FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-16979
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ADT LIMITED
(Exact Name of Registrant as Specified in its Charter)
BERMUDA Cedar House Not Applicable
(Jurisdiction of Incorporation 41 Cedar Avenue (I.R.S. Employer
or Organization) Hamilton HM12, Bermuda Identification No.)
(Address of Principal
Executive Offices)* Not Applicable
(Zip Code)
Registrant's telephone number, including area code 441-295-2244* *See page 2
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Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Shares, par value
$0.10 per share New York Stock Exchange
Series A First Preference
Share purchase rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[ ]
Based on the closing market price per Common Share of $26 7/8 on March 24,
1997, the aggregate market value of the voting shares held by non
affiliates of the registrant was $4,125.7 million.
At March 24, 1997, the number of shares outstanding of the registrant's Common
Shares par value $0.10 per share was 156,696,447 shares. A subsidiary of ADT
Limited owns 3,182,787 Common Shares which are included in the number
outstanding.
<PAGE>
Table of Contents
Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS................................ 1
ITEM 2. DESCRIPTION OF PROPERTIES.............................. 15
ITEM 3. LEGAL PROCEEDINGS...................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS...................................... 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS........................ 19
ITEM 6. SELECTED FINANCIAL DATA................................ 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............ 34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..... 34
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..... 34
ITEM 11. EXECUTIVE COMPENSATION................................. 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
AND MANAGEMENT......................................... 45
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......... 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K................................ 47
SIGNATURES............................................. 52
i
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ADT LIMITED ANNUAL REPORT ON FORM 10-K
The consolidated financial statements of ADT Limited (ADT Limited and its
subsidiaries, where appropriate, is sometimes referred to hereinafter as "ADT"
or the "Company") appearing in this Annual Report have been prepared in United
States dollars ("US dollars" or "$") in accordance with generally accepted
accounting principles in the United States.
This Annual Report contains translations of certain amounts from various
currencies into US dollars. The translations of such foreign currencies into
US dollars appearing in this Annual Report have been made in accordance with
the principles set out in notes 2 and 3 of the notes to consolidated financial
statements of the Company.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
ADT, through its subsidiaries, is engaged in two service businesses,
electronic security services in North America and Europe and vehicle auction
and related services in the United States.
History of ADT Limited
ADT Limited was incorporated in Bermuda on September 28, 1984 under the name
Hawley Group Limited. In December 1984, as part of a corporate
reorganization, Hawley Group Limited became the parent company of the Hawley
group of companies. Prior to this reorganization, the parent company of the
Hawley group of companies was Hawley Group PLC ("Hawley Group"), a company
into which new management had been introduced in 1977, headed by Mr. M.A.
Ashcroft, Chairman and Chief Executive Officer of ADT Limited. At the time of
the reorganization, the Hawley group of companies had a number of interests in
service and other industries. ADT Limited became a publicly traded company
under the name Hawley Group Limited on December 24, 1984 when its common
shares were listed for trading on the London Stock Exchange. Prior to this
date, the ordinary shares of Hawley Group had been listed on the London Stock
Exchange. Hawley Group Limited changed its name to ADT Limited in 1988 after
its acquisition in 1987 of ADT, Inc. (now named ADT Security Services, Inc.,
hereinafter "ADT Security Services"). ADT Limited's businesses are conducted
through its subsidiaries.
ADT Limited operates under the Companies Act, 1981 of Bermuda (as amended).
Development of ADT's Electronic Security Services Business
The electronic security services division in North America principally
consists of ADT Security Services, ADT Canada, Inc., Alert Centre, Inc.
("Alert") and API Security, Inc., a subsidiary of Automated Security
(Holdings) PLC ("ASH"). ADT built the core of its North American electronic
security services business by acquiring Electro-Protective Corporation of
America in 1981, the business of Crime Control, Inc., and ADT Security
Services in 1987. Between 1982 and 1985, ADT also acquired several small
security services businesses in North America. The electronic security
services division in Europe consists of ASH, principally doing business as
Modern Security Systems Limited in the United Kingdom, and Electric Protection
Services Limited doing business as ADT Security Systems in the United Kingdom
("Electric Protection") and other subsidiaries doing business under the ADT
name in continental Europe. Electric Protection and the principal continental
European subsidiaries were acquired as part of the acquisition of ADT Security
Services in 1987.
1
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In 1990, ADT acquired Britannia Security Group PLC
("Britannia"), operating principally in the United Kingdom and, in the third
quarter of 1996 merged with and acquired ASH, which provides electronic
security services in the United Kingdom and North America. In the fourth
quarter of 1995, ADT disposed of its electronic article surveillance business
which was based in Europe and which was previously acquired as part of
Britannia. Alert, which provides electronic security services in the United
States, was acquired in the fourth quarter of 1995.
Development of ADT's Vehicle Auction Business
ADT's auction division was established in 1987 by the acquisition of The
British Car Auction Group PLC ("BCA") which, at that time, had 14 auction
centers in the United Kingdom and 12 auction centers in the United States.
BCA was established in the United Kingdom in 1946 and, during the period from
1946 to 1982, it expanded its vehicle auction business in the United Kingdom.
In 1982, BCA entered the vehicle auction business in the United States by
acquiring two vehicle auctions. From 1982 to 1987, BCA acquired and
constructed additional auction sites in both the United States and the United
Kingdom. Since 1987, the auction division has expanded its vehicle auction
operations by the purchase of eight auction businesses and four auction
centers in the United States, the development and construction of seven new
auction centers and by internal growth. In the fourth quarter of 1995, ADT
disposed of its vehicle auction businesses in the United Kingdom and
continental Europe, retaining a 10 per cent equity interest. In the United
States, the auction division consists of ADT Automotive Holdings, Inc. and its
subsidiaries (formerly Anglo American Auto Auctions).
Registered and Principal Executive Offices
The registered and principal executive offices of ADT Limited are located at
Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda. The executive offices
of the subsidiary which supervises ADT's North American activities are located
in the United States at 1750 Clint Moore Road, PO Box 5035, Boca Raton, Florida
33431. The telephone number there is 561-988-3600.
BUSINESS DESCRIPTION
ADT, through its subsidiaries, is engaged in two service businesses,
electronic security services in North America and Europe and vehicle auction
and related services in the United States. In this business description, the
term "ADT" is used to refer to the relevant operating subsidiary of ADT
Limited engaged in that part of the business being described where the term
appears.
ADT's principal activities in the electronic security services business are
the electronic monitoring and maintenance of its installed base of security
systems and the installation of new, monitored security systems to add to its
installed base. Monitored systems may be sold or, as is most often the case,
ADT may retain ownership of installed systems. ADT receives contractual
recurring fees for monitoring security systems through its electronic customer
monitoring centers and for maintenance of security systems installed at
customer premises and other related services. ADT sells, installs and
maintains monitored security systems, integrated electronic security systems
and other electronic security products for additional fees. Annualized
contractually recurring fees for electronic monitoring and maintenance of
security systems installed at customer premises, and other related services,
as of December 31, 1996, represented approximately 65 per cent of ADT's total
electronic security services revenues in North America and Europe for 1996.
The remainder of ADT's security revenues were derived from the outright sale
and installation of security systems, the installation of security systems in
accordance with monitoring service agreements and the maintenance of security
systems on a non-contractual basis.
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ADT's vehicle auction business operates a network of large modern auction
centers in the United States which provide an organized wholesale marketplace
for the sale and purchase of used vehicles. Principal sellers, or consignors,
include new and used vehicle dealers, vehicle manufacturers, fleet operators,
leasing companies, financial institutions and government agencies. Principal
purchasers include franchise and non-franchise vehicle dealers and
distributors who acquire vehicles to sell in the retail market.
The following table presents the proportion of revenues derived by ADT from
electronic security services and vehicle auction services in 1995 and 1996.
<TABLE>
<S> <C> <C> <C> <C>
Proportion of total Proportion of total
Electronic Security Services Business Revenues
Revenues
1995 1996 1995 1996
Electronic Security Services
North America 71% 75% 54% 62%
United Kingdom and Continental Europe 29% 25% 22% 20%
Proportion of total Vehicle
Auction Services Revenues
Vehicle Auction Services
United States 62% 100% 15% 18%
United Kingdom and Continental Europe 38% * 9% *
</TABLE>
* ADT's vehicle auction services businesses in the United Kingdom and
continental Europe were disposed of in the fourth quarter of 1995.
Electronic Security Services
The Industry
The security services industry encompasses a wide range of products and
services, which can be broadly divided into electronic security products and
services and highly labor intensive manned guarding and patrol services.
ADT's electronic security services division competes primarily in the
comparatively capital intensive electronic monitoring security services sector
of the industry. Electronic security products and services consist of the
sale, installation, continuous monitoring and maintenance of electronic
security systems for commercial and residential use. This business utilizes
modern electronic devices installed in customers' businesses and residences to
provide detection of events, such as intrusion or fire, surveillance and
control of access or articles. Event detection devices may be monitored by
monitoring centers, such as ADT's customer monitoring centers, which are
linked to the customer through telephone lines. These centers are often
located at remote distances from the customer's premises. In some instances,
the customer may monitor these devices at its own premises or the devices may
be connected to local fire or police departments. The products and services
marketed in the electronic security services industry range from residential
systems that provide basic entry and fire protection to sophisticated
commercial systems incorporating closed circuit television systems and access
control.
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The development of centrally monitored alarm systems began at the turn of the
century and, historically, these systems were considered a relatively
expensive form of security and were purchased primarily by businesses and
affluent individuals. The industry continued to evolve as telephone networks
spread and technology advanced. Progress continued steadily until the early
1970's when computer technology and semi-conductor components began to be
incorporated into monitoring systems. Since then, the development of
telecommunications technology and its application in security systems has
accelerated, and technological advances have increased the availability of
lower cost, sophisticated electronics. These advances have enabled the
industry to access a wider market by providing a broader range of monitored
security services at a variety of price levels. Concurrently with these
technological advances, demand for security systems has grown with the
increase in the general awareness of security issues and rising crime rates.
Customers also purchase security systems due to the practice in the insurance
industry of reducing premiums for customers who have a security system
installed, or requiring the installation of a security system as a condition
of coverage.
STAT Resources, Inc., an independent market research firm ("STAT Resources"),
estimates that total United States commercial electronic security systems and
services market revenues and total residential electronic security systems and
services market revenues were approximately $8.0 billion and $5.0 billion,
respectively in 1996. ADT accounted for approximately 7.7 per cent and 7.5
per cent of these amounts, respectively. Although a certain amount of
industry consolidation has taken place, the industry in North America remains
highly fragmented and STAT Resources estimates that there were approximately
13,000 companies in the United States electronic security systems and services
market in 1996. The electronic security services industry in Europe is also
highly fragmented.
Business Strategy
ADT[Registered] is a leading name in electronic security services, and ADT
believes that its name is important in the marketing of its security services
and in competing with other electronic security service providers. Before
1987, ADT's electronic security services business served predominantly
commercial customers. Since 1987, ADT's goals have been to create a lower
cost, more efficient operation, suitable for long-term growth and greater
profitability, and to take advantage of the economies of scale resulting from
increased utilization of its infrastructure. Since 1987, ADT has (i) reduced
the number of central stations and equipped its customer monitoring centers
with enhanced computer technology to further automate the monitoring process
and thus provide increased monitoring capacity, (ii) modernized and
streamlined its computer-based administration and control systems, (iii)
enhanced customer service programs through improved training programs for
sales, management, installation and service employees and (iv) intensively
marketed electronic monitoring services to residential customers to take
greater advantage of the increased monitoring capacity created by the
monitoring center consolidation and modernization program.
Between 1987 and 1993, ADT significantly reduced the number of its central
stations from 162 to 30 in North America and Europe while increasing
monitoring capacity and maintaining geographical coverage. Since then ADT has
continued to pursue its strategy of central station consolidation, although
closures have taken place at a slower rate. Further opportunities for central
station consolidation now exist following the acquisition of ASH. In the first
quarter of 1997, ADT announced that it was investing in planned enhancements
to its technological infrastructure to facilitate a further consolidation of
its monitoring center network in order to provide for future anticipated growth
opportunities while lowering costs and increasing monitoring capacity and
operating efficiency.
As a result of ADT's program implemented in 1988 to target the residential
sector in North America, as well as growth in the level of consumer concern
over crime and security generally and the availability of lower priced
systems, ADT has significantly expanded its residential customer base in North
America. Since 1988, ADT has enjoyed an annual compound growth rate in
residential unit sales in excess of 36 per cent. ADT believes that because of
the success of its sales and marketing efforts since 1988, it is uniquely
positioned to benefit from the range of technological developments that are
expanding and diversifying the types of services that ADT is able to offer.
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During the past several years, ADT's business has been evolving from that of
primarily an intrusion alarm company into a data information company. ADT has,
in the past few years, been offering energy management products and services
to regulate the temperature and lighting in a customer's premises. This
service has been achieved through the use of a communication protocol which
utilizes the premises' existing alternating-current wiring. Another creative
use of new technologies has permitted the launch of CarCop[Registered] which
combines three significant infrastructures, cellular communications, the
global positioning satellite system and ADT's 24 hour monitoring services, to
provide a revolutionary new personal protection and vehicle security service.
ADT believes that its broad customer base, its unique national distribution
system and its highly skilled workforce provide it with a strong capacity to
exploit new technologies and, given the rapid pace of technological change, ADT
anticipates that it will explore partnering opportunities with premier
companies in a variety of industries.
ADT's overall goal is to expand its customer base in both the commercial and
residential sectors. The commercial sectors in North America, the United
Kingdom and continental Europe represent well established markets with growth
prospects closely related to the overall economic growth in these markets.
ADT's strategy is to retain a high percentage of its existing commercial and
residential customers by continuing to provide high quality service. As part
of its strategy to maintain and enhance its commercial market position in
North America, ADT has a national accounts sales team in place in the United
States to serve customers that have multiple locations. ADT believes that the
North American residential marketplace continues to represent a relatively
unpenetrated market and ADT's strategy is to continue to market and install
large numbers of new residential security systems, primarily in this market.
ADT is continuing to implement this strategy through intensive advertising and
marketing in metropolitan areas. ADT believes that incremental monitoring
revenues from new customers should enhance operating margins because
additional customers can be served through ADT's existing monitoring
facilities with very little impact on ADT's total operating costs associated
with monitoring security systems. ADT, however, incurs marketing costs
associated with the sale of new systems and incremental installation costs in
respect of each new system sold which are partly offset by a fee charged to
the customer on installation of the system. In the first quarter of 1997, ADT
announced that it was investing in planned enhancements to its technological
infrastructure to facilitate monitoring center consolidation and provide
increased capacity for future anticipated growth opportunities.
Consistent with its strategy, ADT acquired Alert in the fourth quarter of 1995
and merged with ASH in the third quarter of 1996 adding, in aggregate, over
375,000 customers to ADT's customer base. The acquisition of Alert also
provided ADT with an established dealer program under which security systems
are installed by third parties with the monitoring contracts being onsold to
ADT for monitoring. Such a program represents a cost effective way for ADT to
further enhance its operating leverage. The acquisition of ASH gave ADT
leadership in the electronic security services sector in the United Kingdom
and will provide ADT with a new marketing opportunity in the UK residential
market place.
The following table presents the approximate number of commercial and
residential customers in North America and Europe contracting with ADT for the
monitoring or maintenance of electronic security systems, together with the
aggregate annualized service revenue under contract, as of December 31, 1996,
and the annual combined discontinuance rate for commercial and residential
contracts in respect of 1996.
<TABLE>
<S> <C> <C> <C>
Number of Commercial Number of Residential Annualized Service Annual Combined
Customers Customers Revenue Discontinuance Rate
672,000 1,149,000 $920m 10.4%
</TABLE>
Annualized service revenue and annual combined discontinuance rate are defined
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Operations-Electronic Security Services".
5
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Commercial
ADT provides electronic security services and products to financial
institutions, industrial and commercial businesses and complexes, warehouses,
facilities of federal, state and local government departments, defense
installations, and health care and educational facilities. ADT conducts its
commercial operations in the United States, Canada, the United Kingdom, Spain,
France, Belgium, Greece, The Netherlands and the Republic of Ireland. ADT
sells, installs, monitors and maintains electronic security systems and
products located at its customers' premises. These systems and products are
tailored to customers' specific needs and include electronic monitoring
services that provide intrusion and fire detection, as well as card or keypad
activated access control systems and closed circuit television systems. ADT
also markets standard security packages for specific types of commercial
customers, such as retailers and banks. Certain commercial customers require
more complex electronic security systems. To meet this demand, ADT also sells
integrated electronic security systems that combine a variety of electronic
security services and products. These systems are integrated by ADT to
provide a single computer controlled security system. Integrated security
systems are typically owned by the customer and can range in price from a few
thousand to several million dollars. Integrated security systems may be
monitored by the customer at its premises or connected to an ADT monitoring
center. In either case, ADT usually provides support and maintenance for these
systems through service contracts.
The systems installed at commercial customers' premises may be owned by ADT
or, as in the case of most integrated systems, by the customer. When the
system is sold, the customer pays ADT the purchase price upon installation and
the customer also pays an installation fee. When monitoring equipment is
owned by ADT, as is most often the case, only an installation fee is charged.
Most customers also agree to pay an annual service charge for monitoring and
maintenance. Some customers elect to pay for maintenance on a per visit
basis. Service contracts for integrated security systems are negotiated on an
individual basis. For integrated systems, a separate fee is charged for
systems integration and installation. Service contracts are negotiated on an
individual basis depending upon the number of systems monitored, the type of
alarm transmission and the level of response services required.
STAT Resources estimates that total United States commercial electronic
security systems and services market revenues were approximately $8.0 billion
in 1996. ADT accounted for approximately 7.7 per cent of this amount.
Commercial customers are motivated to purchase security systems to protect
their property, employees and customers and by their insurance carriers which
may offer lower premium rates if a security system is installed or require
that a system be installed as a condition to coverage. Of those insurance
carriers in North America which offer lower premiums or will provide coverage
only to customers with centrally monitored alarm systems, most require the
monitoring center to be approved by Underwriters Laboratories, Inc. ("UL").
UL requires each monitoring center to meet specified design, technical and
operational standards, including back up power capability. UL confirms
compliance with its specifications through periodic on-site inspections. All
of ADT's customer monitoring centers in the United States are UL approved.
As of December 31, 1996, approximately 478,000 commercial customers, some of
which have multiple locations, were under contract in North America,
approximately 153,000 were under contract in the United Kingdom and
approximately 41,000 were under contract in continental Europe. The
electronic security services business in Europe services primarily commercial
customers. In 1996, approximately 68 per cent of ADT's total electronic
security services revenues in North America and Europe were derived from
commercial customers. The electronic security services division is not
dependent upon any single customer, as the revenue from any one customer does
not exceed one per cent of the division's total net revenues.
Contracts with commercial customers for monitoring and maintenance services
are usually for an initial five-year term, automatically renewing on a
year-to-year basis thereafter, unless canceled. A substantial number of
contracts are now beyond their initial term and are therefore on an automatic
renewal basis. It has been ADT's experience that monitoring contracts for
security systems are generally renewed upon their expiration. Contract
discontinuances, however, do occur, principally as a result of customer
relocation or closure.
ADT markets its electronic security services to commercial customers through a
direct sales force in North America and Europe and through direct mail and
print advertising. Customers which have multiple locations in North America
are serviced by a separate national accounts sales force.
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Residential
Residential electronic security services are primarily marketed to customers
in North America and consist of the sale, installation, monitoring and
maintenance of electronically monitored security systems to detect intrusion
and fire. Residential customer service and monitoring are performed from the
same facilities as those used for commercial accounts.
STAT Resources estimates that total United States residential electronic
security systems and services market revenues were approximately $5.0 billion
in 1996. ADT accounted for approximately 7.5 per cent of this amount.
As part of its business strategy, ADT began to intensively market monitored
security systems to residential customers in North America in 1988 and ADT
believes that it has been able to sell a large number of residential security
systems due to the growing level of consumer concern over crime and security
generally and the availability of lower priced systems. In addition,
residential customers are usually able to obtain more favorable insurance rates
if an electronically monitored security system is installed in their home.
ADT targets two groups of residential customers, those who typically require
relatively inexpensive, standard electronically monitored security systems and
a smaller group of residential customers who require more sophisticated
systems.
In 1996, ADT contracted to install and monitor approximately 280,000 new
residential security systems, principally in North America, and as of
December 31, 1996, ADT had approximately 1,149,000 residential customers under
contract for monitoring services, of which approximately 90 per cent were
located in North America. In 1996, approximately 32 per cent of ADT's total
electronic security services revenues in North America and Europe were derived
from residential customers. On average, fees charged by ADT for residential
monitoring services are lower than the fees charged for commercial monitoring
services. Contracts for residential services entered into after 1990 have
usually been for an initial three-year term, automatically renewing on a
year-to-year basis thereafter, unless canceled. For contracts entered into
after April 1992, automatic renewal has been for two-year terms, unless
canceled. A substantial number of contracts are now beyond their initial term
and are therefore on an automatic renewal basis. It has been ADT's experience
that residential contracts are generally renewed upon their expiration.
Contract discontinuances, however, do occur, principally as a result of
customers relocating.
In North America, ADT usually retains ownership of standard residential
systems whereas the more sophisticated systems are usually purchased by the
customer. When the system is sold, the customer pays ADT the purchase price
upon installation and the customer also pays an installation fee. When the
system is owned by ADT, as is most often the case, only an installation fee is
charged. Substantially all residential customers agree to pay an annual
service charge for monitoring and may also subscribe for maintenance services.
Uniform package prices are offered to residential customers who purchase ADT's
standard residential security system which includes a fixed number of
detection devices. Frequently, customers add detection devices to expand the
coverage of the system for which ADT charges an additional installation fee
and an additional sales charge if the system is purchased. Pricing for
residential customers who require more sophisticated systems depends upon the
monitoring components installed, the type of alarm transmission and other
services required.
ADT markets its electronic security services to residential customers through
television and radio advertising, print advertising, telemarketing, direct
mail and through a direct residential sales force as well as through
approximately 120 independent ADT authorized dealers and through third party
affinity marketing arrangements.
Installation, Service and Maintenance
As part of its effort to provide high quality service to its commercial and
residential customers, ADT maintains a trained installation, service and
maintenance force of in North America and Europe. These employees are trained
by ADT to install and service the various types of commercial and residential
security systems which are marketed by ADT. ADT also uses sub-contracted
personnel where appropriate.
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Product Sourcing
ADT does not manufacture any of the components used in its electronic security
services business, although it does provide its own specifications to
manufacturers for certain security system components and undertakes some final
assembly work in respect of more sophisticated systems. Due to the general
availability of the components used in its electronic security services
business, ADT believes that it is not consistent with its role as a services
company to be involved in manufacturing. This policy allows ADT to obtain the
components of its systems from a number of different sources and, by so doing,
to supply its customers with the latest technology generally available in the
industry. ADT is not dependent on any single source for its supplies and
components and has not experienced any material shortages of components.
Monitored Electronic Security Systems
ADT's electronically monitored security systems involve the use on a
customer's premises of devices designed to detect or react to various
occurrences or conditions, such as intrusions, movement, fire, smoke, flooding,
environmental conditions (including temperature or humidity variations),
industrial operations (such as water, gas or steam pressure and process flow
controls) and other hazards. In most systems, these detection devices are
connected to a microprocessor based control panel which communicates through
telephone lines to an ADT monitoring center where alarm and supervisory
signals are received and recorded. Systems may also incorporate an emergency
"panic button", which when pushed causes the control panel to transmit an
alarm signal that takes priority over other alarm signals. In most systems,
control panels can identify the nature of the alarm and the areas within a
building where the sensor was activated and transmit the information to an ADT
customer monitoring center. Depending upon the type of service for which the
subscriber has contracted, monitoring center personnel respond to alarms by
relaying appropriate information to the local fire or police departments,
notifying the customer or taking other appropriate action, such as dispatching
employees to the customer's premises.
In most systems, the control panel communicates with an ADT customer
monitoring center through one of four telephone line transmission systems,
direct wire, multiplex, digital communicator or derived channel. Direct wire
and multiplex systems are used mainly for commercial customers who require a
higher level of security, whereas digital communicator or derived channel
systems are used primarily in systems where cost is more important. Direct
wire transmission uses a dedicated leased telephone line and is the most
expensive form of monitoring connection. The multiplex system uses a remote
device to receive signals from multiple customers' premises and concentrate
and retransmit them over a dedicated leased telephone line to an ADT customer
monitoring center. These two transmission methods allow ADT to continuously
monitor the customer's security system to confirm that the connection to the
monitoring center is functioning properly. The multiplex system provides the
same level of security as direct wire but is less costly due to the reduced
number of dedicated telephone lines which are necessary to monitor the same
number of customers. ADT has a continuing selective conversion program to
replace direct wire transmission systems with lower cost multiplex or digital
systems. These conversions typically replace older equipment and result in a
reduction in telephone line costs and in the frequency of customer service
calls.
A security system which utilizes a digital communicator responds to an event
by dialing the monitoring center through the customer's regular telephone
line. Unlike multiplex and direct wire systems, these systems are not
continuously monitored, and if a control panel or the telephone line is not
functioning properly the monitoring center may not be alerted. The derived
channel system, which is not available in all markets, ties into the existing
regular telephone line network but allows parallel simultaneous communication
on one line using separate distinct frequencies. Using the derived channel
system, it is possible to continuously monitor a digital communicator
connection over the customer's regular telephone line. In certain markets ADT
also offers systems with backup transmission capability through radio
frequency transmission or the local cellular telephone network.
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Other Security Businesses
ADT entered the mobile security services market in 1996 with the launch of
CarCop[Registered], a vehicle security system introduced in the fourth quarter
of 1996 in conjunction with Mobile Security Communications, Inc. which is
responsible for the sale and installation of the CarCop product. CarCop
combines ADT's 24 hour monitoring services with cellular communications
technology and the Global Positioning Satellite system to provide constant
security coverage for a vehicle and its occupants whether the vehicle is
parked, unattended or in use. The system can detect a range of emergency
situations and, through utilizing ADT's 24 hour monitoring services and
employing satellite tracking technology, the appropriate assistance can be
despatched to the vehicle's exact location at any time, day or night.
Competition
The electronic security services business in North America is highly
competitive. New competitors, who have not necessarily had any previous
involvement in the provision of electronic security services, are continually
entering the field. Competition is based primarily on price in relation to
quality of service. ADT believes that the quality of its services is higher
than that of many of its competitors. Accordingly, ADT's prices may therefore
be higher than those charged by many of its competitors. Sources of
competition in the security services business are other providers of central
monitoring services, systems directly connected to police and fire
departments, local alarm systems and other methods of protection, such as
manned guarding. ADT believes the number of local police and fire departments
that perform monitoring has been declining for some years.
The central monitoring sector of the electronic security services business is
characterized by high fixed costs but has low marginal costs associated with
monitoring additional customers. Opportunities exist within the industry to
achieve economies of scale by consolidation of monitoring and administrative
functions and a certain amount of industry consolidation is currently taking
place. The industry in both North America and Europe, however, remains highly
fragmented. ADT believes that it services more customers through its customer
monitoring centers in North America than any other company. Individual
competitors, however, may service more customers in a given local market.
ADT competes with other major firms in North America, which have substantial
financial resources, including Ameritech Corporation (operating under the
SecurityLink from Ameritech[Registered] brand name); Borg-Warner Security
Corporation (operating under the Wells Fargo[Registered] and Pony
Express[Registered] brand names); the Honeywell Protection Services division
of Honeywell, Inc.; the Brink's Home Security division of The Pittston
Company; and approximately 13,000 smaller regional and local companies. ADT
also competes with several national companies and several thousand regional
and local companies in the United Kingdom and continental Europe.
In February 1996, a federal telecommunications reform bill was enacted which
contained provisions specific to the electronic security services industry.
Ameritech Corporation was prohibited from acquiring additional equity or
financial interests in alarm monitoring companies for five years from the date
of enactment of the law and the other regional Bell operating companies are
barred from acquiring more than a 10 per cent equity interest in alarm
monitoring companies or otherwise entering the business for five years from
the same date.
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Regulation
ADT's operations are subject to a variety of federal, state, county and
municipal laws, regulations and licensing requirements in the United States
and national and local government laws, regulations and licensing requirements
in countries outside the United States. Many of the states and countries in
which ADT operates, as well as certain local authorities, require ADT to
obtain licenses or permits to conduct its security services business. Certain
governmental entities also require persons engaged in the alarm business to be
licensed and to meet certain standards in the selection and training of
employees and in the conduct of business. ADT believes that it is in
substantial compliance with all such licensing and regulatory requirements in
each jurisdiction in which it operates. In addition, there has been a trend
recently on the part of municipalities and other localities to attempt to
reduce the level of false alarms through various measures such as the
licensing of individual alarm systems and the imposition of fines upon
customers, revocation of licenses or non-response to alarms after a certain
number of false alarms. While such statutes and ordinances have not had a
material adverse affect on ADT's business operations to date, ADT is unable
to predict whether such statutes or ordinances, or any similar statutes or
ordinances enacted by other jurisdictions, will adversely affect ADT's
business and operations in the future. The alarm industry is also subject to
the oversight and requirements of various insurance, approval, listing and
standards organizations. Adherence to the standards and requirements of such
organizations may be mandatory or voluntary depending upon the type of
customer served, the nature of security service provided and the requirements
of the local governmental jurisdiction. ADT has not had any material
difficulties in complying with such standards and requirements in the past.
ADT's electronic security business relies upon the use of telephone lines to
transmit signals, and the cost of such lines and the type of equipment which
may be utilized are currently regulated by both the federal and state
governments in the United States and national and local governments in other
countries.
Risk Management
The nature of the services provided by ADT potentially exposes it to greater
risks of liability for employee acts or omissions or product liability than
may be inherent in many other service businesses. To attempt to reduce this
risk, ADT's electronic security service contracts contain provisions limiting
its liability and requiring indemnification by its customers. ADT also
carries insurance of various types, including general liability and errors and
omissions insurance, to protect it from product defects and negligent acts of
its employees. ADT obtains such insurance at rates and upon terms negotiated
periodically with various underwriters. The loss experience of ADT and, to
some extent, other security services companies, may affect premium rates
charged to ADT. As of December 31, 1996 such policies provided that ADT
retain liability for the first $1.0 million per occurrence. Certain of ADT's
insurance policies and the laws of some states may limit or prohibit insurance
coverage for punitive or certain other kinds of damages arising from employee
misconduct. In addition, in some states ADT's limitation of liability clause
may be ineffective in cases of gross negligence and in certain other
situations.
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Patents and Trademarks
ADT Security Services holds approximately 40 active patents worldwide and has
several pending patent applications. No patents are due to expire in the near
future that would materially affect the operations of ADT's electronic
security services business. The ADT[Registered] trademark and service mark
are important to ADT's electronic security business. ADT Security Services
uses several other trademarks and service marks in marketing its products and
services,including Focus[Registered], Centrascan[Registered],
Safewatch[Registered] and Customer Link[Registered] . ADT believes that the
rights in these trademarks and service marks, including Focus, Centrascan,
Safewatch and the ADT trademark are adequately protected.
Employees
As of December 31, 1996, the electronic security services division had
approximately 16,000 employees, of whom approximately 12,000 were based in
North America and approximately 4,000 were based in Europe. The majority of
these employees are not represented by unions or covered by collective
bargaining agreements. ADT believes its relations with employees and their
unions are generally good.
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Vehicle Auction Services
The Industry
Vehicle auctions constitute a principal channel of distribution and
redistribution for used vehicles. An auction brings together, in one
location, dealers seeking to restock and diversify their inventory of used
cars with a high volume of various makes and models provided by sellers
seeking to dispose of their vehicles. The vehicle auction industry provides a
reliable marketplace where many dealers participate in the auction's bid
process and thus establish true wholesale prices for used vehicles. Vehicle
auctions are preferred by many dealers, financial institutions and other
sellers because an auction provides an efficient, cost-effective and
convenient method of vehicle resale at the prevailing market price.
The principal sources of vehicles for sale through auctions are consignments
by new and used vehicle dealers, vehicle manufacturers, corporate owners of
vehicles such as fleet operators, daily rental companies, leasing companies,
banks and other financial institutions, manufacturers' credit subsidiaries and
government agencies. The vehicles consigned by dealers include vehicles of
all types and ages and include vehicles that have been traded in against new
car sales. Vehicles consigned by corporate and financial owners include both
repossessed and off-lease vehicles and, as a result, are normally in the range
of one to four years old. The principal purchasers of vehicles at ADT's
auctions are new and used vehicle dealers and distributors.
ADT believes that the consignment of vehicles from dealers is the foundation
of the auction industry. Dealers rely on the sale of used vehicles for a
significant proportion of their profits and are both buyers and sellers at
auction.
A significant number of vehicles sold at auction in recent years has been
attributable to vehicles being disposed of by domestic and import
manufacturers who contract with certain auctions to sell used vehicles on
their behalf. In the late 1980's, vehicle manufacturers found it advantageous
to produce more vehicles than were necessary to satisfy immediate retail
demand. These vehicles were either sold to daily rental car companies with a
guarantee by such manufacturers to repurchase the vehicles or were leased to
the daily rental car companies ("Program Cars"). Upon repurchase, the vehicle
manufacturers chose to remarket these late-model cars to their dealers
primarily through the vehicle auction network. Program Car auctions are
restricted to each manufacturer's franchised dealers with the exception of
auctions for some small volume import manufacturers. According to industry
sources, the number of vehicles coming to auction from this source reached a
peak of 1.6 million units in 1991. As the industry came out of recession in
1992, volumes reduced and have stabilized at around 1.1 million vehicles per
year. When the number of cars available to daily rental companies through
manufacturers' guaranteed repurchase programs was at its peak, many of the top
rental companies obtained large numbers of their vehicles through such
programs. As manufacturers have reduced their buy back programs , the daily
rental companies have been obliged to purchase more vehicles in their own
names and, consequently, their need to remarket vehicles at the end of their
life cycle has increased.
Vehicles owned by corporations and financial institutions represent another
major source of vehicles for sale at auction and include vehicles owned by
daily rental companies, vehicles from company fleets, end of term or early
termination vehicles from leasing companies, including manufacturers' finance
subsidiaries, vehicles from finance companies, including repossessed vehicles,
and vehicles from the public sector. The dynamics of this segment are
changing, particularly as the trend towards leasing new vehicles by
individuals under manufacturers' lease programs increases.
ADT Auctions
As of December 31, 1996, ADT operated 27 vehicle auction centers in the United
States where it is the second largest provider of vehicle auction services.
In 1996 the aggregate value of vehicles sold through ADT auction centers was
approximately $8.7 billion. Substantially all of the vehicles sold at ADT
auction centers are passenger cars and light trucks with the balance
consisting of heavy trucks and industrial vehicles.
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The following table presents the approximate number of vehicles entered and
sold through all of ADT's vehicle auction centers in the United States during
1994, 1995 and 1996.
1994 1995 1996
Vehicles Entered 1,660,000 1,798,000 1,881,000
Vehicles Sold 967,000 994,000 1,064,000
Business Strategy
ADT has been a leader in developing the wholesale vehicle auction business in
the United States. ADT aims to provide a wholesale redistribution system for
used vehicles which is efficient, economical and reliable. ADT's specific
strategies are (i) to maintain and further strengthen its current
relationships with vehicle manufacturers, fleet/lease operators, daily rental
companies and other significant vehicle suppliers and dealers that both supply
vehicles for auction and purchase vehicles at auction and (ii) to increase
ADT's share of total used vehicle transactions. ADT is pursuing these
strategies in part by encouraging more vehicle dealers to attend its auctions.
Where possible, ADT categorizes its auction sales in order to facilitate the
matching of appropriate buyers with vehicles being offered for sale. Auctions
may be categorized by the type of vehicle being sold or by age of vehicle,
mileage or source, for example ex-rental vehicles. ADT maintains a record of
dealers that are authorized to bid at its auctions and employs direct
marketing techniques to target dealers who are known buyers for the category of
vehicle being auctioned and who are registered with ADT as approved buyers.
ADT also holds closed sales for manufacturers' vehicles, including Program
Cars and fleet vehicles, restricted to dealers holding a franchise from that
particular manufacturer.
ADT keeps its site location strategy and real estate requirements under
continuous review together with the potential benefits of expanding its
network through the acquisition of vehicle auction businesses and the
development of new auction centers. ADT however believes that the geographic
coverage of its auction network in the United States is substantially
complete.
Auction Operations
ADT operates a network of large modern auction centers and provides a
comprehensive range of vehicle redistribution services. These services
include collection and transportation of a seller's vehicles to an auction
center, reconditioning the vehicles to retail standards, matching the vehicles
with the auction market most likely to generate the highest amount of sale
proceeds and delivering the vehicles to the buyer. Separate fees are charged
for each of these services. ADT acts solely as an agent in auction
transactions and does not purchase vehicles for its own account. ADT
repurchases a small number of vehicles under its buyer protection programs
which require it to repurchase vehicles that have suffered odometer tampering
or that have an undisclosed salvage history. See "Vehicle Auction
Services-Services and Fees-Insurance." ADT operates almost exclusively in the
wholesale marketplace. In general, the public is not permitted to attend
auctions.
