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<SEC-DOCUMENT>/in/edgar/work/0001086144-00-000093/0001086144-00-000093.txt : 20000930
<SEC-HEADER>0001086144-00-000093.hdr.sgml : 20000930
ACCESSION NUMBER: 0001086144-00-000093
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20000630
FILED AS OF DATE: 20000928
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PE CORP
CENTRAL INDEX KEY: 0000077551
STANDARD INDUSTRIAL CLASSIFICATION: [3826
] IRS NUMBER: 061534213
STATE OF INCORPORATION: NY
FISCAL YEAR END: 0630
</COMPANY-DATA>
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-04389
FILM NUMBER: 730181
</FILING-VALUES>
BUSINESS ADDRESS:
STREET 1: 761 MAIN AVE
CITY: NORWALK
STATE: CT
ZIP: 06859-0001
BUSINESS PHONE: 2037621000
</BUSINESS-ADDRESS>
MAIL ADDRESS:
STREET 1: 761 MAIN AVENUE
CITY: NORWALK
STATE: CT
ZIP: 06859-0001
</MAIL-ADDRESS>
FORMER COMPANY:
FORMER CONFORMED NAME: PERKIN ELMER CORP
DATE OF NAME CHANGE: 19930601
</FORMER-COMPANY>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>PE CORPORATION ANNUAL REPORT
<TEXT>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
[ X ] Annual Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended June 30, 2000
OR
[ ] Transition Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the transition period from _________ to ____________
Commission File Number 1-4389
---------------------
PE Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 06-1534213
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
761 Main Avenue, Norwalk, Connecticut 06859-0001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-762-1000
---------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of class on which registered
- ---------------------------------------------- ---------------------------------------------
<S> <C>
PE Corporation - PE Biosystems Group New York Stock Exchange
Common Stock (par value $0.01 per share) Pacific Exchange
PE Corporation - Celera Genomics Group New York Stock Exchange
Common Stock (par value $0.01 per share) Pacific Exchange
</TABLE>
Securities registered pursuant to Section 12 (g) of the Act:
Title of class
----------------
Class G Warrants
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes _____ No
------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of September 18, 2000, 209,420,304 shares of PE Corporation -- PE
Biosystems Group Common Stock were outstanding, and the aggregate market value
of such shares (based upon the average of the high and low price) held by
non-affiliates was approximately $22,068,840,000. As of September 18, 2000,
60,236,861 shares of PE Corporation -- Celera Genomics Group Common Stock were
outstanding, and the aggregate market value of such shares (based upon the
average of the high and low price) held by non-affiliates was approximately
$5,609,634,000.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for Fiscal Year ended June 30, 2000 - Parts I, II,
and IV. Proxy Statement for Annual Meeting of Stockholders dated September 8,
2000 - Part III.
================================================================================
<PAGE>
PART I
Item 1. BUSINESS
General Development of Business
PE Corporation (hereinafter referred to as the "Company") was
incorporated in 1998 under the laws of the State of Delaware. The Company
conducts its business through two groups: the PE Biosystems Group (which, since
July 2000 has conducted business under the name "Applied Biosystems") and the
Celera Genomics Group. The Company maintains a corporate staff to provide
accounting, tax, treasury, legal, and other internal services.
The PE Biosystems Group manufactures and markets biochemical instrument
systems and associated consumable products for life science research and related
applications. The markets for the PE Biosystems Group's products span the
spectrum of the life sciences industry, including: basic human disease research;
genetic analysis; pharmaceutical drug discovery, development, and manufacturing;
human identification; agriculture; and food and environmental testing.
Universities, government agencies, and other non-profit organizations engaged in
research activities also use the PE Biosystems Group's products.
The Celera Genomics Group is engaged principally in the generation,
sale, and support of genomic information and enabling data management and
analysis software. The Celera Genomics Group's customers use this information
for commercial applications in the pharmaceutical and life sciences industries
in the specific areas of target identification, drug discovery, and drug
development. The Celera Genomics Group also provides gene discovery, genotyping,
and related genomics services. The Celera Genomics Group has recently expanded
its business into the emerging fields of functional genomics, particularly
proteomics and personalized health/medicine.
The Company is the successor to PE Corporation (NY), formerly "The
Perkin-Elmer Corporation," which became a wholly-owned subsidiary of the Company
as a result of a recapitalization of PE Corporation (NY) completed in May 1999.
As part of the recapitalization, the Company established two classes of common
stock that track the businesses of each of the PE Biosystems Group and the
Celera Genomics Group (i.e., PE Corporation -- PE Biosystems Group Common Stock
and PE Corporation -- Celera Genomics Group Common Stock).
In May 1999, the Company sold its Analytical Instruments business to
PerkinElmer, Inc. (formerly EG&G, Inc.) and as part of that transaction also
sold the "Perkin-Elmer" name. The Company is seeking approval from its
stockholders at its 2000 annual meeting to change its corporate name to "Applera
Corporation," which the Company believes will better reference its consituent
parts, and to formally change the name of the PE Biosystems Group to the
"Applied Biosystems Group," which the Company believes is more closely
associated with the business of the PE Biosystems Group than its current name.
In June 2000, the Celera Genomics Group completed the acquisition of
Paracel, Inc. ("Paracel"). Paracel is a leading producer of advanced genomic and
text analysis supercomputing technology.
-2-
<PAGE>
Financial Information About Industry Segments
A summary of net revenues from external customers, operating income
(loss), and total assets attributable to each of the Company's industry segments
for the fiscal years ended June 30, 1998, 1999, and 2000 is incorporated herein
by reference to Note 6 on page 35, Note 6 on page 65, and Note 6 on pages
102-103 of the Company's Annual Report to Stockholders for the fiscal year ended
June 30, 2000.
Narrative Description of Business
PE Biosystems Group (d/b/a Applied Biosystems)
Overview. The PE Biosystems Group manufactures and markets biochemical
instrument systems and associated consumable products for life science research
and related applications. Its products are used in various applications
including the synthesis, amplification, purification, isolation, analysis, and
sequencing of nucleic acids, proteins, and other molecules of biological
interest.
The PE Biosystems Group currently consists of four business units and a
shared service organization consisting of human resources, finance, sales,
marketing, communications, manufacturing, legal, quality control, and advanced
research. The business units that make up the PE Biosystems Group are: Molecular
Biology (formerly Applied Biosystems), PerSeptive Biosystems, Informatics
(formerly PE Informatics), and Tropix. Each business unit is responsible for the
development and marketing of products within its particular area of business.
The business units serve substantially the same customer base but have little
overlap in their product offerings. As a result, the PE Biosystems Group is able
to enhance the operating efficiency of these units through cross-selling and
reduced administrative costs.
Scientific Background. All living organisms contain four basic
biomolecules: nucleic acids, which include DNA and RNA; proteins; carbohydrates;
and lipids. Biomolecules are typically much larger and more complex than common
molecules. These structural differences make the analysis of biomolecules
significantly more complex than the analysis of smaller compounds. Although all
of these biomolecules are critical for a cell to function normally,
historically, key advances in therapeutics have come from an understanding of
proteins or DNA. DNA molecules provide instructions that ultimately control the
synthesis of proteins within a cell. DNA molecules consist of long chains of
chemical subunits, called nucleotides. There are four nucleotides -- adenine,
cytosine, guanine, and thymine -- often abbreviated with their first letters A,
C, G, and T. DNA molecules consist of two long chains of nucleotides bound
together to form a double helix. Genes are individual segments of these DNA
molecules that carry the specific information necessary to construct particular
proteins. Genes may contain from several dozen to tens of thousands of
nucleotides. The entire collection of DNA in an organism, called the genome, may
contain a wide range of nucleotides, including as few as 4 million nucleotides
in the case of simple bacteria and 3.1 billion base pairs of nucleotides in the
case of human beings.
Principally driven by the "biotechnology revolution," and the
increasing focus on DNA, researchers are developing a better understanding of
DNA's role in human disease. An increased appreciation of how DNA ultimately
determines the functions of living organisms has generated
-3-
<PAGE>
a worldwide effort to identify and sequence genes of many organisms, including
the genes that make up the human genome. The Company believes the best
scientific evidence to date indicates that the number of genes in the human
genome is between 50,000 and 80,000, although some have estimated the number to
be as high as 150,000.
Individual research efforts generally fall into two broad categories,
sequencing and sizing. In sequencing procedures, the goal is to determine the
exact order of the individual nucleotides in a DNA strand so that this
information can be related to the genetic activity influenced by that piece of
DNA. In DNA sizing, a particular fragment of a DNA molecule, isolated from a
specific sample, is tested to determine whether it contains a particular
category of size or nucleotide order. This testing is not performed to determine
the complete structure of the segment, but rather is performed to determine if
the particular piece is a certain length or contains a specific short sequence.
The Company believes that genetic research will increase as companies
in the pharmaceutical and biotechnology industries to accelerate their drug
discovery and development efforts. These efforts are expected to create a demand
for increased automation and efficiency in pharmaceutical and biotechnology
laboratories. The PE Biosystems Group's products address this demand by
combining the detection capabilities of bioanalytical instruments with advances
in automation.
Molecular Biology (formerly Applied Biosystems). The Molecular Biology
unit is the genetic analysis and genomics technology unit of the PE Biosystems
Group. The Molecular Biology unit develops, markets, and services instrument
systems for nucleic acid synthesis, Polymerase Chain Reaction ("PCR"), DNA
sequencing, genetic analysis, and cellular detection. These products and
services are used in both research and commercial applications for purifying,
analyzing, synthesizing, sequencing, and amplifying genetic material.
The products of the Molecular Biology unit can be broadly classified
into the following categories:
o PCR Products. PCR is a process in which a short strand of DNA is
copied multiple times, or "amplified," so that it can be more
readily detected and analyzed. The Molecular Biology unit's PCR
amplification instruments, known as thermal cyclers, include 24,
48, and 96 sample amplification systems, several combination
thermal cyclers and PCR detection systems, reagents, and software.
The unit's dual 384-well sample thermal cycler is expected to
complement the Model 3700 DNA Analyzer and fill a significant
market need for laboratories conducting high volume genomic
research.
The Sequence Detection Systems product line, introduced in 1996,
uses TaqMan(R) chemistry, a unique PCR technology designed by the
Roche Group and developed by the Molecular Biology unit. TaqMan(R)
chemistry detects the product of PCR amplification and quantifies
the initial sample during the thermal cycling process. This
product line, which includes the Model 7700, has been widely
accepted in the pharmaceutical discovery research market. The
newly introduced 6700 Automated Nucleic Acid Workstation automates
nucleic acid preparation, including sample filtration and
purification, assay plate set-up, and plate scaling. This
instrument is
-4-
<PAGE>
designed to substantially decrease the labor and cost involved in
preparing DNA for analysis.
o Genetic Analysis. Genetic analysis uses electrophoresis to
separate DNA molecules based on their differing lengths and the
resulting differences in the speeds at which they will pass
through a gel. The Molecular Biology unit's genetic analysis
products generally perform both DNA sequencing and fragment
analysis.
DNA sequencing is used to determine the exact order of nucleotides
in a strand of DNA. Typically, fluorescent tags are used to
generate labeled products, with each of the four different
nucleotides labeled with a different color. The labeled fragments
are run through an electrophoresis gel and detected.
DNA fragment analyzers are used to determine the size, quantity,
or pattern of DNA fragments. Fragment analysis applications
include gene mapping; forensic typing, using microsatellite
markers, single-strand conformation polymorphism (SSCP) analysis
screening for unknown mutations; and oligonucleotide ligation
assays to detect known mutations.
The Molecular Biology unit's DNA sequencing products include a
sequencer with 96 capillaries (Model 3700), a recently introduced
sequencer with 16 capillaries (Model 3100), a one capillary
sequencer (Model 310), a slab-gel instrument expandable to 96
lanes (Model 377), sequencing reagents, and analysis software.
These products are used to sequence DNA to provide an
understanding of human and other genomes and to analyze DNA
fragments for various applications, including human disease
research, food contamination, and forensic analysis.
The high throughput Model 3700 DNA Analyzer, which was introduced
in the Company's 1999 fiscal year, is designed to enable
applications requiring tens of thousands of samples produced
weekly by combining proven capillary electrophoresis hardware and
separation polymer chemistry with new detection technology and
automation. This is an automated instrument which allows 24 hour
unattended operation. The Model 3700 DNA Analyzer is the principal
instrument used by the Celera Genomics Group. The Company
believes the Model 3700 DNA Analyzer is also the principal
instrument used by the Human Genome Project for its sequencing
projects. The Model 3100, which was introduced in the Company's
2000 fiscal year and was designed for use by academic programs and
commercial laboratories worldwide, incorporates the automated
technology developed for these large-scale programs. The PE
Biosystems Group's Model 377 DNA Sequencer accounted for 12.49%,
5.93%, and 3.1% of the Company's consolidated revenues in fiscal
years 1998, 1999, and 2000, respectively. The Model 3700 accounted
for 10.5% and 14.5% of the Company's consolidated revenues in
fiscal years 1999 and 2000, respectively.
o DNA Synthesis. DNA synthesizers produce synthetic DNA
(oligonucleotides) for genetic analysis. The synthetic DNA is an
essential reagent for PCR and DNA sequencing and is also used in
drug discovery applications. The needs of multiple markets are met
with several models of synthesizers and supporting reagents
-5-
<PAGE>
marketed by the Molecular Biology unit. The unit also provides
custom synthesis, in which oligonucleotides are made to order and
shipped to customers.
o PNA. The Molecular Biology unit has a license, which is exclusive
for certain applications, to manufacture and sell peptide nucleic
acid ("PNA") for molecular biology research and various other
applications. PNA is comprised of a sequence of nucleobases, but
unlike DNA, PNA has a modified uncharged peptide-like "backbone."
The unique chemical structure of PNA enhances its affinity and
specificity as a DNA or RNA probe. PNA may be used in many areas,
including basic research, pharmaceutical discovery, diagnostic
development, and food and environmental testing.
o Applied Markets. The Molecular Biology unit has formed product
development and marketing groups to develop products and services
specially designed for specific markets. The focus of these groups
is in the food and environmental testing and human identification
(mainly forensic) markets.
The Molecular Microbiology unit within the Molecular Biology unit
is principally responsible for the development and marketing of
technologies for bacterial and fungal detection, characterization,
and identification. This unit has developed the MicroSeq 16S rDNA
Bacterial Sequencing Kit to accurately identify microorganisms.
TaqMan(R) Pathogen Detection Kits relying on Sequence Detection
Systems instrument platforms are under development. These kits are
being developed to rapidly detect bacterial contamination.
The Human Identification unit within the Molecular Biology unit
develops systems that are used by crime laboratories and other
agencies to identify individuals based on their DNA. The Company
believes these systems are most often used in cases of violent
crime where DNA found at the crime scene is matched with DNA from
suspects. The use of DNA in some criminal investigations may help
solve the crimes and may reduce the cost of the investigation, and
the Company believes there is a growing recognition of the
validity of the use of DNA testing and DNA databases for this
purpose. The systems are also used in the identification of human
remains at disaster sites.
o Human Diagnostics. The Molecular Biology unit has a license from
the Roche Group to use PCR techniques in the development and
marketing of products for human diagnostics. Products developed
for human diagnostics fall into the following general categories:
immunology; genetic disease carrier identification; infectious
disease; and cancer. The PE Biosystems Group expects to develop
tests based on this technology to support tissue typing (HLA) in
bone marrow transplants and for HIV resistance diagnosis. Tests
have also been developed for carrier identification for cystic
fibrosis, fragile X syndrome, and loss of heterozygosity
associated with specific forms of colorectal cancer.
o Cellular Detection Systems. Through its strategic alliance with
Becton, Dickinson and Company, the Molecular Biology unit is
co-developing a fluorometric microvolume assay technology system
("FMAT"). This instrument system uses proprietary scanning
technology to rapidly detect and measure fluorescence
-6-
<PAGE>
associated with objects as small as a single cell. This system is
expected to satisfy market needs in pharmaceutical development for
a cell-based, high throughput screening system.
PerSeptive Biosystems. PerSeptive Biosystems develops, markets, and
supports proprietary consumable products and instrument systems for the
purification, analysis, and synthesis of proteins and related molecules.
Proteins are the products of genes and, after expression and modification, are
the key drivers and mediators of cellular function and biological system
activity. The understanding and treatment of disease today involves the study of
proteins and frequently involves the measurement of a drug's binding to specific
proteins in the body. PerSeptive Biosystems products are designed for use in the
life science markets to reduce the time and cost required for the discovery,
development, and manufacture of pharmaceutical products.
PerSeptive Biosystems products can be broadly classified into the
following categories:
o Mass Spectrometry. PerSeptive Biosystems mass spectrometry
products are used for the analysis of both large molecules such as
proteins and small molecules including those that might be used as
drugs. These systems may be sold and used on a stand-alone basis
or coupled with a liquid chromatograph ("LC/MS"). LC/MS systems
are able to separate and analyze the components of complex
mixtures. All mass spectrometry systems include an ionization
source which creates charged molecules and a mass
separation/detection component which separates these charged
molecules on the basis of their mass, and detects their presence.
Until recently, mass spectrometry was not very useful for the
analysis of large molecules of biological importance such as
proteins because the classical methods for creating ions caused
these complex molecules to disintegrate into many small pieces.
This process resulted in the destruction of the information about
the original large molecule. The mass separation component was
also problematic because it was not possible to distinguish
between large molecules of nearly the same mass. The PE Biosystems
Group believes that its delayed extraction technology used in its
Matrix-Assisted, Laser Desorption Ionization Time-of-flight
("MALDI-TOF") mass spectrometer overcomes those deficiencies for
the analysis of proteins and many other large molecules of
biological importance. This technology, along with planned future
enhancements, is expected to satisfy market needs in the emerging
field of proteomics by providing high throughput systems for the
identification and characterization of proteins.
Since MALDI-TOF instruments are not directly coupled to separation
devices, mixtures are often separated, purified, and collected
before analysis. This process can be accomplished with
PerSeptive Biosystems purification products such as the
VISION(TM) Workstation, an integrated separation device which
provides rapid separation of proteins or other large molecules.
Mass spectrometry systems are also used to identify and quantify
smaller molecules and are especially important for the measurement
of drugs and their metabolites, which are compounds resulting from
the body's acting upon the drug, in bodily fluids such as blood or
urine. This information is required by the U.S. Food and Drug
-7-
<PAGE>
Administration and other regulatory agencies for the approval of
drugs. This application is very demanding because the amounts of
the drugs and their metabolites are very low and the mixtures are
very complex. In order to analyze this mixture, scientists use
LC/MS/MS systems, which consist of high pressure liquid
chromatography ("HPLC") devices which separate the components of
the mixture, usually an extract of blood or urine, and which are
coupled directly to tandem mass spectrometry systems. For this
application, it is important to achieve as much sensitivity and
specificity as possible. This can be done with components which
have been developed and refined by Applied Biosystems/MDS SCIEX
Instruments (formerly Perkin-Elmer/SCIEX Instruments and PE SCIEX
Instruments), a joint venture between the Company and MDS Inc. of
Canada (formerly MDS Health Group Limited of Canada) through which
the Company manufactures and sells certain of its mass
spectrometry instrument systems. Applied Biosystems/MDS SCIEX
Instruments has developed the MS/MS technologies which create the
sensitivity and specificity required for this demanding
application. Under the terms of the joint venture agreement with
MDS Inc., the PE Biosystems Group has the exclusive worldwide
distribution rights to the LC/MS products manufactured for the
joint venture by the MDS SCIEX Division of MDS Inc.
o Purification. As the human genome is sequenced and becomes known,
the information obtained is expected to be used to study proteins,
which are expressed by genes. Consequently, tens of thousands of
proteins will need to be purified and characterized because many
of these proteins may be used as drug targets or as therapeutics.
PerSeptive Biosystems believes that its purification products in
general can be incorporated readily into the development process
of pharmaceutical products and offer productivity advantages,
enabled by high throughput separation, over conventional
counterparts.
PerSeptive Biosystems' patented Perfusion Chromatography(R)
technology uses proprietary flow-through particles and BioCad(R)
Chromatography workstations to reduce the time necessary for the
purification and analysis of biomolecules. This technology
separates biomolecules 10 to 100 times faster than conventional
liquid chromatography or HPLC without compromising resolution or
capacity. The PerSeptive Biosystems Vision(TM) Workstation is
believed to be the first robotic-equipped HPLC platform introduced
to the life science markets that allows for the separation of
proteins followed by analysis of the fractions collected in an
unattended operation. Together, the automated platform and
flow-through particles are designed to increase throughput and
efficiency for the purification of biomolecules.
o Protein Sequencing and Synthesis. Protein sequencers provide
information about the sequence of amino acids that make up a given
protein by chemically disassembling the protein and analyzing the
amino acids. The PerSeptive Biosystems Procise(R) Protein
Sequencing system uses Edman protein sequencing chemistry to
sequence a peptide (the building blocks of proteins), one amino
acid at a time, and in turn to identify or characterize the
protein that contains the peptide.
Synthetically produced peptides are used in understanding antibody
reactions and as potential drugs or drug analogs. The PerSeptive
Biosystems Pioneer(TM) and 433A
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<PAGE>
Peptide Synthesis systems are designed for the high throughput and
quality synthesis of peptides, peptide analogs, and small
proteins. PerSeptive Biosystems also manufactures and sells
proprietary synthesis reagents and fine chemicals for use with
these and other products.
Informatics. The Informatics unit of Applied Biosystems develops,
markets, and distributes software and services to integrate and automate life
sciences research. The unit also provides software for Applied Biosystems
instruments systems.
The science of informatics seeks to blend biology and computing to
transform massive amounts of data into useful information. The Informatics
unit's customers are typically involved in gene mapping, drug discovery and
development, and molecular diagnostics. They use the Informatics unit's various
software products for laboratory information management, sample tracking, data
collection, analysis, and data mining. Laboratories seeking greater automation
and integration of lab processes use the Informatics unit's Rapid Integration
Solutions to streamline and speed their genomics, proteomics, expression, and
high-throughput screening activities.
Tropix. Tropix develops, manufactures, and markets chemiluminescent
substrates and related products for the life science markets. Chemiluminescence
is the conversion of chemical energy stored within a molecule into light.
Chemiluminescent substrates are substances that emit light in the presence of
another target substance that is tagged with an enzyme. Chemiluminescent
technology is used in life science research and commercial applications
including drug discovery and development, clinical diagnostics, gene function
study, molecular biology, and immunology research. Tropix also licenses its
technology to companies selling bioanalytical and clinical diagnostic tests.
Tropix's products include reagents and chemiluminescent plate readers
which measure light emitted by a sample. Tropix also operates a facility devoted
to drug discovery services for the pharmaceutical, biotechnology, and
agricultural markets. The services offered by this facility include custom assay
development using proprietary technologies and high throughput drug screening
with a capacity of 100,000 to approximately 400,000 tests per day.
Marketing and Distribution. The markets for the PE Biosystems Group's
products and services span the spectrum of the life sciences industry,
including: basic human disease research; genetic analysis; pharmaceutical drug
discovery, development, and manufacturing; human identification; agriculture;
and food and environmental testing. Universities, government agencies, and other
non-profit organizations engaged in research activities also use the PE
Biosystems Group's products. Each of these markets has unique requirements and
expectations that the PE Biosystems Group seeks to address in its product
offerings. The PE Biosystems Group's customers are continually searching for
processes and systems that can perform tests faster, more efficiently, and at
lower costs. The PE Biosystems Group believes that its focus on automated and
high throughput systems enables it to respond to this need.
The size and growth of the PE Biosystems Group's markets are influenced
by a number of factors, including:
o technological innovation in bioanalytical practice;
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<PAGE>
o government funding for basic and disease-related research, such as
in heart disease, AIDS, and cancer;
o application of biotechnology in basic agricultural processes;
o increased awareness of biological contamination in food and the
environment; and
o research and development spending by biotechnology and
pharmaceutical companies.
In the United States, the PE Biosystems Group markets the largest
portion of its products directly through its own sales and distribution
organizations, although certain products are marketed through independent
distributors and sales representatives. Sales to major markets outside of the
United States are generally made by the PE Biosystems Group's foreign-based
sales and service staff, but are also made directly from the United States to
foreign customers in some cases. In some foreign countries, sales are made
through various representative and distributorship arrangements. The PE
Biosystems Group owns or leases sales and service offices in the United States
and in foreign countries through its foreign sales subsidiaries and distribution
operations. None of the PE Biosystems Group's products are distributed through
retail outlets.
Raw Materials. There are no specialized raw materials that are
particularly essential to the operation of the PE Biosystems Group's business.
The PE Biosystems Group's manufacturing operations require a wide variety of raw
materials, electronic and mechanical components, chemical and biochemical
materials, and other supplies, some of which are occasionally found to be in
short supply. The PE Biosystems Group has multiple commercial sources for most
components and supplies, but it is dependent on single sources for a limited
number of such items, in which case the PE Biosystems Group normally secures
long-term supply contracts. In some cases, if a supplier discontinues a product,
it could temporarily interrupt the business of the PE Biosystems Group.
Patents, Licenses, and Franchises. The PE Biosystems Group's products
are based on complex, rapidly developing technologies. Some of these
technologies are covered by patents owned by the PE Biosystems Group, and others
are owned by third parties and used by the PE Biosystems Group under license.
The PE Biosystems Group has pursued a policy of seeking patent protection in the
United States and other countries for developments, improvements, and inventions
originating within its organization that are incorporated into the PE Biosystems
Group's products or that fall within its fields of interest. The PE
Biosystems Group's business depends on its ability to continue developing new
technologies which can be patented, or licensing new technologies from third
parties that own patents in such technologies. The rights that the PE Biosystems
Group considers important to its current business include the following:
o The PE Biosystems Group has rights to PCR technology under a
series of agreements with the Roche Group, which owns the patents
covering the PCR process. The first of these patents expires in
2004. In July 2000, the PE Biosystems Group and the Roche Group
agreed to expand the markets each company serves with products
incorporating PCR. This new arrangement will allow both companies
to develop and market products for all potential uses of PCR.
Additionally, the PE
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<PAGE>
Biosystems Group will continue to distribute products the Roche
Group manufactures for research and non-diagnostic applications.
o The PE Biosystems Group also licenses rights under certain patents
assigned to the California Institute of Technology relating to DNA
sequencing. These patents expire between 2006 and 2015.
o The PE Biosystems Group also licenses rights under certain patents
assigned to the University of Colorado relating to oligonucleotide
synthesis. These patents expire between 2000 and 2007.
From time to time, the PE Biosystems Group has asserted that various
competitors and others are infringing its patents; and similarly, from time to
time, others have asserted that the PE Biosystems Group was or is infringing
patents owned by them. (See Item 3, Legal Proceedings, on pp. 24-25 of this
Annual Report on Form 10-K.) These claims are sometimes settled by mutual
agreement on a satisfactory basis and result in the granting of licenses by or
to the PE Biosystems Group. However, the Company cannot make any assurances as
to the outcome of any pending or future claims.
The PE Biosystems Group has established a licensing program that
provides industry access to certain of its intellectual property.
Backlog. The PE Biosystems Group's total recorded backlog at June 30,
1999 was $186.3 million, which included $23.3 million of orders from the Celera
Genomics Group. The PE Biosystems Group's total recorded backlog at June 30,
2000 was $220.9 million, which included $25.8 million of orders from the Celera
Genomics Group. It is the PE Biosystems Group's general policy to include in
backlog only purchase orders or production releases that have firm delivery
dates within one year. Recorded backlog may not result in sales because of
cancellation or other factors. It is anticipated that all orders included in the
current backlog will be delivered before the close of fiscal year 2001.
Competition. The markets in which the PE Biosystems Group operates are
highly competitive and are characterized by the application of advanced
technology. A number of the PE Biosystems Group's competitors are well known
manufacturers with a high degree of technical proficiency. In addition,
competition is intensified by the ever-changing nature of the technologies in
the industries in which the PE Biosystems Group is engaged.
The PE Biosystems Group's principal competition comes from specialized
manufacturers that have strengths in narrow segments of the life science
markets. The PE Biosystems Group competes principally in terms of the breadth
and quality of its product offerings, and its service and distribution
capabilities. While the absence of reliable statistics makes it difficult to
determine the PE Biosystems Group's relative market position in its industry
segment, the PE Biosystems Group believes it is one of the principal suppliers
in its fields, marketing a broad line of instruments and life science systems.
Research, Development, and Engineering. The PE Biosystems Group is
actively engaged in basic and applied research, development, and engineering
programs designed to develop new products and to improve existing products.
Research, development, and engineering expenditures for the PE Biosystems Group
totaled $109.9 million in fiscal 1998,
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$143.6 million in fiscal 1999, and $150.6 million in fiscal 2000. The Company
spent $120.2 million in fiscal 1998, $189.3 million in fiscal 1999, and $284.2
million in fiscal 2000 on company-sponsored research, development, and
engineering activities.
The PE Biosystems Group's new products generally originate from four
sources: internal research and development programs; external collaborative
efforts with technology companies and individuals in academic institutions;
devices or techniques that are generated in customers' laboratories; and
business and technology acquisitions.
Research and development projects at the PE Biosystems Group include
the development of improved electrophoresis techniques for DNA analysis,
real-time PCR for nucleic acid quantification, innovative approaches to cellular
analysis, sample preparation, information technologies, and mass spectrometry.
Environmental Matters. The PE Biosystems Group is subject to federal,
state, and local laws and regulations regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment, in
those jurisdictions where the PE Biosystems Group operates or maintains
facilities. The PE Biosystems Group does not believe that any liability arising
under, or compliance with, environmental laws or regulations will have any
material effect on its business, and no material capital expenditures are
expected for environmental control.
Employees. As of June 30, 2000, the PE Biosystems Group employed
approximately 4,036 persons worldwide. This number does not include the
Company's corporate staff which provides accounting, tax, treasury, legal, and
other internal services for the PE Biosystems Group. As of June 30, 2000, the
Company had 148 corporate staff employees. None of the PE Biosystems Group's
United States employees and none of the Company's corporate staff employees are
subject to collective bargaining agreements, and the Company generally considers
its relations with its employees to be good.
Celera Genomics Group
Overview. The Celera Genomics Group is engaged principally in the
generation, sale, and support of genomic information and enabling data
management and analysis software. The Celera Genomics Group's customers use this
information for commercial applications in the pharmaceutical and life sciences
industries in the specific areas of target identification, drug discovery, and
drug development. The Celera Genomics Group also provides gene discovery,
genotyping, and related genomics services. The Celera Genomics Group has
recently expanded its business into the emerging fields of functional genomics,
particularly proteomics and personalized health/medicine.
The Company and Dr. J. Craig Venter, a leading genomic scientist and
founder of The Institute for Genomic Research ("TIGR"), formed the Celera
Genomics Group business for the purpose of generating and commercializing
genomic, proteomic, and related biological and medical information to accelerate
the understanding of biological processes and to assist pharmaceutical,
biotechnology, and life science research entities in areas of research
including:
o new drugs and improved drug development processes;
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o novel genes and factors that regulate and control gene expression;
o understanding basic biological processes;
o interrelationships between genetic variability, disease, and drug
response; and
o personalized health/medicine.
A key component of the Celera Genomics Group's business strategy is its
Celera Discovery System(TM). The Celera Discovery System is an online system
through which customers can access the Celera Genomics Group's genomic and
related biological information. The Celera Genomics Group is developing the
Celera Discovery System into an integrated information and discovery system
which is expected to include the most comprehensive and integrated databases of
genomic and related biological and medical information available. The Celera
Discovery System contains proprietary information from both the Celera Genomics
Group and external sources. Also, the Celera Genomics Group has developed, and
expects to continue developing, software tools that enable users to view,
browse, and analyze data available through the Celera Discovery System in an
integrated way to facilitate discovery.
The Celera Genomics Group intends to supplement the base-level human
genome sequence data it generates with other information to increase the value
of its Celera Discovery System. This additional information may include
comparative genomic information and associated tissue-specific gene and protein
expression profiles from human and other model organisms. Comparative genomic
information from model organisms, such as Drosophila (fruit fly) and mouse, are
often used as a mechanism to better analyze specific areas of the genome and
develop the interrelationships of the genetic code to disease and drug response.
This information, which facilitates a better understanding of how genes are
controlled by regulatory elements, is expected to have significant implications
for therapeutic development and gene therapy. The Celera Genomics Group
anticipates that its Celera Discovery System will become a resource for a wide
range of customers, including companies in the pharmaceutical and biotechnology
industries, academic and research institutions, and ultimately physicians and
individuals.
The Celera Genomics Group's approach to genomics and scientific
progress to date. Since the early 1990's, with the commencement of the Human
Genome Project, scientists have generally believed that technology would limit
the pace at which the entire human genome might be sequenced. The combination of
the PE Biosystems Group's higher-throughput sequencing equipment and the
advanced sequencing strategy techniques developed by Dr. Venter and his
scientific team at TIGR resulted in the Celera Genomics Group's announcement in
June 2000 that the Celera Genomics Group had completed the sequencing and first
assembly of the human genome. The Celera Genomics Group started sequencing the
human genome in September 1999. This sequencing began after the completion of
the sequencing of Drosophila, Celera's first sequencing project, carried out in
cooperation with the Berkeley Drosophila Genome Project ("BDGP"). Drosophila was
chosen because it is an important organism for biomedical and agricultural
research, and because it is believed that its large and complex nature would
demonstrate the operational capability of the Celera Genomics Group's facilities
and the efficacy of the whole genome shotgun technique in deciphering other
large and complex genomes like the human genome. Upon completion of the
sequencing of the Drosophila genome, the Celera Genomics Group undertook the
task of using its computational approach to assemble the genome
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into its proper order. The Celera Genomics Group has completed its sequencing
and assembly efforts, and the results, together with further in depth analysis,
were published with the BDGP in the spring of 2000.
In sequencing and completing the first assembly of the human genome,
the Celera Genomics Group has used an approach similar to the approach used to
sequence and assemble the Drosophila genome. The Celera Genomics Group has used
a combination of public and proprietary data to build the assembled human
genome. The Celera Genomics Group's customers have started to receive versions
of the assembly that continue to be upgraded.
The Celera Genomics Group believes that its shotgun sequencing strategy
has accelerated the discovery of new genes and has generated genomic information
that has not yet been the focus of research. This information includes rarely
expressed genes, the proteins for which they code, and other factors, such as
regulatory regions, that control gene expression. This data is forming the basis
of the Celera Genomics Group's human genome database. Information from this
database is being delivered regularly to customers through the Celera Discovery
System.
The Celera Genomics Group expects to release a detailed ordered
consensus human genome assembly in a scientific publication. The data that the
Celera Genomics Group releases to non-commercial entities will be available, in
a searchable format, via its web site. The ultimate form of data release will be
affected by, among other things, the evolution of intellectual property law and
the Celera Genomics Group's assessment of the likelihood that other
organizations may seek to obtain the Celera Genomics Group's data and resell it
to their own customers in competition with the Celera Genomics Group. The Celera
Genomics Group believes that current efforts by some companies to obtain data
made publicly available for the purpose of private resale may continue, and that
the need to protect the value of its information while carrying out its
intention to share this data with the research community will affect its data
disclosure strategy.
