-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ot2Ek3XR9+4HlndNC4I+TM+j7faOkLXLxr3zqm5V0gvvemeWZt7Cf5SFaNzmwaUx Fov2vAwvmm7ppDY7lC/ctA== 0000950135-01-000920.txt : 20010327 0000950135-01-000920.hdr.sgml : 20010327 ACCESSION NUMBER: 0000950135-01-000920 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERKINELMER INC CENTRAL INDEX KEY: 0000031791 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 042052042 STATE OF INCORPORATION: MA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-05075 FILM NUMBER: 1579471 BUSINESS ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02481 BUSINESS PHONE: 7812375100 MAIL ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02481 FORMER COMPANY: FORMER CONFORMED NAME: EG&G INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EDGERTON GERMESHAUSEN & GRIER INC DATE OF NAME CHANGE: 19670626 10-K405 1 b38210pee10-k405.txt PERKINELMER INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-5075 PERKINELMER, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 04-2052042 (STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.) OR ORGANIZATION) 02481 45 WILLIAM STREET, WELLESLEY, MASSACHUSETTS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 237-5100 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE, INC. PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the common stock, $1 par value, held by nonaffiliates of the registrant on March 13, 2001, was $3,192,441,444. As of March 13, 2001, there were outstanding, exclusive of treasury shares, 50,353,968 shares of common stock, $1 par value. DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF PERKINELMER, INC.'S PROXY STATEMENT FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS.................... PART III (Items 10, 11, 12 and 13)
================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL BUSINESS DESCRIPTION PerkinElmer, Inc. (hereinafter referred to as "PerkinElmer", the "Company", or the "Registrant", which terms include the Company's subsidiaries) is a global technology company, which provides products and systems to the telecom, pharmaceutical, chemical, semiconductor, medical, aerospace, and photographic markets. The Company has operations in over 125 countries, and is a component of the S&P 500 Index. The Company's continuing operations are classified into four operating segments: Life Sciences, Optoelectronics, Instruments, and Fluid Sciences. In 2000, the Company had sales of $1.7 billion from continuing operations. The Company was incorporated under the laws of the Commonwealth of Massachusetts in 1947. RECENT DEVELOPMENTS On July 31, 2000, we completed our acquisition of NEN Life Sciences, Inc. ("NEN"), a provider of state-of-the-art drug discovery products, services, reagents and technologies to the life sciences industry. NEN generated fiscal 1999 sales of $104 million. Details of the transaction and pro forma financial information were reported on a current report Form 8-K filed by the Company with the SEC on August 1, 2000. OPERATING SEGMENTS Set forth below is a brief summary of each of the Company's four operating segments (also referred to as "strategic business units" or "SBUs") together with a description of certain of their more significant or recently introduced products, services or operations. Life Sciences Our Life Sciences business unit helps solve the complex analytical problems encountered in drug discovery and genetic screening laboratories by providing solutions including measuring instrumentation with interfacing software, and a wide range of reagents and consumables. In 2000, this business unit had sales of $221 million, representing 13% of our total sales. Life Sciences is comprised of two strategic business enterprises: drug discovery and genetic screening. Within the field of drug discovery, Life Sciences focuses on customers engaged in pharmaceutical, biotechnology and academia laboratory research and has a strong presence in research and high throughput screening (HTS) technologies. HTS involves the surveying of a vast number of leads using a combination of reagents, detection instruments and software to detect those leads that might prove to be important targets for drugs. Customers include the HTS laboratories of the world's major pharmaceutical and biotechnology companies. In genetic screening, the subject of the screen is a human patient, typically a large number of patients. For example, newborn babies can be screened for signs of diseases that may be prevented through dietary change or other intervention. Customers include public health authorities in the United States and around the world. Principal Products. The principal products of our Life Sciences business unit include: - Multilabel counters and plate readers for rapid quantitative measurement of light signals. - Imaging systems to observe and measure cellular and molecular processes. - Sample handling and laboratory automation devices. - Chemical reagents to allow heterogeneous and homogeneous assays. - Information management software. 3 New Products. New product releases include: - Key offerings for functional genomic and proteomic based research such as MICROMAX(TM) cDNA, Arrays, the Ultraview(TM) Live Cell Imaging system, and the ProXpress(TM) for multiwavelength Imaging. Brand Names. Our Life Sciences business unit offers its products under various brand names, including Wallac(TM), NEN(R), LANCE(TM), DELFIA(TM), MICROMAX(TM) and [FP]2(TM). Optoelectronics Our Optoelectronics business unit produces a broad spectrum of optoelectronic products, including high volume and high performance specialty lighting sources, detectors, optical fiber communications components, imaging devices, emitters and receivers, mux arrays, and large area amorphous silicon detectors. In 2000, this business unit had sales of $497 million, representing 29% of our total sales. The Optoelectronics operations and sales organizations are aligned along three major applications areas, or strategic business enterprises: Telecom, Ultra Specialty Lighting and Imaging. Strong relationships exist with major customers in each market including medical, analytical instrumentation, telecommunications, consumer, entertainment, industrial and aerospace. Principal Products. The principal products of our Optoelectronics business unit include: - Telecom and sensor components such as high speed Indium Gallium Arsenide (InGaAs) positive intrinsic negative (PIN) photodiodes and avalanche photodiodes (APDs), InGaAs and APD hybrid microelectronic receiver modules, photodiode linear arrays, Dense Wavelength Division Multiplexer (DWDM) channel monitors, custom packaged laser diodes, Erbium Doped Fiber Amplifier (EDFA) pumps, DWDM laser diodes, and fiber optic and cable test equipment. Other products include detectors and sensors for security systems, climate and lighting controls, and blood pressure monitoring systems. - Ultra Specialty Lighting products such as specialty high-intensity discharge (HID) lighting sources and fiber optic systems (xenon, mercury xenon, krypton-arc and metal halide) for medical diagnostics, dental curing and whitening, video projection, semiconductor lithography, stage and studio lighting, cinema projection lighting, solid-state laser pumping, tanning, signage, aerospace lighting, large volume photoflashlamps and other lighting applications. - Imaging products such as linear and two dimensional CCD sensors and cameras for the machine vision and analytical markets, amorphous silicon panels used in x-ray imaging and film replacement markets, photomultipliers for use in analytical instruments, and photocells and thermopiles used in gas and thermal monitoring applications. New Products. Recent product releases include: - The Ultra Specialty Lighting SBE, launched its UV exposure system, the Pro Form GII. This fully automatic imaging system is used for advanced PCB and HDI production. The XL2000 Xenon Lightsource was also launched expanding the product offerings in medical and endoscopic market applications. - The Telecom SBE introduced the 256 Mux Array receiver used in DWDM channel monitoring which improves the effectiveness of new and existing fiber optic cable. The Fiber Optic Test System business introduced the CD400L Delay Dispersion System and PMD4000 Polarisation Mode Dispersion Measurement System. The CD400L delay/dispersion system uses tunable lasers and DSP technology to provide state of the art performance measurements of delay and chromatic dispersion in DWDM components The PMD4000 enables fast PMD measurements for optical fiber makers and cablers. - The Digital Imaging SBE expanded on its amorphous silicon technology with the introduction of the LAE (Large Area Electronic) Detector. This detector is sold into markets such as Industrial Imaging. Medical Imaging and Non-Diagnostic Medical applications such as veterinary medicine. 2 4 Brand Names. Our Optoelectronics business unit offers its products under various brand names including Heimann(TM), ILC(R), ORC, Reticon(R), Vactec, Voltarc(R), Q-Arc, Power Systems and Amorphous Silicon. Instruments Our Instruments business unit develops, manufactures and markets sophisticated analytical instruments and imaging detection systems for research laboratories, academia, medical institutions, government agencies and a wide range of industrial applications designed to provide industry-specific "sample to answer" solutions. In 2000, this business unit had sales of $725 million, representing 43% of our total sales. Applications and Customers. The Instruments business unit has two SBEs: Analytical Instruments and Detection Systems. Analytical Instruments provide world class analytical solutions employing technologies such as molecular and atomic spectroscopies, high pressure liquid chromatography (HPLC), gas chromatography (GC), and thermal and elemental analysis. These instruments measure a range of substances from biomolecules to organic and inorganic chemicals and have applications in the pharmaceutical, food and beverage, chemical semiconductor and environmental markets. Our Detection Systems SBE provides a broad range of products including walk through weapons detection systems, advanced explosive detection systems, and large cargo inspection systems. Typical applications are in the aviation, transportation, government facilities, customs, and hazardous materials detection markets. Principal Products. The principal products of our Instruments business unit include: - Analytical instruments used to accelerate the drug development process, decipher molecular mechanisms of drug actions, monitor and test for environmental pollutants, confirm nutritional content and safety of foods and beverages, and analyze the purity of raw materials used in the development of semiconductor and optical products. - Detection systems used to inspect cargo for weapons, explosives and contraband, hand-held and walk through metal detectors for security screening, and X-ray based technology to identify weapons, explosives or narcotics in hand carried or checked baggage. New Products. Recent product releases include: - Optima(TM) 2000 and 4000 Inductively Coupled Plasma Optical Emission Spectrometers are used by organizations with a broad range of environmental, industrial, geochemical, nutritional, and clinical applications to determine the elemental content of materials. - Lambda(TM) 25/35/45 UV/Visible Spectrometers are based on the proven technology and industry leading performance of the established Lambda platform. These high quality systems provide dependable results and deliver proven robustness and reliability. - TurboMatrix(TM) Chromatography Sample Handling systems provide a more efficient means of introducing samples to gas chromatography systems. - TotalChrom(TM) 6.2 Chromatography Data Management Software makes compliance with internal and external regulations easier. It also includes TC Publisher(TM), a powerful reporting tool that allows users to generate a variety of reports. The seamless flow of TotalChrom data into the NuGenesis(R) SDMS database provides laboratories with an integrated method of data capture and management. - PX 2000 is a revolutionary security product which will employ advanced x-ray generation for the greatest amount of penetration and imaging. Advanced features of the product will allow future growth into technology expansions such as remote maintenance diagnostics, internet transfer of images and data, as well as complete networking of multiple machines across customer facilities. - VIS108 is a new generation advanced explosive detection system machine from the newly acquired Vivid Technologies business. This product will provide the highest speed and highest level of explosive detection capability in the airport checked baggage market. Market place directions to inspect 100% of 3 5 airport checked luggage will necessitate the advanced and economic features of this newly deployed technology. - Mobix is a recent entry into the Large Cargo Inspection market place for Detection Systems. This system is capable of inspecting large trucks and cargo containers at points of entry and border crossings. This system has the capacity to detect illegal contraband and monitor the flow of commerce into countries. Fluid Sciences Our Fluid Sciences business unit provides enabling sealing solutions and advanced fluid containment technologies to the world's leading aerospace, semiconductor, medical implant and power generation equipment manufacturers. Fluid Sciences produces static and dynamic seals and sealing systems; solenoid valves and next-higher-level assembles; bellow devices; advanced pneumatic components, systems and assemblies; and sheetmetal-formed products for market-leading original equipment manufacturers and end users. The SBU also provides durability and fluid testing services to engine and lubricant manufacturers. In 2000, this business unit had sales of $252 million, representing 15% of our total sales. Typical applications for the products of our Fluid Sciences business unit are in critical aerospace, semiconductor, medical implant and power generation equipment markets as well as lubricant and fuel testing. Principal Products. The principal products of our Fluid Sciences business unit include: - Welded metal bellows seals that hold the medication in patient pain reduction implants and welded metal bellows for wafer-process vacuum sealing and linear motion devices. - Valves that provide actuation or control on aircraft. - Brush seals and flexible, metallic C- and E-Seals(TM)that reduce or eliminate emissions and improve efficiency and fuel consumption in power generation engines. - Aircraft engine dynamic and static sealing to enhance engine efficiency and reduce fuel consumption. - UHV/UHP static sealing in gas delivery and process chamber systems, and in laser and memory devices. - Engine and component durability testing, fuel and lubricant testing, vehicle fleet and fuel system testing. New Products. New product releases include: - Belfab(R) Higher-Level-Assemblies for critical semiconductor wafer process equipment. - Microplex(TM) Seals and Microprofile(TM) Joints to enhance performance in microturbines used in power generation. - Tytan(TM) Seals, second generation ultra-high vacuum seals developed for use in the increasingly harsh environment of semiconductor processing and vacuum equipment. - Advanced Brush Seals for difficult sealing applications in power generation and aerospace. Brand Names. Our Fluid Sciences business unit offers its products under various brand names, including Belfab(R), Centurion(TM), Pressure Science(TM), Wright Components(TM), Automotive Research(TM), and Missouri Metal Shaping. Discontinued Operations For a number of years, the Company had provided services under management and operations contracts to the United States Department of Energy (the "DOE") and reports its former DOE Support segment as discontinued operations. The last of these DOE contracts expired in 1997. The Company is in the process of 4 6 negotiating contract closeouts and does not anticipate incurring any material loss in connection with such contracts in excess of previously established reserves. On August 20, 1999, the Company sold the assets of its Technical Services segment, including the capital stock of EG&G Defense Materials, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc., an affiliate of The Carlyle Group LP, for approximately $250 million in cash and the assumption by the buyer of certain liabilities of the Technical Services segment. Through its Technical Services segment, the Company provided engineering, scientific, management and technical support services to a broad range of governmental and industrial customers. In 1999, Technical Services had sales of $303 million, reported as discontinued operations. MARKETING All four of the Company's business units, Life Sciences, Optoelectronics, Instruments and Fluid Sciences, market their products and services through their own specialized sales forces as well as independent foreign and domestic manufacturer representatives and distributors. In certain foreign countries, these operating segments have entered into joint venture and license agreements with local firms to manufacture and market their products. RAW MATERIALS AND SUPPLIES Raw materials and supplies used by the Company are generally readily available in adequate quantities from domestic and foreign sources. PATENTS AND TRADEMARKS While the Company's patents, trademarks and licenses in the aggregate are important to its business, the Company does not believe that the loss of any one patent, trademark or license or group of related patents, trademarks or licenses would have a materially adverse effect on the overall business of the Company or on any of its operating segments. The Company has both trademarks and registered trademarks for a variety of its product names. Registration of the PerkinElmer(TM) trademark is pending. BACKLOG At December 31, 2000, the Company had a backlog in continuing operations of approximately $360 million compared to $400 million at January 2, 2000. The Company includes in backlog only those orders for which it has received a completed purchase order. The Company estimates that more than 95% of its backlog as of December 31, 2000 will be billed during 2001. Certain of these orders are subject to cancellation by the customer with payment of a negotiated charge. Because of the possible changes in delivery schedules, cancellation of orders and potential delays in product shipments, the Company's backlog as of any particular date may not necessarily be representative of actual sales for any succeeding period. COMPETITION Because of the wide range of its products and services, the Company faces many different types of competition and competitors. This affects its ability to sell its products and services and the prices at which such products and services are sold. Competitors range from large foreign and domestic organizations that produce a comprehensive array of goods and services, and which may have greater financial and other resources than the Company, to small concerns producing a small number of goods or services for specialized market segments. In the Life Sciences segment, competition is on the basis of product availability and reliability, and service level. Size of the competition ranges from multinational organizations with a wide range of products to specialized firms that in some cases have well established market niches. The Company competes in these markets on the basis of innovative technologies, product differentiation and quality. The proportion of large competitors in this segment is expected to increase through the continued consolidation of competitors. 5 7 In the Optoelectronics segment, no single competitor competes directly with this segment across its full product range. However, the Company does compete with specialized manufacturing companies in the manufacture and sale of specialty flashtubes and ultraspecialty lighting sources, certain photodetectors and photodiodes, switched power supplies and telecommunications products. Competition is based on price, technological innovation, operational efficiency and product reliability and quality. In the Instruments segment, the Company faces a similar situation in that no single competitor competes directly with this segment as a whole. The Company competes with instrument companies that serve particular segments of markets in industrial instrumentation, and imagining detection systems. The Company competes in this segment primarily on the basis of product performance, product reliability, service and price. In the Fluid Sciences segment, competition is typically based on product innovation, quality, service and price. In a few markets, competitors are large, diversified engineering, and manufacturing concerns. Most of the Company's competitors, however, are small specialized manufacturing companies offering fewer product lines for narrower market segments. Competition for lubricant testing services is from a few specialized testing companies and some customer-owned laboratories, and is mainly based on quality and price. The Company competes primarily on the basis of product performance, technological innovation, service and price. RESEARCH AND DEVELOPMENT During 2000, 1999 and 1998, Company-sponsored research and development expenditures were approximately $86 million, $71 million and $46 million, respectively. ENVIRONMENTAL COMPLIANCE The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (PRP) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period in which the Company's responsibility is established and when the cost can be reasonably estimated. The Company has accrued $8.8 million as of December 31, 2000, representing management's estimate of the total cost of ultimate disposition of known environmental matters. Such amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to five years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material effect on the Company's financial position or results of operations. While it is reasonably possible that a material loss exceeding the amounts recorded may have been incurred, the preliminary stages of the investigations make it impossible for the Company to reasonably estimate the range of potential exposure. EMPLOYEES As of March 1, 2001, the Company employed approximately 12,500 persons. Certain of the Company's subsidiaries are parties to contracts with labor unions. The Company considers its relations with employees to be satisfactory. 6 8 FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS Sales and operating profit by segment for the three years ended December 31, 2000 are shown in the table below:
(IN THOUSANDS) 2000 1999 1998 - -------------- ---------- ---------- -------- LIFE SCIENCES Sales........................................... $ 221,401 $ 158,009 $134,635 Operating Profit (Loss)......................... (3,636) 15,768 9,044 OPTOELECTRONICS Sales........................................... 496,851 447,681 274,506 Operating Profit (Loss)......................... 96,931 40,317 (4,133) INSTRUMENTS Sales........................................... 725,261 532,128 185,038 Operating Profit (Loss)......................... 58,894 (19,323) 6,647 FLUID SCIENCES Sales........................................... 251,754 225,311 237,537 Operating Profit................................ 45,071 31,078 3,887 OTHER Sales........................................... -- -- 22,666 Operating Profit (Loss)......................... (10,685) (1,188) 104,279 CONTINUING OPERATIONS Sales........................................... 1,695,267 1,363,129 854,382 Operating Profit................................ 186,575 66,652 119,724
The Company's Technical Services segment and former Department of Energy segment are presented as discontinued operations and, therefore, are not included in the preceding table. The results for the periods presented include certain acquisition charges, restructuring charges and other nonrecurring items, which are discussed in the Management's Discussion and Analysis section of this document. Sales and operating profit by segment for the three years ended December 31, 2000, excluding goodwill and intangibles amortization, acquisition charges, restructuring and nonrecurring items, are shown in the table below:
(IN THOUSANDS) 2000 1999 1998 - -------------- ---------- ---------- -------- LIFE SCIENCES Sales........................................... $ 221,401 $ 158,009 $134,635 Operating Profit................................ 39,186 23,959 16,215 OPTOELECTRONICS Sales........................................... 496,851 447,681 274,506 Operating Profit................................ 83,603 58,254 20,383 INSTRUMENTS Sales........................................... 725,261 532,128 185,038 Operating Profit................................ 79,430 45,323 16,202 FLUID SCIENCES Sales........................................... 251,754 225,311 237,537 Operating Profit................................ 47,735 26,978 26,566 OTHER Sales........................................... -- -- 22,666 Operating Profit (Loss)......................... (13,694) (10,260) (14,636) CONTINUING OPERATIONS Sales........................................... 1,695,267 1,363,129 854,382 Operating Profit................................ 236,260 144,254 64,730
7 9 Additional information relating to the Company's operating segments is as follows:
DEPRECIATION AND AMORTIZATION EXPENSE CAPITAL EXPENDITURES ----------------------------- ----------------------------- (IN THOUSANDS) 2000 1999 1998 2000 1999 1998 - -------------- ------- ------- ------- ------- ------- ------- Life Sciences.................. $17,719 $ 6,189 $ 5,059 $16,239 $ 7,465 $ 5,415 Optoelectronics................ 25,967 34,430 25,615 34,242 21,155 17,256 Instruments.................... 23,940 17,292 10,573 8,266 6,555 8,382 Fluid Sciences................. 10,663 7,093 6,042 10,895 4,515 10,325 Other.......................... 859 1,111 1,221 956 1,402 3,111 ------- ------- ------- ------- ------- ------- Continuing operations........ $79,148 $66,115 $48,510 $70,598 $41,092 $44,489 ======= ======= ======= ======= ======= ======= Discontinued operations...... -- $ 841 $ 1,869 -- $ 1,341 $ 2,033 ======= ======= ======= =======
TOTAL ASSETS ------------------------ (IN THOUSANDS) 2000 1999 -------------- ---------- ---------- Life Sciences............................................... $ 600,168 $ 125,025 Optoelectronics............................................. 512,395 448,453 Instruments................................................. 816,916 854,452 Fluid Sciences.............................................. 123,096 102,421 Other....................................................... 207,604 184,289 ---------- ---------- $2,260,179 $1,714,640 ========== ==========
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS The following geographic area information for continuing operations includes sales based on location of external customer and net property, plant and equipment based on physical location:
SALES ------------------------------------ (IN THOUSANDS) 2000 1999 1998 - -------------- ---------- ---------- -------- U.S. ........................................... $ 797,587 $ 661,609 $447,793 United Kingdom.................................. 111,676 71,493 47,794 Germany......................................... 102,439 98,787 67,647 Japan........................................... 77,119 73,567 28,306 France.......................................... 61,416 50,282 35,329 Italy........................................... 55,563 56,433 17,565 Other Non-U.S. ................................. 489,467 350,958 209,948 ---------- ---------- -------- $1,695,267 $1,363,129 $854,382 ========== ========== ========
NET PROPERTY, PLANT AND EQUIPMENT ------------------------ (IN THOUSANDS) 2000 1999 - -------------- ---------- ---------- U.S. ....................................................... $160,732 $133,812 Finland..................................................... 26,356 17,277 Canada...................................................... 19,051 14,718 Germany..................................................... 14,137 21,570 United Kingdom.............................................. 12,836 13,282 Other Non-U.S. ............................................. 41,648 27,375 -------- -------- $274,760 $228,034 ======== ========
8 10 Effectively, all of the sales and net property, plant and equipment of the discontinued operations (consisting of the Technical Services segment and former DOE segment) were U.S. based. ITEM 2. PROPERTIES As of January 30, 2001 the Company occupied approximately 4,360,000 square feet of building area, of which approximately 1,840,000 square feet is owned by the Company. The balance is leased. The Company's headquarters occupies 53,400 square feet of leased space in Wellesley, Massachusetts. The Company's other operations are conducted in manufacturing and assembly plants, research laboratories, administrative offices and other facilities located in 14 states and 41 foreign countries. Non-U.S. facilities account for approximately 1,580,000 square feet of owned and leased property, or approximately 36% of the Company's total occupied space. The Company's real property leases are both short-term and long-term. In management's opinion, the Company's properties are well-maintained and are adequate for its present requirements. The following table indicates the approximate square footage of real property owned and leased attributable to each of the Company's operating segments:
OWNED LEASED TOTAL (SQ. FEET) (SQ. FEET) (SQ. FEET) ---------- ---------- ---------- Life Sciences............................................. 464,634 224,480 689,114 Optoelectronics........................................... 661,942 742,798 1,404,740 Instruments............................................... 243,257 1,417,893 1,661,150 Fluid Sciences............................................ 468,369 78,460 546,829 Corporate Offices......................................... 4,561 53,400 57,961 --------- --------- --------- CONTINUING OPERATIONS..................................... 1,842,763 2,517,031 4,359,794 ========= ========= =========
ITEM 3. LEGAL PROCEEDINGS The Company is subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of amounts provided will not have a material adverse effect on the financial position or results of operations of the Company. The Company has received notices from the Internal Revenue Service (IRS) asserting deficiencies in federal corporate income taxes for the Company's 1985 to 1994 tax years. The total additional tax proposed by the IRS amounts to $74 million plus interest. The Company has filed petitions in the United States Tax Court to challenge most of the deficiencies asserted by the IRS. The Company believes that it has meritorious legal defenses to those deficiencies and believes that the ultimate outcome of the case will not result in a material impact on the Company's financial position or results of operations. The Company and its subsidiary, EG&G Idaho, Inc., were named in 1998 as defendants in a lawsuit pending in the United States District Court for the District of Idaho. Filed by two former employees of EG&G Idaho under the Civil False Claims Act, the suit names as defendants six entities which were formerly, or currently are, prime contractors or subcontractors to the Department of Energy at the Idaho National Engineering and Environmental Laboratory. Plaintiffs allege that the defendants submitted false claims to the government for reimbursement of environmental activities which they knew or should have known had either not been performed or were performed improperly. After several preliminary motions narrowed the scope of the case, discovery is now set to begin. Plaintiffs have yet to quantify the damages they are seeking. 9 11 The Company's subsidiary, EG&G Rocky Flats, Inc. and two other companies were also named as defendants in January 2000 in a civil false claim action pending in the United States District Court for the District of Colorado involving security issues at the Department of Energy's Rocky Flats Plant. The United States Department of Justice has filed a motion seeking to have the case dismissed. The Company intends to defend itself vigorously in these matters and believes that their ultimate disposition will not have a material impact on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT Listed below are the executive officers of the Company as of March 23, 2001. No family relationship exists between any of the officers.
NAME POSITION AGE - ---- -------- --- Gregory L. Summe................................... Chairman of the Board, 44 Chief Executive Officer and President Robert F. Friel.................................... Senior Vice President 45 and Chief Financial Officer Terrance L. Carlson................................ Senior Vice President, 48 General Counsel and Clerk Richard F. Walsh................................... Senior Vice President 48 Robert A. Barrett.................................. Senior Vice President 57 Patrik O. Dahlen................................... Senior Vice President 39 John J. Engel...................................... Senior Vice President 39 Stephen P. DeFalco................................. Senior Vice President 40
Mr. Summe joined the Company in 1998 as President and Chief Operating Officer, was elected President and Chief Executive Officer in December 1999, and was elected Chairman of the Board in April 1999. Until late 1997, he was President of AlliedSignal's Automotive Products Group. AlliedSignal, Inc., which recently merged with Honeywell and became known as Honeywell International, is a multi-billion multi-product company, which has operations in aerospace, automotive and engineered materials businesses. Prior to being appointed President of AlliedSignal's Automotive Products Group in 1997, Mr. Summe served as President of AlliedSignal's Aerospace Engines from 1995 to 1997 and as President of AlliedSignal's General Aviation Avionics from 1993 to 1995. Mr. Friel joined the Company in February 1999 as Senior Vice President and Chief Financial Officer. From 1997 to 1999 he was Corporate Vice President and Treasurer of AlliedSignal, Inc. Prior to that he was Vice President, Finance and Administration of AlliedSignal Engines from 1992 to 1996. Mr. Carlson joined the Company in June 1999 as Senior Vice President, General Counsel and Clerk. From 1997 to 1999 he was Deputy General Counsel of AlliedSignal, Inc. Prior to that he was Vice President and General Counsel of AlliedSignal Aerospace from 1994 to 1997, and from 1986 to 1994 he was a partner in the law firm of Gibson, Dunn & Crutcher. Mr. Walsh joined the Company in July 1998 as Senior Vice President of Human Resources. From 1989 to 1998, he served as Senior Vice President of Human Resources of ABB Americas, Inc., the U.S. based subsidiary of an international engineering company. Mr. Barrett was elected a Vice President of the Company in January 1997 and a Senior Vice President in January 2000. He has served as President of the Fluid Sciences Strategic Business Unit since May 1998. From 1990 to 1997, he served as President and General Manager of the Company's Pressure Science division. 10 12 Mr. Dahlen was elected a Vice President of the Company in October 1999 and a Senior Vice President in January 2000. He has served as President of the Life Sciences Strategic Business Unit since September 1999. From April through October 1999, Mr. Dahlen was General Manager of the Reticon division of the Optoelectronics Strategic Business Unit. From September 1995 through April 1999 Mr. Dahlen was Director of Marketing and General Manager of U.S. Diagnostics for the Life Sciences Strategic Business Unit. Mr. Dahlen is a citizen of Finland. Mr. Engel was elected a Vice President of the Company in April 1999 and a Senior Vice President in January 2000. He has served as President of the Optoelectronics Strategic Business Unit since March 1999. Mr. Engel had been associated with AlliedSignal since 1994, serving as Vice President and General Manager of Business and General Aviation from 1997 to March 1999, Vice President of the Flight Controls Enterprise in 1996, and Director of the Radar and Collision Avoidance Enterprise from 1994 to 1995. Mr. DeFalco was elected a Senior Vice President in October 2000 and he has served as President of the Instruments Strategic Business Unit since that time. From June 1999 to October 2000, Mr. DeFalco served as Vice President of the Company's Analytical Instruments business unit. From September 1998 to June 1999, Mr. DeFalco served as Vice President of Strategic Planning and Business Development. Prior to 1998, Mr. DeFalco was associated with United Technologies Corporation where he held the positions of Vice President of Strategic Planning at the Company's Carrier Division and Corporate Director of Strategic Planning. 11 13 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET PRICE OF COMMON STOCK
2000 FISCAL QUARTERS -------------------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------- ------- High.................................................. $79.25 $68.75 $107.00 $119.50 Low................................................... 39.06 50.00 62.13 89.06
1999 FISCAL QUARTERS -------------------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------- ------- High.................................................. $30.06 $35.63 $ 39.75 $ 43.81 Low................................................... 25.75 26.75 31.81 36.88
DIVIDENDS
2000 FISCAL QUARTERS --------------------------------------- FIRST SECOND THIRD FOURTH ----- ------ ----- ------ Cash Dividends Per Common Share......................... $.14 $.14 $.14 $.14
1999 FISCAL QUARTERS --------------------------------------- FIRST SECOND THIRD FOURTH ----- ------ ----- ------ Cash Dividends Per Common Share......................... $.14 $.14 $.14 $.14
The Company's common stock is listed and traded on the New York Stock Exchange. The number of holders of record of the Company's common stock as of March 21, 2001 was approximately 7,900. During fiscal 2000, the Company's Board of Directors declared four regular quarterly cash dividends of 14 cents per share, each resulting in an annual rate of 56 cents per share. On January 30, 2001, the Company announced its intention to effect a two for one split of its common stock. The proposed split is subject to the approval of the Company's shareholders at its Annual Meeting on April 24, 2001. 12 14 ITEM 6. SELECTED FINANCIAL DATA SELECTED FINANCIAL INFORMATION FOR THE FIVE YEARS ENDED DECEMBER 31, 2000
(IN THOUSANDS WHERE APPLICABLE) 2000 1999 1998 1997 1996 - ------------------------------- ---------- ---------- ---------- -------- -------- OPERATIONS: Sales.......................................... $1,695,267 $1,363,129 $ 854,382 $927,482 $928,287 Operating income from continuing operations.... 186,575 66,652 119,724 27,019 56,265 Income from continuing operations.............. 86,067 28,371 79,001 9,562 34,264 Income from discontinued operations, net of income taxes................................. -- 15,665 23,001 24,130 25,892 Gain on disposition of discontinued operations, net of income taxes.......................... 4,453 110,280 -- -- -- Net income..................................... 90,520 154,316 102,002 33,692 60,156 Basic earnings per share: Continuing operations........................ 1.75 .62 1.74 .21 .72 Discontinued operations...................... .09 2.77 .51 .53 .55 Net income................................... .84 3.39 2.25 .74 1.27 Diluted earnings per share: Continuing operations........................ 1.68 .61 1.72 .21 .72 Discontinued operations...................... .09 2.70 .50 .53 .55 Net income................................... 1.77 3.31 2.22 .74 1.27 Weighted-average common shares outstanding: Basic........................................ 49,106 45,522 45,322 45,757 47,298 Diluted...................................... 51,139 46,569 45,884 45,898 47,472 FINANCIAL POSITION: Total assets................................... $2,260,179 $1,714,640 $1,138,778 $777,737 $774,761 Short-term debt................................ 186,206 382,162 157,888 46,167 21,499 Long-term debt................................. 583,337 114,855 129,835 114,863 115,104 Long-term liabilities.......................... 230,854 196,511 124,799 95,940 76,087 Stockholders' equity........................... 728,389 550,776 399,667 328,388 365,106 Total debt/total capital....................... 51% 47% 42% 33% 27% Common shares outstanding...................... 50,001 46,366 44,746 45,333 46,309 CASH FLOWS: Cash flows from continuing operations.......... $ 145,548 $ 108,768 $ 40,853 $ 11,405 $ 48,291 Cash flows from discontinued operations........ -- 7,061 28,702 23,433 31,867 Cash flows from operating activities........... 145,548 115,829 69,555 34,838 80,158 Depreciation and amortization.................. 79,148 66,115 48,510 42,698 38,861 Capital expenditures........................... 70,598 41,092 44,489 47,642 78,796 Purchases of common stock...................... 10,589 970 41,217 28,104 30,760 Cash dividends per common share................ .56 .56 .56 .56 .56
- --------------- Note: The information presented above includes in-process research and development charges, revaluation of acquired inventory, gains, restructuring and other nonrecurring items discussed in greater detail within Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition. 13 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW Fiscal 2000 represented the third year of the Company's transformation into a global, high technology leader. During 2000, the Company continued its focus on shifting the portfolio of businesses to higher growth potential. The Company completed several acquisitions and divestitures including: - acquisition of NEN Life Sciences - acquisition of Vivid Technologies - divestiture of Berthold business - divestiture of Judson business - divestiture of IC Sensors business These transactions resulted in gains from divestitures, acquisition-related charges and restructuring charges. The table presented below reconciles the reported results of the Company in the accompanying financial statements to the financial results before nonrecurring items. On this adjusted basis, EPS increased 22% during 2000 to $2.08 versus $1.70 in 1999. Excluding results of discontinued operations, 2000 adjusted EPS was $2.08 versus $1.36 in 1999, representing an increase of 53%. Cash EPS increased 26% to $2.65 in 2000 versus $2.11 in 1999.
2000 1999 ----- ------ Diluted EPS, as reported.................................... $1.77 $ 3.31 Gains on dispositions....................................... (.56) (2.63) Acquisition and divestiture related charges................. .77 .51 Restructuring-related and other............................. .10 .51 ----- ------ "Adjusted" EPS.............................................. 2.08 1.70 Goodwill and intangibles amortization....................... .57 .41 ----- ------ "Cash" EPS.................................................. $2.65 $ 2.11 ===== ======
ACQUISITIONS AND DIVESTITURES On January 14, 2000, the Company completed its acquisition of Vivid Technologies, Inc. (Vivid) for an aggregate purchase price of approximately $67 million. The transaction was a stock merger whereby the shareholders of Vivid received one share of the Company's common stock for each 6.2 shares of Vivid common stock; approximately 1.6 million shares were issued in connection with the acquisition. Vivid, which is a leading supplier of automated explosive detection systems utilized in airports and high-security facilities worldwide, generated sales of $21 million for the twelve months ended September 30, 1999. Vivid's operations, included in the consolidated results of the Company from the date of acquisition, are reported in the Instruments segment. The acquisition was accounted for as a purchase under Accounting Principles Board (APB) Opinion No. 16, and the Company allocated the purchase price of Vivid based on the fair values of the net assets acquired and liabilities assumed. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included approximately $8.1 million for acquired in-process research and development (R&D) for projects that had not reached technological feasibility as of the acquisition date and for which no alternative use existed. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects; these costs were expensed in the first quarter of 2000. Other acquired intangible assets totaling $6.4 million included the fair value of developed technology. These intangible assets are being amortized over their estimated useful life of 10 years. Goodwill of $24.1 million resulting from the acquisition of Vivid is being amortized over 25 years. On July 31, 2000, the Company completed its acquisition of NEN Life Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products, services, reagents and technologies to the life sciences industry. 14 16 The Company purchased NEN from an investor group led by Genstar Capital LLC for an aggregate purchase price of approximately $400 million. In connection with the acquisition, the Company paid approximately $350 million in cash and issued warrants to purchase approximately 300,000 shares of the Company's common stock in exchange for all of the outstanding shares, options and warrants of NEN. In addition, the Company repaid approximately $50 million of outstanding indebtedness of NEN. The Company financed the acquisition and repayment of the outstanding indebtedness with $410 million of commercial paper borrowings with a weighted-average interest rate of 7%. These short-term borrowings were repaid in early August with proceeds from the issuance of long-term convertible debentures. NEN's operations, included in the consolidated results of the Company from the date of acquisition, are reported in the Life Sciences segment. The acquisition was accounted for as a purchase under APB Opinion No.16, and the Company allocated the purchase price of NEN based on the fair values of the net assets acquired and liabilities assumed. The allocation of the purchase price has not yet been finalized, however, the Company does not expect material changes. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included approximately $24.3 million for acquired in-process R&D for projects that had not reached technological feasibility as of the acquisition date and for which no alternative use existed. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects; these costs were expensed in the third quarter of 2000. Other acquired intangible assets totaling $75.9 million included the fair value of trade names, trademarks, patents and developed technology. Goodwill of $270.8 million resulting from the acquisition of NEN is being amortized over 20 years. Approximately $4 million has been recorded as accrued restructuring costs in connection with the acquisition of NEN. The restructuring plans include initiatives to integrate the operations of the Company and NEN, and to reduce overhead. The primary components of these plans relate to employment costs, consolidation of certain facilities, and the termination of certain leases and other contractual obligations. Management is in the process of developing its restructuring plans related to NEN, and accordingly, the amounts recorded are based on management's current estimate of these costs. The Company will finalize these plans during 2001, and the majority of the restructuring actions are expected to occur during 2001. On May 28, 1999, the Company completed its acquisition of the Analytical Instruments Division (AI) of PE Corp. for an aggregate purchase price of approximately $425 million, plus acquisition costs. In addition, under the terms of the Purchase Agreement dated March 8, 1999 between the Company and PE Corp. (the "Purchase Agreement"), the Company assumed German and other pension liabilities of approximately $65 million. These pension liabilities were historically funded on a pay-as-you go basis, and the funding going-forward is expected to remain consistent. The acquisition was accounted for as a purchase under APB Opinion No. 16 and the Company allocated the purchase price of AI based on the fair values of the net assets acquired and liabilities assumed. AI produces high-quality analytical testing instruments and consumables, and generated 1998 fiscal year sales of $569 million. AI's operations are reported in the Company's Instruments segment. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included approximately $23 million for acquired in-process R&D. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of the acquisition of AI, the development of these projects had not yet reached technological feasibility, and the R&D in process had no alternative future uses. Accordingly, these costs were expensed in the second quarter of 1999. Other acquired intangibles totaling $163.8 million included the fair value of trade names, trademarks, patents and developed technology. These intangibles are being amortized over their respective estimated useful lives ranging from 10-40 years. Goodwill resulting from the acquisition of AI is being amortized over 40 years. Approximately $28 million was recorded as accrued restructuring charges in connection with the acquisition of AI. The restructuring plans include initiatives to integrate the operations of the Company and of AI, and reduce overhead. The primary components of these plans relate to: (a) employee termination benefits and related costs for approximately 20% of the acquired workforce of approximately 3,000 employees; (b) consolidation or shutdown of certain operational facilities worldwide and (c) termination of certain leases and other contractual obligations. 15 17 During the second quarter of 2000, the Company finalized its restructuring plan for AI. Based on continued aggressive actions by the Company to improve the cost structure of the acquired business, and increased costs related primarily to employment integration, the Company adjusted its original estimate of restructuring costs in connection with purchase accounting. The majority of the remaining restructuring actions are expected to occur through fiscal 2001. On December 16, 1998, the Company acquired substantially all of the outstanding common stock and options of Lumen Technologies, Inc. (Lumen), a maker of high-technology specialty light sources. The purchase price of approximately $253 million, which included $75 million of assumed debt, was funded with existing cash and commercial paper borrowings. The acquisition was accounted for as a purchase under APB Opinion No. 16, and the Company allocated the purchase price of Lumen based on the fair values of the assets acquired and liabilities assumed. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing proven valuation procedures and techniques. These intangible assets included approximately $2.3 million for acquired in-process R&D for projects that did not have future alternative uses. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of the acquisition, the development of these projects had not yet reached technological feasibility, and the R&D in process had no alternative future uses. Accordingly, these costs were expensed in the fourth quarter of 1998. Acquired intangibles totaling $11.8 million included the fair value of trade names, trademarks and patents. These intangibles are being amortized over their estimated useful life of 10 years. Goodwill resulting from the Lumen acquisition is being amortized over 30 years. Approximately $5 million was recorded as accrued restructuring charges in connection with the acquisition. The restructuring plans included initiatives to integrate the operations of the Company and Lumen, and to reduce overhead. The primary components of these plans related to: (a) transfer of certain manufacturing activities to lower-cost facilities, (b) integration of the sales and marketing organization and (c) termination of certain contractual obligations. The restructuring actions have been completed. During the first quarter of 2000, the Company sold its micromachined sensors and specialty semiconductor businesses for cash of $24.3 million, resulting in a pre-tax gain of $6.7 million. Combined financial results of the divested businesses for 2000 and 1999 were not material to the consolidated results of the Company. During the third quarter of 2000, the Company recorded pre-tax gains totaling $3.1 million from an insurance settlement and disposition of a building. During the fourth quarter of 2000, the Company sold its Berthold business at a pre-tax gain of $10 million. The Company has deferred gain recognition of approximately $11.9 million of sales proceeds from this divestiture in connection with certain contingencies related to the sale. Revenues for 2000 and 1999 for the divested business were $30 million and $38 million, respectively. Also during the fourth quarter of 2000, the Company recorded a pre-tax gain of $16 million from the sale of a building. During the second quarter of 1999, the Company sold its Structural Kinematics business for cash of $15 million, resulting in a pre-tax gain of $4.3 million. Additionally, as a result of the Company's continuing evaluation of its Instruments businesses, the Company undertook certain repositioning actions during the second quarter of 1999, including exiting selected product lines and activities, rebalancing its customer mix in certain businesses and other related activities. These actions resulted in second quarter pre-tax charges of approximately $3.4 million, primarily recorded in cost of sales. During the fourth quarter of 1999, the Company sold its KT Aerofab business for cash of $4.4 million, resulting in a pre-tax gain of $0.3 million. The net operating results of the divested businesses for 1999 were not significant. In April 1998, the Company sold its Sealol Industrial Seals division for cash of $100 million, resulting in a pre-tax gain of $58.3 million. The after-tax gain of this divestiture was $42.6 million. Sealol's 1998 sales prior to the disposition were $23 million, and its operating income was $2.1 million. In January 1998, the Company sold its Rotron division for $103 million in cash, resulting in a pre-tax gain of $64.4 million. During the first quarter of 1998, the Company also sold a small product line for $4 million in cash, resulting in a pre-tax gain of $3.1 million. The after-tax gain of these divestitures was $45.2 million in 1998. During 2000 and 1999, in connection with the 1998 dispositions of the Company's Rotron and Sealol Industrial Seals divisions, the 16 18 Company recognized approximately $3.7 million and $13.2 million respectively, of pre-tax gains from the previously deferred sales proceeds as a result of the favorable resolution of certain events and contingencies. All of the gains described above are reported on the "Gains on Dispositions" line in the consolidated income statements. DISCUSSION OF CONSOLIDATED RESULTS OF OPERATIONS -- 2000 COMPARED TO 1999 Revenues for 2000 were $1,695 million, increasing $332 million, or 24%, versus revenues of $1,363 million in 1999. Organic growth for 2000 was 11%, which the Company defines as growth in historical businesses plus growth in acquired businesses assuming they were owned in prior periods, reduced for the effects of exited businesses and foreign exchange. Revenues by segment during 2000 versus 1999 are discussed in further detail below under the caption "Segment Results of Operations." Due to the number of changes in the portfolio of businesses, the table presented below reconciles reported net income to net income before nonrecurring items and goodwill and intangibles amortization.