When a vehicle arrives at an ADT auction center, it is checked in and assigned
a computer tracking number. A seller may instruct ADT to perform various
services including vehicle appraisal, appearance reconditioning and paint or
body work to prepare the vehicle for auction. The title is checked against a
computer database held by ADT. If a salvage history appears, the seller must
either disclose the damage or withdraw the vehicle from the auction. ADT
completes all requested services and holds the vehicles in secure parking
areas until the scheduled auction day. The auction centers use computerized
control systems to track vehicles through each step of the auction process.
ADT is responsible for the vehicles while they are under its control.
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Generally, ADT's auction centers hold regularly scheduled auctions for
vehicles from specific market sources. Additional auctions are scheduled as
necessary, including auctions for specific types or categories of vehicles,
such as heavy trucks, municipal and agricultural equipment and classic cars. A
typical auction center consists of an auction hall, large paved areas for the
storage of vehicles, facilities for reconditioning and separate areas for
parking vehicles immediately prior to auction, some of which are covered.
Auction halls typically have a number of lanes through which vehicles are
normally driven, and where the auction bidding process takes place. This is a
continuous process that enables a large number of vehicles to be auctioned
quickly and efficiently. The auction hall building also contains the cashiers
and other administrative personnel, as well as cafeteria and other customer
facilities. When a vehicle is sold, the paperwork associated with a sale,
including conveyance instruments, title or title applications and tag
applications, is generally processed within one hour of the sale and immediate
delivery arrangements are made. A particular vehicle may pass through the
auction system more than once prior to being sold to a new owner.
ADT is responsible for payment to sellers upon presentation of title after a
vehicle is sold. If purchases are made other than on a cash basis, ADT
determines in advance the credit-worthiness of the buyer. It is customary for
buyers at ADT's auctions to pay by banker's draft. The auction collects funds
on drafts within an average of ten working days. ADT's bad debt experience on
these transactions is negligible.
Sources of Vehicles
The principal sources of vehicles for sale at ADT's auctions are consignments
by new and used vehicle dealers, vehicle manufacturers, corporate owners such
as fleet operators, daily rental companies, leasing companies, banks and other
financial institutions, manufacturers' credit subsidiaries and government
agencies.
The supply of consignment vehicles from dealers is relatively constant
throughout the year. The number of Program Cars and vehicles consigned to
auction by corporate fleet owners may fluctuate considerably throughout the
year. As a consequence, auction revenues may fluctuate from quarter to
quarter and at certain times during the year ADT may be storing large numbers
of vehicles awaiting auction.
ADT contracts with vehicle manufacturers for the auction of Program Cars.
These contracts, which do not require the manufacturers to sell any minimum
number of vehicles through ADT's auctions, generally have a term of one year
and may be terminated upon 30 days' notice. In 1996, approximately 27 per
cent of the vehicles sold at ADT auctions were Program Cars, compared to
approximately 31 per cent in 1995. ADT also auctions vehicles from the
manufacturers' own fleets and from manufacturers' affiliates such as their
credit subsidiaries.
During 1996, General Motors Corporation and its credit subsidiaries accounted
for approximately 8 per cent of the vehicle auction division's United States
revenues. ADT believes that its relationship with General Motors Corporation
and the other vehicle manufacturers with which it does business is good. The
loss of General Motors Corporation's business would, however, have a material
adverse effect on the auction division's operations.
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Services and Fees
Auction Services: ADT receives a variety of fees for its auction services.
Entry fees are set charges assessed on the majority of vehicles registered for
auction, except Program Cars, and are payable irrespective of whether the
vehicle is sold. If the vehicle is sold, ADT also receives an auction fee
from the seller and a fee from the buyer of the vehicle. At most sales, the
buyer's auction fee is based upon the sale price of the vehicle, except for
Program Cars where a fixed fee is charged. At most sales, other than
fleet/lease consignment sales and Program Car sales, the seller's auction fee
is based on the sale price of the vehicle. For fleet/lease consignment sales,
the seller's auction fees are based on a fixed fee for national fleet/lease
consignors and on the sale price of the vehicle for local fleet/lease
consignors. For sales of Program Cars, auction fees are fixed periodically by
agreement with the vehicle manufacturers on a per vehicle sold basis.
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Reconditioning Services: Customers may request ADT to prepare, for a fee, a
detailed condition report on vehicles entered for auction. For a separate
fee, ADT also performs on-site reconditioning services. The largest portion
of reconditioning revenue relates to appearance reconditioning and paint and
body work but more extensive body work services including body panel painting
and repair of minor collision damage are also carried out. Appearance
reconditioning services include engine steam-cleaning, washing, detailing,
buffing and waxing, and upholstery cleaning. Other services at certain
centers include replacement of parts, upholstery, tires and glass.
Most manufacturers' vehicles and some fleet/lease vehicles receive appearance
reconditioning and, if necessary, paint and body work. The reconditioning of
manufacturers' Program Cars generates a significant portion of ADT's
reconditioning revenues. Program Cars are delivered to the auction centers
directly from rental car lots or marshaling yards, financial institutions
deliver vehicles directly off-lease or after repossession and fleet operators
deliver vehicles immediately from use. These vehicles generally require
reconditioning to bring them up to sale standards. In many instances, these
sellers do not have the facilities necessary to recondition the vehicles
expediently or economically. ADT does not usually recondition vehicles
consigned by dealers, who generally bring fully serviced cars to auction
directly from their lots. Dealers who purchase reconditioned vehicles are
able to place them in their showrooms or lots immediately, thereby minimizing
the time between purchase and retail sale.
ADT also provides high quality vehicle paint and body repair services under
the Quality Image Services name for vehicles other than those going through
the auction process, principally for fleet owners and insurance companies.
The service, which is aimed at new customers in addition to traditional
auction customers, utilizes ADT's existing reconditioning facilities and
expertise.
Transportation Services: ADT collects and delivers customers' vehicles and
believes that its ability to provide transportation services at competitive
prices is extremely valuable to its marketing efforts. ADT operates a fleet
of vehicle transporters and sub-contracts any additional vehicle
transportation requirements that cannot be met by this fleet.
Insurance: ADT offers, for a fee, a 15-day power and drive train service
contract provided by a third party. ADT also undertakes to repurchase
vehicles that have suffered odometer tampering or have an undisclosed prior
salvage history. ADT also assists sellers in complying with laws regarding
title and odometer readings by providing forms which include the necessary
representations as part of the paperwork signed and delivered in connection
with the auction sale. ADT's liability for losses arising from title and
odometer insurance, power and drive train service contracts and prior salvage
history has been negligible.
Valuation and Appraisal: ADT provides valuation and appraisal advice to
customers in connection with their vehicle disposal programs with a view to
assisting its customers to obtain the best possible price for their vehicles.
Specialized Services: Specialized auctions carried out by the division include
sales of government vehicles, to which the general public is invited, sales of
plant and equipment, sales of construction vehicles, sales of heavy trucks,
sales of municipal and agricultural equipment and sales of classic cars. ADT
provides a vehicle repossession service whereby vehicles are recovered from a
defaulting party and delivered directly to an auction center for liquidation.
ADT's market expertise allows it to offer a comprehensive vehicle remarketing
service to fleet operators, ranging from collection of vehicles leaving the
fleet to advice on vehicle replacement cycles.
Competition
ADT considers its competition to be two other significant auction chains and a
large number of independently owned local auctions which are members of the
National Auto Auction Association. The competing auction chains are Manheim
Auctions, a subsidiary of Cox Broadcasting Company, and ADESA Corporation, a
subsidiary of Minnesota Power & Light Company. Competition is based primarily
on price in relation to the quality and range of services offered to sellers
and buyers of vehicles and ease of accessibility of auction locations. ADT
believes it provides a higher quality of service than its competitors and its
prices may therefore be higher.
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Regulation
Each auction center is licensed by the state in which it is located, in most
cases as a vehicle auction or dealer. These licensing authorities may revoke
a license if an auction is not conducted according to regulations then in
effect. In addition, ADT's vehicle transportation fleet is regulated by the
Interstate Commerce Commission. ADT believes that it is in substantial
compliance with the regulations to which it is subject and has not had any
material difficulties with these regulatory authorities.
Employees
As of December 31, 1996, the vehicle auction division in the United States
employed approximately 3,900 persons on a full-time basis and approximately
2,400 persons on a part-time basis. The part-time employees are utilized
primarily on auction sale days. The majority of these employees are not
represented by unions or covered by collective bargaining agreements. ADT
believes its relations with employees and their unions are generally good.
ITEM 2. DESCRIPTION OF PROPERTIES
In North America, as of December 31, 1996, ADT, through its subsidiaries,
owned 2 customer monitoring centers, leased 19 customer monitoring centers,
owned 22 offices and other properties and leased 315 offices and other
properties which were used in connection with the electronic security services
business. In the United States, as of December 31, 1996, ADT, through its
subsidiaries, owned 21 auction centers, leased 6 auction centers and owned or
leased 6 offices and other properties, which were used in connection with the
vehicle auction business. In Europe, as of December 31, 1996, ADT, through
its subsidiaries, owned 5 customer monitoring centers, leased 8 customer
monitoring centers, owned 11 offices and other properties and leased 107
offices and other properties which were used in connection with the electronic
security services business. In addition, as of December 31, 1996, ADT,
through its subsidiaries, owned approximately 1,294 acres of land and leased
approximately 284 acres of land in the United States used in connection with
the vehicle auction business.
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ITEM 3. LEGAL PROCEEDINGS
On December 27, 1996, Westar Capital, Inc. ("WCI") filed a complaint in the
U.S. District Court for the Southern District of Florida (the "Court") against
the Company, the directors of the Company and Republic Industries, Inc.
("Republic"). The complaint alleges that the Company and its directors
breached their fiduciary duties to WCI and the Company's other shareholders
(i) by issuing to Republic a share purchase warrant for 15,000,000 Common
Shares (the "Republic Warrant") in connection with a proposed amalgamation
with Republic in July 1996 (the "Republic Merger"), (ii) by adopting the
Rights Plan, and (iii) by holding shares of the Company in one of the
Company's subsidiaries with the intention of voting those shares as needed to
entrench existing management. The complaint seeks a court order (i) declaring
the Republic Warrant null and void or preventing the Company and Republic from
exercising their rights under the Republic Warrant, (ii) directing the Company
to redeem the Rights Plan, and (iii) preventing the Company from voting the
shares held by its subsidiary.
On January 3, 1997, WCI filed an amended complaint which, in addition to the
allegations made in the prior complaints, alleges that the Company and its
directors have attempted to interfere with WCI's voting rights by seeking
certain information from WCI pursuant to procedures established in the
Company's Bye-Laws. The amended complaint seeks the same relief as the prior
complaint and also requests that the Court confirm WCI's voting rights.
On January 21, 1997, the Court granted WCI leave to file a second amended
complaint. The second amended complaint contains the same allegations as the
amended complaint and in addition alleges (i) that the Company and its
directors breached their fiduciary duties by setting a July 8, 1997 date for a
meeting of the Company's shareholders, and (ii) that the Company and its
directors violated Section 14(d) of the Securities Exchange Act of 1934, as
amended, by making a recommendation to the Company's shareholders regarding
the tender offer without first making certain filings with the Securities and
Exchange Commission ("SEC"). WCI asks for a court order (i) enjoining the
Company from holding the shareholders meeting (the "Special General Meeting")
on July 8, 1997, (ii) compelling the Company to hold the special General
Meeting on or before March 20, 1997, and (iii) declaring that the Company has
violated Section 14(d) and enjoining the Company from making any further
recommendations relating to the tender offer until the required SEC filings
are made.
On January 23, 1997, WCI filed a motion for a preliminary injunction asking
the Court to enjoin the Company from holding the Special General Meeting on
July 8, 1997, and compelling the Company to hold the Special General Meeting
on or before March 20, 1997. On March 4, 1997, WCI filed a supplemental brief
in support of its motion for a preliminary injunction representing that WCI is
no longer seeking a Special General Meeting on or before March 20, 1997 on the
grounds that such a meeting date would now be impractical. In its
supplemental brief, WCI requests that the meeting date be set 30 days after
its proxy materials for the Special General Meeting are distributed. As of
this date, the Court has not rendered any decision with respect to plaintiff's
motion for a preliminary injunction.
On January 27, 1997, the Company and its directors filed a motion to dismiss
the second amended complaint based on, among other things, the Court's lack of
personal jurisdiction over the Company and its directors and for failure to
state a claim upon which relief can be granted. WCI has filed papers in
opposition to the motion. On February 21, 997, the Court entered an order
ruling that the second amended complaint did not adequately plead personal
jurisdiction over the ADT defendants. On February 27, 1997, WCI filed a third
amended complaint. The third amended complaint contains the same allegations
as the second amended complaint and contains additional allegations relating
to personal jurisdiction.
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On March 11, 1997, the court granted WCI leave to file a fourth amended
complaint. The fourth amended complaint contains the same allegations as
those in the third amended complaint as well as additional allegations
relating to the Amendment to the Rights Plan implemented by the Company on
March 3, 1997. In addition to the relief previously requested, the fourth
amended complaint seeks judicial nullification of the Amendment to the Rights
Plan and a rescission of actions by ADT if it is shown that a subsidiary of
ADT cast decisive votes as a shareholder with respect to those actions.
On March 17, 1997, the Company and its directors filed a motion to dismiss the
fourth amended complaint based on, among other things, the Court's lack of
personal jurisdiction over the Company and its directors and for failure to
state a claim upon which relief can be granted.
The Company and the Board believe that the allegations in the WCI's fourth
amended complaint are without merit and intend to vigorously defend against
them.
On March 24, 1997, WCI filed a motion for a preliminary injunction (i)
preventing Republic from selling or transferring any of the warrant shares
it currently owns, and (ii) preventing the Chairman of ADT from exercising the
proxy on the warrant shares. The Company and the Board have yet to respond
to this motion.
On December 26, 1996, Charles Gachot filed a complaint in the Circuit Court
for the Fifteenth Judicial Circuit in Palm Beach County, Florida against the
Company, certain of its directors, Western and WCI. The complaint was brought
on behalf of a class of all shareholders of the Company and alleges that
Western and WCI have breached their fiduciary duties to the Company's
shareholders by offering an inadequate price for the outstanding Common
Shares. The complaint seeks to enjoin Western and WCI from acquiring the
outstanding Common Shares. The complaint also alleges that the Company and
its directors have refused to negotiate with Western and WCI and that the
Republic Warrant and the Rights Plan are improper. The complaint seeks
unspecified monetary relief from all defendants. The Company and the Board
believe that the allegations in Gachot's complaint against the Company and the
directors are without merit and intend to vigorously defend against them.
On February 7, 1997, ADT Operations, Inc. ("ADT Operations"), a subsidiary of
ADT, filed a complaint in the Supreme Court of the State of New York, County
of New York against The Chase Manhattan Bank, N.A. ("Chase"). The complaint
states that Chase has been an important lender and financial advisor to ADT
Operations since 1993, and that in the course of this business relationship,
ADT Operations has disclosed confidential business information to Chase. The
complaint asserts that ADT Operations and Chase expressly agreed that Chase
would not aid any third party in a hostile takeover bid for ADT. The
complaint alleges that Chase is currently aiding Western in its attempt to
take control of ADT and that Chase's actions constitute: (i) a breach of an
express agreement between Chase and ADT Operations; (ii) a breach of the
implied covenant of good faith that is part of the express agreement between
Chase and ADT Operations; and (iii) a breach of the fiduciary duties that Chase
owes to ADT Operations. The complaint seeks $50 million in monetary damages.
The complaint also seeks to enjoin Chase from advising, funding, or
participating in Western's attempts to take control of ADT and from disclosing
any confidential information regarding ADT Operations and ADT. On March 3,
1997, Chase filed a motion for dismissal of ADT Operations' complaint or,
alternatively, summary judgment. This motion is scheduled to be heard on
April 11, 1997.
On February 7, 1997, ADT Operations filed a motion for a preliminary
injunction, seeking to enjoin Chase from: (i) advising, funding, or assisting
Western in its efforts to take over ADT or participating in these efforts; and
(ii) using or disclosing any confidential information that ADT Operations
provided to Chase. The motion was argued before the Court on February 24,
1997 and is currently pending.
On March 11, 1997, Crandon Capital Partners ("CCP") filed a complaint in the
Circuit Court for the Fifteenth Judicial Circuit in Palm Beach County, Florida
against the Company, certain of its current and former directors, and
Republic. The complaint was brought by CCP in a derivative capacity on behalf
of ADT. The complaint alleges that ADT's directors breached their fiduciary
duties and wasted corporate assets in connection with (i) the granting of
options to certain officers of ADT in 1996, (ii) the issuance of the Republic
Warrant, (iii) the implementation of the Rights Plan, and (iv) harassing and
attempting to disenfranchise WCI. The complaint seeks an unspecified amount
of damages and a court order directing ADT's directors to establish a system
of internal controls to prevent repetition of the alleged breaches of
fiduciary duty and corporate waste.
The Company and its directors believe that the allegations in the complaint
brought by CCP are without merit and intend to vigorously defend against them.
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ADT Limited and various of its subsidiaries are defendants in a number of
other pending legal proceedings incidental to present and former operations,
acquisitions and dispositions. ADT does not expect that the outcome of these
proceedings, either individually or in the aggregate, will have a material
adverse effect upon ADT's consolidated results of operations and cash flows or
its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of the period covered by this Annual Report.
18
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ADT Limited's common shares ("Common Shares") have been listed on the New York
Stock Exchange ("NYSE") since August 1991 and on the London Stock Exchange
since December 1984.
The following table sets forth, for the periods indicated, the high and low
sales prices for the Common Shares as reported in the consolidated transaction
reporting system on the NYSE.
High Low
$ $
1995
First Quarter 12 1/4 9 5/8
Second Quarter 12 1/4 10 1/8
Third Quarter 14 1/8 11 5/8
Fourth Quarter 15 1/4 13
1996
First Quarter 18 14
Second Quarter 19 1/2 16 1/4
Third Quarter 24 3/4 15 7/8
Fourth Quarter 23 1/4 18 1/2
1997
First Quarter to March 24 27 5/8 21 1/4
At March 24, 1997, 156,696,447 Common Shares were held of record by 15,749
record holders. Since a number of the Common Shares were held by brokers
or other nominees, the number of record holders may not be representative
of the number of beneficial holders. A subsidiary of ADT Limited owns
3,182,787 Common Shares which are included in the number outstanding.
Dividends
ADT Limited has not declared any dividends on the Common Shares since April
1991. ADT Limited has no present intention to pay any dividends on the Common
Shares but will keep its dividend policy under review in the light of
prevailing circumstances. Under the terms of the senior notes and revolving
bank credit agreement ADT Limited may not declare, pay or make any dividend or
distribution with respect to its Common Shares, except in certain defined
circumstances (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources").
19
<PAGE>
Exchange Controls and Other Limitations Affecting Security Holders
ADT Limited has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority, Foreign Exchange Control. There
are no limitations on the rights of non-Bermuda owners of the Common Shares
arising out of such designation to hold or vote their shares. Because ADT
Limited has been designated as a non-resident for Bermuda exchange control
purposes, there are no exchange control restrictions on its ability to
transfer funds in and out of Bermuda or to pay dividends to United States
residents who are holders of the Common Shares, except that ADT Limited may
not hold Bermuda dollars except external Bermuda dollars.
The transfer of Common Shares already issued between persons regarded as
resident outside Bermuda for exchange control purposes and the issue of Common
Shares for which consent has already been granted to such persons, may be
effected without specific consent under the Exchange Control Act of 1972 and
regulations thereunder. All further issues of Common Shares and any transfers
of Common Shares involving any person regarded as resident in Bermuda for
exchange control purposes require specific prior approval under the Exchange
Control Act of 1972.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an
applicant acting in a special capacity (for example, as an executor or
trustee), certificates may, at the request of the applicant, record the
capacity in which the applicant is acting. Notwithstanding the recording of
any such special capacity, ADT Limited is not bound to investigate or incur any
responsibility in respect of the proper administration of any such estate or
trust.
Shares purchased for those under 21 years of age must be registered in the
name of the parent or guardian but may be designated with the minor's initials
for the purpose of identification. ADT Limited will take no notice of any
trust applicable to the shares represented by such certificates.
As an "exempted company", ADT Limited is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-residents of
Bermuda, but as an exempted company ADT Limited may not participate in certain
business transactions, including (i) the acquisition or holding of land in
Bermuda (other than that required for its business and held by way of lease or
tenancy for terms of not more than 21 years) without the express authorization
of the Bermuda legislature or the Minister of Finance; (ii) the taking of
mortgages on land in Bermuda to secure an amount in excess of $50,000; (iii)
the acquisition of securities created or issued by, or any interest in, any
local company or business, other than certain types of Bermuda Government
securities or securities of another "exempted" company, partnership or any
other corporation resident in Bermuda but incorporated abroad; or (iv) the
carrying on of business of any kind in Bermuda, except as necessary in
furtherance of the business of the ADT Limited carried on outside Bermuda or
under a license granted by the Minister of Finance of Bermuda.
Under current Bermuda law, no Bermuda withholding tax will be imposed upon
payment of dividends by ADT Limited to its common shareholders. Furthermore,
ADT Limited has received from the Minister of Finance of Bermuda, under the
Exempted Undertakings Tax Protection Act of 1966, as amended, an undertaking
that, in the event of there being enacted in Bermuda any legislation imposing
any tax computed on profits or income, including any dividend or capital gains
withholding tax, or computed on any capital assets, gain or appreciation, or
any tax in the nature of an estate or inheritance tax or duty, the imposition
of such tax shall not be applicable to ADT Limited or any of its operations,
nor to the Common Shares, preference shares or other obligations of ADT
Limited, until the year 2016. This undertaking does not, however, prevent the
application of Bermuda taxes to persons ordinarily resident in Bermuda.
Under current Bermuda law, ADT Limited is required to pay the Bermuda
Government an annual registration fee, which is calculated by a reference to
the authorized capital and share premium of ADT Limited. ADT Limited pays the
maximum fee, which is currently $25,000 per annum.
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the audited
consolidated financial statements of the Company. The information presented
below should be read in conjunction with, and is qualified by reference to,
the consolidated financial statements of the Company and the related notes
thereto and the consolidated financial statement schedules and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
Consolidated income statement data
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended December 31 1996 1995 1994 1993 1992
$m $m $m $m $m
Net sales 1,704.0 1,783.8 1,629.4 1,528.5 1,552.2
======= ======= ======= ======= =======
Operating (loss) income (i) (765.5) 200.8 206.0 186.8 165.3
Interest income 27.5 16.2 15.2 13.3 25.3
Interest expense (101.0) (116.3) (99.3) (76.7) (95.7)
Gain (loss) on disposal of businesses (ii) 1.7 (36.6) (0.3) - 60.5
Other income less expenses (iii) 128.8 (5.0) (4.1) 9.8 23.8
------ ------ ------ ------ ------
(Loss) income before income taxes (708.5) 59.1 117.5 133.2 179.2
Income taxes 21.8 (28.1) (34.9) (22.5) (20.1)
------ ------ ------ ------ ------
(Loss) income from continuing operations (686.7) 31.0 82.6 110.7 159.1
Loss from discontinued operations (iv) - - (3.3) - (2.7)
------ ------ ------ ------ ------
(Loss) income before extraordinary items (686.7) 31.0 79.3 110.7 156.4
Extraordinary items (net of
income taxes) (v) (8.4) (9.8) - - 5.6
------ ------ ------ ------ ------
Net (loss) income (695.1) 21.2 79.3 110.7 162.0
======= ======= ======= ======= =======
$ $ $ $ $
Primary (loss) earnings per common share (vi):
(Loss) income from continuing operations (5.01) 0.22 0.51 0.74 1.19
Loss from discontinued operations - - (0.03) - (0.02)
Extraordinary items (0.06) (0.07) - - 0.05
------ ------ ------ ------ ------
Net (loss) income per common share (5.07) 0.15 0.48 0.74 1.22
======= ======= ======= ======= =======
<PAGE>
Consolidated balance sheet data
At December 31 1996 1995 1994 1993 1992
$m $m $m $m $m
Total assets (vii) 2,730.4 3,419.7 3,412.3 3,477.4 3,368.9
Long-term debt (including
current portion) 1,068.7 1,180.3 1,211.4 953.4 1,067.8
Convertible redeemable preference
shares (viii) - 4.9 5.2 427.2 434.6
Non-voting exchangeable shares - - - 15.0 15.1
Exchangeable redeemable preference shares - - - - 21.0
Total shareholders' equity (ix) 759.8 1,425.3 1,376.5 1,264.8 1,054.4
</TABLE>
21
<PAGE>
(i) Operating loss in 1996 included restructuring and other non-recurring
charges of $237.3 million relating principally to the electronic security
services divisions in the United States and the United Kingdom, and a charge
of $744.7 million relating to the impairment of long-lived assets following
the adoption by the Company of Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). Operating income in 1995 included
restructuring and other non-recurring charges of $34.2 million relating
principally to the United States electronic security services division and to
corporate restructuring in Europe. Operating income in 1994 included
restructuring and other non-recurring charges of $4.5 million relating to
corporate restructuring in Europe.
(ii) Loss on disposal of businesses in 1995 included a net loss of $65.8
million relating to the disposal by the Company of an interest in its United
Kingdom and Continental European vehicle auction services businesses offset by
a net gain of $31.4 million relating to the disposal by the Company of its
entire European electronic article surveillance business. Gain on disposal of
businesses in 1992 related to the disposal by the ASH group of its entire
European loss prevention business.
(iii) Other income less expenses in 1996 included a net gain of $53.4
million relating to the disposal of the Company's entire investment in
Limelight Group plc, and a net settlement gain of $65.0 million relating to an
agreement in full and final settlement of the Company's litigation against BDO
Binder Hamlyn ("BDO"). Other income less expenses in 1994 included net gains
of $21.5 million arising from the ownership of investments and a net write off
of $30.7 million relating to the Company's entire equity investment in Arius,
Inc. which was held by the ASH group. Other income less expenses in 1992
included a $50.9 million deferred net gain arising from the Company's
investment in Quoteplan PLC and a net write off of $33.7 million of the
Company's equity investment in Nu-Swift plc.
(iv) Discontinued operations comprised the disposal during 1994 of all the
Company's non-core businesses, principally Insight Travel Group. The company
no longer has any interests in non-core businesses. Included in the loss from
discontinued operations for 1994 were net losses on disposal of the non-core
businesses amounting to $3.7 million. Net sales from discontinued operations
amounted to $80.6 million in 1994, $96.9 million in 1993 and $101.4 million in
1992. These net sales are not included in net sales in the consolidated
income statement data.
(v) Extraordinary items principally were comprised of the gains and losses
arising on reacquisition/ repayment and the write off of net unamortized
deferred refinancing costs relating to the early extinguishment of certain
amounts outstanding under the Company's long-term debt obligations, and were
stated net of applicable income taxes.
(vi) The calculation of primary earnings per common share was based on the
weighted average number of common shares in issue during the period. Such
weighted average number of common shares in issue for the years ended December
31, 1996, 1995, 1994, 1993 and 1992 was 137,114,415, 138,283,458, 136,148,361,
122,043,139 and 113,480,672 common shares, respectively.
(vii) Following the adoption of SFAS 121 during 1996, the Company recorded a
charge of $744.7 million relating to the impairment of long-lived assets.
(viii) During 1994 the Company redeemed a significant proportion of its
convertible redeemable preference shares. The net effect of this transaction
was to reduce the carrying value of the convertible redeemable preference
shares by $422.0 million. The Company funded the redemption from cash on hand
and through the drawdown of long-term debt facilities.
(ix) During 1993 the Company issued common shares for cash resulting in net
proceeds of $154.8 million.
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
In September 1996 the Company merged with and acquired the whole of the issued
capital of ASH, a United Kingdom quoted company. ASH is engaged in the
provision of electronic security services in North America and Europe. The
merger with and acquisition of ASH by the Company has been accounted for by
means of the pooling of interests method of accounting pursuant to Accounting
Principles Board Opinion No. 16. The pooling of interests method of
accounting assumes that the combining companies have been merged since their
inception, and the historical consolidated financial statements for periods
prior to consummation of the merger are restated as though the companies have
been combined since their inception. Accordingly, the accompanying
consolidated financial statements give effect to the transaction by means of
the pooling of interests and have been restated.
During 1995 management commenced a strategic review of the Company's business
operations and its corporate organizational structure with a view to
developing a business strategy which would place the Company in a stronger
position to deal with the changing business environment and challenges facing
its core service businesses in the late 1990s. As part of this strategic
review, management approved the redeployment of certain of the Company's assets
in order to further concentrate the Company's resources on the electronic
security services operations, principally in the United States, where
management believes the greatest potential for future growth lies.
Consequently, Actron Group, the Company's European electronic article
surveillance business, was disposed of in November 1995 and in December 1995
the Company disposed of an interest in its European vehicle auction services
businesses.
During the fourth quarter of 1995, the Company entered into an agreement for
the acquisition of Alert, the tenth largest electronic security services
company in the United States, with a predominantly residential customer base
located principally in Texas, Florida and Georgia.
As part of the strategic review of its business operations undertaken during
1995, and in the context of the acquisition of Alert and the disposal of an
interest in the European vehicle auction services businesses, management
commenced an evaluation of the entire group corporate structure, and the
administrative, accounting and management information systems of its United
States electronic security services division (the "Re-Engineering Project").
The Re-Engineering Project, which is on-going, is intended to modify and
improve the entire structure of the business operations in order to create a
more profitable, efficient organization with significantly improved marketing,
selling, installation and servicing capabilities supported by upgraded
management information systems.
During 1996 the restructuring in the electronic security services division
included a reorganization of senior management, the closure of a major
corporate office in Parsippany, New Jersey, and a realignment of the
organizational structure along the functional business lines of residential,
commercial and customer service, rather than along geographic lines.
During 1996, as a result of the acquisition of ASH and the further development
of the Re-Engineering Project under the control of new senior management, the
Company identified the need to extend the process of strategic change to
include a significantly expanded agenda. As a result, various strategic
initiatives have been added to the corporate plan and the implementation of
these plans is currently in progress and will continue throughout 1997. In
the United States the plans relate principally to a significant investment in
technological infrastructure enhancements to facilitate further consolidation
of the Company's entire customer monitoring center network down to four, state
of the art, customer service centers, and to place the Company in a stronger
position to take advantage of the significant opportunities in the changing
market place. In Europe, the plans relate principally to the merger,
integration and consolidation of the Company's existing electronic security
services businesses with that of ASH.
23
<PAGE>
RECENT DEVELOPMENTS
In November 1996 the Company announced that it intended to dispose of the
vehicle auction services operations in the United States in order to
concentrate further on the expansion of the Company's electronic security
services business. Accordingly, the Company's vehicle auction services
business segment was then initially reclassified as a discontinued operation
for all years presented. The preliminary, summarized consolidated results of
operations of the Company for the year ended December 31, 1996 were announced
on March 3, 1997, and were filed under Schedule 14A. On March 17, 1997 the
Company announced that the aforementioned intention had been rescinded and
that the vehicle auction services operations in the United States would no
longer be disposed of. Accordingly, all consolidated financial information
set forth in this Form 10-K, including the audited consolidated financial
statements of the Company, is presented with the Company's vehicle auction
services business segment classified as a continuing operation for all years
presented. There is no net effect on the reported net income and total
shareholders' equity when comparing the preliminary, summarized consolidated
results of operations of the Company referred to above and the consolidated
financial information set forth in this Form 10-K. All differences
relate to the reclassification of the vehicle auction services business
segment from discontinued operations to continuing operations.
In December 1996 Western Resources, Inc. ("Western") announced its intention
to commence an offer to exchange all of ADT Limited's outstanding common
shares for consideration consisting of cash and shares of Western common
stock. On March 3, 1997 the Company announced that its board of directors had
determined that the offer made by Western was inadequate and not in the best
interests of ADT Limited's shareholders. On March 17, 1997 the offer made by
Western commenced.
On March 17, 1997 the Company announced that it had entered into a definitive
merger agreement, subject to shareholder approval and other customary matters,
with Tyco International Ltd. ("Tyco"), a United States quoted company engaged
in the manufacture of industrial and commercial products. Tyco shareholders
will receive one common share in the combined company for each Tyco common
share and ADT Limited shareholders, through a reverse stock split, will
receive 0.48133 common shares in the combined company for each ADT Limited
common share.
The information presented below should be read in conjunction with, and is
qualified by reference to, the consolidated financial statements of the
Company and the related notes thereto and the consolidated financial statement
schedules.
24
<PAGE>
RESULTS OF OPERATIONS
The following discussion of results of operations addresses net sales,
operating (loss) income and certain other line items in the consolidated
financial statements.
Net sales
Year ended December 31 1996 1995 1994
$m $m $m
Electronic security services 1,406.2 1,350.9 1,253.3
Vehicle auction services 297.8 432.9 376.1
------- ------- -------
1,704.0 1,783.8 1,629.4
======= ======= =======
Operating (loss) income and (loss) income before income taxes
Year ended December 31 1996 1995 1994
$m $m $m
Electronic security services (756.5) 172.4 182.1
Vehicle auction services 27.1 70.2 62.7
Corporate expenses (36.1) (41.8) (38.8)
------- ------- -------
Operating (loss) income (765.5) 200.8 206.0
------- ------- -------
Interest income 27.5 16.2 15.2
Interest expense (101.0) (116.3) (99.3)
Gain (loss) on disposal of businesses 1.7 (36.6) (0.3)
Other income less expenses 128.8 (5.0) (4.1)
------- ------- -------
(Loss) income before income taxes (708.5) 59.1 117.5
======= ======= =======
Restructuring and other non-recurring charges 237.3 34.2 4.5
Charge for the impairment of long-lived assets 744.7 - -
Depreciation and amortization 224.8 247.9 226.7
Capital expenditures 344.4 325.8 282.6
Electronic Security Services
Net sales derived from the electronic security services division are dependent
on the volume of new customer installations and the number of customers under
contract for the provision of electronic monitoring services. A majority of
the division's revenues are derived from contractually recurring fees for
electronic monitoring and maintenance of security systems installed at
customer premises and other related services. The remainder of the division's
revenues are derived from the outright sale and installation of security
systems, the installation of security systems in accordance with a monitoring
service agreement and the maintenance of security systems on a non-contractual
basis. Security system installation revenues are recognized when the
installation of a system is complete. Where a system has been installed in
accordance with the terms of a monitoring service agreement, the Company
retains ownership of the system and all direct installation costs, which
include materials, labor and installation overheads, are capitalized and
recorded as a fixed asset under subscriber systems. These subscriber systems
are depreciated over their estimated useful life, which is principally 14
years and 10 years for commercial and residential systems, respectively, or,
in the case of commercial systems, the actual contract duration if shorter.
All selling and marketing costs are expensed in the year incurred.
25
<PAGE>
The following table presents the approximate number of commercial and
residential customers in North America and Europe contracting with the Company
for the monitoring or maintenance of electronic security systems together with
the annualized service revenue under contract as of December 31, 1996, and the
annual combined discontinuance rate for commercial and residential contracts
in respect of 1996.
<TABLE>
<S> <C> <C> <C>
Number of Commercial Number of Residential Annualized Service Annual Combined
Customers Customers Revenue Discontinuance Rate
672,000 1,149,000 $920m 10.4%
</TABLE>
ADT defines annualized service revenue as the annualized service billing
arising from its customer base at a point in time for monitoring, maintenance
and related services. The aggregate annualized service billings amount takes
account of cancellations or terminations, increases in contract revenues due
to new contracts, additional services to existing customers and rate
variations at the date of computation. The actual amount of service revenue
for future periods will vary in accordance with changes in the customer base
and fees charged.
ADT calculates the annual combined discontinuance rate by dividing the
annualized service revenue from contracts cancelled or reduced in price during
the year by the annualized service revenue in force at the beginning of the
year, expressed as a percentage.
Since 1987 the division's goals have been to create a lower cost, more
efficient operation, suitable for long-term growth and greater profitability,
and to take advantage of the economies of scale resulting from the utilization
of the existing infrastructure which services its commercial customer base.
During this period the Company equipped its regional customer monitoring
centers with enhanced computer technology to further automate the monitoring
process and increase monitoring capacity. As a result of increased monitoring
and service capacity, and a lower cost structure due to manpower reductions
and reduced facility costs, in the early 1990s the Company began marketing
electronically monitored security systems and services at lower installation
price points to residential customers throughout North America. As a result
of the rapid expansion of the Company's business during the recent past and a
broader business strategy adopted by the Company in a changing market place,
the Company has identified the need to improve and expand its technological
and physical capacity in order to expand its customer base and product range.
Consequently, the Company has approved a plan to significantly enhance its
monitoring capacity, service quality and ability to expand its service and
product range. The Company will continue to aggressively market residential
security systems in North America, while also focusing on opportunities for
growth in the commercial sector as the economies in North America and Europe
improve.
Further details of the electronic security services division's business
strategy are set out under "Description of Business - Business Description -
Electronic Security Services."
26
<PAGE>
1996 compared with 1995
Net sales of the division increased 4.1 per cent in 1996 to $1,406.2 million
from $1,350.9 million in 1995. This sales increase was attributable to an
increase of $102.1 million in the sales of the North American operations offset
by a $46.8 million decline in the sales of the European operations, which was
due to the exclusion of sales of the European electronic article surveillance
operation and certain businesses operating in the ASH group, all of which were
disposed of during 1995. In North America the increase in sales was
principally due to the first time inclusion of the sales of Alert which was
acquired in December 1995, as well as increased recurring monitoring and
maintenance revenues arising from a larger base of residential security
systems. Although unit residential security systems sales in North America
increased in 1996 compared to 1995, due to price competition in the market
place, residential installation revenues in North America showed a modest
decline in 1996 compared with 1995. The commercial business in the United
States remained flat in both new system sales and installation revenues, and
growth in recurring commercial revenues continues to be affected by these
factors. In Europe, after allowing for business disposals and the effect of
foreign exchange, sales showed a modest increase in 1996 compared with 1995.