The Celera Genomics Group believes that disclosing consensus assembled
sequence data to non-commercial entities will not affect the value of its
information products and services to customers. The Celera Genomics Group also
believes that disclosing this data in this manner will establish the Celera
Genomics Group's data as the genome reference standard and will encourage
researchers to use its data and ultimately become customers of the Celera
Genomics Group. The Celera Genomics Group will make available to its customers,
on a subscription basis, extensive integrated genomic information systems,
including proprietary, public, and third party annotations; polymorphism
information; comparative genomics information; protein expression information;
search tools and algorithms; and assay and other services.
Commercial Applications; Products and Services. The Celera Genomics
Group expects that the use of the information it develops and the discoveries it
makes will help transform life sciences research by increasing the understanding
of biological processes, thus enabling scientists to accelerate the discovery
and development process. The Celera Genomics Group also believes that this
information will ultimately facilitate the development of individual genetic
profiles that will be used for personal health planning by the medical and
consumer markets. The commercial markets that the Celera Genomics Group believes
will benefit from its information include pharmaceutical drug discovery and
development, medical, and consumer markets.
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The Celera Genomics Group expects that its primary revenue sources will
come from selling access to its information through subscriptions, collaborative
services, and licensing its intellectual property. For certain information
products, the Celera Genomics Group does not expect to seek ownership of
intellectual property developed by its customers on such use. For these
products, this policy should promote use of its information by a wide variety of
users and will distinguish the Celera Genomics Group from other genomics
companies that seek intellectual property rights in their customers' discoveries
based solely upon access to those companies' database information.
The structure of customer subscriptions, including the databases to be
offered, functionality of the system, the access fees to be charged, the
intellectual property terms, and the nature of any services provided to
customers, will vary according to customer requirements and are expected to
change over time.
The Celera Genomics Group is currently offering, or plans to offer,
the following products and services:
o Information products. The Celera Genomics Group intends to build
the Celera Discovery System into a comprehensive online
information and discovery system that provides subscribers with
access over the Internet to the following information and
services:
- a set of evolving, integrated databases comprised of both genome
and functional genomics information;
- a comprehensive set of bioinformatics tools that allow users to
search, browse, visualize, and analyze information and
information relationships;
- the ability to integrate internal (customer) and external data
sources into the overall system; and
- the capability to perform comparative analysis with other
genomes, including those of Drosophila and mouse, to permit
researchers to better understand gene function and the ways in
which genes and proteins operate within cells.
The Celera Genomics Group is currently offering, or plans to
offer, the following genome and functional database options as
part of the Celera Discovery System:
Genome Databases
- Drosophila Genome Reference Database. The first complete
sequence of available data generated by the Celera Genomics
Group's sequencing activity is the Drosophila genome. Scientists
have widely studied Drosophila, which has been shown to share
similar genes with humans. This genomic information will allow
comparisons of both sequences and genes for the drug discovery
process. The content of the Drosophila database includes DNA
sequence information generated by the Celera Genomics Group or
obtained from public sources and assemblies of the genome
generated by the Celera Genomics Group. Over time, the Celera
Genomics Group intends to supplement this data with data
obtained
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from other accessible resources. The database is expected to
include, at a minimum, the following annotations: DNA and
protein matches, gene predictions, predicted gene function,
identified protein domains, expressed sequence tag ("EST")
matches, and marker locations on chromosome maps.
- Human Gene Index. The Celera Genomics Group expects that this
database will represent the most current view available of the
set of human genes. It will be the extension of the TIGR Human
Gene Index, which has been licensed to the Celera Genomics Group
on a non-exclusive basis. The database will be derived from
transcripts derived from genomic sequences, assemblies of ESTs
and related data used to develop the ESTs. This database is
expected to contain an extensive network of links to other
sources of biological information, including information from
mapping data, genomic sequences, expression data, and the Human
Genome Project's databases.
- Human Genome Database. The Celera Genomics Group believes this
information base will be a foundation for developing an
information and discovery source that ultimately links genomic
data to relevant biological and medical information. The Human
Genome Database, which will also incorporate data from third
party sources, is expected to include types of annotations which
are similar to those of the Drosophila genome.
- Mouse Genome Reference Database. The Celera Genomics Group has
begun sequencing the mouse genome and expects to complete its
work by the end of calendar 2000. The Celera Genomics Group
believes that the mouse is an important model organism for
studying gene function, having been the subject of extensive
genetic studies. In addition, mice are available with specific
genes disabled, allowing further functional characterization.
These genes can be correlated with their human counterparts and
thus can be used to study human health. The Mouse Genome
Reference Database is expected to contain types of annotations
which are similar to those of the human and Drosophila genomes.
In addition, the mouse and human genomes are expected to be
overlaid to allow comparative studies of their respective
structures, the functions of their genes, and their common
regulatory mechanisms.
Functional Genomics Databases
- Gene Expression Databases. The Celera Genomics Group expects to
provide databases consisting of human and animal gene expression
information to provide rapid, in-depth analysis of where genes
are expressed and in what quantities.
- Human Protein Database. The Celera Genomics Group plans for
this database to represent the most comprehensive view of
protein expression in humans. The Celera Genomics Group believes
this information will become a foundation of protein reference
information to which comparative studies in various disease
states and aging studies can be compared. This data is expected
to be correlated to provide an enhanced understanding of key
biological processes, from gene to function.
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- SNP Database. The Celera Genomics Group believes that as it
continues to sequence the DNA from multiple individuals it will
likely discover millions of single nucleotide polymorphism
("SNP") sites. SNP sites are locations on the genome where
variations in genetic sequence can occur and which may lead to
the development of certain diseases or influence the effect of a
drug on a patient. Scientists believe that polymorphism
information is important in understanding the relationship of
genetic factors to disease and how and why certain patients
react favorably to certain drugs while others do not. Because
the identification of polymorphic sites is very difficult using
current methods and few polymorphic discovery programs exist,
the Celera Genomics Group believes that the SNPs it discovers
will add considerable value to its integrated information
system.
- Genotype/Phenotype Database. The Celera Genomics Group expects
to develop an information database that links SNP information to
phenotype information. The Celera Genomics Group believes this
database will be a key asset for both therapeutic development
and medical and diagnostic applications and will enable
personalized health planning.
o Personalized Health/Medicine. The Celera Genomics Group expects
that genomic and proteomic information will be used to develop
molecular diagnostic tests to better classify diseases and to
identify the genetic make-up of individuals. These diagnostic
tests are expected to contribute to a more personalized approach
to medicine. For example, there are many types of cancer that have
similar disease manifestations. Because these disease
manifestations may be similar between one type of cancer and
another, it may be important to differentiate between the actual
type of disease rather than just the disease manifestations in
prescribing an effective treatment. It is believed that, rather
than prescribing a drug based solely on disease manifestations,
physicians will be able to use a molecular diagnostic test to help
select the most effective drug with fewer negative side effects.
As a result, this approach should benefit the patient with more
customized care, reduced illness length, and ultimately, better
treatment results.
It is believed that the genetic profile information that the
Celera Genomics Group intends to develop will provide a key basis
for interactions and transactions among consumers, physicians, and
solution providers. Consumer controlled access to this information
by physicians and solution providers should enable more effective
and efficient application of health solutions that may ultimately
result in reduced health care costs. Further, the Celera Genomics
Group anticipates that the aggregation of the identified genetic
profiles will provide pharmaceutical and biotechnology companies
with a rich demographic database to enhance the research process.
The Celera Genomics Group intends to make this information
available to these communities under various conditions that will
provide revenues to the Celera Genomics Group.
o Value Added Programs. The Celera Genomics Group believes that its
investment in staff and technology and its integrated information
systems should permit it to expand its business into providing
value added programs. These additional areas may include licensing
of proprietary intellectual property rights from its own
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discovery efforts and collaborative endeavors, and establishment
of collaborative relationships to develop information related to
specific customer needs.
The Celera Genomics Group intends to conduct its own discovery
initiatives as part of its analysis of genomic and functional
genomic information generated through its efforts. The Celera
Genomics Group currently intends to pursue intellectual property
protection on such discoveries. If the Celera Genomics Group is
successful in making novel discoveries and generally establishing
intellectual property rights, it expects to license most of its
discoveries broadly.
The Celera Genomics Group may also enter into other collaborative
arrangements with customers to develop information specific to a
particular customer's interest. Such arrangements could involve an
extensive population genetics study on behalf of a pharmaceutical
company or the sequencing of certain plant, animal, or insect
genomes on behalf of customers. In addition, customers may build
proprietary gene expression databases through such collaborative
arrangements. These arrangements may also include providing
customers biological materials, such as full length cDNA clones,
and sequencing clones of novel genes. The Celera Genomics Group
anticipates that the terms of these collaborative arrangements
will generally provide that the Celera Genomics Group will receive
some combination of up-front license fees, research fees, royalty
payments, and milestone payments. In addition, the intention of
such collaborations will be to incorporate information generated
during the research into the Celera Genomics Group's databases.
The Celera Genomics Group is currently offering, or plans to
offer, the following programs:
- Genome Services. The Celera Genomics Group offers programs to
sequence and assemble genomes and discover novel genes of
interest, and also offers full length cloning and gene
expression services.
- Protein Expression Services and Analysis. The proposed
development of a high throughput facility for protein expression
is intended to provide the capability to perform specific
research programs for customers wanting to compare the Celera
Genomics Group's reference information to specific development
projects. The Celera Genomics Group intends to create
comprehensive analysis capabilities for proteins. These
capabilities will be utilized within customer programs and the
Celera Genomics Group intends to analyze the protein reference
information as it is generated to identify and seek intellectual
property protection on diagnostic markers, novel genes, and
therapeutic proteins.
- Human Polymorphism Services and Analysis. The Celera Genomics
Group intends to use the information it creates on polymorphisms
combined with high throughput genotyping technology to provide
services to detect and analyze individual genome profiles. The
Celera Genomics Group has the capability of performing
high throughput sequencing of specific genes or genomic regions
across populations of interest.
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- Informatics Services. The Celera Genomics Group believes that
the quantity of genomics and related data and the application of
sophisticated bioinformatics tools will drive users of this
information to require knowledge management, computing, and
storage solutions. The Celera Genomics Group, with its strategic
partners, is expected to be in a unique position to supply
customized combinations of bioinformatics tools and computer
bandwidth to users of its information.
Intellectual Property. Through its internal research programs and
collaborative programs, the Celera Genomics Group anticipates that it will
develop an ever-increasing portfolio of intellectual property. The Celera
Genomics Group intends to license such intellectual property to customers for
some combination of license fees, milestone payments, and royalty payments.
Raw Materials. The Celera Genomics Group's operations require a variety
of raw materials, such as chemical and biochemical materials, and other
supplies, some of which are occasionally found to be in short supply. The Celera
Genomics Group depends on the PE Biosystems Group for several critical
materials, including reagents and capillary arrays, required for sequencing. For
certain of these materials, the PE Biosystems Group is the sole supplier, and
for other materials the Celera Genomics Group believes that the PE Biosystems
Group provides the highest quality materials available. Any interruption in the
availability of these materials could adversely affect and, in some cases, shut
down sequencing operations.
Patents, Licenses, and Franchises. The Celera Genomics Group's business
and competitive position are dependent, in part, upon its ability to protect its
database information, its proprietary gene sequence methods, its software
technology, and the novel genes it identifies. The Celera Genomics Group's
commercial success will be affected by, but is not directly dependent on, the
ability to obtain patent protection on genes, polymorphisms, and proteins
discovered by it and/or by the Celera Genomics Group's customers on their own
behalf and by collaborators. The Celera Genomics Group plans to seek
intellectual property protection, including copyright protection, for the
Celera Discovery System, including its content, and the software and methods it
creates to manage, store, analyze, and search novel information.
The Celera Genomics Group's current plan is to apply for patent
protection upon the identification of candidate novel genes, novel gene
fragments, and their biological function or utility. Although obtaining patent
protection based on partial gene sequences might enhance the Celera Genomics
Group's business, the Celera Genomics Group does not believe that its commercial
success will be materially dependent on its ability to do so.
The Celera Genomics Group will use a combination of strategies in order
to protect its intellectual property assets involving SNP discovery, validation,
and functional characteristics of genes, proteins, and SNPs. The Celera Genomics
Group recognizes that many of the intellectual property laws are directly
suitable for application to SNP discoveries while other protections may not be
available or extend to cover SNP-based discoveries.
During the sequencing and early assembly phases of the human genome,
the Celera Genomics Group intends to maintain proprietary protection of its SNP
discoveries using a combination of confidential treatment of, and control of
access to, the information, as well as by seeking patent protection where
appropriate. During later stages of assembly and gene
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annotation, the Celera Genomics Group may seek broader patent protections of its
discoveries. Such an approach will be utilized to establish commercial
applications and patentable utility for such SNP discoveries.
The granting of patents on genomic discoveries is uncertain worldwide
and is currently under review and revision in many countries. Moreover,
publication of information concerning partial gene sequences prior to the time
that the Celera Genomics Group applies for patent protection based on the
full-length gene sequences or different partial gene sequences in the same gene
may affect the Celera Genomics Group's ability to obtain patent protection.
Certain court decisions suggest that disclosure to the applicable agency of a
partial sequence may not be sufficient to support the patentability of a
full-length sequence and that patent claims to a partial sequence may not cover
a full-length sequence inclusive of that partial sequence. Currently, the U.S.
Patent and Trademark Office requires an adequate disclosure of a specific and
substantial utility, such as gene function, in order to support the
patentability of a gene sequence.
In January 1997, TIGR, in collaboration with the National Center for
Biological Information, disclosed full-length DNA sequences assembled from ESTs
available in publicly accessible databases or sequenced at TIGR. The National
Human Genome Research Institute also plans to release sequence information to
the public. Such disclosures might limit the scope of the Celera Genomics
Group's claims or make subsequent discoveries related to full-length genes
unpatentable. While the Celera Genomics Group believes that the publication of
sequence data will not preclude it or others from being granted patent
protection on genes, there can be no assurances that such publication has not
affected and will not affect the ability to obtain patent protection.
The Celera Genomics Group can not ensure that any changes to, or
interpretations of, the patent laws will not adversely affect its patent
position. The Celera Genomics Group anticipates that there may be significant
litigation in the industry regarding genomic patent and other intellectual
property rights. If the Celera Genomics Group becomes involved in such
litigation, it could consume a substantial portion of the Celera Genomics
Group's resources, and the Celera Genomics Group may not ultimately prevail. If
the Celera Genomics Group does not prevail in a patent litigation dispute, it
may be required to pay damages or royalties or to take measures to avoid any
future infringement, or the Celera Genomics Group may not be able to stop a
competitor from making, using, or selling similar products or technology.
The Celera Genomics Group also intends to rely on trade secret
protection for its confidential and proprietary information. The Celera Genomics
Group believes it has developed proprietary procedures for sequencing and
analyzing genes and for assembling the genes in their naturally occurring order.
In addition, the Celera Genomics Group believes it has developed novel methods
for searching and identifying particularly important regions of genetic
information or whole genes of interest. The Celera Genomics Group currently
protects these methods and procedures as trade secrets and has sought patent
protection for some of the proprietary methods.
The Celera Genomics Group has taken security measures to protect its
databases concerning genes identified by it, including entering into
confidentiality agreements with employees and academic collaborators who are
provided or have access to confidential or proprietary information. The Celera
Genomics Group continues to explore ways to further enhance the security for its
data, including copyright protection for its databases.
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Backlog. The Celera Genmoics Group's total recorded backlog at June 30,
1999, was $13.9 million. The Celera Genomics Group's total recorded backlog at
June 30, 2000, was $24.3 million. It is the Celera Genomics Group's general
policy to include in backlog only purchase orders that have firm delivery dates
within one year. Recorded backlog may not result in sales because of
cancellation or other factors. It is anticipated that all orders included in the
current backlog will be delivered before the close of fiscal year 2001.
Competition. The Celera Genomics Group's principal competitors are
those public and private entities that are currently involved, or intend to
become involved, in providing genomic sequences, polymorphism information, gene
expression, protein expression, and related analysis capabilities in such areas
as genetic variability and drug target discovery. The Celera Genomics Group's
market and financial success will be dependent, in large part, upon its ability
to maintain a competitive position in each of these areas. Entities with which
the Celera Genomics Group is directly competing in certain markets include
Curagen Corporation, Gene Logic Inc., Genset, Incyte Genetics, Inc., Affymetrix,
Inc., Millennium Pharmaceuticals, Inc., Genaissance Pharmaceuticals, Inc.,
Orchid Biosciences, Inc., Oxford GlycoSciences Plc, and the SNP Consortium. The
SNP Consortium is a non-profit collaboration that was established in April 1999
and is supported by a group of ten major pharmaceutical companies, the Wellcome
Trust, International Business Machines Corporation, and Motorola, Inc. There are
also several small public and private companies with which the Celera Genomics
Group will indirectly compete in particular lines of business, such as in gene
discovery and the development of drug targets. In addition, some of the Celera
Genomics Group's potential customers, such as pharmaceutical companies, may
choose to develop technologies and information similar to those offered by the
Celera Genomics Group. Also, a customer may use the Celera Genomics Group's
services to develop products that compete with products separately developed by
the Celera Genomics Group or its other customers. Finally, new technologies that
improve the gene analysis and discovery process may emerge over time and could
compete with those being developed by the Celera Genomics Group, or otherwise
affect its business strategy.
Research and Development. The Celera Genomics Group is actively engaged
in basic and applied research and development programs designed to develop new
products. Research and development expenditures for the Celera Genomics Group
totaled $10.3 million in fiscal 1998, $48.4 million in fiscal 1999, and $167.8
million in fiscal 2000. The Company spent $120.2 million in fiscal 1998, $189.3
million in fiscal 1999, and $284.2 million in fiscal 2000 on company-sponsored
research, development, and engineering activities.
The Celera Genomics Group's new products are expected to originate from
three sources: internal research and development programs, external
collaborative efforts or alliances, and business and technology acquisitions.
Environmental Matters. The Celera Genomics Group is subject to federal,
state, and local laws and regulations regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment, in
those jurisdictions where the Celera Genomics Group operates or maintains
facilities. The Celera Genomics Group does not believe that any liability
arising under, or compliance with, environmental laws or regulations will have
any material effect on its business, and no material capital expenditures are
expected for environmental control.
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Employees. The Celera Genomics Group had approximately 684 employees as
of June 30, 2000. This number does not include the Company's corporate staff
which provides accounting, tax, treasury, legal, and other internal services for
the Celera Genomics Group. As of June 30, 2000, the Company had 148 corporate
staff employees. The Celera Genomics Group's employees and the Company's
corporate staff employees are not subject to collective bargaining agreements,
and the Company generally considers its relations with its employees to be good.
Financial Information About Geographic Areas
A summary of net revenues from external customers and long-lived assets
attributed to each of the Company's geographic areas for the fiscal years 1998,
1999, and 2000 is incorporated herein by reference to Note 6 on page 35, Note 6
on page 65, and Note 6 on pages 102-103 of the Annual Report to Stockholders for
the fiscal year ended June 30, 2000.
The Company's consolidated net revenues from external customers in
countries other than the United States for fiscal years 1998, 1999, and 2000
were $487.2 million, $607.9 million, and $690.0 million, or 51.6%, 50.0%, and
50.3%, respectively, of the Company's consolidated net revenues.
The Company's manufacturing facilities outside the continental United
States are located in the United Kingdom, Japan, and Singapore.
There are currently no material foreign exchange controls or similar
limitations restricting the repatriation to the United States of capital
earnings from operations outside the United States.
Item 2. PROPERTIES
PE Biosystems Group Facilities
The PE Biosystems Group's headquarters are located in leased facilities
in Foster City, California, and the PE Biosystems Group owns or leases various
other facilities for manufacturing, research and development, and administrative
purposes. All of these facilities
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are maintained in good working order. The following is a list of the PE
Biosystems Group's principal facilities:
<TABLE>
<CAPTION>
Owned or Leased
Location (Approximate Floor Area in Sq. Ft.) (Expiration Dates of Leases)
- -------------------------------------------- ------------------------------
<S> <C>
Foster City, CA (761,235) Leased (2000-2015)
Hayward, CA (66,048) Leased (2004)
San Jose, CA (81,000) Owned
Bedford, MA (43,000) Leased (2007)
Framingham, MA (196,000) Leased (2009)
Santa Fe, NM (14,000) Leased (2010)
Houston, TX (21,000) Leased (2004)
Warrington, England (22,000) Owned
Singapore (30,000) Leased (2002)
Narita, Japan (24,000) Owned
</TABLE>
The leased properties in Foster City, California consist of three
principal facilities totaling approximately 475,455 square feet, and additional
facilities totaling approximately 285,780 square feet. Approximately 40,761
square feet of such space is leased to the Celera Genomics Group.
The PE Biosystems Group also leases space in several locations,
including the Celera Genomics Group headquarters facility in Rockville,
Maryland, for use as regional sales and service offices, technical demonstration
centers, and warehouses. The PE Biosystems Group also owns undeveloped land in
Vacaville, California.
Celera Genomics Group Facilities
The Celera Genomics Group's headquarters are located in owned
facilities in Rockville, Maryland. The Celera Genomics Group's administrative
facilities, sequencing facility, laboratories, and bioinformatics facilities are
located at its headquarters. The Celera Genomics Group also leases various other
facilities for research and development and product marketing. All of these
facilities are maintained in good working order. The following is a list of the
Celera Genomics Group's principal facilities:
<TABLE>
<CAPTION>
Owned or Leased
Location (Approximate Floor Area in Sq. Ft.) (Expiration Date of Leases)
- -------------------------------------------- ---------------------------
<S> <C>
Rockville, MD (220,000) Owned
Foster City, CA (30,000) Leased (2008)
Foster City, CA (10,761) Leased (2003)
Pasadena, CA (25,000) Leased (2001)
Davis, CA (16,200) Leased (2001)
Davis, CA (15,000) Leased (2000)
</TABLE>
All of the space in Rockville, Maryland, which consists of two adjacent
buildings, is occupied by the Celera Genomics Group, except for approximately
7,200 square feet which is leased to the PE Biosystems Group. The Foster City,
California facilities are leased from the PE
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Biosystems Group. The lease for the Pasadena, California facilites will expire
in March 2001. The Celera Genomics Group has signed a lease for a new facility
in Pasadena, California with approximately 85,000 square feet. The term of this
lease is for ten years and will commence upon the expiration of the existing
Pasadena lease.
The Celera Genomics Group also leases space for use as regional sales
and service centers in several locations.
Corporate Facilities
The Company's corporate headquarters are located at an owned facility
in Norwalk, Connecticut with an area of approximately 402,000 square feet. The
Company uses approximately 29,000 square feet of this space for corporate staff
and related support functions. Of the remaining amount of this space,
approximately 260,000 square feet is subleased to PerkinElmer, Inc. and the
balance of approximately 113,000 square feet is vacant. This facility is
maintained in good working order. This facility is being held for sale or long
term lease.
The Company also leases space in facilities located in Wilton,
Connecticut. These facilities were sold by the Company in May 2000. In
connection with the sale, the Company leased back approximately 220,000 square
feet under a lease which is currently scheduled to expire in May 2001. The
Company uses approximately 18,000 square feet of this space for corporate staff
and related support functions. Of the remaining amount of this leased space,
approximately 172,000 square feet is subleased to PerkinElmer, Inc. and balance
of approximately 30,000 square feet is vacant. This facility is maintained in
good working order.
The Company intends to consolidate all of its corporate staff in
Norwalk and Wilton, Connecticut, into a single leased facility upon the
expiration of the Wilton, Connecticut, lease. The Company is considering various
potential facilities for this purpose.
Item 3. LEGAL PROCEEDINGS
The Company is a defendant in various legal actions, including patent,
commercial, and environmental, arising from the conduct of the Company's normal
business activities, including those described below. Although the amount of any
liability that might arise with respect to any of these matters cannot be
accurately predicted, the resulting liability, if any, will not, in the opinion
of management of the Company, have a material adverse effect on the financial
statements of the Company, the PE Biosystems Group, or the Celera Genomics
Group.
Amersham
On November 18, 1997, Amersham Pharmacia Biotech, Inc. ("Amersham")
filed a patent infringement action against the Company in the United States
District Court for the Northern District of California. The complaint alleges
that the Company is directly, contributorily or by inducement infringing U.S.
Patent No. 5,688,648 ("the '648 patent"), entitled "Probes Labelled with Energy
Transfer Coupled Dyes." Amersham asserts that the Company's sale of DNA analysis
reagents and systems that incorporate "BigDye" fluorescence detection technology
would infringe the '648 patent, and seeks injunctive and monetary relief. The
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Company answered the complaint, alleging that the '648 patent is invalid and
that the Company has not infringed the '648 patent. This case is scheduled for
trial in January 2001.
On March 13, 1998, the Company filed a patent infringement action
against Amersham and Molecular Dynamics, Inc. ("Molecular Dynamics") in the
United States District Court for the Northern District of California. The
Company asserts that one of its patents (U.S. 4,811,218) is infringed by reason
of Molecular Dynamics' and Amersham's sale of certain DNA analysis systems
(e.g., the MegaBACE 1000 System). The Company's complaint seeks injunctive and
monetary relief. In response, the defendants have asserted various affirmative
defenses and several counterclaims, including that the Company is infringing two
patents (U.S. 5,091,652 and U.S. 5,459,325) owned by or licensed to Molecular
Dynamics by selling the ABI PRISM 377(TM) DNA Sequencing Systems.
On May 21, 1998, Amersham filed a patent infringement action against
the Company in the United States District Court for the Southern District of New
York. The complaint alleges that the Company is infringing, contributing to the
infringement and inducing the infringement of U.S. Patent No. 4,707,235 ("the
'235 patent") entitled "Electrophoresis Method and Apparatus having Continuous
Detection Means." The complaint seeks injunctive and monetary relief. The
Company answered the complaint, alleging that the '235 patent is invalid and
that the Company does not infringe the '235 patent. The matters described in
this paragraph and the immediately preceding paragraph have been consolidated
into a single case to be heard in the United States District Court for the
Northern District of California. This case has not yet been scheduled for trial.
On May 30, 2000, the Company filed a patent infringement action against
Amersham in the United States District Court for the Northern District of
California. The Company asserts that one of its patents (U.S. 5,945,526) is
infringed by reason of Amersham's sale of DNA analysis reagents and systems that
incorporate ET Terminator fluorescence detection technology. The Company's
complaint seeks injunctive and monetary relief. This case is in the early stages
of discovery.
Berlin v. PE Corporation, et. al.
As of the filing of this Annual Report on Form 10-K, the Company and
certain of its officers had been served in five lawsuits purportedly on behalf
of purchasers of Celera Genomics Group Common Stock in the Company's offering of
Celera Genomics Group Common Stock completed on March 6, 2000. In the offering,
the Company sold an aggregate of 4,370,000 shares of Celera Genomics Group
Common Stock at a public offering price of $225 per share. The complaints in
these lawsuits generally allege that the prospectus used in connection with the
offering contained inaccurate and misleading statements in violation of federal
securities laws. The complaints seek unspecified damages, rescission, costs and
expenses, and such other relief as the court deems proper. All of these lawsuits
have been consolidated into a single case. The plaintiffs filed a motion for
appointment of the lead plaintiff and lead counsel, which has not yet been
decided by the court.
United States v. Davis
The Company is a party to the action United States v. Davis, pending in
the United States District Court for the District of Rhode Island. The Company
was brought into the case
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along with numerous other companies as a result of a third party complaint filed
by United Technologies Corporation ("UTC") seeking contribution for
environmental cleanup costs imposed by the United States government. In December
1998, the District Court found the Company liable to UTC along with certain, but
not all, of the defendants in the case. The Company believes the amount of such
liability to be less than $200,000, which will be determined when all appeals
have been concluded. Both UTC and the Company appealed the District Court's
decision.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
The principal United States market where the Company's PE Biosystems
Group Common Stock and Celera Genomics Group Common Stock are traded is the New
York Stock Exchange, although such stock is also traded on the Pacific Exchange.
The high and low sales prices of PE Biosystems Group Common Stock and
Celera Genomics Group Common Stock for each quarterly period during fiscal year
2000 and for the period from May 6, 1999, through June 30, 1999, and for the
Common Stock of The Perkin-Elmer Corporation for each quarterly period during
fiscal year 1999 through May 5, 1999, is incorporated herein by reference to
Note 12, pages 41-42, Note 12, page 70, and Note 12, pages 110-111 of the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 2000.
Holders
On September 18, 2000, the approximate number of holders of PE
Biosystems Group Common Stock was 6,534, and the approximate number of holders
of Celera Genomics Group Common Stock was 6,104. The approximate number of
holders is based upon the actual number of holders registered in the Company's
books at such date and does not include holders of shares in "street name" or
persons, partnerships, associations, corporations, or other entities identified
in security position listings maintained by depository trust companies. The
calculation of the numbers of shares held by non-affiliates shown on the cover
of this Annual Report on Form 10-K was made on the assumption that there were no
affiliates other than executive officers and directors.
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<PAGE>
Dividends
Information regarding the amount of quarterly dividends during fiscal
years 1999 and 2000 is incorporated herein by reference to Note 12, pages
41-42, and Note 12, pages 110-111 of the Company's Annual Report to Stockholders
for the fiscal year ended June 30, 2000.
Sale of Unregistered Securities
The Company has not sold securities during the fiscal year ended June
30, 2000, that were not registered under the Securities Act of 1933.
Risks Relating to the Company's Capital Structure
Stockholders of the Company are stockholders of one company and,
therefore, financial effects on one group could adversely affect the
other.
The PE Biosystems Group and the Celera Genomics Group are not separate
legal entities. As a result, stockholders are subject to all of the risks of an
investment in the Company, including the PE Biosystems Group and the Celera
Genomics Group. The risks and uncertainties that may affect the operations,
performance, development, and results of the businesses of either group include
but are not limited to rapidly changing technology and dependence on new
products, dependence of sales on customers' capital spending policies and
government-sponsored research, claims for patent infringement, significant
overseas operations, future growth strategy and earthquakes. The assets
attributed to one group could be subject to the liabilities of the other group,
whether such liabilities arise from lawsuits, contracts, or indebtedness that
the Company attributes to the other group. If the Company is unable to satisfy
one group's liabilities out of the assets attributed to it, the Company may be
required to satisfy those liabilities with assets the Company has attributed to
the other group.
Financial effects from one group that affect the consolidated results
of operations or financial condition could, if significant, affect the results
of operations or financial condition of the other group and the market price of
the common stock relating to the other group. In addition, net losses of either
group and dividends or distributions on, or repurchases of, either class of
common stock or repurchases of certain preferred stock will reduce the funds the
Company can pay as dividends on each class of common stock under Delaware law.
For these reasons, stockholders should read the consolidated financial
information with the financial information provided for each group.
Holders of group common stock have limited rights related to their
group.
Holders of PE Biosystems Group Common Stock and Celera Genomics Group
Common Stock have only the rights customarily held by common stockholders. They
have only the following rights related to their corresponding group:
o certain rights with regard to dividends and liquidation;
o requirements for a mandatory dividend, redemption, or conversion
upon the disposition of all or substantially all of the assets of
their corresponding group; and
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<PAGE>
o a right to vote on matters as a separate voting class in the
limited circumstances provided under Delaware law, by stock
exchange rules, or as determined by the Company's Board of
Directors.
The Company will not hold separate meetings for holders of PE
Biosystems Group Common Stock and Celera Genomics Group Common Stock.
Limits exist on the voting power of group common stock.
o Celera Genomics Group Common Stock May Not Initially Have Any
Influence on the Outcome of Stockholder Voting
PE Biosystems Group Common Stock has a substantial majority of the
voting power of the Company's common stock. Except in limited circumstances
requiring separate class voting, either class of common stock that is entitled
to more than the number of votes required to approve any stockholder action
could control the outcome of such vote - even if the matter involves a
divergence or conflict of the interests of the holders of the PE Biosystems
Group Common Stock and Celera Genomics Group Common Stock. These matters may
include mergers and other extraordinary transactions.
o Group common stock with less than majority voting power can block
action if a class vote is required.
If Delaware law, stock exchange rules, or the Company's Board of
Directors requires a separate vote on a matter by the holders of either the PE
Biosystems Group Common Stock or the Celera Genomics Group Common Stock, those
holders could prevent approval of the matter - even if the holders of a majority
of the total number of votes cast or entitled to be cast, voting together as a
class, were to vote in favor of it.
o Holders of only one class of common stock cannot ensure that their
voting power will be sufficient to protect their interests.
Since relative voting power per share of PE Biosystems Group Common
Stock and Celera Genomics Group Common Stock will fluctuate based on the market
values of the two classes of common stock, the relative voting power of a class
of common stock could decrease. As a result, holders of shares of only one of
the two classes of common stock cannot ensure that their voting power will be
sufficient to protect their interests
Stockholders may not have any remedies for breach of fiduciary duties
if any action by directors and officers has a disadvantageous effect on
either class of common stock.
Stockholders may not have any remedies if any action or decision of the
Company's Board of Directors or officers has a disadvantageous effect on the PE
Biosystems Group Common Stock or Celera Genomics Group Common Stock compared to
the other class of common stock.
Recent cases in Delaware involving tracking stocks have established
that decisions by directors or officers involving differing treatment of
tracking stocks are judged under the
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<PAGE>
principle known as the "business judgment rule" unless self-interest is shown.
In addition, principles of Delaware law established in cases involving differing
treatment of two classes of capital stock or two groups of holders of the same
class of capital stock provide that a board of directors owes an equal duty to
all stockholders regardless of class or series. Absent abuse of discretion, a
good faith business decision made by a disinterested and adequately informed
Board of Directors, Board of Directors' committee, or officer of the Company
with respect to any matter having different effects on holders of PE Biosystems
Group Common Stock and holders of Celera Genomics Group Common Stock would be a
defense to any challenge to such determination made by or on behalf of the
holders of either class of stock.
Stock ownership could cause directors and officers to favor one group
over the other.
As a policy, the Company's Board of Directors periodically monitors the
ownership of shares of PE Biosystems Group Common Stock and Celera Genomics
Group Common Stock by the Company's directors and senior officers as well as
their option holdings and other benefits so that their interests are not
misaligned with the two classes of common stock and with their duty to act in
the best interests of the Company and its stockholders as a whole. However,
because the actual value of their interests in PE Biosystems Group Common Stock
and Celera Genomics Group Common Stock could vary significantly, it is possible
that they could favor one group over the other as a result of their common stock
holdings, options and other benefits.