(IN THOUSANDS) 2000 1999 - -------------- -------- -------- Adjusted Income from Continuing Operations.................. $236,260 $144,254 Other Expense, Net.......................................... (42,983) (25,254) Adjusted Income from Continuing Operations Before Income Taxes..................................................... 193,277 119,000 Continuing Operations Nonrecurring Items: Acquisition-Related Charges............................... (39,728) (32,857) Gains on Dispositions..................................... 34,951 19,022 Restructuring Charges, net................................ (3,209) (29,520) Other Nonrecurring Items, net............................. (5,431) (5,228) -------- -------- Net Nonrecurring Items.................................... (13,417) (48,583) Goodwill and Intangibles Amortization....................... (35,371) (25,547) -------- -------- Income From Continuing Operations Before Income Taxes....... 144,489 44,870 Provision for Income Taxes.................................. (58,422) (16,499) -------- -------- Income from Continuing Operations........................... 86,067 28,371 Gain/Income from Discontinued Operations, Net of Income Taxes..................................................... 4,453 125,945 -------- -------- Net Income.................................................. $ 90,520 $154,316 ======== ========
Adjusted operating income before goodwill and intangibles amortization, gains, acquisition charges, restructuring and other nonrecurring items was $236.3 million in 2000 versus $144.3 million in 1999, representing an increase of $92 million, or 64%, during 2000. This increase during 2000 was due to higher revenues discussed above, the benefits of restructuring and productivity initiatives, and the favorable shift of the portfolio to higher margin businesses through acquisitions and divestitures completed during 2000. SEGMENT RESULTS OF OPERATIONS The Company's businesses are reported as four segments, reflecting the Company's management methodology and structure. The Company's Technical Services segment has been classified as discontinued operations due to its divestiture during 1999. The accounting policies of the segments are the same as those described in the footnotes to the accompanying consolidated financial statements. The Company evaluates performance based on operating profit of the respective segments. The discussion that follows is a summary analysis of the primary changes in operating results by segment for 2000 versus 1999 and 1999 versus 1998. 17 19 Life Sciences 2000 Compared to 1999 Sales of $221.4 million for 2000 increased $63.4 million, or 40%, versus 1999. Organic revenue growth for 2000 was 18%. Higher volumes from high throughput screening, drug discovery applications, revenues from new products, and the inclusion of revenues from NEN Life Sciences acquired in August 2000, were the primary drivers of the increase in 2000 versus 1999. Purchase accounting and restructuring charges contributed to a reported operating loss of $3.6 million for 2000 versus reported operating income of $15.8 million in 1999. The 2000 operating loss included goodwill and intangibles amortization of $9.3 million and certain acquisition related charges and other nonrecurring items including a $24.3 million charge for acquired in-process R&D; a $1.8 million charge for the revaluation of acquired inventory; $3.9 million of net restructuring charges and $3.5 million of other acquisition-related charges. The 1999 operating profit included goodwill and intangibles amortization of $2.4 million and net restructuring charges of $5.8 million. Operating profit before goodwill and intangibles amortization and nonrecurring items for 2000 was $39.2 million, representing an increase of $15.2 million, or 63%, versus 1999. Higher revenues discussed above, particularly sales of higher-margin new products, and revenues from the NEN acquisition contributed to the increase in operating profit before goodwill and intangibles amortization and nonrecurring items in 2000 versus 1999. 1999 Compared to 1998 Sales of $158 million for 1999 increased $23.4 million versus 1998. Adjusting for the impact of the stronger dollar, revenue growth during 1999 was 17%. Higher volumes from continued strength in the high throughput screening and genetic disease screening markets, and revenues from new products were the primary contributors to this increase during 1999. Reported operating profit was $15.8 million during 1999 versus $9 million in 1998, representing an increase of $6.8 million, or 76%. 1999 operating profit included net restructuring charges of $5.8 million. Excluding nonrecurring items in 1999 and 1998, operating profit increased $7.9 million during 1999 to $21.6 million, representing a 58% increase versus 1998. Higher sales discussed above and increased gross margins across most businesses, driven primarily by higher-margin new products sold in 1999, were the primary contributors for the overall 1999 increase compared to 1998. Optoelectronics 2000 Compared to 1999 Sales for 2000 were $496.9 million versus $447.7 million in 1999, representing an increase of $49.2 million, or 11%. Organic revenue growth for 2000 was 22%. Strong revenue growth across all businesses contributed to this increase in 2000 versus 1999. Reported operating profit increased $56.6 million in 2000 to $96.9 million versus $40.3 million in 1999, representing a 140% increase. The 2000 operating profit included goodwill and intangibles amortization of $8.1 million and certain nonrecurring items: gains on dispositions of $23.4 million; restructuring credits of $9.9 million; restructuring charges of $10 million and restructuring-related charges of $1.9 million related to the shift by the Company to lower-cost manufacturing areas. The 1999 operating profit included goodwill and intangibles amortization of $9.5 million and certain nonrecurring items: net restructuring charges of $5.5 million and an asset impairment charge of $3 million. Operating profit before goodwill and intangibles amortization and nonrecurring items for 2000 was $83.6 million, increasing $25.3 million, or 43%, versus 1999. The increase in 2000 was due primarily to higher revenues discussed above, the sale of higher-margin new products and the continued benefits of Six Sigma and other manufacturing initiatives. 18 20 1999 Compared to 1998 Sales for 1999 were $447.7 million, compared to 1998 sales of $274.5 million, representing an increase of $173.2 million, or 63%. Revenue from the acquired specialty lighting business and strong organic growth was partially offset by weakness in the sensors business and exited businesses. Reported operating profit for 1999 was $40.3 million versus an operating loss of $4.1 million in 1998. The 1999 operating income included net restructuring charges of $5.5 million and an asset impairment charge of $3 million. Excluding nonrecurring items, operating profit in 1999 and 1998 was $48.8 million and $18.5 million, respectively, representing an increase of $30.3 million, or 164%. The 1999 increase was primarily due to higher revenues discussed above, higher margin new products, the Company's exit from unprofitable businesses and the shift by the Company to lower-cost manufacturing areas. Instruments 2000 Compared to 1999 Sales for 2000 were $725.3 million, increasing $193.1 million, or 36%, versus 1999. Organic revenue growth in 2000 was basically flat. The increase in reported 2000 revenues versus 1999 was due primarily to the inclusion of the AI business for a full year, partially offset by the company's sale of its Berthold business in the fourth quarter, the effects of a stronger dollar in 2000 and some softness in the aviation security market. Reported operating profit for 2000 was $58.9 million versus an operating loss in 1999 of $19.3 million. The 2000 operating profit included goodwill and intangibles amortization of $15.5 million and certain acquisition charges and restructuring-related charges and other nonrecurring items: $8.1 million charge for acquired in-process R&D; $1.1 million charge for the revaluation of acquired inventory; $11.3 million of gains on dispositions; $2.2 million of divestiture-related charges; $1.4 million of acquisition-related charges and $3.5 million of other restructuring-related items. The 1999 operating profit included goodwill and intangibles amortization of $11 million, certain acquisition-related charges and other nonrecurring items: $23 million charge for acquired in-process R&D; $15 million asset impairment charge; $9.8 million charge for the revaluation of acquired inventory and restructuring-related and other charges of $5.8 million. For 2000, operating profit before goodwill and intangibles amortization and nonrecurring items was $79.4 million versus $45.3 million in 1999, representing an increase of $34.1 million, or 75%. The increase is due primarily to the inclusion of the Vivid and AI acquisitions for a full year in 2000, improvements in manufacturing cost structure and benefits from restructuring actions. 1999 Compared to 1998 Sales for 1999 and 1998 were $532.1 million and $185 million, respectively, increasing $347.1 million, or 188%, during 1999 compared to 1998. 1999 revenues from acquisitions and higher security revenues during 1999 offset the effects of divestitures and lower revenues in certain base businesses, primarily automotive, compared to 1998. AI acquisition purchase accounting charges and certain nonrecurring items during 1999 contributed to a reported operating loss of $19.3 million versus operating income of $6.6 million in 1998. The 1999 operating loss included the following: $23 million charge related to acquired in-process research and development; a $9.8 million charge related to the revaluation of acquired inventory; net restructuring charges of $1.4 million; an asset impairment charge of $15 million and other repositioning costs of $4.4 million. Excluding nonrecurring items in 1999 and 1998, operating profit in 1999 increased $19.8 million, or 136%, to $34.3 million compared to 1998. Operating profit from the acquired AI and Lumen photolithography businesses were partially offset by the effects of depressed market conditions in the security and automotive businesses during most of 1999. 19 21 Fluid Sciences 2000 Compared to 1999 Sales for 2000 increased $26.5 million to $251.8 million, a 12% increase versus 1999. Organic revenue growth was 25% in 2000. Strong volume in the semiconductor and power generation markets was the primary contributor to the increase in 2000. Reported operating profit for 2000 was $45.1 million, up $14 million, or 45%, versus 1999. The 2000 operating profit included goodwill and intangibles amortization of $2.5 million and certain nonrecurring items: gains on disposition of $2.7 million and restructuring charges of $2.4 million. The 1999 operating profit included goodwill and intangibles amortization of $2.7 million; $4.6 million of gains on dispositions and a net restructuring credit of $2.2 million. Operating profit before goodwill and intangibles amortization and nonrecurring items for 2000 was $47.7 million, increasing $20.7 million, or 77% versus 1999. Higher revenues discussed above and the benefits of lean manufacturing initiatives were the primary contributors to the increase in 2000. 1999 Compared to 1998 During the third quarter of 1999, the Company's business segment previously referred to as Engineered Products was renamed Fluid Sciences. Sales for 1999 were $225.3 million compared to $237.5 million in 1998, representing a $12.2 million, or 5%, decrease. Recovery in the semiconductor industry and continued growth in the power generation businesses was offset by continued weakness in the aerospace markets and the absence of revenues from businesses exited by the Company during 1998, primarily certain sheet metal fabrication operations. Reported 1999 operating profit increased $27.2 million to $31.1 million compared to $3.9 million in 1998. The 1999 operating income included gains on dispositions of $4.6 million and a net restructuring credit of $2.2 million. Excluding 1999 and 1998 nonrecurring items, 1999 operating profit was $24.3 million versus $25.2 million in 1998. Higher sales discussed above and higher gross margins due to Six Sigma and restructuring initiatives were offset by continued weakness in the aerospace markets and the absence of revenues from businesses exited by the Company during 1998. CONSOLIDATED RESULTS -- RESTRUCTURING AND ASSET IMPAIRMENT CHARGES The Company developed restructuring plans during 1998 to integrate and consolidate its businesses and recorded restructuring charges in the first and second quarters of 1998, which are discussed separately below. During the first quarter of 1998, management developed a plan to restructure certain businesses. The plan resulted in pre-tax restructuring charges totaling $30.5 million. As discussed in Note 3, the principal actions in the restructuring plan included close-down or consolidation of a number of offices and facilities, transfer of assembly activities to lower-cost geographic locations, disposal of underutilized assets, withdrawal from certain product lines and general cost reductions. During the second quarter of 1998, the Company expanded its continuing effort to restructure certain businesses to further improve performance. The plan resulted in additional pre-tax restructuring charges of $19.5 million. As discussed in Note 3, the principal actions in this restructuring plan included the integration of operating divisions into five strategic business units (SBUs), close-down or consolidation of a number of production facilities and general cost reductions. The Technical Services segment was subsequently sold during the third quarter of 1999. 20 22 The following table summarizes the current year restructuring activity related to the 1998 plans:
(IN MILLIONS) - ------------- Accrued restructuring costs at beginning of period.......... $ 6.4 Reversals................................................... (6.3) Charges/Writeoffs........................................... (.1) ----- Accrued restructuring costs at end of period................ $ -- -----
The components of the restructuring charges met the criteria set forth in Emerging Issues Task Force Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The charges do not include additional costs associated with the restructuring plans, such as training, consulting, purchase of equipment and relocation of employees and equipment. These costs were charged to operations or capitalized, as appropriate, when incurred. During the third quarter of 1999, due to the substantial completion of the actions of the 1998 restructuring plans, the Company reevaluated its 1998 restructuring plans. As a result of this review, costs associated with the previously planned shutdown of two businesses were no longer required due to actions taken to improve performance. As a result of these developments, the Company recognized a restructuring credit of $12 million during the third quarter of 1999, which primarily affected the Fluid Sciences and Optoelectronics segments. The $12 million credit is reflected in "Restructuring Charges, Net" in the consolidated income statements. During the second quarter of 2000, the Company recognized a restructuring credit of $6 million related to its 1998 restructuring plans. This resulted from the Company's strategic review during the second quarter of 2000 of its portfolio of businesses, actions taken to improve performance at costs lower than originally estimated, and the sale of certain businesses included in the restructuring plans. The acquisitions by the Company discussed in Note 2 and the Company's divestiture during the third quarter of 1999 of its Technical Services segment (exiting government services) were strategic milestones in the Company's transition to a commercial high technology company. Consistent with the strategic direction of the Company and concurrent with the reevaluation of existing restructuring plans during the third quarter of 1999, the Company developed additional plans during the third quarter of 1999 to restructure certain businesses to continue to improve the Company's performance. These plans resulted in a pre-tax restructuring charge of $23.5 million recorded in the third quarter of 1999. As discussed in Note 3, the principal actions in these restructuring plans include close-down or consolidation of a number of offices and facilities, transfer of assembly activities to lower-cost geographic locations, disposal of underutilized assets, withdrawal from certain product lines and general cost reductions. The restructuring plans are expected to result in the elimination of approximately 400 positions, primarily in the manufacturing and sales categories. The major components of the restructuring charge were $13.6 million of employee separation costs to restructure the worldwide organization, including the sales and manufacturing focus, $2.3 million of noncash charges to dispose of certain product lines and assets through sale or abandonment and $7.6 million of charges to terminate lease and other contractual obligations no longer required as a result of the restructuring plans. The charges do not include additional costs associated with the restructuring plans, such as training, consulting, purchase of equipment and relocation of employees and equipment. These costs will be charged to operations or capitalized, as appropriate, when incurred. 21 23 The following table summarizes the current year restructuring activity related to the 1999 plan:
(IN MILLIONS) - ------------- Accrued restructuring costs at beginning of period........ $ 20.8 Provisions................................................ 2.4 Reversals................................................. (4.9) Charges/Writeoffs......................................... (12.4) ------ Accrued restructuring costs at end of period.............. $ 5.9 ------
During the fourth quarter of 2000, the Company reevaluated its 1999 restructuring plan due to the substantial completion of the respective actions and the continuing transformation of the portfolio of businesses during 2000. This resulted in the reversal of $4.9 million of remaining reserves from the 1999 plan and the recording of a pre-tax restructuring charge of $15.1 million for actions to be completed in 2001 (the "2000 plan"). These charges related to the Company's Life Sciences and Optoelectronics segments. The principal actions in the restructuring actions included close-down or consolidation of a number of offices and facilities, transfer of assembly activities to lower cost geographic locations, disposal of unutilized assets and general cost reductions. The restructuring charges were broken down as follows by operating segment: The Life Sciences' principal actions are associated with rationalization of its distribution network and overall facility consolidation. The Optoelectronics' principal actions are associated with its Lighting and Imaging businesses and relate to the shift of certain manufacturing to low cost geographic areas, facility consolidation and general cost reductions. The following table summarizes activity related to the 2000 plan:
TERMINATION DISPOSAL OF LEASES EMPLOYEE OF CERTAIN AND OTHER SEPARATION PRODUCT LINES CONTRACTUAL (IN MILLIONS) COSTS AND ASSETS OBLIGATIONS TOTAL - ------------- ---------- ------------- ----------- ----- Life Sciences........................... $ 2.9 $ .1 $2.1 $ 5.1 Optoelectronics......................... 7.2 2.8 -- 10.0 ----- ---- ---- ----- Total restructuring charges............. 10.1 2.9 2.1 15.1 Amounts during 2000..................... -- -- -- -- ----- ---- ---- ----- Accrued restructuring costs at December 31, 2000.............................. $10.1 $2.9 $2.1 $15.1
During the second quarter of 2000, the Company finalized its original estimates of the goodwill and restructuring plans related to the acquired AI business. As a result of strategic review of the acquired business, continued aggressive actions by the Company to improve the cost structure of the acquired business, and increased costs related primarily to employment integration, the Company adjusted its original estimate of restructuring costs recorded at the acquisition date in connection with purchase accounting. Approximately $4 million was recorded as accrued restructuring costs in connection with the NEN acquisition in the third quarter of 2000. The following table summarizes the current year restructuring activity related to the Lumen, AI, and NEN acquisitions:
(IN MILLIONS) - ------------- Accrued restructuring costs at beginning of period.......... $14.1 Provisions, through purchase accounting, net................ 28.0 Charges/Writeoffs........................................... (9.8) ----- Accrued restructuring costs at end of period................ $32.3
There are no accrued restructuring costs related to Lumen at December 31, 2000 as all respective actions were completed during 2000. Cash outlays during 2000 were approximately $33 million for all of these plans. 22 24 The Company expects to incur approximately $30 to $35 million of cash outlays in connection with these plans throughout fiscal 2001. These funds will come from operating cash flows or borrowings from existing credit facilities. The majority of the actions remaining are expected to occur during 2001. The estimated full year's pre-tax savings under the restructuring plans, due primarily to lower depreciation and lower employment costs, when the plans are fully implemented are anticipated to be approximately $30 to $35 million, or $.39 to $.45 per share. DISCONTINUED OPERATIONS On August 20, 1999, the Company sold the assets of its Technical Services segment, including the outstanding capital stock of EG&G Defense Materials, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc., an affiliate of The Carlyle Group LP (the "Buyer"), for approximately $250 million in cash and the assumption by the Buyer of certain liabilities of the Technical Services segment. Details of the transaction are discussed in Note 7 to the accompanying consolidated financial statements. The results of operations of the Technical Services segment were previously reported as one of five business segments of the Company. The Company accounted for the sale of its Technical Services segment as a discontinued operation in accordance with APB Opinion No. 30 and, accordingly, the results of operations of the Technical Services segment have been segregated from continuing operations and reported as a separate line item on the Company's accompanying consolidated income statements. OTHER EXPENSE 2000 Compared to 1999 Other expense, net, was $42.1 million in 2000 versus $21.8 million in 1999. This net increase in other expense was due primarily to the higher interest expense on increased debt levels resulting from acquisitions. 1999 Compared to 1998 Other expense, net, was $21.8 million in 1999 versus $1.4 million in 1998. This net increase in other expense was due primarily to the impact of higher interest expense on increased debt levels, at higher 1999 short-term rates, resulting from acquisitions. Included in 1999 other expense was $2.2 million of income received by the Company related to the demutualization of a life insurance company in which the Company is a policyholder. INCOME TAX PROVISION The provision for income taxes on pre-tax income from continuing operations for 2000 and 1999 was $58.4 million and $16.5 million, respectively. Reported income tax expense as a percent of pre-tax income for 2000 and 1999 was 40.4% and 36.8%, respectively, due, in part, to the income tax effect on nonrecurring items. Excluding the nonrecurring items and related tax effects, the effective tax rate was 32.5% in 2000 and 32% in 1999. FINANCIAL CONDITION Short-term debt at December 31, 2000 was $186 million and was comprised primarily of commercial paper borrowings. The weighted-average interest rate on the commercial paper borrowings, which had maturities of 60 days or less, was 6.7%. Short-term debt at January 2, 2000 was $382 million and included one-year promissory notes of $150 million issued to PE Corp. at an interest rate of 5%, money market loans of $85 million and commercial paper borrowings of $140 million. In March 2001, the Company's $300 million revolving credit facility was refinanced and will expire in March 2002 and the Company also refinanced an additional $100 million revolving credit facility which expires in March 2006. These agreements, which serve as backup facilities for the commercial paper 23 25 borrowings, have no significant commitment fees. There were no amounts outstanding under these lines at January 2, 2000 or December 31, 2000. At December 31, 2000 and January 2, 2000, long-term debt was $583.3 million and $114.9 million, respectively, and included $115 million of unsecured ten-year notes issued in October 1995 at an interest rate of 6.8%, which mature in 2005. The carrying amount approximated the estimated fair value at December 31, 2000, based on a quoted market price. In August 2000, the Company sold zero coupon senior convertible debentures with an aggregate purchase price of $460 million. The Company used the offering's net proceeds of approximately $448 million to repay a portion of its commercial paper borrowings, which had been increased temporarily to finance the NEN acquisition. Deferred issuance costs of $12 million were recorded as a noncurrent asset and are being amortized over three years. The debentures, which were offered by a prospectus supplement pursuant to the Company's effective shelf registration statement, are due August 2020, and were priced with a yield to maturity of 3.5%. At maturity, the Company will repay $921 million, comprised of $460 million of original purchase price plus accrued interest. The Company may redeem some or all of the debentures at any time on or after August 7, 2003 at a redemption price equal to the issue price plus accrued original issue discount through the redemption date. Holders of the debentures may require the Company to repurchase some or all of the debentures in August 2003 and August 2010, or at any time when there is a change in control of the Company, as is customary and ordinary for debentures of this nature, at a repurchase price equal to the initial price to the public plus accrued original issue discount through the date of the repurchase. The debentures are currently convertible into 5.4 million shares of the Company's common stock at approximately $85 per share. In connection with the completion of the NEN acquisition on July 31, 2000, the Company paid approximately $350 million in cash and issued warrants to purchase approximately 300,000 shares of the Company's common stock in exchange for all of the outstanding shares, options and warrants of NEN. In addition, the Company repaid approximately $50 million of outstanding indebtedness of NEN. The Company financed the acquisition and repayment of the outstanding indebtedness with $410 million of commercial paper borrowings with a weighted-average interest rate of 7%. These short-term borrowings were repaid in August 2000 with proceeds from the issuance of long-term convertible debentures, as discussed above. Cash and cash equivalents decreased by $1.1 million and were $125.6 million at the end of fiscal 2000. Net cash provided by operating activities for 2000 was $145.5 million. This was comprised of net income before depreciation, amortization and other noncash items, net, of $212 million, partially offset by gains on dispositions and sales of investments, net, of $39.6 million and a $26.9 million net change in certain assets and liabilities and other items during 2000. The primary components of this net change included a $4.3 million increase in accounts receivable, a $23.4 million increase in inventory and $33 million of cash outlays associated with restructuring activities. The increase in inventory is due primarily to the inclusion of Vivid and NEN, both acquired in 2000. Capital expenditures were $70.6 million in 2000. The Company estimates that fiscal 2001 capital expenditures will be approximately $65 to $70 million. During 2000 and 1999, the Company purchased 198 thousand and 20 thousand shares, respectively, of its common stock through periodic purchases on the open market at a cost of $10.5 million and $0.9 million, respectively. As of December 31, 2000 the Company had authorization to purchase 5.7 million additional shares. The Company has relatively limited involvement with derivative financial instruments and uses forward contracts to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. The contracts generally have maturities that do not exceed one month and have no cash requirements until maturity. Credit risk and market risk are minimal because the contracts are with large banks and gains and losses are offset against foreign exchange gains and losses on the underlying hedged transactions. The notional amount of outstanding forward contracts was approximately $190 million as of December 31, 2000. 24 26 DIVIDENDS During fiscal 2000, the Company's Board of Directors declared four regular quarterly cash dividends of 14 cents per share, each resulting in an annual rate of 56 cents per share. STOCK SPLIT On January 30, 2001, the Company announced its intention to effect a two for one split of its common stock. The proposed split is subject to the approval of the Company's shareholders at its Annual Meeting on April 24, 2001. ENVIRONMENTAL The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (PRP) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company's responsibility is established and when the cost can be reasonably estimated. The Company has accrued $8.8 million as of December 31, 2000, representing management's estimate of the total cost of ultimate disposition of known environmental matters. Such amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to five years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material effect on the Company's financial position or results of operations. While it is reasonably possible that a material loss exceeding the amounts recorded may have been incurred, the preliminary stages of the investigations make it impossible for the Company to reasonably estimate the range of potential exposure. FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE This report contains "forward-looking statements" as defined in Section 21E of the Securities and Exchange Commission Act of 1934. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Words such as "believes," "anticipates," "plans," "expects," "will" and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of PerkinElmer, Inc. to differ materially from those indicated by these forward-looking statements including, among others, the factors set forth below. The following important factors affect our business and operations generally or affect multiple segments of our business and operations: OUR OPERATING RESULTS COULD BE HARMED IF THE INDUSTRIES INTO WHICH WE SELL OUR PRODUCTS ARE IN DOWNWARD CYCLES. Some of the industries and markets into which we sell our products are cyclical. Industry downturns often are characterized by reduced product demand, excess manufacturing capacity and erosion of average selling prices. Any significant downturn in our customers' markets or in general economic conditions would likely result in a reduction in demand for our products and could harm our business. For example, in 1998 the operating results of our Fluid Sciences segment were adversely affected by the downturn in the semiconductor market. 25 27 IF WE DO NOT INTRODUCE NEW PRODUCTS IN A TIMELY MANNER, OUR PRODUCTS COULD BECOME OBSOLETE, AND OUR OPERATING RESULTS WOULD SUFFER. We sell many of our products in industries characterized by rapid technological changes, frequent new product and service introductions and evolving industry standards. Without the timely introduction of new products and enhancements, our products could become technologically obsolete over time, in which case our revenue and operating results would suffer. The success of our new product offerings will depend upon several factors, including our ability to: - accurately anticipate customer needs; - innovate and develop new technologies and applications; - successfully commercialize new technologies in a timely manner; - price our products competitively and manufacture and deliver our products in sufficient volumes and on time; and - differentiate our offerings from our competitors' offerings. Many of our products are used by our customers to develop, test and manufacture their products. We therefore must anticipate industry trends and develop products in advance of the commercialization of our customers' products. In developing any new product, we may be required to make a substantial investment before we can determine the commercial viability of the new product. If we fail to accurately foresee our customers' needs and future activities, we may invest heavily in research and development of products that do not lead to significant revenue. ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS COULD ADVERSELY AFFECT OUR SALES. Since we sell our products worldwide, our businesses are subject to risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent a substantial portion of our total revenue. In addition, many of our manufacturing facilities, employees and suppliers are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including: - changes in foreign currency exchange rates; - changes in a country's or region's political or economic conditions, particularly in developing or emerging markets; - longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions; - trade protection measures and import or export licensing requirements; - differing tax laws and changes in those laws; - difficulty in staffing and managing widespread operations; - differing labor laws and changes in those laws; - differing protection of intellectual property and changes in that protection; and - differing regulatory requirements and changes in those requirements. FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY CAUSE OUR STOCK PRICE TO DECLINE. Given the nature of the markets in which we participate, we cannot reliably predict future revenue and profitability. Changes in competitive, market and economic conditions may cause us to adjust our operations. A high proportion of our costs are fixed, due in part to our significant sales, research and development and manufacturing costs. Thus, small declines in revenue could disproportionately affect our 26 28 operating results in a quarter. Factors that may affect our quarterly operating results and the market price of our common stock include: - demand for and market acceptance of our products; - competitive pressures resulting in lower selling prices; - adverse changes in the level of economic activity in regions in which we do business; - adverse changes in industries, such as pharmaceutical discovery, telecommunications, semiconductors and electronics, on which we are particularly dependent; - changes in the portions of our revenue represented by our various products and customers; - delays or problems in the introduction of new products; - our competitors' announcement or introduction of new products, services or technological innovations; - increased costs of raw materials or supplies; and - changes in the volume or timing of product orders. In addition, the stock market has experienced extreme price and volume fluctuations. This volatility has significantly affected the market prices of securities for reasons frequently unrelated to or disproportionate to the operating performance of specific companies. These broad market fluctuations may adversely affect the market price of our common stock. WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY, INTEGRATE ACQUIRED BUSINESSES INTO OUR EXISTING BUSINESS OR MAKE ACQUIRED BUSINESSES PROFITABLE. One of our strategies is to supplement our internal growth by acquiring businesses and technologies that complement or augment our existing product lines. We may be unable to identify or complete promising acquisitions for many reasons, including: - competition among buyers; - the need for regulatory approvals, including antitrust approvals; and - the high valuations of businesses. Some of the businesses we may seek to acquire may be marginally profitable or unprofitable. For these acquired businesses to achieve acceptable levels of profitability, we must improve their management, operations, products and market penetration. We may not be successful in this regard and may encounter other difficulties in integrating acquired businesses into our existing operations. To finance our acquisitions, we may have to raise additional funds, either through public or private financings. We may be unable to obtain such funds or may be able to do so only on unfavorable terms. WE FACE AGGRESSIVE COMPETITION IN MANY AREAS OF OUR BUSINESS; IF WE DO NOT COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED. We encounter aggressive competition from numerous competitors in many areas of our business. We may not be able to compete effectively with all of these competitors. To remain competitive, we must develop new products and periodically enhance our existing products in a timely manner. We anticipate that we may have to adjust prices of many of our products to stay competitive. In addition, new competitors may emerge, and entire product lines may be threatened by new technologies or market trends that reduce the value of these product lines. 27 29 IF WE FAIL TO MAINTAIN SATISFACTORY COMPLIANCE WITH THE FOOD AND DRUG ADMINISTRATION'S REGULATIONS AND THOSE OF OTHER GOVERNMENTAL AGENCIES, WE MAY BE FORCED TO RECALL PRODUCTS AND CEASE THEIR MANUFACTURE AND DISTRIBUTION, AND WE COULD BE SUBJECT TO CIVIL OR CRIMINAL PENALTIES. Some of the products produced by our Life Sciences segment are subject to regulation by the United States Food and Drug Administration and similar international agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, promotion, sales and distribution. If we fail to comply with the FDA's regulations or those of similar international agencies, we may have to recall products and cease their manufacture and distribution. In addition, we could be subject to fines or criminal prosecution. CHANGES IN GOVERNMENTAL REGULATIONS MAY REDUCE DEMAND FOR OUR PRODUCTS OR INCREASE OUR EXPENSES. We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as environmental, health and safety and food and drug regulations. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products. OBTAINING AND ENFORCING PATENT PROTECTION FOR OUR PROPRIETARY PRODUCTS, PROCESSES AND TECHNOLOGIES MAY BE DIFFICULT AND EXPENSIVE; WE MAY INFRINGE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. Patent and trade secret protection is important to us because developing and marketing new technologies and products is time-consuming and expensive. We own many U.S. and foreign patents and intend to apply for additional patents to cover our products. We may not obtain issued patents from any pending or future patent applications owned by or licensed to us. The claims allowed under any issued patents may not be broad enough to protect our technology. Third parties may seek to challenge, invalidate or circumvent issued patents owned by or licensed to us or claim that our products and operations infringe their patent or other intellectual property rights. We may incur significant expense in any legal proceedings to protect our proprietary rights or to defend infringement claims by third parties. In addition, claims of third parties against us could result in awards of substantial damages or court orders that could effectively prevent us from making, using or selling our products in the U.S. or abroad. WE HAVE SUBSTANTIAL EXISTING DEBT AND MAY INCUR ADDITIONAL DEBT IN THE FUTURE. We have substantial amounts of outstanding indebtedness. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal of, interest on and other amounts due in respect of our indebtedness when due. We may also obtain additional long-term debt and working capital lines of credit and issue additional commercial paper to meet future financing needs, which would have the effect of increasing our total leverage. Our substantial leverage could have significant negative consequences, including: - increasing our vulnerability to general adverse economic and industry conditions; - limiting our ability to obtain additional financing; - requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our cash flow available for other purposes, including capital expenditures; - limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete; and - placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources. 28 30 A significant portion of our outstanding indebtedness bears interest at floating rates. As a result, our interest payment obligations on such indebtedness will increase if interest rates increase. MARKET RISK Market Risk: The Company is exposed to market risk, including changes in interest rates and currency exchange rates. To manage the volatility relating to these exposures, the Company enters into various derivative transactions pursuant to the Company's policies to hedge against known or forecasted market exposures. Foreign Exchange Risk Management: As a multinational corporation, the Company is exposed to changes in foreign exchange rates. As the Company's international sales grow, exposure to volatility in exchange rates could have a material adverse impact on the Company's financial results. The Company's risk from exchange rate changes is primarily related to non-dollar denominated sales in Europe and Asia. The Company uses foreign currency forward and option contracts to manage the risk of exchange rate fluctuations. The Company uses these derivative instruments to reduce its foreign exchange risk by essentially creating offsetting market exposures. The instruments held by the Company are not leveraged and are not held for trading purposes. The Company uses forward exchange contracts to hedge its net asset (balance sheet) position. The success of the hedging program depends on forecasts of transaction activity in the various currencies. To the extent that these forecasts are overstated or understated during periods of currency volatility, the Company could experience unanticipated currency gains or losses. The principal currencies hedged are the British Pound, Canadian Dollar, Euro, Japanese Yen and Singapore Dollar. In those currencies where there is a liquid, cost-effective forward market, the Company maintains hedge coverage between minimum and maximum percentages of its anticipated transaction exposure for periods not to exceed one year. The gains and losses on these contracts offset changes in the value of the related exposure. Interest Rate Risk: The Company maintains an investment portfolio consisting of securities of various issuers, types and maturities. The investments are classified as available for sale. These securities are recorded on the balance sheet at market value, with any unrealized gain or loss recorded in comprehensive income. These instruments are not leveraged, and are not held for trading purposes. Value-At-Risk: The Company utilizes a Value-at-Risk ("VAR") model to determine the maximum potential loss in the fair value of its interest rate and foreign exchange sensitive derivative financial instruments within a 95% confidence interval. The Company's computation was based on the interrelationships between movements in interest rates and foreign currencies. These interrelationships were determined by observing historical interest rate and foreign currency market changes over corresponding periods. The assets and liabilities, firm commitments and anticipated transactions, which are hedged by derivative financial instruments, were excluded from the model. The Company's computations are based on the Monte Carlo simulation, utilizing a 95% confidence interval and a holding period of 30 days. The VAR model is a risk analysis tool and does not purport to represent actual gains or losses in fair value that will be incurred by the Company. The VAR model estimated that there is a 5% chance that the market value of the derivative instruments held as of December 31, 2000 will deteriorate due to foreign exchange fluctuations by more than $3 million. During the four quarters ended December 31, 2000, the VAR ranged between $1 million and $3 million, and averaged approximately $1.8 million. Management periodically reviews its interest rate and foreign currency exposures and evaluates strategies to manage such exposures in the near future. The Company implements changes, when deemed necessary, in the management of hedging instruments which mitigate its exposure. Since the Company utilizes interest rate and foreign currency sensitive derivative instruments for hedging, a loss in fair value for those instruments is generally offset by increases in the value of the underlying transaction. It is the Company's policy to enter into foreign currency and interest rate transactions only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into foreign currency or interest rate transactions for speculative purposes. 29 31 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA PERKINELMER, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS FOR THREE YEARS ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999 1998 - -------------------------------------------- ---------- ---------- -------- Sales: Products.............................................. $1,484,275 $1,206,038 $784,520 Services.............................................. 210,992 157,091 69,862 ---------- ---------- -------- Total Sales............................................. 1,695,267 1,363,129 854,382 ---------- ---------- -------- Cost of Sales: Products.............................................. 917,428 746,417 496,861 Services.............................................. 85,768 107,043 54,126 Revaluation of Acquired Inventory..................... 2,946 9,857 -- ---------- ---------- -------- Total Cost of Sales..................................... 1,006,142 863,317 550,987 Selling, General and Administrative Expenses............ 418,979 327,142 203,740 Research and Development Expenses....................... 86,117 71,248 46,026 In-Process Research and Development Charges............. 32,400 23,000 2,300 Restructuring Charges, Net.............................. 4,105 11,520 50,027 Asset Impairment Charges................................ -- 18,000 7,400 Gains on Dispositions................................... (39,051) (17,750) (125,822) ---------- ---------- -------- Operating Income From Continuing Operations............. 186,575 66,652 119,724 Other Expense, Net...................................... (42,086) (21,782) (1,397) ---------- ---------- -------- Income From Continuing Operations Before Income Taxes... 144,489 44,870 118,327 Provision for Income Taxes.............................. 58,422 16,499 39,326 ---------- ---------- -------- Income From Continuing Operations....................... 86,067 28,371 79,001 Income From Discontinued Operations, Net of Income Taxes................................................. -- 15,665 23,001 Gain on Disposition of Discontinued Operations, Net of Income Taxes................................... 4,453 110,280 -- ---------- ---------- -------- Net Income.............................................. $ 90,520 $ 154,316 $102,002 ========== ========== ======== BASIC EARNINGS PER SHARE: Continuing Operations................................. $ 1.75 $ .62 $ 1.74 Discontinued Operations............................... .09 2.77 .51 ---------- ---------- -------- Net Income.............................................. $ 1.84 $ 3.39 $ 2.25 ---------- ---------- -------- DILUTED EARNINGS PER SHARE: Continuing Operations................................. $ 1.68 $ .61 $ 1.72 Discontinued Operations............................... .09 2.70 .50 ---------- ---------- -------- Net Income.............................................. $ 1.77 $ 3.31 $ 2.22 ========== ========== ========
The accompanying notes are an integral part of these consolidated financial statements. 30 32 PERKINELMER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2000 AND JANUARY 2, 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999 - -------------------------------------------- ---------- ---------- Current Assets: Cash and cash equivalents................................. $ 125,551 $ 126,650 Accounts receivable....................................... 359,068 346,160 Inventories............................................... 230,766 201,724 Other current assets...................................... 177,676 140,560 ---------- ---------- TOTAL CURRENT ASSETS........................................ 893,061 815,094 ---------- ---------- Property, Plant and Equipment: At cost................................................... 550,040 496,347 Accumulated depreciation and amortization................. (275,280) (268,313) ---------- ---------- Net Property, Plant and Equipment........................... 274,760 228,034 ---------- ---------- Investments................................................. 36,730 14,911 Intangible Assets........................................... 951,441 592,438 Other Assets................................................ 104,187 64,163 ---------- ---------- TOTAL ASSETS................................................ $2,260,179 $1,714,640 ========== ========== Current Liabilities: Short-term debt........................................... $ 186,206 $ 382,162 Accounts payable.......................................... 151,805 152,920 Accrued restructuring costs............................... 53,344 41,759 Accrued expenses.......................................... 326,244 275,657 ---------- ---------- TOTAL CURRENT LIABILITIES................................... 717,599 852,498 ---------- ---------- Long-Term Debt.............................................. 583,337 114,855 Long-Term Liabilities....................................... 230,854 196,511 Commitments and Contingencies Stockholders' Equity: Preferred stock -- $1 par value, authorized 1,000,000 shares; none outstanding............................... -- -- Common stock -- $1 par value, authorized 100,000,000 shares; issued 61,454,000 shares in 2000 and 60,102,000 in 1999................................................ 61,454 60,102 Capital in Excess of Par.................................. 98,514 -- Retained earnings......................................... 835,917 762,009 Accumulated other comprehensive income (loss)............. (39,042) (14,040) Cost of shares held in treasury; 11,680,000 shares in 2000 and 13,736,000 shares in 1999.......................... (228,454) (257,295) ---------- ---------- Total Stockholders' Equity.................................. 728,389 550,776 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $2,260,179 $1,714,640 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 31 33 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE THREE YEARS ENDED DECEMBER 31, 2000
ACCUMULATED OTHER CAPITAL COMPREHENSIVE COST OF TOTAL (DOLLARS IN THOUSANDS EXCEPT COMPREHENSIVE COMMON RETAINED IN EXCESS INCOME SHARES HELD STOCKHOLDERS' PER SHARE DATA) INCOME STOCK EARNINGS OF PAR (LOSS) IN TREASURY EQUITY - ---------------------------- ------------- ------- -------- --------- ------------- ----------- ------------- BALANCE, DECEMBER 28, 1997......... $60,102 $540,379 $ -- $ (3,857) $(268,236) $328,388 Comprehensive income: Net income....................... $102,002 -- 102,002 -- -- -- 102,002 Other comprehensive income, net of tax: Gross foreign currency translation adjustments...... 4,608 -- -- -- 4,608 -- 4,608 Reclassification adjustment for translation losses realized upon sale of Sealol Industrial Seals............. 3,115 -- -- 3,115 -- 3,115 Unrealized losses on securities arising during the period.... (137) -- -- -- (137) -- (137) -------- Other comprehensive income....... 7,586 -------- Comprehensive income............... $109,588 ======== Cash dividends ($.56 per share).... -- (25,408) -- -- -- (25,408) Exercise of employee stock options and related income tax benefits......................... -- 6,618 -- -- 21,698 28,316 Purchase of common stock for treasury......................... -- -- -- -- (41,217) (41,217) ------- -------- ------- -------- --------- -------- BALANCE, JANUARY 3, 1999........... 60,102 623,591 -- 3,729 (287,755) 399,667 Comprehensive income: Net income....................... $154,316 -- 154,316 -- -- -- 154,316 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments.................. (17,804) -- -- -- (17,804) -- (17,804) Unrealized gains on securities: Gains arising during the period..................... 93 Reclassification adjustment................. (58) -------- Net unrealized gains........... 35 -- -- -- 35 -- 35 -------- Other comprehensive income (loss)......................... (17,769) -------- Comprehensive income............... $136,547 ======== Cash dividends ($.56 per share).... -- (25,499) -- -- -- (25,499) Exercise of employee stock options and related income tax benefits......................... -- 8,369 -- -- 20,264 28,633 Issuance of common stock for employee benefit plans........... -- 1,232 -- -- 11,166 12,398 Purchase of common stock for treasury......................... -- -- -- -- (970) (970) ------- -------- ------- -------- --------- -------- BALANCE, JANUARY 2, 2000........... 60,102 762,009 -- (14,040) (257,295) 550,776 Comprehensive income: Net income....................... $ 90,520 -- 90,520 -- -- -- 90,520 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments.................. (25,484) -- -- -- (25,484) -- (25,484) Unrealized gains on securities: Gains arising during the period..................... 481 Reclassification adjustment................. 1 -------- Net unrealized losses.......... 482 -- -- -- 482 -- 482 -------- Other comprehensive income (loss)......................... (25,002) -------- Comprehensive income............... $ 65,518 ======== Cash dividends ($.56 per share).... -- (27,533) -- -- -- (27,533) Exercise of employee stock options and related income tax benefits......................... -- -- 33,230 -- 34,939 68,169 Issuance of common stock for employee benefit plans........... -- (155) 5,228 -- 4,389 9,462 Purchase of common stock for treasury......................... -- -- (102) -- (10,487) (10,589) Mergers, acquisitions and other.... 1,352 11,076 60,158 -- -- 72,586 ------- -------- ------- -------- --------- -------- BALANCE, DECEMBER 31, 2000......... $61,454 $835,917 $98,514 $(39,042) $(228,454) $728,389 ======= ======== ======= ======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements. 32 34 PERKINELMER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THREE YEARS ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS) 2000 1999 1998 - ---------------------- --------- --------- --------- Operating Activities: Net income................................................ $ 90,520 $ 154,316 $ 102,002 Deduct net income from discontinued operations............ -- (15,665) (23,001) Deduct net gain on disposition of discontinued operations.............................................. (4,453) (110,280) -- --------- --------- --------- Income from continuing operations......................... 86,067 28,371 79,001 Adjustments to reconcile income from continuing operations to net cash provided by continuing operations: Revaluation of acquired inventory....................... 2,946 9,857 -- In-process research and development charges............. 32,400 23,000 2,300 Noncash portion of restructuring charges................ 2,900 2,300 12,020 Asset impairment charges................................ -- 18,000 7,400 Depreciation and amortization........................... 79,148 66,115 48,510 Amortization of debt discount and issuance cost......... 8,567 -- -- Gains on dispositions and sales of investments, net..... (39,570) (21,624) (130,545) Changes in assets and liabilities which provided (used) cash, excluding effects from companies purchased or divested: Accounts receivable................................... (4,256) (54,439) 7,830 Inventories........................................... (23,380) 12,132 3,265 Accounts payable and accrued expenses................. 25,264 62,660 13,797 Tax benefit of common stock option exercises.......... 30,843 5,811 3,431 Accrued restructuring costs........................... (31,440) (21,005) 29,569 Prepaid and deferred taxes............................ -- (2,616) (12,359) Prepaid expenses and other............................ (23,941) (19,794) (23,366) --------- --------- --------- Net Cash Provided by Continuing Operations.................. 145,548 108,768 40,853 Net Cash Provided by Discontinued Operations................ -- 7,061 28,702 --------- --------- --------- Net Cash Provided by Operating Activities................... 145,548 115,829 69,555 --------- --------- --------- Investing Activities: Capital expenditures...................................... (70,598) (41,092) (44,489) Proceeds from dispositions of businesses and sales of property, plant and equipment........................... 87,780 31,560 210,505 Cost of acquisitions, net of cash and cash equivalents acquired................................................ (397,384) (302,288) (217,937) Proceeds from sales/ costs of purchases of investments.... (20,457) 6,086 7,623 Other..................................................... 1,919 (1,408) (160) --------- --------- --------- Net Cash Used in Continuing Operations...................... (398,740) (307,142) (44,458) Net Cash Provided by (Used in) Discontinued Operations...... (2,690) 163,259 (2,033) --------- --------- --------- Net Cash Used in Investing Activities....................... (401,430) (143,883) (46,491) --------- --------- --------- Financing Activities: Proceeds from issuance of convertible debt................ 448,000 -- -- Increase (decrease) in commercial paper borrowings........ 37,000 (10,000) 104,156 Payment of acquired Lumen revolving credit borrowings..... -- -- (59,090) Other debt increases (decreases).......................... (233,991) 69,529 7,270 Proceeds from issuance of common stock.................... 46,902 28,923 28,316 Purchases of common stock................................. (10,589) (970) (41,217) Cash dividends............................................ (27,533) (25,499) (25,408) --------- --------- --------- Net Cash Provided by Financing Activities................... 259,789 61,983 14,027 Effect of Exchange Rate Changes on Cash and Cash Equivalents............................................... (5,006) (2,844) 540 --------- --------- --------- Net (Decrease) Increase in Cash and Cash Equivalents........ (1,099) 31,085 37,631 Cash and Cash Equivalents at Beginning of Year.............. 126,650 95,565 57,934 --------- --------- --------- Cash and Cash Equivalents at End of Year.................... $ 125,551 $ 126,650 $ 95,565 ========= ========= ========= Supplemental Disclosures of Cash Flow Information (see also Note 2): Cash paid during the year for: Interest................................................ $ 45,236 $ 28,438 $ 12,367 Income taxes............................................ 21,819 82,368 59,029 Noncash Investing and Financing Activities: One-year secured 5% promissory notes issued to PE Corp. in connection with the acquisition of the Analytical Instruments Division................................... -- 150,000 --
