No. 142 on January 1, 2002. As a result, goodwill is
no longer amortized and intangible assets with indefinite lives were
reclassified to goodwill.
For comparative purposes, the pro forma adjusted net income per share
excluding amortization of goodwill, distribution channel, and assembled
workforce is as follows:
January 3, December 28, December 29,
2003 2001 2000
---- ---- ----
(in thousands)
Net income (loss) $ 10,324 $ (22,879) $ 14,185
Add back SFAS 142 adjustments:
Amortization of goodwill 7,817 3,116
Amortization of distribution channel 11,230 5,176
Amortization of assembled workforce 1,834 1,225
Adjusted net income (loss) $ 10,324 $ (1,998) $ 23,702
========= ========== ========
Weighted average shares outstanding
Basic 28,573 24,727 23,601
Diluted 29,052 24,727 25,976
Diluted net income (loss) per share $ 0.36 $ (0.93) $ 0.55
--------- ---------- --------
Pro forma adjusted diluted net income (loss) per share $ 0.36 $ (0.08) $ 0.92
========= ========== ========
Note 5 - Certain Balance Sheet Components:
Inventories consisted of the following:
January 3, December 28,
2003 2001
(in thousands)
Raw materials $ 21,098 $ 25,790
Work-in-process 5,187 7,177
Finished goods 34,859 18,843
------ ------
$ 61,144 $ 51,810
========== ==========
Property and equipment consisted of the following:
January 3, December 28,
2003 2001
(in thousands)
Machinery and equipment $ 70,660 $ 66,265
Furniture and fixtures 6,538 6,367
Leasehold improvements 6,451 5,882
Buildings 2,905 3,979
Land 1,391 1,657
----- -----
87,945 84,150
Less accumulated depreciation (65,908) (56,608)
-------- --------
$ 22,037 $ 27,542
========= =========
Other current assets consisted of the following:
January 3, December 28,
2003 2001
(in thousands)
Notes receivable $ 1,685 $ 2,130
Prepaid expenses 5,495 4,150
Other 1,297 256
----- ---
$ 8,477 $ 6,536
========== =========
Other non-current assets consisted of the following:
January 3, December 28,
2003 2001
(in thousands)
Debt issuance costs, net $ 2,493 $ 3,046
Other investments 1,381 2,737
Deposits 1,196 1,241
Demo inventory, net 2,665 1,961
Receivables from employees 1,223 955
Other 3,128 122
----- ---
$ 12,086 $ 10,062
========= ========
Note 6 - Derivative Financial Instruments:
Trimble transacts business in various foreign currencies and hedges
identified risks associated with foreign currency transactions in order to
minimize the impact of changes in foreign currency exchange rates on earnings.
Trimble utilizes forward contracts to hedge certain trade and inter-company
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. These hedge instruments are marked to market through earnings every
period. From time to time, Trimble may also utilize forward foreign exchange
contracts designated as cash flow hedges of operational exposures represented by
firm backlog orders to specific accounts over a specific period of time. Trimble
records changes in the fair value of cash flow hedges in accumulated other
comprehensive income (loss), until the firm backlog transaction ships. Upon
recognition of revenue, the Company reclassifies the gain or loss on the cash
flow hedge to the statement of operations. For the fiscal year ended January 3,
2003, Trimble recorded a gain of $57,000 reflecting the net change and ending
balance in relation to a firm backlog hedge. The critical terms of the cash flow
hedging instruments are the same as the underlying forecasted transactions. The
changes in fair value of the derivatives are intended to offset changes in the
expected cash flow from the forecasted transactions. All forward contracts have
maturity of less than 12 months. As of January 3, 2003, the effect of all
outstanding derivative instruments does not have a material impact on the
Company's financial position or results of operations.
In July 2002, Trimble expanded its worldwide hedging program to include
inter-company transactions among the former Spectra Precision Group entities in
order to minimize the impact of changes in foreign exchange rates on earnings.
The forward foreign currency exchange contracts mature over the next twelve
months. As of January 3, 2003, the effect of all outstanding derivative
instruments does not have a material impact on the Company's financial position
or results of operations.
Note 7 - Disposition of Line of Business and Assets:
Disposition of Line of Business:
On March 6, 2001, the Company sold certain product lines of its Air
Transport Systems to Honeywell Inc. for approximately $4.5 million in cash.
Under the asset purchase agreement, Honeywell International, Inc. purchased
product lines that included the HT 1000, HT 9000, HT 9100 and Trimble's TNL
8100. As part of this sale, during the third quarter of fiscal 2001, the Company
also sold other product lines and discontinued its manufacturing operations in
Austin, Texas. The Company also incurred severance costs of approximately $1.7
million, which are included in restructuring charges, related to the termination
of employees associated with the product lines disposed of in fiscal 2001.
At January 3, 2003, the Company had an accrual of approximately $1.1
million for related liabilities associated with the disposition of these product
lines and the discontinuance of its manufacturing operations.
Note 8 - The Company, Industry Segment, Geographic, and Customer Information:
Trimble is a designer and distributor of positioning products and
applications enabled by GPS, optical, laser, and wireless communications
technology. The Company designs and markets products, by delivering integrated
information solutions such as collecting, analyzing, and displaying position
data to its end-users. Trimble offers an integrated product line for diverse
applications in its targeted markets.
To achieve distribution, marketing, production, and technology advantages
in Trimble's targeted markets, the Company manages its operations in the
following five segments:
o Engineering and Construction - Consists of products currently used by
survey and construction professionals in the field for positioning data
collection, field computing, data management, and automated machine
guidance and control. These products provide solutions for numerous
construction applications including surveying, general construction, site
preparation and excavation, road and runway construction, and underground
construction.
o Field Solutions - Consists of products that provide solutions in a variety
of agriculture and fixed asset applications, primarily in the areas of
precise land leveling, machine guidance, yield monitoring, variable-rate
applications of fertilizers and chemicals, and fixed asset data collection
for a variety of governmental and private entities. This segment is an
aggregation of the Mapping and GIS operation and the Agriculture operation.
Trimble has aggregated these business operations under a single general
manager in order to continue to leverage its research and development
activities due to the similarities of products across the segment.
o Mobile Solutions - Consists of products that enable end-users to monitor
and manage their mobile assets by communicating location-relevant
information from the field to the office. Trimble offers a range of
products that address a number of sectors of this market including truck
fleets, security, telematics, and public safety vehicles.
o Component Technologies - Currently, Trimble markets its GPS component
products through an extensive network of OEM relationships. These products
include proprietary chipsets, modules, and a variety of intellectual
property. The applications into which end-users currently incorporate the
component products include: timing applications for synchronizing wireless
and computer systems; in-vehicle navigation and telematics (tracking)
systems; fleet management; security systems; data collection systems; and
wireless handheld consumer products.
o Portfolio Technologies - The various operations that comprise this segment
were aggregated on the basis that no single operation accounted for more
than 10% of the total revenue. These markets include the operations of the
Military and Advanced Systems business and Tripod Data Systems.
In the first fiscal quarter of fiscal 2002, Trimble realigned two of its
reportable segments and therefore the following table shows restated revenue and
operating income by segment to reflect this realignment. The Agriculture segment
was combined with the Mapping and GIS business to form Field Solutions. Mapping
and GIS were previously part of Fleet and Asset Management. The Mobile
Positioning business that was part of Fleet and Asset Management is now Mobile
Solutions.
The Company began breaking out Mobile Solutions as a separate reporting
segment during the first quarter of 2002 to address the growing importance of
the mobile asset management business and its impact on Trimble's profitability.
At the same time, the Company combined its GIS and Agriculture businesses to
create a new segment called Field Solutions in order to recognize the synergies
and similar product requirements between the two businesses.
Trimble evaluates each of these segment's performance and allocates
resources based on profit and loss from operations before income taxes, and some
corporate allocations.
The accounting policies applied by each of the segments are the same as
those used by Trimble in general.
The following table presents revenues, operating income (loss), and
identifiable assets for the five segments. The information includes the
operations of Spectra Precision Group after July 14, 2000, Tripod Data Systems
after November 14, 2000, Grid Data after April 2, 2001, and LeveLite Technology,
Inc. after August 15, 2002. Operating income (loss) is net revenue less
operating expenses, excluding general corporate expenses, goodwill amortization,
restructuring charges, non-operating income (expense), and income taxes. The
identifiable assets that Trimble's Chief Operating Decision Maker views by
segment are accounts receivable and inventory.
Fiscal Year Ended
January 3, 2003
(in thousands)
Engineering
and Field Mobile Component Portfolio
Construction Solutions Solutions Technologies Technologies Total
External net revenue $ 305,490 $ 67,259 $ 8,486 $ 59,755 $ 25,612 $ 466,602
Inter-segment net
Revenue 6,193 - - - (6,193) -
Operating income (loss)
before corporate
allocations 54,931 12,395 (10,830) 11,290 5,072 72,858
Operating income (loss) $ 54,931 $ 12,395 $(10,830) $ 11,290 $ 5,072 $ 72,858
Assets:
Accounts receivable (2) $ 71,415 $ 11,598 $ 1,960 $ 11,276 $ 4,025 $ 100,274
Inventories $ 44,905 $ 7,337 $ 1,986 $ 2,853 $ 4,063 $ 61,144
Fiscal Year Ended
December 28, 2001
(in thousands)
Engineering
and Field Mobile Component Portfolio
Construction Solutions Solutions Technologies Technologies Total
External net revenue $ 303,944 $ 68,519 $ 13,791 $ 58,083 $ 30,955 $ 475,292
Inter-segment net
revenue 2,080 - - - (2,080) -
Operating income (loss)
before corporate
allocations 51,625 13,652 (8,966) 10,882 4,037 71,230
Operating income (loss) $ 51,625 $ 13,652 $ (8,966) $ 10,882 $ 4,037 $ 71,230
Assets:
Accounts receivable (2) $ 62,471 $ 10,191 $ 4,274 $ 7,392 $ 7,249 $ 91,577
Inventories $ 36,896 $ 4,639 $ 1,992 $ 2,490 $ 5,463 $ 51,480
Fiscal Year Ended
December 29, 2000
(in thousands)
Engineering Field Mobile Component Portfolio
and Solutions Solutions Technologies Technologies Total
Construction
External net revenue $ 195,150 $ 70,652 $ 20,471 $ 60,230 $ 23,295 $ 369,798
Operating income (loss)
before corporate
allocations 43,937 19,834 (369) 14,850 965 79,217
Corporate allocations (1)
(15,120) (8,112) (2,844) (4,788) (2,687) (33,551)
Operating income (loss) $ 28,817 $ 11,722 $ (3,213) $ 10,062 $ (1,722) $ 45,666
Assets:
Accounts receivable (2) $ 58,693 $ 12,439 $ 4,374 $ 11,892 $ 8,522 $ 95,920
Inventories $ 39,146 $ 4,416 $ 3,133 $ 2,360 $ 8,074 $ 57,129
(1) In fiscal 2002 and 2001, Trimble did not allocate corporate expenses to its
individual business segments. In fiscal 2000, the Company determined the
amount of corporate allocations charged to each of its segments based on a
percentage of the segments' monthly revenue, gross profit, and controllable
spending (research and development, sales and marketing, and general and
administrative).
(2) As presented, accounts receivable excludes cash received in advance and
allowances for doubtful accounts, which are not allocated between segments.
The following are reconciliations corresponding to totals in the
accompanying consolidated financial statements:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- --------------------------------------------- ---------------- --------------- ----------------
(in thousands)
Operating income from continuing operations:
Total for reportable divisions $ 72,858 $ 71,230 $ 45,666
Unallocated corporate expenses
(39,035) (71,049) (19,447)
-------- -------- --------
Operating income from continuing operations $ 33,823 $ 181 $ 26,219
========= ========= ===========
January 3, December 28,
2003 2001
-------------- ---------------
(in thousands)
Assets:
Accounts receivable total for reportable
segments $ 100,274 $ 91,577
Unallocated (1) (20,629) (19,897)
Total $ 79,645 $ 71,680
========== =========
Inventory total for reportable segments $ 61,144 $ 51,480
Common inventory (2)
- 330
- ---
Total $ 61,144 $ 51,810
========== =========
- ----------
(1) Includes cash in advance, other receivables, and accruals that are not
allocated by segment.
(2) Consists of common inventory that can be used by multiple segments.
The following table presents revenues by product groups.
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ---------------------------- --------------- ------------- -------------
(in thousands)
GPS products $269,835 $274,439 $274,215
Laser and optical products 182,650 186,948 93,879
Other 14,117 13,905 1,704
------ ------ -----
Total revenue $466,602 $475,292 $369,798
======== ======== ========
The geographic distribution of Trimble's revenues and identifiable assets
is summarized in the table below. Other foreign countries include Canada and
countries within South and Central America. Identifiable assets indicated in the
table below exclude inter-company receivables, investments in subsidiaries,
goodwill, and intangibles assets.
Geographic Area
-----------------------------------------------------------
Europe/ Other
Middle Foreign
Fiscal year ended U.S. East/Africa Asia Countries Eliminations Total
(In thousands)
January 3, 2003
Sales to unaffiliated customers (1) $ 235,716 $ 136,551 $ 60,878 $ 33,457 $ - $ 466,602
Inter-geographic transfers 62,843 73,625 - 4,121 (140,589) -
---------- ---------- ---------- ---------- -------- ----------
Total revenue $ 298,559 $ 210,176 $ 60,878 $ 37,578 (140,589) $ 466,602
---------- ---------- ---------- ---------- -------- ----------
Identifiable assets $ 127,594 $ 70,057 $ 9,955 $ 5,743 (864) $ 212,485
December 28, 2001
Sales to unaffiliated customers (1) $ 236,665 $ 143,051 $ 54,710 $ 40,866 $ - $ 475,292
Inter-geographic transfers 57,481 49,940 2,137 - (109,558) -
---------- ---------- ---------- ----------- --------- ----------
Total revenue $ 294,146 $ 192,991 $ 56,847 $ 40,866 $ (109,558) $ 475,292
---------- ---------- ---------- ----------- -------- ----------
Identifiable assets $ 120,403 $ 71,081 $ 10,048 $ 3,829 $ (5,494) $ 199,867
December 29, 2000
Sales to unaffiliated customers (1) $ 175,993 $ 103,455 $ 43,922 $ 46,428 $ - $ 369,798
Inter-geographic transfers 65,117 12,108 8,320 - (85,545) -
Total revenue $ 241,110 $ 115,563 $ 52,242 $ 46,428 $ (85,545) $ 369,798
Identifiable assets $ 146,821 $ 84,358 $ 12,016 $ 4,588 $ (6,274) $ 241,509
(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 Asia, except for Japan, which is a buy/sell entity,
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. The Japanese
entity's revenue and expenses are included in total revenue and operating income
(loss) in the preceding table. In fiscal 2002, the United States comprised
approximately 51% and Germany 16% of sales to unaffiliated customers.
No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2002, 2001, and 2000.
Note 9 - Restructuring Charges:
Restructuring charges of $1.1 million were recorded in fiscal 2002 and $3.6
million was recorded in fiscal 2001, which related to severance costs. As a
result of these actions, Trimble's headcount decreased in fiscal 2002 by 49 and
in fiscal 2001 by 207 individuals. As of January 3, 2003, all of the
restructuring charges have been paid.
Note 10 - Long-term Debt:
Trimble's long-term debt consists of the following:
January 3, December 28,
2003 2001
(In thousands)
Credit Facilities:
Five-year term loan $ 32,600 $ 61,300
U.S. and multi-currency revolving
credit facility 35,000 40,000
Subordinated note 69,136 84,000
Promissory notes and other 1,789 5,265
138,525 190,565
------- -------
Less Bank and other short-term borrowings 6,556 40,025
Less current portion of long-term debt 24,104 23,443
------ ------
Non-current portion $ 107,865 $ 127,097
========= ==========
The following summarizes the future cash payment obligations (excluding
interest):
2006 and
January 3, 2003 Total 2003 2004 2005 2006 Beyond
- -------------------------------------------------------------------------------------------------------
(In thousands)
Credit Facilities:
Five-year term loan $32,600 $24,000 $ 8,600 $ - $ - $ -
U.S. and multi-currency
revolving credit facility 35,000 6,550 28,450 - - -
Subordinated note 69,136 - 69,136 - - -
Promissory note and other 1,789 110 110 110 110 1,349
----- --- --- --- --- -----
Total contractual cash obligations $138,525 $ 30,660 $106,296 $ 110 $ 110 $ 1,349
======== ======== ======== ===== ====== =======
Credit Facilities
In July of 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "Credit Facilities") from a syndicate of banks to support the
acquisition of Spectra Precision Group and its ongoing working capital
requirements and to refinance certain existing debt. At January 3, 2003, Trimble
has approximately $67.6 million outstanding under the Credit Facilities,
comprised of $32.6 million under a $100 million five-year term loan, $25 million
under a $50 million U.S. dollar only revolving credit facility ("revolver"), and
$10 million under a $50 million multi-currency revolver. The Company has access
to an additional $65 million of cash under the terms of the revolver loans. The
Company has commitment fees on the unused portion of 0.5% if the leverage ratio
(which is defined as all outstanding debt, excluding the seller subordinated
note, over Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA), as defined in the related agreement) is 2.0 or greater and 0.375% if
the leverage ratio is less than 2.0.
Pricing for any borrowings under the Credit Facilities was fixed for the
first six months at LIBOR plus 275 basis points and is thereafter tied to a
formula, based on the leverage ratio. The weighted average interest rate under
the Credit Facilities was 4.9% for the month of December ending January 3, 2003.
The Credit Facilities are secured by all of the Company's material assets,
except for assets that are subject to foreign tax considerations. Financial
covenants of the Credit Facilities include leverage, fixed charge, and minimum
net worth tests, all of which were amended during the third quarter of 2002. At
January 3, 2003, Trimble was in compliance with these debt covenants. The
amounts due under the revolver loans are paid as the loans mature, and the loan
commitment fees are paid on a quarterly basis.
Two of the financial covenants, minimum fixed charge coverage and maximum
leverage ratios are sensitive to EBITDA. EBITDA is correlated to Trimble's
results of operations. Due to uncertainties associated with the downturn in the
worldwide economy and other factors, future revenues by quarter are difficult to
forecast. Cost cutting measures have been put in place by the management team;
however, if revenues should decline at a higher rate than cost cutting measures
on a quarter-to-quarter basis, Trimble may violate the two above-mentioned
financial covenants.
Subordinated Note
In July of 2000, as part of the acquisition of Spectra Precision Group, the
Company issued Spectra-Physics Holdings USA, Inc., a subordinated seller note
that had a stated two-year maturity ($40 million was due in fiscal 2001 and $40
million in fiscal 2002). On March 20, 2002, the Company renegotiated the terms
of the subordinated note. Under the revised agreement, Spectra-Physics Holdings,
Inc., a subsidiary of Thermo Electron, extended the due date of the note until
July 14, 2004, at the current interest rate of approximately 10.4% per year.
As of January 3, 2003 the principal amount outstanding was approximately
$69.1 million. To the extent that interest and principal due on the maturity
date becomes delinquent, an additional 4% interest rate per annum will apply.
The Credit Facilities allow Trimble to repay the subordinated note at any
time (in part or in whole), provided that (a) Trimble's leverage ratio (Debt
(excluding the seller note)/EBITDA) prior to such repayment is less than 1.0x
and (b) after giving effect to such repayment Trimble would have (i) a leverage
ratio (Debt (excluding any remaining portion of the subordinated note)/EBITDA)
of less than 2.0x and (ii) cash and unused availability under the revolvers of
the Credit Facilities of at least $35 million. The note, by its terms, is
subordinated to the Credit Facilities.
Promissory Note
The promissory note consists of a $1.8 million liability arising from the
purchase of a building for Trimble's Corvallis, Oregon site. The note is payable
in monthly installments through April 2015, bearing a variable interest rate
(5.4% as of January 3, 2003).
Weighted Average Cost of Debt
The weighted average cost of debt is approximately 7.6% for fiscal 2002 and
8.0% for fiscal 2001.
Note 11 - Lease Obligations and Commitments:
Trimble's principal facilities in the United States are leased under
non-cancelable operating leases that expire at various dates through 2011. The
Company has options to renew certain of these leases for an additional five
years. Trimble also leases facilities under operating leases in the United
Kingdom, Sweden, and Germany that expire in 2005.
Future minimum payments required under non-cancelable operating leases are as
follows:
Operating
Lease Payments
(In thousands)
2003 $ 12,067
2004 7,438
2005 6,958
2006 1,795
2007 1,461
Thereafter 5,115
-----
Total $ 34,834
==========
Rent expense under operating leases was $11.6 million in fiscal 2002, $13.1
million in fiscal 2001, and $10.6 million in fiscal 2000.
Note 12 - Fair Value of Financial Instruments:
Statement of Financial Accounting Standards 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 currently practicable to estimate such value. None of the Company's financial
instruments are held or issued for trading purposes. The carrying amounts and
fair values of Trimble's financial instruments are as follows:
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
January 3, 2003 December 28, 2001
(In thousands)
Assets:
Cash and cash equivalents (See Note 1*) $28,679 $28,679 $ 31,078 $ 31,078
Forward foreign currency exchange contracts 93 93 191 191
(See Note 6*)
Accounts receivable 79,645 79,645 71,680 71,680
Liabilities:
Subordinated notes (See Note 10*) $69,136 $65,798 $ 84,000 $ 81,290
Credit facilities (See Note 10*) 67,600 67,600 101,300 101,300
Promissory notes and other (See Note 10*) 1,789 1,421 5,189 4,958
Accounts payable 30,669 30,669 21,494 21,494
* See the Notes to the Consolidated Financial Statements
The fair value of the subordinated notes, bank borrowings, promissory note,
and the long-term commitment have been estimated using an estimate of the
interest rate Trimble would have had to pay on the 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 Trimble would currently 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. These contracts are adjusted to
fair value at the end of every month.
Note 13 - Income Taxes:
Trimble's income tax provision consists of the following:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
(in thousands)
Federal:
Current $ - $ - $ 1, 408
Deferred - - -
- - 1,408
State:
Current 142 58 144
Deferred - -
142 58 144
Foreign:
Current 2,052 2,729 931
Deferred 1,306 (887) (908)
3,358 1,842 23
Income tax provision $ 3,500 $ 1,900 $ 1,575
The domestic (loss) income from continuing operations before income taxes
was approximately $3.3 million, $(29.3) million and $14.4 million in fiscal
years 2002, 2001 and 2000, respectively.
The income tax provision 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:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
(dollars in thousands)
Expected tax from continuing operations at 35%
in all years $ 4,839 $ (7,557) $ 5,516
Operating loss not utilized (utilized) (1,156) 9,704 (5,115)
Foreign withholding taxes - 115 141
Foreign tax rate differential (137) (970) 307
Goodwill amortization - 747 370
Other (46) (139) 356
Income tax provision $ 3,500 $ 1,900 $ 1,575
Effective tax rate 25% (9%) 10%
The components of deferred taxes consist of the following:
January 3, December 28,
2003 2001
(in thousands)
Deferred tax liabilities:
Purchased intangibles $ 381 $ 6,933
Depreciation and amortization 2,258 -
Other items (78) 300
Total deferred tax liabilities 2,561 7,233
Deferred tax assets:
Inventory valuation differences 12,069 11,741
Expenses not currently deductible 5,762 5,103
Federal credit carry forwards 8,172 7,300
Deferred revenue 4,317 808
State credit carry forwards 6,215 5,377
Warranty 2,374 2,596
Depreciation and amortization 3,184 6,091
Federal net operating loss (NOL) carry forward 4,451 1,086
Other items 1,827 1,147
Total deferred tax assets 48,371 51,249
Valuation allowance (47,878) (50,974)
Total deferred tax assets 493 275
Total net deferred tax liabilities $ (2,068) $ (6,958)
The Company has $12.7 million federal net operating loss carry forwards,
which expire beginning in 2022. The total federal credit carry forwards of $8.2
million expire beginning in 2005. The Company has state research and development
credit carry forwards of approximately $6.2 million, which do not expire.
Valuation allowances reduce the deferred tax assets to that amount that,
based upon all available evidence, is more likely than not to be realized. The
valuation allowance decreased by $3.1 million in 2002 and increased by $13.1
million in 2001. Approximately $12.1 million of the valuation allowance at
January 3, 2003 relates to the tax benefits of stock option deductions, which
will be credited to equity if and when realized.
Note 14 - Shareholder's Equity:
Common Stock
On December 21, 2001, Trimble completed a private placement of 1,783,337
shares of its common stock at a price of $15.00 per share to certain qualified
investors, resulting in gross proceeds of approximately $26.8 million to the
Company. On January 15, 2002, Trimble had a second closing of the private
placement issuing 1,280,004 shares of common stock at $15.00 per share resulting
in gross proceeds of an additional $19.2 million.
2002 Stock Plan
In 2002, Trimble's Board of Directors adopted the 2002 Stock Plan ("2002
Plan"). The 2002 Plan approved by the shareholders provides for the granting of
incentive and non-statutory stock options for up to 2,000,000 shares plus any
shares currently reserved but un-issued to employees, consultants, and directors
of Trimble. Incentive stock options may be granted at exercise prices that are
not less than 100% of the fair market value of Common Stock on the date of
grant. Employee stock options granted under the 2002 Plan 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 the grant. The exercise price of non-statutory stock options
issued under the 2002 Plan must be at least 85% of the fair market value of
Common Stock on the date of grant. As of January 3, 2003, options to purchase
782,715 shares were outstanding and 1,217,285 were available for future grant
under the 2002 Plan.
1993 Stock Option Plan
In 1992, Trimble's Board of Directors adopted the 1993 Stock Option Plan
("1993 Plan"). The 1993 Plan, as amended to date and approved by shareholders,
provides for the granting of incentive and non-statutory stock options for up to
6,375,000 shares of Common Stock to employees, consultants, and directors of
Trimble. Incentive stock options may be granted at exercise prices that are not
less than 100% of the fair market value of Common Stock on the date of grant.
Employee stock options granted under the 1993 Plan 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 non-statutory 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 3, 2003, options to purchase 4,009,585 shares were
outstanding, and 606,955 shares were available for future grant under the 1993
Plan.
1990 Director Stock Option Plan
In December 1990, Trimble adopted a Director Stock Option Plan under which
an aggregate of 380,000 shares of Common Stock have been reserved for issuance
to non-employee directors as approved by the shareholders to date. At January 3,
2003, options to purchase 208,333 shares were outstanding, and 35,416 shares
were available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan
In 1992, Trimble's Board of Directors approved the 1992 Management Discount
Stock Option Plan ("Discount Plan"). Under the Discount Plan, 300,000
non-statutory stock options were reserved for grant to management employees at
exercise prices that may be 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 3, 2003, there were no 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. There were no
discounted options granted in the plan in fiscal 2002, 2001, and 2000. As of
January 3, 2003, options to purchase 126,000 shares were outstanding under the
1992 Management Discount Stock Option Plan.
1988 Employee Stock Purchase Plan
In 1988, Trimble established an employee stock purchase plan under which an
aggregate of 3,350,000 shares of Common Stock have been reserved for sale to
eligible employees as approved by the shareholders to date. 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 fiscal 2002 and 2001, 241,608
shares and 208,154 shares, respectively, were issued under the plan for
aggregate proceeds to the Company of $2.9 million and $3.1 million,
respectively. At January 3, 2003, the number of shares reserved for future
purchases by eligible employees was 504,203.
SFAS 123 Disclosures
As stated in Note 1 of the Notes to the Consolidated Financial Statements,
Trimble 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 Trimble's employee stock options equals
the market price of the underlying stock on date of grant, no compensation
expense is recognized.
For purposes of pro forma disclosure assumptions, see the related SFAS 123
information in Note 1 of the Notes to the Consolidated Financial Statements.
Exercise prices for options outstanding as of January 3, 2003, ranged from
$8.00 to $51.69. The weighted average remaining contractual life of those
options is 7.13 years. In view of the wide range of exercise prices, Trimble
considers it appropriate to provide the following additional information in
respect of options outstanding:
Currently exercisable
-------------------------------------
Total Weighted-average Weighed-average
Number Weighted-average Remaining Number Exercise price
Range (in thousands) Exercise price contractual life (in thousands)
$8.00 - $ 8.66 574,141 $8.13 5.64 444,958 8.14
$8.88 - $11.94 819,055 $10.99 6.25 583,583 $10.90
$12.00 - $13.99 344,701 $12.81 6.55 190,177 $12.57
$15.34 - $15.34 608,765 $15.34 9.47 - -
$15.38 - $17.05 545,163 $15.80 6.23 350,324 $15.60
$17.13 - $17.47 734,211 $17.35 8.51 230,411 $17.34
$17.50 - $19.94 557,278 $18.63 6.22 400,771 $18.48
$21.00 - $34.13 228,382 $26.92 7.02 134,454 $27.20
$41.13 - $41.13 688,037 $41.13 7.65 321,806 $41.13
$51.69 - $51.69 26,900 $51.69 7.55 13,401 $51.69
$8.00 - $51.69 5,126,633 $18.53 7.13 2,669,885 $17.54
Activity during fiscal 2002, 2001, and 2000, under the combined plans was as
follows:
January 3, 2003 December 28, 2001 December 29, 2000
------------------------------- --------------------------- ---------------------------
Weighted Weighted
Weighted average average average
Fiscal Years Ended Options exercise price Options exercise price Options exercise price
- -------------------------------------- ------------ ----------------- ---------- --------------- ----------- ----------------
(In thousands, except for per share
data)
Outstanding at beginning of year 4,621 $19.04 4,260 $19.09 4,009 $12.36
Granted 850 14.82 1,070 17.08 1,379 34.39
Exercised (132) 10.00 (291) 12.91 (706) 13.08
Cancelled (211) 20.19 (418) 18.55 (422) 15.51
Outstanding at end of year 5,127 $18.53 4,621 $19.04 4,260 $19.07
Exercisable at end of year 2,670 $17.54 2,006 $16.26 1,429 $12.94
Available for grant 1,860 1,043 1,527
Weighted-average fair value of
options granted during year $8.46 $9.58 $19.04
Non-statutory Options
On May 3, 1999, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 30,000 shares of common stock at an exercise price of
$9.75 per share, with an expiration date of March 29, 2004.
As of January 3, 2003, these non-statutory options have not been exercised.
Warrants
On December 21, 2001, Trimble granted five-year warrants to purchase
356,670 shares of common stock at an exercise price of $19.475 per share. These
warrants were granted to investors as part of a private placement of the
Company's common stock.
On January 15, 2002, in connection with the second closing of the December
21, 2001 private placement of the Company's common stock, Trimble granted
five-year warrants to purchase an additional 256,002 shares of common stock,
subject to certain adjustments, at an exercise price of $19.475 per share.
On April 12, 2002, the Company issued to Spectra-Physics Holdings USA,
Inc., a warrant to purchase up to 376,233 shares of Trimble's common stock over
a fixed period of time. Initially, Spectra-Physics' warrant entitles it to
purchase 200,000 shares of common stock over a five-year period at an exercise
price of $15.11 per share. On a quarterly basis beginning July 14, 2002,
Spectra-Physics' warrant became exercisable for an additional 250 shares of
common stock for every $1 million of principal and interest outstanding until
the note is paid off in full. These shares are purchasable at a price equal to
the average of Trimble's closing price for the five days immediately preceding
the last trading day of each quarter. On July 14, 2002 an additional 17,364
shares became exercisable at an exercise price of $14.46 per share. On October
14, 2002 an additional 17,824 shares became exercisable at an exercise price of
$9.18. On January 14, 2003, an additional 18,284 shares became exercisable at an
exercise price of $13.54. The additional shares are exercisable over a 5-year
period.
The approximate fair value of the warrants of $1.5 million was determined
using the Black-Scholes pricing model with the following assumptions:
contractual life of 5-year period, risk-free interest rate of 4%; volatility of
65%; and no dividends during the contractual term. The value of the warrants is
amortized to interest expense over the term of the subordinated note.
Common Stock Reserved for Future Issuances
As of January 3, 2003, Trimble had reserved 8,478,397 common shares for
issuance upon exercise of options and warrants outstanding and options available
for grant under the 2002 Plan, the 1993 Plan, the 1990 Director Plan, and the
1992 Management Discount Plan, and available for issuance under the 1988
Employee Stock Purchase Plan.
Note 15 - Benefit Plans:
401(k) Plan
Under Trimble's 401(k) Plan, U.S. employee participants (including
employees of certain subsidiaries) may direct the investment of contributions to
their accounts among certain mutual funds and the Trimble Navigation Limited
Common Stock Fund. The Trimble Fund sold net 23,813 shares of Common Stock for
an aggregate of $291,565 in fiscal 2002. Trimble, at its discretion, matches
individual employee 401(k) Plan contributions at a rate of fifty cents of every
dollar that the employee contributes to the 401(k) Plan up to 5% of the
employee's annual salary to an annual maximum of $2,500. Trimble's matching
contributions to the 401(k) Plan were $1.8 million in fiscal 2002, $1.7 million
in fiscal 2001, and $0.8 million in fiscal 2000.
Profit-Sharing Plan
In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly adjusted pre-tax
income. Payments under the plan during fiscal 2002, 2001 and 2000 were $1.1
million, $0.9 million, and $2.1 million, respectively.
Defined Contribution Pension Plans
Certain of the Company's European subsidiaries participate in state
sponsored pension plans. Contributions are based on specified percentages of
employee salaries. For these plans, Trimble contributed and charged to expense
approximately $1.4 million for fiscal 2002, $1.4 million for fiscal 2001, and
$0.3 million for fiscal 2000.
Defined Benefit Pension Plan
The Swedish and German subsidiaries have an unfunded defined benefit
pension plan that covered substantially all of their full-time employees through
1993. Benefits are based on a percentage of eligible earnings. The employee must
have had a projected period of pensionable service of at least 30 years as of
1993. If the period was shorter, the pension benefits were reduced accordingly.
Active employees do not accrue any future benefits; therefore, there is no
service cost and the liability will only increase for interest cost.
Net periodic benefit costs in fiscal 2002 and 2001 were not material. The fair
value of the plan assets were as follows:
January 3, December 28,
2003 2001
- -----------------------------------------------------------------------------
(in thousands)
Fair value of plan assets at beginning of year $ 503 $ 465
Actual return on plan assets 60 56
Employer contribution - -
Plan participants' contributions 23 33
Benefits paid - -
Translation adjustment 76 (51)
-- ---
Fair value of plan assets at end of year $ 662 $ 503
===== =====
The defined benefit plan activity was as follows:
January 3, 2003 December 28, 2001
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 4,706 $ 4,811
Interest cost 131 134
Translation adjustment (237) (312)
Actuarial (gain) loss 282 73
Benefit obligation at end of year $ 4,318 $ 4,706
------- -------
Unrecognized prior service cost - -
Unrecognized net actuarial gain - -
Accrued pension costs (included in accrued
liabilities) $ 4,318 $ 4,706
======= =======
Actuarial assumptions used to determine the net periodic pension costs for
the year ended January 3, 2003 were as follows:
Swedish Subsidiary German Subsidiaries
---------------------- ----------------------
Discount rate 5.5% 6.25%
Rate of compensation increase 2.5% 1.5%
Note 16 - Earnings 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.
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- --------------------------------------------------- ---------------- --------------- ---------------
(in thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted earnings (loss)
per share from continuing operations $ 10,324 $ (23,492) $ 14,185
Used in basic and diluted earnings
per share from discontinued operations
-- 613 -
---
Used in basic and diluted earnings (loss)
per share $ 10,324 $ (22,879) $ 14,185
========= =========== =========
Denominator:
Weighted-average number of common shares
used in basic earnings (loss) per share 28,573 24,727 23,601
Effect of dilutive securities (using treasury stock method):
Common stock options 470 - 2,098
Common stock warrants 9 - 277
Weighted-average number of common shares
and dilutive potential common shares used
in diluted income per share 29,052 24,727 25,976
Basic earnings (loss) per share from continuing
operations $ 0.36 $ (0.95) $ 0.60
Basic earnings per share from discontinued
operations
- 0.02 -
- ---- -
Basic earnings (loss) per share $ 0.36 $ (0.93) $ 0.60
-------- --------- -------
Diluted earnings (loss) per share from
continuing operations $ 0.36 $ (0.95) $ 0.55
======== ========= =======
Diluted earnings per share from discontinued
operations
- 0.02 -
- ---- -
Diluted income (loss) per share $ 0.36 $ (0.93) $ 0.55
======== ========= =======
Due to the fact that the Company reported a net loss in fiscal 2001,
options and warrants were not included in the computation of earnings per share
in fiscal 2001. If the Company had reported net income in 2001, additional
938,000 common equivalent shares related to outstanding options and warrants
would have been included in the calculation of diluted loss per share.
Note 17 - Comprehensive Income (Loss):
The components of other comprehensive income (loss), net of related tax as
follows:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
- ------------------------------------------ ---------------- --------------- ---------------
(in thousands)
Cumulative foreign currency translation
adjustments $ 17,697 $ (9,766) $ (8,045)
Net gain (loss) on interest rate swap 210 (203) -
Net unrealized gain (loss) on investments (17) 16 123
Other comprehensive income (loss) $ 17,890 $ (9,953) $ (7,922)
Accumulated other comprehensive income (loss) on the consolidated balance sheets
consists of unrealized gains on available for sale investments and foreign
currency translation adjustments.
The components of accumulated other comprehensive (loss), net of related tax as
follows:
January 3 December 28,
2003 2001
(in thousands)
Cumulative foreign currency translation adjustments $ (1,032) $ (18,729)
Unrealized gain-hedges of forecasted transactions 7 0
Net gain (loss) on interest rate swap (203)
-
Net unrealized gain (loss) on investments (1) 16
--- --
Accumulated other comprehensive loss $ (1,026) $ (18,916)
========= ============
Note 18 - Related-Party Transactions:
Related-Party Lease
Trimble currently leases office space in Ohio from an association of three
individuals, one of whom is an employee of one of the U.S. operating units,
under a non-cancelable operating lease arrangement expiring in 2011. The annual
rent is subject to adjustment based on the terms of the lease. The Consolidated
Statements of Operations include expenses from this operating lease of $0.345
million for fiscal 2002, $0.345 million for fiscal 2001, and $0.172 million for
fiscal 2000.
Related-Party Notes Receivable
Trimble has notes receivable from officers and employees of approximately
$1.2 million as of January 3, 2003 and $955,000 as of December 28, 2001. The
notes bear interest from 4.49% to 6.62% and have an average remaining life of
2.89 years as of January 3, 2003.
Caterpillar Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC (CTCT, or
"Joint Venture"), a Joint Venture formed by Trimble and Caterpillar began
operations. The Joint Venture, 50 percent owned by Trimble and 50 percent owned
by Caterpillar, with equal voting rights, is developing and marketing next
generation advanced electronic guidance and control products for earthmoving
machines in the construction, mining, and waste industries. The Joint Venture is
based in Dayton, Ohio. Under the terms of the joint venture agreement,
Caterpillar contributed $11.0 million cash plus selected technology, for a total
contributed value of $14.5 million, and Trimble contributed selected existing
machine control product technologies valued at $25.5 million. Additionally, both
companies have licensed patents and other intellectual property from their
portfolios to the Joint Venture. During the first fiscal quarter of 2002,
Trimble received a special cash distribution of $11.0 million from the Joint
Venture.
Trimble has elected to treat the cash distribution of $11.0 million as a
deferred gain, being amortized to the extent that losses are attributable from
the Joint Venture under the equity method described above. When and if the Joint
Venture is profitable on a sustainable basis, and future operating losses are
not anticipated, then Trimble will recognize as a gain, the portion of the $11.0
million, which is un-amortized. To the extent that it is possible that the
Company will have any future-funding obligation relating to the Joint Venture,
then the relevant amount of the $11.0 million will be deferred until such a
time, as the funding obligation no longer exists. Both Trimble's share of
profits (losses) under the equity method and the amortization of our $11.0
million deferred gain are recorded under the heading of "Expense for affiliated
operations, net" in Non-operating income (expense).
During fiscal year 2002, Trimble recorded approximately $4.0 million of
expenses under the heading of "Expense for affiliated operations, net" in
Non-operating income (expense) related to certain transactions between the Joint
Venture and Trimble. This was comprised of approximately $4.9 million of
incremental costs incurred by Trimble as a result of purchasing products from
the Joint Venture at a higher transfer price than its original manufacturing
costs, offset by approximately $0.9 million of contract manufacturing fees
charged to the Joint Venture by Trimble. Due to the nature of the transfer price
agreements between Trimble and the Joint Venture, a related party, the impact of
these agreements is classified under Non-operating income (expense).
In addition, during fiscal year 2002, Trimble recorded lower operating
expenses of approximately $4.2 million due to the transfer of employee related
expenses for research and development ($2.8 million), and sales, marketing, and
administrative functions ($1.4 million) to the Joint Venture. These employees
are devoted to the Joint Venture and are primarily engaged in developing next
generation products and technology for that entity.
Trimble has adopted the equity method of accounting for its investment in
the Joint Venture. This requires that the Company records its share of the Joint
Venture profits or losses in a given fiscal period. During fiscal year 2002, the
Joint Venture reported a loss of $0.4 million of which Trimble's share is $0.2
million, which was recorded as a Non-operating expense under the heading of
"Expense for affiliated operations, net", but which was offset by the
amortization of an equal amount of the original deferred gain on the sale of
technology to the Joint Venture.
Note 19 - Statement of Cash Flow Data:
January 3, December 28, December 29,
Fiscal Years Ended 2003 2001 2000
(in thousands)
Supplemental disclosure of cash
flow information:
Interest paid $ 12,215 $ 17,363 $ 9,037
Income taxes paid $ 2,635 $ 825 $ 3,835
Note 20 - Litigation:
In January of 2001, Philip M. Clegg instituted a lawsuit in the United
States District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. On January 29, 2003, Trimble and Mr. Clegg settled this patent
infringement lawsuit whereby Trimble has purchased a fully paid up,
non-exclusive license under U.S. Patent No. 4,807,131 from Mr. Clegg.
In November of 2001, Qualcomm Inc. filed a lawsuit against Trimble in the
Superior Court of the State of California. The complaint alleges claims for an
unspecified amount of money damages arising out of Qualcomm's perceived lack of
assurances in early 1999 that Trimble's products purchased by Qualcomm would
work properly after a scheduled week number rollover event that took place in
August of 1999. Qualcomm is the only customer to make a claim against Trimble
based on the week number rollover event. In the opinion of management, the
resolution of this lawsuit is not expected to have a material adverse effect on
the Company's overall financial position.
The Company is also a party to other disputes incidental to its business.
Trimble believes that its ultimate liability as a result of such disputes, if
any, would not be material to its overall financial position, results of
operations, or liquidity.