Numerous potential conflicts of interest exist between the classes of
common stock which may be difficult to resolve by the Company's Board
of Directors or which may be resolved adversely to one of the classes.
o Allocation of corporate opportunities could favor one group over
the other.
The Company's Board of Directors may be required to allocate corporate
opportunities between the groups. In some cases, the Company's directors could
determine that a corporate opportunity, such as a business that the Company is
acquiring or a new business, should be shared by the groups or be allocated to
one group over the other. Any such decisions could favor one group to the
detriment of the other.
o Groups may compete with each other to the detriment of their
businesses.
The existence of two separate classes of common stock will not prevent
the groups from competing with each other. Any competition between the two
groups could be detrimental to the businesses of either or both of the groups.
Under a Board of Directors' policy, groups will generally not engage in the
principal businesses of the other, except for joint transactions with each
other. However, the Company's Chief Executive Officer or Board of Directors will
permit indirect competition between the groups, such as one group doing business
with a competitor of the other group, based on his or its good faith business
judgment that such competition is in the best interests of the Company and all
of the Company's stockholders as a whole. In addition, the groups may compete in
a business that is not a principal business of the other group.
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o The Board of Directors may pay more or less dividends on group
common stock than if that group were a separate company.
Subject to the limitations referred to below, the Company's Board of
Directors has the authority to declare and pay dividends on the PE Biosystems
Group Common Stock and Celera Genomics Group Common Stock in any amount and
could, in its sole discretion, declare and pay dividends exclusively on the PE
Biosystems Group Common Stock, exclusively on the Celera Genomics Group Common
Stock, or on both, in equal or unequal amounts. The Company's Board of Directors
is not required to consider the amount of dividends previously declared on each
class, the respective voting or liquidation rights of each class, or any other
factor. The performance of one group may cause the Company's Board of Directors
to pay more or less dividends on the common stock relating to the other group
than if that other group was a stand-alone corporation. In addition, Delaware
law and the Company's certificate of incorporation impose limitations on the
amount of dividends which may be paid on each class of common stock.
o Proceeds of mergers or consolidations may be allocated
unfavorably.
The Company's Board of Directors will determine how consideration to be
received by holders of PE Biosystems Group Common Stock and Celera Genomics
Group Common Stock in connection with a merger or consolidation involving the
Company is to be allocated among holders of each class of common stock. Such
percentage may be materially more or less than that which might have been
allocated to such holders had the Company's Board of Directors chosen a
different method of allocation.
o Holders of either class of common stock may be adversely affected
by a conversion of group common stock.
The Company's Board of Directors could, in its sole discretion and
without stockholder approval, determine to convert shares of Celera Genomics
Group Common Stock into shares of PE Biosystems Group Common Stock, or vice
versa, at any time including when either or both classes of common stock may be
considered to be overvalued or undervalued. If the Company's Board of Directors
chose to issue Celera Genomics Group Common Stock in exchange for PE Biosystems
Group Common Stock, or vice versa, such conversion would dilute the interests in
the Company of the holders of the class of common stock being issued in the
conversion. If the Company's Board of Directors chose to issue Celera Genomics
Group Common Stock in exchange for PE Biosystems Group Common Stock, or vice
versa, such conversion could give holders of shares of the class of common stock
converted a greater or lesser premium than any premium that was paid or might be
paid by a third-party buyer of all or substantially all of the assets of the
group whose stock is converted.
o Proceeds of newly issued Celera Genomics Group Common Stock in the
future could be allocated to the PE Biosystems Group.
If and to the extent the PE Biosystems Group has an equity interest in
the Celera Genomics Group in the form of Celera Genomics Designated Shares at
the time of any future sale of Celera Genomics Group Common Stock, the Company's
Board of Directors could allocate some or all of the proceeds of that sale to
the PE Biosystems Group. Any such decision
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could favor one group over the other group. For example, the decision to
allocate the proceeds to the PE Biosystems Group may adversely affect the Celera
Genomics Group's ability to obtain funds to finance its growth strategies. There
are no Celera Genomics Designated Shares outstanding as of the date of this
Annual Report on Form 10-K.
The Company's Board of Directors may change its management and
allocation policies without stockholder approval to the detriment of
either group.
The Company's Board of Directors may modify or rescind the Company's
policies with respect to the allocation of corporate overhead, taxes, debt,
interest, and other matters, or may adopt additional policies, in its sole
discretion, without stockholder approval. A decision to modify or rescind these
policies, or adopt additional policies, could have different effects on holders
of PE Biosystems Group Common Stock and holders of Celera Genomics Group Common
Stock or could result in a benefit or detriment to one class of stockholders
compared to the other class. The Company's Board of Directors will make any such
decision in accordance with its good faith business judgment that the decision
is in the best interests of the Company and all of its stockholders as a whole.
Either group may finance the other group on terms unfavorable to one of
the groups.
From time to time, the Company anticipates that it will transfer cash
and other property between groups to finance their business activities. When
this occurs, the group providing the financing will be subject to the risks
relating to the group receiving the financing. The Company will account for
those transfers in one of the following ways:
o as a reallocation of pooled debt or preferred stock;
o as a short-term or long-term loan between groups or as a repayment
of a previous borrowing;
o as an increase or decrease in the PE Biosystems Group's equity
interest in the Celera Genomics Group; or
o as a sale of assets between groups.
The Company's Board of Directors has not adopted specific criteria for
determining when the Company will account for transfer of cash or other property
as a reallocation of pooled debt or preferred stock, a loan or repayment, an
increase or decrease in equity interest, or a sale of assets. These
determinations, including the terms of any transactions accounted for as debt,
may be unfavorable to either the group transferring or the group receiving the
cash or other property. The Company's Board of Directors expects to make these
determinations, either in specific instances or by setting generally applicable
policies, after considering the financing requirements and objectives of the
receiving group, the investment objectives of the transferring group, and the
availability, cost, and time associated with alternative financing sources,
prevailing interest rates, and general economic conditions.
The Company can not assure stockholders that any terms that it fixes
for debt will approximate those that could have been obtained by the borrowing
group if it were a stand-alone corporation.
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The Celera Genomics Group may not be fully reimbursed for the PE
Biosystems Group's use of its tax benefits and could be charged with
higher future taxes than if it were a stand-alone tax payer.
The Company's management and allocation policies provide that tax
benefits generated but not used by the Celera Genomics Group may be used by the
PE Biosystems Group. In accordance with management policy, the aggregate amount
reimbursed to the Celera Genomics Group for such use may not exceed $75 million.
All subsequent tax benefits in excess of this amount will not be credited to the
Celera Genomics Group and the Celera Genomics Group will not be reimbursed for
those tax benefits, unless the Celera Genomics Group can use those tax benefits.
Accordingly, any tax benefits that can not be used by the Celera Genomics Group
will not be carried forward to reduce its future taxes. This could result in the
Celera Genomics Group being charged a greater portion of the total corporate tax
liability in the future than would have been the case if the Celera Genomics
Group had retained its tax benefits.
Holders of group common stock may receive less consideration upon a
sale of assets than if the group were a separate company.
The Company's certificate of incorporation provides that if a
disposition of all or substantially all of the assets of either group occurs,
the Company must, subject to certain exceptions:
o distribute to holders of the class of common stock relating to
such group an amount equal to the net proceeds of such
disposition, or
o convert at a 10% premium such common stock into shares of the
class of common stock relating to the other group.
If the group subject to the disposition were a separate, independent
company and its shares were acquired by another person, certain costs of that
disposition, including corporate level taxes, might not be payable in connection
with that acquisition. As a result, if the group subject to the disposition were
a separate, independent company, stockholders of that group might receive a
greater amount than the net proceeds that would be received by such stockholders
if the assets of such group were sold. In addition, the Company can not assure
stockholders that the net proceeds per share of the common stock relating to
that group will be equal to or more than the market value per share of such
common stock prior to or after announcement of a disposition.
The Company's capital structure and variable vote per share may
discourage acquisitions of a group or a class of common stock.
A potential acquirer could acquire control of the Company by acquiring
shares of common stock having a majority of the voting power of all shares of
common stock outstanding. Such a majority could be obtained by acquiring a
sufficient number of shares of both classes of common stock or, if one class of
common stock has a majority of such voting power, only shares of that class.
Currently, the PE Biosystems Group Common Stock has a substantial majority of
the voting power. As a result, it is possible for an acquiror to obtain control
by purchasing only shares of the PE Biosystems Group Common Stock.
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Decisions by directors and officers that affect market values could
adversely affect voting and conversion rights.
The relative voting power per share of each class of common stock and
the number of shares of one class of common stock issuable upon the conversion
of the other class of common stock will vary depending upon the relative market
values of the PE Biosystems Group Common Stock and the Celera Genomics Group
Common Stock. The market value of either or both classes of common stock could
be adversely affected by market reaction to decisions by the Company's Board of
Directors or management that investors perceive as affecting differently one
class of common stock compared to the other. These decisions could involve
changes to the Company's management and allocation policies, transfers of assets
between groups, allocations of corporate opportunities, and financing resources
between groups, and changes in dividend policies.
Investors may not value common stock based on group financial
information and policies.
The Company can not assure stockholders that investors will value the
PE Biosystems Group Common Stock and the Celera Genomics Group Common Stock
based on the reported financial results and prospects of the separate groups or
the dividend policies established by the Company's Board of Directors with
respect to such groups.
A recent Clinton Administration proposal could have adverse tax
consequences for the Company or for Holders of group common stock.
The Clinton Administration proposed legislation in February 2000
dealing with tracking stock such as PE Biosystems Group Common Stock and Celera
Genomics Group Common Stock. Such proposal would, among other things, treat the
receipt of stock similar to PE Biosystems Group Common Stock and Celera Genomics
Common Group Stock in exchange for other stock in a corporation, or in a
distribution by the issuing corporation, as taxable to the stockholders. If this
proposal is enacted, it could have adverse tax consequences for the Company or
for holders of PE Biosystems Group Common Stock or Celera Genomics Group Common
Stock. A similar proposal was made in 1999. Congress did not act on the 1999
proposal, and it is not possible to predict whether Congress will act upon this
proposal or any other proposal relating to tracking stock.
If there are adverse U.S. federal income tax law developments, the
Company may convert PE Biosystems Group Common Stock or Celera Genomics Group
Common Stock into shares of the other class without any premium. The proposal of
the Clinton Administration would be such an adverse development if it is
implemented or receives certain legislative action.
Provisions governing common stock could discourage a change of control
and the payment of a premium for stockholders' shares.
The Company's stockholder rights plan could prevent stockholders from
profiting from an increase in the market value of their shares as a result of a
change in control of the Company by delaying or preventing such change in
control. The existence of two classes of common stock
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could also present complexities and could, in certain circumstances, pose
obstacles, financial and otherwise, to an acquiring person. In addition, certain
provisions of Delaware law and the Company's certificate of incorporation may
also deter hostile takeover attempts.
Item 6. SELECTED FINANCIAL DATA
The Company incorporates herein by reference pages 9, 45, and 72 of the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 2000.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company incorporates herein by reference pages 10-19, 46-54, and
73-87 of the Company's Annual Report to Stockholders for the fiscal year ended
June 30, 2000.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company incorporates herein by reference pages 15 and 79 of the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 2000.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and the supplementary financial
information included in the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 2000, are incorporated herein by reference: The
combined Financial Statements and the reports thereon of PricewaterhouseCoopers
LLP dated July 25, 2000, the Consolidated Financial Statements and the report
thereon of PricewaterhouseCoopers LLP dated July 25, 2000, and pages 20-44,
55-71, and 88-114 of said Annual Report, including Note 12, pages 41-42, Note
12, page 70, and Note 12, pages 110-111, which contain unaudited quarterly
financial information.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not changed its public accounting firm within 24 months
prior to June 30, 2000, the date of the Company's most recent financial
statements, or during any subsequent period. There have been no unresolved
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
Identification and Background of Directors
The Company incorporates herein by reference pages 3-4 of the Company's
Proxy Statement dated September 8, 2000, in connection with its Annual Meeting
of Stockholders to be held on October 19, 2000.
Identification of Executive Officers
The following is a list of the Company's executive officers, their
ages, and their positions and offices with the Company, as of September 8,
2000.
<TABLE>
<CAPTION>
Name Age Present Positions and Year First Elected
<S> <C> <C>
Peter Barrett.................... 47 Vice President (1998)
Samuel E. Broder................. 55 Vice President (1999)
Peter Chambre.................... 44 Vice President (2000)
Ugo D. DeBlasi................... 38 Assistant Controller (1999)
Ronald D. Edelstein.............. 51 Vice President and Chief Information Officer (1998)
Elaine J. Heron.................. 52 Vice President (1998)
Michael W. Hunkapiller........... 51 Senior Vice President (1998); President, PE Biosystems Group (1994)
Vikram Jog....................... 44 Controller (1999)
Barbara J. Kerr.................. 54 Vice President, Human Resources (2000)
Joseph E. Malandrakis............ 55 Vice President (1993)
Kenneth D. Noonan................ 52 Senior Vice President, Corporate Development (2000)
William B. Sawch................. 45 Senior Vice President and General Counsel (1993)
Gregory T. Schiffman............. 42 Assistant Controller (1999)
Deborah A. Smeltzer.............. 46 Assistant Controller (1999)
J. Craig Venter.................. 53 Senior Vice President and President, Celera Genomics Group (1998)
Tony L. White.................... 54 Chairman, President, and Chief Executive Officer (1995)
Dennis L. Winger................. 52 Senior Vice President and Chief Financial Officer (1997)
</TABLE>
Each of the foregoing named officers was either elected at the last
organizational meeting of the Company's Board of Directors, or elected by the
Board since that date. The term of each officer will expire on October 19, 2000,
the date of the next scheduled organizational meeting of the Board of Directors,
unless renewed for another year.
Identification of Certain Significant Employees
Not applicable.
Family Relationships
To the best of the Company's knowledge and belief, there is no family
relationship between any of the Company's directors, executive officers, or
persons nominated or chosen by the Company to become a director or an executive
officer.
-35-
<PAGE>
Business Experience
With respect to the business experience of the Company's directors and
persons nominated to become directors, the Company incorporates herein by
reference pages 3-4 of the Company's Proxy Statement dated September 8, 2000, in
connection with its Annual Meeting of Stockholders to be held on October 19,
2000. With respect to the executive officers of the Company, each such officer
has been employed by the Company or a subsidiary in one or more executive or
managerial capacities for at least the past five years, with the exception of
Dr. Broder, Mr. Chambre, Mr. Edelstein, Dr. Heron, Mr. Jog, Ms. Kerr, Dr.
Noonan, Mr. Schiffman, Ms. Smeltzer, Dr. Venter, and Mr. Winger.
Dr. Broder was elected Vice President of the Company on August 19,
1999. Prior to his employment by the Company in August, 1998, Dr. Broder was
Senior Vice President of IVAX Corporation for three years, and from 1989 to 1995
he served as director of the National Cancer Institute.
Mr. Chambre was elected Vice President of the Company on August 17,
2000. Mr. Chambre is expected to assume the formal responsibilities of Chief
Operating Officer of Celera Genomics in the fall of this year. Prior to his
employment by the Company in July 2000, Mr. Chambre served as Chief Executive
Officer of Bespak plc, a United Kingdom drug delivery group, for six years.
Mr. Edelstein was elected Vice President of the Company on June 18,
1998. Prior to his employment by the Company in June 1998, Mr. Edelstein served
as Vice President and Chief Information Officer of Witco Corporation, a
manufacturer of specialty chemicals, for seven years.
Dr. Heron was elected Vice President of the Company on December 21,
1995. She was most recently appointed Vice President and General Manager of the
Molecular Biology unit of the PE Biosystems Group in July 1998. Previously Dr.
Heron served as Vice President, Worldwide Sales, Service, and Marketing since
December 1995. She had served as Vice President of Marketing at Affymetrix,
Inc., a supplier of genetic analysis equipment, for the year prior to this
appointment and previously was Director of Marketing for Applied Biosystems
beginning in 1990.
Mr. Jog was elected Controller of the Company on August 19, 1999. Prior
to his employment by the Company in July, 1999, Mr. Jog served as Vice President
and Controller of Hercules Incorporated, a manufacturer of chemicals, for seven
years.
Ms. Kerr was elected Vice President, Human Resources of the Company on
September 5, 2000. Prior to her employment by the Company in September, 2000,
Ms. Kerr served as a principal of Quantic, Inc., a human resources and
compensation consulting firm. Prior to that, Ms. Kerr was employed by Chiron
Corporation, which conducts research and development in the fields of biological
proteins, gene therapy, and combinatorial chemistry, where she was Vice
President, Human Resources from 1990 to 1997.
Dr. Noonan was elected Senior Vice President of the Company on January
4, 2000. Prior to his employment by the Company in January, 2000, Dr. Noonan was
a partner in the global life sciences practice of Booz, Allen & Hamilton, Inc.,
an international consulting firm,
-36-
<PAGE>
for three years, and from 1990 to 1996 he was a partner in The Wilkerson Group,
a specialty medical products consulting group.
Mr. Schiffman was elected Assistant Controller of the Company on August
19, 1999. Prior to his employment by the Company in June 1998, Mr. Schiffman was
employed by Hewlett-Packard Company, a diversified electronics manufacturer, for
ten years, most recently as controller and manufacturing manager of the
company's NetMetrix Division.
Ms. Smeltzer was elected Assistant Controller of the Company on
November 18, 1999. Prior to her employment by the Company in November 1999, Ms.
Smeltzer served as Chief Financial Officer and Vice President of Genset, SA, a
global genomics company from May 1996 to November 1999, and she was a general
partner of Grotech Capital Group, Inc. from 1988 to 1996.
Dr. Venter was elected Senior Vice President of the Company and
President, Celera Genomics Group, on November 19, 1998. Prior to his employment
by the Company in August 1998, Dr. Venter was employed by The Institute for
Genomic Research (TIGR), a non-profit entity which conducts research and
development in genes, where he was founder, Chairman, and President for six
years, and where he remains as Chairman.
Mr. Winger was elected Senior Vice President and Chief Financial
Officer of the Company on October 16, 1997. Prior to his employment by the
Company in September 1997, Mr. Winger was employed by Chiron Corporation, which
conducts research and development in the fields of biological proteins, gene
therapy, and combinatorial chemistry, where he was Senior Vice President,
Finance and Administration, and Chief Financial Officer since 1989.
Involvement in Certain Legal Proceedings
To the best of the Company's knowledge and belief, none of the
Company's directors, persons nominated to become directors, or executive
officers has been involved in any proceedings during the past five years that
are material to an evaluation of the ability or integrity of such persons to be
directors or executive officers of the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 is incorporated herein by reference to page 10 of the
Company's Proxy Statement dated September 8, 2000, in connection with its Annual
Meeting of Stockholders to be held on October 19, 2000.
Item 11. EXECUTIVE COMPENSATION
The Company incorporates herein by reference pages 10-21 of the
Company's Proxy Statement dated September 8, 2000, in connection with its Annual
Meeting of Stockholders to be held on October 19, 2000.
-37-
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
Information concerning the security ownership of certain beneficial
owners is incorporated herein by reference to pages 8-10 of the Company's Proxy
Statement dated September 8, 2000, in connection with its Annual Meeting of
Stockholders to be held on October 19, 2000.
Security Ownership of Management
Information concerning the security ownership of management is
incorporated herein by reference to pages 8-10 of the Company's Proxy Statement
dated September 8, 2000, in connection with its Annual Meeting of Stockholders
to be held on October 19, 2000.
Changes in Control
The Company knows of no arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent
date result in a change in control of the Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
is incorporated herein by reference to pages 20-21 of the Company's Proxy
Statement dated September 8, 2000, in connection with its Annual Meeting of
Stockholders to be held on October 19, 2000.
-38-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated July 25, 2000, appearing in the Company's
Annual Report to Stockholders for the fiscal year ended June 30, 2000, are
incorporated by reference in this Annual Report on Form 10-K. With the exception
of the aforementioned information and that which is specifically incorporated in
Parts I and II, the Annual Report to Stockholders for the fiscal year ended June
30, 2000, is not to be deemed filed as part of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
PE Biosystems Group
Annual Report
Page No.
------------------
<S> <C>
Combined Statements of Operations
Fiscal years 1998, 1999 and 2000.................... 20
Combined Statements of Financial Position
At June 30, 1999 and 2000........................... 21
Combined Statements of Cash Flows
Fiscal years 1998, 1999, and 2000................... 22
Combined Statements of Group Equity and
Comprehensive Income
Fiscal years 1998, 1999, and 2000................... 23
Notes to Combined Financial Statements....................... 24-43
Report of Management......................................... 44
Report of Independent Accountants............................ 44
-39-
<PAGE>
Celera Genomics Group
Annual Report
Page No.
------------------
Combined Statements of Operations
Fiscal years 1998, 1999, and 2000................... 55
Combined Statements of Financial Position
At June 30, 1999 and 2000........................... 56
Combined Statements of Cash Flows
Fiscal years 1998, 1999, and 2000................... 57
Combined Statements of Group Equity and
Comprehensive Loss
Fiscal years 1998, 1999, and 2000................... 58
Notes to Combined Financial Statements....................... 59-70
Report of Management......................................... 71
Report of Independent Accountants............................ 71
PE Corporation
Annual Report
Page No.
------------------
Consolidated Statements of Operations
Fiscal years 1998, 1999, and 2000................... 88
Consolidated Statements of Financial Position
At June 30, 1999 and 2000........................... 89
Consolidated Statements of Cash Flows
Fiscal years 1998, 1999, and 2000................... 90
Consolidated Statements of Stockholders' Equity
and Comprehensive Income
Fiscal years 1998, 1999, and 2000................... 91
Notes to Consolidated Financial Statements................... 92-113
Report of Management......................................... 114
Report of Independent Accountants............................ 114
</TABLE>
-40-
<PAGE>
(a) 2. Financial Statement Schedules
The following additional financial data should be read in conjunction with the
consolidated financial statements in said Annual Report to Stockholders for the
fiscal year ended June 30, 2000. Schedules not included with this additional
financial data have been omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
10-K Page No.
-------------
Report of Independent Accountants on Financial Statement
Schedule.......................................................... 46
Schedule II - Valuation and Qualifying Accounts and
Reserves.......................................................... 47
(a) 3. Exhibits
Exhibit
No.
- ---------
2(1) Purchase Agreement dated as of March 8, 1999, between The
Perkin-Elmer Corporation and EG&G, Inc. (incorporated by reference to
Exhibit 2.1 to Current Report on Form 8-K of the Company dated May
28, 1999 (Commission file number 1-4389)).
2(2) Agreement and Plan of Merger dated March 10, 1999, among The
Perkin-Elmer Corporation, a New York corporation, The Perkin-Elmer
Corporation, a Delaware corporation, and PE Merger Corp., a New York
corporation (incorporated by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4 (No. 333-67797)).
2(3) Agreement and Plan of Merger, dated as of March 20, 2000, among PE
Corporation, Umbrella Acquisition Corp. and Paracel, Inc.
(incorporated by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (No. 333-35080)).
3(i)(1) Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-4 (No. 333-67797)).
3(i)(2) Certificate of Designations of Series A Participating Junior
Preferred Stock and Series B Participating Junior Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 4.1 to the
Company's Registration Statement on Form S-4 (No. 333-67797)).
3(ii) By-laws of the Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-4 (No. 333-67797)).
4(1) Shareholder Protection Rights Agreement between the Company and
BankBoston, N.A. (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-4 (No. 333-67797)).
4(2) Credit Agreement dated as of April 20, 2000, among The Perkin-Elmer
Corporation, the Company, the lenders party thereto, Salomon Smith
Barney Inc., Wachovia Bank, N.A., The Chase Manhattan Bank, and
Citibank, N.A.
10(1) The Perkin-Elmer Corporation 1988 Stock Incentive Plan for Key
Employees (incorporated by reference to Exhibit 10(4) to Annual
Report on Form 10-K of the Company for the fiscal year ended July 31,
1988 (Commission file number 1-4389)).*
10(2) The Perkin-Elmer Corporation 1993 Stock Incentive Plan for Key
Employees (incorporated by reference to Exhibit 99 to the Company's
Registration Statement on Form S-8 (No. 33-50847)).*
-41-
<PAGE>
10(3) The Perkin-Elmer Corporation 1996 Stock Incentive Plan (incorporated
by reference to Exhibit 99 to the Company's Registration Statement on
Form S-8 (No. 333-15189)).*
10(4) The Perkin-Elmer Corporation 1996 Employee Stock Purchase Plan, as
amended October 15, 1998 (incorporated by reference to Exhibit A to
the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders (Commission file number 1-4389)).*
10(5) The Perkin-Elmer Corporation 1997 Stock Incentive Plan (incorporated
by reference to Exhibit 99 to the Company's Registration Statement on
Form S-8 (No. 333-38713)).*
10(6) PerSeptive Biosystems, Inc. 1989 Stock Plan, as amended August 1,
1991 (incorporated by reference to Exhibit 10(1) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1998 (Commission file number 1-4389)).*
10(7) PerSeptive Biosystems, Inc. 1992 Stock Plan, as amended January 20,
1997 (incorporated by reference to Exhibit 4.1 to the Quarterly
Report on Form 10-Q of PerSeptive Biosystems, Inc. for the fiscal
quarter ended March 29, 1997 (Commission file No. 0-20032)).*
10(8) Molecular Informatics, Inc. 1997 Equity Ownership Plan (incorporated
by reference to Exhibit 99 to the Company's Registration Statement on
Form S-8 (Commission file No. 333-42683)).*
10(9) The Perkin-Elmer Corporation 1998 Stock Incentive Plan (incorporated
by reference to Exhibit B to the Company's Proxy Statement for its
1998 Annual Meeting of Stockholders (Commission file number
1-4389)).*
10(10) PE Corporation 1999 Employee Stock Purchase Plan (incorporated by
reference to Exhibit A to the Company's Proxy Statement for its 1999
Annual Meeting of Stockholders (Commission file number 1-4389)).*
10(11) PE Corporation/PE Biosystems Group 1999 Stock Incentive Plan, as
amended October 21, 1999 (incorporated by reference to Exhibit B to
the Company's Proxy Statement for its 1999 Annual Meeting of
Stockholders (Commission file number 1-4389)).*
10(12) PE Corporation/Celera Genomics Group 1999 Stock Incentive Plan, as
amended October 21, 1999 (incorporated by reference to Exhibit C to
the Company's Proxy Statement for its 1999 Annual Meeting of
Stockholders (Commission file number 1-4389)).*
10(13) Agreement dated September 12, 1995, between the Company and Tony L.
White (incorporated by reference to Exhibit 10(21) to Annual Report
on Form 10-K of the Company for the fiscal year ended June 30, 1995
(Commission file number 1-4389)).*
10(14) Deferred Compensation Contract dated September 15, 1994, between the
Company and Michael W. Hunkapiller (incorporated by reference to
Exhibit 10(7) to Annual Report on Form 10-K of the Company for the
fiscal year ended June 30, 1995 (Commission file number 1-4389)).*
10(15) Change of Control Agreement dated September 12, 1995, between the
Company and Tony L. White (incorporated by reference to Exhibit
10(16) to Annual Report on Form 10-K of the Company for the fiscal
year ended June 30, 1995 (Commission file number 1-4389)).*
10(16) Employment Agreement dated November 16, 1995, between the Company and
Michael W. Hunkapiller (incorporated by reference to Exhibit 10(11)
to Annual Report on Form 10-K of the Company for fiscal year ended
June 30, 1996 (Commission file number 1-4389)).*
10(17) Employment Agreement dated November 16, 1995, between the Company and
William B. Sawch (incorporated by reference to Exhibit 10(16) to
Annual Report on Form 10-K of the Company for fiscal year ended June
30, 1998 (Commission file number 1-4389)).*
10(18) Employment Agreement dated September 25, 1997, between the Company
and Dennis L. Winger (incorporated by reference to Exhibit 10(17) to
Annual Report on Form 10-K of the Company for the fiscal year ended
June 30, 1998 (Commission file number 1-4389)).*
10(19) Letter Agreement dated June 24, 1997, between the Company and Dennis
L. Winger (incorporated by reference to Exhibit 10(18) to Annual
Report on Form 10-K of the Company for the fiscal year ended June 30,
1998 (Commission file number 1-4389)).*
10(20) Deferred Compensation Contract dated July 15, 1993, between the
Company and William B. Sawch (incorporated by reference to Exhibit
10(19) to Annual Report on Form 10-K of the Company for the fiscal
year ended June 30, 1998 (Commission file number 1-4389)).*
-42-
<PAGE>
10(21) Agreement dated April 28, 1999, between the Company and J. Craig
Venter (incorporated by reference to Exhibit 10(20) to Annual Report
on Form 10-K of the Company for the fiscal year ended June 30, 1999
(Commission file number 1-4389)).*
10(22) The Perkin-Elmer Corporation Supplemental Retirement Plan effective
as of August 1, 1979, as amended through October 1, 1996.*
10(23) The Excess Benefit Plan of The Perkin-Elmer Corporation dated August
1, 1984, as amended through August 17, 2000.*
10(24) 1993 Director Stock Purchase and Deferred Compensation Plan as
amended through March 17, 2000 (incorporated by reference to Exhibit
10.1 to Quarterly Report on Form 10-Q of the Company for the quarter
ended March 31, 2000 (Commission file number 1-4389)).*
10(25) PE Corporation Performance Unit Bonus Plan as amended through
November 18, 1999 (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q of the Company for the quarter ended
December 31, 1999 (Commission file number 1-4389)).*
10(26) The Estate Enhancement Plan of The Perkin-Elmer Corporation
(incorporated by reference to Exhibit 10(22) to Annual Report on Form
10-K of the Company for the fiscal year ended June 30, 1997
(Commission file number 1-4389)).
10(27) PE Corporation Deferred Compensation Plan, as amended and restated
effective as of January 1, 1998 (incorporated by reference to Exhibit
4 to the Company's Registration Statement on Form S-8 (No.
333-45187).*
11 Computation of Net Income (Loss) per Share for the three years ended
June 30, 2000 (incorporated by reference to Note 1 to Consolidated
Financial Statements of Annual Report to Stockholders for the fiscal
year ended June 30, 2000).
13 Annual Report to Stockholders for the fiscal year ended June 30, 2000
(to the extent incorporated herein by reference).
21 List of Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
* Management plan or compensatory plan or arrangement
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, the Company filed a Current
Report on Form 8-K dated June 9, 2000, and filed June 12, 2000, to report under
Item 2 thereof the acquisition of Paracel, Inc.
-43-
<PAGE>
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.
PE CORPORATION
By /s/ William B. Sawch
---------------------------
William B. Sawch
Senior Vice President
and General Counsel
Date: September 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Tony L. White September 27, 2000
- --------------------------------------------
Tony L. White
Chairman of the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
/s/ Dennis L. Winger September 27, 2000
- -----------------------------------------------------
Dennis L. Winger
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Vikram Jog September 27, 2000
- -----------------------------------------------------
Vikram Jog
Controller
(Principal Accounting Officer)
-44-
<PAGE>
/s/ Richard H. Ayers September 27, 2000
- -----------------------------------------------------
Richard H. Ayers
Director
/s/ Jean-Luc Belingard September 27, 2000
- -----------------------------------------------------
Jean-Luc Belingard
Director
/s/ Robert H. Hayes September 27, 2000
- -----------------------------------------------------
Robert H. Hayes
Director
/s/ Arnold J. Levine September 27, 2000
- -----------------------------------------------------
Arnold J. Levine
Director
/s/ Theodore E. Martin September 27, 2000
- -----------------------------------------------------
Theodore E. Martin
Director
/s/ Georges C. St. Laurent, Jr. September 27, 2000
- -----------------------------------------------------
Georges C. St. Laurent, Jr.
Director
/s/ Carolyn W. Slayman September 27, 2000
- -----------------------------------------------------
Carolyn W. Slayman
Director
/s/ Orin R. Smith September 27, 2000
- -----------------------------------------------------
Orin R. Smith
Director
/s/ James R. Tobin September 27, 2000
- -----------------------------------------------------
James R. Tobin
Director
-45-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of PE Corporation
Our audits of the consolidated financial statements of PE Corporation
referred to in our report dated July 25, 2000, in the 2000 Annual Report to
Stockholders of PE Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
July 25, 2000
-46-
<PAGE>
PE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JUNE 30, 1998, 1999, AND 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
<S> <C>
Balance at June 30, 1997............................................... $ 3,840
Charged to income in fiscal year 1998.................................. 1,518
Deductions from reserve in fiscal year 1998............................ (1,070)
Acquired Business (2).................................................. 495
-------
Balance at June 30, 1998............................................... 4,783
Charged to income in fiscal year 1999.................................. 2,101
Divested Business (2).................................................. (449)
Deductions from reserve in fiscal year 1999............................ (2,601)
-------
Balance at June 30, 1999 (1)........................................... 3,834
Charged to income in fiscal year 2000.................................. 3,146
Deductions from reserve in fiscal year 2000............................ (3,015)
-------
Balance at June 30, 2000 (1)........................................... $ 3,965
=======
</TABLE>
(1) Deducted in the Consolidated Statements of Financial Position from accounts
receivable.
(2) See Note 2 to the Consolidated Financial Statements.
SCHEDULE II
-47-
<PAGE>
EXHIBIT INDEX
Exhibit Number
4.(2) Credit Agreement
10.(22) The Perkin-Elmer Corporation Supplemental Retirement Plan
10.(23) The Excess Benefit Plan of The Perkin-Elmer Corporation
13 Annual Report to Stockholders for the fiscal year ended
June 30, 2000 (to the extent incorporated herein by
reference).
21 List of Subsidiaries.
23 Consent of Pricewaterhouse Coopers LLP.
27 Financial Data Schedule.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(2)
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>
EXECUTION COPY
U.S. $100,000,000
CREDIT AGREEMENT
Dated as of April 20, 2000
Among
THE PERKIN-ELMER CORPORATION
as Borrower
PE CORPORATION
as Guarantor
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
SALOMON SMITH BARNEY INC.
as Sole Arranger
WACHOVIA BANK, N.A.
as Syndication Agent
THE CHASE MANHATTAN BANK
as Documentation Agent
and
CITIBANK, N.A.
