-----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, BEHN0djjUKNvRjZSWsTxfVvdRR+RA7YH5/96EXsV6TN8gESkHSpXErf0sDydx6k/ Y8rPFwIXXQxv7K6ZhAf9Ag== 0000891618-98-003031.txt : 19980625 0000891618-98-003031.hdr.sgml : 19980625 ACCESSION NUMBER: 0000891618-98-003031 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980624 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLANTRONICS INC /CA/ CENTRAL INDEX KEY: 0000914025 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 770207692 STATE OF INCORPORATION: DE FISCAL YEAR END: 0327 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12696 FILM NUMBER: 98653341 BUSINESS ADDRESS: STREET 1: 337 ENCINAL ST STREET 2: PO BOX 1802 CITY: SANTA CRUZ STATE: CA ZIP: 95061-1802 BUSINESS PHONE: 4084266060 MAIL ADDRESS: STREET 1: 337 ENCINAL STREET P O BOX 1802 CITY: SAANTA CRUZ STATE: CA ZIP: 95061-1802 FORMER COMPANY: FORMER CONFORMED NAME: PI PARENT CORP DATE OF NAME CHANGE: 19931025 10-K405 1 FORM 10-K405 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 MARCH 28, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ---------------------- TO ----------------------. COMMISSION FILE NUMBER 1-12696 ------------------------------- PLANTRONICS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 77-0207692 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 337 ENCINAL STREET, P.O. BOX 1802 95061-1802 SANTA CRUZ, CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (408) 426-5858 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price of $47.625 for shares of the registrant's Common Stock on June 5, 1998 as reported by the New York Stock Exchange, was approximately $263,041,000. In calculating such aggregate market value, shares of Common Stock owned of record or beneficially by officers, directors, and persons reporting ownership of more than five percent of the registrant's voting securities were excluded because such persons may be deemed to be affiliates. The registrant disclaims the existence of control or any admission thereof for any other purpose. Number of shares of Common Stock outstanding as of June 5, 1998: 16,480,928. DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference in Parts I, II, III and IV of this Annual Report on Form 10-K: (1) portions of registrant's annual report to security holders for the fiscal year ended March 28, 1998 (Parts I, II and IV) and (2) portions of registrant's proxy statement for its annual meeting of stockholders to be held on July 30, 1998 (Part III). ================================================================================ 2 PLANTRONICS, INC. 1998 ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 12 Item 3. Legal Proceedings........................................... 13 Item 4. Submission of Matters to a Vote of Security-Holders......... 13 PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters..................................................... 13 Item 6. Selected Financial Data..................................... 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 13 Item 8. Financial Statements and Supplementary Data................. 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 14 PART III Item Directors and Executive Officers of the Registrant.......... 10. 14 Item Executive Compensation...................................... 11. 14 Item Security Ownership of Certain Beneficial Owners and 12. Management.................................................. 14 Item Certain Relationships and Related Transactions.............. 13. 14 PART IV Item Exhibits, Financial Statement Schedules, and Reports on Form 14. 8-K......................................................... 15
------------------------ Clarity, Encore, FreeHand, Mirage, SoundGuard, StarSet, Supra, and TriStar are registered trademarks of Plantronics, Inc. AirSet, CAT132, CHS132, CLA132, CT-460, CT-901, E-10, Encore NC, Headset Switcher, Mirage NC, Sound-Guard Plus, Starbase, StarSet NC, Supra NC, TriStar NC and Vista are trademarks of Plantronics, Inc. 2 3 PART I ITEM 1. BUSINESS GENERAL Plantronics, Inc. (the "Company" or "Registrant") is a leading designer, manufacturer and marketer of lightweight communications headsets and headset accessories and services. In addition, the Company manufactures and markets specialty telephone products, such as amplified telephone handsets for use in noisy environments and specialty telephones for hearing-impaired users. The Company's headsets, which can be worn over the head, in the ear or on either ear, are recognized in the industry for their safety, reliability, comfort and sound quality. The Company's headset products are used worldwide by call center users, such as telemarketing personnel, reservation agents, telephone operators and air traffic controllers, whose occupations involve the constant use of a telephone or communications console. In North America and Europe, the number of call center users has grown significantly over the last 10 years. The use of headsets by call center users has become an industry standard. The Company believes that the number of call center users in these geographic markets will continue to grow. The Company has well-developed distribution channels in North America and Europe, where growth of telemarketing activities and deregulation of the telephone companies have led to more widespread use of telephone headsets. The Company's headsets are also becoming more widely used in the Middle East, Africa, Australia, the Far East and Latin America. The Company believes that the demand for headsets in the rest of the world offers significant growth opportunities for the Company. To date, the Company's most significant penetration of foreign market segments has been the call center user market segment in Europe. The potential for growth in the foreign market segments is the result of such developments as the rapid expansion of the telecommunications infrastructure and increasing worldwide use of call centers for customer service applications. The Company also sells headsets in the business and home office user market segments, which the Company has identified as an area of long-term growth potential. Users in these segments consist of business executives, agents, brokers, lawyers, accountants, home office business people and other professionals whose occupations may require intensive (but not constant) use of a telephone. The business and home office user market segments can be divided into users who attach their headsets to telephones, cellular telephones or to computers. The use of headsets for mobile communications and as computer peripherals is a significant growth area for headset sales. Potential applications in this market segment include mobile communications, personal computer conferencing, computer telephony integration ("CTI"), voice recognition and multimedia applications. The Company sells its headsets to a broad and diverse group of end-user customers worldwide, including regional telephone operating companies, operators of private telephone networks, and governmental agencies. The Company distributes its products through large electronics wholesalers, specialized headset distributors, directly to original equipment manufacturers ("OEMs"), and through retail channels, such as office supply and consumer electronics stores, mail order catalogs, warehouse clubs and office supply distributors. CERTAIN FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, the Company may from time to time make oral forward-looking statements. Such forward-looking statements are based on current expectations and entail various risks and uncertainties. The Company's actual results could differ materially from those anticipated in such forward looking statements as a result of a number of factors. This Annual Report on Form 10-K should be read in conjunction with the condensed consolidated financial statements and related notes set forth in the Company's Annual Report to security holders for the fiscal year ended March 28, 1998, and the section entitled Management's Discussion and 3 4 Analysis of Financial Condition and Results of Operation, particularly including but not limited to the subsection titled "Factors Affecting Future Operating Results," at pages 17 through 21 of such Annual Report to security holders. PRODUCTS The Company's product line consists of communications headsets, headset accessories and services, and specialty telephone products. None of the Company's products or business is considered seasonal. HEADSETS Communications headsets allow users who must perform other tasks while using a telephone to work more effectively, efficiently and comfortably than with a telephone handset, while providing greater communications clarity and security than a speaker phone. Headsets consist of two distinct units. The "top," which is the portion that the user wears and which includes the speaker and microphone, and the "bottom," or amplifier adapter which interfaces with the telephone or other equipment. Both units are currently required in most applications. In some circumstances, however, the interface is built into the telephone, computer or other equipment with which the headset is being used, allowing use of the "top" alone. There are five basic headset "top" styles which Plantronics manufactures: - Over-the-head headsets with ear cushions. The Supra headset is an over-the-head model available with sound reception in one or both ears. Dual ear versions help block out background noise. The Company introduced a new product in this category in fiscal year 1996, the Encore headset, which features user-controllable tone adjustment. - Behind-the-ear headsets with a receiver that rests on either ear. The Mirage headset uses a miniaturized behind-the-ear capsule. Attached to it is a small disc-shaped receiver that rotates to fit against either ear. The receiver rests gently on the ear, not in it. - Behind-the-ear headsets with an ear tip. The StarSet headset is the distinctive Plantronics headset that uses a small capsule that fits behind and in the outer portion of the ear. Sound is delivered to the ear by an acoustic ear tip. The headset is extremely lightweight, requiring no headband, and the ear tip's acoustic coupling provides exceptional sound quality. The TriStar headset, the industry's lightest commercial headset, was introduced during fiscal year 1996. This product features maximum user adjustments for excellent stability, comfort and sound quality. - Headsets that rest in the outer portion of the ear. The FreeHand headset, introduced during fiscal year 1995, offers a functional and lightweight design that allows it to be easily and quickly placed on or removed from its position in the outer portion of the ear with one hand. Its adjustable microphone boom may be rotated for optimum transmit performance. The Company's CHS132 and CAT132 models are versions of the FreeHand headset designed for use with mobile telephones and personal computers, respectively. - Convertible headsets. This product can be converted from an over-the-head to an on-the-ear headset by simply removing the headband and replacing it with a behind-the-ear ear hook. All basic telephone-based headset tops are designed for use with the multitude of different phone systems currently available. Basic models offer features such as user volume control, a mute switch and quick-disconnect, which allows users to leave the phone without removing their headsets or disconnecting the line. Supra NC, StarSet NC, Mirage NC, TriStar NC and Encore NC headset tops are special versions of the Supra, StarSet, Mirage, TriStar and Encore headsets featuring boom-mounted noise-canceling microphones. The Company's Vista headset bottoms feature a universal modular amplifier and interchangeable headset tops. The universal amplifier eliminates compatibility problems with most telephones and incorporates the SoundGuard Plus system, which provides volume control for improved audio comfort and clarity. The 4 5 interchangeability feature of the Vista product allows a user to connect any one of the available Plantronics headset tops to any telephone or console equipped with the Vista amplifier or the Company's Starbase headset telephone. In fiscal year 1997, the Company introduced a new bottom or adapter called the Headset Switcher adapter for use with a telephone and a computer equipped with a soundcard. The Headset Switcher allows the user to switch back and forth from the telephone and computer audio applications by simply flipping a switch. In fiscal year 1997, the Company introduced the E-10 adapter, an in-line headset amplifier, designed specifically for use with the newest generation of carbon based automatic call distribution ("ACD") systems. The E-10 adapter incorporates an "Agent Not Available" feature that signals the ACD system when a call center agent is not available. The small sized unit can be clipped to the user's clothing, permitting enhanced freedom of movement. In addition to its traditional corded products, the Company introduced during fiscal year 1996 the CT-460, a cordless headset telephone aimed at the home office market segment. In fiscal 1998, the Company introduced the CT-901, a 900 megahertz cordless headset telephone designed for use in the home office and small office market segments. Both of these products are comprised of a headset and remote transceiver/dial pack, and a base unit which plugs into a wall jack. These products are sold principally through retail channels. The Company, through its Computer and Mobile Systems Division, also provides a broad range of headset accessory products for use with mobile telephones. The Company's CHS line of headset tops, first introduced in fiscal 1998, are designed for use with cellular/PCS and cordless phones. The tops terminate in a standard 2.5mm plug which is compatible with cellular/PCS and cordless phones featuring a built-in headset port. The incorporation of headset ports in mobile telephones is a trend the company expects will continue in the future. For cellular/PCS phones without a headset port, the company offers two types of adapters for a wide variety of phones. The first is a Cigarette Lighter Adapter (CLA) which incorporates a headset port. Users can talk and drive hands-free while charging their wireless phone. A second type of adapter, the WTA series, introduced in fiscal 1998, is a portable adapter that plugs into the base of a wireless phone. Again, the adapter incorporates a headset port. The Company also introduced the AirSet cordless adapter in fiscal year 1998 for use by professionals in the office market segment. The Airset product is a cordless telephone adapter which uses infrared technology for use in an enclosed office environment. It is compatible with all of the Company's standard commercial headset tops. In addition, the Company's specialty products operation provides headsets and other equipment for special applications that are not served by the Company's standard product lines. HEADSET ACCESSORIES AND SERVICES The Company offers a complete line of headset accessories, including voice tubes, ear cushions, ear tips and background noise suppressors. The Company's Service Center provides customers with a sophisticated service and refurbishment program including headset repair and remanufacturing. SPECIALTY TELEPHONE PRODUCTS The Company's Walker Equipment Division (the "Walker Division") is a designer and distributor of specialty telephone products. Specialty telephone products sold under the Walker Division name include amplified handsets, amplified telephones and telephone amplifier accessories for the hearing-impaired user. The Walker Division Clarity telephone is a full-featured single-line telephone designed for hearing-impaired users. It features volume control circuitry, oversized buttons, a ringer volume control and a light that flashes when the phone rings. In addition, the Walker Division sells special amplified and noise-canceling handsets for high-noise environments, as well as for entry and elevator phones and for use in telephone booths and information kiosks. The Walker Division also offers a device that will amplify the receive volume of 5 6 conventional handsets and has also introduced a portable version of that product. The Walker Division products are currently distributed through the same commercial and retail distribution channels as the Company's products. In Europe, where modular telephone handsets are not currently the norm, the Company developed the Starbase headset telephone, which is a full-featured single-line telephone to which nearly all of the Company's headsets may be attached. This product enables many more businesses to use headsets for non-operator functions. PRODUCT DEVELOPMENT Since the introduction of the original lightweight headset in 1962, the user has been the primary focus of the Company's design efforts. The Company maintains an extensive database of head and ear shapes to assist in the development of its products. The Company's concern for "human engineering" and its efforts to "design-in" comfort and safety have resulted in such product innovations as a behind-the-ear capsule (containing both microphone and receiver) designed to fit all users comfortably and the SoundGuard Plus system, which provides volume control and improved audio comfort and quality. The Company has a number of product development programs currently underway, including a new generation of headset systems, computer and mobile products, a wireless product family and several core technology programs. The Company supplements its in-house engineering capabilities through selected outside contracting arrangements. Research, development and engineering expenditures were $13.7 million, $14.5 million and $17.5 million for the fiscal years ended March 30, 1996, March 29, 1997, and March 28, 1998, respectively. The Company's management believes that substantial investment in research and development is important for the Company to maintain its position in the industry and, therefore, intends to increase its spending for research, development and engineering in subsequent fiscal years. Historically, substantially all of the Company's product development efforts have primarily been directed toward incremental enhancements of existing products. In the future, the Company intends both to enhance its existing products and to develop new products that capitalize on its core technology and expand the Company's product offerings to new user market segments. The success of new product introductions is dependent on a number of factors, including proper new product selection, timely completion and introduction of new product designs, cost-effective manufacturing of such products, quality of new products and market acceptance. To be successful in the future, the Company must be able to develop new products, qualify these products with its customers, successfully introduce these products to the market on a timely basis, and commence and sustain volume production to meet customer demands. Although the Company has attempted to determine the specific needs of the telephone, mobile telephone, computer, individual and home office user segments of the market, there can be no assurance that the market niches identified will in fact materialize or that the Company's existing and future products designed for these market segments will gain substantial market acceptance. Further, assuming the market segments develop and the Company's products meet customer needs, there is no assurance that such new products can be manufactured cost effectively to meet the potential demand. The technology of telephone headsets, both "tops" and "bottoms," has traditionally evolved slowly. Products are currently exhibiting life cycles of three to five years before introduction of the next generation of products, which usually include stylistic changes and quality improvements, but have historically been based on similar technology. The Company believes that future changes in technology may come at a faster pace, particularly in the telephone, cellular telephone and computer segments of the business and home office user portions of the market. The Company's future success will be dependent in part on its ability to develop products that utilize new technologies and to introduce them to the marketplace successfully. In addition, in order to avoid product obsolescence, the Company will have to monitor technological changes in telephony, as well as users' demands for new technologies. Failure by the Company to keep pace with future technological changes could materially adversely affect the Company's revenues and operating results. 6 7 SALES AND DISTRIBUTION The Company distributes its products worldwide through large electronics wholesalers, specialized headset distributors, OEMs, and retail channels. Electronics wholesalers represent the single largest channel of distribution for the Company's products. Such wholesalers are often national organizations offering hundreds of products, including headsets, to both resellers and end users. The Company's products are currently sold in North America through electronics distributors, including Graybar Electric Company, Anixter Brothers and Sprint North Supply, among others. Additional wholesale distributors handle the Company's products in overseas market segments. Specialized headset distributors represent a second major distribution channel for the Company's products. These distributors, which sell on a national basis, are generally smaller companies with total annual revenues of under $10 million, the majority of which are generated by their sales of headsets. The Company also distributes its products on a private labelled or co-branded basis through original equipment manufacturers ("OEMs"). OEMs supply automatic call distributor systems and other telecommunications and computer equipment that utilize headsets. Depending on their marketing strategies, OEMs may purchase the Company's headsets on a private label basis. The Company believes that it is currently the largest supplier of headsets to Lucent Technologies (formerly part of AT&T). Products are sold in the retail channel through office supply and consumer electronics retailers, warehouse clubs, consumer products and office supply distributors, and catalog and mail order companies. These retailers sell headsets to small businesses, small offices and home offices. Direct sales are made in a limited number of cases by the Company to government agencies, including NASA, the FAA, and under the Company's General Service Administration schedule contract. Direct sales are also placed with certain very large call centers operated by regional telephone companies. Financial Information about Industry Segments and Foreign Operations. The Company operates in one industry segment. Financial information about foreign and domestic operations and export sales, included in Note 9 to the Company's Consolidated Financial Statements, appearing at page 13 of the Company's 1998 Annual Report to Stockholders is incorporated herein by this reference. Approximately 26.8%, 30.5% and 30.6% of the Company's net sales in fiscal 1996, fiscal 1997 and fiscal 1998, respectively, were derived from sales to foreign customers. Sales to foreign customers are generally subject to such risks as increased tariffs and the imposition of other trade barriers. Although the Company generally transacts business internationally in United States currency, declines in the values of local currencies relative to the United States dollar in countries in which the Company does business could adversely affect the Company by resulting in less competitive pricing for the Company's products. The Company does not currently engage in any hedging activities to mitigate exchange rate risks and to date has not been adversely affected by fluctuating currencies. To the extent that the Company is successful in increasing its sales to foreign customers, or to the extent that the Company increases its transactions in foreign currencies, the Company's results of operations could be adversely affected by exchange rate fluctuations. In fiscal 1996, the Company established a new wholly-owned subsidiary in the Netherlands. This new subsidiary serves as a strategic logistics center as well as the headquarters for international administration. In fiscal 1998, the Company established new wholly-owned subsidiaries in Brazil and Australia, both of which serve as sales offices. BACKLOG The Company's backlog of unfilled orders was $31.4 million on March 28, 1998, compared to $17.0 million on March 29, 1997. The Company includes in backlog all purchase orders scheduled for delivery over the next 12 months. As part of its commitment to customer service, however, the Company's goal is to ship products within two to four weeks from receipt of an order. The Company's backlog is generally subject to cancellation or rescheduling by the customer on short notice with little or no penalty. While the Company has not experienced any significant cancellations in the past, the Company's backlog as of any particular date may 7 8 not be indicative of actual sales for any future period and therefore should not be used as a measure of future revenue. COMPETITION The Company believes the principal competitive factors in its business are product reliability, product features, customer service and support, reputation, distribution, ability to meet delivery schedules, warranty terms, product life and price. The Company believes that its brand name recognition, distribution network, large user base and large number of product variations, together with its extensive experience in designing safe and reliable products, dealing with regulatory agencies and servicing and repairing headsets, are the key factors for the Company to maintain its position as a leading supplier of lightweight communications headsets. In the call center user segment of the market, the Company faces different competitors depending on the channel of distribution and the geographic location. The Company anticipates that it may face additional indirect competition in this market segment from technological advances such as interactive voice response systems which require no human interface for certain applications, such as account balance inquiries or airplane arrival and departure schedules. The Company believes that this trend will be more than offset by the expansion of telemarketing and catalog sales. In the business and home office user segments of the market, the same competitors who are the Company's competitors in the call center user market currently sell headsets to users within the telephone, cellular telephone and computer segments of the business and home office user part of the market. The Company's competitors sell their competing products primarily through commercial distribution channels. There are also certain competitors who sell exclusively outside the call center segment. As the Company develops new generations of products and enters new market segments, including the developing business and home office user segment of the market, the Company anticipates that it may face additional competition from companies which currently do not offer communication headsets. Such companies may be larger, offer broader product lines and have substantially greater financial and other resources than the Company. Such competition could negatively affect pricing and gross margins. Although the Company has historically competed very successfully in the call center user segment of the market, there can be no assurance that it will be able to continue its leadership position in that segment of the market or that the Company will be able to compete successfully in new market segments. MANUFACTURING Production of the Company's headsets and other products consists of light manufacturing and assembly operations conducted in California, Georgia, Mexico (the predominant manufacturing site, i.e. approximately 90%) and the United Kingdom. A few of the Company's other products are manufactured in whole or in part on a contract basis by third parties. The Company purchases the components for its headset products, including proprietary semi-custom integrated circuits, amplifier boards and other electrical components, from suppliers in the United States, Mexico, Asia and Europe. Although most components and subassemblies used in the Company's manufacturing operations are obtained, or are reasonably available, from numerous sources, certain of its products and components are currently procured only from single suppliers in order to obtain volume pricing. In the past, the Company has experienced only minor interruptions in the supply of these components, none of which has adversely affected its operations. However, an interruption in supply from any of the Company's single source suppliers in the future could temporarily result in the Company's inability to deliver products on a timely basis, which in turn could adversely affect its operations. In addition, manufacturing and assembly of the Company's products could be adversely affected by political or economic conditions in the United States or abroad. In order to meet the requirements of its customers for timely delivery of products, the Company generally manufactures finished goods to meet forecasted customer requirements. Special products and large orders submitted with short lead times requested by the customer are manufactured to order. Since most manufacturing occurs prior to the receipt of purchase orders, the Company maintains an inventory of finished 8 9 goods in addition to inventories of raw materials, work in process and subassemblies and components. Inventories were valued at $29.7 million as of March 28, 1998. In fiscal 1996, the Company began the implementation of a new worldwide management information system. The new system was implemented in April 1997. The new management information system is intended to improve service to the Company's customers, to control Company assets and to enhance management information. Any difficulty in the operation of such new systems or the training of personnel could adversely affect the Company's ability to accurately forecast sales demand and calibrate manufacturing to such demand, to calibrate purchasing levels, to accurately record and control inventory levels, and to record and report financial and management information on a timely and accurate basis. The occurrence of any of these events in the future could have a material adverse effect on the Company's business, financial condition and results of operations. Year 2000 Compliance Issue. As is the case with most other companies using computers in their operations, the Company is in the process of addressing the Year 2000 compliance issue. The Company is currently engaged in a project to modify its software and computer applications to consistently and properly recognize the Year 2000. Management expects to have substantially all of the system and application changes completed by the end of the Company's fiscal year 1999 and believes that its level of preparedness is appropriate. Internal and external resources are being used to review this issue, effect any required modifications and test Year 2000 compliance. The total cost to the Company of these Year 2000 compliance activities is not expected to be material. A portion of these costs will be met from existing resources, with the remainder representing incremental costs which will be expensed as incurred. ENVIRONMENTAL MATTERS The Company is subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, discharge and disposal of hazardous substances in the ordinary course of its manufacturing process. Although management believes that its current manufacturing operations comply in all material respects with applicable environmental laws and regulations, environmental legislation has been enacted and in the future may be enacted or interpreted to create environmental liability with respect to the Company's facilities or operations. The Company has included in its financial statements a reserve of $1.5 million for possible environmental remediation related to one of its discontinued businesses. While no claims have been asserted against the Company in connection with this matter, there can be no assurance that such claims will not be asserted in the future or that any resulting liability will not exceed the amount of the reserve. PATENTS AND TRADEMARKS The Company maintains a program of seeking patent protection for its technology. Significant product features for which the Company has, or is currently seeking, patent protection include the Company's StarSet II capsule design, SoundGuard receiver gain compression integrated circuit, Mirage headset, Clarity frequency enhancing telephone, battery-powered in-line amplifier with an automatic by-pass feature to provide continuous receive signal when battery power gets low, integrated circuit implementation for an audio amplifier operating at extremely low power with an expander function for noise reduction in telephony applications, headset receiver mechanical-acoustical tone control devices, earbud receiver positioning mechanisms and various other products, features including certain wireless technology and electronic components. The existing patents expire from 2000 to 2013. The Company's success will depend in part on its ability to obtain patents and preserve other intellectual property rights covering the design and operation of its products. The Company intends to continue to seek patents on its inventions when appropriate. The process of seeking patent protection can be lengthy and expensive, and there can be no assurance that patents will issue from currently pending or future applications or that the Company's existing patents or any new patents issued will be of sufficient scope or strength or provide meaningful protection or any commercial advantage to the Company. The Company may be subjected to, or may initiate, litigation or patent office interference proceedings, which may require significant financial 9 10 and management resources. The failure to obtain necessary licenses or other rights or the advent of litigation arising out of any such claims could have a material adverse effect on the Company's operations. The Company owns registered trademarks with respect to its name and logo design and many of its products, including, but not limited to, its Encore, FreeHand, Mirage, StarSet, Supra, and TriStar products and currently has trademark applications pending in connection with new products. The Company also claims common law trademark rights in many of its products and/or features. The Company also attempts to protect its trade secrets and other proprietary information through comprehensive security measures, including agreements with customers and suppliers, and proprietary information agreements with employees and consultants. EMPLOYEES On March 28, 1998, there were 1,817 persons employed by the Company. No employees are currently covered by collective bargaining agreements or are members of any labor organization as far as the Company is aware. The Company has not experienced any work stoppages and believes that its employee relations are good. EXECUTIVE OFFICERS Set forth below is certain information regarding the executive officers of the Company and their ages as of June 5, 1998.