Operating results of the division declined from $172.4 million income in 1995
to a $756.5 million loss in 1996, principally due to a charge for the
impairment of long-lived assets of $731.7 million and restructuring and other
non-recurring charges of $232.5 million in 1996.
Operating income of the division before the charge for the impairment of
long-lived assets and restructuring charges increased 7.2 per cent in 1996 to
$207.7 million from $193.8 million in 1995. Operating income before the charge
for the impairment of long-lived assets and restructuring charges as a
percentage of net sales ("operating margin") increased to 14.8 per cent in
1996 from 14.3 per cent in 1995. The increase in operating income before the
charge for the impairment of long-lived assets and restructuring charges
principally reflected the first time inclusion of Alert, the disposal of the
European electronic article surveillance operation in November 1995, and the
continuing success of the North American residential security systems sales
program, which has achieved further advances in recurring revenues in 1996.
However, this improvement has been offset by continued price competition and by
increased marketing and selling costs, which have caused the contribution from
residential installation revenues and outright residential sales to show a
modest decline. The North American commercial installation revenues and
outright sales remained flat. The contribution in Europe showed a modest
increase.
1995 compared with 1994
Net sales of the division increased 9.2 per cent in 1995 to $1,350.9 million
from $1,236.6 million in 1994 (excluding net sales of $16.7 million relating
to the Company's electronic security services businesses in Australia and New
Zealand, disposed of in June 1994). This increase was attributable to
increases in net sales of $90.2 million and $24.1 million in North America and
Europe, respectively. The sales increase in North America was principally due
to increased recurring monitoring and maintenance revenues arising from a
larger base of residential security systems. In addition, the commercial
business in the United States experienced improved growth in new system sales
and installation revenues. However, corporate downsizing and cost containment
has meant that growth in recurring revenues from the commercial sector has
been modest. Sales in Canada, however, have marginally declined. The
increase in sales in Europe was due to increased sales in the commercial
business, particularly in the United Kingdom, as well as increased recurring
monitoring and maintenance revenues from commercial customers, and the
strengthening of European currencies against the US dollar.
Operating income of the division declined from $182.1 million in 1994 to
$172.4 million in 1995, principally due to restructuring and other
non-recurring charges of $21.4 million in 1995.
27
<PAGE>
Operating income of the division before restructuring charges increased 6.5
per cent in 1995 to $193.8 million from $181.9 million in 1994 (excluding
operating income of $0.2 million relating to Australia and New Zealand,
disposed of in June 1994). Operating margin declined from 14.7 per cent in
1994 (after excluding Australia and New Zealand) to 14.3 per cent in 1995
reflecting the higher cost of adding new residential customers in North America
during 1995. The increase in operating income before restructuring charges in
North America reflected the continuing success in the United States of the
residential security systems sales program and growth in the sale of new
systems and installation revenues in the commercial sector. The growth in
residential and commercial sales resulted in increased installation fees and
related monitoring and maintenance revenues and increased utilization of the
monitoring network in the United States. In Canada, however, sales and
margins have fallen and the overall business performance was disappointing.
In Europe operating income before restructuring charges showed a modest
increase despite pressure on margins in the electronic article surveillance
business. In November 1995 the Company disposed of its entire electronic
article surveillance business.
Restructuring and other non-recurring charges
During 1995, the Company commenced a strategic review of its business
operations with a view to developing a business strategy which would place the
Company in a stronger position to deal with the changing business environment
and challenges facing its core electronic security services businesses in the
late 1990s. This strategic review process continued during 1996 following the
completion of the acquisition of Alert, the senior management reorganization
which took place in the first quarter of 1996, and the identification by the
new senior management team of the need to expand significantly the terms of
reference of the restructuring in the United States. The effects of the
Re-Engineering Project and the consequent restructuring are more fully
described in note 5(i) of the notes to consolidated financial statements. As
a consequence of the Re-Engineering Project, in each of the fourth quarters
of 1996 and 1995, senior executive management approved a restructuring plan
which resulted in a charge for restructuring and other non-recurring items of
$134.7 million and $21.4 million, respectively.
During the fourth quarter of 1996, the Company commenced a strategic and
detailed review of the electronic security services businesses acquired as
part of the acquisition of ASH in September 1996. In December 1996 senior
executive management approved a restructuring plan which is intended to merge
and integrate fully the ASH group into the ADT group by the end of 1997. As a
consequence of the restructuring plan a charge for restructuring and other
non-recurring items of $97.8 millon was recorded in the fourth quarter of
1996. Details of the restructuring are more fully described in note 5(i) of
the notes to consolidated financial statements.
Charge for the impairment of long-lived assets
Effective January 1, 1996, the Company was required to adopt SFAS 121.
Following the adoption of SFAS 121, in the first quarter of 1996 the Company
recorded an aggregate non-cash charge for the impairment of long-lived assets
of $731.7 million in the electronic security services division with a
consequential tax credit of $10.8 million. The impairment charge comprised
$397.1 million relating to the ADT group, principally all of which related to
the carrying value of goodwill and other intangibles, and $334.6 million
relating to the ASH group, of which $121.0 million related to the carrying
value of subscriber systems installed at customers' premises which are
included in property, plant and equipment, and $213.6 million related to the
carrying value of goodwill and other intangibles. Further details are set out
in note 6(i) of the notes to consolidated financial statements.
28
<PAGE>
Vehicle Auction Services
Net sales of the vehicle auction services division are a function of the
number of vehicles handled, the number of vehicles sold at auction and the
number of vehicles handled for which ancillary services are provided. The
Company charges an entry fee for the majority of vehicles entered at auction.
On the sale of a vehicle at auction, the Company charges a separate seller's
and buyer's fee for each vehicle sold. This fee per vehicle sold is either
a fixed fee or a variable fee directly related to the sale price achieved.
The fee structure for each vehicle transaction is based upon the contractual
relationship with the customer. Revenues from additional services, which
include reconditioning, body repair, inspection, transportation and insurance
are related to the number of vehicles handled and are an additional integral
source of the division's revenue.
In December 1995 the Company disposed of an interest in its United Kingdom and
Continental European vehicle auction services businesses.
1996 compared with 1995
Net sales of the division declined from $432.9 million in 1995 to $297.8
million in 1996 due to the exclusion of the sales of European Auctions which
was sold in December 1995.
Net sales of the United States vehicle auction services business increased
10.4 per cent in 1996 to $297.8 million from $269.8 million in 1995. The
volume of vehicles sold increased by approximately 7 per cent which was
principally due to an increase in the volume of vehicles sold for fleet lease
customers of approximately 35 per cent, while the volume of vehicles sold for
vehicle manufacturers and new and used vehicle dealers declined by
approximately 5 per cent and approximately 2 per cent, respectively.
Operating income of the division declined from $70.2 million in 1995 to $25.2
million in 1996 due to a charge for the impairment of long-lived assets of
$13.0 million (see note 6(ii) of the notes to consolidated financial
statements) and the exclusion of the operating income of European Auctions.
Operating income before the charge for the impairment of long-lived assets of
the United States vehicle auction services business increased 11.4 per cent in
1996 to $38.2 million from $34.3 million in 1995. Operating margin increased
to 12.8 per cent in 1996 from 12.7 per cent in 1995. The increase in
operating income and operating margin were due principally to the increase in
the volume of vehicles sold and to an increase in the ratio of vehicles sold
to vehicles entered for sale ("conversion ratio") to 56.6 per cent in 1996
from 55.3 per cent in 1995, which was due to a higher proportion of vehicles
entered for sale by fleet lease customers.
In December 1995 the Company disposed of an interest in European Auctions for
an aggregate consideration of $334.9 million. The net loss on disposal of
$65.8 million included $136.5 million relating to the write off of net
unamortized goodwill and other intangibles and a $23.2 million charge relating
to cumulative currency translation adjustments.
1995 compared with 1994
Net sales of the division increased 15.1 per cent in 1995 to $432.9 million
from $376.1 million in 1994. This increase was attributable to increases in
net sales of $40.3 million and $16.5 million in Europe and the United States,
respectively. The increase in Europe was primarily attributable to an
increase in the number of vehicles sold in 1995 of approximately 7 per cent,
the inclusion of the vehicle reconditioning and transportation business in the
United Kingdom which was acquired in December 1994 and the strengthening of
European currencies against the US dollar. In Europe the volume of vehicles
sold for new and used vehicle dealers, fleet lease customers and vehicle
manufacturers increased by approximately 5 per cent, approximately 10 per cent
and approximately 8 per cent, respectively. In the United States the volume
of vehicles sold increased by approximately 3 per cent. This was principally
due to an increase in the volume of vehicles sold for fleet lease customers of
approximately 30 per cent, offset by a decline, in each case, in the volume of
vehicles sold for vehicle manufacturers and new and used vehicle dealers of
approximately 5 per cent.
Operating income of the division increased 12.0 per cent in 1995 to $70.2
million from $62.7 million in 1994. Operating income in Europe increased by
$6.9 million due to the increase in revenue per vehicle sold at auctions, the
inclusion of the vehicle reconditioning and transportation business in the
United Kingdom, effective overhead containment and the strengthening of
European currencies against the US dollar. Operating income in the United
States increased by $0.6 million and operating margin declined from 13.3 per
cent to 12.7 per cent. This was principally due to a decline in the
conversion ratio from 58.3 per cent in 1994 to 55.3 per cent in 1995 which was
due to a lower proportion of vehicles entered for sale by manufacturers and to
lower dealer conversion ratios.
29
<PAGE>
Corporate expenses
Corporate expenses comprise administrative, legal and general corporate
expenses net of other income and include all central costs incurred not
directly connected with the operational management of the Company's two
businesses which are responsible for their own corporate overheads.
The effects of the Re-Engineering Project and the merger of the ASH group into
the ADT group resulted in a charge for restructuring and other non-recurring
items at the corporate level in the fourth quarter of 1996 of $4.8 million.
During 1995 management evaluated the Company's entire group corporate
structure, in particular in the United Kingdom. As a result, in December
1995, senior executive management approved a restructuring plan which resulted
in a charge for restructuring and other non-recurring items at the corporate
level of $12.8 million. The corporate restructuring charge in 1994 of $4.5
million was principally attributable to the Company's corporate administration
in the United Kingdom. Details of the restructurings are more fully described
in note 5(ii) of the notes to consolidated financial statements.
OTHER ITEMS - INCOME STATEMENT
Interest income and interest expense
Year ended December 31 1996 1995 1994
$m $m $m
Interest income 27.5 16.2 15.2
Interest expense (101.0) (116.3) (99.3)
Interest income increased in 1996 compared with 1995 principally due to the
effects of the disposal of the European vehicle auction division and the
European electronic article surveillance business in the fourth quarter of
1995, and the inclusion of $8.9 million interest income in 1996 related to the
ITS Vendor Note. Interest income increased in 1995 to compared with 1994
principally due to the increase in the level of cash deposits held by the
Company in 1995.
Interest expense declined in 1996 compared with 1995 principally due to the
effects of the refinancing which took place in the third quarter of 1995. In
1996 interest expense included $20.3 million (1995 - $9.4 million) relating
to Liquid Yield Option Notes discount amortization, and $3.7 million (1995 -
$5.3 million) relating to refinancing costs amortization. Interest expense
increased in 1995 compared with 1994 principally due to the effects of the
financing of the redemption of a significant proportion of the Company's
convertible redeemable preference shares in 1994. In 1995 interest expense
included $9.4 million (1994 - nil) relating to Liquid Yield Option Notes
discount amortization, and $5.3 million (1994 - $5.7 million) relating to
refinancing costs amortization. The Company holds no derivative financial
instruments.
See Liquidity and Capital Resources and notes 21 and 23 of the notes to
consolidated financial statements which provide details of short-term and
long-term debt, respectively.
30
<PAGE>
Disposal of businesses
In December 1995 the Company disposed of an interest in its United Kingdom and
Continental European vehicle auction services businesses for an aggregate
consideration of $334.9 million (see notes 18 and 34 of the notes to
consolidated financial statements for further details). The net loss on
disposal of $65.8 million included $136.5 million relating to the write off of
net unamortized goodwill and a $23.2 million charge relating to cumulative
currency translation adjustments.
In November 1995 the Company disposed of its entire European electronic
article surveillance business for an aggregate consideration of $54.0 million.
The net gain on disposal of $31.4 million included a $2.1 million gain
relating to cumulative currency translation adjustments.
Other income less expenses
Year ended December 31 1996 1995 1994
$m $m $m
Gains and losses arising from the
ownership of investments 54.4 (5.0) 21.5
Write off in value of associate - - (30.7)
Settlement gain 65.0 - -
Gains and losses on currency transactions 9.7 0.9 2.1
Other income less expenses - net (0.3) (0.9) 3.0
----- ---- -----
128.8 (5.0) (4.1)
===== ==== =====
During 1996 gains arising from the ownership of investments included a net
gain of $53.4 million relating to the disposal in November 1996 of the
Company's entire investment in Limelight Group plc. The write off in value of
associate in 1994 related to the Company's entire equity investment in Arius,
Inc. which was held by the ASH group. In December 1996 the Company and BDO
entered into an agreement in full and final settlement of the Company's
litigation against BDO. The net gain arising on this settlement, after the
write off of certain deferred legal costs, amounted to $69.7 million, of which
$65.0 million was included in other income less expenses and $4.7 million was
included in interest income. See note 8 of the notes to consolidated
financial statements for further details of other income less expenses.
Income taxes
Current income taxes principally relate to state, local and other tax
liabilities incurred in the United States and other non-US tax liabilities.
The Company's effective income tax rate as adjusted for financial reporting
purposes has increased in 1996, 1995 and 1994. This effective tax rate
increase principally arose from an increase in the deferred tax charge.
During 1996 the Company's deferred income tax charge was impacted by tax
effects of the restructuring in the United States and other non-US tax
jurisdictions. See note 9 of the notes to consolidated financial statements
for further details of income taxes.
<PAGE>
Discontinued operations
Discontinued operations comprised the disposal during 1994 of all the
Company's non-core businesses. The Company no longer has any interests in
non-core businesses. Included in the loss from discontinued operations for
1994 were net losses on disposal of the non-core businesses amounting to $3.7
million, which included $19.1 million relating to the write off of net
unamortized goodwill and other intangibles on the disposal of the non-core
businesses. The net income from operations for 1994 included in the loss from
discontinued operations amounted to $0.4 million on net sales of $80.6 million.
31
<PAGE>
Extraordinary items
Extraordinary items in 1996 and 1995 included net losses amounting to $1.2
million and $1.5 million, respectively, arising on the reacquisition of
certain of the Company's senior subordinated notes. Further details are
provided in notes 11 and 23(ii) of the notes to consolidated financial
statements.
In September 1996 the Company repaid in full all amounts owed by the ASH group
under its senior notes and bank credit agreement. Further details on the net
loss amounting to $4.6 million which arose on these transactions are provided
in notes 11 and 23(vi) of the notes to consolidated financial statements.
In December 1996 the Company gave notice that it would redeem in full all
amounts outstanding to the convertible capital bond holders owed by the ASH
group. Further details on the net loss amounting to $1.6 million which arose
on this transaction are provided in notes 11 and 23(v) of the notes to
consolidated financial statements.
In July 1995 and December 1996 the Company repaid in full and cancelled
certain bank credit agreements as part of refinancing arrangements at the
time. Further details of the net losses amounting to $8.3 million in 1995 and
$1.0 million in 1996 which arose on these transactions are provided in notes
11, 23(iii) and 23(iv) of the notes to consolidated financial statements.
Dividends on preference shares
As a result of the redemption of a significant proportion of the Company's
convertible redeemable preference shares in 1994, dividends payable on the
balance of such shares outstanding were negligible in 1996 and 1995.
Effects of inflation
Due to the relatively low levels of inflation experienced in 1994, 1995 and
1996 in the major markets in which the Company operates, inflation did not
have a significant effect on the results of the Company in these years.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated cash flow information
The net decrease in cash and cash equivalents amounted to $135.0 million,
after the positive effect of currency translation on cash and cash equivalents
of $1.4 million. Net cash of $308.7 million provided by operating activities
was offset by net cash utilized by investing activities of $328.4 million and
net cash utilized by financing activities of $116.7 million.
Net cash provided by operating activities of $308.7 million principally
included cash provided by the Company's electronic security services and
vehicle auction services divisions less other expenses and adjusted for the net
increase in working capital. Within the net increase of $32.7 million in
working capital were increases in accounts receivable of $11.9 million and
inventories and other assets of $15.0 million and a net decrease in
liabilities of $5.8 million, principally relating to increases in accounts
payable and deferred revenue and a decrease in other liabilities. The
movement in accounts receivable was principally due to an increase in accounts
receivable in the vehicle auction services division. The movement in deferred
revenue was principally due to the timing of billings within the electronic
security services division.
Net cash utilized by investing activities of $328.4 million was principally
due to capital expenditures of $314.2 million and $25.7 million in the
electronic security services and vehicle auction services divisions,
respectively, $25.5 million relating to the acquisition of the minority
interest in Alert and $34.6 million relating to the purchase of customer
contracts to provide electronic security monitoring. These were principally
offset by $15.4 million received on the disposal of certain investments in and
loans to associates and $54.1 million received on the disposal of other
investments, principally Limelight Group plc.
32
<PAGE>
Net cash utilized by financing activities of $116.7 million was principally
due to the repayments of long-term debt of $209.9 million, principally
relating to the ASH group, and the purchase of $23.1 million of the Company's
senior subordinated notes at a cost of $24.0 million. These were principally
offset by $86.8 million relating to the proceeds from long-term debt and $24.7
million realized on the issue of common shares.
Cash, liquid resources and sources of finance
Liquid assets available to the Company at December 31, 1996 represented cash
and cash equivalents of $215.9 million. At December 31, 1996 the Company had
available but undrawn facilities of $35.9 million under its revolving bank
credit agreement.
In July 1996, as part of the then agreement to combine with Republic
Industries, Inc. ("Republic"), ADT Limited granted to Republic a warrant
to acquire 15 million common shares of ADT Limited at an exercise price of
$20 per common share. Following termination of the agreement to combine
with Republic, the warrant vested and was exercisable by Republic in the
six month period commencing September 27, 1996. On March 21, 1997 the
warrant was exercised by Republic and the Company received $300 million in
cash.
Future commitments and cash requirements
Capital expenditures during 1997 are estimated to be approximately $487
million which represent normal replacement needs and the purchase of
additional equipment, facilities and customer contracts necessary to meet
planned increases in sales. Approximately 90 per cent of the capital
expenditures projected for electronic security services relates to
installation of subscriber systems at customers' premises. This amount
does not include any amounts for acquisitions which the Company may pursue
from time to time.
The Company believes that the working capital at December 31, 1996, its
available credit facilities and the current cash flows from operations are
adequate for the Company's normal growth and operating needs, the funding of
its capital expenditures budget and the current servicing of its debt
requirements.
ADT Limited has no present intention to pay any dividends on its common shares
but will keep its dividend policy under review in the light of prevailing
circumstances. Under the terms of the senior notes and revolving bank credit
agreement ADT Limited may not declare, pay or make any dividend or
distribution with respect to its common shares, except in certain defined
circumstances. See note 23 of the notes to consolidated financial statements
for further details.
Forward looking information
Certain statements in this Form 10-K constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
In particular any statements contained herein regarding the consummation and
benefits of future acquisitions, as well as expectations with respect to
future sales, operating efficiencies and product expansion, are subject to
known and unknown risks, uncertainties and contingencies, many of which are
beyond the control of the Company, which may cause actual results, performance
or achievements to differ materially from anticipated results, performance or
achievements. Factors that might affect such forward looking statements
included, among others, overall economic and business conditions, the demand
for the Company's service, competitive factors in the industry, regulatory
approvals and the uncertainty of consummation of future acquisitions.
33
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ADT Limited's consolidated financial statements are included on pages F-1 to
F-77 and its consolidated financial statement schedules are included on pages
F-78 and F-79. Information required by Item 302 of Regulation S-K is included
in note 35 of the notes to consolidated financial statements and under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers
Set forth below are the names, ages, positions and certain other information
concerning the current directors and executive officers of the Company and
three executive officers of subsidiaries of the Company as at December 31,
1996.
Name Age Position with Company
- ---- --- ---------------------
Michael A. Ashcroft 50 Chairman of the Board; Chief Executive
Officer
John E. Danneberg 50 Director
Raymond A. Gross 47 Senior Vice President of ADT Security
Services, Inc.
Alan B. Henderson 63 Director
Ronnie G. Lakey 42 Director of ADT (UK) Holdings PLC
James S. Pasman, Jr. 66 Director
Michael J. Richardson 60 President and Chief Executive Officer of
ADT Automotive, Inc.
Stephen J. Ruzika 41 Chief Financial Officer; Executive Vice
President; Director
W. Peter Slusser 67 Director
William W. Stinson 63 Director
Raymond S. Troubh 70 Director
_________________________
Mr. Ashcroft has been Chairman and Chief Executive Officer of the Company
since 1984 and is Chairman of the Executive Committee. He was Chairman and
Chief Executive Officer of the Company's predecessor company, Hawley Group
PLC, from 1977 to 1984. He is the non-executive Chairman of BHI Corporation.
Mr. Danneberg has been a director of the Company since December 1991 and was
previously a director of the Company from 1984 to June 1991. He was the
President of Foliage Plant Systems, Inc., an interior landscape contractor,
from 1988 to October 1995 and has been Chief Executive Officer of Sonitrol
Corporation since August 1996, under a consulting agreement with ADT, Inc.
Mr. Gross has been a Senior Vice President of ADT Security Services, Inc.
since March 1, 1996. From August 1993, he was President and Chief Executive
Officer of Alert Centre, Inc., which was acquired by ADT in December 1995, and
prior to that he was President/General Manager of Cellular One of Ohio from
November 1988.
34
<PAGE>
Mr. Henderson has been a director of the Company since 1992 and is a member of
the Audit and Remuneration Committees. He is Chairman of Ranger Oil (UK)
Limited, an oil exploration and production company, and has been a director of
Ranger Oil (UK) Limited since 1972. He is also Chairman of Abtrust Emerging
Economies Investment Trust Plc and Abtrust New Thai Investment Trust Plc, and
is a director of Abtrust New Dawn Investment Trust Plc, Energy Capital
Investment Company PLC and Greenfriar Investment Company PLC.
Mr. Lakey has been a director of ADT (UK) Holdings PLC since its incorporation
in 1996. He has operational responsibility for the Company's electronic
security services operations in Canada and Europe. He has held various
positions with the Company since joining in 1987.
Mr. Pasman has been a director of the Company since 1992 and is a member of
the Audit and Remuneration Committees. He was President and Chief Operating
Officer of National Intergroup, Inc., an industrial holding company, from 1989
to 1991 and was Chairman and Chief Executive Officer of Kaiser Aluminum and
Chemical Corp., an aluminum and chemical company, from 1987 to 1989. He is a
director of BEA Income Fund, Inc., BEA Strategic Income Fund, Inc. and BT
Insurance Funds Trust.
Mr. Richardson has been the President and Chief Executive Officer of ADT
Automotive, Inc., which supervises the United States vehicle auction services
business, since 1982.
Mr. Ruzika has been a director and Executive Vice President of the Company
since 1987, has been Chief Financial Officer since 1989 and President of ADT
Security Services, Inc. since 1996. He is a member of the Executive
Committee. He was previously Chief Financial Officer of the Company's United
States operations. He is also a non-executive director of BHI Corporation.
Mr. Slusser has been a director of the Company since 1992 and is a member of
the Audit and Remuneration Committees. He has been the President of Slusser
Associates, Inc., a private investment banking firm in New York City, since
1988 and was previously a managing director and head of mergers and
acquisitions at PaineWebber Incorporated. He is a director of Ampex
Corporation, a leading producer of high performance television and data
storage recording systems.
Mr. Stinson has been a director of the Company since 1991. He retired as
Chairman and Chief Executive Officer of Canadian Pacific Limited in 1996 after
serving as Chief Executive Officer for 11 years. He remains a director of
that company. He is also a director of Laidlaw, Inc., Western Star Trucks
Inc., Sun Life Assurance Company of Canada, and a number of other corporations.
Mr. Troubh has been a director of the Company since 1991 and is a member of
the Audit and Remuneration Committees. He has been an independent financial
consultant since 1974. He is a director of America West Airlines, Inc., ARIAD
Pharmaceuticals, Inc., Becton, Dickinson and Company, Diamond Offshore
Drilling, Inc., Foundation Health Corporation, General American Investors
Company, Inc., Olsten Corporation, Petrie Stores Corporation, Time Warner
Inc., Triarc Companies, Inc. and WHX Corporation.
Each director is currently serving a term which expires at the next annual
general meeting. Each such director is eligible for re-election. Under the
Bye-Laws of the Company, no person other than a director retiring at a General
Meeting of the Company shall, unless recommended by the directors, be eligible
for election to the office of director unless, between six and 28 days before
the meeting date, the Secretary of the Company has been given, by a
shareholder of the Company (other than the person to be proposed) entitled to
attend and vote at the annual general meeting or special general meeting,
written notice of his intention to propose such person for election and also
written notice, signed by the person to be proposed, of his willingness to be
elected. A director may hold any other office or position of profit under the
Company (other than the office of Auditor) in conjunction with this office of
director for such period and on such terms as the Company may from time to
time determine in general meeting.
35
<PAGE>
Meetings and Committees of the Board
During 1996, there were eleven meetings of the Board. All directors attended
at least 75 per cent of the meetings of the Board and of the committees of
which they were members.
The Board has several committees, including an Audit Committee and a
Remuneration Committee. The Audit Committee, formed in 1991, and the
Remuneration Committee, formed in 1992, consist of Messrs. Henderson, Pasman,
Slusser and Troubh each of whom is an independent director. During 1996,
there were four meetings of the Audit Committee and four meetings of the
Remuneration Committee. The function of the Audit Committee is to review the
services performed by the Company's independent accountants and to review and
act or report to the Board with respect to the scope of audit procedures and
accounting practices. The function of the Remuneration Committee is to review
and approve compensation and other employment benefits afforded certain
executive officers. The Company has no standing nominating committee.
Compensation of Directors
Directors who are not employees of the Company are paid an annual
director's fee of $25,000 each and are reimbursed for reasonable and
customary travel and other expenses incurred in performing their duties.
In addition, Messrs. Henderson, Pasman, Slusser and Troubh are each paid
an annual sum of $15,000 for their services on the Audit and Remuneration
Committees.
36
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
Summary Compensation Table
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the fiscal years ended
December 31, 1996, 1995 and 1994, of those persons who were, at December
31, 1996 (i) the Chief Executive Officer and (ii) the other four most
highly compensated executive officers of the Company, including three
executive officers of a subsidiaries of the Company (the "Named Officers").
<TABLE>
<CAPTION> Long-Term
Compensation
Annual Compensation(1) Awards
----------------------------------------------------------------
Securities
Underlying
Stock Options All Other
Name and principal position Year Salary Bonus (#) Compensation
- --------------------------- ---- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Michael A. Ashcroft(2) 1996 $1,143,844 $2,344,880 5,000,000 $1,330,380(3)
Chairman of the Board; Chief 1995 $1,089,375 $2,233,219 1,500,000 $1,921,939
Executive Officer 1994 $1,037,500 1,945,313 750,000 $ 783,403
Raymond A. Gross 1996 $ 183,353(4) $ 82,500 100,000 -0-
Senior Vice President of ADT 1995 -0- -0- -0- -0-
Security Services, Inc. 1994 -0- -0- -0- -0-
Ronnie G. Lakey 1996 $ 248,962 $ 125,000 100,000 $ 27,020(5)
Director of ADT (UK) Holdings 1995 $ 195,866 $ 140,000 20,000 $ 14,822
PLC 1994 $ 188,827 $ 135,000 25,000 $ 14,138
Michael J. Richardson(6) 1996 $ 335,000 $ 222,705 40,000 $ 6,461(7)
Chief Executive Officer of ADT 1995 $ 314,000 $ 145,245 50,000 $ 6,461
Automotive, Inc. 1994 $ 300,000 $ 115,000 45,000 $ 6,480
Stephen J. Ruzika(8) 1996 $ 686,306 $1,100,000(9) 208,333 $ 40,323(10)
Chief Financial Officer; Executive 1995 $ 653,625 $ 250,000 500,000 $ 37,432
Vice President; Director 1994 $ 622,500 $ 200,000 250,000 $ 35,639
</TABLE>
- ---------------------
(1) While officers enjoy certain perquisites, such perquisites did not exceed
the lesser of $50,000 or 10 per cent of each officer's salary and
bonus. Except as set forth below under "Employment Contracts,
Termination of Employment and Change in Control Arrangements", a
change in control of the Company does not of itself require the
payment of any moneys to any of the Named Officers. However, such an
event does accelerate the vesting of certain pension rights and the
exercisability of certain stock options.
37
<PAGE>
(2) The salary, bonus and all other compensation shown in respect of 1994 and
1995 represent Mr. Ashcroft's entitlement to those amounts. Mr.
Ashcroft utilized $2,500,000 of the compensation due to him for 1995,
being the whole of his bonus entitlement of $2,233,219 and $266,781 of
his other compensation to subscribe for options, at the rate of $2.50
per option, to subscribe for Common Shares. Mr. Ashcroft also
utilized $2,500,000 of the compensation due to him for 1994, being the
whole of his bonus entitlement of $1,945,313 and $554,687 of his other
compensation entitlement to subscribe for these options.
(3) The other compensation due to Mr. Ashcroft in respect of 1996 represents
the US dollar equivalent of Pound Sterling 851,344 being an amount in
lieu of providing Mr. Ashcroft with retirement and death benefits
under a defined pension plan. The amounts in respect of 1995 and 1994,
and which are referred to in note (2) above, were the equivalents of
Pound Sterling 1,217,341 and Pound Sterling 511,126, respectively.
(4) Represents salary since joining ADT Security Services, Inc. in March
1996. Mr. Gross' annualized salary for 1996 was $220,000.
(5) Represents the amount contributed to Mr. Lakey's retirement income plan
(1995 - $14,822, 1994 - $14,138).
(6) The salary amount shown for 1996 represents Mr. Richardson's entitlement
to salary in the year. Prior to becoming entitled to receive certain
salary, however, Mr. Richardson elected to receive options at the rate
of $2.50 per option, to subscribe for Common Shares at an exercise
price of $8.625 per share, in lieu of receiving $69,444 in salary (1995
- $83,333, 1994 - $97,222).
(7) Represents $4,500 contributed to a defined contribution 401(k) pension
benefit plan (1995 - $4,500, 1994 - $4,500) and $1,961 which is the
aggregate incremental cost to the Company of providing Mr. Richardson
with enhanced group term life insurance benefits (1995 - $1,961, 1994 -
$1,980).
(8) The salary amount shown for 1996 represents Mr. Ruzika's entitlement to
salary in the year. Prior to becoming entitled to receive certain
salary, however, Mr. Ruzika elected to receive options at the rate of
$2.50 per option, to subscribe for Common Shares at an exercise price
of $8.625 per share, in lieu of receiving $80,136 in salary (1995 -
$104,167, 1994 - $128,198).
(9) Mr. Ruzika earned a bonus for 1996 of $1,100,000 (1995 - $250,000) under
a bonus arrangement by which payments are related directly to the
performance of the Common Share price.
(10) Represents $37,639 contributed to Mr. Ruzika's retirement income plan
(1995 - $35,777, 1994 - $34,003) and $2,684 which is the estimated
aggregate incremental cost to the Company of providing Mr. Ruzika
with supplemental term life insurance (1995 - $1,655, 1994 - $1,636).
38
<PAGE>
Option Grants in Last Fiscal Year
Shown below are all grants of share options to the Named Officers during
the fiscal year ended December 31, 1996. The following table shows, along
with certain information, hypothetical realizable values of share options
granted for the last fiscal year, at assumed rates of cumulative share
price appreciation over the ten-year life of such options. These assumed
rates of appreciation are set by the rules of the SEC and are not intended
to forecast appreciation of the price of the Common Shares. These
hypothetical values have not been discounted to reflect their present
values.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------
Potential Realizable Value
% of at Assumed Annual Rates
Total Options Exercise of Share Price Appreciation
Granted or for Option Term(2)
Options to Employees Base Price Expiration
Name Granted(1) in Fiscal Year ($/share) Date 5% 10%
- ---- --------- -------------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft 5,000,000 78.3% $15.00 Aug 4, 2003 $30,968,000 $74,713,000
Raymond A. Gross 100,000 1.6% $16.50 May 6, 2006 $ 1,017,000 $ 2,597,000
Ronnie G. Lakey 100,000 1.6% $16.50 May 6, 2006 $ 1,017,000 $ 2,597,000
Michael J. Richardson 40,000 0.6% $16.50 May 6, 2006 $ 407,000 $ 1,039,000
Stephen J. Ruzika 208,333 3.3% $15.00 April 29, 2004 $ 1,452,000 $ 3,567,000
</TABLE>
- -------------------
(1) The options granted to Mr. Ashcroft and Mr. Ruzika represent the net
increase in the number of options which were received by Mr. Ashcroft
and Mr. Ruzika in connection with an amendment to a previously granted
option on 3,000,000 and 125,000 Common Shares, respectively. At the
same time as the number of options was increased, the exercise price
was also increased from $8.625 to $15.00. All the other terms and
conditions of the options, including the expiry dates, remained
unchanged.
Of the options granted to Mr. Gross, Mr. Lakey and Mr. Richardson, 50 per
cent are exercisable after three years from the date of grant, 25 per
cent are exercisable after 4 years from the date of grant and 25 per
cent are exercisable after five years from the date of grant.
(2) Gains are reported net of the option exercise price but before taxes
associated with exercise. The amounts shown represent certain assumed
rates of appreciation only. Actual gains, if any, on option exercises
are dependent on the future price performance of the Common Shares as
well as the option holders' continued employment through the vesting
period. The potential realizable values reflected in this table may
not necessarily be achieved.
39
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Shown below is information with respect to aggregate option exercises by the
Named Officers in the fiscal year ended December 31, 1996 and with respect
to unexercised options to purchase Common Shares granted in fiscal 1996 and
prior years to the Named Officers and held by them at December 31, 1996.
[CAPTION]
<TABLE>
Value of Unexercised In-the-
Shares Value Number of Unexercised Money Options at Fiscal Year
Acquired on Realized on Options at Fiscal Year End End(1)(2)
Exercise of Exercise of -------------------------------------------------------------------
Options in Options in
Name Fiscal Year Fiscal Year Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft 825,000 $6,626,250 9,700,000 1,550,000 $78,437,190 $17,493,125
Raymond A. Gross -0- -0- -0- 100,000 -0- $ 637,500
Ronnie G. Lakey 32,000 $ 256,016 15,000 145,000 $ 208,125 $ 1,209,375
Michael J. Richardson 45,000 $ 318,125 270,000 135,000 $ 3,496,750 $ 1,441,875
Stephen J. Ruzika 12,000 $ 54,900 1,141,663 516,670 $12,951,731 $ 5,831,080
</TABLE>
- --------------------
(1) Based on the closing price of $22.875 per Common Share on December 31,
1996.
(2) Messrs. Ashcroft, Richardson and Ruzika were granted certain options for
which they have paid a subscription price of $2.50 per option which has
been taken into account for the purpose of valuing these options.
Certain Defined Benefit Plans
The Company does not maintain any defined benefit or actuarial retirement
plans ("pension plans"). However, Mr. Lakey, Mr. Richardson and Mr.
Ruzika participate in pension plans that are maintained by indirect, wholly
owned subsidiaries of the Company. Certain information is set forth below
regarding the pension plans in which Mr. Lakey, Mr. Richardson and Mr.
Ruzika, as well as other employees of the Company's subsidiaries,
participate.
Mr. Richardson is a participant in the ADT Pension Plan maintained by ADT
Group PLC ("ADT Group"). Mr. Richardson is the only Named Officer who
participates in the ADT Group's Pension Plan (the "ADT Group Plan"). The
ADT Group Plan provides Mr. Richardson an annual benefit payable for life
beginning at age 60. The annual benefit is equal to 66.7 per cent of base
salary for the three years of the most recent ten years prior to retirement
that produce the highest average. Mr. Richardson's annual benefit payable
at age 60 for life is Pound Sterling146,095. Since Mr. Richardson has
already attained age 60, the benefit payable to him upon his actual
retirement will be adjusted based upon his actual retirement date.
Benefits payable under the ADT Group Plan are not offset by Social Security
benefits.
ADT, Inc. maintains a supplemental executive retirement plan (the "ADT
SERP"). Mr. Lakey and Mr. Ruzika are the only Named Officers who
participate in the ADT SERP. Benefits for Mr. Ruzika under the ADT SERP
are also supplemented under a Supplemental Benefit Agreement between Mr.
Ruzika and ADT Management Services Limited (the "Supplemental Benefit
Agreement").
40
<PAGE>
The ADT SERP provides benefits to Mr. Lakey for a total of 20 years,
beginning at age 60. This annual benefit is equal to 60 per cent of Mr.