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<S> <C> <C>
SECTION 1.01. Certain Defined Terms 1
---------------------
SECTION 1.02. Computation of Time Periods 12
---------------------------
SECTION 1.03. Accounting Terms 12
----------------
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances 12
-----------------------------
SECTION 2.02. Making the Revolving Credit Advances 12
------------------------------------
SECTION 2.03. The Competitive Bid Advances 13
----------------------------
SECTION 2.04. Fees 16
----
SECTION 2.05. Optional Termination or Reduction of the Commitments 16
----------------------------------------------------
SECTION 2.06. Repayment of Revolving Credit Advances 16
--------------------------------------
SECTION 2.07. Interest on Revolving Credit Advances 17
-------------------------------------
SECTION 2.08. Interest Rate Determination 17
---------------------------
SECTION 2.09. Optional Conversion of Revolving Credit Advances 18
------------------------------------------------
SECTION 2.10. Prepayments of Revolving Credit Advances 18
----------------------------------------
SECTION 2.11. Increased Costs 19
---------------
SECTION 2.12. Illegality 19
----------
SECTION 2.13. Payments and Computations 19
-------------------------
SECTION 2.14. Taxes 20
-----
SECTION 2.15. Sharing of Payments, Etc. 22
------------------------
SECTION 2.16. Evidence of Debt 22
----------------
SECTION 2.17. Use of Proceeds 23
---------------
SECTION 2.18. Increase in the Aggregate Commitments 23
-------------------------------------
SECTION 2.19. Extension of Termination Date 24
-----------------------------
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 26
---------------------------------------------------------------
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing 27
------------------------------------------------------
SECTION 3.04. Determinations Under Section 3.01 28
---------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower and the Guarantor 28
ARTICLE V
COVENANTS OF THE GUARANTOR
SECTION 5.01. Affirmative Covenants 30
---------------------
SECTION 5.02. Negative Covenants 31
------------------
<PAGE>
ii
Page
SECTION 5.03. Financial Covenants 32
-------------------
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default 33
-----------------
ARTICLE VII
GUARANTY
7.01. Guaranty 35
--------
7.02. Guaranty Absolute 35
-----------------
7.03. Waivers and Acknowledgments 36
---------------------------
7.04. Subrogation 36
-----------
7.05. Continuing Guaranty; Assignments 37
--------------------------------
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action 37
------------------------
SECTION 8.02. Agent's Reliance, Etc. 37
---------------------
SECTION 8.03. Citibank and Affiliates 38
-----------------------
SECTION 8.04. Lender Credit Decision 38
----------------------
SECTION 8.05. Indemnification 38
---------------
SECTION 8.06. Successor Agent 38
---------------
SECTION 8.07. Other Agents. 39
-------------
ARTICLE IX
MISCELLAEOUS
SECTION 9.01. Amendments, Etc. 39
---------------
SECTION 9.02. Notices, Etc. 39
------------
SECTION 9.03. No Waiver; Remedies 40
-------------------
SECTION 9.04. Costs and Expenses 40
------------------
SECTION 9.05. Right of Set-off 41
----------------
SECTION 9.06. Binding Effect 41
--------------
SECTION 9.07. Assignments and Participations 41
------------------------------
SECTION 9.08. Confidentiality 43
---------------
SECTION 9.09. Governing Law 43
-------------
SECTION 9.10. Execution in Counterparts 43
-------------------------
SECTION 9.11. Jurisdiction, Etc. 43
-----------------
Schedules
Schedule I - List of Applicable Lending Offices
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C> <C>
Schedule 3.01(b) - Disclosed Litigation
Schedule 5.02(a) - Existing Liens
Exhibits
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Opinion of Counsel for the Borrower and the Guarantor
</TABLE>
<PAGE>
CREDIT AGREEMENT
Dated as of April 20, 2000
THE PERKIN-ELMER CORPORATION, a New York corporation (the
"Borrower"), PE CORPORATION, a Delaware corporation the ("Guarantor"), the
banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof, SALOMON SMITH BARNEY INC., as
sole arranger, WACHOVIA BANK, N.A., as syndication agent, THE CHASE MANHATTAN
BANK, as documentation agent, and CITIBANK, N.A. ("Citibank"), as administrative
agent (the "Agent") for the Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 20% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agent's Account" means the account of the Agent maintained by
the Agent at Citibank at its office at 399 Park Avenue, New York, New
York 10043, Account No. 36852248, Attention: Brian Maxwell.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance and, in the case of a Competitive Bid
Advance, the office of such Lender notified by such Lender to the Agent
as its Applicable Lending Office with respect to such Competitive Bid
Advance.
"Applicable Margin" means as of any date, a percentage per
annum determined by reference to the Pricing Level in effect on such
date as set forth below:
<PAGE>
2
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Pricing Level Applicable Margin for Applicable Margin for
Base Rate Advances Eurodollar Rate Advances
-----------------------------------------------------------------------------------------
<S> <C> <C>
Level 1 0.00% 0.185%
-----------------------------------------------------------------------------------------
Level 2 0.00% 0.270%
-----------------------------------------------------------------------------------------
Level 3 0.00% 0.350%
-----------------------------------------------------------------------------------------
Level 4 0.00% 0.500%
-----------------------------------------------------------------------------------------
Level 5 0.00% 0.675%
-----------------------------------------------------------------------------------------
</TABLE>
"Applicable Percentage" means, as of any date a percentage per
annum determined by reference to the Pricing Level in effect on such
date as set forth below:
<TABLE>
<CAPTION>
--------------------------------------------------------------
Pricing Level Applicable Percentage
<S> <C>
--------------------------------------------------------------
Level 1 0.065%
--------------------------------------------------------------
Level 2 0.080%
--------------------------------------------------------------
Level 3 0.100%
--------------------------------------------------------------
Level 4 0.125%
--------------------------------------------------------------
Level 5 0.175%
--------------------------------------------------------------
</TABLE>
"Applicable Utilization Fee" means, as of any date on which
the aggregate outstanding Advances exceed 33% of the aggregate
Commitments, a percentage per annum determined by reference to the
Pricing Level in effect on such date as set forth below:
<TABLE>
<CAPTION>
--------------------------------------------------------------
Pricing Level Applicable Utilization Fee
--------------------------------------------------------------
<S> <C>
Level 1 0.050%
--------------------------------------------------------------
Level 2 0.075%
--------------------------------------------------------------
Level 3 0.100%
--------------------------------------------------------------
Level 4 0.125%
--------------------------------------------------------------
Level 5 0.150%
--------------------------------------------------------------
</TABLE>
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Assuming Lender" has the meaning specified in Section
2.18(d).
<PAGE>
3
"Assumption Agreement" has the meaning specified in Section
2.18(d)(ii).
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/16 of 1% or,
if there is no nearest 1/16 of 1%, to the next higher 1/16 of
1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by
dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for
three-month certificates of deposit of major United States
money market banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending
on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations
for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected
by Citibank, by (B) a percentage equal to 100% minus the
average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar
non-personal time deposits in the United States, plus (iii)
the average during such three-week period of the annual
assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United
States; and
(c) 1/2 of one percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a)(i).
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances or LIBO
Rate Advances, on which dealings are carried on in the London interbank
market.
"Commitment" means as to any Lender (a) the amount set forth
opposite such Lender's name on the signature pages hereof, (b) if such
Lender has become a Lender hereunder pursuant to an Assumption
Agreement, the amount set forth in such Assumption Agreement or (c) if
such Lender has entered into any Assignment and Acceptance, the amount
set forth for such Lender in the Register maintained by the Agent
pursuant to Section 9.07(d), as such amount may be reduced pursuant to
Section 2.05 or increased pursuant to Section 2.18.
"Commitment Date" has the meaning specified in Section
2.18(b).
"Commitment Increase" has the meaning specified in Section
2.18(a).
<PAGE>
4
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to a
Fixed Rate Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such
Lender resulting from a Competitive Bid Advance made by such Lender.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Confidential Information" means information that the Borrower
or the Guarantor furnishes to the Agent or any Lender in a writing
designated as confidential, but does not include any such information
that is or becomes generally available to the public or that is or
becomes available to the Agent or such Lender from a source other than
the Borrower or the Guarantor.
"Consenting Lender" has the meaning specified in Section
2.19(b).
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of the other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services
(other than trade payables not overdue by more than 90 days incurred in
the ordinary course of such Person's business), (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
obligations of such Person as lessee under leases that have been or
should be, in accordance with GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person in respect of
acceptances, letters of credit or similar extensions of credit, (g) all
obligations of such Person in respect of Hedge Agreements, (h) all Debt
of others referred to in clauses (a) through (g) above or clause (i)
below guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through
an agreement (1) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (2) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(4) otherwise to assure a creditor against loss, and (i) all Debt
referred to in clauses (a) through (h) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise,
to be secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt.
<PAGE>
5
"Debt for Borrowed Money" of any Person means all Debt of such
Person of the types described in clauses (a) through (e) of the
definition of "Debt", to the extent reflected on a Consolidated balance
sheet of such Person in accordance with GAAP.
"Debt Rating" means, as of any date, the Public Debt Rating in
effect on such date or, if no Public Debt Rating is then in effect, the
Implied Debt Rating in effect on such date.
"Debt/Total Capital Ratio" means, as of any date of
determination, the ratio, expressed as a decimal fraction, of
Consolidated Debt for Borrowed Money of the Guarantor and its
Subsidiaries to the sum of Consolidated Debt for Borrowed Money of the
Guarantor and its Subsidiaries plus Net Worth.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Disclosed Litigation" has the meaning specified in Section
3.01(b).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assumption Agreement
or the Assignment and Acceptance pursuant to which it became a Lender,
or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Agent.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; and (iii) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 9.07, the Borrower,
such approval not to be unreasonably withheld or delayed; provided,
however, that neither the Borrower nor an Affiliate of the Borrower
shall qualify as an Eligible Assignee.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response,
remedial or other actions or damages and (b) by any governmental or
regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety
or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
<PAGE>
6
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Guarantor's controlled group, or under
common control with the Guarantor, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph
(9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to
a Plan; (c) the provision by the administrator of any Plan of a notice
of intent to terminate such Plan pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of
operations at a facility of the Borrower, the Guarantor or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA;
(e) the withdrawal by the Borrower, the Guarantor or any ERISA
Affiliate from a Multiple Employer Plan during a plan year for which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for the imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (g) the adoption of
an amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of
ERISA that constitutes grounds for the termination of, or the
appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assumption Agreement
or the Assignment and Acceptance pursuant to which it became a Lender
(or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the rate per annum (rounded upward to the
nearest whole multiple of 1/100 of 1% per annum) appearing on Telerate
Page 3750 (or any successor page) as the London interbank offered rate
for deposits in U.S. dollars at approximately 11:00 A.M. (London time)
two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period or, if for any reason such rate
is not available, the average (rounded upward to the nearest whole
multiple of 1/100 of 1% per annum, if such average is not such a
multiple) of the rate per annum at which deposits in U.S. dollars are
offered by the principal office of each of the Reference Banks in
London, England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to such Reference
Bank's Eurodollar Rate Advance comprising part of such Revolving Credit
Borrowing to be outstanding during such Interest Period and for a
period equal to such Interest Period by (b) a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage for such Interest Period.
If the Telerate Page 3750 (or any successor page) is unavailable, the
Eurodollar Rate for any Interest Period for each Eurodollar Rate
Advance comprising part of the same Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks two Business Days
before the first day of such Interest Period, subject, however, to the
provisions of Section 2.08.
<PAGE>
7
"Eurodollar Rate Advance" means a Revolving Credit Advance
that bears interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances or LIBO Rate Advances comprising part
of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on Eurodollar
Rate Advances or LIBO Rate Advances is determined) having a term equal
to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Extension Date" has the meaning specified in Section 2.19(b).
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum and petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Implied Debt Rating" means the rating assigned by S&P to the
Guarantor's unsecured "implied senior debt" from time to time, as
published by S&P on January 11, 2000 or any subsequent publication
thereof in any medium by S&P (which rating on the date hereof is A-)
or, if such rating is unavailable, the equivalent rating assigned by
Moody's to the Guarantor's unsecured "implied senior debt", as notified
in writing to the Guarantor by Moody's.
"Increase Date" has the meaning specified in Section 2.18(a).
"Increasing Lender" has the meaning specified in Section
2.18(b).
"Information Memorandum" means the information memorandum
dated March 13, 2000 used by the Agent in connection with the
syndication of the Commitments.
<PAGE>
8
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing and each LIBO
Rate Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurodollar Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurodollar Rate Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurodollar Rate Advances, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months or nine or
twelve months if available by all Lenders, as the Borrower may, upon
notice received by the Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(i) the Borrower may not select any Interest Period
that ends after the Termination Date;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving
Credit Borrowing or for LIBO Rate Advances comprising part of
the same Competitive Bid Borrowing shall be of the same
duration;
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(iv) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Lenders" means the Initial Lenders, each Assuming Lender that
shall become a party hereto pursuant to Section 2.18 or 2.19 and each
Person that shall become a party hereto pursuant to Section 9.07.
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upward to the nearest whole
multiple of 1/100 of 1% per annum) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits
in U.S. dollars at approximately 11:00 A.M. (London time) two Business
Days prior to the first day of such Interest Period for a term
comparable to such Interest Period or, if for any reason such rate is
not available, the average (rounded upward to the nearest whole
multiple of 1/100 of 1% per annum, if such average is not such a
multiple) of the rate per annum at which deposits in U.S. dollars
offered by the principal office of each of the Reference Banks in
London, England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the amount that
would be the Reference Banks' respective ratable shares of such
Borrowing if such Borrowing were to be a Revolving Credit Borrowing to
be outstanding during such interest Period and for a period equal
<PAGE>
9
to such Interest Period by (b) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period. If
Telerate Page 3750 (or any successor page) is unavailable, the LIBO
Rate for any Interest Period for each LIBO Rate Advance comprising part
of the same Competitive Bid Borrowing shall be determined by the Agent
on the basis of applicable rates furnished to and received by the Agent
from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.08.
"LIBO Rate Advances" means a Competitive Bid Advance bearing
interest based on the LIBO Rate.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor.
"Material Adverse Change" means any material adverse change in
the business, financial condition or results of operations of the
Guarantor and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, financial condition or operations of the Guarantor
and its Subsidiaries taken as a whole or (b) the rights and remedies of
the Agent or any Lender under this Agreement or any Note.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower, the Guarantor or
any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower, the Guarantor or any ERISA Affiliate and at
least one Person other than the Borrower, the Guarantor and the ERISA
Affiliates or (b) was so maintained and in respect of which the
Borrower, the Guarantor or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"Net Worth" means stockholders' equity of the Guarantor.
"Non-Consenting Lender" has the meaning specified in Section
2.19(b).
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising
<PAGE>
10
in the ordinary course of business securing obligations that are not
overdue for a period of more than 60 days or that are being contested
in good faith by appropriate proceedings; (c) pledges or deposits to
secure obligations under workers' compensation laws, unemployment
insurance or similar legislation or to secure public or statutory
obligations; and (d) easements, rights of way and other encumbrances on
title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect the use
of such property for its present purposes.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Pricing Level" means, as of any date the level set forth
below as then in effect for the Guarantor, as determined in accordance
with the following provisions of this definition:
Level 1: Debt Rating of not lower than A+ by S&P or not lower
than A1 by Moody's or, if no Debt Rating is available from S&P
or Moody's, Net Worth of not less than $2,000,000,000 and
Debt/Total Capital Ratio of not more than 0.30:1.00.
Level 2: Debt Rating of lower than Level 1 but not lower than
A by S&P or A2 by Moody's or, if no Debt Rating is available
from S&P or Moody's, Net Worth of not less than $1,600,000,000
and Debt/Total Capital Ratio of not more than 0.35:1.00.
Level 3: Debt Rating of lower than Level 2 but not lower than
A- by S&P or A3 by Moody's or, if no Debt Rating is available
from S&P or Moody's, Net Worth of not less than $1,300,000,000
and Debt/Total Capital Ratio of not more than 0.40:1.00.
Level 4: Debt Rating of lower than Level 3 but not lower than
BBB+ by S&P or Baa1 by Moody's or, if no Debt Rating is
available from S&P or Moody's, Net Worth of not less than
$1,000,000,000 and Debt/Total Capital Ratio of not more than
0.45:1.00.
Level 5: Debt Rating of lower than Level 4 or, if no Debt
Rating is available from S&P or Moody's, Net Worth of less
than $1,000,000,000 or Debt/Total Capital Ratio of more than
0.45:1.00.
For purposes of the foregoing, (a) if only one of S&P and Moody's shall
have in effect a Debt Rating, the Pricing Level shall be determined by
reference to the available rating; (b) if the ratings established by
S&P and Moody's shall fall within different levels, the Pricing Level
shall be based upon the higher rating; and (c) if no Debt Rating is
then available (x) any change in the Pricing Level determined by
reference to the Borrower's Net Worth or Debt/Total Capital Ratio shall
be effective on the date that the financial statements required to be
delivered pursuant to Section 5.01(h)(i) and (ii) are delivered or
deemed delivered in accordance with such Section and (y) the Pricing
Level shall be at Level 5 for so long as the Borrower has not delivered
the information described in clause (c)(x) above as and when required
under Section 5.01(h)(i) or (ii), as the case may be.
"Public Debt Rating" means, as of any date, the lowest rating
that has been most recently announced by either S&P or Moody's, as the
case may be, for any class of non-credit enhanced long-term senior
unsecured debt issued by the Guarantor. For purposes of the foregoing,
(a) if any rating established by S&P or Moody's shall be changed, such
change shall be effective as of the date on which such change is first
announced publicly
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11
by the rating agency making such change; and (b) if S&P or Moody's
shall change the basis on which ratings are established, each reference
to the Public Debt Rating announced by S&P or Moody's, as the case may
be, shall refer to the then equivalent rating by S&P or Moody's, as the
case may be.
"Reference Banks" means Citibank, The Chase Manhattan Bank and
Wachovia Bank, N.A.
"Register" has the meaning specified in Section 9.07(d).
"Required Lenders" means at any time Lenders owed at least a
majority in interest of the then aggregate unpaid principal amount of
the Revolving Credit Advances owing to Lenders, or, if no such
principal amount is then outstanding, Lenders having at least a
majority in interest of the Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
Borrower as part of a Revolving Credit Borrowing and refers to a Base
Rate Advance or a Eurodollar Rate Advance (each of which shall be a
"Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type and, in the
case of Eurodollar Rate Advances, for the same Interest Period, made by
each of the Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of the
Borrower payable to the order of any Lender, delivered pursuant to a
request made under Section 2.16 in substantially the form of Exhibit
A-1 hereto, evidencing the aggregate indebtedness of the Borrower to
such Lender resulting from the Revolving Credit Advances made by such
Lender.
"S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower, the Guarantor or any ERISA Affiliate and no
Person other than the Borrower, the Guarantor and the ERISA Affiliates
or (b) was so maintained and in respect of which the Borrower, the
Guarantor or any ERISA Affiliate could have liability under Section
4069 of ERISA in the event such plan has been or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Termination Date" means the earlier of (a) April 20, 2005,
subject to the extension thereof pursuant to Section 2.19 and (b) the
date of termination in whole of the Commitments pursuant to Section
2.05 or 6.01; provided, however, that the Termination Date of any
Lender that is a Non-Consenting Lender to any requested extension
pursuant to Section 2.19 shall be the Termination Date in effect
immediately prior to the applicable Extension Date for all purposes of
this Agreement.
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12
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Advances to the Borrower from time to time on any Business Day
during the period from the Effective Date until the Termination Date in an
aggregate amount not to exceed at any time outstanding such Lender's Commitment
provided that the aggregate amount of the Commitments of the Lenders shall be
deemed used from time to time to the extent of the aggregate amount of the
Competitive Bid Advances then outstanding and such deemed use of the aggregate
amount of the Commitments shall be allocated among the Lenders ratably according
to their respective Commitments (such deemed use of the aggregate amount of the
Commitments being a "Competitive Bid Reduction"). Each Revolving Credit
Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances
of the same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of each Lender's Commitment, the
Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.10 and
reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
Revolving Credit Borrowing shall be made on notice, given not later than (x)
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Eurodollar Rate Advances or (y) 11:00 A.M. (New York
City time) on the date of the proposed Revolving Credit Borrowing in the case of
a Revolving Credit Borrowing consisting of Base Rate Advances, by the Borrower
to the Agent, which shall give to each Lender prompt notice thereof by
telecopier or telex. Each such notice of a Revolving Credit Borrowing (a "Notice
of Revolving Credit Borrowing") shall be by telephone, confirmed immediately in
writing, or telecopier or telex in substantially the form of Exhibit B-1 hereto,
specifying therein the requested (i) date of such Revolving Credit Borrowing,
(ii) Type of Advances comprising such Revolving Credit Borrowing, (iii)
aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a
Revolving Credit Borrowing consisting of Eurodollar Rate Advances, initial
Interest Period for each such Revolving Credit Advance. Each Lender shall,
before 12:00 noon (New York City time) on the date of such Revolving Credit
Borrowing make available for the account of its Applicable Lending Office to the
Agent at the Agent's Account, in same day funds, such Lender's ratable portion
of such Revolving Credit Borrowing. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower at the Agent's address
referred to in Section 9.02.
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13
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $5,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or
2.12 and (ii) the Eurodollar Rate Advances may not be outstanding as part of
more than ten separate Revolving Credit Borrowings.
(c) Each Notice of Revolving Credit Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Revolving Credit
Borrowing that the related Notice of Revolving Credit Borrowing specifies is to
be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Revolving Credit Advance to be made by such Lender as part of
such Revolving Credit Borrowing when such Revolving Credit Advance, as a result
of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's ratable portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Revolving Credit Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Revolving Credit Advances comprising such Revolving Credit Borrowing and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Revolving Credit Advance as part of such Revolving
Credit Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender on the date of any
Revolving Credit Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 10 days prior to the Termination Date
in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any Competitive Bid Reduction).
(i) The Borrower may request a Competitive Bid Borrowing under
this Section 2.03 by delivering to the Agent, by telecopier or telex, a
notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid
Borrowing"), in substantially the form of Exhibit B-2 hereto,
specifying therein the requested (v) date of such proposed Competitive
Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid
Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of
LIBO Rate Advances, Interest Period, or in the case of a Competitive
Bid Borrowing consisting of Fixed Rate Advances, maturity date for
repayment of each Fixed Rate Advance to be made as part of such
Competitive Bid Borrowing (which maturity
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14
date may not be earlier than the date occurring 7 days after the date
of such Competitive Bid Borrowing or later than the Termination Date),
(y) interest payment date or dates relating thereto, and (z) other
terms (if any) to be applicable to such Competitive Bid Borrowing, not
later than 10:00 A.M. (New York City time) (A) at least one Business
Day prior to the date of the proposed Competitive Bid Borrowing, if the
Borrower shall specify in the Notice of Competitive Bid Borrowing that
the rates of interest to be offered by the Lenders shall be fixed rates
per annum (the Advances comprising any such Competitive Bid Borrowing
being referred to herein as "Fixed Rate Advances") and (B) at least
four Business Days prior to the date of the proposed Competitive Bid
Borrowing, if the Borrower shall instead specify in the Notice of
Competitive Bid Borrowing that the Advances comprising such Competitive
Bid Borrowing shall be LIBO Rate Advances. Each Notice of Competitive
Bid Borrowing shall be irrevocable and binding on the Borrower. The
Agent shall in turn promptly notify each Lender of each request for a
Competitive Bid Borrowing received by it from the Borrower by sending
such Lender a copy of the related Notice of Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances
to the Borrower as part of such proposed Competitive Bid Borrowing at a
rate or rates of interest specified by such Lender in its sole
discretion, by notifying the Agent (which shall give prompt notice
thereof to the Borrower), (A) before 9:30 A.M. (New York City time) on
the date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances and (B)
before 10:00 A.M. (New York City time) three Business Days before the
date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of LIBO Rate Advances of the
minimum amount and maximum amount of each Competitive Bid Advance which
such Lender would be willing to make as part of such proposed
Competitive Bid Borrowing (which amounts of such proposed Competitive
Bid may, subject to the proviso to the first sentence of this Section
2.03(a), exceed such Lender's Commitment, if any), the rate or rates of
interest therefor and such Lender's Applicable Lending Office with
respect to such Competitive Bid Advance; provided that if the Agent in
its capacity as a Lender shall, in its sole discretion, elect to make
any such offer, it shall notify the Borrower of such offer at least 30
minutes before the time and on the date on which notice of such
election is to be given to the Agent, by the other Lenders. If any
Lender shall elect not to make such an offer, such Lender shall so
notify the Agent before 10:00 A.M. (New York City time), and such
Lender shall not be obligated to, and shall not, make any Competitive
Bid Advance as part of such Competitive Bid Borrowing; provided that
the failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any Competitive Bid Advance as part of
such proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, (A) before 10:30 A.M. (New
York City time) on the date of such proposed Competitive Bid Borrowing,
in the case of a Competitive Bid Borrowing consisting of Fixed Rate
Advances and (B) before 11:00 A.M. (New York City time) three Business
Days before the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
either:
(x) cancel such Competitive Bid Borrowing by giving
the Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Agent of the amount
of each Competitive Bid Advance (which amount shall be equal
to or greater than the minimum amount, and equal to or less
than the maximum amount, notified to the Borrower by the Agent
on behalf of such Lender for such Competitive Bid Advance
pursuant to paragraph (ii) above) to be made by each Lender as
part of such Competitive Bid Borrowing, and reject any
remaining offers made by Lenders pursuant to paragraph (ii)
above by giving the Agent notice to that effect. The Borrower
shall accept
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15
the offers made by any Lender or Lenders to make Competitive
Bid Advances in order of the lowest to the highest rates of
interest offered by such Lenders. If two or more Lenders have
offered the same interest rate, the amount to be borrowed at
such interest rate will be allocated among such Lenders in
proportion to the amount that each such Lender offered at such
interest rate (with appropriate rounding, in the sole
discretion of the Borrower, to assure that each accepted
Competitive Bid Advance is an integral multiple of
$1,000,000).
(iv) If the Borrower notifies the Agent that such Competitive
Bid Borrowing is canceled pursuant to paragraph (iii)(x) above, the
Agent shall give prompt notice thereof to the Lenders and such
Competitive Bid Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent
shall in turn promptly notify (A) each Lender that has made an offer as
described in paragraph (ii) above, of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers
made by such Lender pursuant to paragraph (ii) above have been accepted
by the Borrower, (B) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, of the amount of
each Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make a Competitive Bid Advance as part of such Competitive
Bid Borrowing shall, before 11:00 A.M. (New York City time) on the date
of such Competitive Bid Borrowing specified in the notice received from
the Agent pursuant to clause (A) of the preceding sentence or any later
time when such Lender shall have received notice from the Agent
pursuant to clause (C) of the preceding sentence, make available for
the account of its Applicable Lending Office to the Agent at its
address referred to in Section 9.02, in same day funds, such Lender's
portion of such Competitive Bid Borrowing. Upon fulfillment of the
applicable conditions set forth in Article III and after receipt by the
Agent of such funds, the Agent will make such funds available to the
Borrower at the location specified by the Borrower in its Notice of
Competitive Bid Borrowing. Promptly after each Competitive Bid
Borrowing the Agent will notify each Lender of the amount of the
Competitive Bid Borrowing, the consequent Competitive Bid Reduction and
the dates upon which such Competitive Bid Reduction commenced and will
terminate.
(vi) If the Borrower notifies the Agent that it accepts one or
more of the offers made by any Lender or Lenders pursuant to paragraph
(iii)(y) above, such notice of acceptance shall be irrevocable and
binding on the Borrower. The Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result
of any failure to fulfill on or before the date specified in the
related Notice of Competitive Bid Borrowing for such Competitive Bid
Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund
the Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing when such Competitive Bid Advance, as a
result of such failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each Competitive Bid Borrowing, the Borrower shall
be in compliance with the limitations set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, provided that a Competitive Bid Borrowing shall not be made within
three Business Days of the date of any other Competitive Bid Borrowing.
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16
(d) The Borrower shall repay to the Agent for the account of
each Lender that has made a Competitive Bid Advance, on the maturity date of
each Competitive Bid Advance (such maturity date being that specified by the
Borrower for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such Competitive Bid Advance),
the then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the Competitive
Bid Note evidencing such Competitive Bid Advance or except in connection with an
assignment of such Lender's Commitments as a result of a demand by the Borrower
under Section 9.07(a).
(e) The Borrower shall pay interest on the unpaid principal
amount of each Competitive Bid Advance from the date of such Competitive Bid
Advance to the date the principal amount of such Competitive Bid Advance is
repaid in full, at the rate of interest for such Competitive Bid Advance
specified by the Lender making such Competitive Bid Advance in its notice with
respect thereto delivered pursuant to subsection (a)(ii) above, payable on the
interest payment date or dates specified by the Borrower for such Competitive
Bid Advance in the related Notice of Competitive Bid Borrowing delivered
pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note
evidencing such Competitive Bid Advance. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), the Borrower shall pay
interest on the amount of unpaid principal of and interest on each Competitive
Bid Advance owing to a Lender, payable in arrears on the date or dates interest
is payable thereon, at a rate per annum equal at all times to 2% per annum above
the rate per annum required to be paid on such Competitive Bid Advance under the
terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless
otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each
Competitive Bid Advance made to the Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower
payable to the order of the Lender making such Competitive Bid Advance.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the Effective Date in the case of each
Initial Lender and from the effective date specified in the Assumption Agreement
or in the Assignment and Acceptance pursuant to which it became a Lender in the
case of each other Lender until the Termination Date at a rate per annum equal
to the Applicable Percentage in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December,
commencing June 30, 2000, and on the Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Borrower
and the Agent.
SECTION 2.05. Optional Termination or Reduction of the
Commitments. The Borrower shall have the right, upon at least three Business
Days' notice to the Agent, to terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Lenders, provided that each
partial reduction shall be in the aggregate amount of $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and provided further that the aggregate
amount of the Commitments of the Lenders shall not be reduced to an amount that
is less than the aggregate principal amount of the Competitive Bid Advances then
outstanding.
SECTION 2.06. Repayment of Revolving Credit Advances. The
Borrower shall repay to the Agent for the ratable account of the Lenders on the
Termination Date the aggregate principal amount of the Revolving Credit Advances
then outstanding.
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17
SECTION 2.07. Interest on Revolving Credit Advances. (a)
Scheduled Interest. The Borrower shall pay interest on the unpaid principal
amount of each Revolving Credit Advance owing to each Lender from the date of
such Revolving Credit Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance, a rate per annum equal at all
times to the sum of (x) the Base Rate in effect from time to time plus
(y) the Applicable Margin in effect from time to time plus (z) the
Applicable Utilization Fee in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September and
December during such periods and on the date such Base Rate Advance
shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during each Interest Period for such Revolving
Credit Advance to the sum of (x) the Eurodollar Rate for such Interest
Period for such Revolving Credit Advance plus (y) the Applicable Margin
in effect from time to time plus (z) the Applicable Utilization Fee in
effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and on
the date such Eurodollar Rate Advance shall be Converted or paid in
full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), the Borrower shall pay
interest on (i) the unpaid principal amount of each Revolving Credit Advance
owing to each Lender, payable in arrears on the dates referred to in clause
(a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum
above the rate per annum required to be paid on such Revolving Credit Advance
pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent
permitted by law, the amount of any interest, fee or other amount payable
hereunder that is not paid when due, from the date such amount shall be due
until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on Base Rate
Advances pursuant to clause (a)(i) above.
SECTION 2.08. Interest Rate Determination. (a) The Agent shall
give prompt notice to the Borrower and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.07(a)(i) or (ii), and the
rate, if any, furnished by each Reference Bank for the purpose of determining
the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the
Required Lenders notify the Agent that the Eurodollar Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Required
Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Agent shall forthwith so notify the
Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to
make, or to Convert Revolving Credit Advances into, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Borrower and the Lenders and such Advances
will automatically, on the last day of the then existing Interest Period
therefor, be Converted into Base Rate Advances.
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(d) On the date on which the aggregate unpaid principal amount
of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $5,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
(f) If Telerate Page 3750 is unavailable and fewer than two
Reference Banks furnish timely information to the Agent for determining the
Eurodollar Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate
Advances, as the case may be,
(i) the Agent shall forthwith notify the Borrower and the
Lenders that the interest rate cannot be determined for such Eurodollar
Rate Advances or LIBO Rate Advances, as the case may be,
(ii) with respect to Eurodollar Rate Advances, each such
Advance will automatically, on the last day of the then existing
Interest Period therefor, be prepaid by the Borrower or be
automatically Converted into a Base Rate Advance (or if such Advance is
then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make Eurodollar Rate
Advances or LIBO Rate Advances or to Convert Revolving Credit Advances
into Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
SECTION 2.09. Optional Conversion of Revolving Credit
Advances. The Borrower may on any Business Day, upon notice given to the Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.08 and 2.12, Convert all Revolving Credit Advances of one Type comprising the
same Borrowing into Revolving Credit Advances of the other Type; provided,
however, that any Conversion of Base Rate Advances into Eurodollar Rate Advances
shall be in an amount not less than the minimum amount specified in Section
2.02(b) and no Conversion of any Revolving Credit Advances shall result in more
separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each
such notice of a Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to
be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Revolving Credit Advances. The
Borrower may, upon notice at least two Business Days' prior to the date of such
prepayment, in the case of Eurodollar Rate Advances, and not later than 11:00
A.M. (New York City time) on the date of such prepayment, in the case of Base
Rate Advances, to the Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amount of the Revolving Credit Advances comprising
part of the same Revolving Credit Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x) each partial prepayment shall be in
an aggregate principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment of a
Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 9.04(c).
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SECTION 2.11. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting
from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii)
changes in the basis of taxation of overall net income or overall gross income
by the United States or by the foreign jurisdiction or state under the laws of
which such Lender is organized or has its Applicable Lending Office or any
political subdivision thereof), then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to compensate
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
(c) Notwithstanding the foregoing, the Borrower shall not be
required to compensate a Lender pursuant to this Section 2.11 for any amounts
incurred more than six months prior to the date that such Lender notifies the
Borrower of such Lender's intention to claim compensation therefor; provided
that, if the circumstances giving rise to such claim have a retroactive effect,
then such six-month period shall be extended to include the period of such
retroactive effect.
SECTION 2.12. Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will
automatically, upon such demand, Convert into a Base Rate Advance and (b) the
obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances
or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 2.13. Payments and Computations. (a) The Borrower
shall make each payment hereunder not later than 11:00 A.M. (New York City time)
on the day when due to the Agent at the Agent's Account in same day funds. The
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or facility fees ratably (other than
amounts payable pursuant to Section 2.03, 2.11, 2.14 or 9.04(c)) to the Lenders
for the account of their respective Applicable Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender to such Lender
for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon any Assuming Lender becoming a
Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18
or an extension of the Termination Date pursuant to Section 2.19, and upon the
Agent's receipt of such Lender's Assumption Agreement and recording of the
information contained therein in the Register, from and after the applicable
Increase Date or Extension Date, as the case may be, the
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20
Agent shall make all payments hereunder and under any Notes issued in connection
therewith in respect of the interest assumed thereby to the Assuming Lender.
Upon its acceptance of an Assignment and Acceptance and recording of the
information contained therein in the Register pursuant to Section 9.07(c), from
and after the effective date specified in such Assignment and Acceptance, the
Agent shall make all payments hereunder and under the Notes in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on the Base Rate shall
be made by the Agent on the basis of a year of 365 or 366 days, as the case may
be, all computations of interest based on the Eurodollar Rate, the LIBO Rate or
the Federal Funds Rate or in respect of Fixed Rate Advances and of fees shall be
made by the Agent on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or facility fees are payable.