NAME AGE POSITION ---- --- -------- Benjamin Brussell 37 Vice President -- Corporate Development Robert S. Cecil 63 Chairman of the Board of Directors and Chief Executive Officer C. Donald Cooper 53 Senior Vice President and Chief Strategy Officer Donald S. Houston 44 Senior Vice President -- Sales David Huddart 48 Senior Vice President -- Engineering and Technology S. Kenneth Kannappan 38 President and Chief Operating Officer Farhad Kashani 45 Senior Vice President -- Operations John A. Knutson 52 Vice President -- Legal, Senior General Counsel and Secretary H. Craig May 38 Senior Vice President -- Marketing Barbara V. Scherer 42 Senior Vice President -- Finance & Administration and Chief Financial Officer
Mr. Brussell joined the Company in March 1998 as Vice President -- Corporate Development and reports directly to the Chief Executive Officer. Prior to joining the Company, Mr. Brussell was Vice President, Corporate Development at Storage Technology Corporation, a leading provider of enterprise and network information storage systems, from March 1992 to March 1998. From June 1990 until March 1992, Mr. Brussell acted as a consultant to Storage Technology Corporation and other technology and health care industry companies. From January 1985 to June 1990, Mr. Brussell held various positions with Solomon Brothers, the last of which was Vice President, Corporate Finance, Technology Group. Mr. Brussell has a Bachelor of Arts degree in Math/Economics from Wesleyan University and a Masters Degree in Management from M.I.T. Sloan School of Management. Mr. Cecil joined the Company in March 1992 as President, Chief Executive Officer and Director, and in September 1993 he was elected Chairman of the Board of Directors. As of March 1998, Mr. Cecil no longer serves as President due to the promotion of Mr. Kannappan. From 1984 to December 1991, Mr. Cecil held a number of positions with LIN Broadcasting Corporation, a subsidiary of McCaw Cellular Communications, Inc. that provides cellular services in North America, including President of its Cellular Group. From 1977 to 1984, he held various positions with Motorola, Inc., including Vice President and Corporate Director of Marketing. Prior to that he held various senior sales and marketing management positions with IBM Corporation. Mr. Cecil has a Bachelor of Science degree in Engineering from the U.S. Naval Academy and a Masters of Business Administration in Finance from the Harvard Graduate School of Business Administra- 10 11 tion. Mr. Cecil also serves on the Board of Directors of TAB Products Co., which manufactures and markets a broad range of filing systems and supplies, systems furniture, computer-related products and forms processing equipment; Xylan Corporation, a provider of high bandwidth switching systems that enhance the performance of existing local area networks and facilitate migration to networking technologies; and GT Group Telecom Inc., a Canadian company which is a competitive local exchange carrier. Mr. Cooper joined the Company in February 1997 as Vice President -- Business Development and has recently taken the position of Senior Vice President and Chief Strategy Officer. Mr. Cooper has over 17 years of experience in senior level executive positions. From 1989 to 1996, Mr. Cooper held a number of positions with AT&T Paradyne, a $500 million unit of AT&T, engaged in the business of data networking, including most recently President and General Manager. Mr. Cooper earned a Bachelor of Science degree in Electrical Engineering from the University of Missouri and a Master of Business Administration degree in Marketing from the University of Houston. Mr. Cooper reports directly to the Chief Executive Officer. Mr. Houston joined the Company in November 1996 as Vice President -- Sales and was promoted to Senior Vice President -- Sales in March 1998. From February 1995 through November 1996, Mr. Houston served as Vice President -- Worldwide Sales for Proxima Corporation, a designer, developer, manufacturer and marketer of multimedia projection products. From 1985 until January of 1995, Mr. Houston held a number of positions at Calcomp, Inc., which is engaged in the business of manufacturing computer peripherals for the CAD and graphic market, including Regional Sales Manager and most recently Vice President of Sales, Service and Marketing. Prior to 1985, Mr. Houston held various sales and marketing management positions with IBM Corporation. Mr. Houston is a graduate of the University of Arizona with a Bachelor of Science degree in Business/Marketing. He reports directly to the President and Chief Operating Officer. Mr. Huddart was appointed Vice President -- Engineering and Technology in April 1996, and became Senior Vice President -- Engineering and Technology in March 1998. He joined Plantronics Limited in September 1994 as Engineering Manager. Prior to joining Plantronics Limited, he was the Technical Marketing and Sales Director for IST Laboratories Ltd., a developer of electronic substrate interconnections, from May 1991 through April 1994. From October 1986 through May 1991, he was employed by Tunstall Group plc and its subsidiaries, and held various positions, including Group Technical Director of Tunstall Group plc, and Marketing Director and Technical Director of Tunstall Telecom. From 1972 until June of 1986, he was employed by TMC Philips Ltd. as an engineer in positions with increasing levels of responsibility. Mr. Huddart has a Bachelor of Science degree from the University of North London Polytenic and a Management Diploma from Ashridge Management College. Mr. Kannappan joined the Company in February 1995 as Vice President -- Sales, responsible for OEM Sales and International Markets for Plantronics, Inc. He was promoted to Vice President -- Sales, responsible for all U.S., Asian and Latin American Sales in September 1995. He was promoted to Managing Director -- Plantronics Limited in England in March 1996. In March 1997, Mr. Kannappan returned from England and was promoted to Senior Vice President responsible for Plantronics' Worldwide Operations, Mobile Division, Walker Division and Plantronics Limited. In March 1998, Mr. Kannappan was promoted to President and Chief Operating Officer. Prior to joining Plantronics, Mr. Kannappan was Senior Vice President of Investment Banking for Kidder, Peabody & Co. Incorporated from August 1985 through January 1995. Mr. Kannappan has a Bachelor of Arts degree in Economics from Yale University and a Masters of Business Administration from Stanford University. Mr. Kashani joined the Company in February 1998 as Senior Vice President -- Operations and reports directly to the President and Chief Operating Officer. Prior to joining the Company, Mr. Kashani spent ten years with Wyse Technology, and a subsidiary company, Link Technologies, in various positions of increasing responsibility, from 1987 to February 1998. From August 1997 to February 1998, Mr. Kashani was Vice President of Operations, Service and Quality with Wyse Technology, USA, and from December 1996 to July 1997, he was Vice President of Operations, Wyse Technology, Hsin Chu, Taiwan. From 1994 to 1996, Mr. Kashani was Vice President of Operations, Wyse Technology, USA; from 1990 to 1994 he was Vice President of Operations for Link Technologies, a subsidiary of Wyse Technology; from 1989 to 1990 he was Director of U.S. Manufacturing, Wyse Technology and from 1987 to 1989 he was Director of Quality 11 12 Assurance, Link Technologies. Mr. Kashani has a Bachelor of Science degree in Agricultural Engineering from Pahlavi University and a Masters of Business Administration from the Iran Center for Management Studies. Mr. Knutson has served as Vice President -- Legal, Senior General Counsel and Secretary since March 1994. Mr. Knutson was Managing Partner of the law firm of Kenney, Burd, Knutson & Markowitz, San Francisco, California, from January 1991 until shortly before joining the Company. From August 1979 until December 1990, he practiced law with the law firm of Fisher & Hurst, San Francisco, California, as a partner from April 1982 to December 1986, and as Managing Partner from January 1987 to December 1990. After graduating from the University of California -- Hastings College of Law with a Juris Doctorate degree and being admitted to the California Bar in 1974, Mr. Knutson practiced law in San Francisco with the Law Offices of Garrett McEnerney until August 1979. Mr. May joined the Company in May 1998 as Senior Vice President -- Marketing and reports directly to the President and Chief Operating Officer. Mr. May was most recently with Dell Computer Corporation from March 1998 to May 1998, responsible for Program Management of the Work Stations Business Unit. Prior to that Mr. May was with Siemens Business Communication Systems, Inc., as Director of Product Management, Desktops and Mobility, from October 1993 to May 1998. Prior to that position, Mr. May served as special assignment to the President of Siemens Business Communications Systems, Inc. from July 1993 to October 1993. From June 1992 to July 1993, Mr. May was ROLM Executive Delegate for Siemens AG, Private Networks Group, Desktop Products, Munich, Germany. Mr. May held a number of positions with ROLM from July 1987 to June 1992, such as Director of Systems Planning, Manager of New Product Planning and Senior Product Manager. From 1981 to June 1987 Mr. May worked for ROLM, an IBM Company and Shell Oil Company in various product manager and engineering positions of increasing authority. Mr. May has a Bachelor of Science degree in Electrical Engineering from the University of Houston. Ms. Scherer joined the Company in March 1997, and in April 1997 was named Vice President -- Finance & Administration and Chief Financial Officer. In March 1998, Ms. Scherer was promoted to Senior Vice President -- Finance & Administration and Chief Financial Officer. Prior to joining the Company, Ms. Scherer was Senior Vice President and Chief Financial Officer at StreamLogic Corporation, a developer of video delivery, digital media storage, networking RAID and data management products, from October 1996 until March 1997; before that she was Senior Vice President of Operations from April 1996 until October 1996. Prior to that she held various positions spanning a nine year career with Micropolis Corporation, a disk drive manufacturer, including, from 1995 until April 1996, Vice President Finance, Chief Financial Officer and Treasurer, and from 1993 until 1994, Vice President, Treasurer and Video Systems Division Controller. Ms. Scherer is a graduate of the University of California at Santa Barbara and received her Masters from Yale School of Organization and Management. She reports directly to the Chief Executive Officer. Executive officers serve at the discretion of the Board of Directors. There are no family relationships between any of the directors and executive officers of the Company. ITEM 2. PROPERTIES The principal executive offices of the Company are located in Santa Cruz, California. The Company owns or leases a total of approximately 320,000 square feet of manufacturing, administrative, engineering and office facilities, including: (i) approximately 160,000 square feet of manufacturing and administrative facilities owned by the Company in Santa Cruz, California, approximately 38,500 square feet of which are leased to third parties as office and warehouse space; (ii) approximately 11,600 square feet of manufacturing and administrative facilities related to operations in Ringgold, Georgia under a lease expiring in 1999; (iii) approximately 93,600 square feet for assembly and related operations in Tijuana, Mexico, under a lease expiring in 2001; (iv) approximately 38,400 square feet for assembly operations, sales and administration in Wootton Bassett, England under a lease expiring in 2015; (v) approximately 4,000 square feet for administrative facilities in Hoofddorp, The Netherlands, under a lease expiring in 1999; and (vi) smaller leased or rented facilities in Singapore, Japan, Hong Kong, France, Germany, Italy, Spain, Brazil, Colorado 12 13 and New Jersey. The Company believes that its existing properties are generally suitable and adequate for its business with excess capacity available for expansion. ITEM 3. LEGAL PROCEEDINGS Neither the Company, nor any of its subsidiaries, is a party to any litigation, other than non-material litigation incidental to the Company's business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS No matters were submitted to a vote of the security holders of the Company during the fourth quarter of the fiscal year ended March 28, 1998. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is publicly traded on the New York Stock Exchange. Information included in the Corporate Directory appearing on the back cover of the Company's 1998 Annual Report to Stockholders concerning the market price of and cash dividends declared on the Company's Common Stock for each quarterly period within the two most recent fiscal years is incorporated herein by reference. As of June 5, 1998 there were 80 holders of record of the Company's Common Stock. ITEM 6. SELECTED FINANCIAL DATA The information appearing under the caption "Selected Financial Data" appearing at page 23 of the Company's 1998 Annual Report to Stockholders is incorporated herein by this reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information appearing under the caption "Management's Discussion and Analysis" appearing at pages 17 through 21 of the Company's 1998 Annual Report to Stockholders is incorporated herein by this reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following information appearing in the Company's 1998 Annual Report to Stockholders is incorporated herein by this reference: Consolidated Balance Sheets -- March 28, 1998 and March 29, 1997 Consolidated Financial Statements for fiscal years ended March 28, 1998, March 29, 1997 and March 30, 1996: Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Statements of Stockholders' Equity (Deficit) Notes to Consolidated Financial Statements Report of Independent Accountants, dated April 17, 1998. With the exception of the information mentioned in Items 5, 6, 7 and 8, the Company's 1998 Annual Report to Stockholders is not to be deemed filed as part of this Annual Report on Form 10-K. 13 14 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with accountants on any matter of accounting principles and practices or financial disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding the identification and business experience of the Company's directors under the caption "Nominees" under the main caption "Proposal One -- Election of Directors" in the Company's definitive 1998 Proxy Statement for the annual meeting of stockholders to be held, as filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year ended March 28, 1998, is incorporated herein by this reference. For information regarding the identification and business experience of the Company's executive officers, see "Executive Officers" at the end of Item 1 in Part I of this Annual Report on Form 10-K. The Registrant's Chief Financial Officer, Barbara V. Scherer, joined the Company in March 1997, having last been employed as Chief Financial Officer of StreamLogic Corporation. StreamLogic Corporation filed voluntarily for protection under Chapter 11 of the Federal Bankruptcy Code on June 26, 1997. Information concerning filing requirements applicable to the Company's executive officers and directors under the caption "Compliance With Section 16(a) of the Exchange Act" in the Company's 1998 Proxy Statement is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION The information under the captions "Executive Compensation" and "Compensation of Directors" in the Company's 1998 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the caption "Security Ownership of Principal Stockholders and Management" under the main caption "Additional Information" in the 1998 Proxy Statement is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under the caption "Certain Transactions" in the 1998 Proxy Statement is incorporated herein by this reference. With the exception of the information specifically incorporated by reference from the 1998 Proxy Statement in Part III of this Annual Report on Form 10-K, the 1998 Proxy Statement shall not be deemed to be filed as part of this Report. Without limiting the foregoing, the information under the captions "Report of the Compensation Committee of the Board of Directors" and "Company's Stock Performance" under the main caption "Additional Information" in the 1998 Proxy Statement is not incorporated by reference in this Annual Report on Form 10-K. 14 15 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Incorporation by Reference. The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K: (1) Financial Statements. The consolidated financial statements of the Company (including the notes thereto) are incorporated by reference from the Company's 1998 Annual Report to Stockholders as indicated in Item 8 of this report. (2) Financial Statement Schedules. All financial statement schedules have been omitted because the required information is not applicable or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. (3) Exhibits. The exhibits listed under Item 14(c) hereof are filed with, or incorporated by reference into, this Annual Report on Form 10-K. (b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant during the fourth quarter of the fiscal year ended March 28, 1998. (c) Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K: 3.1 Amended and Restated By-Laws of the Registrant (incorporated herein by reference to Exhibit (3.4) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). 3.2 Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on January 19, 1994 (incorporated herein by reference to Exhibit (3.1) to the Registrant's Quarterly Report on Form 10-Q, SEC File Number 1-12696, for the fiscal quarter ended December 25, 1993, filed on March 4, 1994). 3.3 Certificate of Retirement and Elimination of Preferred Stock and Common Stock of the Registrant filed with the Secretary of State of Delaware on January 11, 1996 (incorporated herein by reference to Exhibit (3.3) of the Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996). 4.1 Indenture between Registrant, as issuer, and First National Bank of Boston, as Trustee dated as of January 15, 1994 (including the form of Senior Notes) relating to Registrant's 10% Senior Notes Due 2001 (incorporated herein by reference to Exhibit (4.1) to the Registrant's Quarterly Report on Form 10-Q, SEC File Number 1-12696, for the fiscal quarter ended December 25, 1993, filed on March 4, 1994). 10.1 Quarterly Profit Sharing Plan (as amended) (incorporated herein by reference to Exhibit (10.2) to Registrant's predecessor, Plantronics, Inc.'s Report on Form 10-K, SEC File Number 1-6642, for the fiscal year ended May 29, 1982, filed on August 27, 1982). 10.2 Form of Agreement For Restricted Property in connection with Target Benefit Plan; and Schedule of Other Documents Omitted, (incorporated herein by reference to Exhibit (10.19) to PI Holdings Inc.'s Transitional Report on Form 10-K for the transition period ended April 1, 1989, SEC file number 33-26770, filed on August 21, 1989). 10.3 Form of Indemnification Agreement between the Registrant and certain directors and executives and Schedule of Other Documents Omitted (incorporated herein by reference to Exhibit (10.1) to PI Holdings Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended December 26, 1992, SEC File Number 33-26770, filed February 9, 1993).
15 16 10.4 Form of Employment Agreement, Addendum to Employment Agreement and Second Addendum to Employment Agreement between the Registrant and certain executives; and Schedule of Other Documents Omitted (incorporated herein by reference to Exhibit (10.2) to PI Holdings Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended December 26, 1992, SEC File Number 33-26770, filed February 9, 1993). 10.5 Executive Bonus Plan (incorporated herein by reference to Exhibit (10.4) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). 10.6 Board Designation Agreement dated as of October 22, 1993 between the Registrant and Citicorp Venture Capital, Ltd. (incorporated herein by reference to Exhibit (10.21) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed October 20, 1993). 10.7 Lease Agreement dated July 1993 between Inmobiliara Mexhong S.A. de C.V. and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference to Exhibit (10.30) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). 10.8 Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, England (incorporated herein by reference to Exhibit (10.32) to the Registrant's Registration Statement on Form S-1 (as amended), No.33-70744, filed on October 20, 1993). 10.9 1993 Stock Plan (incorporated herein by reference to Exhibit (10.1) to the Registrant's Registration Statement on Form S-1 (as amended), SEC File Number 33-70744, filed on October 20, 1993). Amendment effective as of April 23, 1996 to the 1993 Stock Plan (incorporated herein by reference to Exhibit (4.2) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-14833, filed on October 25, 1996). 10.10 1993 Director Stock Option Plan (incorporated herein by reference to Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as amended), SEC File Number 33-70744, filed on October 20, 1993). Amendment Effective as of April 23, 1996 to the 1993 Director Stock Option Plan (incorporated herein by reference to Exhibit (4.4) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-14833, filed on October 25, 1996). 10.11 Employment Agreement between the Registrant and Robert S. Cecil dated January 4, 1994 (supersedes Employment Agreement between Plantronics and Robert S. Cecil dated January 20, 1993) (incorporated herein by reference to Exhibit (10.16) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). Amendment Number One to Employment Agreement between the Registrant and Robert S. Cecil entered into as of January 4, 1995 (incorporated herein by reference to Exhibit (10.6) of the Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996). Letter agreement between Registrant and Robert S. Cecil dated April 10, 1996 (incorporated herein by reference to Exhibit (10.6) of the Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996). Amendment Number Two to Employment Agreement between the Registrant and Robert S. Cecil entered into as of January 1, 1998.
16 17 10.12 Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (incorporated herein by reference to Exhibit (4.1) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997). Amendment Number One to the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (incorporated herein by reference to Exhibit (4.2) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997). 10.13 Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan Trust (incorporated herein by reference to Exhibit (4.3) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997). 10.14 Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase Plan (incorporated herein by reference to Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.15 Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated herein by reference to Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.16 Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated herein by reference to Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.17 Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by reference to Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.18 Credit Agreement dated as of February 19, 1997 between Registrant and Bank of America National Trust and Savings Association (incorporated by reference to Exhibit (10.22) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 29, 1997, filed on June 27, 1997). First Amendment to Credit Agreement, dated as of May 15, 1997 (incorporated by reference to Exhibit (10.22) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 29, 1997, filed on June 27, 1997). Second Amendment to Credit Agreement, dated as of February 18, 1998. 10.19 Lease dated May 8, 1997 between Royal Liver Assurance Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, England. 13.1 Information incorporated by reference from the Registrant's Annual Report to Stockholders for the fiscal year ended March 28, 1998. 21 Subsidiaries of the Registrant. 23.1 Consent of Price Waterhouse LLP, Independent Accountants. 27 Financial Data Schedule.