Note 21 - Selected Quarterly Financial Data (unaudited):
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------- ---------------- ---------------- ---------------- ----------------
(In thousands, except per share data)
Fiscal 2002
Total revenue $ 104,029 $ 123,256 $ 114,748 $ 124,569
Gross margin 54,333 60,951 57,581 61,567
Net income (loss) (715) 4,326 2,708 4,005
---- ----- ----- -----
Basic net income (loss) per share $ (0.03) $ 0.15 $ 0.09 $ 0.14
======== ======= ======== ========
Diluted net income (loss) per share $ (0.03) $ 0.15 $ 0.09 $ 0.14
======== ========= ======== ========
Fiscal 2001
Total revenue $ 117,863 $ 133,587 $ 117,437 $ 106,405
Gross margin 57,500 65,531 60,315 53,889
Net loss (11,587) (1,974) (2,686) (6,632)
------- ------ ------ ------
Basic net loss per share $ (0.48) $ (0.08) $ (0.11) $ (0.26)
========= ========= ======== ========
Diluted net loss per share $ (0.48) $ (0.08) $ (0.11) $ (0.26)
======== ======== ======== ========
Significant quarterly items include the following: (i) in the first quarter
of 2002 a $0.3 million charge or $0.01 per diluted share relating to workforce
reduction (ii) in the second quarter of 2002 a $0.2 million charge, or $0.01 per
diluted share relating to work force reduction (iii) in the third quarter of
2002 a $0.2 million charge, or $0.01 per diluted share relating to work force
reduction and a $0.2 million gain, or $0.01 per diluted share relating to the
sale of an investment; (iv) in the fourth quarter of 2002 a $0.5 million charge,
or $0.02 per diluted share relating to work force reduction and a $1.5 million
charge, or $0.05 per diluted share relating to the write-down of an investment.
Significant quarterly items include the following: (i) in the first quarter
of 2001 a $2.0 million charge or $0.08 per diluted share relating to loss on
sale of Air Transport business and the exiting of certain product lines; (ii) in
the second quarter of 2001 a $0.9 million charge, or $0.04 per diluted share
relating to work force reduction; and $0.2 million in income or $0.01 per
diluted share relating to a gain on the sale of a minority investment; (iii) in
the third quarter of 2001 a $0.4 million charge, or $0.01 per diluted share
relating to work force reduction; (iv) in the fourth quarter of 2001 a $0.5
million charge, or $0.02 per diluted share relating to work force reduction; a
$0.1 million gain, or $0.01 per diluted share on sale of business; and a $0.1
million charge, or $0.01 per diluted share relating to the write-down of an
investment.
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 3, 2003 and December 28, 2001, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended January 3, 2003. Our audits also
included the financial statement schedule listed in the index at Item 14(a)(2).
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 auditing standards generally
accepted in the United States. 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 3, 2003 and December 28, 2001, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended January 3, 2003, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
s/ Ernst & Young LLP
January 24, 2003
Palo Alto, California
TRIMBLE NAVIGATION LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10 Directors and Executive Officers of the Registrant
The information required by this item, insofar as it relates to Trimble's
directors, will be contained under the captions "Election of Directors" and
"Section 16 Beneficial Ownership Reporting Compliance" in the Proxy Statement
and is incorporated herein by reference.
Item 11 Executive Compensation
The information required by this item will be contained in the Proxy
Statement under the caption "Executive Compensation" and is incorporated herein
by reference.
Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information required by this item will be contained in the Proxy
Statement under the caption "Security Ownership of Certain Beneficial Owners and
Management Related Stockholder Matters" and is incorporated herein by reference.
Item 13 Certain Relationships and Related Transactions
The information required by this item will be contained in the Proxy
Statement under the caption "Certain Relationships and Related Transactions" and
is incorporated herein by reference.
Item 14 Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our chief executive officer and chief financial officer evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) and 15(d)-14(c) under the Securities Exchange Act of 1934, as amended)
within 90 days of the filing of this Form 10-K (the "Evaluation Date") and,
based on that evaluation, concluded that, as of the Evaluation Date, our
disclosure controls and procedures are effective to timely alert management to
material information relating to Trimble during the period when our periodic
reports are being prepared.
(b) Changes in internal controls.
Since the Evaluation Date, there have not been any significant changes to
our internal controls or in other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART IV
Item 15. 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 3, 2003 and December 28, 2001 56
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 3, 2003 57
Consolidated Statement of Shareholders' Equity for the three fiscal years
in the period ended January 3, 2003 58
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 3, 2003 59
Notes to Consolidated Financial Statements 60-92
Report of Ernst & Young LLP, Independent Auditors 93
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.
3. Exhibits
Exhibit
Number
3.1 Restated Articles of Incorporation of the Company filed June 25, 1986.
(6)
3.2 Certificate of Amendment of Articles of Incorporation of the Company
filed October 6, 1988. (6)
3.3 Certificate of Amendment of Articles of Incorporation of the Company
filed July 18, 1990. (6)
3.4 Certificate of Determination of the Company filed February 19, 1999.
(6)
3.8 Amended and Restated Bylaws of the Company. (15)
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. (5)
4.3 First Amended and Restated Stock and Warrant Purchase Agreement
between and among the Company and the investors thereto dated January
14, 2002. (10)
4.4 Form of Warrant to Purchase Shares of Common Stock dated January 14,
2002. (11)
4.5 Form of Warrant dated April 12, 2002. (12)
10.4+ Form of Indemnification Agreement between the Company and its
officers and directors. (1)
10.32+ 1990 Director Stock Option Plan, as amended, and form of Outside
Director Non-statutory Stock Option Agreement. (4)
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)
10.40 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. (3)
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. (3)
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. (3)
10.46+ 1992 Management Discount Stock Option and form of Nonstatutory Stock
Option Agreement. (3)
10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (8)
10.60+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (8)
10.65+ Standby Consulting Agreement between the Company and Bradford W.
Parkinson dated September 1, 1998. (6)
10.66+ Standby Consulting Agreement between the Company and Robert S.
Cooper dated September 1, 1998. (6)
10.67+ Employment Agreement between the Company and Steven W. Berglund
dated March 17, 1999. (6)
10.68+ Nonqualified deferred Compensation Plan of the Company effective
February 10, 1994. (6)
10.70***Supply Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron Federal
Systems, Inc. (7)
10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock
Purchase Plan. (9)
10.80 Amended and Restated Subordinated Promissory Note dated March 20,
2002. (13)
10.81+ 2002 Stock Plan, including form of Option. (14)
10.82 Amended and Restated Credit Agreement dated January 14, 2003. (16)
10.83 Letter dated May 8, 2002 exercising renewal option of the Supply
Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc.
(16)
21.1 Subsidiaries of the Company. (16)
23.1 Consent of Ernst & Young LLP, independent auditors. (16)
24.1 Power of Attorney included on signature page herein.
99.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (16)
99.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (16)
*** Confidential treatment has been granted for certain portions of this
exhibit pursuant to an order dated effective October 5, 1999.
+ 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 to 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 to 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 to the
registrant's Registration Statement on Form S-1 (File No. 33-45990),
which was filed February 18, 1992.
(4) Incorporated by reference to identically numbered exhibits to the
registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
(5) Incorporated by reference to Exhibit No. 1 to the registrant's
Registration Statement on Form 8-A, which was filed on February 18,
1999.
(6) Incorporated by reference to identically numbered exhibits to the
registrant's Annual Report on Form 10-K for the fiscal year ended
January 1, 1999.
(7) Incorporated by reference to identically numbered exhibits to the
registrant's Report on Form 8-K, which was filed on August 25, 1999.
(8) Incorporated by reference to identically numbered exhibits to the
registrant's registration statement on Form S-8 filed on June 1, 2000.
(9) Incorporated by reference to identically numbered exhibits to the
registrant's Annual Report on Form 10-K for the fiscal year ended
December 29, 2000.
(10) Incorporated by reference to exhibit number 4.1 to the registrant's
Current Report on Form 8-K filed on January 16, 2002.
(11) Incorporated by reference to exhibit number 4.2 to the registrant's
Current Report on Form 8-K filed on January 16, 2002.
(12) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-3 filed on April 19, 2002.
(13) Incorporated by reference to exhibit number 10.80 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 29, 2002.
(14) Incorporated by reference to exhibit number 10.82 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 28, 2002.
(15) Incorporated by reference to exhibit number 3.8 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 27,
2002.
(16) Filed herewith.
(b) Reports on Form 8-K.
On October 24, 2002, the Company filed a report on Form 8-K reporting
the Company's quarterly earnings for the third fiscal quarter of 2002.
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 6, 2003
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Steven W. Berglund 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.
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 6, 2003
- ----------------------- Officer, Director
Steven W. Berglund
/s/ Mary Ellen Genovese Chief Financial Officer and Assistant March 7, 2003
- ------------------------ Secretary (Principal Financial Officer)
Mary Ellen Genovese
/s/ Anup V. Singh Corporate Controller March 7, 2003
- ------------------- (Principal Accounting Officer)
Anup V. Singh
/s/ Robert S. Cooper Director March 4, 2003
- -----------------------
Robert S. Cooper
/s/ John B. Goodrich Director March 7, 2003
- ----------------------
John B. Goodrich
/s/ William Hart Director March 6, 2003
- ----------------
William Hart
/s/ Ulf J. Johansson Director March 4, 2003
- ---------------------
Ulf J. Johansson
/s/ Bradford W. Parkinson Director March 4, 2003
- -------------------------
Bradford W. Parkinson
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Steven W. Berglund, certify that:
1. I have reviewed this annual report on Form 10-K of Trimble Navigation
Limited.
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Annual Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Annual Report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Annual Report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls;
6. The registrant's other certifying officers and I have indicated in
this Annual Report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 6, 2003 /s/ Steven W. Berglund
----------------------
Steven W. Berglund
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mary Ellen Genovese, certify that:
1. I have reviewed this annual report on Form 10-K of Trimble Navigation
Limited.
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Annual Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Annual Report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Annual Report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls;
6. The registrant's other certifying officers and I have indicated in
this Annual Report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 7, 2003 /s/ Mary Ellen Genovese
-----------------------
Mary Ellen Genovese
Chief Financial Officer
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
January 3, December 28, December 29,
Allowance for doubtful accounts: 2003 2001 2000
---------------------------------------
Balance at beginning of period $ 8,540 $ 6,538 $ 2,949
Acquired allowance (1) - - 4,445
Bad debt expense 5,443 5,077 1,198
Write-offs, net of recoveries (4,083) (3,075) (2,054)
----------- ---------- --------------
Balance at end of period $9,900 $8,540 $6,538
----------- ---------- --------------
Inventory allowance:
Balance at beginning of period $23,274 $19,285 $14, 109
Acquired allowance (2) - - 7,672
Additions to allowance 3,901 7,242 188
Write-offs, net of recoveries (2,025) (3,253) (2,684)
----------- ---------- --------------
Balance at end of period $25,150 $23,274 $19,285
----------- ---------- --------------
(1) Includes $4,419,000 acquired at July 14, 2000 as part of the
acquisition of Spectra Precision Group and $26,000 acquired at November 14, 2000
as part of the acquisition of Tripod Data Systems.
(2) Includes $7,659,000 acquired at July 14, 2000 as part of the
acquisition of Spectra Precision Group and $13,000 acquired at November 14, 2000
as part of the acquisition of Tripod Data Systems.
EXHIBIT 10.82
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of January 14, 2003
among
TRIMBLE NAVIGATION LIMITED,
as the Company,
THE SUBSIDIARY BORROWERS,
THE INSTITUTIONS FROM TIME TO TIME
PARTIES HERETO AS LENDERS,
THE BANK OF NOVA SCOTIA,
as Administrative Agent, Issuing Bank, and Swing Line Bank,
FLEET NATIONAL BANK,
as Syndication Agent,
and
BANK OF AMERICA, N.A.,
as Documentation Agent,
-------------------------------------------
Arranged By
THE BANK OF NOVA SCOTIA,
as Lead Arranger and Sole Book Runner,
and
FLEET SECURITIES, INC.,
as Co-Arranger
-2-
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 14,
2003, is entered into by and among, TRIMBLE NAVIGATION LIMITED, a California
corporation (the "Company"), the institutions from time to time parties hereto
as Lenders, whether by execution of this Agreement or an Assignment Agreement
pursuant to Section 14.3, THE BANK OF NOVA SCOTIA ("BNS"), in its capacity as
administrative agent for itself and the other Lenders (the "Administrative
Agent"), FLEET NATIONAL BANK, in its capacity as syndication agent (the
"Syndication Agent"), and BANK OF AMERICA, N.A., in its capacity as
documentation agent (the "Documentation Agent").
R E C I T A L S:
A. Pursuant to the Credit Agreement, dated as of July 14, 2000 (as
amended, supplemented, amended and restated or otherwise modified prior to the
date hereof, the "Existing Credit Agreement"), among the Company, the various
financial institutions and other Persons from time to time parties thereto as
lenders (the "Existing Lenders"), the Syndication Agent, BNS, as documentation
agent, and ABN Amro Bank N.V., as administrative agent thereunder, the Existing
Lenders were committed to make extensions of credit to the Company and the
Subsidiary Borrowers on the terms and conditions set forth therein and made
revolving loans (the "Existing Revolving Loans") and term loans (the "Existing
Term Loans", and collectively with the Existing Revolving Loans, the "Existing
Loans") to the Company and the Subsidiary Borrowers.
B. In order to provide for the ongoing working capital and general
corporate needs of the Company, the Company desires to, among other things,
continue certain of the Existing Loans as Loans under this Agreement and to
obtain the commitments to make Loans set forth herein.
C. The Company has requested that the Existing Credit Agreement be
amended and restated in its entirety to become effective and binding on the
Company pursuant to the terms of this Agreement, and the Lenders (including the
Existing Lenders) have agreed (subject to the terms of this Agreement) to amend
and restate the Existing Credit Agreement in its entirety to read as set forth
in this Agreement, and it has been agreed by the parties to the Existing Credit
Agreement that (a) the commitments which the Existing Lenders have agreed to
extend to the Company under the Existing Credit Agreement shall be extended or
advanced upon the amended and restated terms and conditions contained in this
Agreement and (b) the Existing Loans and other Obligations outstanding under the
Existing Credit Agreement shall be governed by and deemed to be outstanding
under the amended and restated terms and conditions contained in this Agreement,
with the intent that the terms of this Agreement shall supersede the terms of
the Existing Credit Agreement (each of which shall hereafter have no further
effect upon the parties thereto, other than for accrued fees and expenses, and
indemnification provisions, accrued and owing under the terms of the Existing
Credit Agreement on or prior to the date hereof or arising (in the case of an
indemnification) under the terms of the Existing Credit Agreement); provided
that any Hedging Agreements with any one or more Existing Lenders (or their
respective Affiliates) shall continue unamended and in full force and effect.
D. All Obligations are and shall continue to be secured by, among other
things, the Collateral Documents and the other Loan Documents.
E. The Lenders are willing to extend such financial accommodations on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the
Lenders and the Administrative Agent hereby agree as follows:
ARTICLE I: DEFINITIONS
1.1 Certain Defined Terms. In addition to the terms defined above, the
following terms used in this Agreement shall have the following meanings,
applicable both to the singular and the plural forms of the terms defined.
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Company or any of its Subsidiaries (a) acquires any going business concern or
all or substantially all of the assets of any firm, corporation or division
thereof, whether through purchase of assets, merger or otherwise or (b) directly
or indirectly acquires (in one transaction or as the most recent transaction in
a series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage of voting power) of the
outstanding equity interests of another Person.
"Acquisition Documents" means the Stock and Asset Purchase Agreement,
the documents evidencing the Subordinated Seller Debt and the other documents,
certificates and agreements delivered in connection with the Spectra Precision
Acquisition.
"Administrative Agent" is defined in the preamble and includes each
other Person appointed as the successor Administrative Agent pursuant to Section
12.11.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loan(s) made by some or all of the Lenders to the
applicable Borrower of the same Type and, in the case of Eurocurrency Rate
Advances and Alternate Currency Loans, in the same currency and for the same
Interest Period.
"Affected Lender" is defined in Section 2.20 hereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of greater than ten percent (10%) or more of any class of voting
securities (or other voting interests) of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
Capital Stock, by contract or otherwise.
"Aggregate Revolving Loan Commitment" means, as of any date of
determination, the sum of (a) the Aggregate Tranche A Revolving Loan Commitment
as of such date, (b) the Aggregate Tranche B Revolving Loan Commitment as of
such date, (c) the Aggregate Tranche C Revolving Loan Commitment as of such date
and (d) the Aggregate Tranche D Revolving Loan Commitment as of such date.
"Aggregate Tranche A Revolving Loan Commitment" means the aggregate of
the Tranche A Revolving Loan Commitments of all the Lenders, as they may be
adjusted from time to time pursuant to the terms hereof. The Aggregate Tranche A
Revolving Loan Commitment shall not be greater than the difference between the
Aggregate Tranche C Revolving Loan Commitment and Fifty Million and 00/100
Dollars ($50,000,000.00).
"Aggregate Tranche B Revolving Loan Commitment" means the aggregate of
the Tranche B Revolving Loan Commitments of all the Lenders, as they may be
adjusted from time to time pursuant to the terms hereof. The Aggregate Tranche B
Revolving Loan Commitment shall not be greater than the difference between the
Aggregate Tranche D Revolving Loan Commitment and Fifty Million and 00/100
Dollars ($50,000,000.00).
"Aggregate Tranche C Revolving Loan Commitment" means the aggregate of
the Tranche C Revolving Loan Commitments of all the Lenders, as they may be
adjusted from time to time pursuant to the terms hereof. The Aggregate Tranche C
Revolving Loan Commitment shall not be greater than Fifty Million and 00/100
Dollars ($50,000,000.00).
"Aggregate Tranche D Revolving Loan Commitment" means the aggregate of
the Tranche D Revolving Loan Commitments of all the Lenders, as they may be
adjusted from time to time pursuant to the terms hereof. The Aggregate Tranche D
Revolving Loan Commitment shall not be greater than Fifty Million and 00/100
Dollars ($50,000,000.00).
"Agreed Currencies" means (a) Dollars, (b) so long as such currency
remains an Eligible Currency, euros, and (c) any other Eligible Currency which
the applicable Borrower requests the Administrative Agent to include as an
Agreed Currency hereunder and which is agreed to by all of the Lenders with a
Tranche B Revolving Loan Commitment and a Tranche D Revolving Loan Commitment;
provided that the Administrative Agent shall promptly notify each such Lender of
each such request and each such Lender shall be deemed not to have agreed to
each such request unless and until its written consent thereto has been received
by the Administrative Agent.
"Agreement" means, on any date, the Existing Credit Agreement as
amended and restated hereby and as further amended, supplemented, amended and
restated or otherwise modified from time to time and in effect on such date.
"Agreement Accounting Principles" means generally accepted accounting
principles as applied in a manner consistent with that used in preparing the
financial statements of the Company referred to in Section 6.4 hereof; provided
that for the purposes of determining compliance with the financial covenants set
forth in Section 7.4 hereof, "Agreement Accounting Principles" means generally
accepted accounting principles as in effect as of the date of this Agreement.
"Alternate Base Rate" means, for any day, a fluctuating rate of
interest per annum equal to in the case of Loans in Dollars, the higher of (a)
the Prime Rate for such day and (b) the sum of (i) the Federal Funds Effective
Rate for such day and (ii) one half percent (.50%) per annum and in the case of
Loans in other Eligible Currencies, the comparable rate for such other Eligible
Currency, as reasonably determined by the Administrative Agent or the Alternate
Currency Bank, as applicable.
"Alternate Currency" shall mean any Eligible Currency which is not an
Agreed Currency and which the applicable Borrower requests the applicable
Alternate Currency Bank to include as an Alternate Currency hereunder and which
is acceptable to the applicable Alternate Currency Bank and with respect to
which an Alternate Currency Addendum has been executed by a Subsidiary Borrower
or the Company and the applicable Alternate Currency Bank in connection
therewith.
"Alternate Currency Addendum" means an addendum substantially in the
form of Exhibit H hereto with such modifications thereto as shall be approved by
the applicable Alternate Currency Bank and the Administrative Agent.
"Alternate Currency Bank" means BNS and any other Lender with a Tranche
B Revolving Loan Commitment or a Tranche D Revolving Loan Commitment (or any
Affiliate, branch or agency thereof) to the extent it is party to an Alternate
Currency Addendum as the "Alternate Currency Bank" thereunder. If any agency,
branch or Affiliate of such Lender shall be a party to an Alternate Currency
Addendum, such agency, branch or Affiliate shall, to the extent of any
commitment extended and any Loans made by it, have all the rights of such Lender
hereunder; provided that such Lender shall to the exclusion of such agency,
branch or Affiliate, continue to have all the voting rights vested in it by the
terms hereof.
"Alternate Currency Borrowing" means any borrowing consisting of a Loan
made in an Alternate Currency.
"Alternate Currency Commitment" means, for any Alternate Currency Bank
for each Alternate Currency, the obligation of such Alternate Currency Bank to
make Alternate Currency Loans not exceeding the Dollar Amount set forth in the
applicable Alternate Currency Addendum, as such amount may be modified from time
to time pursuant to the terms of this Agreement and the applicable Alternate
Currency Addendum.
"Alternate Currency Interest Period" means, with respect to any
Alternate Currency Loan, the Interest Period as set forth in, or determined in
accordance with, the applicable Alternate Currency Addendum.
"Alternate Currency Loan" means any Loan denominated in an Alternate
Currency made by the applicable Alternate Currency Bank to a Subsidiary Borrower
or the Company pursuant to Section 2.21 and an Alternate Currency Addendum.
"Alternate Currency Rate" means, for any day for any Alternate Currency
Loan, the per annum rate of interest selected by the applicable Borrower under
and as set forth in the applicable Alternate Currency Addendum.
"Amendment Effective Date" means the date upon which the applicable
conditions precedent set forth in Article V have been satisfied and the Loans
hereunder made.
"Applicable Commitment Fee Percentage" means, as at any date of
determination, the rate per annum then applicable in the determination of the
amount payable under Section 2.15(c)(i) hereof determined in accordance with the
provisions of Section 2.15(d)(ii) hereof.
"Applicable Eurocurrency Margin" means, as at any date of
determination, the rate per annum then applicable to Eurocurrency Rate Loans
determined in accordance with the provisions of Section 2.15(d)(ii) hereof.
"Applicable Floating Rate Margin" means, as at any date of
determination, the rate per annum then applicable to Floating Rate Loans
determined in accordance with the provisions of Section 2.15(d)(ii) hereof.
"Applicable L/C Fee Percentage" means, as at any date of determination,
a rate per annum equal to the Applicable Eurocurrency Margin for Eurocurrency
Rate Loans in effect on such date.
"Approved Fund" means, with respect to any Lender that is a fund or
commingled investment vehicle that invests in commercial loans, any other fund
that invests in commercial loans and is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment advisor.
"Approximate Equivalent Amount" of any currency with respect to any
amount of Dollars shall mean the Equivalent Amount of such currency with respect
to such amount of Dollars at such date, rounded up to the nearest amount of such
currency as determined by the Administrative Agent from time to time.
"Arrangers" means each of BNS, as Lead Arranger and Sole Book Runner,
and Fleet Securities, Inc., as Co-Arranger, in their respective capacities as
arrangers for the loan transaction evidenced by this Agreement.
"Asset Sale" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction) to any Person other than the
Company or any of its Wholly-Owned Subsidiaries other than (a) the sale or lease
of Inventory in the ordinary course of business, (b) the sale or other
disposition of any obsolete, excess, damaged or worn-out Equipment disposed of
in the ordinary course of business and (c) the sale or liquidation of Cash
Equivalents, (d) dispositions or transfers in the nature of a license or
sublicense of intellectual property, other than licenses that are exclusive
across all regions and fields and (e) other sales, dispositions, leases,
conveyances or transfers in the ordinary course of business, consistent with
past practices; provided that sales, dispositions, leases, conveyances or
transfers described in clauses (b), (d) and (e) shall only be excluded from the
definition of Asset Sale to the extent that they do not exceed $10,000,000 in
any fiscal year.
"Assigning Lender" is defined in Section 14.3.
"Assignment Agreement" means an assignment and acceptance agreement
entered into in connection with an assignment pursuant to Section 14.3 hereof in
substantially the form of Exhibit D hereto.
"Assumption Letter" means a letter of a Subsidiary of the Company
addressed to the Lenders in substantially the form of Exhibit J hereto pursuant
to which such Subsidiary agrees to become a Subsidiary Borrower and agrees to be
bound by the terms and conditions hereof.
"Authorized Officer" means any of the Chairman of the Board, the
President, the Treasurer, any Vice President or the Chief Financial Officer of
the Company, acting singly.
"Benefit Plan" means a defined benefit plan as defined in Section 3(35)
of ERISA (other than a Multiemployer Plan or a Foreign Employee Benefit Plan)
and in respect of which the Company or any other member of the Controlled Group
is, or within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA.
"BNS" is defined in the preamble.
"Borrower" means, as applicable, any of the Company and the Subsidiary
Borrowers, together with their respective successors and assigns; and
"Borrowers" shall mean, collectively, the Company and the Subsidiary Borrowers.
"Borrowing Date" means a date on which a Loan is made hereunder.
"Borrowing/Conversion/Continuation Notice" is defined in Section 2.8
hereof.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurocurrency Rate, a day (other than
a Saturday or Sunday) on which banks are open for business in Chicago, Illinois,
New York, New York and San Francisco, California and (i) in addition, for Loans
denominated in Agreed Currencies (other than euro), on which dealings in Dollars
and the other applicable Agreed Currencies are carried on in the London
interbank market and (ii) in addition, for Loans denominated in euro, on which
dealings in euro are carried on in Brussels, Belgium interbank market, and (b)
for all other purposes a day (other than a Saturday or Sunday) on which banks
are open for business in Chicago, Illinois, New York, New York and San
Francisco, California.
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with Agreement Accounting Principles
excluding (a) the cost of assets acquired with Capitalized Lease Obligations,
(b) expenditures of insurance proceeds to rebuild or replace any asset after a
casualty loss and (c) leasehold improvement expenditures for which the Company
or a Subsidiary is reimbursed promptly by the lessor.
"Capital Stock" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership, partnership interests
(whether general or limited) and (d) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person; provided that "Capital Stock"
shall not include any debt securities convertible into equity securities prior
to such conversion.
"Capitalized Lease" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the government of the United States and backed by
the full faith and credit of the United States government; (b) domestic and
Eurocurrency certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies, the long-term
indebtedness of which institution at the time of acquisition is rated A- (or
better) by Standard & Poor's Ratings Group or A3 (or better) by Moody's
Investors Services, Inc., and which certificates of deposit and time deposits
are fully protected against currency fluctuations for any such deposits with a
term of more than ninety (90) days; (c) shares of money market, mutual or
similar funds having assets in excess of $100,000,000 and the investments of
which are limited to (i) investment grade securities (i.e., securities rated at
least Baa by Moody's Investors Service, Inc. or at least BBB by Standard &
Poor's Ratings Group) and (ii) commercial paper of United States and foreign
banks and bank holding companies and their subsidiaries and United States and
foreign finance, commercial industrial or utility companies which, at the time
of acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group or
P-1 (or better) by Moody's Investors Services, Inc. (all such institutions
being, "Qualified Institutions"); (d) commercial paper of Qualified
Institutions; provided that the maturities of such Cash Equivalents shall not
exceed three hundred sixty-five (365) days from the date of acquisition thereof
and (e) other Investments properly classified as "cash" or "cash equivalents" in
accordance with Agreement Accounting Principles and made in accordance with the
Company's investment policy, as approved by the Company's Board of Directors
from time to time.
"Change" is defined in Section 4.2 hereof.
"Change of Control" means an event or series of events by which:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act of 1934), becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act of 1934,
provided that a person shall be deemed to have "beneficial ownership"
of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of
time), directly or indirectly, of twenty-five percent (25%) or more of
the combined voting power of the Company's outstanding Capital Stock
ordinarily having the right to vote at an election of directors; or
(b) the majority of the board of directors of the Company fails to
consist of Continuing Directors; or
(c) the Company consolidates with or merges into another corporation or
conveys, transfers or leases all or substantially all of its property
to any Person, or any corporation consolidates with or merges into the
Company, in either event pursuant to a transaction in which the
outstanding Capital Stock of the Company is reclassified or changed
into or exchanged for cash, securities or other property.
"Closing Date" means July 14, 2000, the date the initial Existing Loans
were made under the Existing Credit Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Agent" means the collateral agent for the Lenders, selected
pursuant to Section 12.13.
"Collateral Documents" means, collectively, (a) the Security
Agreements, the Mortgages, the Pledge Agreements and all other security
agreements, mortgages, deeds of trust, patent and trademark assignments, lease
assignments, guarantees and other similar agreements between any Borrower or
Guarantor and the Lenders, the Administrative Agent or the Collateral Agent for
the benefit of the Lenders now or hereafter delivered to the Lenders, the
Administrative Agent or the Collateral Agent pursuant to or in connection with
the transactions contemplated hereby, and all financing statements (or
comparable documents now or hereafter fixed in accordance with the UCC or
comparable law) against any Borrower or Guarantor as debtor in favor of the
Lenders, the Administrative Agent or the Collateral Agent for the benefit of the
Lenders as secured party, and (b) any amendments, supplements, modifications,
renewals, replacements, consolidations, substitutions and extensions of any of
the foregoing.
"Commission" means the Securities and Exchange Commission of the United
States of America and any Person succeeding to the functions thereof.
"Company" is defined in the preamble and includes such Person's
successors and assigns, including a debtor-in-possession on behalf of such
Person.
"Consolidated Net Assets" means the total assets of the Company and its
Subsidiaries on a consolidated basis (determined in accordance with Agreement
Accounting Principles), but excluding therefrom all goodwill and other
intangible assets under Agreement Accounting Principles.
"Consolidated Net Worth" means, at a particular date, all amounts which
would be included under shareholders' equity on the consolidated balance sheet
for the Company and its consolidated Subsidiaries, in each case as determined in
accordance with Agreement Accounting Principles but excluding the effects,
whether positive or negative, of foreign exchange translation adjustments after
the Closing Date.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined in Environmental, Health or Safety Requirements of Law.
"Contingent Obligation", as applied to any Person, means any
Contractual Obligation, contingent or otherwise, of that Person with respect to
any Indebtedness of another or other obligation or liability of another,
including, without limitation, any such Indebtedness, obligation or liability of
another directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable, including Contractual Obligations
(contingent or otherwise) arising through any agreement to purchase, repurchase,
or otherwise acquire such Indebtedness, obligation or liability or any security
therefor, or to provide funds for the payment or discharge thereof (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other financial
condition, or to make payment other than for value received. The amount of any
Contingent Obligation shall be equal to the portion of the obligation so
guaranteed or otherwise supported, in the case of known recurring obligations,
and the maximum reasonably anticipated liability in respect of the portion of
the obligation so guaranteed or otherwise supported assuming such Person is
required to perform thereunder, in all other cases.
"Continuing Director" means, with respect to any Person as of any date
of determination, any member of the board of directors of such Person who (a)
was a member of such board of directors on the date hereof or (b) was nominated
for election or elected to such board of directors with the approval of the
Continuing Directors who were members of such board at the time of such
nomination or election.
"Contractual Obligation", as applied to any Person, means any provision
of any equity or debt securities issued by that Person or any indenture,
mortgage, deed of trust, security agreement, pledge agreement, guaranty,
contract, undertaking, agreement or instrument, in any case in writing, to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject.
"Controlled Group" means the group consisting of (a) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company; (b) a partnership or
other trade or business (whether or not incorporated) which is under common
control (within the meaning of Section 414(c) of the Code) with the Company; and
(c) a member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as the Company, in each case ((a), (b) or (c)) giving effect
to the consummation of the transactions contemplated by the Loan Documents and
the Acquisition Documents.
"Customary Permitted Liens" means:
(a) Liens (other than Environmental Liens and Liens in favor
of the IRS or the PBGC) with respect to the payment of taxes,
assessments or governmental charges in all cases which are not yet due
or (so long as foreclosure, distraint, sale or other similar
proceedings shall not have been commenced or any such proceeding after
being commenced is stayed) which are being contested in good faith by
appropriate proceedings properly instituted and diligently conducted
and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with Agreement Accounting
Principles;
(b) Statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen, service providers or
workmen and other similar Liens imposed by law created in the ordinary
course of business for amounts not more than sixty (60) days past due
or which thereafter can be paid without penalty or which are being
contested in good faith by appropriate proceedings properly instituted
and diligently conducted and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
Agreement Accounting Principles;
(c) Liens arising with respect to zoning restrictions,
easements, encroachments, licenses, reservations, covenants,
rights-of-way, utility easements, building restrictions and other
similar charges, restrictions or encumbrances on the use of real
property which do not in any case materially detract from the value of
the property subject thereto or materially interfere with the ordinary
use or occupancy of the real property or with the ordinary conduct of
the business of the Company or any of its Subsidiaries;
(d) Liens arising in the ordinary course of business out of
pledges or deposits under worker's compensation laws, unemployment
insurance, old age pensions, or other social security or retirement
benefits, or similar legislation;
(e) Liens arising from or upon any judgment or award; provided
that such judgment or award is being contested in good faith by proper
appeal proceedings and only so long as execution thereon shall be
stayed;
(f) Deposits to secure the performance of bids, trade
contracts (other than for Indebtedness for borrowed money), leases,
statutory obligations, surety bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of the
Company's or any Subsidiary's business;
(g) Leases or subleases and licenses and sublicenses granted
to others in the ordinary course of the Company's business not
interfering in any material respect with the business of the Company
and its Subsidiaries taken as a whole, and any interest or title of a
lessor, licensor or under any lease or license;
(h) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods; and
(i) Liens that are subordinate to the Lien of the
Administrative Agent or Lenders which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on deposit,
whether arising by operation of law or by contract, in connection
with arrangements entered into with banks in the ordinary course of
business.
"Default" means an event described in Article VIII hereof.
"Disqualified Stock" means any class or series of capital stock of any
Person that by its terms or otherwise: (a) is required to be redeemed prior to
the date which is six months after the Facility Termination Date, (b) is
redeemable at the option of the holder of such class or series of capital stock
at any time prior to the date which is six months after the Facility Termination
Date; or (c) is convertible into or exchangeable or exchangeable for capital
stock referred to in clause (a) or (b) or Indebtedness having a scheduled
maturity prior to the date which is six months after the Facility Termination
Date.
"Documentation Agent" is defined in the preamble and includes such
Person's successors and assigns.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"Dollar" and "$" means dollars in the lawful currency of the United
States of America.
"Dollar Amount" of any currency at any date shall mean (a) the amount
of such currency if such currency is Dollars or (b) the Equivalent Amount of
Dollars if such currency is any currency other than Dollars.
"Domestic Subsidiary" means a Subsidiary of the Company organized under
the laws of a jurisdiction located in the United States of America.
"EBITDA" means, for any period, on a consolidated basis for the Company
and its Subsidiaries, the sum of the amounts for such period, without
duplication, of (a) Net Income, plus (b) cash Interest Expense to the extent
deducted in computing Net Income, plus (c) charges against income for foreign,
federal, state and local taxes to the extent deducted in computing Net Income,
plus (d) depreciation expense to the extent deducted in computing Net Income,
plus (e) amortization expense, including, without limitation, amortization of
goodwill and other intangible assets to the extent deducted in computing Net
Income, plus (f) other extraordinary non-cash charges to the extent deducted in
computing Net Income, minus (g) other extraordinary cash or non-cash credits to
the extent added in computing Net Income.
"Eligible Currency" means any currency other than Dollars with respect
to which the Administrative Agent or the applicable Borrower has not given
notice in accordance with Section 2.23 and that is readily available, freely
traded, in which deposits are customarily offered to banks in the London
interbank market (or other market where the Administrative Agent's or Alternate
Currency Bank's, as applicable, foreign currency operations in respect of such
currency are then being conducted), convertible into Dollars in the
international interbank market available to the Lenders in such market and as to
which an Equivalent Amount may be readily calculated. If, after the designation
pursuant to the terms of this Agreement of any currency as an Agreed Currency or
Alternate Currency, (a) currency control or other exchange regulations are
imposed in the country in which such currency is issued with the result that
different types of such currency are introduced, such country's currency is, in
the determination of the Administrative Agent, no longer readily available or
freely traded or (b) in the determination of the Administrative Agent, an
Equivalent Amount for such currency is not readily calculable (each of clause
(a) and (b), a "Disqualifying Event"), then the Administrative Agent shall
promptly notify the Lenders and the Company, and such country's currency shall
no longer be an Agreed Currency or Alternate Currency until such time as the
Disqualifying Event(s) no longer exist, but in any event within five (5)
Business Days of receipt of such notice from the Administrative Agent, the
applicable Borrowers shall repay all Loans in such currency to which the
Disqualifying Event applies or convert such Loan into Loans in Dollars or
another Agreed Currency or Alternate Currency, subject to the other terms
contained in Articles II and IV.
"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law derived from or relating to foreign, federal, state and
local laws or regulations relating to or addressing pollution or protection of
the environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq., the Occupational Safety and Health Act of 1970,
29 U.S.C. ss. 651 et seq., and the Resource Conservation and Recovery Act of
1976, 42 U.S.C. ss. 6901 et seq., in each case including any amendments thereto,
any successor statutes, and any regulations or guidance promulgated thereunder,
and any state or local equivalent thereof.
"Environmental Lien" means a lien in favor of any Governmental
Authority for (a) any liability under Environmental, Health or Safety
Requirements of Law, or (b) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Equipment" means all of the Company's and its Subsidiaries' present
and future (a) equipment, including, without limitation, machinery,
manufacturing, distribution, selling, data processing and office equipment,
assembly systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, vessels, aircraft, aircraft engines, and trade fixtures,
(b) other tangible personal property (other than the Company's or its
Subsidiaries' Inventory), and (c) any and all accessions, parts and
appurtenances attached to any of the foregoing or used in connection therewith,
and any substitutions therefor and replacements, products and proceeds thereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equivalent Amount" of any currency with respect to any amount of
Dollars at any date shall mean the equivalent in such currency of such amount of
Dollars, calculated on the basis of the arithmetic mean of the buy and sell spot
rates of exchange of the Administrative Agent or Alternate Currency Bank, as
applicable, in the London interbank market (or other market where the
Administrative Agent's or Alternate Currency Bank's, as applicable, foreign
exchange operations in respect of such currency are then being conducted) for
such other currency at or about 11:00 a.m. (local time) two (2) Business Days
prior to the date on which such amount is to be determined, rounded up to the
nearest amount of such currency as determined by the applicable Alternate
Currency Bank from time to time; provided that if at the time of any such
determination, for any reason, no such spot rate is being quoted, the
Administrative Agent or Alternate Currency Bank, as applicable, may use any
reasonable method it deems appropriate to determine such amount, and such
determination shall be conclusive absent manifest error.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"euro" means the euro referred to in the Council Regulation (EC) No.
1103/97 dated 17 June 1997 passed by the Council of the European Union, or, if
different, the then lawful currency of the member states of the European Union
that participate in the third stage of the Economic and Monetary Union.
"Eurocurrency Base Rate" means, with respect to a Eurocurrency Rate
Loan for any specified Interest Period, (a) for any Eurocurrency Rate Loan in
any Agreed Currency other than euro, either (i) the rate of interest per annum
equal to the rate for deposits in the applicable Agreed Currency in the
approximate amount of the Pro Rata Tranche A Revolving Share, Pro Rata Tranche B
Revolving Share, Pro Rata Tranche C Revolving Share, Pro Rata Tranche D
Revolving Share or Pro Rata Term Share, as applicable, of the Administrative
Agent of such Eurocurrency Rate Advance with a maturity approximately equal to
such Interest Period which appears on Telerate Page 3740 or Telerate Page 3750,
as applicable, or, if there is more than one such rate, the average of such
rates rounded to the nearest 1/100 of 1%, as of 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Interest Period or (ii) if no such
rate of interest appears on Telerate Page 3740 or Telerate Page 3750, as
applicable, for any specified Interest Period, the rate at which deposits in the
applicable Agreed Currency are offered by the Administrative Agent to
first-class banks in the London interbank market at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such Interest
Period, in the approximate amount of the Pro Rata Tranche A Revolving Share, Pro
Rata Tranche B Revolving Share, Pro Rata Tranche C Revolving Share, Pro Rata
Tranche D Revolving Share or Pro Rata Term Share, as applicable, of the
Administrative Agent of such Eurocurrency Rate Loan and having a maturity
approximately equal to such Interest Period; and (b) with respect to any
Eurocurrency Rate Loan in euro for any Interest Period, the interest rate per
annum equal to the rate determined by the Administrative Agent to be the rate at
which deposits in euro appear on Telerate Page 248 as of 11:00 a.m. (Brussels
time), on the date that is two (2) TARGET Settlement Days preceding the first
day of such Interest Period; provided that if such rate does not appear on
Telerate Page 248, then the Eurocurrency Base Rate shall be an interest rate per
annum equal to the arithmetic mean determined by the Administrative Agent
(rounded upwards to the nearest .01%) of the rates per annum at which deposits
in euro are offered by the three (3) leading banks in the euro-zone interbank
market on or about 11:00 a.m. (Brussels time), on the date which is two (2)
TARGET Settlement Days prior to the first day of such Interest Period to other
leading banks in the euro-zone interbank market. The terms "Telerate Page 3740",
"Telerate Page 3750" and "Telerate Page 248" mean the display designated as
"Page 3740", "Page 3750" and "Page 248", as applicable, on the Associated
Press-Dow Jones Telerate Service (or such other page as may replace Page 3740,
Page 3750 or Page 248, as applicable, on the Associated Press-Dow Jones Telerate
Service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association interest rate settlement rates for the relevant Agreed
Currency).
"Eurocurrency Payment Office" of the Administrative Agent shall mean,
for each of the Agreed Currencies, any agency, branch or Affiliate of the
Administrative Agent, specified as the "Eurocurrency Payment Office" for such
Agreed Currency in Exhibit A-1 hereto or such other agency, branch, Affiliate or
correspondence bank of the Administrative Agent, as it may from time to time
specify to the applicable Borrowers and each Lender as its Eurocurrency Payment
Office.
"Eurocurrency Rate" means, with respect to a Eurocurrency Rate Loan for
the relevant Interest Period, the sum of (a) the quotient of (i) the
Eurocurrency Base Rate applicable to such Interest Period divided by (ii) one
minus the Reserve Requirement plus (b) the then Applicable Eurocurrency Margin,
changing as and when the Applicable Eurocurrency Margin changes.
"Eurocurrency Rate Advance" means an Advance which bears interest at
the Eurocurrency Rate.
"Eurocurrency Rate Loan" means a Loan made by a Lender pursuant to
Section 2.1, which bears interest at the Eurocurrency Rate.