Each determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
or the Guarantor hereunder or under the Notes shall be made, in accordance with
Section 2.13, free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, taxes imposed on its overall net income, and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction under the laws of which such
Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
overall net income, and franchise taxes imposed on it in lieu of net income
taxes, by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision thereof or any other jurisdiction that is imposed on the
Agent or any Lender as a result of a present or former connection between the
Agent or such Lender and such jurisdiction (other than any such connection
arising solely from the Agent or such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement or the Notes) (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If the
Borrower or the Guarantor shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any Note to any Lender or the
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.14) such Lender or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or the Guarantor shall make such
deductions and (iii) the Borrower or the Guarantor shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
<PAGE>
21
(b) In addition, the Borrower shall pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, performing under, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as "Other
Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for
and hold it harmless against the full amount of Taxes or Other Taxes (including,
without limitation, taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.14) imposed on or paid by such Lender or the Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Agent (as the case may
be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower or the Guarantor, as the case may be, shall furnish to the Agent, at
its address referred to in Section 9.02, the original or a certified copy of a
receipt evidencing such payment. In the case of any payment hereunder or under
the Notes by or on behalf of the Borrower through an account or branch outside
the United States or by or on behalf of the Borrower or the Guarantor, as the
case may be, by a payor that is not a United States person, if the Borrower or
the Guarantor, as the case may be, determines that no Taxes are payable in
respect thereof, the Borrower or the Guarantor shall furnish, or shall cause
such payor to furnish, to the Agent, at such address, an opinion of counsel
acceptable to the Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "United States"
and "United States person" shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender and on the date of the
Assumption Agreement or the Assignment and Acceptance pursuant to which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter as requested in writing by the Borrower (but only so long as such
Lender remains lawfully able to do so), shall provide each of the Agent and the
Borrower with two original Internal Revenue Service forms W-8BEN or W-8ECI, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement or
the Notes. If the form provided by a Lender at the time such Lender first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Lender provides the appropriate forms
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; provided, however, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender assignee becomes a party to this Agreement, the
Lender assignor was entitled to payments under subsection (a) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Lender assignee on such date. If any form or document referred to in this
subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof
by Internal Revenue Service form W-8BEN or W-8ECI, that the Lender reasonably
considers to be confidential, the Lender shall give notice thereof to the
Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender has failed
to provide the Borrower with the appropriate form described in Section 2.14(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under subsection (e) above), such Lender shall not be
entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes
imposed by the United States by reason of such failure; provided, however, that
should a Lender become subject
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22
to Taxes because of its failure to deliver a form required hereunder, the
Borrower shall take such steps as the Lender shall reasonably request to assist
the Lender to recover such Taxes.
(g) Any Lender claiming any additional amounts payable
pursuant to this Section 2.14 agrees to use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Revolving Credit Advances
owing to it (other than pursuant to Section 2.11, 2.14 or 9.04(c)) in excess of
its ratable share of payments on account of the Revolving Credit Advances
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Revolving Credit Advances owing to them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Revolving Credit
Advance owing to such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder in respect of Revolving Credit Advances. The Borrower agrees that upon
notice by any Lender to the Borrower (with a copy of such notice to the Agent)
to the effect that a Revolving Credit Note is required or appropriate in order
for such Lender to evidence (whether for purposes of pledge, enforcement or
otherwise) the Revolving Credit Advances owing to, or to be made by, such
Lender, the Borrower shall promptly execute and deliver to such Lender a
Revolving Credit Note payable to the order of such Lender in a principal amount
up to the Commitment of such Lender.
(b) The Register maintained by the Agent pursuant to Section
9.07(d) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances comprising such
Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assumption Agreement and each Assignment and Acceptance delivered
to and accepted by it, (iii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iv) the amount of any sum received by the Agent from the Borrower hereunder
and each Lender's share thereof.
(c) Entries made in good faith by the Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of the
Borrower under this Agreement.
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SECTION 2.17. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds) for
general corporate purposes of the Borrower and its Subsidiaries, including
commercial paper backstop.
SECTION 2.18. Increase in the Aggregate Commitments. (a) The
Borrower may, at any time but in any event not more than once in any calendar
year prior to the Termination Date, by notice to the Agent, request that the
aggregate amount of the Commitment be increased by a minimum amount of
$25,000,000 (each a "Commitment Increase") to be effective as of a date that is
at least 90 days prior to the scheduled Termination Date then in effect (the
"Increase Date") as specified in the related notice to the Agent; provided,
however that (i) in no event shall the aggregate amount of the Commitments at
any time exceed $150,000,000 and (ii) on the date of any request by the Borrower
for a Commitment Increase and on the related Increase Date, the Borrower's Debt
Ratings are at least BBB+ from S&P or Baa3 from Moody's, or if no Debt Rating is
available from S&P or Moody's, the Guarantor's Net Worth is not less than
$1,000,000,000 and Debt/Total Capital Ratio is not more than 0.45:1.00, and the
applicable conditions set forth in Article III shall be satisfied.
(b) The Agent shall promptly notify the Lenders of a request
by the Borrower for a Commitment Increase, which notice shall include (i) the
proposed amount of such requested Commitment Increase, (ii) the proposed
Increase Date and (iii) the date by which Lenders wishing to participate in the
Commitment Increase must commit to an increase in the amount of their respective
Commitments (the "Commitment Date"). Each Lender that is willing to participate
in such requested Commitment Increase (each an "Increasing Lender") shall, in
its sole discretion, give written notice to the Agent on or prior to the
Commitment Date of the amount by which it is willing to increase its Commitment.
If the Lenders notify the Agent that they are willing to increase the amount of
their respective Commitments by an aggregate amount that exceeds the amount of
the requested Commitment Increase, the requested Commitment Increase shall be
allocated among the Lenders willing to participate therein in such amounts as
are agreed between the Borrower and the Agent.
(c) Promptly following each Commitment Date, the Agent shall
notify the Borrower as to the amount, if any, by which the Lenders are willing
to participate in the requested Commitment Increase. If the aggregate amount by
which the Lenders are willing to participate in any requested Commitment
Increase on any such Commitment Date is less than the requested Commitment
Increase, then the Borrower may extend offers to one or more Eligible Assignees
to participate in any portion of the requested Commitment Increase that has not
been committed to by the Lenders as of the applicable Commitment Date; provided,
however, that the Commitment of each such Eligible Assignee shall be in a
minimum amount of $5,000,000.
(d) On each Increase Date, each Eligible Assignee that accepts
an offer to participate in a requested Commitment Increase in accordance with
Section 2.18(c) (each such Eligible Assignee and each Eligible Assignee that
agrees to an extension of the Termination Date in accordance with Section
2.19(c), an "Assuming Lender") shall become a Lender party to this Agreement as
of such Increase Date and the Commitment of each Increasing Lender for such
requested Commitment Increase shall be so increased by such amount (or by the
amount allocated to such Lender pursuant to the last sentence of Section
2.18(b)) as of such Increase Date; provided, however, that the Agent shall have
received on or before such Increase Date the following, each dated such date:
(i) (A) certified copies of resolutions of the Board of
Directors of the Borrower or the Executive Committee of such Board
approving the Commitment Increase and the corresponding modifications
to this Agreement, (B) an opinion of counsel for the Borrower (which
may be in-house counsel), in substantially the form of Exhibit D
hereto and (C) a consent of the Guarantor approving the Commitment
Increase and the corresponding modifications to this Agreement;
<PAGE>
24
(ii) an assumption agreement from each Assuming Lender, if
any, in form and substance satisfactory to the Borrower and the Agent
(each an "Assumption Agreement"), duly executed by such Eligible
Assignee, the Agent and the Borrower;
(iii) confirmation from each Increasing Lender of the increase
in the amount of its Commitment in a writing satisfactory to the
Borrower and the Agent; and
(iv) if any Revolving Credit Advances are then outstanding, a
Notice of Revolving Credit Borrowing for Advances to be made by only
the Increasing Lenders and the Assuming Lenders under this Section 2.18
in an aggregate amount equal to the amount which, after giving effect
to such Advances, will result in the aggregate Revolving Credit
Advances made by all Lenders to be ratable in proportion to their
respective Commitments after giving effect to such Commitment Increase,
and of a Type and for an Interest Period which will, to the extent
practicable, result in each Lender having funded Advances of the same
Type and for co-terminus Interest Periods.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.18(d), the Agent shall notify
the Lenders (including, without limitation, each Assuming Lender) and the
Borrower, on or before 1:00 P.M. (New York City time), by telecopier or telex,
of the occurrence of the Commitment Increase to be effected on such Increase
Date and shall record in the Register the relevant information with respect to
each Increasing Lender and each Assuming Lender on such date.
SECTION 2.19. Extension of Termination Date. (a) At least 45
days but not more than 60 days prior to the Termination Date, the Borrower, by
written notice to the Agent, may request an extension of the Termination Date in
effect at such time by one year from its then scheduled expiration. The Agent
shall promptly notify each Lender of such request, and each Lender shall in
turn, in its sole discretion, not later than 20 days prior to the Termination
Date, notify the Borrower and the Agent in writing as to whether such Lender
will consent to such extension. If any Lender shall fail to notify the Agent and
the Borrower in writing of its consent to any such request for extension of the
Termination Date at least 20 days prior to the Termination Date, such Lender
shall be deemed to be a Non-Consenting Lender with respect to such request. The
Agent shall notify the Borrower not later than 15 days prior to the Termination
Date of the decision of the Lenders regarding the Borrower's request for an
extension of the Termination Date.
(b) If all the Lenders consent in writing to any such request
in accordance with subsection (a) of this Section 2.19, the Termination Date in
effect at such time shall, effective as at the Termination Date (the "Extension
Date"), be extended for one year; provided that on each Extension Date the
applicable conditions set forth in Article III shall be satisfied. If less than
all of the Lenders consent in writing to any such request in accordance with
subsection (a) of this Section 2.19, the Termination Date in effect at such time
shall, effective as at the applicable Extension Date and subject to subsection
(d) of this Section 2.19, be extended as to those Lenders that so consented
(each a "Consenting Lender") but shall not be extended as to any other Lender
(each a "Non-Consenting Lender"). To the extent that the Termination Date is not
extended as to any Lender pursuant to this Section 2.19 and the Commitment of
such Lender is not assumed in accordance with subsection (c) of this Section
2.19 on or prior to the applicable Extension Date, the Commitment of such
Non-Consenting Lender shall automatically terminate in whole on such unextended
Termination Date without any further notice or other action by the Borrower,
such Lender or any other Person; provided that such Non-Consenting Lender's
rights under Sections 2.11, 2.14 and 9.04, and its obligations under Section
8.05, shall survive the Termination Date for such Lender as to matters occurring
prior to such date. It is understood and agreed that no Lender shall have any
obligation whatsoever to agree to any request made by the Borrower for any
requested extension of the Termination Date.
(c) If less than all of the Lenders consent to any such
request pursuant to subsection (a) of this Section 2.19, the Agent shall
promptly so notify the Consenting Lenders, and each Consenting Lender may, in
its sole
<PAGE>
25
discretion, give written notice to the Agent not later than 10 days prior to the
Termination Date of the amount of the Non-Consenting Lenders' Commitments for
which it is willing to accept an assignment. If the Consenting Lenders notify
the Agent that they are willing to accept assignments of Commitments in an
aggregate amount that exceeds the amount of the Commitments of the
Non-Consenting Lenders, such Commitments shall be allocated among the Consenting
Lenders willing to accept such assignments in such amounts as are agreed between
the Borrower and the Agent. If after giving effect to the assignments of
Commitments described above there remains any Commitments of Non-Consenting
Lenders, the Borrower may arrange for one or more Consenting Lenders or other
Eligible Assignees as Assuming Lenders to assume, effective as of the Extension
Date, any Non-Consenting Lender's Commitment and all of the obligations of such
Non-Consenting Lender under this Agreement thereafter arising, without recourse
to or warranty by, or expense to, such Non-Consenting Lender; provided, however,
that the amount of the Commitment of any such Assuming Lender as a result of
such substitution shall in no event be less than $5,000,000 unless the amount of
the Commitment of such Non-Consenting Lender is less than $5,000,000, in which
case such Assuming Lender shall assume all of such lesser amount; and provided
further that:
(i) any such Consenting Lender or Assuming Lender shall have
paid to such Non-Consenting Lender (A) the aggregate principal amount
of, and any interest accrued and unpaid to the effective date of the
assignment on, the outstanding Advances, if any, of such Non-Consenting
Lender plus (B) any accrued but unpaid facility fees owing to such
Non-Consenting Lender as of the effective date of such assignment;
(ii) all additional costs reimbursements, expense
reimbursements and indemnities payable to such Non-Consenting Lender,
and all other accrued and unpaid amounts owing to such Non-Consenting
Lender hereunder, as of the effective date of such assignment shall
have been paid to such Non-Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable
processing and recordation fee required under Section 9.07(a) for such
assignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
2.14 and 9.04, and its obligations under Section 8.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At least
three Business Days prior to any Extension Date, (A) each such Assuming Lender,
if any, shall have delivered to the Borrower and the Agent an Assumption
Agreement, duly executed by such Assuming Lender, such Non-Consenting Lender,
the Borrower and the Agent, (B) any such Consenting Lender shall have delivered
confirmation in writing satisfactory to the Borrower and the Agent as to the
increase in the amount of its Commitment and (C) each Non-Consenting Lender
being replaced pursuant to this Section 2.19 shall have delivered to the Agent
any Note or Notes held by such Non-Consenting Lender. Upon the payment or
prepayment of all amounts referred to in clauses (i), (ii) and (iii) of the
immediately preceding sentence, each such Consenting Lender or Assuming Lender,
as of the Extension Date, will be substituted for such Non-Consenting Lender
under this Agreement and shall be a Lender for all purposes of this Agreement,
without any further acknowledgment by or the consent of the other Lenders, and
the obligations of each such Non-Consenting Lender hereunder shall, by the
provisions hereof, be released and discharged.
(d) If (after giving effect to any assignments or assumptions
pursuant to subsection (c) of this Section 2.19) Lenders having Commitments
equal to more than 50% of the Commitments in effect immediately prior to the
Extension Date consent in writing to a requested extension (whether by execution
or delivery of an Assumption Agreement or otherwise) not later than one Business
Day prior to such Extension Date, the Agent shall so notify the Borrower, and,
subject to the satisfaction of the applicable conditions in Article III, the
Termination Date then in effect shall be extended for the additional one-year
period as described in subsection (a) of this Section 2.19, and all references
in this Agreement, and in the Notes, if any, to the "Termination Date" shall,
with respect to each Consenting Lender and each Assuming Lender for such
Extension Date, refer to the Termination Date as so extended. Promptly following
each Extension Date, the Agent shall notify the Lenders (including, without
limitation, each Assuming Lender) of the
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26
extension of the scheduled Termination Date in effect immediately prior thereto
and shall thereupon record in the Register the relevant information with respect
to each such Consenting Lender and each such Assuming Lender.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become
effective on and as of the first date (the "Effective Date") on which the
following conditions precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change since
June 30, 1999.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting the Guarantor or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect other than the matters described on Schedule
3.01(b) hereto (the "Disclosed Litigation") or (ii) purports to affect
the legality, validity or enforceability of this Agreement or any Note
or the consummation of the transactions contemplated hereby.
(c) All governmental and third party consents and approvals
necessary in connection with the transactions contemplated hereby shall
have been obtained (without the imposition of any conditions that are
not acceptable to the Lenders) and shall remain in effect.
(d) The Borrower shall have notified each Lender and the Agent
in writing as to the proposed Effective Date.
(e) The Borrower shall have paid all accrued fees and expenses
of the Agent and the Lenders (including the accrued fees and expenses
of counsel to the Agent).
(f) On the Effective Date, the following statements shall be
true and the Agent shall have received for the account of each Lender a
certificate signed by a duly authorized officer of the Borrower, dated
the Effective Date, stating that:
(i) The representations and warranties contained in
Section 4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(g) The Agent shall have received on or before the Effective
Date the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Revolving Credit Notes)
in sufficient copies for each Lender:
(i) The Revolving Credit Notes to the order of the
Lenders to the extent requested by any Lender pursuant to
Section 2.16.
(ii) Certified copies of the resolutions of the Board
of Directors of the Borrower approving this Agreement and the
Notes, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to this Agreement and the Notes.
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27
(iii) Certified copies of the resolutions of the
Board of Directors of the Guarantor approving this Agreement,
and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to
this Agreement.
(iv) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign
this Agreement and the Notes and the other documents to be
delivered by it hereunder.
(v) A certificate of the Secretary or an Assistant
Secretary of the Guarantor certifying the names and true
signatures of the officers of the Guarantor authorized to sign
this Agreement and the other documents to be delivered by it
hereunder.
(vi) A favorable opinion of Thomas Livingston,
counsel for the Borrower and the Guarantor, substantially in
the form of Exhibit D hereto and as to such other matters as
any Lender through the Agent may reasonably request.
(vii) A favorable opinion of Shearman & Sterling,
counsel for the Agent, in form and substance satisfactory to
the Agent.
(h) The Borrower shall have terminated the commitments of the
lenders, and repaid or prepaid all outstanding obligations under, the
$100,000,000 Five-Year Credit Agreement dated as of June 1, 1994, as
amended, among the Borrower, the banks parties thereto and Morgan
Guaranty Trust Company of New York, as agent, and each of the Lenders
that is a party to such Five-Year Credit Agreement hereby waives the
requirement of Section 2.09(i) of such Five-Year Credit Agreement to
the extent that such provision requires three days notice to terminate
the commitments of the lenders under such Five-Year Credit Agreement.
SECTION 3.02. Conditions Precedent to Each Revolving Credit
Borrowing, Increase Date and Extension Date. The obligation of each Lender to
make a Revolving Credit Advance on the occasion of each Revolving Credit
Borrowing, each Commitment Increase and each extension of Commitments pursuant
to Section 2.19 shall be subject to the conditions precedent that the Effective
Date shall have occurred and on the date of such Revolving Credit Borrowing the
applicable Increase Date or the applicable Extension Date (a) the following
statements shall be true (and each of the giving of the applicable Notice of
Revolving Credit Borrowing, request for Commitment Increase, request for
Commitment Extension and the acceptance by the Borrower of the proceeds of such
Revolving Credit Borrowing shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing, such Increase Date or such
Extension Date such statements are true):
(i) the representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f)(i) thereof) are correct on
and as of such date, before and after giving effect to such Revolving
Credit Borrowing, such Increase Date or such Extension Date and to the
application of the proceeds therefrom, as though made on and as of such
date, and
(ii) no event has occurred and is continuing, or would result
from such Revolving Credit Borrowing, such Increase Date, such
Extension Date or from the application of the proceeds therefrom, that
constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
<PAGE>
28
SECTION 3.03. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender for each of the one or more Competitive Bid
Advances to be made by such Lender as part of such Competitive Bid Borrowing, in
a principal amount equal to the principal amount of the Competitive Bid Advance
to be evidenced thereby and otherwise on such terms as were agreed to for such
Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date
of such Competitive Bid Borrowing the following statements shall be true (and
each of the giving of the applicable Notice of Competitive Bid Borrowing and the
acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Competitive Bid Borrowing such statements are true):
(a) the representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f)(i) thereof) are correct on
and as of the date of such Competitive Bid Borrowing, before and after
giving effect to such Competitive Bid Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date, and
(b) no event has occurred and is continuing, or would result
from such Competitive Bid Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
SECTION 3.04. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document, condition or other matter required thereunder to
be consented to or approved by or acceptable or satisfactory to the Lenders
unless an officer of the Agent responsible for the transactions contemplated by
this Agreement shall have received notice from such Lender prior to the date
that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Agent shall promptly
notify the Lenders of the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower
and the Guarantor. The Borrower and the Guarantor each represents and warrants
as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of
this Agreement and the Notes to be delivered by it, and the
consummation of the transactions contemplated hereby, are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's charter or
by-laws or (ii) law or any contractual restriction binding on or
affecting the Borrower. The execution, delivery and performance by the
Guarantor of this Agreement, and the consummation of the transactions
contemplated hereby, are within the Guarantor's corporate powers, have
been duly authorized by
<PAGE>
29
all necessary corporate action, and do not contravene (i) the
Guarantor's charter or by-laws or (ii) law or any contractual
restriction binding on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery
and performance by the Borrower or the Guarantor of this Agreement or,
in the case of the Borrower, the Notes to be delivered by it.
(d) This Agreement has been, and each of the Notes to be
delivered by it when delivered hereunder will have been, duly executed
and delivered by the Borrower and this Agreement has been duly executed
and delivered by the Guarantor. This Agreement is, and each of the
Notes when delivered hereunder will be, the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with their respective terms and this Agreement is the legal,
valid and binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms; except, in each case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principals
(whether enforcement is sought by proceedings in equity or at law).
(e) The Consolidated balance sheet of the Guarantor and its
Subsidiaries as at June 30, 1999, and the related Consolidated
statements of income and cash flows of the Guarantor and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion
of PricewaterhouseCoopers LLP, independent public accountants, and the
Consolidated balance sheet of the Guarantor and its Subsidiaries as at
December 31, 1999, and the related Consolidated statements of income
and cash flows of the Guarantor and its Subsidiaries for the six months
then ended, duly certified by the chief financial officer or chief
accounting officer of the Guarantor, copies of which have been
furnished to each Lender, fairly present, subject, in the case of said
balance sheet as at December 31, 1999, and said statements of income
and cash flows for the six months then ended, to year-end audit
adjustments, the Consolidated financial condition of the Guarantor and
its Subsidiaries as at such dates and the Consolidated results of the
operations of the Guarantor and its Subsidiaries for the periods ended
on such dates, all in accordance with generally accepted accounting
principles consistently applied. Since June 30, 1999, there has been no
Material Adverse Change.
(f) There is no pending or threatened action, suit,
investigation, litigation or proceeding, including, without limitation,
any Environmental Action, affecting the Guarantor or any of its
Subsidiaries before any court, governmental agency or arbitrator that
(i) could be reasonably likely to have a Material Adverse Effect (other
than the Disclosed Litigation) or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any Note.
(g) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (the Guarantor and its
Subsidiaries on a Consolidated basis) subject to the provisions of
Section 5.02(a) or subject to any restriction contained in any
agreement or instrument between the Guarantor and any Lender or any
Affiliate of any Lender relating to Debt and within the scope of
Section 6.01(d) will be margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System).
(h) Neither the Borrower nor the Guarantor is an "investment
company", or a company "controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940, as amended.
<PAGE>
30
ARTICLE V
COVENANTS OF THE GUARANTOR
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Guarantor will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and Environmental Laws.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Guarantor nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Guarantor or such Subsidiary operates; provided, however, that the
Guarantor and its Subsidiaries may self-insure to the same extent as
other companies engaged in similar businesses and owning similar
properties in the same general areas in which the Guarantor or such
Subsidiary operates and to the extent consistent with prudent business
practice.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises;
provided, however, that the Guarantor and its Subsidiaries may
consummate any merger or consolidation permitted under Section 5.02(b)
and provided further that neither the Guarantor nor any of its
Subsidiaries shall be required to preserve any right or franchise if
the Board of Directors of the Guarantor or such Subsidiary shall
determine that the preservation thereof is no longer desirable in the
conduct of the business of the Guarantor or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Guarantor and its Subsidiaries taken as a
whole.
(e) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Guarantor and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Guarantor and any of its Subsidiaries with
any of their officers or directors and with their independent certified
public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Guarantor and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
<PAGE>
31
(h) Reporting Requirements. Furnish to the Lenders (which, to
the extent any of the following are publically filed with the
Securities and Exchange Commission in electronic format (EDGAR), shall
be deemed so furnished upon such filing):
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
fiscal year of the Guarantor, the Consolidated balance sheet
of the Guarantor and its Subsidiaries as of the end of such
quarter and Consolidated statements of income and cash flows
of the Guarantor and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to
year-end audit adjustments) by the chief financial officer of
the Guarantor as having been prepared in accordance with
generally accepted accounting principles and certificates of
the chief financial officer or chief accounting officer of the
Guarantor as to compliance with the terms of this Agreement
and setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 5.03,
provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Guarantor shall
also provide, if necessary for the determination of compliance
with Section 5.03, a statement of reconciliation conforming
such financial statements to GAAP;
(ii) as soon as available and in any event within 100
days after the end of each fiscal year of the Guarantor, a
copy of the annual report for such year for the Guarantor and
its Subsidiaries, containing the audited Consolidated balance
sheet of the Guarantor and its Subsidiaries as of the end of
such fiscal year and audited Consolidated statements of income
and cash flows of the Guarantor and its Subsidiaries for such
fiscal year, in each case accompanied by a report of
PricewaterhouseCoopers LLP or other independent public
accountants of nationally recognized standing, provided that
in the event of any change in GAAP used in the preparation of
such financial statements, the Guarantor shall also provide,
if necessary for the determination of compliance with Section
5.03, a statement of reconciliation conforming such financial
statements to GAAP;
(iii) as soon as possible and in any event within
five Business Days after the occurrence of each Default
continuing on the date of such statement, a statement of the
chief financial officer or chief accounting officer of the
Borrower or the Guarantor setting forth details of such
Default and the action that the Borrower or the Guarantor has
taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports that the Guarantor sends to any of its
public securityholders, and copies of all reports that the
Guarantor or any Subsidiary files with the Securities and
Exchange Commission;
(v) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Guarantor or any of its
Subsidiaries of the type described in Section 4.01(f)(ii);
(vi) so long as no Public Debt Rating is then in
effect, within five Business Days after receipt thereof by the
Guarantor, copies of each notice from S&P (or Moody's, if S&P
has ceased to provide the Implied Debt Rating) indicating any
change in the Implied Debt Rating; and
(vii) such other information respecting the Guarantor
or any of its Subsidiaries as any Lender through the Agent may
from time to time reasonably request.
SECTION 5.02. Negative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Guarantor will not:
<PAGE>
32
(a) Liens, Etc. Create or suffer to exist, or permit any of
its Subsidiaries to create or suffer to exist, any Lien on or with
respect to any of its properties, whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, other than:
(i) Permitted Liens,
(ii) purchase money Liens upon or in any fixed or
capital assets acquired or held by the Guarantor or any
Subsidiary in the ordinary course of business to secure the
purchase price of such assets or to secure Debt incurred for
the purpose of financing the acquisition of such assets, or
Liens existing on such assets at the time of its acquisition
(other than any such Liens created in contemplation of such
acquisition that were not incurred to finance the acquisition
of such assets) or extensions, renewals or replacements of any
of the foregoing for the same or a lesser amount, provided,
however, that no such Lien shall extend to or cover any assets
of any character other than the assets being acquired, and no
such extension, renewal or replacement shall extend to or
cover any properties not theretofore subject to the Lien being
extended, renewed or replaced, provided further that the
aggregate principal amount of the indebtedness secured by the
Liens referred to in this clause (ii) shall not exceed
$50,000,000 at any time outstanding,
(iii) the Liens existing on the Effective Date and
described on Schedule 5.02(a) hereto,
(iv) other Liens securing Debt in an aggregate
principal amount not to exceed at any time outstanding an
amount equal to 5% of the Consolidated assets of the Guarantor
and its Subsidiaries at the time of incurrence, and
(v) the replacement, extension or renewal of any Lien
permitted by clause (iii) or (iv) above upon or in the same
property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount or change
in any direct or contingent obligor) of the Debt secured
thereby.
(b) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to, any Person, or
permit any of its Subsidiaries to do so, except that any Subsidiary of
the Guarantor may merge or consolidate with or into, or dispose of
assets to, any other Subsidiary of the Guarantor, and except that any
Subsidiary of the Guarantor may merge into or dispose of assets to the
Guarantor and the Guarantor may merge with any other Person so long as
the Guarantor is the surviving corporation, provided, in each case,
that no Default shall have occurred and be continuing at the time of
such proposed transaction or would result therefrom.
SECTION 5.03. Financial Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Guarantor will:
(a) Net Worth. Maintain Net Worth of not less than
$900,000,000.
(b) Debt/Total Capital Ratio. Maintain a Debt/Total Capital
Ratio of not more than 0.50:1.00.
<PAGE>
33
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; or the Borrower shall
fail to pay any interest on any Advance or make any other payment of
fees or other amounts payable under this Agreement or any Note within
five Business Days after the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower or the
Guarantor herein or by the Borrower or the Guarantor (or any of their
respective officers) in connection with this Agreement shall prove to
have been incorrect in any material respect when made; or
(c) (i) The Guarantor shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(d), 5.01(h)(iii),
5.01(h)(v), 5.01(h)(vi), 5.02 or 5.03, or (ii) the Guarantor shall fail
to perform or observe any other term, covenant or agreement contained
in this Agreement on its part to be performed or observed if such
failure shall remain unremedied for 30 days after written notice
thereof shall have been given to the Guarantor by the Agent or any
Lender; or
(d) The Guarantor or any of its Subsidiaries shall fail to pay
any principal of or premium or interest on any Debt that is outstanding
in a principal or notional amount of at least $50,000,000 in the
aggregate (but excluding Debt outstanding hereunder) of the Guarantor
or such Subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(e) The Guarantor or any of its Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Guarantor or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 60
days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or
the Guarantor or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this
subsection (e); or
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34
(f) Judgments or orders for the payment of money in excess of
$50,000,000 in the aggregate shall be rendered against the Guarantor or
any of its Subsidiaries and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; provided, however, that any such
judgment or order shall not be an Event of Default under this Section
6.01(f) if and for so long as (i) the amount of such judgment or order
is covered by a valid and binding policy of insurance between the
defendant and the insurer covering payment thereof and (ii) such
insurer, which shall be rated at least "A-" by A.M. Best Company, has
been notified of, and has not disputed the claim made for payment of,
the amount of such judgment or order; or
(g) (i) Any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934), directly or indirectly, of Voting Stock of the
Guarantor (or other securities convertible into such Voting Stock)
representing 20% or more of the combined voting power of all Voting
Stock of the Guarantor; or (ii) the board of directors of the Guarantor
shall for any reason cease to consist of a majority of the directors of
the Guarantor on the Effective Date and each other director whose
nomination for election to the board of directors of the Guarantor is
recommended by at least a majority of the directors of the board of
directors of the Guarantor on the Effective Date and directors so
recommended; or (iii) any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise, or shall have
entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of the power to exercise, directly
or indirectly, a controlling influence over the management or policies
of the Guarantor; or
(h) The Guarantor or any of its ERISA Affiliates shall incur,
or shall be reasonably likely to incur liability in excess of
$50,000,000 in the aggregate as a result of one or more of the
following: (i) the occurrence of any ERISA Event; (ii) the partial or
complete withdrawal of the Borrower, the Guarantor or any of its ERISA
Affiliates from a Multiemployer Plan; or (iii) the reorganization or
termination of a Multiemployer Plan; or
(i) any provision of Article VII shall for any reason cease to
be valid and binding on or enforceable against the Guarantor, or the
Guarantor shall so state in writing;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
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35
ARTICLE VII
GUARANTY
SECTION 7.01. Guaranty. The Guarantor hereby absolutely,
unconditionally and irrevocably guarantees the punctual payment when due,
whether at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise, of all obligations of the Borrower now or
hereafter existing under or in respect of this Agreement and the Notes
(including, without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing obligations), whether
direct or indirect, absolute or contingent, and whether for principal, interest,
premiums, fees, indemnities, contract causes of action, costs, expenses or
otherwise (such obligations being the "Guaranteed Obligations"), and agrees to
pay any and all expenses (including, without limitation, reasonable fees and
expenses of counsel) incurred by the Agent or any other Lender in enforcing any
rights under this Article VII. Without limiting the generality of the foregoing,
the Guarantor's liability shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by the Borrower to the Agent or any
Lender under or in respect of this Agreement or the Notes but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.
SECTION 7.02. Guaranty Absolute. The Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement and the Notes, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Lender with respect thereto. The obligations of the Guarantor
under or in respect of this Article VII are independent of the Guaranteed
Obligations or any other obligations of any the Borrower under or in respect of
this Agreement and the Notes, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Article VII, irrespective
of whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. The liability of the Guarantor under this
Article VII shall be irrevocable, absolute and unconditional irrespective of,
and the Guarantor hereby irrevocably waives any defenses it may now have or
hereafter acquire in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of this Agreement
(other than this Article VII), the Notes or any agreement or instrument
relating thereto;
(b) subject to Section 9.01, any change in the time, manner or
place of payment of, or in any other term of, all or any of the
Guaranteed Obligations or any other obligations of the Borrower under
or in respect of this Agreement or the Notes, or any other amendment or
waiver of or any consent to departure from this Agreement or the Notes,
including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to the
Borrower or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of, or
consent to departure from, any other guaranty, for all or any of the
Guaranteed Obligations;
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Guaranteed Obligations or any other obligations of the Borrower under
this Agreement or the Notes or any other assets of the Borrower or any
of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries;
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36
(f) any failure of any Lender or the Agent to disclose to the
Guarantor any information relating to the business, condition
(financial or otherwise), operations, performance, properties or
prospects of the Borrower now or hereafter known to such Lender or the
Agent (the Guarantor waiving any duty on the part of the Lenders and
the Agent to disclose such information); or
(g) any other circumstance or any existence of or reliance on
any representation by any Lender or the Agent that might otherwise
constitute a defense available to, or a discharge of, the Borrower or
any other guarantor or surety.
This Article VII shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Lender or the Agent or any other
Person upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made.
SECTION 7.03. Waivers and Acknowledgments. (a) The Guarantor
hereby unconditionally and irrevocably waives promptness, diligence, notice of
acceptance, presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice with respect to
any of the Guaranteed Obligations and this Article VII and any requirement that
any Lender or the Agent protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against the
Borrower or any other Person or any collateral.
(b) The Guarantor hereby unconditionally and irrevocably
waives any right to revoke this Article VII and acknowledges that the guaranty
under this Article VII is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future.
(c) The Guarantor hereby unconditionally and irrevocably
waives (i) any defense arising by reason of any claim or defense based upon an
election of remedies by any Lender or the Agent that in any manner impairs,
reduces, releases or otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of the Guarantor or other
rights of the Guarantor to proceed against the Borrower, any other guarantor or
any other Person or any collateral and (ii) any defense based on any right of
set-off or counterclaim against or in respect of the obligations of the
Guarantor hereunder.
(d) The Guarantor hereby unconditionally and irrevocably
waives any duty on the part of any Lender or the Agent to disclose to the
Guarantor any matter, fact or thing relating to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
the Borrower or any of its Subsidiaries now or hereafter known by such Lender or
the Agent.
(e) The Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by this Agreement and the Notes and that the waivers set forth in
Section 7.02 and this Section 7.03 are knowingly made in contemplation of such
benefits.