17 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PLANTRONICS, INC. By: /s/ ROBERT S. CECIL --------------------------------------------------------------------- Robert S. Cecil Chief Executive Officer Dated: June 23, 1998 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. /s/ ROBERT S. CECIL Chairman of the Board, Chief June 23, 1998 - --------------------------------------------------- Executive Officer, and Director (Robert S. Cecil) (Principal Executive Officer) /s/ BARBARA V. SCHERER Senior Vice President, and Chief June 5, 1998 - --------------------------------------------------- Financial Officer (Principal (Barbara V. Scherer) Financial Officer, Principal Accounting Officer) /s/ ROBERT F.B. LOGAN Director June 23, 1998 - --------------------------------------------------- (Robert F.B. Logan) /s/ M. SALEEM MUQADDAM Director June 23, 1998 - --------------------------------------------------- (M. Saleem Muqaddam) /s/ JOHN O'MARA Director June 23, 1998 - --------------------------------------------------- (John Mowbray O'Mara) /s/ TRUDE C. TAYLOR Director June 23, 1998 - --------------------------------------------------- (Trude C. Taylor) /s/ J. SIDNEY WEBB Director June 23, 1998 - --------------------------------------------------- (J. Sidney Webb) /s/ DAVID A. WEGMANN Director June 23, 1998 - --------------------------------------------------- (David A. Wegmann)
18 19 INDEX TO EXHIBITS 3.1 Amended and Restated By-Laws of the Registrant (incorporated herein by reference to Exhibit (3.4) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). 3.2 Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on January 19, 1994 (incorporated herein by reference to Exhibit (3.1) to the Registrant's Quarterly Report on Form 10-Q, SEC File Number 1-12696, for the fiscal quarter ended December 25, 1993, filed on March 4, 1994). 3.3 Certificate of Retirement and Elimination of Preferred Stock and Common Stock of the Registrant filed with the Secretary of State of Delaware on January 11, 1996 (incorporated herein by reference to Exhibit (3.3) of the Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996). 4.1 Indenture between Registrant, as issuer, and First National Bank of Boston, as Trustee dated as of January 15, 1994 (including the form of Senior Notes) relating to Registrant's 10% Senior Notes Due 2001 (incorporated herein by reference to Exhibit (4.1) to the Registrant's Quarterly Report on Form 10-Q, SEC File Number 1-12696, for the fiscal quarter ended December 25, 1993, filed on March 4, 1994). 10.1 Quarterly Profit Sharing Plan (as amended) (incorporated herein by reference to Exhibit (10.2) to Registrant's predecessor, Plantronics, Inc.'s Report on Form 10-K, SEC File Number 1-6642, for the fiscal year ended May 29, 1982, filed on August 27, 1982). 10.2 Form of Agreement For Restricted Property in connection with Target Benefit Plan; and Schedule of Other Documents Omitted, (incorporated herein by reference to Exhibit (10.19) to PI Holdings Inc.'s Transitional Report on Form 10-K for the transition period ended April 1, 1989, SEC file number 33-26770, filed on August 21, 1989). 10.3 Form of Indemnification Agreement between the Registrant and certain directors and executives and Schedule of Other Documents Omitted (incorporated herein by reference to Exhibit (10.1) to PI Holdings Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended December 26, 1992, SEC File Number 33-26770, filed February 9, 1993). 10.4 Form of Employment Agreement, Addendum to Employment Agreement and Second Addendum to Employment Agreement between the Registrant and certain executives; and Schedule of Other Documents Omitted (incorporated herein by reference to Exhibit (10.2) to PI Holdings Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended December 26, 1992, SEC File Number 33-26770, filed February 9, 1993). 10.5 Executive Bonus Plan (incorporated herein by reference to Exhibit (10.4) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). 10.6 Board Designation Agreement dated as of October 22, 1993 between the Registrant and Citicorp Venture Capital, Ltd. (incorporated herein by reference to Exhibit (10.21) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed October 20, 1993). 10.7 Lease Agreement dated July 1993 between Inmobiliara Mexhong S.A. de C.V. and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference to Exhibit (10.30) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). 10.8 Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, England (incorporated herein by reference to Exhibit (10.32) to the Registrant's Registration Statement on Form S-1 (as amended), No.33-70744, filed on October 20, 1993).
20 10.9 1993 Stock Plan (incorporated herein by reference to Exhibit (10.1) to the Registrant's Registration Statement on Form S-1 (as amended), SEC File Number 33-70744, filed on October 20, 1993). Amendment effective as of April 23, 1996 to the 1993 Stock Plan (incorporated herein by reference to Exhibit (4.2) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-14833, filed on October 25, 1996). 10.10 1993 Director Stock Option Plan (incorporated herein by reference to Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as amended), SEC File Number 33-70744, filed on October 20, 1993). Amendment Effective as of April 23, 1996 to the 1993 Director Stock Option Plan (incorporated herein by reference to Exhibit (4.4) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-14833, filed on October 25, 1996). 10.11 Employment Agreement between the Registrant and Robert S. Cecil dated January 4, 1994 (supersedes Employment Agreement between Plantronics and Robert S. Cecil dated January 20, 1993) (incorporated herein by reference to Exhibit (10.16) to the Registrant's Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993). Amendment Number One to Employment Agreement between the Registrant and Robert S. Cecil entered into as of January 4, 1995 (incorporated herein by reference to Exhibit (10.6) of the Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996). Letter agreement between Registrant and Robert S. Cecil dated April 10, 1996 (incorporated herein by reference to Exhibit (10.6) of the Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996). Amendment Number Two to Employment Agreement between the Registrant and Robert S. Cecil entered into as of January 1, 1998. 10.12 Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (incorporated herein by reference to Exhibit (4.1) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997). Amendment Number One to the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (incorporated herein by reference to Exhibit (4.2) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997). 10.13 Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan Trust (incorporated herein by reference to Exhibit (4.3) to the Registrant's Registration Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997). 10.14 Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase Plan (incorporated herein by reference to Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.15 Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated herein by reference to Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.16 Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated herein by reference to Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997).
21 10.17 Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by reference to Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997). 10.18 Credit Agreement dated as of February 19, 1997 between Registrant and Bank of America National Trust and Savings Association (incorporated by reference to Exhibit (10.22) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 29, 1997, filed on June 27, 1997). First Amendment to Credit Agreement, dated as of May 15, 1997 (incorporated by reference to Exhibit (10.22) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 29, 1997, filed on June 27, 1997). Second Amendment to Credit Agreement, dated as of February 18, 1998. 10.19 Lease dated May 8, 1997 between Royal Liver Assurance Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, England. 13.1 Information incorporated by reference from the Registrant's Annual Report to Stockholders for the fiscal year ended March 28, 1998. 21 Subsidiaries of the Registrant. 23.1 Consent of Price Waterhouse LLP, Independent Accountants. 27 Financial Data Schedule.
EX-10.11 2 AMENDMENT NUMBER TWO TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.11 AMENDMENT NUMBER TWO TO EMPLOYMENT AGREEMENT This Amendment to the Employment Agreement dated as of January 4, 1994, between Plantronics, Inc., a Delaware corporation (the "Company") and Robert S. Cecil (the "Executive") is entered into as of January 1, 1998. RECITALS A. The Company and the Executive are parties to an Employment Agreement entered into as of January 4, 1994, as amended pursuant to Amendment Number One entered into as of January 4, 1995 (the "Employment Agreement"). B. The Company and the Executive desire to clarify and amend the Employment Agreement effective January 1, 1998. In consideration of the foregoing and the respective covenants and agreements of the parties contained herein, the Company and the Executive agree as follows: 1. Paragraph 4 - Base Salary: Shall be amended to provide as follows: "For all services to be rendered by the Executive pursuant to this Agreement, the Company agrees to pay the Executive during the Employment Period a base salary (the "Base Salary") at an annual rate of not less than $526,350, effective January 1, 1998. The Base Salary shall be paid in periodic installments in accordance with the Company's regular payroll practices. The Company agrees to review the Base Salary at least annually as of the payroll payment date nearest each anniversary of the Amended Effective Date (beginning in 1998), and to make such increases therein as the Board of Directors may approve." 2. In all other respects, the Employment Agreement shall continue in full force and effect without change. 3. This Amendment may be executed in one or more counterparts, each of which shall be an original, but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the undersigned representative of the Company, on behalf of the Company and the Company's Board of Directors and Compensation Committee, and the Executive have executed this Amendment as of the date set forth above. PLANTRONICS, INC. EXECUTIVE By: /s/ J. SIDNEY WEBB By: /s/ ROBERT S. CECIL --------------------------------- ------------------------------------ J. Sidney Webb Robert S. Cecil EX-10.18 3 SECOND AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10.18 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of February 18, 1998, is entered into by and between PLANTRONICS, INC. a Delaware corporation (the "Company") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank"). RECITALS A. The Company and the Bank are parties to a Credit Agreement dated as of February 19, 1997, as amended by a First Amendment to Credit Agreement dated as of May 15, 1997, effective as of February 19, 1997 (as so amended, the "Credit Agreement") pursuant to which the Bank has extended certain credit facilities to the Company. B. The Company has requested that the Bank agree to certain amendments of the Credit Agreement. C. The Bank is willing to amend the Credit Agreement, subject to the terms and conditions of this Amendment. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings, if any, assigned to them in the Credit Agreement. 2. Amendments to Credit Agreement. (a) Section 1.01 of the Credit Agreement shall be amended by amending and restating the definition of "Applicable Rate" in its entirety to read as follows: "Applicable Rate" means, for any day, with respect to any Offshore Rate Loan, CD Rate Loan or Base Rate Loan and the commitment and standby letter of credit fees payable hereunder, as the case may be, the applicable rate per annum set forth in the chart below under the caption "Offshore Rate Margin," "CD Rate Margin," "Base Rate Margin," "Commitment Fee," and "Standby Letter of Credit Fee," as the case may be, based upon the respective Performance Levels in effect on such day as set forth below. 2
- ------------------------------------------------------------------------------------------------------- Offshore Base Standby CD Rate Rate Rate Commit- Letter of Margin Margin Margin ment Fee Credit Fee - ------------------------------------------------------------------------------------------------------- Performance Level 1 0.6250% 0.5000% 0.0000% 0.1000% 0.5000% Net Funded Debt to EBITDA Ratio < 1.50 to 1.00 - ------------------------------------------------------------------------------------------------------- Performance Level 2 0.7500% 0.6250% 0.0000% 0.1500% 0.6250% Net Funded Debt to EBITDA Ratio < 2.00 to 1.00 but >1.50 to 1.00 - - - ------------------------------------------------------------------------------------------------------- Performance Level 3 1.1250% 1.0000% 0.0000% 0.2000% 1.0000% Net Funded Debt to EBITDA Ratio < 2.50 to 1.00 but >2.00 to 1.00 - ------------------------------------------------------------------------------------------------------- Performance Level 4 1.3750% 1.2500% 0.2500% 0.3000% 1.2500% Net Funded Debt to EBITDA Ratio >2.50 to 1.00 - -------------------------------------------------------------------------------------------------------
The applicable Performance Level as of any day shall be determined by reference to the Net Funded Debt to EBITDA Ratio as of the last day of the fiscal quarter most recently ended on or prior to such day, and any change in the Performance Level shall become effective upon the delivery to the Bank of the Compliance Certificate required to accompany the financial statements delivered pursuant to Section 7.01 upon which such change is based, which Compliance Certificate shall set forth in reasonable detail the calculation of the Net Funded Debt to EBITDA Ratio. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. Notwithstanding the foregoing, at any time prior to the time the first delivery of financial statements under Section 7.01 after the Closing Date, the Applicable Rate shall be determined as if the Net Funded Debt to EBITDA Ratio were at Performance Level 1. (b) Section 1.01 of the Credit Agreement shall be amended by amending and restating the definition of "Revolving Termination Date" in its entirety to read as follows: "Revolving Termination Date" means the earlier to occur of: 2 3 (a) February 17, 1999; and (b) the date on which the Commitment shall terminate in accordance with the provisions of this agreement. (c) Section 8.13 of the Credit Agreement shall be amended and restated in its entirety to read as follows: 8:13 Tangible Net Worth. The company shall not permit Tangible Net Worth on a consolidated basis as of the last day of any fiscal quarter to be less than the sum of (a) 90% of Tangible Net Worth as of the quarter ended September 30, 1997 minus (b) the lesser of (i) the amount of its stock repurchased by the Company after September 30, 1997; provided that such repurchases are otherwise permitted hereunder, and (ii) $25,000,000 plus (c) 50% of the Company's consolidated net income (but not less any net losses for any period) earned in each fiscal quarter starting with the quarter ended December 31, 1997 plus (d) 75% of the net proceeds of any equity securities issued after September 30,1997 plus (e) 75% of any increase in stockholders' equity resulting from the conversion of debt securities to equity securities after September 30, 1997. (d) Schedule 2 to Exhibit C to the Credit Agreement (the form of Compliance Certificate) is hereby amended and restated in its entirety to read as set forth in Schedule 2 attached hereto. 3. Representations and Warranties. The Company hereby represents and warrants to the Bank as follows: (a) No Default or Event of Default has occurred and is continuing. (b) The execution, delivery and performance by the Company of this Amendment have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. The Credit Agreement as amended by this Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. (c) All representations and warranties of the Company contained in the Credit Agreement are true and correct in all material respects as of the date hereof, except to the extent such representations and warranties expressly refer to an earlier date, in which case they are true and correct in all material respects as of such date. (d) The Company is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Bank or any other Person. 3 4 4. Effective Date. This Amendment will become effective as of February 18, 1998 (the "Effective Date"), provided that each of the following conditions precedent is satisfied: (a) The Bank has received from the Company a duly executed original (or, if elected by the Bank, an executed facsimile copy) of this Amendment. (b) The Bank has received from the Company a copy of a resolution passed by the board of directors of such corporation, certified by the Secretary or an Assistant Secretary of such corporation as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of this Amendment, along with an incumbency certificate. 5. Reservation of Rights. The Company acknowledges and agrees that the execution and delivery by the Bank of this Amendment shall not be deemed to create a course of dealing or otherwise obligate the Bank to execute similar amendments under the same or similar circumstances in the future. 6. Miscellaneous. (a) Except as herein expressly amended, all terms, covenants and provisions of the Credit Agreement are and shall remain in full force and effect and all references therein and in the other Credit Documents to such Credit Agreement shall henceforth refer to the Credit Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Credit Agreement. (b) This Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment. (c) This Amendment shall be governed by and construed in accordance with the law of the State of California. (d) This Amendment may be executed in any number of counterparts, each of which shall be deemed an original but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Bank of a facsimile transmitted document purportedly bearing the signature of the Company shall bind the Company with the same force and effect as the delivery of a hard copy original. Any failure by the Bank to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document which hard copy page was not received by the Bank. (e) This Amendment, together with the Credit Agreement, contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed 4 5 herein and therein. This Amendment supersedes all prior drafts and communications with respect thereto. This Amendment may not be amended except in accordance with the provisions of Section 10.01 of the Credit Agreement. (f) If any term or provision of this Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Amendment or the Credit Agreement, respectively. (g) Company covenants to pay or reimburse the Bank, within 30 Business Days after demand, for all reasonable costs and expenses (including allocated costs of in-house counsel) incurred in connection with the development, preparation, negotiation, execution and delivery of this Amendment. 5 6 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written. PLANTRONICS, INC. By: /s/ BARBARA V. SCHERER --------------------------------- Title: Barbara V. Scherer, Vice President of Administration & Finance, Chief Financial Officer By: /s/ JOHN A. KNUTSON --------------------------------- Title: John A. Knutson, Vice President Legal, Senior General Counsel, Secretary BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: --------------------------------- Title: --------------------------------- 6 7 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written. PLANTRONICS, INC. By: --------------------------------- Title: --------------------------------- By: --------------------------------- Title: --------------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ JAMES P. JOHNSON --------------------------------- Title: JAMES P. JOHNSON --------------------------------- Managing Director 6 8 Date: , -------------- ------- For the fiscal quarter/year ended , -------------- ------- PLANTRONICS, INC. SCHEDULE 2 to the Compliance Certificate ($ in 000's)(1)
Actual Required/Permitted ------ ------------------ 1. Section 8.12 Net Funded Debt to EBITDA Ratio. The ratio of: A. Net Funded Debt: the difference of: (i) Indebtedness(2) ------- plus ---- (ii) Guaranty Obligations(2) ------- less ---- (iii) cash and Cash Equivalents(3) ------- (i)+(ii)-(iii) ------- B. EBITDA(4) the sum of: (i) net income or loss(5) ------- plus ---- (ii) depreciation ------- plus ---- (iii) amortization ------- plus ---- (iv) interest ------- plus ---- (v) taxes on income ------- plus ---- (vi) non-cash expenses or charges for management stock compensation -------
- -------------------- (1) All items determined on a consolidated basis and in accordance with GAAP, consistently applied. (2) See definition of Net Funded Debt for certain items excluded. (3) Not subject to any Lien, and to extent exceeding $5,000,000. (4) Calculated on a rolling four-quarter basis. (5) Without giving effect to extraordinary losses or gains. 1 9
Actual Required/Permitted ------ ------------------ (i)+(ii)+(iii)+(iv)+(v)+(vi) ----- A --- B ===== Not more than 3.00 2. Section 8.13 Tangible Net Worth. Tangible Net Worth: Not to be less than the sum of: (i) gross book value of assets _____ A. Tangible Net Worth as of 9/30/97. less (1) gross book value of assets _____ ---- (ii) goodwill, licensing agreements, less patents, trademarks, trade names, ---- organization expenses, treasury stock, (ii) goodwill, licensing agreements, trademarks, unamortized debt discount and premium, trade names, organization expenses, treasury deferred charges and other like intangibles _____ stock, unamortized debt discount and premium, deferred charges and other like intangibles. _____ less less ---- ---- (iii) reserves applicable to assets (including (iii) reserves applicable to assets (including reserves for depreciation and amortization) _____ reserves for depreciation and amortization) _____ less less ---- ---- (iv) all liabilities (including accrued and (iv) all liabilities (including accrued and deferred income taxes and any subordinated deferred income taxes and subordinated liabilities) _____ liabilities) _____ (i)-(ii)-(iii)-(iv) = (i)-(ii)-(iii)-(iv) = ===== ===== x 90% (6) ===== LESS ---- B. Stock repurchases after 9/30/97 (not to exceed $25,000,000) _____ plus ---- - ------------------------- (6) Calculation will need to be done for first compliance certificate only; thereafter this number will be inserted.
2 10
Actual Required/Permitted ------ ------------------ C. 50% of net income after Income taxes (without Subtracting losses) Earned after 9/30/97 ____ plus ---- D. 75% of net proceeds from any equity security issued after 9/30/97 ____ plus ---- E. 75% of any increase in stockholder's equity resulting from the conversion of debt securities to equity securities after 9/30/97 ____ A - B + C + D + E = ==== 3. Section 8.14 Interest Coverage Ratio.(7) The ratio of: A. Adjusted EBITDA (i) EBITDA (from 1(B) above) _____ less ---- (ii) Capital Expenditures _____ (i) - (ii) _____ B. Cash Interest Expense (i) Total interest expense (including commissions, discounts, fees and other charges in connection with standby letters of credit and similar instruments _____ less ---- (ii) Non-cash items included in (i) _____ (i) - (ii) _____ A - B Not less than 3.00 ===== - --------------- (7) Calculated on a rolling four-quarter basis.