"Excess Cash Flow" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, (a) the sum of (i) Net Income, plus (ii)
amortization, depreciation and other non-cash charges, minus (b) the sum of (i)
Capital Expenditures, plus (ii) principal payments made on all Indebtedness
(exclusive of mandatory prepayments made for Excess Cash Flow during such
period), and minus (c) the increase (or plus the decrease, as the case may be),
as of the last day of a fiscal year from the last day of the previous fiscal
year in the excess of Current Assets over Current Liabilities. For purposes of
this definition, "Current Assets" means all accounts receivable and Inventory of
the Company and its Subsidiaries, calculated in accordance with Agreement
Accounting Principles, excluding cash and Cash Equivalents and excluding
Accounts due from Affiliates and "Current Liabilities" means all liabilities of
the Company and its Subsidiaries which should, in accordance with Agreement
Accounting Principles, be classified as current liabilities, and in any event
shall include all Indebtedness payable on demand or within one year from the
date of determination without any option on the part of the obligor to extend or
renew beyond such year, all accruals for federal or other taxes based on or
measured by income and payable within such year, and the current portion of
long-term Indebtedness required to be paid within one year (excluding the
Revolving Credit Obligations).
"Existing Credit Agreement" is defined in the first recital.
"Existing Lenders" is defined in the first recital.
"Existing Loans" is defined in the first recital.
"Existing Revolving Loans" is defined in the first recital.
"Existing Term Loans" is defined in the first recital.
"Facility Termination Date" is defined in Section 2.19.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11:00 a.m. (New
York time) on such day on such transactions received by the Administrative Agent
from three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Fixed Charge Coverage Ratio" means, as of any date of determination,
the ratio of (a) EBITDA to (b) Fixed Charges in each case for the period of four
fiscal quarters ending on such date.
"Fixed Charges" means, with respect to the Company and its Subsidiaries
on a consolidated basis, as of any date of determination, (a) cash interest
expenses (other than unscheduled payments of interest under the Subordinated
Seller Note) paid on outstanding Indebtedness for the period of four fiscal
quarters ending on the date of determination, plus (b) scheduled principal
payments on Indebtedness (other than the Subordinated Seller Note) made during
such period, plus (c) dividends paid on stock, plus (d) Capital Expenditures
made during such period.
"Fixed-Rate Advance" means an Advance which bears interest at the
Eurocurrency Rate or at a fixed Alternate Currency Rate.
"Fixed-Rate Loans" means, collectively, the Eurocurrency Rate Loans and
the Alternate Currency Loans.
"Floating Rate" means, for any day for any Loan, a rate per annum equal
to (a) in the case of Loans in Dollars, the Alternate Base Rate for such day,
changing when and as the Alternate Base Rate changes, plus the then Applicable
Floating Rate Margin, and (b) in the case of Alternate Currency Loans, the rate
specified as such in the applicable Alternate Currency Addendum.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan, or portion thereof, which bears
interest at the Floating Rate.
"Foreign Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of the Company, any of its Subsidiaries or any members
of its Controlled Group and is not covered by ERISA pursuant to ERISA Section
4(b)(4).
"Foreign Subsidiary" means a Subsidiary of the Company which is not a
Domestic Subsidiary.
"Foreign Pension Plan" means any employee benefit plan as described in
Section 3(3) of ERISA which (a) is maintained or contributed to for the benefit
of employees of the Company, any of its Subsidiaries or any member of its
Controlled Group, (b) is not covered by ERISA pursuant to Section 4(b)(4) of
ERISA, and (c) under applicable local law, is required to be funded through a
trust or other funding vehicle.
"Governmental Acts" is defined in Section 3.10(a) hereof.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative authority or
functions of or pertaining to government, including any authority or other
quasi-governmental entity established to perform any of such functions.
"Guaranteed Obligations" is defined in Section 10.1 hereof.
"Guarantor" means each Domestic Subsidiary of the Company that from
time to time is party to a Guaranty.
"Guaranty" means each of (a) that certain Guaranty (and any and all
supplements thereto) executed from time to time by each Subsidiary Borrower that
is a Domestic Subsidiary and each other Domestic Subsidiary of the Company as
required pursuant to Section 7.2(k) in favor of the Administrative Agent for the
benefit of itself and the Holders of Obligations, in substantially the form of
Exhibit G-1 attached hereto, and (b) the guaranty by the Company of all of the
Obligations of the Subsidiary Borrowers pursuant to this Agreement and the
Alternate Currency Addenda, in each case as amended, supplemented, amended and
restated or otherwise modified from time to time.
"Hedging Agreements" is defined in Section 7.3(n) hereof.
"Hedging Obligations" of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, commodity prices,
exchange rates or forward rates applicable to such party's assets, liabilities
or exchange transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Holders of Obligations" means the holders of the Obligations from time
to time and shall include (a) each Lender in respect of its Loans, (b) each
Issuing Bank in respect of Reimbursement Obligations owed to it, (c) the
Administrative Agent, the Lenders and the Issuing Banks in respect of all other
present and future obligations and liabilities of the Company or any of its
Subsidiaries of every type and description arising under or in connection with
this Agreement or any other Loan Document, (d) each Indemnitee in respect of the
obligations and liabilities of the Company or any of its Subsidiaries to such
Person hereunder or under the other Loan Documents, and (e) their respective
successors, transferees and assigns.
"Indebtedness" of a Person means, without duplication, such Person's
(a) obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens on or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by notes,
acceptances, or other similar instruments, (e) Capitalized Lease Obligations,
(f) Hedging Obligations, (g) Contingent Obligations, (h) actual and contingent
reimbursement obligations in respect of letters of credit, and (i) the implied
debt component of synthetic leases of which such Person is lessee or any other
off-balance sheet financing arrangements (including, without limitation, any
such arrangements giving rise to any Off-Balance Sheet Liabilities); provided
that the term "Indebtedness" shall not include any (a) accrued or deferred
interest or other expenses, unless capitalized in accordance with Agreement
Accounting Principles, or (b) lease properly classified as an operating lease in
accordance with Agreement Accounting Principles. The amount of any item of
Indebtedness, except for any item of Indebtedness described in clause (h), shall
be the amount of any liability in respect thereof appearing on a balance sheet
properly prepared in accordance with Agreement Accounting Principles, except
that the amount of any item of Indebtedness described in clause (g) shall be
determined in accordance with the definition of Contingent Obligations and the
amount of any item of Indebtedness described in clause (i) above shall be the
"principal-equivalent" amount of such obligation.
"Interest Expense" means, for any period, the total interest expense of
the Company and its consolidated Subsidiaries, whether paid or accrued
(including the interest component of Capitalized Leases, commitment fees and
fees for stand-by letters of credit), all as determined in conformity with
Agreement Accounting Principles.
"Interest Period" means (a) with respect to Alternate Currency Loans,
any Alternate Currency Interest Period and (b) with respect to a Eurocurrency
Rate Loan, a period of one (1), two (2), three (3) or six (6) months or, with
the consent of all of the Lenders, nine (9) months, commencing on a Business Day
selected by the applicable Borrower on which a Eurocurrency Rate Advance is made
to such Borrower pursuant to this Agreement. Such Interest Period described in
clause (b) above shall end on (but exclude) the day which corresponds
numerically to such date one, two, three, six or nine months thereafter;
provided that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Interest Period shall end on the
last Business Day of such next, second, third or sixth succeeding month. If an
Interest Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day, provided that if
said next succeeding Business Day falls in a new calendar month, such Interest
Period shall end on the immediately preceding Business Day.
"Inventory" shall mean any and all goods, including, without
limitation, goods in transit, wheresoever located, whether now owned or
hereafter acquired by the Company or any of its Subsidiaries, which are held for
sale, rental or lease, furnished under any contract of service or held as raw
materials, work in process or supplies, and all materials used or consumed in
the business of the Company or any of its Subsidiaries, and shall include all
right, title and interest of the Company or any of its Subsidiaries in any
property the sale or other disposition of which has given rise to Receivables
and which has been returned to or repossessed or stopped in transit by the
Company or any of its Subsidiaries.
"Investment" means, with respect to any Person, (a) any purchase or
other acquisition by that Person of any Indebtedness, Equity Interests or other
securities, or of a beneficial interest in any Indebtedness, Equity Interests or
other securities, issued by any other Person, (b) any purchase by that Person of
all or substantially all of the assets of a business (whether of a division,
branch, unit operation, or otherwise) conducted by another Person, and (c) any
loan, advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, accounts receivable, advances to
employees and similar items made or incurred in the ordinary course of business)
or capital contribution by that Person to any other Person, including all
Indebtedness to such Person arising from a sale of property by such Person other
than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"Issuing Banks" means BNS or any of its Affiliates in its separate
capacity as an issuer of Letters of Credit pursuant to Sections 3.1 and 3.2.
"L/C Documents" is defined in Section 3.4 hereof.
"L/C Draft" means a draft drawn on an Issuing Bank pursuant to a Letter
of Credit.
"L/C Interest" shall have the meaning ascribed to such term in Section
3.6 hereof.
"L/C Obligations" means, without duplication, an amount equal to the
sum of (a) the aggregate amount then available for drawing under each of the
Letters of Credit, (b) the face amount of all outstanding L/C Drafts
corresponding to the Letters of Credit, which L/C Drafts have been accepted by
the applicable Issuing Bank, (c) the aggregate outstanding amount of all
Reimbursement Obligations at such time and (d) the aggregate amount equal to the
face amount of all Letters of Credit requested by the Borrowers but not yet
issued (unless the request for an unissued Letter of Credit has been denied).
"Lenders" means the lending institutions listed on the signature pages
of this Agreement, and their successors and assigns.
"Lending Installation" means, with respect to a Lender or the
Administrative Agent, any office, branch, subsidiary or Affiliate of such Lender
or the Administrative Agent.
"Letter of Credit" means standby letters of credit to be (a) issued by
the Issuing Banks pursuant to Section 3.1 hereof or (b) deemed issued by the
Issuing Banks pursuant to Section 3.2 hereof.
"Leverage Ratio" means, as of any date of determination, the ratio of
(a) Total Indebtedness (not including the Seller Subordinated Debt) on such date
of determination to (b) EBITDA for the most recently ended period of four fiscal
quarters (including any fiscal quarters ending on the date of determination.)
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement of any kind or nature whatsoever (including,
without limitation, the interest of a vendor or lessor under any conditional
sale, Capitalized Lease or other title retention agreement); provided that in no
event shall the lessor's interest under any lease properly classified as an
operating lease in accordance with Agreed Accounting Principles be a "Lien" for
purposes of this definition.
"Loan(s)" means, (a) in the case of any Lender, such Lender's portion
of any Advance made pursuant to Section 2.1 hereof, in the case of any Alternate
Currency Bank, any Alternate Currency Loan made by it pursuant to Section 2.21
and the applicable Alternate Currency Addendum, and in the case of the Swing
Line Bank, any Swing Line Loan made by it pursuant to Section 2.3, and (b)
collectively, all Revolving Loans, Term Loans, Alternate Currency Loans, and
Swing Line Loans.
"Loan Account" is defined in Section 2.13(a) hereof.
"Loan Documents" means this Agreement, each Alternate Currency Addendum
executed hereunder, each Assumption Letter executed hereunder, the Collateral
Documents, the Guaranty, the Subordination Agreement, the New Fee Letter and all
other documents, instruments, notes and agreements executed in connection
therewith or contemplated thereby, as the same may be amended, restated or
otherwise modified and in effect from time to time.
"Loan Parties" means each of the Company, each Subsidiary Borrower and
each of the Guarantors.
"Margin Stock" shall have the meaning ascribed to such term in
Regulation U.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or the Company and its Subsidiaries,
taken as a whole, (b) the ability of the Company or any of its Subsidiaries to
perform their respective obligations under the Loan Documents, or (c) the
ability of the Lenders or the Administrative Agent to enforce the Obligations.
"Mortgages" means one or more deeds of trust, mortgages, leasehold
mortgages, assignments of rents or similar documents, satisfactory in form and
substance to the Administrative Agent, executed and delivered by the Company and
its Domestic Subsidiaries pursuant to or in connection with the transactions
contemplated hereby, as the same may be amended, supplemented or otherwise
modified from time to time.
"Multiemployer Plan" means a "Multiemployer Plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, or was required to be, contributed to by either the Company or any member
of the Controlled Group.
"National Currency Unit" means the unit of currency (other than a euro)
of each member state of the European Union that participates in the third stage
of Economic and Monetary Union.
"Net Income" means, for any period, the net income (or loss) after
taxes of the Company and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
Agreement Accounting Principles.
"Net Proceeds" means (a) with respect to any Asset Sale, the sum of
cash or readily marketable cash equivalents received (including by way of a cash
generating sale or discounting of a note or receivable, but excluding any other
consideration received in the form of assumption by the acquiring Person of debt
or other obligations relating to the properties or assets so disposed of or
received in any other non-cash form) therefrom, whether at the time of such
disposition or subsequent thereto, or (b) with respect to any sale or issuance
of any debt or equity securities of the Company or any Subsidiary, cash or
readily marketable cash equivalents received (but excluding any other non-cash
form) therefrom, whether at the time of such disposition, sale or issuance or
subsequent thereto, net, in either case, of all legal, title and recording tax
expenses, commissions and other fees and all costs and expenses incurred and all
federal, state, local and other taxes required to be paid or accrued as a
liability as a consequence of such transactions.
"New Fee Letter" means that certain fee letter, dated as of November
2002, by and between the Company and BNS, as the Administrative Agent.
"Notice of Assignment" is defined in Section 14.3(b) hereof.
"Obligations" means all Loans, L/C Obligations, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrowers or any of
their Subsidiaries to the Administrative Agent, any Lender, the Swing Line Bank,
any Arranger, any Affiliate of the Administrative Agent or any Lender, any
Issuing Bank or any Indemnitee, of any kind or nature, present or future,
arising under this Agreement, the L/C Documents, any Alternate Currency Addendum
or any other Loan Document, whether or not evidenced by any note, guaranty or
other instrument, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, guaranty, indemnification, or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, reasonable attorneys' fees and
disbursements, reasonable paralegals' fees (in each case whether or not
allowed), and any other sum chargeable to the Company or any of its Subsidiaries
under this Agreement or any other Loan Document.
"Obligor" is defined in Section 10.1 hereof.
"Off-Balance Sheet Liabilities" of a Person means (i) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to Receivables sold by such Person or any of its Subsidiaries, (ii) any
liability of such Person or any of its Subsidiaries under any sale and leaseback
transactions which do not create a liability on the consolidated balance sheet
of such Person, (iii) any liability of such Person or any of its Subsidiaries
under any financing lease or so-called "synthetic" lease transaction, or (iv)
any obligations of such Person or any of its Subsidiaries arising with respect
to any other transaction which is the functional equivalent of or takes the
place of borrowing but which does not constitute a liability on the consolidated
balance sheets of such Person and its Subsidiaries.
"Original Fee Letter" means that certain fee letter, dated as of May
15, 2000, by and between the Company and ABN AMRO Bank N.V., as the
Administrative Agent.
"Other Taxes" is defined in Section 2.15(e)(ii) hereof.
"Participants" is defined in Section 14.2(a) hereof.
"Payment Date" means the last day of each March, June, September and
December, the date on which the Aggregate Revolving Loan Commitment shall
terminate or be cancelled, and the Facility Termination Date.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Acquisition" is defined in Section 7.3(f) hereof.
"Permitted Existing Contingent Obligations" means the Contingent
Obligations of the Company and its Subsidiaries identified as such on Schedule
1.1.1 to this Agreement.
"Permitted Existing Indebtedness" means the Indebtedness of the Company
and its Subsidiaries identified as such on Schedule 1.1.2 to this Agreement.
"Permitted Existing Investments" means the Investments of the Company
and its Subsidiaries identified as such on Schedule 1.1.3 to this Agreement.
"Permitted Existing Liens" means the Liens on assets of the Company and
its Subsidiaries identified as such on Schedule 1.1.4 to this Agreement.
"Person" means any individual, corporation, firm, enterprise,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, limited liability company or other entity of any kind, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA,
other than a Multiemployer Plan, in respect of which the Company or any member
of the Controlled Group is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreements" means one or more pledge agreements, each in form
and substance satisfactory to the Administrative Agent, executed and delivered
by the Company and/or certain of its Subsidiaries pursuant to or in connection
with transactions contemplated by this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Prime Rate" means the "prime rate" of interest announced by BNS from
time to time at its Chicago office, changing when and as said prime rate
changes.
"Pro Rata Revolving Share" means, with respect to any Lender, the
percentage obtained by dividing (a) such Lender's Revolving Loan Commitment at
such time (as adjusted from time to time in accordance with the provisions of
this Agreement) by (b) the Aggregate Revolving Loan Commitment at such time (as
adjusted from time to time in accordance with the provisions of this Agreement);
provided that if all of the Revolving Loan Commitments are terminated pursuant
to the terms of this Agreement, then "Pro Rata Revolving Share" means, with
respect to any Lender, the percentage obtained by dividing (i) the sum of (A)
such Lender's Revolving Loans, plus (B) such Lender's share of the obligations
to purchase participations in Alternate Currency Loans and Letters of Credit
plus (C) such Lender's share of the obligations to refund or purchase
participations in Swing Line Loans, by (ii) the sum of (A) the aggregate
outstanding amount of all Revolving Loans, plus (B) the aggregate outstanding
amount of all Alternate Currency Loans and all Letters of Credit, plus (C) the
aggregate outstanding amount of all Swing Line Loans.
"Pro Rata Share" means, with respect to any Lender, the percentage
obtained by dividing (a) the sum of (i) such Lender's Revolving Loan Commitment
at such time (as adjusted from time to time in accordance with the provisions of
this Agreement) plus (ii) such Lender's Term Loans by (b) the sum of (i) the
Aggregate Revolving Loan Commitment at such time (as adjusted from time to time
in accordance with the provisions of this Agreement) plus (ii) the aggregate
outstanding amount of all Term Loans; provided that if all of the Revolving Loan
Commitments are terminated pursuant to the terms of this Agreement, then "Pro
Rata Share" means, with respect to any Lender, the percentage obtained by
dividing (i) the sum of (A) such Lender's Revolving Loans, plus (B) such
Lender's Term Loans, plus (C) such Lender's share of the obligations to purchase
participations in Alternate Currency Loans and Letters of Credit plus (D) such
Lender's share of the obligations to refund or purchase participations in Swing
Line Loans, by (ii) the sum of (A) the aggregate outstanding amount of all
Revolving Loans, plus (B) the aggregate outstanding amount of all Term Loans,
plus (C) the aggregate outstanding amount of all Alternate Currency Loans and
all Letters of Credit, plus (D) the aggregate outstanding amount of all Swing
Line Loans.
"Pro Rata Term Share" means, with respect to any Lender, the percentage
obtained by dividing such Lender's Term Loans by the aggregate outstanding
amount of all Term Loans.
"Pro Rata Tranche A Revolving Share" means, with respect to any Lender,
the percentage obtained by dividing (a) such Lender's Tranche A Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement) by (b) the Aggregate Tranche A Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement); provided that if all of the Tranche A Revolving
Loan Commitments are terminated pursuant to the terms of this Agreement, then
"Pro Rata Tranche A Revolving Share" means, with respect to any Lender, the
percentage obtained by dividing (i) such Lender's Tranche A Revolving Loans by
(ii) the aggregate outstanding amount all Tranche A Revolving Loans.
"Pro Rata Tranche B Revolving Share" means, with respect to any Lender,
the percentage obtained by dividing (a) such Lender's Tranche B Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement) by (b) the Aggregate Tranche B Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement); provided that if all of the Tranche B Revolving
Loan Commitments are terminated pursuant to the terms of this Agreement, then
"Pro Rata Tranche B Revolving Share" means, with respect to any Lender, the
percentage obtained by dividing (i) the sum of (A) such Lender's Tranche B
Revolving Loans plus (B) such Lender's share of the obligations to purchase
Alternate Currency Loans, by (ii) the sum of (A) the aggregate outstanding
amount of all Tranche B Revolving Loans, plus (B) the aggregate outstanding
amount of all Alternate Currency Loans.
"Pro Rata Tranche C Revolving Share" means, with respect to any Lender,
the percentage obtained by dividing (a) such Lender's Tranche C Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement) by (b) the Aggregate Tranche C Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement); provided that if all of the Tranche C Revolving
Loan Commitments are terminated pursuant to the terms of this Agreement, then
"Pro Rata Tranche C Revolving Share" means, with respect to any Lender, the
percentage obtained by dividing (i) the sum of (A) such Lender's Tranche C
Revolving Loans, plus (B) such Lender's share of the obligations to purchase
participations in Letters of Credit plus (C) such Lender's share of the
obligations to refund or purchase participations in Swing Line Loans by (ii) the
sum of (A) the aggregate outstanding amount of all Tranche C Revolving Loans,
plus (B) the aggregate outstanding amount of all Letters of Credit, plus (C) the
aggregate outstanding amount of all Swing Line Loans.
"Pro Rata Tranche D Revolving Share" means, with respect to any Lender,
the percentage obtained by dividing (a) such Lender's Tranche D Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement) by (b) the Aggregate Tranche D Revolving Loan
Commitment at such time (as adjusted from time to time in accordance with the
provisions of this Agreement); provided that if all of the Tranche D Revolving
Loan Commitments are terminated pursuant to the terms of this Agreement, then
"Pro Rata Tranche D Revolving Share" means, with respect to any Lender, the
percentage obtained by dividing (i) the sum of (A) such Lender's Tranche D
Revolving Loans plus (B) such Lender's share of the obligations to purchase
Alternate Currency Loans, by (ii) the sum of (A) the aggregate outstanding
amount of all Tranche D Revolving Loans, plus (B) the aggregate outstanding
amount of all Alternate Currency Loans.
"Purchasers" is defined in Section 14.3(a) hereof.
"Rate Option" means the Eurocurrency Rate, the Floating Rate or the
Alternate Currency Rate, as applicable.
"Receivable(s)" means and includes all of the Company's and its
Subsidiaries' presently existing and hereafter arising or acquired accounts,
accounts receivable, notes receivable, and all present and future rights of the
Company or its Subsidiaries, as applicable, to payment for goods sold or leased
or for services rendered (except those evidenced by instruments or chattel
paper), whether or not they have been earned by performance, and all rights in
any merchandise or goods which any of the same may represent, and all rights,
title, security and guaranties with respect to each of the foregoing, including,
without limitation, any right of stoppage in transit.
"Register" is defined in Section 14.3(c) hereof.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks, non-banks and non-broker lenders for the purpose
of purchasing or carrying Margin Stock applicable to member banks of the Federal
Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"Reimbursement Obligation" is defined in Section 3.7 hereof.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Contaminants
through or in the air, soil, surface water or groundwater.
"Replacement Lender" is defined in Section 2.20 hereof.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation or otherwise
waived the requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days after such event occurs, provided that a failure to meet the
minimum funding standards of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders hereunder whose Pro Rata Shares, in
the aggregate, are at least fifty-one percent (51%).
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act of 1933, the Securities
Exchange Act of 1934, Regulations T, U and X, ERISA, the Fair Labor Standards
Act, the Worker Adjustment and Retraining Notification Act, the Americans with
Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance,
building, environmental or land use requirement or permit or environmental,
labor, employment, occupational safety or health law, rule or regulation,
including Environmental, Health or Safety Requirements of Law.
"Reserve Requirement" shall mean, at any time, the maximum reserve
requirement, as the prescribed by the Board of Governors of the Federal Reserve
System (or any successor) with respect to "Eurocurrency liabilities" or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurocurrency Rate Loans is determined or
category of extensions of credit or other assets which includes loans by a
non-United States office of any Lender to United States residents.
"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, on account of any Equity Interests of the Company or any of
its Subsidiaries now or hereafter outstanding, except a dividend payable solely
in the Company's or such Subsidiaries' Equity Interests other than Disqualified
Stock or in options, warrants or other rights to purchase such common stock, (b)
any redemption, retirement, purchase or other acquisition for value, direct or
indirect, of any Equity Interests of the Company or any of its Subsidiaries now
or hereafter outstanding, other than in exchange for Equity Interests other than
Disqualified Stock of the Company, and (c) any redemption, purchase, retirement,
defeasance, prepayment or other acquisition for value, direct or indirect, of
any Indebtedness subordinated to the Obligations.
"Revolving Credit Obligations" means, at any particular time, the sum
of (a) the Tranche A Revolving Credit Obligations at such time, plus (b) the
Tranche B Revolving Credit Obligations at such time, plus (c) the Tranche C
Revolving Credit Obligations at such time, plus (d) the Tranche D Revolving
Credit Obligations at such time.
"Revolving Loan" is defined in Section 2.1 hereof.
"Revolving Loan Commitment" means, for each Lender, the aggregate of
such Lender's Tranche A Revolving Loan Commitment, such Lender's Tranche B
Revolving Loan Commitment, such Lender's Tranche C Revolving Loan Commitment and
such Lender's Tranche D Revolving Loan Commitment.
"Revolving Loan Termination Date" means, as the case may be, the
Tranche A Revolving Loan Termination Date, the Tranche B Revolving Loan
Termination Date, the Tranche C Revolving Loan Termination Date or the Tranche D
Revolving Loan Termination Date.
"Sale and Leaseback Transaction" shall mean any lease, whether an
operating lease or a Capitalized Lease, of any property (whether real or
personal or mixed), (a) which the Company or one of its Subsidiaries sold or
transferred or is to sell or transfer to any other Person, or (b) which the
Company or one of its Subsidiaries intends to use for substantially the same
purposes as any other property which has been or is to be sold or transferred by
the Company or one of its Subsidiaries to any other Person in connection with
such lease.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Security Agreements" means one or more security agreements, each in
form and substance satisfactory to the Administrative Agent, executed and
delivered by the Company and its Domestic Subsidiaries pursuant to or in
connection with transactions contemplated by this Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Seller" means Spectra Precision Holdings, Inc. and each party to the
Stock and Asset Purchase Agreement, other than the Company.
"Single Employer Plan" means a Benefit Plan maintained by the Company
or any member of the Controlled Group for employees of the Company or any member
of the Controlled Group.
"Solvent" means, when used with respect to any Person, that at the time
of determination:
(a) the fair value of its assets (both at fair valuation and
at present fair saleable value) is equal to or in excess of the total
amount of its liabilities, including, without limitation, contingent
liabilities; and
(b) it is then able and expects to be able to pay its debts
as they mature; and
(c) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
With respect to contingent liabilities (such as litigation, guarantees and
pension plan liabilities), such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represent the amount which can be reasonably be expected to become an actual or
matured liability.
"Spectra Precision Acquisition" means the acquisition made pursuant to
the Stock and Asset Purchase Agreement and pursuant to which the Company
purchased substantially all of the assets and all of the capital stock of the
Seller and certain Subsidiaries thereof and modified the corporate structure of
the Seller's European holdings for tax planning purposes and pursuant to which
the Seller became a Subsidiary of the Company.
"Stock and Asset Purchase Agreement" means that certain Stock and Asset
Purchase Agreement dated May 11, 2000 by and among the Company, Spectra Physics
Holdings USA, Inc., Spectra Precision AB and Spectra Precision Europe Holdings,
BV, as amended, supplemented, amended and restated or otherwise modified from
time to time.
"Subordinated Seller Debt" means the Indebtedness of the Company to
Spectra Physics Holdings USA, Inc., evidenced by the Seller Subordinated Note,
which Indebtedness is subordinated to the Obligations.
"Subordinated Seller Note" means the $80,000,000 promissory note issued
to Spectra Physics Holdings USA, Inc. by the Company pursuant to the Stock and
Asset Purchase Agreement, as amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with its terms.
"Subordination Agreement" means that certain Subordination Agreement
(and any and all supplements thereto) executed from time to time by each
Subsidiary of the Company which may now or in the future have any claim against
any Loan Party and each other Subsidiary of the Company as required pursuant to
Section 7.2(k) in favor of the Administrative Agent for the benefit of itself
and the Holders of Obligations, in substantially the form of Exhibit G-2
attached hereto, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Subsidiary" of a Person means (a) any corporation more than fifty
(50%) of the outstanding securities having ordinary voting power of which shall
at the time be owned or controlled, directly or indirectly, by such Person or by
one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (b) any partnership, association, limited liability company,
joint venture or similar business organization more than fifty percent (50%) of
the ownership interests having ordinary voting power of which shall at the time
be so owned or controlled. Unless otherwise expressly provided, all references
herein to a "Subsidiary" mean a Subsidiary of the Company.
"Subsidiary Borrower" means each Subsidiary of the Company (whether now
existing or hereafter formed) duly designated by the Company pursuant to Section
2.24 to request Advances hereunder, which Subsidiary shall have delivered to the
Administrative Agent an Assumption Letter in accordance with Section 2.24 and
such other documents as may be required pursuant to this Agreement, in each case
together with its respective successors and assigns, including a
debtor-in-possession on behalf of such Subsidiary Borrower.
"Swing Line Bank" means BNS and its successors and assigns.
"Swing Line Commitment" means the obligation of the Swing Line Bank to
make Swing Line Loans up to a maximum principal amount of $10,000,000 at any one
time outstanding.
"Swing Line Loan" means a Loan made to the Company by the Swing Line
Bank pursuant to Section 2.3 hereof.
"Syndication Agent" is defined in the preamble and includes such
Person's successors and assigns.
"TARGET Settlement Day" means any day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open.
"Taxes" is defined in Section 2.15(e)(i) hereof.
"Term Loan" means the Existing Term Loans, as continued under the terms
of this Agreement, in an aggregate amount on the Amendment Effective Date equal
to $32,600,000 and, collectively, all such term loans.
"Term Loan Maturity Date" means June 30, 2004.
"Termination Event" means (a) a Reportable Event with respect to any
Benefit Plan; (b) the withdrawal of the Company or any member of the Controlled
Group from a Benefit Plan during a plan year in which the Company or such
Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Company or any member of the Controlled Group; (c) the
imposition of an obligation on the Company or any member of the Controlled Group
under Section 4041 of ERISA to provide affected parties written notice of intent
to terminate a Benefit Plan in a distress termination described in Section
4041(c) of ERISA; (d) the institution by the PBGC or any similar foreign
governmental authority of proceedings to terminate a Benefit Plan or Foreign
Pension Plan; (e) any event or condition which constitutes grounds under Section
4042 of ERISA which are reasonably likely to lead to the termination of, or the
appointment of a trustee to administer, any Benefit Plan; (f) that a foreign
governmental authority shall appoint or institute proceedings to appoint a
trustee to administer any Foreign Pension Plan in place of the existing
administrator, or (g) the partial or complete withdrawal of the Company or any
member of the Controlled Group from a Multiemployer Plan or Foreign Pension
Plan.
"Total Indebtedness" means, without duplication, (a) all Indebtedness
for borrowed money of the Company and its Subsidiaries, on a consolidated basis,
plus, without duplication, (b) (i) the face amount of all outstanding letters of
credit (including Letters of Credit) in respect of which the Company or any
Subsidiary has any actual or contingent reimbursement obligation, plus (ii) the
principal amount of all Indebtedness of any Person in respect of which the
Company or any Subsidiary has a Contingent Obligation, plus (iii) Indebtedness
of the Company and its Subsidiaries evidenced by notes, acceptances or similar
instruments, plus (iv) Capitalized Lease Obligations of the Company and its
Subsidiaries, plus (v) the implied debt component of synthetic leases of which
the Company or any of its Subsidiaries is lessee, plus (vi) Hedging Obligations
of the Company and its subsidiaries.
"Tranche A Advance" means an Advance comprised of Tranche A Revolving
Loans.
"Tranche A Revolving Credit Availability" means, at any particular
time, the amount by which (a) the Aggregate Tranche A Revolving Loan Commitment
at such time exceeds (b) the Dollar Amount of the Tranche A Revolving Credit
Obligations outstanding at such time.
"Tranche A Revolving Credit Obligations" means, at any particular time,
the sum of the outstanding principal Dollar Amount of the Tranche A Revolving
Loans at such time.
"Tranche A Revolving Loan" is defined in Section 2.1 hereof.
"Tranche A Revolving Loan Commitment" means, for each Lender, the
obligation of such Lender to make Tranche A Revolving Loans not exceeding the
amount set forth on Exhibit A to this Agreement opposite its name thereon under
the heading "Tranche A Revolving Loan Commitment" or the signature page of the
assignment and acceptance by which it became a Lender as such amount may be
modified from time to time pursuant to the terms of this Agreement or to give
effect to any applicable assignment and acceptance.
"Tranche A Revolving Loan Termination Date" means July 14, 2003.
"Tranche B Advance" means an Advance comprised of Tranche B Revolving
Loans.
"Tranche B Revolving Credit Availability" means, at any particular
time, the amount by which (a) the Aggregate Tranche B Revolving Loan Commitment
at such time exceeds (b) the sum of (i) the Dollar Amount of the Tranche B
Revolving Credit Obligations outstanding at such time plus (ii) the aggregate
unused Alternate Currency Commitments at such time.
"Tranche B Revolving Credit Obligations" means, at any particular time,
(a) the outstanding principal Dollar Amount of the Tranche B Revolving Loans at
such time, plus (b) the Dollar Amount of the outstanding principal amount of the
Alternate Currency Loans at such time.
"Tranche B Revolving Loan" is defined in Section 2.1 hereof.
"Tranche B Revolving Loan Commitment" means, for each Lender, the
obligation of such Lender to make Tranche B Revolving Loans and to participate
in Alternate Currency Loans not exceeding the amount set forth on Exhibit A to
this Agreement opposite its name thereon under the heading "Tranche B Revolving
Loan Commitment" or the signature page of the assignment and acceptance by which
it became a Lender as such amount may be modified from time to time pursuant to
the terms of this Agreement or to give effect to any applicable assignment and
acceptance.
"Tranche B Revolving Loan Termination Date" means July 14, 2003.
"Tranche C Advance" means an Advance comprised of Tranche C Revolving
Loans.
"Tranche C Revolving Credit Availability" means, at any particular
time, the amount by which (a) the Aggregate Tranche C Revolving Loan Commitment
at such time exceeds (b) the Dollar Amount of the Tranche C Revolving Credit
Obligations outstanding at such time.
"Tranche C Revolving Credit Obligations" means, at any particular time,
the sum of (a) the outstanding principal Dollar Amount of the Tranche C
Revolving Loans at such time, plus (b) the outstanding L/C Obligations at such
time, plus (c) the outstanding principal amount of all Swing Line Loans at such
time.
"Tranche C Revolving Loan" is defined in Section 2.1 hereof.
"Tranche C Revolving Loan Commitment" means, for each Lender, the
obligation of such Lender to make Tranche C Revolving Loans, to purchase
participations in Letters of Credit and to refund or participate in Swing Line
Loans not exceeding the amount set forth on Exhibit A to this Agreement opposite
its name thereon under the heading "Tranche C Revolving Loan Commitment" or the
signature page of the assignment and acceptance by which it became a Lender as
such amount may be modified from time to time pursuant to the terms of this
Agreement or to give effect to any applicable assignment and acceptance.
"Tranche C Revolving Loan Termination Date" means April 7, 2004.
"Tranche D Advance" means an Advance comprised of Tranche D Revolving
Loans.
"Tranche D Revolving Credit Availability" means, at any particular
time, the amount by which (a) the Aggregate Tranche D Revolving Loan Commitment
at such time exceeds (b) the sum of (i) the Dollar Amount of the Tranche D
Revolving Credit Obligations outstanding at such time plus (ii) the aggregate
unused Alternate Currency Commitments at such time.
"Tranche D Revolving Credit Obligations" means, at any particular time,
(a) the outstanding principal Dollar Amount of the Tranche D Revolving Loans at
such time, plus (b) the Dollar Amount of the outstanding principal amount of the
Alternate Currency Loans at such time.
"Tranche D Revolving Loan" is defined in Section 2.1 hereof.
"Tranche D Revolving Loan Commitment" means, for each Lender, the
obligation of such Lender to make Tranche D Revolving Loans and to participate
in Alternate Currency Loans not exceeding the amount set forth on Exhibit A to
this Agreement opposite its name thereon under the heading "Tranche D Revolving
Loan Commitment" or the signature page of the assignment and acceptance by which
it became a Lender as such amount may be modified from time to time pursuant to
the terms of this Agreement or to give effect to any applicable assignment and
acceptance.
"Tranche D Revolving Loan Termination Date" means April 7, 2004.
"Transferee" is defined in Section 14.5 hereof.
"Trigger Event Date" means the date on which the Company shall have
demonstrated to the reasonable satisfaction of the Administrative Agent that (a)
no Default or Unmatured Default then exists and (b) the Leverage Ratio of the
Company and its Subsidiaries, as reflected in the financial statements delivered
pursuant to Section 7.1(a)(i) and (ii) shall have been less than 2.00 for four
consecutive fiscal quarters after the Closing Date.
"Type" means, with respect to any Loan, its nature as a Floating Rate
Loan or a Eurocurrency Rate Loan.
"UCC" means the Uniform Commercial Code as in effect in the State of
Illinois.
"Unfunded Liabilities" means (a) in the case of Single Employer Plans,
the amount (if any) by which the aggregate accumulated benefit obligations
exceeds the aggregate fair market value of assets of all Single Employer Plans
as of the most recent measurement date for which actuarial valuations have been
completed and certified to the Company, all as determined under FAS 87 using the
methods and assumptions used by the Company for financial accounting purposes,
and (b) in the case of Multiemployer Plans, the withdrawal liability that would
be incurred by the Controlled Group if all members of the Controlled Group
completely withdrew from all Multiemployer Plans.
"Unmatured Default" means an event which, but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled, in each case, other than director qualifying shares.
Unless the context otherwise requires, "Wholly-Owned Subsidiary" means a
wholly-owned subsidiary of the Company.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Any accounting terms used in
this Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with generally accepted accounting
principles in existence as of the date hereof.
1.2 References. Any references to Subsidiaries of the Company set forth
herein shall not in any way be construed as consent by the Administrative Agent
or any Lender to the establishment, maintenance or acquisition of any
Subsidiary, except as may otherwise be permitted hereunder.
1.3 Rounding and Other Consequential Changes. Without prejudice to any
method of conversion or rounding prescribed by any legislative measures of the
Council of the European Union, each reference in this Agreement to a fixed
amount or to fixed amounts in a National Currency Unit to be paid to or by the
Administrative Agent shall be replaced by a reference to such comparable and
convenient fixed amount or fixed amounts in euro as the Administrative Agent may
from time to time specify unless such National Currency Unit remains available
and the Company and the Administrative Agent agree to use such National Currency
Unit instead of the euro.
ARTICLE II: LOAN FACILITIES
On the terms and subject to the conditions of this Agreement, the Lenders
severally agree to the continuation and reallocation (as the case may be) of the
Existing Loans and to make the Loans as set forth below.
2.1 Revolving Loans.
(a) Each of the parties hereto acknowledges and agrees that the
Existing Revolving Loans shall continue as Revolving Loans for all
purposes under this Agreement and the Loan Documents, subject to
reallocation pursuant to Section 2.26.
(b) Upon the satisfaction of the conditions precedent set forth in
Sections 5.1, 5.2 and 5.3, as applicable, from and including the
Amendment Effective Date and prior to the applicable Revolving Loan
Termination Date, each Lender severally and not jointly agrees, on the
terms and conditions set forth in this Agreement, to make revolving
loans to the Borrowers from time to time (i) in Dollars, in a Dollar
Amount not to exceed such Lender's Pro Rata Tranche A Revolving Share
of Tranche A Revolving Credit Availability at such time (each
individually, a "Tranche A Revolving Loan" and, collectively, the
"Tranche A Revolving Loans"); (ii) in Dollars or any Agreed Currency,
in a Dollar Amount not to exceed such Lender's Pro Rata Tranche B
Revolving Share of Tranche B Revolving Credit Availability at such time
(each individually, a "Tranche B Revolving Loan" and, collectively, the
"Tranche B Revolving Loans"); (iii) in Dollars, in a Dollar Amount not
to exceed such Lender's Pro Rata Tranche C Revolving Share of Tranche C
Revolving Credit Availability at such time (each individually, a
"Tranche C Revolving Loan" and, collectively, the "Tranche C Revolving
Loans"); and (iv) in Dollars or any Agreed Currency, in a Dollar Amount
not to exceed such Lender's Pro Rata Tranche D Revolving Share of
Tranche D Revolving Credit Availability at such time (each
individually, a "Tranche D Revolving Loan", and, collectively, the
"Tranche D Revolving Loans" and, together with the Tranche A Revolving
Loans, the Tranche B Revolving Loans and the Tranche C Revolving Loans,
the "Revolving Loans"); provided that (i) at no time shall the Dollar
Amount of the Tranche A Revolving Credit Obligations exceed the
Aggregate Tranche A Revolving Loan Commitment; (ii) at no time shall
the Dollar Amount of the Tranche B Revolving Credit Obligations exceed
the Aggregate Tranche B Revolving Loan Commitment; (iii) at no time
shall the Dollar Amount of the Tranche C Revolving Credit Obligations
exceed the Aggregate Tranche C Revolving Loan Commitment; (iv) at no
time shall the Dollar Amount of the Tranche D Revolving Credit
Obligations exceed the Aggregate Tranche D Revolving Loan Commitment;
(v) at no time shall the Dollar Amount of the Revolving Credit
Obligations of any Subsidiary Borrower that is a Domestic Subsidiary
exceed $40,000,000; (vi) at no time shall the aggregate Dollar Amount
of the Revolving Credit Obligations of all Foreign Subsidiaries exceed
$30,000,000 and (vii) no Tranche A Revolving Loans or Tranche C
Revolving Loans shall be made to any Borrower which is not organized
under the laws of a jurisdiction located in the United States of
America. Subject to the terms of this Agreement, the Borrowers may
borrow, repay and reborrow Revolving Loans at any time prior to the
applicable Revolving Loan Termination Date. Revolving Loans shall be,
at the option of the applicable Borrower, selected in accordance with
Section 2.10, and shall be either Floating Rate Loans or Eurocurrency
Rate Loans. On the applicable Revolving Loan Termination Date, each
Borrower shall repay in full the outstanding principal balance of
Revolving Loans made to it. The Tranche A Revolving Loans shall be made
by each Lender ratably in proportion to such Lender's respective Pro
Rata Tranche A Revolving Share, the Tranche B Revolving Loans shall be
made by each Lender ratably in proportion to such Lender's respective
Pro Rata Tranche B Revolving Share, the Tranche C Revolving Loans shall
be made by each Lender ratably in proportion to such Lender's
respective Pro Rata Tranche C Revolving Share and the Tranche D
Revolving Loans shall be made by each Lender ratably in proportion to
such Lender's respective Pro Rata Tranche D Revolving Share.