SECTION 7.04. Subrogation. The Guarantor hereby
unconditionally and irrevocably agrees not to exercise any rights that it may
now have or hereafter acquire against the Borrower or any other insider
guarantor that arise from the existence, payment, performance or enforcement of
the Guarantor's Obligations under or in respect of this Article VII, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of any Lender or the Agent against the Borrower or any other insider
guarantor or any collateral, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Borrower or any other insider
guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner,
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37
payment or security on account of such claim, remedy or right, unless and until
all of the Guaranteed Obligations and all other amounts payable under this
Article VII shall have been paid in full in cash and the Commitments shall have
expired or been terminated. If any amount shall be paid to the Guarantor in
violation of the immediately preceding sentence at any time prior to the later
of (a) the payment in full in cash of the Guaranteed Obligations and all other
amounts payable under this Article VII and (b) the Termination Date, such amount
shall be received and held in trust for the benefit of the Lenders and the
Agent, shall be segregated from other property and funds of the Guarantor and
shall forthwith be paid or delivered to the Agent in the same form as so
received (with any necessary endorsement or assignment) to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
Article VII, whether matured or unmatured, in accordance with the terms of this
Agreement, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this Article VII thereafter arising. If (i) the Guarantor
shall make payment to any Lender or the Agent of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Article VII shall have been paid in full in cash and
(iii) the Termination Date shall have occurred, the Lenders and the Agent will,
at the Guarantor's request and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Guaranteed Obligations resulting from such payment made by the
Guarantor pursuant to this Article VII.
SECTION 7.05. Continuing Guaranty; Assignments. The guaranty
under this Article VII is a continuing guaranty and shall (a) remain in full
force and effect until the later of (i) the payment in full of the Guaranteed
Obligations and all other amounts payable under this Article VII and (ii) the
Termination Date, (b) be binding upon the Guarantor, its successors and assigns
and (c) inure to the benefit of and be enforceable by the Lenders and the Agent
and their successors, transferees and assigns. Without limiting the generality
of clause (c) of the immediately preceding sentence, any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under this
Agreement (including, without limitation, all or any portion of its Commitments,
the Advances owing to it and the Note or Notes held by it) to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, in each case as and
to the extent provided in Section 9.07. The Guarantor shall not have the right
to assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower or the
Guarantor pursuant to the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the Lender that made any Advance as the holder of the Debt resulting therefrom
until the Agent receives and accepts an Assumption Agreement entered into by an
Assuming Lender as
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38
provided in Section 2.18 or 2.19, as the case may be, or an Assignment and
Acceptance entered into by such Lender, as assignor, and an Eligible Assignee,
as assignee, as provided in Section 9.07; (ii) may consult with legal counsel
(including counsel for the Borrower or the Guarantor), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or the Guarantor or to
inspect the property (including the books and records) of the Borrower or the
Guarantor; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of this Agreement by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telecopier, telegram or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 8.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the
Guarantor, any of its Subsidiaries and any Person who may do business with or
own securities of the Guarantor or any such Subsidiary, all as if Citibank were
not the Agent and without any duty to account therefor to the Lenders.
SECTION 8.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 8.05. Indemnification. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Revolving Credit Advances then owed to
each of them (or if no Revolving Credit Advances are at the time outstanding,
ratably according to the respective amounts of their Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement (collectively, the
"Indemnified Costs"), provided that no Lender shall be liable for any portion of
the Indemnified Costs resulting from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
the Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable counsel fees) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, to the extent that the Agent is not reimbursed for such expenses
by the Borrower. In the case of any investigation, litigation or proceeding
giving rise to any Indemnified Costs, this Section 8.05 applies whether any such
investigation, litigation or proceeding is brought by the Agent, any Lender or a
third party.
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39
SECTION 8.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 8.07. Other Agents. Each Lender hereby acknowledges
that neither the documentation agent nor any other Lender designated as an
"Agent" on the signature pages hereof has any liability hereunder other than in
its capacity as a Lender.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by the Borrower or the Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Borrower, the
Guarantor and the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by each Lender directly affected thereby, do any of the
following: (a) waive any of the conditions specified in Section 3.01, (b)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Revolving Credit
Advances or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Revolving Credit
Advances or any fees or other amounts payable hereunder, (e) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Revolving Credit Advances, or the number of Lenders, that shall be required for
the Lenders or any of them to take any action hereunder, (f) reduce or limit the
obligations of the Guarantor under Section 7.01 or release the Guarantor or
otherwise limit the Guarantor's liability with respect to its obligations under
Article VII, (g) change the manner of application of any payments made under
this Agreement or the Notes or (h) amend this Section 9.01; and provided further
that no amendment, waiver or consent shall, unless in writing and signed by the
Agent in addition to the Lenders required above to take such action, affect the
rights or duties of the Agent under this Agreement or any Note.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed
or delivered, if to the Borrower or the Guarantor, at its address at 761 Main
Avenue, Norwalk, Connecticut 06859, Attention: Treasurer; if to any Initial
Lender, at its Domestic Lending Office specified opposite its name on Schedule I
hereto; if to any other Lender, at its Domestic Lending Office specified in the
Assumption Agreement or the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Agent, at its address at Two Penns Way, New
Castle, Delaware 19720, Attention: Bank Loan Syndications Department; or, as to
the Borrower, the Guarantor or the Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to
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40
the Borrower and the Agent. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when deposited in the
mails, telecopied, delivered to the telegraph company or confirmed by telex
answerback, respectively, except that notices and communications to the Agent
pursuant to Article II, III or VIII shall not be effective until received by the
Agent. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Notes or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Borrower agrees to
pay on demand all costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication (including
printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant, and audit expenses and (B) the reasonable
fees and expenses of counsel for the Agent with respect thereto and with respect
to advising the Agent as to its rights and responsibilities under this
Agreement. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without limitation, reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the Notes and
the other documents to be delivered hereunder, including, without limitation,
reasonable fees and expenses of counsel for the Agent and each Lender in
connection with the enforcement of rights under this Section 9.04(a).
(b) The Borrower agrees to indemnify and hold harmless the
Agent and each Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (i) the Notes, this Agreement,
any of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances or (ii) the actual or alleged presence of Hazardous
Materials on any property of the Borrower or any of its Subsidiaries or any
Environmental Action relating in any way to the Borrower or any of its
Subsidiaries, except to the extent such claim, damage, loss, liability or
expense results from such Indemnified Party's gross negligence or willful
misconduct. In the case of an investigation, litigation or other proceeding to
which the indemnity in this Section 9.04(b) applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by the Borrower, its directors, shareholders or creditors or an Indemnified
Party or any other Person or any Indemnified Party is otherwise a party thereto
and whether or not the transactions contemplated hereby are consummated. The
Borrower also agrees not to assert any claim for special, indirect,
consequential or punitive damages against the Agent, any Lender, any of their
Affiliates, or any of their respective directors, officers, employees, attorneys
and agents, on any theory of liability, arising out of or otherwise relating to
the Notes, this Agreement, any of the transactions contemplated herein or the
actual or proposed use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance, LIBO Rate Advance is made by the Borrower to or for the
account of a Lender other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.08(d) or
(e), 2.09, 2.10 or 2.12, acceleration of the maturity of the Notes pursuant to
Section 6.01 or for any other reason or by an Eligible Assignee to a Lender
other than on the last day of the Interest Period for such Advance upon an
assignment of rights and obligations under this Agreement pursuant to Section
9.07 as a result of a demand by the Borrower pursuant to
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Section 9.07(a), the Borrower shall, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment or Conversion,
including, without limitation, any loss (excluding loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower and,
in the case of Section 2.14, the Guarantor, contained in Sections 2.11, 2.14 and
9.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the Notes.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Notes due and payable pursuant to the provisions of
Section 6.01, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of the Borrower or
the Guarantor against any and all of the obligations of the Borrower or the
Guarantor now or hereafter existing under this Agreement and the Note held by
such Lender, whether or not such Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrower or the Guarantor, as the case may
be, after any such set-off and application, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender and its Affiliates under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its Affiliates may have.
SECTION 9.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower, the Guarantor and the Agent and when
the Agent shall have been notified by each Initial Lender that such Initial
Lender has executed it and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Guarantor, the Agent and each Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
SECTION 9.07. Assignments and Participations. (a) Each Lender
may, with the consent of the Agent and the Borrower (which consent shall not be
unreasonably withheld or delayed) and, if demanded by the Borrower (following a
demand by such Lender pursuant to Section 2.11 or 2.14, a notice by such Lender
under Section 2.12 or the failure of such Lender to perform its obligations
hereunder) so long as no Event of Default has occurred and is continuing, upon
at least five Business Days' notice to such Lender and the Agent, will assign to
one or more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Revolving Credit Advances owing to it and the Revolving Credit Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all rights and obligations under this
Agreement (other than any right to make Competitive Bid Advances, Competitive
Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of
an assignment to a Person that, immediately prior to such assignment, was a
Lender or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, and (iv) the parties to each
such assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any
Revolving Credit Note
<PAGE>
42
subject to such assignment and a processing and recordation fee of $3,500
payable by the parties to each such assignment, provided, however, that in the
case of an assignment made as a result of a demand by the Borrower, such
recordation fee shall be payable by the Borrower except that no such recordation
fee shall be payable in the case of an assignment made at the request of the
Borrower to an Eligible Assignee that is an existing Lender, and (vii) any
Lender may, without the approval of the Borrower or the Agent, assign all or a
portion of its rights to any of its Affiliates. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of a Lender hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Guarantor or the performance or observance by the Borrower or the
Guarantor of any of their obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Credit Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
(d) The Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assumption Agreement and each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Guarantor, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower, the Guarantor or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
<PAGE>
43
(e) Each Lender may sell participations to one or more banks
or other entities (other than the Guarantor or any of its Affiliates) in or to
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and any Note or Notes held by it); provided, however, that (i) such Lender's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower or the Guarantor therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, release any guaranty
given to support the obligations of the Borrower hereunder or amend this Section
9.07(e), or postpone any date fixed for any payment of principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower or the Guarantor furnished
to such Lender by or on behalf of the Borrower or the Guarantor; provided that,
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree to preserve the confidentiality of any Confidential
Information relating to the Borrower or the Guarantor received by it from such
Lender.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and any Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 9.08. Confidentiality. Neither the Agent nor any
Lender shall disclose any Confidential Information to any other Person without
the consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, agents and advisors and, as
contemplated by Section 9.07(f), to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process and (c) as requested or required by any
state, federal or foreign authority or examiner regulating banks or banking.
SECTION 9.09. Governing Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION 9.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the Notes, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other
<PAGE>
44
manner provided by law. Nothing in this Agreement shall affect any right that
any party may otherwise have to bring any action or proceeding relating to this
Agreement or the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
THE PERKIN-ELMER CORPORATION,
as Borrower
By /s/ John S. Ostaszewski
-----------------------------------------
Title:
By /s/ Vikram Jog
-----------------------------------------
Title:
PE CORPORATION,
as Guarantor
By /s/ John S. Ostaszewski
-----------------------------------------
Title:
By /s/ Vikram Jog
-----------------------------------------
Title:
CITIBANK, N.A.,
as Agent
By /s/ Robert D. Wetrus
-----------------------------------------
Title: Robert D. Wetrus
Citibank, N.A.
Vice President
Initial Lenders
---------------
Commitment
- ----------
$30,000,000 CITIBANK, N.A.
By /s/ Wolfgang Viragh
-----------------------------------------
Title: VP
<PAGE>
45
$20,000,000 BANK OF AMERICA, N.A.
By /s/ Philip S. Durand
-------------------------------------------
Title: Philip S. Durand
Principal
$25,000,000 THE CHASE MANHATTAN BANK
By /s/ A. Neil Sweeny
-------------------------------------------
Title: Vice President
$25,000,000 WACHOVIA BANK
By /s/ Jane C. Deaver
-------------------------------------------
Title: Jane C. Deaver
Senior Vice President
$100,000,000 Total of the Commitments
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
THE PERKIN-ELMER CORPORATION
FIVE YEAR CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
CITIBANK, N.A. Two Penns Way Two Penns Way
New Castle, DE 19720 New Castle, DE 19720
Attn: Brian Maxwell Attn: Brian Maxwell
T: 302 894-6023 T: 302 894-6023
F: 302 894-6120 F: 302 894-6120
- --------------------------------------------------------------------------------------------------------------------
BANK OF AMERICA, N.A. 101 N. Tryon Street 101 N. Tryon Street
NCI-001-15-03 NCI-001-15-03
Charlotte, NC 28255 Charlotte, NC 28255
Attn: M. Menz Attn: M. Menz
T: 704 388-1111 T: 704 388-1111
F: 704 409-0083 F: 704 409-0083
- --------------------------------------------------------------------------------------------------------------------
THE CHASE MANHATTAN BANK 999 Broad Street 999 Broad Street
Bridgeport, CT 06604 Bridgeport, CT 06604
Attn: Diana Lopez Attn: Diana Lopez
T: 203 382-5341 T: 203 382-5341
F: 203 382-5360 F: 203 382-5360
- --------------------------------------------------------------------------------------------------------------------
WACHOVIA BANK, N.A. 191 Peachtree Street 191 Peachtree Street
Atlanta, GA 30303 Atlanta, GA 30303
Attn: Trudy T. Collins Attn: Trudy T. Collins
T: 404 332-6688 T: 404 332-6688
F: 404 332-4320 F: 404 332-4320
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 200_
FOR VALUE RECEIVED, the undersigned, THE PERKIN-ELMER
CORPORATION, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY to
the order of _________________________ (the "Lender") for the account of its
Applicable Lending Office on the Termination Date (each as defined in the Credit
Agreement referred to below) the principal sum of U.S.$[amount of the Lender's
Commitment in figures] or, if less, the aggregate principal amount of the
Revolving Credit Advances made by the Lender to the Borrower pursuant to the
Credit Agreement dated as of April 20, 2000 among the Borrower, PE Corporation,
the Lender and certain other lenders parties thereto, Salomon Smith Barney Inc.,
as sole arranger, Wachovia Bank, N.A., as syndication Agent, The Chase Manhattan
Bank, as documentation agent, and Citibank, N.A. as Agent for the Lender and
such other lenders (as amended or modified from time to time, the "Credit
Agreement"; the terms defined therein being used herein as therein defined)
outstanding on the Termination Date.
The Borrower promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, as Agent, at 399 Park Avenue, New York,
New York 10043, in same day funds. Each Revolving Credit Advance owing to the
Lender by the Borrower pursuant to the Credit Agreement, and all payments made
on account of principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This Promissory Note is one of the Revolving Credit Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, (i) provides for the making of Revolving
Credit Advances by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Revolving
Credit Advance being evidenced by this Promissory Note and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
THE PERKIN-ELMER CORPORATION
By
-------------------------
Title:
<PAGE>
2
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Amount of
Date Amount of Principal Paid Unpaid Principal Notation
Advance or Prepaid Balance Made By
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 200_
FOR VALUE RECEIVED, the undersigned, THE PERKIN-ELMER
CORPORATION, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY to
the order of _________________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement dated as of April
20, 2000 among the Borrower, PE Corporation, the Lender and certain other
lenders parties thereto, Salomon Smith Barney Inc., as sole arranger, Wachovia
Bank, N.A., as syndication agent, The Chase Manhattan Bank, as documentation
agent, and Citibank, N.A., as Agent for the Lender and such other lenders (as
amended or modified from time to time, the "Credit Agreement"; the terms defined
therein being used herein as therein defined)), on _______________, 200_, the
principal amount of $_______________.
The Borrower promises to pay interest on the unpaid principal
amount hereof from the date hereof until such principal amount is paid in full,
at the interest rate and payable on the interest payment date or dates provided
below:
Interest Rate: _____% per annum (calculated on the basis of a year of
_____ days for the actual number of days elapsed).
Both principal and interest are payable in lawful money of the
United States to Citibank, as agent, for the account of the Lender at the office
of Citibank, at Two Penns Way, New Castle Delaware 19720 in same day funds.
This Promissory Note is one of the Competitive Bid Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
THE PERKIN-ELMER CORPORATION
By
-------------------------
Title:
<PAGE>
EXHIBIT B-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, The Perkin-Elmer Corporation, refers to the
Credit Agreement, dated as of April 20, 2000 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, PE Corporation, certain Lenders parties
thereto, Salomon Smith Barney Inc., as sole arranger, Wachovia Bank, N.A., as
syndication agent, The Chase Manhattan Bank, as documentation agent, and
Citibank, N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Revolving Credit Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit
Borrowing is _____________, 200_.
(ii) The Type of Advances comprising the Proposed
Revolving Credit Borrowing is [Base Rate Advances] [Eurodollar Rate
Advances].
(iii) The aggregate amount of the Proposed Revolving Credit
Borrowing is $_____________.
[(iv) The initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed Revolving Credit Borrowing is
_____ month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Revolving Credit Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement (except the representations set forth in
the last sentence of subsection (e) thereof and in subsection (f)(i)
thereof) are correct, before and after giving effect to the Proposed
Revolving Credit Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date; and
<PAGE>
2
(B) no event has occurred and is continuing, or would result
from such Proposed Revolving Credit Borrowing or from the application
of the proceeds therefrom, that constitutes a Default.
Very truly yours,
THE PERKIN-ELMER CORPORATION
By
-------------------------
Title:
<PAGE>
EXHIBIT B-2 - FORM OF NOTICE OF
COMPETITIVE BID BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, The Perkin-Elmer Corporation, refers to the
Credit Agreement, dated as of April 20, 2000 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, PE Corporation, certain Lenders parties
thereto, Salomon Smith Barney Inc., as sole arranger, Wachovia Bank, N.A., as
syndication agent, The Chase Manhattan Bank, as documentation agent, and
Citibank, N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.03 of the Credit Agreement that the
undersigned hereby requests a Competitive Bid Borrowing under the Credit
Agreement, and in that connection sets forth the terms on which such Competitive
Bid Borrowing (the "Proposed Competitive Bid Borrowing") is requested to be
made:
(A) Date of Competitive Bid Borrowing _____________________
(B) Amount of Competitive Bid Borrowing _____________________
(C) [Maturity Date] [Interest Period] _____________________
(D) Interest Rate Basis _____________________
(E) Interest Payment Date(s) _____________________
(F) ___________________ _____________________
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f)(i) thereof) are correct,
before and after giving effect to the Proposed Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date;
(b) no event has occurred and is continuing, or would result
from the Proposed Competitive Bid Borrowing or from the application of
the proceeds therefrom, that constitutes a Default; and
(c) the aggregate amount of the Proposed Competitive Bid
Borrowing and all other Borrowings to be made on the same day under the
Credit Agreement is within the aggregate amount of the unused
Commitments of the Lenders.
The undersigned hereby confirms that the Proposed Competitive
Bid Borrowing is to be made available to it in accordance with Section
2.03(a)(v) of the Credit Agreement.
<PAGE>
2
Very truly yours,
THE PERKIN-ELMER CORPORATION
By
-------------------------
Title:
<PAGE>
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of April
20, 2000 (as amended or modified from time to time, the "Credit Agreement")
among The Perkin-Elmer Corporation, a New York corporation (the "Borrower"), PE
Corporation, a Delaware corporation (the "Guarantor"), the Lenders (as defined
in the Credit Agreement), Salomon Smith Barney Inc., as sole arranger, Wachovia
Bank, N.A., as syndication agent, The Chase Manhattan Bank, as documentation
agent, and Citibank, N.A., as agent for the Lenders (the "Agent"). Terms defined
in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof (other than in respect of Competitive Bid Advances and Competitive
Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of
all outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Revolving Credit Advances owing to the Assignee will be as set forth on
Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Guarantor or the performance or observance by the Borrower or
the Guarantor of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) attaches the
Revolving Credit Note, if any, held by the Assignor [and requests that the Agent
exchange such Revolving Credit Note for a new Revolving Credit Note payable to
the order of [the Assignee in an amount equal to the Commitment assumed by the
Assignee pursuant hereto or new Revolving Credit Notes payable to the order of
the Assignee in an amount equal to the Commitment assumed by the Assignee
pursuant hereto and] the Assignor in an amount equal to the Commitment retained
by the Assignor under the Credit Agreement, [respectively,] as specified on
Schedule 1 hereto].
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.14 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
<PAGE>
2
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement and the Revolving Credit Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
facility fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Revolving Credit Notes for periods prior to the Effective Date directly
between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE>
Schedule 1
to
Assignment and Acceptance
<TABLE>
<S> <C>
Percentage interest assigned: _____%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of Revolving Credit Advances assigned: $__________
[Principal amount of Revolving Credit Note payable to Assignee: $__________]
[Principal amount of Revolving Credit Note payable to Assignor: $__________]
Effective Date*: _______________, 200_
</TABLE>
[NAME OF ASSIGNOR], as Assignor
By
-------------------------
Title:
Dated: _______________, 200_
[NAME OF ASSIGNEE], as Assignee
By
-------------------------
Title:
Dated: _______________, 200_
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
- -----------------
* This date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to the Agent.
<PAGE>
2
Accepted [and Approved]* this
__________ day of _______________, 200_
CITIBANK, N.A., as Agent
By
------------------------------------------
Title:
[Approved this __________ day
of _______________, 200_
THE PERKIN-ELMER CORPORATION
By ]**
------------------------------------------
Title:
- ----------------------
* Required if the Assignee is an Eligible Assignee solely by reason of clause
(iii) of the definition of "Eligible Assignee".
** Required if the Assignee is an Eligible Assignee solely by reason of clause
(iii) of the definition of "Eligible Assignee".
<PAGE>
EXHIBIT D - FORM OF
OPINION OF COUNSEL
FOR THE BORROWER
AND THE GUARANTOR
April 20, 2000
To each of the Lenders parties
to the Credit Agreement dated
as of April 20, 2000 among
The Perkin-Elmer Corporation,
PE Corporation, said Lenders and
Citibank, N.A., as Agent for said Lenders,
and to Citibank, N.A., as Agent
The Perkin-Elmer Corporation
----------------------------
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01(g)(vi) of the
Credit Agreement, dated as of April 20, 2000 (the "Credit Agreement"), among The
Perkin-Elmer Corporation (the "Borrower"), PE Corporation (the "Guarantor"), the
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders. Terms
defined in the Credit Agreement are used herein as therein defined.
I have acted as counsel for the Borrower and the Guarantor in
connection with the preparation, execution and delivery of the Credit Agreement.
In that connection, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Borrower and the
Guarantor pursuant to Article III of the Credit Agreement.
(3) The Restated Certificate of Incorporation of the
Borrower and all amendments thereto (the "Borrower's Charter").
(4) The by-laws of the Borrower and all amendments
thereto (the "Borrower's By-laws").
<PAGE>
-2-
(5) A certificate of the Secretary of State of New York, dated
March 28, 2000, attesting to the continued corporate existence and good
standing of the Borrower in that State.
(6) The Restated Certificate of Incorporation of the
Guarantor and all amendments thereto (the "Guarantor's Charter").
(7) The by-laws of the Guarantor and all amendments
thereto (the "Guarantor's By-laws").
(5) A certificate of the Secretary of State of Delaware, dated
March 29, 2000, attesting to the continued corporate existence and good
standing of the Guarantor in that State.
I have also examined the originals, or copies certified to my
satisfaction, of such other corporate records of the Borrower and the Guarantor,
certificates of public officials and of officers of the Borrower and the
Guarantor, and agreements, instruments, and other documents, as I have deemed
necessary as a basis for the opinions expressed below. As to questions of fact
material to such opinions, I have, when relevant facts were not independently
established by me, relied upon certificates of the Borrower, the Guarantor, or
their respective officers, or of public officials. I have assumed the due
execution and delivery, pursuant to due authorization, of the Credit Agreement
by the Initial Lenders and the Agent.
My opinions expressed below are limited to the law of the State of New
York, the General Corporation Law of the State of Delaware, and the federal law
of the United States.
Based upon the foregoing and upon such investigation as I have deemed
necessary, I am of the following opinion:
1. The Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York.
The Guarantor is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware.
2. The execution, delivery, and performance by the Borrower
and the Guarantor of the Credit Agreement and, in the case of the
Borrower, the Notes, and the consummation of the transactions
contemplated thereby, are within the Borrower's and the Guarantor's
respective corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's Charter, the
Borrower's By-laws, the Guarantor's Charter, or the Guarantor's
By-laws, (ii) any law, rule, or regulation applicable to the Borrower
or the Guarantor (including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System), or (iii) any
agreement, judgment, injunction, order, or other instrument known by me
to be binding on the Borrower or the Guarantor. The Credit Agreement
and the Notes have been duly executed and delivered on behalf of the
Borrower. The Credit Agreement has been duly executed and delivered on
behalf of the Guarantor.
<PAGE>
-3-
3. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery,
and performance by the Borrower or the Guarantor of the Credit
Agreement and, in the case of the Borrower, the Notes.
4. The Credit Agreement is, and after giving effect to the
initial Borrowing, the Notes will be, legal, valid, and binding
obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms. The Credit Agreement is the
legal, valid, and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with its terms.
5. To the best of my knowledge, there are no pending or
overtly threatened actions or proceedings against the Guarantor or any
of its Subsidiaries before any court, governmental agency, or
arbitrator that purport to affect the legality, validity, binding
effect, or enforceability of the Credit Agreement or any of the Notes
or the consummation of the transactions contemplated thereby or, except
as described in Exhibit 3.01(d) to the Credit Agreement, that are
likely to have a materially adverse effect upon the financial condition
or operations of the Guarantor and its Subsidiaries taken as a whole.
The opinions set forth above are subject to the following
qualifications:
(a) My opinion in paragraph 4 above as to enforceability is
subject to the effect of (i) any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium, or similar law affecting
creditors' rights generally and (ii) general principles of equity,
including, without limitation, concepts of materiality, reasonableness,
good faith, and fair dealing (regardless of whether considered in a
proceeding in equity or at law).
(b) I express no opinion as to (i) Section 2.15 of the Credit
Agreement insofar as it provides that any Lender purchasing a
participation from another Lender pursuant thereto may exercise set-off
or similar rights with respect to such participation, (ii) the effect
of the law of any jurisdiction other than the State of New York wherein
any Lender may be located or wherein enforcement of the Credit
Agreement or the Notes may be sought that limits the rates of interest
legally chargeable or collectible, (iii) the effect of any provision of
the Credit Agreement which is intended to permit modification thereof
only by means of an agreement in writing signed by the parties thereto,
(iv) the effect of any provision of the Credit Agreement imposing
penalties or forfeitures, (v) the enforceability of any provision of
the Credit Agreement to the extent that such provision constitutes a
waiver of illegality as a defense to performance of contract
obligations, (vi) the effect of any provision of the Credit Agreement
relating to indemnification or exculpation in connection with
violations of any securities laws or relating to indemnification,
contribution, or exculpation in connection with willful, reckless, or
criminal acts of the indemnified or exculpated Person or the Person
receiving contribution.
<PAGE>
-4-
This opinion is intended only for the benefit of the addressees and may
not be relied upon by any other person without my prior written consent.
Very truly yours,
Thomas P. Livingston
Corporate Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(22)
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>SUPPLEMENTAL RETIREMENT PLAN
<TEXT>
THE PERKIN-ELMER CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
Effective Date: August 1, 1979
Amended: August 1, 1985
May 21, 1987
August 1, 1988
August 1, 1991
July 1, 1995
<PAGE>
THE PERKIN-ELMER CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
1. Purpose. This Supplemental Retirement Plan (hereinafter referred to
as the "Plan") is intended to provide covered employees with supplemental
retirement benefits from The Perkin-Elmer Corporation (the "Corporation") in
recognition of the additional compensation actually received by such employees
under the terms of the Corporation's Contingent Compensation Plan for Key
Employees and the Incentive Compensation Plan which payments are not included as
compensation for benefit purposes under The Employee Pension Plan of The
Perkin-Elmer Corporation. This Plan is unfunded, noncontributory and is not
qualified under the provisions of the Internal Revenue Code of 1954, as amended.
2. Participants. All key employees of the Corporation or one of its
United States subsidiaries selected for participation in the Contingent
Compensation Plan for Key Employees or the Incentive Compensation Plan are
automatically Participants in the Plan. A key employee who has become a
Participant under this Plan shall continue to be considered a Participant, for
purposes of this Plan only, so long as the key employee has a right to a benefit
under this Plan.
3. Definitions.
(a) "Compensation" shall mean payments accrued for a current Fiscal Year
and paid in the subsequent Fiscal Year from the Contingent
Compensation Plan and the Incentive Compensation Plan. Payments
accrued as of the last day of the Fiscal Year will count as
Compensation if a Participant retires on the last day of the Fiscal
Year but prior to receipt of such payment.
(b) "Final Average Compensation" shall mean the Participant's average
Compensation received during the three (3) consecutive Fiscal Years
out of the ten (10) Fiscal Years prior to and including a
Participant's termination of employment which produce the highest
average. Rules governing Final Average Compensation are as follows:
(i) Only Fiscal Years commencing after June 30, 1995 shall be
counted.
1
<PAGE>
(ii) Fiscal Years while a Participant during which Compensation is
not awarded from the Contingent Compensation Plan and
Incentive Compensation shall count as zero for purposes of
Compensation and as a Fiscal Year for purposes of averaging.
(iii) If a Participant has less than three (3) Fiscal Years
Compensation after June 30, 1995, Final Average Compensation
shall mean the average of the Compensation received in all
Fiscal Years after June 30, 1995 divided by the number of
Fiscal Years during which Compensation was accrued unless a
Participant meets (ii) above. In which instance, the
Participant will have a zero for purposes of Compensation for
that Fiscal Year, but a year for purposes of averaging.
(c) "Fiscal Year" shall mean the period commencing July 1 of each year
and ending on the following June 30.
(d) "Pre-July 1, 1995, Accrued Benefit" shall mean the Participant's
Accrued Annual Retirement Benefit under the terms of the Plan as of
June 30, 1995 and shall include the accrual for Compensation for the
Fiscal Year ending June 30, 1995.
(e) "Years of Service" shall mean continuous service measured from the
later of July 1, 1995 or the date a Participant first participates
in the Plan until the first day of the month coincident with or next
following the Participant's termination of employment. Months of
service while not a Participant in the Contingent Compensation Plan
or the Incentive Compensation Plan which occur after initial
participation in this Plan will not count as continuous service.
4. Accrued Annual Retirement Benefit. A Participant's Accrued Annual
Retirement Benefit payable at age sixty-five (65) in the form of a life annuity
shall be the sum of (a) and (b) where:
(a) The Participant's pre-July 1, 1995 Accrued Benefit; and
(b) The product of (i) times (ii) where:
(i) one and one-half percent (1.5%) of the Participant's Final
Average Compensation; and
2
<PAGE>
(ii) Years of Service.
5. Payment of Benefits. A Participant's accrued annual retirement
benefit will be paid as follows:
(a) Monthly payments upon retirement at or after the Participant's
Normal Retirement Date under the terms of The Employee Pension Plan
of The Perkin-Elmer Corporation, adjusted in accordance with the
optional form of retirement benefit elected by the Participant under
that Pension Plan.
(b) Reduced monthly payments upon early retirement, calculated pursuant
to terms of The Employee Pension Plan of The Perkin-Elmer
Corporation, adjusted in accordance with the optional form of
retirement benefit elected by the Participant under the Pension
Plan.
(c) Reduced monthly payments upon commencement of a deferred vested
pension under the terms of The Employee Pension Plan of The
Perkin-Elmer Corporation, adjusted in accordance with the optional
form of retirement benefit elected by the Participant under the
Pension Plan.
(d) Upon disability retirement of the Participant under the terms of The
Employee Pension Plan of The Perkin-Elmer Corporation, with benefits
commencing at the same time and under the same terms as applicable
under that Pension Plan.
(e) Upon the death of the Participant prior to retirement and on or
after attainment of eligibility for early retirement under The
Employee Pension Plan of The Perkin-Elmer Corporation, the surviving
spouse, if any, will receive a monthly benefit under the same terms
as are applicable under the Pension Plan.
(f) Upon the death of the Participant prior to retirement and prior to
attainment of eligibility for early retirement under The Employee
Pension Plan of The Perkin-Elmer Corporation, the surviving spouse,
if any, will be entitled to a Surviving Spouse Death Benefit of 50%
of the Participant's Deferred Vested pension under the Plan in
3
<PAGE>
accordance with the applicable provisions of The Employee Pension
Plan of The Perkin-Elmer Corporation.
(g) Anything in the Plan to the contrary notwithstanding, in the event
the monthly pension payable under this Plan to any Participant or
any Contingent Annuitant has a lump sum value less than or equal to
the sum stated in The Employee Pension Plan of The Perkin-Elmer
Corporation, the Committee may, but shall not be required to, direct
that the benefits be payable in one lump sum amount.
The factors used to determine the lump sum value of a benefit shall
be the same factors as applicable under that Pension Plan.
(h) A Participant who does not become entitled to benefits in accordance
with sub-paragraphs (a) through (g) above will receive no benefits
under this Plan.
6. Financing of Benefits. No separate trust, escrow account or any other
similar funding arrangement will be established to prefund the benefits provided
under this Plan. Payment of benefits under this Plan will be a general
obligation of the Corporation payable from the general funds of the Corporation.
7. Amendment or Termination. The Board of Directors of the Corporation
is authorized to amend or modify this Plan, or to suspend or terminate the Plan
in whole or in part, at any time in its sole discretion. The rights of all
Participants in this Plan shall be subject to the provisions of this Plan as
such Plan shall exist at any given time. Notwithstanding the foregoing, accrued
benefits under this Plan shall not be forfeitable.
8. Effective Date. This Plan shall become effective on August 1, 1979.
9. Miscellaneous Provisions. This Plan shall be administered by the
Pension Plan Committee of the Corporation (hereinafter referred to as the
"Committee"), appointed in accordance with the provisions of The Employee
Pension Plan of The Perkin-Elmer Corporation. In the administration of this Plan
the following considerations shall be applicable:
(a) Except as expressly provided herein, this Plan will be
administered by the Committee in a manner consistent with the
provisions of the Contingent
4
<PAGE>
Compensation Plan for Key Employees, the Incentive Compensation
Plan and The Employee Pension Plan of The Perkin-Elmer
Corporation.
(b) No benefit payable under this Plan shall be subject in any
manner whatsoever to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge.
(c) This Plan shall not be deemed to constitute a contract of
employment between the Corporation and any Participant for
any purpose whatsoever.
(d) All former Participants in the Contingent Compensation Plan for
Key Employees who have since retired directly from the
employment of the Corporation, and who are alive on the
effective date of this Plan, shall be treated as Participants in
this Plan. Such former Participants shall be entitled to a
benefit under this Plan computed as set forth above, with
payments commencing on the first day of the month following the
effective date of this Plan.
10. Applicable Law. This Plan shall be construed and its provisions
enforced and administered in accordance with the laws of the State of New York.