3 EX-10.19 4 LEASE DATED MAY 8, 1997 1 EXHIBIT 10.19 DATE May 8th, 1997 ROYAL LIVER ASSURANCE LIMITED and PLANTRONICS LIMITED LEASE of premises known as Unit C Plot 5 Interface Business Park Bincknoll Lane Wootton Bassett Wiltshire PHILIP G OWEN 3RD FLOOR, ROYAL LIVER BUILDING PIER HEAD LIVERPOOL L3 1JH 2 THIS LEASE is made the eight day of May 1997 BETWEEN ROYAL LIVER ASSURANCE LIMITED whose registered office is at Royal Liver Building Pier Head Liverpool L3 1HT (hereinafter called the "Landlord" which expression shall where the context so admits include the estate owner for the time being of the reversion of the premises hereby demised expectant on the term hereby granted) of the one part and PLANTRONICS LIMITED whose registered office is at 236 Grays Inn Road London WCIX 8HB Company Registration Number: 1773891 (hereinafter called the "Tenant" which expression shall where the context so admits include the estate owner for the time being in respect of the term hereby granted) of the other part 1 DEFINITIONS 1.1 "Demised Premises" means the premises described in the First Schedule hereto 1.2 "the Plan" means the plan annexed to this lease 1.3 "Term" shall be a term of years commencing on the date hereof and expiring on the 28th September 2015 1.4 "Service Media" means the common watercourses water supply pipes waste water pipes soil pipes drains sewers gutters downpipes gas pipes fuel pipes oil pipes electricity cables telephone cables sprinklers ducts conduits flues wires and all other conducting media plant equipment and apparatus for the provision or supply of services serving the Development or any part thereof including (but not serving exclusively) the Demised Premises and where applicable serving in common any adjoining or adjacent building or premises 1.5 "Planning Law" means every law for the time being in force by virtue of the Town and Country Planning Act 1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the Planning (Consequential Provisions) Act 1990, the Planning (Hazardous Substances) Act 1990, and the Planning and Compensation Act 1991 1.6 "Interest" means an amount or amounts equivalent to Four per cent per annum above the Base Rate of National Westminster Bank PLC for the time being in force (except in respect of Clause 7 ) where the rate shall be the base rate as aforesaid) (or if such Base Rate shall no longer be readily ascertainable a rate of interest of at least Ten per cent per 2 3 annum specified by the Landlord as representing its opinion of the equivalent rate) calculated on a daily basis from the due date for payment to the day of actual payment thereof (whether before or after judgement) compounded quarterly on each usual quarter day (and so in proportion for part of a quarter) 1.7 "Common Parts" means all car parking areas forecourts and loading and unloading and service areas (whether used exclusively or otherwise) and also all parts of the Development which do not from time to time comprise Lettable Units and which are intended for general use or use by more than one occupier of the Development including without prejudice to the generality of the foregoing all the following which may from time to time be comprised in or appurtenant to the Development the roadways paths pavements vehicular and pedestrian ways court yards loading unloading and parking areas the Service Media retaining party and perimeter walls palisades landscaped areas gates fences fire escape ways ramps signs and notice boards storage areas refuse collection and disposal areas and parking areas 1.8 "Service Charge" means:- 1.8.1 43 per cent of any service charge payments demanded of the Landlord or paid or incurred by the Landlord pursuant to the terms of the Transfer dated the 2nd January 1990 made between (1) Trafalgar House Business Parks Limited and (2) Canynge Bicknell Limited 1.8.2 43 per cent of all sums incurred by or demanded of the Landlord for the maintenance repair renewal cleansing and lighting of the roadway shown coloured brown on the Plan and also all service media which serve the Development 1.9 "Development" means the land (of which the Demised Premises form part) and all buildings and other structures of whatsoever nature from time to time erected thereon or on some part or parts thereof and the appurtenances thereof which land is known as Plot 5 Interface Business Park Bincknoll Lane Wootton Bassett and for the purpose of identification only is shown edged green on the Plan 1.10 "Lettable Unit" means any unit of accommodation forming part of the Development which is or is intended by the Landlord at any material time to be the subject matter of a separate letting 3 4 1.11 "Landlord's Surveyors" means such surveyors or other staff (whether or not retained or employed by the Landlord) who shall fulfil the functions allocated to them by this Lease 1.12 "Insured Risks" means loss or damage (other than in the case of war invasion ionising and other radiation or other similar cause for which the Demised Premises or any premises of which the Demised Premises form part are not covered under the Landlord's insurance policy or policies for the time being and subject to such exclusions and limitations as may be imposed by the insurers) by fire explosion storm tempest flood impact malicious damage property owners liability and (in times of peace) aircraft and articles dropped or falling therefrom and also against third party risks and such other risks and perils as the Landlord shall in its absolute discretion determine including three years loss of rent (including estimated increases upon review) and an additional sum to cover the cost of debris removal demolition site clearance Architects and Surveyors fees liability to pay charges or fees upon the submission of applications for planning permission or other consents which may be required for reinstatement and Value Added Tax thereon including insurance revaluation fees 1.13 "the 1995 Act" means the Landlord and Tenant (Covenants) Act 1995 1.14 "Unit A" means Unit A Plot 5 Interface Business Park Bincknoll Lane edged blue on the Plan 2 IN CONSIDERATION of the rents hereby reserved and the covenants and conditions herein contained on the part of the Tenant the Landlord HEREBY DEMISES unto the Tenant the Demised Premises which expression shall include all alterations additions and improvements at any time and from time to time made thereto and all fixtures and fittings plant and machinery and any new buildings erected thereon during the Term TOGETHER WITH so far as the Landlord has power to grant the same (in common with the Landlord and all other persons authorised by the Landlord or entitled thereto) the rights (if any) set out in the Second Schedule hereto EXCEPTING AND RESERVING to the Landlord the rights set out in the Third Schedule hereto and SUBJECT TO and with the benefit of any matters contained or referred to in the registers of title number WT 111772 TO HOLD the same unto the Tenant for the Term YIELDING AND PAYING THEREFOR FIRST from the 15th day of December 1997 until the first Date of Review (as that expression is hereinafter defined) the yearly rent of Ninety six thousand pounds (pound sterling96,000) and for the remainder of the Term the yearly rent to be agreed or determined as hereinafter appearing such rent to be paid in advance without any deduction or set 4 5 off by equal quarterly payments on the four usual quarter days in every year save that the first of such payments or a proportionate part thereof shall be made on the 15th day of December 1997 and shall be the appropriate proportion of the said yearly rent from the 15th day of December 1997 to next succeeding quarter day AND SECONDLY by way of additional rent on demand a fair proportion to be determined by the Landlord or the Landlord's Surveyors for the time being of all sums of money (including any increased premium payable as a result of the use of the Demised Premises by the Tenant or other occupiers thereof) as may be expended by the Landlord in effecting or maintaining the insurance of the Demised Premises against the Insured Risks provided that in particular no deduction shall be allowed to or made by the Tenant in respect of any agency allowance or other commission or discount whether paid or allowed to the Landlord itself or otherwise and the full nominal or gross amount of each sum or premium (before deduction of any such allowance commission or discount) shall be treated as expended by the Landlord for the said insurance and the Landlord shall be entitled to retain for its own benefit the said agency allowance other commission or discount so allowed AND THIRDLY also by way of additional rent payable in accordance with Clause 3.30 the Service Charge PROVIDED THAT if and whenever the Tenant shall pay the said rent or rents after the day on which the same shall become due the Tenant shall pay to the Landlord Interest and the amount of Interest so payable shall at the option of the Landlord be recoverable by action or as rent in arrear 3 THE TENANT HEREBY COVENANTS with the Landlord as follows: 3.1 RENTS To pay the respective rents herein reserved including any increased rent at the times and in the manner provided by Banker's Standing Order or Direct Debit or such other means as the Landlord may require provided that any payment made by Standing Order or Direct Debit will not be treated as having been made until the monies are received by the Landlord's bank TOGETHER WITH any tax now or hereafter imposed on the payments of rents other than one required by statute to be borne by the Landlord and without prejudice to any other rights of the Landlord to pay to the Landlord on demand an amount equal to Interest on any rent or other payment of whatsoever nature due from the Tenant to the Landlord (including any rent or other payment not demanded nor if demanded not accepted by the Landlord because of the Tenant's breach of covenant) in respect of the period from the due date until payment is received or accepted 3.2 OUTGOINGS 5 6 To pay and discharge all existing and future rates taxes duties charges assessments impositions and outgoings of any description whatsoever which are now or may at any time hereafter be assessed charged or imposed upon or be payable in respect of the Demised Premises or any part thereof or on the owner or occupier thereof (save only for any occasioned by any disposition or dealing with or the ownership of any estate or interest expectant on the reversion on the termination of the term) PROVIDED ALWAYS THAT where such rate tax duty charge or assessment is assessed or levied on the Landlord the Tenant shall have the right to require the Landlord to appeal such rate tax duty charge or assessment and to conduct such appeal as reasonably directed by the Tenant subject to the Tenant indemnifying the Landlord against all costs expenses claims and liability directly or indirectly incurred by the Landlord in respect of such appeal and without prejudice to the generality of the foregoing to pay to the Landlord the amount of any rates or surcharge payable by the Landlord after the date of termination of the term through the Landlord's ability to claim void rate relief for the maximum period (commencing on the date of termination of the term) which would have been allowed had the Demised Premises been occupied up to the date of the termination of the term up to a maximum amount payable by the Tenant to the Landlord under this sub-clause equal to one half of the total relief available 3.3 JOINT OUTGOINGS In the event of any rates taxes duties charges assessments impositions or outgoings being assessed charged or imposed upon or being payable during the Term in respect of any premises of which the Demised Premises or any part thereof form part or jointly with other premises to bear and pay to or by the direction of the Landlord the proportions of the same which are fairly and properly attributable to the Demised Premises or any part thereof as certified by the Landlord or the Landlord's Surveyors and to keep the Landlord effectually indemnified against the same 3.4 COST OF SERVICES CONSUMED To pay for all (or where applicable a due proportion of the cost of) gas and electricity and other fuel or power consumed and water telephone and any other services in or to the Demised Premises and the rent of all meters and any other charges for the supply thereof and to comply with all regulations and requirements of the Boards or other Authorities and Companies supplying the same 3.5 REPAIR AND DECORATION 6 7 3.5.1 At all times (except in the case of damage by any of the Insured Risks save to the extent that such policies shall have been vitiated or payment refused in consequence of some act or default of the Tenant) to the satisfaction of the Landlord or the Landlord's Surveyors well and substantially to maintain cleanse repair and keep in good and substantial repair order and condition (and renew by way of repair) the whole of the Demised Premises and every part thereof including without prejudice to the generality of the foregoing the sanitary water heating cooling and ventilating apparatus the fire escapes roadways paths walls sewers drains conduits gutters watercourses pipes cables wires ducts and mains and apparatus associated therewith and any equipment fixtures and fittings ancillary thereto forming part of the Demised Premises and as and when required by the Landlord to clean and repoint any external stone and brickwork of the Demised Premises 3.5.2 To paint with three coats of good quality paint in colours approved by the Landlord in a proper and workmanlike manner or to treat with appropriate materials all the wood iron stucco and cement work and other parts of the Demised Premises heretofore or usually or properly painted or otherwise treated as to the external work in every third year of the Term and in the last year of the Term or on sooner determination (howsoever determined) of the Term and as to the internal work in every fifth year and in the last year of the Term or on sooner determination (howsoever determined) of the Term and after every painting to grain polish varnish wash stop whiten and colour all such parts as are usually so treated and to repaper with suitable paper of good quality the parts usually papered 3.5.3 To clean the inside and outside of all windows of the Demised Premises as often as necessary 3.5.4 To enter into specialist contracts for the proper servicing and maintenance at intervals of not less than once a year of any boiler heating and hot water systems lifts plant sprinklers fire alarms and air conditioning such contracts or copies thereof to be produced to the Landlord on request 3.5.5 To keep all landscaped areas of the Demised Premises in a neat and tidy condition and duly tended 7 8 3.5.6 To maintain repair cleanse and light that part of the roadway and pathway within the Development coloured purple on the Plan 3.6 WORKS At the Tenant's own expense to execute all such works as may under any Act of Parliament or bye-law of any local or other Public Authority already or hereafter to be passed be required by any Local or Public Authority to be executed whether by the Landlord or Tenant thereof at any time during the Term upon or in respect of the Demised Premises or the user thereof authorised by this Lease or for the benefit of the persons employed therein AND not to do or omit any act or thing by reason of which the Landlord may incur or have imposed on it or become liable to pay any penalty and at all times as well after as before the determination of the Term to keep the Landlord indemnified against all liability loss damages costs and expenses arising out of or incidental to any contravention of or non-compliance with the provisions of this sub-clause and to conform in all respects with the provisions of and regulation under any Act of Parliament or bye-law which may be applicable to the Demised Premises 3.7 NOTICES Forthwith to give notice in writing to the Landlord of any defect in the state of the Demised Premises which would or might give rise to an obligation on the Landlord to do or refrain from doing any act or thing in order to comply with any duty of care imposed on the Landlord pursuant to the Defective Premises Act 1972 and to indemnify and to keep indemnified the Landlord from and against all loss claims actions costs or demands arising from any failure to give such notice and at all times to display and maintain any notices (including the wording thereof) which the Landlord may from time to time display or require to be displayed at the Demised Premises 3.8 ENTRY 3.8.1 To permit the Landlord and the Landlord's Surveyors with or without workmen and others at all reasonable times in the daytime after first giving reasonable notice to the Tenant to enter the Demised Premises to view the condition thereof and to take inventories of the Landlord's fixtures and fittings and to make inspections in order to value the Demised Premises for insurance sale rent review or other reasonable purposes 8 9 3.8.2 To permit the Landlord and the lessees of the Landlord and their respective employees workmen and agents and any other persons entitled thereto to enter upon the Demised Premises upon forty-eight hours notice (except in emergency) without compensation (beyond making good damage to the Demised Premises) to exercise the rights set out at paragraphs 3, 4 and 5 the Third Schedule hereto 3.9 FAILURE TO REPAIR To comply with any notice in writing which the Landlord shall give to the Tenant or leave for the Tenant upon the Demised Premises specifying any want of repair or decoration for which the Tenant is liable under the covenants herein contained and if the Tenant shall not within three calendar months after the date of such notice complete the execution of all work necessary to make good such wants of repair or decoration to permit the Landlord (but without prejudice to the right of re-entry hereinafter contained) to enter the Demised Premises and carry out such work and all expenses thereby incurred shall on demand be paid by the Tenant to the Landlord and if the same shall not be so paid within ten days of the date of demand they shall be added to the rent hereinbefore reserved and be recoverable as rent and shall carry Interest from the date of demand to the date of actual payment 3.10 ALTERATIONS 3.10.1 Not to make any addition or alteration to the exterior or structure or to any principal or load bearing wall beam or girder or to any means of access or to the elevation external design appearance or external decorative scheme of the Demised Premises nor to erect any new building or structure of any kind on any part of the Demised Premises 3.10.2 Subject to the preceding sub-clause hereof not without the Landlord's previous written consent such consent not to be unreasonably withheld to make any addition or alteration to the interior or to the internal arrangement partitioning design or appearance of the Demised Premises or to the electrical wiring or to the heating or air conditioning plant equipment and apparatus (if any) or sprinkler system (if any) in the Demised Premises except in accordance with plans and specifications thereof previously submitted at the Tenant's expense in quadruplicate to and approved in writing by the Landlord and in a manner approved by the Landlord and in accordance with any relevant terms conditions 9 10 recommendations and regulations of the Institution of Electrical Engineers and the electricity and water supply and fire control authorities and the insurance company with whom the Demised Premises are for the time being insured PROVIDED ALWAYS THAT no such alterations additions modifications or erections shall be carried out until the Landlord has issued its consent in writing to which the Tenant shall if required by the Landlord join as a party in order to give such covenants including those relating to reinstatement as the Landlord may reasonably require (such consent subject to compliance with the foregoing not to be unreasonably withheld) 3.10.3 To submit to the Landlord such other plans elevations sections and specifications necessary to enable the Landlord to consider any application for such approval and to pay the costs fees and disbursements (including fees paid for professional advice) whether such approval be granted or not incurred by the Landlord consequent upon any such application or upon any reinstatement 3.10.4 Before the end of the Term or forthwith upon sooner determination thereof or the determination of any extension thereof if so required by the Landlord to reinstate the Demised Premises to the reasonable satisfaction of the Landlord's Surveyors to the state and condition as that existing at the commencement of the Term 3.10.5 Notwithstanding the above the Tenant shall be entitled (with the consent of the Landlord) to install alter or remove demountable partitions which do not affect the structure of the Demised Premises 3.11 INSURANCE Not to do or permit or suffer to be done anything whereby the policy or policies of insurance in respect of the Demised Premises or of any adjoining or nearby property may become void or voidable and to repay to the Landlord all sums paid by way of increased premiums and all expenses incurred by the Landlord in or about any renewal of such policy or policies rendered necessary by a breach of this covenant and in the event of the Tenant doing anything which shall increase the rate of premium for insuring the Demised Premises or any adjoining premises of the Landlord to a rate higher than that previously charged in respect of premises similar to the Demised Premises or any adjoining premises of the Landlord to pay the revised premium for insuring the Demised Premises or any adjoining premises of the Landlord and if such sums 10 11 expenses and premiums shall not be paid within Fourteen days of the date of demand they shall be added to the rent hereinbefore reserved and be recoverable as rent and shall carry Interest from the date of demand to the date of actual payment 3.12 DEALINGS 3.12.1 The Tenant must not hold the Demised Premises on trust for another. The Tenant must not part with possession of the Demised Premises or any part of them or permit another to occupy them or any part of them except pursuant to a transaction permitted by and effected in accordance with the provisions of this Lease 3.12.2 The Tenant must not assign sublet or charge part only of the Demised Premises nor charge the whole of the Demised Premises 3.12.3 Subject to clauses 3.12.4 and 3.12.5 the Tenant must not assign the whole of the Demised Premises without the consent of the Landlord whose consent may not be unreasonably withheld or delayed 3.12.4 If any of the following circumstances which are specified for the purposes of the Landlord and Tenant Act 1927 section 19(1A) applies either at the date when application for consent to assign is made to the Landlord or after that date but before the Landlord's consent is given the Landlord may withhold his consent and if after the Landlord's consent has been given but before the assignment has taken place any such circumstances apply the Landlord may revoke his consent, whether his consent is expressly subject to a condition as referred to in subclause 3.12.5.4 or not. The circumstances are: 3.12.4.1 that any sum due from the Tenant under this Lease remains unpaid or if the reasonable opinion of the Landlord there is a subsisting material breach of covenant in this lease on the part of the Tenant 11 12 3.12.4.2 that in the Landlord's reasonable opinion the assignee is not a person who is likely to be able to comply with the tenant covenants of this Lease and to continue to be able to comply with them following the assignment 3.12.4.3 that the proposed assignee is an associated company of the Tenant 3.12.4.4 that the proposed assignee is not resident in Great Britain provided that whilst the Tenant remains Plantronics Limited clauses 3.12.4.3 and 3.12.4.4. shall not apply 3.12.5 The Landlord may impose any or all of the following conditions which are specified for the purposes of the Landlord and Tenant Act 1927 section 19(1A) on giving any consent for an assignment by the Tenant, and any such consent is to be treated as being subject to each of the following: 3.12.5.1 a condition that on or before any assignment and before giving occupation to the assignee the Tenant requesting consent to assign, together with any former tenant who by virtue of the 1995 Act section 11 was not released on an earlier unauthorised assignment of this Lease must enter into an authorised guarantee agreement in favour of the Landlord in the terms set out in the Fifth Schedule 3.12.5.2 a condition that if reasonably so required by the Landlord on an assignment to an individual or body corporate or partnership or other person not being a Government Department the assignee must ensure that a guarantor or guarantors reasonably acceptable to the Landlord enter into a guarantee of the covenants of the assignee the guarantee to be in the terms set out in the Fifth Schedule 3.12.5.3 a condition that upon or before any assignment the Tenant making the request for consent to assign must give to the Landlord a copy of the 12 13 health and safety file required to be maintained under the Construction (Design and Management) Regulations 1994 containing full details of all works undertaken to the Demised Premises by that Tenant and 3.12.5.4 a condition that if at any time before the assignment the circumstances specified in clause 3.12.4, or any of them apply the Landlord may revoke the consent by written notice to the Tenant 3.12.6 The Tenant must not sublet the whole of the Demised Premises without the consent of the Landlord whose consent may not be unreasonably withheld or delayed 3.12.7 Every permitted sublease must be granted, without a fine or premium at a rent not less than the open market rent payable in respect of the Demised Premises to be approved by the Landlord before the sublease or in default of any such approval as may be determined by a single arbitrator in accordance with the Arbitration Act 1996 or by an expert (as the Landlord shall elect) and as additional yearly rents amounts equivalent to and consistent with the additional rents hereby reserved and the open market rent to be payable in advance on the days on which such rent is payable under this Lease. Every permitted sublease must contain provisions approved by the Landlord 3.12.7.1 for the upwards only review of the rent reserved by it on the basis set out in clause 7 and on the Dates of Review 3.12.7.2 prohibiting the subtenant from doing or allowing anything in relation to the Demised Premises inconsistent with or in breach of the provisions of this Lease 3.12.7.3 for re-entry by the sublandlord on breach of any covenant by the subtenant 13 14 3.12.7.4 imposing an absolute prohibition against all dealings with the Demised Premises other than assignment of the whole 3.12.7.5 prohibiting assignment of the whole of the Demised Premises without the consent of the Landlord under this Lease 3.12.7.6 requiring the assignee on any assignment of the sublease to enter into direct covenants with the Landlord to the same effect as those contained in clause 3.12.8 3.12.7.7 prohibiting the subtenant from holding on trust for another or permitting another to share or occupy the whole or any part of the Demised Premises 3.12.7.8 imposing in relation to any permitted assignment the same obligations for registration with the Landlord as are contained in this Lease in relation to dispositions by the Tenant 3.12.8 Before any permitted subletting the Tenant must ensure that the subtenant enters into a direct covenant with the Landlord that while the subtenant is bound by the tenant covenants of the sublease and while he is bound by an authorised guarantee agreement the subtenant will observe and perform the tenant covenants contained in this Lease except the covenant to pay the rent reserved by this Lease and in that sublease 3.12.9 In relation to any permitted sublease, the Tenant must enforce the performance and observance by every subtenant of the provisions of the sublease and must not at any time either expressly or by implication waive any breach of the covenants or conditions on the part of any subtenant or assignee of any sublease, or without the consent of the Landlord, whose consent may not be unreasonably withheld or delayed vary the terms of any permitted sublease 3.13 SHARING OF OCCUPATION 14 15 Not to share the occupation of the whole or part of the Demised Premises PROVIDED ALWAYS THAT any Tenant for the time being being a limited company may with the consent of the Landlord (such consent not to be unreasonably withheld) share the occupation of the Demised Premises with a company within the same group (as that expression is defined in Section 42 of the Landlord and Tenant Act 1954) PROVIDED FURTHER THAT no such sharing of occupation shall be effected so as to afford the relevant company security of tenure in the relevant premises nor to create a relationship of lessor and lessee 3.14 REGISTRATION Within twenty-one days from the date thereof to produce of every assignment underlease transfer mortgage charge probate letters of administration order instrument or other writing effecting or evidencing any transmission or devolution of any estate or interest (derivative or otherwise) in the Demised Premises to the Landlord or its solicitors for registration and to leave a certified copy of the same to pay to the Landlord or its solicitors a reasonable registration fee (being not less than ten pounds) 3.15 USER 3.15.1 Not to use the Demised Premises or any part thereof otherwise than for purposes within Classes BI and B8 of The Town and Country Planning (Use Classes) Order 1987 together with ancillary car parking 3.15.2 In the event of the Demised Premises remaining unoccupied for seven days to give notice to that effect to the Landlord and to ensure that the premises are properly locked and secured and to make such other provisions for supervision and security of the Demised Premises as the Landlord shall reasonably consider necessary 3.16 STATUTORY REQUIREMENTS 3.16.1 To comply at all times during the Term with all statutory and other requirements for ensuring the health safety and welfare of the persons (including disabled persons) using or employed in or about the Demised Premises or any part thereof and in particular but without prejudice to the generality of the foregoing the Factory Act 1961 the Offices Shops and Railway Premises Act 1963 and the 15 16 Health and Safety at Work Act 1974 or any statutory modification or re-enactment thereof for the time being in force and all regulations and orders made thereunder and to indemnify and keep the Landlord indemnified against any breach or non observance thereof or any liability in respect thereof and also to produce to the Landlord on demand sufficient evidence of compliances as aforesaid 3.16.2 Without prejudice to the generality of clause 3.16.1 the Tenant must comply with the provisions of the Construction (Design and Management) Regulations 1994 ('the CDM Regulations'), be the only client as defined in the provisions of the CDM Regulations, fulfil, in relation to all and any works, all the obligations of the client as set out in or reasonably to be inferred from the CDM Regulations, and make a declaration to that effect to the Health and Safety Executive in accordance with the Approved Code of Practice published from time to time by the Health and Safety Executive in relation to the CDM Regulations. 