(c) Making of Tranche A Revolving Loans. Promptly after receipt of the
Borrowing/ Conversion/Continuation Notice under Section 2.8 in respect
of Tranche A Revolving Loans, the Administrative Agent shall notify
each Lender with a Tranche A Revolving Loan Commitment, of the
requested Tranche A Revolving Loan. Each Lender with a Tranche A
Revolving Loan Commitment shall make available its Tranche A Revolving
Loan in accordance with the terms of Section 2.7. The Administrative
Agent will promptly make the funds so received from the Lenders
available to the applicable Borrower at the Administrative Agent's
office in New York, New York on the applicable Borrowing Date and shall
disburse such proceeds in accordance with the applicable Borrower's
disbursement instructions set forth in such
Borrowing/Conversion/Continuation Notice. The failure of any Lender to
deposit the amount described above with the Administrative Agent on the
applicable Borrowing Date shall not relieve any other Lender of its
obligations hereunder to make its Tranche A Revolving Loan on such
Borrowing Date.
(d) Making of Tranche B Revolving Loans. Promptly after receipt of the
Borrowing/Conversion/Continuation Notice under Section 2.8 in respect
of Tranche B Revolving Loans, the Administrative Agent shall notify
each Lender with a Tranche B Revolving Loan Commitment, of the
requested Tranche B Revolving Loan. Each Lender with a Tranche B
Revolving Loan Commitment shall make available its Tranche B Revolving
Loan in accordance with the terms of Section 2.7. The Administrative
Agent will promptly make the funds so received from the Lenders
available to the applicable Borrower at the Administrative Agent's
office in New York, New York on the applicable Borrowing Date and shall
disburse such proceeds in accordance with the applicable Borrower's
disbursement instructions set forth in such
Borrowing/Conversion/Continuation Notice. The failure of any Lender to
deposit the amount described above with the Administrative Agent on the
applicable Borrowing Date shall not relieve any other Lender of its
obligations hereunder to make its Tranche B Revolving Loan on such
Borrowing Date.
(e) Making of Tranche C Revolving Loans. Promptly after receipt of the
Borrowing/Conversion/Continuation Notice under Section 2.8 in respect
of Tranche C Revolving Loans, the Administrative Agent shall notify
each Lender with a Tranche C Revolving Loan Commitment, of the
requested Tranche C Revolving Loan. Each Lender with a Tranche C
Revolving Loan Commitment shall make available its Tranche C Revolving
Loan in accordance with the terms of Section 2.7. The Administrative
Agent will promptly make the funds so received from the Lenders
available to the applicable Borrower at the Administrative Agent's
office in New York, New York on the applicable Borrowing Date and shall
disburse such proceeds in accordance with the applicable Borrower's
disbursement instructions set forth in such
Borrowing/Conversion/Continuation Notice. The failure of any Lender to
deposit the amount described above with the Administrative Agent on the
applicable Borrowing Date shall not relieve any other Lender of its
obligations hereunder to make its Tranche C Revolving Loan on such
Borrowing Date.
(f) Making of Tranche D Revolving Loans. Promptly after receipt of the
Borrowing/Conversion/Continuation Notice under Section 2.8 in respect
of Tranche D Revolving Loans, the Administrative Agent shall notify
each Lender with a Tranche D Revolving Loan Commitment, of the
requested Tranche D Revolving Loan. Each Lender with a Tranche D
Revolving Loan Commitment shall make available its Tranche D Revolving
Loan in accordance with the terms of Section 2.7. The Administrative
Agent will promptly make the funds so received from the Lenders
available to the applicable Borrower at the Administrative Agent's
office in New York, New York on the applicable Borrowing Date and shall
disburse such proceeds in accordance with the applicable Borrower's
disbursement instructions set forth in such
Borrowing/Conversion/Continuation Notice. The failure of any Lender to
deposit the amount described above with the Administrative Agent on the
applicable Borrowing Date shall not relieve any other Lender of its
obligations hereunder to make its Tranche D Revolving Loan on such
Borrowing Date.
2.2 Term Loans.
(a) Each of the parties hereto acknowledges and agrees that the
Existing Term Loans shall continue as Term Loans for all purposes under
this Agreement and the Loan Documents, with each Lender's share of Term
Loans being set forth opposite its name on Exhibit A to this Agreement
or set forth in a Lender Assignment Agreement under the Term Loan
column, as such amount may be adjusted from time to time pursuant to
the terms hereof. Amounts borrowed as a Term Loan which are repaid or
prepaid by the Company may not be reborrowed. The Company shall repay
all outstanding principal and all accrued but unpaid interest on the
Term Loan Maturity Date.
(b) Term Loan Amortization. The Term Loans shall continue to be
payable in quarterly installments in the amounts and on the dates as
follows:
PAYMENT DATE AMOUNT
March 31, 2003 $6,000,000
June 30, 2003 $6,000,000
September 30, 2003 $6,000,000
December 31, 2003 $6,000,000
March 31, 2004 $6,000,000
June 30, 2004 $2,600,000 or such other
amount as shall then be
outstanding.
2.3 Swing Line Loans.
(a) Amount of Swing Line Loans. Upon the satisfaction of the conditions
precedent set forth in Section 5.1, 5.2 and 5.3, as applicable, from
and including the Amendment Effective Date and prior to the Tranche C
Revolving Loan Termination Date, the Swing Line Bank agrees, on the
terms and conditions set forth in this Agreement, to make revolving
swing line loans (each, individually, a "Swing Line Loan" and
collectively, the "Swing Line Loans") to the Company from time to time
in Dollars; provided that at no time shall the aggregate outstanding
principal amount of all Swing Line Loans exceed the Swing Line
Commitment; provided, further, that, at no time shall the Dollar Amount
of the Tranche C Revolving Credit Obligations exceed the Aggregate
Tranche C Revolving Loan Commitment; provided, further, that at no time
shall the sum of (i) the outstanding principal amount of the Swing Line
Loans plus (ii) the Dollar Amount of the Swing Line Bank's Pro Rata
Tranche C Revolving Share of the amount equal to the Tranche C
Revolving Credit Obligations less the outstanding principal amount of
Swing Line Loans, exceed the Swing Line Bank's Tranche C Revolving Loan
Commitment at such time.
(b) Borrowing/Conversion/Continuation Notice; Interest Rate. The
Company and/or the applicable Borrower shall deliver to the
Administrative Agent and the Swing Line Bank (if the Swing Line Bank is
not BNS) a Borrowing/Conversion/Continuation Notice, signed by it, not
later than 12:00 noon (New York time) on the Borrowing Date of each
Swing Line Loan (or at such later time as may be acceptable to the
Swing Line Bank in its sole discretion), specifying (i) the applicable
Borrowing Date (which date shall be a Business Day and which may be the
same date as the date the Borrowing/Conversion/Continuation Notice is
given, (ii) the aggregate amount of the requested Swing Line Loan, the
amount of which shall be not less than $1,000,000 and (iii) payment
instructions for the disbursement of such Loans. The Swing Line Loans
shall bear interest at the Floating Rate.
(c) Making of Swing Line Loans. Not later than 3:00 p.m. (New York
time) on the applicable Borrowing Date, the Swing Line Bank shall make
available its Swing Line Loan, in funds immediately available in New
York, New York to the Administrative Agent at its address specified
pursuant to Article XV. The Administrative Agent will promptly make the
funds so received from the Swing Line Bank available to the Company on
the Borrowing Date at the Administrative Agent's aforesaid address.
(d) Repayment of Swing Line Loans. Each Swing Line Loan shall be paid
in full by the Company on or before the seventh (7th) Business Day
after the Borrowing Date for such Swing Line Loan. The Company may at
any time pay, without penalty or premium, all outstanding Swing Line
Loans. In addition, the Administrative Agent (i) may at any time in its
sole discretion with respect to any outstanding Swing Line Loan, (ii)
shall at any time upon the request of the Swing Line Bank in its sole
discretion, or (iii) shall on the seventh (7th) Business Day after the
Borrowing Date of any Swing Line Loan, require (by giving notice
thereof to each Lender with a Tranche C Revolving Loan Commitment not
later than 10:00 a.m. (New York time) one Business Day before the date
of such Loan) each Lender with a Tranche C Revolving Loan Commitment
(including the Swing Line Bank) to make a Tranche C Revolving Loan in
the amount of such Lender's Pro Rata Tranche C Revolving Share of such
Swing Line Loan, for the purpose of repaying all or any outstanding
portion of such Swing Line Loan. Not later than 2:00 p.m. (New York
time) on the date of any notice received pursuant to this Section
2.3(d), each Lender shall make available its required Tranche C
Revolving Loan, in funds immediately available in New York to the
Administrative Agent at its address specified pursuant to Article XV.
Tranche C Revolving Loans made pursuant to this Section 2.3(d) shall
initially be Floating Rate Loans and thereafter may be continued as
Floating Rate Loans or converted into Eurocurrency Rate Loans in the
manner provided in Section 2.10 and subject to the other conditions and
limitations therein set forth and set forth in this Article II. Unless
a Lender shall have notified the Swing Line Bank, prior to its making
any Swing Line Loan, that any applicable condition precedent set forth
in Sections 5.1, 5.2 and 5.3, as applicable, had not then been
satisfied, such Lender's obligation to make Tranche C Revolving Loans
pursuant to this Section 2.3(d) to repay Swing Line Loans shall be
unconditional, continuing, irrevocable and absolute and shall not be
affected by any circumstances, including, without limitation, (a) any
set-off, counterclaim, recoupment, defense or other right which such
Lender may have against the Administrative Agent, the Swing Line Bank
or any other Person, (b) the failure to satisfy any condition set forth
herein or the occurrence or continuance of a Default or Unmatured
Default, (c) any adverse change in the condition (financial or
otherwise) of the Company, or (d) any other circumstances, happening or
event whatsoever. In the event that any Lender fails to make payment to
the Administrative Agent of any amount due under this Section 2.3(d),
the Administrative Agent shall be entitled to receive, retain and apply
against such obligation the principal and interest otherwise payable to
such Lender hereunder until the Administrative Agent receives such
payment from such Lender or such obligation is otherwise fully
satisfied. In addition to the foregoing, if for any reason any Lender
fails to make payment to the Administrative Agent of any amount due
under this Section 2.3(d) or may not make any Revolving Loan required
by this Section 2.3, such Lender shall be deemed, at the option of the
Administrative Agent or the Swing Line Bank, to have unconditionally
and irrevocably purchased from the Swing Line Bank, without recourse or
warranty, an undivided interest and participation in the Swing Line
Loan in the amount of such Revolving Loan, and such interest and
participation shall be paid by such Lender upon demand by the Swing
Line Bank together with interest thereon at the Federal Funds Effective
Rate for each day during the period commencing on the date of demand
and ending on the date such amount is received. On the Tranche C
Revolving Loan Termination Date, the Company shall repay in full the
outstanding principal balance of the Swing Line Loans.
2.4 Rate Options for all Advances; Maximum Interest Periods.
The Revolving Loans and Term Loans may be Floating Rate Advances or
Eurocurrency Rate Advances, or a combination thereof, selected by the Company or
the applicable Borrower in accordance with Section 2.9; provided that Loans
denominated in euros may not be Floating Advances. The Company or the applicable
Borrower may select, in accordance with Section 2.9, Rate Options and Interest
Periods applicable to portions of the Revolving Loans, Term Loans and Alternate
Currency Loans; provided that there shall be no more than twelve (12) Interest
Periods in effect with respect to all of the Loans at any time (unless otherwise
provided in the applicable Alternate Currency Addendum with respect to Alternate
Currency Loans). Each Alternate Currency Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at the Alternate Currency Rate as set forth in the applicable Alternate
Currency Addendum.
2.5 Optional Payments; Mandatory Prepayments.
(a) Optional Payments. The Company or the applicable Borrower may from
time to time and at any time upon at least one (1) Business Day's prior
written notice repay or prepay without penalty or premium all or any
part of outstanding Floating Rate Advances in an aggregate minimum
amount of $5,000,000 and in integral multiples of $1,000,000 in excess
thereof. Eurocurrency Rate Advances may be voluntarily repaid or
prepaid prior to the last day of the applicable Interest Period,
subject to the indemnification provisions contained in Section 4.4,
provided that the applicable Borrower may not so prepay Eurocurrency
Rate Advances unless it shall have provided at least four (4) Business
Days' prior written notice to the Administrative Agent of such
prepayment. Each Subsidiary Borrower may, upon prior written notice to
the Administrative Agent and to the applicable Alternate Currency Bank
as prescribed in the applicable Alternate Currency Addendum and
specifying that it is prepaying all or a portion of its Alternate
Currency Loans, prepay its Alternate Currency Loans in whole at any
time, or from time to time in part in a Dollar Amount aggregating
$5,000,000 or any larger multiple Dollar Amount of $1,000,000 (or as
otherwise specified in the applicable Alternate Currency Addendum) by
paying the principal amount to be paid together with all accrued and
unpaid interest thereon to and including the date of payment; provided
that any such payment occurring prior to the last day of any Interest
Period related to such Alternate Currency Loan shall be subject to the
indemnification provisions contained in Section 4.4.
(b) Mandatory Prepayments of Loans.
(i) If at any time and for any reason (other than
fluctuations in currency exchange rates) the Dollar Amount of the
Tranche A Revolving Credit Obligations, the Tranche B Revolving
Credit Obligations, the Tranche C Revolving Credit Obligations or
the Tranche D Revolving Credit Obligations is greater than the
Aggregate Tranche A Revolving Loan Commitment, the Aggregate
Tranche B Revolving Loan Commitment, the Aggregate Tranche C
Revolving Loan Commitment or the Aggregate Tranche D Revolving
Loan Commitment, respectively, the Company shall immediately make
or cause to be made a mandatory prepayment of the Tranche A
Revolving Credit Obligations, the Tranche B Revolving Credit
Obligations, the Tranche C Revolving Credit Obligations or the
Tranche D Revolving Credit Obligations, as the case may be, in an
amount equal to such excess.
(ii) On the last Business Day of each month, the
Administrative Agent shall calculate the Dollar Amount of all
outstanding Alternate Currency Loans, Tranche B Revolving Credit
Obligations and Tranche D Revolving Credit Obligations using, for
each currency, the arithmetic mean of the buy and sell spot rates
of exchange of the Administrative Agent in the London interbank
market (or other market where the Administrative Agent's foreign
exchange operations in respect of such currency are then being
conducted) and if, on such Business Day:
(A) the Dollar Amount of the Tranche B Revolving Credit
Obligations exceeds one hundred percent (100%) of the
Aggregate Tranche B Revolving Loan Commitment as a
result of fluctuations in currency exchange rates,
the Borrowers shall immediately prepay Tranche B
Revolving Loans in an aggregate amount such that
after giving effect thereto the Dollar Amount of the
Tranche B Revolving Credit Obligations is less than
or equal to the Aggregate Tranche B Revolving Loan
Commitment; or
(B) the Dollar Amount of the Tranche D Revolving Credit
Obligations exceeds one hundred percent (100%) of the
Aggregate Tranche D Revolving Loan Commitment as a
result of fluctuations in currency exchange rates,
the Borrowers shall immediately prepay Tranche D
Revolving Loans in an aggregate amount such that
after giving effect thereto the Dollar Amount of the
Tranche D Revolving Credit Obligations is less than
or equal to the Aggregate Tranche D Revolving Loan
Commitment; or
(C) the Dollar Amount of the aggregate outstanding
principal amount of Alternate Currency Loans in the
same Alternate Currency exceeds the aggregate
Alternate Currency Commitments with respect thereto
as a result of fluctuations in currency exchange
rates, the applicable Borrowers shall on such date
prepay Alternate Currency Loans in such Alternate
Currency in an aggregate amount such that after
giving effect thereto the Dollar amount of all
Alternate Currency Loans is less than or equal to the
aggregate Alternate Currency Commitments with respect
thereto.
(iii) The Company shall make all mandatory prepayments
required under Section 2.6.
(iv) At any time prior to the Trigger Event Date and so long
as any Term Loans are outstanding, the Company shall prepay the
Term Loans in an amount equal to 100% of (A) the Net Proceeds
realized upon any Asset Sale made by the Company or its
Subsidiaries, (B) any insurance proceeds received by the Company
or its Subsidiaries in respect of any casualty involving such
Person's property and (C) any payments received by the Company or
its Subsidiaries from a condemnation of such Person's property,
to the extent any of the foregoing amounts are not applied (or
committed to be applied) within one hundred and twenty (120) days
after the consummation or receipt thereof, as applicable, to the
purchase of similar assets that are not classified as current
assets under Agreement Accounting Principles and are used or
useful in the business of the Company or its Subsidiaries or to
the repair or restoration of the Company's or its Subsidiaries'
property. If the Company or the applicable Subsidiary does intend
to so reinvest any such amounts, the Company shall give notice of
such intent (and the amount intended to be reinvested) to the
Administrative Agent upon receipt of such proceeds. Pending such
reinvestment, the Company shall use such amounts to pay down the
principal amount of the Revolving Loans to the extent thereof
(but without a permanent reduction of the Revolving Loan
Commitments). If the Company or the applicable Subsidiary does
not intend to so reinvest such proceeds or if the period set
forth in the immediately preceding sentence expires without the
Company or such Subsidiary having reinvested such proceeds, the
Company shall prepay the Term Loans (within one (1) Business Day
of the expiration of said one hundred and twenty (120) day
period) in an amount equal to such proceeds after giving effect
to all reinvestments permitted by this subsection.
(v) At any time prior to the Trigger Event Date and so long
as any Term Loans are outstanding, within ninety (90) days after
the end of each fiscal year, the Company shall prepay the Term
Loans in an amount equal to fifty percent (50%) of the Excess
Cash Flow, if any, generated by the Company and its Subsidiaries
during the immediately preceding fiscal year of the Company.
(vi) At any time prior to the Trigger Event Date and so long
as any Term Loans are outstanding, if the Company or any
Subsidiary shall issue new Equity Interests or receive any
capital contributions other than Equity Interests issued to the
Company or another Subsidiary and capital contributions received
from the Company or another Subsidiary, the Company shall
promptly notify the Administrative Agent of the estimated Net
Proceeds of such issuance or of such capital contribution to be
received in respect thereof. Promptly upon, and in no event later
than one (1) Business Day after, receipt by the Company or such
Subsidiary of Net Proceeds of such issuance or of such capital
contribution, the Company shall prepay the Term Loans in an
amount equal to 50% of such Net Proceeds or capital contribution
(unless a Default or Unmatured Default shall have occurred and be
continuing, in which case the Company shall prepay the Term Loans
in an amount equal to 100% of such Net Proceeds or capital
contribution). Notwithstanding the foregoing, in no event shall
the Company's obligation to prepay the Term Loans pursuant to an
issuance under this Section 2.5(b)(vi) exceed an amount equal to
the Net Proceeds of such issuance less any prepayment of the
Subordinated Seller Note made with respect to such issuance and
required under Section 4.2 of the Subordinated Seller Note (but
only to the extent otherwise permitted by the subordination
provisions of the Subordinated Seller Note).
(vii) At any time prior to the Trigger Event Date and so
long as any Term Loans are outstanding, the Company shall
immediately prepay the Term Loans in an amount equal to 100% of
the Net Proceeds of any Indebtedness issued by the Company or any
Subsidiary (excluding Indebtedness permitted pursuant to Section
7.3(c)).
(viii) All of the mandatory prepayments made under Section
2.5(b)(i)-(iii) shall be applied to the Tranche A Revolving
Credit Obligations, the Tranche B Revolving Credit Obligations,
the Tranche C Revolving Credit Obligations or the Tranche D
Revolving Credit Obligations, as applicable, first to Floating
Rate Loans and to any Eurocurrency Rate Loans and Alternate
Currency Loans maturing on such date and then to subsequently
maturing Eurocurrency Rate Loans and Alternate Currency Loans in
order of maturity.
(ix) Any prepayments pursuant to Sections 2.5(b)(iv)-(vii)
shall be applied to the outstanding principal balance of the Term
Loans against all remaining scheduled principal installments in
inverse order of maturity.
2.6 Reductions and Adjustments of Revolving Loan Commitments.
(a) The Company may permanently reduce (i) the Aggregate Tranche A
Revolving Loan Commitment in whole, or in part ratably among the
Lenders with a Tranche A Revolving Loan Commitment, in an aggregate
minimum amount of $5,000,000 and in integral multiples of $1,000,000
in excess of that amount (unless the Aggregate Tranche A Revolving
Loan Commitment is reduced in whole), (ii) the Aggregate Tranche B
Revolving Loan Commitment in whole, or in part ratably among the
Lenders with a Tranche B Revolving Loan Commitment, in an aggregate
minimum amount of $5,000,000 and in integral multiples of $1,000,000
in excess of that amount (unless the Aggregate Tranche B Revolving
Loan Commitment is reduced in whole), (iii) the Aggregate Tranche C
Revolving Loan Commitment in whole, or in part ratably among the
Lenders with a Tranche C Revolving Loan Commitment, in an aggregate
minimum amount of $5,000,000 and in integral multiples of $1,000,000
in excess of that amount (unless the Aggregate Tranche C Revolving
Loan Commitment is reduced in whole), (iv) the Aggregate Tranche D
Revolving Loan Commitment in whole, or in part ratably among the
Lenders with a Tranche D Revolving Loan Commitment, in an aggregate
minimum amount of $5,000,000 and in integral multiples of $1,000,000
in excess of that amount (unless the Aggregate Tranche D Revolving
Loan Commitment is reduced in whole) or (v) the Swing Line Commitments
in whole or in part in amounts of $1,000,000 upon at least three (3)
Business Day's prior written notice to the Administrative Agent and
the Swing Line Bank, which notice shall specify the amount of any such
reduction; provided that (a) the amount of the Aggregate Tranche A
Revolving Loan Commitment may not be reduced below the aggregate
principal Dollar Amount of the outstanding Tranche A Revolving Credit
Obligations, (b) the amount of the Aggregate Tranche B Revolving Loan
Commitment may not be reduced below the aggregate principal Dollar
Amount of the outstanding Tranche B Revolving Credit Obligations or
below the aggregate amount of Alternate Currency Commitments, (c) the
amount of the Aggregate Tranche C Revolving Loan Commitment may not be
reduced below the aggregate principal Dollar Amount of the outstanding
Tranche C Revolving Credit Obligations or below the aggregate amount
of the Swing Line Commitment and (d) the amount of the Aggregate
Tranche D Revolving Loan Commitment may not be reduced below the
aggregate principal Dollar Amount of the outstanding Tranche D
Revolving Credit Obligations or below the aggregate amount of
Alternate Currency Commitments. All accrued commitment fees shall be
payable on the effective date of any termination of all or any part
the obligations of the Lenders to make Loans hereunder. Each
Subsidiary Borrower may, upon three (3) Business Days prior written
notice to the Administrative Agent and to the applicable Alternate
Currency Bank, terminate entirely at any time or reduce from time to
time by an aggregate amount of $5,000,000 or any larger multiple of
$1,000,000 (or as set forth on the applicable Alternate Currency
Addendum), the unused portions of the applicable Alternate Currency
Commitment as specified by the applicable Subsidiary Borrower in such
notice to the Administrative Agent and the applicable Alternate
Currency Bank; provided that at no time shall the Alternate Currency
Commitment of any Lender in respect of any Alternate Currency be
reduced to an amount less than the total outstanding principal amount
of all Alternate Currency Loans of such Lender made in such Alternate
Currency.
(b) Any Lender (i) with a Tranche A Revolving Loan Commitment may,
upon three (3) Business Day's prior written notice to the
Administrative Agent and the Company, convert all of its Tranche A
Revolving Loan Commitment to a Tranche C Revolving Loan Commitment and
upon such conversion such Lender shall have a Tranche C Revolving Loan
Commitment in an amount equal to such Lender's prior Tranche A
Revolving Loan Commitment, such Lender's prior Tranche A Revolving
Loan Commitment shall be permanently reduced to zero and the Aggregate
Tranche A Revolving Loan Commitment shall be permanently reduced by an
amount equal to such Lender's new Tranche C Revolving Loan Commitment
and (ii) with a Tranche B Revolving Loan Commitment may, upon three
(3) Business Day's prior written notice to the Administrative Agent
and the Company, convert all of its Tranche B Revolving Loan
Commitment to a Tranche D Revolving Loan Commitment and upon such
conversion such Lender shall have a Tranche D Revolving Loan
Commitment in an amount equal to such Lender's prior Tranche B
Revolving Loan Commitment, such Lender's prior Tranche B Revolving
Loan Commitment shall be permanently reduced to zero and the Aggregate
Tranche B Revolving Loan Commitment shall be permanently reduced by an
amount equal to such Lender's new Tranche D Revolving Loan Commitment.
(c) If any prospective Lender has indicated its desire to provide
commitments (i) with respect to Tranche C Revolving Loans, the Company
may, simultaneously with the execution by such prospective Lender of
an Assignment Agreement pursuant to Section 14.3, permanently reduce
the Aggregate Tranche A Revolving Loan Commitment ratably among the
Lenders with a Tranche A Revolving Loan Commitment in an amount equal
to the new Tranche C Revolving Loan Commitment of such prospective
Lender with a concurrent ratable transfer of any outstanding Tranche A
Revolving Loans to Tranche C Revolving Loans and (ii) with respect to
Tranche D Revolving Loans, the Company may, simultaneously with the
execution by such prospective Lender of an Assignment Agreement
pursuant to Section 14.3, permanently reduce the Aggregate Tranche B
Revolving Loan Commitment ratably among the Lenders with a Tranche B
Revolving Loan Commitment in an amount equal to the new Tranche D
Revolving Loan Commitment of such prospective Lender with a concurrent
ratable transfer of any outstanding Tranche B Revolving Loans to
Tranche D Revolving Loans.
2.7 Method of Borrowing. Not later than 2:00 p.m. (New York time) on each
Borrowing Date, each Lender shall make available its Revolving Loan in
immediately available funds in the applicable Agreed Currency to the
Administrative Agent at its address specified on its signature page hereto or as
otherwise specified pursuant to Article XV, unless the Administrative Agent has
notified the Lenders that such Loan is to be made available to the applicable
Borrower at the Administrative Agent's Eurocurrency Payment office, in which
case each Lender shall make available its Loan or Loans, in funds immediately
available to the Administrative Agent at its Eurocurrency Payment Office, not
later than 12:00 noon (local time in the city of the Administrative Agent's
Eurocurrency Payment Office) in the Agreed Currency designated by the
Administrative Agent. The Administrative Agent will promptly make the funds so
received from the Lenders available to the applicable Borrower at the
Administrative Agent's aforesaid address or Eurocurrency Payment Office, as
applicable.
2.8 Method of Selecting Types and Interest Periods for Advances. The
applicable Borrower shall select the Type of Advance and, in the case of each
Eurocurrency Rate Advance, the Interest Period, Agreed Currency and/or Alternate
Currency applicable to each Advance from time to time. The applicable Borrower
shall give the Administrative Agent irrevocable notice in substantially the form
of Exhibit B hereto (a "Borrowing/Conversion/Continuation Notice") not later
than 11:00 a.m. (New York time) (a) one (1) Business Day before the Borrowing
Date of each Floating Rate Advance, and (b) three (3) Business Days before the
Borrowing Date for each Eurocurrency Rate Advance to be made in Dollars, and (c)
four (4) Business Days before the Borrowing Date for each Eurocurrency Rate
Advance to be made in any Agreed Currency other than Dollars and (d) three (3)
Business Days before the Borrowing Date for each Alternate Currency Loan (or
such other period as may be agreed to by the Administrative Agent and the
applicable Borrower), and the applicable Borrower shall give the applicable
Alternate Currency Bank irrevocable notice by 11:00 a.m. (local time) three (3)
Business Days prior to the Borrowing Date for such Alternate Currency Loan (or
such other period as may be agreed to by the applicable Alternate Currency Bank
or specified in the applicable Alternate Currency Addendum), specifying: (i) the
Borrowing Date (which shall be a Business Day) of such Advance; (ii) the
aggregate amount of such Advance; (iii) the Type of Advance selected; (iv)
whether the Advance will be a Tranche A Advance, a Tranche B Advance, a Tranche
C Advance or a Tranche D Advance; and (v) in the case of each Eurocurrency Rate
Loan, the Interest Period and Agreed Currency or Alternate Currency applicable
thereto. Each Floating Rate Advance, each Alternate Currency Loan bearing a
fluctuating Alternate Currency Rate and all Obligations other than Loans shall
bear interest from and including the date of the making of such Advance, in the
case of Loans, and the date such Obligation is due and owing in the case of such
other Obligations, to (but not including) the date of repayment thereof at the
Floating Rate or Alternate Currency Rate, as applicable, changing when and as
such Floating Rate or Alternate Currency Rate, as applicable, changes. Changes
in the rate of interest on that portion of any Advance maintained as a Floating
Rate Loan will take effect simultaneously with each change in the Alternate Base
Rate. Changes in the rate of interest on any portion of any Alternate Currency
Loan bearing a fluctuating Alternate Currency Rate will take effect
simultaneously with each change in such Alternate Currency Rate. Each
Eurocurrency Rate Advance shall bear interest from and including the first day
of the Interest Period applicable thereto to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such
Eurocurrency Rate Advance and shall change as and when the Applicable
Eurocurrency Margin changes.
2.9 Minimum Amount of Each Advance. Each Advance (other than an Advance
to repay a Swing Line Loan or Reimbursement Obligation) shall be in the minimum
Dollar Amount of $5,000,000 (or the Approximate Equivalent Amount of any Agreed
Currency other than Dollars or any Alternate Currency) and in Dollar Amount
multiples of $1,000,000 (or the Approximate Equivalent Amount of any Agreed
Currency other than Dollars or any Alternate Currency) if in excess thereof (or
such other amounts as may be specified in the applicable Alternate Currency
Addendum), provided that any Floating Rate Advance may be in the amount of the
unused Aggregate Tranche A Revolving Loan Commitment, Aggregate Tranche B
Revolving Loan Commitment, Aggregate Tranche C Revolving Loan Commitment or
Aggregate Tranche D Revolving Loan Commitment, as the case may be.
2.10 Method of Selecting Types and Interest Periods for Conversion and
Continuation of Advances.
(a) Right to Convert. The applicable Borrower may elect from time to
time, subject to the provisions of Section 2.4 and this Section 2.10,
to convert all or any part of a Loan (other than a Swing Line Loan) of
any Type into any other Type or Types of Loans (other than a Swing Line
Loan); provided that any conversion of any Eurocurrency Rate Advance
shall be made on, and only on, the last day of the Interest Period
applicable thereto.
(b) Automatic Conversion and Continuation. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate
Loans are converted into Eurocurrency Rate Loans. Eurocurrency Rate
Loans shall continue as Eurocurrency Rate Loans until the end of the
then applicable Interest Period therefor, at which time such
Eurocurrency Rate Loans shall be automatically converted into Floating
Rate Loans unless the Company shall have given the Administrative Agent
notice in accordance with Section 2.10(d) requesting that, at the end
of such Interest Period, such Eurocurrency Rate Loans continue as a
Eurocurrency Rate Loan. Unless a Borrowing/Conversion/Continuation
Notice shall have timely been given in accordance with the terms of
this Section 2.10, Eurocurrency Rate Advances in an Agreed Currency
other than Dollars and Alternate Currency Loans shall automatically
continue as Eurocurrency Rate Advances in the same Agreed Currency or
Alternate Currency Loans in the same Alternate Currency, as applicable,
with an Interest Period of one (1) month.
(c) No Conversion Post-Default or Post-Unmatured Default.
Notwithstanding anything to the contrary contained in Section 2.10(a)
or Section 2.10(b), no Loan may be converted into or continued as a
Eurocurrency Rate Loan (except with the consent of the Required
Lenders) when any Default or Unmatured Default has occurred and is
continuing.
(d) Borrowing/Conversion/Continuation Notice. The Company shall give
the Administrative Agent a Borrowing/Conversion/Continuation Notice
with respect to each conversion of a Floating Rate Loan into a
Eurocurrency Rate Loan or continuation of a Eurocurrency Rate Loan not
later than 11:00 a.m. (New York time) (i) three (3) Business Days prior
to the date of the requested conversion or continuation, with respect
to any Loan to be converted or continued as a Eurocurrency Rate Loan in
Dollars, (ii) four (4) Business Days prior to the date of the requested
conversion or continuation with respect to any Loan to be converted or
continued as a Eurocurrency Rate Loan in an Agreed Currency other than
Dollars, and (iii) five (5) Business Days before the date of the
requested conversion or continuation Borrowing Date with respect to the
conversion or continuation of any Alternate Currency Loan (or such
other period as may be agreed to by the Administrative Agent), and the
applicable Subsidiary Borrower shall give the applicable Alternate
Currency Bank irrevocable notice by 11:00 a.m. (local time) three (3)
Business Days prior to the conversion or continuation of such Alternate
Currency Loan (or such other period as may specified in the applicable
Alternate Currency Addendum), specifying: (x) the requested date (which
shall be a Business Day) of such conversion or continuation; (y) the
amount and Type of the Loan to be converted or continued; and (z) the
amount of Eurocurrency Rate Loan(s) or Alternate Currency Loan(s), as
applicable, into which such Loan is to be converted or continued, the
Agreed Currency or Alternate Currency, as applicable, and the duration
of the Interest Period applicable thereto.
(e) Notwithstanding anything herein to the contrary, (i) Eurocurrency
Rate Advances in an Agreed Currency may be continued as Eurocurrency
Rate Advances only in the same Agreed Currency, (ii) Alternate Currency
Loans in an Alternate Currency may be continued as Alternate Currency
Loans only in the same Alternate Currency, (iii) Tranche A Advances may
only be continued as Tranche A Advances, (iv) Tranche B Advances may
only be continued as Tranche B Advances, (v) Tranche C Advances may
only be continued as Tranche C Advances and (vi) Tranche D Advances may
only be continued as Tranche D Advances.
2.11 Default Rate. After the occurrence and during the continuance of a
Default, each outstanding Loan shall bear interest at a rate equal to the rate
otherwise applicable thereto (giving effect to the provisions of Section
2.15(d)(ii)) plus 2% per annum.
2.12 Method of Payment. All payments of principal, interest, fees,
commissions, and other amounts payable hereunder shall be made, without setoff,
deduction or counterclaim in immediately available funds to the Administrative
Agent (a) at the Administrative Agent's address specified pursuant to Article XV
with respect to Advances or other Obligations denominated in Dollars and (b) at
the Administrative Agent's Eurocurrency Payment Office with respect to any
Advance or other Obligations denominated in an Agreed Currency other than
Dollars, or at any other Lending Installation of the Administrative Agent
specified in writing by the Administrative Agent to the Company, by 1:00 p.m.
(New York time) on the date when due and shall be applied ratably among the
applicable Lenders with respect to any principal and interest due in connection
with Loans. Each Advance shall be repaid or prepaid in the Agreed Currency in
which it was made in the amount borrowed and interest payable thereon shall also
be paid in such currency. Each payment delivered to the Administrative Agent for
the account of any Lender shall be delivered promptly by the Administrative
Agent to such Lender in the same type of funds which the Administrative Agent
received at its address specified pursuant to Article XV or at any Lending
Installation specified in a notice received by the Administrative Agent from
such Lender. The Company authorizes the Administrative Agent to charge the
account of the Company maintained with BNS for each payment of principal,
interest, fees, commissions and L/C Obligations as it becomes due hereunder.
Each reference to the Administrative Agent in this Section 2.12 shall also be
deemed to refer, and shall apply equally, to each Issuing Bank, in the case of
payments required to be made by the Company to any Issuing Bank pursuant to
Article III.
All payments to be made by the Borrowers hereunder in respect of any
Alternate Currency Loans shall be made in the currencies in which such Loans are
denominated and in funds immediately available, at the office or branch from
which the Loan was made pursuant to Section 2.20 and the applicable Alternate
Currency Addendum not later than 3:00 p.m. (local time) on the date on which
such payment shall become due. Promptly, and in any event within two (2)
Business Days after receipt, upon receipt of any payment of principal of the
Alternate Currency Loans the applicable Alternate Currency Bank shall give
written notice to the Administrative Agent by telex or telecopy of the receipt
of such payment.
Notwithstanding the foregoing provisions of this Section, if, after the
making of any Advance in any currency other than Dollars, currency control or
exchange regulations are imposed in the country which issues such Agreed
Currency or Alternate Currency, as applicable, with the result that different
types of such Agreed Currency or Alternate Currency, as applicable, (the "New
Currency") are introduced and the type of currency in which the Advance was made
(the "Original Currency") no longer exists or any Borrower is not able to make
payment to the Administrative Agent for the account of the Lenders or Alternate
Currency Bank, as applicable, in such Original Currency, then all payments to be
made by the Borrowers hereunder in such currency shall be made to the
Administrative Agent or Alternate Currency Bank, as applicable, in such amount
and such type of the New Currency or Dollars as shall be equivalent to the
amount of such payment otherwise due hereunder in the Original Currency, it
being the intention of the parties hereto that the Borrowers take all risks of
the imposition of any such currency control or exchange regulations. In
addition, notwithstanding the foregoing provisions of this Section, if, after
the making of any Advance in any currency other than Dollars, the applicable
Borrower is not able to make payment to the Administrative Agent for the account
of the Lenders or the applicable Alternate Currency Bank in the type of currency
in which such Advance was made because of the imposition of any such currency
control or exchange regulation, then such Advance shall instead be repaid when
due in Dollars in a principal amount equal to the Dollar Amount (as of the date
of repayment) of such Advance.
2.13 Evidence of Debt.
(a) Each Lender shall maintain in accordance with its usual practice an
account or accounts (a "Loan Account") evidencing the indebtedness of
the Borrowers owing to such Lender hereunder from time to time,
including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.
(b) The Register maintained by the Administrative Agent pursuant to
Section 14.3(c) shall reflect (i) the date and the amount of each Loan
made hereunder, the Type thereof and the Interest Period, if any,
applicable thereto, (ii) the amount and the currency of any principal
or interest due and payable or to become due and payable from the
Borrowers to each Lender hereunder, (iii) the effective date and amount
of each Assignment Agreement delivered to and accepted by it and the
parties thereto pursuant to Section 14.3, (iv) the amount of any sum
received by the Administrative Agent hereunder for the account of the
Lenders and each Lender's share thereof, and (v) all other appropriate
debits and credits as provided in this Agreement, including, without
limitation, all fees, charges, expenses and interest.
(c) The entries made in the Loan Account, the Register and the other
accounts maintained pursuant to subsections (a) or (b) of this Section
shall be presumptively correct for all purposes, absent manifest error;
provided that the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any manner
affect the obligation of the Borrowers to repay the Obligations in
accordance with the terms of this Agreement.
(d) Any Lender may request that the Tranche A Revolving Loans, the
Tranche B Revolving Loans, the Tranche C Revolving Loans, the Tranche D
Revolving Loans or the Term Loans made by it each be evidenced by a
promissory note in substantially the forms of Exhibit I-1, Exhibit I-2,
Exhibit I-3, Exhibit I-4 or Exhibit I-5, respectively, to evidence such
Lender's Tranche A Revolving Loans, Tranche B Revolving Loans, Tranche
C Revolving Loans, Tranche D Revolving Loans or Term Loans, as
applicable. In such event, the applicable Borrower shall promptly
prepare, execute and deliver to such Lender a promissory note for such
Loans payable to the order of such Lender and in a form approved by the
Administrative Agent and consistent with the terms of this Agreement.
Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to
Section 14.3) be represented by one or more promissory notes in such
form payable to the order of the payee named therein.
2.14 Telephonic Notices. The Borrowers authorize the Lenders and the
Administrative Agent to extend Loans, effect selections of Types of Advances and
to transfer funds based on telephonic notices made by any person or persons the
Administrative Agent or any Lender in good faith believes to be acting on behalf
of the applicable Borrower. The Borrowers agree to deliver promptly to the
Administrative Agent a written confirmation, signed by an Authorized Officer. If
the written confirmation differs in any material respect from the action taken
by the Administrative Agent and the Lenders, the records of the Administrative
Agent and the Lenders shall govern absent manifest error.
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control Accounts.
(a) Promise to Pay. Each Borrower unconditionally promises to pay when
due the principal amount of each Loan and all other Obligations
incurred by it, and to pay all unpaid interest accrued thereon, in
accordance with the terms of this Agreement and the other Loan
Documents.
(b) Interest Payment Dates. Interest accrued on each Floating Rate Loan
and each Alternate Currency Loan bearing a fluctuating Alternate
Currency Rate shall be payable on each Payment Date, commencing with
the first such date to occur after the date hereof, upon any prepayment
whether by acceleration or otherwise, and at maturity (whether by
acceleration or otherwise). Interest accrued on each Fixed-Rate Loan
shall be payable on the last day of its applicable Interest Period, on
any date on which the Fixed-Rate Loan is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on each
Fixed-Rate Loan having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval
during such Interest Period. Interest accrued on the principal balance
of all other Obligations shall be payable in arrears (i) on the last
day of each calendar month, commencing on the first such day following
the incurrence of such Obligation, (ii) upon repayment thereof in full
or in part, and (iii) if not theretofore paid in full, at the time such
other Obligation becomes due and payable (whether by acceleration or
otherwise).
(c) Fees.
(i) The Company shall pay to the Administrative Agent (A) for
the account of the Lenders in accordance with their Pro Rata Tranche A
Revolving Shares, from and after the date of this Agreement until the
Tranche A Revolving Loan Termination Date, a commitment fee accruing at
the rate of the then Applicable Commitment Fee Percentage on the
unutilized portion of such Lender's Tranche A Revolving Loan
Commitment, (B) for the account of the Lenders in accordance with their
Pro Rata Tranche B Revolving Shares, from and after the date of this
Agreement until the Tranche B Revolving Loan Termination Date, a
commitment fee accruing at the rate of the then Applicable Commitment
Fee Percentage on the unutilized portion of such Lender's Tranche B
Revolving Loan (treating Alternate Currency Loans as usage), (C) for
the account of the Lenders in accordance with their Pro Rata Tranche C
Revolving Shares, from and after the date of this Agreement until the
Tranche C Revolving Loan Termination Date, a commitment fee accruing at
the rate of the then Applicable Commitment Fee Percentage on the
unutilized portion of such Lender's Tranche C Revolving Loan Commitment
(treating Letters of Credit, but not Swing Line Loans, as usage) and
(D) for the account of the Lenders in accordance with their Pro Rata
Tranche D Revolving Shares, from and after the date of this Agreement
until the Tranche D Revolving Loan Termination Date, a commitment fee
accruing at the rate of the then Applicable Commitment Fee Percentage
on the unutilized portion of such Lender's Tranche D Revolving Loan
(treating Alternate Currency Loans as usage). The commitment fee shall
be payable in arrears on each Payment Date hereafter, and, in addition,
on any date on which the Tranche A Revolving Loan Commitment, the
Tranche B Revolving Loan Commitment, the Tranche C Revolving Loan
Commitment or the Tranche D Revolving Loan Commitment, as applicable,
shall be terminated in whole or, with respect to such terminated
amount, in part.