The accompanying notes are an integral part of these consolidated financial statements. 33 35 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of PerkinElmer, Inc. (formerly EG&G, Inc.) and its subsidiaries (the Company). All material intercompany balances and transactions have been eliminated in consolidation. Nature of Operations: PerkinElmer, Inc. is a global high technology company which provides products and systems to the telecom, medical, pharmaceutical, chemical, semiconductor, photographic and other markets. The Company's operating segments are Life Sciences, Optoelectronics, Instruments and Fluid Sciences. In August 1999, the Company divested its Technical Services segment, which is presented as discontinued operations in accordance with Accounting Principles Board (APB) Opinion No. 30, Reporting the Results of Operations (see Note 7). 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Sales: The majority of the Company's product sales are recorded at the time of shipment and when persuasive evidence of an arrangement exists, the seller's price to the buyer is fixed or determinable and collectibility is reasonably assured. Provision is made at the time the related revenue is recognized for the cost of any installation obligations and the estimated cost of product warranties. When other significant obligations remain after products are delivered, including certain customer acceptance provisions, revenue is recognized only after such obligations are fulfilled. If a loss is anticipated on any contract, provision for the entire loss is made immediately. Revenue related to the sale of maintenance contracts is deferred and amortized on a straight-line basis over the service period. For equipment leased to a customer under a sales-type lease, revenue recognition generally commences when the equipment has been shipped and installed. In the fourth quarter of 2000, retroactive to January 1, 2000, the Company adopted Securities and Exchange Commission (SEC) Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements, which provides guidance in applying generally accepted accounting principles to certain revenue recognition issues. The adoption of SAB 101 did not have a material impact on the Company's financial position or quarterly or annual results of operations. The former Technical Services segment had cost-reimbursement contracts with governmental agencies. These contracts included both cost plus fixed fee contracts and cost plus award fee contracts based on performance. Sales under cost-reimbursement contracts were recorded as costs were incurred and included applicable income in the proportion that costs incurred bear to total estimated costs. Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. The majority of inventories is accounted for using the first-in, first-out method of determining inventory costs; remaining inventories are accounted for using the last-in, first-out (LIFO) method. Property, Plant and Equipment: For financial statement purposes, the Company depreciates plant and equipment using the straight-line method over their estimated useful lives, which generally fall within the following ranges: buildings and special-purpose structures -- 10 to 25 years; leasehold improvements -- estimated useful life or remaining term of lease, whichever is shorter; machinery and equipment -- 3 to 7 years. Nonrecurring tooling costs are capitalized, while recurring costs are expensed. For income tax purposes, the Company depreciates plant and equipment over their estimated useful lives using accelerated methods. Pension Plans: The Company's funding policy provides that payments to the U.S. pension trusts shall at least be equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974. Non-U.S. plans are accrued for, but generally not funded, and benefits are paid from operating funds. 34 36 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Translation of Foreign Currencies: The balance sheet accounts of non-U.S. operations, exclusive of stockholders' equity, are translated at year-end exchange rates, and income statement accounts are translated at weighted-average rate in effect during the year; any translation adjustments are made directly to a component of stockholders' equity. Intangible Assets: In accordance with Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and APB Opinion No. 17, Intangible Assets, the Company reviews long-lived assets and all intangible assets (including goodwill) for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate, to the carrying amount including associated intangible assets of such operation. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. (See Note 4 for further discussion of asset impairment charges.) Stock-Based Compensation: In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, the Company accounts for stock-based compensation at intrinsic value with disclosure of the effects of fair value accounting on net income and earnings per share on a pro forma basis. Cash Flows: For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid instruments with a purchased maturity of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value due to the short maturities. Environmental Matters: The Company accrues for costs associated with the remediation of environmental pollution when it is probable that a liability has been incurred and the Company's proportionate share of the amount can be reasonably estimated. Any recorded liabilities have not been discounted. Comprehensive Income: The Company has adopted the provisions of SFAS No. 130, Reporting Comprehensive Income, which established standards for reporting and display of comprehensive income and its components. Comprehensive income is the total of net income and all other nonowner changes in stockholders' equity. Segments and Related Information: The Company has adopted the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The statement established standards for the way that public business enterprises report information and operating segments in annual financial statements and requires reporting of selected information in interim financial reports. Derivative Instruments and Hedging: The Financial Accounting Standards Board issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133, in June 1999. SFAS No. 133 is now effective for all fiscal quarters of all fiscal years beginning after June 15, 2000; earlier adoption is allowed. The statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The effect of the adoption of SFAS No. 133 as of January 1, 2001 will not be material. Reclassifications: Certain amounts from prior years have been reclassified to conform to the 2000 financial statement presentation. NOTE 2. ACQUISITIONS AND DIVESTITURES On January 14, 2000, the Company completed its acquisition of Vivid Technologies, Inc. (Vivid) for an aggregate purchase price of approximately $67 million. The transaction was a stock merger whereby the shareholders of Vivid received one share of the Company's common stock for each 6.2 shares of Vivid common stock; approximately 1.6 million shares were issued in connection with the acquisition. Vivid, which is a leading 35 37 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) supplier of automated explosive detection systems utilized in airports and high-security facilities worldwide, generated sales of $21 million for the twelve months ended September 30,1999. Vivid's operations, included in the consolidated results of the Company from the date of acquisition, are reported in the Instruments segment. The acquisition was accounted for as a purchase under Accounting Principles Board (APB) Opinion No. 16, Business Combinations. In accordance with APB Opinion No. 16, the Company allocated the purchase price of Vivid based on the fair values of the net assets acquired and liabilities assumed. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included approximately $8.1 million for acquired in-process research and development (R&D) for projects that had not reached technological feasibility as of the acquisition date and for which no alternative use existed. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects; these costs were expensed in the first quarter of 2000. Other acquired intangible assets totaling $6.4 million included the fair value of developed technology. These intangible assets are being amortized over their estimated useful life of 10 years. Goodwill of $24.1 million resulting from the acquisition of Vivid is being amortized over 25 years. On July 31, 2000, the Company completed its acquisition of NEN Life Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products, services, reagents and technologies to the life sciences industry. The Company purchased NEN from an investor group led by Genstar Capital LLC for an aggregate purchase price of approximately $400 million. In connection with the acquisition, the Company paid approximately $350 million in cash and issued warrants to purchase approximately 300,000 shares of the Company's common stock in exchange for all of the outstanding shares, options and warrants of NEN. In addition, the Company repaid approximately $50 million of outstanding indebtedness of NEN. The Company financed the acquisition and repayment of the outstanding indebtedness with $410 million of commercial paper borrowings with a weighted-average interest rate of 7%. These short-term borrowings were repaid in early August with proceeds from the issuance of long-term convertible debentures (see Note 14). NEN's operations, included in the consolidated results of the Company from the date of acquisition, are reported in the Life Sciences segment. The acquisition was accounted for as a purchase under APB Opinion No. 16, and the Company allocated the purchase price of NEN based on the fair values of the net assets acquired and liabilities assumed. The allocation of the purchase price has not yet been finalized, however, the Company does not expect material changes. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included approximately $24.3 million for acquired in-process research and development (R&D) for projects that had not reached technological feasibility as of the acquisition date and for which no alternative use existed. This allocation represents the estimated fair value based non risk-adjusted cash flows related to the in-process R&D projects; these costs were expensed in the third quarter of 2000. Other acquired intangible assets totaling $75.9 million included the fair value of trade names, trademarks, patents and developed technology with lives ranging from 10 - 20 years. Goodwill of $270.8 million resulting from the acquisition of NEN is being amortized over 20 years. Approximately $4 million has been recorded as accrued restructuring costs in connection with the acquisition of NEN. The restructuring plans include initiatives to integrate the operations of the Company and NEN, and to reduce overhead. The primary components of these plans relate to employment costs, consolidation of certain facilities, and the termination of certain leases and other contractual obligations. Management is in the process of developing its restructuring plans related to NEN, and accordingly, the amounts recorded are based on management's current estimate of these costs. The Company will finalize these plans during 2001, and the majority of the restructuring actions are expected to occur during 2001. 36 38 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of NEN's purchase price and preliminary allocation were as follows:
(IN THOUSANDS) - -------------- Consideration and acquisition costs: Cash paid to NEN.......................................... $348,918 Debt assumed.............................................. 48,262 Acquisition costs......................................... 13,647 Fair value of warrants issued............................. 6,940 -------- Total............................................. $417,767 ======== Preliminary allocation of purchase price: Current assets............................................ $ 34,327 Property, plant and equipment............................. 59,755 Other assets.............................................. 739 Acquired intangibles...................................... 75,900 In-process R&D............................................ 24,300 Goodwill.................................................. 270,790 Liabilities............................................... (48,044) -------- Total............................................. $417,767 ========
On May 28, 1999, the Company completed its acquisition of the Analytical Instruments Division (AI) of PE Corp. for an aggregate purchase price of approximately $425 million, plus acquisition costs. In addition, under the terms of the Purchase Agreement dated March 8, 1999 between the Company and PE Corp. (the "Purchase Agreement"), the Company assumed German and other pension liabilities of approximately $65 million. These pension liabilities were historically funded on a pay-as-you-go basis, and the funding going-forward is expected to remain consistent. The acquisition was accounted for as a purchase under APB Opinion No. 16. In accordance with APB Opinion No. 16, the Company allocated the purchase price of AI based on the fair values of the net assets acquired and liabilities assumed. AI produces high-quality analytical testing instruments and consumables, and generated 1998 fiscal year sales of $569 million. AI's operations are reported in the Company's Instruments segment. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included approximately $23 million for acquired in-process R&D. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of the acquisition of AI, the development of these projects had not yet reached technological feasibility, and the R&D in process had no alternative future uses. Accordingly, these costs were expensed in the second quarter of 1999. Other acquired intangibles totaling $163.8 million included the fair value of trade names, trademarks, patents and developed technology. These intangibles are being amortized over their respective estimated useful lives ranging from 10-40 years. Goodwill resulting from the acquisition of AI is being amortized over 40 years. Approximately $28 million was recorded as accrued restructuring charges in connection with the acquisition of AI. The restructuring plans include initiatives to integrate the operations of the Company and of AI, and reduce overhead. The primary components of these plans relate to: (a) employee termination benefits and related costs for approximately 20% of the acquired workforce of approximately 3,000 employees; (b) consolidation or shutdown of certain operational facilities worldwide and (c) termination of certain leases and other contractual obligations. During the second quarter of 2000, the Company finalized its restructuring plan for AI. Based on continued aggressive actions by the Company to improve the cost structure of the acquired business, and increased costs related primarily to employment integration, the Company adjusted its original estimate of restructuring costs recorded at the acquisition date in connection with purchase accounting. The majority of the remaining restructuring actions are expected to occur through fiscal 2001. 37 39 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the purchase price and allocation were as follows:
(IN THOUSANDS) -------------- Consideration and acquisition costs: Cash paid................................................. $ 275,000 Seller note............................................... 150,000 Pension liabilities assumed............................... 65,000 Acquisition costs......................................... 10,000 --------- $ 500,000 ========= Preliminary allocation of purchase price: Current assets............................................ $ 253,777 Property, plant and equipment............................. 33,308 Acquired intangibles...................................... 163,800 In-process R&D............................................ 23,000 Goodwill.................................................. 185,941 Liabilities assumed and other............................. (159,826) --------- $ 500,000 =========
On December 16, 1998, the Company acquired substantially all of the outstanding common stock and options of Lumen Technologies, Inc. (Lumen), a maker of high-technology specialty light sources. The purchase price of approximately $253 million, which included $75 million of assumed debt, was funded with existing cash and commercial paper borrowings. The acquisition was accounted for as a purchase under APB Opinion No. 16, and the Company allocated the purchase price of Lumen based on the fair values of the assets acquired and liabilities assumed. Portions of the purchase price, including intangible assets, were valued by independent appraisers utilizing proven valuation procedures and techniques. These intangible assets included approximately $2.3 million for acquired in-process R&D for projects that did not have future alternative uses. This allocation represents the estimated fair value based on risk-adjusted cash flows related to the in-process R&D projects. At the date of the acquisition, the development of these projects had not yet reached technological feasibility, and the R&D in process had no alternative future uses. Accordingly, these costs were expensed in the fourth quarter of 1998. Acquired intangibles totaling $11.8 million included the fair value of trade names, trademarks and patents. These intangibles are being amortized over their estimated useful life of 10 years. Goodwill resulting from the Lumen acquisition is being amortized over 30 years. Approximately $5 million was recorded as accrued restructuring charges in connection with the acquisition. The restructuring plans included initiatives to integrate the operations of the Company and Lumen, and to reduce overhead. The primary components of these plans related to: (a) transfer of certain manufacturing activities to lower-cost facilities, (b) integration of the sales and marketing organization and (c) termination of certain contractual obligations. Unaudited pro forma operating results for the Company, assuming the acquisitions of Lumen and AI occurred on December 29, 1997, and NEN occurred on January 3, 1999, are as follows:
(IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999 1998 ------------------------------------ ---------- ---------- ---------- Sales from continuing operations................... $1,765,111 $1,681,817 $1,556,094 Income from continuing operations.................. 92,981 (3,547) 45,813 Basic earnings per share......................... 1.89 (.08) 1.01 Diluted earnings per share....................... 1.82 (.08) 1.00 Net Income......................................... $ 97,434 $ 122,398 $ 68,814 Basic earnings per share......................... 1.98 2.69 1.52 Diluted earnings per share....................... 1.91 2.69 1.50
38 40 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The pro forma amounts in the table above exclude the in-process R&D charges of $24.3 million, $23 million and $2.3 million for NEN, AI and Lumen, respectively. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of the Company's operating results that would have occurred had the acquisitions been consummated on the date for which the consummation of the acquisitions is being given effect, nor is it necessarily indicative of the Company's future operating results. The pro forma amounts do not reflect any operating efficiencies and cost savings that the Company believes are achievable. Pro forma amounts for the Vivid acquisition are not included as its effect is not material to the Company's consolidated financial statements. During the first quarter of 2000, the Company sold its micromachined sensors and specialty semiconductor businesses for cash of $24.3 million, resulting in a pre-tax gain of $6.7 million. Combined financial results of the divested businesses for 2000 and 1999 were not material to the consolidated results of the Company. During the third quarter of 2000, the Company recorded pre-tax gains totaling $3.1 million from an insurance settlement and disposition of a building. During the fourth quarter of 2000, the Company sold its Berthold business at a pre-tax gain of $10 million. The Company has deferred gain recognition of approximately $11.9 million of sales proceeds from this divestiture in connection with certain contingencies related to the sale. Revenues for 2000 and 1999 for the divested business were $30 million and $38 million, respectively. Also during the fourth quarter of 2000, the Company recorded a pre-tax gain of $16 million from the sale of a building. During the second quarter of 1999, the Company sold its Structural Kinematics business for cash of $15 million, resulting in a pre-tax gain of $4.3 million. Additionally, as a result of the Company's continuing evaluation of its Instruments businesses, the Company undertook certain repositioning actions during the second quarter of 1999, including exiting selected product lines and activities, rebalancing its customer mix in certain businesses and other related activities. These actions resulted in second quarter pre-tax charges of approximately $3.4 million, primarily recorded in cost of sales. During the fourth quarter of 1999, the Company sold its KT Aerofab business for cash of $4.4 million, resulting in a pre-tax gain of $0.3 million. The net operating results of the divested businesses for 1999 were not significant. In April 1998, the Company sold its Sealol Industrial Seals division for cash of $100 million, resulting in a pre-tax gain of $58.3 million. The after-tax gain of this divestiture was $42.6 million. Sealol's 1998 sales prior to the disposition were $23 million, and its operating income was $2.1 million. In January 1998, the Company sold its Rotron division for $103 million in cash, resulting in a pre-tax gain of $64.4 million. During the first quarter of 1998, the Company also sold a small product line for $4 million in cash, resulting in a pre-tax gain of $3.1 million. The after-tax gain of these divestitures was $45.2 million in 1998. During 2000 and 1999, in connection with the 1998 dispositions of the Company's Rotron and Sealol Industrial Seals divisions, the Company recognized approximately $3.7 million and $13.2 million respectively, of pre-tax gains from the previously deferred sales proceeds as a result of the favorable resolution of certain events and contingencies. All of the gains described above are reported on the "Gains on Dispositions" line in the consolidated income statements. NOTE 3. RESTRUCTURING AND INTEGRATION CHARGES The Company developed restructuring plans during 1998 to integrate and consolidate its businesses and recorded restructuring charges in the first and second quarters of 1998, which are discussed separately below. During the first quarter of 1998, management developed a plan to restructure certain businesses. A discussion of the businesses affected within each segment is presented below. The plan resulted in pre-tax restructuring charges totaling $30.5 million. The principal actions in the restructuring plan included close-down or consolidation of a number of offices and facilities, transfer of assembly activities to lower-cost geographic locations, disposal of underutilized assets, withdrawal from certain product lines and general cost reductions. 39 41 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Specific businesses within each segment which were affected by the restructuring actions are as follows: the Fluid Sciences business affected primarily manufactures mechanical components and systems; the Optoelectronics businesses affected produce various lighting and sensor components and systems; the Instruments restructuring related primarily to its X-ray imaging business which produces security screening equipment, as well as its Instruments for Research and Applied Science business which produces particle detector equipment. During the second quarter of 1998, the Company expanded its continuing effort to restructure certain businesses to further improve performance. The plan resulted in additional pre-tax restructuring charges of $19.5 million. The principal actions in this restructuring plan included the integration of operating divisions into five strategic business units (SBUs), close-down or consolidation of a number of production facilities and general cost reductions. The Technical Services segment was subsequently sold during the third quarter of 1999. The components of the restructuring charges met the criteria set forth in Emerging Issues Task Force Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The charges do not include additional costs associated with the restructuring plans, such as training, consulting, purchase of equipment and relocation of employees and equipment. These costs were charged to operations or capitalized, as appropriate, when incurred. During the third quarter of 1999, due to the substantial completion of the actions of the 1998 restructuring plans, the Company reevaluated its 1998 restructuring plans. As a result of this review, costs associated with the previously planned shutdown of two businesses were no longer required due to actions taken to improve performance. As a result of these developments, the Company recognized a restructuring credit of $12 million during the third quarter of 1999, which primarily affected the Fluid Sciences and optoelectronics segments. During the second quarter of 2000, the Company recognized an additional restructuring credit of $6 million related to its 1998 restructuring plans. This resulted from the elimination of certain planned actions, actions taken to improve performance at costs lower than originally estimated, and the sale of certain businesses included in the restructuring plans. These credits are reflected in "Restructuring Charges, Net" in the consolidated income statements. The restructuring charges related to continuing operations recorded in 1998 were broken down as follows by operating segment:
TERMINATION OF DISPOSAL OF LEASES AND OTHER EMPLOYEE CERTAIN PRODUCT CONTRACTUAL (IN MILLIONS) SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL - ------------- ---------------- ---------------- ---------------- ------ Life Sciences..................... $ 3.6 $ .4 $ .6 $ 4.6 Optoelectronics................... 8.5 6.4 5.4 20.3 Instruments....................... 6.4 2.9 2.0 11.3 Fluid Sciences.................... 6.2 1.9 1.8 9.9 Corporate and Other............... 3.8 -- .1 3.9 ----- ------ ----- ------ Total restructuring charges....... 28.5 11.6 9.9 50.0 Amounts incurred through January 3, 1999......................... (8.1) (11.6) (1.0) (20.7) ----- ------ ----- ------ Accrued restructuring costs at January 3, 1999................. 20.4 -- 8.9 29.3 Amounts incurred during 1999...... (8.3) -- (2.6) (10.9) Amounts reversed during 1999...... (7.4) -- (4.6) (12.0) ----- ------ ----- ------
40 42 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TERMINATION OF DISPOSAL OF LEASES AND OTHER EMPLOYEE CERTAIN PRODUCT CONTRACTUAL (IN MILLIONS) SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL - ------------- ---------------- ---------------- ---------------- ------ Accrued restructuring costs at January 2, 2000................. 4.7 -- 1.7 6.4 Amounts incurred during 2000...... -- -- (.1) (.1) Amounts reversed during 2000...... (4.7) -- (1.6) (6.3) ----- ------ ----- ------ Accrued restructuring costs at December 31, 2000............... $ -- $ -- $ -- $ -- ===== ====== ===== ======
The acquisitions by the Company discussed in Note 2 and the Company's divestiture during the third quarter of 1999 of its Technical Services segment (exiting government services) were strategic milestones in the Company's transition to a commercial high-technology company. Consistent with the strategic direction of the Company and concurrent with the reevaluation of existing restructuring plans during the third quarter of 1999, the Company developed additional plans during the third quarter of 1999 to restructure certain businesses to continue to improve the Company's performance. These plans resulted in a pre-tax restructuring charge of $23.5 million recorded in the third quarter of 1999. The principal actions in these restructuring plans include close-down or consolidation of a number of offices and facilities, transfer of assembly activities to lower-cost geographic locations, disposal of underutilized assets, withdrawal from certain product lines and general cost reductions. The restructuring plans are expected to result in the elimination of approximately 400 positions, primarily in the manufacturing and sales categories. The major components of the restructuring charge were $13.6 million of employee separation costs to restructure the worldwide organization, including the sales and manufacturing focus, $2.3 million of noncash charges to dispose of certain product lines and assets through sale or abandonment and $7.6 million of charges to terminate lease and other contractual obligations no longer required as a result of the restructuring plans. The charges do not include additional costs associated with the restructuring plans, such as training, consulting, purchase of equipment and relocation of employees and equipment. These costs will be charged to operations or capitalized, as appropriate, when incurred. The restructuring actions related to the 1999 charge are broken down as follows by business segment:
TERMINATION OF DISPOSAL OF LEASES AND OTHER EMPLOYEE CERTAIN PRODUCT CONTRACTUAL (IN MILLIONS) SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL - ------------- ---------------- ---------------- ---------------- ------ Life Sciences..................... $ .5 $ .8 $ 4.9 $ 6.2 Optoelectronics................... 6.1 .8 2.1 9.0 Instruments....................... 1.8 -- -- 1.8 Fluid Sciences.................... 5.2 .2 .1 5.5 Corporate and Other............... -- .5 .5 1.0 ----- ---- ----- ------ Total restructuring charge........ 13.6 2.3 7.6 23.5 Amounts incurred through January 2, 2000......................... (2.1) (.2) (.4) (2.7) ----- ---- ----- ------
41 43 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TERMINATION OF DISPOSAL OF LEASES AND OTHER EMPLOYEE CERTAIN PRODUCT CONTRACTUAL (IN MILLIONS) SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL - ------------- ---------------- ---------------- ---------------- ------ Accrued restructuring costs at January 2, 2000................. $11.5 $2.1 $ 7.2 $ 20.8 Provisions during 2000............ 2.4 -- -- 2.4 Amounts incurred during 2000...... (7.4) (.2) (4.8) (12.4) Amounts reversed during 2000...... (4.0) -- (.9) (4.9) ----- ---- ----- ------ Accrued restructuring costs at December 31, 2000............... $ 2.5 $1.9 $ 1.5 $ 5.9 ===== ==== ===== ======
Further details of the Company's restructuring actions are presented below. Specific businesses within each segment which were affected by the restructuring actions are as follows: the primary Fluid Sciences business affected manufactures certain products for the aerospace markets; the Optoelectronics businesses affected produce various lighting and sensor components and systems; the Instruments restructuring relates to its analytical instruments business, its X-ray imaging business which produces security screening equipment, and its Instruments for Research and Applied Science business which produces particle detector equipment. Close-down of certain facilities: Costs have been accrued for the closing down of certain facilities. These costs relate primarily to the Instruments and Optoelectronics segments. Transfer of assembly activities: The Company continues to relocate certain activities, primarily in its Optoelectronics segment, to lower-cost geographic areas, such as the Philippines, Indonesia and China. The costs included in the restructuring charges related to costs associated with exiting the previous operations. Actual costs to physically relocate are charged to operations as incurred. Disposal of underutilized assets: The Company plans to dispose of underutilized assets either through sale or abandonment, primarily in its Instruments and Optoelectronics segments. Withdrawal from certain product lines: The Company has made a strategic decision to discontinue certain unprofitable product lines, primarily in its Optoelectronics segment. Most of the actions remaining at December 31, 2000 are expected to occur in fiscal 2001. During the fourth quarter of 2000, the Company reevaluated its 1999 restructuring plan due to the substantial completion of the respective actions and the continuing transformation of the portfolio of businesses during 2000. This resulted in the reversal of $4.9 million of remaining reserves from the 1999 plan and the recording of a pre-tax restructuring charge of $15.1 million for actions to be completed in 2001 (the "2000 plan"). These charges related to the Company's Life Sciences and Optoelectronics segments. The principal actions in the restructuring plans included close-down or consolidation of a number of offices and facilities, transfer of assembly activities to lower cost geographic locations, disposal of underutilized assets and general cost reductions. The restructuring charges were broken down as follows by operating segment: The Life Sciences' principal actions are associated with rationalization of its distribution network and overall facility consolidation. The Optoelectronics' principal actions are associated with its Lighting and Imaging businesses and relate to the shift of certain manufacturing to low cost geographic areas, facility consolidation and general cost reductions. 42 44 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes activity related to the 2000 plan:
TERMINATION OF DISPOSAL OF LEASES AND OTHER EMPLOYEE CERTAIN PRODUCT CONTRACTUAL (IN MILLIONS) SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL - ------------- ---------------- ---------------- ---------------------- ----- Life Sciences.................. $ 2.9 $ .1 $2.1 $ 5.1 Optoelectronics................ 7.2 2.8 -- 10.0 ----- ---- ---- ----- Total restructuring charges.... 10.1 2.9 2.1 15.1 Amounts during 2000............ -- -- -- -- ----- ---- ---- ----- Accrued restructuring costs at December 31, 2000............ $10.1 $2.9 $2.1 $15.1 ===== ==== ==== =====
During the second quarter of 2000, the Company finalized its restructuring plan for AI. Based on continued aggressive actions by the Company to improve the cost structure of the acquired business, and increased costs related primarily to employment integration, the Company adjusted its original estimate of restructuring costs recorded at the acquisition date in connection with purchase accounting. The majority of the remaining restructuring actions are expected to occur through fiscal 2001. The following table summarizes reserve activity through December 31, 2000 related to the May 1999 AI acquisition as discussed in Note 2:
(IN MILLIONS) - ------------- Accrued restructuring costs at beginning of period.......... $12.4 Provisions, through purchase accounting, net................ 24.0 Charges/Writeoffs........................................... (7.7) ----- Accrued restructuring costs at December 31, 2000............ $28.7 =====
The following table summarizes reserve activity through December 31, 2000 related to the December 1998 Lumen acquisition and July 2000 NEN acquisition as discussed in Note 2 (all Lumen actions were completed during 2000):
(IN MILLIONS) - ------------- Accrued restructuring costs at beginning of period (Lumen)................................................... $ 1.7 Provisions, through purchase accounting..................... 4.0 Charges/Writeoffs........................................... (2.1) ----- Accrued restructuring costs at end of period................ $ 3.6 =====
Cash outlays during 2000 were approximately $33 million for all of these plans. The Company expects to incur approximately $30 to $35 million of cash outlays in connection with these plans throughout fiscal 2001. The majority of the actions remaining are expected to occur during 2001. NOTE 4. ASSET IMPAIRMENT CHARGES During the third quarter of 1999, in connection with its ongoing review of its portfolio of businesses, the Company conducted a strategic review of certain units within its business segments. The strategic review triggered an impairment review of long-lived assets of certain business units that were expected to be disposed. The Company calculated the present value of expected cash flows of certain business units to determine the fair value of those assets. Accordingly, in the third quarter of 1999, the Company recorded noncash impairment charges and wrote down goodwill by $15 million in the Instruments segment and $3 million in the Optoelectronics segment. Sales and 43 45 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) operating profit for the businesses under strategic review were approximately $54 million and $2 million, respectively, in 1999. During 2000, the Company disposed of its Berthold business which represented $30 million of the $54 million of sales. During the second quarter of 1998, the Company recorded a $7.4 million noncash impairment charge related to an automotive testing facility in the Instruments segment. The impairment charge applied to fixed assets and resulted from projected changes in the principal customer's demand for services. The Company calculated the present value of expected cash flows of the testing facility to determine the fair value of the assets. NOTE 5. OTHER EXPENSE Other income (expense), net, consisted of the following:
(IN THOUSANDS) 2000 1999 1998 - -------------- -------- -------- -------- Interest Income......................................... $ 4,495 $ 3,365 $ 6,873 Interest Expense........................................ (41,412) (28,284) (11,391) Gains on sales of investments, net...................... 1,294 1,952 4,465 Other................................................... (6,463) 1,185 (1,344) -------- -------- -------- $(42,086) $(21,782) $ (1,397) ======== ======== ========
Other consists mainly of foreign exchange losses, and $2.2 million of income received by the Company in 1999 related to the demutualization of a life insurance company in which the Company is a policyholder. The increase in interest expense in 2000 versus 1999 is due to the impact of higher debt levels resulting from acquisitions. NOTE 6. INCOME TAXES The components of income from continuing operations before income taxes for financial reporting purposes were as follows:
(IN THOUSANDS) 2000 1999 1998 - -------------- -------- ------- -------- U.S. .................................................... $ 34,807 $ 1,044 $ 26,664 Non-U.S. ................................................ 109,682 43,826 91,663 -------- ------- -------- $144,489 $44,870 $118,327 ======== ======= ========
44 46 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the provision for income taxes for continuing operations were as follows:
DEFERRED (IN THOUSANDS) CURRENT (PREPAID) TOTAL - -------------- ------- --------- ------- 2000 Federal................................................. $13,161 $ 14,338 $27,499 State................................................... 3,470 3,095 6,565 Non-U.S. ............................................... 25,538 (1,180) 24,358 ------- -------- ------- $42,169 $ 16,253 $58,422 ======= ======== ======= 1999 Federal................................................. $ 9,397 $ (5,436) $ 3,961 State................................................... 921 (621) 300 Non-U.S. ............................................... 13,052 (814) 12,238 ------- -------- ------- $23,370 $ (6,871) $16,499 ======= ======== ======= 1998 Federal................................................. $32,067 $ (7,538) $24,529 State................................................... 3,802 (977) 2,825 Non-U.S. ............................................... 15,951 (3,979) 11,972 ------- -------- ------- $51,820 $(12,494) $39,326 ======= ======== =======
The total provision for income taxes included in the consolidated financial statements was as follows:
(IN THOUSANDS) 2000 1999 1998 - -------------- ------- ------- ------- Continuing Operations...................................... $58,422 $16,499 $39,326 Discontinued Operations.................................... 2,847 80,522 14,706 ------- ------- ------- $61,269 $97,021 $54,032 ======= ======= =======
The major differences between the Company's effective tax rate for continuing operations and the federal statutory rate were as follows:
2000 1999 1998 ----- ----- ----- Federal statutory rate...................................... 35.0% 35.0% 35.0% Non-U.S. rate differential, net............................. (12.4) (18.0) (19.0) Future remittance of non-U.S. earnings...................... -- -- 8.4 State income taxes, net..................................... 2.9 1.4 1.6 Goodwill amortization....................................... 8.2 7.6 .6 Goodwill write-downs........................................ -- 11.7 -- In-process R&D.............................................. 7.9 -- -- Change in valuation allowance............................... (1.7) 9.0 2.0 Other, net.................................................. .5 (9.9) 4.6 ----- ----- ----- Effective tax rate.......................................... 40.4% 36.8% 33.2% ===== ===== =====
The 2000 tax provision and effective rate for continuing operations includes tax for nonrecurring items such as the disposals of Berthold, IC Sensors and Judson. The effective tax rate on continuing operations, excluding nonrecurring items, was 32.5% in 2000. 45 47 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The 1999 tax provision and effective rate for continuing operations was impacted by a non-deductible goodwill write-down. Excluding the impairment charges and related tax effects, the effective tax rate was 32% in 1999. The tax effects of temporary differences and carryovers that gave rise to deferred income tax assets and liabilities as of December 31, 2000 and January 2, 2000 were as follows:
(IN THOUSANDS) 2000 1999 - -------------- -------- -------- Deferred tax assets: Inventory reserves........................................ $ 3,331 $ 7,042 Other reserves............................................ 22,336 16,417 Deferred income........................................... 6,179 6,024 Vacation pay.............................................. 5,704 5,499 Net operating loss carryforwards.......................... 14,447 28,562 Postretirement health benefits............................ 4,981 4,072 Restructuring reserve..................................... 16,005 15,567 In-process R&D............................................ 10,726 8,970 All other, net............................................ 47,265 50,138 -------- -------- Total deferred tax assets................................... 130,974 142,291 -------- -------- Deferred tax liabilities: Pension contribution...................................... (14,565) (13,354) Amortization.............................................. (6,488) (468) Depreciation.............................................. (39,896) (19,661) All other, net............................................ (17,588) (20,748) -------- -------- Total deferred tax liabilities.............................. (78,537) (54,231) -------- -------- Valuation allowance......................................... (14,447) (28,580) -------- -------- Net prepaid taxes........................................... $ 37,990 $ 59,480 ======== ========
At December 31, 2000, the Company had non-U.S. (primarily from Germany) net operating loss carryovers of $53.4 million, substantially all of which carry forward indefinitely. The valuation allowance results primarily from these carryovers, for which the Company currently believes it is more likely than not that they will not be realized. Current deferred tax assets of $54 million and $92 million were included in other current assets at December 31, 2000 and January 2, 2000, respectively. Long-term deferred tax liabilities of $16 million and $33 million were included in long-term liabilities at December 31, 2000 and January 2, 2000, respectively. In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Repatriation of retained earnings is done only when it is advantageous. Applicable federal taxes are provided only on amounts planned to be remitted. In connection with 1998 divestitures, certain proceeds will not be permanently reinvested in those operations, and, accordingly, federal taxes in the amount of $10 million were provided in connection with those earnings. NOTE 7. DISCONTINUED OPERATIONS On August 20, 1999, the Company sold the assets of its Technical Services segment, including the outstanding capital stock of EG&G Defense Materials, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc., an affiliate of The Carlyle Group L.P. (the "Buyer"), for approximately $250 million in cash and the assumption by the Buyer of certain liabilities of the Technical Services segment. Approximately $2.1 million of the cash purchase price will be paid by the Buyer to the Company on the seventh anniversary of the closing of this transaction. The 46 48 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company recorded an additional pre-tax gain of $7.3 million on the disposition of discontinued operations as a result of a post-closing selling price settlement in the second quarter of 2000. The results of operations of the Technical Services segment were previously reported as one of five business segments of the Company. The Company accounted for the sale of its Technical Services segment as a discontinued operation in accordance with APB Opinion No. 30 and, accordingly, the results of operations of the Technical Services segment have been segregated from continuing operations and reported as a separate line item on the Company's Consolidated Income Statements. The Company recorded a pre-tax gain on disposition of discontinued operations of $181 million, net of transaction and related costs, during 1999. The $110 million after-tax gain was reported separately from the results of the Company's continuing operations. The Company's former Department of Energy (DOE) segment is also presented as discontinued operations in accordance with APB Opinion No. 30. The Company's last DOE management and operations contract expired in 1997. The Company is in the process of negotiating contract closeouts and does not anticipate incurring any material loss in excess of previously established reserves. Summary operating results of the discontinued operations (through August 20, 1999) were as follows:
(IN THOUSANDS) 1999 1998 - -------------- -------- -------- Sales....................................................... $302,776 $553,514 Costs and expenses.......................................... 278,242 517,762 -------- -------- Operating income from discontinued operations............... 24,534 35,752 Other income................................................ 1,147 1,955 -------- -------- Income from discontinued operations before income taxes..... 25,681 37,707 Provision for income taxes.................................. 10,016 14,706 -------- -------- Income from discontinued operations, net of income taxes.... $ 15,665 $ 23,001 ======== ========
NOTE 8. EARNINGS PER SHARE Basic earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding during the year. Diluted earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding plus all potentially dilutive common shares outstanding, primarily shares issuable upon the exercise of stock options using the treasury stock method. The following table reconciles the number of shares utilized in the earnings per share calculations:
(IN THOUSANDS) 2000 1999 1998 - -------------- ------ ------ ------ Number of common shares -- basic............................ 49,106 45,522 45,322 Effect of dilutive securities: Stock options............................................. 2,011 1,015 516 Other..................................................... 22 32 46 ------ ------ ------ Number of common shares -- diluted.......................... 51,139 46,569 45,884 ====== ====== ======
Options to purchase 27,200 and 92,000 shares of common stock were not included in the computation of diluted earnings per share for 2000 and 1998, respectively, because the options' exercise prices were greater than the average market price of the common shares and thus their effect would have been antidilutive. Additionally, the Company's zero coupon senior convertible debentures (See Note 14) are currently convertible into 5.4 million shares of the Company's common stock at approximately $85 per share. Conversion of the debentures was not assumed in the computation of diluted earnings per share because the effect of assumed conversion would have been antidilutive. 47 49 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 9. ACCOUNTS RECEIVABLE Accounts receivable were net of reserves for doubtful accounts of $15.0 million and $12.9 million as of December 31, 2000 and January 2, 2000, respectively. The increase is primarily due to the higher revenues in 2000 versus 1999 and the inclusion of Vivid and NEN in 2000. NOTE 10. INVENTORIES Inventories as of December 31, 2000 and January 2, 2000, consisted of the following:
(IN THOUSANDS) 2000 1999 - -------------- -------- -------- Finished goods.............................................. $ 88,508 $ 87,177 Work in process............................................. 56,482 26,342 Raw materials............................................... 85,776 88,205 -------- -------- $230,766 $201,724 ======== ========
The increase in inventories was primarily due to the acquisitions of Vivid and NEN in 2000. NOTE 11. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, at cost, as of December 31, 2000 and January 2, 2000 consisted of the following:
(IN THOUSANDS) 2000 1999 - -------------- -------- -------- Land........................................................ $ 26,058 $ 28,724 Buildings and leasehold improvements........................ 143,402 127,908 Machinery and equipment..................................... 380,580 339,715 -------- -------- $550,040 $496,347 ======== ========
Increases in property, plant and equipment due to the acquisitions of Vivid and NEN and capital expenditures during 2000 were partially offset by decreases resulting from dispositions and the effect of translating fixed assets denominated in non-U.S. currencies at current exchange rates. NOTE 12. INVESTMENTS Investments as of December 31, 2000 and January 2, 2000 consisted of the following:
(IN THOUSANDS) 2000 1999 - -------------- ------- ------- Marketable investments...................................... $21,936 $11,082 Joint venture and other investments......................... 14,794 3,829 ------- ------- $36,730 $14,911 ======= =======
The primary components of the increase in investments in 2000 versus 1999 are certain strategic alliances and equity investments made through the Company's Life Sciences and Optoelectronics segments. Joint venture investments are accounted for using the equity method. Marketable investments consisted of trust assets which were carried at market value and were primarily invested in common stocks and fixed-income securities to meet the supplemental executive retirement plan obligation, as well as an $8 million equity investment in Genomic Solutions made in 2000. The market values were based on quoted market prices. As of December 31, 2000 the fixed-income securities, on average, had maturities of approximately 15 years. The net unrealized holding gain on marketable investments, net of deferred income taxes, reported as a component of accumulated other comprehensive income (loss) in stockholders' equity, was $0.9 million and $0.4 million at December 31, 2000 and 48 50 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) January 2, 2000, respectively. During 2000, the Company completed a strategic alliance with and made an initial $5 million investment in Bragg Photonics, a maker of key fiber optic components. The Company's initial 13% investment in Bragg Photonics was increased to 26% during the year for a total investment at December 31, 2000 of $10 million. Marketable investments classified as available for sale as of December 31, 2000 and January 2, 2000 consisted of the following:
GROSS UNREALIZED HOLDING MARKET ----------------------------- (IN THOUSANDS) VALUE COST GAINS (LOSSES) - -------------- ------- ------- ------ -------- 2000 Common stocks.................................... $17,356 $16,021 $1,689 $(354) Fixed-income securities.......................... 4,143 4,074 69 -- Other............................................ 437 492 -- (55) ------- ------- ------ ----- $21,936 $20,587 $1,758 $(409) ======= ======= ====== ===== 1999 Common stocks.................................... $ 7,046 $ 6,345 $ 721 $ (20) Fixed-income securities.......................... 3,360 3,449 -- (89) Other............................................ 676 652 24 -- ------- ------- ------ ----- $11,082 $10,446 $ 745 $(109) ======= ======= ====== =====
NOTE 13. INTANGIBLE ASSETS Intangible assets consist mainly of goodwill from acquisitions accounted for using the purchase method of accounting, representing the excess of cost over the fair market value of the net assets of the acquired businesses. Goodwill is being amortized over periods of 10-40 years. Goodwill, net of accumulated amortization, was $688 million and $417 million at December 31, 2000 and January 2, 2000, respectively. Other identifiable intangible assets from acquisitions include patents, trademarks, trade names and developed technology and are being amortized over periods of 10-40 years. Other identifiable intangible assets, net of accumulated amortization, were $263 million and $175 million at December 31, 2000 and January 2, 2000, respectively. Intangible assets as of December 31, 2000 and January 2, 2000 consisted of the following:
(IN THOUSANDS) 2000 1999 - -------------- ---------- -------- Goodwill.................................................... $ 744,607 $477,072 Other identifiable intangible assets........................ 304,300 182,550 ---------- -------- 1,048,907 659,622 Accumulated amortization.................................... (97,466) (67,184) ---------- -------- $ 951,441 $592,438 ========== ========
The increase in intangible assets resulted primarily from the Vivid and NEN acquisitions. NOTE 14. DEBT Short-term debt at December 31, 2000 was $186 million and was comprised primarily of commercial paper borrowings. The weighted-average interest rate on the commercial paper borrowings, which had maturities of 60 days or less, was 6.7%. 49 51 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Short-term debt at January 2, 2000 was $382 million and included one-year promissory notes of $150 million issued to PE Corp. at an interest rate of 5%, money market loans of $85 million and commercial paper borrowings of $140 million. In March 2001, the Company's $300 million revolving credit facility was refinanced and will expire in March 2002 and the Company also refinanced an additional $100 million revolving credit facility which expires in March 2006. These agreements, which serve as backup facilities for the commercial paper borrowings, have no significant commitment fees. There were no amounts outstanding under these lines at January 2, 2000 or December 31, 2000. At December 31, 2000 and January 2, 2000, long-term debt was $583.3 million and $114.9 million, respectively, and included $115 million of unsecured ten-year notes issued in October 1995 at an interest rate of 6.8%, which mature in 2005 as well as $460 million of zero coupon senior convertible debentures described below. The carrying amount of the unsecured ten-year notes approximated the estimated fair value at December 31, 2000, based on a quoted market price. The estimated fair value of the convertible debentures approximated $558 million at December 31, 2000, also based on a quoted market price. In August 2000, the Company sold zero coupon senior convertible debentures with an aggregate purchase price of $460 million. The Company used the offering's net proceeds of approximately $448 million to repay a portion of its commercial paper borrowings, which had been increased temporarily to finance the NEN acquisition. Deferred issuance costs of $12 million were recorded as a noncurrent asset and are being amortized over three years. The debentures, which were offered by a prospectus supplement pursuant to the Company's effective shelf registration statement, are due August 2020, and were priced with a yield to maturity of 3.5%. At maturity, the Company will repay $921 million, comprised of $460 million of original purchase price plus accrued original issue discount. The Company may redeem some or all of the debentures at any time on or after August 7, 2003 at a redemption price equal to the issue price plus accrued original issue discount through the redemption date. Holders of the debentures may require the Company to repurchase some or all of the debentures in August 2003 and August 2010, or at any time when there is a change in control of the Company, as is customary and ordinary for debentures of this nature, at a repurchase price equal to the initial price to the public plus accrued original issue discount through the date of the repurchase. The debentures are currently convertible into 5.4 million shares of the Company's common stock at approximately $85 per share. In connection with the completion of the NEN acquisition on July 31, 2000, the Company paid approximately $350 million in cash as a part of the purchase price. In addition, the Company repaid approximately $50 million of outstanding indebtedness of NEN. The Company financed the acquisition and repayment of the outstanding indebtedness with $410 million of commercial paper borrowings with a weighted-average interest rate of 7%. These short-term borrowings were repaid in early August with proceeds from the issuance of long-term convertible debentures, as discussed above. NOTE 15. ACCRUED EXPENSES Accrued expenses as of December 31, 2000 and January 2, 2000 consisted of the following:
(IN THOUSANDS) 2000 1999 - -------------- -------- -------- Payroll and incentives...................................... $ 43,064 $ 32,720 Employee Benefits........................................... 48,495 49,293 Federal, non-U.S. and state income taxes.................... 42,292 45,234 Other accrued operating expenses............................ 192,393 148,320 -------- -------- $326,244 $275,657 ======== ========
The increase is due primarily to the inclusion of Vivid and NEN, both of which were acquired in 2000. 50 52 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. EMPLOYEE BENEFIT PLANS Savings Plan: The Company has a savings plan for the benefit of qualified U.S. employees. Under this plan, the Company contributes an amount equal to the lesser of 55% of the amount of the employee's voluntary contribution or 3.3% of the employee's annual compensation. Savings plan expense charged to continuing operations was $5.4 million in 2000, $3.9 million in 1999, and $2.7 million in 1998. Pension Plans: The Company has defined benefit pension plans covering substantially all U.S. employees and non-U.S. pension plans for non-U.S. employees. The plans provide benefits that are based on an employee's years of service and compensation near retirement. Assets of the U.S. plan are comprised primarily of equity and debt securities. Net periodic pension cost included the following components:
(IN THOUSANDS) 2000 1999 1998 - -------------- -------- -------- -------- Service cost............................................ $ 6,063 $ 8,539 $ 9,365 Interest cost........................................... 16,974 19,528 18,300 Expected return on plan assets.......................... (17,998) (23,130) (23,360) Net amortization and deferral........................... (487) (645) (816) -------- -------- -------- $ 4,552 $ 4,292 $ 3,480 ======== ======== ========
The following table sets forth the changes in the funded status of the principal U.S. pension plan and the principal non-U.S. pension plans and the amounts recognized in the Company's consolidated balance sheets as of December 31, 2000 and January 2, 2000.