Lakey's base salary for the three consecutive years that produce the
highest average. This benefit is reduced by the value of any benefits
derived from employer contributions under any other retirement plan
maintained by ADT, Inc. or its affiliates. Mr. Lakey's estimated annual
benefit payable at age 60 for a total of 20 years, net of the estimated
offset attributable to employer contributions under certain defined
contribution plans, is $30,764. The estimated offset is based on the
assumption that Mr. Lakey will have 27 years of service at age 60.
Benefits are not offset by Social Security benefits.
The ADT SERP and Supplemental Benefit Agreement together provide benefits
payable to Mr. Ruzika for a total of 20 years beginning at age 55. This
annual benefit is equal to 65 per cent of base salary and bonuses for the
three consecutive years that produce the highest average. Effective for
benefits accrued after December 31, 1994, the benefit is calculated using
base salary including, for this purpose, the purchase price of any options
to purchase the Company's shares received in lieu of base salary. This
benefit is reduced by the value of any benefits derived from employer
contributions under any other retirement plan maintained by ADT, Inc. or
its affiliates.
Mr. Ruzika's estimated annual benefit payable at age 55 for a total of 20
years, net of the estimated offset attributable to employer contributions
under certain defined contribution plans, is $361,802. The estimated
offset is based upon the assumption that Mr. Ruzika will have 28 years of
service at age 55. Benefits are not offset by Social Security benefits.
Compliance with Reporting Requirements
The Company believes that, during 1996, all filing requirements under
Section 16(a) of the Exchange Act applicable to its officers, directors and
beneficial owners of more than 10 per cent of equity securities were
complied with on a timely basis.
41
<PAGE>
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Company has entered into a written employment agreement with Mr.
Ashcroft, dated as of May 8, 1993. An amendment to the agreement was
approved on November 4, 1996, which provides that Mr. Ashcroft shall serve
as Chairman of the Board and Chief Executive Officer until March 31, 2000,
subject to renewal for additional two-year terms thereafter. Mr.
Ashcroft's initial base salary was $1,000,000 per annum subject to annual
review and adjustment by the Board but may only be reduced by a maximum of
15 per cent during the term of the agreement without Mr. Ashcroft's
consent. During 1996, Mr. Ashcroft's base salary was increased to
$1,157,625 per annum. Mr. Ashcroft is also eligible for annual bonus
payments based upon an earnings-per-share target for the Common Shares set
each year, subject to a maximum bonus of $4,000,000. The maximum bonus is
payable upon attaining 117.5 per cent of the targeted earnings per share.
As a term of the contract, Mr. Ashcroft was granted options to purchase
1,000,000 Common Shares under the ADT 1993 Long Term Incentive Plan, with
50 per cent of such options exercisable at market value on the date of
grant, as defined, 25 per cent exercisable at 110 per cent of market value,
and 25 per cent exercisable at 120 per cent of market value, vesting in
equal annual installments over a three-year period commencing one year from
the date of grant and exercisable over a ten-year period. The Company will
make annual payments to Mr. Ashcroft calculated to provide him with
retirement and death benefits no less favorable than if he were a member of
ADT Group Plan. Such annual payments will not be less than $450,000. The
Company may terminate the agreement upon Mr. Ashcroft's death, when Mr.
Ashcroft attains the age of 60, if Mr. Ashcroft is unable to perform his
duties for 180 days due to ill heath, accident or otherwise, if Mr.
Ashcroft fails to discharge his duties or engages in conduct that is
materially injurious to the Company, or if Mr. Ashcroft willfully and
continually commits a material breach of the agreement. Mr. Ashcroft may
terminate the agreement upon, among other reasons, a breach by the Company
which breach (except for a material breach) is not cured within 30 days, if
he is removed from his position as Chairman of the Board or his position as
Chief Executive Officer, or if the scope of his duties and responsibilities
becomes inconsistent with his position as an officer of the Company.
Mr. Ashcroft may also terminate the agreement without cause at any time
upon 90 days notice. In the event the agreement is terminated pursuant to
its terms by the Company or without cause by Mr. Ashcroft upon 90 days
notice, Mr. Ashcroft will be entitled to the pro rata portion of his base
salary, bonus payment, pension payment and other benefits but will not be
entitled to any additional payments. If the agreement is terminated due to
a disability, Mr. Ashcroft will be entitled to an additional payment equal
to two times his highest base salary. In the event the agreement is
terminated by the Company without cause or by Mr. Ashcroft with cause, Mr.
Ashcroft will be entitled to a severance payment equal to two times his
highest base salary and average bonus payment, annual pension payments for
the year of termination and the following two years, and one year of any
other benefits previously provided.
Mr. Ruzika entered into an employment agreement with ADT as of February
26, 1997. The agreement provides that Mr. Ruzika will serve as Chief
Financial Officer of ADT and as President of ADT Security Services, Inc.,
ADT Operations, Inc. and ADT, Inc., subsidiaries of ADT, from March 1, 1997
until February 28, 1999, subject to renewal for additional two-year terms
thereafter. Mr. Ruzika's initial annual base salary will be $694,500 and
will be subject to annual review for possible adjustments. Mr. Ruzika
will also be eligible for annual bonus payments at the discretion of the
Company as well as other compensation and benefit plans of the Company
including stock option plans. The termination provisions of this agreement
provide that in the event that agreement is terminated by ADT without cause
or by Mr. Ruzika with cause, Mr. Ruzika will be entitled to receive a
severance payment equal to twice his base salary and certain fringe
benefits.
Mr. Lakey entered into an employment agreement with ADT, Inc. as of
January 16, 1997. The agreement provides that Mr. Lakey will have
operational responsibility for ADT's electronic security operations in
Canada and Europe from January 16, 1997 until December 31, 1999, subject to
renewal for additional two-year terms thereafter. Mr. Lakey's initial
annual base salary will be $265,000. Mr. Lakey will also be eligible for
annual bonus payments at the discretion of the Company as well as certain
other enumerated benefits and relocation expenses. The termination
provisions of this agreement include a term to the effect that, in the
event that agreement is terminated by ADT without cause or by Mr. Lakey
with cause, Mr. Lakey will be entitled to receive his base salary and
certain fringe benefits for two years.
42
<PAGE>
Under the ADT SERP (and, in the case of Mr. Ruzika, the Supplemental
Benefit Agreement), Mr. Ruzika and Mr. Lakey become fully vested in the
accrued benefits thereunder upon a Change in Control (as defined below) of
the Company or ADT, Inc. Mr. Ruzika also becomes fully vested upon a
Change in Control (as defined below) of ADT Management Services Limited.
If Mr. Ruzika or Mr. Lakey's employment is terminated within one year
from the date of a Change in Control, the terminated executive will
receive, in lieu of all other amounts due to him under the ADT SERP (and,
in Mr. Ruzika's case, the Supplemental Benefit Agreement), a lump-sum
distribution equal to the present value of his accrued benefit and an
additional amount calculated under a formula intended to put him in the
same after-tax position that he would have been in if he had received a
lump-sum distribution of his accrued benefit on his normal retirement date.
Under this formula Mr. Ruzika would currently receive an additional amount
of approximately $653,295 and Mr. Lakey would currently receive an
additional amount of approximately $54,253.
A "Change in Control" is deemed to have occurred under the ADT SERP if :
(1) any person (other than Laidlaw, Inc. or its affiliates, collectively
the "Laidlaw Group") acquires more than 40 per cent of the Company's voting
stock (the triggering percentage has been reduced from 40 per cent to 35
per cent because the Laidlaw Group's beneficial ownership of the Company's
voting stock is less than 20 per cent); (2) the Laidlaw Group becomes the
beneficial owner of more than 45 per cent of the Company's outstanding
voting stock; (3) there is a change of 50 per cent or more in the
composition of the Company's directors during any 3-year period (unless the
change in directors was approved by two thirds of the directors in office
at the beginning of such 3-year period or directors who had previously been
elected with the requisite two thirds approval); (4) a person acquires the
legal right to direct the management and policies of the Company (other
than by virtue of membership on the board of directors or a committee of
the board); (5) the Company ceases to own, directly or indirectly through
subsidiaries, at least 80 per cent of the voting stock of ADT, Inc. or (6)
the shareholders of either the Company or ADT, Inc. approve a merger,
consolidation or a sale or disposition of all, or substantially all, of the
assets of the Company or ADT, Inc. as the case may be, with the relevant
company not surviving. In the case of Mr. Ruzika, the provisions of (4),
(5), and (6) above include a change in the ownership of ADT Management
Services Limited (as well as the Company or ADT, Inc.).
Mr. Richardson entered into an employment agreement with ADT Automotive
Holdings, Inc. ("ADT Automotive Holdings"), the corporate parent of ADT
Automotive, Inc., as of November 30, 1993. The agreement provides that Mr.
Richardson will serve as Chief Executive Officer of ADT Automotive Holdings
and its subsidiaries from December 1, 1993 until July 31, 1996, subject to
renewal for additional one-year terms thereafter. The agreement was
renewed on a year-to-year basis as of July 31, 1996. The agreement
provides that the term will be extended for an additional one year period
thereafter unless either ADT Automotive Holdings or Mr. Richardson shall
have given the other notice of intention not to extend the term six months
prior to July 31, 1997. On January 29, 1997, ADT Automotive Holdings and
Mr. Richardson entered into an agreement which provides that Mr.
Richardson's time to give such notice is extended to and including April
30, 1997. Mr. Richardson's initial annual base salary will be $300,000
and will be subject to annual review for possible increases. Mr.
Richardson will also be eligible for annual bonus payments at the
discretion of the Company. The termination provisions of this agreement
include a term to the effect that, in the event that agreement is
terminated by ADT Automotive Holdings without cause or by Mr. Richardson
with cause, Mr. Richardson will be entitled to receive his base salary and
certain fringe benefits for two years or the remaining term of the
agreement, whichever is longer.
43
<PAGE>
Mr. Richardson has also entered into an incentive compensation agreement
for payment upon the successful sale of ADT Automotive Holdings by the
Company. To the extent that the gross consideration for such sale exceeds
$430 million, on completion of the sale, ADT has agreed to pay Mr.
Richardson one-half of one per cent of such excess. Gross consideration is
deemed to be the aggregate of proceeds received by ADT and debt remaining
in the auctions group which is assumed by the purchaser other than debt
considered to be a component of working capital, including bank overdrafts.
The Remuneration Committee of the Board has considered the recommendations
of the Company's outside independent human resources consultants, and has
reviewed industry practices concerning change in control severance
benefits. In view of the need to minimize employee distractions and to
retain employee loyalty and dedication to the Company and to assure
attention to the Company's performance pending resolution of the Western
Offer, on February 27, on the recommendation of the Remuneration Committee,
the Board unanimously approved a severance agreement between Mr. Gross and
ADT Security Services, Inc. in the event of a change of control, which
severance arrangement it has determined is fair and consistent with
industry practices. The agreement provides that in the event that there is
a "Severance Change in Control" (as defined below) of ADT prior to February
9, 2000, and either (x) Mr. Gross's employment is terminated without
cause or (y) Mr. Gross terminates his employment for good reason, Mr.
Gross shall be entitled to (a) an amount of severance pay equal to twice
the total of (i) the higher of his annual full base salary as of the date
of termination or as of the date of the Severance Change in Control,
calculated on an annualized basis, plus (ii) the amount of the bonus
awarded to Mr. Gross, if any, in the year prior to the date of termination
and (b) for the twelve-month period following such termination, benefits
substantially similar to the higher of those which Mr. Gross is receiving
immediately prior to the date of termination or as of the date of the
Severance Change in Control. A "Severance Change in Control" is deemed to
have occurred under the severance agreement if: (1) any person becomes the
beneficial owner of more than 50 per cent of ADT's then-outstanding voting
securities; (2) there is a change of 50 per cent or more in the
composition of the Company's directors during the term of the agreement
(unless the change in directors was approved by two thirds of the directors
in office at the beginning of such term or directors who had previously
been elected with the requisite two thirds approval); (3) a person
acquires the legal right to direct the management and policies of the
Company (other than by virtue of membership on the board of directors or a
committee of the board); or (4) the shareholders of ADT approve a merger,
consolidation or a sale or disposition of all, or substantially all, of the
assets of ADT in which ADT is not the surviving entity.
In 1996, the Remuneration Committee of the Board resolved to increase the
subscription price and size of certain share options held by Mr. Ashcroft
and Mr. Ruzika. In 1993, Mr. Ashcroft and Mr. Ruzika were granted
options to subscribe for 3,000,000 and 125,000 Common Shares respectively
at an exercise price of $8.625 per share for which each was required to pay
$2.50 per option, representing a total payment of $7,500,000 and $312,500
respectively, as a condition of vesting. In 1996, the exercise price of
these options was increased to $15 and the number of related shares was
increased to 8,000,000 and 333,333 respectively. All the other material
terms and conditions remained unchanged. These changes were approved by
the shareholders of the Company. At the time that the Remuneration
Committee approved these changes, the closing price of the Common Shares
was $14.75. In November 1996, the Remuneration Committee resolved that the
options of Mr. Ashcroft be transferable and, at the same time, in return,
Mr. Ashcroft agreed to extend the termination date of his employment
agreement from March 31, 1998 to March 31, 2000.
44
<PAGE>
In November 1996, the Remuneration Committee also approved a bonus plan
under which Mr. Ruzika is to receive a bonus of $200,000 when the Common
Share price exceeds $21.00 for a continuous period of 30 trading days and
$200,000 each time the Common Share price exceeds by $1.00 for a continuous
period of 30 trading days the share price level at which a bonus payment
was previously made. The plan is due to expire in 2001 or such earlier
date as the Common Share price exceeds $30.00 for a continuous period of 30
trading days. Should the share price exceed $30.00 within two and one half
years, Mr. Ruzika will receive an additional payment of $1,000,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, with respect to
beneficial ownership (determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Common
Shares by any person known by the Company to beneficially own more than
five per cent of the outstanding Common Shares (i) as at December 31, 1996
by FMR Corp. ("FMR"); (ii) as at March 17, 1997 by WCI; (iii) as at
March 21, 1997 by Republic; and (iv) as at March 24, 1997 by (a) all
directors of the Company, (b) the named directors and officers of the
Company, including three executive officers of subsidiaries of the Company
and (c) all directors and executive officers of the Company as a group.
An asterisk indicates ownership of less than one per cent of outstanding
Common Shares.
Number of
Name of Beneficial Owner Common Shares Per cent of
or Identity of Group Beneficially Owned(1),(2) Class(3)
- --------------------------- ------------------------- -----------
Westar Capital, Inc. (4)
818 Kansas Avenue
Topeka, Kansas 66601 38,287,111 24.9%
FMR Corp.(5)
82 Devonshire Street
Boston, Massachusetts 02109 8,416,744 5.4%
Republic Industries, Inc.(6)
450 East Las Olas Boulevard
Fort Lauderdale, Florida 33301 15,000,000 9.8%
M.A. Ashcroft(6)(7) 11,525,718 7.0%
J.E. Danneberg 102 *
R.A. Gross 2,000 *
A.B. Henderson 621 *
R.G. Lakey 25,000 *
J.S. Pasman, Jr. 2,000 *
M.J. Richardson 327,837 *
S.J. Ruzika 1,307,407 *
W.P. Slusser 2,800 *
W.W. Stinson 3,010 *
R.S. Troubh 2,500 *
All directors and executive officers
as a group, 11 persons(8) 13,198,995 8.0%
45
<PAGE>
(1) Includes Common Shares which may be acquired upon exercise of the
following number of options to purchase Common Shares from the Company
exercisable on or within 60 days of March 24, 1997 held by the
following persons: M.A. Ashcroft, 10,150,000 (excluding 15,000,000
Common Shares owned by Republic for which Mr. Ashcroft, as Chairman of
ADT, holds a proxy as described in footnote 6, but as to which Mr.
Ashcroft disclaims beneficial ownership); R.A. Gross, nil; R.G.
Lakey, 25,000; M.J. Richardson, 315,000 and S.J. Ruzika, 1,291,665.
(2) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any Common Shares which such person has
the right to acquire on or within 60 days after March 24, 1997. For
purposes of computing the percentage of outstanding Common Shares held
by each person or group of persons named above, any security which such
person or persons has or have the right to acquire on or within 60 days
after March 24, 1997 is deemed to be outstanding, but is not deemed to
be outstanding for the purpose of computing the percentage ownership of
any other person.
(3) Based upon Common Shares outstanding on March 24, 1997, but excluding
3,182,787 Common Shares owned by a subsidiary of the Company.
(4) The Company has received an Amendment No. 10 to Schedule 13D dated March
17, 1997 filed with the SEC by WCI, a wholly owned subsidiary of
Western Resources Inc., in respect of ownership of 38,287,111 Common
Shares. The Company has not attempted to verify independently any of
the information contained in the Schedule 13D.
(5) The Company has received an Amendment No. 4 to Schedule 13G dated
February 14, 1997 filed with the by SEC in respect of ownership of
8,416,744 of Common Shares at December 31, 1996 by accounts under the
discretionary investment management of its wholly owned subsidiaries
Fidelity Management Research Company and Fidelity Management Trust
Company. As of December 31, 1996, FMR exercised sole voting power with
respect to 112,714 Common Shares and sole dispositive power with
respect to 8,416,744 Common Shares. The Company has not attempted to
independently verify any of the information contained in the Schedule
13G.
(6) The Company has received an Amendment No. 2 to Schedule 13D dated
March 26, 1997, describing that on March 21, 1997, Republic, through
Triangle Corporation, a Delaware corporation and a wholly owned
subsidiary of Republic ("Triangle"), purchased 15,000,000 Common Shares
by exercise of the Republic Warrant. Under the terms of the Republic
Warrant, Triangle has granted the Chairman of ADT an irrevocable proxy
to vote, at any meeting of ADT's shareholders, the 15,000,000 Common
Shares issued under the Republic Warrant, with respect to any matter
which shall be voted upon by ADT's shareholders. The proxy expires as
to any such Common Shares on the earlier of (i) September 27, 1998 and
(ii) the date such shares are no longer held by Republic or any of its
affiliates or nominees. Mr. Ashcroft, the current Chairman of ADT,
disclaims beneficial ownership of the Common Shares held by Triangle.
46
<PAGE>
(7) The number of Common Shares beneficially owned by Mr. Ashcroft includes
718 Common Shares owned by Mr. Ashcroft's wife.
(8) The address for these officers and directors is the address of the
Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Relationships and Related Transactions
ADT, Inc., a wholly owned subsidiary of ADT, entered into a consulting
agreement with John E. Danneberg, one of ADT's directors, as of August 28,
1996. The agreement provides that Mr. Danneberg, as an independent
consultant, will serve as Chief Executive Officer of Sonitrol Corporation
("Franchisor") and certain franchisees of Franchisor owned or acquired by
affiliates of ADT, Inc. The agreement provides that the initial term of
such engagement shall be for a period of six months commencing on September
1, 1996 and shall be automatically renewed on a month to month basis unless
written notice is given by ADT, Inc. or Mr. Danneberg not to renew the
agreement at least 30 days before the end of such initial term, which
notice was not given. Under the terms of the agreement, ADT, Inc. pays Mr.
Danneberg a monthly fee of $15,000 and Mr. Danneberg is reimbursed
directly for all reasonable out-of-pocket business expenses.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Consolidated Financial Statements
Report of Independent Accountants
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
47
<PAGE>
(b) Exhibits
2.1 Agreement and Plan of Merger by and among ADT Limited, Limited Apache,
Inc. and Tyco International Ltd. dated as of March 17, 1997.(6)
3.1 Memorandum of Association (as altered) and Bye-Laws of ADT Limited
(incorporating all amendments to May 26, 1992).(1)
3.2 Certified copy of a resolution approved at the Annual General Meeting of
common shareholders of ADT Limited held on October 12, 1993, approving
an increase in the authorized common share capital of ADT Limited from
$19.5 million to $22.0 million.(4)
4.1 Indenture relating to the senior notes dated August 4, 1993 among ADT
Operations, as issuer, and ADT Limited and certain subsidiaries of ADT
Operations, as guarantors, and The Chase Manhattan Bank (National
Association), as trustee, and the form of senior note included
therein.(2)
4.2 Indenture relating to the senior subordinated notes dated August 4, 1993
among ADT Operations, as issuer, and ADT Limited, as guarantor, and
NationsBank of Georgia, National Association, as trustee, and the form
of senior subordinated note included therein.(2)
4.3 Indenture dated as of July 1, 1995 among ADT Operations, Inc., ADT
Limited and Bank of Montreal Trust Company, as trustee and the form of
note included therein. (5)
4.4 Rights Agreement between ADT Limited and Citibank, N.A. dated as of
November 6, 1996.(9)
4.5 First Amendment between ADT Limited and Citibank, N.A. dated as of March
3, 1997 to Rights Agreement between ADT Limited and Citibank, N.A. dated
as of November 6, 1996.(9)
10.1 Rules of the ADT UK Executive Share Option Scheme (1984), amended to
reflect the reverse split of Common Shares effective June 17, 1991.(1)*
10.2 Rules of the ADT International Executive Share Option Plan, amended to
reflect the reverse split of Common Shares effective June 17, 1991.(1)*
10.3 Rules of the ADT UK and International Executive Share Option Schemes
(1984) New Section, amended to reflect the reverse split of Common
Shares effective June 17, 1991.(1)*
48
<PAGE>
10.4 Rules of the ADT Senior Executive Share Option Plan, amended to reflect
the reverse split of Common Shares effective June 17, 1991.(1)*
10.5 US (1990) Stock Option Plan of ADT Limited, amended to reflect the
reverse split of Common Shares effective June 17, 1991.(1)*
10.6 Employment Agreement dated May 8, 1993 between ADT Limited and Michael
Anthony Ashcroft.(2)*
10.7 Amendment to Employment Agreement dated December 18, 1996 between ADT
Limited and Michael Anthony Ashcroft.(9)*
10.8 Employment agreement between ADT Limited and Stephen J. Ruzika dated as
of February 26, 1997.(9)*
10.9 Employment agreement between ADT, Inc. and Ron G. Lakey dated as of
January 16, 1997.(9)*
10.10 Agreement between ADT Automotive Holdings, Inc. and Michael J.
Richardson dated as of January 29, 1997.(9)*
10.11 Incentive Compensation Agreement between ADT, Inc. and Michael J.
Richardson dated as of February 10, 1997.(9)*
10.12 Severance Agreement between ADT Security Services, Inc. and Raymond
Gross dated as of February 26, 1997.(9)*
10.13 Consulting Agreement between ADT, Inc. and John E. Danneberg dated as of
August 28, 1996.(9)*
10.14 Form of Indemnification Agreement.(9)*
10.15 The ADT 1993 Long-Term Incentive Plan (as amended February 29,
1996).(3)*
10.16 Purchase Agreement dated June 29, 1995 among ADT Operations, Inc., ADT
Limited and Merrill Lynch & Co., Inc. and the related pricing agreement
(5)
10.17 US$200,000,000 Credit Agreement dated as of January 9, 1997, among ADT
Operations, Inc., as the Borrower, and Certain Commercial Lending
Institutions as the Lenders, and the Bank of Nova Scotia as the Agent
for the Lenders.
10.18 Guaranty, dated as of January 9, 1997, made by ADT Limited in favor of
each of the Lender Parties (as defined therein).
10.19 Subsidiary Guarantor Guaranty, dated as of January 9, 1997, made by each
Subsidiary Guarantor (as defined therein) in favor of each of the Lender
Parties (as defined therein).
10.20 Pound Sterling 90,000,000 Facility Agreement dated March 17, 1997, among
ADT Finance Plc, as the Borrower, ADT (UK) Holdings PLC and Others as
Guarantors, The Bank of Nova Scotia as Arranger and as Agent and Others.
10.21 ADT Limited Guarantee dated as of March 25, 1997, in respect of a
Pound Sterling 90,000,000 facility made available to ADT Finance Plc.
10.22 Pound Sterling 27,000,000 On Demand Facility Letter dated January 3,
1997, between ADT Finance Plc and The Bank of Nova Scotia.
10.23 ADT Limited Guarantee in respect of the obligations of ADT Finance Plc
under a Pound Sterling 27,000,000 Facility Letter dated January 3,
1997.
10.24 Agreement dated December 29, 1995 among ADT (UK) Limited, ADT Holdings
BV, Ruskin Limited, ADT Limited, Loanoption Limited and Integrated
Transport Systems Limited for the sale and purchase of European
Auctions.(7)
10.25 Agreement among ADT Limited, Thomas J. Gibson and Integrated Transport
Systems Limited dated December 29, 1995.(8)*
10.26 Agreement among ADT Limited, David B. Hammond and Integrated Transport
Systems Limited dated December 29, 1995.(8)*
10.27 Common Share Purchase Warrant issued by ADT Limited on July 1, 1996 to
Republic Industries, Inc.(10)
49
<PAGE>
11.1 Statement regarding the computation of earnings per common share.
21.1 List of subsidiaries of ADT Limited
23.1 Consent of independent accountants to the incorporation by reference of
this Annual Report into Form S-3 and Forms S-8.
27 Financial Data Schedule (for SEC use only).
- --------------
(1) Previously filed as an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.
(2) Previously filed as an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.
(3) Previously filed as an Exhibit to the Registrant's Registration
Statement dated May 16, 1996, on Form S-8 filed May 17, 1996.
(4) Previously filed as an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.
(5) Previously filed as an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995.
(6) Previously filed as an Exhibit to the Registrant's Current Report
dated March 24, 1997 on Form 8-K filed March 25, 1997.
(7) Previously filed as an Exhibit to the Registrant's Current Report
dated December 29, 1995 on Form 8-K filed January 16, 1996.
(8) Previously filed as an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(9) Previously filed as an Exhibit to the Registrant's Schedule 14D-9
dated March 3, 1997.
(10) Previously filed as an Exhibit to the Registrant's Current Report
dated July 10, 1996 on Form 8-K filed July 11, 1996.
* Management contract or compensatory plan.
50
<PAGE>
(c) Reports on Form 8-K
Current Reports on Form 8-K were filed by ADT Limited on September 19, 1996,
October 21, 1996 and November 12, 1996 regarding the acquisition of and merger
with Automated Security (Holdings) PLC.
A Current Report on Form 8-K was filed by ADT Limited on March 25, 1997,
regarding the Agreement and Plan of Merger with Tyco International Ltd.
51
<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.
ADT LIMITED
By: /s/ Stephen J. Ruzika
----------------------
Stephen J. Ruzika
Director and Executive
Vice President
Date: March 26, 1997
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.
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/ Michael A. Ashcroft Chairman of the Board and Chief March 26, 1997
- -------------------------- Executive Officer (Principal Executive
Michael A. Ashcroft Officer)
/s/ Stephen J. Ruzika Chief Financial Officer, Executive Vice March 26, 1997
- -------------------------- President and Director
Stephen J. Ruzika (Principal Financial Officer and
Principal Accounting Officer)
/s/ John E. Danneberg Director March 26, 1997
- --------------------------
John E. Danneberg
/s/ Alan B. Henderson Director March 26, 1997
- --------------------------
Alan B. Henderson
/s/ James S. Pasman, Jr. Director March 26, 1997
- --------------------------
James S. Pasman, Jr.
/s/ W. Peter Slusser Director March 26, 1997
- --------------------------
W. Peter Slusser
/s/ William W. Stinson Director March 26, 1997
- --------------------------
William W. Stinson
/s/ Raymond S. Troubh Director March 26, 1997
- --------------------------
Raymond S. Troubh
</TABLE>
52
ADT LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Page
Consolidated Financial Statements
Report of Independent Accountants..........................................F-2
Consolidated Statements of Income
for the years ended December 31, 1996, 1995 and 1994.....................F-3
Consolidated Balance Sheets at December 31, 1996 and 1995..................F-4
Consolidated Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994.....................F-5
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994.....................F-8
Notes to Consolidated Financial Statements................................F-10
Consolidated Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts...........................F-78
The consolidated financial statements and consolidated financial statement
schedules were approved by the Board of Directors of ADT Limited on March 26,
1997.
F-1
<PAGE>
ADT LIMITED
Report of Independent Accountants
To the Board of Directors and Shareholders of ADT Limited
We have audited the consolidated financial statements and the consolidated
financial statement schedules of ADT Limited listed in the index on page F-1.
These consolidated financial statements and consolidated financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and consolidated financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ADT Limited as at December 31, 1996 and 1995, and the consolidated results
of its operations and cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles in the United States. In addition, in our opinion, the
consolidated financial statement schedules referred to above, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
As discussed in note 6 to the consolidated financial statements, effective
January 1, 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of".
COOPERS & LYBRAND
Hamilton, Bermuda
March 26, 1997
F-2
<PAGE>
ADT LIMITED
Consolidated Statements of Income
<TABLE>
Year ended December 31 1996 1995 1994
Notes $m $m $m
<S> <C> <C> <C> <C>
Net sales 4 1,704.0 1,783.8 1,629.4
Cost of sales (920.0) (990.4) (913.4)
Selling, general and administrative expenses (567.5) (558.4) (505.5)
Restructuring and other non-recurring charges 5 (237.3) (34.2) (4.5)
Charge for the impairment of long-lived assets 6 (744.7) - -
------- ------- -------
Operating (loss) income 4 (765.5) 200.8 206.0
Interest income 27.5 16.2 15.2
Interest expense (101.0) (116.3) (99.3)
Gain (loss) on disposal of businesses 7,34 1.7 (36.6) (0.3)
Other income less expenses 8 128.8 (5.0) (4.1)
------- ------- -------
(Loss) income before income taxes (708.5) 59.1 117.5
Income taxes 9 21.8 (28.1) (34.9)
------- ------- -------
(Loss) income from continuing operations (686.7) 31.0 82.6
Loss from discontinued operations 10 - - (3.3)
------- ------- -------
(Loss) income before extraordinary items (686.7) 31.0 79.3
Extraordinary items (net of income taxes) 11 (8.4) (9.8) -
------- ------- -------
Net (loss) income (695.1) 21.2 79.3
Dividends on preference shares 28 (0.3) (0.3) (13.3)
------- ------- -------
Net (loss) income available to common shareholders (695.4) 20.9 66.0
======= ======= =======
Primary and fully diluted (loss) earnings
per common share 12 $ $ $
(Loss) income from continuing operations (5.01) 0.22 0.51
Loss from discontinued operations - - (0.03)
Extraordinary items (0.06) (0.07) -
------- ------- -------
Net (loss) income per common share (5.07) 0.15 0.48
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
ADT LIMITED
Consolidated Balance Sheets
At December 31 1996 1995
Notes $m $m
Assets
Current assets:
Cash and cash equivalents 215.9 350.9
Accounts receivable - net 13 210.7 196.4
Inventories 14 39.2 38.0
Prepaid expenses and other current assets 15 117.0 34.5
------- -------
Total current assets 582.8 619.8
Property, plant and equipment - net 16 1,513.6 1,571.3
Goodwill and other intangibles - net 17 458.0 1,053.6
Investment in and loans to associate 18,34 - 88.8
Long-term investments 19 100.6 2.0
Other long-term assets 20 75.4 84.2
------- -------
Total assets 2,730.4 3,419.7
======= =======
Liabilities and shareholders' equity
Current liabilities:
Short-term debt 21 209.2 44.9
Accounts payable 138.0 112.0
Other current liabilities 22 293.6 227.2
------- -------
Total current liabilities 640.8 384.1
Long-term debt 23 910.1 1,174.8
Deferred revenue 24 146.1 137.4
Deferred income taxes 25 91.5 142.4
Other long-term liabilities 26 182.1 135.2
Minority interests 27 - 15.6
------- -------
Total liabilities 1,970.6 1,989.5
------- -------
Commitments and contingencies 32
Convertible redeemable preference shares 28 - 4.9
Shareholders' equity:
Common shares 30 14.1 13.9
Additional paid-in capital
Share premium 882.5 858.0
Contributed surplus 1,563.1 1,563.1
Treasury shares 31 (79.7) (79.7)
Accumulated deficit (1,598.8) (903.4)
Cumulative currency translation adjustments (21.4) (26.6)
------- -------
Total shareholders' equity 759.8 1,425.3
------- -------
Total liabilities and shareholders' equity 2,730.4 3,419.7
======= =======
See notes to consolidated financial statements
F-4
<PAGE>
ADT LIMITED
Consolidated Statements of Cash Flows
Year ended December 31 1996 1995 1994
$m $m $m
Cash flows from operating activities
Net (loss) income (695.1) 21.2 79.3
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Charge for the impairment of long-lived assets 744.7 - -
Depreciation 206.2 209.0 189.0
Goodwill and other intangibles amortization 18.6 38.9 37.7
Restructuring and other non-recurring charges 217.4 32.7 4.5
Interest on ITS Vendor Note (8.9) - -
Liquid Yield Option Notes discount amortization 20.3 9.4 -
Yield maintenance amortization -
senior notes - ASH 1.5 1.1 0.6
Refinancing costs amortization 3.7 5.3 5.7
Deferred income taxes (39.5) 18.4 24.9
Extraordinary items 8.4 9.8 -
Gain on disposal of property, plant
and equipment (2.4) (1.7) (3.1)
(Gain) loss on disposal of businesses (1.7) 36.6 0.3
(Gain) loss on disposal of investment
in associates (1.2) 5.1 (4.2)
Gain arising from the ownership of investments (53.2) (0.1) (17.3)
Write off in value of associate - - 30.7
Settlement gain (69.7) - -
Gain on currency transactions (9.7) (0.9) (2.1)
Loss on disposal of discontinued operations - - 3.7
Other 2.0 1.1 (2.6)
Changes in assets and liabilities:
Accounts receivable (11.9) (36.3) (14.3)
Inventories (3.3) 0.6 (3.9)
Other assets (11.7) (5.7) 3.6
Accounts payable 11.3 6.1 16.5
Deferred revenue 4.3 2.7 8.0
Other liabilities (21.4) (16.3) 6.1
----- ----- -----
Net cash provided by operating activities 308.7 337.0 363.1
----- ----- -----
See notes to consolidated financial statements
F-5
<PAGE>
Cash flows from investing activities
Purchase of property, plant and equipment (344.4) (325.8) (282.6)
Disposal of property, plant and equipment 10.0 8.0 13.5
Acquisition of businesses (25.5) (68.3) (14.8)
Purchase of customer contracts (34.6) (0.5) (2.3)
Purchase of other investments (6.8) (0.4) (6.1)
Disposal of businesses 3.0 254.8 10.0
Disposal of discontinued operations - - 4.6
Disposal of investment in and loans
to associates 15.4 7.8 40.2
Disposal of other investments 54.1 0.2 72.5
Other 0.4 5.6 (6.6)
----- ----- -----
Net cash utilized by investing activities (328.4) (118.6) (171.6)
----- ----- -----
Year ended December 31 1996 1995 1994
$m $m $m
Cash flows from financing activities
Net receipt (repayments) of short-term debt 10.9 (103.9) (26.2)
Repayments of long-term debt (209.9) (216.9) (1.3)
Repayment of long-term acquisition debt - (39.6) -
Proceeds from long-term debt 86.8 314.0 240.6
Debt refinancing costs - (12.0) (1.0)
Purchase of senior subordinated notes (24.0) (33.7) -
Proceeds from issue of common shares 24.7 7.0 7.3
Redemption of convertible redeemable
preference shares (4.9) - (420.2)
Dividends paid by ADT (0.3) (0.3) (18.1)
Dividends paid by ASH - (4.5) (3.3)
Other - (0.3) (11.7)
----- ----- -----
Net cash utilized by financing activities (116.7) (90.2) (233.9)
----- ----- -----
Effect of currency translation on cash
and cash equivalents 1.4 0.8 2.1
----- ----- -----
Net (decrease) increase in cash and (135.0) 129.0 (40.3)
cash equivalents
Cash and cash equivalents at beginning of year 350.9 221.9 262.2
----- ----- -----
Cash and cash equivalents at end of year 215.9 350.9 221.9
===== ===== =====
<PAGE>
Cash payments during the year for
Interest 77.3 103.5 86.0
Income taxes 8.9 15.0 10.3
Non-cash investing and financing activities
Exchange of Liquid Yield Option Notes 0.4 - -
Conversion of convertible redeemable
preference shares - 0.1 -
Exchange of non-voting exchangeable shares - - 9.7
In conjunction with the acquisition of
businesses, net (assets) liabilities
were assumed as follows
Goodwill and other intangibles 10.3 123.0 12.7
Cash paid (net of cash assumed) (25.5) (68.3) (14.8)
----- ----- -----
Net (assets) liabilities assumed (15.2) 54.7 (2.1)
===== ===== =====
See notes to consolidated financial statements
F-6
<PAGE>
Year ended December 31 1996 1995 1994
$m $m $m
In conjunction with the disposal of businesses,
net assets were disposed as follows
Cash received (net of cash disposed) 3.0 254.8 10.0
Notes received - 87.9 10.5
Ordinary shares received - 0.9 -
Deferred consideration - 5.6 -
Currency translation adjustments transferred on
disposal of businesses - (22.2) -
(Gain) loss on disposal of businesses (including
net unamortized goodwill and other intangibles
and cumulative currency translation
adjustments) (1.7) 36.6 0.3
--- ----- ----
Net assets disposed 1.3 363.6 20.8
=== ===== ====
In conjunction with the disposal of
discontinued operations, net assets
were disposed as follows
Cash received (net of cash disposed) - - 4.6
Loss on disposal of discontinued operations
(including net unamortized goodwill and
other intangibles) - - 3.7
--- ----- ----
Net assets disposed - - 8.3
=== ===== ====
See notes to consolidated financial statements
F-7
<PAGE>
ADT LIMITED
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
Cumulative
Accum- currency
Common Share Contributed Treasury ulated translation
shares premium surplus shares deficit adjustments Total
$m $m $m $m $m $m $m
<S> <C> <C> <C> <C> <C> <C> <C>
At January 1, 1994 -
as previously reported 13.0 710.8 1,442.7 (102.9) (1,060.9) (45.4) 957.3
Pooling of interests with
ASH (note 3) 0.7 133.1 126.5 - 77.1 (29.9) 307.5
----- ----- ------- ------ ------- ----- -------
At January 1, 1994 -
as restated 13.7 843.9 1,569.2 (102.9) (983.8) (75.3) 1,264.8
Common shares issued 0.1 7.2 - - - - 7.3
Exchange of non-voting
exchangeable shares - - (8.1) 23.1 - - 15.0
Reversal of redemption
premium on convertible
preference shares - - 1.8 - - - 1.8
Net income - - - - 79.3 - 79.3
Dividends on ADT preference
shares - - - - (13.3) - (13.3)
Dividends on ASH
preference shares (i) - - - - (4.3) - (4.3)
Currency translation
adjustments - - - - - 25.9 25.9
----- ----- ------- ------ ------- ----- -------
At December 31, 1994 13.8 851.1 1,562.9 (79.8) (922.1) (49.4) 1,376.5
Common shares issued 0.1 6.9 - - - - 7.0
Conversion of convertible
preference shares - - 0.3 - - - 0.3
Exchange of non-voting
exchangeable shares - - (0.1) 0.1 - - -
Net income - - - - 21.2 - 21.2
Dividends on ADT
preference shares - - - - (0.3) - (0.3)
Dividends on ASH
preference shares (i) - - - - (2.2) - (2.2)
Currency translation
adjustments - - - - - (0.5) (0.5)
Currency translation
adjustments transferred
on disposal of businesses
and associates - - - - - 23.3 23.3
----- ----- ------- ------ ------- ----- -------
At December 31, 1995 13.9 858.0 1,563.1 (79.7) (903.4) (26.6) 1,425.3
<PAGE>
Common shares issued 0.2 24.5 - - - - 24.7
Exchange of Liquid Yield
Option Notes - - 0.3 - - - 0.3
Net loss - - - - (695.1) - (695.1)
Dividends on ADT
preference shares - - - - (0.3) - (0.3)
Currency translation and
other adjustments - - (0.3) - - 5.2 4.9
----- ----- ------- ------ ------- ----- ------
At December 31, 1996 14.1 882.5 1,563.1 (79.7) (1,598.8) (21.4) 759.8
===== ===== ======= ====== ======= ===== ======
</TABLE>
See notes to consolidated financial statements
F-8
<PAGE>
ADT LIMITED
Consolidated Statements of Changes in Shareholders' Equity (continued)
(i) Prior to the Company's merger with Automated Security (Holdings) PLC
("ASH") in September 1996 (note 3), ASH had issued and outstanding two classes
of convertible cumulative redeemable preference shares. The dividends on
these preference shares have been charged to the accumulated deficit account
during the relevant periods. Given the terms and conditions of the preference
shares and that the holders of these preference shares received ADT common
shares at the time of the Company's merger with ASH, the dividends have not
been included in the calculation of earnings per common share in any period
presented.