3.16.3 At the end of the Term, the Tenant must forthwith deliver to the Landlord any and all health and safety files relating to the Demised Premises in accordance with the CDM Regulations 3.17 NUISANCE 3.17.1 Not to do on the Demised Premises or any part thereof or on adjoining or neighbouring premises any act matter or thing whatsoever nor cause any smoke effluvia vapour grit smells or odour which shall in the opinion of the Landlord be or become a nuisance danger damage annoyance inconvenience or disturbance to the Landlord or the owners tenants or occupiers of any adjoining or neighbouring property And not to hold any sale by auction on the Demised Premises And not to carry on upon the Demised Premises or any part thereof any offensive or noisy trade business manufacture or occupation or use the Demised Premises for any illegal or immoral or political purpose and not to allow any person to reside or sleep in the Demised Premises nor to cook or re-heat or prepare in any way any food therein save as a minor facility to those employed within the Demised Premises and not to play any loud music on the Demised Premises 3.17.2 To pay all costs charges and expenses incurred by the Landlord in abating any nuisance public or private caused by the Tenant or any occupant of the Demised 16 17 Premises or its or their servants agents licensees and invitees whether emanating from the Demised Premises or otherwise affecting the Demised Premises and executing all such works as may be necessary for abating any such nuisance or for remedying any other matter in connection with the Demised Premises whether or not in obedience to a notice served by a Local Authority 3.17.3 Not to form any refuse dump or rubbish or scrap heap on the Demised Premises but to keep all waste materials and other discarded matter in suitable receptacles and to remove or cause to be removed daily all perishable or malodorous refuse and not less frequently than once a week all other refuse rubbish or scrap which may have accumulated on the Demised Premises and all used tins cans boxes and other containers and comply with such directions and regulations as the Landlord may prescribe for the disposal of rubbish and generally to keep the Demised Premises and any pavement or forecourt space between the Demised Premises and any adjoining premises in a clean and tidy condition free from deposits of materials or refuse and not to bring or keep upon the Demised Premises anything which is or may become in the opinion of the Landlord untidy unclean unsightly or in any way detrimental to the amenity of the neighbourhood 3.17.4 Not to allow to pass into the sewers drains or watercourses serving the Demised Premises any noxious or deleterious effluent or other substance which will cause an obstruction in or injure the said sewers drains or watercourses and in the event of obstruction or injury forthwith to make good such damage to the reasonable satisfaction of the Landlord's Surveyors 3.17.5 Not for any reason to store or stack any goods on any part of the Demised Premises which may for the time being be unbuilt upon or use any part thereof as a stacking area or for carrying out any industrial process or for the repair and maintenance of motor vehicles 3.18 WEIGHT Not to allow any article of excessive weight to be placed on the floors or to be hung from the walls or roof or roof members or ceilings of the Demised Premises so as to be likely to cause damage to the Demised Premises or other premises or which may be in excess of the weight which such floors walls roof and ceilings are calculated to bear with due margin for safety and in case of any 17 18 dispute arising out of this sub-clause the decision of the Landlord's Surveyors shall be binding on the Tenant 3.19 EASEMENTS Not to stop up or obstruct any windows or light belonging to the Demised Premises or to any other building belonging to the Landlord nor knowingly to permit or suffer any encroachment upon the Demised Premises or any part thereof or the acquisition of any new right of light passage drainage or other easement to be acquired on over or under the Demised Premises or any part thereof and if any such encroachment or easement shall be made or threatened to be made forthwith to give written notice to the Landlord and at the request and cost of the Landlord to do all such things as may be proper for the purpose of preventing the making of such encroachment or the acquisition of such easement or right and if the Tenant shall omit or neglect forthwith to do all such things as aforesaid it shall be lawful for the Landlord or its agents officers servants and workmen to enter upon the Demised Premises and to do the same 3.20 SIGNS Not to place or expose upon any part of the exterior or in any windows or upon the exterior of any walls of the Demised Premises any advertisement hoarding notice name-plate board sign or inscription (whether illuminated or otherwise) except such as shall be previously approved by or on behalf of the Landlord such approval not to be unreasonably withheld or delayed 3.21 PLANNING 3.21.1 Within seven days of receipt to give full particulars to the Landlord of any notice or order or a proposal for a notice or order made given or issued to the Tenant by a Planning Authority under or by virtue of Planning Law and if so required by the Landlord to produce such notice order or proposal for a notice or order to the Landlord and also without delay to take all reasonable or necessary steps to comply with any such notice or order and also at the request and cost of the Landlord to make or join with the Landlord in making such objection or objections or representation or representations against or in respect of any such notice order or proposal as the Landlord shall reasonably deem expedient 18 19 3.21.2 Not to do or omit or suffer to be done or omitted any act or thing in on or respecting the Demised Premises required to be omitted or done (as the case may be) by Planning Law and at all times hereafter to indemnify and to keep indemnified the Landlord against all actions proceedings costs claims demands and expenses in respect of such act or thing contravening the provisions of Planning Law 3.21.3 to carry out before the expiration or sooner determination of the Term any works stipulated to be carried out to the Demised Premises as a condition of any planning permission which may have been granted (other than to the Landlord) and implemented (in part or whole) during the Term 3.21.4 if the Tenant shall receive or shall have been entitled to receive any compensation in relation to its leasehold interest in the Demised Premises resulting from any restriction imposed upon the use of the Demised Premises under or by virtue of Planning Law the Tenant shall on the determination or expiration of its leasehold interest forthwith make such provision as is just and equitable for the Landlord to receive its due benefit from such compensation 3.21.5 not to make any planning application relating to the Demised Premises without the Landlord's prior written consent such consent not to be unreasonably withheld or delayed 3.21.6 if and when called upon so to do to produce to the Landlord all such plans documents and other evidence as the Landlord may require in order to satisfy itself that the provisions of this sub-clause have been complied with in all respects 3.22 LETTING BOARDS Provided the Tenant has not made an application to the Court for the renewal of this Lease under the Landlord and Tenant Act 1954 to permit the Landlord to place and maintain in prominent positions notice boards indicating that the Demised Premises are to be sold or (during the last six months of the Term) let and to allow intending purchasers or lessees reasonable facilities for viewing the Demised Premises 3.23 YIELD UP 19 20 To yield up to the Landlord or as it may direct at the end of the Term the Demised Premises with full vacant possession together with all additions and improvements made thereto (unless the Landlord shall require reinstatement of the Demised Premises to their original condition) and all fixtures (other than Tenant's fixtures) all in such repair order and condition in accordance with the Tenant's covenants herein contained having replaced any of the Landlord's fixtures and fittings as require replacement with those of similar quality and value and having removed all signs and made good any damage thereby caused 3.24 DANGEROUS SUBSTANCES Not to keep or to permit or suffer to be kept on the Demised Premises any materials of a dangerous noxious combustible or explosive nature the keeping of which may contravene any statute or order or local regulation or bye-law or constitute a nuisance to the occupiers of neighbouring property and not to carry on or to permit or suffer to be carried on upon the Demised Premises any trade of a noxious or offensive nature 3.25 INDEMNITY To indemnify and keep the Landlord indemnified from and against all actions proceedings costs claims demands expenses and liability in respect of the death of or any injury to any person and in respect of any damage to any property movable or immovable or in respect of the infringement disturbance or destruction of any right easement or privilege or otherwise by reason of or arising in any way directly or indirectly out of the repair or state of repair of the Demised Premises or any part thereof or the execution by the Tenant of any alteration or addition to the Demised Premises or the non-performance or breach of any of the Tenant's covenants or the conditions herein contained and to insure and keep insured in the joint names of the Tenant and the Landlord with an insurance company of repute and approved by the Landlord a reasonable amount (not being less than any amount from time to time to be approved by the Landlord such approval not to be unreasonably withheld or delayed) in respect of such expenses costs claims damages demands and any other liability aforesaid and to pay all premiums therefor when required and to produce to the Landlord whenever required a copy of the policy and of the receipt for the last premium due thereunder 3.26 VAT 20 21 3.26.1 If Value Added Tax shall be chargeable by the Landlord in respect of any rents fees and charges payable hereunder or otherwise in respect of any supplies (as defined in the Value Added Tax legislation from time to time in force) made to the Tenant to pay to the Landlord in addition to any amounts otherwise payable the amount of the Value Added Tax so chargeable 3.26.2 if any payment hereunder (not being a payment to which Value Added Tax is added pursuant to sub-clause (a) hereof) shall be in reimbursement of any expenditure by or on behalf of the Landlord which includes Value Added Tax to pay also so much of the Value Added Tax as is not recoverable by the Landlord as an input 3.27 COSTS To pay: 3.27.1 to the Landlord all costs charges and expenses (including legal costs and fees payable to a Surveyor) which may be incurred by the Landlord in or in contemplation of any proceedings under Sections 146 and 147 of the Law of Property Act 1925 (whether or not any right of re-entry or forfeiture has been waived by the Landlord or the Tenant has been relieved under the provisions of the said Act) or in connection with any application to any Planning Authority or under Planning Law or of any application to the Landlord for any consent pursuant to the covenants herein contained and of any Schedule of Dilapidations whether prepared or served before or after the expiry or sooner determination of this Lease and to keep the Landlord fully and effectually indemnified against all costs expenses claims and demands whatsoever in respect of the said applications consents and proceedings 3.27.2 the legal charges and surveyors' fees incurred by the Landlord resulting from all applications by the Tenant for any consent required by this Lease including legal charges and surveyors' and other professional fees incurred in consequence of such applications in cases where consent is refused or the application is withdrawn 21 22 3.27.3 all legal and other costs incurred by the Landlord in recovering or attempting to recover whether by any legal process including distress or by correspondence or otherwise rent and items being treated as rent 3.28 VEHICLES Not to park or permit or suffer any kind of vehicle to be parked on any access road or loading bay or obstruct in any way any access the use of which is common to the Demised Premises and any adjoining or nearby property of the Landlord nor to load or unload or permit or suffer the loading or unloading of goods except as permitted by the terms of the Second Schedule 3.29 REGULATIONS To comply with the regulations set out in the Fourth Schedule hereto and any other reasonable regulations made by the Landlord from time to time for the management of the Demised Premises and any land or premises used or to be used in common or jointly with any other person 3.30 SERVICE CHARGE To pay to the Landlord on written demand as further and additional rent the Service Charge 3.31 TITLE COVENANTS To comply with the covenants contained or referred to in the charges register of title number WT 111772 hereto in so far as they relate to the Demised Premises and to indemnify and keep indemnified the Landlord against all costs claims and demands in respect of any breach or non-performance thereof 3.32 CONSENT TO LANDLORD'S RELEASE Not to unreasonably withhold consent to a request made by the Landlord under the 1995 Act section 8 for a release from all or any of the landlord's covenants of this Lease 4 THE LANDLORD HEREBY COVENANTS with the Tenant (subject to payment by the Tenant of the rents hereby reserved and compliance by the Tenant of all covenants and conditions 22 23 hereunder and not so as to impose any liability upon the Landlord after it has parted with its interest in the Demised Premises) as follows:- 4.1 QUIET ENJOYMENT That the Tenant paying the rents and performing and observing the several covenants and conditions herein contained and on the Tenant's part to be performed and observed shall (subject to all rights of entry hereunder for the Landlord and others authorised by it) peaceably and quietly hold and enjoy the Demised Premises during the Term hereby without any interruption or disturbance from or by the Landlord or any person or persons claiming under or in trust for them or by virtue of title paramount 4.2 TO INSURE At all times during the Term to keep the Demised Premises or any premises of which the Demised Premises form part insured (unless such insurance shall be vitiated by any act of the Tenant or any other occupier of such premises or any part thereof or their respective servants agents licensees or invitees) against loss or damage by the Insured Risks in some Insurance Office of repute to be nominated by the Landlord for the Landlord's opinion of the full cost of reinstatement thereof and to pay all premiums necessary for that purpose and if the Tenant so demands at its cost to produce to the Tenant details of the terms of the policy of insurance and evidence that the current year's premium has been paid and to use all reasonable endeavours to procure that the interest of the Tenant is noted on the policy and to notify the Tenant of any material changes in the risks covered by the policy and further that in case of destruction or damage to the Demised Premises or any premises of which the Demised Premises form part by way of the Insured Risks will subject to the provisions of any Act of Parliament or local bye-law for the time being in force with all due speed apply for and diligently pursue an application for planning permission for the Works of reinstatement and upon receipt of the same with all due speed spend and lay out all monies received in respect of such insurance (except sums in respect of loss of rent) in rebuilding or reinstating in a good and substantial manner those premises so destroyed or damaged and making good any shortfall in the insurance money Provided that if the rebuilding or reinstatement of the Demised Premises or any premises of which the Demised Premises form part shall be prevented or frustrated all such insurance monies shall belong absolutely to the Landlord and shall be paid to the Landlord accordingly PROVIDED that in any reinstatement after damage by any of the insured risks the Landlord shall not be obliged to reinstate in accordance with the plans sections elevations and specifications of the existing building but (so far as is reasonably 23 24 practicable) and consistent with planning and all other relevant statutes bye-laws and regulations) shall provide the Tenant with accommodation reasonably equivalent to that hereby demised the covenants and conditions contained in this Lease to apply thereto in all respects mutatis mutandis as they apply to the Demised Premises 4.3 SERVICES 4.3.1 To use its best endeavours to procure that the roadways coloured brown and coloured yellow on the Plan and Service Media are kept in good repair and condition (and shall renew the same whenever necessary) and properly cleansed and lit as appropriate 4.3.2 To use its best endeavours at the Tenants request to enforce the covenants on the part of Interface (Wootton Bassett) Management Company Limited contained in a deed of covenant dated 1st April 1992 referred to in entry No. 6 of the charges register of title number WT 111772 5 PROVISOS PROVIDED ALWAYS and these presents are upon the following express conditions 5.1 FORFEITURE If the said rents or any part thereof shall at any time be unpaid for Fourteen days after the same shall have become due (whether any legal demand therefor shall have been made or not) or if the Tenant shall at any time fail to perform or observe any of the covenants by the Tenant or the conditions herein contained or shall enter into any arrangement or composition for the benefit of the Tenant's creditors or permit any execution to be levied on the Demised Premises or if the Tenant being a person or persons shall become bankrupt or have a receiving order made against him or them or if the Tenant being a company shall enter into liquidation whether compulsory or voluntary (save voluntarily when solvent for the purpose of amalgamation or reconstruction) then and in any such case it shall be lawful for the Landlord or any person duly authorised by the Landlord to re-enter the Demised Premises or any part thereof in the name of the whole and peaceably to hold the Demised Premises thenceforth as if these presents had not been made without prejudice to any right of action or remedy of the Landlord in respect of any breach of any of the covenants by the Tenant or the conditions herein contained 24 25 5.2 EXCLUSION OF RIGHTS 5.2.1 Neither the Tenant nor the Demised Premises is nor shall become entitled to any right of light or air or to any other right easement or quasi-easement whatsoever (other than those expressly hereby granted) which would or might restrict or interfere with the use for building or any other purposes of any adjoining or neighbouring property and nothing herein contained or implied shall give the Tenant the benefit of or the right to enforce or to have enforced or to prevent the release or modification of any right easement covenant condition or stipulation enjoyed or entered into by any lessee of the Landlord in respect of property not demised by this Lease or prevent or restrict the development or use of any land not demised by this Lease and Section 62 of the Law of Property Act 1925 shall not apply to this Lease and no interest in the soil or premises below or about the Demised Premises is or shall deemed to be included in the demise hereinbefore contained 5.2.2 The exercise of the easements and rights hereby granted is and shall be subject to due compliance by the Tenant of its covenants herein contained 5.3 DISPUTES Any dispute arising as between the Tenant and any occupier of any adjoining or neighbouring property of the Landlord relating to any easement right or privilege in connection with the Demised Premises or relating to the amount of any contribution towards the expenses of works or to services used in common shall be referred to the Landlord whose decision shall be binding upon the parties to the dispute 5.4 REMOVAL OF PROPERTY If at such time as the Tenant has vacated the Demised Premises on the determination of the Term either by effluxion of time or otherwise any property of the Tenant shall remain in or on the Demised Premises and the Tenant shall fail to remove the same within fourteen days after being requested by the Landlord so to do the Landlord may as the agent of the Tenant (and the Landlord is hereby appointed by the Tenant to act in that behalf) sell such property and shall then hold the proceeds of the sale after deducting the costs and expenses of removal storage and sale reasonably and properly incurred by it and any other monies due from the Tenant to the Landlord 25 26 to the order of the Tenant or apply the same towards sums owed by the Tenant to the Landlord PROVIDED ALWAYS THAT if such proceeds of sale shall be insufficient to meet the costs and expenses as aforesaid the Tenant shall pay the amount of the deficiency on demand and will indemnify the Landlord against any claim or liability in respect thereof PROVIDED FURTHER THAT the Tenant will indemnify the Landlord against any liability incurred by it to any third party whose property shall have been sold by the Landlord in the bona fide mistaken belief (which shall be presumed unless the contrary be proved) that such property belonged to the Tenant 5.5 EXCLUSION OF LIABILITY The Landlord shall not be liable beyond any sum which may be recovered under any policy or policies of insurance maintained by the Landlord for any loss accident damage or injury which may at any time during the said term be suffered by the Tenant or the Tenant's employees servants agents invitees or licensees or which may be done to the Demised Premises or to any of the goods or property thereon as a result of any neglect or default of the employees servants or agents of the Landlord or of the defective working accidental stoppage or breakage of the Service Media or any part thereof 5.6 LACK OF WARRANTY Nothing contained in this Lease shall be deemed to constitute any warranty by the Landlord that the Demised Premises or any part thereof are authorised for use under Planning Law or are fit or otherwise usable for any specific purpose 5.7 FEES AND EXPENSES The fees expenses and value added tax thereon of any arbitrator incurred in any arbitration proceedings arising directly or indirectly out of this Lease may be paid to the arbitrator by the Landlord notwithstanding that part or all of such fees and expenses are ultimately to be borne by the Tenant and the Tenant shall forthwith upon demand reimburse the Landlord in respect of such payment 5.8 LANDLORD'S LIABILITY Notwithstanding any other provision herein contained the Landlord shall not be liable to the Tenant in respect of any interruption in any service provided pursuant to clause 4.3 of this lease by 26 27 reason of repair or maintenance of the Common Parts the Service Media or any other premises or damage thereto or destruction thereof by any of the Insured Risks or any breakdown or suspension of any such services or any closure of any of the Common Parts due to any cause beyond the Landlord's control 5.9 RENT CESSER 5.9.1 If during the Term the Demised Premises or any part thereof shall at any time during the Term be so damaged or destroyed as to be unfit for occupation and use then (save to the extent that the Insurance monies shall be irrecoverable by reason of any act or default of the Tenant or any underlessee servant visitor agent or licensee of the Tenant) the rent hereby first reserved or a fair proportion thereof according to the nature and extent of the damage sustained shall be suspended for the period of 3 years or until the Demised Premises shall again be rendered fit for occupation and use (whichever is the sooner) and any dispute with reference to this proviso shall be referred to arbitration in accordance with the Arbitration Act 1996 5.9.2 Notwithstanding the terms of clause 5.9.1 above the Landlord shall be entitled to determine this Lease by six months notice in writing to the Tenant to be given at any time after the expiration of 3 years from the date of such damage or destruction if the Landlord is prevented from re-building or reinstating the Demised Premises as a result of its inability to obtain the relevant Planning Permission bye-laws or other necessary consents or as a result of some other circumstance beyond the Landlord's control or if the Lease is legally frustrated and in any such case the term hereby created shall cease and determine the Tenant in any event paying the rents hereby reserved up to the date of such damage or destruction and all Insurance monies shall belong absolutely to the Landlord and shall be paid to the Landlord accordingly 5.9.3 At any time on or after a date being six months prior to the expiration of a period of 3 years after the date of such damage or destruction the Tenant shall be entitled to serve six months notice in writing on the Landlord determining this Lease provided that any such notice shall be effective only if the re-building or reinstatement of the Demised Premises has not commenced by the date upon which the six months notice shall expire and in any such case the Tenant shall 27 28 pay the rents hereby reserved up to the date of such damage or destruction and all insurance monies shall belong absolutely to the Landlord and shall be paid to the Landlord accordingly 5.9.4 The determination of this Lease by the Landlord or the Tenant in accordance with subclauses 5.9.2 and 5.9.3 above shall be without prejudice to the claim of either party for any earlier breach of covenant by the other 5.10 EXCLUSION OF COMPENSATION Subject to Section 38(2) of the Landlord and Tenant Act 1954 the Tenant shall not be entitled on the termination hereof to compensation under Section 37 of the said Act 5.11 NOTICES A notice shall be deemed duly served on the Tenant if addressed to the Tenant and left at or sent by registered post or recorded delivery to the Demise Premises and shall be deemed to be duly served on the Landlord if addressed to the Landlord and left at or sent by registered post or recorded delivery to its registered office for the time being or if the Landlord at the time is not a corporate body to the last known address of the Landlord and every such notice shall be deemed to have been served on the day on which it is so left or if posted the day immediately following that on which it is so posted 5.12 HEADINGS All clause headings herein are descriptive only and shall not affect the construction or interpretation of this Lease. 