2000 1999 -------------------- -------------------- (IN THOUSANDS) NON-U.S. U.S. NON-U.S. U.S. - -------------- -------- -------- -------- -------- Actuarial present value of benefit obligations: Accumulated benefit obligations............... $63,518 $157,587 $84,110 $144,588 ======= ======== ======= ======== Projected benefit obligations at beginning of year........................................ $91,888 $171,106 $32,571 $259,468 AI projected benefit obligations at date of acquisition................................. -- -- 67,780 -- Service cost.................................. 1,439 4,624 1,528 7,011 Interest cost................................. 4,778 12,196 3,872 15,656 Benefits paid................................. (3,398) (9,677) (2,345) (11,802) Actuarial loss (gain)......................... (4,168) (3,898) (4,489) 1,859 Effect of exchange rate changes............... (6,251) -- (7,029) -- Dispositions.................................. (17,584) -- -- -- Settlement loss -- discontinued operations.... -- -- -- 20,316 Curtailment gain -- discontinued operations... -- -- -- (13,798) Reduction of projected benefit obligations -- discontinued operations..................... -- -- -- (107,604) ------- -------- ------- -------- Projected benefit obligations at end of year........................................ 66,704 174,351 91,888 171,106 ------- -------- ------- -------- Fair value of plan assets at beginning of year........................................ -- 254,535 -- 310,024 Actual return on plan assets.................. -- (14,038) -- 65,040
51 53 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000 1999 -------------------- -------------------- (IN THOUSANDS) NON-U.S. U.S. NON-U.S. U.S. - -------------- -------- -------- -------- -------- Benefits paid and plan expenses............... -- (9,678) -- (12,679) Transfer out-discontinued operations.......... -- (472) -- (107,850) ------- -------- ------- -------- Fair value of plan assets at end of year...... -- 230,347 -- 254,535 ------- -------- ------- -------- Plan assets less (greater) than projected benefit obligations......................... 66,704 (55,996) 91,888 (83,429) Unrecognized net transition asset............. -- 512 -- 1,024 Unrecognized prior service costs.............. (732) (52) (918) (54) Unrecognized net gain......................... 3,252 19,469 2,385 48,078 ------- -------- ------- -------- Accrued pension liability (asset)............. $69,224 $(36,067) $93,355 $(34,381) ======= ======== ======= ======== Actuarial assumptions as of the year-end measurement date: Discount rate............................... 6.0% 7.5% 5.8% 7.5% Rate of compensation increase............... 3.3% 4.5% 3.5% 4.5% Expected rate of return on assets........... -- 9.0% -- 9.0%
Non-U.S. accrued pension liabilities classified as long-term liabilities totaled $86 million and $122 million as of December 31, 2000 and January 2, 2000, respectively. The U.S. pension asset was classified as other noncurrent assets. The Company also sponsors a supplemental executive retirement plan to provide senior management with benefits in excess of normal pension benefits. At December 31, 2000 and January 2, 2000, the projected benefit obligations were $16.4 million and $14.9 million, respectively. Assets with a fair value of $9.2 million and $9.8 million segregated in a trust, were available to meet this obligation as of December 31, 2000 and January 2, 2000, respectively. Pension expense for this plan was approximately $2.0 million in 2000, $1.8 million in 1999 and $1.4 million in 1998. Postretirement Medical Plans: The Company provides health care benefits for eligible retired U.S. employees under a comprehensive major medical plan or under health maintenance organizations where available. The majority of the Company's U.S. employees become eligible for retiree health benefits if they retire directly from the Company and have at least ten years of service. Generally, the major medical plan pays stated percentages of covered expenses after a deductible is met and takes into consideration payments by other group coverages and by Medicare. The plan requires retiree contributions under most circumstances and has provisions for cost-sharing changes. For employees retiring after 1991, the Company has capped its medical premium contribution based on employees' years of service. The Company funds the amount allowable under a 401(h) provision in the Company's defined benefit pension plan. Assets of the plan are comprised primarily of equity and debt securities. Net periodic postretirement medical benefit cost (credit) included the following components:
(IN THOUSANDS) 2000 1999 1998 - -------------- -------- -------- -------- Service cost............................................ $ 232 $ 289 $ 360 Interest cost........................................... 992 1,036 1,250 Expected return on plan assets.......................... (1,219) (1,304) (1,245) Net amortization and deferral........................... (1,516) (1,022) (402) -------- -------- -------- $ (1,511) $ (1,001) $ (37) ======== ======== ========
52 54 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the changes in the postretirement medical plan's funded status and the amounts recognized in the Company's consolidated balance sheets at December 31, 2000 and January 2, 2000:
(IN THOUSANDS) 2000 1999 - -------------- ------- ------- Actuarial present value of accumulated benefit obligations: Retirees.................................................. $10,379 $13,672 Active employees eligible to retire....................... 371 800 Other active employees.................................... 2,117 5,256 ------- ------- Accumulated benefit obligations at beginning of year........ 12,867 19,728 ------- ------- Service cost................................................ 232 289 Interest cost............................................... 992 1,036 Benefits paid............................................... (1,196) (1,204) Actuarial loss (gain)....................................... 430 (2,782) Plan adjustments............................................ 530 -- Settlement loss -- discontinued operations.................. -- 381 Curtailment gain -- discontinued operations................. -- (2,350) Reduction of accumulated benefit obligations -- discontinued operations................................................ -- (2,231) ------- ------- Change in accumulated benefit obligations during the year... 988 (6,861) ------- ------- Retirees.................................................. 10,651 10,379 Active employees eligible to retire....................... 400 371 Other active employees.................................... 2,804 2,117 ------- ------- Accumulated benefit obligations at end of year.............. 13,855 12,867 ------- ------- Fair value of plan assets at beginning of year.............. 14,474 15,255 Actual return on plan assets................................ (590) 3,214 Benefits paid and plan expenses............................. (1,630) (757) Transfer out-discontinued operations........................ -- (3,238) ------- ------- Fair value of plan assets at end of year.................... 12,254 14,474 ------- ------- Fair value of plan assets less (greater) than accumulated benefit obligations....................................... 1,601 (1,605) Unrecognized prior service costs............................ (489) -- Unrecognized net gain....................................... 4,614 9,234 ------- ------- Accrued postretirement medical liability.................... $ 5,726 $ 7,629 ======= ======= Actuarial assumptions as of the year-end measurement date: Discount rate............................................. 7.5% 7.5% Expected rate of return on assets......................... 9.0% 9.0% Health care cost trend rate: First year............................................. 8.0% 9.0% Ultimate............................................... 5.5% 5.5% Time to reach ultimate................................. 3 years 4 years
The accrued postretirement medical liability included $4.7 million and $6.6 million classified as long-term liabilities as of December 31, 2000 and January 2, 2000, respectively. If the health care cost trend rate was increased 1%, the accumulated postretirement benefit obligations would have increased by approximately $0.6 million at December 31, 2000. The effect of this increase on the annual cost for 2000 would have been approximately $42,000. If the health care cost trend rate was decreased 1%, the 53 55 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accumulated postretirement benefit obligations would have decreased by approximately $0.5 million at December 31, 2000. The effect of this decrease on the annual cost for 2000 would have been approximately $37,000. Deferred Compensation Plans: During 1998, the Company implemented certain nonqualified deferred compensation programs that provide benefits payable to officers and certain key employees or their designated beneficiaries at specified future dates, upon retirement or death. Benefit payments under these plans are funded by a combination of contributions from participants and the Company. Other: In April 1999, the Company's stockholders approved the 1999 Incentive Plan, under which cash performance awards as well as an aggregate of 3.5 million shares of the Company's common stock were made available for option grants, restricted stock awards, performance units and other stock-based awards. NOTE 17. REIMBURSEMENT OF INVESTED CAPITAL In 1997, the Company received a $30.4 million payment as part of the negotiation of a joint development contract. This payment represented a $27 million reimbursement of previously invested capital, which will be amortized to income over the estimated life of the related assets, and a $3.4 million reimbursement of cost of capital, which was included in other income. The reimbursement, net of accumulated amortization, included in long-term liabilities was $11 million as of December 31, 2000 and $15.3 million as of January 2, 2000. NOTE 18. COMMITMENTS AND CONTINGENCIES The Company is subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of amounts provided will not have a material adverse effect on the financial position or results of operations of the Company. In addition, the Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (PRP) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company's responsibility is established and when the cost can be reasonably estimated. The Company has accrued $8.8 million as of December 31, 2000, representing management's estimate of the total cost of ultimate disposition of known environmental matters. Such amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to five years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material effect on the Company's financial position or results of operations. While it is reasonably possible that a material loss exceeding the amounts recorded may have been incurred, the preliminary stages of the investigations make it impossible for the Company to reasonably estimate the range of potential exposure. The Company has received notices from the Internal Revenue Service (IRS) asserting deficiencies in federal corporate income taxes for the Company's 1985 to 1994 tax years. The total additional tax proposed by the IRS amounts to $74 million plus interest. The Company has filed petitions in the United States Tax Court to challenge most of the deficiencies asserted by the IRS. The Company believes that it has meritorious legal defenses to those 54 56 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) deficiencies and believes that the ultimate outcome of the case will not result in a material impact on the Company's consolidated results of operations or financial position. NOTE 19. RISKS AND UNCERTAINTIES For information concerning various investigations, claims, legal proceedings, environmental investigations and remedial actions, and notices from the IRS, see Note 18. For information concerning factors affecting future performance, see Management's Discussion and Analysis. Costs incurred under cost-reimbursable government contracts, primarily in the former Technical Services segment, which is presented as discontinued operations, are subject to audit by the government. The results of prior audits, completed through 1996, have not had a material effect on the Company. The Company's management and operations contracts with the DOE are presented as discontinued operations. The Company's last DOE management and operations contract expired on September 30, 1997. The Company is in the process of negotiating contract closeouts and does not anticipate incurring any material loss in excess of previously established reserves. NOTE 20. STOCKHOLDERS' EQUITY Stock-Based Compensation: Under the 1999 Incentive Plan, 3.5 million additional shares of the Company's common stock were made available for option grants, restricted stock awards, performance units and other stock-based awards. At December 31, 2000, 1.9 million shares of the Company's common stock were reserved for employee benefit plans. The Company has nonqualified and incentive stock option plans for officers and key employees. Under these plans, options may be granted at prices not less than 100% of the fair market value on the date of grant. Options expire 7-10 years from the date of grant, and options granted become exercisable, in ratable installments, over periods of 3-5 years from the date of grant. The Compensation Committee of the Board of Directors, at its sole discretion, may also include stock appreciation rights in any option granted. There are no stock appreciation rights outstanding under these plans. The following table summarizes stock option activity for the three years ended December 31, 2000:
2000 1999 1998 ---------------------- ---------------------- ---------------------- WEIGHTED- WEIGHTED- WEIGHTED- NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE (SHARES IN THOUSANDS) OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE - --------------------- --------- --------- --------- --------- --------- --------- Outstanding at beginning of year............................ 4,572 $23.53 3,300 $20.05 4,187 $19.64 Granted........................... 2,782 50.77 2,711 25.94 568 22.82 Exercised......................... (1,862) 20.23 (1,109) 19.08 (1,209) 19.87 Lapsed............................ (667) 31.02 (330) 23.28 (246) 20.29 ------ ------ ------ Outstanding at end of year........ 4,809 39.03 4,572 23.53 3,300 20.05 ====== ====== ====== Exercisable at end of year........ 1,245 25.42 1,851 19.31 1,540 19.46 ====== ====== ======
55 57 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information about stock options outstanding at December 31, 2000:
RANGE OF EXERCISE PRICES OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------ -------------------------------------- ---------------------- WEIGHTED- AVERAGE WEIGHTED- WEIGHTED- REMAINING AVERAGE AVERAGE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE (SHARES IN THOUSANDS) SHARES LIFE (YEARS) PRICE SHARES PRICE - --------------------- --------- ------------ --------- --------- --------- $ 3.11 - 21.63......................... 622 4.8 $19.53 375 $18.52 21.75 - 27.75......................... 1,158 5.6 26.26 688 26.43 28.44 - 39.72......................... 2,156 5.9 36.94 171 30.03 40.63 - 118.56......................... 889 6.6 73.53 62 94.85
During 2000, approximately 2,782,000 options were granted pursuant to the 1999 Incentive Plan at exercise prices ranging from $39.65 per share to $118.56 per share. During 1999, 1,611,000 options were granted pursuant to the 1992 Stock Option Plan at exercise prices ranging from $25.75 per share to $28.81 per share; 421,000 options were granted pursuant to the 1999 Incentive Plan at exercise prices ranging from $29.69 per share to $39.19 per share and 250,000 options were granted to an officer at an exercise price of $27.25 per share pursuant to a plan other than the 1992 and 1999 Plans. In connection with the acquisition of Lumen Technologies, Lumen options were converted into approximately 429,000 Company stock options, effective January 5, 1999. These options had an average exercise price of $14.47 per share and were fully vested. In January 1998, the Board of Directors granted 400,000 options to an officer at an exercise price of $21.19 per share; 200,000 options were granted pursuant to the 1992 Plan, and 200,000 options were granted pursuant to a plan other than the 1992 Plan. In addition, 167,500 options were granted pursuant to the 1992 Plan at various dates in 1998 at exercise prices ranging from $23.13 per share to $30.25 per share. The weighted-average fair values of options granted during 2000, 1999 and 1998 were $17.66, $9.14 and $6.83, respectively. The values were estimated on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used in the model:
2000 1999 1998 --------- --------- ------- Risk-free interest rate................................... 6.5% 4.9% 5.4% Expected dividend yield................................... 2% 2% 2% Expected lives............................................ 3.7 years 5.5 years 6 years Expected stock volatility................................. 46% 27% 27%
In April 1999, the Company's stockholders approved the 1998 Employee Stock Purchase Plan, whereby participating employees currently have the right to purchase common stock at a price equal to 85% of the lower of the closing price on the first day or the last day of the six-month offering period. The number of shares which an employee may purchase, subject to certain aggregate limits, is determined by the employee's voluntary contribution, which may not exceed 10% of base compensation. During 2000, the Company issued 210,144 shares under this plan at a weighted-average price of $43.68 per share. During 1999, the Company issued 358,000 shares under this plan at a weighted-average price of $22.14 per share. There remains available for sale to employees an aggregate of 1.9 million shares of the Company's stock out of 2.5 million shares authorized by the stockholders. As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the Company continues to apply APB Opinion No. 25 in accounting for its stock option and stock purchase plans. As required, the following table 56 58 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) discloses pro forma net income and diluted earnings per share had compensation cost for the Company's stock-based compensation plans been determined based on the fair value approach:
(IN THOUSANDS EXCEPT PER SHARE DATA) 2000 1999 1998 - ------------------------------------ ------- -------- -------- Net income: As reported............................................ $90,520 $154,316 $102,002 Pro forma.............................................. 76,092 145,354 100,000 Diluted earnings per share: As reported............................................ 1.77 3.31 2.22 Pro forma.............................................. 1.49 3.12 2.18
Pro forma compensation cost may not be representative of that to be expected in future years since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. Shareholder Rights Plan: Under a Shareholder Rights Plan, preferred stock purchase rights were distributed on February 8, 1995 as a dividend at the rate of one right for each share of common stock outstanding. Each right, when exercisable, entitles a stockholder to purchase one one-thousandth of a share of a new series of junior participating preferred stock at a price of $60. The rights become exercisable only if a person or group acquires 20% or more or announces a tender or exchange offer for 30% or more of the Company's common stock. This preferred stock is nonredeemable and will have 1,000 votes per share. The rights are nonvoting, expire in 2005 and may be redeemed prior to becoming exercisable. The Company has reserved 70,000 shares of preferred stock, designated as Series C Junior Participating Preferred Stock, for issuance upon exercise of such rights. If a person (an Acquiring Person) acquires or obtains the right to acquire 20% or more of the Company's outstanding common stock (other than pursuant to certain approved offers), each right (other than rights held by the Acquiring Person) will entitle the holder to purchase shares of common stock of the Company at one-half of the current market price at the date of occurrence of the event. In addition, in the event that the Company is involved in a merger or other business combination in which it is not the surviving corporation or in connection with which the Company's common stock is changed or converted, or it sells or transfers 50% or more of its assets or earning power to another person, each right that has not previously been exercised will entitle its holder to purchase shares of common stock of such other person at one-half of the current market price of such common stock at the date of the occurrence of the event. Comprehensive Income: The components of accumulated other comprehensive income (loss) were as follows:
FOREIGN CURRENCY ACCUMULATED OTHER TRANSLATION UNREALIZED GAINS COMPREHENSIVE (IN THOUSANDS) ADJUSTMENTS ON SECURITIES INCOME (LOSS) - -------------- ---------------- ---------------- ----------------- Balance, December 28, 1997............... $ (4,380) $ 523 $ (3,857) Current year change...................... 7,723 (137) 7,586 -------- ----- -------- Balance, January 3, 1999................. 3,343 386 3,729 Current year change...................... (17,804) 35 (17,769) -------- ----- -------- Balance, January 2, 2000................. (14,461) 421 (14,040) Current year change...................... (25,484) 482 (25,002) -------- ----- -------- Balance, December 31, 2000............... $(39,945) $ 903 $(39,042) ======== ===== ========
57 59 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The tax effects related to each component of other comprehensive income (loss) were as follows:
BEFORE-TAX TAX (PROVISION) AFTER-TAX (IN THOUSANDS) AMOUNT BENEFIT AMOUNT - -------------- ---------- --------------- --------- 2000 Foreign currency translation adjustments.................... $(25,484) $ -- $(25,484) Unrealized gains on securities: Gains arising during the period........................... 673 (192) 481 Reclassification adjustment............................... 1 -- 1 -------- ----- -------- Net unrealized gains........................................ 674 (192) 482 -------- ----- -------- Other comprehensive income (loss)........................... $(24,810) $(192) $(25,002) ======== ===== ======== 1999 Foreign currency translation adjustments.................... $(17,804) $ -- $(17,804) Unrealized gains on securities: Gains arising during the period........................... 143 (50) 93 Reclassification adjustment............................... (89) 31 (58) -------- ----- -------- Net unrealized gains........................................ 54 (19) 35 -------- ----- -------- Other comprehensive income (loss)........................... $(17,750) $ (19) $(17,769) ======== ===== ======== 1998 Gross foreign currency translation adjustments.............. $ 4,608 $ -- $ 4,608 Reclassification adjustment for translation losses realized upon sale of Sealol Industrial Seals...................... 3,115 -- 3,115 Unrealized losses on securities arising during the period... (211) 74 (137) -------- ----- -------- Other comprehensive income.................................. $ 7,512 $ 74 $ 7,586 ======== ===== ========
NOTE 21. FINANCIAL INSTRUMENTS Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and accounts receivable. The Company believes it had no significant concentrations of credit risk as of December 31, 2000. In the ordinary course of business, the Company enters into foreign exchange forward contracts for periods consistent with its committed exposures to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. Transactions covered by hedge contracts include intercompany and third-party receivables and payables. The contracts are primarily in European and Asian currencies, generally have maturities that do not exceed one month and have no cash requirements until maturity. Credit risk and market risk are minimal because the forward contracts are with very large banks, and gains and losses are offset against foreign exchange gains and losses on the underlying hedged transactions. Realized gains and losses on foreign currency instruments, which are hedges of committed transactions on assets and liabilities, are recognized at the time the underlying transaction is completed. Realized and unrealized gains and losses on forward contracts, which are not hedges of committed transactions, are recognized in income. The notional amount of outstanding forward contracts was approximately $190 million as of December 31, 2000 and $75 million at January 2, 2000. The carrying value as of December 31, 2000 and January 2, 2000, which approximated fair value, was not significant. See Notes 1, 12 and 14 for disclosures about fair values, including methods and assumptions, of other financial instruments. 58 60 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 22. LEASES The Company leases certain property and equipment under operating leases. Rental expense charged to continuing operations for 2000, 1999 and 1998 amounted to $19 million, $19.2 million and $10.1 million, respectively. Minimum rental commitments under noncancelable operating leases are as follows: $16.4 million in 2001, $8.3 million in 2002, $6.5 million in 2003, $5.3 million in 2004, $5 million in 2005 and $31 million after 2005. NOTE 23. INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which changed the way the Company reports information about its operating segments. The Company's businesses are reported as four reportable segments which reflect the Company's management and structure under four SBUs. The accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates the performance of its operating segments based on operating profit. Intersegment sales and transfers are not significant. The operating segments and their principal products and services are: Life Sciences: Sample handling and measuring instruments, computer software and chemical reagents for use in bio-screening and population screening laboratories. Bio-screening activities include academic research applications and drug discovery applications in high throughput screening laboratories of major pharmaceutical companies. Population screening activities include inherited and infectious disease screening, as well as routine clinical diagnostics. Optoelectronics: A broad spectrum of optoelectronic products, including large area amorphous silicon detectors, high volume and high-performance specialty lighting sources, detectors, imaging devices, as well as telecom products, which include emitters, receivers and mux arrays. Instruments: Products and services for detection, measurement and testing applications, including analytical instruments for the pharmaceutical, food and beverage, environmental, chemical and plastics industries. Fluid Sciences: Static and dynamic seals, sealing systems, solenoid valves, bellows devices, advanced pneumatic components, systems and assemblies and sheet metal-formed products for original equipment manufacturers and end users. Sales to U.S. government agencies, which were predominantly to the Department of Defense and NASA in the former Technical Services segment, which is reflected as discontinued operations in the accompanying financial statements (see Note 7), were $326 million and $524 million in 1999 and 1998, respectively. Sales and operating profit by segment for the three years ended December 31, 2000 are shown in the table below:
(IN THOUSANDS) 2000 1999 1998 - -------------- ---------- ---------- -------- LIFE SCIENCES Sales................................................ $ 221,401 $ 158,009 $134,635 Operating Profit (Loss).............................. (3,636) 15,768 9,044 OPTOELECTRONICS Sales................................................ 496,851 447,681 274,506 Operating Profit (Loss).............................. 96,931 40,317 (4,133) INSTRUMENTS Sales................................................ 725,261 532,128 185,038 Operating Profit (Loss).............................. 58,894 (19,323) 6,647
59 61 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS) 2000 1999 1998 - -------------- ---------- ---------- -------- FLUID SCIENCES Sales................................................ 251,754 225,311 237,537 Operating Profit..................................... 45,071 31,078 3,887 OTHER Sales................................................ -- -- 22,666 Operating Profit (Loss).............................. (10,685) (1,188) 104,279 CONTINUING OPERATIONS Sales................................................ 1,695,267 1,363,129 854,382 Operating Profit..................................... 186,575 66,652 119,724
The Company's Technical Services segment and former Department of Energy segment are presented as discontinued operations and, therefore, are not included in the preceding table. The results for the periods presented included certain nonrecurring items which are discussed in the Management's Discussion and Analysis section of this document. Additional information relating to the Company's operating segments is as follows:
DEPRECIATION AND AMORTIZATION EXPENSE CAPITAL EXPENDITURES ----------------------------- ----------------------------- (IN THOUSANDS) 2000 1999 1998 2000 1999 1998 - -------------- ------- ------- ------- ------- ------- ------- Life Sciences...................... $17,719 $ 6,189 $ 5,059 $16,239 $ 7,465 $ 5,415 Optoelectronics.................... 25,967 34,430 25,615 34,242 21,155 17,256 Instruments........................ 23,940 17,292 10,573 8,266 6,555 8,382 Fluid Sciences..................... 10,663 7,093 6,042 10,895 4,515 10,325 Other.............................. 859 1,111 1,221 956 1,402 3,111 ------- ------- ------- ------- ------- ------- Continuing operations............ $79,148 $66,115 $48,510 $70,598 $41,092 $44,489 ======= ======= ======= ======= ======= ======= Discontinued operations.......... -- $ 841 $ 1,869 -- $ 1,341 $ 2,033 ======= ======= ======= ======= ======= =======
TOTAL ASSETS ------------------------ (IN THOUSANDS) 2000 1999 - -------------- ---------- ---------- Life Sciences............................................... $ 600,168 $ 125,025 Optoelectronics............................................. 512,395 448,453 Instruments................................................. 816,916 854,452 Fluid Sciences.............................................. 123,096 102,421 Other....................................................... 207,604 184,289 ---------- ---------- $2,260,179 $1,714,640 ========== ==========
60 62 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following geographic area information for continuing operations includes sales based on location of external customer and net property, plant and equipment based on physical location:
SALES ------------------------------------ (IN THOUSANDS) 2000 1999 1998 - -------------- ---------- ---------- -------- U.S. ................................................ $ 797,587 $ 661,609 $447,793 United Kingdom....................................... 111,676 71,493 47,794 Germany.............................................. 102,439 98,787 67,647 Japan................................................ 77,119 73,567 28,306 France............................................... 61,416 50,282 35,329 Italy................................................ 55,563 56,433 17,565 Other Non-U.S. ...................................... 489,467 350,958 209,948 ---------- ---------- -------- $1,695,267 $1,363,129 $854,382 ========== ========== ========
NET PROPERTY, PLANT AND EQUIPMENT ------------------------ (IN THOUSANDS) 2000 1999 - -------------- ---------- ---------- U.S. ....................................................... $160,732 $133,812 Finland..................................................... 26,356 17,277 Canada...................................................... 19,051 14,718 Germany..................................................... 14,137 21,570 United Kingdom.............................................. 12,836 13,282 Other Non-U.S. ............................................. 41,648 27,375 -------- -------- $274,760 $228,034 ======== ========
Effectively all of the sales and net property, plant and equipment of the discontinued operations (consisting of the Technical Services segment and former DOE segment) were U.S. based. NOTE 24. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Selected quarterly financial information follows:
FIRST SECOND THIRD FOURTH (IN THOUSANDS EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR - ------------------------------------ -------- -------- -------- -------- ---------- 2000 Sales...................................... $402,286 $398,705 $431,863 $462,413 $1,695,267 Operating income (loss) from continuing operations............................... 35,888 51,465 30,702 68,520 186,575 Income (loss) from continuing operations before income taxes...................... 27,313 43,530 17,608 56,038 144,489 Income (loss) from continuing operations... 16,243 31,120 2,080 36,624 86,067 Net income................................. 16,243 35,573 2,080 36,624 90,520 Basic earnings (loss) per share: Continuing operations.................... .34 .63 .04 .80 1.75 Net income............................... .34 .72 .04 .80 1.84 Diluted earnings (loss) per share: Continuing operations.................... .32 .61 .04 .75 1.68 Net income............................... .32 .70 .04 .75 1.77 Cash dividends per common share............ .14 .14 .14 .14 .56
61 63 PERKINELMER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRST SECOND THIRD FOURTH (IN THOUSANDS EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR - ------------------------------------ -------- -------- -------- -------- ---------- Market price of common stock: High..................................... 79.25 68.75 107.00 119.13 119.13 Low...................................... 39.06 50.00 62.13 89.06 39.06 Close.................................... 66.50 66.14 104.38 105.00 105.00 1999 Sales...................................... $243,217 $304,258 $388,413 $427,241 $1,363,129 Operating income (loss) from continuing operations............................... 17,028 1,940 (328) 48,012 66,652 Income (loss) from continuing operations before income taxes...................... 12,396 (4,257) (8,932) 45,663 44,870 Income (loss) from continuing operations... 8,042 (2,725) (5,801) 28,855 28,371 Net income................................. 14,087 3,617 103,773 32,839 154,316 Basic earnings (loss) per share: Continuing operations.................... .18 (.06) (.13) .62 .62 Net income............................... .31 .08 2.27 .71 3.39 Diluted earnings (loss) per share: Continuing operations.................... .18 (.06) (.13) .61 .61 Net income............................... .31 .08 2.27 .69 3.31 Cash dividends per common share............ .14 .14 .14 .14 .56 Market price of common stock: High..................................... 30.19 36.25 39.94 45.00 45.00 Low...................................... 25.50 26.50 31.50 36.63 25.50 Close.................................... 26.75 35.75 38.75 41.69 41.69
62 64 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of PerkinElmer, Inc.: We have audited the accompanying consolidated balance sheets of PerkinElmer, Inc. (a Massachusetts corporation) and subsidiaries as of December 31, 2000 and January 2, 2000 and the related consolidated statements of income, stockholders' equity and cash flows for the years ended December 31, 2000, January 2, 2000, and January 3, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of PerkinElmer, Inc. and subsidiaries as of December 31, 2000 and January 2, 2000, and the results of their operations and their cash flows for the years ended December 31, 2000, January 2, 2000 and January 3, 1999 in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP - --------------------------------------------------------- Boston, Massachusetts January 25, 2001 63 65 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT a) DIRECTORS The information required by this Item with respect to Directors is contained in the Company's 2001 Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 2001 (the "2001 Proxy Statement") under the captions "Election of Directors" and "Information Relative to the Board of Directors and Certain of its Committees" and is herein incorporated by reference. The 2001 Proxy Statement, in definitive form, was filed electronically with the Securities and Exchange Commission in Washington, D.C on March 12, 2001. b) EXECUTIVE OFFICERS The information required by this item with respect to Executive Officers is contained in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is contained under the captions "Summary Compensation Table" up to and including "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Value Option Values" and Notes thereto in the 2001 Proxy Statement, and is herein incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is contained under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the 2001 Proxy Statement, and is herein incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is contained under the caption "Certain Transactions" in the 2001 Proxy Statement, and is herein incorporated by reference. 64 66 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF THIS REPORT: 1. FINANCIAL STATEMENTS Included in Part II, Item 8: Consolidated Income Statements for the Three Years Ended December 31, 2000 Consolidated Balance Sheets at December 31, 2000 Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 2000 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2000 Notes to Consolidated Financial Statements Report of Independent Public Accountants 2. FINANCIAL STATEMENT SCHEDULES Report of Independent Public Accountants on Financial Statement Schedules Schedule II -- Valuation and Qualifying Accounts Financial statement schedules, other than those above, are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. Separate financial statements of the Registrant are omitted since it is primarily an operating company, and since all subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have minority equity interests and/or indebtedness to any person other than the Registrant or its consolidated subsidiaries in amounts which together exceed five percent of total consolidated assets. 3. EXHIBITS 3.1 The Company's Restated Articles of Organization were filed with the Commission on March 30, 1999 as Exhibit 3.1 to the Company's Annual Report on Form 10-K and are herein incorporated by reference. 3.2 Articles of Amendment to the Company's Restated Articles of Organization were filed with the Commission on November 5, 1999 as Exhibit 3 to the Report on Form 8-K and are herein incorporated by reference. 3.3 The Company's By-Laws as amended and restated by the Board of Directors on April 27,1999 were filed with the Commission on March 28, 2000 as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2000 and are herein incorporated by reference. 4.1 Specimen Certificate of the Company's Common Stock, $1 par value, was filed with the Commission on November 5, 1999 as Exhibit 4 to the Report on Form 8-K and is incorporated herein by reference. 4.2 Form of Indenture dated June 28, 1995 between the Company and the First National Bank of Boston, as Trustee, was filed with the Commission as Exhibit 4.1 to EG&G's Registration Statement on Form S-3, File No. 33-59675 and is herein incorporated by reference. 4.3 Form of Senior Indenture, dated August 7, 2000, between the Company and Bank One Trust Company, N.A., as Trustee, was filed with the Commission as Exhibit 4.1 to the Company's Registration Statement on Form S-3, File No. 333-71069, and is incorporated herein by reference. 4.4 Form of Supplemental Indenture, dated August 7, 2000, between the Company and Bank One Trust Company, N.A., as Trustee, was filed with the Commission on August 4, 2000 as Exhibit 4.1 to the Company's Report on Form 8-K, and is incorporated herein by reference. 4.5 Amended and Restated Rights agreement dated as of January 30, 2001 between the Company and Mellon Investor Services LLC, as Rights Agent, is attached hereto as Exhibit 4.5. *10.1 The Company's Supplemental Executive Retirement Plan revised as of April 19, 1995 was filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and is herein incorporated by reference.
65 67 *10.2 The Company's 1999 INCENTIVE PLAN was filed with the Commission on April 2, 1999 as Exhibit B to the Company's Definitive Proxy Statement on Schedule 14A and is herein incorporated by reference. 10.3 $100,000,000 Competitive Advance and Revolving Credit Facility Agreement (referred to as the "Credit Agreement") dated as of March 2, 2001 among the Company, the Lenders Named Herein and The Chase Manhattan Bank as Administrative Agent, is attached hereto as Exhibit 10.3. 10.4 $300,000,000 364-Day Amended and Restated Competitive Advance and Revolving Credit Facility Agreement dated as of March 2, 2001 among the Company, the Lenders Named Herein and The Chase Manhattan Bank as Administrative Agent is attached hereto as Exhibit 10.4. *10.5 Employment Contracts: (1) Employment contract between Gregory L. Summe and the Company dated January 8, 1998, as amended by an amendment dated November 5, 1999, was filed as Exhibit 10.5 (a) to the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2000 and is herein incorporated by reference. Said contract was further amended by a Second Amendment dated March 3, 2000 which is attached hereto as Exhibit 10.5(a). (2) Employment contract between Robert F. Friel and the Company dated November 18, 1999 is attached hereto as Exhibit 10.5(b). (3) Employment contract between Terrance L. Carlson and the Company dated June 1, 1999. (4) Employment contract between Richard F. Walsh and the Company dated July 1999. (5) Employment contract between Robert A. Barrett and the Company dated July 23, 1999. (6) Employment contract between Patrik Dahlen and the Company dated October 1, 1999. (7) Employment contract between John J. Engel and the Company dated December 1, 1999. (8) Employment contract between Stephen P. DeFalco and the Company dated October 23, 2000. Except for the name of the officer in the employment contracts identified by numbers 2 through and including 8 the form of said employment contracts is identical in all material respects. The employment contract, as amended, identified by number 1 is substantially similar to the contracts identified by numbers 2 through 8 although that it provides for a longer contract term, three years as opposed to one year. The employment contract between Robert F. Friel and the Company is representative of the employment contracts of the executive officers listed in numbers 2 through and including 8 and is attached hereto as Exhibit 10.5(b). *10.6 The Company's 1982 INCENTIVE STOCK OPTION PLAN was filed as Exhibit 4(v) to the Company's Registration Statement on Form S-8, File No. 33-36082 and is herein incorporated by reference. *10.7 The Company's 1992 STOCK OPTION PLAN was filed as Exhibit 4(vi) to EG&G's Registration Statement on Form S-8, File No. 333-32059 and is herein incorporated by reference. *10.8 The Company's 1998 EMPLOYEE STOCK PURCHASE PLAN was filed with the Commission on March 30, 1999 as Exhibit 10.8 to the Company's Annual Report on Form 10-K and is herein incorporated by reference. 21 Subsidiaries of the Registrant is attached hereto as Exhibit 21. 23 Consent of Independent Public Accountants (appears on signature page). 24 Power of Attorney (appears on signature page).
- --------------- * This exhibit is a management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 14(c) of Form 10-K. (b) REPORTS ON FORM 8-K None. (c) PROXY STATEMENT The Company's 2001 Proxy Statement, in definitive form, was filed electronically on March 12, 2001, with the Securities and Exchange Commission in Washington, D.C. pursuant to the Commission's Rule 14a-6. 66 68 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To PerkinElmer, Inc.: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of PerkinElmer, Inc. included in this Form 10-K and have issued our report thereon dated January 25, 2001. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP - ---------------------------------- Arthur Andersen LLP Boston, Massachusetts January 25, 2001 67 69 SCHEDULE II PERKINELMER, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 2000 (IN THOUSANDS)
BALANCE AT BALANCE BEGINNING OF CHARGES/ AT END DESCRIPTION YEAR PROVISIONS WRITEOFFS OTHER OF YEAR - ----------- ------------ ---------- --------- -------- ------- RESERVE FOR DOUBTFUL ACCOUNTS Year Ended January 3, 1999............. $ 4,710 $ 1,084 $ (960) $ (434)(a) $ 4,400 Year Ended January 2, 2000............. $ 4,400 $ 2,569 $ (1,302) $ 7,261(b) $12,928 Year Ended December 31, 2000........... $12,928 $ 5,957 $ (3,165) $ (742)(c) $14,978 ACCRUED RESTRUCTURING COSTS Year Ended January 3, 1999............. $ 3,025 $50,027 $(23,483) $ 5,000(d) $34,569 Year Ended January 2, 2000............. $34,569 $11,520(f) $(32,525) $ 28,195(e) $41,759 Year Ended December 31, 2000........... $41,759 $ 4,105(h) $(22,300) $ 29,780(g) $53,344
- --------------- (a) Includes reserves for doubtful accounts of $1,371 related to companies acquired in 1998. (b) Includes reserve for doubtful accounts of $6,500 related to AI acquired in 1999. (c) Includes reserve for doubtful accounts of $1,888 related to a company acquired in 2000. (d) Represents accrued restructuring costs of $5,000 related to Lumen acquired in 1998. (e) Represents accrued restructuring costs of $28,195 related to AI acquired in 1999. (f) Includes a $23,500 restructuring charge related to the 1999 plan and an $11,980 reversal related to the 1998 plan. (g) Includes approximately $24 million, net and $4 million related to the acquisitions of AI and NEN, respectively. (h) Includes $15.1 million related to the 2000 plan and net reversals related to the 1998 and 1999 plans totaling $11 million. 68 70 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated January 25, 2001, included in this Form 10-K, into Registration Statements previously filed by PerkinElmer, Inc. on, respectively, Form S-8, File No. 2-98168; Form S-8, File No. 33-36082; Form S-8, File No. 33-35379; Form S-8, File No. 33-49898; Form S-8, File No. 33-57606; Form S-8, File No. 33-54785; Form S-8, File No. 33-62805; Form S-8, File No. 333-8811; Form S-8, File No. 333-32059; Form S-8, File No. 333-32463; Form S-3, File No. 33-59675; Form S-8, File No. 333-50953; Form S-8, File No. 333-56921; Form S-8, File No. 333-58517; Form S-8, File No. 333-61615; Form S-8, File No. 333-65367; Form S-8, File No. 333-69115; Form S-8, File No. 333-70977; Form S-3, File No. 333-71069; Form S-8, File No. 333-81759; Form S-4, File No. 333-91535 and Form S-8, File No. 333-30150. /s/ ARTHUR ANDERSEN LLP - --------------------------------------------------------- Arthur Andersen LLP Boston, Massachusetts March 26, 2001 POWER OF ATTORNEY We, the undersigned officers and directors of PerkinElmer, Inc., hereby severally constitute Gregory L. Summe, and Terrance L. Carlson, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names, in the capacities indicated below, this Annual Report on Form 10-K and any and all amendments to said Annual Report on Form 10-K, and generally to do all such things in our name and behalf in our capacities as officers and directors to enable PerkinElmer, Inc. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby rectifying and confirming signed by our said attorneys, and any and all amendments thereto. Witness our hands on the date set forth below. SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. PERKINELMER, INC.
SIGNATURE TITLE DATE --------- ----- ---- By: /s/ GREGORY L. SUMME Chairman of the Board, Chief Executive March 26, 2001 Officer and President (Principal - -------------------------------------------------- Executive Officer) Gregory L. Summe By: /s/ ROBERT F. FRIEL Senior Vice President and Chief March 26, 2001 Financial Officer (Principal Financial - -------------------------------------------------- Officer and Principal Accounting Robert F. Friel Officer)
69 71 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
SIGNATURE TITLE DATE --------- ----- ---- By: /s/ TAMARA J. ERICKSON Director March 26, 2001 - -------------------------------------------------- Tamara J. Erickson By: /s/ KENT F. HANSEN Director March 26, 2001 - -------------------------------------------------- Kent F. Hansen By: /s/ JOHN F. KEANE Director March 26,2001 - -------------------------------------------------- John F. Keane By: /s/ NICHOLAS A. LOPARDO Director March 26, 2001 - -------------------------------------------------- Nicholas A. Lopardo By: /s/ GRETA E. MARSHALL Director March 26, 2001 - -------------------------------------------------- Greta E. Marshall By: /s/ GABRIEL SCHMERGEL Director March 26, 2001 - -------------------------------------------------- Gabriel Schmergel By: /s/ MICHAEL C. RUETTGERS Director March 26, 2001 - -------------------------------------------------- Michael C. Ruettgers By: /s/ GREGORY L. SUMME Director March 26, 2001 - -------------------------------------------------- Gregory L. Summe By: /s/ JOHN LARKIN THOMPSON Director March 26, 2001 - -------------------------------------------------- John Larkin Thompson By: /s/ G. ROBERT TOD Director March 26, 2001 - -------------------------------------------------- G. Robert Tod
70 72 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT NAME - ------- ------------ 3.1 The Company's Restated Articles of Organization were filed with the Commission on March 30, 1999 as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1999 and are herein incorporated by reference. 3.2 Articles of Amendment to the Company's Restated Articles of Organization were filed with the Commission on November 5, 1999 as Exhibit 3 to the Company's Report on Form 8-K and are herein incorporated by reference. 3.3 The Company's By-Laws as amended and restated by the Board of Directors on April 27, 1999 were filed with the Commission on March 28, 2000 as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2000 and are herein incorporated by reference. 4.1 Specimen Certificate of the Company's Common Stock, $1 par value, was filed with the Commission on November 5, 1999 as Exhibit 4 to the Company's Report on Form 8-K and is herein incorporated by reference. 4.2 Form of Indenture dated June 28,1995 between the Company and the First National Bank of Boston, as Trustee, was filed with the Commission as Exhibit 4.1 to the Company's Registration Statement on Form S-3, File No. 33-59675 and is herein incorporated by reference. 4.3 Form of Senior Indenture, dated August 7, 2000, between the Company and Bank One Trust Company, N.A., as Trustee, was filed with the Commission as Exhibit 4.1 to the Company's Registration Statement on Form S-3, File No. 333-71069, and is incorporated herein by reference. 4.4 Form of Supplemental Indenture, dated August 7, 2000, between the Company and Bank One Trust Company, N.A., as Trustee, was filed with the Commission on August 4, 2000 as Exhibit 4.1 to the Company's Report on Form 8-K, and is incorporated herein by reference. 4.5 Amended and Restated Rights Agreement dated as of January 30, 2001 between the Company and Mellon Investor Services LLC, as Rights Agent, is attached hereto as Exhibit 4.5. 10.1 The Company's Supplemental Executive Retirement Plan revised as of April 19, 1995 was filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and is herein incorporated by reference. 10.2 The Company's 1999 INCENTIVE PLAN was filed with the Commission on April 2, 1999 as Exhibit B to the Company's Definitive Proxy Statement on Schedule 14A and is herein incorporated by reference. 10.3 $100,000,000 Competitive Advance and Revolving Credit Facility Agreement dated as of March 2, 2001 among the Company, the Lenders Named Herein and The Chase Manhattan Bank as Administrative Agent is attached hereto as Exhibit 10.3. 10.4 $300,000,000 364-Day Amended and Restated Competitive Advance and Revolving Credit Facility Agreement dated as of March 2, 2001 among the Company, the Lenders Named Herein and The Chase Manhattan Bank as Administrative Agent, is attached hereto as Exhibit 10.4. 10.5(a) Employment Contract between the Company and Gregory L. Summe dated January 8, 1998, as amended by an amendment dated November 5, 1999, was filed with the Commission on March 28, 2000 as Exhibit 10.5(a) to the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2000 and is herein incorporated by reference. Said contract was further amended by a Second Amendment dated March 3, 2001 which is attached hereto as Exhibit 10.5(a). 10.5(b) Employment Contract between the Company and Robert F. Friel dated November 18, 1999 is attached hereto as Exhibit 10.5(b). 10.6 The Company's 1982 INCENTIVE STOCK OPTION PLAN was filed as Exhibit 4(v) to the Company's Registration Statement on Form S-8, File No. 33-36082 and is herein incorporated by reference. 10.7 The Company's 1992 STOCK OPTION PLAN was filed as Exhibit 4(vi) to the Company's Registration Statement on Form S-8, File No. 333-32059 and is herein incorporated by reference.
73
EXHIBIT NUMBER EXHIBIT NAME - ------- ------------ 10.8 The Company's 1998 EMPLOYEE STOCK PURCHASE PLAN was filed with the Commission on March 30, 1999 as Exhibit 10.8 to the Company's Annual Report on Form 10-K and is herein incorporated by reference. 21 Subsidiaries of the Registrant is attached hereto as Exhibit 21. 23 Consent of Independent Public Accountants (appears on signature page). 24 Power of Attorney (appears on signature page).
EX-4.5 2 b38210peex4-5.txt AMENDED AND RESTATED RIGHTS AGREEMENT 1 Exhibit 4.5 ================================================================================ PERKINELMER, INC. and MELLON INVESTOR SERVICES LLC Rights Agent Amended and Restated Rights Agreement Dated as of January 30, 2001 ================================================================================ 2 Table of Contents
Section Page Section 1. Certain Definitions .................................................................... 1 Section 2. Appointment of Rights Agent ............................................................ 5 Section 3. Issue of Rights ........................................................................ 5 Section 4. Form of Rights Certificates ............................................................ 7 Section 5. Countersignature and Registration ...................................................... 8 Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates .......................................... 9 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights .......................... 10 Section 8. Cancellation and Destruction of Rights Certificates .................................... 11 Section 9. Reservation and Availability of Capital Stock .......................................... 12 Section 10. Preferred Stock Record Date ............................................................ 13 Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights ............ 13 Section 12. Certificate of Adjusted Purchase Price or Number of Shares ............................. 21 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power ................... 21 Section 14. Fractional Rights and Fractional Shares ................................................ 23 Section 15. Rights of Action ....................................................................... 25 Section 16. Agreement of Rights Holders ............................................................ 25 Section 17. Rights Certificate Holder Not Deemed a Stockholder ..................................... 26 Section 18. Concerning the Rights Agent ............................................................ 26 Section 19. Merger or Consolidation or Change of Name of Rights Agent .............................. 26 Section 20. Duties of Rights Agent ................................................................. 27 Section 21. Change of Rights Agent ................................................................. 29 Section 22. Issuance of New Rights Certificates .................................................... 30 Section 23. Redemption and Termination ............................................................. 30 Section 24. Exchange ............................................................................... 31 Section 25. Notice of Certain Events ............................................................... 32 Section 26. Notices ................................................................................ 33 Section 27. Supplements and Amendments ............................................................. 33 Section 28. Successors ............................................................................. 34 Section 29. Determinations and Actions by the Board of Directors etc. .............................. 34 Section 30. Benefits of this Agreement ............................................................. 35 Section 31. Severability ........................................................................... 35 Section 32. Governing Law .......................................................................... 35 Section 33. Counterparts ........................................................................... 35 Section 34. Descriptive Headings ................................................................... 35 Exhibit A Terms of Series C Junior Participating Preferred Stock Exhibit B Form of Rights Certificate Exhibit C Summary of Rights
-i- 3 AMENDED AND RESTATED RIGHTS AGREEMENT This Amended and Restated Rights Agreement dated as of January 30, 2001 (the "Agreement"), between PerkinElmer, Inc., a Massachusetts corporation formerly known as EG&G, Inc. (the "Company"), and Mellon Investor Services LLC, a New Jersey limited liability company (the "Rights Agent"), hereby amends and restates the Rights Agreement dated January 25, 1995 between EG&G, Inc. and The First National Bank of Boston (the "Original Agreement"). W I T N E S S E T H - - - - - - - - - - WHEREAS, on January 25, 1995 the Board of Directors of the Company (the "Board") authorized and declared a dividend distribution of one Right for each share of Common Stock (as hereinafter defined) of the Company outstanding at the close of business on February 8, 1995 (the "Record Date"), and authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each share of Common Stock of the Company issued between the Record Date (whether originally issued or delivered from the Company's treasury) and the earlier of the Expiration Date and the Distribution Date, each Right initially representing the right to purchase one one-thousandth of a share of Series C Junior Participating Preferred Stock of the Company having the rights, powers and preferences set forth on Exhibit A attached hereto, upon the terms and subject to the conditions hereinafter set forth (the "Rights"); WHEREAS, after the Company has delivered the notices required to name a successor Rights Agent pursuant to Section 21 of the Original Agreement and the expiration of the notice periods thereunder, Mellon Investor Services is hereby agreeing to succeed The First National Bank of Boston as Rights Agent; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company, or (iv) any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 20% or more of the shares of Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 20% or more of the shares of Common Stock of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Stock of the Company, then 4 such Person shall be deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement unless and until such Person shall again become an "Acquiring Person." (b) "Act" shall mean the Securities Act of 1933, as amended. (c) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"). (d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities: (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), whether or not in writing, or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(a)(i) hereof in connection with an adjustment made with respect to any Original Rights; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act, or any comparable or successor rule), including pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and -2- 5 Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), whether or not in writing, for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (d)) or disposing of any voting securities of the Company. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. (e) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the Commonwealth of Massachusetts or the States of Connecticut or New Jersey are authorized or obligated by law or executive order to close. (f) "Close of business" on any given date shall mean 5:00 P.M., Boston time, on such date, provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., Boston time, on the next succeeding Business Day. (g) "Common Stock" shall mean the common stock, $1.00 par value, of the Company, except that "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person. (h) "Common stock equivalents" shall have the meaning set forth in Section 11(a)(iii) hereof. (i) "Continuing Director" shall mean (i) any member of the Board, while such Person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and was a member of the Board prior to the date of the Original Agreement, or (ii) any Person who subsequently became or becomes a member of the Board, while such Person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. (j) "Current market price" shall have the meaning set forth in Section 11(d)(i) hereof. -3- 6 (k) "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof. (l) "Distribution Date" shall have the meaning set forth in Section 3(a) hereof. (m) "Exchange Act" shall have the meaning set forth in Section 1(c) hereof. (n) "Expiration Date" shall have the meaning set forth in Section 7(a) hereof. (o) "Final Expiration Date" shall mean the close of business on February 8, 2005. (p) "Permitted Offer" shall have the meaning set forth in Section 11(a)(ii) hereof. (q) "Person" shall mean any individual, firm, corporation, limited liability company, trust, partnership or other entity and shall include any successor (by merger or otherwise) thereof or thereto. (r) "Preferred Stock" shall mean shares of Series C Junior Participating Preferred Stock, $1.00 par value, of the Company having the rights and preferences set forth in Exhibit A attached hereto and, to the extent that there is not a sufficient number of shares of Series C Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of Preferred Stock, $1.00 par value, of the Company designated for such purpose containing terms substantially similar to the terms of the Series C Junior Participating Preferred Stock. (s) "Principal Party" shall have the meaning set forth in Section 13(h) hereof. (t) "Purchase Price" shall have the meaning set forth in section 4(a) hereof. (u) "Record Date" shall have the meaning set forth in the WHEREAS clause at the beginning of this Agreement. (v) "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. (w) "Rights" shall have the meaning set forth in the WHEREAS clause at the beginning of this Agreement. (x) "Rights Certificates" shall have the meaning set forth in Section 3(a) hereof. (y) "Section 11(a)(ii) Event" shall mean an event described in the first sentence of Section 11(a)(ii) hereof. (z) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii) hereof. -4- 7 (aa) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof. (bb) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof. (cc) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. (dd) "Subsidiary" shall mean, with reference to any person, any corporation of which an amount of voting securities sufficient to elect at least a majority of the directors of such corporation is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such Person. (ee) "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. (ff) "Trading Day" shall have the meaning set forth in Section 11(d)(i) hereof. (gg) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and in no event shall be liable for, the acts or omissions of any such Co-Rights Agent. Section 3. Issue of Rights. (a) Until the earlier of (i) the close of business on the tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), or (ii) the close of business on the tenth Business Day (or such later date as the Board of Directors shall determine) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be the Beneficial Owner of 30% or more of the shares of Common Stock then outstanding (the earlier of (i) and (ii) being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As -5- 8 soon as practicable after the Distribution Date, the Rights Agent will, if provided with all necessary information, send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided. In the event that an adjustment in the number of Rights herein per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Right Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred. (b) As promptly as practicable following the Record Date, the Company sent a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form attached hereto as Exhibit C, by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the close of business on the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. (c) Rights shall be issued in respect of all shares of Common Stock that are issued (either as an original issuance or from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date. Certificates representing such shares of Common Stock (including, without limitation, certificates issued upon transfer or exchange of Common Stock) shall also be deemed to be certificates for Rights, and, with respect to such certificates issued after the date hereof, shall bear the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Amended and Restated Rights Agreement between PerkinElmer, Inc. (the "Company") and Mellon Investor Services LLC (the "Rights Agent") dated as of January 30, 2001 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a -6- 9 written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights. (d) Until the earlier of the Distribution Date or the Expiration Date, the transfer of any certificates representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock. In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding. (e) In connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the Expiration Date, the Company (i) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities issued by the Company, and (ii) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (A) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (B) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase, certification and assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (which shall not affect the duties or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or over-the-counter market on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a share, the "Purchase -7- 10 Price"), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3 or Section 22 hereof that represents Rights beneficially owned by persons known to be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding that has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement. The absence of the foregoing legend on any Rights Certificate shall in no way affect any of the other provisions of this Agreement, including, without limitation, the provisions of Section 7(e) hereof. Section 5. Countersignature and Registration. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof, which shall be attested by the Clerk or an Assistant Clerk of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an officer. -8- 11 (b) Following the Distribution Date, the Rights Agent shall keep or cause to be kept, at its office designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates, the Certificate number and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates representing Rights that have become null and void pursuant to Section 7(e) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged, with the form of assignment and certificate appropriately executed, at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have properly completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. The Rights Agent shall have no duty or obligation under this Section unless and until it is satisfied that all such taxes and/or charges have been paid. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. -9- 12 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earlier of (i) the Final Expiration Date, (ii) the time at which the Rights expire as provided in Section 13(d) hereof, (iii) the time at which the Rights are redeemed as provided in Section 23 hereof, or (iv) the time at which such Rights are exchanged as provided in Section 24 hereof (the earlier of (i), (ii), (iii) and (iv) being herein referred to as the "Expiration Date"). (b) The Purchase Price for each one one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $60.00, and shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-thousandth of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths of a share of Preferred Stock to be purchased and the Company hereby authorizes its transfer agent to comply with such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such requests, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by certified bank check or money order payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay -10- 13 cash and/or distribute other property pursuant to Section 11(a) hereof, the Company shall make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding that has as a primary purpose or effect avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence or any purported transfer or exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate following the form of assignment or election to purchase set forth on the reverse side of the Rights Certificate surrendered for such assignment or exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the -11- 14 written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Capital Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights. (b) So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights are eligible for listing on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Expiration Date. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect, each time with prompt written notice thereof to the Rights Agent. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite registration or qualification in such jurisdiction shall have been effected or obtained. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-thousandths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to -12- 15 payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. (e) The Company further covenants and agrees that it will pay when due and payable any and all taxes and charges that may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required (i) to pay any tax or charge that may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax or charge shall have been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's or the Rights Agent's satisfaction that no such tax or charge is due. Section 10. Preferred Stock Record Date. Each Person in whose name any certificate for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable taxes or charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate, as such, shall not be entitled to any rights of a stockholder of the Company with respect to securities for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital -13- 16 stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event that at any time after the Record Date any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan) shall become an Acquiring Person, then, promptly following the first occurrence of such event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths of a share of Preferred Stock, such number of shares of Common Stock of the Company that equals the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (such product, following such first occurrence, shall thereafter be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the "Adjustment Shares"). Notwithstanding the foregoing provisions of this Section 11(a)(ii), the adjustment to the terms of the Rights provided for in the preceding sentence shall not be triggered by, and the term "Section 11(a)(ii) Event" shall not be deemed to include, an acquisition of Common Stock that is either (A) a transaction set forth in Section 13(a) hereof, or (B) an acquisition of shares of Common Stock pursuant to a tender offer or an exchange offer for all outstanding shares of Common Stock at a price and on terms determined, prior to the consummation of such acquisition, by at least a majority of the members of the Board of Directors who are not officers of the Company and who are not representatives, nominees, Affiliates or Associates of an Acquiring Person, after receiving advice from a nationally recognized investment banking firm selected by the Board of Directors of the Company, to be (a) at a price that is fair to stockholders (taking into account all factors which such members of the Board deem relevant including, without limitation, prices which could reasonably be achieved if the Company or its assets were sold on an orderly -14- 17 basis designed to realize maximum value) and (b) otherwise in the best interests of the Company and its stockholders (such tender offer or exchange offer being referred to as a "Permitted Offer"). (iii) In the event that the number of shares of Common Stock that are authorized by the Company's Articles of Organization but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock which the Board of Directors of the Company has deemed to have the same value as shares of Common Stock (such shares of preferred stock, "common stock equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors of the Company based upon the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect, each time with prompt written notice thereof to the Rights Agent. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of the Common Stock on the -15- 18 Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be deemed to have the same value as the Common Stock on such date. (b) In case the Company shall fix a record date for the issuance of rights (other than the Rights), options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock ("equivalent preferred stock")) or securities convertible into Preferred Stock or equivalent preferred stock at a price per share of Preferred Stock or per share of equivalent preferred stock (or having a conversion price per share, if a security convertible into Preferred Stock or equivalent preferred stock) less than the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or equivalent preferred stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date. Such adjustments shall be made successively -16- 19 whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed. (d)(i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following but not including such date; provided, however, that in the event that the current market price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification shall not have occurred prior to the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the "current market price" shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq") or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. -17- 20 (ii) For the purpose of any computation hereunder, the "current market price" per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the current market price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the "current market price" per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of the Original Agreement) multiplied by the current market price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, "current market price" per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the "current market price" of one one-thousandth of a share of Preferred Stock shall be equal to the "current market price" of one share of Preferred Stock divided by 1,000. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price, provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest hundred-millionth of a share of Preferred Stock, or hundred-thousandth of a share of Common Stock or other share, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall -18- 21 thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest ten-millionth) obtained by (i) multiplying (x) the number of one one-thousandths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one one-hundred-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement (with prompt written notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share and the number of one one-thousandths of a share which were expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated value, if any, of the number of one one-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such number of one one-thousandths of a share of fully paid and nonassessable Preferred Stock at such adjusted Purchase Price. -19- 22 (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the current market price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders. (n) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the shareholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 11(n). (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23, Section 24 or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. -20- 23 (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Record Date and prior to the Distribution Date (i) declare or pay any dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the occurrence of such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately following the occurrence of such event. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief, reasonably detailed statement of the facts, computations and methodology accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment unless and until it shall have received such certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event that, on or following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case and except as contemplated by Section 13(d) hereof, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, nonassessable -21- 24 and freely tradable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-thousandths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (such product, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (2) 50% of the current market price (determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of such -22- 25 Persons having an ownership in such joint venture and the Principal Parties in each such case shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will (i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement (A) to become effective as soon as practicable after such filing and (B) to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; (ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; and (iii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is consummated with a Person or Persons (or a wholly owned Subsidiary of any such Person or Persons) who acquired shares of Common Stock pursuant to a Permitted Offer, (ii) the price per share of Common Stock paid in such transaction is not less than the price per share of Common Stock paid to all holders of shares of Common Stock whose shares were purchased pursuant to such tender offer or exchange offer, and (iii) the form of consideration paid in such transaction is the same as the form of consideration paid pursuant to such tender offer or exchange offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights hereunder shall expire. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(i) or 11(p) hereof, or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, there shall be paid -23- 26 to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fractions of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last such quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates that evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock), the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-thousandth of a share of Preferred Stock shall be one one-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market price of one (1) share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (d) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14. The Rights Agent shall have no duty or obligation with respect to this Section 14 and Section 24(e) unless and until it has received specific instructions (and -24- 27 sufficient cash, if required) from the Company with respect to the Rights Agent's duties and obligations under such Sections. Section 15. Rights of Action. All rights of action in respect of this Agreement, except the rights of action expressly given to the Rights Agent in Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates duly completed and fully executed; (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to prevent the issuance of such order, decree or -25- 28 ruling and to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-thousandths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith, or willful misconduct on the part of the Rights Agent (which gross negligence, bad faith, or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The indemnity provided herein shall survive the termination of this Agreement and the exercise or expiration of the Rights. The costs and expenses reasonably incurred in enforcing this right of indemnification shall be paid by the Company. (b) The Rights Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its acceptance and administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof. Section 19. Merger or Consolidation or Change of Name of Rights Agent. -26- 29 (a) Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of paper or any further act on the part of any of the parties hereto; provided, however, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agreement shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes only the express duties and obligations imposed by this Agreement (and no implied duties or obligations) upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company) and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of "current market price") be proved or established by the Company prior to taking, suffering or omitting any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Clerk or any Assistant Clerk of the Company and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent for any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate. -27- 30 (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the Rights Agent by liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. Any liability of the Rights Agent under this Agreement will be limited to the amount of fees paid by the Company to the Rights Agent. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11, Section 13 or Section 24 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of a certificate describing any such adjustment, delivered pursuant to Section 12); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Clerk, any Assistant Clerk, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken, suffered or omitted to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the Rights Agent with respect to its duties or obligations under this Agreement the date on and/or after which such action shall be taken, suffered or such omission shall be effective. The Rights Agent shall not be liable for any action taken or omitted in accordance with a proposal included in any such application on or after the date specified therein (which date shall not be less than five Business Days after the date any such officer actually receives such application, unless any such officer -28- 31 shall have consented in writing to an earlier date) unless, prior to taking or omitting any such action, the Rights Agent has received written instructions in response to such application specifying the action to be taken, suffered or omitted. (h) The Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, director, officer or employee from acting in any other capacity for the Company or for any other Person. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct in the selection and continued employment of such attorneys or agents thereof (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has not been completed, the Company and the Rights Agent will deem the Beneficial Owner of the Rights evidenced by such Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof and such assignment or election to purchase will not be honored. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights -29- 32 Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States (or of any state of the United States) in good standing, which is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a Person described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. Section 23. Redemption and Termination. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth day following the Record Date), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar stock transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price") and the Company may, at its option, pay the Redemption Price either in shares of Common Stock (based on the "current market price", as defined in Section 11(d)(i) hereof, of the shares of Common Stock at the time of redemption) or cash. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights shall terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors -30- 33 ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after the occurrence of a Section 11(a)(ii) Event, exchange all or part of the then outstanding and exercisable Rights (which (i) shall not include Rights that have become null and void pursuant to the provisions of Section 7(e) hereof, and (ii) shall include, without limitation, any Rights issued after the Distribution Date in connection with the exercise of options pursuant to the Company's employee benefit plans, where such option is exercised for securities of the Company or surrendered for cash) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors may effect such an exchange only if there are at least two Continuing Directors then in office and a majority of such Continuing Directors concur with such exchange. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24, evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange with prompt written notice thereof to the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange shall state the method by which the exchange of shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Stock (or equivalent preferred stock, as such term is defined in Section 11(b) hereof) for shares of Common Stock exchangeable for Rights, at the initial rate of one one-thousandth of a share of Preferred Stock (or equivalent preferred stock) for each share of Common Stock, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Stock pursuant to Section III(A) of the terms of Preferred Stock attached hereto as -31- 34 Exhibit A, so that the fraction of a share of Preferred Stock (or equivalent preferred stock) delivered in lieu of each share of Common Stock shall have the same voting rights as one share of Common Stock. (d) In the event that there shall not be sufficient shares of Common Stock or Preferred Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock or Preferred Stock for issuance upon exchange of the Rights. (e) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this subsection (e), the current market value of a whole share of Common Stock shall be the closing price per share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Certain Events. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date -32- 35 of participation therein by the holders of the shares of Preferred Stock, whichever shall be the earlier. (b) In case a Section 11(a)(ii) Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer also to Common Stock and/or, if appropriate, other securities. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: PerkinElmer, Inc. 45 William Street Wellesley, MA 02481 Attention: General Counsel Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Mellon Investor Services LLC 111 Founders Plaza, 11th Floor East Hartford, CT 06108 Attention: Relationship Manager With a copy to: Mellon Investor Services LLC 85 Challenger Road Ridgefield Park, NJ 07660-2108 Attention: General Counsel Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. Prior to the Distribution Date and subject to the penultimate sentence of this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement (including the -33- 36 acceleration of or other amendment to the Final Expiration Date in connection with an event that would be deemed a Section 11(a)(ii) Event but for the provisions of the last sentence of Section 11(a)(ii) or an event that would be deemed a Section 13 Event but for Section 13(d)) without the approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date and subject to the penultimate sentence of this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder (which shortening or lengthening shall be effective only if there are at least two Continuing Directors then in office and shall require the concurrence of a majority of such Continuing Directors), or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or an Associate or Affiliate of an Acquiring Person. Upon the delivery of a certificate from an appropriate officer of the Company and, if requested by the Rights Agent, an opinion of counsel, which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price, the Final Expiration Date (except as provided in the first sentence of this Section 27), the Purchase Price or the number of one one-thousandths of a share of Preferred Stock for which a Right is exercisable. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board of Directors etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend this Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and -34- 37 binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock). Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 32. Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the Commonwealth of Massachusetts and for all purposes shall be governed by and construed in accordance with the laws of such Commonwealth applicable to contracts made and to be performed entirely within such Commonwealth; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -35- 38 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: PERKINELMER, INC. By: /s/ John L. Healy By: /s/ Terrance L. Carlson ----------------- ----------------------- Name: John L. Healy Name: Terrance L. Carlson Title: Assistant Clerk Title: Senior Vice President Attest: MELLON INVESTOR SERVICES LLC, as Rights Agent By: /s/ Kimberly Crowell By: /s/ Lynore A. LeConche -------------------- ---------------------- Name: Kimberly Crowell Name: Lynore A. LeConche Title: Assistant Vice President Title: Vice President -36- 39 Exhibit A TERMS OF SERIES C JUNIOR PARTICIPATING PREFERRED STOCK of PERKINELMER, INC. (To be attached to a Certificate of Vote of Directors Establishing a Series of a Class of Stock Pursuant to Chapter 156B, Section 26 of the General Laws of the Commonwealth of Massachusetts) ------------------------- Series C Junior Participating Preferred Stock: I. Designation and Amount The shares of such series shall be designated as "Series C Junior Participating Preferred Stock" (the "Series C Preferred Stock") and the number of shares constituting the Series C Preferred Stock shall be 70,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series C Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series C Preferred Stock. II. Dividends and Distributions (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series C Preferred Stock with respect to dividends, the holders of shares of Series C Preferred Stock, in preference to the holders of Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or 40 fraction of a share of Series C Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series C Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) and the Corporation shall pay such dividend or distribution on the Series C Preferred Stock before the dividend or distribution declared on the Common Stock is paid or set apart; provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series C Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. -2- 41 III. Voting Rights The holders of shares of Series C Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series C Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, by law, or in any other Certificate of Vote of Directors creating a series of Preferred Stock or any similar stock, the holders of shares of Series C Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Series C Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the holders of the Series C Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of the Board of Directors in addition to any Directors elected by any other series, class or classes of securities and the authorized number of Directors will automatically be increased by two. Promptly thereafter, the Board of Directors of this Corporation shall, as soon as may be practicable, call a special meeting of holders of Series C Preferred Stock for the purpose of electing such members of the Board of Directors. Said special meeting shall in any event be held within 45 days of the occurrence of such arrearage. (ii) During any period when the holders of Series C Preferred Stock, voting as a separate series, shall be entitled and shall have exercised their right to elect two Directors, then and during such time as such right continues (a) the then authorized number of Directors shall be increased by two, and the holders of Series C Preferred Stock, voting as a separate series, shall be entitled to elect the additional Directors so provided for, and (b) each such additional Director shall not be a member of any existing class of the Board of Directors, but shall serve until the next annual meeting of stockholders for the election of Directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section III(C). -3- 42 (iii) A Director elected pursuant to the terms hereof may be removed with or without cause by the holders of Series C Preferred Stock entitled to vote in an election of such Director. (iv) If, during any interval between annual meetings of stockholders for the election of Directors and while the holders of Series C Preferred Stock shall be entitled to elect two Directors, there is no such Director in office by reason of resignation, death or removal, then, promptly thereafter, the Board of Directors shall call a special meeting of the holders of Series C Preferred Stock for the purpose of filling such vacancy and such vacancy shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of such vacancy. (v) At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series C Preferred Stock outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, the term of office of any Director elected pursuant to this Section III(C), or his successor, shall automatically terminate, and the authorized number of Directors shall automatically decrease by two, the rights of the holders of the shares of the Series C Preferred Stock to vote as provided in this Section III(C) shall cease, subject to renewal from time to time upon the same terms and conditions, and the holders of shares of the Series C Preferred Stock shall have only the limited voting rights elsewhere herein set forth. (D) Except as set forth herein, or as otherwise provided by law, holders of Series C Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. IV. Certain Restrictions (A) Whenever quarterly dividends or other dividends or distributions payable on the Series C Preferred Stock as provided in Section II are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except dividends paid ratably on the Series C Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; -4- 43 (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series C Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, or any shares of stock ranking on a parity with the Series C Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section IV, purchase or otherwise acquire such shares at such time and in such manner. V. Reacquired Shares Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Organization, in any other Certificate of Vote of Directors creating a series of Preferred Stock or any similar stock or as otherwise required by law. VI. Liquidation, Dissolution or Winding Up (A) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock unless, prior thereto, the holders of shares of Series C Preferred Stock shall have received $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series C Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except distributions made ratably on the Series C Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. -5- 44 (B) Neither the consolidation, merger or other business combination of the Corporation with or into any other corporation nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section VI. (C) In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this Section VI shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. VII. Consolidation, Merger, etc. Notwithstanding anything to the contrary contained herein, in case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series C Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. VIII. Redemption The shares of Series C Preferred Stock shall not be redeemable. -6- 45 IX. Rank The Series C Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, on a parity with the Series B Junior Participating Preferred Stock of the Corporation and junior to all series of any other class of the Corporation's Preferred Stock issued either before or after the issuance of the Series C Preferred Stock, unless the terms of any such series shall provide otherwise. X. Amendment The Articles of Organization of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series C Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series C Preferred Stock, voting together as a single series. XI. Fractional Shares Series C Preferred Stock may be issued in fractions of a share which are integral multiples of one-thousandth of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of Series C Preferred Stock. -7- 46 [Form of Rights Certificate] Certificate No. R- ________ Rights NOT EXERCISABLE AFTER FEBRUARY 8, 2005 OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]* Rights Certificate PERKINELMER, INC. This certifies that _______________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Amended and Restated Rights Agreement, dated as of January 30, 2001 (the "Rights Agreement"), between PerkinElmer, Inc., a Massachusetts corporation (the "Company"), and Mellon Investor Services LLC, a New Jersey limited liability company (the "Rights Agent"), to purchase from the Company after the Distribution Date (as such term is defined in the Rights Agreement) and at any time prior to 5:00 P.M. (Boston time) on February 8, 2005 at the office of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, nonassessable share of Series C Junior Participating Preferred Stock (the "Preferred Stock") of the Company, $1.00 par value per share, at a purchase price of $60.00 in cash per one one-thousandth of a share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of one one-thousandths of a share of Preferred Stock which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of the close of business on February 8, 1995, based on the Preferred Stock as constituted at such date. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Rights Agreement. - ------------------------- * The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence. 47 Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate who becomes a transferee after the Acquiring Person becomes such, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, concurrently with or after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event. As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including a Section 11(a)(ii) Event. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the principal offices of the Company and are available upon written request to the Company. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, with the Form of Election and Certificate set forth on the reverse side duly executed, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-thousandths of a share of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.01 per Right at any time prior to the earlier of the close of business on (i) the tenth day following the Stock Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. Subject to the provisions of the Rights Agreement, the Company may, at its option, at any time after a Section 11(a)(ii) Event, subject to the approval of a majority of the Continuing Directors, exchange all or part of the Rights evidenced by this Certificate for shares of the Company's Common Stock or for Preferred Stock (or shares of a class or series of the Company's preferred stock having the same rights, privileges and preferences as the Preferred Stock). -2- 48 No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ____________________, 200__ ATTEST: PERKINELMER, INC. ____________________________________ By: ____________________________ Clerk Title: _________________________ Countersigned: MELLON INVESTOR SERVICES LLC as Rights Agent By: ____________________________________ Authorized Signature -3- 49 FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate.) FOR VALUE RECEIVED ___________________________________________________________ hereby sells, assigns and transfers unto _____________________________________________________ ________________________________________________________________________________ (Please print name and address of transferee) ________________________________________________________________________________ this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _____________________ Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated: ________________________ 200__ _________________________________ Signature Signature Guaranteed: Certificate The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement). Dated: ____________________, 200__ _________________________________ Signature Signature Guaranteed: -4- 50 [Form of Reverse Side of Rights Certificate--Continued] FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise Rights represented by the Rights Certificate.) TO: PERKINELMER, INC. The undersigned hereby irrevocably elects to exercise __________ Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to: Please insert social security or other identifying number ____________________________________________________ ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ____________________________________________________ ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ Dated: _____________________, 200__ _________________________________ Signature Signature Guaranteed: -5- 51 Certificate The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement). Dated: ________________________ 200__ _________________________________ Signature Signature Guaranteed: NOTICE The signature to the foregoing Form of Assignment or Form of Election to Purchase must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored. -6- 52 Exhibit C SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK On January 25, 1995, the Board of Directors of EG&G, Inc. (the "Company") declared a dividend of one preferred stock purchase right (a "Right") for each outstanding share of the Company's Common Stock to stockholders of record at the close of business on February 8, 1995 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share (a "Unit") of Series C Junior Participating Preferred Stock, $1.00 par value (the "Preferred Stock"), at a purchase price of $60.00 in cash per Unit (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement dated as of January 25, 1995 (the "Rights Agreement") between the Company and The First National Bank of Boston, as Rights Agent. Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Rights Certificates will be distributed. The Rights will separate from the Common Stock and a Distribution Date will occur upon the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of Common Stock (the "Stock Acquisition Date"), or (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 30% or more of such outstanding shares of Common Stock. Until the Distribution Date (or earlier redemption or expiration of the rights), (i) the Rights will be evidenced by the Common Stock certificates and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for Common Stock outstanding, even without such notation, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. The Rights are not exercisable until the Distribution Date and will expire at the close of business on February 8, 2005, subject to earlier expiration or termination as provided in the Rights Agreement. As soon as practicable after the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, such separate Rights Certificates alone will represent the Rights. Except as otherwise determined by the Board of Directors and except in connection with shares of Common Stock issued upon the exercise of employee stock options, issuances under other employee stock benefit plans or the conversion of convertible securities issued hereafter, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights. In the event that a Person becomes an Acquiring Person, except pursuant to an offer for all outstanding shares of Common Stock which the independent directors determine to be fair to, 53 and otherwise in the best interests of, shareholders (a "Permitted Offer"), each holder of a Right will thereafter have the right to receive, upon exercise, that number of shares of Common Stock (or, in certain circumstances, cash, property or other securities of the Company) which equals the exercise price of the Right divided by one-half of the current market price (as defined in the Rights Agreement) of the Common Stock at the date of the occurrence of the event. However, Rights are not exercisable following the occurrence of any of the events set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. Notwithstanding any of the foregoing, following the occurrence of the event set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. The event set forth in this paragraph is referred to as a "Section 11(a)(ii) Event." For example, at an exercise price of $60.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase for $60.00 such number of shares of Common Stock (or other consideration, as noted above) as equals $60.00 divided by one-half of the current market price (as defined in the Rights Agreement) of the Common Stock. Assuming that the Common Stock had a per share value of $30.00 at such time, the holder of each valid Right would be entitled to purchase four shares of Common Stock for $60.00. In the event that, at any time following the Stock Acquisition Date, (i) the Company is acquired in a merger or other business combination transaction in which either the Company is not the surviving corporation or its Common Stock is changed or exchanged (other than a merger which follows a Permitted Offer), or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, that number of shares of common stock of the acquiring company which equals the exercise price of the Right divided by one-half of the current market price of such common stock at the date of the occurrence of the event. For example, at an exercise price of $60.00 per Right, each valid Right following an event set forth in the preceding paragraph would entitle its holder to purchase for $60.00 such number of shares of common stock of the acquiring company as equals $60.00 divided by one-half of the current market price (as defined in the Rights Agreement) of such common stock. Assuming that such common stock had a per share value of $30.00 at such time, the holder of each valid Right would be entitled to purchase four shares of common stock of the acquiring company for $60.00. At any time after the occurrence of a Section 11(a)(ii) Event, and subject to the concurrence of a majority of the Continuing Directors (as defined in the Rights Agreement), the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person which have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or one one-thousandth of a share of Preferred Stock (or of a share of a class or series of the Company's preferred stock having equivalent rights, preferences and privileges), per Right (subject to adjustment). -2- 54 The Purchase Price payable, and the number of Units of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the then-current market price of the Preferred Stock, or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings) or of subscription rights or warrants (other than those referred to above). The number of Rights associated with each share of Common Stock is also subject to adjustment in the event of a stock split of the Common Stock or a stock dividend on the Common Stock payable in Common Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date. Preferred Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $1.00 per share and will be entitled to an aggregate dividend of 1,000 times the dividend declared per share of Common Stock. In the event of liquidation, the holders of the Preferred Stock will be entitled to a minimum preferential liquidation payment of $1,000 per share and will be entitled to an aggregate payment of 1,000 times the payment made per share of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the Common Stock. Finally, in the event of any merger, consolidation or other transaction in which Common Stock is exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock. These rights are protected by customary antidilution provisions. Because of the nature of the Preferred Stock's dividend, liquidation and voting rights, the value of one one-thousandth of a share of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise. At any time until ten days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"), payable in cash or stock. Immediately upon the action of the Board of Directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights -3- 55 become exercisable for Common Stock (or other consideration) of the Company or for common stock of the acquiring company as set forth above. Prior to the Distribution Date, the terms of the Rights are subject to amendment by the Board of Directors without the consent of the holders of the Rights, except that (i) the redemption price of the Rights, the exercise price of the Rights and the number of shares of Preferred Stock issuable upon exercise of the Rights are not subject to amendment and (b) the expiration date of the Rights is subject to amendment (including acceleration) only in connection with an acquisition of the Company at a price determined to be fair by a majority of the members of the Company's Board of Directors who are not officers of the Company and who are not affiliated with the acquiring party. After the Distribution Date, only limited terms of the Rights are subject to amendment by the Board, and the consent of the Continuing Directors (as defined in the Rights Agreement) is required where appropriate to protect the Rights. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated January 27, 1995. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference. -4- EX-10.3 3 b38210peex10-3.txt COMPETITIVE ADVANCE AND REVOLVING CREDIT 1 CONFORMED COPY Exhibit 10.3 ================================================================================ $100,000,000 FIVE-YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT Dated as of March 2, 2001 among PERKINELMER, INC. THE LENDERS NAMED HEREIN and THE CHASE MANHATTAN BANK as Administrative Agent ------------------------------ JPMORGAN as Advisor, Lead Arranger and Bookrunner FLEET NATIONAL BANK, as Co-Documentation Agent WACHOVIA BANK, N.A., as Co-Documentation Agent ================================================================================ [CS&M 6700-795] 2 TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.01. Defined Terms...................................................5 SECTION 1.02. Terms Generally.................................................9 ARTICLE II The Credits SECTION 2.01. Commitments....................................................10 SECTION 2.02. Loans..........................................................10 SECTION 2.03. Competitive Bid Procedure......................................12 SECTION 2.04. Standby Borrowing Procedure....................................13 SECTION 2.05. Facility Fees..................................................14 SECTION 2.06. Conversion and Continuation of Standby Borrowings..............14 SECTION 2.07. Repayment of Loans; Evidence of Debt...........................14 SECTION 2.08. Interest on Loans..............................................15 SECTION 2.09. Default Interest...............................................15 SECTION 2.10. Alternate Rate of Interest.....................................15 SECTION 2.11. Termination and Reduction of Commitments.......................16 SECTION 2.12. Prepayment.....................................................16 SECTION 2.13. Reserve Requirements; Change in Circumstances..................16 SECTION 2.14. Change in Legality.............................................18 SECTION 2.15. Indemnity......................................................18 SECTION 2.16. Pro Rata Treatment.............................................19 SECTION 2.17. Sharing of Setoffs.............................................19 SECTION 2.18. Payments.......................................................19 SECTION 2.19. Duty to Mitigate; Assignment of Commitments Under Certain Circumstances.............................................20 SECTION 2.20. Taxes..........................................................20 ARTICLE III Representations and Warranties SECTION 3.01. Corporate Existence and Power..................................22 3 SECTION 3.02. Corporate and Governmental Authorization; Contravention........22 SECTION 3.03. Binding Effect.................................................23 SECTION 3.04. Financial Information..........................................23 SECTION 3.05. Litigation.....................................................23 SECTION 3.06. Compliance with ERISA..........................................23 SECTION 3.07. Taxes..........................................................23 SECTION 3.08. Subsidiaries...................................................24 SECTION 3.09. Representations and Warranties of Each Borrowing Subsidiary....24 SECTION 3.10. Federal Reserve Regulations....................................24 SECTION 3.11. Investment Company Act; Public Utility Holding Company Act.....25 SECTION 3.12. Environmental and Safety Matters...............................25 SECTION 3.13. No Material Adverse Change.....................................25 SECTION 3.14. Solvency.......................................................25 ARTICLE IV Conditions of Effectiveness and Lending SECTION 4.01. All Borrowings.................................................27 SECTION 4.02. Effectiveness..................................................27 SECTION 4.03. First Borrowing by Each Borrowing Subsidiary...................28 ARTICLE V Covenants SECTION 5.01. Information....................................................28 SECTION 5.02. Corporate Existence; Businesses and Properties.................30 SECTION 5.03. Insurance......................................................30 SECTION 5.04. Litigation and Other Notices...................................30 SECTION 5.05. Maintaining Records; Access to Properties and Inspections......30 SECTION 5.06. Consolidated EBITDA to Consolidated Interest Expense Ratio.....30 SECTION 5.07. Net Debt to Capitalization Ratio...............................30 SECTION 5.08. Negative Pledge................................................30 SECTION 5.09. Consolidations, Mergers and Sales of Assets....................31 SECTION 5.10. Ownership of Margin Stock......................................32 ARTICLE VI Events of Default.............................................................32 ARTICLE VII 4 Guarantee.....................................................................35 ARTICLE VIII The Administrative Agent......................................................36 ARTICLE IX Miscellaneous SECTION 9.01. Notices........................................................38 SECTION 9.02. Survival of Agreement..........................................38 SECTION 9.03. Binding Effect.................................................38 SECTION 9.04. Successors and Assigns.........................................38 SECTION 9.05. Expenses; Indemnity............................................40 SECTION 9.06. Applicable Law.................................................41 SECTION 9.07. Waivers; Amendment.............................................41 SECTION 9.08. Entire Agreement...............................................42 SECTION 9.09. Severability...................................................42 SECTION 9.10. Counterparts...................................................42 SECTION 9.11. Headings.......................................................42 SECTION 9.12. Right of Setoff................................................42 SECTION 9.13. Jurisdiction; Consent to Service of Process....................42 SECTION 9.14. Waiver of Jury Trial...........................................43 SECTION 9.15. Addition of Borrowing Subsidiaries.............................43 SECTION 9.16. Confidentiality................................................43 SECTION 9.17. Collateral.....................................................43 SECTION 9.18. Interest Rate Limitation.......................................43 5 Schedules - --------- Schedule 2.01 Commitments Schedule 3.08 Subsidiaries Schedule 3.12 Environmental Exceptions (Facilities Owned by the Company and its Subsidiaries) Exhibits - -------- Exhibit A-1 Competitive Bid Request Exhibit A-2 Invitation by Administrative Agent for Competitive Bids Exhibit A-3 Competitive Bid by a Lender Exhibit A-4 Competitive Bid Accept/Reject Letter Exhibit A-5 Standby Borrowing Request Exhibit B Administrative Questionnaire Exhibit C Assignment and Acceptance Exhibit D-1 Opinion of Terrance L. Carlson, Esq. with respect to the Company Exhibit D-2 Opinion of Terrance L. Carlson, Esq. with respect to the Borrowing Subsidiaries Exhibit E Borrowing Subsidiary Agreement 6 $100,000,000 FIVE-YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT (the "Agreement") dated as of March 2, 2001, among PERKINELMER, INC., a Massachusetts corporation (the "Company"), the Borrowing Subsidiaries (as such term is defined herein; together with the Company, the "Borrowers"), the lenders listed in Schedule 2.01 (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). The Lenders have been requested to extend credit to the Borrowers to enable them to borrow on a standby revolving credit basis on and after the date hereof and at any time and from time to time prior to the Maturity Date a principal amount not in excess of $100,000,000 at any time outstanding. The Lenders have also been requested to provide a procedure pursuant to which the Borrowers may invite the Lenders to bid on an uncommitted basis on short-term borrowings by the Borrowers. The proceeds of all such borrowings are to be used by the Borrowers for general corporate purposes, including to finance acquisitions and to provide working capital for use in the ordinary course of their businesses. The Lenders are willing to extend such credit on the terms and subject to the conditions herein set forth. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in Article I. Accordingly, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loan" shall mean any Standby Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit B hereto. "Affiliate" shall mean, when used with respect to a specified person, another person that directly or indirectly controls or is controlled by or is under common control with the person specified. "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect 7 2 on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as effective. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as released on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so released for any day which is a Business Day, the arithmetic average (rounded upwards to the next 1/100th of 1%), as determined by the Administrative Agent, of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" shall mean on any date, with respect to Eurodollar Standby Loans or with respect to the Facility Fee, as the case may be, the applicable percentage set forth below under the caption "Eurodollar Spread" or "Facility Fee Percentage", as the case may be, based upon the Ratings in effect on such date:
================================================================================ Rating Eurodollar Spread Facility Fee Percentage - -------------------------------------------------------------------------------- Category 1 .230% .070% Aa3 or higher by Moody's; AA- or higher by S&P - -------------------------------------------------------------------------------- Category 2 .300% .100% A1 or A2 by Moody's; A+ or A by S&P - -------------------------------------------------------------------------------- Category 3 .375% .125% A3 by Moody's; A- by S&P - -------------------------------------------------------------------------------- Category 4 .450% .150% Baa1 by Moody's; BBB+ by S&P - --------------------------------------------------------------------------------
8 3
================================================================================ Rating Eurodollar Spread Facility Fee Percentage - -------------------------------------------------------------------------------- Category 5 .575% .175% Baa2 by Moody's; BBB by S&P - -------------------------------------------------------------------------------- Category 6 .650% .225% Baa3 by Moody's; BBB- by S&P - -------------------------------------------------------------------------------- Category 7 .700% .300% Ba1 or lower by Moody's; BB+ or lower by S&P ================================================================================
For purposes of the foregoing, (i) if the Ratings shall fall within different Categories, the Applicable Percentage shall be based upon the higher of the two Categories; provided, however, that if the difference in the Ratings is greater than one Category, the Applicable Percentage will be based on the Category which is one Category below the higher Rating; (ii) if no Ratings exist, the Applicable Percentage shall be based upon Category 7; and (iii) if any Rating shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the rating agency making such change. Each such change in the Applicable Percentage shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the parties hereto shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system or the non-availability of ratings from such rating agency, and pending the effectiveness of any such amendment the Applicable Percentage shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee in the form of Exhibit C. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Board of Directors" shall mean the Board of Directors of the Company or any duly authorized committee thereof. "Borrowing" shall mean a group of Loans of a single Type made by the Lenders to a single Borrower (or, in the case of a Competitive Borrowing, by the Lender or Lenders whose 9 4 Competitive Bids have been accepted pursuant to Section 2.03) on a single date and as to which a single Interest Period is in effect. "Borrowing Subsidiary" shall mean any Subsidiary which shall have executed and delivered to the Administrative Agent and each Lender a Borrowing Subsidiary Agreement. "Borrowing Subsidiary Agreement" shall mean an agreement, in the form of Exhibit E hereto, duly executed by the Company and a Subsidiary. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City; provided, however, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "A Change in Control" shall be deemed to have occurred if (a) any person or group of persons shall have acquired beneficial ownership of more than 50% of the outstanding Voting Shares of the Company (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder), or (b) during any period of 12 consecutive months, commencing before or after the date of this Agreement, individuals who on the first day of such period were directors of the Company (together with any replacement or additional directors who were nominated or elected by a majority of directors then in office) cease to constitute a majority of the Board of Directors of the Company. "Charges" shall have the meaning assigned to such term in Section 9.18. "Closing Date" shall mean the date of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. "Commitment" shall mean, with respect to each Lender, the commitment of such Lender hereunder as set forth as of the Closing Date in Schedule 2.01 hereto as such Lender's Commitment may be permanently terminated or reduced from time to time pursuant to Section 2.11. The Commitment of each Lender shall automatically and permanently terminate on the Maturity Date if not terminated earlier pursuant to the terms hereof. "Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan pursuant to Section 2.03. "Competitive Bid Accept/Reject Letter" shall mean a notification made by a Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4. 10 5 "Competitive Bid Rate" shall mean, as to any Competitive Bid, (i) in the case of a Eurodollar Loan, the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the Lender making such Competitive Bid. "Competitive Bid Request" shall mean a request made pursuant to Section 2.03 in the form of Exhibit A-1. "Competitive Borrowing" shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted under the bidding procedure described in Section 2.03. "Competitive Loan" shall mean a Loan made pursuant to the bidding procedure described in Section 2.03. Each Competitive Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan. "Consolidated EBITDA" shall mean, for any period, Consolidated Net Income of the Company and its Consolidated Subsidiaries excluding the effect of non-cash extraordinary items and accounting changes for such period, plus income taxes during such period, plus the aggregate amount deducted in determining such Consolidated Net Income for such period in respect of Consolidated Interest Expense of the Company and its Consolidated Subsidiaries for such period, plus all amounts attributable to depreciation and amortization of the Company and its Consolidated Subsidiaries for such period, all determined in accordance with GAAP. "Consolidated Interest Expense" shall mean, for any period, (a) the gross interest expense of the Company and its Consolidated Subsidiaries (excluding the amortization of transaction costs) in respect of Indebtedness included within clauses (i) through (iv) of the definition of Indebtedness for such period, all determined in accordance with GAAP. "Consolidated Net Income" shall mean, for any period, the consolidated net income (or loss) of the Company and its Consolidated Subsidiaries for such period, determined in accordance with GAAP. "Consolidated Net Indebtedness" shall mean, for any date, (a) the sum of all outstanding Indebtedness of the Company and its Consolidated Subsidiaries as of such date less (b) the lesser of (i) $50,000,000 and (ii) Eligible Investments as of such date, all determined on a consolidated basis in accordance with GAAP. "Consolidated Subsidiary" shall mean, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements as of such date. "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "dollars" or "$" shall mean lawful money of the United States of America. 11 6 "Eligible Investments" shall mean: (a) cash and cash equivalents; (b) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof by the Company or any Subsidiary; (c) investments in money market funds the assets of which are invested in obligations of the type described in (b) above (irrespective of maturity); and (d) other money market investments offered by any of the Lenders or a commercial bank having the highest credit rating available from Standard & Poor's Corporation or Moody's Investors Service, Inc. and having maturities of less than 90 days. "Environmental Laws" shall have the meaning assigned to such term in Section 3.12. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414 of the Code. "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. "Eurodollar Competitive Loan" shall mean any Competitive Loan bearing interest at a rate determined by reference to the LIBO Rate in accordance with the provisions of Article II. "Eurodollar Loan" shall mean any Eurodollar Competitive Loan or Eurodollar Standby Loan. "Eurodollar Standby Loan" shall mean any Standby Loan bearing interest at a rate determined by reference to the LIBO Rate in accordance with the provisions of Article II. "Event of Default" shall have the meaning assigned to such term in Article VI. "Existing Credit Agreement" shall mean the $100,000,000 Competitive Advance and Revolving Credit Facility Agreement dated March 21, 1994, as amended, among the Company, the Borrowing Subsidiaries, the lenders party thereto and the Administrative Agent. "Facility Fee" shall have the meaning assigned to such term in Section 2.05(a). "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer, treasurer or assistant treasurer of such corporation. 12 7 "Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans. "Fixed Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (expressed in the form of a decimal to no more than four decimal places) specified by the Lender making such Loan in its Competitive Bid. "GAAP" shall mean generally accepted accounting principles, applied on a consistent basis. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guaranteed Obligations" shall mean the principal of and interest on the Loans made to, and the other obligations, monetary or otherwise, of, the Borrowing Subsidiaries under this Agreement. "Indebtedness" of any person shall mean at any date, without duplication, (i) all obligations of such person for borrowed money (but not including non-recourse obligations of such person), (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, except trade payables and reimbursement obligations in respect of performance bonds and standby letters of credit to the extent the obligations underlying such letters of credit would not be considered Indebtedness, all of which arise in the ordinary course of business, (iii) all obligations of such person to pay the deferred purchase price of property or services, except trade accounts payable and accrued expenses arising in the ordinary course of business, (iv) all obligations of such person as lessee under capital leases, (v) all Indebtedness of others secured by a Lien on any asset of such person (but not including non-recourse obligations of such person) and (vi) all Indebtedness of others guaranteed by such person. "Information" shall mean any materials, documents and information (other than annual reports, prospectuses, proxy statements and other materials distributed to the Company's shareholders) that the Company or any of its Subsidiaries may have furnished or may hereafter furnish to the Administrative Agent or any Lender in connection with Sections 4.03(d), 5.01, 5.04 and 5.05 of this Agreement. "Interest Payment Date" shall mean (i) as to any Eurodollar Loan for which the Interest Period is 1, 2 or 3 months, the last day of the Interest Period, (ii) as to any Eurodollar Loan for which the Interest Period is 6 months, the last day of the Interest Period and the date that would be the last day of an Interest Period commencing on the same date but having a duration of 3 months, (iii) as to any ABR Loan, the last day of March, June, September and December in each year, or if such day is not a Business Day, the next succeeding Business Day and (iv) as to any Fixed Rate Loan, the last day of the Interest Period applicable thereto. "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the 13 8 calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the next succeeding March 31, June 30, September 30 or December 31, or, if earlier, on the Maturity Date or the date such Borrowing is repaid or prepaid in accordance with Section 2.07 or Section 2.12 and (c) as to any Fixed Rate Borrowing, the period commencing on the date of such Borrowing and ending on the date specified in the Competitive Bids in which the offers to make the Fixed Rate Loans comprising such Borrowing were extended, which shall not be earlier than seven days after the date of such Borrowing or later than 360 days after the date of such Borrowing; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of Eurodollar Loans only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the arithmetic average of the rates at which dollar deposits approximately equal in principal amount to (i) in the case of a Standby Borrowing, the Administrative Agent's portion of such Eurodollar Borrowing and (ii) in the case of a Competitive Borrowing, a principal amount that would have been the Administrative Agent's portion of such Competitive Borrowing had such Competitive Borrowing been a Standby Borrowing, and for a maturity comparable to such Interest Period are offered to the principal London offices of the Administrative Agent (or, if the Administrative Agent does not at the time maintain a London office, the principal London office of any Affiliate of the Administrative Agent) in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). "Loan" shall mean a Competitive Loan or a Standby Loan, whether made as a Eurodollar Loan, an ABR Loan or a Fixed Rate Loan, as permitted hereby. "Margin" shall mean, as to any Eurodollar Competitive Loan, the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the LIBO Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan. "Margin Regulations" shall mean Regulations U and X of the Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof. 14 9 "Margin Stock" shall have the meaning given such term under Regulation U of the Board. "Material Adverse Effect" shall mean a materially adverse effect on the business, assets, operations or condition, financial or otherwise, of the Company and its Consolidated Subsidiaries taken as a whole. "Maturity Date" shall mean the fifth anniversary of the Closing Date. "Maximum Rate" shall have the meaning assigned to such term in Section 9.18. "Moody's" shall mean Moody's Investors Service, Inc., or any of its successors. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "New Lending Office" shall have the meaning assigned to such term in Section 2.20(g). "Non-U.S. Lender" shall mean any Lender (or Transferee) that is organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia. "Other Taxes" shall have the meaning assigned to such term in Section 2.20(b). "person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code that is maintained for current or former employees, or any beneficiary thereof, of the Company or any ERISA Affiliate. "Ratings" shall mean the ratings from time to time established by Moody's and S&P for senior, unsecured, non-credit-enhanced long-term debt of the Company. "Register" shall have the meaning given such term in Section 9.04(d). "Regulation D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. 15 10 "Reportable Event" shall mean any reportable event as defined in Section 4043(b) of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414). "Required Lenders" shall mean, at any time, Lenders having Commitments representing more than 50% of the Total Commitment or, for purposes of acceleration pursuant to clause (ii) of Article VI, Lenders holding Loans representing more than 50% of the aggregate principal amount of the Loans outstanding. "S&P" shall mean Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any of its successors. "Shareholders' Equity" shall mean, with respect to the Company at any date, (a) the sum of (i) common stock and preferred stock taken at par or stated value at such date, (ii) capital in excess of par value at such date, (iii) cumulative translation adjustments and other adjustments required by GAAP at such date and (iv) retained earnings (or deficit) at such date minus (b) treasury stock at such date, all determined in accordance with GAAP. "Standby Borrowing" shall mean a Borrowing consisting of simultaneous Standby Loans from each of the Lenders. "Standby Borrowing Request" shall mean a request made pursuant to Section 2.04 in the form of Exhibit A-5. "Standby Loans" shall mean the revolving loans made pursuant to Section 2.04. Each Standby Loan shall be a Eurodollar Standby Loan or an ABR Loan. "subsidiary" shall mean, with respect to any person (the "parent"), any corporation, association or other business entity of which securities or other ownership interests representing more than 50% of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" shall mean a subsidiary of the Company. "Taxes" shall have the meaning assigned to such term in Section 2.20(a). "364-Day Facility" shall mean the 364-Day Amended and Restated Competitive Advance and Revolving Credit Facility Agreement dated the date hereof, as amended from time to time, among the Company, certain of the Subsidiaries, the lenders named therein and The Chase Manhattan Bank, as administrative agent. "Total Commitment" shall mean, at any time, the aggregate amount of Commitments of all the Lenders, as in effect at such time. 16 11 "Transferee" shall have the meaning assigned to such term in Section 2.20(a). "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall include the LIBO Rate, the Alternate Base Rate and the Fixed Rate. "Voting Shares" shall mean, as to any corporation, outstanding shares of stock of any class of such corporation entitled to vote in the election of directors, excluding shares entitled so to vote only upon the happening of some contingency. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any covenant set forth in Article V, such terms shall be construed in accordance with GAAP as in effect on the date hereof applied on a basis consistent with the application used in preparing the Company's audited financial statements referred to in Section 3.04. ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Standby Loans to the Borrowers, at any time and from time to time on and after the Closing Date hereof and until the earlier of the Maturity Date and the termination of the Commitment of such Lender, in an aggregate principal amount at any time outstanding not to exceed such Lender's Commitment minus the amount by which the Competitive Loans outstanding at such time shall be deemed to have used such Commitment pursuant to Section 2.16, subject, however, to the conditions that (i) at no time shall (A) the sum of (x) the outstanding aggregate principal amount of all Standby Loans made by all Lenders plus (y) the outstanding aggregate principal amount of all Competitive Loans made by all Lenders exceed (B) the Total Commitment and (ii) at all times the outstanding aggregate principal amount of all Standby Loans made by each Lender shall equal the product of (A) the percentage which its Commitment represents of the Total Commitment times (B) the outstanding aggregate principal amount of all Standby Loans. 17 12 Within the foregoing limits, the Borrowers may borrow, pay or prepay and reborrow Standby Loans hereunder, on and after the Closing Date and prior to the Maturity Date, subject to the terms, conditions and limitations set forth herein. SECTION 2.02. Loans. (a) Each Standby Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments; provided, however, that the failure of any Lender to make any Standby Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.03. The Standby Loans or Competitive Loans comprising any Borrowing shall be in an aggregate principal amount which is an integral multiple of $1,000,000 and not less than $5,000,000 (or an aggregate principal amount equal to the remaining balance of the available Commitments). (b) Each Competitive Borrowing shall be comprised entirely of Eurodollar Competitive Loans or Fixed Rate Loans, and each Standby Borrowing shall be comprised entirely of Eurodollar Standby Loans or ABR Loans, as any Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that (i) any exercise of such option shall not affect the obligation of such Borrower to repay such Loan in accordance with the terms of this Agreement and (ii) the Borrowers shall not be liable for increased costs under Section 2.13 or 2.14 to the extent that (A) such costs could be avoided by the use of a different branch or Affiliate to make Eurodollar Loans and (B) such use would not, in the judgment of such Lender, entail any expense for which such Lender shall not be indemnified hereunder. Borrowings of more than one Type may be outstanding at the same time; provided, however, that no Borrowing shall be requested which, if made, would result in an aggregate of more than 10 separate Standby Borrowings comprised of Eurodollar Loans being outstanding hereunder at any one time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Subject to Section 2.02(d), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to the Administrative Agent in New York, New York, not later than 12:00 noon, New York City time, and the Administrative Agent shall by 3:00 p.m., New York City time, credit the amounts so received to the general deposit account of the applicable Borrower with the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids therefor are accepted pursuant to Section 2.03 in the amounts so accepted. Standby Loans shall be made by the Lenders pro rata in accordance with Section 2.16. Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with this paragraph (c) and the Administrative Agent may, in 18 13 reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the applicable Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of such Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Effective Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (d) Any Borrower may refinance all or any part of any Borrowing with a Borrowing of the same or a different Type made pursuant to Section 2.03 or Section 2.04, subject to the conditions and limitations set forth herein and elsewhere in this Agreement, including refinancings of Competitive Borrowings with Standby Borrowings and Standby Borrowings with Competitive Borrowings. Any Borrowing or part thereof so refinanced shall be deemed to be repaid in accordance with Section 2.07 with the proceeds of a new Borrowing hereunder and the proceeds of the new Borrowing, to the extent they do not exceed the principal amount of the Borrowing being refinanced, shall not be paid by the Lenders to the Administrative Agent or by the Administrative Agent to the applicable Borrower pursuant to Section 2.02(c); provided, however, that (i) if the principal amount extended by a Lender in a refinancing is greater than the principal amount extended by such Lender in the Borrowing being refinanced, then such Lender shall pay such difference to the Administrative Agent for distribution to the Lender described in (ii) below, (ii) if the principal amount extended by a Lender in the Borrowing being refinanced is greater than the principal amount being extended by such Lender in the refinancing, the Administrative Agent shall return the difference to such Lender out of amounts received pursuant to (i) above and (iii) to the extent any Lender fails to pay the Agent amounts due from it pursuant to (i) above, any Loan or portion thereof being refinanced with such amounts shall not be deemed repaid in accordance with Section 2.07 and shall be payable by the Company. SECTION 2.03. Competitive Bid Procedure. (a) In order to request Competitive Bids, a Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be received by the Administrative Agent (i) in the case of a Eurodollar Competitive Borrowing, not later than 10:00 a.m., New York City time, four Business Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day before a proposed Competitive Borrowing. No ABR Loan shall be requested in, or made pursuant to, a Competitive Bid Request. A Competitive Bid Request that does not conform substantially to the format of Exhibit A-1 may be rejected in the Administrative Agent's sole discretion, and the Administrative Agent shall promptly notify the applicable Borrower of such rejection by telecopy. Each Competitive Bid Request shall refer to this Agreement and specify whether the Borrowing then being requested is to be a Eurodollar Borrowing or a Fixed Rate Borrowing, the date of such Borrowing (which shall be a Business Day), the aggregate principal amount thereof, which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000, and the Interest Period with respect thereto (which may not end after the Maturity Date). Promptly after its receipt of a Competitive Bid Request that is not rejected as aforesaid, the Administrative 19 14 Agent shall invite by telecopy (in the form set forth in Exhibit A-2 hereto) the Lenders to bid, on the terms and conditions of this Agreement, to make Competitive Loans. (b) Each Lender invited to bid may, in its sole discretion, make one or more Competitive Bids to the applicable Borrower responsive to such Borrower's Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Administrative Agent by telecopy, in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Borrowing. Multiple bids will be accepted by the Administrative Agent. Competitive Bids that do not conform substantially to the format of Exhibit A-3 may be rejected by the Administrative Agent, and the Administrative Agent shall notify the Lender making such nonconforming bid of such rejection as soon as practicable. Each Competitive Bid shall refer to this Agreement and specify (x) the principal amount (which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested) of the Competitive Loan or Loans that the Lender is willing to make, (y) the Competitive Bid Rate or Rates at which the Lender is prepared to make the Competitive Loan or Loans and (z) the Interest Period and the last day thereof. If any Lender invited to bid shall elect not to make a Competitive Bid, such Lender shall so notify the Administrative Agent by telecopy (I) in the case of Eurodollar Competitive Loans, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing, and (II) in the case of Fixed Rate Loans, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Borrowing; provided, however, that failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Loan as part of such Competitive Borrowing. A Competitive Bid submitted by a Lender pursuant to this paragraph (b) shall be irrevocable. (c) The Administrative Agent shall promptly notify the applicable Borrower, by telecopy, of all the Competitive Bids made, the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender that made each bid. The Administrative Agent shall send a copy of all Competitive Bids to such Borrower for its records as soon as practicable after completion of the bidding process set forth in this Section 2.03. (d) The applicable Borrower may in its sole and absolute discretion, subject only to the provisions of this paragraph (d), accept or reject any Competitive Bid referred to in paragraph (c) above. Such Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject any of or all the bids referred to in paragraph (c) above, (x) in the case of a Eurodollar Competitive Borrowing, not later than 10:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing, and (y) in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the day of a proposed Competitive Borrowing; provided, however, that (i) the failure of such Borrower to give such notice shall be deemed to be a rejection of all the bids referred to in paragraph (c) above, (ii) such Borrower shall not accept a bid made at a particular Competitive Bid Rate if it has decided to reject a bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive 20 15 Bids accepted by such Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) if such Borrower shall accept a bid or bids made at a particular Competitive Bid Rate but the amount of such bid or bids shall cause the total amount of bids to be accepted to exceed the amount specified in the Competitive Bid Request, then such Borrower shall accept a portion of such bid or bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance, in the case of multiple bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such bid at such Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further, however, that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of the applicable Borrower. A notice given pursuant to this paragraph (d) shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate) by telecopy, and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan or Loans in respect of which its bid has been accepted. (f) A Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request. (g) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such bid directly to the applicable Borrower one quarter of an hour earlier than the latest time at which the other Lenders are required to submit their bids to the Administrative Agent pursuant to paragraph (b) above. (h) All notices required by this Section 2.03 shall be given in accordance with Section 9.01. SECTION 2.04. Standby Borrowing Procedure. In order to request a Standby Borrowing, a Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Standby Borrowing Request in the form of Exhibit A-5 (a) in the case of a Eurodollar Standby Borrowing, not later than 10:30 a.m., New York City time, three Business Days before such Borrowing, and (b) in the case of an ABR Borrowing, not later than 10:30 a.m., New York City time, on the day of such Borrowing. No Fixed Rate Loan shall be requested or made pursuant to a Standby Borrowing Request. Such notice shall be irrevocable and shall in each case specify (i) whether the Borrowing then being requested is to be a Eurodollar Standby Borrowing or an ABR Borrowing; (ii) the date of such Standby Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if such Borrowing is to be a Eurodollar Standby Borrowing, the Interest Period with respect thereto, which shall not end after the Maturity Date. If no election as to the 21 16 Type of Standby Borrowing is specified in any such notice, then the requested Standby Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Standby Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Notwithstanding any other provision of this Agreement to the contrary, no Standby Borrowing shall be requested if the Interest Period with respect thereto would end after the Maturity Date. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.04 and of each Lender's portion of the requested Borrowing. SECTION 2.05. Facility Fees. (a) The Company agrees to pay to each Lender, through the Administrative Agent, on each March 31, June 30, September 30 and December 31 (with the first payment being due on March 31, 2001), on the Maturity Date and on the date on which the Commitment of such Lender shall be terminated as provided herein, a facility fee (a "Facility Fee"), at a rate per annum equal to the Applicable Percentage from time to time in effect on the average daily amount of the Commitment of such Lender, whether used or unused, during the preceding quarter (or other period commencing on the date of this Agreement, or ending with the Maturity Date or the date on which the Commitment of such Lender shall be terminated). All Facility Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Facility Fee due to each Lender shall commence to accrue on the date of this Agreement, and shall cease to accrue on the earlier of the Maturity Date and the date on which the Commitment of such Lender shall have been terminated and the Loans of such Lender shall have been repaid. (b) All Facility Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the Facility Fees shall be refundable under any circumstances. SECTION 2.06. Conversion and Continuation of Standby Borrowings. The applicable Borrower shall have the right, upon prior irrevocable notice to the Administrative Agent, (a) not later than 11:00 a.m., New York City time, one Business Day prior to conversion, to convert any Eurodollar Standby Borrowing into an ABR Borrowing, (b) not later than 11:00 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Standby Borrowing or to continue any Eurodollar Standby Borrowing as a Eurodollar Standby Borrowing for an additional Interest Period, and (c) not later than 11:00 a.m., New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Standby Borrowing to another permissible Interest Period subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Standby Borrowing; (ii) if less than all the outstanding principal amount of any Standby Borrowing shall be converted or continued, the aggregate principal amount of such Standby Borrowing converted or continued shall be an integral multiple of $1,000,000 and not less than $5,000,000; 22 17 (iii) if any Eurodollar Standby Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the applicable Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15; (iv) any portion of a Standby Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Standby Borrowing; (v) any portion of a Eurodollar Standby Borrowing which cannot be converted into or continued as a Eurodollar Standby Borrowing by reason of clause (iv) above shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and (vi) no Interest Period may be selected for any Eurodollar Standby Borrowing that would end later than the Maturity Date. Each notice pursuant to this Section 2.06 shall be by hand delivery or telecopier and irrevocable and shall refer to this Agreement and specify (A) the identity and amount of the Standby Borrowing that the Borrower requests be converted or continued, (B) whether such Standby Borrowing is to be converted to or continued as a Eurodollar Standby Borrowing or an ABR Borrowing, (C) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (D) if such Standby Borrowing is to be converted to or continued as a Eurodollar Standby Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Standby Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the other Lenders of any notice given pursuant to this Section 2.06 and of each Lender's portion of any converted or continued Standby Borrowing. If, with respect to any Interest Period ending on or after the Termination Date, the applicable Borrower shall not have given notice in accordance with this Section 2.06 to continue any Standby Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.06 to convert such Standby Borrowing), such Standby Borrowing shall, at the end of such Interest Period (unless repaid pursuant to the terms hereof), automatically be continued into such subsequent Interest Period as an ABR Borrowing. SECTION 2.07 Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby agrees that the outstanding principal balance of each Standby Loan shall be payable on the Maturity Date and that the outstanding principal balance of each Competitive Loan shall be payable on the last day of the Interest Period applicable thereto. Each Loan shall bear interest on the outstanding principal balance thereof as set forth in Section 2.08. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid such Lender from time to time under this Agreement. 23 18 (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type of each Loan made and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from each Borrower and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) of this Section 2.07 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, 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 obligations of the Borrowers to repay the Loans in accordance with their terms. SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to (i) in the case of each Eurodollar Standby Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect plus an additional .125% per annum on any day on which (A) the sum of (1) the outstanding aggregate principal amount of all Standby Loans made by all Lenders plus (2) the outstanding aggregate principal amount of all Competitive Loans made by all Lenders exceeds (B) 33% of the Total Commitment and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such Loan and accepted by the applicable Borrower pursuant to Section 2.03. (b) Subject to the provisions of Section 2.09, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, for periods during which the Alternate Base Rate is determined by reference to the Prime Rate and 360 days for other periods) at a rate per annum equal to the Alternate Base Rate. (c) Subject to the provisions of Section 2.09, each Fixed Rate Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03. (d) Interest on each Loan shall be payable on each Interest Payment Date applicable to such Loan except as otherwise provided in this Agreement. The applicable LIBO Rate or Alternate Base Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.09. Default Interest. If a Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, whether by scheduled maturity, notice of prepayment, acceleration or otherwise, such Borrower shall owe 24 19 interest, payable on demand, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed as provided in Section 2.08(b)) equal to the Alternate Base Rate plus 2%. SECTION 2.10. Alternate Rate of Interest. (a) In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined (i) that dollar deposits in the principal amounts of the Eurodollar Loans comprising such Borrowing are not generally available in the London interbank market or (ii) that reasonable means do not exist for ascertaining the LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give telecopy notice of such determination to the Borrowers and the Lenders. In the event of any such determination under clauses (i) or (ii) above, until the Administrative Agent shall have advised the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, (x) any request by a Borrower for a Eurodollar Competitive Borrowing pursuant to Section 2.03 shall be of no force and effect and shall be denied by the Administrative Agent and (y) any request by a Borrower for a Eurodollar Standby Borrowing pursuant to Section 2.04 shall be deemed to be a request for an ABR Borrowing. (b) In the event a Lender notifies the Administrative Agent that the rates at which dollar deposits are being offered will not adequately and fairly reflect the cost to such Lender of making or maintaining its Eurodollar Loan during such Interest Period, the Administrative Agent shall notify the applicable Borrower of such notice and until the Lender shall have advised the Administrative Agent that the circumstances giving rise to such notice no longer exist, any request by such Borrower for a Eurodollar Standby Borrowing shall be deemed a request for an ABR Borrowing for the same Interest Period with respect to such Lender. (c) Each determination by the Administrative Agent hereunder shall be made in good faith and shall be conclusive absent manifest error. SECTION 2.11. Termination and Reduction of Commitments. (a) The Commitments shall be automatically terminated on the Maturity Date. (b) Upon at least three Business Days' prior irrevocable telecopy notice to the Administrative Agent, the Company may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Total Commitment; provided, however, that (i) each partial reduction of the Total Commitment shall be in an integral multiple of $1,000,000 and in a minimum principal amount of $5,000,000 and (ii) no such termination or reduction shall be made which would reduce the Total Commitment to an amount less than the aggregate outstanding principal amount of the Loans. (c) Each reduction in the Total Commitment hereunder shall be made ratably among the Lenders in accordance with their respective Commitments. The Company shall pay to the Administrative Agent for the account of the Lenders, on each date of reduction of any portion of the Total Commitment, the Facility Fees on the amount of the Commitments so terminated accrued through the date of such termination or reduction. 25 20 SECTION 2.12. Prepayment. (a) Each Borrower shall have the right at any time and from time to time to prepay any Standby Borrowing, in whole or in part, upon giving telecopy notice (or telephone notice promptly confirmed by telecopy) to the Administrative Agent: (i) before 10:00 a.m., New York City time, three Business Days prior to prepayment, in the case of Eurodollar Loans, and (ii) before 10:00 a.m., New York City time, one Business Day prior to prepayment, in the case of ABR Loans; provided, however, that each partial prepayment shall be in an amount which is an integral multiple of $1,000,000 and not less than $5,000,000. No prepayment may be made in respect of any Competitive Borrowing. (b) On the date of any termination or reduction of the Commitments pursuant to Section 2.11(b), the Borrowers shall pay or prepay so much of the Standby Borrowings as shall be necessary in order that the aggregate principal amount of the Competitive Loans and Standby Loans outstanding will not exceed the Total Commitment, after giving effect to such termination or reduction. (c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the applicable Borrower to prepay such Borrowing (or portion thereof) by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall result in the imposition, modification or applicability of any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender, or shall result in the imposition on any Lender or the London interbank market of any other condition affecting this Agreement, such Lender's Commitment or any Eurodollar Loan or Fixed Rate Loan made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan or to reduce the amount of any sum received or receivable by such Lender with respect to any Eurodollar Loan or Fixed Rate Loan hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then such additional amount or amounts as will compensate such Lender for such additional costs or reduction will be paid by the Borrowers to such Lender upon demand. Notwithstanding the foregoing, no Lender shall be entitled to request compensation under this paragraph with respect to any Competitive Loan if the change giving rise to such request was applicable to such Lender at the time of submission of the Competitive Bid pursuant to which such Competitive Loan was made. (b) If any Lender shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards," or the adoption after the date hereof of any other law, rule, 26 21 regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or any entity controlling a Lender (or any lending office of such Lender or entity controlling such Lender) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital (or the capital of an entity controlling such Lender) as a consequence of this Agreement, such Lender's Commitment or the Loans made by such Lender pursuant hereto to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time such additional amount or amounts as will compensate such Lender for such reduction will be paid by the Borrowers to such Lender. (c) A certificate of each Lender setting forth such amount or amounts as shall be necessary to compensate such Lender as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Company promptly by such Lender upon becoming aware of any costs pursuant to paragraphs (a) or (b) above and shall be conclusive absent manifest error. The Company shall pay each Lender the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. (d) Failure on the part of any Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's right to demand compensation with respect to such period or any other period. The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. No Lender shall be entitled to compensation under this Section 2.13 for any costs incurred or reduction suffered with respect to any date unless such Lender shall have notified the Company that it will demand compensation for such costs or reductions not more than 90 days after the later of (i) such date and (ii) the date on which such Lender shall have become aware of such costs or reductions. Notwithstanding any other provision of this Section 2.13, no Lender shall demand compensation for any increased cost or reduction referred to above if it shall not at the time be the general policy or practice of such Lender to demand such compensation in similar circumstances under comparable provisions of other credit agreements, if any. SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision herein, if any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Company and to the Administrative Agent, such Lender may: (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon such Lender shall not submit a Competitive Bid in response to a request for Eurodollar Competitive Loans and any request for a Eurodollar Standby 27 22 Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.14, a notice by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt. SECTION 2.15. Indemnity. The Borrowers shall indemnify each Lender against any out-of-pocket loss or expense which such Lender may sustain or incur as a consequence of (a) any failure to borrow or to refinance any Loan hereunder after irrevocable notice of such borrowing or refinancing has been given pursuant to Section 2.03 or 2.04, (b) any payment, prepayment or conversion, or assignment required under Section 2.19, of a Eurodollar Loan required by any other provision of this Agreement (other than Section 2.14) or otherwise made or deemed made on a date other than the last day of the Interest Period, if any, applicable thereto, (c) any default in payment or prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, whether by scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise) or (d) the occurrence of any Event of Default, including, in each such case, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Loan or any part thereof as a Eurodollar Loan or a Fixed Rate Loan. Such loss or reasonable expense shall include an amount equal to the excess, if any, as reasonably determined by such Lender, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, refinanced or not borrowed or so assigned (assumed to be the LIBO Rate applicable thereto or, in the case of a Fixed Rate Loan, the fixed rate of interest applicable thereto) for the period from the date of such payment, prepayment, refinancing or failure to borrow or refinance or such assignment, to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or refinance the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying in similar investments the funds so paid, prepaid or not borrowed or refinanced or so assigned for the remainder of such period or Interest Period, as the case may be. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.15 shall be delivered to the Borrowers and shall be conclusive absent manifest error. SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.13, each payment or prepayment of principal of any Standby Borrowing, each payment of interest on 28 23 the Standby Loans, each payment of the Facility Fees, each reduction of the Commitments and each refinancing of any Borrowing with a Standby Borrowing of any Type, shall be allocated pro rata among the Lenders in accordance with their respective Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Standby Loans). Each payment of principal of any Competitive Borrowing shall be allocated pro rata among the Lenders participating in such Borrowing in accordance with the respective principal amounts of their outstanding Competitive Loans comprising such Borrowing. Each payment of interest on any Competitive Borrowing shall be allocated pro rata among the Lenders participating in such Borrowing in accordance with the respective amounts of accrued and unpaid interest on their outstanding Competitive Loans comprising such Borrowing. For purposes of determining the available Commitments of the Lenders at any time, each outstanding Competitive Borrowing shall be deemed to have utilized the Commitments of the Lenders (including those Lenders which shall not have made Loans as part of such Competitive Borrowing) pro rata in accordance with such respective Commitments. Each Lender agrees that in computing such Lender's portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing to the next higher or lower whole dollar amount. SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Standby Loan or Loans as a result of which the unpaid principal portion of its Standby Loans shall be proportionately less than the unpaid principal portion of the Standby Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Standby Loans of such other Lender, so that the aggregate unpaid principal amount of the Standby Loans and participations in the Standby Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Standby Loans then outstanding as the principal amount of its Standby Loans prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Standby Loans outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. Any Lender holding a participation in a Standby Loan deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing to such Lender by reason thereof as fully as if such Lender had made a Standby Loan in the amount of such participation. SECTION 2.18. Payments. (a) The Borrowers shall make each payment (including principal of or interest on any Borrowing and any Facility Fees or other amounts) hereunder from an account in the United States not later than 12:00 noon, New York City time, on the date when due in dollars to the Administrative Agent at its offices at 270 Park Avenue, 29 24 New York, New York, in immediately available funds, without setoff, counterclaim or other deductions. (b) Whenever any payment (including principal of or interest on any Borrowing or any Facility Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Facility Fees, if applicable. SECTION 2.19. Duty to Mitigate; Assignment of Commitments Under Certain Circumstances. (a) Any Lender (or Transferee) claiming any additional amounts payable pursuant to Section 2.13 or Section 2.20 or exercising its rights under Section 2.14 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue or avoid the circumstances giving rise to such exercise and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (b) In the event that any Lender shall have delivered a notice or certificate pursuant to Section 2.10(b), 2.13 or 2.14, or the Borrower shall be required to make additional payments to any Lender under Section 2.20, the Company shall have the right, at its own expense (which shall include the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender and the Administrative Agent, to require such Lender to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 9.04) all interests, rights and obligations contained hereunder to another financial institution approved by the Administrative Agent (which approval shall not be unreasonably withheld) which shall assume such obligations; provided that (i) no such assignment shall conflict with any law, rule or regulation or order of any Governmental Authority and (ii) the assignee or the Borrowers, as the case may be, shall pay to the affected Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder. SECTION 2.20. Taxes. (a) Any and all payments to the Lenders hereunder shall be made, in accordance with Section 2.18, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) income taxes imposed on the net income of the Administrative Agent or any Lender (or any transferee or assignee thereof, including a participation holder (any such entity a "Transferee")) and (ii) franchise taxes imposed on the net income of the Administrative Agent or any Lender (or Transferee), in each case by the jurisdiction under the laws of which the Administrative Agent or such Lender (or Transferee) is organized or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, "Taxes"). If any Borrower shall be required to deduct any Taxes from or in respect of any sum payable hereunder to any Lender (or any Transferee) or the Administrative Agent, (i) the sum payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions (including 30 25 deductions applicable to additional sums payable under this Section 2.20) such Lender (or Transferee) or the Administrative Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrowers shall pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement ("Other Taxes"). (c) The Borrowers shall indemnify each Lender (or Transferee) and the Administrative Agent for the full amount of Taxes and Other Taxes paid by such Lender (or Transferee) or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto. A certificate as to the amount of such payment or liability prepared by a Lender, or the Administrative Agent on its behalf, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date the Lender (or Transferee) or the Administrative Agent, as the case may be, makes written demand therefor. (d) If a Lender (or Transferee) or the Administrative Agent shall become aware that it is entitled to claim a refund from a Governmental Authority in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrowers, or with respect to which the Borrowers have paid additional amounts, pursuant to this Section 2.20, it shall promptly notify the Borrowers of the availability of such refund claim and shall, within 30 days after receipt of a request by the Borrowers, make a claim to such Governmental Authority for such refund at the Borrowers' expense. If a Lender (or Transferee) or the Administrative Agent receives a refund (including pursuant to a claim for refund made pursuant to the preceding sentence) in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section 2.20, it shall within 30 days from the date of such receipt pay over such refund to the Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 2.20 with respect to the Taxes or Other Taxes giving rise to such refund), without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Borrowers, upon the request of such Lender (or Transferee) or the Administrative Agent, agree to repay the amount paid over to the Borrowers (plus penalties, interest or other charges) to such Lender (or Transferee) or the Administrative Agent in the event such Lender (or Transferee) or the Administrative Agent is required to repay such refund to such Govern- mental Authority. (e) As soon as practicable after the date of any payment of Taxes or Other Taxes by the Borrowers to the relevant Governmental Authority, the Borrowers will deliver to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof. 31 26 (f) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.20 shall survive the payment in full of the principal of and interest on all Loans made hereunder for a period of 3 years. (g) Each Non-U.S. Lender shall deliver to the Company and the Administrative Agent two copies of either United States Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on payments by the Company under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of a Transferee that is a participation holder, on or before the date such participation holder becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this Section 2.20(g), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.20(g) that such Non-U.S. Lender is not legally able to deliver. (h) The Borrowers shall not be required to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of United States Federal withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to United States Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Transferee that is a participation holder, on the date such participation holder became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender designated such New Lending Office with respect to a Loan; provided, however, that this clause (i) shall not apply to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the request of the Company; and provided further, however, that this clause (i) shall not apply to the extent the indemnity payment or additional amounts any Transferee, or Lender (or Transferee) through a New Lending Office, would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or additional amounts that the person making the assignment, participation or transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of paragraph (g) above. (i) Any Lender (or Transferee) claiming any indemnity payment or additional 32 27 amounts payable pursuant to this Section 2.20 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document reasonably requested in writing by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such indemnity payment or additional amounts that may thereafter accrue and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (j) Nothing contained in this Section 2.20 shall require any Lender (or Transferee) or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). ARTICLE III Representations and Warranties The Company represents and warrants to each of the Lenders that: SECTION 3.01. Corporate Existence and Power. The Company and each Borrowing Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 3.02. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Company of this Agreement (a) is within the Company's corporate powers, (b) has been duly authorized by all necessary corporate action, (c) requires no action by or in respect of, or filing with, any Governmental Authority and (d) does not (i) contravene, or constitute a default under, any applicable provision of law or regulation either of the United States or a particular state thereof or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or (ii) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. SECTION 3.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of the rights of its creditors generally and subject to general legal and equitable principles with respect to the availability of particular remedies. SECTION 3.04. Financial Information. (a) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 2000, and the related consolidated statements of earnings and changes in financial position for the fiscal year then ended, a copy of which has been delivered to each of the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Company and its Consolidated Subsidiaries 33 28 as of such date and their consolidated results of operations and changes in financial position for such fiscal year. (b) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of September 30, 2000, and the related unaudited consolidated statements of earnings and changes in financial position for the nine months then ended, set forth in the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2000, a copy of which has been delivered to each of the Lenders, fairly present, in conformity with GAAP applied on a basis consistent with the financial statements referred to in paragraph (a) of this Section 3.04, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such nine month period (subject to normal year-end adjustments). SECTION 3.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of a final adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries taken as a whole or which in any manner draws into question the validity of this Agreement. SECTION 3.06. Compliance with ERISA. The Company and each ERISA Affiliate has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code relating to the Plans, and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA. SECTION 3.07. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended January 3, 1988. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all material taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary which the Company or any Subsidiary is not disputing in a good faith manner. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. SECTION 3.08. Subsidiaries. Attached hereto as Schedule 3.08 is a schedule which correctly identifies all Subsidiaries as of the date of this Agreement. Except as noted on Schedule 3.08, all of the issued and outstanding shares of the capital stock of each Subsidiary is duly issued and outstanding, fully paid and non-assessable and except for directors' qualifying shares and shares issued solely for the purpose of satisfying local requirements concerning the minimum number of shareholders is owned by the Company or a Subsidiary free and clear of any mortgage, pledge, lien or encumbrance. 34 29 SECTION 3.09. Representations and Warranties of Each Borrowing Subsidiary. Each Borrowing Subsidiary shall be deemed by the execution and delivery of a Borrowing Subsidiary Agreement to have represented and warranted as of the date thereof as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business and in good standing in each other jurisdiction in which it owns property and/or conducts its business and in which failure to be so qualified and in good standing would have a materially adverse effect on the business of such Borrowing Subsidiary. (b) The execution, delivery and performance by it of its Borrowing Subsidiary Agreement, and the performance by it of the provisions of this Agreement applicable to it, are within its corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) its charter or by-laws (or the equivalent thereof) or (ii) any law or regulation or any agreement, judgment, injunction, order, decree or other instrument binding on or affecting it. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by it of its Borrowing Subsidiary Agreement or for the performance by it of the provisions of this Agreement applicable to it, except for those which have been duly obtained or made and are in full force and effect. (d) It is not in breach of or default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which would have a material adverse effect on its ability to perform its obligations hereunder after taking into consideration its other financial obligations. (e) This Agreement is a legal, valid and binding obligation of such Borrowing Subsidiary enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of the rights of its creditors generally and subject to general legal and equitable principles with respect to the availability of particular remedies. (f) The proceeds of each Loan made to it will be used solely for general corporate purposes, including the acquisition of new businesses. SECTION 3.10. Federal Reserve Regulations. (a) Neither any Borrower nor any Subsidiary is engaged principally, or as a substantial part of its activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock (within the meaning of Regulation U). (b) No part of the proceeds of any Loan has been or will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, in any manner or for any purpose that has resulted or will result in a violation of Regulation U. 35 30 SECTION 3.11. Investment Company Act; Public Utility Holding Company Act. Neither any Borrower nor any Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.12. Environmental and Safety Matters. With respect to all facilities owned and operated by the Company and its Subsidiaries, or at which the Company or any of its Subsidiaries has a leasehold interest, except as set forth in Schedule 3.12 (i) the Company and each Subsidiary is in compliance in all material respects with all Federal, state, local and other statutes, ordinances, orders, judgments, rulings and regulations relating to environmental pollution or to environmental regulation or control or to employee health or safety (collectively "Environmental Laws") except where the failure to be in compliance so would not be reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect; (ii) neither the Company nor any Subsidiary has received notice of any material failure so to comply, which non- compliance neither has been remedied nor is the subject of the Company's good faith efforts to achieve compliance, except where the failure to be in compliance would not be reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect and (iii) the Company is aware of no events, conditions or circumstances involving environmental pollution or contamination or employee health or safety that in its judgment would be reasonably likely to result in a Material Adverse Effect. SECTION 3.13. No Material Adverse Change. Since January 2, 2000, there has occurred no event, condition or change in or affecting the Company or the Subsidiaries that, individually or in the aggregate with other such events, conditions or changes, has had or could reasonably be expected to have a Material Adverse Effect. SECTION 3.14. Solvency. On the Closing Date, (i) the fair value of the assets of the Company and the Subsidiaries on a consolidated basis, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of the Company and the Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay their probable liability on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Company and the Subsidiaries will on a consolidated basis be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Company and the Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date. ARTICLE IV Conditions of Effectiveness and Lending The obligations of the Lenders to make Loans hereunder are subject to the satisfaction of the following conditions: 36 31 SECTION 4.01. All Borrowings. On the date of each Borrowing: (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 or Section 2.04, as applicable. (b) The representations and warranties set forth in Article III (except in the case of a refinancing that does not increase the aggregate principal amount of Loans of any Lender outstanding, the representations set forth in Section 3.05 and 3.12) hereof shall be true and correct in all material respects on and as of the date of such Borrowing with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) At the time of and immediately after such Borrowing no Event of Default or Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the applicable Borrower on the date of such Borrowing as to the matters specified in paragraphs (b) and (c) of this Section 4.01. SECTION 4.02. Effectiveness. On the Closing Date: (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received the favorable written opinion of Terrance L. Carlson, Esq., dated the Closing Date and addressed to the Lenders and satisfactory to Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D-1 hereto. (c) The Administrative Agent shall have received (i) a copy of the certificate of incorporation, including all amendments thereto, of the Company, certified as of a recent date by the Secretary of State of its state of incorporation, and a certificate as to the good standing of the Company as of a recent date from such Secretary of State; (ii) a certificate of the Clerk or an Assistant Clerk of the Company dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of the Company as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate of incorporation referred to in clause (i) above has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to such clause (i) and (D) as to the incumbency and specimen signature of each officer executing this Agreement or any other document delivered in connection 37 32 herewith on behalf of the Company; and (iii) a certificate of another officer of the Company as to the incumbency and specimen signature of the Clerk or Assistant Clerk executing the certificate pursuant to (ii) above. (d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Company, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. (e) No Loan shall be outstanding under the Existing Credit Agreement or under the $300,000,000 364-Day Amended and Restated Competitive Advance and Revolving Credit Facility dated as of March 3, 2000, and all interest, fees and other amounts accrued for the accounts of or otherwise owed to the Administrative Agent or the lenders thereunder through the date immediately preceding the Closing Date shall have been paid. The Administrative Agent shall have received evidence of the termination of the Existing Credit Agreement. SECTION 4.03. First Borrowing by Each Borrowing Subsidiary. On the first date on which Loans are made to each Borrowing Subsidiary: (a) The Administrative Agent shall have received the favorable written opinion of Terrance L. Carlson, Esq., dated the date of such Loans, addressed to the Lenders and satisfactory to Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D-2 hereto. (b) Each Lender shall have received a copy of the Borrowing Subsidiary Agreement executed by such Borrowing Subsidiary. (c) Such Loans shall not violate any law, rule or regulation binding on any of the Lenders. (d) Each Lender shall have received from the Company an unaudited consolidated balance sheet and related consolidated statements of earnings and changes in financial position for the fiscal year most recently ended of such Borrowing Subsidiary. ARTICLE V Covenants The Company covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any Facility Fees or any other amounts payable hereunder shall be unpaid, unless the Required Lenders shall otherwise consent in writing: SECTION 5.01. Information. The Company will give the Administrative Agent prompt written notice of any change in any Rating that results in a change in the Category on which the Applicable Percentage is based. The Company will deliver to each of the Lenders: 38 33 (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Arthur Andersen & Co. or other independent public accountants of nationally recognized standing acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Company and the Consolidated Subsidiaries in accordance with GAAP; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of earnings and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, compliance with GAAP and consistency by a Financial Officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of a Financial Officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06 and 5.07 on the date of such financial statements and (ii) stating whether there exists on the date of such certificate any Default and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) forthwith upon the occurrence of any Default, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all annual or quarterly reports and upon request by any Lender copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) which the Company shall have filed with the Securities and Exchange Commission; (g) (i) as soon as possible after, and in any event within 30 days after the Company or any ERISA Affiliate knows or has reason to know that, any Reportable Event has occurred that alone or together with any other Reportable Event could reasonably be expected to result in liability of the Company to the PBGC in an aggregate amount exceeding $5,000,000, a statement of a Financial Officer setting forth details as to such Reportable Event and the action that the Company proposes to take with respect thereto, together with a copy of the notice, if any, 39 34 of such Reportable Event given to the PBGC, (ii) promptly after receipt thereof, a copy of any notice that the Company or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee to administer any such Plan, (iii) within 10 days after the due date for filing with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make a required installment or other payment with respect to a Plan, a statement of a Financial Officer setting forth details as to such failure and the action that the Company proposes to take with respect thereto, together with a copy of any such notice given to the PBGC and (iv) promptly and in any event within 30 days after receipt thereof by the Company or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Company or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is expected to be, terminated or in reorganization, both within the meaning of Title IV of ERISA; and (h) from time to time such additional information regarding the financial position or business of the Company as any Lender may reasonably request. SECTION 5.02. Corporate Existence; Businesses and Properties. (a) The Company will, and will cause each Borrowing Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate existence. (b) Except to the extent that failure to do so would not have a Material Adverse Effect, the Company will, and will cause each Borrowing Subsidiary to, (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect all rights, licenses, permits and franchises material to the conduct of the business of the Company and the Subsidiaries, taken as a whole, (ii) comply with all laws and regulations applicable to it and (iii) conduct its business in substantially the same manner as heretofore conducted or as at the time permitted under applicable law. SECTION 5.03. Insurance. The Company will, and will cause each Subsidiary to, keep its insurable properties adequately insured at all times by financially sound and reputable insurers, and maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses. SECTION 5.04. Litigation and Other Notices. The Company will give each Lender prompt written notice of the following: (a) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding which could reasonably be expected to result in a Material Adverse Effect; and (b) any development in the business or affairs of the Company or any Subsidiary that has resulted in a Material Adverse Effect. 40 35 SECTION 5.05. Maintaining Records; Access to Properties and Inspections. The Company will, and will cause each Subsidiary to, maintain financial records in accordance with GAAP and, upon reasonable notice, at all reasonable times, permit (a) any authorized representative designated by any Lender to discuss the affairs, finances and condition of the Company and the Subsidiaries with a Financial Officer of the Company and such other officers as the Company shall deem appropriate and (b) any authorized representative designated by the Administrative Agent or the Required Lenders to visit and inspect the properties of the Company and of any Subsidiary. SECTION 5.06. Consolidated EBITDA to Consolidated Interest Expense Ratio. The Company will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter to be less than 5:1. SECTION 5.07. Net Debt to Capitalization Ratio. The Company will not permit on any date the ratio of (a) Consolidated Net Indebtedness on such date to (b) the sum of (i) Shareholders' Equity on such date and (ii) Consolidated Net Indebtedness on such date to be greater than 0.55:1.00. SECTION 5.08. Negative Pledge. Neither the Company nor any Consolidated Subsidiary will create, assume or suffer to exist any Lien securing Indebtedness on any asset now owned or hereafter acquired by it, except: (a) Liens on all or part of the assets of Consolidated Subsidiaries securing Indebtedness owing by Consolidated Subsidiaries to the Company and Consolidated Subsidiaries; (b) mortgages on real property or security interests in personal property securing Indebtedness of the Company and Consolidated Subsidiaries in an aggregate amount not exceeding ten percent (10%) of the consolidated total assets of the Company and the Consolidated Subsidiaries; (c) Liens to secure taxes, assessments and other governmental charges or claims for labor, material or supplies to the extent that payment thereof shall not at the time be required to be made in accordance with Section 3.07 hereof; (d) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age, pension or other social security obligations; (e) Liens in respect of judgments or awards not exceeding $1,000,000 in the aggregate at any time, and any other Liens with respect to which the execution or enforcement thereof is being effectively stayed and the claims secured thereby are being contested in good faith by appropriate proceedings; (f) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens, in existence less than 120 days from the date of creation thereof; 41 36 (g) encumbrances consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Company or a Consolidated Subsidiary is a party, and other similar encumbrances none of which in the opinion of the Company interferes materially with the use of the property in the ordinary conduct of the business of the Company and the Consolidated Subsidiaries; and similar encumbrances on interests in real estate located outside the United States, which defects do not individually or in the aggregate have a material adverse effect on the business of the Company individually or of the Company and the Consolidated Subsidiaries on a consolidated basis; and (h) to the extent that the value of all Margin Stock owned by the Company and its Consolidated Subsidiaries (determined in accordance with Regulation U) would otherwise exceed 25% of the value of the total assets of the Company and its Consolidated Subsidiaries subject to this Section 5.08 (as so determined), Liens on such excess Margin Stock (it being understood that Margin Stock not in excess of 25% of the value of such assets will be subject to the restrictions of this Section 5.08). SECTION 5.09. Consolidations, Mergers and Sales of Assets. (a) The Company will not (i) consolidate or merge with or into any other person unless (A) the Company shall be the surviving entity and (B) immediately thereafter no Default or Event of Default shall have occurred and be continuing or (ii) sell, lease or otherwise transfer all or any substantial part of its assets to any other person. The Company will not sell, lease or otherwise transfer any of its assets to any other person except for full and adequate consideration. (b) No Borrowing Subsidiary will (i) consolidate or merge with or into any other person unless (A) if the surviving entity shall be other than such Borrowing Subsidiary, (x) such surviving entity or the Company shall have assumed in writing all obligations of such Borrowing Subsidiary relating to this Agreement and (y) such surviving entity shall be 100% owned by the Company and (B) no Default or Event of Default shall have occurred and be continuing either before or immediately after such consolidation or merger or (ii) sell, lease or otherwise transfer all or any substantial part of its assets to any other person. No Borrowing Subsidiary will sell, lease or otherwise transfer any of its assets to any other person except for full and adequate consideration. (c) Notwithstanding anything in the foregoing to the contrary, to the extent that the value of all Margin Stock owned by the Company and its Consolidated Subsidiaries (determined in accordance with Regulation U) would otherwise exceed 25% of the value of the total assets of the Company and its Consolidated Subsidiaries subject to this Section 5.09 (as so determined), the restrictions contained in subsections (a)(ii) and (b)(ii) of this Section 5.09 shall not apply to such excess Margin Stock (it being understood that Margin Stock not in excess of 25% of the value of such assets will be subject to the restrictions of this Section 5.09). SECTION 5.10. Ownership of Margin Stock. The Company will not, and will not permit its Subsidiaries to, own Margin Stock to the extent the value of such Margin Stock would exceed 25% of the value of the total assets of the Company and its Consolidated Subsidiaries. 42 37 ARTICLE VI Events of Default In case of the happening of any of the following events (each an "Event of Default"): (a) any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or the Borrowings hereunder or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with this Agreement shall prove to have been incorrect in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or any Facility Fee or any other amount (other than an amount referred to in paragraph (b) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days; (d) default shall be made in the due observance or performance of any covenant, condition or agreement contained in Sections 5.02 or 5.06 through 5.09; (e) default shall be made in the due observance or performance of any covenant, condition or agreement contained herein (other than those specified in paragraphs (b), (c) or (d) above) and such default shall continue unremedied for a period of 10 days after notice thereof from the Administrative Agent or any Lender to the Company; (f) the Company or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in an aggregate principal amount in excess of $15,000,000, when and as the same shall become due and payable, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or any Subsidiary, or of a substantial part of the property or assets of the Company or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, 43 38 (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or a Subsidiary or (iii) the winding up or liquidation of the Company or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more final and nonappealable judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Company or any Subsidiary to enforce any such final and nonappealable judgment or judgments aggregating in excess of $5,000,000; (j) a Reportable Event or Reportable Events, or a failure to make a required installment or other payment (within the meaning of Section 412(n)(l) of the Code), shall have occurred with respect to any Plan or Plans that reasonably could be expected to result in liability of the Company to the PBGC or to a Plan in an aggregate amount exceeding $5,000,000 and, within 30 days after the reporting of any such Reportable Event to the Administrative Agent, the Administrative Agent shall have notified the Company in writing that (i) the Required Lenders have made a determination that, on the basis of such Reportable Event or Reportable Events or the failure to make a required payment, there are reasonable grounds (A) for the termination of such Plan or Plans by the PBGC, (B) for the appointment by the appropriate United States District Court of a trustee to administer such Plan or Plans or (C) for the imposition of a lien in favor of a Plan and (ii) as a result thereof an Event of Default exists hereunder; or a trustee shall be appointed by a United States District Court to administer any such Plan or Plans; or the PBGC shall institute proceedings to terminate any Plan or Plans; (k) (i) the Company or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA Affiliate does not have reasonable 44 39 grounds for contesting such Withdrawal Liability or is not in fact contesting such Withdrawal Liability in a timely and appropriate manner and (iii) the amount of the Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date or dates of such notification), exceeds $5,000,000 or requires payments exceeding $1,000,000 in any year; (1) the Company or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if solely as a result of such reorganization or termination the aggregate annual contributions of the Company and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or have been or are being terminated have been or will be increased over the amounts required to be contributed to such Multiemployer Plans for their most recently completed plan years by an amount exceeding $1,000,000; (m) any guarantee purported to be created by Article VII hereof shall cease to be, or shall be asserted by the Company not to be, a valid and enforceable guarantee of the Guaranteed Obligations; or (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Facility Fees and all other liabilities of the Borrowers accrued hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding; and, in any event with respect to the Company described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Facility Fees and all other liabilities of the Borrowers accrued hereunder shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding. ARTICLE VII Guarantee The Company unconditionally and irrevocably guarantees the due and punctual payment and performance, when and as due, whether at maturity, by acceleration, upon one or 45 40 more dates set for prepayment or otherwise, of the Guaranteed Obligations. The Company further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from it and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligations. The Company waives presentment to, demand of payment from and protest to the Borrowing Subsidiaries of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure of any Lender or the Administrative Agent to assert any claim or demand or to enforce any right or remedy against the Borrowing Subsidiaries under the provisions of this Agreement or otherwise; (b) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any guarantee or any other agreement; or (c) the failure of any Lender or the Administrative Agent to exercise any right or remedy against any other guarantor of the Guaranteed Obligations. The Company further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any security, if any, held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on its books, in favor of the Borrowing Subsidiaries or any other person. The obligations of the Company hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Company hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement, any guarantee or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of the Company or otherwise operate as a discharge of the Company as a matter of law or equity. To the extent permitted by applicable law, the Company waives any defense based on or arising out of any defense available to the Borrowing Subsidiaries, including any defense based on or arising out of any disability of the Borrowing Subsidiaries, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrowing Subsidiaries, other than final payment in full of the Guaranteed Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, or exercise any other right or remedy available to them against the Borrowing Subsidiaries, or any security without affecting or impairing in any way the liability of the Company hereunder except to the extent the Guaranteed Obligations have been fully and finally paid. The Company waives any defense arising out of any such election even though such election operates to impair or to extinguish any 46 41 right of reimbursement or subrogation or other right or remedy of the Company against any Borrowing Subsidiary or any security. The Company further agrees that its guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Lender upon the bankruptcy or reorganization of any Borrowing Subsidiary or otherwise. In furtherance of the foregoing and not in limitation of any other right which the Administrative Agent or any Lender may have at law or in equity against the Company by virtue hereof, upon the failure of any Borrowing Subsidiary to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Company hereby promises to and will, upon receipt of written demand by the Administrative Agent or any Lender, forthwith pay or cause to be paid to the Administrative Agent or such Lender in cash the amount of such unpaid Guaranteed Obligation. Upon payment by the Company of any sums to the Administrative Agent or any Lender, as provided above, all rights of the Company against the other Borrowers arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Guaranteed Obligations to the Administrative Agent and the Lenders. ARTICLE VIII The Administrative Agent In order to expedite the transactions contemplated by this Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender or holder and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrowers of any Event of Default of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute promptly to each Lender copies of all notices, financial statements and other materials delivered by the Borrowers pursuant to this Agreement as received by the Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his or her own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be 47 42 required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants or agreements contained in this Agreement. The Administrative Agent shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or other instruments or agreements. The Administrative Agent may deem and treat the Lender that makes any Loan as the holder of the indebtedness resulting therefrom for all purposes hereof until it shall have received notice from such Lender, given as provided herein, of the transfer thereof. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrowers on account of the failure of or delay in performance or breach by any other Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Borrowers of any of their respective obligations hereunder or in connection herewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent reasonably acceptable to the Company. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then, the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall 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. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.05 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 Administrative Agent. With respect to the Loans made by it hereunder, the Administrative Agent in its individual capacity and not as Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may accept deposits from, lend money to and generally 48 43 engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent. Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Commitment hereunder or, if the Commitments shall have been terminated, the amount of its outstanding Loans) of any out-of-pocket expenses incurred for the benefit of the Lenders by the Administrative Agent, including reasonable counsel fees and compensation of agents paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by it under this Agreement to the extent the same shall not have been reimbursed by the Borrowers; provided that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent or any of its directors, officers, employees or agents. Each Lender agrees that any allocation made in good faith by the Administrative Agent of expenses or other amounts referred to in this paragraph between this Agreement and the 364-Day Facility shall be conclusive and binding for all purposes. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any related agreement or any document furnished hereunder or thereunder. ARTICLE IX Miscellaneous SECTION 9.01. Notices. Except as otherwise expressly provided herein, notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy, as follows: (a) if to any Borrower, to PerkinElmer, Inc., 45 William Street, Wellesley, Massachusetts 02481, Attention of Treasurer, (Telecopy No. 781-431-4113); 49 44 (b) if to the Administrative Agent, to it at One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Lisa Pucciarelli, (Telecopy No. 212-552- 5777); and (c) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Facility Fee or any other amount payable under this Agreement is outstanding and unpaid or the Commitments have not been terminated. SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Company and the Administrative Agent and when the Administrative Agent shall have received copies hereof (telecopied or otherwise) which, when taken together, bear the signature of each Lender, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrowers shall not have the right to assign any rights hereunder or any interest herein without the prior consent of all the Lenders. SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any party that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or a domestic Affiliate of a Lender, the Company must give its prior written consent to such assignment (which consent shall not be unreasonably withheld); provided, however, that the consent of the Company shall not be required to any such assignment during the continuance of any Event of Default, (ii) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and a processing and recordation fee of 50 45 $3,500 and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.20 and 9.05, as well as to any Facility Fees accrued for its account hereunder and not yet paid)). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any Loans so retained until such Loans have been repaid in full in accordance with this Agreement. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of the Borrowers or the performance or observance by the Borrowers of any obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender 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; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent shall maintain at one of its offices in the City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and the principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and 51 46 the Borrowers, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by each party hereto, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Company to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. (f) Each Lender may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) each participating bank or other entity shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.20 to the same extent as if it was the selling Lender (but limited to the amount that could have been claimed by the selling Lender had it continued to hold the interest of such participating bank or other entity), except that all claims made pursuant to such Sections shall be made through such selling Lender, and (iv) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such selling Lender in connection with such Lender's rights and obligations under this Agreement, and such selling Lender shall retain the sole right to enforce the obligations of the Borrowers relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or changing or extending the Commitments). (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrowers furnished to such Lender; provided that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of any such information. (h) The Borrowers shall not assign or delegate any rights and duties hereunder without the prior written consent of all Lenders. (i) Any Lender may at any time pledge all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided that no such pledge shall release any Lender from its obligations hereunder or substitute any such Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, each Borrower shall, at the request of the 52 47 assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to such Borrower by the assigning Lender hereunder. SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree, jointly and severally, to pay the fees and disbursements of counsel for the Administrative Agent in connection with entering into this Agreement and in connection with any amendments, modifications or waivers of the provisions hereof, and agree, jointly and severally, to pay the reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement or the Loans made hereunder, including the reasonable fees and disbursements of counsel for the Administrative Agent or any Lender. (b) The Borrowers agree, jointly and severally, to indemnify the Administrative Agent, each Lender, each of their Affiliates and the directors, officers, employees and agents of the foregoing (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees and expenses, incurred by or asserted against any Indemnitee arising out of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the transactions contemplated thereby, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or from such Indemnitee's violation of the Federal securities laws prohibiting insider trading. (c) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of the Administrative Agent or any Lender. All amounts due under this Section shall be payable on written demand therefor. SECTION 9.06. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.07. Waivers; Amendment. (a) No failure or delay of the Administrative Agent or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure therefrom shall in any event be effective unless the same 53 48 shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Borrower or any Subsidiary in any case shall entitle such party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan, without the prior written consent of each Lender affected thereby, (ii) increase or extend the Commitment or decrease the Facility Fee of any Lender or extend any date for payment thereof without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.16 or Section 9.04(h), the provisions of this Section or the definition of the "Required Lenders," or (iv) release the Company from any of its obligations under Article VII hereof without the prior written consent of each Lender; provided further, however, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section and any consent by any Lender pursuant to this Section shall bind any assignee of its rights and interests hereunder. SECTION 9.08. Entire Agreement. This Agreement constitutes the entire contract among the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 9.09. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.03. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.12. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or 54 49 demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or account of the Company and any Borrowing Subsidiary now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company after such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have. SECTION 9.13. Jurisdiction; Consent to Service of Process. (a) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Subject to the foregoing and to paragraph (b) below, nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement against any other party hereto in the courts of any jurisdiction. (b) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each Borrower hereby irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.14. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement. Each party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certification in this Section. SECTION 9.15. Addition of Borrowing Subsidiaries. Each wholly owned Subsidiary of the Company which shall deliver to the Administrative Agent a Borrowing Subsidiary Agreement executed by such Subsidiary and the Company shall, upon such delivery 55 50 and without further act, become a party hereto and a Borrower hereunder with the same effect as if it had been an original party to this Agreement. SECTION 9.16. Confidentiality. Each Lender and the Administrative Agent agree to keep confidential the Information, except that any such Lender and the Administrative Agent shall be permitted to disclose Information (a) to such of its officers, directors, employees, agents and representatives as need to know such Information; (b) to the extent required by applicable laws and regulations or by any subpoena or similar legal process, including with respect to the enforcement of this Agreement, provided that such Lender and the Administrative Agent shall use reasonable efforts to notify the Company of such prospective disclosure a reasonable time prior to any such disclosure and shall take such actions reasonably requested by the Company to assist the Company in obtaining a protective order or confidential treatment with respect to such Information (it being understood that failure to give such notice after having made any such reasonable efforts shall not result in any liability hereunder to such Lender or the Administrative Agent, as the case may be); (c) to the extent requested by any bank regulatory authority; (d) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Agreement, (ii) becomes available to such Lender or the Administrative Agent on a non-confidential basis from a source other than the Company and its Affiliates or (iii) was available to such Lender or the Administrative Agent on a non-confidential basis prior to its disclosure to such Lender or the Administrative Agent by the Company or its Affiliates; (e) to any Affiliate of or any actual or prospective assignee or participant in any rights of such Lender or the Administrative Agent under this Agreement, provided that such Affiliate, assignee or participant delivers to the Administrative Agent or such Lender, as applicable, a confidentiality letter containing substantially the undertakings set forth in this Section 9.16 and (f) to the extent the Company shall have consented to such disclosure in writing. SECTION 9.17. Collateral. Each of the Lenders represents to each of the other Lenders that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.18. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges which are treated as interest under applicable law (collectively the "Charges"), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, all Charges payable to such Lender shall be limited to the Maximum Rate. 56 51 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PERKINELMER, INC., by /s/ Robert F. Friel ---------------------------------------- Name: Robert F. Friel Title: Senior Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Gail Weiss ---------------------------------------- Name: Gail Weiss Title: Vice President ABN AMRO BANK N.V. by /s/ James E. Davis ---------------------------------------- Name: James E. Davis Title: Group Vice President /s/ David A. Carroll ---------------------------------------- Name: David A. Carroll Title: Assistant Vice President BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH by /s/ Giulio Giovine ---------------------------------------- Name: Giulio Giovine Title: Vice President /s/ Leonardo Valentini ---------------------------------------- Name: Leonardo Valentini Title: First Vice President 57 52 BANK ONE, N.A., CHICAGO BRANCH by /s/ Mahua G. Thakurta ---------------------------------------- Name: Mahua G. Thakurta Title: Commercial Banking Officer BARCLAYS BANK, PLC, by /s/ Terance Bullock ---------------------------------------- Name: Terance Bullock Title: Vice President CITIZENS BANK OF MASSACHUSETTS by /s/ Mariel Keane Hough ---------------------------------------- Name: Mariel Keane Hough Title: Vice President FIRSTAR BANK, N.A. by /s/ Derek S. Roudebush ---------------------------------------- Name: Derek S. Roudebush Title: Vice President /s/ Patrick H. McGraw ---------------------------------------- Name: Patrick H. McGraw Title: Assistant Vice President FLEET NATIONAL BANK by /s/ Jorge A. Schwarz ---------------------------------------- Name: Jorge A. Schwarz Title: Director 58 53 MELLON BANK, N.A. by /s/ Janet R. Twomey ---------------------------------------- Name: Janet R. Twomey Title: Vice President NORTHERN TRUST by /s/ John A. Konstantos ---------------------------------------- Name: John A. Konstantos Title: Vice President SOCIETE GENERALE by /s/ Nicolas Eugrin ---------------------------------------- Name: Nicolas Eugrin Title: Vice President STANDARD CHARTERED BANK by /s/ John Biscette ---------------------------------------- Name: John Biscette Title: Vice President /s/ Andrew Y. Ng ---------------------------------------- Name: Andrew Y. Ng Title: Vice President WACHOVIA BANK, N.A. by /s/ Christa P. Holland ---------------------------------------- Name: Christa P. Holland Title: Vice President EX-10.4 4 b38210peex10-4.txt 364-DAY AMENDED AND RESTATED COMPETITIVE ADVANCE 1 CONFORMED COPY Exhibit 10.4 $300,000,000 364-DAY AMENDED AND RESTATED COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT Dated as of March 2, 2001 among PERKINELMER, INC. THE LENDERS NAMED HEREIN and THE CHASE MANHATTAN BANK as Administrative Agent JPMORGAN as Advisor, Lead Arranger and Bookrunner FLEET NATIONAL BANK, as Co-Documentation Agent WACHOVIA BANK, N.A., as Co-Documentation Agent 2
TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.01. Defined Terms.......................................................................................1 SECTION 1.02. Terms Generally....................................................................................10
ARTICLE II The Credits SECTION 2.01. Commitments........................................................................................10 SECTION 2.02. Loans..............................................................................................11 SECTION 2.03. Competitive Bid Procedure..........................................................................12 SECTION 2.04. Standby Borrowing Procedure........................................................................14 SECTION 2.05. Facility Fees......................................................................................14 SECTION 2.06. Conversion and Continuation of Standby Borrowings..................................................14 SECTION 2.07. Repayment of Loans; Evidence of Debt...............................................................15 SECTION 2.08. Interest on Loans..................................................................................16 SECTION 2.09. Default Interest...................................................................................16 SECTION 2.10. Alternate Rate of Interest.........................................................................17 SECTION 2.11. Termination and Reduction of Commitments...........................................................17 SECTION 2.12. Prepayment.........................................................................................17 SECTION 2.13. Reserve Requirements; Change in Circumstances......................................................18 SECTION 2.14. Change in Legality.................................................................................19 SECTION 2.15. Indemnity..........................................................................................19 SECTION 2.16. Pro Rata Treatment.................................................................................20 SECTION 2.17. Sharing of Setoffs.................................................................................20 SECTION 2.18. Payments...........................................................................................21 SECTION 2.19. Duty to Mitigate; Assignment of Commitments Under Certain Circumstances..............................................................................21 SECTION 2.20. Taxes..............................................................................................21
ARTICLE III Representations and Warranties SECTION 3.01. Corporate Existence and Power......................................................................24 SECTION 3.02. Corporate and Governmental Authorization; Contravention............................................24 SECTION 3.03. Binding Effect.....................................................................................24
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SECTION 3.04. Financial Information..............................................................................24 SECTION 3.05. Litigation.........................................................................................25 SECTION 3.06. Compliance with ERISA..............................................................................25 SECTION 3.07. Taxes..............................................................................................25 SECTION 3.08. Subsidiaries.......................................................................................25 SECTION 3.09. Representations and Warranties of Each Borrowing Subsidiary........................................25 SECTION 3.10. Federal Reserve Regulations........................................................................26 SECTION 3.11. Investment Company Act; Public Utility Holding Company Act.........................................26 SECTION 3.12. Environmental and Safety Matters...................................................................26 SECTION 3.13. No Material Adverse Change.........................................................................26 SECTION 3.14. Solvency...........................................................................................27
ARTICLE IV Conditions of Effectiveness and Lending SECTION 4.01. All Borrowings.....................................................................................27 SECTION 4.02. Effectiveness......................................................................................27 SECTION 4.03. First Borrowing by Each Borrowing Subsidiary.......................................................28
ARTICLE V Covenants SECTION 5.01. Information........................................................................................29 SECTION 5.02. Corporate Existence; Businesses and Properties.....................................................30 SECTION 5.03. Insurance..........................................................................................30 SECTION 5.04. Litigation and Other Notices.......................................................................30 SECTION 5.05. Maintaining Records; Access to Properties and Inspections..........................................30 SECTION 5.06. Consolidated EBITDA to Consolidated Interest Expense Ratio.........................................31 SECTION 5.07. Net Debt to Capitalization Ratio...................................................................31 SECTION 5.08. Negative Pledge....................................................................................31 SECTION 5.09. Consolidations, Mergers and Sales of Assets........................................................32 SECTION 5.10. Ownership of Margin Stock..........................................................................32
ARTICLE VI Events of Default..................................................................................................32
ARTICLE VII Guarantee..........................................................................................................35
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ARTICLE VIII The Administrative Agent..........................................................................................36
ARTICLE IX Miscellaneous SECTION 9.01. Notices............................................................................................38 SECTION 9.02. Survival of Agreement..............................................................................38 SECTION 9.03. Binding Effect.....................................................................................39 SECTION 9.04. Successors and Assigns.............................................................................39 SECTION 9.05. Expenses; Indemnity................................................................................41 SECTION 9.06. Applicable Law.....................................................................................41 SECTION 9.07. Waivers; Amendment.................................................................................42 SECTION 9.08. Entire Agreement...................................................................................42 SECTION 9.09. Severability.......................................................................................42 SECTION 9.10. Counterparts.......................................................................................42 SECTION 9.11. Headings .......................................................................................42 SECTION 9.12. Right of Setoff....................................................................................42 SECTION 9.13. Jurisdiction; Consent to Service of Process........................................................43 SECTION 9.14. Waiver of Jury Trial...............................................................................43 SECTION 9.15. Addition of Borrowing Subsidiaries.................................................................43 SECTION 9.16. Confidentiality....................................................................................43 SECTION 9.17. Collateral.........................................................................................44 SECTION 9.18. Interest Rate Limitation...........................................................................44
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Schedules Schedule 2.01 Commitments Schedule 3.08 Subsidiaries Schedule 3.12 Environmental Exceptions (Facilities Owned by the Company and its Subsidiaries)
Exhibits Exhibit A-1 Competitive Bid Request Exhibit A-2 Invitation by Administrative Agent for Competitive Bids Exhibit A-3 Competitive Bid by a Lender Exhibit A-4 Competitive Bid Accept/Reject Letter Exhibit A-5 Standby Borrowing Request Exhibit B Administrative Questionnaire Exhibit C Assignment and Acceptance Exhibit D-1 Opinion of Terrance L. Carlson, Esq. with respect to the Company Exhibit D-2 Opinion of Terrance L. Carlson, Esq. with respect to the Borrowing Subsidiaries Exhibit E Borrowing Subsidiary Agreement
6 $300,000,000 364-DAY AMENDED AND RESTATED COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT (the "Agreement") dated as of March 2, 2001, among PERKINELMER, INC., a Massachusetts corporation (the "Company"), the Borrowing Subsidiaries (as such term is defined herein; together with the Company, the "Borrowers"), the lenders listed in Schedule 2.01 (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). The Lenders have been requested to extend credit to the Borrowers to enable them to borrow on a standby revolving credit basis on and after the date hereof and at any time and from time to time prior to the Termination Date a principal amount not in excess of $300,000,000 at any time outstanding. The Lenders have also been requested to provide a procedure pursuant to which the Borrowers may invite the Lenders to bid on an uncommitted basis on short-term borrowings by the Borrowers. The proceeds of all such borrowings are to be used by the Borrowers for general corporate purposes, including to finance acquisitions and to provide working capital for use in the ordinary course of their businesses. The Lenders are willing to extend such credit on the terms and subject to the conditions herein set forth. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in Article I. This Agreement amends and restates the $300,000,000 Amended and Restated Competitive Advance and Revolving Credit Facility Agreement dated as of March 3, 2000, among the Company, the Borrowing Subsidiaries, the lenders party thereto and the Administrative Agent (the "Existing Credit Agreement"). Accordingly, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loan" shall mean any Standby Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit B hereto. 7 2 "Affiliate" shall mean, when used with respect to a specified person, another person that directly or indirectly controls or is controlled by or is under common control with the person specified. "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as effective. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as released on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so released for any day which is a Business Day, the arithmetic average (rounded upwards to the next 1/100th of 1%), as determined by the Administrative Agent, of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" shall mean on any date, with respect to Eurodollar Standby Loans or with respect to the Facility Fee, as the case may be, the applicable percentage set forth below under the caption "Eurodollar Spread" or "Facility Fee Percentage", as the case may be, based upon the Ratings in effect on such date:
Rating Eurodollar Spread Facility Fee Percentage Category 1 .250% .050% Aa3 or higher by Moody's; AA- or higher by S&P Category 2 A1 or A2 by Moody's; .320% .080% A+ or A by S&P Category 3 A3 by Moody's; .400% .100% A- by S&P
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Facility Fee Rating Eurodollar Spread Percentage Category 4 Baa1 by Moody's; .475% .125% BBB+ by S&P Category 5 Baa2 by Moody's; .600% .150% BBB by S&P Category 6 Baa3 by Moody's; .700% .175% BBB- by S&P Category 7 Ba1 or lower by Moody's; .750% .250% BB+ or lower by S&P
For purposes of the foregoing, (i) if the Ratings shall fall within different Categories, the Applicable Percentage shall be based upon the higher of the two Categories; provided, however, that if the difference in the Ratings is greater than one Category, the Applicable Percentage will be based on the Category which is one Category below the higher Rating; (ii) if no Ratings exist, the Applicable Percentage shall be based upon Category 7; and (iii) if any Rating shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the rating agency making such change. Each such change in the Applicable Percentage shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the parties hereto shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system or the non-availability of ratings from such rating agency, and pending the effectiveness of any such amendment the Applicable Percentage shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee in the form of Exhibit C. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. 9 4 "Board of Directors" shall mean the Board of Directors of the Company or any duly authorized committee thereof. "Borrowing" shall mean a group of Loans of a single Type made by the Lenders to a single Borrower (or, in the case of a Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have been accepted pursuant to Section 2.03) on a single date and as to which a single Interest Period is in effect. "Borrowing Subsidiary" shall mean any Subsidiary which shall have executed and delivered to the Administrative Agent and each Lender a Borrowing Subsidiary Agreement. "Borrowing Subsidiary Agreement" shall mean an agreement, in the form of Exhibit E hereto, duly executed by the Company and a Subsidiary. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City; provided, however, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "A Change in Control" shall be deemed to have occurred if (a) any person or group of persons shall have acquired beneficial ownership of more than 50% of the outstanding Voting Shares of the Company (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder), or (b) during any period of 12 consecutive months, commencing before or after the date of this Agreement, individuals who on the first day of such period were directors of the Company (together with any replacement or additional directors who were nominated or elected by a majority of directors then in office) cease to constitute a majority of the Board of Directors of the Company. "Charges" shall have the meaning assigned to such term in Section 9.18. "Closing Date" shall mean the date of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. "Commitment" shall mean, with respect to each Lender, the commitment of such Lender hereunder as set forth as of the Closing Date in Schedule 2.01 hereto as such Lender's Commitment may be permanently terminated or reduced from time to time pursuant to Section 2.11. The Commitment of each Lender shall automatically and permanently terminate on the Termination Date if not terminated earlier pursuant to the terms hereof. "Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan pursuant to Section 2.03. 10 5 "Competitive Bid Accept/Reject Letter" shall mean a notification made by a Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4. "Competitive Bid Rate" shall mean, as to any Competitive Bid, (i) in the case of a Eurodollar Loan, the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the Lender making such Competitive Bid. "Competitive Bid Request" shall mean a request made pursuant to Section 2.03 in the form of Exhibit A-1. "Competitive Borrowing" shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted under the bidding procedure described in Section 2.03. "Competitive Loan" shall mean a Loan made pursuant to the bidding procedure described in Section 2.03. Each Competitive Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan. "Consolidated EBITDA" shall mean, for any period, Consolidated Net Income of the Company and its Consolidated Subsidiaries excluding the effect of non-cash extraordinary items and accounting changes for such period, plus income taxes during such period, plus the aggregate amount deducted in determining such Consolidated Net Income for such period in respect of Consolidated Interest Expense of the Company and its Consolidated Subsidiaries for such period, plus all amounts attributable to depreciation and amortization of the Company and its Consolidated Subsidiaries for such period, all determined in accordance with GAAP. "Consolidated Interest Expense" shall mean, for any period, (a) the gross interest expense of the Company and its Consolidated Subsidiaries (excluding the amortization of transaction costs) in respect of Indebtedness included within clauses (i) through (iv) of the definition of Indebtedness for such period, all determined in accordance with GAAP. "Consolidated Net Income" shall mean, for any period, the consolidated net income (or loss) of the Company and its Consolidated Subsidiaries for such period, determined in accordance with GAAP. "Consolidated Net Indebtedness" shall mean, for any date, (a) the sum of all outstanding Indebtedness of the Company and its Consolidated Subsidiaries as of such date less (b) the lesser of (i) $50,000,000 and (ii) Eligible Investments as of such date, all determined on a consolidated basis in accordance with GAAP. "Consolidated Subsidiary" shall mean, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements as of such date. "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. 11 6 "dollars" or "$" shall mean lawful money of the United States of America.- "Eligible Investments" shall mean: (a) cash and cash equivalents; (b) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof by the Company or any Subsidiary; (c) investments in money market funds the assets of which are invested in obligations of the type described in (b) above (irrespective of maturity); and (d) other money market investments offered by any of the Lenders or a commercial bank having the highest credit rating available from Standard & Poor's Corporation or Moody's Investors Service, Inc. and having maturities of less than 90 days. "Environmental Laws" shall have the meaning assigned to such term in Section 3.12. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414 of the Code. "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. "Eurodollar Competitive Loan" shall mean any Competitive Loan bearing interest at a rate determined by reference to the LIBO Rate in accordance with the provisions of Article II. "Eurodollar Loan" shall mean any Eurodollar Competitive Loan or Eurodollar Standby Loan. "Eurodollar Standby Loan" shall mean any Standby Loan bearing interest at a rate determined by reference to the LIBO Rate in accordance with the provisions of Article II. "Event of Default" shall have the meaning assigned to such term in Article VI. "Existing Credit Agreement" shall have the meaning assigned to such term in the recitals to this Agreement. "Facility Fee" shall have the meaning assigned to such term in Section 2.05(a). 12 7 "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer, treasurer or assistant treasurer of such corporation. "Five-Year Facility" shall mean the 5-Year Competitive Advance and Revolving Credit Facility Agreement dated as of the date hereof, as amended from time to time, among the Company, certain of the Subsidiaries, the lenders named therein and The Chase Manhattan Bank, as administrative agent. "Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans. "Fixed Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (expressed in the form of a decimal to no more than four decimal places) specified by the Lender making such Loan in its Competitive Bid. "GAAP" shall mean generally accepted accounting principles, applied on a consistent basis. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guaranteed Obligations" shall mean the principal of and interest on the Loans made to, and the other obligations, monetary or otherwise, of, the Borrowing Subsidiaries under this Agreement. "Indebtedness" of any person shall mean at any date, without duplication, (i) all obligations of such person for borrowed money (but not including non-recourse obligations of such person), (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, except trade payables and reimbursement obligations in respect of performance bonds and standby letters of credit to the extent the obligations underlying such letters of credit would not be considered Indebtedness, all of which arise in the ordinary course of business, (iii) all obligations of such person to pay the deferred purchase price of property or services, except trade accounts payable and accrued expenses arising in the ordinary course of business, (iv) all obligations of such person as lessee under capital leases, (v) all Indebtedness of others secured by a Lien on any asset of such person (but not including non-recourse obligations of such person) and (vi) all Indebtedness of others guaranteed by such person. "Information" shall mean any materials, documents and information (other than annual reports, prospectuses, proxy statements and other materials distributed to the Company's shareholders) that the Company or any of its Subsidiaries may have furnished or may hereafter furnish to the Administrative Agent or any Lender in connection with Sections 4.03(d), 5.01, 5.04 and 5.05 of this Agreement. "Interest Payment Date" shall mean (i) as to any Eurodollar Loan for which the Interest Period is 1, 2 or 3 months, the last day of the Interest Period, (ii) as to any Eurodollar Loan for which the Interest Period is 6 months, the last day of the Interest Period and the date that would be the last day of an Interest Period commencing on the same date but having a duration of 3 13 8 months, (iii) as to any ABR Loan, the last day of March, June, September and December in each year, or if such day is not a Business Day, the next succeeding Business Day and (iv) as to any Fixed Rate Loan, the last day of the Interest Period applicable thereto. "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the next succeeding March 31, June 30, September 30 or December 31, or, if earlier, on the Maturity Date or the date such Borrowing is repaid or prepaid in accordance with Section 2.07 or Section 2.12 and (c) as to any Fixed Rate Borrowing, the period commencing on the date of such Borrowing and ending on the date specified in the Competitive Bids in which the offers to make the Fixed Rate Loans comprising such Borrowing were extended, which shall not be earlier than seven days after the date of such Borrowing or later than 360 days after the date of such Borrowing; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of Eurodollar Loans only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the arithmetic average of the rates at which dollar deposits approximately equal in principal amount to (i) in the case of a Standby Borrowing, the Administrative Agent's portion of such Eurodollar Borrowing and (ii) in the case of a Competitive Borrowing, a principal amount that would have been the Administrative Agent's portion of such Competitive Borrowing had such Competitive Borrowing been a Standby Borrowing, and for a maturity comparable to such Interest Period are offered to the principal London offices of the Administrative Agent (or, if the Administrative Agent does not at the time maintain a London office, the principal London office of any Affiliate of the Administrative Agent) in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). "Loan" shall mean a Competitive Loan or a Standby Loan, whether made as a Eurodollar Loan, an ABR Loan or a Fixed Rate Loan, as permitted hereby. 14 9 "Margin" shall mean, as to any Eurodollar Competitive Loan, the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the LIBO Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan. "Margin Regulations" shall mean Regulations U and X of the Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Margin Stock" shall have the meaning given such term under Regulation U of the Board. "Material Adverse Effect" shall mean a materially adverse effect on the business, assets, operations or condition, financial or otherwise, of the Company and its Consolidated Subsidiaries taken as a whole. "Maturity Date" shall mean March 1, 2003. "Maximum Rate" shall have the meaning assigned to such term in Section 9.18. "Moody's" shall mean Moody's Investors Service, Inc., or any of its successors. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "New Lending Office" shall have the meaning assigned to such term in Section 2.20(g). "Non-U.S. Lender" shall mean any Lender (or Transferee) that is organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia. "Other Taxes" shall have the meaning assigned to such term in Section 2.20(b). "person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code that is maintained for current or former employees, or any beneficiary thereof, of the Company or any ERISA Affiliate. 15 10 "Ratings" shall mean the ratings from time to time established by Moody's and S&P for senior, unsecured, non-credit-enhanced long-term debt of the Company. "Register" shall have the meaning given such term in Section 9.04(d). "Regulation D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Reportable Event" shall mean any reportable event as defined in Section 4043(b) of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414). "Required Lenders" shall mean, at any time, Lenders having Commitments representing more than 50% of the Total Commitment or, for purposes of acceleration pursuant to clause (ii) of Article VI, Lenders holding Loans representing more than 50% of the aggregate principal amount of the Loans outstanding. "S&P" shall mean Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any of its successors. "Shareholders' Equity" shall mean, with respect to the Company at any date, (a) the sum of (i) common stock and preferred stock taken at par or stated value at such date, (ii) capital in excess of par value at such date, (iii) cumulative translation adjustments and other adjustments required by GAAP at such date and (iv) retained earnings (or deficit) at such date minus (b) treasury stock at such date, all determined in accordance with GAAP. "Standby Borrowing" shall mean a Borrowing consisting of simultaneous Standby Loans from each of the Lenders. "Standby Borrowing Request" shall mean a request made pursuant to Section 2.04 in the form of Exhibit A-5. "Standby Loans" shall mean the revolving loans made pursuant to Section 2.04. Each Standby Loan shall be a Eurodollar Standby Loan or an ABR Loan. "subsidiary" shall mean, with respect to any person (the "parent"), any corporation, association or other business entity of which securities or other ownership interests representing more than 50% of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" shall mean a subsidiary of the Company. "Taxes" shall have the meaning assigned to such term in Section 2.20(a). 16 11 "Termination Date" shall mean March 1, 2002. "Total Commitment" shall mean, at any time, the aggregate amount of Commitments of all the Lenders, as in effect at such time. "Transferee" shall have the meaning assigned to such term in Section 2.20(a). "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall include the LIBO Rate, the Alternate Base Rate and the Fixed Rate. "Voting Shares" shall mean, as to any corporation, outstanding shares of stock of any class of such corporation entitled to vote in the election of directors, excluding shares entitled so to vote only upon the happening of some contingency. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any covenant set forth in Article V, such terms shall be construed in accordance with GAAP as in effect on the date hereof applied on a basis consistent with the application used in preparing the Company's audited financial statements referred to in Section 3.04. ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Standby Loans to the Borrowers, at any time and from time to time on and after the Closing Date hereof and until the earlier of the Termination Date and the termination of the Commitment of such Lender, in an aggregate principal amount at any time outstanding not to exceed such Lender's Commitment minus the amount by which the Competitive Loans outstanding at such time shall be deemed to have used such Commitment pursuant to Section 2.16, subject, however, to the conditions that (i) at no time shall (A) the sum of (x) the outstanding aggregate 17 12 principal amount of all Standby Loans made by all Lenders plus (y) the outstanding aggregate principal amount of all Competitive Loans made by all Lenders exceed (B) the Total Commitment and (ii) at all times the outstanding aggregate principal amount of all Standby Loans made by each Lender shall equal the product of (A) the percentage which its Commitment represents of the Total Commitment times (B) the outstanding aggregate principal amount of all Standby Loans. Within the foregoing limits, the Borrowers may borrow, pay or prepay and reborrow Standby Loans hereunder, on and after the Closing Date and prior to the Termination Date, subject to the terms, conditions and limitations set forth herein. SECTION 2.02. Loans. (a) Each Standby Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments; provided, however, that the failure of any Lender to make any Standby Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.03. The Standby Loans or Competitive Loans comprising any Borrowing shall be in an aggregate principal amount which is an integral multiple of $1,000,000 and not less than $5,000,000 (or an aggregate principal amount equal to the remaining balance of the available Commitments). (b) Each Competitive Borrowing shall be comprised entirely of Eurodollar Competitive Loans or Fixed Rate Loans, and each Standby Borrowing shall be comprised entirely of Eurodollar Standby Loans or ABR Loans, as any Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that (i) any exercise of such option shall not affect the obligation of such Borrower to repay such Loan in accordance with the terms of this Agreement and (ii) the Borrowers shall not be liable for increased costs under Section 2.13 or 2.14 to the extent that (A) such costs could be avoided by the use of a different branch or Affiliate to make Eurodollar Loans and (B) such use would not, in the judgment of such Lender, entail any expense for which such Lender shall not be indemnified hereunder. Borrowings of more than one Type may be outstanding at the same time; provided, however, that no Borrowing shall be requested which, if made, would result in an aggregate of more than 10 separate Standby Borrowings comprised of Eurodollar Loans being outstanding hereunder at any one time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Subject to Section 2.02(d), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to the Administrative Agent in New York, New York, not later than 12:00 noon, New York City time, and the Administrative Agent shall by 3:00 p.m., New York City time, credit the amounts so received to the general deposit account of the applicable Borrower with the Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids therefor are accepted pursuant to 18 13 Section 2.03 in the amounts so accepted. Standby Loans shall be made by the Lenders pro rata in accordance with Section 2.16. Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with this paragraph (c) and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the applicable Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of such Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Effective Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (d) Any Borrower may refinance all or any part of any Borrowing with a Borrowing of the same or a different Type made pursuant to Section 2.03 or Section 2.04, subject to the conditions and limitations set forth herein and elsewhere in this Agreement, including refinancings of Competitive Borrowings with Standby Borrowings and Standby Borrowings with Competitive Borrowings. Any Borrowing or part thereof so refinanced shall be deemed to be repaid in accordance with Section 2.07 with the proceeds of a new Borrowing hereunder and the proceeds of the new Borrowing, to the extent they do not exceed the principal amount of the Borrowing being refinanced, shall not be paid by the Lenders to the Administrative Agent or by the Administrative Agent to the applicable Borrower pursuant to Section 2.02(c); provided, however, that (i) if the principal amount extended by a Lender in a refinancing is greater than the principal amount extended by such Lender in the Borrowing being refinanced, then such Lender shall pay such difference to the Administrative Agent for distribution to the Lender described in (ii) below, (ii) if the principal amount extended by a Lender in the Borrowing being refinanced is greater than the principal amount being extended by such Lender in the refinancing, the Administrative Agent shall return the difference to such Lender out of amounts received pursuant to (i) above and (iii) to the extent any Lender fails to pay the Agent amounts due from it pursuant to (i) above, any Loan or portion thereof being refinanced with such amounts shall not be deemed repaid in accordance with Section 2.07 and shall be payable by the Company. SECTION 2.03. Competitive Bid Procedure. (a) In order to request Competitive Bids, a Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be received by the Administrative Agent (i) in the case of a Eurodollar Competitive Borrowing, not later than 10:00 a.m., New York City time, four Business Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day before a proposed Competitive Borrowing. No ABR Loan shall be requested in, or made pursuant to, a Competitive Bid Request. A Competitive Bid Request that does not conform substantially to the format of Exhibit A-1 may be rejected in the Administrative Agent's sole discretion, and the Administrative Agent shall promptly notify the applicable Borrower of such rejection by telecopy. 19 14 Each Competitive Bid Request shall refer to this Agreement and specify whether the Borrowing then being requested is to be a Eurodollar Borrowing or a Fixed Rate Borrowing, the date of such Borrowing (which shall be a Business Day), the aggregate principal amount thereof, which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000, and the Interest Period with respect thereto (which may not end after the Termination Date). Promptly after its receipt of a Competitive Bid Request that is not rejected as aforesaid, the Administrative Agent shall invite by telecopy (in the form set forth in Exhibit A-2 hereto) the Lenders to bid, on the terms and conditions of this Agreement, to make Competitive Loans. (b) Each Lender invited to bid may, in its sole discretion, make one or more Competitive Bids to the applicable Borrower responsive to such Borrower's Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Administrative Agent by telecopy, in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Borrowing. Multiple bids will be accepted by the Administrative Agent. Competitive Bids that do not conform substantially to the format of Exhibit A-3 may be rejected by the Administrative Agent, and the Administrative Agent shall notify the Lender making such nonconforming bid of such rejection as soon as practicable. Each Competitive Bid shall refer to this Agreement and specify (x) the principal amount (which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Borrowing requested) of the Competitive Loan or Loans that the Lender is willing to make, (y) the Competitive Bid Rate or Rates at which the Lender is prepared to make the Competitive Loan or Loans and (z) the Interest Period and the last day thereof. If any Lender invited to bid shall elect not to make a Competitive Bid, such Lender shall so notify the Administrative Agent by telecopy (I) in the case of Eurodollar Competitive Loans, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing, and (II) in the case of Fixed Rate Loans, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Borrowing; provided, however, that failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Loan as part of such Competitive Borrowing. A Competitive Bid submitted by a Lender pursuant to this paragraph (b) shall be irrevocable. (c) The Administrative Agent shall promptly notify the applicable Borrower, by telecopy, of all the Competitive Bids made, the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender that made each bid. The Administrative Agent shall send a copy of all Competitive Bids to such Borrower for its records as soon as practicable after completion of the bidding process set forth in this Section 2.03. (d) The applicable Borrower may in its sole and absolute discretion, subject only to the provisions of this paragraph (d), accept or reject any Competitive Bid referred to in paragraph (c) above. Such Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject any of or all the bids referred to in paragraph (c) above, (x) in the case of a Eurodollar Competitive Borrowing, not later than 10:30 a.m., New York City time, three Business Days before a proposed Competitive Borrowing, and (y) in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City 20 15 time, on the day of a proposed Competitive Borrowing; provided, however, that (i) the failure of such Borrower to give such notice shall be deemed to be a rejection of all the bids referred to in paragraph (c) above, (ii) such Borrower shall not accept a bid made at a particular Competitive Bid Rate if it has decided to reject a bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by such Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) if such Borrower shall accept a bid or bids made at a particular Competitive Bid Rate but the amount of such bid or bids shall cause the total amount of bids to be accepted to exceed the amount specified in the Competitive Bid Request, then such Borrower shall accept a portion of such bid or bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance, in the case of multiple bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such bid at such Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further, however, that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of the applicable Borrower. A notice given pursuant to this paragraph (d) shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate) by telecopy, and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan or Loans in respect of which its bid has been accepted. (f) A Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request. (g) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such bid directly to the applicable Borrower one quarter of an hour earlier than the latest time at which the other Lenders are required to submit their bids to the Administrative Agent pursuant to paragraph (b) above. (h) All notices required by this Section 2.03 shall be given in accordance with Section 9.01. SECTION 2.04. Standby Borrowing Procedure. In order to request a Standby Borrowing, a Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Standby Borrowing Request in the form of Exhibit A-5 (a) in the case of a Eurodollar Standby Borrowing, not later than 10:30 a.m., New York City time, three Business Days before such Borrowing, and (b) in the case of an ABR Borrowing, not later than 10:30 a.m., New York 21 16 City time, on the day of such Borrowing. No Fixed Rate Loan shall be requested or made pursuant to a Standby Borrowing Request. Such notice shall be irrevocable and shall in each case specify (i) whether the Borrowing then being requested is to be a Eurodollar Standby Borrowing or an ABR Borrowing; (ii) the date of such Standby Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if such Borrowing is to be a Eurodollar Standby Borrowing, the Interest Period with respect thereto, which shall not end after the Termination Date. If no election as to the Type of Standby Borrowing is specified in any such notice, then the requested Standby Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Standby Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.04 and of each Lender's portion of the requested Borrowing. SECTION 2.05. Facility Fees. (a) The Company agrees to pay to each Lender, through the Administrative Agent, on each March 31, June 30, September 30 and December 31 (with the first payment being due on March 31, 2001), on the Termination Date, on the Maturity Date and on the date on which the Commitment of such Lender shall be terminated as provided herein, a facility fee (a "Facility Fee"), at a rate per annum equal to the Applicable Percentage from time to time in effect (i) on the average daily amount of the Commitment of such Lender, whether used or unused, on or prior to the Termination Date, and (ii) on the daily average amount of the outstanding Loans of such Lender after the Termination Date, in each case during the preceding quarter (or other period commencing on the date of this Agreement, or ending with the Termination Date or the Maturity Date or the date on which the Commitment of such Lender shall be terminated). All Facility Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Facility Fee due to each Lender shall commence to accrue on the date of this Agreement and shall cease to accrue on the earlier of the Maturity Date and the date on which the Commitment of such Lender shall have been terminated and the Loans of such Lender shall have been repaid. (b) All Facility Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the Facility Fees shall be refundable under any circumstances. SECTION 2.06. Conversion and Continuation of Standby Borrowings. The applicable Borrower shall have the right, upon prior irrevocable notice to the Administrative Agent, (a) not later than 11:00 a.m., New York City time, one Business Day prior to conversion, to convert any Eurodollar Standby Borrowing into an ABR Borrowing, (b) not later than 11:00 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Standby Borrowing or to continue any Eurodollar Standby Borrowing as a Eurodollar Standby Borrowing for an additional Interest Period, and (c) not later than 11:00 a.m., New York City time, three Business Days prior to conversion, to convert the Interest 22 17 Period with respect to any Eurodollar Standby Borrowing to another permissible Interest Period subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Standby Borrowing; (ii) if less than all the outstanding principal amount of any Standby Borrowing shall be converted or continued, the aggregate principal amount of such Standby Borrowing converted or continued shall be an integral multiple of $1,000,000 and not less than $5,000,000; (iii) if any Eurodollar Standby Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the applicable Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15; (iv) any portion of a Standby Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Standby Borrowing; (v) any portion of a Eurodollar Standby Borrowing which cannot be converted into or continued as a Eurodollar Standby Borrowing by reason of clause (iv) above shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and (vi) no Interest Period may be selected for any Eurodollar Standby Borrowing that would end later than the Maturity Date. Each notice pursuant to this Section 2.06 shall be by hand delivery or telecopier and irrevocable and shall refer to this Agreement and specify (A) the identity and amount of the Standby Borrowing that the Borrower requests be converted or continued, (B) whether such Standby Borrowing is to be converted to or continued as a Eurodollar Standby Borrowing or an ABR Borrowing, (C) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (D) if such Standby Borrowing is to be converted to or continued as a Eurodollar Standby Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Standby Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the other Lenders of any notice given pursuant to this Section 2.06 and of each Lender's portion of any converted or continued Standby Borrowing. If, with respect to any Interest Period ending on or after the Termination Date, the applicable Borrower shall not have given notice in accordance with this Section 2.06 to continue any Standby Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.06 to convert such Standby Borrowing), such Standby Borrowing shall, at the end of such Interest Period (unless repaid pursuant to the terms hereof), automatically be continued into such subsequent Interest Period as an ABR Borrowing. 23 18 SECTION 2.07 Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby agrees that the outstanding principal balance of each Standby Loan shall be payable on the Maturity Date and that the outstanding principal balance of each Competitive Loan shall be payable on the last day of the Interest Period applicable thereto and on the Termination Date. Each Loan shall bear interest on the outstanding principal balance thereof as set forth in Section 2.08. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type of each Loan made and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from each Borrower and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) of this Section 2.07 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, 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 obligations of the Borrowers to repay the Loans in accordance with their terms. SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to (i) in the case of each Eurodollar Standby Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage from time to time in effect plus an additional .125% per annum on any day on which (A) the sum of (1) the outstanding aggregate principal amount of all Standby Loans made by all Lenders plus (2) the outstanding aggregate principal amount of all Competitive Loans made by all Lenders exceeds (B) 33% of the Total Commitment and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus the Margin offered by the Lender making such Loan and accepted by the applicable Borrower pursuant to Section 2.03. (b) Subject to the provisions of Section 2.09, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, for periods during which the Alternate Base Rate is determined by reference to the Prime Rate and 360 days for other periods) at a rate per annum equal to the Alternate Base Rate. (c) Subject to the provisions of Section 2.09, each Fixed Rate Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a 24 19 year of 360 days) equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.03. (d) Interest on each Loan shall be payable on each Interest Payment Date applicable to such Loan except as otherwise provided in this Agreement. The applicable LIBO Rate or Alternate Base Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.09. Default Interest. If a Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, whether by scheduled maturity, notice of prepayment, acceleration or otherwise, such Borrower shall owe interest, payable on demand, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed as provided in Section 2.08(b)) equal to the Alternate Base Rate plus 2%. SECTION 2.10. Alternate Rate of Interest. (a) In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined (i) that dollar deposits in the principal amounts of the Eurodollar Loans comprising such Borrowing are not generally available in the London interbank market or (ii) that reasonable means do not exist for ascertaining the LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give telecopy notice of such determination to the Borrowers and the Lenders. In the event of any such determination under clauses (i) or (ii) above, until the Administrative Agent shall have advised the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, (x) any request by a Borrower for a Eurodollar Competitive Borrowing pursuant to Section 2.03 shall be of no force and effect and shall be denied by the Administrative Agent and (y) any request by a Borrower for a Eurodollar Standby Borrowing pursuant to Section 2.04 shall be deemed to be a request for an ABR Borrowing. (b) In the event a Lender notifies the Administrative Agent that the rates at which dollar deposits are being offered will not adequately and fairly reflect the cost to such Lender of making or maintaining its Eurodollar Loan during such Interest Period, the Administrative Agent shall notify the applicable Borrower of such notice and until the Lender shall have advised the Administrative Agent that the circumstances giving rise to such notice no longer exist, any request by such Borrower for a Eurodollar Standby Borrowing shall be deemed a request for an ABR Borrowing for the same Interest Period with respect to such Lender. (c) Each determination by the Administrative Agent hereunder shall be made in good faith and shall be conclusive absent manifest error. SECTION 2.11. Termination and Reduction of Commitments. (a) The Commitments shall be automatically terminated on the Termination Date. (b) Upon at least three Business Days' prior irrevocable telecopy notice to the Administrative Agent, the Company may at any time in whole permanently terminate, or from time 25 20 to time in part permanently reduce, the Total Commitment; provided, however, that (i) each partial reduction of the Total Commitment shall be in an integral multiple of $1,000,000 and in a minimum principal amount of $5,000,000 and (ii) no such termination or reduction shall be made which would reduce the Total Commitment to an amount less than the aggregate outstanding principal amount of the Loans. (c) Each reduction in the Total Commitment hereunder shall be made ratably among the Lenders in accordance with their respective Commitments. The Company shall pay to the Administrative Agent for the account of the Lenders, on each date of reduction of any portion of the Total Commitment, the Facility Fees on the amount of the Commitments so terminated accrued through the date of such termination or reduction. SECTION 2.12. Prepayment. (a) Each Borrower shall have the right at any time and from time to time to prepay any Standby Borrowing, in whole or in part, upon giving telecopy notice (or telephone notice promptly confirmed by telecopy) to the Administrative Agent: (i) before 10:00 a.m., New York City time, three Business Days prior to prepayment, in the case of Eurodollar Loans, and (ii) before 10:00 a.m., New York City time, one Business Day prior to prepayment, in the case of ABR Loans; provided, however, that each partial prepayment shall be in an amount which is an integral multiple of $1,000,000 and not less than $5,000,000. No prepayment may be made in respect of any Competitive Borrowing. (b) On the date of any termination or reduction of the Commitments pursuant to Section 2.11(b), the Borrowers shall pay or prepay so much of the Standby Borrowings as shall be necessary in order that the aggregate principal amount of the Competitive Loans and Standby Loans outstanding will not exceed the Total Commitment, after giving effect to such termination or reduction. (c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the applicable Borrower to prepay such Borrowing (or portion thereof) by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall result in the imposition, modification or applicability of any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender, or shall result in the imposition on any Lender or the London interbank market of any other condition affecting this Agreement, such Lender's Commitment or any Eurodollar Loan or Fixed Rate Loan made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan or to reduce the amount of any sum received or receivable by such Lender with 26 21 respect to any Eurodollar Loan or Fixed Rate Loan hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then such additional amount or amounts as will compensate such Lender for such additional costs or reduction will be paid by the Borrowers to such Lender upon demand. Notwithstanding the foregoing, no Lender shall be entitled to request compensation under this paragraph with respect to any Competitive Loan if the change giving rise to such request was applicable to such Lender at the time of submission of the Competitive Bid pursuant to which such Competitive Loan was made. (b) If any Lender shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards," or the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or any entity controlling a Lender (or any lending office of such Lender or entity controlling such Lender) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital (or the capital of an entity controlling such Lender) as a consequence of this Agreement, such Lender's Commitment or the Loans made by such Lender pursuant hereto to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time such additional amount or amounts as will compensate such Lender for such reduction will be paid by the Borrowers to such Lender. (c) A certificate of each Lender setting forth such amount or amounts as shall be necessary to compensate such Lender as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Company promptly by such Lender upon becoming aware of any costs pursuant to paragraphs (a) or (b) above and shall be conclusive absent manifest error. The Company shall pay each Lender the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. (d) Failure on the part of any Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's right to demand compensation with respect to such period or any other period. The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. No Lender shall be entitled to compensation under this Section 2.13 for any costs incurred or reduction suffered with respect to any date unless such Lender shall have notified the Company that it will demand compensation for such costs or reductions not more than 90 days after the later of (i) such date and (ii) the date on which such Lender shall have become aware of such costs or reductions. Notwithstanding any other provision of this Section 2.13, no Lender shall demand compensation for any increased cost or reduction referred to above if it shall not at the time be the 27 22 general policy or practice of such Lender to demand such compensation in similar circumstances under comparable provisions of other credit agreements, if any. SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision herein, if any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Company and to the Administrative Agent, such Lender may: (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon such Lender shall not submit a Competitive Bid in response to a request for Eurodollar Competitive Loans and any request for a Eurodollar Standby Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.14, a notice by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt. SECTION 2.15. Indemnity. The Borrowers shall indemnify each Lender against any out-of-pocket loss or expense which such Lender may sustain or incur as a consequence of (a) any failure to borrow or to refinance any Loan hereunder after irrevocable notice of such borrowing or refinancing has been given pursuant to Section 2.03 or 2.04, (b) any payment, prepayment or conversion, or assignment required under Section 2.19, of a Eurodollar Loan required by any other provision of this Agreement (other than Section 2.14) or otherwise made or deemed made on a date other than the last day of the Interest Period, if any, applicable thereto, (c) any default in payment or prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, whether by scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise) or (d) the occurrence of any Event of Default, including, in each such case, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Loan or any part thereof as a Eurodollar Loan or a Fixed Rate Loan. Such loss or reasonable expense shall include an amount equal to the excess, if any, as reasonably determined by such Lender, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, refinanced or not borrowed or so assigned (assumed to be the LIBO Rate 28 23 applicable thereto or, in the case of a Fixed Rate Loan, the fixed rate of interest applicable thereto) for the period from the date of such payment, prepayment, refinancing or failure to borrow or refinance or such assignment, to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or refinance the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying in similar investments the funds so paid, prepaid or not borrowed or refinanced or so assigned for the remainder of such period or Interest Period, as the case may be. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.15 shall be delivered to the Borrowers and shall be conclusive absent manifest error. SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.13, each payment or prepayment of principal of any Standby Borrowing, each payment of interest on the Standby Loans, each payment of the Facility Fees, each reduction of the Commitments and each refinancing of any Borrowing with a Standby Borrowing of any Type, shall be allocated pro rata among the Lenders in accordance with their respective Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Standby Loans). Each payment of principal of any Competitive Borrowing shall be allocated pro rata among the Lenders participating in such Borrowing in accordance with the respective principal amounts of their outstanding Competitive Loans comprising such Borrowing. Each payment of interest on any Competitive Borrowing shall be allocated pro rata among the Lenders participating in such Borrowing in accordance with the respective amounts of accrued and unpaid interest on their outstanding Competitive Loans comprising such Borrowing. For purposes of determining the available Commitments of the Lenders at any time, each outstanding Competitive Borrowing shall be deemed to have utilized the Commitments of the Lenders (including those Lenders which shall not have made Loans as part of such Competitive Borrowing) pro rata in accordance with such respective Commitments. Each Lender agrees that in computing such Lender's portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing to the next higher or lower whole dollar amount. SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Standby Loan or Loans as a result of which the unpaid principal portion of its Standby Loans shall be proportionately less than the unpaid principal portion of the Standby Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Standby Loans of such other Lender, so that the aggregate unpaid principal amount of the Standby Loans and participations in the Standby Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Standby Loans then outstanding as the principal amount of its Standby Loans prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Standby Loans outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; 29 24 provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. Any Lender holding a participation in a Standby Loan deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing to such Lender by reason thereof as fully as if such Lender had made a Standby Loan in the amount of such participation. SECTION 2.18. Payments. (a) The Borrowers shall make each payment (including principal of or interest on any Borrowing and any Facility Fees or other amounts) hereunder from an account in the United States not later than 12:00 noon, New York City time, on the date when due in dollars to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, in immediately available funds, without setoff, counterclaim or other deductions. (b) Whenever any payment (including principal of or interest on any Borrowing or any Facility Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Facility Fees, if applicable. SECTION 2.19. Duty to Mitigate; Assignment of Commitments Under Certain Circumstances. (a) Any Lender (or Transferee) claiming any additional amounts payable pursuant to Section 2.13 or Section 2.20 or exercising its rights under Section 2.14 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue or avoid the circumstances giving rise to such exercise and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (b) In the event that any Lender shall have delivered a notice or certificate pursuant to Section 2.10(b), 2.13 or 2.14, or the Borrower shall be required to make additional payments to any Lender under Section 2.20, the Company shall have the right, at its own expense (which shall include the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender and the Administrative Agent, to require such Lender to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 9.04) all interests, rights and obligations contained hereunder to another financial institution approved by the Administrative Agent (which approval shall not be unreasonably withheld) which shall assume such obligations; provided that (i) no such assignment shall conflict with any law, rule or regulation or order of any Governmental Authority and (ii) the assignee or the Borrowers, as the case may be, shall pay to the affected Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder. 30 25 SECTION 2.20. Taxes. (a) Any and all payments to the Lenders hereunder shall be made, in accordance with Section 2.18, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) income taxes imposed on the net income of the Administrative Agent or any Lender (or any transferee or assignee thereof, including a participation holder (any such entity a "Transferee")) and (ii) franchise taxes imposed on the net income of the Administrative Agent or any Lender (or Transferee), in each case by the jurisdiction under the laws of which the Administrative Agent or such Lender (or Transferee) is organized or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, "Taxes"). If any Borrower shall be required to deduct any Taxes from or in respect of any sum payable hereunder to any Lender (or any Transferee) or the Administrative Agent, (i) the sum payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) such Lender (or Transferee) or the Administrative Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrowers shall pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement ("Other Taxes"). (c) The Borrowers shall indemnify each Lender (or Transferee) and the Administrative Agent for the full amount of Taxes and Other Taxes paid by such Lender (or Transferee) or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto. A certificate as to the amount of such payment or liability prepared by a Lender, or the Administrative Agent on its behalf, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date the Lender (or Transferee) or the Administrative Agent, as the case may be, makes written demand therefor. (d) If a Lender (or Transferee) or the Administrative Agent shall become aware that it is entitled to claim a refund from a Governmental Authority in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrowers, or with respect to which the Borrowers have paid additional amounts, pursuant to this Section 2.20, it shall promptly notify the Borrowers of the availability of such refund claim and shall, within 30 days after receipt of a request by the Borrowers, make a claim to such Governmental Authority for such refund at the Borrowers' expense. If a Lender (or Transferee) or the Administrative Agent receives a refund (including pursuant to a claim for refund made pursuant to the preceding sentence) in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section 2.20, it shall within 30 days from the date of such receipt pay over such refund to the Borrowers (but only to the extent 31 26 of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 2.20 with respect to the Taxes or Other Taxes giving rise to such refund), without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Borrowers, upon the request of such Lender (or Transferee) or the Administrative Agent, agree to repay the amount paid over to the Borrowers (plus penalties, interest or other charges) to such Lender (or Transferee) or the Administrative Agent in the event such Lender (or Transferee) or the Administrative Agent is required to repay such refund to such Governmental Authority. (e) As soon as practicable after the date of any payment of Taxes or Other Taxes by the Borrowers to the relevant Governmental Authority, the Borrowers will deliver to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof. (f) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.20 shall survive the payment in full of the principal of and interest on all Loans made hereunder for a period of 3 years. (g) Each Non-U.S. Lender shall deliver to the Company and the Administrative Agent two copies of either United States Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on payments by the Company under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of a Transferee that is a participation holder, on or before the date such participation holder becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this Section 2.20(g), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.20(g) that such Non-U.S. Lender is not legally able to deliver. (h) The Borrowers shall not be required to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of United States Federal withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to United States Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Transferee that is a participation holder, on the date such participation holder became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender designated such 32 27 New Lending Office with respect to a Loan; provided, however, that this clause (i) shall not apply to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the request of the Company; and provided further, however, that this clause (i) shall not apply to the extent the indemnity payment or additional amounts any Transferee, or Lender (or Transferee) through a New Lending Office, would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or additional amounts that the person making the assignment, participation or transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of paragraph (g) above. (i) Any Lender (or Transferee) claiming any indemnity payment or additional amounts payable pursuant to this Section 2.20 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document reasonably requested in writing by the Company or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such indemnity payment or additional amounts that may thereafter accrue and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (j) Nothing contained in this Section 2.20 shall require any Lender (or Transferee) or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). ARTICLE III Representations and Warranties The Company represents and warrants to each of the Lenders that: SECTION 3.01. Corporate Existence and Power. The Company and each Borrowing Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 3.02. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Company of this Agreement (a) is within the Company's corporate powers, (b) has been duly authorized by all necessary corporate action, (c) requires no action by or in respect of, or filing with, any Governmental Authority and (d) does not (i) contravene, or constitute a default under, any applicable provision of law or regulation either of the United States or a particular state thereof or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or (ii) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 33 28 SECTION 3.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of the rights of its creditors generally and subject to general legal and equitable principles with respect to the availability of particular remedies. SECTION 3.04. Financial Information. (a) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 2000, and the related consolidated statements of earnings and changes in financial position for the fiscal year then ended, a copy of which has been delivered to each of the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such fiscal year. (b) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of September 30, 2000, and the related unaudited consolidated statements of earnings and changes in financial position for the nine months then ended, set forth in the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2000, a copy of which has been delivered to each of the Lenders, fairly present, in conformity with GAAP applied on a basis consistent with the financial statements referred to in paragraph (a) of this Section 3.04, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such nine month period (subject to normal year-end adjustments). SECTION 3.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of a final adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries taken as a whole or which in any manner draws into question the validity of this Agreement. SECTION 3.06. Compliance with ERISA. The Company and each ERISA Affiliate has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code relating to the Plans, and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA. SECTION 3.07. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended January 3, 1988. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all material taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary which the Company or any Subsidiary is not disputing in a good faith manner. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. 34 29 SECTION 3.08. Subsidiaries. Attached hereto as Schedule 3.08 is a schedule which correctly identifies all Subsidiaries as of the date of this Agreement. Except as noted on Schedule 3.08, all of the issued and outstanding shares of the capital stock of each Subsidiary is duly issued and outstanding, fully paid and non-assessable and except for directors' qualifying shares and shares issued solely for the purpose of satisfying local requirements concerning the minimum number of shareholders is owned by the Company or a Subsidiary free and clear of any mortgage, pledge, lien or encumbrance. SECTION 3.09. Representations and Warranties of Each Borrowing Subsidiary. Each Borrowing Subsidiary shall be deemed by the execution and delivery of a Borrowing Subsidiary Agreement to have represented and warranted as of the date thereof as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business and in good standing in each other jurisdiction in which it owns property and/or conducts its business and in which failure to be so qualified and in good standing would have a materially adverse effect on the business of such Borrowing Subsidiary. (b) The execution, delivery and performance by it of its Borrowing Subsidiary Agreement, and the performance by it of the provisions of this Agreement applicable to it, are within its corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) its charter or by-laws (or the equivalent thereof) or (ii) any law or regulation or any agreement, judgment, injunction, order, decree or other instrument binding on or affecting it. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by it of its Borrowing Subsidiary Agreement or for the performance by it of the provisions of this Agreement applicable to it, except for those which have been duly obtained or made and are in full force and effect. (d) It is not in breach of or default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which would have a material adverse effect on its ability to perform its obligations hereunder after taking into consideration its other financial obligations. (e) This Agreement is a legal, valid and binding obligation of such Borrowing Subsidiary enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of the rights of its creditors generally and subject to general legal and equitable principles with respect to the availability of particular remedies. (f) The proceeds of each Loan made to it will be used solely for general corporate purposes, including the acquisition of new businesses. SECTION 3.10. Federal Reserve Regulations. (a) Neither any Borrower nor any Subsidiary is engaged principally, or as a substantial part of its activities, in the business of 35 30 extending credit for the purpose of purchasing or carrying Margin Stock (within the meaning of Regulation U). (b) No part of the proceeds of any Loan has been or will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, in any manner or for any purpose that has resulted or will result in a violation of Regulation U. SECTION 3.11. Investment Company Act; Public Utility Holding Company Act. Neither any Borrower nor any Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.12. Environmental and Safety Matters. With respect to all facilities owned and operated by the Company and its Subsidiaries, or at which the Company or any of its Subsidiaries has a leasehold interest, except as set forth in Schedule 3.12 (i) the Company and each Subsidiary is in compliance in all material respects with all Federal, state, local and other statutes, ordinances, orders, judgments, rulings and regulations relating to environmental pollution or to environmental regulation or control or to employee health or safety (collectively "Environmental Laws") except where the failure to be in compliance so would not be reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect; (ii) neither the Company nor any Subsidiary has received notice of any material failure so to comply, which non-compliance neither has been remedied nor is the subject of the Company's good faith efforts to achieve compliance, except where the failure to be in compliance would not be reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect and (iii) the Company is aware of no events, conditions or circumstances involving environmental pollution or contamination or employee health or safety that in its judgment would be reasonably likely to result in a Material Adverse Effect. SECTION 3.13. No Material Adverse Change. Since January 2, 2000, there has occurred no event, condition or change in or affecting the Company or the Subsidiaries that, individually or in the aggregate with other such events, conditions or changes, has had or could reasonably be expected to have a Material Adverse Effect. SECTION 3.14. Solvency. On the Closing Date, (i) the fair value of the assets of the Company and the Subsidiaries on a consolidated basis, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of the Company and the Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay their probable liability on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Company and the Subsidiaries will on a consolidated basis be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Company and the Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date. 36 31 ARTICLE IV Conditions of Effectiveness and Lending SECTION 4.01. All Borrowings. The obligations of the Lenders to make Loans hereunder on the date of each Borrowing are subject to the satisfaction of the following conditions: (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 or Section 2.04, as applicable. (b) The representations and warranties set forth in Article III (except in the case of a refinancing that does not increase the aggregate principal amount of Loans of any Lender outstanding, the representations set forth in Section 3.05 and 3.12) hereof shall be true and correct in all material respects on and as of the date of such Borrowing with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) At the time of and immediately after such Borrowing no Event of Default or Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the applicable Borrower on the date of such Borrowing as to the matters specified in paragraphs (b) and (c) of this Section 4.01. SECTION 4.02. Effectiveness. This Agreement shall become effective upon the satisfaction of the following conditions: (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received the favorable written opinion of Terrance L. Carlson, Esq., dated the Closing Date and addressed to the Lenders and satisfactory to Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D-1 hereto. (c) The Administrative Agent shall have received (i) a copy of the certificate of incorporation, including all amendments thereto, of the Company, certified as of a recent date by the Secretary of State of its state of incorporation, and a certificate as to the good standing of the Company as of a recent date from such Secretary of State; (ii) a certificate of the Clerk or an Assistant Clerk of the Company dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of the Company as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of 37 32 resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate of incorporation referred to in clause (i) above has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to such clause (i) and (D) as to the incumbency and specimen signature of each officer executing this Agreement or any other document delivered in connection herewith on behalf of the Company; and (iii) a certificate of another officer of the Company as to the incumbency and specimen signature of the Clerk or Assistant Clerk executing the certificate pursuant to (ii) above. (d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Company, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. (e) No Loan shall be outstanding under the Existing Credit Agreement or under the $100,000,000 Five-Year Competitive Advance and Revolving Credit Facility dated as of March 21, 1994, as amended, and all interest, fees and other amounts accrued for the accounts of or otherwise owed to the Administrative Agent or the lenders thereunder through the date immediately preceding the Closing Date shall have been paid. The Administrative Agent shall have received evidence of the termination of the $100,000,000 Five-Year Competitive Advance and Revolving Credit Facility dated as of March 21, 1994, as amended. SECTION 4.03. First Borrowing by Each Borrowing Subsidiary. On the first date on which Loans are made to each Borrowing Subsidiary: (a) The Administrative Agent shall have received the favorable written opinion of Terrance L. Carlson, Esq., dated the date of such Loans, addressed to the Lenders and satisfactory to Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect set forth in Exhibit D-2 hereto. (b) Each Lender shall have received a copy of the Borrowing Subsidiary Agreement executed by such Borrowing Subsidiary. (c) Such Loans shall not violate any law, rule or regulation binding on any of the Lenders. (d) Each Lender shall have received from the Company an unaudited consolidated balance sheet and related consolidated statements of earnings and changes in financial position for the fiscal year most recently ended of such Borrowing Subsidiary. 38 33 ARTICLE V Covenants The Company covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any Facility Fees or any other amounts payable hereunder shall be unpaid, unless the Required Lenders shall otherwise consent in writing: SECTION 5.01. Information. The Company will give the Administrative Agent prompt written notice of any change in any Rating that results in a change in the Category on which the Applicable Percentage is based. The Company will deliver to each of the Lenders: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Arthur Andersen & Co. or other independent public accountants of nationally recognized standing acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Company and the Consolidated Subsidiaries in accordance with GAAP; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of earnings and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, compliance with GAAP and consistency by a Financial Officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of a Financial Officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06 and 5.07 on the date of such financial statements and (ii) stating whether there exists on the date of such certificate any Default and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) forthwith upon the occurrence of any Default, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; 39 34 (e) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all annual or quarterly reports and upon request by any Lender copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) which the Company shall have filed with the Securities and Exchange Commission; (g) (i) as soon as possible after, and in any event within 30 days after the Company or any ERISA Affiliate knows or has reason to know that, any Reportable Event has occurred that alone or together with any other Reportable Event could reasonably be expected to result in liability of the Company to the PBGC in an aggregate amount exceeding $5,000,000, a statement of a Financial Officer setting forth details as to such Reportable Event and the action that the Company proposes to take with respect thereto, together with a copy of the notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt thereof, a copy of any notice that the Company or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee to administer any such Plan, (iii) within 10 days after the due date for filing with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make a required installment or other payment with respect to a Plan, a statement of a Financial Officer setting forth details as to such failure and the action that the Company proposes to take with respect thereto, together with a copy of any such notice given to the PBGC and (iv) promptly and in any event within 30 days after receipt thereof by the Company or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Company or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is expected to be, terminated or in reorganization, both within the meaning of Title IV of ERISA; and (h) from time to time such additional information regarding the financial position or business of the Company as any Lender may reasonably request. SECTION 5.02. Corporate Existence; Businesses and Properties. (a) The Company will, and will cause each Borrowing Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate existence. (b) Except to the extent that failure to do so would not have a Material Adverse Effect, the Company will, and will cause each Borrowing Subsidiary to, (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect all rights, licenses, permits and franchises material to the conduct of the business of the Company and the Subsidiaries, taken as a whole, (ii) comply with all laws and regulations applicable to it and (iii) conduct its business in substantially the same manner as heretofore conducted or as at the time permitted under applicable law. SECTION 5.03. Insurance. The Company will, and will cause each Subsidiary to, keep its insurable properties adequately insured at all times by financially sound and reputable 40 35 insurers, and maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses. SECTION 5.04. Litigation and Other Notices. The Company will give each Lender prompt written notice of the following: (a) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding which could reasonably be expected to result in a Material Adverse Effect; and (b) any development in the business or affairs of the Company or any Subsidiary that has resulted in a Material Adverse Effect. SECTION 5.05. Maintaining Records; Access to Properties and Inspections. The Company will, and will cause each Subsidiary to, maintain financial records in accordance with GAAP and, upon reasonable notice, at all reasonable times, permit (a) any authorized representative designated by any Lender to discuss the affairs, finances and condition of the Company and the Subsidiaries with a Financial Officer of the Company and such other officers as the Company shall deem appropriate and (b) any authorized representative designated by the Administrative Agent or the Required Lenders to visit and inspect the properties of the Company and of any Subsidiary. SECTION 5.06. Consolidated EBITDA to Consolidated Interest Expense Ratio. The Company will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter to be less than 5:1. SECTION 5.07. Net Debt to Capitalization Ratio. The Company will not permit on any date the ratio of (a) Consolidated Net Indebtedness on such date to (b) the sum of (i) Shareholders' Equity on such date and (ii) Consolidated Net Indebtedness on such date to be greater than 0.55:1.00. SECTION 5.08. Negative Pledge. Neither the Company nor any Consolidated Subsidiary will create, assume or suffer to exist any Lien securing Indebtedness on any asset now owned or hereafter acquired by it, except: (a) Liens on all or part of the assets of Consolidated Subsidiaries securing Indebtedness owing by Consolidated Subsidiaries to the Company and Consolidated Subsidiaries; (b) mortgages on real property or security interests in personal property securing Indebtedness of the Company and Consolidated Subsidiaries in an aggregate amount not exceeding ten percent (10%) of the consolidated total assets of the Company and the Consolidated Subsidiaries; 41 36 (c) Liens to secure taxes, assessments and other governmental charges or claims for labor, material or supplies to the extent that payment thereof shall not at the time be required to be made in accordance with Section 3.07 hereof; (d) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age, pension or other social security obligations; (e) Liens in respect of judgments or awards not exceeding $1,000,000 in the aggregate at any time, and any other Liens with respect to which the execution or enforcement thereof is being effectively stayed and the claims secured thereby are being contested in good faith by appropriate proceedings; (f) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens, in existence less than 120 days from the date of creation thereof; (g) encumbrances consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Company or a Consolidated Subsidiary is a party, and other similar encumbrances none of which in the opinion of the Company interferes materially with the use of the property in the ordinary conduct of the business of the Company and the Consolidated Subsidiaries; and similar encumbrances on interests in real estate located outside the United States, which defects do not individually or in the aggregate have a material adverse effect on the business of the Company individually or of the Company and the Consolidated Subsidiaries on a consolidated basis; and (h) to the extent that the value of all Margin Stock owned by the Company and its Consolidated Subsidiaries (determined in accordance with Regulation U) would otherwise exceed 25% of the value of the total assets of the Company and its Consolidated Subsidiaries subject to this Section 5.08 (as so determined), Liens on such excess Margin Stock (it being understood that Margin Stock not in excess of 25% of the value of such assets will be subject to the restrictions of this Section 5.08). SECTION 5.09. Consolidations, Mergers and Sales of Assets. (a) The Company will not (i) consolidate or merge with or into any other person unless (A) the Company shall be the surviving entity and (B) immediately thereafter no Default or Event of Default shall have occurred and be continuing or (ii) sell, lease or otherwise transfer all or any substantial part of its assets to any other person. The Company will not sell, lease or otherwise transfer any of its assets to any other person except for full and adequate consideration. (b) No Borrowing Subsidiary will (i) consolidate or merge with or into any other person unless (A) if the surviving entity shall be other than such Borrowing Subsidiary, (x) such surviving entity or the Company shall have assumed in writing all obligations of such Borrowing Subsidiary relating to this Agreement and (y) such surviving entity shall be 100% owned by the Company and (B) no Default or Event of Default shall have occurred and be continuing either 42 37 before or immediately after such consolidation or merger or (ii) sell, lease or otherwise transfer all or any substantial part of its assets to any other person. No Borrowing Subsidiary will sell, lease or otherwise transfer any of its assets to any other person except for full and adequate consideration. (c) Notwithstanding anything in the foregoing to the contrary, to the extent that the value of all Margin Stock owned by the Company and its Consolidated Subsidiaries (determined in accordance with Regulation U) would otherwise exceed 25% of the value of the total assets of the Company and its Consolidated Subsidiaries subject to this Section 5.09 (as so determined), the restrictions contained in subsections (a)(ii) and (b)(ii) of this Section 5.09 shall not apply to such excess Margin Stock (it being understood that Margin Stock not in excess of 25% of the value of such assets will be subject to the restrictions of this Section 5.09). SECTION 5.10. Ownership of Margin Stock. The Company will not, and will not permit its Subsidiaries to, own Margin Stock to the extent the value of such Margin Stock would exceed 25% of the value of the total assets of the Company and its Consolidated Subsidiaries. ARTICLE VI Events of Default In case of the happening of any of the following events (each an "Event of Default"): (a) any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or the Borrowings hereunder or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with this Agreement shall prove to have been incorrect in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or any Facility Fee or any other amount (other than an amount referred to in paragraph (b) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days; (d) default shall be made in the due observance or performance of any covenant, condition or agreement contained in Sections 5.02 or 5.06 through 5.09; (e) default shall be made in the due observance or performance of any covenant, condition or agreement contained herein (other than those specified in paragraphs (b), (c) 43 38 or (d) above) and such default shall continue unremedied for a period of 10 days after notice thereof from the Administrative Agent or any Lender to the Company; (f) the Company or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in an aggregate principal amount in excess of $15,000,000, when and as the same shall become due and payable, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or any Subsidiary, or of a substantial part of the property or assets of the Company or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or a Subsidiary or (iii) the winding up or liquidation of the Company or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more final and nonappealable judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Company or any Subsidiary to enforce any such final and nonappealable judgment or judgments aggregating in excess of $5,000,000; 44 39 (j) a Reportable Event or Reportable Events, or a failure to make a required installment or other payment (within the meaning of Section 412(n)(l) of the Code), shall have occurred with respect to any Plan or Plans that reasonably could be expected to result in liability of the Company to the PBGC or to a Plan in an aggregate amount exceeding $5,000,000 and, within 30 days after the reporting of any such Reportable Event to the Administrative Agent, the Administrative Agent shall have notified the Company in writing that (i) the Required Lenders have made a determination that, on the basis of such Reportable Event or Reportable Events or the failure to make a required payment, there are reasonable grounds (A) for the termination of such Plan or Plans by the PBGC, (B) for the appointment by the appropriate United States District Court of a trustee to administer such Plan or Plans or (C) for the imposition of a lien in favor of a Plan and (ii) as a result thereof an Event of Default exists hereunder; or a trustee shall be appointed by a United States District Court to administer any such Plan or Plans; or the PBGC shall institute proceedings to terminate any Plan or Plans; (k) (i) the Company or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA Affiliate does not have reasonable grounds for contesting such Withdrawal Liability or is not in fact contesting such Withdrawal Liability in a timely and appropriate manner and (iii) the amount of the Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date or dates of such notification), exceeds $5,000,000 or requires payments exceeding $1,000,000 in any year; (1) the Company or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if solely as a result of such reorganization or termination the aggregate annual contributions of the Company and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or have been or are being terminated have been or will be increased over the amounts required to be contributed to such Multiemployer Plans for their most recently completed plan years by an amount exceeding $1,000,000; (m) any guarantee purported to be created by Article VII hereof shall cease to be, or shall be asserted by the Company not to be, a valid and enforceable guarantee of the Guaranteed Obligations; or (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together 45 40 with accrued interest thereon and any unpaid accrued Facility Fees and all other liabilities of the Borrowers accrued hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding; and, in any event with respect to the Company described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Facility Fees and all other liabilities of the Borrowers accrued hereunder shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding. ARTICLE VII Guarantee The Company unconditionally and irrevocably guarantees the due and punctual payment and performance, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, of the Guaranteed Obligations. The Company further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from it and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligations. The Company waives presentment to, demand of payment from and protest to the Borrowing Subsidiaries of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure of any Lender or the Administrative Agent to assert any claim or demand or to enforce any right or remedy against the Borrowing Subsidiaries under the provisions of this Agreement or otherwise; (b) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any guarantee or any other agreement; or (c) the failure of any Lender or the Administrative Agent to exercise any right or remedy against any other guarantor of the Guaranteed Obligations. The Company further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any security, if any, held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on its books, in favor of the Borrowing Subsidiaries or any other person. The obligations of the Company hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Company hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or 46 41 demand or to enforce any remedy under this Agreement, any guarantee or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of the Company or otherwise operate as a discharge of the Company as a matter of law or equity. To the extent permitted by applicable law, the Company waives any defense based on or arising out of any defense available to the Borrowing Subsidiaries, including any defense based on or arising out of any disability of the Borrowing Subsidiaries, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrowing Subsidiaries, other than final payment in full of the Guaranteed Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, or exercise any other right or remedy available to them against the Borrowing Subsidiaries, or any security without affecting or impairing in any way the liability of the Company hereunder except to the extent the Guaranteed Obligations have been fully and finally paid. The Company waives any defense arising out of any such election even though such election operates to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Company against any Borrowing Subsidiary or any security. The Company further agrees that its guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Lender upon the bankruptcy or reorganization of any Borrowing Subsidiary or otherwise. In furtherance of the foregoing and not in limitation of any other right which the Administrative Agent or any Lender may have at law or in equity against the Company by virtue hereof, upon the failure of any Borrowing Subsidiary to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Company hereby promises to and will, upon receipt of written demand by the Administrative Agent or any Lender, forthwith pay or cause to be paid to the Administrative Agent or such Lender in cash the amount of such unpaid Guaranteed Obligation. Upon payment by the Company of any sums to the Administrative Agent or any Lender, as provided above, all rights of the Company against the other Borrowers arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Guaranteed Obligations to the Administrative Agent and the Lenders. ARTICLE VIII The Administrative Agent In order to expedite the transactions contemplated by this Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative Agent on behalf of the Lenders. 47 42 Each of the Lenders hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender or holder and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrowers of any Event of Default of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute promptly to each Lender copies of all notices, financial statements and other materials delivered by the Borrowers pursuant to this Agreement as received by the Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his or her own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants or agreements contained in this Agreement. The Administrative Agent shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or other instruments or agreements. The Administrative Agent may deem and treat the Lender that makes any Loan as the holder of the indebtedness resulting therefrom for all purposes hereof until it shall have received notice from such Lender, given as provided herein, of the transfer thereof. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrowers on account of the failure of or delay in performance or breach by any other Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Borrowers of any of their respective obligations hereunder or in connection herewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a 48 43 successor Administrative Agent reasonably acceptable to the Company. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then, the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall 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. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.05 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 Administrative Agent. With respect to the Loans made by it hereunder, the Administrative Agent in its individual capacity and not as Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent. Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Commitment hereunder or, if the Commitments shall have been terminated, the amount of its outstanding Loans) of any out-of-pocket expenses incurred for the benefit of the Lenders by the Administrative Agent, including reasonable counsel fees and compensation of agents paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by it under this Agreement to the extent the same shall not have been reimbursed by the Borrowers; provided that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent or any of its directors, officers, employees or agents. Each Lender agrees that any allocation made in good faith by the Administrative Agent of expenses or other amounts referred to in this paragraph between this Agreement and the Five-Year Facility shall be conclusive and binding for all purposes. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not 49 44 taking action under or based upon this Agreement or any related agreement or any document furnished hereunder or thereunder. ARTICLE IX Miscellaneous SECTION 9.01. Notices. Except as otherwise expressly provided herein, notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy, as follows: (a) if to any Borrower, to PerkinElmer, Inc., 45 William Street, Wellesley, Massachusetts 02481, Attention of Treasurer, (Telecopy No. 781-431-4113); (b) if to the Administrative Agent, to it at One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Lisa Pucciarelli, (Telecopy No. 212-552-5777); and (c) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Facility Fee or any other amount payable under this Agreement is outstanding and unpaid or the Commitments have not been terminated. SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Company and the Administrative Agent and when the Administrative Agent shall have received copies hereof (telecopied or otherwise) which, when taken together, bear the signature of each Lender, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrowers shall not have the right to assign any rights hereunder or any interest herein without the prior consent of all the Lenders. 50 45 SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any party that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or a domestic Affiliate of a Lender, the Company must give its prior written consent to such assignment (which consent shall not be unreasonably withheld); provided, however, that the consent of the Company shall not be required to any such assignment during the continuance of any Event of Default, (ii) the amount of the Commitment (or, after the Termination Date, the outstanding Loans) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and a processing and recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.20 and 9.05, as well as to any Facility Fees accrued for its account hereunder and not yet paid)). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any Loans so retained until such Loans have been repaid in full in accordance with this Agreement. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of the Borrowers or the performance or observance by the Borrowers of any obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Sec- 51 46 tion 5.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender 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; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent shall maintain at one of its offices in the City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and the principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and the Borrowers, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by each party hereto, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Company to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. (f) Each Lender may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) each participating bank or other entity shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.20 to the same extent as if it was the selling Lender (but limited to the amount that could have been claimed by the selling Lender had it continued to hold the interest of such participating bank or other entity), except that all claims made pursuant to such Sections shall be made through such selling Lender, and (iv) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such selling Lender in connection with such Lender's rights and obligations under this Agreement, and such selling Lender shall retain the sole right to enforce the obligations of the Borrowers relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or changing or extending the Commitments). 52 47 (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrowers furnished to such Lender; provided that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of any such information. (h) The Borrowers shall not assign or delegate any rights and duties hereunder without the prior written consent of all Lenders. (i) Any Lender may at any time pledge all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided that no such pledge shall release any Lender from its obligations hereunder or substitute any such Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, each Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to such Borrower by the assigning Lender hereunder. SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree, jointly and severally, to pay the fees and disbursements of counsel for the Administrative Agent in connection with entering into this Agreement and in connection with any amendments, modifications or waivers of the provisions hereof, and agree, jointly and severally, to pay the reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement or the Loans made hereunder, including the reasonable fees and disbursements of counsel for the Administrative Agent or any Lender. (b) The Borrowers agree, jointly and severally, to indemnify the Administrative Agent, each Lender, each of their Affiliates and the directors, officers, employees and agents of the foregoing (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees and expenses, incurred by or asserted against any Indemnitee arising out of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the transactions contemplated thereby, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or from such Indemnitee's violation of the Federal securities laws prohibiting insider trading. (c) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on 53 48 behalf of the Administrative Agent or any Lender. All amounts due under this Section shall be payable on written demand therefor. SECTION 9.06. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.07. Waivers; Amendment. (a) No failure or delay of the Administrative Agent or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Borrower or any Subsidiary in any case shall entitle such party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan, without the prior written consent of each Lender affected thereby, (ii) increase or extend the Commitment or decrease the Facility Fee of any Lender or extend any date for payment thereof without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.16 or Section 9.04(h), the provisions of this Section or the definition of the "Required Lenders," or (iv) release the Company from any of its obligations under Article VII hereof without the prior written consent of each Lender; provided further, however, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section and any consent by any Lender pursuant to this Section shall bind any assignee of its rights and interests hereunder. SECTION 9.08. Entire Agreement. This Agreement constitutes the entire contract among the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 9.09. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any 54 49 way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.03. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.12. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or account of the Company and any Borrowing Subsidiary now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Company after such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have. SECTION 9.13. Jurisdiction; Consent to Service of Process. (a) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Subject to the foregoing and to paragraph (b) below, nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement against any other party hereto in the courts of any jurisdiction. (b) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 55 50 (c) Each Borrower hereby irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.14. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement. Each party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certification in this Section. SECTION 9.15. Addition of Borrowing Subsidiaries. Each wholly owned Subsidiary of the Company which shall deliver to the Administrative Agent a Borrowing Subsidiary Agreement executed by such Subsidiary and the Company shall, upon such delivery and without further act, become a party hereto and a Borrower hereunder with the same effect as if it had been an original party to this Agreement. SECTION 9.16. Confidentiality. Each Lender and the Administrative Agent agree to keep confidential the Information, except that any such Lender and the Administrative Agent shall be permitted to disclose Information (a) to such of its officers, directors, employees, agents and representatives as need to know such Information; (b) to the extent required by applicable laws and regulations or by any subpoena or similar legal process, including with respect to the enforcement of this Agreement, provided that such Lender and the Administrative Agent shall use reasonable efforts to notify the Company of such prospective disclosure a reasonable time prior to any such disclosure and shall take such actions reasonably requested by the Company to assist the Company in obtaining a protective order or confidential treatment with respect to such Information (it being understood that failure to give such notice after having made any such reasonable efforts shall not result in any liability hereunder to such Lender or the Administrative Agent, as the case may be); (c) to the extent requested by any bank regulatory authority; (d) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Agreement, (ii) becomes available to such Lender or the Administrative Agent on a non-confidential basis from a source other than the Company and its Affiliates or (iii) was available to such Lender or the Administrative Agent on a non-confidential basis prior to its disclosure to such Lender or the Administrative Agent by the Company or its Affiliates; (e) to any Affiliate of or any actual or prospective assignee or participant in any rights of such Lender or the Administrative Agent under this Agreement, provided that such Affiliate, assignee or participant delivers to the Administrative Agent or such Lender, as applicable, a confidentiality letter containing substantially the undertakings set forth in this Section 9.16 and (f) to the extent the Company shall have consented to such disclosure in writing. SECTION 9.17. Collateral. Each of the Lenders represents to each of the other Lenders that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. 56 51 SECTION 9.18. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges which are treated as interest under applicable law (collectively the "Charges"), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, all Charges payable to such Lender shall be limited to the Maximum Rate. 57 52 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. PERKINELMER, INC., by /s/ Robert F. Friel -------------------------------------------- Name: Robert F. Friel Title: Senior Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Gail Weiss -------------------------------------------- Name: Gail Weiss Title: Vice President ABN AMRO BANK N.V. by /s/ James E. Davis ------------------------------------------- Name: James E. Davis Title: Group Vice President /s/ David A. Carroll ------------------------------------------- Name: David A. Carroll Title: Assistant Vice President BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH by /s/ Giulio Giovine ------------------------------------------- Name: Giulio Giovine Title: Vice President /s/ Leonardo Valentini ------------------------------------------- 58 53 Name: Leonardo Valentini Title: First Vice President BANK ONE, N.A., CHICAGO BRANCH by /s/ Mahua G. Thakurta ------------------------------------------- Name: Mahua G. Thakurta Title: Commercial Banking Officer BARCLAYS BANK, PLC, by /s/ Terance Bullock ------------------------------------------- Name: Terance Bullock Title: Vice President CITIZENS BANK OF MASSACHUSETTS by /s/ Mariel Keane Hough ------------------------------------------- Name: Mariel Keane Hough Title: Vice President FIRSTAR BANK, N.A. by /s/ Derek S. Roudebush ------------------------------------------- Name: Derek S. Roudebush Title: Vice President /s/ Patrick H. McGraw -------------------------------------------- Name: Patrick H. McGraw Title: Assistant Vice President FLEET NATIONAL BANK by /s/ Jorge A. Schwarz ------------------------------------------- Name: Jorge A. Schwarz Title: Director 59 54 MELLON BANK, N.A. by /s/ Janet R. Twomey ------------------------------------------- Name: Janet R. Twomey Title: Vice President NORTHERN TRUST by /s/ John A. Konstantos ------------------------------------------- Name: John A. Konstantos Title: Vice President SOCIETE GENERALE by /s/ Nicolas Eugrin Name: Nicolas Eugrin ------------------------------------------- Title: Vice President STANDARD CHARTERED BANK by /s/ John Biscette Name: John Biscette ------------------------------------------- Title: Vice President /s/ Andrew Y. Ng ------------------------------------------- Name: Andrew Y. Ng Title: Vice President WACHOVIA BANK, N.A. by /s/ Christa P. Holland ------------------------------------------- Name: Christa P. Holland Title: Vice President EX-10.5(A) 5 b38210peex10-5a.txt EMPLOYMENT CONTRACT GREGORY L. SUMME 1 EXHIBIT 10.5(a) SECOND AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment made as of the 3rd day of March, 2000, to an Employment Agreement made as of the 8th day of January, 1998 between EG&G, Inc., now PerkinElmer, Inc., a Massachusetts corporation (hereinafter called the "Company"), and Gregory L. Summe (hereinafter referred to as the "Employee"). WITNESSETH: WHEREAS, the Employee and the Company entered into an Employment Agreement dated as of the 8th day of January, 1998; and WHEREAS, the Employee and the Company amended said Employment Agreement by an instrument dated as of the 5th day of November, 1999 (the "Amendment"); and WHEREAS, the Employee and the Company wish to amend said Employment Agreement; and NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows, effective as of the date hereof, except as otherwise provided: 1. Paragraph 6(a)(iv) of the Employment Agreement, as amended by the Amendment, is hereby further amended by deleting the reference to "Paragraph 5g" and replacing it with "Paragraph 5h", effective as of the effective date of the Amendment. 2. Paragraph 6(b) of the Employment Agreement, as amended by the Amendment, is hereby amended to read in its entirety as follows; "b) For purposes of this Agreement, a "Change in Control of the Company" means an event or occurrence set forth in any one or more of clauses (i) through (iv) below (including an event or occurrence that constitutes a Change in Control under one or such clauses but is specifically exempted from another such clause): (i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1 Second Amendment to Employment Agreement 2 Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership of any capital stock or the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (1) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this paragraph (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with subclauses (1) and (2) or clause(iii) of this Section 6b; or (ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (1) who was a member of the Board on the date of the execution of this Agreement or (2) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (2) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or 2 Second Amendment to Employment Agreement 3 (iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (1) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Stock and Outstanding Company Voting Securities, respectively; and (2) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or (iv) approval by the stockholders of the Company or a complete liquidation or dissolution of the Company." 3. Except as provided above, the Employment Contract, as amended by the Amendment, shall continue in full force and effect. IN WITNESS WHEREOF, the Company has caused its seal to be hereunto affixed and 3 Second Amendment to Employment Agreement 4 these presents to be signed by its proper officers, and the Employee has hereunto set his hand and seal the day and year first above written. (SEAL) PerkinElmer, Inc. By: /s/Richard F. Walsh Employee: /s/Gregory L. Summe 4 Second Amendment to Employment Agreement EX-10.5(B) 6 b38210peex10-5b.txt EMPLOTMENT AGREEMENT ROBERT F. FRIEL 1 EXHIBIT 10.5(b) EMPLOYMENT AGREEMENT This Agreement made as of the 18th day of November, 1999, between PerkinElmer, Inc., a Massachusetts corporation (hereinafter called the "Company"), and Robert F. Friel, 16 Longmeadow Drive, Westwood, MA 02090(hereinafter referred to as the "Employee"). WITNESSETH: WHEREAS, the Employee is being employed in a management position with the Company; and WHEREAS, the Employee hereby agrees to continue to perform such services and duties of a management nature as shall be assigned to him; and WHEREAS, the Employee hereby agrees to the compensation herein provided and agrees to serve the Company to the best of his ability during the period of this Agreement. NOW, THEREFORE, in consideration of the sum of One Dollar, and of the mutual covenants herein contained, the parties agree as follows: 1. a) Except as hereinafter otherwise provided, the Company agrees to employ the employee in a management position with the Company, and the Employee agrees to remain in the employment of the Company in that capacity for a period of one year from the date hereof and from year to year thereafter until such time as this Agreement is terminated. b) The Company will, during each year of the term of this Agreement, place in nomination before the Board of Directors of the Company the name of the Employee for election as an Officer of the Company except when a notice of termination has been given in accordance with Paragraph 5(b). 2. The Employee agrees that, during the specified period of employment, he shall, to the best of his ability, perform his duties, and shall devote his full business time, best efforts, business judgment, skill and knowledge to the advancement of the Company and its interests and to the discharge of his duties and responsibilities hereunder. The Employee shall not engage in any business, profession or occupation which would conflict with the rendition of the agreed-upon services, either directly or indirectly, without the prior approval of the Board of Directors, except for personal investment, charitable and philanthropic activities. 1 Employment Agreement 2 3. During the period of his employment under this Agreement, the Employee shall be compensated for his services as follows: a) Except as otherwise provided in this Agreement, he shall be paid a salary during the period of this Agreement at a base rate to be determined by the Company on an annual basis. Except as provided in Subparagraph 3d, such annual base salary shall under no circumstances be fixed at a rate below the annual base rate then currently in effect; b) He shall be reimbursed for any and all monies expended by him in connection with his employment for reasonable and necessary expenses on behalf of the Company in accordance with the policies of the Company then in effect; c) He shall be eligible to participate under any and all bonus, benefit, pension, compensation, and option plans which are, in accordance with company policy, available to persons in his position (within the limitation as stipulated by such plans). Such eligibility shall not automatically entitle him to participate in any such plan; d) If, because of adverse business conditions or for other reasons, the Company at any time puts into effect salary reductions applicable at a single rate to all management employees of the Company generally, the salary payments required to be made under this Agreement to the Employee during any period in which such general reduction is in effect may be reduced by the same percentage as is applicable to all management employees of the Company generally. Any benefits made available to the Employee which are related to base salary shall also be reduced in accordance with any salary reduction. 4. a) So long as the Employee is employed by the Company and for a period of one year after the termination of expiration of employment, the Employee will not directly or indirectly: (i) as an individual proprietor, partner, stockholder, officer, employee, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1%) of the total outstanding stock of a publicly held company), engage directly or indirectly in any business or entity which competes with the business conducted by the Company or its affiliates in any city or geographic area in which the company or its affiliates conduct material operations at the time of termination of employment under this Agreement, except as approved in advance by the Board after full and adequate disclosure; or (ii) recruit, solicit or induct, or attempt to induce, any 2 Employment Agreement 3 employee or employees of the company to terminate their employment with, to otherwise cease their relationship with, the Company; or (iii) solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers or accounts, of the Company that were contacted, solicited or served by the Employee while employed by the Company. b) If any restriction set forth in this Section 4 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographical area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. c) The restrictions contained in this Section 4 are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable for such purpose. The Employee agrees that any breach of this Section 4 will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. d) The Employee agrees to sign and be bound by the Employee Patent and Proprietary Information Utilization Agreement in the form attached hereto. e) During the period of his employment by the Company or for any period during which the Company shall continue to pay the Employee his salary under this Agreement, whichever shall be longer, the Employee shall not in any way whatsoever aid or assist any party seeking to cause, initiate or effect a Change in Control of the Company as defined in Paragraph 6 without the prior approval of the Board of Directors. 5. Except for the Employee covenants set forth in Paragraph 4 which covenants shall remain in effect for the periods stated therein, and subject to Paragraph 6, this Agreement shall terminate upon the happening of any of the following events and (except as provided herein) all of the Company's obligations under this Agreement, including, but not limited to, making payments to the Employee shall cease and terminate: a) On the effective date set forth in any resignation submitted by the Employee and accepted by the Company, or if no effective date is agreed upon, the date of receipt of such resignation letter; b) One year after written notice of termination is given by the Company to the Employee; 3 Employment Agreement 4 c) At the death of the Employee; d) At the termination of the Employee for cause. As used in the Agreement, the term "cause" shall mean: i) Misappropriating any funds or property of the Company; ii) Unreasonable refusal to perform the duties assigned to him under this Agreement; iii) Conviction of a felony; iv) Continuous conduct bringing notoriety to the Company and having an adverse effect on the name or public image of the Company; v) Violation of the Employee's covenants as set forth in Paragraph 4 above; or vi) Continued failure by the Employee to observe any of the provisions of this Agreement after being informed of such breach. e) Twelve months after written notice of termination (a "Disability Termination Notice") is given by the Company to the Employee based on a determination by the Board of Directors that the Employee is disabled (which, for purposes of this Agreement, shall mean that the Employee is unable to perform his regular duties, with such determination to be made by the Board of Directors, in reliance upon the opinion of the Employee's physician or upon the opinion of one or more physicians selected by the Company). A Disability Termination Notice shall be deemed properly delivered if given by the Company to the Employee on the 184th day of continuous disability of the Employee. Notwithstanding the foregoing, if, during the twelve-month period following proper delivery of a Disability Termination Notice as aforesaid, the Employee is no longer disabled and is able to return to work, such Disability Termination Notice shall be deemed automatically rescinded upon the Employee's return to work, and the employment of the Employee shall continue in accordance with the terms of this Agreement. During the first 184 days of continuous disability of the Employee, the Company will make periodic payments to the Employee in an amount equal to the difference between his base salary and the benefits received by the Employee under the Company's Short-Term Disability Income Plan. During the twelve-month period following proper delivery of a Disability Termination Notice as aforesaid, the Company will make periodic 4 Employment Agreement 5 payments to the Employee in an amount equal to the difference between his base salary and the benefits provided by the Company's Long-Term Disability Plan. If any payments to the Employee under the Company's Long-Term Disability Plan are not subject to federal income taxes, the payments to be made directly by the Company pursuant to the preceding sentence shall be reduced such that the total amount received by the Employee (from the Company and from the Long-Term Disability Plan), after payment of any income taxes, is equal to the amount that the Employee would have received had he been paid his base salary, after payment of any income taxes on such base salary. f) In the event of the termination of the Employee by the Company pursuant to paragraph 5(b) above, the Employee shall, for a period of one year from the date this agreement shall terminate, (i) continue to receive his Full Salary (as defined below), which shall be payable in accordance with the payment schedule in effect immediately prior to his employment termination, and (ii) continue to be entitled to participate in all employee benefit plans and arrangements of the Company (such as life, health and disability insurance and automobile arrangements) to the same extent (including coverage of dependents, if any) and upon the same terms as were in effect immediately prior to his termination. For purposes of this Agreement, "Full Salary" shall mean the Employee's annual base salary, plus the amount of any bonus or incentive payments received by the Employee with respect to the last full fiscal year of the Company for which all bonus or incentive payments to be made have been made. g) In the event of a termination of employment pursuant to paragraph 5(a), (c) or (d), the Company shall pay the Employee his full salary through the date of termination of employment. 6. a) In the event of a Change in Control of the Company (as defined below), the provisions of this Agreement shall be amended as follows: i) Paragraph 1a shall be amended to read in its entirety as follows: "Except as hereinafter otherwise provided, the Company agrees to continue to employ the Employee in a management position with the Company, and the Employee agrees to remain in the employment in the Company in that capacity, for a period of three (3) years from the date of the Change in Control. Except as provided in Paragraph 3d, the Employee's salary as set forth in Paragraph 3a and his other employee benefits pursuant to the plans described in Paragraph 3c shall not be decreased during such period." 5 Employment Agreement 6 ii) Paragraph 5a shall be amended by the addition of the following provision at the end of such paragraph: "provided that the Employee agrees not to resign, except for Good Reason (as defined below), during the one-year period following the date of the Change in Control." iii) Paragraph 5b shall be deleted in its entirety. iv) Paragraph 5f shall be amended to read in its entirety as follows: "Notwithstanding the foregoing provisions, if, within 36 months following the occurrence of a Change in Control, the Employee's employment by the Company is terminated (A) by the Company other than for Cause, which shall not include any failure to perform his duties hereunder after giving notice or termination for Good Reason, disability or death or (B) by the Employee for Good Reason, (1) the Company shall pay to the Employee, on the date of his employment termination, a lump sum cash payment in an amount equal to the sum of (x) his unpaid base salary through the date of termination, (y) prorata portion of prior year's bonus and (z) his Full Salary (as defined below) multiplied by three and (2) the Employee shall for 36 months following the occurrence of the Change in Control be eligible to participate in all employee benefit plans and arrangements of the Company (such as life, health and disability insurance and automobile arrangements but excluding incentive arrangements and grants of stock options) to the same extent (including coverage of dependents, if any) and upon the same terms as were in effect immediately prior to his termination. For purposes of this Agreement, "Full Salary" shall mean the Employee's annual base salary, plus the amount of any bonus or incentive payments received by the Employee with respect to the last full fiscal year of the Company for which all bonus or incentive payments to be made have been made. Payments under this Paragraph 5f shall be made without regard to whether the deductibility of such payments (or any other "parachute payments," as that term is defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), to or for the benefit of the Employee) would be limited or precluded by Section 280G and without regard to whether such payments (or any other "parachute payments" as so defined in said Section 280G) would subject the Employee to the federal excise tax levied on certain "excess parachute payments" under Section 4999 of the Code (the "Excise Tax"). In addition, the Employee shall be entitled to receive a payment (the "Gross-Up Payment") which shall be an amount equal to the sum of (a) the Excise Tax imposed on any parachute payment, whether or not 6 Employment Agreement 7 payable under this Agreement, and (b) the amount necessary to pay all additional taxes imposed on (or economically borne by) the Employee (including the Excise Tax, state and federal income taxes and all applicable withholding taxes) attributable to the receipt of the Gross-Up Payment, computed assuming the application of the maximum tax rates provided by law. The determination of the Gross-Up Payment shall be made at the Company's expense by Arthur Andersen & Co. or by such other certified public accounting firm as the Board of Directors of the Company may designate prior to a Change in Control of the Company. In the event of any underpayment or overpayment under this Paragraph 5f as determined by Arthur Andersen & Co. (or such other firm as may have been designated in accordance with the preceding sentence), the amount of such underpayment or overpayment shall forthwith be paid to the Employee or refunded to the Company, as the case may be, with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code." v) Paragraph 8 shall be amended to read in its entirety as follows: "The Employee may pursue any lawful remedy he deems necessary or appropriate for enforcing his rights under this Agreement following a Change in Control of the Company, and all costs incurred by the Employee in connection therewith (including without limitation attorneys' fees) shall be promptly reimbursed to him by the Company, regardless of the outcome of such endeavor." b) For purposes of this Agreement, a "Change in Control of the Company" means an event or occurrence set forth in any one or more of clauses (i) through (iv) below (including an event or occurrence that constitutes a Change in Control under one or such clauses but is specifically exempted from another such clause): (i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership of any capital stock or the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (1) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this paragraph (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company 7 Employment Agreement 8 (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with subclauses (1) and (2) or clause(iii) of this Section 6b; or (ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (1) who was a member of the Board on the date of the execution of this Agreement or (2) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (2) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or (iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (1) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such 8 Employment Agreement 9 Business Combination, of the Outstanding Company Stock and Outstanding Company Voting Securities, respectively; and (2) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or (iv) approval by the stockholders of the Company or a complete liquidation or dissolution of the Company. c) For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following events: (i) a reduction in the Employee's base salary as in effect on the date hereof or as the same may be increased from time to time, except as provided in Paragraph 3d; (ii) a failure by the Company to pay annual cash bonuses to the Employees in an amount at least equal to the most recent annual cash bonuses paid to the Employee; (iii) a failure by the Company to maintain in effect any material compensation or benefit plan in which the Employee participated immediately prior to the Change in Control, unless an equitable arrangement has been made with respect to such plan, or a failure to continue the Employee's participation therein on a basis not materially less favorable than existed immediately prior to the Change in Control; (iv) any significant and substantial diminution in the Employee's position, duties, authorities, responsibilities or title as in effect immediately prior to the Change in Control; (v) any requirement by the Company that the location at which the Employee performs his principal duties be changed to a new location outside a radius of 25 miles from the Employee's principal place of employment immediately prior to the Change in Control;(vi) any requirement by the Company that the Employee travel on an overnight basis to an extent not substantially consistent with the Employee's business travel obligations immediately prior to the Change in Control or (vii) the failure of the Company to obtain the agreement, in a form reasonably satisfactory to the Employee, from any successor to the Company to assume and agree to perform this Agreement. Notwithstanding the foregoing, the resignation shall not be considered to be for Good Reason if any such circumstances are fully corrected prior to the date of resignation. The Employee's right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. 7. Neither the Employee nor, in the event of his death, his legal representative, beneficiary or estate, shall have the power to transfer, assign, mortgage or otherwise encumber in advance 9 Employment Agreement 10 any of the payments provided for in this Agreement, nor shall any payments nor assets or funds of the Company be subject to seizure for the payment of any debts, judgments, liabilities, bankruptcy or other actions. 8. Any controversy relating to this Agreement and not resolved by the Board of Directors and the Employee shall be settled by arbitration in the City of Boston, Commonwealth of Massachusetts, pursuant to the rules then obtaining of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction, and the Board of Directors and Employee agree to be bound by the arbitration decision on any such controversy. Unless otherwise agreed by the parties hereto, arbitration will be by three arbitrators selected from the panel of the American Arbitration Association. The full cost of any such arbitration shall be borne by the Company. 9. Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times by either party. 10. All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered personally to the Employee or to the General Counsel of the Company or when mailed by registered or certified mail to the other party (if to the Company, at 45 William Street, Wellesley, Massachusetts 02481, attention General Counsel; if to the Employee, at the last known address of the Employee as set forth in the records of the Company). 11. This Agreement has been executed and delivered and shall be construed in accordance with the laws of the Commonwealth of Massachusetts. This Agreement is and shall be binding on the respective legal representatives or successors of the parties, but shall not be assignable except to a successor to the Company by virtue of a merger, consolidation or acquisition of all or substantially all of the assets of the Company. This Agreement constitutes and embodies the entire understanding and agreement of the parties and, except as otherwise provided herein, there are no other agreements or understandings, written or oral, in effect between the parties hereto relating to the employment of the Employee by the Company. All previous employment contracts between the Employee and the Company or any of the Company's present or former subsidiaries or affiliates is hereby canceled and of no effect. 12. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to assume expressly in writing and to agree to perform its obligations under this 10 Employment Agreement 11 Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement prior to the effectiveness of succession shall be a breach of this Agreement. As used in this Agreement, "the Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 11 Employment Agreement 12 IN WITNESS WHEREOF, the Company has caused its seal to be hereunto affixed and these presents to be signed by its proper officers, and the Employee has hereunto set his hand and seal the day and year first above written. (SEAL) PERKINELMER, INC. By: /s/ Gregory L. Summe -------------------- Gregory L. Summe Chairman and Chief Executive Officer Employee: /s/ Robert F. Friel ------------------- Robert F. Friel 12 Employment Agreement EX-21 7 b38210peex21.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 Subsidiaries of the Registrant As of March 1, 2001, the following is a list of the parent (Registrant) and its active subsidiaries, together with their subsidiaries. Except as noted, all voting securities of the listed subsidiaries are 100% beneficially owned by the Registrant or a subsidiary thereof. The subsidiaries are arranged alphabetically by state and then country of incorporation or organization.
- --------------------------------------------------------------------------------------------------------------------------- State or Country of Incorporation Name of Parent Name of Company or Organization =========================================================================================================================== 1. PerkinElmer, Inc. Massachusetts N/A 2. PerkinElmer Detection Systems, Inc. California PerkinElmer, Inc. 3. Applied Surface Technology, Inc. California PerkinElmer, Inc. 4. PerkinElmer Instruments, Inc. Delaware PerkinElmer Holdings, Inc. 5. PerkinElmer Optoelectronics, Inc. Delaware PerkinElmer Optoelectronics SC, Inc. 6. Lumen Technologies, Inc. Delaware PerkinElmer, Inc. 7. PerkinElmer Optoelectronics NC, Inc. Delaware Lumen Technologies, Inc. 8. PerkinElmer Optoelectronics SC, Inc. Delaware Lumen Technologies, Inc. 9. PerkinElmer Instruments LLC Delaware PerkinElmer, Inc. 10. Genomic Solutions Inc. Delaware PerkinElmer, Inc. (5%) 11. PerkinElmer Detection Systems, Inc. Delaware PerkinElmer, Inc. 12. Advanced Bioconcepts, Inc. Delaware PerkinElmer Life Sciences, Inc. 13. NEN Life Sciences, Inc. Delaware PerkinElmer, Inc. 14. PerkinElmer Life Sciences, Inc. Delaware NEN Life Sciences, Inc. 15. Receptor Biology, Inc. Delaware PerkinElmer Life Sciences, Inc. 16. PKL LLC Delaware PerkinElmer Holdings, Inc. (49%) 17. EG&G Ventures, Inc. Massachusetts PerkinElmer, Inc. 18. PerkinElmer Holdings, Inc. Massachusetts PerkinElmer, Inc. (94%) (1) 19. PerkinElmer Automotive Research, Inc. Texas PerkinElmer Holdings, Inc. 20. Perkin-Elmer Argentina S.R.L Argentina PerkinElmer Holdings, Inc. 21. PerkinElmer VertriebsgmbH Austria Wellesley BV 22. Perkin Elmer Pty Limited Australia PerkinElmer Holdings, Inc. 23. PerkinElmer Belgium NV Belgium PerkinElmer Life Sciences, Inc. 24. NEN Life Science Products (Bermuda) Ltd. Bermuda PerkinElmer Life Sciences, Inc. 25. PerkinElmer do Brasil Ltda. Brazil PerkinElmer International CV (94.6%) (2) 26. PerkinElmer Canada Investments Inc. Canada PerkinElmer International CV 27. PerkinElmer Canada Inc. Canada PerkinElmer, Inc. 28. Bragg Photonics, Inc. Canada PerkinElmer Canada Inc. (31%) 29. PerkinElmer Sciex Instruments Canada PerkinElmer Canada, Inc. (50%) 30. Advanced Bioconcept Company Canada Advanced Bioconcepts, Inc. 31. PerkinElmer Instruments International Ltd. Cayman Islands PerkinElmer International CV 32. PerkinElmer Optoelectronics Philippines, Inc. Cayman Islands PerkinElmer International CV 33. Perkin Elmer Chile Limitada Chile PerkinElmer Holdings, Inc. (3) 34. PerkinElmer Shenzhen Industrial Ltd. China PerkinElmer Optoelectronics GmbH (Germany) 35. Shanghai EG&G Reticon Optoelectronics Co. Ltd. China PerkinElmer, Inc. (50%) 36. Perkin Elmer de Centro America S.A. Costa Rica PerkinElmer Holdings, Inc. 37. Perkin-Elmer S.R.O. Czech Republic Wellesley BV 38. PerkinElmer A/S Denmark Wallac Oy 39. PerkinElmer Egypt Ltd. Egypt PerkinElmer International CV 40. PerkinElmer Oy Finland Wellesley BV 41. Wallac Oy Finland PerkinElmer Oy (Finland) 42. Wallac Finland Oy Finland Wallac Oy 43. PerkinElmer S.A.S. France PerkinElmer Benelux BV (Netherlands) 44. NEN Life Science Products - France SA France PerkinElmer Life Sciences, Inc. 45. PerkinElmer Instruments GmbH Germany PerkinElmer Holdings, Inc.
- ------------------------------ (1) PerkinElmer Instruments, Inc., Delaware corporation, owns the remaining 6%. (2) PerkinElmer Holdings, Inc. (5%), PerkinElmer Life Sciences Inc., Delaware corporation, owns a de minimus share. (3) PerkinElmer Instruments LLC owns a de minimus share. 2 46. PerkinElmer Holding GmbH Germany PerkinElmer, Inc. 47. Wallac Distribution GmbH Germany PerkinElmer Instruments GmbH 48. PerkinElmer Instruments International Ltd. & Co. KG Germany PerkinElmer International CV (100%) (4) 49. PerkinElmer GmbH & Co. KG Germany PerkinElmer Instruments GmbH (58%) (5) 50. PerkinElmer Optoelectronics GmbH Germany PerkinElmer GmbH & Co 51. NEN Life Science Products GmbH Germany PerkinElmer Life Sciences, Inc. 52. PerkinElmer Limited Hong Kong PerkinElmer International CV (99%) (6) 53. Perkin Elmer Hungaria Kft Hungary Wellesley BV 54. PT. PerkinElmer Batam Indonesia PerkinElmer Holdings, Inc. 55. PerkinElmer Srl Italy Wellesley BV 56. Perkin Elmer Italia SpA Italy PerkinElmer Srl, Italy 57. NEN Life Science Products Italy Srl Italy PerkinElmer Life Sciences, Inc. 58. Neopt Corporation Japan PerkinElmer, Inc. (49%) 59. Seiko EG&G Co. Ltd. Japan PerkinElmer, Inc. (49%) 60. Wallac Berthold Japan Co., Ltd. Japan Wallac Oy (80%) 61. Perkin-Elmer Japan Co., Ltd. Japan PerkinElmer Holdings, Inc. 62. Perkin Elmer Yuhan Hoesa Korea PerkinElmer International CV 63. Perkin Elmer Sdn. Bhd. Malaysia PerkinElmer International CV 64. Perkin Elmer de Mexico, S.A. Mexico PerkinElmer Holdings, Inc. (7) 65. PerkinElmer Benelux B.V. Netherlands Wellesley BV 66. Wellesley B.V. Netherlands PerkinElmer International CV 67. PerkinElmer International C.V. Netherlands PerkinElmer Holdings, Inc. (99%) (8) 68. NEN Life Science Products Netherlands BV Netherlands PerkinElmer Life Sciences, Inc. 69. PerkinElmer Norge AS Norway Wallac Oy 70. EG&G Omni, Inc. Philippines PerkinElmer Holdings, Inc. 71. PerkinElmer Instruments (Philippines) Corporation Philippines PerkinElmer Holdings, Inc. 72. Perkin Elmer Polska Sp zo.o. Poland Wellesley BV 73. PerkinElmer Portugal Lda. Portugal Wellesley BV (100%) (9) 74. PerkinElmer Rus Russia PerkinElmer Oy 75. PerkinElmer Singapore Pte Ltd. Singapore PerkinElmer International CV 76. PerkinElmer South Africa (PTY) Ltd. South Africa PerkinElmer International CV 77. PerkinElmer Espana, S.L. Spain Wellesley BV 78. PerkinElmer Sverige AB Sweden Wallac Oy 79. PerkinElmer (Switzerland) Ltd. Switzerland Wellesley BV 80. Wallac-ADL AG Switzerland Wallac Distribution GmbH (90%) 81. NEN Life Science Products AG Switzerland PerkinElmer Life Sciences, Inc. 82. PerkinElmer Taiwan Corporation Taiwan PerkinElmer International CV 83. Perkin-Elmer Limited Thailand PerkinElmer International CV 84. Life Science Resources Limited United Kingdom PerkinElmer Holdings, Inc. 85. PerkinElmer (UK) Holdings Ltd. United Kingdom Wellesley BV 86. PerkinElmer Ltd. United Kingdom PerkinElmer (UK) Holdings Ltd 87. PerkinElmer Services Ltd. United Kingdom PerkinElmer (UK) Holdings Ltd 88. PerkinElmer Q-Arc Ltd. United Kingdom PerkinElmer (UK) Holdings Ltd. 89. PerkinElmer (UK) Ltd. United Kingdom PerkinElmer (UK) Holdings Ltd. 90. Vivid Technologies UK Ltd. United Kingdom Vivid Technologies, Inc. 91. NEN Life Science Products - UK Ltd. United Kingdom PerkinElmer Life Sciences, Inc. 92. Receptor Biology UK Ltd. United Kingdom Receptor Biology, Inc. 93. PerkinElmer Exporters Ltd. U.S. Virgin Islands PerkinElmer Holdings, Inc. 94. ILC Light Source Foreign Sales Corporation U.S. Virgin Islands PerkinElmer Optoelectronics NC, Inc. 95. Optical Radiation Foreign Sales Corporation U.S. Virgin Islands PerkinElmer Optoelectronics SC, Inc.
- ------------------------------ (4) PerkinElmer Instruments International, Cayman Islands corporation owns a de minimus share. (5) PerkinElmer Holding GmbH owns 2.3%, PerkinElmer Automotive Research, Inc. owns 39.7%. (6) Wellesley BV owns a de minimus share. (7) PerkinElmer, Inc. owns a de minimus share. (8) PerkinElmer, Inc. owns the remaining 1%. (9) PerkinElmer International CV owns a de minimus share. -----END PRIVACY-ENHANCED MESSAGE-----