See notes to consolidated financial statements
F-9
<PAGE>
ADT LIMITED
Notes to Consolidated Financial Statements
Note 1 - Basis of consolidated financial statements
The consolidated financial statements have been prepared in United States
dollars in accordance with generally accepted accounting principles in the
United States and as described in notes 2 and 3. The preparation of
consolidated financial statements in accordance with generally accepted
accounting principles in the United States requires management to make
extensive use of estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. These management estimates
include an allowance for doubtful receivables, estimates of future cash flows
associated with assets, asset impairments, and useful lives for depreciation
and amortization, loss contingencies, income taxes and valuation allowances
for deferred tax assets, and the determination of discount and other rate
assumptions for pension and post-retirement employee benefit expenses. Actual
results could differ from those estimates. Certain figures at December 31,
1995 and for the years ended December 31, 1995 and 1994 have been reclassified
to conform to the 1996 presentation.
Note 2 - Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements incorporate the financial statements of
ADT Limited ("ADT"), a company incorporated in Bermuda, and its subsidiaries
(the "Company"). ADT is a holding company with no independent business
operations or assets other than its investment in its subsidiaries,
intercompany balances and holdings of cash and cash equivalents. ADT's
businesses are conducted through its subsidiaries. The Company consolidates
companies in which it owns or controls more than fifty per cent of the voting
shares unless control is likely to be temporary. The results of subsidiary
companies acquired or disposed of during the financial year are included in
the consolidated financial statements from the effective date of acquisition
or up to the date of disposal except in the case of pooling of interests (note
3). All significant intercompany balances and transactions have been
eliminated in consolidation.
Associates
For investments in which the Company owns or controls more than twenty per
cent of the voting shares, or over which it exerts significant influence over
operating and financial policies, the equity method of accounting is used in
the consolidated financial statements. The investment in associates is shown
in the consolidated balance sheets as the Company's proportion of the
underlying net assets of these companies plus any goodwill attributable to the
acquisitions less any write off required for a permanent diminution in value.
The consolidated statements of income include the Company's share of net
income of associates less applicable goodwill amortization.
<PAGE>
Currency translation
The results of subsidiaries and associates located outside the United States
which account in a functional currency other than United States dollars are
translated into United States dollars at the average rate of exchange for the
year. The assets and liabilities of subsidiaries and associates located
outside the United States which account in a functional currency other than
United States dollars are translated into United States dollars at the rate
ruling at the balance sheet date. Currency translation adjustments arising
from the use of differing exchange rates from period to period are included as
a separate component in shareholders' equity.
The gains and losses arising from currency transactions are included in the
consolidated statements of income.
F-10
<PAGE>
Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits and highly
liquid instruments, with an original maturity of three months or less. As a
result of the short-term maturity of these financial instruments their carrying
value is approximately equal to their fair market value.
Inventories
Inventories are carried at the lower of cost or net realizable value. Cost
includes an addition for production overheads where appropriate and is
determined on a first-in first-out basis.
Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is provided to write off the cost of the assets
over their estimated useful lives, using the straight line method, at the
following annual rates:
Owned property and related improvements 2% to 4%
Leased property and related improvements term of lease
Subscriber systems shorter of actual contract
duration or 7%, and 10%
Other plant and equipment 7% to 40%
Repairs and maintenance costs are expensed as incurred. Gains and losses
arising on the disposal of property, plant and equipment are included in the
consolidated statements of income.
Goodwill and other intangibles
The goodwill that arises where the acquisition cost of subsidiaries and
associates exceeds the fair values attributable to the underlying net assets
is capitalized and is being amortized on a straight line basis over its
estimated useful life, covering periods not exceeding forty years. Goodwill
arising on the acquisition of associates is included in investment in
associates. Costs attributable to the acquisition, including the costs of any
reorganization arrangements, less related income, are treated as reducing the
value of the net assets acquired. The carrying value of goodwill is evaluated
periodically in relation to the operating performance and future undiscounted
cash flows of the underlying businesses. Where, in the opinion of the
Company, a permanent diminution in the value of goodwill has occurred, the
amount of the diminution is included in the consolidated statements of income.
Other intangibles principally comprise customer contracts which are being
amortized on a straight line basis over periods not exceeding ten years.
Income taxes
Deferred tax liabilities and assets are recognized for the expected future tax
consequences of events that have been included in the consolidated financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the differences between the consolidated financial statements and tax
bases of assets and liabilities, using tax rates in effect for the years in
which the differences are expected to reverse.
F-11
<PAGE>
Share premium and contributed surplus
In accordance with the Bermuda Companies Act 1981, when ADT issues shares for
cash at a premium to their par value, the resulting premium is credited to a
share premium account, a non-distributable reserve. When ADT issues shares in
exchange for shares of another company, the excess of the fair value of the
shares acquired over the par value of the shares issued by ADT is credited,
where applicable, to contributed surplus which is, subject to certain
conditions, a distributable reserve.
Net sales
Net sales represent the invoiced value of goods and services to outside
customers net of sales-related taxes.
Revenue recognition
Revenue from services or products is recognized in the consolidated statements
of income as services are rendered or deliveries made. Service charges, which
consist of subscriber billings for services not yet rendered, are deferred and
taken into income as earned and the deferred element is all included in
long-term liabilities. Revenue from the installation of electronic security
systems is recognized when installations are completed.
Pensions and post-retirement benefits
The Company operates various pension and post-retirement benefit plans
designed in accordance with conditions and practices in the countries
concerned. Contributions or accruals for costs are based on periodic actuarial
valuations and are charged to the consolidated statements of income on a
systematic basis over the expected average remaining service lives of current
employees.
Note 3 - Merger with Automated Security (Holdings) PLC
In September 1996 ADT merged with and acquired the whole of the issued capital
of ASH, a United Kingdom quoted company. ASH is engaged in the provision of
electronic security services in North America and Europe. Under the terms of
the transaction, ASH shareholders received 3 ADT common shares for every 92
ASH ordinary shares, 2 ADT common shares for every 31 ASH 5 per cent
convertible cumulative redeemable preference shares and 2 ADT common shares
for every 31 ASH 6 per cent convertible cumulative redeemable preference
shares. The total consideration in respect of the whole of the issued capital
of ASH consisted of the issue of 7,034,940 ADT common shares (note 30(i)).
The merger with and acquisition of ASH by ADT has been accounted for by means
of the pooling of interests method of accounting pursuant to Accounting
Principles Board Opinion No. 16. The pooling of interests method of
accounting assumes that the combining companies have been merged since their
inception, and the historical consolidated financial statements for periods
prior to consummation of the merger are restated as though the companies have
been combined since their inception. Accordingly, the consolidated financial
statements give effect to the transaction by means of the pooling of interests
and have been restated.
F-12
<PAGE>
The consolidated financial statements of ASH have previously been presented in
pounds sterling, ASH's functional currency. For the purposes of these
consolidated financial statements, ASH's consolidated financial statements have
been translated into United States dollars at the appropriate exchange rates.
In addition, ASH's financial year end is November 30, with appropriate
quarterly period ends of February 28, May 31, and August 31. These periods
have not yet been amended in order to facilitate timely reporting. It is
these periods which have been used to give effect to the pooling of interests
with ADT. Certain figures of ASH for all periods presented have been
reclassified to conform to the ADT presentation.
Combined and separate results of ADT and ASH for the periods preceding the
merger were as follows:
ADT Group ASH Group Adjustments Combined
$m $m $m $m
Six months ended June 30, 1996 (unaudited)
Net sales 715.6 118.1 - 833.7
Extraordinary items (1.2) - - (1.2)
Net loss (347.7) (328.9) 0.5(i) (676.1)
------ ------ ------ ------
Year ended December 31, 1995
Net sales 1,525.4 258.4 - 1,783.8
Extraordinary items (9.8) - - (9.8)
Net income (loss) 41.5 (18.7) (1.6)(ii) 21.2
------ ------ ------ ------
Year ended December 31, 1994
Net sales 1,375.9 253.5 - 1,629.4
Net income (loss) 111.0 (31.7) - 79.3
------ ------ ------ ------
(i) Income tax adjustment arising on preference share dividends accrued by
the ASH group but not payable following merger.
(ii) Income tax adjustment of $0.6 million credit referred to in (i) above,
and a $2.2 million charge relating to cumulative currency translation
adjustments on the disposal of businesses and associates by the ASH group whose
consolidated financial statements were prepared in pounds sterling - its
functional currency.
F-13
<PAGE>
Note 4 - Segment information
The Company is engaged in two service businesses, electronic security services
in North America and Europe and vehicle auction and related services in the
United States. The Company's principal activities in the electronic security
services business are the electronic monitoring and maintenance of its
installed base of security systems and the installation of new, monitored
security systems to add to its installed base. The Company's vehicle auction
services business operates a network of large auction centers which provide a
range of vehicle redistribution services and an organized wholesale
marketplace for the sale and purchase of used vehicles.
Year ended December 31 1996 1995 1994
$m $m $m
Net sales
Electronic security services (i) 1,406.2 1,350.9 1,253.3
Vehicle auction services (ii) 297.8 432.9 376.1
------- ------- -------
1,704.0 1,783.8 1,629.4
======= ======= =======
Operating (loss) income
Electronic security services (i) (756.5) 172.4 182.1
Vehicle auction services (ii) 27.1 70.2 62.7
Corporate (iii) (36.1) (41.8) (38.8)
------- ------- -------
(765.5) 200.8 206.0
======= ======= =======
(i) In 1996 electronic security services operating income was stated after
a charge of $232.5 million (1995 - $21.4 million) relating to restructuring
and other non-recurring items (note 5(i)) and after a charge for the
impairment of long-lived assets of $731.7 million (note 6(i)).
During 1996 the Company disposed of a European electronic security services
business operated by the ASH group. The net gain on disposal of $1.7 million
was included in the gain on disposal of businesses (note 7(iii)).
In November 1995 the Company disposed of its entire European electronic
article surveillance business. The net gain on disposal of $31.4 million was
included in the loss on disposal of businesses (note 7(ii)).
During 1995 the Company disposed of certain of the European electronic
security services operations and businesses operated by the ASH group. The
net loss on disposal of $2.2 million was included in the loss on disposal of
businesses (note 7(iii)).
During 1994 the Company disposed of its entire Australasian electronic
security service businesses, and also disposed of certain of the North
American electronic security services operations of the ADT group and the ASH
group. The net loss on disposal of $0.3 million was included in the loss on
disposal of businesses (note 7(iii)).
F-14
<PAGE>
The following information represents the amounts included in the electronic
security services business segment information above which related to the
businesses and operations disposed of.
Year ended December 31 1996 1995 1994
$m $m $m
Net sales 0.7 62.7 97.4
Operating loss (0.9) (5.3) (1.0)
(ii) In 1996 vehicle auction services operating income was stated after a
charge for the impairment of long-lived assets of $13.0 million (note 6(ii)).
In December 1995 the Company disposed of an interest in its United Kingdom
and Continental European vehicle auction services businesses ("European
Auctions") (notes 18 and 34). The net loss on disposal of $65.8 million was
included in the loss on disposal of businesses (note 7(i)).
The following information represents the amounts included in the vehicle
auction services business segment information above which related to the
businesses disposed of.
Year ended December 31 1996 1995 1994
$m $m $m
Net sales - 163.1 122.8
Operating income - 35.9 29.0
(iii) Corporate expenses comprise administrative, legal and general
corporate expenses net of other income. In 1996 corporate expenses were
stated after a charge of $4.8 million (1995 - $12.8 million; 1994 - $4.5
million) relating to restructuring and other non-recurring items (note 5(ii)).
In 1996 corporate expenses included $11.3 million related to professional and
other transaction costs arising in connection with the merger of ADT and ASH
and the terminated merger with Republic Industries, Inc. ("Republic"),
together with various refinancing costs incurred by the ASH group prior to the
merger with ADT of $1.6 million (1995 - $5.0 million).
(iv) The costs incurred in producing and communicating advertising are
generally expensed when incurred. The total amount of advertising expense for
the year included in the consolidated statements of income amounted to $65.7
million (1995 - $58.9 million; 1994 - $47.1 million).
F-15
<PAGE>
Year ended December 31 1996 1995 1994
$m $m $m
Depreciation and amortization
Electronic security services 209.2 221.9 202.5
Vehicle auction services 15.0 25.4 23.5
Corporate 0.6 0.6 0.7
------- ------- -------
224.8 247.9 226.7
======= ======= =======
Capital expenditures
Electronic security services 314.2 292.4 259.2
Vehicle auction services 25.7 31.8 23.1
Corporate 4.5 1.6 0.3
------- ------- -------
344.4 325.8 282.6
======= ======= =======
Identifiable assets
Electronic security services 1,898.0 2,514.9 2,337.8
Vehicle auction services 465.1 438.1 809.8
Corporate 367.3 466.7 264.7
------- ------- -------
2,730.4 3,419.7 3,412.3
======= ======= =======
Net sales
North America 1,358.6 1,228.5 1,121.8
Europe 345.4 555.3 490.9
Australasia - - 16.7
------- ------- -------
1,704.0 1,783.8 1,629.4
======= ======= =======
Operating (loss) income
North America (483.6) 153.0 156.8
Europe (281.9) 47.8 49.0
Australasia - - 0.2
------- ------- -------
(765.5) 200.8 206.0
======= ======= =======
Identifiable assets
North America 2,300.5 2,563.8 2,295.7
Europe 429.9 855.9 1,116.6
------- ------- -------
2,730.4 3,419.7 3,412.3
======= ======= =======
F-16
<PAGE>
Note 5 - Restructuring and other non-recurring charges
Year ended December 31 1996 1995 1994
$m $m $m
Electronic security services (i) (232.5) (21.4) -
Corporate (ii) (4.8) (12.8) (4.5)
------ ----- ----
(237.3) (34.2) (4.5)
====== ===== ====
During 1995 the Company commenced a strategic review of its business
operations and its corporate organizational structure with a view to
developing a business strategy which would place the Company in a stronger
position to deal with the changing business environment and challenges facing
its core service businesses in the late 1990s. During 1996 this strategic
review process continued and was extended to include a significantly expanded
agenda.
(i) As part of the strategic review the Company commenced an evaluation of
the administrative, accounting, management information systems and
technological infrastructures of its United States electronic security services
division (the "Re-Engineering Project"). The Re-Engineering Project, which is
on-going, is intended to modify and improve the entire structure of the
business operations. As a consequence of the Re-Engineering Project, and
incorporating the effects of the acquisition of Alert Centre, Inc. ("Alert"),
in each of the fourth quarters of 1996 and 1995 senior executive management
approved a restructuring plan which resulted in a charge for restructuring and
other non-recurring items in the United States electronic security services
division of $131.6 million and $19.4 million, respectively.
The United States electronic security services division restructuring charge
in 1996 was principally attributable to planned technological infrastructure
enhancements to facilitate further consolidation of the Company's entire
customer monitoring center network together with all related operations, which
it is expected will be substantially completed by December 1997. The
restructuring charge included the write off of certain property, plant and
equipment of $82.6 million, provision for idle property leases of $18.9
million, the termination of certain contractual obligations and other
settlement costs of $9.4 million, and other integration and restructuring
costs of $20.7 million. The amounts paid and charged in 1996 against the
provisions for the termination of certain contractual obligations and other
settlement costs, and against other integration and restructuring costs,
amounted to $4.8 million and $4.3 million, respectively.
The United States electronic security services division restructuring charge
in 1995 was principally attributable to the closure of the Parsippany, New
Jersey and associated corporate offices, which will be substantially completed
by March 1997. Full implementation of the restructuring plan will result in
the termination of approximately 250 employees of which approximately 180
employees had been terminated by December 31, 1996. Employee severance and
other associated costs included in the restructuring charge amounted to $13.6
million, the write off of certain property, plant and equipment amounted to
$1.9 million, and other integration and restructuring costs amounted to $3.9
million. The amounts paid and charged in 1996 against the provisions for
employee severance and other associated costs, and against other integration
and restructuring costs, amounted to $7.1 million and $3.5 million,
respectively.
F-17
<PAGE>
During the fourth quarter of 1996, the Company commenced a strategic and
detailed review of the electronic security services businesses acquired as
part of the acquisition of ASH in September 1996. In December 1996 senior
executive management approved a restructuring plan which is intended to merge
and integrate fully the ASH group into the ADT group by December 1997, and
which resulted in a charge for restructuring and other non-recurring items in
the United Kingdom and the United States electronic security services
divisions of $68.6 million and $29.2 million, respectively.
The restructuring charge included the write off of certain property, plant and
equipment of $13.2 million, provision for idle property leases of $22.5
million, the termination of certain contractual obligations and other
settlement costs of $35.2 million, and other integration and restructuring
costs of $26.9 million. The amounts paid and charged in 1996 against the
provisions for the termination of certain contractual obligations and other
settlement costs, and against other integration and restructuring costs,
amounted to $7.2 million and $1.0 million, respectively.
As part of the strategic review, in 1996 the Company also commenced an
evaluation of the customer monitoring center network in its Canadian
electronic security services division which resulted in a charge for
restructuring and other non-recurring items of $3.1 million. The
restructuring charge included the write off of certain property, plant and
equipment of $1.3 million and provision for idle property leases of $1.8
million, of which $0.2 million was paid and charged in 1996.
As part of the strategic review, in 1995 the Company also commenced an
evaluation of the management information systems of its United Kingdom
electronic security services division which resulted in a charge for
restructuring and other non-recurring items in 1995 of $2.0 million
principally relating to the write off of certain property, plant and equipment.
(ii) The effects of the Re-Engineering Project and the merger of the ASH
group into the ADT group resulted in a charge for restructuring and other
non-recurring items at the corporate level in 1996 of $4.8 million, comprising
other integration and restructuring costs, of which $3.0 million was paid and
charged in 1996.
During 1995 the Company also evaluated its group corporate structure, in
particular in the United Kingdom. As a result, in the fourth quarter of 1995,
senior executive management approved a restructuring plan, which was
substantially completed by December 1996, which resulted in a charge for
restructuring and other non-recurring items at the corporate level of $12.8
million.
The corporate restructuring charge included the provision for idle property
leases of $5.6 million, the termination of certain contractual obligations and
other settlement costs of $4.8 million, and employee severance for four
executives, all of whom were terminated during 1996, and other associated
costs, of $2.4 million. The amounts paid and charged in 1996 against the
provisions in the aforementioned categories were $0.6 million, $4.8 million and
$1.8 million, respectively.
The corporate restructuring charge in 1994 of $4.5 million was principally
attributable to the Company's corporate administration in the United Kingdom
and related to a provision for idle property leases.
F-18
<PAGE>
Note 6 - Charge for the impairment of long-lived assets
Year ended December 31 1996 1995 1994
$m $m $m
Electronic security services (i) (731.7) - -
Vehicle auction services (ii) (13.0) - -
------ ------ ------
(744.7) - -
====== ====== ======
Effective January 1, 1996, the Company was required to adopt Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 prescribes a methodology for assessing and measuring an impairment
loss that is significantly different from previous guidelines and procedures.
SFAS 121 requires the recoverability of the carrying value of long-lived
assets, primarily property, plant and equipment, and related goodwill, and
other intangible assets, to be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. Under SFAS 121 it is necessary to evaluate for and
calculate an impairment loss at the lowest level of asset grouping for which
there are identifiable cash flows. Under SFAS 121, if an asset being tested
for recoverability was acquired in a business combination accounted for using
the purchase method, the goodwill that arose in the transaction is included
in the impairment evaluation of that asset.
SFAS 121 requires that an impairment loss is recognized when the carrying
amount of an asset exceeds the sum of the estimated undiscounted future cash
flows of the asset. Under SFAS 121 an impairment loss is calculated as the
difference between the carrying amount of the asset, including the related
goodwill, and its estimated fair value. The carrying amount of the related
goodwill is eliminated before making any reduction in the carrying amount of
any other impaired long-lived asset.
Prior to the adoption of SFAS 121, the Company's policy was to evaluate for
impairment of long-lived assets, including goodwill, on an aggregate basis for
each business segment. Management has determined that within the electronic
security services division the lowest level of asset grouping referred to
above can be determined on a country by country basis and, with effect from
the first quarter of 1996, further split principally in terms of commercial
and residential sectors. The assets principally comprise subscriber systems
installed at customers' premises, which are included in property, plant and
equipment, and the related goodwill, and other intangible assets. Within the
vehicle auction services division the lowest level of asset grouping can be
determined principally on an individual auction center basis, and the assets
principally comprise land and real estate, which are included in property,
plant and equipment, and the related goodwill. Management has estimated the
fair values referred to above by using an analysis of estimated discounted
future cash flows as the best available estimate of fair value. The basis of
the calculation was the Company's business strategy, plans and financial
projections, and an appropriate discount factor based on the Company's
estimated cost of capital.
F-19
<PAGE>
Following the adoption of SFAS 121, in particular the change in methodology
requiring the Company to evaluate assets at the lowest level of asset
grouping, rather than on an aggregate basis, in the first quarter of 1996 the
Company recorded an aggregate non-cash charge for the impairment of long-lived
assets of $744.7 million, as a separate line item in the consolidated
statements of income, with a consequential tax credit of $10.8 million. The
$744.7 million impairment charge comprised $731.7 million relating to the
electronic security services division and $13.0 million relating to the
vehicle auction services division.
(i) The $731.7 million impairment charge in the electronic security
services division comprised $397.1 million related to the ADT group and $334.6
million related to the ASH group.
The $397.1 million impairment charge in the electronic security services
division of the ADT group related to an impairment in the carrying value of
subscriber systems principally in the commercial sector, including related
goodwill which principally arose on the acquisition of ADT Security Services
in 1987 of $395.3 million and other assets of $1.8 million. Since 1989 the
Company's electronic security services operations in the residential sector
have developed at a very rapid rate based principally on internally generated
growth. As a consequence, the Company's operations in the commercial sector,
which were acquired principally in 1987, have now been complemented by a
significant residential electronic security services operation. This was a
major factor in the Company's decision to commence the Re-Engineering Project
in 1995, which is on-going. In the context of the Re-Engineering Project and
changes in the electronic security services business environment, the
electronic security services operations have now been reorganized along
separate commercial and residential business lines, rather than on an
aggregate geographic basis, with effect from the first quarter of 1996, and
which is fully supported by management and financial reporting systems that
now record the results and cash flows of each sector separately. When the
financial projections and estimated future cash flows of the commercial sector
were analyzed separately, they indicated that the carrying amount of the
related assets may not be fully recoverable. This is reflective of increased
competition and other pricing factors as well as changes in the business
environment. Accordingly, upon adoption of SFAS 121 the Company evaluated the
commercial sector assets for impairment with a resultant charge being
recorded. In the United States the impairment charge amounted to $303.4
million. In Canada, where the business performance has continued to be
disappointing, the impairment charge amounted to $56.7 million. In Europe,
the impairment charge amounted to $37.0 million, principally due to the
business performance of certain countries not meeting previous expectations.
The $334.6 million impairment charge in the electronic security services
division of the ASH group related to an impairment in the carrying value of
subscriber systems of $121.0 million, and the carrying value of related
goodwill and other intangibles of $213.6 million which principally arose on
the acquisition of certain of the businesses of Modern Security Systems in
1989 and 1990, API Security in 1989 and the Sonitrol Group in 1992. The
impairment charge amounted to $211.2 million and $123.4 million in the United
Kingdom and the United States, respectively. In both the United Kingdom and
the United States, the adoption of SFAS 121 coincided with a reorganization of
both the commercial and residential business sectors to address, in part,
changes in the electronic security services business environment and
performance similar to those being addressed by the ADT group. In addition,
the aggregate fair value of ADT common shares issued to ASH shareholders on
merger was significantly less than ASH's consolidated net asset value. It was
for all these reasons that the Company reviewed the assets for impairment upon
adoption of SFAS 121.
(ii) The $13.0 million impairment charge in the vehicle auction services
division related to an impairment in the carrying value of property and
related improvements, including related goodwill which principally arose on
the acquisition of ADT Automotive in 1987.
F-20
<PAGE>
Note 7 - Gain (loss) on disposal of businesses
Year ended December 31 1996 1995 1994
$m $m $m
United Kingdom and Continental European vehicle
auction services businesses (i) - (65.8) -
European electronic article
surveillance business (ii) - 31.4 -
Other (iii) 1.7 (2.2) (0.3)
---- ----- ----
1.7 (36.6) (0.3)
==== ===== ====
(i) In December 1995 the Company disposed of an interest in European
Auctions (note 34) for an aggregate consideration of $334.9 million (note 18).
The net loss on disposal of $65.8 million included $136.5 million relating
to the write off of net unamortized goodwill and other intangibles (note
17(ii)) and a $23.2 million charge related to cumulative currency translation
adjustments.
(ii) In November 1995 the Company disposed of its entire European
electronic article surveillance business for an aggregate consideration of
$54.0 million, comprising cash of $48.6 million and deferred consideration of
$5.4 million. The net gain on disposal of $31.4 million included a $2.1
million gain relating to cumulative currency translation adjustments.
(iii) During 1996 the Company disposed of a European electronic security
services business operated by the ASH group for an aggregate cash
consideration of $3.0 million. The net gain on disposal amounted to $1.7
million.
During 1995 the Company disposed of certain of the European electronic
security services operations and businesses operated by the ASH group for an
aggregate consideration of $6.1 million, comprising cash of $5.9 million and
deferred consideration of $0.2 million. The net loss on disposal of $2.2
million included $2.8 million relating to the write off of net unamortized
goodwill and other intangibles (note 17(ii)) and a $1.1 million charge
relating to cumulative currency translation adjustments.
During 1994 the Company disposed of its entire Australasian electronic
security services businesses, and also disposed of certain of the North
American electronic security services operations of the ADT group and the ASH
group. The aggregate consideration on these disposals amounted to $21.6
million, comprising cash of $11.1 million and notes receivable of $10.5
million, and the net loss on disposal of $0.3 million included $10.7 million
relating to the write off of net unamortized goodwill and other intangibles.
F-21
<PAGE>
Note 8 - Other income less expenses
Year ended December 31 1996 1995 1994
$m $m $m
Gains and losses arising from the ownership of:
Short-term investments - - 3.0
Long-term investments (i) 54.4 (5.0) 18.5
Write off in value of associate (ii) - - (30.7)
Settlement gain (iii) 65.0 - -
Gains and losses on currency transactions 9.7 0.9 2.1
Other income less expenses - net (0.3) (0.9) 3.0
----- ---- ----
128.8 (5.0) (4.1)
===== ==== ====
(i) Realized gains and losses arising from the ownership of short-term and
long-term investments are principally stated before carrying costs of
interest, administrative and other expenses. During 1996 gains arising from
the ownership of long-term investments comprised a net gain of $53.4 million
relating to the disposal in November 1996 of the Company's entire investment
in Limelight Group plc, a United Kingdom quoted company, which was previously
valued and accounted for by the Company at a nominal amount, a net gain of
$1.2 million relating to the disposal of the Company's equity investment in
Integrated Transport Systems Limited (notes 18 and 34) and other net losses of
$0.2 million principally arising from the disposal of other non-core
investments.
During 1995 losses arising from the ownership of long-term investments
comprised $5.1 million relating to the disposal, principally during the second
quarter of 1995, of the Company's entire equity investments in Compagnie
Generale de Protection et Securite SA ("CGPS") and Microtech Security (UK)
Limited ("Microtech") which were held by the ASH group (note 18), and other
net gains of $0.1 million principally arising from the disposal of other
non-core investments. The net loss on disposal of $5.0 million included $7.3
million relating to the write off of net unamortized goodwill and other
intangibles and a $1.1 million charge relating to cumulative currency
translation adjustments.
During 1994 gains arising from the ownership of long-term investments
comprised $4.2 million relating to the disposal of the Company's entire equity
investment in Nu-Swift plc, a United Kingdom quoted company, and other net
gains of $14.3 million principally arising from the disposal of other non-core
investments.
(ii) The write off in value of associate in 1994 related to the Company's
entire equity investment in Arius, Inc. ("Arius"), a United States unquoted
company, which was held by the ASH group. A detailed assessment of the
investment in Arius was carried out during 1994 and as a result a net write
off of $30.7 million was recorded, of which $26.5 million related to the write
off of net unamortized goodwill and other intangibles and $2.9 million related
to other provisions. During 1995 Arius went into voluntary liquidation.
F-22
<PAGE>
(iii) During 1991 a lengthy review and evaluation of the businesses and
assets acquired in 1990 in respect of Britannia Security Group PLC
("Britannia") was undertaken by the Company. This review revealed that, at the
time of the acquisition of Britannia by ADT certain assets, particularly
subscriber systems installed at customer premises, had been included in the
consolidated financial statements of Britannia at values materially in excess
of their net realizable value. During 1992 ADT commenced legal proceedings
against Britannia's auditors at the time of acquisition, BDO Binder Hamlyn
("BDO"), to seek recovery of the damages suffered. In December 1995 the High
Court of Justice in England awarded damages of approximately $160 million
(including interest) against BDO, plus the reimbursement of certain legal
costs incurred in connection with the litigation. BDO then appealed against
the judgment. At December 31, 1995 ADT did not recognize the award of any
damages in its consolidated statements of income and had deferred certain
legal costs incurred in connection with the litigation amounting to $11.1
million in order to match these costs with the award when recognized. These
deferred costs were included in other long-term assets (note 20).
In December 1996 ADT and BDO entered into a settlement agreement, subject to
completion of certain additional documentation which was signed in February
1997, which included the payment to ADT of $77.5 million in cash (included in
other current assets (note 15)) together with a further deferred payment of
$8.6 million, in full and final settlement of the aforementioned proceedings,
including the judgment, accrued interest and costs. As a result of the
settlement BDO have withdrawn their appeal. The net gain arising on this
settlement amounted to $69.7 million, of which $65.0 million was included in
other income less expenses and $4.7 million was included in interest income.
Note 9 - Income taxes
(i) The provision for income taxes in the consolidated statements of
income was as follows:
Year ended December 31 1996 1995 1994
$m $m $m
Current income taxes:
US (6.5) (3.1) (4.6)
Non US (11.2) (6.6) (5.4)
----- ----- -----
(17.7) (9.7) (10.0)
----- ----- -----
Deferred income taxes: (note 25)
US (principally federal income taxes) 20.9 (18.0) (22.6)
Non US 18.6 (0.4) (2.3)
----- ----- -----
39.5 (18.4) (24.9)
----- ----- -----
21.8 (28.1) (34.9)
===== ===== =====
US current income taxes in 1996 comprise federal and state income taxes, and
in 1995 and 1994 principally comprise state income taxes.
F-23
<PAGE>
(ii) (Loss) income before income taxes included the following components:
Year ended December 31 1996 1995 1994
$m $m $m
US (loss) income (485.6) 59.5 53.8
Non US (loss) income (222.9) (0.4) 63.7
------ ---- -----
(Loss) income before income taxes (708.5) 59.1 117.5
====== ==== =====
(iii) The reconciliation between notional US federal income taxes at the
statutory rate on consolidated (loss) income before income taxes and the
Company's income tax provision was as follows:
Year ended December 31 1996 1995 1994
$m $m $m
Notional US federal income taxes at the
statutory rate 248.0 (20.7) (41.1)
Adjustments to reconcile to the Company's
income tax provision:
US state income tax provisions, net (3.1) (2.7) (3.2)
Non US net (losses) earnings (70.6) (7.1) 14.6
SFAS 121 impairment (150.2) - -
Utilization and/or recognition of tax loss
carryforwards and other items (2.3) 2.4 (5.2)
------ ---- -----
Income tax provision 21.8 (28.1) (34.9)
====== ==== =====
Note 10 - Loss from discontinued operations
During 1994 the Company disposed of all its remaining non-core businesses,
principally the Insight Travel Group. The Company no longer has any interests
in non-core businesses. The aggregate cash consideration on these disposals
amounted to $11.2 million and the net loss amounted to $3.7 million, which
included $19.1 million relating to the write off of net unamortized goodwill
and other intangibles. The net income from operations for 1994 amounted to
$0.4 million on net sales of $80.6 million.
Note 11 - Extraordinary items
During 1996 and 1995 the Company reacquired in the market certain of its
senior subordinated notes (note 23(ii)), which was financed from cash on hand.
Extraordinary items included the loss arising on reacquisition of $0.9 million
(1995 - $0.9 million) and the write off of net unamortized deferred
refinancing costs of $0.5 million (1995 - $0.8 million) relating to the early
extinguishment of certain amounts outstanding under the senior subordinated
notes, and were stated net of applicable income taxes of $0.2 million (1995 -
$0.2 million).
F-24
<PAGE>
In September 1996 the Company repaid in full all amounts owed by the ASH group
under its senior notes and bank credit agreement (note 23(vi)), which were
subsequently cancelled, and which was financed from cash on hand and loans
drawn under the revolving bank credit agreement. Extraordinary items included
the loss arising on repayment of $4.2 million and the write off of net
unamortized deferred refinancing costs of $0.4 million relating to the early
extinguishment of all amounts outstanding under the senior notes and bank
credit agreement owed by the ASH group, with no consequential tax effect.
In December 1996 the Company gave notice to all convertible capital bond
holders that all of the outstanding capital bonds owed by the ASH group would
be fully redeemed by the Company, and subsequently cancelled (note 23(v)), and
which was financed from cash on hand and amounts drawn down under the sterling
denominated bank credit facility (note 23(vii)). Extraordinary items included
the write off of net unamortized deferred refinancing costs of $1.6 million
relating to the early extinguishment of all amounts outstanding under the
convertible capital bonds owed by the ASH group, with no consequential tax
effect.
In December 1996 the Company entered into a new bank credit agreement, subject
to completion of certain additional documentation which was signed in January
1997, which replaced in full its previous bank credit agreement and which was
subsequently cancelled (note 23(iv)). Extraordinary items included the write
off of net unamortized deferred refinancing costs of $1.5 million relating to
the early extinguishment of all amounts outstanding under the bank credit
agreement owed by the ADT group, and were stated net of applicable income
taxes of $0.5 million.
In July 1995 the Company repaid in full all amounts owed by the ADT group
under its previous bank credit agreement, which was subsequently cancelled.