11. Payment in the event of Change in Control. Notwithstanding any other
provision of this Plan, if, within three years of a Change in Control, the
employment of a Participant is terminated by the Participant for Good Reason or
by the Corporation without Cause, then the Participant will be entitled to
payment of his accrued annual retirement benefit commencing on or after the date
the Participant attains age 55. The Participant may elect, by written notice to
the Committee at least 30 days in advance, the date on which this benefit
commences and the form of payment of such benefit, which may be any optional
form of benefit permitted under The Employee Pension Plan of The Perkin-Elmer
Corporation. If a Participant's annual retirement benefit commences prior to
what would have been his Normal Retirement Date under the Pension Plan or is
paid in a form other than an annuity for his life only, the amount of such
benefit shall be adjusted in accordance with the adjustments under the Pension
Plan. If the Pension Plan is not in effect on the date benefit payments commence
hereunder, all references in this Section to the Pension Plan shall be
understood to refer to the terms and conditions of the Pension Plan immediately
prior to the date it is terminated.
5
<PAGE>
For purposes of this Section:
(a) A "Change in Control: shall have occurred if (i) any "person" within
the meaning of Section 14(d) of the Securities Exchange Act of 1934 becomes the
"beneficial owner" as defined in Rule 13d-3 thereunder, directly or indirectly,
of more than 25% of the Corporation's Common Stock, (ii) any "person" acquires
by proxy or otherwise, other than pursuant to solicitations by the Incumbent
Board (as hereinafter defined), the right to vote more than 35% of the
Corporation's Common Stock for the election of directors, for any merger or
consolidation of the Corporation or for any other manner or question, (iii)
during any two-year period, individuals who constitute the Board of Directors of
the Corporation (the "Incumbent Board") as of the beginning of the period cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director during such period whose election or nomination for
election by the Corporation's stockholders was approved by a vote of at least
three-quarters of the Incumbent Board (either by a specific vote or by approval
of the proxy statement of the Corporation in which such person is named as a
nominee for director without objection to such nomination) shall be, for
purposes of this clause (iii) considered as though such person were a member of
the Incumbent Board, or (iv) the approval by the Corporation's stockholders of
the sale of all or substantially all of the assets of the Corporation.
(b) Termination by the Corporation of the employment of a Participant
for "Cause" shall mean termination upon (i) the willful and continued failure by
the Participant to perform substantially his duties with the Corporation (other
than any such failure resulting from the Participant's incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to the Participant by the Chairman of the Board or President of the
Corporation which specifically identifies the manner in which such executive
believes that the Participant has not substantially performed his duties, of
(ii) the willful engaging by the Participant in illegal conduct which is
materially and demonstrably injurious to the Corporation.
For purposes of this subparagraph (b), no act, or failure to act, on the part of
the Participant shall be considered "willful" unless done, or omitted to be
done, by such Participant in bad faith and without reasonable belief that the
Participant's action or omission was in, or not opposed to, the best interests
of the Corporation. Notwithstanding the foregoing, a Participant shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to such Participant a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for the purpose (after
reasonable notice to such Participant and an opportunity for him, together with
his
6
<PAGE>
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board such Participant was guilty of the conduct set forth above in (i)
or (ii) of this subparagraph (b) and specifying the particulars thereof in
detail.
(c) Termination by the Participant of employment for "Good Reason"
shall mean termination based on:
(i) an adverse change in the status of the Participant (other than any
such change primarily attributable to the fact that the Corporation may
no longer be publicly owned) or position(s) as an officer of the
Corporation as in effect immediately prior to the Change in Control, or
the assignment to the Participant of any duties or responsibilities
which, in his reasonable judgement, are inconsistent with such status
position(s), or any removal of the Participant from or any failure to
reappoint or reelect him to such position(s) (except in connection with
the termination of the Participant's employment for Cause, total
disability or retirement on or after attaining age 65 or as a result of
death or by the Participant other than for Good Reason);
(ii) a reduction by the Corporation in the Participant's base salary as
in effect immediately prior to the Change in Control;
(iii) a material reduction in the Participant's total annual
compensation; a reduction for any year of over 10% of total compensation
measured by the preceding year without a substantially similar reduction
to other executives shall be considered "material"; provided, however,
the failure of the Corporation to adopt or renew a stock option plan or
to grant stock options to the Participant shall not be considered a
reduction; and
(iv) the Corporation's requiring the Participant to be based more than
fifty miles from the site to which he regularly reported for work prior
to the Change in Control, except for required travel on the
Corporation's business to an extent substantially consistent with the
business travel obligations which he undertook on behalf of the
Corporation prior to the Change in Control.
7
<PAGE>
AMENDMENT TO
THE PERKIN-ELMER CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
WHEREAS, The Perkin-Elmer Corporation ("Company") last amended and restated The
Perkin-Elmer Corporation Supplemental Retirement Plan (the "Plan") effective as
of July 1, 1995; and
WHEREAS, the Board of Directors of the Company pursuant to Section 7 may amend
the plan from time to time; and
WHEREAS, it has been determined that certain amendments are required at this
time.
NOW, THEREFORE, the Plan be amended effective October 1, 1996 as follows:
1. Section 3(a) of the Plan is amended by adding a new sentence which shall
appear as the second sentence and shall now read as follows:
"Compensation shall include any amounts of Incentive Compensation or
Contingent Compensation which is contributed by the Company pursuant to a
salary reduction agreement and which is not includable in the gross income
of the Employee because it is made to a deferred compensation plan
sponsored by the Company."
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(23)
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>EXCESS BENEFIT PLAN
<TEXT>
THE EXCESS BENEFIT PLAN
OF
THE PERKIN-ELMER CORPORATION
Effective August 1, 1984
Restated August 1, 1989
Amended June 30, 1993
Restated October 1, 1995
Amended April 1, 2000
Amended August 17, 2000
Working Copy
Incorporating First and Second Amendments to Plan
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE 1 Definitions 1
ARTICLE 2 Purpose of Plan 3
ARTICLE 3 Eligibility 4
ARTICLE 4 Benefits 5
ARTICLE 5 Administration 7
ARTICLE 6 Amendment and Termination 8
ARTICLE 7 Miscellaneous 9
</TABLE>
<PAGE>
THE EXCESS BENEFIT PLAN
OF
THE PERKIN-ELMER CORPORATION
The Perkin-Elmer Corporation, a New York corporation having its
principal place of business in Norwalk, Connecticut, hereby restates as of
October 1, 1995 The Excess Benefit Plan of The Perkin-Elmer Corporation which
was effective as of August 1, 1984.
ARTICLE 1
Definitions
The words and phrases defined hereinafter shall have the following
meaning:
Section 1.1 - Act. The Employee Retirement Income Security Act of
1974.
Section 1.2 - Beneficiary. The person or persons named under the
provisions of Section 4.4 of this Plan.
Section 1.3 - Board of Directors. The Board of Directors of the
Company.
Section 1.4 - Code. The Internal Revenue Code of 1986, as amended,
or as it may be amended from time to time.
Section 1.5 - Company. The Perkin-Elmer Corporation, a New York
corporation, or any successor to it in ownership of all or substantially all of
its assets.
Section 1.6 - Committee. The Committee appointed by the Board of
Directors as provided for in Article XII of The Employee Pension Plan of The
Perkin-Elmer Corporation.
Section 1.7 - Effective Date. August 1, 1984. The effective date of
this restatement is October 1, 1995.
Section 1.8 - Employee. Any person, including any officer or director
who is employed in the service of the Company and who is a participant in the
Pension Plan or the Savings Plan.
1
<PAGE>
Section 1.9 - Pension Plan. The Employee Pension Plan of The
Perkin-Elmer Corporation formerly known as the Employee Retirement Plan of The
Perkin-Elmer Corporation.
Section 1.10 - Plan. The Excess Benefit Plan of The Perkin-Elmer
Corporation.
Section 1.11 - Plan Year. The period August 1, 1992 through June 30,
1993 shall constitute a short Plan Year. Thereafter, a Plan Year shall mean each
twelve (12) consecutive month period from July 1 to the next succeeding June 30.
Section 1.12 - Savings Plan. The Employee Savings Plan of The
Perkin-Elmer Corporation formerly known as the Profit Sharing and Savings Plan
of The Perkin-Elmer Corporation.
Any word or phrase that is not a defined term in this section, which is
a defined word or term in either the Savings Plan or Pension Plan and is used in
this Plan, shall have the same meaning as the Plan in which it appears.
2
<PAGE>
ARTICLE 2
Purpose of Plan
Section 2.1 - Purpose. This Plan is designed to provide retirement
benefits payable out of the general assets of the Company where benefits cannot
be paid under the Pension Plan and/or contributions are limited under the
Savings Plan because of the application of Code Section 415 and Code Section
401(a)(17) and the provisions of the Pension Plan and/or the Savings Plan which
implement such sections.
3
<PAGE>
ARTICLE 3
Eligibility
Section 3.1 - Eligibility. Any Employee or his Beneficiary shall be
eligible for coverage under this Plan if such Employee is an officer of the
Company or is highly compensated within the meaning of Code Section 414(q).
4
<PAGE>
ARTICLE 4
Benefits
Section 4.1 - Amount of Benefits. The benefit payable under this Plan
shall be equal to the sum of the following amounts:
a) the benefit, if any, which, when calculated under the Pension
Plan without taking into account the provisions of the Pension
Plan dealing with limits on pensions imposed by Code Section 415
and Code Section 401(a)(17), is in excess of the benefit payable
to or on behalf of the Employee under the Pension Plan after
taking into account such provisions; and
b) an amount equal to the Automatic Company Contributions and/or
Company Matching Contributions which would have been allocated
on behalf of the Employee under Article III of the Savings Plan
if the limitations of Code Sections 401(a)(17) and 415 were
inapplicable, adjusted to take into account investment income
and gain or loss experienced by Vanguard LifeStrategy Moderate
Growth Fund of the Savings Plan. Should any Automatic Company
Contributions and/or Company Matching Contributions be
inadvertently allocated to the Employee's Account in the Savings
Plan in excess of the limitations of Section 401(a)(17) and/or
Section 415, upon correction in the Savings Plan, the Employee's
account in this Plan will be credited with the actual income and
gain or loss experienced in the Savings Plan.
Section 4.2 - Form of Benefit Payments. Benefits payable to or on
behalf of an Employee or his Beneficiary resulting from the provisions of
subsection 4.1(a) shall be paid in monthly installments after adjustment in
accordance with the optional form of benefit payable elected under the Pension
Plan. Benefits payable to or on behalf of an Employee or his Beneficiary
resulting from the provisions of subsection 4.1(b) shall be paid in cash in a
single lump sum or in installments in the form of a term-certain annuity, a
single life annuity or a joint and survivor annuity, or by a combination of such
methods, as determined by the Committee in its discretion.
Section 4.3 - Time of Benefit Payments. Benefits due under this Plan
shall be paid at such time or times following the Employee's termination,
retirement or death as the Committee in its discretion determines.
5
<PAGE>
Section 4.4 - Beneficiary in the Event of Death. Upon the death of an
Employee, any remaining benefits due under this Plan to an Employee other than
benefits resulting from subsection 4.1(a) shall be distributed to (1) the
Beneficiary designated by the Employee under this Plan, or if none, (2) the
Beneficiary designated by the Employee under the Pension Plan, or if none, (3)
the Beneficiary designated by the Employee under the Savings Plan, or if none,
(4) the estate of the deceased Employee.
The designation of Beneficiary under this Plan shall be made on a form
specified by the Committee and may be changed from time to time in the manner
prescribed by the Committee.
Section 4.5 - Benefits Unfunded. Benefits payable under this Plan shall
be paid by the Company each year out of its general assets and shall not be
funded in any manner.
Section 4.6 - Vesting. An Employee shall not have a right to a benefit
under this Plan unless:
a) for purposes of the Section 4.1(a) benefit, he has five (5) years
of vesting service under the Pension Plan; and
b) for purposes of the Section 4.1(b) benefit, he has completed years
of vesting service under the Savings Plan in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
</TABLE>
6
<PAGE>
ARTICLE 5
Administration
Section 5.1 - Duties of Committee. This Plan shall be administered by
the Committee in accordance with its terms and purposes. The Committee shall
determine the amount and manner of payments of the benefits due to or on behalf
of each Employee and/or his Beneficiary from this Plan and shall cause them to
be paid accordingly.
Section 5.2 - Finality of Decisions. The decisions made by and the
actions taken by the Committee in the administration of this Plan shall be final
and conclusive on all persons, and the members of the Committee shall not be
subject to individual liability with respect to this Plan.
Section 5.3 - Claims Procedure. A claim for benefits under the Plan
must be made to the Committee in writing. The Committee shall provide adequate
notice in writing within sixty (60) days of the receipt of the claim for
benefits to any Participant, Contingent Annuitant or Beneficiary whose claim for
benefits under the Plan has been denied, setting forth the specific reasons for
such denial, written in as simple language as possible. If a claim is denied, in
whole or in part, the Committee shall send the claimant a notice of denial
explaining the reasons for denial of the claim. A claimant whose claim has been
denied, or his authorized representative, may request a review of the denial,
but such a request must be in writing, and must be submitted to the Committee
within ninety (90) days after the claimant's receipt of the notice of denial.
Upon appeal for review by a claimant whose claim for benefits from the Plan has
been denied in whole or in part, the claimant shall be given an opportunity to
review the Plan document with a representative of the Committee and shall
further be given the opportunity to submit in writing any statement or comments
material or relevant to the claim.
The review of a claim which has been denied shall be made by the
Committee within sixty (60) days of the receipt of the request for review,
unless the Committee determines that special circumstances required additional
time, in which case a decision shall be rendered not later than one hundred
twenty (120) days after receipt of the request for review. The decision of the
review shall be in writing and shall include specific reasons for the decision,
written in as simple language as possible with specific reference to the
pertinent Plan provisions on which the decision is based.
7
<PAGE>
ARTICLE 6
Amendment and Termination
Section 6.1 - Amendment and Termination. While the Company intends to
maintain this Plan in conjunction with the Pension Plan and the Savings Plan for
as long as necessary, the Company acting through its Board, reserves the right
to amend and/or terminate it at any time for whatever reasons it may deem
appropriate.
8
<PAGE>
ARTICLE 7
Miscellaneous
Section 7.1 - No Employment Rights. Nothing contained in this Plan
shall be construed as a contract of employment between the Company and any
Employee, or as a right of any Employee to be continued in employment or as a
limitation of the right of the Company to discharge any Employee with or without
cause.
Section 7.2 - Unsecured Creditor. Employees and their Beneficiaries,
heirs and successors under this Plan shall have solely those rights of an
unsecured creditor of the Company. Any and all assets of the Company shall not
be deemed to be held in trust for any Employee, their Beneficiaries, heirs and
successors, nor shall any assets be considered security for the performance of
obligations of the Company and said assets shall at all times remain unpledged,
unrestricted general assets of the Company. The Company's obligation under the
Plan shall be an unsecured and unfunded promise to pay benefits at a future
date.
Section 7.3 - Non-Assignability. The Participant and their
Beneficiaries, heirs and successors shall not have any right to commute, sell,
pledge, assign, transfer or otherwise convey the right to receive any payment
under this Plan. The right to any payment of benefit shall be non-assignable and
non-transferable.
Section 7.4 - Withholding Taxes. The Committee may take any appropriate
arrangements to deduct from all amounts paid under the Plan any taxes required
to be withheld by any government or governmental agency.
Section 7.5 - Invalidity of Certain Provisions. If any provision of
this Plan is held invalid or unenforceable, such invalidity or
unenforceabilility shall not affect any other provision hereof and this Plan
shall be construed and enforced as if such provision had not been included.
Section 7.6 - Incapacity. In the event that any Participant is unable
to care for his affairs because of illness or accident, any payment due may be
paid to the Participant's spouse, parent, brother, sister or other person deemed
by the Committee to have incurred expenses for the care of such Participant,
unless a duly qualified guardian or other legal representative has been
appointed.
9
<PAGE>
Section 7.7 - Law Applicable. This Plan shall be governed by the laws
of the State of Connecticut.
10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>2000 ANNUAL REPORT
<TEXT>
APPLIED BIOSYSTEMS Selected Financial Data
<TABLE>
<CAPTION>
(Dollar amounts in thousands except per share amounts)
For the years ended June 30, 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
=====================================================================================================================
Financial Operations
Net revenues $ 642,059 $ 767,465 $ 940,095 $ 1,221,691 $ 1,388,100
Income from continuing operations 3,899 132,739 24,009 148,365 186,247
Per share of common stock
Basic .74 .90
Diluted .72 .86
Income (loss) from discontinued
operations (net of income taxes) (37,833) 27,906 40,694 79,058
Net income (loss) (33,934) 160,645 64,703 227,423 186,247
Per share of common stock
Basic 1.13 .90
Diluted 1.10 .86
Dividends per share .0425 .17
=====================================================================================================================
Other Information
Cash and short-term investments $ 121,145 $ 217,222 $ 84,091 $ 236,530 $ 394,608
Working capital 226,414 355,163 289,151 274,638 395,149
Capital expenditures 27,125 57,646 68,172 92,077 95,475
Total assets 809,856 1,003,810 1,128,937 1,347,550 1,698,156
Note payable to the
Celera Genomics group 150,000
Long-term debt 33,694 59,152 33,726 31,452 36,115
Total allocated debt 89,801 89,068 45,825 35,363 51,808
Group equity 373,116 507,734 565,507 534,332 934,364
=====================================================================================================================
</TABLE>
The selected financial data should be read with the combined financial
statements and the consolidated financial statements.
The recapitalization of the Company on May 6, 1999 resulted in the issuance of
two new classes of common stock called PE Corporation-PE Biosystems Group
Common Stock and PE Corporation-Celera Genomics Group Common Stock. The PE
Biosystems group is currently doing business as Applied Biosystems and will seek
formal approval of a change to this name at the 2000 annual meeting. The PE
Biosystems group is referred to as Applied Biosystems.
Per share data reflects the two-for-one stock splits effective July 1999 and
February 2000.
A number of items impact the comparability of the data from continuing
operations. Before-tax amounts include:
o Restructuring, other merger costs, and acquisition-related costs of $17.5
million for fiscal 1996, $48.1 million for fiscal 1998, $6.1 million for
fiscal 1999, and $2.1 million for fiscal 2000;
o A restructuring reserve adjustment of $9.2 million for fiscal 1999 relating to
excess fiscal 1998 restructuring liabilities;
o Gains on investments of $11.7 million for fiscal 1996, $64.9 million for
fiscal 1997, $1.6 million for fiscal 1998, $6.1 million for fiscal 1999, and
$48.6 million for fiscal 2000;
o Acquired research and development charges of $31.8 million for fiscal 1996 and
$28.9 million for fiscal 1998;
o Charges for the impairment of assets of $9.9 million for fiscal 1996, $.7
million for fiscal 1997, and $14.5 million for fiscal 1999;
o Tax benefit and valuation allowance reductions of $22.2 million for fiscal
1999;
o A charge of $3.5 million for a donation to the Company's charitable foundation
for fiscal 1999;
o Foreign currency hedge contract-related gain of $2.3 million for fiscal 1999;
o Charges of $4.6 million for fiscal 1999 relating to the recapitalization of
the Company;
o Charges relating to the acceleration of certain long-term compensation
programs as a result of the attainment of performance targets of $9.1 million
for fiscal 1999 and $45.0 million for fiscal 2000; and
o A gain of $8.2 million on the sale of real estate for fiscal 2000.
================================================================================
9 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis
Management's Discussion of
Continuing Operations
PE Corporation ("PE" or "our company") is comprised of two separate business
segments in continuing operations: the PE Biosystems group and the Celera
Genomics group. The performance of these businesses is reflected separately by
two classes of common stock: PE Corporation-PE Biosystems Group Common Stock
("PE Biosystems stock") and PE Corporation-Celera Genomics Group Common Stock
("Celera Genomics stock"). The PE Biosystems group manufactures and markets
biochemical instrument systems and associated consumable products for life
science research and related applications. The PE Biosystems group is currently
doing business as Applied Biosystems and will seek formal approval of a change
to this name at our company's 2000 annual meeting. We refer to the PE Biosystems
group as Applied Biosystems. The Celera Genomics group is engaged principally in
the generation, sale, and support of genomic information and enabling data
management and analysis software. The Celera Genomics group's customers use this
information for commercial applications in the pharmaceutical and life sciences
industries in the specific areas of target identification, drug discovery, and
drug development. The Celera Genomics group also provides gene discovery,
genotyping, and related genomics services. The Celera Genomics group has
recently expanded its business into the emerging fields of functional genomics,
in particular, proteomics and personalized health/medicine.
You should read this discussion with the combined financial statements and
consolidated financial statements. Historical results and percentage
relationships are not necessarily indicative of operating results for any future
periods.
Throughout the following discussion of operations we refer to the
impact on our reported results of the movement in foreign currency exchange
rates from one reporting period to another as "foreign currency translation."
Discontinued Operations
Effective May 28, 1999, PE completed the sale of its Analytical Instruments
business to EG&G, Inc. Analytical Instruments, formerly a unit of Applied
Biosystems, developed, manufactured, marketed, sold, and serviced analytical
instruments used in a variety of markets. The aggregate consideration received
from the sale was $425 million, consisting of $275 million in cash and one-year
secured promissory notes in the aggregate principal amount of $150 million
bearing interest at a rate of 5% per annum. The promissory notes were collected
in fiscal 2000. In fiscal 1999, our company recognized a net gain on disposal of
discontinued operations of $100.2 million, net of $87.8 million of income taxes.
Amounts previously reported for Analytical Instruments were reclassified and
stated as discontinued operations. See Note 15 to Applied Biosystems' combined
financial statements.
Events Impacting Comparability
Acquisitions, Investments, and Dispositions
On January 22, 1998, our company acquired PerSeptive Biosystems, Inc. The
acquisition was accounted for as a pooling of interests and, accordingly,
Applied Biosystems' financial results were restated to include the combined
operations.
Our company acquired Molecular Informatics, Inc. and a 14.5% interest, and
approximately 52% of the voting rights, in Tecan AG during the second quarter of
fiscal 1998. The results of operations for these acquisitions, each of which was
accounted for as a purchase, were included in Applied Biosystems' combined
financial statements since the date of acquisition. During the fourth quarter of
fiscal 1999, our company divested its interest in Tecan. A before-tax gain of
$1.6 million was recognized on the sale.
A discussion of significant acquisitions, investments, and dispositions is
provided in Note 2 to Applied Biosystems' combined financial statements.
Restructuring and Other Special Charges
During fiscal 2000, Applied Biosystems incurred $2.1 million of before-tax costs
associated with acquisitions which were not consummated.
In fiscal 1999, Applied Biosystems was allocated non-recurring before-tax
special charges of $4.6 million. These costs were incurred in connection with
the recapitalization of our company. Applied Biosystems and the Celera Genomics
group were each allocated 50% of the $9.2 million total recapitalization costs
incurred by our company. See Note 1 to Applied Biosystems' combined financial
statements for a discussion of the recapitalization.
During fiscal 1998, $48.1 million of before-tax charges were recorded for
restructuring and other merger costs to integrate PerSeptive into Applied
Biosystems following the acquisition. The objectives of the integration plan
were to lower PerSeptive's cost structure by reducing excess manufacturing
capacity, achieve broader worldwide distribution of PerSeptive's products, and
combine sales, marketing, and administrative functions. The charge included:
$33.9 million for restructuring the combined operations; $8.6 million for
transaction costs; and $4.1 million of inventory-related write-offs, recorded in
cost of sales, associated with the rationalization of certain product lines.
Additional merger-related period costs of $6.1 million for fiscal 1999 and $1.5
million for fiscal 1998 were incurred for training, relocation, and
communication in connection with the integration.
During the fourth quarter of fiscal 1999, Applied Biosystems completed the
restructuring actions. The costs to implement the program were $9.2 million
below the $48.1 million charge recorded for fiscal 1998. As a result, during the
fourth quarter of fiscal 1999, Applied Biosystems recorded a $9.2 million
reduction of charges required to implement the fiscal 1998 plan. A discussion of
the restructuring program is provided in Note 14 to Applied Biosystems' combined
financial statements.
================================================================================
PE CORPORATION 2000 ANNUAL REPORT 10
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
Acquired Research and Development
During the second quarter of fiscal 1998, Applied Biosystems expensed $28.9
million of the Molecular Informatics acquisition cost as in-process research and
development, representing 53.6% of the purchase price. This amount was
attributed and supported by a discounted probable cash flow analysis on a
project-by-project basis. At the acquisition date, the technological feasibility
of the acquired technology had not been established and the acquired technology
had no future alternative uses.
We attributed approximately 10% of the in-process research and development value
to BioLIMS, a software system that manages data, initiates analysis programs,
and captures the results in a centralized, relational database for sequencing
instruments; 6% to GA SFDB, a client-side add-on product to several existing
gene sequencing instruments; 38% to BioMERGE, a client-server management and
integration system that organizes proprietary, public, and third-party results
in a single relational database for the drug discovery and genomic research
markets; 9% to BioCLINIC, a client-server management and integration system that
organizes proprietary, public, and third-party results generated from DNA and
protein sequence analysis in a single database for the clinical trials phase of
drug development; and 37% to SDK, an open architecture software platform from
which all of Molecular Informatics' future software applications were expected
to be derived.
As of the acquisition date, all of the major functionality for BioLIMS 2.0 had
been completed and the product was subsequently released in September 1998. As
of the acquisition date, BioLIMS 3.0 was in the design and scoping phase. As of
the acquisition date, GA SFDB was in early alpha phase and had been completed
concurrent with the development of BioLIMS 2.0. The product was released in
September 1998. As of the acquisition date, BioMERGE 3.0's functional scope was
defined and the requirements assessment had been completed. The product was
subsequently released in November 1998. As of the acquisition date, the
BioCLINIC product requirements had been specified and discussions had begun with
two potential customers to begin the specific software modifications.
Development efforts were terminated in April 1998 due to unsuccessful marketing
efforts. As of the acquisition date, the SDK requirements' assessment had been
completed and the functional scope had been defined.
We attributed $11.8 million of the purchase price to core technology and
existing products, primarily related to the BioMERGE product. We applied a
risk-adjusted discount rate to the project's cash flows of 20% for existing
technology and 23% for in-process technology. The risk premium of 3% for
in-process technologies was determined by management based on the associated
risks of releasing these in-process technologies versus the existing
technologies for the emerging bioinformatics software industry. The significant
risks associated with these products include the limited operating history of
Molecular Informatics, uncertainties surrounding the market acceptance of such
in-process products, competitive threats from other bioinformatics companies,
and other risks. Management is primarily responsible for estimating the fair
value of such existing and in-process technology.
Asset Impairment
During the fourth quarter of fiscal 1999, Applied Biosystems incurred a $14.5
million charge to cost of sales for the impairment of intangible assets
associated with the Molecular Informatics business. This impairment resulted
primarily from a decline in management's assessment of future cash flows from
this business, which included the discontinuance of certain product lines in the
fourth quarter.
Gain on Investments
Fiscal 2000 included a before-tax gain of $48.6 million related to the sale of
minority equity investments. Fiscal 1999 and 1998 included before-tax gains of
$4.5 million and $1.6 million, respectively, related to the sale and release of
contingencies on minority equity investments. As previously described, fiscal
1999 also included a before-tax gain of $1.6 million related to the sale of our
company's interest in Tecan. See Note 2 to Applied Biosystems' combined
financial statements.
Other Events Impacting Comparability
Fiscal 2000 and 1999 included charges of $45.0 million and $9.1 million,
respectively, to selling, general and administrative expenses, for costs related
to the acceleration of certain long-term compensation programs as a result of
the attainment of performance targets.
During the fourth quarter of fiscal 2000, Applied Biosystems recorded a gain of
$8.2 million to other income, net from the sale of real estate. A gain of $2.3
million related to foreign currency hedge contracts was recognized in other
income, net during the fourth quarter of fiscal 1999.
During the fourth quarter of fiscal 1999, PE made a $3.5 million donation to our
company's charitable foundation, which supports educational and other charitable
programs. The charge was recorded to Applied Biosystems' selling, general and
administrative expenses.
The effective income tax rate for fiscal 1999 included certain tax benefit and
valuation allowance reductions of $22.2 million. See Note 4 to Applied
Biosystems' combined financial statements for a discussion of income taxes.
Results of Continuing Operations--2000 Compared With 1999
Applied Biosystems reported income from continuing operations of $186.2 million
for fiscal 2000 compared with $148.4 million for fiscal 1999. On a comparable
basis, excluding the special items previously described from both fiscal years
and Tecan from the prior fiscal year, income from continuing operations
increased 35.4% to $186.2 million for fiscal 2000 compared with $137.5 million
for fiscal 1999. This increase is attributable primarily to the growth in net
revenues and lower operating expenses as a percentage of net revenues.
================================================================================
11 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
Net revenues were $1.4 billion for fiscal 2000 compared with $1.2 billion for
fiscal 1999. Excluding the results of Tecan for the prior fiscal year, net
revenues increased 24.0%. Increased net revenues for sequence detection systems,
including reagents and instrument systems for gene expression analysis and
single nucleotide polymorphism ("SNP") detection, mass spectrometry products,
and DNA sequencing consumables were contributors. The effects of foreign
currency translation decreased net revenues by approximately $1.8 million
compared with the prior fiscal year as weakness in the euro was essentially
offset by strengthening of the Japanese yen. Net revenues from leased
instruments and shipments of consumables and project materials to the Celera
Genomics group were $59.8 million for fiscal 2000, or 4.3% of Applied
Biosystems' net revenues. For fiscal 1999, net revenues from leased instruments,
shipments of instruments and consumables, and contracted R&D services to the
Celera Genomics group were $17.3 million and represented less than 2% of Applied
Biosystems' net revenues.
Geographically, excluding the net revenues of Tecan for fiscal 1999, Applied
Biosystems reported revenue growth in all regions for fiscal 2000 compared with
the prior fiscal year. Net revenues increased 21.6% in the United States, 18.5%
in Europe, 35.8% in the Far East, and 50.7% in Latin America and other markets.
Excluding the favorable effects of foreign currency translation in Japan, net
revenues increased approximately 23% in the Far East, partly reflecting
increased government funding for genomics-related research. Excluding the
negative effects of foreign currency translation in Europe, net revenues
increased by approximately 27%.
Gross margin as a percentage of net revenues was 54.1% for fiscal 2000 compared
with 53.9% for fiscal 1999. Excluding Tecan and the asset impairment charge from
the prior fiscal year, gross margin as a percentage of net revenues was 54.1%
for fiscal 1999.
SG&A expenses were $393.9 million for fiscal 2000 compared with $335.9 million
for fiscal 1999, an increase of 17.3%. On a comparable basis, excluding the
long-term compensation charges for fiscal 2000 and 1999, Tecan, and the $3.5
million charge for a contribution to our company's charitable foundation for
fiscal 1999, SG&A expenses for Applied Biosystems increased 20.5%. This increase
was due to higher planned worldwide selling and marketing expenses commensurate
with the higher revenue growth. As a percentage of net revenues, excluding the
special charges from both fiscal years and Tecan from the prior fiscal year,
SG&A expenses were 25.1% for fiscal 2000 compared with 25.9% for fiscal 1999.
R&D expenses were $141.2 million for fiscal 2000 compared with $133.5 million
for fiscal 1999, an increase of 5.7%. Excluding Tecan from the prior fiscal
year, R&D expenses for fiscal 2000 increased 18.4% compared with fiscal 1999. As
a percentage of net revenues, excluding Tecan from fiscal 1999, R&D expenses
were 10.2% for fiscal 2000 compared with 10.7% for the prior fiscal year. The
prior fiscal year's R&D expense level was higher as a percentage of net revenues
due to the development of new products released in the second half of fiscal
1999.
During fiscal 2000, Applied Biosystems incurred $2.1 million of costs associated
with acquisitions which were not consummated. Merger-related period costs of
$6.1 million were incurred during fiscal 1999 for training, relocation, and
communication in connection with the integration of PerSeptive into Applied
Biosystems. During the fourth quarter of fiscal 1999, Applied Biosystems
completed the restructuring actions associated with integration of PerSeptive
following the acquisition. The costs to implement the program were $9.2 million
below the $48.1 million charge recorded for fiscal 1998. As a result, during the
fourth quarter of fiscal 1999, Applied Biosystems recorded a $9.2 million
reduction of charges required to implement the fiscal 1998 plan. See Note 14 to
Applied Biosystems' combined financial statements for a discussion of the
restructuring. Also during fiscal 1999, Applied Biosystems was allocated a
non-recurring charge of $4.6 million for costs incurred in connection with the
recapitalization of our company. These costs included investment banking and
professional fees.
<TABLE>
<CAPTION>
Operating Income
(Dollar amounts in millions) 1999 2000
=============================================================
<S> <C> <C>
Operating income before
special items $ 216.5 $ 260.3
Asset impairment (14.5)
Long-term compensation
programs (9.1) (45.0)
Charitable foundation
contribution (3.5)
Restructuring and other
merger costs, net 3.1
Recapitalization costs (4.6)
Acquisition-related costs (2.1)
- -------------------------------------------------------------
Operating income $ 187.9 $ 213.2
=============================================================
</TABLE>
Operating income increased to $213.2 million for fiscal 2000 compared with
$187.9 million for the prior fiscal year. On a comparable basis, excluding the
special items previously described from both fiscal years and Tecan from the
prior fiscal year, operating income increased 32.0% for fiscal 2000 compared
with fiscal 1999. Applied Biosystems benefited from increased revenues as a
result of strong worldwide demand and lower operating expenses as a percentage
of net revenues, partially as a result of a slower than planned increase in
staffing during the fiscal year. Operating income as a percentage of net
revenues, excluding the special items from both fiscal years and Tecan from the
prior fiscal year, increased to 18.8% for fiscal 2000 compared with 17.6% for
fiscal 1999.
Fiscal 2000 and 1999 included before-tax gains of $48.6 million and $4.5
million, respectively, related to the sale of minority equity investments.
Fiscal 1999 also included a gain of $1.6 million related to the sale of our
company's interest in Tecan.
================================================================================
PE CORPORATION 2000 ANNUAL REPORT 12
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
Interest expense was $8.1 million for fiscal 2000 compared with $4.5
million for the prior fiscal year. This increase was primarily due to the
interest on the $150 million note payable to the Celera Genomics group. Interest
income was $18.6 million for fiscal 2000, compared with $2.3 million for the
prior fiscal year. The increase in interest income was due to the interest on
the note receivable related to the sale of the Analytical Instruments business,
higher balances of cash and cash equivalents, and higher interest rates.
Other income, net for fiscal 2000 was $3.4 million, primarily related to a gain
on the sale of real estate, and was partially offset by costs associated with a
portion of our company's foreign currency management program. Other income, net
was $.5 million for fiscal 1999, which related primarily to the revaluation of
foreign exchange contracts and a legal settlement that were partially offset by
the loss on the disposal of certain assets and other non-operating costs.