5.13 NEW LEASE This Lease is a new tenancy for the purposes of the 1995 Act section 1 6 INTERPRETATION IN this Lease 28 29 6.1.1 where there are two or more persons included in the expression "Tenant" covenants contained in this Lease which are expressed to be made by the Tenant shall be deemed to be made by such persons jointly and severally 6.1.2 words importing the neuter gender only shall include the masculine and feminine gender and words importing the masculine gender only shall include the feminine gender and words importing the singular number only include the plural number and vice versa and 6.1.3 references in this Lease to any Statute Rule and Order shall be deemed to include every statutory amendment re-enactment and replacement thereof for the time being in force and every statutory instrument rule order notice direction and regulation from time to time in force thereunder save that any references to the Town and Country Planning (Use Classes) Order 1987 herein shall be a reference to the said order excluding any future amendment re-enactment and replacement thereof 6.1.4 every covenant by the Tenant herein and every other provision hereof that the Tenant will not do or omit to be done or allow any act matter or thing is deemed to be a covenant or (as the case may require) a provision that the Tenant will not permit or suffer the doing or (as the case may require) the omission or allowance thereof and every reference herein (whether expressed or implied) to a consequence of the Tenant having done or having omitted to do or having allowed any act matter or thing is deemed to be a reference extending the consequence of any act or omission or allowance of or by the Tenant's employees servants agents licensees and invitees and any person claiming under the Tenant and that person's employees servants agents licensees and invitees or any of them 7 RENT REVIEW 7.1 THE yearly rent payable by the Tenant from the expiration of the fifth year of the Term and from the expiration of each period of five years thereafter during the Term (the time in each case being computed from the date of the commencement of the Term and the date of expiration of each such period being herein referred to as "the Date of Review") shall be whichever shall be the higher of:- 29 30 7.1.1 the yearly rent payable by the Tenant immediately before the Date of Review 7.1.2 an amount equal to the rental value (as hereinafter defined) of the Demised Premises at the Date of Review 7.2 The rental value of the Demised Premises at the Date of Review shall be such an amount as may be agreed between the Landlord and the Tenant or determined in accordance with sub-clause 7.3 of this Clause as representing the best yearly rack rent at which the Demised Premises might reasonably be expected to be let as a whole at the Date of Review in the open market without a fine or premium and with vacant possession by a willing lessor to a willing lessee disregarding any rent free period concessional rent or other financial incentive of any nature which the Tenant might receive or expect to receive in the open market assuming a term equivalent to the residue of the Term at the Date of Review or a term of 15 years (whichever is the longer) and on the assumption (if not a fact) that the lessee has complied in all respects with all the obligations imposed upon the Tenant hereunder (but without prejudice to any rights or remedies of the Landlord in relation thereto) on the same terms and conditions (other than the amount of the rent (but including the provisions for the review thereof)) as this Lease and on the further assumptions that:- 7.2.1 the user permitted by the lease complies with Planning Law 7.2.2 the Demised Premises are fit for immediate beneficial occupation and use by the lessee 7.2.3 if the Demised Premises have been destroyed or damaged they have been fully restored but there being disregarded (if applicable):- 7.2.4 any goodwill attributable to the Demised Premises by reason of any trade or business carried on thereat by the Tenant or any permitted under tenant 7.2.5 any effect of any works carried out to the Demised Premises prior to the Date of Review and whether before or after the commencement of the term for which the Landlord shall have given written consent (where required) in accordance with the 30 31 provisions herein contained carried out by the Tenant or any permitted under tenant (or on their behalf) wholly at its own expense otherwise than in pursuance of an obligation to the Landlord or a requirement by any local statutory or public authority 7.2.6 any effect on rental value of any work carried out by the Tenant or any under tenant or their or its predecessors in title that has diminished such rental value 7.2.7 any effect on rent of the fact that the Tenant or any permitted under tenant may have been in occupation of the Demised Premises 7.2.8 (so far as may be permitted by law) all restrictions whatsoever relating to rent or to security of tenure contained in any statute or orders rules or regulations made thereunder 7.2.9 The Tenants initial fitting out works carried out at its expense pursuant to the agreement to grant this lease made between the parties hereto 7.3 If by the date one month before the Date of Review the Landlord and the Tenant shall not have agreed on the amount of the rental value as aforesaid then the same shall be determined by an Arbitrator or an Expert (as the Landlord shall direct) who shall in either case be agreed upon by the parties hereto or in default of agreement within fourteen days before the Date of Review by an Arbitrator or Expert to be nominated by the President for the time being of The Royal Institution of Chartered Surveyors upon the application of either party and the decision of such Arbitrator or Expert shall be binding on both the Landlord and the Tenant and the cost of appointment and the fees payable to any such Arbitrator or Expert in respect of any decision made by him shall be borne and paid by the parties hereto in such shares and in such manner as he shall determine 7.4 In the event that the rental value shall not have been agreed or determined by or before the Date of Review then: 7.4.1 in respect of the period of time (hereinafter called the "said interval") beginning with the Date of Review and ending on the rent payment day immediately following the date upon which the rental value of the Demised Premises shall 31 32 have been agreed or determined as aforesaid the rent hereby first reserved shall continue to be paid at the rate payable immediately before the Date of Review 7.4.2 at the expiration of the said interval there shall be due as additional rent payable by the Tenant to the Landlord a sum of money equal to the amount whereby the yearly rent so agreed or determined as aforesaid shall exceed the yearly rent payable immediately before the Date of Review duly apportioned in respect of the said interval together with Interest thereon calculated from the rent payment days upon which the Landlord would have received such amounts had the rental value been agreed before the Date of Review and expiring on the day of payment to the Landlord 7.5 Notwithstanding the decision of the Arbitrator or Expert hereinbefore referred to in no event shall the rent payable by the Tenant to the Landlord after the Date of Review be less than the rent payable by the Tenant to the Landlord immediately before the Date of Review 7.6 If at the Date of Review the Landlord shall be obliged legally or otherwise to comply with any enactment or directive (which expression shall include any Act of Parliament now or hereafter in force and any instrument regulation or order made thereunder or deriving validity therefrom) dealing with control of rent and which shall restrict or modify the Landlord's right to revise the rent in accordance with the terms of these presents then the Landlord shall on each occasion that any such enactment or directive is removed relaxed or modified be entitled on giving not less than one month's notice in writing to the Tenant expiring after the date of each such removal relaxation or modification to introduce an intermediate review date (hereinafter called "the Intermediate Review Date") and the rent payable hereunder from the Intermediate Review Date to the next succeeding Date of Review or Intermediate Review Date or until the expiration of the Term (whichever shall first occur) shall be determined in like manner as the rent payable from each Date of Review but substituting for the Date of Review for the purpose of fixing the date upon which the open market rental value is to be fixed the Intermediate Review Date 7.7 A memorandum recording the yearly rent payable from each Date of Review shall as soon as reasonably possible be endorsed on this Lease and the Counterpart thereof and executed by the Landlord and the Tenant respectively 32 33 7.8 Time shall not be of the essence of the contract in agreeing or determining the open market rental value of the Demised Premises under this Lease and the right of the Landlord to a review of the yearly rent payable hereunder shall not be prejudiced by any failure to give or receive any notice or to appoint an independent Arbitrator or Expert under sub-clause 7.3 hereof 8 It is certified that this Lease gives effect to an Agreement for Lease dated _________ 1997 IN WITNESS whereof the parties hereto have executed this Lease as their deed the day and year first before written THE FIRST SCHEDULE Description of Demised Premises ALL THOSE PREMISES known as Unit C Interface Business Centre Bincknoll Lane Wootton Bassett in the County of Wiltshire including all structural parts thereof as the said premises are shown for the purpose of identification only edged red on the Plan and (for the purpose of obligation but not of grant) all service media exclusively serving the same THE SECOND SCHEDULE Rights Included 1 Full and free right and liberty in connection with the use hereby authorised and enjoyment of the Demised Premises for the Tenant its servants and duly authorised agents invitees and visitors for the purpose only of access and egress to and from the Demised Premises at all times to pass and repass with or without vehicles over the roadways shown coloured brown and coloured yellow on the Plan and the estate roads between the Demised Premises and the public highway known as Bincknoll Lane and to pass and repass on foot only over all pavements comprised in the Common Parts and over any forecourt between the same and the Demised Premises subject however to the reasonable rules and regulations for the use thereof as prescribed from time to time by the Landlord 2 The right of passage of gas electricity telephone water and soil drainage air smoke or other effluvia from and to the Demised Premises through the Service Media passing along or through or 33 34 over upon or under the Development or adjoining land between the Demised Premises and the public highway 3 The right of support and protection for the benefit of the Demised Premises as is now enjoyed thereby from any contiguous premises 4 The right to enter on Unit A after reasonable notice and at reasonable times (except in case of emergency) for the purpose of carrying out any necessary repairs and maintenance to any roadway paths or Service Media used jointly by the Demised Premises and Unit A the Tenant being responsible for making good all damage caused to Unit A by the exercise of this right as quickly as possible THE THIRD SCHEDULE Rights Reserved 1 The right to build upon or to heighten alter or extend (whether vertically or laterally) any building notwithstanding that the access of light and air or either of them to the Demised Premises and the light windows and openings thereof may be affected 2 The right to the passage of water and soil drainage gas electricity telephone and all other services or supplies and air and smoke from and to any land through the Service Media now or at any time hereafter in over upon under or passing through the Demised Premises 3 The right for the Landlord and also the tenant of Unit A (with or without workmen plant and machinery) at all reasonable times (and at any time in the case of emergency) to enter upon the Demised Premises for the purpose of carrying out any necessary repairs and maintenance to any roadways pathways or Service Media used jointly by the Demised Premises and Unit A the person exercising such right being responsible for making good all damage caused to the Demised Premises by the exercise of this right a quickly as possible 4 The right at all reasonable times (and at any time in the case of emergency) to enter upon the Demised Premises with or without appliances and workmen and others as often as may be necessary for all the purposes for which the Tenant covenants hereunder to permit entry and for the purposes of complying with any statutory requirement 34 35 5 The right to enter upon the Demised Premises after reasonable notice and at reasonable times (except in each case in case of emergency) in order to build on or into any party walls and to examine repair and rebuild any adjoining or contiguous premises the person or persons exercising such rights making good all damage thereby occasioned to the reasonable satisfaction of the Tenant 6 The right to any support given by the Demised Premises 7 The right at all times to pass and repass with or without vehicles over the roadway coloured purple on the Plan THE FOURTH SCHEDULE Regulations 1 All loading and unloading and delivery and dispatch of goods shall be done only within any areas designated by the Landlord for that purpose and no unnecessary obstruction shall be caused in any part of the Development 2 No loud speakers television sets radios or other devices shall be used in a manner so as to be heard outside the Demised Promises. 3 The drains and all plumbing facilities shall not be used for any other purpose than that for which they are intended and no foreign substance of any kind shall be placed therein. 4 The Tenant will keep clear and free from obstruction all ventilation or other ducts and flues in the Demised Premises or the Common Parts. 5 The Tenant shall not burn any refuse of any kind in or about the Demised Premises or the Development. 6 The Tenant shall give immediate notice to the Landlord in case of fire accident defects or structural damage in the Demised Premises. 7 The roads within or leading to the Development shall be used only for the purpose of gaining access to and egress from the Demised Premises and no vehicles shall be parked thereon. 35 36 8 No vehicles parked on any allocated car parking areas shall be repaired maintained or cleaned thereon apart from any emergency repairs necessary in order to move the vehicle therefrom and no deleterious matter or substance shall be deposited or allowed to be deposited on any car parking spaces FIFTH SCHEDULE FORM OF AUTHORISE GUARANTEE AGREEMENT 1 Guarantee 1.1 The Guarantor[s] [jointly and severally] guarantee[s] to the Landlord that the Tenant will pay the rents reserved by and perform and observe all the Tenant's covenants in this Lease throughout the Term and any extension by statute of the tenancy created by this Lease and the Guarantor[s] will pay and make good to the Landlord on demand any losses damages costs and expenses suffered or incurred by the Landlord by reason of any failure of the Tenant to do so 1.2 This Guarantee is to take effect immediately on the assignment of the Lease to the Tenant and is to remain in force for so long as and to the extent that the Tenant is not released by law from liability for the Tenant's covenants in the Lease 1.3 In the context of these guarantee provisions, references to the Tenant are to the assignee only (in its capacity as Tenant) with respect to whom this guarantee is given 2 No waiver or release of liability The Guarantor[s] is not to be released from liability under these provisions by reason of: 2.1 any forbearance the granting of time or any other indulgence on the part of the Landlord, including (but without affecting the general operation of this paragraph 2) any granting or extension of time or varying the procedure set out in seventh schedule; or 2.2 any variation of this Lease, whether or not made with the consent of the Guarantor[s], and the guarantee of Guarantor[s] in paragraph 1 is to operate in relation to this Lease as it may be varied from time to time 3 Guarantor[s] to accept new lease upon disclaimer 36 37 3.1 If this Lease is determined by re-entry by the Landlord or is effectively determined by disclaimer, the Guarantor[s] shall, if the Landlord by notice within three months after the date of determination so requires take from the Landlord a lease of the Premises 3.2 The Lease to be granted to the Guarantor[s] under paragraph 3.1 is to be on the following terms: 3.2.1 the term is to commence on the date of termination of this Lease and to be equal to the residue of the Term which would have remained unexpired at that date if this Lease had not then been terminated 3.2.2 the yearly rent is to be the same as would have been payable under this Lease if it had continued and, if a rent review operative from a review date before the grant of the lease has not been completed, the Guarantor[s] will complete the rent review as if it had been the Tenant under this Lease 3.2.3 the lease is otherwise to be on the same terms and conditions as would have applied under this Lease if it had continued undetermined; and 3.2.4 the Guarantor[s] [is][are] to succeed to the rights and assume the liability of the Tenant under this Lease as if the Lease had continued undetermined 4 Subordination of rights of the Guarantor[s] 4.1 With respect to any sums paid by the Guarantor[s] under this Schedule and to any other rights which may accrue to the Guarantor[s] in respect of any sums so paid or liabilities incurred under this guarantee or in the observance performance or discharge of the obligations and covenants of the Tenant in this Lease, the Guarantor[s] shall rank and be entitled to enforce its rights only after all obligations and covenants under this guarantee have been fully observed and performed, and if they have not the Guarantor[s] shall not: 4.1.1 seek to recover from the Tenant, or any third party whether directly or by way of set-off lien counterclaim or otherwise or accept any money or other property or security or exercise any rights in respect of any sum which may be or become due to the Guarantor[s] on account of the failure by the Tenant to observe and perform or discharge such obligations or covenants in this Lease; 4.1.2 claim, prove or accept any payment in composition by way of winding-up, liquidation, bankruptcy or other form of insolvency of the Tenant in competition with 37 38 the Landlord for any amount whatsoever owing to the Guarantor[s] by the Tenant; nor 4.1.3 exercise any right or remedy in respect of any amount paid by the Guarantor[s] under this Lease or any liability incurred by the Guarantor[s] in observing performing or discharging the obligations and covenants of the Tenant 4.2 The Guarantor[s] warrant[s] that it has not taken, and undertakes with the Landlord that it will not without the consent of the Landlord: 4.2.1 take any security from the Tenant in respect of this guarantee and, if any such security is so taken notwithstanding, it shall be held on trust for the Landlord as security for the respective liabilities of the Guarantor[s] and the Tenant; nor 4.2.2 be entitled to any right of proof in the bankruptcy, liquidation or other form of insolvency of the Tenant or exercise any other right of the Guarantor[s] discharging his liability in respect of such obligations and covenants THE COMMON SEAL of ROYAL LIVER ASSURANCE LIMITED [SEAL] was hereunto affixed in the presence of [SIG] Member of the Committee of Management [SIG] Secretary 38 EX-13.1 5 INFORMATION FROM THE ANNUAL REPORT TO STOCKHOLDERS 1 EXHIBIT 13.1 CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, ----------------------------- 1997 1998 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 42,262 $ 64,901 Accounts receivable, net 36,981 41,550 Inventory 20,042 29,741 Deferred income taxes 2,840 2,130 Other current assets 909 1,774 --------- --------- Total current assets 103,034 140,096 Property, plant and equipment, net 18,970 21,255 Other assets 5,237 4,124 --------- --------- Total Assets $ 127,241 $ 165,475 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,578 $ 8,327 Accrued liabilities 20,441 26,629 Income taxes payable 9,674 6,381 --------- --------- Total current liabilities 39,693 41,337 Deferred tax liabilities 1,616 5,652 Long-term debt, less current maturities 65,050 65,050 --------- --------- Total liabilities 106,359 112,039 --------- --------- Commitments and contingencies (note 8) Stockholders' equity: Common stock, $0.01 par value per share; 40,000 shares authorized, 16,366 shares and 16,449 shares issued and outstanding 171 174 Additional paid-in capital 58,217 63,816 Cumulative translation adjustment (891) (891) Retained Earnings (Deficit) (23,834) 15,355 --------- --------- 33,663 78,454 Less: Treasury stock (common: 963 shares in fiscal year 1998, net of sales) at cost (12,781) (25,018) --------- --------- Total stockholders' equity 20,882 53,436 --------- --------- Total liabilities and stockholders' equity $ 127,241 $ 165,475 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 2 CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
FISCAL YEAR ENDED MARCH 31, ------------------------------------------------- 1996 1997 1998 --------- --------- --------- Net sales $ 182,959 $ 195,307 $ 236,112 Cost of sales 86,887 90,567 108,514 --------- --------- --------- Gross profit 96,072 104,740 127,598 --------- --------- --------- Operating expenses: Research, development and engineering 13,718 14,503 17,543 Selling, general and administrative 34,845 39,898 47,682 --------- --------- --------- Total operating expenses 48,563 54,401 65,225 --------- --------- --------- Operating income 47,509 50,339 62,373 Interest expense, including amortization of debt issuance costs 7,140 7,104 6,984 Interest income and other income, net (1,385) (1,722) (2,243) --------- --------- --------- Income before income taxes 41,754 44,957 57,632 Income tax expense 16,284 15,286 18,443 --------- --------- --------- Net income $ 25,470 $ 29,671 $ 39,189 ========= ========= ========= Basic earnings per common share $ 1.53 $ 1.75 $ 2.38 ========= ========= ========= Shares used in basic per share calculations 16,593 17,003 16,481 ========= ========= ========= Diluted earnings per common share $ 1.42 $ 1.67 $ 2.15 ========= ========= ========= Shares used in diluted per share calculations 17,964 17,792 18,223 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FISCAL YEAR ENDED MARCH 31, ---------------------------------------------- 1996 1997 1998 -------- -------- -------- Cash flows from operating activities: Income from operations $ 25,470 $ 29,671 $ 39,189 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 2,367 2,935 3,632 Deferred income taxes (745) 2,789 4,746 Other non-cash charges, net 758 649 (225) Changes in assets and liabilities: Accounts receivable (8,310) 1,624 (5,024) Provision for doubtful accounts 575 (50) 455 Inventory (1,150) (2,035) (9,699) Other current assets (426) 318 (865) Other assets 471 (459) 1,113 Accounts payable 2,206 1,194 (1,251) Accrued liabilities 2,271 (251) 6,188 Income taxes payable 3,413 (1,769) 986 -------- -------- -------- Cash provided by operating activities 26,900 34,616 39,245 -------- -------- -------- Cash flows from investing activities: Capital expenditures (3,903) (8,195) (5,917) -------- -------- -------- Cash flows from financing activities: Purchase of treasury stock -- (12,880) (13,162) Proceeds from sale of treasury stock -- 99 1,250 Proceeds from exercise of stock options 763 1,835 1,223 -------- -------- -------- Cash provided by (used for) financing activities 763 (10,946) (10,689) -------- -------- -------- Effect of exchange rate changes on cash: (333) -- -- Net increase (decrease) in cash and cash equivalents 23,427 15,475 22,639 Cash and cash equivalents at beginning of year 3,360 26,787 42,262 -------- -------- -------- Cash and cash equivalents at end of year $ 26,787 $ 42,262 $ 64,901 ======== ======== ======== Supplemental disclosures: Cash paid for: Interest $ 6,608 $ 6,577 $ 6,550 Income taxes $ 13,557 $ 14,192 $ 12,439 Noncash operating and financing activities: Income tax benefit associated with stock options $ -- $ 597 $ 4,279
The accompanying notes are an integral part of these consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
TOTAL COMMON STOCK ADDITIONAL CUMULATIVE ACCUMULATED STOCKHOLDERS' ------------------------- PAID-IN TRANSLATION EQUITY TREASURY EQUITY SHARES AMOUNT CAPITAL ADJUSTMENT (DEFICIT) STOCK (DEFICIT) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at March 31, 1995 16,418,642 165 $ 54,652 $ (558) $ (78,975) $ -- $ (24,716) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Stock option compensation amortization -- 231 -- -- -- 231 Exercise of stock options 359,270 4 759 -- -- -- 763 Foreign currency translation adjustment -- -- (333) -- -- (333) Net income -- -- -- 25,470 -- 25,470 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at March 31, 1996 16,777,912 169 $ 55,642 $ (891) $ (53,505) $ -- $ 1,415 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Stock option compensation amortization -- 146 -- -- -- 146 Exercise of stock options 284,442 2 1,832 -- -- -- 1,834 Income tax benefit associated with stock options 597 597 Purchase of treasury stock (701,226) -- -- (12,873) (12,873) Sale of treasury stock 5,084 -- -- 92 92 Net income -- -- -- 29,671 -- 29,671 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at March 31, 1997 16,366,212 171 $ 58,217 $ (891) $ (23,834) $ (12,781) $ 20,882 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Stock option compensation amortization -- (225) -- -- -- (225) Exercise of stock options 348,958 3 1,220 -- -- -- 1,223 Income tax benefit associated -- with stock options 4,279 4,279 Purchase of treasury stock (317,600) -- -- -- (13,162) (13,162) Sale of treasury stock 51,072 325 -- -- 925 1,250 Net income -- -- -- 39,189 -- 39,189 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at March 31, 1998 16,448,642 174 $ 63,816 $ (891) $ 15,355 $ (25,018) $ 53,436 =========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 5 SELECTED FINANCIAL DATA
FISCAL YEAR ENDED MARCH 31, ---------------------------------------------------------------------- STATEMENT OF OPERATIONS DATA 1994 1995 1996 1997 1998 --------- --------- --------- --------- --------- (in thousands) Net sales $ 133,996 $ 169,923 $ 182,959 $ 195,307 $ 236,112 Income (loss) from continuing operations (40,696) 20,808 25,470 29,671 39,189 Mandatorily redeemable preferred stock dividends (1,298) -- -- -- -- --------- --------- --------- --------- --------- Net income (loss) $ (41,994) $ 20,808 $ 25,470 $ 29,671 $ 39,189 ========= ========= ========= ========= ========= Diluted net income (loss) per common share $ (3.27) $ 1.19 $ 1.42 $ 1.67 $ 2.15 Shares used in diluted per share calculations 12,830 17,512 17,964 17,792 18,223
FISCAL YEAR ENDED MARCH 31, ---------------------------------------------------------------------- BALANCE SHEET DATA 1994 1995 1996 1997 1998 --------- --------- --------- --------- --------- (in thousands) Total assets $ 67,026 $ 74,855 $ 108,661 $ 127,241 $ 165,475 Long-term debt 85,000 65,050 65,050 65,050 65,050
QUARTER ENDED -------------------------------------------------------------------------------------------------- Jun. 30 Sep. 30 Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31 QUARTERLY DATA 1996 1996 1996 1997 1997 1997 1997 1998 ------- ------- ------- ------- ------- ------- ------- ------- (in thousands) Net sales $45,584 $47,120 $50,309 $52,294 $54,023 $56,539 $62,017 $63,533 Gross profit $24,500 $25,333 $26,761 $28,146 $29,067 $30,536 $33,553 $34,442 Income from operations $11,517 $12,230 $13,104 $13,488 $15,456 $14,766 $16,632 $17,364 Net income $ 6,625 $ 7,152 $ 7,843 $ 8,051 $ 8,305 $ 9,366 $10,421 $11,097 Income per diluted share $ 0.37 $ 0.40 $ 0.44 $ 0.45 $ 0.47 $ 0.51 $ 0.57 $ 0.61