The Company funded the repayment from the net proceeds of the issue of its
Liquid Yield Option Notes (note 23(iii)). Extraordinary items included the
write off of net unamortized deferred refinancing costs of $12.8 million
relating to the early extinguishment of all amounts outstanding under the
previous bank credit agreement owed by the ADT group, and were stated net of
applicable income taxes of $4.5 million.
Note 12 - (Loss) earnings per common share
The calculation of primary (loss) earnings per common share was based on the
weighted average of 137,114,415 (1995 - 138,283,458; 1994 - 136,148,361)
common shares in issue during the year which in 1996 did not allow for the
allotment of common shares under executive share option schemes, which are
considered common stock equivalents, because their effect was anti-dilutive as
a consequence of the net loss for the year. Common stock equivalents included
in the weighted average number of common shares in issue during 1995 and 1994
were 2,921,286 and 2,503,059, respectively. Primary (loss) earnings per
common share from continuing operations was based on adjusted net loss from
continuing operations available to common shareholders of $687.0 million (1995
- - $30.7 million net income; 1994 - $69.3 million net income).
F-25
<PAGE>
Note 13 - Accounts receivable - net
At December 31 1996 1995
$m $m
Trade accounts receivable 229.2 213.4
Less: allowance for doubtful receivables (18.5) (17.0)
----- -----
210.7 196.4
===== =====
Note 14 - Inventories
At December 31 1996 1995
$m $m
Raw materials and consumables 8.6 8.8
Work in process 18.9 14.1
Finished goods 11.7 15.1
----- -----
39.2 38.0
===== =====
Note 15 - Prepaid expenses and other current assets
At December 31 1996 1995
$m $m
Prepaid expenses 10.9 11.6
Other current assets 106.1 22.9
----- -----
117.0 34.5
===== =====
At December 31, 1996 other current assets included $77.5 million of settlement
gain proceeds (note 8(iii)).
F-26
<PAGE>
Note 16 - Property, plant and equipment - net
At December 31 1996 1995
$m $m
Cost:
Property and related improvements 290.7 271.6
Subscriber systems 1,977.5 1,874.0
Other plant and equipment 214.8 199.0
------- -------
Total cost 2,483.0 2,344.6
------- -------
Accumulated depreciation:
Property and related improvements 56.0 41.5
Subscriber systems 762.0 614.2
Other plant and equipment 151.4 117.6
------- -------
Total accumulated depreciation 969.4 773.3
------- -------
Net book values 1,513.6 1,571.3
======= =======
Note 17 - Goodwill and other intangibles - net
1996 1995
$m $m
Cost:
At January 1 1,290.6 1,345.2
SFAS 121 impairment (note 6) (825.6) -
Acquisitions (i) 44.9 123.0
Disposals (ii) - (174.1)
Currency translation adjustments - (3.5)
------- -------
At December 31 509.9 1,290.6
------- -------
Accumulated amortization:
At January 1 237.0 233.7
SFAS 121 impairment (note 6) (203.7) -
Charge for the year 18.6 38.9
Disposals (ii) - (34.8)
Currency translation adjustments - (0.8)
------- -------
At December 31 51.9 237.0
------- -------
Net book values:
At December 31 458.0 1,053.6
======= =======
(i) In February 1996 the Company acquired the remaining 24.0 per cent of
the outstanding voting share capital of Alert, an electronic security services
company in the United States, not already owned by the Company, for an
aggregate cash consideration of $25.5 million, which was financed from cash on
hand. The amount of goodwill arising from this acquisition was $10.3 million.
During 1996 the Company purchased other intangibles, principally customer
contracts, in North America and Europe for an aggregate cash consideration of
$34.6 million which was financed from cash on hand.
F-27
<PAGE>
In December 1995 the Company acquired 76.0 per cent of the outstanding voting
share capital of Alert, for an aggregate cash consideration of $69.0 million,
which was financed from cash on hand. The amount of goodwill and other
intangibles arising from this acquisition was $80.1 million and $40.0 million,
respectively. In January 1995 the Company acquired a vehicle auction services
business in Belgium for an aggregate cash consideration of $4.2 million, which
was disposed of in December 1995 as part of the disposal by the Company of an
interest in European Auctions (note 17(ii)). During 1995 the Company also
acquired several small electronic security services businesses in the United
States and Europe for an aggregate cash consideration of $1.0 million.
These acquisitions have been accounted for using the purchase method.
Accordingly, the respective purchase prices have been allocated to assets
acquired and liabilities assumed based on their preliminary estimated fair
values. These allocations resulted in goodwill and other intangibles of $44.9
million arising during the year (1995 - $123.0 million).
(ii) In December 1995 the Company disposed of an interest in European
auctions (notes 18 and 34). Net unamortized goodwill and other intangibles
on disposal of $136.5 million was included in the loss on disposal of
businesses (note 7(i)). During 1995 the Company disposed of certain of the
European electronic security services operations and businesses operated by
the ASH group. The net unamortized goodwill and other intangibles on
disposal of $2.8 million was included in the gain on disposal of businesses
(note 7(iii)).
(iii) The accumulated cost, accumulated amortization and net book values of
the goodwill balance included within goodwill and other intangibles at
December 31, 1996 amounted to $421.0 million, $43.0 million and $378.0
million, respectively (1995 - $1,120.1 million, $206.9 million and $913.2
million, respectively).
Note 18 - Investment in and loans to associate
At December 31 1996 1995
$m $m
Vendor Note - 83.9
Shareholder Loan Notes - 13.9
----- -----
- 97.8
Less: unamortized discount - (9.9)
----- -----
- 87.9
Investment in ordinary share capital - 0.9
----- -----
- 88.8
===== =====
In December 1995 the Company disposed of an interest in European Auctions to
Integrated Transport Systems Limited ("ITS") (note 34) for an aggregate
consideration of $334.9 million.
F-28
<PAGE>
The aggregate consideration received by the Company on closing was comprised
of cash of $235.1 million, $187.6 million aggregate principal amount at
maturity of a subordinated deep discount zero coupon loan note issued by ITS
maturing in March 2004 ("Vendor Note"), $31.1 million aggregate principal
amount at maturity of subordinated deep discount zero coupon loan notes issued
by ITS maturing in March 2004 ("Shareholder Loan Notes"), and a 43.1 per cent
interest in the ordinary share capital of ITS at an issue price of $2.0
million.
The Vendor Note is a sterling loan note with an issue price of $83.9 million,
reflecting a yield to maturity of 10.0 per cent per annum, and was valued by
the Company at $74.6 million. There are no periodic payments of interest.
The Vendor Note is a subordinated, non-collateralized obligation of ITS and is
transferrable, under certain conditions, after December 1998. The discount on
the Vendor Note of $9.3 million will be amortized on a basis linked to the
yield to maturity over the life of the loan note as a credit to interest
income, and represents the difference between the stated yield to maturity and
the prevailing market yield to maturity of approximately 11.5 per cent per
annum, for similar types of loan notes at the time the Vendor Note was issued
in December 1995. The interest yield and discount amortization for 1996
amounted to $8.6 million and $0.3 million, respectively.
The Shareholder Loan Notes are transferrable sterling loan notes with an issue
price of $13.9 million, reflecting a yield to maturity of 10.0 per cent per
annum, and were valued by the Company at $13.3 million. There are no periodic
payments of interest. The Shareholder Loan Notes are subordinated,
non-collateralized obligations of ITS and are also subordinated to the Vendor
Note.
The aggregate fair market value of the Vendor Note and Shareholder Loan Notes
at December 31, 1995 amounted to $87.9 million, and was based on discounting
the loan notes at estimated current sterling interest rates on similar term
financial instruments.
The 43.1 per cent interest in the ordinary share capital of ITS was valued and
accounted for by the Company at $0.9 million.
In February 1996 the Company disposed of its entire interest in Shareholder
Loan Notes with an issue price of $13.9 million and valued by the Company at
$13.3 million (net of unamortized discount of $0.6 million), and 33.1 per cent
of the ordinary share capital of ITS valued by the Company at $0.9 million,
for an aggregate cash consideration of $15.4 million. The net gain arising on
the transaction amounted to $1.2 million which was included in other income
less expenses (note 8(i)).
As a result of the above transaction, the Company now holds a 10.0 per cent
interest in the ordinary share capital of ITS, valued and accounted for by the
Company at a nominal amount, together with the Vendor Note, which at December
31, 1996 is disclosed as a long-term investment (note 19) and has been
accounted for at its amortized cost.
F-29
<PAGE>
The movement in the carrying value of investment in and loans to associate
since January 1, 1995 has been as follows:
1996 1995
$m $m
At January 1 88.8 12.6
Acquisitions - 88.8
Disposals (14.2) (12.6)
Reclassifications (74.6) -
----- -----
At December 31 - 88.8
===== =====
During 1995 the Company disposed of its entire equity investments in CGPS, a
French unquoted company, and Microtech, a United Kingdom unquoted company, for
an aggregate consideration of $8.6 million comprising cash of $7.8 million and
notes receivable of $0.8 million. The net loss on disposal of $5.1 million,
including $7.3 million relating to the write off of net unamortized goodwill
and other intangibles and a $1.1 million charge relating to cumulative
currency translation adjustments, was included in other income less expenses
(note 8(i)).
Note 19 - Long-term investments
At December 31 1996 1995
$m $m
Vendor Note (note 18) 102.0 -
Less: unamortized discount (10.0) -
----- -----
92.0 -
Other long-term investments 8.6 2.0
----- -----
100.6 2.0
===== =====
The fair market value of the Vendor Note at December 31, 1996 amounted to
$89.7 million, and is based on discounting the loan note at estimated current
sterling interest rates on similar term financial instruments. The aggregate
fair market value of other long-term investments at December 31, 1996 amounted
to $8.6 million (1995 - $2.0 million) and is based on estimates made by the
Company.
F-30
<PAGE>
Note 20 - Other long-term assets
At December 31 1996 1995
$m $m
Deferred refinancing costs 19.4 27.1
Other long-term assets 56.0 57.1
----- -----
75.4 84.2
===== =====
In connection with the refinancing of certain long-term debt obligations of
the Company certain fees and expenses were incurred. These refinancing costs
are being amortized as interest expense through the consolidated statements
of income on a straight line basis over the terms of the respective lives of
the Company's various long-term debt obligations. The refinancing costs
amortization for the year amounted to $3.7 million (1995 - $5.3 million; 1994
- - $5.7 million). During the year $4.0 million (1995 - $13.6 million; 1994 -
nil) of net unamortized deferred refinancing costs, relating to the early
extinguishment of certain amounts outstanding under the Company's long-term
debt obligations, were written off as extraordinary items in the consolidated
statements of income (note 11).
Note 21 - Short-term debt
At December 31 1996 1995
$m $m
Bank and acceptance facilities 50.6 39.4
Current portion of long-term debt (note 23) 158.6 5.5
----- -----
209.2 44.9
===== =====
The average rate of interest on short-term debt outstanding at December 31,
1996 was 7.8 per cent (1995 - 7.9 per cent). Short-term debt is generally
repayable on demand or at an interest payment date, and is non-collateralized
except for $0.5 million of bank and acceptance facilities in 1995, and $5.5
million of the current portion of long-term debt in 1995.
F-31
<PAGE>
Note 22 - Other current liabilities
At December 31 1996 1995
$m $m
Accruals 70.6 78.5
Payroll and employee benefits 58.1 53.5
Payments received on account 17.1 10.1
Income taxes 15.6 12.0
Interest payable 23.7 25.4
Short-term restructuring, disposition and other provisions 95.6 37.4
Other current liabilities 12.9 10.3
------- -------
293.6 227.2
======= =======
Note 23 - Long-term debt
At December 31 1996 1995
$m $m
Senior notes (i) 250.0 250.0
Senior subordinated notes (ii) 294.1 317.2
Liquid Yield Option Notes (iii) 326.8 306.8
Revolving bank credit agreement (iv) 83.0 15.0
Convertible capital bonds (v) 75.6 68.7
Bank credit agreement - ASH (vi) - 126.2
Senior notes - ASH (vi) - 56.8
Other (vii) 39.2 39.6
------- -------
1,068.7 1,180.3
Less: current portion (note 21) (158.6) (5.5)
------- -------
910.1 1,174.8
======= =======
(i) The $250.0 million 8.25 per cent senior notes due August 2000 were
issued in August 1993, through a public offering, by ADT Operations, Inc., a
company incorporated in the United States and an indirect wholly owned
subsidiary of ADT, and are guaranteed on a senior basis by ADT and certain
subsidiaries of ADT Operations, Inc. The senior notes are not redeemable
prior to maturity and interest is payable semi-annually. The indentures
governing the senior notes contain certain covenants including limitations on
indebtedness, limitations on certain payments, including dividends on the
Company's common shares, and compliance with various financial and operating
covenants and prohibitions, and certain change in control provisions. The
senior notes are non-collateralized senior obligations of ADT Operations, Inc.
ranking pari passu in right of payment with all other existing and future
senior indebtedness of ADT Operations, Inc. including indebtedness under the
revolving bank credit agreement referred to in (iv) below.
F-32
<PAGE>
(ii) The $350.0 million 9.25 per cent senior subordinated notes due August
2003 were issued in August 1993, through a public offering, by ADT Operations,
Inc., and are guaranteed on a senior subordinated basis by ADT. The senior
subordinated notes are redeemable in whole or in part, at the option of ADT
Operations, Inc., at any time after August 1998 at the following redemption
prices: during the twelve month period beginning (a) August 1998 at 103.75
per cent (b) August 1999 at 102.50 per cent (c) August 2000 at 101.25 per
cent, and thereafter at 100.00 per cent of the principal amount. Interest is
payable semi-annually. The indentures governing the senior subordinated notes
contain certain covenants as set out for the senior notes in (i) above. The
senior subordinated notes are non-collateralized, senior subordinated
obligations of ADT Operations, Inc. ranking pari passu with, or senior in
right of payment to, all other existing and future indebtedness of ADT
Operations, Inc. that is expressly subordinated to senior indebtedness of ADT
Operations, Inc. During 1996 the Company reacquired in the market $23.1
million (1995 - $32.8 million) face value of the senior subordinated notes at
a purchase cost of $24.0 million (1995 - $33.7 million) which was financed
from cash on hand. The loss arising on reacquisition of $0.9 million (1995 -
$0.9 million), and related costs of $0.5 million (1995 - $0.8 million), was
included in extraordinary items (note 11).
(iii) In July 1995 ADT Operations, Inc. issued $776,250,000 aggregate
principal amount at maturity of its zero coupon subordinated Liquid Yield
Option Notes ("Notes") maturing July 2010. The net proceeds of the issue
amounted to $287.4 million which was used to repay in full all amounts
outstanding under ADT Operations, Inc.'s previous bank credit agreement, which
was subsequently cancelled. The issue price per Note was $383.09, being
38.309 per cent of the principal amount of $1,000 per Note at maturity,
reflecting a yield to maturity of 6.5 per cent per annum (computed on a
semi-annual bond equivalent basis). There are no periodic payments of
interest. The discount amortization on the Notes is being charged as interest
expense through the consolidated statements of income on a basis linked to the
yield to maturity. The Notes discount amortization for 1996 amounted to $20.3
million (1995 - $9.4 million). Each Note is exchangeable for common shares of
ADT at the option of the holder at any time prior to maturity, unless
previously redeemed or otherwise purchased by ADT Operations, Inc., at an
exchange rate of 28.23 common shares per Note. During 1996 619 Notes with a
carrying value of $0.3 million were exchanged, at the option of the holders,
for 17,472 ADT common shares (note 30). Any Note will be purchased by ADT
Operations, Inc. at the option of the holder as of July 2002 for a purchase
price per Note of $599.46. At this time, if the holder exercises the option,
ADT has the right to deliver all or a portion of the purchase price in the
form of common shares of ADT. Beginning July 2002 the Notes are redeemable
for cash at any time at the option of ADT Operations, Inc., in whole or in
part, at redemption prices equal to the issue price plus accrued original
issue discount to the date of redemption. The Notes are guaranteed on a
subordinated basis by ADT. If, on or prior to maturity, there is a change in
control, the holder has the right to require ADT Operations, Inc. to purchase
the Notes at the change in control purchase price.
(iv) In August 1995 ADT Operations, Inc. entered into a new $300 million
revolving bank credit agreement which replaced in full its previous bank
credit agreement. The new agreement has a term of five years and is
guaranteed on a senior basis by ADT and certain subsidiaries of ADT
Operations, Inc. Amounts available under this facility are available for
borrowing and reborrowing (or issuance and reissuance in the case of letters
of credit up to a maximum of $100 million), subject to certain conditions at
that time, until June 2000 at which time all amounts are repayable in full.
At December 31, 1996 $83.0 million (1995 - $15.0 million) was drawn down under
the agreement, which has been classified in the current portion of long-term
debt, plus letters of credit amounting to $81.1 million (1995 - $81.0 million)
which have been issued and have terms of less than one year. The Company
utilizes letters of credit to back certain financing arrangements and
insurance policies as well as for trade purposes. The letters of credit
approximately reflect fair value as a condition of their underlying purpose.
The Company expects the counterparties to fully perform under the terms of the
agreements.
F-33
<PAGE>
Amounts drawn down under the revolving bank credit agreement bear interest at
a floating rate equal, at the option of ADT Operations, Inc., to either the
alternative base rate plus a margin or the reserve adjusted LIBO rate plus a
margin. The average rate of interest at December 31, 1996 was 6.5 per cent
(1995 - 7.6 per cent).
The revolving bank credit agreement contains certain financial and operating
covenants, including restrictions on the Company's ability to incur additional
indebtedness, limitations on certain payments, including dividends on the
common shares of ADT and ADT Operations, Inc., and certain other financial
covenants, including a minimum cash flow coverage ratio, a minimum debt to
total capitalization ratio and a minimum level of shareholders' equity, and
certain change in control provisions.
In December 1996 ADT Operations, Inc. entered into a new $200 million
revolving bank credit agreement, subject to completion of certain additional
documentation which was signed in January 1997, which replaced in full its
previous bank credit agreement, and which was subsequently cancelled. The new
agreement has a term of one year and is guaranteed on a senior basis by ADT
and certain subsidiaries of ADT Operations, Inc. Amounts available under this
new facility are available for borrowing and reborrowing (or issuance and
reissuance in the case of letters of credit up to a maximum of $100 million),
subject to certain conditions at that time, until January 1998 at which time
all amounts are repayable in full. The interest rates and financial and
operating covenants in place under the new facility are substantially the same
as those referred to above for the previous bank credit agreement.
(v) The 9.5 per cent sterling denominated convertible capital bonds due
July 2006 were issued by ASH Capital Finance (Jersey) Limited, a company
incorporated in Jersey and an indirect wholly owned subsidiary of ADT, and are
unconditionally and irrevocably guaranteed on a non-collateralized and
subordinated basis by ADT. Interest is payable semi-annually. The capital
bonds are convertible, at the option of the holder, into fully paid 2.0 per
cent (fixed cumulative dividend) exchangeable redeemable preference shares in
ASH Capital Finance (Jersey) Limited with a nominal value of one pence each.
The preference shares are unconditionally and irrevocably guaranteed on a
non-collateralized and subordinated basis by ADT. The preference shares are
redeemable at their paid up value of Pound Sterling 1 each and they are also
exchangeable, at the option of the holder, for fully paid common shares of ADT
at a price of Pound Sterling 76.66 per common share, the price of which is
subject to adjustment under certain circumstances. The capital bonds are
unconditionally and irrevocably guaranteed on a non-collateralized and
subordinated basis by ASH, and were formerly convertible into ordinary shares
of ASH. Under the terms of the issue, ADT can require conversion of any
outstanding capital bond if 85 per cent of the issue has been previously
converted or purchased and cancelled, in which case the bond holders may elect
for redemption in lieu of conversion. On or after June 1, 1996, ADT may
exercise a call option at 100 per cent of the aggregate paid up amounts of the
capital bonds outstanding.
In December 1996 ASH Capital Finance (Jersey) Limited gave notice to all bond
holders that in January 1997 it would redeem all of the capital bonds then
outstanding at a price equating to the denomination of each capital bond
together with all accrued interest due. Accordingly, in January 1997 the
capital bonds were fully redeemed at their carrying amount, which was financed
from cash on hand and amounts drawn down under the sterling denominated bank
credit facility, as set out in (vii) below, and at December 31, 1996 have been
classified in the current portion of long-term debt.
(vi) In September 1996 the Company repaid in full all amounts owed by the
ASH group under its senior notes and bank credit agreement, which were
subsequently cancelled, and which was financed from cash on hand and loans
drawn under the revolving bank credit agreement. The loss arising on
repayment of $4.2 million, and related costs of $0.4 million, was included in
extraordinary items (note 11).
F-34
<PAGE>
During 1994 ASH issued $60.7 million of its 8.28 per cent senior notes due
January 1998 of which $5.6 million was in respect of yield maintenance. The
senior notes were collateralized obligations of the ASH group. The yield
maintenance amortization on the senior notes has been charged as interest
expense through the consolidated statements of income. The yield maintenance
amortization for 1996 amounted to $1.5 million (1995 - $1.1 million; 1994 -
$0.6 million). The effective rate of interest including yield maintenance was
10.7 per cent.
During 1995 ASH entered into a bank credit agreement totalling approximately
$134 million with a maturity date in January 1998. The amounts drawn under
the agreement were collateralized obligations of the ASH group and bore
interest principally at LIBO rate plus a margin.
(vii) Other long-term debt principally represents revolving facilities with
various banks falling due for repayment in 1999 bearing interest at a floating
rate equal, at the option of the Company, to either the alternative base rate
plus a margin or the reserve adjusted LIBO rate plus a margin. The average
rate of interest at December 31, 1996 was 7.5 per cent (1995 - 6.9 per cent).
In addition, at December 31, 1996 $0.6 million (1995 - $2.0 million) in
letters of credit have been issued under certain of these facilities and have
terms of less than one year.
In January 1997 the Company entered into a sterling denominated bank credit
facility which is repayable on demand. The amount drawn down under the
facility amounted to $26 million which was used to repay, in part, the amounts
owed under the convertible capital bonds in (v) above. The facility is
guaranteed by ADT and certain of its subsidiaries. Interest is payable at
LIBO rate plus a margin.
In March 1997 the Company entered into a new $154 million sterling denominated
bank credit facility of which $146 million is a term loan facility and $8
million is a revolving credit facility. The term loan facility was fully
drawn down and, in part, was used to repay in full the $26 million drawn down
under the sterling denominated bank credit facility referred to above. The
new facility has a term of five years and is guaranteed by ADT and certain of
its subsidiaries. Interest is payable at LIBO rate plus a margin.
The average rate of interest on all long-term debt during the year was 8.0 per
cent (1995 - 8.2 per cent; 1994 - 8.4 per cent).
Based on estimated interest rates currently available to the Company for
long-term debt with similar terms and average maturities, the fair value of
all long-term debt at December 31, 1996 amounted to approximately $1,119
million (1995 - approximately $1,241 million).
F-35
<PAGE>
The maturities and installments with respect to long-term debt outstanding at
December 31, 1996 are as follows:
$m
Year ending December 31 1997 158.6
1998 0.9
1999 34.5
2000 251.7
2001 0.9
Thereafter 622.1
-------
1,068.7
=======
Note 24 - Deferred revenue
Deferred revenue is comprised of all subscriber billings for services not yet
rendered.
Note 25 - Deferred income taxes
The movement in deferred income taxes since January 1, 1994 has been as
follows:
1996 1995 1994
$m $m $m
At January 1 142.4 123.5 95.3
(Credit) charge for the year (note 9(i)) (39.5) 18.4 24.9
Extraordinary items (note 11) (0.7) (4.7) -
Eliminated on disposals - (3.3) -
Currency translation adjustments (0.7) 0.7 (0.2)
Reclassifications (10.0) 7.8 3.5
----- ----- -----
At December 31 91.5 142.4 123.5
===== ===== =====
F-36
<PAGE>
The significant temporary timing differences and tax loss carryforwards that
gave rise to the deferred income tax balance at December 31, 1996 were as
follows:
US Non US Total
$m $m $m
Liabilities:
Depreciation 864.8 72.6 937.4
Other 6.9 15.2 22.1
------ ------ ------
871.7 87.8 959.5
------ ------ ------
Assets:
Tax operating loss carryforwards 436.6 99.2 535.8
Provisions for estimated costs and expenses 143.7 57.2 200.9
Interest expense 147.9 - 147.9
Post-retirement benefit obligations 78.6 - 78.6
Depreciation - 66.2 66.2
------ ------ ------
806.8 222.6 1,029.4
Valuation allowance (163.6) (155.8) (319.4)
------ ------ ------
643.2 66.8 710.0
------ ------ ------
Gross deferred income tax liability 228.5 21.0 249.5
------ ------ ------
Deferred income tax liability at
statutory tax rates 80.0 11.5 91.5
====== ====== ======
The US tax operating loss carryforwards at December 31, 1996 expire as follows:
$m
Year ending December 31 1999 6.8
2000 4.1
2001 24.2
2002 18.3
2003 7.5
2004 86.4
2005 144.4
2006 107.2
2007 24.7
2008 13.0
-----
436.6
=====
No provision has been made for deferred income taxes on undistributed earnings
of subsidiaries ($655.9 million at December 31, 1996) which are required to
finance their continuing operations.
F-37
<PAGE>
The significant temporary timing differences and tax loss carryforwards that
gave rise to the deferred income tax balance at December 31, 1995 were as
follows:
US Non US Total
$m $m $m
Liabilities:
Depreciation 857.9 124.4 982.3
Other 5.2 14.5 19.7
------ ------ -------
863.1 138.9 1,002.0
------ ------ -------
Assets:
Tax operating loss carryforwards 428.9 94.5 523.4
Provisions for estimated costs and expenses 69.2 12.5 81.7
Interest expense 99.6 - 99.6
Post-retirement benefit obligations 66.5 - 66.5
------ ------ -------
664.2 107.0 771.2
Valuation allowance (120.0) (49.3) (169.3)
------ ------ -------
544.2 57.7 601.9
------ ------ -------
Gross deferred income tax liability 318.9 81.2 400.1
------ ------ -------
Deferred income tax liability at
statutory tax rates 111.6 30.8 142.4
====== ====== =======
Note 26 - Other long-term liabilities
At December 31 1996 1995
$m $m
Pensions (note 33(i)) 28.4 20.6
Post-retirement benefits other than pensions (note 33(iv)) 48.2 47.8
Long-term restructuring, disposition and other provisions 74.6 41.3
Other long-term liabilities 30.9 25.5
----- -----
182.1 135.2
===== =====
Note 27 - Minority interests
At December 31, 1995 minority interests represent the 24.0 per cent interest
in the outstanding voting share capital of Alert held by the minority
shareholders of Alert and not owned by the Company. The value is based on the
consolidated net assets of Alert on a historical cost basis.
F-38
<PAGE>
In February 1996, following approval by Alert's shareholders, Alert was merged
into the Company and, as a result, those shares then held by the minority
shareholders and not owned by the Company were converted into the right to
receive in cash the price paid per share by the Company in the initial tender
offer. Accordingly, the minority interest outstanding at December 31, 1995
has been eliminated.
Note 28 - Convertible redeemable preference shares
At December 31 1996 1995 1994
$m $m $m
Authorized:
225,000 5 3/4% convertible cumulative redeemable
preference shares 2002 of $1 each (1995 - 225,000;
1994 - 225,000) (i) 0.2 0.2 0.2
500,000 6% convertible cumulative redeemable
preference shares 2002 of $1 each (1995 - 500,000;
1994 - 500,000) (ii) 0.5 0.5 0.5
125,000,000 convertible cumulative redeemable
preference shares of $1 each (1995 - 125,000,000;
1994 - 125,000,000) (iii) 125.0 125.0 125.0
----- ----- -----
125.7 125.7 125.7
===== ===== =====
The movement in convertible redeemable preference shares since January 1, 1994
has been as follows:
5 3/4% shares 6% shares
Number $m Number $m
Issued and outstanding:
At January 1, 1994 29,738 35.5 283,030 391.7
Reacquired in the market at
purchase cost (25) - - -
Redeemed (28,957) (34.6) (278,625) (385.6)
Reversal of redemption premium
on shares not redeemed - (0.1) - (1.7)
------- ------- ------- -------
At December 31, 1994 756 0.8 4,405 4.4
Converted into common
shares (note 30) - - (225) (0.3)
------- ------- ------- -------
At December 31, 1995 756 0.8 4,180 4.1
Redeemed (756) (0.8) (4,180) (4.1)
------- ------- ------- -------
At December 31, 1996 - - - -
======= ======= ======= =======
In January 1994 ADT redeemed 28,957 of its 5 3/4% convertible redeemable
preference shares for an aggregate consideration, including redemption
premium, of $34.6 million. The Company funded the redemption from cash on
hand.
F-39
<PAGE>
In October 1994 ADT redeemed 278,625 of its 6% convertible redeemable
preference shares for an aggregate consideration, including redemption
premium, of $385.6 million. The Company funded the redemption through the
drawdown of $231.6 million under its previous bank credit agreement and $154.0
million from cash on hand.
In November 1996 ADT redeemed 756 of its 5 3/4% convertible redeemable
preference shares and 4,180 of its 6% convertible redeemable preference shares
for an aggregate consideration of $4.9 million. The Company funded the
redemption from cash on hand.
Dividends on convertible redeemable preference shares amounted to:
Year ended December 31 1996 1995 1994
$m $m $m
5 3/4% convertible redeemable preference shares - - -
6% convertible redeemable preference shares 0.3 0.3 13.3
----- ----- -----
0.3 0.3 13.3
===== ===== =====
F-40
<PAGE>
(i) 5 3/4% convertible cumulative redeemable preference shares 2002 (par
value $1 each)
In April 1987 175,000 of these mandatorily redeemable preference shares were
issued for cash at a price of $1,000 each, and during the period to December
31, 1996 139,262 of these preference shares were converted into ADT common
shares. The holders of these preference shares were entitled to a fixed
cumulative preferential dividend at the rate of 5 3/4 per cent per annum.
These preference shares were subject to redemption, at the option of the
holders, in January 1994 at 119.625 per cent of their issue amount. ADT had
the right to require redemption or conversion of the preference shares in
certain circumstances. This right was exercised in November 1996 and all
remaining preference shares were redeemed at their carrying amount.
(ii) 6% convertible cumulative redeemable preference shares 2002 (par value
$1 each)
In September 1987 400,000 of these mandatorily redeemable preference shares
were issued for cash at a price of $1,000 each, and during the period to
December 31, 1996 225 of these preference shares were converted into ADT
common shares. The holders of these preference shares were entitled to a
fixed cumulative preferential dividend at the rate of 6 per cent per annum.
These preference shares were subject to redemption, at the option of the
holders, in October 1994 at 138.375 per cent of their issue amount. ADT had
the right to require redemption or conversion of the preference shares in
certain circumstances. This right was exercised in November 1996 and all
remaining preference shares were redeemed at their carrying amount.
(iii) Convertible cumulative redeemable preference shares (par value $1 each)
In November 1996 the board of directors of ADT determined that 2.5 million of
the 125 million authorized convertible cumulative redeemable preference shares
of $1 each be classified as Series A First Preference Shares Purchase Rights,
pursuant to the Shareholders Rights Plan referred to below, which have been
reserved for issuance upon exercise of the said Rights.
The rights attaching to the balance of 122.5 million convertible cumulative
redeemable preference shares of $1 each, none of which are issued and
outstanding, as to dividends, return of capital, redemption, conversion,
voting and otherwise may be determined by ADT on or before the time of
allotment.
In November 1996 the board of directors of ADT adopted a Shareholder Rights
Plan ("the Plan"). Under the Plan each ADT common shareholder received a
distribution of one right for each ADT common share held. Each right entitles
the holder to purchase from ADT shares of a new series of first preference
shares at an initial purchase price of $90 per one hundredth of a first
preference share. The rights will become exercisable and will detach from the
common shares a specified period of time after any person becomes the
beneficial owner of 15 per cent or more of ADT's common shares, or commences a
tender or exchange offer which, if consummated, would result in any person
becoming the beneficial owner of 15 per cent or more of ADT's common shares.
The rights did not become exercisable on account of any person being the
beneficial owner of 15 per cent or more of ADT's common shares when the Plan
was adopted, but become exercisable if such a person increases their
beneficial ownership after that time (note 32(iv)).
F-41
<PAGE>
If any person becomes the beneficial owner of 15 per cent or more of ADT's
common shares, or if any person who was already the beneficial owner of 15 per
cent or more of ADT's common shares when the Plan was adopted increases their
beneficial ownership, each right will enable the holder, other than the
acquiring person, to purchase, for the rights purchase price, ADT common
shares having a market value of twice the rights purchase price.
If, following an acquisition of 15 per cent or more of ADT's common shares,
ADT is involved in any mergers or other business combinations or sells or
transfers more than 50 per cent of its assets or earnings power, each right
will entitle the holder to purchase, for the rights purchase price, common
shares, of the other party to such transaction, having a market value of twice
the rights purchase price.
ADT may redeem the rights at a price of $0.01 per right at any time prior to
the specified period of time after a person has become the beneficial owner of
15 per cent or more of ADT's common shares. The rights will expire in
November 2005 unless exercised or redeemed earlier.
In the event of liquidation of ADT, the holders of all of ADT's convertible
redeemable preference shares are together entitled to payment to them of the
amount for which the preference shares were subscribed and any unpaid
dividends, prior to any payment to the common shareholders.
Note 29 - Non-voting exchangeable shares
The movement in non-voting exchangeable shares since January 1, 1994 has been
as follows:
Number $m
At January 1, 1994 925,537 15.0
Exchanged into common shares held as
treasury shares (note 31) (922,628) (15.0)
-------- -----
At December 31, 1994 2,909 -
Exchanged into common shares held as
treasury shares (note 31) (2,909) -
-------- -----
At December 31, 1995 and December 31, 1996 - -
======== =====
In March 1991 ADT Finance Inc., an indirect wholly owned Canadian subsidiary
of ADT, issued 1,000,000 non-voting exchangeable shares exchangeable for
common shares of ADT at the option of the holder, at any time, on a one for
one basis. Holders of non-voting exchangeable shares were entitled only to
dividends equivalent to dividends declared and paid on common shares of ADT.
F-42
<PAGE>
Note 30 - Common shares
At December 31 1996 1995 1994
$m $m $m
Authorized:
220,000,000 shares of $0.10 each
(1995 - 220,000,000; 1994 - 220,000,000) 22.0 22.0 22.0
====== ====== ======
Issued and outstanding:
141,382,697 shares of $0.10 each
(1995 - 138,885,405; 1994 - 138,097,754) 14.1 13.9 13.8
====== ====== ======
The movement in common shares since January 1, 1994 has been as follows:
1996 1995 1994
Number Number Number
At January 1 (i) 138,885,405 138,097,754 137,364,915
Exercise of executive share options (ii) 2,479,820 780,366 35,000
Exchange of Liquid Yield Option
Notes (note 23(iii)) 17,472 - -
Conversion of convertible preference
shares (note 28) - 7,285 -
Exercise of warrants (iii) - - 697,839
----------- ----------- -----------
At December 31 141,382,697 138,885,405 138,097,754
=========== =========== ===========
(i) The number of common shares at January 1, 1994 has been restated for
the pooling of interests with ASH (note 3).
Number
At January 1, 1994 - as previously reported 130,329,975
Pooling of interests with ASH (note 3) 7,034,940
-----------
At January 1, 1994 - as restated 137,364,915
===========
(ii) ADT has granted employee share options which are issued under five
fixed share option plans and schemes which reserve common shares for issuance
to the Company's executives and managers. The majority of options have been
granted under the ADT 1993 Long-Term Incentive Plan ("the Incentive Plan").
The Incentive Plan was originally approved by shareholders of ADT in October
1993 and certain subsequent amendments to the Incentive Plan were approved by
shareholders of ADT in April 1996. The Incentive Plan is administered by the
remuneration committee of the board of directors of ADT, which consists
exclusively of independent non-executive directors of ADT. Options are
generally granted to purchase ADT common shares at prices which equate to or
are above the market price of the common shares on the date the option is
granted. Conditions of vesting are determined at the time of grant. Certain
options have been granted in which participants were required to pay a
subscription price as a condition of vesting. Options which have been granted
under the Incentive Plan to date have generally vested and become exercisable
in installments over a three year period from the date of grant and have a
maximum term of ten years.
F-43
<PAGE>
The movement in executive share options outstanding since January 1, 1994 has
been as follows:
1996 1995 1994
Number Number Number
At January 1 13,491,185 12,180,778 10,410,425
Granted 6,448,333 3,000,000 1,975,000
Exercised (2,479,820) (780,366) (35,000)
Cancelled on purchase (note 34) - (657,832) -
Lapsed/surrendered (207,298) (251,395) (169,647)
---------- ---------- ----------
At December 31 17,252,400 13,491,185 12,180,778
========== ========== ==========
The number of executive share options exercisable and available for future
grant at December 31 was as follows:
1996 1995 1994
Number Number Number
Exercisable 12,787,060 5,423,423 3,454,935
Available for future grant 2,593,335 401,668 3,385,000
---------- --------- ---------
The weighted average executive share options exercise price information since
January 1, 1994 has been as follows:
1996 1995 1994
$ $ $
Outstanding at January 1 11.52 11.08 11.32
Granted 15.32 11.97 9.24
Exercised 9.98 8.84 8.93
Cancelled on purchase (note 34) - 9.10 -
Lapsed/surrendered 17.24 12.68 15.85
Outstanding at December 31 13.06 11.52 11.08
Exercisable at December 31 13.21 12.38 12.59
----- ----- -----
The estimated weighted average fair value of executive share options granted
during 1996 was $4.33 on the date of grant using the option-pricing model and
assumptions referred to below.