(ii) The Company agrees to pay to the Administrative Agent,
for the sole account of the Administrative Agent (unless otherwise
agreed between the Administrative Agent and any Lender) the fees set
forth in the Original Fee Letter, payable at the times and in the
amounts set forth therein.
(iii) The applicable Borrower agrees to pay to each Alternate
Currency Bank, for its sole account, a fronting fee equal to 0.25% of
the average daily outstanding Dollar Amount of all Alternate Currency
Loans made by such Alternate Currency Bank.
(d) Interest and Fee Basis; Applicable Floating Rate Margin,
Applicable Eurocurrency Margin and Applicable Commitment Fee
Percentage.
(i) Interest on all Fixed-Rate Loans (except as provided
otherwise in the applicable Alternate Currency Addendum in the case of
an Alternate Currency Loan) and fees shall be calculated for actual
days elapsed on the basis of a 360-day year. Interest on all Floating
Rate Loans shall be calculated for actual days elapsed on the basis of
a 365-, or when appropriate 366-, day year. Interest shall be payable
for the day an Obligation is incurred but not for the day of any
payment on the amount paid if payment is received prior to 3:00 p.m.
(local time) at the place of payment. If any payment of principal of or
interest on a Loan or any payment of any other Obligations shall become
due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal
payment, such extension of time shall be included in computing
interest, fees and commissions in connection with such payment.
(ii) The Applicable Floating Rate Margin, Applicable
Eurocurrency Margin and Applicable Commitment Fee Percentage shall be
determined from time to time on the basis of the then applicable
Leverage Ratio in accordance with the following table:
APPLICABLE APPLICABLE APPLICABLE
FLOATING RATE EUROCURRENCY COMMITMENT
LEVERAGE RATIO MARGIN MARGIN FEE PERCENTAGE
Less than 1.50 0.25% 1.25% 0.375%
1.50 or greater,
but less than 2.00 0.75% 1.75% 0.375%
2.00 or greater,
but less than 2.50 1.25% 2.25% 0.500%
2.50 or greater,
but less than 2.75 1.75% 2.75% 0.500%
2.75 or greater,
but less than 3.00 2.00% 3.00% 0.500%
3.00 or greater 2.25% 3.25% 0.500%
Upon receipt of the financial statements to be delivered by
the Company in accordance with Section 7.1(a)(i) or (ii), as
applicable, for any fiscal quarter or, if earlier, upon receipt of the
Company's audited financial statements for any fiscal year, the
Applicable Floating Rate Margin, Applicable Eurocurrency Margin and
Applicable Commitment Fee Percentage shall be adjusted, such adjustment
being effective five (5) Business Days following the Administrative
Agent's receipt of such financial statements and the compliance
certificate required to be delivered in connection therewith pursuant
to Section 7.1(a)(iii); provided that if the Company shall not have
timely delivered its financial statements in accordance with Section
7.1(a)(i) or (ii), as applicable, then commencing on the date upon
which such financial statements should have been delivered and
continuing until such financial statements are actually delivered, it
shall be assumed for purposes of determining the Applicable Floating
Rate Margin, Applicable Eurocurrency Margin and Applicable Commitment
Fee Percentage that the Leverage Ratio was greater than 2.50 to 1.0.
Notwithstanding the foregoing, for so long as any Default shall have
occurred and be continuing, the Applicable Floating Rate Margin,
Applicable Eurocurrency Margin and Applicable Commitment Fee Percentage
shall be the highest Applicable Floating Rate Margin, Applicable
Eurocurrency Margin and Applicable Commitment Fee Margin set forth in
the foregoing table.
(e) Taxes.
(i) Any and all payments by the Borrowers hereunder (whether
in respect of principal, interest, fees or otherwise) shall be made
free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings or
any interest, penalties and liabilities with respect thereto but
excluding, in the case of each Lender and the Administrative Agent,
such taxes (including income taxes, franchise taxes and branch profit
taxes) as are imposed on or measured by such Lender's or the
Administrative Agent's, as the case may be, net income by the United
States of America or any Governmental Authority of the jurisdiction
under the laws of which such Lender or the Administrative Agent, as the
case may be, is organized (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings, and liabilities which the
Administrative Agent or a Lender determines to be applicable to this
Agreement, the other Loan Documents, the Revolving Loan Commitments,
the Loans or the Letters of Credit being hereinafter referred to as
"Taxes"). If any Borrower shall be required by law to deduct or
withhold any Taxes from or in respect of any sum payable hereunder or
under the other Loan Documents to any Lender or the Administrative
Agent, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including
deductions applicable to additional sums payable under this Section
2.15(e)) such Lender or Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions or
withholdings been made, (ii) the applicable Borrower shall make such
deductions or withholdings, and (iii) the applicable Borrower shall pay
the full amount deducted or withheld to the relevant taxation authority
or other authority in accordance with applicable law.
(ii) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges, or similar levies which arise from any payment made
hereunder, from the issuance of Letters of Credit hereunder, or from
the execution, delivery or registration of, or otherwise with respect
to, this Agreement, the other Loan Documents, the Revolving Loan
Commitments, the Loans or the Letters of Credit (hereinafter referred
to as "Other Taxes").
(iii) The Company and each Subsidiary Borrower shall indemnify
each Lender and the Administrative Agent for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed by any Governmental Authority on amounts payable under
this Section 2.15(e)) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest,
and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date
such Lender or the Administrative Agent (as the case may be) makes
written demand therefor. A certificate as to any additional amount
payable to any Lender or the Administrative Agent under this Section
2.15(e) submitted to the applicable Borrower and the Administrative
Agent (if a Lender is so submitting) by such Lender or the
Administrative Agent shall show in reasonable detail the amount payable
and the calculations used to determine such amount and shall, absent
manifest error, be final, conclusive and binding upon all parties
hereto.
(iv) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by the Company or any Subsidiary Borrower, the
Company shall furnish to the Administrative Agent the original or a
certified copy of a receipt evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement
of the Company and the Subsidiary Borrowers hereunder, the agreements
and obligations of the Borrowers contained in this Section 2.15(e)
shall survive the payment in full of all Obligations, the termination
of the Letters of Credit and the termination of this Agreement.
(vi) Each Lender (including any Replacement Lender or
Purchaser) that is not created or organized under the laws of the
United States of America or a political subdivision thereof (each a
"Non-U.S. Lender") shall deliver to the Company and the Administrative
Agent on or before the Closing Date, or, if later, the date on which
such Lender becomes a Lender pursuant to Section 14.3 hereof (and from
time to time thereafter upon the request of the Company or the
Administrative Agent, but only for so long as such Non-U.S. Lender is
legally entitled to do so), either (A) two (2) duly completed copies of
either (x) IRS Form W-8BEN, or (y) IRS Form W-8ECI, or in either case
an applicable successor form or (B) in the case of a Non-U.S. Lender
that is not legally entitled to deliver either form listed in clause
(vi)(A)(I), (I) a certificate of a duly authorized officer of such
Non-U.S. Lender to the effect that such Non-U.S. Lender is not (x) a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, (y) a
"10 percent shareholder" of the Company or any Subsidiary Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or (z) a
controlled foreign corporation receiving interest from a related person
within the meaning of Section 881(c)(3)(C) of the Code (such
certificate, an "Exemption Certificate") and (II) two (2) duly
completed copies of IRS Form W-8BEN or applicable successor form. Each
such Lender further agrees to deliver to the Company and the
Administrative Agent from time to time a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender in a
form satisfactory to the Company and the Administrative Agent, before
or promptly upon the occurrence of any event requiring a change in the
most recent certificate previously delivered by it to the Company and
the Administrative Agent pursuant to this Section 2.15(e)(vi). Further,
each Lender which delivers a form or certificate pursuant to this
clause (vi) covenants and agrees to deliver to the Company and the
Administrative Agent within fifteen (15) days prior to the expiration
of such form, for so long as this Agreement is still in effect, another
such certificate and/or two (2) accurate and complete original
newly-signed copies of the applicable form (or any successor form or
forms required under the Code or the applicable regulations promulgated
thereunder).
Each Lender shall promptly furnish to the Company and the
Administrative Agent such additional documents as may be reasonably
required by any Borrower or the Administrative Agent to establish any
exemption from or reduction of any Taxes or Other Taxes required to be
deducted or withheld and which may be obtained without undue expense to
such Lender. Notwithstanding any other provision of this Section
2.15(e), no Borrower shall be obligated to gross up any payments to any
Lender pursuant to Section 2.15(e)(i), or to indemnify any Lender
pursuant to Section 2.15(e)(iii), in respect of United States federal
withholding taxes to the extent imposed as a result of (x) the failure
of such Lender to deliver to the Company the form or forms and/or an
Exemption Certificate, as applicable to such Lender, pursuant to
Section 2.15(e)(vi), or (y) such form or forms and/or Exemption
Certificate not establishing a complete exemption from U.S. federal
withholding tax or the information or certifications made therein by
the Lender being untrue or inaccurate on the date delivered in any
material respect, provided that the applicable Borrower shall be
obligated to gross up any payments to any such Lender pursuant to
Section 2.15(e)(i), and to indemnify any such Lender pursuant to
Section 2.15(e)(iii), in respect of United States federal withholding
taxes if (x) any such failure to deliver a form or forms or an
Exemption Certificate or the failure of such form or forms or exemption
certificate to establish a complete exemption from U.S. federal
withholding tax or inaccuracy or untruth contained therein resulted
from a change in any applicable statute, treaty, regulation or other
applicable law or any interpretation of any of the foregoing occurring
after the date hereof, which change rendered such Lender no longer
legally entitled to deliver such form or forms or Exemption Certificate
or otherwise ineligible for a complete exemption from U.S. federal
withholding tax, or rendered the information or the certifications made
in such form or forms or Exemption Certificate untrue or inaccurate in
any material respect, or (y) the obligation to gross up payments to any
such Lender pursuant to Section 2.15(e)(i), or to indemnify any such
Lender pursuant to Section 2.15(e)(iii), is with respect to a Purchaser
that becomes a Purchaser as a result of an assignment made at the
request of the Company.
2.16 Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions. Promptly after receipt thereof,
the Administrative Agent will notify each Lender of the contents of each
Aggregate Revolving Loan Commitment reduction notice,
Borrowing/Conversion/Continuation Notice, and repayment notice received by it
hereunder. The Administrative Agent will notify the Company or applicable
Borrower and each Lender of the interest rate and Agreed Currency applicable to
each Fixed-Rate Loan promptly upon determination of such interest rate and
Agreed Currency and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.17 Lending Installations. Each Lender may book its Loans or Letters
of Credit at any Lending Installation selected by such Lender and may change its
Lending Installation from time to time. All terms of this Agreement shall apply
to any such Lending Installation. Each Lender may, by written or facsimile
notice to the Administrative Agent and the Company, designate a Lending
Installation through which Loans will be made by it and for whose account Loan
payments and/or payments of L/C Obligations are to be made.
2.18 Non-Receipt of Funds by the Administrative Agent. Unless a
Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the Administrative
Agent of (a) in the case of a Lender, the proceeds of a Loan or (b) in the case
of any Borrower, a payment of principal, interest fees or other Obligations to
the Administrative Agent for the account of any of the Lenders, that it does not
intend to make such payment, the Administrative Agent may assume that such
payment has been made. The Administrative Agent may, but shall not be obligated
to, make the amount of such payment available to the intended recipient in
reliance upon such assumption. If such Lender or the applicable Borrower, as the
case may be, has not in fact made such payment to the Administrative Agent, the
recipient of such payment shall, on demand by the Administrative Agent, repay to
the Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Administrative Agent until the date the
Administrative Agent recovers such amount at a rate per annum equal to (i) in
the case of payment by a Lender, the Federal Funds Effective Rate for such day
or (ii) in the case of payment by a Borrower, the interest rate applicable to
the relevant Loan.
2.19 Termination Date. This Agreement shall be effective until the date
(the "Facility Termination Date") upon which (a) all of the Obligations (other
than contingent indemnity obligations) shall have been fully and indefeasibly
paid and satisfied, (b) all commitments of the Lenders to extend credit
hereunder have expired or have been terminated and (c) all of the Letters of
Credit shall have expired, been canceled or terminated. Notwithstanding the
occurrence of the Facility Termination Date, obligations of the Borrowers and
other terms hereof which by the terms of this Agreement survive termination
shall survive the Facility Termination Date.
2.20 Replacement of Certain Lenders. In the event a Lender ("Affected
Lender") shall have: (a) failed to fund its Pro Rata Tranche A Revolving Share,
Pro Rata Tranche B Revolving Share, Pro Rata Tranche C Revolving Share or Pro
Rata Tranche D Revolving Share of any Advance requested by the applicable
Borrower, or to make payment in respect of any Alternate Currency Loan purchased
by such Lender pursuant to Section 2.21(e), which such Lender is obligated to
fund under the terms of this Agreement and which failure has not been cured, (b)
requested compensation from any Borrower under Sections 2.15(e), 4.1 or 4.2 to
recover Taxes, Other Taxes or other additional costs incurred by such Lender
which are not being incurred generally by the other Lenders except as provided
under any applicable Alternate Currency Addendum, or (c) delivered a notice
pursuant to Section 4.3 claiming that such Lender is unable to extend
Eurocurrency Rate Loans to the Company for reasons not generally applicable to
the other Lenders, then, in any such case, after the engagement of one or more
"Replacement Lenders" (as defined below) by the Company and/or the
Administrative Agent, the Company or the Administrative Agent may make written
demand on such Affected Lender (with a copy to the Administrative Agent in the
case of a demand by the Company and a copy to the Company in the case of a
demand by the Administrative Agent) for the Affected Lender to assign, and such
Affected Lender shall use commercially reasonable efforts to assign pursuant to
one or more duly executed Assignment Agreements five (5) Business Days after the
date of such demand, to one or more financial institutions that comply with the
provisions of Section 14.3(a) which the Company or the Administrative Agent, as
the case may be, shall have engaged for such purpose (each, a "Replacement
Lender"), all of such Affected Lender's rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Revolving Loan Commitment, all Loans owing to it, all of its participation
interests in existing Letters of Credit, and its obligation to participate in
additional Letters of Credit and Alternate Currency Loans hereunder) in
accordance with Section 14.3. The Administrative Agent is authorized to execute
one or more of such assignment agreements as attorney-in-fact for any Affected
Lender failing to execute and deliver the same within five (5) Business Days
after the date of such demand. With respect to such assignment the Affected
Lender shall be entitled to receive, in cash, all amounts due and owing to the
Affected Lender hereunder or under any other Loan Document, including, without
limitation, the aggregate outstanding principal amount of the Loans owed to such
Lender, together with accrued interest thereon through the date of such
assignment, amounts payable under Sections 2.15(e), 4.1, and 4.2 with respect to
such Affected Lender and compensation payable under Section 2.15(c) in the event
of any replacement of any Affected Lender under clause (b) or clause (c) of this
Section 2.20; provided that upon such Affected Lender's replacement, such
Affected Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.15(e), 4.1, 4.2, 4.4, and 11.6, as well
as to any fees accrued for its account hereunder and not yet paid, and shall
continue to be obligated under Section 12.8.
2.21 Alternate Currency Loans.
(a) Upon the satisfaction of the conditions precedent set forth in
Article V hereof and set forth in the applicable Alternate Currency
Addendum, from and including the later of the date of this Agreement
and the date of execution of the applicable Alternate Currency Addendum
and prior to the termination of the Aggregate Tranche B Revolving Loan
Commitment or the Aggregate Tranche D Revolving Loan Commitment, as
applicable (or such earlier termination date as shall be specified in
or pursuant to the applicable Alternate Currency Addendum), each
Alternate Currency Bank agrees, on the terms and conditions set forth
in this Agreement and in the applicable Alternate Currency Addendum, to
make Alternate Currency Loans under such Alternate Currency Addendum to
the applicable Borrower party to such Alternate Currency Addendum from
time to time in the applicable Alternate Currency, in an amount not to
exceed each such Alternate Currency Bank's applicable Alternate
Currency Commitment; provided that at no time shall the Dollar Amount
of the Alternate Currency Loans for any specific Alternate Currency
exceed the maximum amount specified as the maximum amount for such
Alternate Currency in the applicable Alternate Currency Addendum other
than as a result of currency fluctuations and then only to the extent
permitted in Section 2.5(b)(ii) and provided, further, that at no time
shall (i) the Dollar Amount of the Tranche B Revolving Credit
Obligations exceed the Aggregate Tranche B Revolving Loan Commitments
or (ii) the Dollar Amount of the Tranche D Revolving Credit Obligations
exceed the Aggregate Tranche D Revolving Loan Commitments. Subject to
the terms of this Agreement and the applicable Alternate Currency
Addendum, the applicable Borrowers may borrow, repay and reborrow
Alternate Currency Loans in the applicable Alternate Currency at any
time prior to the termination of the Aggregate Tranche B Revolving Loan
Commitment or the Aggregate Tranche D Revolving Loan Commitment, as
applicable (or such earlier termination date as shall be specified in
or pursuant to the applicable Alternate Currency Addendum). On the
termination of the Aggregate Tranche B Revolving Loan Commitment or the
Aggregate Tranche D Revolving Loan Commitment, as applicable (or such
earlier termination date as shall be specified in or pursuant to the
applicable Alternate Currency Addendum), the outstanding principal
balance of the Alternate Currency Loans shall be paid in full by the
applicable Borrower and prior to the termination of the Aggregate
Tranche B Revolving Loan Commitment or the Aggregate Tranche D
Revolving Loan Commitment, as applicable (or such earlier termination
date as shall be specified in or pursuant to the applicable Alternate
Currency Addendum) prepayments of the Alternate Currency Loans shall be
made by the applicable Borrower if and to the extent required by
Section 2.5(b)(ii). For the avoidance of doubt, it is understood that
no Lender shall have any obligation hereunder to execute an Alternate
Currency Addendum and so to become an Alternate Currency Bank.
(b) Borrowing Notice. When the applicable Borrower desires to borrow
under this Section 2.21, the applicable Borrower shall deliver to the
applicable Alternate Currency Bank and the Administrative Agent a
Borrowing/Conversion/Continuation Notice, signed by it, as provided in
Section 2.8 specifying that such Borrower is requesting an Alternate
Currency Loan pursuant to this Section 2.21 and whether such borrowing
shall be made as a Tranche B Revolving Loan or Tranche D Revolving
Loan, and the Administrative Agent shall give prompt notice to the
Lenders with a Tranche B Revolving Loan Commitment or a Tranche D
Revolving Loan Commitment, as applicable, of any such request for an
Alternate Currency Loan. Any Borrowing/Conversion/Continuation Notice
given pursuant to this Section 2.21 shall be irrevocable.
(c) Termination. Except as otherwise required by applicable law, in no
event shall any Alternate Currency Bank have the right to accelerate
the Alternate Currency Loans outstanding under any Alternate Currency
Addendum or to terminate its commitments (if any) thereunder to make
Alternate Currency Loans prior to the stated termination date in
respect thereof, except that each Alternate Currency Bank shall have
such rights upon an acceleration of the Loans and a termination of the
Aggregate Revolving Loan Commitments pursuant to Article IX.
(d) Statements. Each Alternate Currency Bank shall furnish to the
Administrative Agent not less frequently than monthly, at the end of
each calendar quarter, and at any other time at the reasonable request
of the Administrative Agent, a statement setting forth the outstanding
Alternate Currency Loans made and repaid during the period since the
last such report under such Alternate Currency Addendum.
(e) Risk Participation. Immediately and automatically upon the
occurrence of a Default under Sections 8.1(a), (e) or (f), each Lender
with a Tranche B Revolving Loan Commitment or a Tranche D Revolving
Loan Commitment, as applicable, shall be deemed to have unconditionally
and irrevocably purchased from the applicable Alternate Currency Bank,
without recourse or warranty, an undivided interest in and
participation in each Alternate Currency Loan ratably in an amount
equal to such Lender's Pro Rata Tranche B Revolving Share or Pro Rata
Tranche D Revolving Share, as applicable, of the amount of principal
and accrued interest of such Loan, and immediately and automatically
all Alternate Currency Loans shall be converted to and redenominated in
Dollars equal to the Dollar Amount of each such Alternate Currency Loan
determined as of the date of such conversion; provided that to the
extent such conversion shall occur other than at the end of an Interest
Period, the applicable Borrower shall pay to the applicable Alternate
Currency Bank, all losses and breakage costs related thereto in
accordance with Section 4.4. Each of the Lenders shall pay to the
applicable Alternate Currency Bank not later than two (2) Business Days
following a request for payment from such Alternate Currency Bank, in
Dollars, an amount equal to the undivided interest in and participation
in the Alternate Currency Loan purchased by such Lender pursuant to
this Section 2.21(e). In the event that any Lender fails to make
payment to the applicable Alternate Currency Bank of any amount due
under this Section 2.21(e), the Administrative Agent shall be entitled
to receive, retain and apply against such obligation the principal and
interest otherwise payable to such Lender hereunder until the
Administrative Agent receives from such Lender an amount sufficient to
discharge such Lender's payment obligation as prescribed in this
Section 2.21(e) together with interest thereon at the Federal Funds
Effective Rate for each day during the period commencing on the date of
demand by the applicable Alternate Currency Bank and ending on the date
such obligation is fully satisfied. The Administrative Agent will
promptly remit all payments received as provided above to the
applicable Alternate Currency Bank. In consideration of the risk
participations prescribed in this Section 2.21(e), each Lender shall
receive, from the accrued interest paid for periods prior to the
conversion of any Alternate Currency Loan as described above by the
applicable Borrower on each Alternate Currency Loan, a fee equal to
such Lender's Pro Rata Tranche B Revolving Share or Pro Rata Tranche D
Revolving Share, as applicable, of the Applicable Eurocurrency Margin
component of the interest accrued on such Loan, as in effect from time
to time during the period such interest accrued. Such portion of the
interest paid by the applicable Borrower on Alternate Currency Loans to
the applicable Alternate Currency Bank shall be paid as promptly as
possible by such Alternate Currency Bank to the Administrative Agent,
and the Administrative Agent shall as promptly as possible convert such
amount into Dollars at the spot rate of exchange in accordance with its
normal banking practices and apply such resulting amount ratably among
the Lenders (including the Alternate Currency Banks) in proportion to
their Pro Rata Tranche B Revolving Share or Pro Rata Tranche D
Revolving Share, as applicable.
(f) Other Provisions Applicable to Alternate Currency Loans. The
specification of payment of Alternate Currency Loans in the related
Alternate Currency at a specific place pursuant to this Agreement is of
the essence. Such Alternate Currency shall, subject to Section 2.21, be
the currency of account and payment of such Loans under this Agreement
and the applicable Alternate Currency Addendum. Notwithstanding
anything in this Agreement, the obligation of the applicable Borrower
in respect of such Loans shall not be discharged by an amount paid in
any other currency or at another place, whether pursuant to a judgment
or otherwise, to the extent the amount so paid, on prompt conversion
into the applicable Alternate Currency and transfer to such Lender
under normal banking procedure, does not yield the amount of such
Alternate Currency due under this Agreement or the applicable Alternate
Currency Addendum. In the event that any payment, whether pursuant to a
judgment or otherwise, upon conversion and transfer, does not result in
payment of the amount of such Alternate Currency due under this
Agreement or the applicable Alternate Currency Addendum, such Lender
shall have an independent cause of action against each of the Borrowers
for the currency deficit. In the event that any payment, upon
conversion and transfer, results in payment in excess of the amount of
such Alternate Currency due under this Agreement or the applicable
Alternate Currency Addendum, such Lender shall refund such excess to
the applicable Borrower.
2.22 Judgment Currency. If, for the purposes of obtaining judgment in
any court, it is necessary to convert a sum due from any Borrower hereunder in
the currency expressed to be payable herein (the "specified currency") into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the specified currency with such other currency at the Administrative
Agent's office in New York, New York on the Business Day preceding that on which
the final, non-appealable judgment is given. The obligations of each Borrower in
respect of any sum due to any Lender or the Administrative Agent hereunder
shall, notwithstanding any judgment in a currency other than the specified
currency, be discharged only to the extent that on the Business Day following
receipt by such Lender or the Administrative Agent (as the case may be) of any
sum adjudged to be so due in such other currency such Lender or the
Administrative Agent (as the case may be) may in accordance with normal,
reasonable banking procedures purchase the specified currency with such other
currency. If the amount of the specified currency so purchased is less than the
sum originally due to such Lender or the Administrative Agent, as the case may
be, in the specified currency, each Borrower agrees, to the fullest extent that
it may effectively do so, as a separate obligation and notwithstanding any such
judgment, to indemnify such Lender or the Administrative Agent, as the case may
be, against such loss, and if the amount of the specified currency so purchased
exceeds (a) the sum originally due to any Lender or the Administrative Agent, as
the case may be, in the specified currency and (b) any amounts shared with other
Lenders as a result of allocations of such excess as a disproportionate payment
to such Lender under Section 13.2, such Lender or the Administrative Agent, as
the case may be, agrees to remit such excess to such Borrower.
2.23 Market Disruption; Denomination of Amounts in Dollars;
Dollar Equivalent of Reimbursement Obligations.
(a) Notwithstanding the satisfaction of all conditions referred to in
this Article II with respect to any Advance in any Agreed Currency
other than Dollars or an Alternate Currency, as applicable, if there
shall occur on or prior to the date of such Advance any change in
national or international financial, political or economic conditions
or currency exchange rates or exchange controls which would in the
reasonable opinion of the Company, any Subsidiary Borrower, any
Alternate Currency Bank, the Administrative Agent or the Required
Lenders make it impracticable for the Eurocurrency Rate Loans or
Alternate Currency Loans comprising such Advance to be denominated in
the Agreed Currency or Alternate Currency, as applicable, specified by
the applicable Borrower, then the Administrative Agent shall forthwith
give notice thereof to the Company or such Borrower, the applicable
Alternate Currency Bank and the Lenders, or the applicable Borrower
shall give notice to the Administrative Agent, the applicable Alternate
Currency Bank and the Lenders, as the case may be, and such
Eurocurrency Rate Loans or Alternate Currency Loans shall not be
denominated in such currency but shall be made on such Borrowing Date
in Dollars, in an aggregate principal amount equal to the Dollar Amount
of the aggregate principal amount specified in the related Borrowing
Notice, as Floating Rate Loans, unless the applicable Borrower notifies
the Administrative Agent at least one (1) Business Day before such date
that (i) it elects not to borrow on such date or (ii) it elects to
borrow on a date at least three (3) Business Days thereafter in a
different Agreed Currency or Alternate Currency, as the case may be, in
which the denomination of such Loans would in the opinion of the
Administrative Agent, any Alternate Currency Bank, if applicable, and
the Required Lenders be practicable and in an aggregate principal
amount equal to the Dollar Amount of the aggregate principal amount
specified in the related Borrowing Notice.
(b) Except as set forth in Sections 2.1, 2.5 and 2.21, all amounts
referenced in this Article II shall be calculated using the Dollar
Amount determined based upon the Equivalent Amount in effect as of the
date of any determination thereof; provided to the extent that any
Borrower shall be obligated hereunder to pay in Dollars any Advance
denominated in a currency other than Dollars, such amount shall be paid
in Dollars using the Dollar Amount of the Advance (calculated based
upon the Equivalent Amount in effect on the date of payment thereof)
and in the event that the applicable Borrower does not reimburse the
Administrative Agent and the Lenders are required to fund a purchase of
a participation in such Advance, such purchase shall be made in Dollars
in an amount equal to the Dollar Amount of such Advance (calculated
based upon the Equivalent Amount in effect on the date of payment
thereof). Notwithstanding anything herein to the contrary, the full
risk of currency fluctuations shall be borne by the Borrowers and the
Borrowers agree to indemnify and hold harmless each Issuing Bank, the
Alternate Currency Banks, the Administrative Agent and the Lenders from
and against any loss resulting from any borrowing denominated in a
currency other than in Dollars and for which the Lenders are not
reimbursed on the day of such borrowing.
2.24 Subsidiary Borrowers. The Company may at any time or from time to
time, with the consent of the Administrative Agent, add as a party to this
Agreement any Wholly-Owned Subsidiary to be a "Subsidiary Borrower" hereunder by
the execution and delivery to the Administrative Agent and the Lenders of (a) a
duly completed Assumption Letter by such Subsidiary, with the written consent of
the Company at the foot thereof and (b) such other guaranty, security and
subordinated intercompany indebtedness documents (and related closing
documentation) as may be reasonably required by the Administrative Agent, such
documents with respect to any additional Subsidiaries to be substantially
similar in form and substance to the Loan Documents executed on or about the
Closing Date by or in respect of the Subsidiaries parties hereto as of the
Closing Date. Upon such execution, delivery and consent such Subsidiary shall
for all purposes be a party hereto as a Subsidiary Borrower as fully as if it
had executed and delivered this Agreement. So long as the principal of and
interest on any Advances made to any Subsidiary Borrower under this Agreement
shall have been paid in full, all Letters of Credit issued for the account of
such Subsidiary Borrower have expired or been returned and terminated and all
other obligations of such Subsidiary Borrower under this Agreement shall have
been fully performed, the Company may, by not less than five (5) Business Days'
prior notice to the Administrative Agent (which shall promptly notify the
Lenders thereof), terminate such Subsidiary Borrower's status as a "Subsidiary
Borrower".
2.25 Security. All Obligations of the Borrowers under this Agreement
and all other Loan Documents shall be secured in accordance with the Collateral
Documents.
2.26 Assignment and Reallocation of Existing Commitments and Existing
Loans. Each of the parties hereto severally and for itself agrees that on the
Amendment Effective Date, each Existing Lender hereby irrevocably sells,
transfers, conveys and assigns, without recourse, representation or warranty
(except as expressly set forth herein), to each Lender that is not an Existing
Lender, and each such Lender hereby irrevocably purchases from such Existing
Lender, a portion of the rights and obligations of such Existing Lender under
the Existing Credit Agreement and each other Loan Document in respect of its
Existing Loans and Commitments under (and as defined in) the Existing Credit
Agreement such that, after giving effect to the foregoing assignment and
delegation, each Lender's Revolving Loan Commitments and portion of the Existing
Loans for the purposes of this Agreement and each other Loan Document will be as
set forth opposite such Person's name on Exhibit A to this Agreement.
(a) Each Existing Lender hereby represents and warrants to each Lender,
that immediately before giving effect to the provisions of this
Section, (i) such Existing Lender is the legal and beneficial owner of
the portion of its rights and obligations in respect of its Existing
Loans being assigned to each Lender as set forth above; and (ii) such
rights and obligations being assigned and sold by such Existing Lender
are free and clear of any adverse claim or encumbrance created by such
Existing Lender.
(b) Each of the Lenders hereby acknowledges and agrees that (i) other
than the representations and warranties contained above, no Lender nor
the Administrative Agent has made any representations or warranties or
assumed any responsibility with respect to (A) any statements,
warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability,
genuineness or sufficiency of this Agreement, the Existing Credit
Agreement or any other Loan Document or (B) the financial condition of
any Borrower or the performance by any Borrower of the Obligations;
(ii) it has received such information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Agreement;
and (iii) it has made and continues to make its own credit decisions in
taking or not taking action under this Agreement, independently and
without reliance upon the Administrative Agent or any other Lender.
(c) The Borrowers, each of the Lenders and the Administrative Agent
also agree that each of the Lenders shall, as of the Amendment
Effective Date, have all of the rights and interests as a Lender in
respect of the Loans purchased and assumed by it, to the extent of the
rights and obligations so purchased and assumed by it.
(d) Each Lender which is purchasing any portion of the Existing Loans
shall deliver to the Administrative Agent immediately available funds
in the full amount of the purchase made by it and the Administrative
Agent shall, to the extent of the funds so received, disburse such
funds to the Existing Lenders that are making sales and assignments in
the amount of the portions so sold and assigned.
ARTICLE III: THE LETTER OF CREDIT FACILITY
3.1 Obligation to Issue Letters of Credit. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties and covenants of the Company herein set forth, each Issuing Bank
hereby agrees to issue for the account of the Company or any Subsidiary Borrower
through such Issuing Bank's branches as it and the Company may jointly agree,
one or more Letters of Credit denominated in Dollars in accordance with this
Article III, from time to time during the period, commencing on the Amendment
Effective Date and ending on the Business Day prior to the termination of the
Aggregate Tranche C Revolving Loan Commitment.
3.2 Transitional Provision. Schedule 3.2 contains a schedule of certain
letters of credit issued for the account of the Company and its Subsidiaries
prior to the Amendment Effective Date. From and after the Amendment Effective
Date, such letters of credit shall be deemed to be Letters of Credit issued
pursuant to this Article III.
3.3 Types and Amounts. No Issuing Bank shall have any obligation to
and no Issuing Bank shall:
(a) issue (or amend) any Letter of Credit if on the date of issuance
(or amendment), before or after giving effect to the Letter of Credit
requested hereunder, (i) the amount of the Tranche C Revolving Credit
Obligations at such time would exceed the Aggregate Tranche C
Revolving Loan Commitment at such time, or (ii) the aggregate
outstanding amount of the L/C Obligations would exceed $25,000,000; or
(b) issue (or amend) any Letter of Credit which has an expiration date
later than the date which is the earlier of one (1) year after the
date of issuance thereof or the Tranche C Revolving Loan Termination
Date; provided that any Letter of Credit with a one-year tenor may
provide for the renewal thereof for additional one-year periods (not
to extend beyond the Tranche C Revolving Loan Termination Date) with
the consent of the applicable Issuing Bank.
3.4 Conditions. In addition to being subject to the satisfaction of
the conditions contained in Sections 5.1, 5.2 and 5.3, the obligation of an
Issuing Bank to issue any Letter of Credit is subject to the satisfaction in
full of the following conditions:
(a) the Company shall have delivered to the applicable Issuing Bank
(at such times and in such manner as such Issuing Bank may reasonably
prescribe) and the Administrative Agent, a request for issuance of
such Letter of Credit in substantially the form of Exhibit C hereto
(each such request a "Request For Letter of Credit"), duly executed
application for such Letter of Credit, and such other documents,
instructions and agreements as may be required pursuant to the terms
thereof (all such applications, documents, instructions, and
agreements being referred to herein as the "L/C Documents"), and the
proposed Letter of Credit shall be reasonably satisfactory to such
Issuing Bank as to form and content; and
(b) as of the date of issuance no order, judgment or decree of any
court, arbitrator or Governmental Authority shall purport by its terms
to enjoin or restrain the applicable Issuing Bank from issuing such
Letter of Credit and no law, rule or regulation applicable to such
Issuing Bank and no request or directive (whether or not having the
force of law) from a Governmental Authority with jurisdiction over
such Issuing Bank shall prohibit or request that such Issuing Bank
refrain from the issuance of Letters of Credit generally or the
issuance of that Letter of Credit.
3.5 Procedure for Issuance of Letters of Credit.
(a) Subject to the terms and conditions of this Article III and
provided that the applicable conditions set forth in Sections 5.1, 5.2
and 5.3 hereof have been satisfied, the applicable Issuing Bank shall,
on the requested date, issue a Letter of Credit on behalf of the
Company or a Subsidiary Borrower, as applicable in accordance with
such Issuing Bank's usual and customary business practices and, in
this connection, such Issuing Bank may assume that the applicable
conditions set forth in Sections 3.3(b), 3.4(b) and 5.3 hereof have
been satisfied unless it shall have received notice to the contrary
from the Administrative Agent or a Lender or has knowledge that the
applicable conditions have not been met.
(b) Promptly, and in any event not more than one (1) Business Day
following the date of issuance of any Letter of Credit, the applicable
Issuing Bank shall give the Administrative Agent written or telex
notice, or telephonic notice confirmed promptly thereafter in writing,
of the issuance of a Letter of Credit (provided that the failure to
provide such notice shall not result in any liability on the part of
such Issuing Bank), and the Administrative Agent shall promptly give
notice to the Lenders of each such issuance.
(c) No Issuing Bank shall extend or amend any Letter of Credit unless
the requirements of this Section 3.5 are met as though a new Letter of
Credit was being requested and issued.
3.6 Letter of Credit Participation. On the Amendment Effective Date,
with respect to the Letters of Credit identified on Schedule 3.2, and
immediately upon the issuance of each Letter of Credit hereunder, each Lender
shall be deemed to have automatically, irrevocably and unconditionally purchased
and received from the applicable Issuing Bank an undivided interest and
participation in and to such Letter of Credit, the obligations of the Company in
respect thereof, and the liability of such Issuing Bank thereunder
(collectively, an "L/C Interest") in the amount available for drawing under such
Letter of Credit multiplied by such Lender's Pro Rata Tranche C Revolving Share.
3.7 Reimbursement Obligation.
(a) The Company agrees unconditionally, irrevocably and absolutely to
pay immediately to the Administrative Agent, for the account of the
Lenders with Tranche C Revolving Loan Commitments, the amount of each
advance drawn under or pursuant to a Letter of Credit or an L/C Draft
related thereto (such obligation of the Company to reimburse the
Administrative Agent for an advance made under a Letter of Credit or
L/C Draft being hereinafter referred to as a "Reimbursement
Obligation" with respect to such Letter of Credit or L/C Draft), each
such reimbursement to be made by the Company no later than the
Business Day on which the applicable Issuing Bank makes payment of
each such L/C Draft or, if the Company shall have received notice of a
Reimbursement Obligation later than 12:00 noon (New York time), on any
Business Day or on a day which is not a Business Day, no later than
12:00 noon (New York time), on the immediately following Business Day
or, in the case of any other draw on a Letter of Credit, the date
specified in the demand of such Issuing Bank. If the Company at any
time fails to repay a Reimbursement Obligation pursuant to this
Section 3.7, the Issuing Bank shall promptly notify the Administrative
Agent and the Administrative Agent shall promptly notify each Lender
and the Company shall be deemed to have requested to borrow Tranche C
Revolving Loans from the Lenders with Tranche C Revolving Loan
Commitments, as of the date of the advance giving rise to the
Reimbursement Obligation, equal to the amount of the unpaid
Reimbursement Obligation. Such Tranche C Revolving Loans shall be made
as of the date of the payment giving rise to such Reimbursement
Obligation, automatically, without notice and without any requirement
to satisfy the conditions precedent otherwise applicable to an Advance
of Tranche C Revolving Loans.
(b) Each Lender with a Tranche C Revolving Loan Commitment shall upon
any notice pursuant to Section 3.7(a) make available to the
Administrative Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro
Rata Tranche C Revolving Share of the amount of the drawing, whereupon
such Lenders shall (subject to Section 3.7(d)) each be deemed to have
made a Revolving Loan constituting a Floating Rate Advance, the
proceeds of which Advance shall be used to repay such Reimbursement
Obligation. If any Lender so notified fails to make available to the
Administrative Agent for the account of the Issuing Bank the amount of
such Lender's Pro Rata Tranche C Revolving Share of the amount of the
drawing by no later than 2:00 p.m. (New York time) on the date of the
advance giving rise to the Reimbursement Obligation, then interest
shall accrue on such Lender's obligation to make such payment, from
such date to the date such Lender makes such payment, at a rate per
annum equal to the Federal Funds Effective Rate in effect from time to
time during such period. The Administrative Agent will promptly give
notice of the occurrence of the draw, but failure of the
Administrative Agent to give any such notice in sufficient time to
enable any Lender to effect such payment on such date shall not
relieve such Lender from its obligations under this Section 3.7.
(c) Each Lender's obligation in accordance with this Agreement to make
the Tranche C Revolving Loans, as contemplated by this Section 3.7, as
a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Banks and shall not
be affected by any circumstance, including (i) any set-off,
counterclaim, recoupment, defense or other right which such Revolving
Lender may have against an Issuing Bank, the Company or any other
Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default, an Unmatured Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
(d) If, for any reason, the Company fails to repay a Reimbursement
Obligation on the day such Reimbursement Obligation arises and, for
any reason, the Lenders are unable to make or have no obligation to
make Revolving Loans, then such Reimbursement Obligation shall bear
interest from and after such day, until paid in full, at the interest
rate applicable to a Floating Rate Advance.
3.8 Letter of Credit Fees. The Company agrees to pay:
(a) quarterly, in arrears, to the Administrative Agent for the ratable
benefit of the Lenders with a Tranche C Revolving Loan Commitment a
letter of credit fee at a rate per annum equal to the Applicable L/C
Fee Percentage on the average daily outstanding amount available for
drawing under all Letters of Credit;
(b) quarterly, in arrears, to the applicable Issuing Bank, a letter of
credit fronting fee in an amount agreed to between the Company and the
applicable Issuing Bank on the average daily outstanding face amount
available for drawing under all Letters of Credit issued by such
Issuing Bank; and
(c) to the applicable Issuing Bank, all reasonable and customary fees
and other issuance, amendment, document examination, negotiation and
presentment expenses and related charges in connection with the
issuance, amendment, presentation of L/C Drafts, and the like
customarily charged by such Issuing Banks with respect to standby
letters of credit.
3.9 Issuing Bank Reporting Requirements. In addition to the notices
required by Section 3.5(b), each Issuing Bank shall, no later than the tenth
(10th) Business Day following the last day of each month, provide to the
Administrative Agent, upon the Administrative Agent's request, schedules, in
form and substance reasonably satisfactory to the Administrative Agent, showing
the date of issue, account party, amount, expiration date and the reference
number of each Letter of Credit issued by it outstanding at any time during such
month and the aggregate amount paid by the Company during such month. In
addition, upon the request of the Administrative Agent, each Issuing Bank shall
furnish to the Administrative Agent copies of any Letter of Credit and any
application for or reimbursement agreement with respect to a Letter of Credit to
which the Issuing Bank is party and such other documentation as may reasonably
be requested by the Administrative Agent. Upon the request of any Lender, the
Administrative Agent will provide to such Lender information concerning such
Letters of Credit.
3.10 Indemnification; Exoneration.
(a) In addition to amounts payable as elsewhere provided in this
Article III, the Company hereby agrees to protect, indemnify, pay and
save harmless the Administrative Agent, each Issuing Bank and each
Lender from and against any and all liabilities and costs which the
Administrative Agent, such Issuing Bank or such Lender may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance
of any Letter of Credit other than, in the case of the applicable
Issuing Bank, as a result of its gross negligence or willful
misconduct, as determined by the final judgment of a court of
competent jurisdiction, or (ii) the failure of the applicable Issuing
Bank to honor a drawing under a 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 herein called "Governmental Acts").