6 NOTES TO FINANCIAL STATEMENTS NOTE 1 -- THE COMPANY: Plantronics, Inc. (the Company), which introduced the first lightweight headset in 1962, is the world's largest designer, manufacturer and marketer of lightweight communications headsets. In addition, the Company manufactures and markets specialty telephone products, such as amplified telephone handsets and specialty telephones for hearing-impaired users and noise-canceling handsets for use in high-noise environments. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: MANAGEMENT'S USE OF ESTIMATES AND ASSUMPTIONS The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiary companies. Intercompany transactions and balances have been eliminated in consolidation. FISCAL YEAR The Company's fiscal year end is the Saturday closest to March 31. For purposes of presentation, the Company has indicated its accounting year ending on March 31 or the month-end for interim quarterly periods. Results of operations for fiscal years 1996, 1997 and 1998 each included 52 weeks. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The Company considers all highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash equivalents. Pursuant to the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities", management determines the appropriate classification of debt and equity securities at the time of purchase, and reassesses the classification at each reporting date. At March 31, 1998, all of the Company's short-term investments, consisting primarily of fixed maturity debt securities, have been classified as "held to maturity". Under this classification, the investments are recorded at amortized cost. The Company's cash and cash equivalents consist of the following:
MARCH 31, ------------------------- 1997 1998 ------- ------- (in thousands) Cash $ 5,106 $ 9,662 Cash equivalents 37,156 55,239 ------- ------- Cash and cash equivalents $42,262 $64,901 ======= =======
INVENTORY Inventory is stated at the lower of cost, determined on the first-in, first-out method, or market. 1 7 DEPRECIATION AND AMORTIZATION Depreciation and amortization of property, plant and equipment are principally calculated using the straight-line method over the estimated useful lives of the respective assets. DEFERRED DEBT ISSUANCE COSTS Debt issuance costs are assigned to the various debt instruments and amortized over the shorter of the terms of the respective debt agreements or an estimated period the debt will be outstanding. REVENUE RECOGNITION Revenue is recognized when products are shipped. Provision is made for estimated potential customer returns and warranty costs at the time of shipment. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and trade receivables. The Company's cash investment policies limit investments to those that are short-term and low risk. Concentrations of credit risk with respect to trade receivables are generally limited due to the large number of customers comprising the Company's customer base, and their dispersion across different geographic areas. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for uncollectible accounts receivable based upon expected collectibility of all accounts receivable. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of the Company's financial instruments, including cash, cash equivalents, accounts receivable, accrued expenses and liabilities, approximate fair value due to their short maturities. The fair value of long-term debt, including the current portion, was estimated by management based on current rates offered on the open market for debt of the same remaining maturities. The fair value of the long-term debt was not materially different from the carrying value of $65.1 million at March 31, 1998. INCOME TAXES The Company accounts for income taxes under the liability method, which recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their financial statement reported amounts. Tax credits are accounted for as a reduction of tax expense in the year in which the credits reduce taxes payable. FOREIGN OPERATIONS AND CURRENCY TRANSLATION The Company has foreign assembly and manufacturing operations in Mexico, light assembly, research and development and sales and marketing in the United Kingdom, an international finance, customer service and logistics headquarters in the Netherlands, and sales offices in Canada, Asia, Europe, Australia and South America. For fiscal 1997 and 1998, the functional currency of all foreign operations was the US dollar. For fiscal 1996, the functional currency of all foreign operations was the US dollar, with the exception of the operation located in the United Kingdom. Accordingly, gains or losses arising from the translation of foreign currency statements and transactions, except for the operation in the United Kingdom in fiscal 1996, are included in determining consolidated results of operations. Aggregate exchange gains (losses) for fiscal 1996, 1997 and 1998 were $0.3 million, $0.4 million and ($0.2) million, respectively. Gains or losses arising from the translation of the United Kingdom statements prior to fiscal 1997 were recorded as a separate component of stockholders' equity. STOCK BASED COMPENSATION Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("FAS 123"), encourages, but does not require, companies to record compensation cost for stock-based 2 8 employee compensation plans based on the fair value of options granted. The Company has elected to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations, and to provide additional disclosures with respect to the pro forma effects of adoption had the company recorded compensation expense as provided in FAS 123, (see note 10). Effective December 27, 1997 the Company adopted Statement of Financial Accounting Standards No. 128 "Earnings per Share", (SFAS 128). The new standard requires presentation of both basic EPS and diluted EPS on the face of the income statement. Basic EPS, which replaces primary EPS, is computed by dividing net income available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Unlike the computation of primary EPS, basic EPS excludes the dilutive effect of stock options. Diluted EPS replaces fully diluted EPS and gives effect to all dilutive potential common shares outstanding during a period. Following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the periods presented below:
YEAR ENDED MARCH 31, --------------------------------- 1996 1997 1998 ------- ------- ------- (in thousands) Numerator for earnings per common share - income $25,470 $29,671 $39,189 ======= ======= ======= Denominator for basic earnings per common share 16,593 17,003 16,481 ------- ------- ------- Effect of dilutive securities 1,371 789 1,742 ------- ------- ------- Denominator for diluted earnings per common share 17,964 17,792 18,223 ======= ======= ======= Net income per common share: Basic $ 1.53 $ 1.75 $ 2.38 ======= ======= ======= Diluted $ 1.42 $ 1.67 $ 2.15 ======= ======= =======
RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This statement is effective for the Company's fiscal year ending March 27, 1999. The statement establishes presentation and disclosure requirements for reporting comprehensive income. Comprehensive income includes charges or credits to equity that are not the result of transactions with owners. The Company plans to adopt the disclosure requirements and report comprehensive income as part of the Consolidated Statements of Shareholders' Equity as required under SFAS 130, and expects there to be no material impact on the Company's financial position and results of operations as a result of the adoption of this new accounting standard. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"). The statement requires the Company to report certain information about operating segments in annual financial statements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company will adopt SFAS 131 beginning in fiscal 1999 and does not expect such adoption to have a material effect on the consolidated financial statement disclosures. 3 9 NOTE 3 - DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS:
MARCH 31, ----------------------- 1997 1998 -------- -------- (in thousands) Accounts receivable: Accounts receivable from customers $ 38,278 $ 43,302 Allowance for doubtful accounts (1,297) (1,752) -------- -------- $ 36,981 $ 41,550 ======== ======== Inventory: Finished goods $ 11,056 $ 13,224 Work in process 1,647 4,431 Purchased parts 7,339 12,086 -------- -------- $ 20,042 $ 29,741 ======== ======== Property, plant and equipment: Land $ 4,693 $ 4,693 Buildings and improvements (useful life 10-30 years) 9,104 9,486 Machinery and equipment (useful life 2-8 years) 25,949 31,484 -------- -------- 39,746 45,663 Less accumulated depreciation (20,776) (24,408) -------- -------- $ 18,970 $ 21,255 ======== ======== Accruals: Interest $ 1,394 $ 1,386 Employee benefits and other 19,047 25,243 -------- -------- $ 20,441 $ 26,629 ======== ========
NOTE 4 - DEBT: Long-term debt, consisting of Senior Notes, was $65.1 million at the end of fiscal 1996, 1997 and 1998. The Senior Notes are general unsecured obligations of the Company that bear interest, payable semiannually, at a rate of 10% per annum and will mature on January 15, 2001. The Senior Notes are redeemable, at the Company's option, in whole or in part, at any time on or after January 15, 1999. Redemption prior to January 15, 2001 will be at a premium. The Senior Note Indenture contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur indebtedness, pay dividends, issue preferred stock of subsidiaries, engage in transactions with affiliates, create liens, engage in mergers and consolidations, or make certain asset sales and investments. The Senior Note Indenture also provides that holders of the Senior Notes have the right to require that the Company repurchase their Senior Notes in the event of a "change in control" and contain various customary events of default. The Company has a one-year $20.0 million revolving unsecured credit facility with Bank of America. This facility expires on February 17, 1999. The facility includes a $10.0 million letter of credit subfacility. Combined borrowings and commitments under both facilities cannot exceed $20.0 million. Principal outstanding bears interest at the Company's choice of the Bank of America base rate, the offshore rate or a CD rate plus a margin ranging from 0.000% to 1.375%, depending on the rate choice and performance level ratios. There were no borrowings outstanding under the facility at March 31, 1998, however, at that date $2.3 million, associated with inventory purchases and other matters, was committed under the letter of credit sub-facility. The revolving credit facility includes covenants relating to, among other things, the maintenance of a maximum net funded debt ratio, a minimum tangible net worth ratio and a maximum interest coverage ratio. The Company was in compliance with the terms of the covenants as of March 31, 1998. 4 10 The revolving credit facility also expressly restricts the ability of the Company to incur additional indebtedness (including contingent liabilities and guarantees), grant additional liens, redeem stock, dispose of and acquire assets, incur lease obligations, and make investments, including loans, joint ventures, and acquisitions of other businesses. The Company is permitted to pay cash dividends on shares of its capital stock in an amount not to exceed 50% of the Company's cumulative net income (net of cumulative losses) for the period commencing February 19, 1997 through the date of declaration. NOTE 5 - COMMON AND TREASURY STOCK: EFFECT OF INCREASE IN STOCK AND STOCK SPLIT In July 1997, the Company's stockholders approved an increase in the authorized shares of Common Stock of Plantronics, Inc., to 40,000,000. On September 2, 1997, the Company effected a two-for-one stock split in the form of a stock dividend to stockholders of record as of August 18, 1997. All share, per share, Common Stock, and capital in excess of par value amounts herein have been restated to reflect the effect of this split. During fiscal 1998 the Company purchased 317,600 shares of its Common Stock in the open market at a total cost of $13.2 million and 51,072 shares were reissued for $1.3 million. NOTE 6 - INCOME TAXES: Income tax expense for fiscal 1996, 1997 and 1998 consisted of the following:
FISCAL YEAR ENDED MARCH 31, --------------------------------------------- 1996 1997 1998 -------- -------- -------- (in thousands) Federal Current $ 13,586 $ 8,744 $ 10,109 Deferred (827) 2,789 4,746 State 1,622 1,854 1,472 Foreign 1,903 1,899 2,116 -------- -------- -------- $ 16,284 $ 15,286 $ 18,443 ======== ======== ========
Pre-tax earnings of the foreign subsidiaries were $2.8 million, $8.2 million and $15.7 million for fiscal years 1996, 1997 and 1998, respectively. Cumulative earnings of foreign subsidiaries which have been permanently reinvested as of March 31, 1998 totaled $5.5 million. The following is a reconciliation between statutory federal income taxes and the total provision for taxes on pre-tax income:
FISCAL YEAR ENDED MARCH 31, -------------------------------------- 1996 1997 1998 -------- -------- -------- (in thousands) Tax expense at statutory rate $ 14,614 $ 15,735 $ 20,171 Foreign operations taxed at different rates 910 (971) (4,364) State taxes, net of federal benefit 1,054 1,204 1,476 Other, net (294) (682) 1,160 -------- -------- -------- $ 16,284 $ 15,286 $ 18,443 ======== ======== ========
5 11 Deferred tax liabilities (assets) represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
MARCH 31, --------------------- 1997 1998 ------- ------- (in thousands) Deferred gains on sales of properties $ 2,740 $ 2,476 Deferred state tax -- 314 Unremitted earnings of certain subsidiaries -- 5,749 Other deferred tax liabilities 333 1,111 ------- ------- Gross deferred tax liabilities 3,073 9,650 Accruals and other reserves (2,748) (5,670) Deferred state tax deduction (635) -- Other deferred tax assets (914) (458) ------- ------- Gross deferred tax assets (4,297) (6,128) Total net deferred tax liabilities $(1,224) $ 3,522 ======= =======
NOTE 7 - EMPLOYEE BENEFIT PLANS: Subject to eligibility requirements, substantially all domestic employees participate in quarterly cash and annual deferred profit sharing plans. Employees also have the option of participating in a salary deferral plan qualified under Section 401(k) of the Internal Revenue Service Code. The Quarterly Profit Sharing Plan benefits are paid on the basis of profitability and the relationship of each participating employee's base salary as a percent of the total base salaries of all participants. The Annual Profit Sharing Plan benefits are based on 10% of the Company's results of operations before interest and taxes, adjusted for other items, minus quarterly profit sharing cash distributions and administrative expenses, and are allocated to employees based on the relationship of each participating employee's base salary as a percent of all participants' base salaries. The Annual Profit Sharing Plan distributions include a cash distribution and a tax deferred distribution made to individual accounts of participants held in trust. The deferred portion is subject to a two year vesting schedule based on an employees date of hire. Total annual and quarterly profit sharing contributions were $5.4 million, $5.5 million and $6.9 million for fiscal 1996, 1997 and 1998, respectively. NOTE 8 - COMMITMENTS AND CONTINGENCIES: MINIMUM FUTURE RENTAL PAYMENTS The Company leases certain equipment and facilities under operating leases expiring in various years through and after 2003. Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of 1 year as of March 31, 1998:
FISCAL YEAR ENDING MARCH 31, AMOUNT ----------- (in thousands) 1999 $ 1,283 2000 1,165 2001 1,159 2002 1,174 2003 1,190 ----------- Total minimum future rental payments $ 5,971 ===========
Rent expense for operating leases was approximately $1.1 million in fiscal 1996, $1.1 million in fiscal 1997 and $1.3 million in fiscal 1998. 6 12 EXISTENCE OF RENEWAL OPTIONS Certain operating leases provide for renewal options for periods from 1 to 3 years. In the normal course of business, operating leases are generally renewed or replaced by other leases. CLAIMS AND LITIGATION In the opinion of management, litigation, contingent liabilities and claims against the Company arising in the ordinary course of business are not expected to involve any judgments or settlements which would be material to the Company's consolidated financial condition or results of operations. NOTE 9 - INDUSTRY SEGMENT AND FOREIGN OPERATIONS DATA: BUSINESS SEGMENT The Company operates in a single industry segment and is engaged in developing, manufacturing, marketing and servicing telecommunications equipment. No one customer accounted for 10% or more of total revenue from consolidated sales for fiscal year 1996, 1997 or 1998. GEOGRAPHIC SEGMENTS In geographical reporting, revenues are attributed to the geographical location of the sales and service organizations. Costs directly and indirectly incurred in generating revenues are similarly assigned.
FISCAL YEAR ENDED MARCH 31, ------------------------------------ 1996 1997 1998 -------- -------- -------- (in thousands) Net revenues from unaffiliated customers: United States $133,957 $135,664 $163,684 International 49,002 59,643 72,428 -------- -------- -------- $182,959 $195,307 $236,112 ======== ======== ======== Operating income: United States $ 35,365 $ 37,036 $ 44,916 International 12,144 13,303 17,457 -------- -------- -------- $ 47,509 $ 50,339 $ 62,373 ======== ======== ======== Identifiable assets: United States $ 91,400 $ 97,138 $121,627 International 17,261 30,103 43,848 -------- -------- -------- $108,661 $127,241 $165,475 ======== ======== ======== Intercompany transfers $ 18,057 $ 49,575 $ 69,261
The geographical reporting classification reflects the international restructuring completed in fiscal 1997. The establishment of Plantronics B.V. changed the ownership of inventory and the methodology of intercompany transfers. In fiscal 1996 intercompany transfers were from the US to Europe. Starting in the last quarter of fiscal 1996, intercompany transfers are from Plantronics B.V. to the US and Japan. Intercompany transfers are at arms length prices sufficient to recover a reasonable profit. NOTE 10 - STOCK OPTION PLANS AND STOCK PURCHASE PLANS: STOCK OPTION PLAN In September 1993, the Board of Directors approved the PI Parent Corporation 1993 Stock Plan (the "1993 Stock Plan"). Under the 1993 Stock Plan, 4,159,242 shares of Common Stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization or certain corporate reorganizations) are reserved for issuance to employees and consultants of the Company, as approved from time to time by the Compensation Committee of the Board of Directors. The reserved shares include 980,000 shares which were authorized by the Board of Directors and approved by the stockholders for issuance in 1997. The 1993 Stock Plan, which has a term of ten years, provides for incentive as well as 7 13 nonqualified stock options to purchase shares of Common Stock. The Board of Directors may terminate the 1993 Stock Plan at any time at its discretion. Incentive stock options may not be granted at less than 100 percent of the estimated fair market value, as determined by the Board of Directors, of the Company's Common Stock at the date of grant and the option term may not exceed 10 years. For holders of 10 percent or more of the total combined voting power of all classes of the Company's stock, incentive stock options may not be granted at less than 110 percent of the estimated fair market value of the Common Stock at the date of grant and the option term may not exceed five years. Nonqualified stock options may be granted at less than fair market value. Options generally vest over 4 years. In September 1993 the Compensation Committee of the Board of Directors approved nonqualified options to certain executive officers to purchase 255,792 shares of Common Stock at an exercise price of $2.74 per share that were granted upon the completion of the Company's initial public offering. Compensation related to these options of $0.9 million based on the $6.25 per share offering price was charged to expense over a four year-vesting period commencing January 1994 as the options were granted for future services. Options to purchase an additional 289,252 shares were granted during fiscal 1994 to certain executive officers at exercise prices ranging from $2.74 to $7.63 per share. Compensation related to these options of $0.8 million was charged to expense over a four-year vesting period. As of March 31, 1998, the total compensation expense was amortized. DIRECTORS' STOCK OPTION PLAN In September 1993, the Board of Directors adopted a Directors' Stock Option Plan (the "Directors' Option Plan") and reserved 40,000 shares of Common Stock for issuance to non-employee directors of the Company. An additional 20,000 shares were authorized for issuance in 1997 under the Directors' Option Plan, pursuant to Board of Directors' and stockholder approval. The Directors' Option Plan provides that each non-employee director shall be granted an option to purchase 4,000 shares of Common Stock on the later of the effective date of the Company's initial public offering or the date on which the person becomes a director. Thereafter, each non-employee director shall be granted an option to purchase 1,000 shares of Common Stock each year. At the end of fiscal 1998, options for 45,000 shares of Common Stock were outstanding under the Directors' Option Plan. All options were granted at fair market value and accordingly, had no compensatory impact. Options vest generally over a four-year period. Stock option activity under the 1993 Stock Plan and the Directors' Stock Option Plan are as follows:
OPTIONS OUTSTANDING SHARES ----------------------------- AVAILABLE WEIGHTED FOR GRANT SHARES AVERAGE PRICE ---------- ---------- ------------- Balance at March 31, 1995 106,780 3,094,526 $ 3.45 Options Granted (206,820) 206,820 $ 16.22 Options Exercised (359,270) $ 2.13 Options Canceled 158,794 (158,794) $ 4.35 ---------- ---------- ---------- Balance at March 31, 1996 58,754 2,783,282 $ 4.52 Options Authorized 1,000,000 Options Granted (631,588) 631,588 $ 19.80 Options Exercised (284,442) $ 6.45 Options Canceled 111,048 (111,048) $ 6.49 ---------- ---------- ---------- Balance at March 31, 1997 538,214 3,019,380 $ 7.46 Options Granted (654,500) 654,500 $ 27.37 Options Exercised (348,958) $ 3.49 Options Canceled 233,010 (233,010) $ 18.53 ---------- ---------- ---------- Balance at March 31, 1998 116,724 3,091,912 $ 11.29 ========== ========== ========== Exercisable at March 31, 1998 1,884,602 ==========
8 14 Significant option groups outstanding at March 31, 1998 and related weighted average prices and lives are as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------------------------------------- ---------------------------------------- Number Weighted Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise Price As of March 31, 1998 Contractual Life Exercise Price As of March 31, 1998 Exercise Price - -------------- -------------------- ---------------- -------------- -------------------- -------------- $ 0.90 - $ 0.90 732,944 5.49 $ 0.90 732,944 $ 0.90 2.74 - 2.74 814,161 5.81 2.74 814,161 2.74 3.13 - 18.44 736,177 7.58 14.70 321,956 11.00 18.63 - 41.69 808,630 9.18 26.22 15,541 19.72 - --------------- -------------------- ---------------- -------------- -------------------- -------------- $ 0.90 - $41.69 3,091,912 7.04 $11.29 1,884,602 $ 3.57 - --------------- -------------------- ---------------- -------------- -------------------- --------------
FAIR VALUE DISCLOSURES All options in fiscal 1996, 1997 and 1998 were granted at an exercise price equal to the fair market value of the Company's Common Stock at the date of grant. The weighted average fair value at date of grant for options granted during 1996, 1997 and 1998 were $5.43, $6.34 and $9.79 per share, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following assumptions for 1996; dividend yield of 0%, an expected life of 5 years, expected volitility of 24% and risk free interest rates of 5.9%. For 1997 the assumptions were; dividend yield of 0%, an expected life of 5 years, expected volitility of 17% and risk free interest rates of 6.6%. For 1998 the assumptions were; dividend yield of 0%, an expected life of 5 years, expected volitility of 28% and risk free interest rates of 5.6%. Had compensation expense for the Company's stock-based compensation plans been determined based on the methods prescribed by SFAS No. 123, the Company's net income and net income per share would have been as follows:
FISCAL YEAR ENDED MARCH 31, ---------------------------------------------- 1996 1997 1998 ------------ ------------ ------------ (in thousands, except per share amounts) Net income: As reported $ 25,470 $ 29,671 $ 39,189 Pro forma $ 25,390 $ 29,044 $ 37,381 Net income per share: As reported $ 1.42 $ 1.67 $ 2.15 Pro forma $ 1.41 $ 1.63 $ 2.05