F-44
<PAGE>
The following table summarizes information about outstanding and exercisable
executive share options at December 31, 1996.
<TABLE>
Options outstanding Options exercisable
<S> <C> <C> <C> <C> <C>
Weighted
Range of Weighted average Weighted
exercise average remaining average
prices Number exercise price contractual Number exercise price
$ outstanding $ life-years exercisable $
8.01 to 10.00 4,292,250 8.91 6.9 3,607,748 8.87
10.01 to 13.00 2,997,250 11.68 5.6 503,080 11.52
13.01 to 15.00 8,690,400 14.95 6.8 8,523,732 14.97
15.01 to 20.00 1,163,000 16.48 9.1 43,000 15.94
20.01 to 30.00 109,500 26.43 2.5 109,500 26.43
---------- ------ ---------- -----
17,252,400 13.06 12,787,060 13.21
========== ====== ========== =====
</TABLE>
During 1996 the Company was required to adopt Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 allows companies to measure compensation cost in connection
with executive share option plans and schemes using a fair value based method,
or to continue to use an intrinsic value based method which generally does not
result in a compensation cost. The Company has decided to continue to use the
intrinsic value based method and no compensation cost has been recorded. Had
the fair value based method been adopted consistent with the provisions of
SFAS 123, the Company's proforma net (loss) income and proforma net (loss)
income per common share for the years ended December 31, 1996 and 1995 would
have been as follows:
Year ended December 31 1996 1995
Net (loss) income-proforma ($717.1m) $17.8m
-------- ------
Net (loss) income per common share-proforma ($5.23) $0.13
======== ======
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions.
Expected stock price volatility 28 per cent
Risk free interest rate 5.9 per cent
Expected dividend yield nil per cent
Expected life of options 3.7 years
The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995
and additional awards in future years are anticipated.
F-45
<PAGE>
(iii) In April 1992 an issue was made to common shareholders of warrants to
subscribe for ADT common shares on the basis of one warrant for every six
common shares then held. Each warrant gave the holder the right to subscribe
for one common share at $10.00 per common share during the period from July 1,
1992 to June 30, 1994. All warrants not exercised at June 30, 1994 have
lapsed in accordance with the terms of the warrants.
The movement in warrants since January 1, 1994 has been as follows:
Number
At January 1, 1994 18,254,318
Exercised (697,839)
Lapsed (17,556,479)
-----------
At December 31, 1994, December 31, 1995 and
December 31, 1996 -
===========
(iv) In July 1996, as part of the then agreement to combine with Republic,
ADT granted to Republic a warrant to acquire 15 million common shares of ADT
at an exercise price of $20 per common share. Following termination of the
agreement to combine with Republic, the warrant vested and was exercisable by
Republic in the six month period commencing September 27, 1996 (note 32(iv)).
In March 1997 the warrant was exercised by Republic and the Company received
$300 million in cash.
(v) In March 1997 the Company announced that it had entered into a
definitive merger agreement, subject to shareholder approval and other
customary matters, with Tyco International Ltd. ("Tyco"), a United States
quoted company engaged in the manufacture of industrial and commercial
products. Tyco shareholders will receive one common share in the combined
company for each Tyco common share and ADT shareholders, through a reverse
stock split, will receive 0.48133 common shares in the combined company for
each ADT common share.
Note 31 - Treasury shares
The movement in treasury common shares held by a subsidiary of ADT at purchase
cost since January 1, 1994 has been as follows:
Number $m
At January 1, 1994 4,109,324 102.9
Exchange of non-voting exchangeable shares (note 29) (922,628) (23.1)
--------- -----
At December 31, 1994 3,186,696 79.8
Exchange of non-voting exchangeable shares (note 29) (2,909) (0.1)
Treasury shares given as employee remuneration (1,000) -
--------- -----
At December 31, 1995 and December 31, 1996 3,182,787 79.7
========= =====
F-46
<PAGE>
Note 32 - Commitments and contingencies
(i) The Company leases land, buildings, motor vehicles and other equipment
under various contracts. The future total minimum rental payments required
under operating leases that have remaining noncancelable lease terms in excess
of one year at December 31, 1996 are as follows:
$m
Year ending December 31 1997 67.3
1998 54.4
1999 39.0
2000 28.3
2001 18.9
Thereafter 41.6
-----
249.5
=====
The net operating lease rental charge for the year included in the
consolidated statements of income amounted to $77.2 million (1995 - $75.3
million; 1994 - $68.6 million).
(ii) Financial instruments which potentially subject the Company to
concentrations of credit risk principally consist of cash and cash equivalents
and trade receivables. The Company places its cash and cash equivalents with
high credit quality financial institutions throughout the world and, by
policy, limits the amount of credit exposure to any one financial institution.
The Company's trade receivables primarily result from its electronic security
services and vehicle auction services businesses and reflects a broad
international customer base. Credit limits, ongoing credit evaluation and
account monitoring procedures are utilized to minimize the risk of loss. As a
consequence, concentrations of credit risk are limited. In addition, the
Vendor Note (note 19) also subjects the Company to credit risk in the event of
non-performance by ITS. However, the Company currently expects that ITS will
meet its liabilities to the Company under the terms of the Vendor Note.
(iii) At December 31, 1996 the Company had issued guarantor surety bonds of
$10.0 million (1995 - $10.0 million) to back insurance policies. These surety
bonds have unlimited duration.
(iv) In December 1996 Westar Capital, Inc. ("WCI"), a wholly owned
subsidiary of Western Resources, Inc. and a 24 per cent shareholder of ADT,
filed a complaint (as subsequently amended) in the US Courts against ADT and
its directors, among others. The complaint alleges, among other things, that
ADT and its directors breached their fiduciary duties to WCI and ADT's other
shareholders (a) by adopting the Plan (note 28(iii)), and (b) by issuing to
Republic the warrant (note 30(iv)). The complaint seeks a court order (a)
directing ADT to redeem the Plan, and (b) declaring the warrant issued to
Republic null and void or preventing ADT and Republic from exercising their
rights under the warrant or preventing Republic from selling or transferring
any of the warrant shares it currently owns. The complaint also seeks
unspecified damages, attorneys' fees and costs. Accordingly, an estimate
of any potential loss or range of possible losses, if any, cannot be made.
ADT and its board of directors believe that the allegations in WCI's
complaint against ADT and its directors are without merit and intend to
vigorously defend against them.
F-47
<PAGE>
In December 1996 Mr. C. Gachot filed a complaint in the US Courts against ADT
and certain of its directors, among others. The complaint was brought on
behalf of a class of all shareholders of ADT and alleges, among other things,
that the Plan (note 28(iii)) and the warrant issued to Republic (note 30(iv))
are improper. The complaint seeks unspecified monetary relief. Accordingly,
an estimate of any potential loss or range of possible losses, if any, cannot
be made. ADT and its board of directors believe that the allegations in Mr.
Gachot's complaint against ADT and certain of its directors are without merit
and intend to vigorously defend against them.
In March 1997 Crandon Capital Partners ("CCP") filed a complaint in the US
Courts against ADT and certain of its current and former directors, among
others. The complaint was brought by CCP in a derivative capacity on behalf
of ADT. The complaint alleges, among other things, that ADT's directors
breached their fiduciary duties and wasted corporate assets in connection with
(a) the granting of options to certain officers of ADT in 1996, (b) the
implementation of the Plan (note 28(iii)), and (c) the issuance to Republic of
the warrant (note 30(iv)). The complaint seeks a court order directing ADT's
directors to establish a system of internal controls to prevent repetition of
the alleged breaches of fiduciary duty and corporate waste, and an unspecified
amount of damages. Accordingly, an estimate of any potential loss or range of
possible losses, if any, cannot be made. ADT and its directors believe that
the allegations in CCP's complaint against ADT and certain of its directors
are without merit and intend to vigorously defend against them.
The Company is a defendant in a number of other pending legal proceedings
incidental to present and former operations, acquisitions and dispositions.
The Company does not expect the outcome of these proceedings either
individually or in the aggregate to have a material adverse effect on the
consolidated results of operations and cash flows or the consolidated
financial position of the Company.
Note 33 - Pension and other plans
The Company operates various defined benefit pension plans designed in
accordance with conditions and practices in the countries concerned.
Contributions are based on periodic actuarial valuations which use the
projected unit credit method of calculation and are charged to the
consolidated statements of income on a systematic basis over the expected
average remaining service lives of current employees. The net pension expense
is assessed in accordance with the advice of professionally qualified
actuaries in the countries concerned or is based on subsequent formal reviews
for this purpose.
The Company's United States electronic security services operation has a
non-contributory, funded, defined benefit pension plan covering substantially
all of its employees.
The Company has two contributory, funded, defined benefit pension plans in the
United Kingdom covering substantially all salaried and non-salaried employees.
F-48
<PAGE>
Details of the most recent independent actuarial valuations or formal reviews
are set out below:
(i) United States plan
The net pension expense for the United States plan included the following
components:
Year ended December 31 1996 1995 1994
$m $m $m
Service cost-benefits earned during year 6.5 5.1 6.1
Interest cost on projected benefit obligations 13.3 12.9 11.9
Return on assets (17.1) (16.3) (16.1)
Net amortization and deferral 4.9 (0.8) 0.1
----- ----- -----
Net pension expense 7.6 0.9 2.0
===== ===== =====
As a result of an early retirement plan implemented during 1996, a curtailment
loss of $4.8 million is included in the net amortization and deferral
component of net pension expense for the year ended December 31, 1996.
The following table sets forth the actuarial present value of accumulated
benefit obligations and funded status for the Company's United States plan:
At December 31 1996 1995
$m $m
Accumulated benefit obligations, including vested
benefits of $155.4 million (1995 - $157.8 million) 169.5 164.4
====== ======
Total projected benefit obligations 193.5 189.4
------ ------
Plan assets at fair value, primarily stocks,
bonds and money market funds 192.6 183.5
Less: Unrecognized net gain (28.1) (15.4)
Plus: Unrecognized prior service costs 0.6 0.7
------ ------
165.1 168.8
------ ------
Net pension liability (note 26) 28.4 20.6
====== ======
Benefit cover 99% 97%
------ ------
The actuarial assumptions for the expected long-term rate of return on plan
assets, weighted average discount rate, and rate of increase of future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations for 1996 were 10.0 per cent, 7.5 per cent and
4.0 per cent, respectively (1995 - 10.0 per cent, 7.0 per cent and 4.0 per
cent, respectively). The actuarial valuations of the United States plan were
carried out by Kwasha Lipton in 1996 and by Buck Consultants in 1995 and 1994.
F-49
<PAGE>
(ii) United Kingdom plans
The aggregate net pension (income) expense for the United Kingdom plans
included the following components:
Year ended December 31 1996 1995 1994
$m $m $m
Service cost-benefits earned during year 3.6 3.9 5.0
Interest cost on projected benefit obligations 7.1 8.8 7.0
Return on assets (11.5) (17.3) -
Net amortization and deferral (2.2) 6.8 (9.7)
----- ----- -----
Net pension (income) expense (3.0) 2.2 2.3
===== ===== =====
As a result of the disposal of an interest in European Auctions (notes 7(i)
and 34) a curtailment gain of $2.7 million is included in the net amortization
and deferral component of net pension income for the year ended December 31,
1996.
The following table sets forth the aggregate actuarial present value of
accumulated benefit obligations and funded status for the Company's United
Kingdom plans:
At December 31 1996 1995
$m $m
Accumulated benefit obligations, including vested
benefits of $92.8 million (1995 - $82.4 million) 92.8 82.4
===== =====
Total projected benefit obligations 101.4 91.6
----- -----
Plan assets at fair value, primarily stocks,
bonds and money market funds 133.3 116.7
Less:Unamortized net assets (13.0) (6.1)
Less: Unrecognized net gain (12.1) (21.1)
Plus: Unrecognized prior service costs - 2.1
----- -----
108.2 91.6
----- -----
Net pension asset 6.8 -
===== =====
Benefit cover 131% 127%
----- -----
The actuarial assumptions for the expected long-term rate of return on plan
assets, weighted average discount rate, and rate of increase of future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations for 1996 were 9.5 per cent, 8.5 per cent and
7.0 per cent, respectively (1995 - 9.0 per cent, 8.3 per cent and 6.5 per
cent, respectively). The actuarial valuations of the United Kingdom plans
were principally carried out by William M. Mercer and by Friends Provident.
The net pension asset at December 31, 1996 is included in other long-term
assets (note 20).
F-50
<PAGE>
(iii) The aggregate net pension expense for the year in respect of the
United States and United Kingdom plans amounted to $4.6 million (1995 - $3.1
million; 1994 - $4.3 million).
(iv) The Company's United States electronic security services operation
sponsors an unfunded defined benefit post-retirement plan which covers both
salaried and non-salaried employees and which provides medical and other
benefits. This post-retirement health care plan is contributory, with retiree
contributions adjusted annually.
The net post-retirement benefit expense included the following components:
Year ended December 31 1996 1995 1994
$m $m $m
Service cost 0.7 0.5 0.6
Interest cost 2.5 2.4 2.3
Net amortization and deferral (1.2) (1.3) (1.3)
---- ---- ----
Net post-retirement benefit expense 2.0 1.6 1.6
==== ==== ====
The following table sets forth the components of the plan's accumulated
post-retirement benefit obligations and benefit liability:
At December 31 1996 1995
$m $m
Retirees 27.6 22.8
Fully eligible active plan participants 5.0 7.7
Other active plan participants 6.4 4.8
---- ----
Accumulated post-retirement benefit obligations 39.0 35.3
Less: Unrecognized net loss (5.3) (3.3)
Plus: Unrecognized prior service credit 14.5 15.8
---- ----
Post-retirement benefit liability (note 26) 48.2 47.8
==== ====
During 1992 the Company adopted amendments to the plan that reduced benefits
attributable to prior service. These amendments resulted in approximately a
$20 million decrease in the obligation for benefits attributable to prior
service. This decrease is being amortized as a reduction of plan costs on an
actuarially calculated basis over a period of approximately twenty years
beginning January 1992. Effective January 1995 the Company implemented a
defined dollar benefit cap for all current and future retirees, regardless of
age.
F-51
<PAGE>
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligations was 7.5 per cent (1995 - 7.0 per cent).
The actuarial valuations of the plan were carried out by Kwasha Lipton in 1996
and by Buck Consultants in 1995 and 1994.
Note 34 - Related party transactions
In December 1995 the Company entered into an agreement with Integrated
Transport Systems Limited ("ITS"), a United Kingdom unquoted company, and its
wholly owned subsidiaries Loanoption Limited and ITS Finance Limited, under
which the Company disposed of an interest in European Auctions.
The aggregate consideration received by the Company on closing was comprised
of cash of $235.1 million, $187.6 million Vendor Note (note 18) with an issue
price of $83.9 million and valued by the Company at $74.6 million, $31.1
million Shareholder Loan Notes (note 18) with an issue price of $13.9 million
and valued by the Company at $13.3 million, and a 43.1 per cent interest in
the ordinary share capital of ITS at an issue price of $2.0 million and valued
by the Company at $0.9 million.
In February 1996 the Company disposed of its entire interest in Shareholder
Loan Notes and 33.1 per cent of the ordinary share capital of ITS for an
aggregate cash consideration of $15.4 million (note 18). As a result, the
Company now holds a 10.0 per cent interest in the ordinary share capital of
ITS, valued and accounted for by the Company at a nominal amount, together
with the Vendor Note which has been accounted for at its amortized cost.
Mr. D.B. Hammond and Mr. T.J. Gibson are both directors of ITS. Mr. Hammond
was, until April 1996, Deputy Chairman of ADT and Mr. Gibson was the Chief
Executive Officer of ADT Auction Group Limited.
Mr. Hammond and Mr. Gibson subscribed $10.4 million and $0.8 million, in
total, respectively, to the capital of ITS and, as a result, were interested
in Shareholder Loan Notes with issue prices of $9.4 million and $0.7 million,
respectively, and 22.3 per cent and 1.7 per cent, respectively, of the
ordinary share capital of ITS. Other senior management and employees of
European Auctions subscribed $3.7 million to the capital of ITS and, as a
group, were interested in Shareholder Loan Notes with an issue price of $3.3
million and 8.0 per cent of the ordinary share capital of ITS. In addition,
at closing, Mr. M.A. Ashcroft, Chairman and Chief Executive Officer of ADT,
subscribed $7.0 million to the capital of ITS and, as a result, was interested
in Shareholder Loan Notes with an issue price of $6.3 million and 15.0 per
cent of the ordinary share capital of ITS, which interest he continues to
hold. Mr. Ashcroft is not an officer or director of ITS or any of its
subsidiaries and has no involvement in the day to day management of ITS or any
of its subsidiaries.
Upon the disposal by the Company of an interest in European Auctions, ADT
share options held by directors and employees of European Auctions became
immediately exercisable. ADT entered into arrangements with Mr. Gibson under
which share options held by him at the time of the disposal by the Company of
an interest in European Auctions were purchased by ADT for an aggregate
economic value totalling $1.2 million, based on ADT's common share price on
December 19, 1995, of which Mr. Gibson invested $0.8 million in the capital of
ITS, referred to above. ADT also entered into similar arrangements with other
senior management and employees of European Auctions under which ADT purchased
share options held by them for an aggregate economic value totalling $0.6
million, in order to enable them to invest in the capital of ITS. In
addition, in order to further enable Mr. Hammond to invest in the capital of
ITS, ADT purchased from him share options with an aggregate economic value
totalling $1.1 million, based on ADT's common share price on December 19,
1995, which would otherwise have been exercisable in March 1996.
F-52
<PAGE>
Upon the disposal by the Company of an interest in European Auctions, Mr.
Gibson received a severance payment of $0.3 million and other senior
management and employees of European Auctions, as a group, received severance
payments totalling $0.4 million.
A company controlled by Mr. Ashcroft made non-collateralized loans to Mr.
Hammond, or companies controlled by him, of an aggregate of $7.8 million,
solely for the purpose of enabling Mr. Hammond or these companies to invest in
the capital of ITS.
The cash consideration paid to the Company on closing was obtained by the ITS
group through the subscription of $26.5 million in the capital of ITS and
approximately $209.7 million through the drawdown of sterling term loans under
a bank credit agreement entered into between the ITS group and a group of
banks. The bank credit agreement has a term of seven years and obligations
thereunder are guaranteed and collateralized by a first priority pledge of the
shares and assets of all the companies comprising European Auctions and the
ITS group.
At closing, the Company entered into an agreement with the ITS group whereby
the Company granted to ITS and its subsidiaries permission to use the ADT name
and certain trademarks for a period of up to three years for a total cash
consideration, paid at closing, of $0.6 million.
At closing, the Company entered into an option agreement with Mr. Ashcroft
which, if exercised, would have required Mr. Ashcroft to purchase from the
Company, for cash fifty days after closing, Shareholder Loan Notes with an
issue price of up to $8.2 million and up to 19.6 per cent of the ordinary
share capital of ITS. In addition, at closing, ITS entered into an agreement
with the Company and Mr. Ashcroft under which ITS agreed to use its reasonable
efforts, for a forty-five day period after closing, to find unrelated third
party investors to purchase Shareholder Loan Notes and ordinary share capital
of ITS from the Company and Mr. Ashcroft, and under which the Company and Mr.
Ashcroft agreed to certain voting restrictions in respect of their holdings of
the ordinary share capital of ITS as described below. In February 1996 the
Company and Mr. Ashcroft agreed that the mutual obligations under the option
agreement be released.
At December 31, 1995 the Company's investment in the ordinary share capital of
ITS was accounted for as an unconsolidated subsidiary under temporary control,
due to an agreement between ITS, the Company and Mr. Ashcroft limiting the
voting rights of each of the Company and Mr. Ashcroft to 15.0 per cent of the
voting rights of ITS and due to the fact that Mr. Hammond did not be seek
re-election to the board of directors of ADT at the 1996 annual general
meeting. Accordingly, at December 31, 1995 the equity method of accounting
was used in the consolidated financial statements, and the Vendor Note and
Shareholder Loan Notes were accounted for at their amortized cost.
An opinion regarding the fair value of the transactions described above was
provided to the independent non-executive directors of ADT by a leading
European investment banking firm and the transactions were approved
unanimously by the independent non-executive directors of ADT.
F-53
<PAGE>
Note 35 - Quarterly financial data (unaudited)
<TABLE>
1996 1996 1996 1996 1996
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
$m $m $m $m $m
<S> <C> <C> <C> <C> <C>
Net sales:
Electronic security services 336.7 347.1 355.0 367.4 1,406.2
Vehicle auction services 74.6 75.3 72.9 75.0 297.8
------ ------ ------ ------ -------
Net sales 411.3 422.4 427.9 442.4 1,704.0
====== ====== ====== ====== =======
Operating (loss) income:
Electronic security services (i) (679.2) 54.1 52.5 (183.9) (756.5)
Vehicle auction services (ii) (2.2) 12.9 9.7 6.7 27.1
Corporate (iii) (5.4) (7.2) (15.1) (8.4) (36.1)
------ ------ ------ ------ -------
Operating (loss) income (686.8) 59.8 47.1 (185.6) (765.5)
Interest income 6.5 6.3 5.4 9.3 27.5
Interest expense (27.4) (26.7) (24.5) (22.4) (101.0)
Gain on disposal of businesses - - 1.7 - 1.7
Other income less expenses (iv) (0.3) 1.0 0.7 127.4 128.8
------ ------ ------ ------ -------
(Loss) income before
income taxes (708.0) 40.4 30.4 (71.3) (708.5)
Income taxes 2.4 (9.7) (7.2) 36.3 21.8
------ ------ ------ ------ -------
(Loss) income before
extraordinary items (705.6) 30.7 23.2 (35.0) (686.7)
Extraordinary items (v) - (1.2) (4.6) (2.6) (8.4)
------ ------ ------ ------ -------
Net (loss) income (705.6) 29.5 18.6 (37.6) (695.1)
====== ====== ====== ====== =======
Dividends on preference
shares (0.1) (0.1) - (0.1) (0.3)
------ ------ ------ ------ -------
Net (loss) income available
to common shareholders (705.7) 29.4 18.6 (37.7) (695.4)
====== ====== ====== ====== =======
Primary (loss) earnings
per common share (vi) $ $ $ $ $
(Loss) income before
extraordinary items (5.20) 0.22 0.16 (0.25) (5.01)
Extraordinary items - (0.01) (0.03) (0.02) (0.06)
------ ------ ------ ------ -------
Net (loss) income per
common share (5.20) 0.21 0.13 (0.27) (5.07)
====== ====== ====== ====== =======
</TABLE>
F-54
<PAGE>
Notes:
(i) In the first quarter of 1996 electronic security services operating
income was stated after a charge for the impairment of long-lived assets of
$731.7 million (note 6(i)). In the fourth quarter of 1996 electronic security
services operating income was stated after a charge of $232.5 million relating
to restructuring and other non-recurring items (note 5(i)).
(ii) In the first quarter of 1996 vehicle auction services operating income
was stated after a charge for the impairment of long-lived assets of $13.0
million (note 6(ii)).
(iii) In the second and third quarters of 1996 corporate expenses included
$0.4 million and $10.9 million, respectively, related to professional and
other transaction costs arising in connection with the merger of ADT and ASH
and the terminated merger with Republic (note 4(iii)). In the fourth quarter
of 1996 corporate expenses were stated after a charge of $4.8 million relating
to restructuring and other non-recurring items (note 5(ii)).
(iv) Other income less expenses principally comprised a net gain arising
from the disposal of the Company's entire investment in Limelight Group plc, a
net settlement gain with BDO, and gains and losses on currency transactions
(note 8).
(v) Extraordinary items principally were comprised of losses on repayment
and the write off of net unamortized deferred refinancing costs relating to
the early extinguishment of debt (note 11).
(vi) Primary (loss) earnings per common share equalled fully diluted (loss)
earnings per common share in all periods except for the second quarter of
1996. In the second quarter of 1996 fully diluted earnings per common share
from income before extraordinary items, extraordinary items and net income
were $0.21, $0.01 (loss) and $0.20, respectively.
F-55
<PAGE>
Note 35 - Quarterly financial data (unaudited) (continued)
<TABLE>
1995 1995 1995 1995 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
$m $m $m $m $m
<S> <C> <C> <C> <C> <C>
Net sales:
Electronic security services 321.1 337.7 337.5 354.6 1,350.9
Vehicle auction services 112.3 110.7 106.5 103.4 432.9
------ ------ ------ ------ --------
Net sales 433.4 448.4 444.0 458.0 1,783.8
====== ====== ====== ====== ========
Operating income:
Electronic security services (i) 42.6 46.4 50.0 33.4 172.4
Vehicle auction services 22.7 20.3 17.2 10.0 70.2
Corporate (ii) (7.5) (7.3) (6.7) (20.3) (41.8)
------ ------ ------ ------ --------
Operating income 57.8 59.4 60.5 23.1 200.8
Interest income 3.7 3.9 4.7 3.9 16.2
Interest expense (28.3) (30.5) (30.4) (27.1) (116.3)
Loss on disposal
of businesses (iii) - (4.9) (0.5) (31.2) (36.6)
Other income less expenses (iv) 1.1 (6.9) 0.9 (0.1) (5.0)
------ ------ ------ ------ --------
Income (loss) before
income taxes 34.3 21.0 35.2 (31.4) 59.1
Income taxes (9.7) (10.7) (9.2) 1.5 (28.1)
------ ------ ------ ------ --------
Income (loss) before
extraordinary items 24.6 10.3 26.0 (29.9) 31.0
Extraordinary items (v) - - (8.0) (1.8) (9.8)
------ ------ ------ ------ --------
Net income (loss) 24.6 10.3 18.0 (31.7) 21.2
Dividends on preference
shares (0.1) (0.1) (0.1) - (0.3)
------ ------ ------ ------ --------
Net income (loss) available
to common shareholders 24.5 10.2 17.9 (31.7) 20.9
====== ====== ====== ====== ========
Primary earnings (loss)
per common share (vi) $ $ $ $ $
Income (loss) before
extraordinary items 0.18 0.07 0.19 (0.22) 0.22
Extraordinary items - - (0.06) (0.01) (0.07)
------ ------ ------ ------ -------
Net income (loss) per
common share 0.18 0.07 0.13 (0.23) 0.15
====== ====== ====== ====== =======
</TABLE>
F-56
<PAGE>
Notes:
(i) In the fourth quarter of 1995 electronic security services operating
income was stated after a charge of $21.4 million relating to restructuring
and other non-recurring items (note 5(i)).
(ii) In the fourth quarter of 1995 corporate expenses were stated after a
charge of $12.8 million relating to restructuring and other non-recurring
items (note 5(ii)).
(iii) In the fourth quarter of 1995 loss on disposal of businesses
principally comprised a net loss of $65.8 million arising on the disposal by
the Company of an interest in European Auctions and a net gain of $31.4 million
arising on the disposal of its entire European electronic article surveillance
business (notes 7(i) and 7(ii)).
(iv) Other income less expenses principally comprised net losses arising
from the disposal of the Company's entire equity investments in CGPS and
Microtech which were held by the ASH group (note 8(i)).
(v) Extraordinary items principally were comprised of the write off of net
unamortized deferred refinancing costs relating to the early extinguishment of
debt (note 11).
(vi) Primary earnings (loss) per common share equalled fully diluted
earnings (loss) per common share in all periods except for the third quarter
of 1995. In the third quarter of 1995 fully diluted earnings per common share
from income before extraordinary items, extraordinary items and net income
were $0.18, $0.05 (loss) and $0.13, respectively.
F-57
<PAGE>
Note 36 - ADT Operations, Inc.
ADT Operations, Inc., a company incorporated in the State of Delaware, United
States, is an indirect wholly owned subsidiary of ADT. ADT Operations, Inc.
is a holding company that, through its subsidiaries, conducts a substantial
proportion of the Company's electronic security services businesses in the
United States and all of the Company's vehicle auction services businesses in
the United States. ADT Operations, Inc. has no independent business
operations or assets other than its investment in its subsidiaries,
intercompany balances and holdings of cash and cash equivalents.
The consolidated financial statements presented below incorporate the
financial statements of ADT Operations, Inc. and its subsidiaries ("ADT
Operations"). The basis upon which the consolidated financial statements of
ADT Operations has been prepared and the summary of significant accounting
policies applied are as described in notes 1 and 2. The consolidated
financial statements of ADT Operations have been prepared assuming that ADT
Operations will continue as a going concern. This assumption is based on the
subordinated and non-collateralized debt position of ADT Operations, its
financing structure within the ADT group of companies and ADT Operations'
financial plans and projections. In the consolidated financial statements of
ADT Operations, "affiliates" refers to certain direct and indirect wholly
owned subsidiaries of ADT which are not within the ADT Operations group of
companies.
Consolidated statements of income
Year ended December 31 1996 1995 1994
Notes $m $m $m
Net sales (i) 1,212.0 1,094.3 986.3
Cost of sales (605.2) (537.5) (491.0)
Selling, general and
administrative expenses (421.9) (369.3) (331.4)
Restructuring and other non-recurring
charges (ii) (132.1) (19.4) -
Charge for the impairment of
long-lived assets (iii) (316.4) - -
------ ------- ------
Operating (loss) income (i) (263.6) 168.1 163.9
Interest income - affiliates 1.3 - 29.7
Interest income - non-affiliates 2.4 3.1 2.6
Interest expense - affiliates (32.4) (22.5) (49.1)
Interest expense - non-affiliates (75.1) (79.9) (66.4)
Gain on disposal of businesses
to affiliates (iv) 2.0 - -
Loss on disposal of businesses to
non-affiliates (v) - - (0.4)
Other income less expenses (vi) 8.5 (6.7) (0.3)
------ ------- ------
(Loss) income before income taxes (356.9) 62.1 80.0
Income taxes (vii) 1.4 (19.0) (25.5)
------ ------- ------
(Loss) income before extraordinary items (355.5) 43.1 54.5
Extraordinary items (net of
income taxes) (viii) (1.3) (8.9) -
------ ------- ------
Net (loss) income (356.8) 34.2 54.5
====== ======= ======
F-58
<PAGE>
Consolidated balance sheets
At December 31 1996 1995
Notes $m $m
Assets
Current assets:
Cash and cash equivalents 82.9 54.0
Accounts receivable - net - affiliates 44.4 28.9
Accounts receivable - net - non-affiliates (ix) 149.4 132.8
Inventories (x) 21.6 17.2
Prepaid expenses and other current assets (xi) 22.9 6.9
-------- --------
Total current assets 321.2 239.8
Property, plant and equipment - net (xii) 1,131.3 1,049.1
Goodwill and other intangibles - net (xiii) 351.1 698.4
Long-term notes receivable - affiliates (xiv) 51.3 -
Other long-term assets (xv) 31.2 28.9
-------- --------
Total assets 1,886.1 2,016.2
======== ========
Liabilities and shareholder's equity
Current liabilities:
Short-term debt - non-affiliates (xvi) 129.8 36.3
Accounts payable - affiliates 14.5 9.6
Accounts payable - non-affiliates 91.8 75.2
Other current liabilities - non-affiliates(xvii) 143.5 127.5
-------- --------
Total current liabilities 379.6 248.6
Long-term debt - affiliates (xviii) 690.1 130.2
Long-term debt - non-affiliates (xix) 877.2 895.4
Deferred revenue (note 24) 72.4 67.3
Deferred income taxes (xx) 78.9 92.9
Other long-term liabilities - affiliates (xxi) 117.4 129.8
Other long-term liabilities
- non-affiliates (xxii) 119.4 96.3
Minority interests (note 27) - 15.6
-------- --------
Total liabilities 2,335.0 1,676.1
-------- --------
Commitments and contingencies (xxiv)
Shareholder's equity:
Common shares (xxiii) - -
Contributed surplus 858.5 858.5
Accumulated deficit (1,307.4) (518.4)
-------- --------
Total shareholder's equity (448.9) 340.1
-------- --------
Total liabilities and shareholder's equity 1,886.1 2,016.2
======== ========
F-59
<PAGE>
Consolidated statements of cash flows
Year ended December 31 1996 1995 1994
$m $m $m
Cash flows from operating activities
Net (loss) income (356.8) 34.2 54.5
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Charge for the impairment of long-lived assets 316.4 - -
Depreciation 144.0 120.2 104.6
Goodwill and other intangibles amortization 11.7 18.2 18.5
Restructuring and other non-recurring charges 122.0 18.4 -
Interest on long-term notes
receivable - affiliates (1.3) - -
Liquid Yield Option Notes discount amortization 20.3 9.4 -
Refinancing costs amortization 3.2 4.9 5.3
Deferred income taxes (4.3) 16.5 22.0
Extraordinary items 1.3 8.9 -
Gain on disposal of property,
plant and equipment (2.2) (1.2) (0.8)
Gain on disposal of businesses to affiliates (2.0) - -
Loss on disposal of businesses to non-affiliates - - 0.4
Gain on customer contract transactions
- affiliates (18.1) - -
Gain arising from the ownership of investments - - (3.2)
Other 3.2 2.3 -
Changes in assets and liabilities:
Accounts receivable - affiliates (7.5) (14.6) (0.4)
Accounts receivable - non-affiliates (10.5) (29.3) (3.9)
Inventories (3.5) 3.6 (4.3)
Other assets (11.0) (0.4) 1.1
Accounts payable - affiliates (7.5) (5.2) (7.4)
Accounts payable - non-affiliates 14.7 16.6 7.7
Deferred revenue 3.1 2.7 0.9
Other liabilities (5.6) (8.8) 3.5
----- ----- -----
Net cash provided by operating activities 209.6 196.4 198.5
----- ----- -----
Cash flows from investing activities
Purchase of property, plant and equipment (293.2) (221.4) (175.8)
Disposal of property, plant and equipment 6.9 3.9 5.4
Long-term notes receivable - affiliates (50.0) - 318.8
Acquisition of businesses from non-affiliates (25.5) (64.0) -
Purchase of customer contracts (4.1) - -
Disposal of businesses to non-affiliates - - 10.2
Disposal of assets to affiliates 73.2 - -
Disposal of other investments to non-affiliates - - 19.7
Disposal of trademarks to affiliates - - 150.0
Other (1.7) (1.6) (5.2)
----- ----- -----
Net cash (utilized) provided by
investing activities (294.4) (283.1) 323.1
----- ----- -----
F-60
<PAGE>
Cash flows from financing activities
Net receipt (repayments) of
short-term debt - affiliates - - (145.3)
Net repayments of short-term
debt - non-affiliates 11.4 (19.6) (25.9)
Repayments of long-term debt - affiliates - - (430.4)
Proceeds from long-term debt - affiliates 34.3 33.0 199.9
Repayments of long-term debt - non-affiliates (15.0) (209.6) (0.2)
Repayment of long-term acquisition debt - (39.6) -
Proceeds from long-term debt - non-affiliates 83.0 312.4 231.6
Debt refinancing costs - (12.0) (1.0)
Dividends paid - - (352.5)
Other - (2.2) (3.7)
----- ----- -----
Net cash provided (utilized) by
financing activities 113.7 62.4 (527.5)
----- ----- -----
Net increase (decrease) in cash and
cash equivalents 28.9 (24.3) (5.9)
Cash and cash equivalents at beginning of year 54.0 78.3 84.2
----- ----- -----
Cash and cash equivalents at end of year 82.9 54.0 78.3
===== ===== =====
Cash payments during the year for
Interest - affiliates 31.3 21.7 49.3
Interest - non-affiliates 52.0 66.5 57.7
Income taxes 2.6 2.3 4.0
In conjunction with the acquisition of businesses from
affiliates, net assets were assumed as follows
Goodwill and other intangibles 5.4 - -
Notes issued (70.0) - -
----- ----- -----
Net assets assumed (64.6) - -
===== ===== =====
In conjunction with the acquisition of businesses from
non-affiliates, net (assets) liabilities were assumed as follows
Goodwill and other intangibles 10.3 121.0 -
Cash paid (net of cash assumed) (25.5) (64.0) -
----- ----- -----
Net (assets) liabilities assumed (15.2) 57.0 -
===== ===== =====
F-61
<PAGE>
Year ended December 31 1996 1995 1994
$m $m $m
In conjunction with the disposal of businesses to
affiliates, net assets were disposed as follows
Short-term receivable 8.0 - -
Gain on disposal of businesses (including net
unamortized goodwill and other intangibles) (2.0) - -
----- ----- -----
Net assets disposed 6.0 - -
===== ===== =====
In conjunction with the disposal of businesses to
non-affiliates, net assets were disposed as follows
Cash received (net of cash disposed) - - 10.2
Loss on disposal of businesses (including net
unamortized goodwill and other intangibles) - - 0.4
----- ----- -----
Net assets disposed - - 10.6
===== ===== =====
Consolidated statements of changes in shareholder's equity
Common Contributed Accumulated
shares surplus deficit Total
$m $m $m $m
At January 1, 1994 - 858.5 (254.6) 603.9
Net income - - 54.5 54.5
Cash dividends - - (352.5) (352.5)
------ ------ ------- ------
At December 31, 1994 - 858.5 (552.6) 305.9
Net income - - 34.2 34.2
------ ------ ------- ------
At December 31, 1995 - 858.5 (518.4) 340.1
Net loss - - (356.8) (356.8)
Dividends (a) - - (432.2) (432.2)
------ ------ ------- ------
At December 31, 1996 - 858.5 (1,307.4) (448.9)
====== ====== ======= ======
(a) A dividend of $432.2 million was paid by ADT Operations, Inc. in
December 1996 and the consideration was the assignment to ADT Operations
Inc.'s immediate parent of a loan note owed to ADT Operations, Inc. by a
subsidiary (note (xviii)).