(b) As among the Company, the Lenders, the Administrative Agent and
the Issuing Banks, the Company assumes all risks of the acts and
omissions of, or misuse of such Letter of Credit by, the beneficiary
of any Letters of Credit. In furtherance and not in limitation of the
foregoing, subject to the provisions of the Letter of Credit
applications and Letter of Credit reimbursement agreements executed by
the Company at the time of request for any Letter of Credit, neither
the Administrative Agent, any Issuing Bank nor any Lender shall be
responsible (in the absence of gross negligence or willful misconduct
of such party in connection therewith, as determined by the final
judgment of a court of competent jurisdiction): (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for
and issuance of the Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid
or ineffective for any reason; (iii) for failure of the beneficiary of
a Letter of Credit to comply duly with conditions not expressly
provided on the face of such Letter of Credit and required in order to
draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (v) for errors in interpretation of
technical trade terms; (vi) for 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) for the
misapplication by the beneficiary of a Letter of Credit of the
proceeds of any drawing under such Letter of Credit; and (viii) for
any consequences arising from causes beyond the control of the
Administrative Agent, the Issuing Banks and the Lenders, including,
without limitation, any Governmental Acts. None of the above shall
affect, impair, or prevent the vesting of any Issuing Bank's rights or
powers under this Section 3.10.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any
Issuing Bank under or in connection with the Letters of Credit or any
related certificates shall not, in the absence of gross negligence or
willful misconduct, as determined by the final judgment of a court of
competent jurisdiction, put the applicable Issuing Bank, the
Administrative Agent or any Lender under any resulting liability to
the Company or relieve the Company of any of its obligations hereunder
to any such Person.
(d) Without prejudice to the survival of any other agreement of the
Company hereunder, the agreements and obligations of the Company
contained in this Section 3.10 shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of
Credit and the termination of this Agreement.
3.11 Cash Collateral. Notwithstanding anything to the contrary herein
or in any application for a Letter of Credit, after the occurrence and during
the continuance of a Default, the Company shall, on the Business Day that it
receives the Administrative Agent's demand, deliver to the Administrative Agent
for the benefit of the Lenders and the Issuing Banks, cash, or other collateral
of a type satisfactory to the Required Lenders, having a value, as determined by
such Lenders, equal to one hundred percent (100%) of the aggregate Dollar Amount
of the outstanding L/C Obligations. In addition, if the Tranche C Revolving
Credit Availability is at any time less than the Dollar Amount of all contingent
L/C Obligations outstanding at any time, the Company shall deposit cash
collateral with the Administrative Agent in Dollars in an amount equal to
one-hundred five percent (105%) of the Dollar Amount by which such L/C
Obligations exceed such Tranche C Revolving Credit Availability. Any such
collateral shall be held by the Administrative Agent in a separate account
appropriately designated as a cash collateral account in relation to this
Agreement and the Letters of Credit and retained by the Administrative Agent for
the benefit of the Lenders and the Issuing Banks as collateral security for the
Company's obligations in respect of this Agreement and each of the Letters of
Credit and L/C Drafts. Such amounts shall be applied to reimburse the Issuing
Banks for drawings or payments under or pursuant to Letters of Credit or L/C
Drafts, or if no such reimbursement is required, to payment of such of the other
Obligations as the Administrative Agent shall determine. If no Default shall be
continuing, amounts remaining in any cash collateral account established
pursuant to this Section 3.11 which are not to be applied to reimburse an
Issuing Bank for amounts actually paid or to be paid by such Issuing Bank in
respect of a Letter of Credit or L/C Draft, shall be returned to the Company
within one (1) Business Day (after deduction of the Administrative Agent's
expenses incurred in connection with such cash collateral account).
ARTICLE IV: CHANGE IN CIRCUMSTANCES
4.1 Yield Protection. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) adopted after the date of this Agreement or any interpretation or
application thereof by any Governmental Authority charged with the
interpretation or application thereof, or the compliance of any Lender
therewith, subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from any Borrower
(excluding taxation of the overall net income of any Lender or taxation of a
similar basis, which are governed by Section 2.14(e)), or changes the basis of
taxation of payments to any Lender in respect of its Revolving Loan Commitment,
Loans, its L/C Interests, the Letters of Credit or other amounts due it
hereunder, or imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurocurrency Rate Loans)
with respect to its Revolving Loan Commitment, Loans, L/C Interests or the
Letters of Credit, or imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation of
making, funding or maintaining its Revolving Loan Commitment, Loans, the L/C
Interests or the Letters of Credit or reduces any amount received by any Lender
or any applicable Lending Installation in connection with its Revolving Loan
Commitment, Loans or Letters of Credit, or requires any Lender or any applicable
Lending Installation to make any payment calculated by reference to the amount
of Revolving Loan Commitment, Loans or L/C Interests held or interest received
by it or by reference to the Letters of Credit, by an amount deemed material by
such Lender; and the result of any of the foregoing is to increase the cost to
that Lender of making, renewing or maintaining its Revolving Loan Commitment,
Loans, L/C Interests, or Letters of Credit or to reduce any amount received
under this Agreement, then, within fifteen (15) days after receipt by the
Company or any other Borrower of written demand by such Lender pursuant to
Section 4.5, the applicable Borrowers shall pay such Lender that portion of such
increased expense incurred or reduction in an amount received which such Lender
reasonably determines is attributable to making, funding and maintaining its
Loans, L/C Interests, Letters of Credit and its Revolving Loan Commitment.
4.2 Changes in Capital Adequacy Regulations. If a Lender determines (a)
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a "Change" (as defined below), and (b) such increase
in capital will result in an increase in the cost to such Lender of maintaining
its Revolving Loan Commitment, Loans, L/C Interests, the Letters of Credit or
its obligation to make Loans hereunder, then, within fifteen (15) days after
receipt by the Company or any other Borrower of written demand by such Lender
pursuant to Section 4.5, the applicable Borrowers shall pay such Lender the
amount necessary to compensate for any shortfall in the rate of return on the
portion of such increased capital which such Lender reasonably determines is
attributable to this Agreement, its Revolving Loan Commitment, its Loans, its
L/C Interests, the Letters of Credit or its obligation to make Loans hereunder
(after taking into account such Lender's policies as to capital adequacy).
"Change" means (i) any change after the date of this Agreement in the
"Risk-Based Capital Guidelines" (as defined below) excluding, for the avoidance
of doubt, the effect of any phasing in of such Risk-Based Capital Guidelines or
any other capital requirements passed prior to the date hereof, or (ii) any
adoption of or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender. "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement, including transition rules, and
(ii) the corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
4.3 Availability of Types of Advances. If (a) any Lender determines
that maintenance of its Eurocurrency Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, or (b) the Required Lenders determine
that (i) deposits of a type, currency or maturity appropriate to match fund
Fixed-Rate Advances are not available or (ii) the interest rate applicable to a
Fixed-Rate Advance does not accurately reflect the cost of making or maintaining
such an Advance, then the Administrative Agent shall suspend the availability of
the affected Type of Advance and, in the case of any occurrence set forth in
clause (a), require any Advances of the affected Type to be repaid or converted
into another Type.
4.4 Funding Indemnification. If any payment of a Fixed-Rate Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment, or otherwise, or a Fixed-Rate
Advance is not made on the date specified by the applicable Borrower for any
reason other than default by the Lenders, the Borrowers shall indemnify each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain the Fixed-Rate Advance or Swing Line Loan, as
applicable.
4.5 Lender Statements; Survival of Indemnity. If reasonably possible,
each Lender shall designate an alternate Lending Installation with respect to
its Fixed-Rate Loans to reduce any liability of any Borrower to such Lender
under Sections 4.1 and 4.2 or to avoid the unavailability of a Type of Advance
under Section 4.3, so long as such designation is not, in such Lender's
judgment, disadvantageous to such Lender. Any demand for compensation pursuant
to this Article IV shall be in writing and shall state the amount due, if any,
under Section 4.1, 4.2 or 4.4 and shall set forth in reasonable detail the
calculations upon which such Lender determined such amount. Such written demand
shall be rebuttably presumed correct for all purposes. Determination of amounts
payable under such Sections in connection with a Fixed-Rate Loan shall be
calculated as though each Lender funded its Fixed-Rate Loan through the purchase
of a deposit of the type, currency and maturity corresponding to the deposit
used as a reference in determining the Fixed-Rate applicable to such Loan,
whether in fact that is the case or not. The obligations of the Company and the
other Borrowers under Sections 4.1, 4.2 and 4.4 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE V: CONDITIONS PRECEDENT
5.1 Effectiveness. The amendment and restatement of the Existing Credit
Agreement (and the obligations of the Lenders to continue the Existing Loans as
Loans under this Agreement) shall become effective when the Company has
furnished to the Administrative Agent each of the following, with sufficient
copies for the Lenders, and the other conditions set forth below have been
satisfied:
(a) Copies of the Certificate of Incorporation or equivalent document
of each of the Loan Parties, together with all amendments thereto,
and, to the extent applicable, a certificate of good standing, in each
case certified by the appropriate governmental officer in its
jurisdiction of incorporation.
(b) Copies, certified by the Secretary or Assistant Secretary of each
of the Loan Parties of their respective Board of Directors'
resolutions authorizing the execution of the Loan Documents.
(c) An incumbency certificate, executed by the Secretary or Assistant
Secretary of each of the Loan Parties, which shall identify by name
and title and bear the signature of the officers of the applicable
Loan Party authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificate the Lenders shall be
entitled to rely until informed of any change in writing by the
applicable Loan Party.
(d) A certificate, in form and substance satisfactory to the
Administrative Agent, executed by the chief financial officer of the
Company, stating that on the Amendment Effective Date, all the
representations and warranties of the Loan Parties in the Loan
Documents are true and correct (unless such representation and
warranty is made as of a specific date, in which case, such
representation and warranty shall be true as of such date) and no
Default or Unmatured Default has occurred and is continuing.
(e) A reaffirmation of the Guaranty, in form and substance
satisfactory to the Administrative Agent, dated as of the Amendment
Effective Date, executed by the Secretary or Assistant Secretary of
each Subsidiary Borrower that is a Domestic Subsidiary and each other
Domestic Subsidiary of the Company as required pursuant to Section
7.2(k).
(f) Written opinions of the Loan Parties' United States counsel, and,
if applicable, foreign counsel, addressed to the Administrative Agent
and the Lenders, in form and substance satisfactory to the
Administrative Agent.
(g) Such other documents as the Administrative Agent or its counsel or
the Required Lenders may have reasonably requested.
(h) There shall not have occurred a material adverse change since
December 31, 2001 in the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole.
(i) The Administrative Agent, Lenders and/or their Affiliates shall
have received all fees and expenses, including the reasonable fees and
expenses of Mayer, Brown, Rowe & Maw, required to be paid on or before
the Amendment Effective Date.
5.2 Initial Advance to Each New Subsidiary Borrower. No Lender shall be
required to make an Advance hereunder or purchase participations in Letters of
Credit or Alternate Currency Loans hereunder, no Swing Line Bank shall be
required to make any Swing Line Loans hereunder, and no Alternate Currency Bank
shall be required to make any Alternate Currency Loans, in each case, to or for
the account of a new Subsidiary Borrower added after the Amendment Effective
Date unless the Company has furnished or caused to be furnished to the
Administrative Agent with sufficient copies for the Lenders:
(a) The Assumption Letter executed and delivered by such Subsidiary
Borrower and containing the written consent of the Company thereon, as
contemplated by Section 2.24.
(b) Copies, certified by the Secretary, Assistant Secretary, Director
or Officer of the Subsidiary Borrower, of its Board of Directors'
resolutions approving the Assumption Letter.
(c) An incumbency certificate, executed by the Secretary, Assistant
Secretary, Director or Officer of the Subsidiary Borrower, which shall
identify by name and title and bear the signature of the officers of
such Subsidiary Borrower authorized to sign the Assumption Letter and
the other documents to be executed and delivered by such Subsidiary
Borrower hereunder, upon which certificate the Administrative Agent and
the Lenders shall be entitled to rely until informed of any change in
writing by the Company.
(d) An opinion of counsel to such Subsidiary Borrower, in form and
substance satisfactory to the Administrative Agent.
(e) Guaranty documentation and contribution agreement documentation
from such Subsidiary Borrower in form and substance satisfactory to the
Administrative Agent.
(f) With respect to the initial Advance made to any Subsidiary Borrower
organized under the laws of England and Wales, the Administrative Agent
shall have received originals and/or copies, as applicable, of all
filings required to be made and such other evidence as the
Administrative Agent may require establishing to the Administrative
Agent's satisfaction that each Lender and Issuing Bank is entitled to
receive payments under the Loan Documents without deduction or
withholding of any English taxes or with such deductions and
withholding of English taxes as may be acceptable to the Administrative
Agent.
5.3 Each Advance and Each Letter of Credit. The Lenders shall not be
required to make any Loan, or issue any Letter of Credit, unless on the
applicable Borrowing Date, or in the case of a Letter of Credit, the date on
which the Letter of Credit is to be issued:
(a) There exists no Default or Unmatured Default and no Default or
Unmatured Default would result after giving effect to the making of
any Loan or issuance of any Letter of Credit;
(b) All of the representations and warranties contained in Article VI
are true and correct as of such Borrowing Date (unless such
representation and warranty is made as of a specific date, in which
case, such representation and warranty shall be true as of such date);
(c) (i) The Tranche A Revolving Credit Obligations do not, and after
making such proposed Advance would not, exceed the Aggregate Tranche A
Revolving Loan Commitment, (ii) the Tranche B Revolving Credit
Obligations do not, and after making such proposed Advance would not,
exceed the Aggregate Tranche B Revolving Loan Commitment, (ii) the
Tranche C Revolving Credit Obligations do not, and after making such
proposed Advance or issuing such Letter of Credit would not, exceed
the Aggregate Tranche C Revolving Loan Commitment and (iv) the Tranche
D Revolving Credit Obligations do not, and after making such proposed
Advance would not, exceed the Aggregate Tranche D Revolving Loan
Commitment; and
(d) the Administrative Agent has received a timely Borrowing Notice
with respect to the applicable Loan.
Each Borrowing/Conversion/Continuation Notice with respect to a new
Advance and the letter of credit application with respect to each Letter of
Credit or Letter of Credit amendment shall constitute a representation and
warranty by the Company that the conditions contained in Sections 5.3(a), (b)
and (c) have been satisfied.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and the Lenders to enter
into this Agreement, to continue the Existing Loans hereunder and to make the
Loans and the other financial accommodations to the Borrowers and to issue the
Letters of Credit described herein, each of the Borrowers represents and
warrants as follows to each Lender and the Administrative Agent as of the date
of this Agreement, giving effect to the consummation of the transactions
contemplated by the Loan Documents, and thereafter on each date as required by
Sections 5.2 and 5.3:
6.1 Organization; Corporate Powers. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of formation and has all requisite authority to conduct
its business in each jurisdiction in which its business is conducted, except
where the failure to do so would not have a Material Adverse Effect.
6.2 Authorization and Validity. Each of the Loan Parties has the
requisite power and authority and legal right to execute and deliver the Loan
Documents to which it is a party and to perform its obligations thereunder. The
execution and delivery by each of the Loan Parties of the Loan Documents to
which it is a party and the performance of its obligations thereunder have been
duly authorized by proper proceedings, and the Loan Documents to which it is a
party constitute legal, valid and binding obligations of each of the Loan
Parties enforceable against each of the Loan Parties in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
6.3 No Conflict; Government Consent. Neither the execution and delivery
by the Loan Parties of the Loan Documents, nor the consummation of the
transactions contemplated thereby, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Company or any Subsidiary or the Company's or any
Subsidiary's articles of incorporation or by-laws or other constitutive
documents and agreements or the provisions of any material indenture, instrument
or agreement to which the Company or any Subsidiary is a party or is subject, or
by which it, or its property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on the
property of the Company or any of its Subsidiaries pursuant to the terms of any
such indenture, instrument or agreement. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize any Loan Party, or is required to be obtained
by any Loan Party in connection with the execution, delivery and performance of,
or the legality, validity, binding effect or enforceability of, any of the Loan
Documents.
6.4 Financial Statements. Each of the consolidated financial statements
of the Company and its Subsidiaries for the fiscal years ended January 2, 1998,
January 1, 1999 and December 31, 1999 were prepared in accordance with Agreement
Accounting Principles and fairly present the consolidated financial condition
and operations of the Company and its Subsidiaries at such dates and the
consolidated results of their operations for the periods then ended.
6.5 Material Adverse Change. Since December 31, 2001, there has
occurred no change in the business, assets, liabilities (actual or contingent),
operations, condition (financial or otherwise) or prospects, of the Company, or
the Company and its Subsidiaries taken as a whole, or any other event which has
had or could reasonably be expected to have a Material Adverse Effect.
6.6 Taxes. The Company and the Subsidiaries have filed all United
States federal tax returns and all other material tax returns which are required
to be filed and have paid all taxes due pursuant to said returns or pursuant to
any assessment received by the Company or any Subsidiary, except such taxes, if
any, as are being contested in good faith and as to which adequate reserves have
been provided. No tax liens have been filed and no claims are being asserted
with respect to any such taxes. The charges, accruals and reserves on the books
of the Company and the Subsidiaries in respect of any taxes or other
governmental charges are adequate.
6.7 Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of the Borrowers, threatened against or affecting the
Company or any of its Subsidiaries (a) challenging the Spectra Precision
Acquisition or the validity or enforceability of any material provision of the
Loan Documents or (b) which could reasonably be expected to have a Material
Adverse Effect. There is no material loss contingency within the meaning of
Agreement Accounting Principles which has not been reflected in the consolidated
financial statements of the Company or prepared and delivered pursuant to
Section 7.1(a) for the fiscal period during which such material loss contingency
was incurred. Neither the Company nor any of its Subsidiaries is subject to or
in default with respect to any final judgment, writ, injunction, restraining
order or order of any nature, decree, rule or regulation of any court or
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect.
6.8 Subsidiaries. Schedule 6.8 hereto contains an accurate list of all
of the Subsidiaries of the Company in existence on the Amendment Effective Date,
setting forth their respective jurisdictions of formation and the percentage of
their respective capital stock owned directly or indirectly by the Company or
other Subsidiaries. All of the issued and outstanding Capital Stock of such
Subsidiaries have been duly authorized and issued and are fully paid and
non-assessable. Except as set forth on Schedule 6.8, no authorized but unissued
or treasury shares of capital stock of any Subsidiary are subject to any option,
warrant, right to call or commitment of any kind or character. Except as set
forth on Schedule 6.8, neither the Company nor any Subsidiary has any
outstanding stock or securities convertible into or exchangeable for any shares
of its capital stock, or any right issued to any Person (either preemptive or
other) to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to any of its capital
stock or any stock or securities convertible into or exchangeable for any of its
capital stock other than as expressly set forth in the certificate or articles
of incorporation of the Company or such Subsidiary. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock or any
convertible securities, rights or options of the type described in the preceding
sentence except as otherwise set forth on Schedule 6.8. Except as set forth on
Schedule 6.8, as of the date hereof the Company does not own or hold, directly
or indirectly, any capital stock or equity security of, or any equity or
partnership interest in any Person other than such Subsidiaries.
6.9 ERISA. As at December 31, 1999 the Unfunded Liabilities of all
Single Employer Plans did not in the aggregate exceed $5,000,000. Each Plan
complies and has been maintained in all material respects with all applicable
requirements of law and regulations. No Reportable Event has occurred with
respect to any Single Employer Plan having any Unfunded Liability which has or
may reasonably be expected to result in a liability to the Company in excess of
$10,000,000. Neither the Company nor any other members of the Controlled Group
has terminated any Single Employer Plan without in each instance funding all
vested benefit obligations thereunder. Each member of the Controlled Group has
fulfilled its minimum funding obligations with respect to each Multiemployer
Plan. No Termination Event has occurred or is reasonably expected to occur.
There are no material actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of the Company or its Subsidiaries,
threatened with respect to any Plan or Multiemployer Plan.
6.10 Accuracy of Information. None of the (a) information, exhibits or
reports furnished or to be furnished by the Company or any Subsidiary to the
Administrative Agent or to any Lender in connection with the negotiation of the
Loan Documents, or (b) representations or warranties of the Company or any
Subsidiary contained in this Agreement, the other Loan Documents or any other
document, certificate or written statement furnished to the Administrative Agent
or the Lenders by or on behalf of the Company or any Subsidiary for use in
connection with the transactions contemplated by this Agreement, contained,
contains or will contain any untrue statement of a material fact or omitted,
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The pro forma financial information
contained in such materials is based upon good faith estimates and assumptions
believed by the Company to be reasonable at the time made. There is no fact
known to the Company (other than matters of a general economic nature) that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed herein or in such other documents, certificates and
statements furnished to the Lenders for use in connection with the transactions
contemplated by this Agreement. No information, exhibit or report furnished by
the Company or any Subsidiary to any Administrative Agent or to any Lender in
connection with the negotiation of, or compliance with, the Loan Documents,
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not materially
misleading.
6.11 Regulation U. Margin Stock constitutes less than 25% of those
assets of the Company and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
6.12 Material Agreements. Neither the Company nor any of its
Subsidiaries is a party to any Contractual Obligation the performance of which
could reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is subject to any charter or other
restriction in any constitutive agreement or document affecting its business,
properties, financial condition, prospects or results of operations which could
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any Subsidiary is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any Contractual
Obligation to which it is a party, which default could reasonably be expected to
have a Material Adverse Effect.
6.13 Compliance With Laws. The Company and its Subsidiaries have
complied with all Requirements of Law except to the extent that such
non-compliance could not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any Requirements
of Law or the subject of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release of any toxic or hazardous
waste or substance into the environment, which non-compliance or remedial action
could reasonably be expected to have a Material Adverse Effect.
6.14 Ownership of Properties. On the Amendment Effective Date, the
Company and its Subsidiaries have good title, free of all Liens, to all of the
properties and assets reflected in its December 31, 2001 audited financial
statements as owned by it (other than properties and assets disposed of in the
ordinary course of business since such date), except Liens permitted under
Section 7.3(c).
6.15 Statutory Indebtedness Restrictions. Neither the Company nor any
of its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal or state statute or
regulation which limits its ability to incur indebtedness or its ability to
consummate the transactions contemplated hereby.
6.16 Environmental Matters. Each of the Company and its Subsidiaries is
in compliance with all Environmental, Health or Safety Requirements of Laws in
effect in each jurisdiction where it is presently doing business and as to which
the failure to so comply, in the aggregate for all such failures, would
reasonably be likely to subject the Company to liability that would have a
Material Adverse Effect. Neither the Company nor any Subsidiary is subject to
any liability under the Environmental, Health or Safety Requirements of Laws in
effect in any jurisdiction where it is presently doing business that could
reasonably be expected to have a Material Adverse Effect. As of the date hereof,
neither the Company nor any Subsidiary has received any:
(a) notice from any Governmental Authority by which any of the
Company's or such Subsidiary's present or previously-owned or leased
property has been identified in any manner by any such Governmental
Authority as a hazardous substance disposal or removal site, "Super
Fund" clean-up site or candidate for removal or closure pursuant to any
Environmental, Health or Safety Requirements of Law; or
(b) notice of any Lien arising under or in connection with any
Environmental, Health or Safety Requirements of Law that has attached
to any of the Company's or such Subsidiary's owned or leased property
or any revenues of the Company's or such Subsidiary's owned or leased
property; or
(c) communication, written or oral, from any Governmental Authority
concerning action or omission by the Company or such Subsidiary in
connection with its ownership or leasing of any property resulting in
the release of any hazardous substance resulting in any violation of
any Environmental, Health or Safety Requirements of Law;
where the effect of which, in the aggregate for all such notices and
communications, could reasonably be expected to have a Material Adverse Effect.
6.17 Insurance. The properties and assets and business of the Company
and its Subsidiaries are insured with financially sound and reputable insurance
companies not Subsidiaries of the Company, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and are similarly situated.
6.18 Labor Matters. As of the Amendment Effective Date, no labor
disputes, strikes or walkouts affecting the operations of the Company or any of
its Subsidiaries, are pending, or, to the Company's knowledge, threatened,
planned or contemplated which could reasonably be expected to have a Material
Adverse Effect.
6.19 Solvency. After giving effect to (i) the extensions of credit made
hereunder on the Closing Date or such other date as Loans requested hereunder
were made, (ii) the other transactions contemplated by this Agreement and the
other Loan Documents, including the Spectra Precision Acquisition, and (iii) the
payment and accrual of all transaction costs with respect to the foregoing, the
Company and its Subsidiaries are Solvent.
6.20 Default. No Default or Unmatured Default has occurred and is
continuing.
6.21 Foreign Employee Benefit Matters.
(a) Each Foreign Employee Benefit Plan is in compliance in all
material respects with all laws, regulations and rules applicable
thereto and the respective requirements of the governing documents for
such Plan;
(b) the aggregate of the accumulated benefit obligations under all
Foreign Pension Plans does not exceed to any material extent the
current fair market value of the assets held in the trusts or similar
funding vehicles for such Plans;
(c) with respect to any Foreign Employee Benefit Plan (other than a
Foreign Pension Plan), reasonable reserves have been established in
accordance with prudent business practice or where required by
ordinary accounting practices in the jurisdiction in which such Plan
is maintained; and (d) there are no material actions, suits or claims
(other than routine claims for benefits) pending or, to the knowledge
of the Company and its Subsidiaries, threatened against the Company or
any Subsidiary of it or any member of its Controlled Group with
respect to any Foreign Employee Benefit Plan.
6.22 Acquisition Documents. The Acquisition Documents as originally
executed and delivered by the parties thereto have not been amended, waived,
supplemented or modified without the consent of the Administrative Agent. The
representations and warranties of the Company set forth therein and, to the
knowledge of the Company, the representations and warranties of the other
parties set forth therein are true and correct in all material respects as of
the date thereof. On the date of this Agreement, neither the Company nor any
other party to any of the Acquisition Documents is in default in the performance
of or compliance with any provisions under the Acquisition Documents. The
Spectra Precision Acquisition (other than certain modifications to the corporate
structure of the Seller's European holdings in a manner acceptable to the
Administrative Agent) has been consummated in accordance with applicable laws
and regulations.
6.23 Collateral Documents. All representations and warranties of the
Borrowers contained in the Collateral Documents are true and correct.
6.24 Security. The provisions of the Collateral Documents are effective
to create and give the Administrative Agent, for the benefit of the Lenders, as
security for the repayment of the obligations secured thereby, a legal, valid,
perfected and enforceable Lien (which priority is subject only to prior Liens
permitted by such agreements) upon all right, title and interest of the Company
and its Subsidiaries in any and all of the Collateral described therein. The
Mortgages, upon their execution and delivery, will be effective to create and
give the Administrative Agent, for the benefit of the Lenders, as security for
repayment of the obligations to be secured thereby, a legal, valid, perfected
and enforceable Lien (which priority will be subject only to prior Liens
permitted by such mortgages) upon all right, title and interest of the Borrowers
in the Collateral described therein. The Pledge Agreement is effective to create
and give the Administrative Agent, for the benefit of the Lenders, as security
for the repayment of the obligations secured thereby, a legal, valid, perfected
and enforceable first priority Lien upon and security interest in the capital
stock pledged thereby.
6.25 Subordinated Seller Debt. Each Borrower incurring the same has the
corporate power and authority to incur the Indebtedness evidenced by the
Subordinated Seller Debt. The subordination provisions of the Subordinated
Seller Debt will be enforceable against the holders of the Subordinated Seller
Debt by any Holder of Obligations which has not effectively waived the benefits
thereof. All Obligations, including the Obligations to pay principal of and
interest on the Loans, constitute senior Indebtedness entitled to the benefits
of subordination created by the Subordinated Seller Debt. The Borrowers
acknowledge that the Administrative Agent and each Lender are entering into this
Agreement and are extending the Aggregate Revolving Loan Commitment and Term
Loans in reliance upon the subordination provisions of the Subordinated Seller
Note and this Section 6.25.
6.26 Subsidiaries. Except as set forth on Schedule 6.8, each Subsidiary
of the Company is a Wholly-Owned Subsidiary.
6.27 Representations and Warranties of each Subsidiary Borrower.
Each Subsidiary Borrower further represents and warrants to the Administrative
Agent and the Lenders that:
(a) Organization and Corporate Powers. Such Subsidiary Borrower (i) is
a company duly formed and validly existing and in good standing under
the laws of the state or country of its organization (such jurisdiction
being hereinafter referred to as the "Home Country"); (ii) has the
requisite power and authority to own its property and assets and to
carry on its business substantially as now conducted except where the
failure to have such requisite authority would not have a material
adverse effect on such Subsidiary Borrower; and (iii) has the requisite
power and authority and legal right to execute and deliver any
Alternate Currency Addendum to which it is a party and each other Loan
Document to which it is a party and the performance by it of its
obligations thereunder have been duly authorized by proper corporate
proceedings.
(b) Binding Effect. Each Loan Document, including, without limitation,
any Alternate Currency Addendum, executed by such Subsidiary Borrower
is the legal, valid and binding obligations of such Subsidiary Borrower
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and general
equitable principles.
(c) No Conflict; Government Consent. Neither the execution and delivery
by such Subsidiary Borrower of the Loan Documents to which it is a
party, nor the consummation by it of the transactions therein
contemplated to be consummated by it, nor compliance by such Subsidiary
Borrower with the provisions thereof will violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding
on such Subsidiary Borrower or any of its Subsidiaries or such
Subsidiary Borrower's or any of its Subsidiaries' memoranda or articles
of association or the provisions of any indenture, instrument or
agreement to which such Subsidiary Borrower or any of its Subsidiaries
is a party or is subject, or by which it, or its property, is bound, or
conflict with or constitute a default thereunder, or result in the
creation or imposition of any lien in, of or on the property of such
Subsidiary Borrower or any of its Subsidiaries pursuant to the terms of
any such indenture, instrument or agreement in any such case which
violation, conflict, default, creation or imposition could reasonably
be expected to have a material adverse effect on such Subsidiary
Borrower. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption
by, any governmental agency is required to authorize, or is required in
connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the
Loan Documents.
(d) Filing. To ensure the enforceability or admissibility in evidence
of this Agreement and each Loan Document to which such Subsidiary
Borrower is a party (including, without limitation, any Alternate
Currency Addendum) in its Home Country, it is not necessary that this
Agreement or any other Loan Document to which such Subsidiary Borrower
is a party or any other document be filed or recorded with any court or
other authority in its Home Country or that any stamp or similar tax be
paid to or in respect of this Agreement or any other Loan Document of
such Subsidiary Borrower. The qualification by any Lender or the
Administrative Agent for admission to do business under the laws of
such Subsidiary Borrower's Home Country does not constitute a condition
to, and the failure to so qualify does not affect, the exercise by any
Lender or the Administrative Agent of any right, privilege, or remedy
afforded to any Lender or the Administrative Agent in connection with
the Loan Documents to which such Subsidiary Borrower is a party or the
enforcement of any such right, privilege, or remedy against such
Subsidiary Borrower. The performance by any Lender or the
Administrative Agent of any action required or permitted under the Loan
Documents will not (i) violate any law or regulation of such Subsidiary
Borrower's Home Country or any political subdivision thereof, (ii)
result in any tax or other monetary liability to such party pursuant to
the laws of such Subsidiary Borrower's Home Country or political
subdivision or taxing authority thereof (provided that, should any such
action result in any such tax or other monetary liability to the Lender
or the Administrative Agent, the Borrowers hereby agree to indemnify
such Lender or the Administrative Agent, as the case may be, against
(x) any such tax or other monetary liability and (y) any increase in
any tax or other monetary liability which results from such action by
such Lender or the Administrative Agent and, to the extent the
Borrowers make such indemnification, the incurrence of such liability
by the Administrative Agent or any Lender will not constitute a
Default) or (iii) violate any rule or regulation of any federation or
organization or similar entity of which the such Subsidiary Borrower's
Home Country is a member.
(e) No Immunity. Neither such Subsidiary Borrower nor any of its assets
is entitled to immunity from suit, execution, attachment or other legal
process. Such Subsidiary Borrower's execution and delivery of the Loan
Documents to which it is a party constitute, and the exercise of its
rights and performance of and compliance with its obligations under
such Loan Documents will constitute, private and commercial acts done
and performed for private and commercial purposes.
(f) Application of Representations and Warranties. It is understood and
agreed by the parties hereto that the representations and warranties of
each Subsidiary Borrower (other than any Subsidiary Borrower that shall
be a Subsidiary Borrower as of the Amendment Effective Date) in this
Section 6.27 shall only be applicable to such Subsidiary Borrower on
and after the date of its execution of an Assumption Letter and, if
applicable, an Alternate Currency Addendum.
ARTICLE VII: COVENANTS
The Company covenants and agrees that so long as any Revolving Loan
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than contingent indemnity obligations) and termination of all
Letters of Credit, unless the Required Lenders shall otherwise give prior
written consent:
7.1 Reporting. The Company shall:
(a) Financial Reporting. Furnish to the Administrative Agent and the
Lenders:
(i) Quarterly Reports. As soon as practicable and in any event
within forty-five (45) days after the end of the first three quarterly
periods of each of its fiscal years, for itself and the Subsidiaries,
consolidated and consolidating unaudited balance sheets as at the end
of each such period and consolidated and consolidating statement of
income and consolidated and consolidating statement of changes in
owners' equity, and a statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, presented on
the same basis as described in Section 7.1(a)(ii) and on a comparative
basis with the statements for such period in the prior fiscal year of
the Company.
(ii) Annual Reports. As soon as practicable, and in any event
within ninety (90) days after the end of each of its fiscal years, (a)
an audit report, certified (as to consolidated, but not consolidating
statements) by internationally recognized independent certified public
accountants, prepared in accordance with generally accepted accounting
principles, on a consolidated and consolidating basis for itself and
the Subsidiaries, including balance sheets as of the end of such
period, related statement of income and consolidated and consolidating
statement of changes in owners' equity, and a statement of cash flows,
which audit report shall be unqualified and shall state that such
financial statements fairly present the consolidated financial position
of the Company and its Subsidiaries as at the dates indicated and the
results of operations and cash flows for the periods indicated in
conformity with generally accepted accounting principles and that the
examination by such accountants in connection with such consolidated
and consolidating financial statements has been made in accordance with
generally accepted auditing standards and (b) projected balance sheets,
statements of income and cash flows for each fiscal year through the
Termination Date, prepared in accordance with generally accepted
accounting principles, on a consolidated basis, together with the
appropriate supporting details and a statement of underlying
assumptions, all in form similar to those delivered to the Lenders
prior to the Closing Date.
(iii) Officer's Certificate. Together with each delivery of
any financial statement (a) pursuant to clauses (i) and (ii) of this
Section 7.1(a), an Officer's Certificate of the Company, substantially
in the form of Exhibit E attached hereto and made a part hereof,
stating that as of the date of such Officer's Certificate no Default or
Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof and (b) pursuant to
clauses (i) and (ii) of this Section 7.1(a), a compliance certificate,
substantially in the form of Exhibit F attached hereto and made a part
hereof, signed by the Company's chief financial officer, chief
accounting officer or treasurer, setting forth calculations for the
period then ended for Section 2.5(b), if applicable, which demonstrate
compliance, when applicable, with the provisions of Sections 7.3(a)
through (h), Section 7.3(p) and Section 7.4, and which calculate the
Leverage Ratio for purposes of determining the then Applicable Floating
Rate Margin, Applicable Eurocurrency Margin and Applicable Commitment
Fee Percentage.
(b) Notice of Default. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer,
controller or other executive officer of the Company obtaining actual
knowledge (i) of any condition or event which constitutes a Default or
Unmatured Default, (ii) that any Lender or Administrative Agent has
given any written notice to any Authorized Officer with respect to a
claimed Default or Unmatured Default under this Agreement, or (iii)
that any Person has given any written notice to any Authorized Officer
or any Subsidiary of the Company or taken any other action with respect
to a claimed default or event or condition of the type referred to in
Section 8.1(d), the Company shall deliver to the Administrative Agent
and the Lenders an Officer's Certificate specifying (A) the nature and
period of existence of any such claimed default, Default, Unmatured
Default, condition or event, (B) the notice given or action taken by
such Person in connection therewith, and (C) what action the Company
has taken, is taking or proposes to take with respect thereto.
(c) Lawsuits. (i) Promptly upon the Company obtaining actual knowledge
of the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration, by or before any
Governmental Authority, against or affecting the Company or any of its
Subsidiaries or any property of the Company or any of its Subsidiaries
not previously disclosed pursuant to Section 6.7, which action, suit,
proceeding, governmental investigation or arbitration exposes, or in
the case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general
allegations or circumstances which expose, in the Company's reasonable
judgment, the Company or any of its Subsidiaries to liability in an
amount aggregating $5,000,000 or more (exclusive of claims covered by
insurance policies of the Company or any of its Subsidiaries unless the
insurers of such claims have disclaimed coverage or reserved the right
to disclaim coverage on such claims), give written notice thereof to
the Administrative Agent and the Lenders and provide such other
information as may be reasonably available to enable each Lender and
the Administrative Agent and its counsel to evaluate such matters; and
(ii) in addition to the requirements set forth in clause (i) of this
Section 7.1(c), upon request of the Administrative Agent or the
Required Lenders, promptly give written notice of the status of any
action, suit, proceeding, governmental investigation or arbitration
covered by a report delivered pursuant to clause (i) above and provide
such other information as may be reasonably available to it to enable
the Required Lenders and the Administrative Agent and its counsel to
evaluate such matters.
(d) ERISA Notices. Deliver or cause to be delivered to the
Administrative Agent and the Lenders, at the Company's expense, the
following information and notices as soon as reasonably possible, and
in any event:
(i) within ten (10) Business Days after the Company or any
member of the Controlled Group obtains knowledge that a Termination
Event has occurred or a lawsuit involving a Plan or Multiemployer Plan
has been filed, in each case which could reasonably be expected to
subject the Company to liability in excess of $5,000,000, a written
statement of the chief financial officer, treasurer or designee of the
Company describing such Termination Event and the action, if any, which
the member of the Controlled Group has taken, is taking or proposes to
take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Company or any of
its Subsidiaries obtains knowledge that a material prohibited
transaction (defined in Sections 406 of ERISA and Section 4975 of the
Code) has occurred, a statement of the chief financial officer,
treasurer or designee of the Company describing such transaction and
the action which the Company or such Subsidiary has taken, is taking or
proposes to take with respect thereto;
(iii) within ten (10) Business Days after the Company or any
of its Subsidiaries receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under Section
401(a) of the Code, copies of each such letter;
(iv) within ten (10) Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by the Company or a
member of the Controlled Group with respect to such request;
(v) within ten (10) Business Days after receipt by the Company
or any member of the Controlled Group of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice;
(vi) within ten (10) Business Days after the Company or any
member of the Controlled Group fails to make a required installment or
any other required payment under Section 412 of the Code on or before
the due date for such installment or payment, a notification of such
failure;
(vii) within ten (10) Business Days after the establishment of
any Foreign Employee Benefit Plan or the commencement of, or obligation
to commence, contributions to any Foreign Employee Benefit Plan to
which the Company or any Subsidiary was not previously contributing,
where the aggregate annual contributions to such Plan(s) resulting
therefrom are or could reasonably be expected to be in excess of
$5,000,000, notification of such establishment, commencement or
obligation to commence and the amount of such contributions; and
For purposes of this Section 7.1(d), the Company, any of its Subsidiaries
and any member of the Controlled Group shall be deemed to know all facts known
by the administrator of any Plan which is a Single Employer Plan.
(e) Labor Matters. Notify the Administrative Agent and the Lenders in
writing, promptly upon an Authorized Officer learning of (i) any
material labor dispute to which the Company or any of its Subsidiaries
may become a party, including, without limitation, any strikes,
lockouts or other disputes relating to such Persons' plants and other
facilities and (ii) any material Worker Adjustment and Retraining
Notification Act liability incurred with respect to the closing of any
plant or other facility of the Company or any of its Subsidiaries.
(f) Other Indebtedness. Deliver to the Administrative Agent (i) a copy
of each regular report, notice or communication regarding potential or
actual defaults (including any accompanying officer's certificate)
delivered by or on behalf of the Company to the holders of Indebtedness
for money borrowed with an aggregate outstanding principal amount in
excess of $10,000,000 pursuant to the terms of the agreements governing
such Indebtedness, such delivery to be made at the same time and by the
same means as such notice of default is delivered to such holders, and
(ii) a copy of each notice or other communication received by the
Company from the holders of Indebtedness for money borrowed with an
aggregate outstanding principal amount in excess of $10,000,000
regarding potential or actual defaults pursuant to the terms of such
Indebtedness, such delivery to be made promptly after such notice or
other communication is received by the Company.
(g) Other Reports. Deliver or cause to be delivered to the
Administrative Agent and the Lenders copies of (i) all financial
statements, reports on Form S-1, 8-K, 10-K or 10-Q and non-routine
notices, if any, sent or made available generally by the Company to its
securities holders or filed with the Commission by the Company, and
(ii) all notifications received from the Commission by the Company or
its Subsidiaries pursuant to the Securities Exchange Act of 1934 and
the rules promulgated thereunder other than routine reminders or
notices that do not relate to specific violations of rules promulgated
by the Commission. The Company shall include the Administrative Agent
and the Lenders on its standard distribution lists for all press
releases made available generally by the Company or any of the
Company's Subsidiaries to the public concerning material developments
in the business of the Company or any such Subsidiary.
(h) Environmental Notices. As soon as possible and in any event within
fifteen (15) days after receipt by the Company, deliver to the
Administrative Agent and the Lenders a copy of (i) any notice or claim
to the effect that the Company or any of its Subsidiaries is or may be
liable to any Person as a result of the Release by the Company, any of
its Subsidiaries, or any other Person of any Contaminant into the
environment, and (ii) any notice alleging any violation of any
Environmental, Health or Safety Requirements of Law by the Company or
any of its Subsidiaries if, in either case, such notice or claim
relates to an event which could reasonably be expected to subject the
Company and each of its Subsidiaries to liability individually or in
the aggregate in excess of $10,000,000.
(i) Other Information. Promptly upon receiving a request therefor from
the Administrative Agent, prepare and deliver to the Administrative
Agent and the Lenders such other information with respect to the
Company or any of its Subsidiaries, as from time to time may be
reasonably requested by the Administrative Agent.
7.2 Affirmative Covenants.
(a) Corporate Existence, Etc. Subject to Section 7.3(i), the Company
shall, and shall cause each of its Subsidiaries to, at all times
maintain its corporate existence and preserve and keep, or cause to be
preserved and kept, in full force and effect its rights and franchises
material to its businesses except where, in the case of Subsidiaries
which are not Subsidiary Borrowers, failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(b) Corporate Powers; Conduct of Business. The Company shall, and shall
cause each of its Subsidiaries to, qualify and remain qualified to do
business in each jurisdiction in which the nature of its business
requires it to be so qualified and where the failure to be so qualified
will have or could reasonably be expected to have a Material Adverse
Effect.
(c) Compliance with Laws, Etc. The Company shall, and shall cause its
Subsidiaries to, (a) comply with all Requirements of Law and all
restrictive covenants affecting such Person or the business, prospects,
properties, assets or operations of such Person, and (b) obtain as
needed all permits necessary for its operations and maintain such
permits in good standing unless failure to comply or obtain such
permits could not reasonably be expected to have a Material Adverse
Effect.