EMPLOYEE STOCK PURCHASE PLAN On April 23, 1996 the Board of Directors of the Company approved the 1996 Employee Stock Purchase Plan, (the "ESPP") which was approved by the stockholders on August 6, 1996, to provide certain employees with an opportunity to purchase Common Stock through payroll deductions. The plan is a qualified plan under applicable IRS guidelines and certain highly compensated employees are excluded from participation. Under the ESPP, the purchase price of the Common Stock will equal 95% of the market price of the Common Stock immediately before the beginning of the applicable participation period. Each participation period is 6 months long. Once purchased the shares are restricted for 6 months. During fiscal 1997, 581 shares were issued under the plan. The fair value of the employee's purchase rights was estimated 9 15 using the Black-Scholes model with the following assumptions; dividend yield of 0%, an expected life of 6 months, expected volatility of 17%, and risk free interest rates of 5.5%. The weighted-average fair value of these purchase rights granted in fiscal 1997 was $2.27. During fiscal 1998, 2021 shares were issued under the plan. The fair value of the employee's purchase rights was estimated using the Black-Scholes model with the following assumptions; dividend yield of 0%, an expected life of 6 months, expected volatility of 28%, and risk free interest rates of 5.3%. The weighted-average fair value of these purchase rights granted in fiscal 1998 was $4.85. SENIOR EXECUTIVE STOCK OWNERSHIP PLAN In November, 1996 the Board of Directors approved a Senior Executive Stock Purchase Plan, effective January 1, 1997, to encourage ownership of the company's Common Stock by senior executives. This is a voluntary plan in which executives are encouraged to participate and achieve a target ownership over a 5 year period in annual increments of 20% or more. The target ownership is equal to two times the Chief Executive Officer's base salary and one times the individual Vice Presidents' base salary. To encourage participation, the Company's Treasury Stock will be sold by the Company to executives under this voluntary purchase program. The price will be equal to the greater of: 95% of the price set by the Board of Directors on an annual basis or 85% of the fair market value of the stock on the date of transaction. The various vehicles that are available to executives to obtain ownership of the company's stock are as follows: 401 (k) Plan contributions, personal IRA account purchases, Deferred Compensation Plan contributions, outright purchase of stock or exercising and holding vested stock options. The discounted price is not applicable to exercising and holding of vested stock options. MANAGEMENT'S DISCUSSION AND ANALYSIS CERTAIN FORWARD-LOOKING INFORMATION This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include the statement relating to the ability to make required interest payments in the first sentence in the last paragraph under "Financing Activities" and the statements below under "Factors Affecting Future Operating Results." In addition, the Company may from time to time make oral forward looking statements. These forward looking statements are based on current expectations and entail various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward looking statements as a result of a number of factors, including those set forth below under "Factors Affecting Future Operating Results." The following discussions titled "Annual Results of Operations" and "Liquidity and Capital Resources" should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere herein, the Company's annual report on Form 10-K, as well as the section below entitled "Factors Affecting Future Operating Results." ANNUAL RESULTS OF OPERATIONS NET SALES Net sales in fiscal 1997 increased 6.7% to $195.3 million from $183.0 million earned in fiscal 1996 and increased an additional 20.9% to $236.1 million in fiscal 1998. Revenue grew consistently both domestically and internationally. Domestic sales increased 20.7% from 1997 to 1998 while international sales increased 21.4% in the same period. Growth came across all the Company's market segments and is attributed to growth in the distribution channels, substantial growth in small and large call centers, increased acceptance of headsets into the small office/home office market segments and new products. Domestic US sales were lead by a 50% increase in sales through retail channels, principally due to increased penetration of headsets into the office and home office market segments. The Company's net sales to customers outside the United States, predominately in Europe, were $49.0, $59.6 and $72.4 million in fiscal 1996, 1997 and 1998, respectively, and accounted for 26.8%, 30.5% and 30.7%, respectively, of net sales in those periods. International sales grew more strongly in Europe, with sales increasing 24.6% year over year. Sales to customers in Asia, the Pacific Rim and South America grew by 8.5%, reflecting, in part, the impact of the Asian economic slowdown. 10 16 GROSS PROFIT The Company's gross profit increased 9.0% from $96.1 million earned in fiscal 1996 to $104.7 million in fiscal 1997 and increased an additional 21.9% to $127.6 million in fiscal 1998. Gross profit as a percent of net sales was 52.5% in fiscal 1996, 53.6% in fiscal 1997 and 54.0% in fiscal 1998. The $31.5 million improvement in gross profit over the three year period primarily reflects the impact of additional revenues with the balance coming from improved manufacturing efficiencies and material and logistics cost reduction programs. OPERATING EXPENSES Operating expenses for the Company were $48.6 million or 26.5% of net sales in fiscal 1996, $54.4 million or 27.9% in fiscal 1997 and $65.2 million or 27.6% of net sales in fiscal 1998. Research and development increased by approximately $3 million in fiscal 1998 compared to fiscal 1997 due to the growth of the engineering development team in Europe and costs associated with new product development. Selling, general and administrative expenses increased by $7.8 million as compared to fiscal 1997 due principally to costs associated with higher sales volume worldwide, increases in market research and planned increases in general and administrative costs, including the Company's investment in a new business information system that was implemented in the first quarter of fiscal 1998. INTEREST EXPENSE Interest expense was $7.1 million in fiscal 1996, $7.1 million in fiscal 1997 and $7.0 million in fiscal 1998. Included in interest expense in fiscal 1996, fiscal 1997, and fiscal 1998 was $0.5 million, $0.5 million and $0.4 million, respectively, in non-cash deferred debt issuance costs related to the Senior Notes and revolving credit facility. Unamortized deferred debt costs related to the revolving credit facility and Senior Notes at March 31, 1998 were $1.0 million, which are being amortized over the remaining term of the debt. FOREIGN CURRENCY The Company's cash holdings are substantially US dollar denominated. However, the Company is exposed to certain foreign currency fluctuations. Historically, that risk has been primarily evident in Europe and Mexico. The source of currency risk in Europe is due to receivables denominated in local currency. This has been largely offset by payables denominated in local currency. This natural hedging approach has substantially limited the Company's net exposure to the effect of currency fluctuations and management believes additional hedging has not been merited. This strategy will require review as the Company may experience greater exposure to currency fluctuations as a result of its increasing international activities. In the fourth quarter of fiscal 1996, the company formed Plantronics B.V., a wholly owned subsidiary incorporated in the Netherlands. Administrative functions, particularly with respect to the Company's international sales, were transferred to Plantronics B.V. The Company now incurs local expenses in its Plantronics B.V. subsidiary in Dutch guilders and a smaller proportion of expenses in pound sterling, while recording no revenue in Dutch guilders. The Company's peso transaction exposure at its manufacturing subsidiary in Tijuana, Mexico is limited mostly to payroll. The favorable effects to the Company on the devaluation of the peso in the years reported was somewhat offset by local currency pay raises to its employees in Mexico. Because of these factors, management does not believe the devaluation has had a material effect on the Company. In fiscal 1998, the impact of foreign currency on operations was an unfavorable ($0.2) million compared to a favorable $0.4 in fiscal 1997. INCOME TAX EXPENSE In fiscal 1996, fiscal 1997, and fiscal 1998 income tax expense was $16.3 million, $15.3 million and $18.4 million, respectively, representing an effective tax rate of 39%, 34% and 32%, respectively. The overall company-wide effective tax rate has been falling due to the faster relative increase of income in countries with tax rates lower than the United States. 11 17 LIQUIDITY AND CAPITAL RESOURCES In fiscal 1996 and 1997, liquidity was provided by $26.9 million and $34.6 million, respectively, from operating activities. The Company's principal source of liquidity in fiscal 1998 was $39.2 million of cash generated from operating activities. Cash and cash equivalents increased from $42.3 million at March 31, 1997 to $64.9 million at March 31, 1998. The Company has a $20.0 million credit facility, including a $10.0 million letter of credit sub-facility, with a major bank. In the quarter ended March 31, 1997, the Company renegotiated the terms of its credit facility so that borrowings are no longer secured and ongoing fees and costs are substantially reduced. As of March 31, 1998, the Company had no cash borrowings under the revolving credit facility and had $2.3 million outstanding under the letter of credit subfacility. OPERATING ACTIVITIES In fiscal 1998, the $39.2 million in net cash generated from operating activities primarily resulted from $39.2 in net income. INVESTING ACTIVITIES Capital expenditures were $3.9 million in fiscal 1996, $8.2 million in fiscal 1997, and $5.9 million in fiscal 1998. The decrease in fiscal 1998 from fiscal 1997 was caused by the completion of a significant upgrade to the Company's business information systems which occurred primarily in fiscal 1997 and was completed in the first quarter of fiscal 1998. FINANCING ACTIVITIES During fiscal 1996, financing activities consisted of receipt of $0.8 million in stock option exercise proceeds. During fiscal 1997, the Company repurchased 701,226 shares of its Common Stock for $12.9 million and realized $1.8 million in proceeds from the exercise of stock options and $0.1 million from the sale of 5,084 shares of Treasury Stock. In fiscal 1998, the Company repurchased 317,600 shares of its Common Stock for $13.2 million, received $1.2 million in proceeds from the exercise of stock options and realized $1.3 million from the sale of 51,072 shares of Treasury Stock. For fiscal 1996, 1997, and 1998, aggregate interest expense (including current interest payable in cash, deferred interest payable in cash and amortization of debt issuance costs) was $7.1 million, $7.1 million and $7.0 million, respectively. The Senior Notes that were issued during fiscal 1994, in the remaining principal amount of $65.1 million, bear interest, payable semiannually, at a rate of 10% per annum and mature on January 15, 2001. The Senior Notes are redeemable, at the Company's option, in whole or in part, any time after January 15, 1999. The Senior Note Indenture contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur indebtedness, pay dividends, issue preferred stock of subsidiaries, engage in transactions with affiliates, create liens, engage in mergers and consolidations, make certain asset sales or make certain investments. The Senior Note Indenture also provides that holders of the Senior Notes have the right to require the Company to repurchase their Senior Notes in the event of a "change in control" and certain various customary events of default. The Company believes that its current cash balance and cash to be provided by operations, together with available borrowing capacity under the revolving credit facility, will be sufficient to make required interest payments under the Senior Notes and to fund operations at least through the next 12 months. Subject to the terms and conditions of the 10% Senior Note Indenture and the Company's revolving credit facility, the Company may use cash for such purposes as repurchasing Senior Notes, repurchasing the Company's Common Stock or acquiring complementary businesses, products or technologies. 12 18 FACTORS AFFECTING FUTURE OPERATING RESULTS Plantronics participates in an increasingly volatile industry that is characterized by industry-wide competition for business. Industry participants confront aggressive pricing practices, continually changing customer demand patterns, growing competition from new market entrants, and increasingly rapid technological development. In accordance with the provisions of the Private Securities Litigation Reform Act of 1995, the cautionary statements set forth below discuss important factors that could cause actual results to differ materially from the projected results contained in any forward-looking statements in this report or otherwise made orally or in writing by the Company. NEED TO SUCCESSFULLY DEVELOP NEW PRODUCTS AND MARKETS The Company's net sales to date have been derived principally from the sale of lightweight communications headsets ("tops") and associated telephone adapter amplifier bases ("bottoms"). Historically, a substantial amount of the company's sales have been made through distributors to call center users such as telemarketing personnel, reservation agents, telephone operators and air traffic controllers. The Company has recently expanded its marketing efforts to sell lightweight communications headsets to the business, mobile and home office user market segments. The Company's product development efforts historically have been directed toward incremental enhancement of its existing products and development of new products that capitalize on its core technologies and thus expand the Company's product offerings to new user market segments. The success of new product introductions is dependent on several factors, including proper new product selection, timely completion and introduction of new product designs, cost-effective manufacture of such products, quality of new products and market acceptance. To be successful in the future, the Company must be able to develop new products, qualify these new products with its customers, successfully introduce these products to the market on a timely basis, and commence and sustain volume production to meet customer demands. Although the Company has attempted to determine the specific needs of these new market segments, there is no assurance that the Company's present and future products designed for these market segments will gain substantial market acceptance. As discussed below, even if the market segments develop and the Company's products meet the needs of the potential segment, there is no assurance that the Company can cost effectively manufacture such products. COMPETITION The Company encounters aggressive competition in all areas of its business activity. The Company competes primarily on the basis of technology, performance, price, quality, reliability, distribution, and customer service and support. As the Company develops new generations of products and enters new market segments, including the developing business, computer, mobile and home office user segments of the market, the Company anticipates that it may face additional competition from companies which currently do not offer communications headsets. Such companies may be larger, offer broader product lines and have substantially greater financial and other resources than the Company. Such competition could negatively affect pricing and gross margins. Although the Company has historically competed very successfully in the call center segment of the market, there can be no assurance that it will be able to continue its leadership position in that segment of the market or that the Company will be able to compete successfully in the previously defined new market segments. DEMAND OF CHANGING TECHNOLOGIES The technology of telephone headsets, both "tops" and "bottoms," has traditionally evolved slowly. Products have traditionally exhibited life cycles of three to five years before introduction of the next generation of products. Next generation products usually included stylistic changes and quality improvements but were based on similar technology. The Company believes that future changes in technology may come at a faster pace, particularly in the telephone, wireless telephone and computer uses in the business and home office market segments. In addition, in order to avoid product obsolescence, the Company will have to monitor technological changes in telephone and computer technologies, as well as users' demands for new technologies. The Company may experience fluctuations in manufacturing yields that can materially affect the Company's operations, particularly in the start-up phase of new products or 13 19 new manufacturing processes. The Company's future success will be dependent in part on its ability to develop products that utilize new technologies and to introduce them successfully to the marketplace. Failure by the Company to keep pace with future technological changes could materially adversely affect the Company's revenues and operating results. 14 20 RISKS RELATED TO GROSS PROFIT The Company's gross profit percentage is a function of the product mix sold in any period. Therefore, the gross profit percentage may fluctuate, affecting the Company's operating results. Factors such as unit volumes, obsolescence/surplus of inventory, heightened price competition, changes in channels of distribution, shortages and cost increases in supplies of component parts from vendors, and the availability and cost of labor, also may cause fluctuations in gross profit percentages. NEED TO MATCH PRODUCTION TO DEMAND Historically, the Company has seen steady increases in customer demand for its products and has generally been able to increase production to meet that demand. Demand for the Company's products is dependent on many factors and such demand is inherently difficult to forecast. Rapid increases in production levels could require expenditures that may negatively affect gross margins and may result in decreased manufacturing yields. Failure to balance demand and production could result in excesses or shortages of components and parts and excesses or shortages of manufacturing capacity. Failure to meet demand could result in the inability to meet customer expectations and adversely affect the Company's operations and operating results. RELIANCE UPON SUPPLIERS The Company's manufacturing operations primarily consist of assembly of components and subassemblies that Plantronics manufactures or purchases from a variety of sources. The cost, quality, and availability of such components are essential to the successful production of the Company's communications products. Most components and subassemblies used in the Company's manufacturing operations are obtained, or are reasonably available, from numerous sources. However, certain of its subassemblies and components are currently obtained only from single suppliers. The Company currently purchases those goods on a purchase order basis. The Company periodically experiences constrained supply of certain component parts and such constraints, if persistent, may adversely affect operating results until alternate sourcing can be developed. To date, the Company has experienced only minor interruptions in the supply of these components, none of which has adversely affected its operations. However, an interruption in supply from any of the Company's single source suppliers in the future could temporarily result in the Company's inability to deliver products on a timely basis, which in turn could adversely affect its operations. IMPORTANCE OF PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS The Company's success will depend in part on its ability to obtain patents and preserve other intellectual property rights covering the design and operation of its products. The Company currently holds certain patents and intends to continue to seek patents on its inventions when appropriate. The process of seeking patent protection can be lengthy and expensive, and there can be no assurance that patents will issue from currently pending or future applications or that the Company's existing patents or any new patents issued will be of sufficient scope or strength or provide meaningful protection or any commercial advantage to the Company. The Company may be subjected to, or may initiate, litigation or patent office interference proceedings, which may require significant financial and management resources. The failure to obtain necessary licenses or other rights or the advent of litigation arising out of any such claims could have a material adverse effect on the Company's operations. RISK ASSOCIATED WITH FOREIGN OPERATIONS AND SALES Approximately 30.7% of the Company's net sales in fiscal 1998 were derived from customers outside the United States. In addition, the Company conducts substantially all of its headset assembly operations in its Mexican manufacturing facility and obtains most of the components of its products from various foreign suppliers. Offshore operations are subject to certain inherent risks, including delays in transportation, changes in governmental policies, taxes, tariffs and import/export regulations, political unrest, fluctuations in currency exchange rates and geographic limitations on management controls and reporting. There can be no assurance that the inherent risks of offshore operations, particularly in 15 21 Mexico, will not adversely affect the Company's business, operating results and financial condition in the future. Although the Company generally transacts business internationally in United States currency, declines in the values of local currencies relative to the United States dollar in countries in which the Company sells its products could adversely affect the Company by resulting in less competitive pricing for the Company's products. Substantial increases in the values of local currencies relative to the United States dollar in countries in which the Company purchases components or assembles products could adversely affect the Company by increasing the cost of its products, decreasing margins or possibly requiring less competitive pricing because of resulting price increases. The Company does not currently engage in any hedging activities to mitigate exchange rate risks and to date has not been adversely affected by fluctuating currencies. To the extent that the Company is successful in increasing its sales to foreign customers, or to the extent that the Company increases its transactions in foreign currencies, the Company's results of operations could be adversely affected by exchange rate fluctuations. DEPENDENCE UPON SENIOR MANAGEMENT The Company believes that it has benefited substantially from the leadership of Robert S. Cecil, the Chairman of the Board and Chief Executive Officer of the Company, and the other current members of senior management, and that the loss of their services could have a material adverse effect on the Company's business and future operations. Although the Company has an employment agreement with Mr. Cecil, such agreement permits him to voluntarily terminate his employment at any time. In addition, although Mr. Cecil's agreement contains a five-year non-compete covenant which takes effect upon termination of his employment, such covenants are generally not enforceable under California law. CONCLUSION Because of the foregoing factors, as well as other variables affecting or which could affect the Company's operating results, past financial performance should not be considered a reliable indicator of future performance. Investors should not rely upon historical trends to anticipate results or trends in future periods. 16 22 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Plantronics, Inc. In our opinion, the accompanying consolidated balance sheets and the related statements of operations, of cash flows and of stockholders' equity present fairly, in all material respects, the financial position of Plantronics, Inc. and its subsidiaries at March 31, 1997 and 1998 and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP /s/ PRICE WATERHOUSE LLP San Jose, California April 17, 1998 23 BOARD OF DIRECTORS Robert S. Cecil Chairman of the Board and Chief Executive Officer Robert F.B. Logan Private Investor M. Saleem Muqaddam Vice President Citicorp Venture Capital, Ltd. John Mowbray O'Mara Management Consultant Trude C. Taylor Private Investor J. Sidney Webb Chairman of the Board The Titan Corporation David A. Wegmann Private Investor EXECUTIVE OFFICERS Robert S. Cecil Chairman of the Board and Chief Executive Officer S. Kenneth Kannappan President and Chief Operating Officer Benjamin Brussell Vice President-Corporate Development C. Donald Cooper Senior Vice President and Chief Strategy Officer Donald S. Houston Senior Vice President-Sales David Huddart Senior Vice President- Engineering and Technology Farhad Kashani Senior Vice President-Operations John A. Knutson Vice President-Legal, Senior General Counsel and Secretary H. Craig May Senior Vice President-Marketing Barbara V. Scherer Senior Vice President-Finance and Administration and Chief Financial Officer CORPORATE INFORMATION Corporate Headquarters 337 Encinal Street Santa Cruz, California 95060 Telephone: 408-426-6060 Fax: 408-426-6098 http://www.plantronics.com Registrar and Transfer Agent Boston EquiServe, L.P. Shareholder Services MailStop: 45-01-06 P.O. Box 644 Boston, Massachusetts 02102-0644 Independent Accountants Price Waterhouse LLP San Jose, California Corporate Counsel Wilson Sonsini Goodrich & Rosati Palo Alto, California FORM 10-K A copy of the Annual Report on Form 10-K filed with the Securities and Exchange Commission that contains additional information about the Company may be obtained without charge by writing to: Investor Relations Plantronics, Inc. P.O. Box 1802 Santa Cruz, CA 95061-1802 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock, $.01 par value, has traded on the New York Stock Exchange, under the symbol "PLT," since the Company's initial public offering on January 19, 1994. The initial offering price was $6.25 per share. The following table sets forth the high and low daily sales prices for the Common Stock for the Company's 1997 and 1998 fiscal years.
FY 1997 Low High First Quarter $17 11/16 $20 1/4 Second Quarter $18 1/2 $19 3/4 Third Quarter $18 5/16 $22 Fourth Quarter $21 1/2 $24 7/8
FY 1998 Low High First Quarter $20 1/4 $25 3/16 Second Quarter $25 $38 3/4 Third Quarter $33 15/16 $41 7/16 Fourth Quarter $39 1/4 $44 3/4
No cash dividends were declared or paid during fiscal 1997 and fiscal 1998, and the Company has no current intention to pay dividends. As of March 31, 1998, there were approximately 84 holders of record of the Company's Common Stock. PLANTRONICS WORLDWIDE OPERATIONS Computer and Mobile Systems Division 345 Encinal Street Santa Cruz, California 95060 Telephone: 408-426-5858 Fax: 408-458-7787 Plamex, S.A. de C.V. Avenida Produccion, #12 Parque Industrial Internacional Tijuana Mesa de Otay Tijuana, Baja California 22390 Mexico Telephone: 011-52-66-822798 Fax: 011-52-66-822796 Plantronics Acoustics Italia S.r.l. Centro Direzionale Lombardo Palazzo E/2 Via Roma 108 20060 Cassina de' Pecchi Milano, Italy Telephone: 011-39-295-11900-1-2 Fax: 011-39-295-11903 Plantronics A.G. c/o Plantronics Limited Interface Business Park Bincknoll Lane Wootton Bassett, Wiltshire SN4 8QQ England Telephone: 011-44-1793-848999 Fax: 011-44-1793-848853 Plantronics B.V. Antareslaan 9 2132 JE Hoofddorp Netherlands Telephone: 011-31-23-5648010 Fax: 011-31-23-5626790 Plantronics Canada Limited c/o Andrews & Associates 225 Hymus Boulevard, Suite 10 Pointe Claire, Quebec H9R 1G4 Canada Telephone: 514-694-3185 Fax: 514-694-7770 Plantronics France S.A.R.L. Parc Technologique "La Corvette" 142-176 Avenue de Stalingrad 92700 Colombes, France Telephone: 011-33-1-46-49-83-00 Fax: 011-33-1-46-49-83-09 Plantronics GmbH Mail: Postfach 7146 50342 Hurth, (Cologne) Germany Telephone: 011-49-2233-932340 Fax: 011-49-2233-373274 Plantronics Hong Kong Ste. 1111, Tower II Silvercord Bldg., 30 Canton Road Tsim Sha Tsui, Kowloon Hong Kong Telephone: 011-852-2375-8480 Fax: 011-852-2377-0573 Plantronics International do Brasil LTDA Rua Jesuino Arruda, 676-154 04532-082 Sao Paulo, SP Brazil Telephone: 011-55-11-282-8759 Fax: 011-55-11-3064-5309 Plantronics K.K. 1-22-7, Naka-Cho, Musashino-shi Tokyo 180, Japan Telephone: 011-81-422-55-0805 Fax: 011-81-422-55-0806 24 Plantronics Limited Interface Business Park Bincknoll Lane Wootton Bassett, Wiltshire SN4 8QQ England Telephone: 011-44-1793-848999 Fax: 011-44-1793-848853 Plantronics Nordic Oskarsvagen 10 S-702 14 Orebro Sweden Telephone: 011-46-19-121930 Fax: 011-46-19-121933 Plantronics Pty Limited Level 27 530 Collins St. Melbourne, Victoria 3000 Australia Plantronics Singapore 391 A Orchard Road #12-01 Ngee Ann City, Tower A Singapore 238873 Telephone: 011-65-838-5239 Fax: 011-65-235-1447 Plantronics Spain Calle Orense 8 (Oficinas) First Floor 28020 Madrid, Spain Telephone: 011-34-91-514-94-06 Fax: 011-34-91-514-94-66 Walker Equipment Division 4009 Cloud Springs Road Ringgold, Georgia 30736 Telephone: 706-861-2212 Fax: 706-861-5069 Copyright (C) 1998, Plantronics, Inc. All rights reserved. Printed in U.S.A. EX-21 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21
JURISDICTION OF SUBSIDIARIES OF REGISTRANT INCORPORATION - ------------------------------------------------------------------------- ------------------ Plamex, S.A.............................................................. Mexico Plantronics A.G......................................................... Cham, Switzerland Plantronics Holdings Limited*............................................ Canada Plantronics Canada Limited(1)............................................ Canada Plantronics GmbH(2)...................................................... Germany Plantronics Limited(2).................................................. England Plantronics Acoustics Italia S.r.l.(2).................................. Italy Plantronics France S.A.R.L.(3)........................................... France Plantronics B.V.(1)...................................................... Netherlands Plantronics International do Brasil LTDA(4).............................. Brazil Pacific Plantronics, Inc.(1)*............................................ California Frederick Electronics Corporation*....................................... Maryland Emtel, S.A.(1)*.......................................................... Mexico Plantronics K.K.(4)...................................................... Japan Plantronics Pty Limited.................................................. Australia
- --------------- * Inactive (1) 100% owned by Plantronics Holdings Limited, except for qualifying shares, if any. (2) 100% owned by Plantronics, A.G., except for qualifying shares, if any. (3) 100% owned by Plantronics Limited, except for qualifying shares, if any. (4) 99% owned by Plantronics, Inc. and 1% owned by Plantronics B.V. EX-23.1 7 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-19351; 333-14833; and 33-81980) and in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-70744) of Plantronics, Inc. of our report dated April 17, 1998 appearing on page 22 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. /s/ PRICE WATERHOUSE LLP - ------------------------ Price Waterhouse LLP San Jose, California June 22, 1998 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT MARCH 31,1998 AND THE STATEMENT OF INCOME FOR THE FISCAL YEAR THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING NOTES APPEARING IN THE COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS. 1,000 U.S. DOLLARS YEAR MAR-28-1998 MAR-30-1997 MAR-28-1998 1 64,901 0 43,302 1,752 29,741 140,096 45,663 24,408 165,475 41,337 65,050 0 0 174 53,262 165,475 236,112 236,112 108,514 108,514 65,225 0 6,984 57,632 18,443 39,189 0 0 0 39,189 2.38 2.15 For Purpose of This Exhibit, Primary means Basic.
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