The effective income tax rate was 32% for fiscal 2000 compared with 16% for
fiscal 1999. Excluding special items in both fiscal years and Tecan in fiscal
1999, the effective income tax rate was 30% for fiscal 2000 compared with 29%
for the prior fiscal year. The effective income tax rate for fiscal 1999
included the release of valuation allowances of $17.4 million. Because the sale
of the Analytical Instruments business had been completed, the valuation
allowance was reduced as management believed that it was more likely than not
that the deferred tax assets to which the valuation allowance related would be
realized. An analysis of the differences between the federal statutory income
tax rate and the effective income tax rate is provided in Note 4 to Applied
Biosystems' combined financial statements.
For fiscal 1999, Applied Biosystems incurred minority interest expense of $13.4
million relating to our company's 14.5% financial interest in Tecan.
Results of Continuing Operations--1999 Compared With 1998
Applied Biosystems reported income from continuing operations of $148.4 million
for fiscal 1999 compared with $24.0 million for fiscal 1998. On a comparable
basis, excluding the special items previously described, income from continuing
operations increased 44.8% to $137.5 million for fiscal 1999 compared with $95.2
million for fiscal 1998.
Net revenues were $1.2 billion for fiscal 1999 compared with $940.1 million for
fiscal 1998, an increase of 30.0%. Excluding the results of Tecan, net revenues
for fiscal 1999 increased 25.9% compared with fiscal 1998. The effects of
foreign currency translation increased net revenues by less than 1% compared
with fiscal 1998. Net revenues from shipments to the Celera Genomics group were
$17.3 million for fiscal 1999 and represented less than 2% of Applied
Biosystems' net revenues. There were no revenues from shipments to the Celera
Genomics group for fiscal 1998.
Geographically, excluding the net revenues of Tecan, Applied Biosystems reported
revenue growth in all regions for fiscal 1999 compared with fiscal 1998.
Revenues increased 32.5% in the United States, 19.5% in Europe, 20.9% in the Far
East, and 12.6% in Latin America and other markets, compared with fiscal 1998.
Demand for Applied Biosystems' ABI PRISM(R) 3700 DNA Analyzer, which began
shipping in the second quarter of fiscal 1999, was strong. Shipments for
sequence detection systems and liquid chromatography/mass spectrometry ("LC/MS")
products also contributed to the growth.
Gross margin as a percentage of net revenues was 53.9% for fiscal 1999 compared
with 54.1% for fiscal 1998. Fiscal 1999 gross margin included $14.5 million for
the impairment of intangible assets associated with the Molecular Informatics
business. Fiscal 1998 gross margin included $4.1 million of inventory-related
write-offs associated with the rationalization of certain product lines in
connection with the acquisition of PerSeptive. On a comparable basis, excluding
the special items from both fiscal years, gross margin as a percentage of net
revenues was 55.1% for fiscal 1999 and 54.5% for fiscal 1998. The improved gross
margin was primarily the result of a change in product mix. Increased unit sales
of reagents to support genetic analysis systems, increased royalty revenues, and
continued demand in instrument sales of higher margin genetic analysis product
offerings contributed to the growth.
SG&A expenses were $335.9 million for fiscal 1999 compared with $276.7 million
for fiscal 1998, an increase of 21.4%. Excluding Tecan, SG&A expenses increased
15.6% for fiscal 1999 compared with fiscal 1998. Fiscal 1999 expenses included a
charge of $9.1 million for costs related to the acceleration of certain
long-term compensation programs as a result of the recapitalization of our
company and the attainment of performance targets. Fiscal 1999 expenses also
included $3.5 million for a contribution to our company's charitable foundation.
On a comparable basis, excluding the special items, SG&A expenses increased
10.8%. This increase was due to higher planned expenses, reflecting the growth
in sales and orders. As a percentage of net revenues, excluding Tecan and the
special items, SG&A expenses were 25.9% for fiscal 1999 compared with 29.4% for
fiscal 1998.
R&D expenses increased 26.6% to $133.5 million for fiscal 1999 compared with
$105.5 million for fiscal 1998. Excluding Tecan, expenses increased 19.5%
compared with fiscal 1998 in support of the introduction of new products and the
acceleration of product development. As a percentage of net revenues, excluding
Tecan, R&D expenses were 10.7% for fiscal 1999 compared with 11.2% for fiscal
1998.
During fiscal 1998, $48.1 million of before-tax charges were recorded for
restructuring and other merger-related costs to integrate PerSeptive into
Applied Biosystems following the acquisition. The objectives of the integration
plan were to lower PerSeptive's cost structure by reducing excess manufacturing
capacity; achieve broader worldwide distribution of PerSeptive's products; and
combine sales, marketing, and administrative functions. The charge included:
$33.9 million for restructuring the combined operations; $8.6 million for
transaction costs; and $4.1 million of inventory-related write-offs, recorded in
cost of sales, associated with the
================================================================================
13 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
rationalization of certain product lines. Additional merger-related period costs
of $6.1 million for fiscal 1999 and $1.5 million for fiscal 1998 were incurred
for training, relocation, and communication costs.
The $33.9 million restructuring charge included $13.8 million for
severance-related costs and workforce reductions of approximately 170 employees,
consisting of 114 employees in production labor and 56 employees in sales and
administrative support. The remaining $20.1 million represented facility
consolidation and asset-related write-offs that included: $11.7 million for
contract and lease terminations and facility-related expenses in connection with
the reduction of excess manufacturing capacity; $3.2 million for dealer
termination payments, sales office consolidations, and consolidation of sales
and administrative support functions; and $5.2 million for the write-off of
certain tangible and intangible assets and the termination of certain
contractual obligations. Transaction costs of $8.6 million included
acquisition-related investment banking and professional fees.
During the fourth quarter of fiscal 1999, Applied Biosystems completed the
restructuring actions. The costs to implement the program were $9.2 million
below the $48.1 million charge recorded for fiscal 1998. As a result, during the
fourth quarter of fiscal 1999, Applied Biosystems recorded a $9.2 million
reduction of charges required to implement the fiscal 1998 plan. See Note 14 to
Applied Biosystems' combined financial statements for a discussion of the
restructuring.
During fiscal 1999, Applied Biosystems was allocated a before-tax special charge
of $4.6 million for costs incurred in connection with the recapitalization of
our company. Applied Biosystems and the Celera Genomics group were each
allocated 50% of the $9.2 million total recapitalization costs incurred by our
company.
Fiscal 1998 included $28.9 million of purchased in-process research and
development associated with the acquisition of Molecular Informatics.
<TABLE>
<CAPTION>
Operating Income
(Dollar amounts in millions) 1998 1999
=============================================================
<S> <C> <C>
Operating income before
special items $ 130.4 $ 216.5
Asset impairment (14.5)
Long-term compensation
programs (9.1)
Charitable foundation
contribution (3.5)
Restructuring and other
merger costs, net (48.1) 3.1
Recapitalization costs (4.6)
Acquired research and
development (28.9)
- -------------------------------------------------------------
Operating income $ 53.4 $ 187.9
=============================================================
</TABLE>
Operating income increased to $187.9 million for fiscal 1999 compared with $53.4
million for fiscal 1998. On a comparable basis, excluding the results of Tecan
and the special items previously described, operating income increased 60.7% for
fiscal 1999 compared with fiscal 1998. Applied Biosystems benefited from
increased revenues, higher gross margins, and lower operating expenses as a
percentage of net revenues. Higher operating income from sequencing, mapping
systems, and LC/MS products were the primary contributors. The effects of
foreign currency translation for Applied Biosystems increased operating income
by less than 1% for fiscal 1999 compared with fiscal 1998. Operating income as a
percentage of net revenues, excluding the results of Tecan and the special
items, increased to 17.6% for fiscal 1999 compared with 13.8% for fiscal 1998.
For fiscal 1999 and 1998, Applied Biosystems recorded gains of $4.5 million and
$1.6 million, respectively, on the sale and release of contingencies on minority
equity investments. Fiscal 1999 also included a gain of $1.6 million related to
the sale of our company's interest in Tecan.
Interest expense was $4.5 million for fiscal 1999 compared with $4.9 million for
fiscal 1998. This decrease was primarily due to the refinancing of PerSeptive's
8-1/4% Convertible Subordinated Notes (the "PerSeptive Notes") and lower average
interest rates. Fiscal 1999 included $.7 million of interest expense associated
with the note payable to the Celera Genomics group. Interest income was $2.3
million for fiscal 1999 compared with $5.9 million for fiscal 1998, primarily
because of lower average cash balances during the fiscal year.
Other income, net for fiscal 1999 was $.5 million compared with $3.1 million for
fiscal 1998. Fiscal 1999 other income, net primarily related to the revaluation
of foreign exchange contracts and a legal settlement that were partially offset
by the loss on the disposal of certain assets and other non-operating costs.
Other income, net for fiscal 1998 resulted from a gain on the sale of certain
operating and non-operating assets.
The effective income tax rate was 16% for fiscal 1999 and 50% for fiscal 1998.
Excluding Tecan, and the special items, the effective income tax rate was 29%
for fiscal 1999 and 25% for fiscal 1998. The effective income tax rate for
fiscal 1999 included the release of valuation allowances of $17.4 million.
Because the sale of the Analytical Instruments business had been completed, the
valuation allowance was reduced as management believed that it was more likely
than not that the deferred tax assets to which the valuation allowance related
would be realized. An analysis of the differences between the federal statutory
income tax rate and the effective income tax rate is provided in Note 4 to
Applied Biosystems' combined financial statements.
Applied Biosystems incurred minority interest expense of $13.4 million for
fiscal 1999 and $5.6 million for fiscal 1998 relating to our company's 14.5%
financial interest in Tecan. As previously indicated, our company divested its
interest in Tecan during the fourth quarter of fiscal 1999.
================================================================================
PE CORPORATION 2000 ANNUAL REPORT 14
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
Market Risk
Applied Biosystems operates internationally, with manufacturing and distribution
facilities in various countries throughout the world. For fiscal 2000 and 1999,
Applied Biosystems derived approximately 50% of its revenues from countries
outside of the United States. Results continue to be affected by market risk,
including fluctuations in foreign currency exchange rates and changes in
economic conditions in foreign markets.
The risk management strategy for Applied Biosystems utilizes derivative
financial instruments, including forward, swap, and purchased option contracts,
to hedge certain foreign currency and interest rate exposures, with the intent
of offsetting losses and gains that occur on the underlying exposures with gains
and losses, respectively, on the derivatives. Applied Biosystems does not use
derivative financial instruments for trading purposes, nor is Applied Biosystems
a party to leveraged derivatives. At June 30, 2000, outstanding hedge contracts
covered approximately 50% of the estimated foreign currency exposures to be
realized over the next twelve months. The outstanding hedges were a combination
of forward and option contracts maturing over this period.
We performed sensitivity analyses as of June 30, 2000 and June 30, 1999.
Assuming a hypothetical adverse change of 10% in foreign exchange rates in
relation to the U.S. dollar at June 30, 2000, we calculated a hypothetical loss
of $1.9 million when comparing the change in fair value of both the foreign
currency contracts outstanding and the underlying exposures being hedged.
Performing a similar hypothetical calculation at June 30, 1999, we calculated a
hypothetical loss of $6.1 million. These hypothetical analyses exclude the
impact of foreign currency translation on Applied Biosystems' operations. Actual
gains and losses in the future could, however, differ materially from these
analyses, based on changes in the timing and amount of foreign currency exchange
rate movements and actual exposures and hedges.
Interest rate swaps are used to hedge underlying debt obligations. In fiscal
1997, PE executed an interest rate swap, allocated to Applied Biosystems, in
conjunction with our company entering into a five-year Japanese yen debt
obligation. Under the terms of the swap agreement, we pay a fixed rate of
interest at 2.1% and receive a floating LIBOR interest rate. At June 30, 2000,
the notional amount of indebtedness covered by the interest rate swap was yen
3.8 billion or $36.1 million. The maturity date of the swap coincides with the
maturity of the yen loan in March 2002. A change in interest rates would have no
impact on our reported interest expense and related cash payments because the
floating rate debt and fixed rate swap contract have the same maturity and are
based on the same rate index.
Management's Discussion of Financial Resources and Liquidity
The following discussion of financial resources and liquidity focuses on the
Combined Statements of Financial Position and the Combined Statements of Cash
Flows.
Cash and cash equivalents were $394.6 million at June 30, 2000 and $236.5
million at June 30, 1999, with total debt of $51.8 million at June 30, 2000 and
$185.4 million at June 30, 1999. Fiscal 1999 debt included a $150.0 million note
payable to the Celera Genomics group, which was paid during fiscal 2000.
Working capital was $395.1 million at June 30, 2000 and $274.6 million at June
30, 1999. Excluding the $150.0 million note payable to the Celera Genomics
group, working capital was $424.6 million at June 30, 1999. Debt to total
capitalization decreased to 5% at June 30, 2000 from 26% at June 30, 1999.
Excluding the note payable, debt to total capitalization was 6% at June 30,
1999.
At September 30, 1998, our company allocated to the Celera Genomics group a $330
million short-term note payable from Applied Biosystems. The $330 million note
represented an allocation of our company's capital to the Celera Genomics group
and did not result in Applied Biosystems holding an equity interest in the
Celera Genomics group. Accordingly, no interest was ascribed to the note. The
allocation of capital represented management's decision to allocate a portion of
our company's capital to the Celera Genomics group and the remaining capital to
Applied Biosystems prior to the effective date of the recapitalization. The note
payable was liquidated on May 28, 1999 in exchange for a portion of the proceeds
received from the sale of the Analytical Instruments business and a new note
payable to the Celera Genomics group for $150 million. The new note payable was
for a term of one-year, bearing an interest rate of 5% per annum. During fiscal
2000, Applied Biosystems transferred the funds received upon collection of the
promissory notes associated with the sale of the Analytical Instruments business
to satisfy the note payable to the Celera Genomics group.
In addition, our Board of Directors adopted a financing policy, included in Note
1 to Applied Biosystems' combined financial statements, that permits Applied
Biosystems to make loans to the Celera Genomics group and to make equity
contributions to the Celera Genomics group in exchange for an equity interest in
the Celera Genomics group.
Significant Changes in the Combined Statements of Financial Position
Accounts receivable increased $61.2 million to $367.4 million at June 30, 2000
from $306.2 million at June 30, 1999, reflecting the growth in net revenues.
Other long-term assets increased to $469.4 million at June 30, 2000 from $247.1
million at June 30, 1999. The change was primarily a result of a net $251.5
million increase in minority equity investments, offset by a $28.3 million
decrease in non-current deferred tax asset.
================================================================================
15 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
The decrease in non-current deferred tax asset was primarily due to the increase
in the tax liability established for unrealized gains on equity securities of
minority investments.
The tax benefit payable to the Celera Genomics group increased to $16.7 million
at June 30, 2000 from $9.9 million at June 30, 1999. See Note 1 to Applied
Biosystems' combined financial statements.
Accounts payable increased to $173.6 million at June 30, 2000 from $147.7
million at June 30, 1999. The increase was primarily related to higher purchases
to support production and operating requirements as a result of revenue growth
in fiscal 2000.
Accrued salaries and wages increased $36.1 million to $79.4 million at June 30,
2000 from $43.3 million at June 30, 1999, primarily reflecting the timing of
payments.
Accrued taxes on income increased $17.3 million to $149.5 million at June 30,
2000 from $132.2 million at June 30, 1999, as a result of the increased income
before taxes in foreign tax jurisdictions.
Combined Statements of Cash Flows
Operating activities from continuing operations generated $166.9 million of cash
for fiscal 2000 compared with $102.4 million for fiscal 1999 and $74.9 million
for fiscal 1998. For fiscal 2000, effective working capital management was the
primary contributor to the increase in operating cash flow.
For fiscal 2000, net cash provided by investing activities from continuing
operations was $117.6 million, compared with $239.3 million for fiscal 1999. For
fiscal 2000, Applied Biosystems' capital expenditures were $95.5 million. The
capital expenditures included $8.6 million related to improvement of its
information technology infrastructure and $21.6 million for the acquisition of a
new corporate airplane. Applied Biosystems realized net cash proceeds of $82.8
million from the sale of minority equity investments and real estate during
fiscal 2000. Applied Biosystems invested $20.7 million in minority investments
in fiscal 2000. The $150 million note receivable resulting from the sale of the
Analytical Instruments business was collected during fiscal 2000.
For fiscal 1999, Applied Biosystems generated $325.8 million in net cash
proceeds from the sale of various assets. Net cash proceeds included $275.0
million from the sale of the Analytical Instruments business, $30.0 million from
the sale of Tecan, and $20.8 million from the sale of minority equity
investments and certain non-operating assets. The proceeds were partially offset
by $92.1 million of capital expenditures, which included $12.9 million as part
of the strategic program to improve its information technology infrastructure,
$17.5 million for the acquisition of an airplane, and $10.6 million of capital
equipment leased to the Celera Genomics group. For fiscal 1999, $4.0 million was
used for various acquisitions and investments.
For fiscal 1998, net cash used by investing activities from continuing
operations was $125.7 million. During fiscal 1998, Applied Biosystems generated
$19.5 million in net cash proceeds from the sale of assets and $9.7 million from
the collection of a note receivable. The proceeds were more than offset by $68.2
million of capital expenditures, which included $33.7 million as part of the
strategic program to improve its information technology infrastructure, and
$98.0 million for acquisitions and investments, primarily Tecan and Molecular
Informatics.
Net cash used by financing activities was $98.9 million for fiscal 2000 compared
with $146.4 million for fiscal 1999. For fiscal 2000, Applied Biosystems
received $43.4 million of proceeds from stock issued for stock plans compared
with $94.9 million for fiscal 1999. Fiscal 1999 included $2.2 million for the
purchase of shares of common stock for treasury. No shares were repurchased
during fiscal 2000 or 1998. Dividends paid were $26.4 million for fiscal 2000
and $34.2 million for fiscal 1999. Increases in loans payable were $6.7 million
for fiscal 2000 compared with a reduction in loans payable and principal
payments on long-term debt of $16.4 million for fiscal 1999. During fiscal 2000,
Applied Biosystems transferred the $150 million received on the collection of
the promissory notes associated with the sale of the Analytical Instruments
business to satisfy the note payable to the Celera Genomics group. In connection
with the Celera Genomics group's acquisition of Paracel, Inc. during fiscal
2000, the transfer of the Paracel shares allocated to Applied Biosystems
resulted in a $27.3 million cash payment from the Celera Genomics group, which
represented the fair market value of those shares at the transfer date. See Note
2 to Applied Biosystems' combined financial statements for a discussion of the
Paracel transaction. Net cash allocated for fiscal 1999 to the Celera Genomics
group was $188.5 million, representing payments against the $330 million note
payable established at September 30, 1998 and cash funding for the first quarter
of fiscal 1999.
During fiscal 1998, Applied Biosystems received $33.6 million of proceeds from
stock issued for stock plans. These were more than offset by stockholder
dividend payments of $39.1 million and a reduction in loans payable and
principal payments on long-term debt of $32.2 million. The fiscal 1998 principal
payment on long-term debt included $24.7 million for the redemption of the
PerSeptive Notes. Net cash allocated for fiscal 1998 to the Celera Genomics
group was $10.5 million.
During fiscal 2000, Applied Biosystems made cash payments of $3.5 million for
obligations related to restructuring plans. Restructuring liabilities remaining
at June 30, 2000 were $2.3 million. See Note 14 to Applied Biosystems' combined
financial statements. The funding for the remaining restructuring liabilities
will be from current cash balances and funds generated from operating
activities.
Our company's $100 million revolving credit agreement was replaced effective
April 20, 2000 with a new $100 million revolving credit agreement with four
banks that matures on
================================================================================
PE CORPORATION 2000 ANNUAL REPORT 16
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
April 20, 2005. Terms of this new revolving credit agreement are substantially
similar to those of the previous credit agreement.
Applied Biosystems believes its cash and cash equivalents, funds generated from
operating activities, and available borrowing facilities are sufficient to
provide for its anticipated financing needs for at least the next two years. At
June 30, 2000, our company had unused credit facilities totaling $341 million
which is available to the groups.
Impact of Inflation and Changing Prices
Inflation and changing prices are continually monitored. Applied Biosystems
attempts to minimize the impact of inflation by improving productivity and
efficiency through continual review of both manufacturing capacity and operating
expense levels. When operating costs and manufacturing costs increase, Applied
Biosystems attempts to recover such costs by increasing, over time, the selling
price of its products and services. Applied Biosystems believes the effects of
inflation have been appropriately managed and therefore have not had a material
impact on its historic operations and resulting financial position.
Euro Conversion
A single currency called the euro was introduced in Europe on January 1, 1999.
Eleven of the fifteen member countries of the European Union agreed to adopt the
euro as their common legal currency on that date. Fixed conversion rates between
these participating countries' existing currencies (the "legacy currencies") and
the euro were established as of that date. The legacy currencies are scheduled
to remain legal tender as denominations of the euro until at least January 1,
2002, but not later than July 1, 2002. During this transition period, parties
may settle transactions using either the euro or a participating country's legal
currency.
Applied Biosystems is currently evaluating the impact of the euro conversion on
its computer and financial systems, business processes, market risk, and price
competition. Applied Biosystems does not expect this conversion to have a
material impact on its results of operations, financial position, or cash flows.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," amended in June 2000 by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities."
The provisions of the statements require the recognition of all derivatives as
either assets or liabilities in the statement of financial position and the
measurement of those instruments at fair value. The accounting for changes in
the fair value of a derivative depends on the intended use of the derivative and
the resulting designation. Applied Biosystems is required to implement the
statements in the first quarter of fiscal 2001. Applied Biosystems estimates
that, upon adoption, it will record an immaterial adjustment for a change in
accounting principles in its Combined Statements of Operations and in
accumulated other comprehensive income in the Combined Statements of Financial
Position.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB No. 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. Applied Biosystems does not expect any
impact from the application of SAB No. 101.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN No. 44"),
"Accounting for Certain Transactions Involving Stock Compensation-An
Interpretation of Accounting Principles Board ("APB") Opinion No. 25." FIN No.
44 clarifies the following: the definition of an employee for purposes of
applying APB No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of the previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN No. 44 is
effective July 1, 2000, but certain conclusions in FIN No. 44 cover specific
events that occurred after either December 15, 1998 or January 12, 2000.
Management does not expect the application of FIN No. 44 to have a material
impact on Applied Biosystems' combined financial statements.
Applied Biosystems continues to apply APB No. 25 in accounting for stock-based
compensation plans. Accordingly, no compensation expense has been recognized for
these plans, as all options have been issued with an exercise price equal to
fair value. The effect of accounting for such plans at fair value, under SFAS
No. 123, "Accounting for Stock-Based Compensation," would be to decrease fiscal
2000 income from continuing operations by $46.0 million and diluted earnings per
share from continuing operations by $.21. The method used to determine the fair
value is the Black-Scholes option pricing model. Accordingly, changes in
dividend yield, volatility, interest risk, and option life could have a material
effect on the fair value. See Note 8 to Applied Biosystems' combined financial
statements for a more detailed discussion regarding the accounting for
stock-based compensation.
Outlook
Applied Biosystems expects to continue to grow and maintain profitability in
fiscal 2001. Applied Biosystems should continue to benefit from its customers in
basic medical research, pharmaceutical development, and applied markets for
sophisticated, automated, and cost-effective life science tools.
================================================================================
17 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
Sales of Applied Biosystems' genetic analysis systems are increasingly moving
beyond the basic research markets to a wider group of commercial customers and
public agencies. Applied Biosystems should also benefit from shipments of new
high-throughput screening products such as the FMAT(TM) 8100 HTS System, the
NorthStar(TM) HTS Workstation, and the ABI PRISM(TM) 6700 Automated Nucleic Acid
Workstation. Applied Biosystems recently announced new products and initiatives
in proteomics and a new genetic analyzer system. Applied Biosystems expects that
the ABI PRISM(R) 3100 Genetic Analyzer and the forthcoming MALDI-Q-STAR(TM) for
proteomics will be important new products during fiscal 2001. During the next
year, Applied Biosystems expects to introduce other new products to serve unmet
customer needs in the areas of gene expression, SNP analysis, and proteomics.
We remain concerned about adverse currency effects because approximately 50% of
our revenues were derived from regions outside the United States in fiscal 2000.
Forward-Looking Statements
Certain statements contained in this report, including the Outlook section, are
forward-looking and are subject to a variety of risks and uncertainties. These
statements may be identified by the use of forward-looking words or phrases such
as "believe," "expect," "anticipate," "should," "planned," "estimated," and
"potential," among others. These forward-looking statements are based on our
current expectations. The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for such forward-looking statements. In order to comply
with the terms of the safe harbor, we note that a variety of factors could cause
our actual results and experience to differ materially from the anticipated
results or other expectations expressed in such forward-looking statements. The
risks and uncertainties that may affect the operations, performance,
development, and results of our businesses include, but are not limited to:
Rapidly changing technology in life sciences could make Applied Biosystems'
product line obsolete unless it continues to improve existing products and
develop new products. A significant portion of the net revenues for Applied
Biosystems each year is derived from products that did not exist in the prior
year. Applied Biosystems' future success will depend on its ability to
continually improve its current products and to develop and introduce, on a
timely and cost-effective basis, new products that address the evolving needs of
its customers. Applied Biosystems' products are based on complex technology
which is subject to rapid change as new technologies are developed and
introduced in the marketplace. Unanticipated difficulties or delays in replacing
existing products with new products could adversely affect Applied Biosystems'
future operating results.
A significant portion of sales depends on customers' capital spending policies
which may be subject to significant and unexpected decreases. A significant
portion of Applied Biosystems' instrument product sales are capital purchases by
its customers. Applied Biosystems' customers include pharmaceutical,
environmental, research, and chemical companies, and the capital spending
policies of these companies can have a significant effect on the demand for
Applied Biosystems' products. These policies are based on a wide variety of
factors, including the resources available to make purchases, the spending
priorities among various types of research equipment, and policies regarding
capital expenditures during recessionary periods. Any decrease in capital
spending or change in spending policies of these companies could significantly
reduce the demand for Applied Biosystems' products.
A substantial portion of Applied Biosystems' sales is to customers at
universities or research laboratories whose funding is dependent on both the
level and timing of funding from government sources. As a result, the timing and
amount of revenues from these sources may vary significantly due to factors that
can be difficult to forecast. Although research funding has increased during the
past several years, grants have, in the past, been frozen for extended periods
or otherwise become unavailable to various institutions, sometimes without
advance notice. Budgetary pressures, particularly in the United States and
Japan, may result in reduced allocations to government agencies that fund
research and development activities. If government funding necessary to purchase
Applied Biosystems' products were to become unavailable to researchers for any
extended period of time, or if overall research funding were to decrease, the
business of Applied Biosystems could be adversely affected.
Due to rapidly developing technology and lack of legal precedents, Applied
Biosystems' products could be subject to claims for patent infringement and
trade secret theft. Applied Biosystems' products are based on complex, rapidly
developing technologies. These products could be developed without knowledge of
previously filed but unpublished patent applications that cover some aspect of
these technologies. In addition, there are relatively few decided court cases
interpreting the scope of patent claims in these technologies, and Applied
Biosystems' belief that its products do not infringe the technology covered by
patents and patent applications could be successfully challenged by third
parties. Also, in the course of its business, Applied Biosystems may from time
to time have access to confidential or proprietary information of third parties,
and such parties could bring a theft of trade secret claim against Applied
Biosystems asserting that Applied Biosystems' products improperly utilize
technologies which are not patented but which are protected as trade secrets.
Applied Biosystems has been and could be in the future made a party to
litigation regarding intellectual property matters. Applied Biosystems has from
time to time been notified that it may be infringing certain patents and other
intellectual property rights of others. It may be necessary or desirable in the
future to obtain licenses relating to one or more products or relating to
current or future technologies, and we cannot assure you that Applied Biosystems
will be able to obtain these licenses or other rights on commercially reasonable
terms.
================================================================================
PE CORPORATION 2000 ANNUAL REPORT 18
<PAGE>
APPLIED BIOSYSTEMS Management's Discussion and Analysis continued
Since Applied Biosystems' business is dependent on foreign sales, fluctuating
currencies will make our revenues and operating results more volatile.
Approximately 50% of Applied Biosystems' net revenues during fiscal 2000 were
derived from sales to customers outside of the United States. The majority of
these sales were based on the relevant customer's local currency. As a result,
Applied Biosystems' reported and anticipated operating results and cash flows
are subject to fluctuations due to material changes in foreign currency exchange
rates that are beyond Applied Biosystems' control.
Integrating acquired technologies may be costly and may not result in
technological advances. The future growth of Applied Biosystems depends in part
on its ability to acquire complementary technologies through acquisitions and
investments. Since January 1, 1996, Applied Biosystems has acquired a number of
companies, including PerSeptive Biosystems, Inc., Molecular Informatics, Inc.,
and Tropix, Inc., and made investments in others. The consolidation of
employees, operations, and marketing and distribution methods could present
significant managerial challenges. For example, Applied Biosystems may encounter
operational difficulties in the integration of manufacturing or other
facilities. In addition, technological advances resulting from the integration
of technologies may not be achieved as successfully or rapidly as anticipated,
if at all.
Earthquakes could disrupt operations in California. A significant portion of
Applied Biosystems' operations is located near major California earthquake
faults. The ultimate impact of earthquakes on Applied Biosystems, significant
suppliers and the general infrastructure is unknown, but operating results could
be materially affected in the event of a major earthquake.
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19 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Combined Statements of Operations
<TABLE>
<CAPTION>
(Dollar amounts in thousands except per share amounts)
For the years ended June 30, 1998 1999 2000
=================================================================================================================
<S> <C> <C> <C>
Net Revenues $ 940,095 $ 1,221,691 $ 1,388,100
Cost of sales 431,738 562,867 637,693
- -----------------------------------------------------------------------------------------------------------------
Gross Margin 508,357 658,824 750,407
- -----------------------------------------------------------------------------------------------------------------
Selling, general and administrative 276,674 335,873 393,889
Research, development and engineering 105,485 133,525 141,194
Restructuring and other special charges 43,980 1,500 2,142
Acquired research and development 28,850
- -----------------------------------------------------------------------------------------------------------------
Operating Income 53,368 187,926 213,182
Gain on investments 1,605 6,126 48,603
Interest expense 4,905 4,503 8,126
Interest income 5,938 2,344 18,620
Other income, net 3,147 522 3,446
- -----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 59,153 192,415 275,725
Provision for income taxes 29,547 30,688 89,478
Minority interest 5,597 13,362
- -----------------------------------------------------------------------------------------------------------------
Income From Continuing Operations 24,009 148,365 186,247
- -----------------------------------------------------------------------------------------------------------------
Discontinued Operations, Net Of Income Taxes
Income (loss) from discontinued operations 40,694 (21,109)
Gain on disposal of discontinued operations 100,167
- -----------------------------------------------------------------------------------------------------------------
Net Income $ 64,703 $ 227,423 $ 186,247
=================================================================================================================
Income Per Share From Continuing Operations
(see Note 1)
Basic $ .74 $ .90
Diluted $ .72 $ .86
Income Per Share From Discontinued Operations
Basic $ .39
Diluted $ .38
Net Income Per Share
Basic $ 1.13 $ .90
Diluted $ 1.10 $ .86
=================================================================================================================
</TABLE>
See accompanying notes to Applied Biosystems' combined financial statements.
The PE Biosystems group is currently doing business as Applied Biosystems and
will seek formal approval of a change to this name at the 2000 annual meeting.
The PE Biosystems group is referred to as Applied Biosystems.
================================================================================
PE CORPORATION 2000 ANNUAL REPORT 20
<PAGE>
APPLIED BIOSYSTEMS Combined Statements of Financial Position
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
At June 30, 1999 2000
====================================================================================================
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 236,530 $ 394,608
Note receivable 150,000
Accounts receivable (less allowances for doubtful
accounts of $3,834 and $3,965, respectively) 306,225 367,370
Inventories 149,670 154,491
Prepaid expenses and other current assets 75,801 81,338
- ----------------------------------------------------------------------------------------------------
Total current assets 918,226 997,807
Property, plant and equipment, net 182,183 230,940
Other long-term assets 247,141 469,409
- ----------------------------------------------------------------------------------------------------
Total Assets $ 1,347,550 $ 1,698,156
====================================================================================================
Liabilities And Group Equity
Current liabilities
Loans payable $ 3,911 $ 15,693
Note payable to the Celera Genomics group (see Note 3) 150,000
Tax benefit payable to the Celera Genomics group (see Note 1) 9,935 16,702
Accounts payable 147,704 173,631
Accrued salaries and wages 43,316 79,409
Accrued taxes on income 132,170 149,505
Other accrued expenses 156,552 167,718
- ----------------------------------------------------------------------------------------------------
Total current liabilities 643,588 602,658
Long-term debt 31,452 36,115
Other long-term liabilities 138,178 125,019
- ----------------------------------------------------------------------------------------------------
Total Liabilities 813,218 763,792
- ----------------------------------------------------------------------------------------------------
Commitments and contingencies (see Note 10)
Group Equity 534,332 934,364
- ----------------------------------------------------------------------------------------------------
Total Liabilities And Group Equity $ 1,347,550 $ 1,698,156
====================================================================================================
</TABLE>
See accompanying notes to Applied Biosystems' combined financial statements.
The PE Biosystems group is currently doing business as Applied Biosystems and
will seek formal approval of a change to this name at the 2000 annual meeting.
The PE Biosystems group is referred to as Applied Biosystems.
================================================================================
21 PE CORPORATION 2000 ANNUAL REPORT
<PAGE>
APPLIED BIOSYSTEMS Combined Statements of Cash Flows
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
For the years ended June 30, 1998 1999 2000
================================================================================================================
<S> <C> <C> <C>
Operating Activities From Continuing Operations
Income from continuing operations $ 24,009 $ 148,365 $ 186,247
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities
Depreciation and amortization 35,278 44,309 54,513
Long-term compensation programs 6,853 14,680 9,652
Deferred income taxes 10,234 (25,533) (19,428)
Gains from sales of assets (3,052) (6,126) (56,801)
Provision for restructured operations and other
merger costs 48,080 (9,200)
Acquired research and development 28,850
Asset impairment 14,464
Changes in operating assets and liabilities
Increase in accounts receivable (23,153) (105,018) (62,186)
Increase in inventories (21,362) (22,387) (2,795)
Increase in prepaid expenses and other assets (30,858) (43,207) (22,396)
Increase in accounts payable and other liabilities 68 92,052 80,061
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 74,947 102,399 166,867
- ----------------------------------------------------------------------------------------------------------------
Investing Activities From Continuing Operations
Additions to property, plant and equipment (net of
disposals of $11,339, $9,614, and $1,026, respectively) (56,833) (82,463) (94,449)
Acquisitions and investments, net (97,998) (4,025) (20,748)
Proceeds from the sale of assets, net 19,496 325,766 82,763
Proceeds from the collection of notes receivable 9,673 150,000
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) By Investing Acti