(d) Payment of Taxes and Claims; Tax Consolidation. The Company shall
pay, and cause each of its Subsidiaries to pay, (i) all material taxes,
assessments and other governmental charges imposed upon it or on any of
its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or interest accrues
thereon, and (ii) all claims (including, without limitation, claims for
labor, services, materials and supplies) for material sums which have
become due and payable and which by law have or may become a Lien
(other than a Lien permitted by Section 7.3(c)) upon any of the
Company's or such Subsidiary's property or assets, prior to the time
when any penalty or fine shall be incurred with respect thereto;
provided that no such taxes, assessments and governmental charges
referred to in clause (i) above or claims referred to in clause (ii)
above (and interest, penalties or fines relating thereto) need be paid
if being contested in good faith by appropriate proceedings diligently
instituted and conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with Agreement
Accounting Principles shall have been made therefor.
(e) Insurance. The Company will maintain, and will cause to be
maintained on behalf of each of its Subsidiaries, insurance coverage by
financially sound and reputable insurance companies or associations,
against such casualties and contingencies, of such types and in such
amounts as are customary for companies engaged in similar businesses
and owning and operating similar properties, it being understood that
the Company and its Subsidiaries may self-insure against hazards and
risks with respect to which, and in such amounts, as the Company in
good faith determines prudent and consistent with sound financial
practice, and as are customary for companies engaged in similar
businesses and owning and operating similar properties. The Company
shall furnish to any Lender upon request full information as to the
insurance carried.
(f) Inspection of Property; Books and Records; Discussions. The Company
shall permit and cause each of the Company's Subsidiaries to permit,
any authorized representative(s) designated by either the
Administrative Agent or the Required Lenders to visit and inspect, for
a reasonable purpose, any of the properties of the Company or any of
its Subsidiaries, to examine, audit, check and make copies of their
respective financial and accounting records, books, journals, orders,
receipts and any correspondence and other data relating to their
respective businesses or the transactions contemplated hereby
(including, without limitation, in connection with environmental
compliance, hazard or liability), and to discuss their affairs,
finances and accounts with their officers and their independent
certified public accountants, all upon reasonable notice and at such
reasonable times during normal business hours, as often as may be
reasonably requested. The Company shall keep and maintain, and cause
each of the Company's Subsidiaries to keep and maintain proper books of
record and account in which entries in conformity with Agreement
Accounting Principles shall be made of all dealings and transactions in
relation to their respective businesses and activities.
(g) ERISA Compliance. The Company shall, and shall cause each of the
Company's Subsidiaries to, establish, maintain and operate all Plans
(and, to the extent it is within the power of the Company or a
Subsidiary, all Multiemployer Plans) to comply in all material respects
with the provisions of ERISA, the Code, all other applicable laws, and
the regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
(h) Maintenance of Property. The Company shall cause all property used
or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and shall cause
to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times and except to the
extent that the failure to so maintain such property could not be
reasonably expected to have a Material Adverse Effect.
(i) Environmental Compliance. The Company shall, and shall cause each
of the Company's Subsidiaries to comply with, all Environmental, Health
or Safety Requirements of Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect.
(j) Use of Proceeds. The Borrowers shall use the proceeds of the
Advances to make payments on the Seller Subordinated Note (subject to
the provisions of this Agreement and the subordination provisions of
the Seller Subordinated Note) and to provide funds for the additional
working capital needs and other general corporate purposes of the
Company and its Subsidiaries, including, without limitation, the
financing of Permitted Acquisitions. The Company will not, nor will it
permit any Subsidiary to, use any of the proceeds of the Advances to
make any Acquisition other than a Permitted Acquisition made pursuant
to Section 7.3(g).
(k) Subsidiary Guarantees; Subsidiary Subordination Agreement. The
Company will:
(i) cause each Subsidiary Borrower that is a Domestic Subsidiary
and each Domestic Subsidiary that has assets with a book value in
excess of $10,000,000 to execute the Guaranty (and from and after the
Amendment Effective Date cause each other Subsidiary Borrower that is
a Domestic Subsidiary and each other Domestic Subsidiary which has
such assets to execute and deliver to the Administrative Agent, within
ten (10) days after becoming a Subsidiary Borrower or another Domestic
Subsidiary which has such assets, as applicable, an assumption or
joinder agreement pursuant to which it agrees to be bound by the terms
and provisions of the Guaranty (whereupon such Subsidiary shall become
a "Guarantor" under this Agreement)) and cause such Guarantors to
execute and deliver to the Administrative Agent such Collateral
Documents as the Administrative Agent may require;
(ii) in the event that at any time the book value of the assets
of all Domestic Subsidiaries which are not Guarantors exceeds the
lesser of (a) twelve percent (12%) of the Consolidated Net Assets of
the Company and its Subsidiaries at such time and (b) $25,000,000,
within ten (10) days thereafter cause one or more of such Subsidiaries
to execute and deliver to the Administrative Agent an assumption or
joinder agreement pursuant to which it or they agree to be bound by
the terms and provisions of the Guaranty (whereupon each such
Subsidiary shall become a "Guarantor" under this Agreement) such that,
after giving effect thereto, the book value of the assets of all
Domestic Subsidiaries which are not Guarantors does not exceed the
lesser of (a) twelve percent (12%) of the Consolidated Net Assets of
the Company and its Subsidiaries at such time and (b) $25,000,000, and
cause such Guarantors to execute and deliver to the Administrative
Agent such Collateral Documents as the Administrative Agent may
require;
(iii) cause each Subsidiary, before it makes a loan to any of the
Borrowers, to execute the Subordination Agreement (and from and after
the Amendment Effective Date cause each other Subsidiary to execute
and deliver to the Administrative Agent, within ten (10) days after
becoming a Subsidiary, as applicable, an assumption or joinder
agreement pursuant to which it agrees to be bound by the terms and
provisions of the Subordination Agreement);
(iv) deliver and cause such Subsidiaries to deliver corporate
resolutions, opinions of counsel, and such other corporate
documentation as the Administrative Agent may reasonably request, all
in form and substance reasonably satisfactory to the Administrative
Agent; and
(v) cause each Subsidiary to be a Wholly-Owned Subsidiary, except
as set forth on Schedule 6.8.
(l) Foreign Employee Benefit Compliance. The Company shall, and shall
cause each of its Subsidiaries and each member of its Controlled Group
to, establish, maintain and operate all Foreign Employee Benefit Plans
to comply in all material respects with all laws, regulations and rules
applicable thereto and the respective requirements of the governing
documents for such Plans, except for failures to comply which, in the
aggregate, would not be reasonably expected to subject the Company or
any of its Subsidiaries to liability, individually or in the aggregate,
in excess of $5,000,000.
(m) Subordinated Seller Debt. The Company shall, and shall cause each
of its Subsidiaries to, comply at all times with each covenant
contained in the documents evidencing the Subordinated Seller Debt and
shall not permit any potential or actual defaults to occur with respect
to the Seller Subordinated Debt.
7.3 Negative Covenants.
(a) Sales of Assets. The Company shall not, nor shall it permit any
Subsidiary to, sell or otherwise dispose of any Receivables, with or
without recourse or consummate any Asset Sale, except:
(i) transfers of assets to the Company, between the Company and
any Guarantor which is a Domestic Subsidiary or between any such
Guarantors; and
(ii) sales, assignments, transfers, lease conveyances or other
dispositions of other assets if such transaction (a) is for not less
than fair market value (as determined in good faith by the Company's
chief financial officer), and (b) when combined with all such other
transactions (each such transaction being valued at book value) and
all Sale and Leaseback Transactions (each such Sale and Leaseback
Transaction being valued at book value) during the period from the
Closing Date to the date of such proposed transaction, represents the
disposition of not greater than ten percent (10%) of the Company's
Consolidated Net Assets at the end of the fiscal year immediately
preceding that in which such transaction is proposed to be entered
into.
(b) Liens. The Company shall not, nor shall it permit any Subsidiary
to, directly or indirectly create, incur, assume or permit to exist a
Lien on or with respect to the Capital Stock of any Subsidiary of the
Company. In addition, the Company shall not, nor shall it permit any
Subsidiary to, directly or indirectly create, incur, assume or permit
to exist any Lien on or with respect to any of their respective other
property or assets except:
(i) Permitted Existing Liens;
(ii) Customary Permitted Liens;
(iii) Liens with respect to Equipment acquired by the Company
or any of its Subsidiaries after the date hereof pursuant to a
Permitted Acquisition (and not created in contemplation of such
acquisition); provided that such Liens shall extend only to the
property so acquired;
(iv) Liens securing Indebtedness of a Subsidiary to the Company
or to another Wholly-Owned Subsidiary;
(v) Liens securing Indebtedness permitted under Section
7.3(c)(vii); and
(vi) Additional Liens; provided that the Indebtedness secured
thereby does not exceed in the aggregate $10,000,000 (less the amount
of any Indebtedness secured by Liens permitted under clause (v)).
(c) Indebtedness. The Company shall not, nor shall it permit any
Subsidiary to, cause or permit, directly or indirectly create, incur,
assume or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness, except:
(i) the Obligations;
(ii) the Subordinated Seller Debt;
(iii) Permitted Existing Indebtedness;
(iv) Indebtedness arising from intercompany loans and advances
from the Company or any Domestic Subsidiary to any Subsidiary, provided
that (A) such intercompany Indebtedness shall not be evidenced by any
note or similar instrument; (B) the Company and each applicable
Subsidiary shall record all intercompany transactions on their
respective books and records in a manner satisfactory to the
Administrative Agent; (C) the obligations of each Subsidiary with
respect to any such intercompany loans shall be subordinated to any
Obligations of such Subsidiary hereunder in a manner satisfactory to
the Administrative Agent; (D) no Default or Unmatured Default would
occur and be continuing after giving effect to any such proposed
intercompany loan; (E) the aggregate Dollar Amount outstanding of such
intercompany loans owing by Foreign Subsidiaries other than loans
pursuant to the Spectra Precision Acquisition shall not exceed
$30,000,000 at any time and (F) other than loans pursuant to the
Spectra Precision Acquisition, such intercompany loans shall be made in
the ordinary course of business, consistent with past practices and the
proceeds of such loans shall be used to fund operating expenses of the
applicable Subsidiary;
(v) Contingent Obligations to the extent permitted under
Section 7.3(d);
(vi) Hedging Obligations to the extent permitted under
Section 7.3(n);
(vii) Indebtedness with respect to Capital Lease Obligations
and purchase money Indebtedness with respect to real or personal
property in an aggregate amount not to exceed $10,000,000;
(viii) Indebtedness incurred for the purpose of refinancing any
of the Indebtedness permitted under clause (iii); and
(ix) additional unsecured Indebtedness in an aggregate amount
at any time outstanding not exceeding $50,000,000 (less any
Indebtedness described in clause (vii) above) of which not more than
$25,000,000 may be incurred by Subsidiaries which are not Subsidiary
Borrowers or Guarantors.
(d) Contingent Obligations. The Company shall not, nor shall it permit
any Subsidiary to, directly or indirectly create or become or be liable
with respect to any Contingent Obligation, except: (i) recourse
obligations resulting from endorsement of negotiable instruments for
collection in the ordinary course of business; (ii) Permitted Existing
Contingent Obligations; (iii) obligations, warranties, guaranties and
indemnities, not relating to Indebtedness of any Person, which have
been or are undertaken or made in the ordinary course of business and
not for the benefit of or in favor of an Affiliate of the Company or
such Subsidiary; (iv) Contingent Obligations of the Subsidiaries of the
Company under the Guaranty to which they are a party, (v) obligations
arising under or related to the Loan Documents; (vi) Contingent
Obligations in respect of the Subordinated Seller Debt or other
Indebtedness permitted by Section 7.3(c) above, and (vii) additional
Contingent Obligations in an aggregate amount not to exceed in the
aggregate five percent (5%) of Consolidated Net Worth at any one time
outstanding.
(e) Restricted Payments. The Company shall not, nor shall it permit any
Subsidiary to, make or declare any Restricted Payments (other than
Restricted Payments by a Subsidiary to the Company) except that (i) the
Company may make prepayments of the Seller Subordinated Note from the
proceeds of equity offerings as required by Section 4.2 of the Seller
Subordinated Note (but only to the extent otherwise permitted by the
subordination provisions of the Seller Subordinated Note); (ii) so long
as no Default or Unmatured Default then exists, the Company may
repurchase shares from its employees, officers or directors pursuant to
any vesting provisions with respect thereto; and (iii) so long as no
Default or Unmatured Default then exists, the Company may make
Restricted Payments not to exceed, for any fiscal year, an aggregate
amount equal to twenty-five percent (25%) of Net Income for the
previous fiscal year.
(f) Conduct of Business; Subsidiaries; Acquisitions. The Company shall
not, nor shall it permit any Subsidiary to, engage in any business
other than the businesses engaged in by the Company on the date hereof
and any business or activities which are similar, related or incidental
thereto or logical extensions thereof. The Company shall not create,
acquire or capitalize any Subsidiary after the date hereof unless (i)
no Default or Unmatured Default shall have occurred and be continuing
or would result therefrom; (ii) after such creation, acquisition or
capitalization, all of the representations and warranties contained
herein shall be true and correct in all material respects (unless such
representation and warranty is made as of a specific date, in which
case, such representation or warranty shall be true as of such date);
and (iii) after such creation, acquisition or capitalization the
Company shall be in compliance with the terms of Section 7.2(k). The
Company shall not make any Acquisitions, other than Acquisitions
meeting the following requirements (each such Acquisition constituting
a "Permitted Acquisition"):
(i) no Default or Unmatured Default shall have occurred and be
continuing or would result from such Acquisition or the incurrence of
any Indebtedness in connection therewith;
(ii) the purchase is consummated pursuant to a negotiated
acquisition agreement on a non-hostile basis and approved by the
target company's board of directors (and shareholders, if necessary)
prior to the consummation of the Acquisition;
(iii) if the purchase price payable in respect to any such
Acquisition (including, without limitation, cash or stock (other than
Equity Interests (other than Disqualified Stock) of the Company)
consideration paid and Indebtedness or other liabilities assumed)
exceeds $25,000,000, prior to each such Acquisition, the Company shall
have delivered to the Administrative Agent and the Lenders a
certificate from one of the Authorized Officers, demonstrating that
after giving effect to such Acquisition, on a pro forma basis in
respect of each such Acquisition as if the Acquisition and such
incurrence of Indebtedness had occurred on the first day of the
twelve-month period ending on the last day of the Company's most
recently completed fiscal quarter, the Company would have been in
compliance with the financial covenants in Section 7.4 and not
otherwise in Default;
(iv) if the purchase price for the Acquisition (excluding
consideration in the form of the Company's Equity Interests (other than
Disqualified Stock)) exceeds, together with all other Permitted
Acquisitions permitted under this Section 7.3(f) during the same fiscal
year, $25,000,000 (the "Permitted Acquisition Basket") (including the
incurrence or assumption of any Indebtedness in connection therewith),
the Required Lenders shall have consented to such Acquisition;
(v) the businesses being acquired shall be similar to that of the
Company and its Subsidiaries as of the Closing Date, related or
incidental thereto or logical extensions thereof; and
(vi) such Acquisition shall be structured as an asset
acquisition, as an acquisition of one hundred percent (100%) of the
outstanding voting equity securities of the target company or as a
merger permitted hereby.
(g) Investments. Neither the Company nor any of its Subsidiaries shall
purchase or acquire, or make any commitment therefor, any Equity
Interest, or any obligations or other securities of, or any interest
in, any Person, or make or commit to make any advance, loan, extension
of credit or capital contribution to or any other investment in, any
Person including any Affiliate of the Company, except for:
(i) Investments by the Company or any Subsidiary in any
Wholly-Owned Subsidiary which is a Guarantor;
(ii) Investments incurred in order to consummate Permitted
Acquisitions otherwise permitted herein;
(iii) Loans giving rise to Indebtedness permitted by Section
7.3(c)(iv);
(iv) Advances to employees for business expenses not to exceed
$1,000,000 in the aggregate outstanding at any one time;
(v) other loans to employees in the ordinary course of business
and consistent with past practices, not to exceed $5,000,000 in the
aggregate outstanding at any one time;
(vi) Investments in Cash Equivalents;
(vii) Permitted Existing Investments; and
(viii) other Investments in an aggregate amount not to exceed the
sum of (A) $20,000,000 (based on the initial amount invested) plus (B)
proceeds (net of the initial amount invested) from Investments
permitted hereunder.
(h) Transactions with Shareholders and Affiliates. Neither the Company
nor any of its Subsidiaries shall directly or indirectly enter into or
permit to exist any transaction (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of
any service) with, or make loans or advances to, any Affiliate of the
Company which is not its Wholly-Owned Subsidiary, on terms that are
less favorable to the Company or any of its Subsidiaries, as
applicable, than those that might be obtained in an arm's length
transaction at the time from Persons who are not such a holder or
Affiliate, except for Restricted Payments permitted by Section 7.3(f).
(i) Restriction on Fundamental Changes. Neither the Company nor any of
its Subsidiaries shall enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), or convey, lease, sell, transfer or otherwise dispose of,
in one transaction or series of transactions, all or substantially all
of the Company's consolidated business or property (each such
transaction a "Fundamental Change"), whether now or hereafter acquired,
except (i) Fundamental Changes permitted under Sections 7.3(a), 7.3(b)
or 7.3(f), (ii) a Subsidiary of the Company may be merged into or
consolidated with the Company or any Wholly-Owned Subsidiary of the
Company (in which case the Company or such Wholly-Owned Subsidiary
shall be the surviving corporation); provided that if the predecessor
Subsidiary was a Guarantor, the surviving Subsidiary, if applicable,
shall be a Guarantor hereunder, (iii) any liquidation of any Subsidiary
of the Company into the Company or another Subsidiary of the Company,
as applicable, and (iv) the Company may merge with any other Person, or
any Subsidiary of the Company may consolidate or merge with any other
Person, provided that (A) no Default or Unmatured Default shall exist
immediately before or after giving effect to such Fundamental Change,
(B) in the case of any merger of the Company, the Company is the
surviving corporation in such merger and such merger is with a Person
in a line of business substantially similar to that of the Company and
its Subsidiaries as of the Closing Date or any business or activities
which are similar, related or incidental thereto or logical extensions
thereof, and (C) in the case of any merger or consolidation of any
Subsidiary of the Company, the surviving corporation in such
Fundamental Change is or becomes as a result thereof a Wholly-Owned
Subsidiary of the Company and if the predecessor Subsidiary was a
Guarantor, the surviving Subsidiary shall be a Guarantor hereunder, and
(D) such transaction is with a Person in a line of business
substantially similar to or related to that of the Company and its
Subsidiaries as of the Closing Date or is a logical extension thereof.
(j) Margin Regulations. Neither the Company nor any of its
Subsidiaries, shall use all or any portion of the proceeds
of any credit extended under this Agreement to
purchase or carry Margin Stock.
(k) ERISA.
(i) The Company shall not:
(A) engage, or permit any of its Subsidiaries to engage, in
any material prohibited transaction described in Sections 406 of ERISA
or 4975 of the Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained from
the DOL;
(B) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Code), with respect to
any Benefit Plan, whether or not waived;
(C) fail, or permit any Controlled Group member to fail, to
pay timely required material contributions or annual installments due
with respect to any waived funding deficiency to any Benefit Plan;
(D) terminate, or permit any Controlled Group member to
terminate, any Benefit Plan which would result in any material
liability of the Company or any Controlled Group member under Title IV
of ERISA;
(E) fail to make any material contribution or payment to any
Multiemployer Plan which the Company or any Controlled Group member may
be required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto;
(F) permit any unfunded liabilities with respect to any
Foreign Pension Plan except to the extent that any such unfunded
liabilities are being funded by annual contributions made by the
Company or any member of its Controlled Group and such annual
contributions are not less than the minimum amounts, if any, required
under applicable local law;
(G) fail, or permit any of its Subsidiaries or Controlled
Group members to fail, to pay any required contributions or payments to
a Foreign Pension Plan on or before the due date for such required
installment or payment;
(H) fail, or permit any Controlled Group member to fail, to
pay any required material installment or any other payment required
under Section 412 of the Code on or before the due date for such
installment or other payment; or
(I) amend, or permit any Controlled Group member to amend, a
Plan resulting in a material increase in current liability for the plan
year such that the Company or any Controlled Group member is required
to provide security to such Plan under Section 401(a)(29) of the Code.
(ii) For purposes of this Section 7.3(k), "material" means any
noncompliance or basis for liability which could reasonably be
expected to subject the Company or any of its Subsidiaries to
liability, individually or in the aggregate, in excess of $5,000,000.
(l) Certain Documents. Neither the Company nor any of its Subsidiaries
shall amend, modify or otherwise change any of the terms or provisions
of (i) the Acquisition Documents, or of any of their respective
constituent documents as in effect on the date hereof in any manner
materially adverse to the interests of the Lenders or (ii) the
documents evidencing the Subordinated Seller Debt.
(m) Fiscal Year. Neither the Company nor any of its consolidated
Subsidiaries shall change its fiscal year for accounting or tax
purposes from a period consisting of the twelve-month period ending on
Friday nearest to December 31 of each year, except as required by
Agreement Accounting Principles or by law and disclosed to the Lenders
and the Administrative Agent.
(n) Hedging Obligations. The Company shall not and shall not permit any
of its Subsidiaries to enter into any interest rate, commodity or
foreign currency exchange, swap, collar, cap or similar agreements
evidencing Hedging Obligations, other than interest rate, foreign
currency or commodity exchange, swap, collar, cap or similar agreements
entered into by the Company or its Subsidiaries pursuant to which the
Company or its Subsidiaries has hedged its actual or anticipated
interest rate, foreign currency or commodity exposure. Such permitted
hedging agreements entered into by the Company or its Subsidiaries and
any Lender or any Affiliate of any Lender are sometimes referred to
herein as "Hedging Agreements".
(o) Capital Expenditures. The Company shall not, and shall not permit
any of its Subsidiaries to, make Capital Expenditures in any fiscal
year to the extent that during any fiscal year the aggregate amount of
Capital Expenditures for the Company and its Subsidiaries would exceed
$15,000,000, excluding any amount attributable to a Permitted
Acquisition (the "Capital Expenditures Limit"). Notwithstanding the
foregoing, in the event that the Company and its Subsidiaries do not
expend the entire Capital Expenditures Limit for any fiscal year, the
Company and its Subsidiaries may carry forward to the immediately
succeeding fiscal year the unutilized portion of such Capital
Expenditures Limit.
(p) Restrictive Agreements. Other than (x) the Subordinated Seller
Note, (y) customary provisions in licenses or similar agreements that
restrict the ability of the Company or its Subsidiaries to assign,
transfer, license or sublicense any intellectual property subject to
such license or agreement and (z) negative pledge provisions in
Equipment financing agreements which restrict only Liens on the
Equipment subject to such agreement together with any accessions,
additions, replacements or proceeds of such Equipment, the Company
shall not, nor shall it permit any of its Subsidiaries to, enter into
any indenture, agreement, instrument or other arrangement which
directly or indirectly prohibits or restrains, or has the effect of
prohibiting or restraining, or imposes materially adverse conditions
upon, the ability of the Company or any Subsidiary to create Liens upon
their assets securing the Obligations or of any Subsidiary to (i) pay
dividends or make other distributions or Restricted Payments (A) on its
Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits, (ii) make loans or
advances to or other investments in the Company or any Subsidiary,
(iii) repay loans or advances from the Company or any Subsidiary or
(iv) transfer any of its properties to the Company or any Subsidiary.
7.4 Financial Covenants.
(a) Minimum Fixed Charge Coverage Ratio. The Company shall maintain as
of the end of each fiscal quarter set forth below a Fixed Charge
Coverage Ratio for the four fiscal quarter period then ending of not
less than the ratio set forth below opposite such period:
Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 2002 through June 30, 2003 1.10:1.00
September 30, 2003 and thereafter 1.20:1.00
(b) Maximum Leverage Ratio. The Company shall at all times during the
periods specified below maintain a Leverage Ratio for the four fiscal
quarter period then ending of not greater than the ratio set forth
below opposite such period:
Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 2002 through June 30, 2003 2.00:1.00
September 30, 2003 and thereafter 1.75:1.00
(c) Minimum Consolidated Net Worth. The Company shall not permit its
Consolidated Net Worth at any time to be less than the sum of (i) 85%
of Consolidated Net Worth on June 28, 2002 plus (ii) fifty percent
(50%) of Net Income (if positive) calculated separately for each
subsequent quarterly accounting period, in each case, excluding changes
in cumulative foreign exchange translation adjustment, plus (iii) the
aggregate amount of all Equity Interests issued after June 28, 2002.
ARTICLE VIII: DEFAULTS
8.1 Defaults. Each of the following occurrences shall constitute a
Default under this Agreement:
(a) Failure to Make Payments When Due. The Company or any Subsidiary
Borrower shall (i) fail to pay when due any of the Obligations
consisting of principal with respect to any Loan or (ii) shall fail to
pay within five (5) Business Days of the date when due any of the other
Obligations under this Agreement or the other Loan Documents.
(b) Breach of Certain Covenants. The Company or any Subsidiary
Borrower shall fail duly and punctually to perform or observe any
agreement, covenant or obligation binding on it under:
(i) Sections 7.1(b), 7.1(c), 7.1(f), 7.2(j), 7.2(k), 7.2(m), 7.3
or 7.4 or
(ii) any section of this Agreement or any other Loan Document not
covered by Section 8.1(a), 8.1(b)(i) or 8.1(m) and such failure shall
continue unremedied for thirty (30) days after the occurrence thereof.
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by the Company or any Subsidiary Borrower
to the Administrative Agent or any Lender herein or by the Company or
any Subsidiary Borrower or any of their Subsidiaries in any of the
other Loan Documents or in any statement or certificate or information
at any time given by any such Person pursuant to any of the Loan
Documents shall be false in any material respect on the date as of
which made or deemed made.
(d) Default as to Other Indebtedness. The Company or any of its
Subsidiaries shall fail to pay when due (i) any Subordinated Seller
Debt or (ii) any Indebtedness in excess of $5,000,000 (any such
Indebtedness being "Material Indebtedness"); or the Company or any of
its Subsidiaries shall fail to perform (beyond the applicable grace
period with respect thereto, if any) any term, provision or condition
contained in any agreement under which any such Material Indebtedness
was created or is governed, or any other event shall occur or condition
exist, the effect of which default or event is to cause, or to permit
the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its stated maturity; or
any Material Indebtedness of the Company or any of its Subsidiaries
shall be declared to be due and payable or required to be prepaid or
repurchased (other than by a regularly scheduled payment) prior to the
stated maturity thereof.
(e) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against the Company
or any of the Company's Subsidiaries and the petition shall not be
dismissed, stayed, bonded or discharged within forty-five (45) days
after commencement of the case; or a court having jurisdiction in the
premises shall enter a decree or order for relief in respect of the
Company or any of the Company's Subsidiaries in an involuntary case,
under any applicable bankruptcy, insolvency or other similar law now or
hereinafter in effect; or any other similar relief shall be granted
under any applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the
Company or any of the Company's Subsidiaries or over all or a
substantial part of the property of the Company or any of the Company's
Subsidiaries shall be entered; or an interim receiver, trustee or other
custodian of the Company or any of the Company's Subsidiaries or of all
or a substantial part of the property of the Company or any of the
Company's Subsidiaries shall be appointed or a warrant of attachment,
execution or similar process against any substantial part of the
property of the Company or any of the Company's Subsidiaries shall be
issued and any such event shall not be stayed, dismissed, bonded or
discharged within forty-five (45) days after entry, appointment or
issuance.
(f) Voluntary Bankruptcy; Appointment of Receiver, Etc. The Company or
any of the Company's Subsidiaries shall (i) commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (ii) consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to
a voluntary case, under any such law, (iii) consent to the appointment
of or taking possession by a receiver, trustee or other custodian for
all or a substantial part of its property, (iv) make any assignment for
the benefit of creditors or (v) take any corporate action to authorize
any of the foregoing.
(g) Judgments and Attachments. Any money judgment(s) writ or warrant of
attachment, or similar process against the Company or any Domestic
Subsidiary or any of their respective assets involving in any single
case or in the aggregate an amount in excess of $5,000,000 is or are
entered and shall remain undischarged, unvacated, unbonded or unstayed
for a period of thirty (30) days or in any event later than fifteen
(15) days prior to the date of any proposed sale thereunder.
(h) Dissolution. Any order, judgment or decree shall be entered against
the Company or any Domestic Subsidiary decreeing its involuntary
dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of forty-five (45) days; or the Company
or any Domestic Subsidiary shall otherwise dissolve or cease to exist
except as specifically permitted by this Agreement.
(i) Termination Event. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject the Company to
liability in excess of $5,000,000. The Unfunded Liabilities of all
Single Employer Plans shall exceed in the aggregate $10,000,000.
(j) Waiver of Minimum Funding Standard. If the plan administrator of
any Plan applies under Section 412(d) of the Code for a waiver of the
minimum funding standards of Section 412(a) of the Code and the
Administrative Agent or the Required Lenders believe the substantial
business hardship upon which the application for the waiver is based
could reasonably be expected to subject either the Company or any
Controlled Group member to liability in excess of $5,000,000.
(k) Change of Control. A Change of Control shall occur.
(l) Guarantor Revocation. Any Guaranty shall fail to remain in full
force or effect or any action shall be taken to discontinue or to
assert the invalidity or unenforceability of any Guaranty, or any
Guarantor shall fail to comply with any of the terms or provisions of
any Guaranty to which it is a party, or any Guarantor shall deny that
it has any further liability under any Guaranty to which it is a party,
or shall give notice to such effect; in each case other than a
Guarantor's ceasing to be a Subsidiary Borrower pursuant to Section
2.23 hereof or the disposition of such Guarantor in any transaction
permitted by Section 7.3(b) hereof.
(m) Collateral Documents. Any Collateral Documents shall fail to remain
in full force or effect or any action shall be taken to discontinue or
to assert the invalidity or unenforceability of any Collateral
Document, or any "Default" or "Unmatured Default" shall occur under and
as defined in any Collateral Document or shall deny, or give notice to
such effect, that it has any further liability under such Collateral
Document or any Collateral Document shall for any reason fail to create
a valid and perfected, first priority security interest in any
collateral purported to be covered thereby, except as permitted by the
terms of such Collateral Document.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with Section 9.2.
ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES
9.1 Termination of Revolving Loan Commitments; Acceleration. If any
Default described in Section 8.1(e) or 8.1(f) occurs with respect to the Company
or any Subsidiary Borrower, the obligations of the Lenders to make Loans
(including, without limitation, Alternate Currency Loans) hereunder and the
obligation of any Issuing Banks to issue Letters of Credit hereunder shall
automatically terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Administrative Agent
or any Lender. If any other Default occurs, the Required Lenders, or the
Administrative Agent acting at the direction of the Required Lenders may
terminate or suspend the obligations of the Lenders to make Loans (including,
without limitation, Alternate Currency Loans) hereunder and the obligation of
the Issuing Banks to issue Letters of Credit hereunder, or declare the
Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrowers expressly waive.
9.2 Amendments. Subject to the provisions of this Article IX, the
Required Lenders (or the Administrative Agent with the consent in writing of the
Required Lenders) and the Borrowers may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the Borrowers
hereunder or waiving any Default or Unmatured Default hereunder; provided that
no such supplemental agreement shall, without the consent of each Lender
directly affected thereby:
(a) Postpone or extend the Revolving Loan Termination Date, the Term
Loan Maturity Date or any other date scheduled for any payment of
principal of, or interest on, the Loans, the Reimbursement Obligations
or any fees or other amounts payable to such Lender (except with
respect to a waiver of the application of the default rate of interest
pursuant to Section 2.12 hereof).
(b) Reduce the principal amount of any Loans or L/C Obligations, or
reduce the rate or extend the time of payment of interest or fees
thereon.
(c) Reduce the percentage specified in the definition of Required
Lenders or any other percentage of Lenders hereunder specified to be
the applicable percentage in this Agreement to act on specified
matters or amend the definitions of "Required Lenders", "Pro Rata
Revolving Share", "Pro Rata Share", "Pro Rata Term Share", "Pro Rata
Tranche A Revolving Share", "Pro Rata Tranche B Revolving Share", "Pro
Rata Tranche C Revolving Share" or "Pro Rata Tranche D Revolving
Share".
(d) Increase the amount of the Revolving Loan Commitment of any Lender
hereunder.
(e) Permit the Company or any Subsidiary Borrower to assign its rights
under this Agreement or any Guaranty.
(f) Release the Company or any Guarantor from any of its obligations
under the Guaranty set forth in Article X hereof or any other
Guaranty.
(g) Amend this Section 9.2.
(h) Release all or a substantial portion of the collateral pledged
pursuant to the Collateral Documents (except as expressly provided
therein).
(i) Amend the definition of "Trigger Event Date".
No amendment of any provision of this Agreement relating to (a) the
Administrative Agent shall be effective without the written consent of the
Administrative Agent, (b) any Issuing Bank shall be effective without the
written consent of such Issuing Bank and (c) any Swing Line Loan shall be
effective without the written consent of the Swing Line Bank. The Administrative
Agent may waive payment of the fee required under Section 14.3(b) without
obtaining the consent of any of the Lenders.
9.3 Preservation of Rights. No delay or omission of the Lenders or the
Administrative Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan or the issuance of a Letter of Credit
notwithstanding the existence of a Default or the inability of the Company or
any other Borrower to satisfy the conditions precedent to such Loan or issuance
of such Letter of Credit shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the requisite number of
Lenders required pursuant to Section 9.2, and then only to the extent in such
writing specifically set forth. All remedies contained in the Loan Documents or
by law afforded shall be cumulative and all shall be available to the
Administrative Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE X: GUARANTY
10.1 Guaranty. For valuable consideration, the receipt of which is
hereby acknowledged, and to induce the Lenders to make advances to each
Subsidiary Borrower and to make, issue and participate in Letters of Credit,
Swing Line Loans and Alternate Currency Loans, the Company hereby absolutely and
unconditionally guarantees prompt payment when due, whether at stated maturity,
upon acceleration or otherwise, and at all times thereafter, of any and all
existing and future obligations including without limitation the Obligations, of
each Subsidiary Borrower to the Administrative Agent, the Lenders, the Swing
Line Bank, the Issuing Lenders, the Alternate Currency Banks, or any of them,
under or with respect to the Loan Documents or under or with respect to any
Hedging Agreement entered into in connection with this Agreement, whether for
principal, interest, (including interest accruing after the commencement of any
bankruptcy insolvency or similar proceeding whether or not allowed as a claim in
such proceeding) fees, expenses or otherwise (collectively, the "Guaranteed
Obligations", and each such Subsidiary Borrower being an "Obligor" and
collectively, the "Obligors").
10.2 Waivers. The Company waives notice of the acceptance of this
guaranty and of the extension or continuation of the Guaranteed Obligations or
any part thereof. The Company further waives presentment, protest, notice of
notices delivered or demand made on any Obligor or action or delinquency in
respect of the Guaranteed Obligations or any part thereof, including any right
to require the Administrative Agent and the Lenders to sue any Obligor, any
other guarantor or any other Person obligated with respect to the Guaranteed
Obligations or any part thereof, or otherwise to enforce payment thereof against
any collateral securing the Guaranteed Obligations or any part thereof. The
Administrative Agent and the Lenders shall have no obligation to disclose or
discuss with the Company their assessments of the financial condition of the
Obligors.
10.3 Guaranty Absolute. This guaranty is a guaranty of payment and not
of collection, is a primary obligation of the Company and not one of surety, and
the validity and enforceability of this guaranty shall be absolute and
unconditional irrespective of, and shall not be impaired or affected by any of
the following: (a) any extension, modification or renewal of, or indulgence with
respect to, or substitutions for, the Guaranteed Obligations or any part thereof
or any agreement relating thereto at any time; (b) any failure or omission to
enforce any right, power or remedy with respect to the Guaranteed Obligations or
any part thereof or any agreement relating thereto, or any collateral; (c) any
waiver of any right, power or remedy with respect to the Guaranteed Obligations
or any part thereof or any agreement relating thereto or with respect to any
collateral; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any collateral,
any other guaranties with respect to the Guaranteed Obligations or any part
thereof, or any other obligation of any Person with respect to the Guaranteed
Obligations or any part thereof; (e) the enforceability or validity of the
Guaranteed Obligations or any part thereof or the genuineness, enforceability or
validity of any agreement relating thereto or with respect to any collateral;
(f) the application of payments received from any source to the payment of
obligations other than the Guaranteed Obligations, any part thereof or amounts
which are not covered by this guaranty even though the Administrative Agent and
the Lenders might lawfully have elected to apply such payments to any part or
all of the Guaranteed Obligations or to amounts which are not covered by this
guaranty; (g) any change in the ownership of any Obligor or the insolvency,
bankruptcy or any other change in the legal status of any Obligor; (h) the
change in or the imposition of any law, decree, regulation or other governmental
act which does or might impair, delay or in any way affect the validity,
enforceability or the payment when due of the Guaranteed Obligations; (i) the
failure of the Company or any Obligor to maintain in full force, validity or
effect or to obtain or renew when required all governmental and other approvals,
licenses or consents required in connection with the Guaranteed Obligations or
this guaranty, or to take any other action required in connection with the
performance of all obligations pursuant to the Guaranteed Obligations or this
guaranty; (j) the existence of any claim, setoff or other rights which the
Company may have at any time against any Obligor, or any other Person in
connection herewith or an unrelated transaction; (k) the Administrative Agent's
or any Lender's election, in any case or proceeding instituted under chapter 11
of the Bankruptcy Code, of the application of section 1111(b)(2) of the
Bankruptcy Code; (l) any borrowing, use of cash collateral, or grant of a
security interest by the Company, as debtor in possession, under section 363 or
364 of the United States Bankruptcy Code; (m) the disallowance of all or any
portion any Lender's claims for repayment of the Guaranteed Debt under section
502 or 506 of the United States Bankruptcy Code; or (n) any other circumstances,
whether or not similar to any of the foregoing, which could constitute a defense
to a guarantor; all whether or not the Company shall have had notice or
knowledge of any act or omission referred to in the foregoing clauses (a)
through (n) of this paragraph. It is agreed that the Company's liability
hereunder is several and independent of any other guaranties or other
obligations at any time in effect with respect to the Guaranteed Obligations or
any part thereof and that the Company's liability hereunder may be enforced
regardless of the existence, validity, enforcement or non-enforcement of any
such other guaranties or other obligations or any provision of any applicable
law or regulation purporting to prohibit payment by any Obligor of the
Guaranteed Obligations in the manner agreed upon between the Obligor and the
Administrative Agent and the Lenders.
10.4 Acceleration. The Company agrees that, as between the Company on
the one hand, and the Lenders and the Administrative Agent, on the other hand,
the obligations of each Obligor guaranteed under this Article X may be declared
to be forthwith due and payable, or may be deemed automatically to have been
accelerated, as provided in Section 9.1 hereof for purposes of this Article X,
notwithstanding any stay, injunction or other prohibition (whether in a
bankruptcy proceeding affecting such Obligor or otherwise) preventing such
declaration as against such Obligor and that, in the event of such declaration
or automatic acceleration, such obligations (whether or not due and payable by
such Obligor) shall forthwith become due and payable by the Company for purposes
of this Article X.
10.5 Marshaling; Reinstatement. None of the Lenders nor the
Administrative Agent nor any Person acting for or on behalf of the Lenders or
the Administrative Agent shall have any obligation to marshall any assets in
favor of the Company or against or in payment of any or all of the Guaranteed
Obligations. If the Company, any other Borrower or any other guarantor of all or
any part of the Guaranteed Obligations makes a payment or payments to any Lender
or the Administrative Agent, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to such Borrower, the Company, such other guarantor
or any other Person, or their respective estates, trustees, receivers or any
other party, including, without limitation, the Company, under any bankruptcy
law, state or federal law, common law or equitable cause, then, to the extent of
such payment or repayment, the part of the Guaranteed Obligations which has been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the time immediately preceding such initial payment,
reduction or satisfaction.
10.6 Subrogation. Until the irrevocable payment in full of the
Obligations and termination of all commitments which could give rise to any
Guaranteed Obligation, the Company shall have no right of subrogation with
respect to the Guaranteed Obligations, and hereby waives any right to enforce
any remedy which the Administrative Agent and/or the Lenders now has or may
hereafter have against the Company, any endorser or any other guarantor of all
or any part of the Guaranteed Obligations, and the Company hereby waives any
benefit of, and any right to participate in, any security or collateral given to
the Administrative Agent and/or the Lenders to secure payment of the Guaranteed
Obligations or any part thereof or any other liability of any Obligor to the
Administrative Agent and/or the Lenders.
10.7 Termination Date. Subject to Section 10.5 this guaranty shall
continue in effect until the later of (a) the Facility Termination Date, and (b)
the date on which this Agreement has otherwise expired or been terminated in
accordance with its terms and all of the Guaranteed Obligations have been paid
in full in cash.
ARTICLE XI: GENERAL PROVISIONS
11.1 Survival of Representations. All representations and warranties of
the Company contained in this Agreement shall survive delivery of this Agreement
and the making of the Loans herein contemplated so long as any principal,
accrued interest, fees, or any other amount due and payable under any Loan
Document is outstanding and unpaid (other than contingent reimbursement and
indemnification obligations) and so long as the Revolving Loan Commitments have
not been terminated.
11.2 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Company or any other Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
11.3 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
11.4 Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrowers, the Administrative Agent and the Lenders
and supersede all prior agreements and understandings among the Borrowers, the
Administrative Agent and the Lenders relating to the subject matter thereof
other than the New Fee Letter.
11.5 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other Lender (except to the extent to which
the Administrative Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any other
Lender from any of its obligations hereunder. Any obligation of "the Borrowers"
hereunder shall be joint and several obligation of the Borrowers. This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns.
11.6 Expenses; Indemnification.
(a) Expenses. The Borrowers shall reimburse the Administrative Agent
for any reasonable costs and out-of-pocket expenses (including
reasonable attorneys' and paralegals' fees and time charges of
attorneys and paralegals for the Administrative Agent, Issuing Banks,
Swing Line Bank and Alternative Currency Banks) paid or incurred by the
Administrative Agent in connection with the preparation, negotiation,
execution, delivery, syndication, review, proposed or completed
amendment, waiver or modification, and administration of the Loan
Documents. The Borrowers also agree to reimburse the Administrative
Agent, each Alternate Currency Bank, each Arranger and each of the
Lenders for any costs and out-of-pocket expenses (including reasonable
attorneys' and paralegals' fees and time charges of attorneys and
paralegals for the Administrative Agent, each Alternate Currency Bank,
each Arranger and each Lender, which attorneys and paralegals may be
employees of the Administrative Agent, such Alternate Currency Bank,
such Arranger, or the Lenders) paid or incurred by the Administrative
Agent, the Alternate Currency Banks, the Arrangers or any Lender in
connection with the collection of the Obligations and enforcement of
the Loan Documents. The Administrative Agent shall provide the
Borrowers with a detailed statement of all reimbursements requested
under this Section 11.6(a).
(b) Indemnity. The Borrowers hereby further agree to indemnify the
Administrative Agent, the Arrangers, the Alternate Currency Banks, the
Issuing Banks and each and all of the Lenders and each of their
respective Affiliates, and each of the Administrative Agent's,
Arrangers', Alternate Currency Bank's, Issuing Bank's, Lender's and
Affiliate's directors, officers, employees, attorneys and agents (all
such persons, "Indemnitees") against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether
or not such Indemnitee is a party thereto) which any of them may pay or
incur arising out of or relating to this Agreement, the other Loan
Documents, the Spectra Precision Acquisition, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder except to the extent
that they are determined in a final non-appealable judgment by a court
of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the party seeking indemnification.
(c) Waiver of Certain Claims. The Borrowers further agree to assert no
claim against any of the Indemnitees on any theory of liability
seeking consequential, special, indirect, exemplary or punitive
damages.
(d) Survival of Agreements. The obligations and agreements of the
Borrowers under this Section 11.6 shall survive the termination of
this Agreement.
11.7 Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to each
of the Lenders.
11.8 Accounting. Except with respect to the pricing grid calculations
in Section 2.15 and the financial covenant calculations in Section 7.4, both of
which shall be made in accordance with Agreement Accounting Principles as in
effect on the date hereof, all accounting terms used herein shall be interpreted
and all accounting determinations hereunder shall be made in accordance with
generally accepted accounting principles as in effect from time to time,
consistently applied.
11.9 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
11.10 Nonliability of Lenders. The relationship between the Borrowers
and the Lenders and the Administrative Agent shall be solely that of borrower
and lender. Neither the Administrative Agent nor any Lender shall have any
fiduciary responsibilities to the Borrowers or the Guarantors. Neither the
Administrative Agent nor any Lender undertakes any responsibility to any
Borrower or Guarantor to review or inform any Borrower or Guarantor of any
matter in connection with any phase of the Borrowers' business or operations.
11.11 GOVERNING LAW. ANY DISPUTE BETWEEN ANY BORROWER AND THE
ADMINISTRATIVE AGENT, ANY LENDER OR ANY OTHER HOLDER OF OBLIGATIONS ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (BUT WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.
11.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(a) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (b), EACH
OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS
LOCATED IN NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES
BROUGHT PURSUANT TO THIS SUBSECTION (a) ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(b) OTHER JURISDICTIONS. EACH BORROWER AGREES THAT THE ADMINISTRATIVE
AGENT, ANY LENDER OR ANY OTHER HOLDER OF OBLIGATIONS SHALL HAVE THE
RIGHT TO PROCEED AGAINST EACH BORROWER OR ITS RESPECTIVE PROPERTY IN A
COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL
JURISDICTION OVER ANY BORROWERS (2) IN ORDER TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON OR (3) FORECLOSE ON
COLLATERAL LOCATED IN SUCH JURISDICTION. EACH BORROWER AGREES THAT IT
WILL NOT ASSERT ANY PERMISSIVE UNRELATED COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON ANY SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
SUCH PERSON. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SUBSECTION (b).
(c) VENUE. EACH BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(d) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH.
EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF SECTION 11.6 AND THIS SECTION 11.12, WITH ITS
COUNSEL.
11.13 Other Transactions. Each of the Administrative Agent, the
Arrangers, the Lenders, the Issuing Banks, the Swing Line Bank and the Borrowers
acknowledge that the Administrative Agent and the Lenders (or Affiliates of the
Administrative Agent and the Lenders) may, from time to time, effect
transactions for their own accounts or the accounts of customers, and hold
positions in loans or options on loans of the Company, the Company's
Subsidiaries and other companies that may be the subject of this credit
arrangement and nothing in this Agreement shall impair the right of any such
Person to enter into any such transaction (to the extent it is not expressly
prohibited by the terms of this Agreement) or give any other Person any claim or
right of action hereunder as a result of the existence of the credit
arrangements hereunder, all of which are hereby waived. In addition, certain
Affiliates of one or more of the Lenders are or may be securities firms and as
such may effect, from time to time, transactions for their own accounts or for
the accounts of customers and hold positions in securities or options on
securities of the Company, the Company's Subsidiaries and other companies that
may be the subject of this credit arrangement and nothing in this Agreement
shall impair the right of any such Person to enter into any such transaction (to
the extent it is not expressly prohibited by the terms of this Agreement) or
give any other Person any claim or right of action hereunder as a result of the
existence of the credit arrangements hereunder, all of which are hereby waived.
Other business units affiliated with the Administrative Agent may from time to
time provide other financial services and products to the Company and its
Subsidiaries.
ARTICLE XII: THE ADMINISTRATIVE AGENT
12.1 Appointment; Nature of Relationship. BNS is appointed by the
Lenders as the Administrative Agent hereunder and under each other Loan
Document, and each of the Lenders irrevocably authorizes the Administrative
Agent to act as the contractual representative of such Lender with the rights
and duties expressly set forth herein and in the other Loan Documents. The
Administrative Agent agrees to act as such contractual representative upon the
express conditions contained in this Article XII. Notwithstanding the use of the
defined term "Administrative Agent," it is expressly understood and agreed that
the Administrative Agent shall not have any fiduciary responsibilities to any
Holder of Obligations by reason of this Agreement and that the Administrative
Agent is merely acting as the representative of the Lenders with only those
duties as are expressly set forth in this Agreement and the other Loan
Documents. In its capacity as the Lenders' contractual representative, the
Administrative Agent (i) does not assume any fiduciary duties to any of the
Holders of Obligations, (ii) is a "representative" of the Holders of Obligations
within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is
acting as an independent contractor, the rights and duties of which are limited
to those expressly set forth in this Agreement and the other Loan Documents.
Each of the Lenders, for itself and on behalf of its Affiliates as Holders of
Obligations, agrees to assert no claim against the Administrative Agent on any
agency theory or any other theory of liability for breach of fiduciary duty, all
of which claims each Holder of Obligations waives.
12.2 Powers. The Administrative Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the
Administrative Agent by the terms of each thereof, together with such powers as
are reasonably incidental thereto. The Administrative Agent shall have no
implied duties or fiduciary duties to the Lenders, or any obligation to the
Lenders to take any action hereunder or under any of the other Loan Documents
except any action specifically provided by the Loan Documents required to be
taken by the Administrative Agent.
12.3 General Immunity. Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be liable to the Company, the
Lenders or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except to the extent such action or inaction is found in a final
judgment by a court of competent jurisdiction to have arisen primarily from the
gross negligence or willful misconduct of such Person.
12.4 No Responsibility for Loans, Creditworthiness, Recitals, Etc.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into,
or verify (a) any statement, warranty or representation made in connection with
any Loan Document or any borrowing hereunder; (b) the performance or observance
of any of the covenants or agreements of any obligor under any Loan Document;
(c) the satisfaction of any condition specified in Article V, except receipt of
items required to be delivered solely to the Administrative Agent; (d) the
existence or possible existence of any Default or (e) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith. The Administrative Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or in any of the other Loan Documents, or for the execution,
effectiveness, genuineness, validity, legality, enforceability, collectibility,
or sufficiency of this Agreement or any of the other Loan Documents or the
transactions contemplated thereby, or for the financial condition of any
guarantor of any or all of the Obligations, the Company or any of its
Subsidiaries.
12.5 Action on Instructions of Lenders. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders (or all of the Lenders in the event
that and to the extent that this Agreement expressly requires such), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders and on all owners of Loans and on all Holders of
Obligations. The Administrative Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Loan Document unless
it shall first be indemnified to its satisfaction by the Lenders pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.
12.6 Employment of Agents and Counsel. The Administrative Agent may
execute any of its duties as the Administrative Agent hereunder and under any
other Loan Document by or through employees, agents, and attorneys-in-fact and
shall not be answerable to the Lenders, except as to money or securities
received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. The
Administrative Agent shall be entitled to advice of counsel concerning the
contractual arrangement between the Administrative Agent and the Lenders and all
matters pertaining to the Administrative Agent's duties hereunder and under any
other Loan Document.
12.7 Reliance on Documents; Counsel. The Administrative Agent shall be
entitled to rely upon any notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
to legal matters, upon the opinion of counsel selected by the Administrative
Agent, which counsel may be employees of the Administrative Agent.
12.8 The Administrative Agent's, Issuing Banks', Swing Line Bank's and
Alternate Currency Banks' Reimbursement and Indemnification.
(a) The Lenders agree to reimburse and indemnify the Administrative
Agent ratably in proportion to their respective Pro Rata Shares (i)
for any expenses incurred by the Administrative Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (ii) for any
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement
of any of the terms thereof or of any such other documents; provided
that no Lender shall be liable for any of the foregoing to the extent
any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have arisen primarily from the
gross negligence or willful misconduct of the Administrative Agent.
(b) The Lenders with a Revolving Loan Commitment agree to reimburse
and indemnify the Administrative Agent, the Issuing Banks, the Swing
Line Bank and the Alternate Currency Banks ratably in proportion to
their respective Pro Rata Revolving Shares (i) any amounts not
reimbursed by any Borrower for which the Administrative Agent, the
Issuing Banks, the Swing Line Bank and the Alternate Currency Banks
are entitled to reimbursement by any Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Administrative
Agent, any Issuing Bank, the Swing Line Bank or any Alternate Currency
Bank on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan
Documents and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by
or asserted against the Administrative Agent, any Issuing Bank, the
Swing Line Bank or any Alternate Currency Bank in any way relating to
or arising out of the Loan Documents or any other document delivered
in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other
documents; provided that no Lender shall be liable for any of the
foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have
arisen primarily from the gross negligence or willful misconduct of
the Administrative Agent, the applicable Issuing Bank, the Swing Line
Bank or the applicable Alternate Currency Bank.
12.9 Rights as a Lender. With respect to its Revolving Loan Commitment,
Loans made by it, Swing Line Loans made by it and Letters of Credit issued by
it, the Administrative Agent shall have the same rights and powers hereunder and
under any other Loan Document as any Lender or Issuing Bank and may exercise the
same as though it were not the Administrative Agent, and the term "Lender" or
"Lenders", "Swing Line Bank", "Issuing Bank" or "Issuing Banks" shall, unless
the context otherwise indicates, include the Administrative Agent in its
individual capacity. The Administrative Agent may accept deposits from, lend
money to, and generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Company or any of its Subsidiaries in which such Person
is not prohibited hereby from engaging with any other Person.
12.10 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, the Arrangers
or any other Lender and based on the financial statements prepared by the
Company and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and the
other Loan Documents. Each Lender also acknowledges that it will, independently
and without reliance upon the Administrative Agent, the Arrangers or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents.
12.11 Successor Administrative Agent. The Administrative Agent may
resign at any time by giving written notice thereof to the Lenders and the
Company. Upon any such resignation, the Required Lenders shall have the right to
appoint, on behalf of the Borrowers and the Lenders, a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty days
after the retiring Administrative Agent's giving notice of resignation, then the
retiring Administrative Agent may appoint, on behalf of the Borrowers and the
Lenders, a successor Administrative Agent. Such successor Administrative Agent
shall be a commercial bank having capital and retained earnings of at least
$500,000,000. Upon the acceptance of any appointment as the Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Article XII shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Administrative
Agent hereunder and under the other Loan Documents.
12.12 No Duties Imposed Upon Syndication Agent, Documentation Agent or
Arrangers. None of the Persons identified on the cover page to this Agreement,
the signature pages to this Agreement or otherwise in this Agreement as a
"Syndication Agent", "Documentation Agent" or "Arranger" shall have any right,
power, obligation, liability, responsibility or duty under this Agreement other
than, (a) expressly granted indemnification rights and (b) if such Person is a
Lender, those applicable to all Lenders as such. Without limiting the foregoing,
none of the Persons identified on the cover page to this Agreement, the
signature pages to this Agreement or otherwise in this Agreements as a
"Syndication Agent", "Documentation Agent" or "Arranger" shall have or be deemed
to have any fiduciary duty to or fiduciary relationship with any Lender. In
addition to the agreements set forth in Section 12.10, each of the Lenders
acknowledges that it has not relied, and will not rely, on any of the Persons so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
12.13 Collateral Agent. The Lenders agree that the Administrative Agent
may, on their behalf, appoint a Collateral Agent under the Mortgages with
respect to real estate located in the State of Ohio and related title insurance,
surveys and other documentation. All references to the "Administrative Agent" in
Article XII shall also be deemed to be references to the Collateral Agent.
ARTICLE XIII: SETOFF; RATABLE PAYMENTS
13.1 Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if any Default occurs and is continuing, any
Indebtedness from any Lender to the Company or any other Borrower (including all
account balances, whether provisional or final and whether or not collected or
available) may be offset and applied toward the payment of the Obligations owing
to such Lender, whether or not the Obligations, or any part hereof, shall then
be due.
13.2 Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant to
Sections 4.1, 4.2 or 4.4 and payments expressly hereunder provided to be
distributed on other than a pro rata basis or payments made and distributed in
accordance with Section 2.12) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligation or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to the obligations owing to them. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
13.3 Application of Payments. The Administrative Agent shall apply all
payments and prepayments in respect of any Obligations in the following order:
first, to pay interest on and then principal of any portion of the Loans which
the Administrative Agent may have advanced on behalf of any Lender for which the
Administrative Agent has not then been reimbursed by such Lender or the
applicable Borrower and to pay any Swing Line Loan, Alternate Currency Loan or
Reimbursement Obligation that has not been paid; second, to the ratable payment
of the Obligations then due and payable; and third, to the ratable payment of
all other Obligations.
13.4 Relations Among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Administrative Agent)
authorized to act for, any other Lender.
ARTICLE XIV: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
14.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lenders and their respective successors and assigns, except that (a) no
Borrower shall have any right to assign its rights or obligations under the Loan
Documents without the consent of all of the Lenders, and any such assignment in
violation of this Section 14.1(a) shall be null and void, and (b) any assignment
by any Lender must be made in compliance with Section 14.3 hereof.
Notwithstanding clause (b) of this Section 14.1 or Section 14.3, (i) any Lender
may at any time, without the consent of any Borrower or the Administrative Agent
(unless a Default or Unmatured Default has occurred and is continuing, in which
case the consent of the Administrative Agent shall be required, which consent
shall not unreasonably be withheld), assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank and (ii) any Lender which is a
fund or commingled investment vehicle that invests in commercial loans in the
ordinary course of its business may at any time, without the consent of any
Borrower or the Administrative Agent (unless a Default or Unmatured Default has
occurred and is continuing, in which case the consent of the Administrative
Agent shall be required, which consent shall not unreasonably be withheld),
pledge or assign all or any part of its rights under this Agreement to a trustee
or other representative of holders of obligations owed or securities issued by
such Lender as collateral to secure such obligations or securities; provided
that no such assignment or pledge shall release the transferor Lender from its
obligations hereunder. The Administrative Agent may treat each Lender as the
owner of the Loans made by such Lender hereunder for all purposes hereof unless
and until such Lender complies with Section 14.3 hereof in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Administrative Agent. Any assignee or transferee
of a Loan, Revolving Loan Commitment, L/C Interest or any other interest of a
lender under the Loan Documents agrees by acceptance thereof to be bound by all
the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the owner of any Loan, shall be conclusive and binding
on any subsequent owner, transferee or assignee of such Loan.
14.2 Participations.
(a) Permitted Participants; Effect. Subject to the terms set forth in
this Section 14.2, any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Revolving Loan
Commitment of such Lender, any L/C Interest of such Lender or any other
interest of such Lender under the Loan Documents on a pro rata or
non-pro rata basis. Notice of such participation to the Administrative
Agent shall be required prior to any participation becoming effective
with respect to a Participant which is not a Lender or an Affiliate
thereof. Upon receiving said notice, the Administrative Agent shall
record the participation in the Register it maintains. Moreover,
notwithstanding such recordation, such participation shall not be
considered an assignment under Section 14.3 of this Agreement and such
Participant shall not be considered a Lender. In the event of any such
sale by a Lender of participating interests to a Participant, such
Lender's obligations under the Loan Documents shall remain unchanged,
such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, such Lender shall remain the
owner of all Loans made by it for all purposes under the Loan
Documents, all amounts payable by the applicable Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the applicable Borrower and the
Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under the Loan Documents except that, for purposes of Article IV and
Section 9.2 hereof, the Participants shall be entitled to the same
rights as if they were Lenders.
(b) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan, Letter of Credit or
Revolving Loan Commitment in which such Participant has an interest
which forgives principal, interest or fees or reduces the interest rate
or fees payable pursuant to the terms of this Agreement with respect to
any such Loan or Revolving Loan Commitment, postpones any date fixed
for any regularly-scheduled payment of principal of, or interest or
fees on, any such Loan or Revolving Loan Commitment.
14.3 Assignments.
(a) Permitted Assignments.
(i) Any Lender (each such assigning Lender under this Section
14.3 being an "Assigning Lender") may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to
one or more banks or other entities (other than the Company or any of
its Affiliates) ("Purchasers") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its
Tranche A Revolving Loan Commitment, its Tranche B Revolving Loan
Commitment, its Tranche C Revolving Loan Commitment, its Tranche D
Revolving Loan Commitment, any Loans owing to it, all of its
participation interests in existing Letters of Credit, Swing Line
Loans and Alternate Currency Loans, and its obligation to participate
in additional Letters of Credit, Swing Line Loans and Alternate
Currency Loans hereunder) in accordance with the provisions of this
Section 14.3. Such assignment shall be substantially in the form of
Exhibit D hereto and shall not be permitted hereunder unless such
assignment is either for all of such Assigning Lender's rights and
obligations under the Loan Documents or, without the prior written
consent of the Administrative Agent and the Company, involves loans
and commitments as a consequence of which neither the Assigning Lender
nor the Purchaser will have a Revolving Loan Commitment or Term Loans,
as applicable, of less than $5,000,000; provided that the foregoing
restrictions with respect to such Revolving Loan Commitments or Term
Loans having a minimum aggregate amount (A) shall not apply to any
assignment between Lenders, or to an Affiliate or Approved Fund of any
Lender, and (B) in any event may be waived by the Administrative
Agent. The written consent of the Administrative Agent, and, prior to
the occurrence of a Default, the Company (which consent, in each such
case, shall not be unreasonably withheld), shall be required prior to
an assignment becoming effective with respect to a Purchaser which is
not a Lender or an Affiliate or Approved Fund of such Lender.
(ii) Notwithstanding anything to the contrary contained herein,
any Lender (each such Lender, a "Granting Bank") may grant to a
special purpose funding vehicle (each such special purpose funding
vehicle, a "SPC"), identified as such in writing from time to time by
the applicable Granting Bank to the Administrative Agent and the
Company, the option to provide to the Company and the other Borrowers
all or any part of any Advance that such Granting Bank would otherwise
be obligated to make to the applicable Borrower pursuant to this
Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Advance, (ii) if an SPC elects not
to exercise such option or otherwise fails to provide all or any part
of such Advance, the applicable Granting Bank shall be obligated to
make such Advance pursuant to the terms hereof. The making of an
Advance by any SPC hereunder shall utilize the Revolving Loan
Commitment of the applicable Granting Bank to the same extent, and as
if, such Advance were made by such Granting Bank. Each party hereto
hereby agrees that no SPC shall be liable for any indemnity or other
similar payment obligation under this Agreement (all liability for
which shall remain with the applicable Granting Bank). All notices
hereunder to any Granting Bank or the related SPC, and all payments in
respect of the Obligations due to such Granting Bank or the related
SPC, shall be made to such Granting Bank. In addition, each Granting
Bank shall vote as a Lender hereunder without giving effect to any
assignment under this Section 14.3(a)(ii), and not SPC shall have any
vote as a Lender under this Agreement for any purpose. In furtherance
of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior indebtedness of any SPC,
it will not institute against, or join any other person in instituting
against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United
States or any State thereto. In addition, notwithstanding anything to
the contrary contained in this Section 14.3, any SPC may (A) with
notice to, but without the prior written consent of, the Company and
the Administrative Agent and without paying any processing or
administrative fee therefor, assign all or a portion of its interest
in any Advances to the Granting Bank or to any financial institutions
(consented to by the Company and the Administrative Agent in
accordance with the terms of Section 14.3(a)(i)) providing liquidity
and/or credit support to or for the account of such SPC to support the
funding or maintenance of Advances and (B) disclose on a confidential
basis any non-public information relating to its Advances to any
rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC. This Section
14.3(a)(ii) may not be amended without the written consent of each SPC
affected thereby.
(b) Effect; Effective Date. Upon (i) delivery to the Administrative
Agent and the Alternate Currency Banks of a notice of assignment,
substantially in the form attached as Appendix I to Exhibit D hereto (a
"Notice of Assignment"), together with any consent required by Section
14.3(a) hereof, (ii) payment of a $3,500 fee by the assignee or the
assignor (as agreed) to the Administrative Agent for processing such
assignment, and (iii) the completion of the recording requirements in
Section 14.3(c), such assignment shall become effective on the later of
such date when the requirements in clauses (i), (ii), and (iii) are met
or the effective date specified in such Notice of Assignment. The
Notice of Assignment shall contain a representation by the Purchaser to
the effect that none of the consideration used to make the purchase of
the Revolving Loan Commitment, Loans and L/C Obligations under the
applicable assignment agreement are "plan assets" as defined under
ERISA and that the rights and interests of the Purchaser in and under
the Loan Documents will not be "plan assets" under ERISA. On and after
the effective date of such assignment, such Purchaser, if not already a
Lender, shall for all purposes be a Lender party to this Agreement and
any other Loan Documents executed by the Lenders and shall have all the
rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no further
consent or action by any Borrower, the Lenders, the Alternate Currency
Banks or the Administrative Agent shall be required to release the
Assigning Lender with respect to the percentage of the Aggregate
Revolving Loan Commitment, Loans and Letter of Credit, Swing Line Loans
and Alternate Currency Loan participations assigned to such Purchaser.
Upon the consummation of any assignment to a Purchaser pursuant to this
Section 14.3(b), the Assigning Lender, the Administrative Agent, the
Alternate Currency Banks and the Borrowers shall make appropriate
arrangements so that, to the extent notes have been issued to evidence
any of the transferred Loans, replacement notes are issued to such
Assigning Lender and new notes or, as appropriate, replacement notes,
are issued to such Purchaser, in each case in principal amounts
reflecting their Revolving Loan Commitment, as adjusted pursuant to
such assignment. Notwithstanding anything to the contrary herein, no
Borrower shall, at any time, be obligated to pay under Section 2.14(e)
to any Lender that is a Purchaser, assignee or transferee any sum in
excess of the sum which such Borrower would have been obligated to pay
to the Lender that was the Assigning Lender, assignor or transferor had
such assignment or transfer not been effected.
(c) The Register. Notwithstanding anything to the contrary in this
Agreement, each Borrower hereby designates the Administrative Agent,
and the Administrative Agent hereby accepts such designation, to serve
as such Borrower's contractual representative solely for purposes of
this Section 14.3(c). In this connection, the Administrative Agent
shall maintain at its address referred to in Section 15.1 a copy of
each assignment delivered to and accepted by it pursuant to this
Section 14.3 and a register (the "Register") for the recordation of the
names and addresses of the Lenders, the Revolving Loan Commitment of
each Lender, the principal amount of and interest on the Loans owing
to, each Lender from time to time and whether such Lender is an
original Lender or the assignee of another Lender pursuant to an
assignment under this Section 14.3. The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and
the Company and each of its Subsidiaries, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by any Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
14.4 Confidentiality. Subject to Section 14.5, the Administrative Agent
and the Lenders and their respective representatives shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement and
identified as such by the Company or any other Borrower in accordance with such
Person's customary procedures for handling confidential information of this
nature and in accordance with safe and sound commercial lending or investment
practices and in any event may make disclosure reasonably required by a
prospective Transferee in connection with the contemplated participation or
assignment or as required or requested by any Governmental Authority or any
securities exchange or similar self-regulatory organization or representative
thereof or pursuant to a regulatory examination or legal process, or to any
direct or indirect contractual counterparty in swap agreements or such
contractual counterparty's professional advisor. In no event shall the
Administrative Agent or any Lender be obligated or required to return any
materials furnished by the Company; provided that each prospective Transferee
shall be required to agree that if it does not become a participant or assignee
it shall return all materials furnished to it by or on behalf of the Company in
connection with this Agreement.
14.5 Dissemination of Information. Each Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the Company and its Subsidiaries; provided that prior to any such
disclosure, such prospective Transferee shall agree to preserve in accordance
with Section 14.4 the confidentiality of any confidential information described
therein.
ARTICLE XV: NOTICES
15.1 Giving Notice. Except as otherwise permitted by Section 2.10(d)
with respect to Borrowing/Conversion/Continuation Notices, all notices and other
communications provided to any party hereto under this Agreement or any other
Loan Documents shall be in writing or by telex or by facsimile and addressed or
delivered to such party at its address set forth below its signature hereto or
at such other address as may be designated by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with postage
prepaid, shall be deemed given when received; any notice, if transmitted by
telex or facsimile, shall be deemed given when transmitted (answerback confirmed
in the case of telexes).
15.2 Change of Address. The Borrowers, the Administrative Agent and any
Lender may each change the address for service of notice upon it by a notice in
writing to the other parties hereto.
15.3 Authority of Company. Each of the Subsidiary Borrowers, by its
execution hereof or of an Assumption Letter (a) irrevocably authorizes the
Company, on behalf of such Subsidiary Borrower, to give and receive all notices
under the Loan Documents and to make all elections under the Loan Documents and
to give all Borrowing/Conversion/Continuation Notices on its behalf, (b) agrees
to be bound by any such notices or elections and (c) agrees that the
Administrative Agent and Lenders may rely upon any such policies or elections as
if they had been given or made by such Subsidiary Borrower.
ARTICLE XVI: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Company, the
Administrative Agent and the Lenders and each party has notified the
Administrative Agent by telex or telephone, that it has taken such action.
IN WITNESS WHEREOF, the Company, the Subsidiary Borrowers, the Lenders
and the Administrative Agent have executed this Agreement as of the date first
above written.
TRIMBLE NAVIGATION LIMITED, as the Company
By: /s/ Mary Ellen Genovese
------------------------
Name: Mary Ellen Genovese
Title: CFO and Asst. Secretary
Address: 645 North Mary Avenue
Sunnyvale, CA 94086
Attention: Mary Ellen Genovese
Telephone No.: (408) 481-7856
Facsimile No.: (408) 481-2996
THE BANK OF NOVA SCOTIA, as Administrative Agent, Issuing Bank,
Swing Line Bank, Alternate Currency Bank, Arranger and Lender
By:/s/ Liz Hanson
---------------
Name: Liz Hanson
Title: Director
Address: The Bank of Nova Scotia
580 California Street, Suite 2100
San Francisco, CA 94104
Attention: Liz Hanson
Telephone No.: (415) 616-4153
Facsimile No.: (415) 397-0791
FLEET NATIONAL BANK, as Syndication Agent and Lender
By:/s/ Lee A. Merkly-Raymond
-------------------------
Name: Lee A. Merkle-Raymond
Title: Director
Address: 100 Federal Street
Boston, MA 02110
Attention: Chris Mathon
Telephone No.: (617) 434-5726
Facsimile No.: (617) 434-0382
BANK of AMERICA, N.A., as Documentation Agent and as Lender
By:/s/ John C. Plecque
-------------------
Name: John C. Plecque
Title: Senior Vice President
Credit Products Officer
Address: 530 Lytton Avenue, 2nd Floor
Palo Alto, CA 94301
Attention: John C. Plecque
Telephone No.: (650) 853-4475
Facsimile No.: (650) 853-4529
ERSTE BANK, NEW YORK BRANCH, as Lender
By:/s/ Robert J. Wagman
--------------------
Name: Robert J. Wagman
Title: Vice President
By:/s/ John Fay
------------
Name: John Fay
Title: Vice President
Address: 280 Park Avenue
West Building
New York, NY 10017
Attention: Robert J. Wagman
Telephone No.: (212) 984-5633
Facsimile No.: (212) 986-5627
WELLS FARGO BANK, as Lender
By:/s/ Jill B. Ta
--------------
Name: Jill B. Ta
Title: Vice President
Address: 400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Jill B. Ta
Telephone No.: (650) 855-6629
Facsimile No.: (650) 328-0814
NORDEA BANK FINLAND PLC, NEW YORK BRANCH, as Lender
By: /s/ Ulf Forsstrom
------------------
Name: Ulf Forsstrom
Title: Vice President
By:/s/ Leena Parker
----------------
Name: Leena Parker
Title: Vice President
Address: 437 Madison Avenue
New York, NY 10022
Attention: Ulf Forsstrom
Telephone No.: (212) 318-9302
Facsimile No.: (212) 421-4420
BANK OF THE WEST, as Lender
By:/s/ Tien Lim
------------
Name: Tien Lim
Title: Assistant Vice President
Address: 220 Almaden Blvd., 2nd Floor
San Jose, CA 95113
Attention: Tien Lim
Telephone No.: (408) 299-1630
Facsimile No.: (408) 292-4092
NATIONAL CITY BANK OF KENTUCKY, as Lender
By:/s/ Tom Gurbach
------------------
Name: Tom Gurbach
Title: Vice President
Address: 1900 East 9th Street
Locator 2077
Cleveland, OH 44114
Attention: Tom Gurbach
Telephone No.: (216) 222-9324
Facsimile No.: (216) 222-0003
IBM CREDIT CORPORATION, as Lender
By:/s/
Name:
Title:
Address: North Castle Drive
Armonk, NY 10504
Attention: Ronald J. Bachner
Telephone No.: (914) 765-6068
Facsimile No.: (914) 765-6271
UNION BANK OF CALIFORNIA, N.A., as Lender
By:/s/ Allan B. Miner
---------------------
Name: Allan B. Miner
Title: Vice President
Address: 99 Almaden Blvd., Suite 200
San Jose, CA 95113
Attention: Al Miner
Telephone No.: (408) 279-7742
Facsimile No.: (408) 280-7163
EXHIBIT A
LOAN COMMITMENTS AND AMOUNTS
Amount of Amount of Amount of Amount of
Tranche A Tranche B Tranche C Tranche D
Revolving Revolving Revolving Revolving
Loan Loan Loan Loan Total Commitment/
Commitment Commitment Commitment Commitment Term Loans Loans
Lender
- ------
The Bank of Nova Scotia $0 $0 $6,500,000 $8,500,000 $4,238,000 $19,238,000
Fleet National Bank $0 $0 $3,625,000 $9,875,000 $4,401,000 $17,901,000
Bank of America, N.A. $0 $0 $7,500,000 $7,500,0000 $4,075,000 $19,075,000
National City Bank of Kentucky $0 $0 $3,750,000 $3,750,000 $2,445,000 $9,945,000
Kentucky Bank of the West $1,910,377 $1,066,514 $0 $0 $2,445,000 $5,421,891
Nordea Bank Finland PLC,
New York Branch $0 $0 $3,750,000 $3,750,000 $2,445,000 $9,945,000
Wells Fargo Bank $0 $0 $3,750,000 $3,750,000 $2,445,000 $9,945,000
Erste Bank, New York Branch $0 $0 $2,500,000 $2,500,000 $1,630,000 $6,630,000
Union Bank of California, N.A. $0 $0 $6,125,000 $8,875,000 $0 $15,000,000
ABN AMRO Bank N.V. $0 $1,086,611 $0 $0 $4,401,000 $5,487,611
IBM Credit Corporation $12,500,000 $0 $0 $0 $4,075,000 $16,575,000
TOTAL $12,500,000 $1,500,000 $37,500,000 $48,500,000 $32,600,000 $132,600,000
=========== ========== =========== =========== =========== ============
Table of Contents
(continued)
-vi-
Table of Contents
-i-
ARTICLE I: DEFINITIONS.......................................................2
1.1 Certain Defined Terms.....................................................2
1.2 References...............................................................33
1.3 Rounding and Other Consequential Changes.................................33
ARTICLE II: LOAN FACILITIES..................................................33
2.1 Revolving Loans..........................................................33
2.2 Term Loans...............................................................36
2.3 Swing Line Loans.........................................................36
2.4 Rate Options for all Advances; Maximum Interest Periods..................38
2.5 Optional Payments; Mandatory Prepayments.................................38
2.6 Reductions and Adjustments of Revolving Loan Commitments.................41
2.7 Method of Borrowing......................................................43
2.8 Method of Selecting Types and Interest Periods for Advances..............43
2.9 Minimum Amount of Each Advance...........................................44
2.10 Method of Selecting Types and Interest Periods for Conversion
and Continuation of Advances.................................................44
2.11 Default Rate............................................................46
2.12 Method of Payment.......................................................46
2.13 Evidence of Debt........................................................47
2.14 Telephonic Notices......................................................48
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control
Accounts.....................................................................48
2.16 Notification of Advances, Interest Rates, Prepayments and Aggregate
Revolving Loan Commitment Reductions.........................................53
2.17 Lending Installations...................................................54
2.18 Non-Receipt of Funds by the Administrative Agent........................54
2.19 Termination Date........................................................54
2.20 Replacement of Certain Lenders..........................................54
2.21 Alternate Currency Loans................................................55
2.22 Judgment Currency.......................................................58
2.23 Market Disruption; Denomination of Amounts in Dollars;
Dollar Equivalent of Reimbursement Obligations...............................58
2.24 Subsidiary Borrowers....................................................59
2.25 Security................................................................60
2.26 Assignment and Reallocation of Existing Commitments and
Existing Loans...............................................................60
ARTICLE III: THE LETTER OF CREDIT FACILITY..................................61
3.1 Obligation to Issue Letters of Credit....................................61
3.2 Transitional Provision...................................................61
3.3 Types and Amounts........................................................61
3.4 Conditions...............................................................62
3.5 Procedure for Issuance of Letters of Credit..............................62
3.6 Letter of Credit Participation...........................................63
3.7 Reimbursement Obligation.................................................63
3.8 Letter of Credit Fees....................................................64
3.9 Issuing Bank Reporting Requirements......................................64
3.10 Indemnification; Exoneration............................................65
3.11 Cash Collateral.........................................................66
ARTICLE IV: CHANGE IN CIRCUMSTANCES.........................................66
4.1 Yield Protection.........................................................66
4.2 Changes in Capital Adequacy Regulations..................................67
4.3 Availability of Types of Advances........................................68
4.4 Funding Indemnification..................................................68
4.5 Lender Statements; Survival of Indemnity.................................68
ARTICLE V: CONDITIONS PRECEDENT.............................................69
5.1 Effectiveness............................................................69
5.2 Initial Advance to Each New Subsidiary Borrower..........................70
5.3 Each Advance and Each Letter of Credit...................................70
ARTICLE VI: REPRESENTATIONS AND WARRANTIES..................................71
6.1 Organization; Corporate Powers...........................................71
6.2 Authorization and Validity...............................................71
6.3 No Conflict; Government Consent..........................................72
6.4 Financial Statements.....................................................72
6.5 Material Adverse Change..................................................72
6.6 Taxes....................................................................72
6.7 Litigation and Contingent Obligations....................................73
6.8 Subsidiaries.............................................................73
6.9 ERISA....................................................................73
6.10 Accuracy of Information.................................................74
6.11 Regulation U............................................................74
6.12 Material Agreements.....................................................74
6.13 Compliance With Laws....................................................74
6.14 Ownership of Properties.................................................75
6.15 Statutory Indebtedness Restrictions.....................................75
6.16 Environmental Matters...................................................75
6.17 Insurance...............................................................75
6.18 Labor Matters...........................................................76
6.19 Solvency................................................................76
6.20 Default.................................................................76
6.21 Foreign Employee Benefit Matters........................................76
6.22 Acquisition Documents...................................................76
6.23 Collateral Documents....................................................76
6.24 Security................................................................76
6.25 Subordinated Seller Debt................................................77
6.26 Subsidiaries............................................................77
6.27 Representations and Warranties of each Subsidiary Borrower..............77
ARTICLE VII: COVENANTS......................................................79
7.1 Reporting................................................................79
7.2 Affirmative Covenants....................................................83
7.3 Negative Covenants.......................................................86
7.4 Financial Covenants......................................................94
ARTICLE VIII: DEFAULTS......................................................94
8.1 Defaults.................................................................94
ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES......................................................97
9.1 Termination of Revolving Loan Commitments; Acceleration..................97
9.2 Amendments...............................................................97
9.3 Preservation of Rights...................................................98
ARTICLE X: GUARANTY.........................................................99
10.1 Guaranty................................................................99
10.2 Waivers.................................................................99
10.3 Guaranty Absolute.......................................................99
10.4 Acceleration...........................................................100
10.5 Marshaling; Reinstatement..............................................100
10.6 Subrogation............................................................101
10.7 Termination Date.......................................................101
ARTICLE XI: GENERAL PROVISIONS.............................................101
11.1 Survival of Representations............................................101
11.2 Governmental Regulation................................................101
11.3 Headings...............................................................101
11.4 Entire Agreement.......................................................101
11.5 Several Obligations; Benefits of this Agreement........................102
11.6 Expenses; Indemnification..............................................102
11.7 Numbers of Documents...................................................103
11.8 Accounting.............................................................103
11.9 Severability of Provisions.............................................103
11.10 Nonliability of Lenders...............................................103
11.11 Governing Law.........................................................103
11.12 Consent to Jurisdiction; Service of Process; Jury Trial...............103
11.13 Other Transactions....................................................105
ARTICLE XII: THE ADMINISTRATIVE AGENT......................................105
12.1 Appointment; Nature of Relationship....................................105
12.2 Powers.................................................................106
12.3 General Immunity.......................................................106
12.4 No Responsibility for Loans, Creditworthiness, Recitals, Etc...........106
12.5 Action on Instructions of Lenders......................................106
12.6 Employment of Agents and Counsel.......................................107
12.7 Reliance on Documents; Counsel.........................................107
12.8 The Administrative Agent's, Issuing Banks', Swing Line Bank's and
Alternate Currency Banks' Reimbursement and Indemnification.................107
12.9 Rights as a Lender.....................................................108
12.10 Lender Credit Decision................................................108
12.11 Successor Administrative Agent........................................108
12.12 No Duties Imposed Upon Syndication Agent,
Documentation Agent or Arrangers............................................109
12.13 Collateral Agent......................................................109
ARTICLE XIII: SETOFF; RATABLE PAYMENTS.....................................109
13.1 Setoff.................................................................109
13.2 Ratable Payments.......................................................109
13.3 Application of Payments................................................110
13.4 Relations Among Lenders................................................110
ARTICLE XIV: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.............110
14.1 Successors and Assigns.................................................110
14.2 Participations.........................................................111
14.3 Assignments............................................................111
14.4 Confidentiality........................................................114
14.5 Dissemination of Information...........................................114
ARTICLE XV: NOTICES........................................................115
15.1 Giving Notice..........................................................115
15.2 Change of Address......................................................115
15.3 Authority of Company...................................................115
ARTICLE XVI: COUNTERPARTS..................................................115
EXHIBIT 10.83
May 8, 2002
Solectron Federal Systems, Inc.
Attention: Kiran Patel
Executive Vice President, Corporate Development
Chief Financial Officer
847 Gibraltar Drive
Milpitas, CA 95035
Via Fed-Ex
Re: Supply Agreement
Dear Mr. Patel,
Pursuant to Section 26.2 of the Supply Agreement dated August 13, 1999 between
Solectron Federal Systems, Inc., Solectron Corporation and Trimble Navigation
Limited ("Trimble"), Trimble hereby exercises its option to extend the term of
the Agreement for an additional period of one year.
Very truly yours,
Trimble Navigation Limited
/s/ Irwin L. Kwatek
Irwin L. Kwatek
Vice President and General Counsel
Cc: Solectron Corporation
Attn: Corporate Legal Department
847 Gibraltar Drive
Milpitas, CA 95035
EXHIBIT 21.1
TRIMBLE NAVIGATION LIMITED
LIST OF SUBSIDIARIES OF REGISTRANT
Name of Subsidiary Jurisdiction of
Incorporation
Trimble Navigation Australia Pty Limited Australia
Spectra Precision Pty Ltd. Australia
Trimble Austria Ges.mbH Austria
Trimble Belgium BVBA Belgium
Trimble Brasil Limitada Brazil
Datacom Software Limited California
Jamestown Manufacturing Corporation California
Trimble Export Limited California
Trimble Navigation International Limited California
Trimble Specialty Products, Inc. California
TR Navigation Corporation California
Trimble Canada Ltd. Canada
Trimble Navigation Technology (Shanghai) Co. Ltd. China
SPHM Inc. Delaware
Trimble Middle East WLL Egypt
Trimble France S.A.S. France
Trimble GmbH Germany
Trimble Holdings GmbH Germany
Trimble Kaiserslautern GmbH Germany
Trimble terraSat GmbH Germany
ZSP Geodetic Systems GmbH Germany
Trimble Italia SRL Italy
Trimble Navigation Italia s.r.l Italy
Trimble Japan K.K. Japan
Spectra Precision de Mexico, SA de CV Mexico
Trimble Mexico S de RL Mexico
Trimble Europe B.V. Netherlands
Trimble Navigation New Zealand Limited New Zealand
Datacom Software Research Limited New Zealand
Tripod Data Systems Oregon
Trimble Navigation Singapore PTE Limited Singapore
Trimble International Holdings S.L. Spain
Trimble Navigation Iberica S.L. Spain
Spectra Precision Scandinavia AB Sweden
Trimble AB Sweden
TNL Flight Services, Inc Texas
Trimble Navigation Europe Limited United Kingdom
Trimble Pty Ltd. United Kingdom
EXHIBIT 23.1
TRIMBLE NAVIGATION LIMITED
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(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,
333-53703, 333-84949, 333-38264, 333-65758, 333-65760, and 333-97979) 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,
the 1993 Stock Option Plan, C. Trimble Non-statutory Option Plan, and the 2002
Stock Option Plan and the related Prospectuses, of our report dated January 24,
2003 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 3, 2003.
/s/ Ernst & Young LLP
March 4, 2003
Palo Alto, California
EXHIBIT NO. 99.1
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Trimble Navigation
Limited (the "Company") for the period ended January 3, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Steven W.
Berglund, as Chief Executive Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Steven W. Berglund
-----------------------
Steven W. Berglund
Chief Executive Officer
March 6, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
EXHIBIT NO. 99.2
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Trimble Navigation
Limited (the "Company") for the period ended January 3, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Mary Ellen
Genovese, as Chief Financial Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, to the best of her knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Mary Ellen Genovese
------------------------
Mary Ellen Genovese
Chief Financial Officer
March 7, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