F-62
<PAGE>
Note (i) - Segment information
Year ended December 31 1996 1995 1994
$m $m $m
Net sales
Electronic security services (a) 914.2 824.5 733.0
Vehicle auction services 297.8 269.8 253.3
------- ------- -------
1,212.0 1,094.3 986.3
======= ======= =======
Operating (loss) income
Electronic security services (a) (289.9) 135.2 135.6
Vehicle auction services (b) 27.1 34.3 33.7
Corporate (c) (0.8) (1.4) (5.4)
------- ------- -------
(263.6) 168.1 163.9
======= ======= =======
(a) In 1996 electronic security services operating income was stated after
a charge of $131.6 million (1995 - $19.4 million) relating to restructuring
and other non-recurring items (note (ii)) and after a charge for the
impairment of long-lived assets of $303.4 million (note (iii)).
In December 1996 ADT Operations disposed of certain of its electronic security
services operations (Sonitrol franchises) to an affiliate. The net gain on
disposal of $2.0 million was included in the gain on disposal of businesses to
affiliates (note (iv)).
During 1994 ADT Operations disposed of certain of its electronic security
services operations (Puerto Rico and US Virgin Islands). The net loss on
disposal of $0.4 million was included in the loss on disposal of businesses to
non-affiliates (note (v)).
The following information represents the amounts included in the electronic
security services business segment information above which related to the
operations disposed of.
Year ended December 31 1996 1995 1994
$m $m $m
Net sales 6.1 6.1 12.7
Operating income 0.2 0.4 2.5
(b) In 1996 vehicle auction services operating income was stated after a
charge for the impairment of long-lived assets of $13.0 million (note (iii)).
(c) Corporate expenses comprise administrative, legal and general
corporate expenses net of other income. In 1996 corporate expenses were
stated after a charge of $0.5 million relating to restructuring and other
non-recurring items (note (ii)).
F-63
<PAGE>
(d) The costs incurred in producing and communicating advertising are
generally expensed when incurred. The total amount of advertising expense for
the year included in the consolidated statements of income amounted to $58.3
million (1995 - $49.7 million; 1994 - $38.1 million).
Year ended December 31 1996 1995 1994
$m $m $m
Depreciation and amortization
Electronic security services 140.5 123.6 108.8
Vehicle auction services 15.0 14.7 14.2
Corporate 0.2 0.1 0.1
------ ------ ------
155.7 138.4 123.1
====== ====== ======
Capital expenditures
Electronic security services 264.7 201.1 161.8
Vehicle auction services 25.7 18.9 14.0
Corporate 2.8 1.4 -
------ ------ ------
293.2 221.4 175.8
====== ====== ======
Identifiable assets
Electronic security services 1,289.0 1,513.4 1,284.6
Vehicle auction services 467.7 440.3 425.3
Corporate 129.4 62.5 90.3
------- ------- -------
1,886.1 2,016.2 1,800.2
======= ======= =======
Note (ii) - Restructuring and other non-recurring charges
Year ended December 31 1996 1995 1994
$m $m $m
Electronic security services (131.6) (19.4) -
Corporate (0.5) - -
------ ------ ------
(132.1) (19.4) -
====== ====== ======
As a consequence of the Re-Engineering Project, and incorporating the effects
of the acquisition of Alert, in each of the fourth quarters of 1996 and 1995
senior executive management approved a restructuring plan which resulted in a
charge for restructuring and other non-recurring items of $131.6 million and
$19.4 million, respectively (note 5(i)). The effects of the Re-Engineering
Project resulted in a charge for restructuring and other non-recurring items
at the corporate level in 1996 of $0.5 million (note 5(ii)).
F-64
<PAGE>
Note (iii) - Charge for the impairment of long-lived assets
Effective January 1, 1996, ADT Operations was required to adopt SFAS 121.
Following the adoption of SFAS 121, in the first quarter of 1996 ADT
Operations recorded an aggregate non-cash charge for the impairment of
long-lived assets of $316.4 million, as a separate line item in the
consolidated statements of income, with no consequential tax effect (note 6).
The $303.4 million impairment charge in the electronic security services
division comprised $302.4 million relating to goodwill and other intangibles
and $1.0 million relating to other assets. The $13.0 million impairment
charge in the vehicle auction services division related to goodwill and other
intangibles.
Note (iv) - Gain on disposal of businesses to affiliates
In December 1996 ADT Operations disposed of certain of its electronic security
services operations (Sonitrol franchises) to an affiliate. The aggregate
consideration on disposal amounted to $8.0 million, which was financed through
a short-term receivable from an affiliate, and the net gain on disposal of
$2.0 million included $1.8 million relating to the write off of net
unamortized goodwill and other intangibles (note (xiii)).
Note (v) - Loss on disposal of businesses to non-affiliate
During 1994 ADT Operations disposed of certain of its electronic security
services operations (Puerto Rico and US Virgin Islands). The aggregate cash
consideration on disposal amounted to $10.6 million and the net loss on
disposal of $0.4 million included $4.8 million relating to the write off of
net unamortized goodwill and other intangibles.
Note (vi) - Other income less expenses
Year ended December 31 1996 1995 1994
$m $m $m
Net gain arising on customer
contract transactions - affiliates 18.1 - -
Management fees - net - affiliates (9.6) (6.7) (3.5)
Gains and losses arising from the ownership of
long-term investments - - 3.2
---- ---- ----
8.5 (6.7) (0.3)
==== ==== ====
F-65
<PAGE>
Note (vii) - Income taxes
(a) The provision for income taxes in the consolidated statements of
income was as follows:
Year ended December 31 1996 1995 1994
$m $m $m
Current income taxes:
US (principally state income taxes) (2.9) (2.5) (3.5)
Deferred income taxes: (note (xx))
US (principally federal income taxes) 4.3 (16.5) (22.0)
---- ----- -----
1.4 (19.0) (25.5)
==== ===== =====
(b) The reconciliation between notional US federal income taxes at the
statutory rate on consolidated (loss) income before income taxes and ADT
Operations' income tax provision was as follows:
Year ended December 31 1996 1995 1994
$m $m $m
Notional US federal income taxes
at the statutory rate 124.9 (21.7) (28.0)
Adjustments to reconcile to ADT Operations'
income tax provision:
US state income tax provisions, net (2.9) (2.5) (3.2)
SFAS 121 impairment (110.7) - -
Utilization and/or recognition of tax loss
carryforwards and other items (9.9) 5.2 5.7
------ ------ ------
Income tax provision 1.4 (19.0) (25.5)
====== ====== ======
F-66
<PAGE>
Note (viii) - Extraordinary items
During 1996 and 1995 affiliates of ADT Operations reacquired in the market
certain of ADT Operations, Inc.'s senior subordinated notes (note (xix)(a)),
which was financed from cash on hand. Extraordinary items included the write
off of net unamortized deferred refinancing costs of $0.5 million (1995 - $0.8
million), and were stated net of applicable income taxes of $0.2 million (1995
- - $0.2 million).
In December 1996 ADT Operations, Inc. entered into a new bank credit
agreement, subject to completion of certain additional documentation which was
signed in January 1997, which replaced in full its previous bank credit
agreement and which was subsequently cancelled (note (xix)(c)). Extraordinary
items included the write off of net unamortized deferred refinancing costs of
$1.5 million relating to the early extinguishment of all amounts outstanding
under the revolving bank credit agreement, and were stated net of applicable
income taxes of $0.5 million.
In July 1995 ADT Operations, Inc. repaid in full all amounts owed under its
previous bank credit agreement, which was subsequently cancelled. ADT
Operations, Inc. funded the repayment from the net proceeds of the issue of its
Liquid Yield Option Notes (note (xix)(b)). Extraordinary items included the
write off of net unamortized deferred refinancing costs of $12.8 million
relating to the early extinguishment of all amounts outstanding under the
previous bank credit agreement, and were stated net of applicable income taxes
of $4.5 million.
Note (ix) - Accounts receivable - net - non-affiliates
At December 31 1996 1995
$m $m
Trade accounts receivable 160.2 144.7
Less: allowance for doubtful receivables (10.8) (11.9)
----- -----
149.4 132.8
===== =====
Note (x) - Inventories
At December 31 1996 1995
$m $m
Raw materials and consumables 6.0 6.5
Work in process 11.4 7.4
Finished goods 4.2 3.3
----- -----
21.6 17.2
===== =====
F-67
<PAGE>
Note (xi) - Prepaid expenses and other current assets
At December 31 1996 1995
$m $m
Prepaid expenses 4.5 4.1
Other current assets 18.4 2.8
----- -----
22.9 6.9
===== =====
Note (xii) - Property , plant and equipment - net
At December 31 1996 1995
$m $m
Cost:
Property and related improvements 278.5 254.0
Subscriber systems 1,336.9 1,098.1
Other plant and equipment 156.7 136.1
------- -------
Total cost 1,772.1 1,488.2
------- -------
Accumulated depreciation:
Property and related improvements 50.3 35.9
Subscriber systems 480.6 330.8
Other plant and equipment 109.9 72.4
------- -------
Total accumulated depreciation 640.8 439.1
------- -------
Net book values 1,131.3 1,049.1
======= =======
F-68
<PAGE>
Note (xiii) - Goodwill and other intangibles - net
1996 1995
$m $m
Cost:
At January 1 841.2 720.2
SFAS 121 impairment (note (iii)) (429.1) -
Acquisitions (a) 19.8 121.0
Disposals (b) (41.1) -
------- -------
At December 31 390.8 841.2
------- -------
Accumulated amortization:
At January 1 142.8 124.6
SFAS 121 impairment (note (iii)) (113.7) -
Charge for the year 11.7 18.2
Disposals (b) (1.1) -
------- -------
At December 31 39.7 142.8
------- -------
Net book values:
At December 31 351.1 698.4
======= =======
(a) In February 1996 ADT Operations acquired the remaining 24.0 per cent
of the outstanding voting share capital of Alert, an electronic security
services company, not already owned by ADT Operations, for an aggregate cash
consideration of $25.5 million, which was financed from cash on hand. The
amount of goodwill arising from this acquisition was $10.3 million. During
1996 ADT Operations purchased other intangibles, principally customer
contracts, for an aggregate cash consideration of $4.1 million which was
financed from cash on hand. In December 1996 ADT Operations acquired the
electronic security services business and net assets of an affiliate for an
aggregate consideration of $70.0 million which was financed through a
long-term loan from an affiliate. The amount of goodwill arising from this
acquisition was $5.4 million.
In December 1995 ADT Operations acquired 76.0 per cent of the outstanding
voting share capital of Alert, for an aggregate cash consideration of $69.0
million, which was financed from $54.0 million of cash on hand and through a
long-term loan from affiliates of $15.0 million. The amount of goodwill and
other intangibles arising from this acquisition was $80.1 million and $40.0
million, respectively. During 1995 ADT Operations also acquired several small
electronic security services businesses for an aggregate cash consideration of
$0.9 million.
These acquisitions have been accounted for using the purchase method.
Accordingly, the respective purchase prices have been allocated to assets
acquired and liabilities assumed based on their preliminary estimated fair
values. These allocations resulted in goodwill and other intangibles of $19.8
million arising during the year (1995 - $121.0 million).
F-69
<PAGE>
(b) During 1996, ADT Operations disposed of certain of its customer
contracts to an affiliate. The aggregate cash consideration on disposal
amounted to $74.5 million and the net gain on disposal of $36.3 million was
included in other income less expenses (note (vi)). In December 1996 ADT
Operations disposed of certain of its electronic security services operations
(Sonitrol franchises) to an affiliate. The net unamortized goodwill and other
intangibles on disposal of $1.8 million was included in the gain on disposal
of businesses to affiliates (note (iv)).
(c) The accumulated cost, accumulated amortization and net book values of
the goodwill balance included within goodwill and other intangibles at
December 31, 1996 amounted to $385.7 million, $39.1 million and $346.6
million, respectively (1995 - $801.2 million, $142.8 million and $658.4
million, respectively).
Note (xiv) - Long-term notes receivable - affiliates
In September 1996 ADT Operations subscribed for $73.8 million aggregate
principal amount at maturity of subordinated deep discount zero coupon loan
notes issued by an affiliate maturing in September 2001. There are no
periodic payments of interest. The notes were issued at a price of $50.0
million, reflecting a yield to maturity of 7.9 per cent per annum. ADT
Operations funded the subscription through loans drawn down under the revolving
bank credit agreement. The interest yield for 1996 amounted to $1.3 million.
Note (xv) - Other long-term assets
At December 31 1996 1995
$m $m
Deferred refinancing costs 19.5 24.7
Other long-term assets 11.7 4.2
---- ----
31.2 28.9
==== ====
In connection with the refinancing of certain long-term debt obligations of
ADT Operations certain fees and expenses were incurred. These refinancing
costs are being amortized as interest expense through the consolidated
statements of income on a straight line basis over the terms of the respective
lives of ADT Operations various long-term debt obligations. The refinancing
costs amortization for the year amounted to $3.2 million (1995 - $4.9 million;
1994 - $5.3 million). During the year $2.0 million (1995 - $13.6 million;
1994 - nil) of net unamortized deferred refinancing costs, relating to the
early extinguishment of certain amounts outstanding under ADT Operations
long-term debt obligations, were written off as extraordinary items in the
consolidated statements of income (note (viii)).
F-70
<PAGE>
Note (xvi) - Short-term debt - non-affiliates
At December 31 1996 1995
$m $m
Bank and acceptance facilities 46.8 36.1
Current portion of long-term debt (note (xix)) 83.0 0.2
----- ----
129.8 36.3
===== ====
The average rate of interest on short-term debt - non-affiliates outstanding
at December 31, 1996 was 6.8 per cent (1995 - 7.9 per cent). Short-term debt
- - non-affiliates is generally repayable on demand or at an interest payment
date, and is non-collateralized except for $0.2 million of the current portion
of long-term debt in 1995.
Note (xvii) - Other current liabilities - non-affiliates
At December 31 1996 1995
$m $m
Accruals 23.3 24.1
Payroll and employee benefits 40.9 41.7
Payments received on account 12.5 8.9
Income taxes 2.3 2.0
Interest payable 20.9 21.3
Short-term restructuring, disposition and other provisions 37.9 25.3
Other current liabilities 5.7 4.2
----- ----
143.5 127.5
===== =====
Note (xviii) - Long-term debt - affiliates
At December 31 1996 1995
$m $m
Interest bearing, non-collateralized,
subordinated loan notes 634.2 97.4
Senior subordinated notes held by
affiliates (note (xix)(a)) 55.9 32.8
----- -----
690.1 130.2
===== =====
The average rate of interest on the non-collateralized, subordinated notes at
December 31, 1996 was 10.8 per cent (1995 - 10.8 per cent). The average rate
of interest on the non-collateralized, subordinated loan notes during the year
was 10.6 per cent (1995 - 11.1 per cent; 1994 - 9.4 per cent). The loan notes
are repayable in December 1999 ($132.0 million), in December 2001 ($70.0
million) and in August 2003 ($432.2 million).
F-71
<PAGE>
Note (xix) - Long-term debt - non-affiliates
At December 31 1996 1995
$m $m
Senior notes (a) 250.0 250.0
Senior subordinated notes (a) 294.1 317.2
Liquid Yield Option Notes (b) 326.8 306.8
Revolving bank credit agreement (c) 83.0 15.0
Other 6.3 6.6
----- -----
960.2 895.6
Less: current portion (note (xvi)) (83.0) (0.2)
----- -----
877.2 895.4
===== =====
(a) In August 1993 ADT Operations, Inc. issued, through a public offering,
$250.0 million of its 8.25 per cent senior notes due August 2000 guaranteed on
a senior basis by ADT and certain subsidiaries of ADT Operations, Inc. (note
23(i)) and $350.0 million of its 9.25 per cent senior subordinated notes due
August 2003 guaranteed on a senior subordinated basis by ADT (note 23(ii)).
During 1996 affiliates of ADT Operations reacquired in the market $23.1
million (1995 - $32.8 million) face value of the senior subordinated notes and
these notes are all classified under long-term debt - affiliates (note
(xviii)).
(b) In July 1995 ADT Operations, Inc. issued $776,250,000 aggregate
principal amount at maturity of its zero coupon subordinated Liquid Yield
Option Notes maturing July 2010 (note 23(iii)). The net proceeds of the issue
amounted to $287.4 million which was used to repay in full all amounts
outstanding under ADT Operations, Inc.'s previous bank credit agreement, which
was subsequently cancelled. The Notes discount amortization for 1996 amounted
to $20.3 million (1995 - $9.4 million). During 1996 619 Notes with a carrying
value of $0.3 million were exchanged, at the option of the holders, for 17,472
ADT common shares (note 30).
(c) In August 1995 ADT Operations, Inc. entered into a new $300 million
revolving bank credit agreement which replaced in full its previous bank
credit agreement. The new agreement has a term of five years and is
guaranteed on a senior basis by ADT and certain subsidiaries of ADT
Operations, Inc. (note 23(iv)). At December 31, 1996 $83.0 million (1995 -
$15.0 million) was drawn down under the agreement, which has been classified in
the current portion of long-term debt, plus letters of credit amounting to
$81.1 million (1995 - $81.0 million) which have been issued and have terms of
less than one year. The average rate of interest at December 31, 1996 was 6.5
per cent (1995 - 7.6 per cent).
In December 1996 ADT Operations, Inc. entered into a new $200 million
revolving bank credit agreement, subject to completion of certain additional
documentation which was signed in January 1997, which replaced in full its
previous bank credit agreement (note 23(iv)).
The average rate of interest on all long-term debt - non-affiliates during the
year was 7.9 per cent (1995 - 8.2 per cent; 1994 - 8.7 per cent).
F-72
<PAGE>
Based on estimated interest rates currently available to ADT Operations for
long-term debt - non-affiliates with similar terms and average maturities, the
fair value of all long-term debt - non-affiliates at December 31, 1996
amounted to approximately $1,010 million (1995 - approximately $960 million).
The maturities and installments with respect to long-term debt -
non-affiliates outstanding at December 31, 1996 are as follows:
$m
Year ending December 31 1997 83.0
1998 0.9
1999 1.6
2000 251.7
2001 0.9
Thereafter 622.1
-----
960.2
=====
Under the terms of the indenture governing the senior subordinated notes a
payment blockage prevents ADT Operations, Inc. and its guarantor subsidiaries
and ADT from making any payment of principal, interest or premium on the
senior subordinated notes and from purchasing, redeeming or otherwise
acquiring any senior subordinated notes during the continuance of any payment
blockage period. No payment blockage is currently in effect.
At December 31, 1996, ADT Operations, Inc. had $414.1 million of Senior
Indebtedness comprised of $83.0 million of Senior Indebtedness related to
loans under the revolving bank credit agreement, $81.1 million of Senior
Indebtedness related to letters of credit issued under the terms of the
revolving bank credit agreement and $250.0 million of Senior Indebtedness
related to the Senior Notes, (in each case as defined in the Senior
Subordinated Note Indenture).
At December 31, 1996, ADT had no Guarantor Senior Indebtedness (as defined in
the Senior Note Indenture, but excluding Indebtedness in respect of guarantees
issued by ADT of debt of ADT Operations, Inc. or its subsidiaries). At
December 31, 1996, the subsidiary guarantors had $53.2 million of Guarantor
Senior Indebtedness (as defined in the Senior Note Indenture), in each case
ranking pari passu in right of payment with the Senior Note Guarantees.
All of the subsidiary guarantors under the senior notes and the revolving bank
credit agreement are direct or indirect, wholly owned subsidiaries of ADT
Operations, Inc. Separate financial statements and other disclosures for the
subsidiary guarantors are not included herein because the subsidiary
guarantors have guaranteed the senior notes on a joint and several basis, the
aggregate assets, liabilities, earnings and equity of the subsidiary guarantors
are substantially equivalent to the assets, liabilities, earnings and equity
of ADT Operations, Inc. on a consolidated basis and such separate financial
statements and other disclosures are not considered material to investors.
F-73
<PAGE>
Note (xx) - Deferred income taxes
The movement in deferred income taxes since January 1, 1994 has been as
follows:
1996 1995 1994
$m $m $m
At January 1 92.9 74.5 52.5
(Credit) charge for the year (note (vii)(a)) (4.3) 16.5 22.0
Extraordinary items (note (viii)) (0.7) (4.7) -
Assumed on acquisitions - affiliates (9.0) - -
Reclassifications - 6.6 -
---- ---- ----
At December 31 78.9 92.9 74.5
==== ==== ====
The significant temporary timing differences and tax loss carryforwards that
gave rise to the deferred income tax balance were as follows:
At December 31 1996 1995
$m $m
Liabilities:
Depreciation 861.0 733.9
Other 6.9 5.2
----- -----
867.9 739.1
----- -----
Assets:
Tax operating loss carryforwards 406.7 331.3
Provisions for estimated costs and expenses 121.0 59.4
Interest expense 147.9 99.6
Post-retirement benefit obligations 78.6 66.5
----- -----
754.2 556.8
Valuation allowance (111.8) (83.2)
----- -----
642.4 473.6
----- -----
Gross deferred income tax liability 225.5 265.5
----- -----
Deferred income tax liability at statutory tax rate 78.9 92.9
===== =====
F-74
<PAGE>
The tax operating loss carryforwards at December 31, 1996 expire as follows:
$m
Year ending December 31 1999 6.8
2000 4.1
2001 24.2
2002 18.3
2003 7.5
2004 80.2
2005 123.2
2006 107.2
2007 23.1
2008 12.1
-----
406.7
=====
Note (xxi) - Other long-term liabilities - affiliates
At December 31 1996 1995
$m $m
Deferred gain 117.4 129.8
===== =====
During 1994 ADT Operations assigned its interest in its trademarks, service
marks and associated goodwill to an affiliate for an aggregate consideration
of $150.0 million. In view of the fact that the assignment was to an
affiliate, and taking into account the terms of the transaction, the net gain
of $141.7 million arising on the assignment was deferred. During 1996 $12.4
million (1995 - $11.9 million) of this deferred gain was credited to the
consolidated statements of income to offset license fee payments made by ADT
Operations to the affiliate, calculated as a fixed percentage of net sales,
for use of the trademarks and service marks referred to above.
F-75
<PAGE>
Note (xxii) - Other long-term liabilities - non-affiliates
At December 31 1996 1995
$m $m
Pensions (note 33(i)) 28.4 20.6
Post-retirement benefits other than pensions (note 33(iv)) 48.2 47.8
Long-term restructuring, disposition and other provisions 27.8 15.0
Other long-term liabilities 15.0 12.9
----- ----
119.4 96.3
===== ====
Note (xxiii) - Common shares
At December 31 1996 1995 1994
Number Number Number
Authorized:
Common shares of $0.10 each 10,000 10,000 10,000
====== ====== ======
Issued and outstanding:
Common shares of $0.10 each 1,820 1,820 1,820
====== ====== ======
There has been no movement in authorized, issued and outstanding common shares
since January 1, 1994.
Note (xxiv) - Commitments and contingencies
(a) ADT Operations leases land, buildings, motor vehicles and other
equipment under various contracts. The future total minimum rental payments
required under operating leases that have remaining noncancelable lease terms
in excess of one year at December 31, 1996 are as follows:
$m
Year ending December 31 1997 37.5
1998 35.2
1999 28.3
2000 20.3
2001 12.7
Thereafter 12.2
-----
146.2
=====
The net operating lease rental charge for the year included in the
consolidated statements of income amounted to $43.4 million (1995 - $44.1
million; 1994 - $37.8 million).
F-76
<PAGE>
(b) Financial instruments which potentially subject ADT Operations to
concentrations of credit risk principally consist of cash and cash equivalents
and trade receivables. ADT Operations places its cash and cash equivalents
with high credit quality financial institutions and, by policy, limits the
amount of credit exposure to any one financial institution. ADT Operations'
trade receivables primarily result from its electronic security services and
vehicle auction services businesses and reflects a broad customer base.
Credit limits, ongoing credit evaluation and account monitoring procedures are
utilized to minimize the risk of loss. As a consequence, concentrations of
credit risk are limited.
(c) ADT Operations is a defendant in a number of pending legal proceedings
incidental to present and former operations, acquisitions and dispositions.
ADT Operations does not expect the outcome of these proceedings either
individually or in the aggregate to have a material adverse effect on the
consolidated results of operations and cash flows or the consolidated
financial position of ADT Operations.
Note (xxv) - Pension and other plans
(a) ADT Operations' United States electronic security services operation
has a non-contributory, funded, defined benefit pension plan covering
substantially all of its employees. Details of this pension plan are provided
in note 33(i).
(b) ADT Operations' United States electronic security services operation
sponsors an unfunded defined benefit post-retirement plan which covers both
salaried and non-salaried employees and which provides medical and other
benefits. Details of this post-retirement plan are provided in note 33(iv).
F-77
<PAGE>
ADT LIMITED
Consolidated Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
<CPATION>
<TABLE>
Balance at Subsidiaries Additions Deductions- Balance
beginning acquired charged to primarily at end
of period (disposed of) income write-offs of period
$m $m $m $m $m
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful receivables:
Year ended December 31, 1994 22.1 (0.6) 4.0 (8.6) 16.9
====== ====== ====== ====== ======
Year ended December 31, 1995 16.9 (1.1) 6.6 (5.4) 17.0
====== ====== ====== ====== ======
Year ended December 31, 1996 17.0 - 10.6 (9.1) 18.5
====== ====== ====== ====== ======
</TABLE>
F-78
<PAGE>
ADT OPERATIONS, INC.
Consolidated Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
[CAPTION]
<TABLE>
Balance at Subsidiaries Additions Deductions- Balance
beginning acquired charged to primarily at end
of period (disposed of) income write-offs of period
$m $m $m $m $m
<S> <C> <C> <C> <C> <C>
Allowance for doubtful receivables:
Year ended December 31, 1994 8.4 - 1.9 (2.3) 8.0
====== ====== ====== ====== =====
Year ended December 31, 1995 8.0 1.5 4.4 (2.0) 11.9
====== ====== ====== ====== =====
Year ended December 31, 1996 11.9 - 4.8 (5.9) 10.8
====== ====== ====== ====== =====
</TABLE>
F-79
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger by and among ADT Limited, Limited Apache,
Inc. and Tyco International Ltd. dated as of March 17, 1997.(6)
3.1 Memorandum of Association (as altered) and Bye-Laws of ADT Limited
(incorporating all amendments to May 26, 1992).(1)
3.2 Certified copy of a resolution approved at the Annual General Meeting of
common shareholders of ADT Limited held on October 12, 1993, approving
an increase in the authorized common share capital of ADT Limited from
$19.5 million to $22.0 million.(4)
4.1 Indenture relating to the senior notes dated August 4, 1993 among ADT
Operations, as issuer, and ADT Limited and certain subsidiaries of ADT
Operations, as guarantors, and The Chase Manhattan Bank (National
Association), as trustee, and the form of senior note included
therein.(2)
4.2 Indenture relating to the senior subordinated notes dated August 4, 1993
among ADT Operations, as issuer, and ADT Limited, as guarantor, and
NationsBank of Georgia, National Association, as trustee, and the form
of senior subordinated note included therein.(2)
4.3 Indenture dated as of July 1, 1995 among ADT Operations, Inc., ADT
Limited and Bank of Montreal Trust Company, as trustee and the form of
note included therein. (5)
4.4 Rights Agreement between ADT Limited and Citibank, N.A. dated as of
November 6, 1996.(9)
4.5 First Amendment between ADT Limited and Citibank, N.A. dated as of March
3, 1997 to Rights Agreement between ADT Limited and Citibank, N.A. dated
as of November 6, 1996.(9)
10.1 Rules of the ADT UK Executive Share Option Scheme (1984), amended to
reflect the reverse split of Common Shares effective June 17, 1991.(1)*
10.2 Rules of the ADT International Executive Share Option Plan, amended to
reflect the reverse split of Common Shares effective June 17, 1991.(1)*
10.3 Rules of the ADT UK and International Executive Share Option Schemes
(1984) New Section, amended to reflect the reverse split of Common
Shares effective June 17, 1991.(1)*
10.4 Rules of the ADT Senior Executive Share Option Plan, amended to reflect
the reverse split of Common Shares effective June 17, 1991.(1)*
10.5 US (1990) Stock Option Plan of ADT Limited, amended to reflect the
reverse split of Common Shares effective June 17, 1991.(1)*
10.6 Employment Agreement dated May 8, 1993 between ADT Limited and Michael
Anthony Ashcroft.(2)*
10.7 Amendment to Employment Agreement dated December 18, 1996 between ADT
Limited and Michael Anthony Ashcroft.(9)*
10.8 Employment agreement between ADT Limited and Stephen J. Ruzika dated as
of February 26, 1997.(9)*
10.9 Employment agreement between ADT, Inc. and Ron G. Lakey dated as of
January 16, 1997.(9)*
10.10 Agreement between ADT Automotive Holdings, Inc. and Michael J.
Richardson dated as of January 29, 1997.(9)*
10.11 Incentive Compensation Agreement between ADT, Inc. and Michael J.
Richardson dated as of February 10, 1997.(9)*
10.12 Severance Agreement between ADT Security Services, Inc. and Raymond
Gross dated as of February 26, 1997.(9)*
10.13 Consulting Agreement between ADT, Inc. and John E. Danneberg dated as of
August 28, 1996.(9)*
10.14 Form of Indemnification Agreement.(9)*
10.15 The ADT 1993 Long-Term Incentive Plan (as amended February 29,
1996).(3)*
10.16 Purchase Agreement dated June 29, 1995 among ADT Operations, Inc., ADT
Limited and Merrill Lynch & Co., Inc. and the related pricing agreement
(5)
10.17 US$200,000,000 Credit Agreement dated as of January 9, 1997, among ADT
Operations, Inc., as the Borrower, and Certain Commercial Lending
Institutions as the Lenders, and the Bank of Nova Scotia as the Agent
for the Lenders.
10.18 Guaranty, dated as of January 9, 1997, made by ADT Limited in favor of
each of the Lender Parties (as defined therein).
10.19 Subsidiary Guarantor Guaranty, dated as of January 9, 1997, made by each
Subsidiary Guarantor (as defined therein) in favor of each of the Lender
Parties (as defined therein).
10.20 Pound Sterling 90,000,000 Facility Agreement dated March 17, 1997, among
ADT Finance Plc, as the Borrower, ADT (UK) Holdings PLC and Others as
Guarantors, The Bank of Nova Scotia as Arranger and as Agent and Others.
10.21 ADT Limited Guarantee dated as of March 25, 1997, in respect of a
Pound Sterling 90,000,000 facility made available to ADT Finance Plc.
10.22 Pound Sterling 27,000,000 On Demand Facility Letter dated January 3,
1997, between ADT Finance Plc and The Bank of Nova Scotia.
10.23 ADT Limited Guarantee in respect of the obligations of ADT Finance Plc
under a Pound Sterling 27,000,000 Facility Letter dated January 3,
1997.
10.24 Agreement dated December 29, 1995 among ADT (UK) Limited, ADT Holdings
BV, Ruskin Limited, ADT Limited, Loanoption Limited and Integrated
Transport Systems Limited for the sale and purchase of European
Auctions.(7)
10.25 Agreement among ADT Limited, Thomas J. Gibson and Integrated Transport
Systems Limited dated December 29, 1995.(8)*
10.26 Agreement among ADT Limited, David B. Hammond and Integrated Transport
Systems Limited dated December 29, 1995.(8)*
10.27 Common Share Purchase Warrant issued by ADT Limited on July 1, 1996 to
Republic Industries, Inc.(10)
11.1 Statement regarding the computation of earnings per common share.
21.1 List of subsidiaries of ADT Limited
23.1 Consent of independent accountants to the incorporation by reference of
this Annual Report into Form S-3 and Forms S-8.
27 Financial Data Schedule (for SEC use only).
- --------------
(1) Previously filed as an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.
(2) Previously filed as an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.
(3) Previously filed as an Exhibit to the Registrant's Registration
Statement dated May 16, 1996, on Form S-8 filed May 17, 1996.
(4) Previously filed as an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.
(5) Previously filed as an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995.
(6) Previously filed as an Exhibit to the Registrant's Current Report
dated March 24, 1997 on Form 8-K filed March 25, 1997.
(7) Previously filed as an Exhibit to the Registrant's Current Report
dated December 29, 1995 on Form 8-K filed January 16, 1996.
(8) Previously filed as an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(9) Previously filed as an Exhibit to the Registrant's Schedule 14D-9
dated March 3, 1997.
(10) Previously filed as an Exhibit to the Registrant's Current Report
dated July 10, 1996 on Form 8-K filed July 11, 1996.
* Management contract or compensatory plan.
EXHIBIT 10.17
[CONFORMED COPY]
U.S. $200,000,000
CREDIT AGREEMENT,
dated as of January 9, 1997,
among
ADT OPERATIONS, INC.,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
and
THE BANK OF NOVA SCOTIA,
as the Agent for the Lenders
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms.................................................. 1
1.2. Use of Defined Terms........................................... 37
1.3. Cross-References............................................... 37
1.4. Accounting and Financial Determinations........................ 37
ARTICLE II
COMMITMENTS, COMPETITIVE BID LOANS,
BORROWING PROCEDURES AND NOTES
2.1. Commitments.................................................... 38
2.1.1. Revolving Loan Commitment...................................... 38
2.1.2. Commitment to Issue Letters of Credit.......................... 38
2.1.3. Lenders Not Permitted or Required To Make Loans Under Certain
Circumstances.................................................. 38
2.1.4. Reduction of the Revolving Loan Commitment
Amount......................................................... 39
2.1.4.1. Voluntary Reduction............................................ 39
2.1.4.2. Mandatory Reduction............................................ 39
2.2. Borrowing Procedure for Revolving Loans........................ 40
2.3. Competitive Bid Loans.......................................... 40
2.3.1. Competitive Bid Loan Borrowing Request......................... 40
2.3.2. Invitation for Bid Loan Offers................................. 41
2.3.3. Submission and Contents of Bid Loan Offers..................... 41
2.3.4. Notice to Borrower............................................. 43
2.3.5. Competitive Bid Loan Acceptance................................ 43
2.3.6. Funding of Competitive Bid Loans............................... 45
2.4. Continuation and Conversion Elections.......................... 45
2.5. Funding........................................................ 46
2.6. Notes.......................................................... 46
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments..................................... 47
3.1.1. Voluntary Prepayments.......................................... 47
3.1.1.1. Revolving Loans................................................ 47
3.1.1.2. Competitive Bid Loans.......................................... 48
3.1.2. Mandatory Prepayments.......................................... 48
3.1.2.1. Mandatory Prepayment Upon Commitment Reduction................. 48
3.1.2.2. Acceleration of Scheduled Maturity............................. 49
3.2. Interest Provisions............................................ 49
3.2.1. Rates.......................................................... 49
3.2.2. Post-Maturity Rates............................................ 50
3.2.3. Payment Dates.................................................. 51
3.2.4. Interest Rate Determination.................................... 52
3.3. Fees........................................................... 52
3.3.1. Facility Fee................................................... 52
3.3.2. Letter of Credit Face Amount Fee............................... 53
3.3.3. Letter of Credit Issuer Fronting Fee........................... 53
3.3.4. Letter of Credit Administrative Expenses....................... 53
3.3.5. Other Fees..................................................... 53
ARTICLE IV
LETTERS OF CREDIT
4.1. Issuances and Extensions....................................... 54
4.2. Issuance Requests.............................................. 54
4.3. Expenses....................................................... 55
4.4. Participation By Lenders....................................... 55
4.5. Disbursements.................................................. 57
4.6. Repayment/Reimbursement........................................ 58
4.7. Deemed Disbursements and Cash Collateralization of Letters of
Credit......................................................... 58
4.8. Nature of Repayment/Reimbursement Obligations.................. 59
4.9. Increased Costs; Indemnity..................................... 60
ARTICLE V
CERTAIN LIBO RATE AND OTHER PROVISIONS
5.1. LIBO Rate Lending Unlawful..................................... 61
5.2. Deposits Unavailable........................................... 62
5.3. Increased LIBO Rate Loan Costs, etc............................ 62
5.4. Funding Losses................................................. 63
5.5. Increased Capital Costs........................................ 64
5.6. Taxes.......................................................... 64
5.7. Payments, Computations, etc.................................... 66
5.8. Sharing of Payments............................................ 67
5.9. Setoff......................................................... 68
5.10. Use of Proceeds................................................ 68
5.11. Use of Letters of Credit....................................... 68
5.12. Substitution of LIBOR Office or Domestic Office in Certain
Circumstances.................................................. 68
5.13. Substitution of Bank; Election to Terminate.................... 69
ARTICLE VI
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
6.1. Closing Date................................................... 70
6.1.1. Resolutions, etc............................................... 70
6.1.2. Delivery of Notes.............................................. 70
6.1.3. Termination of Existing Credit Facility........................ 70
6.1.4. Guarantees..................................................... 70
6.1.5. Delivery of Certain Documents.................................. 71
6.1.6. Consents, etc.................................................. 71
6.1.7. Delivery of Closing Date Certificates.......................... 71
6.1.8. No Material Adverse Change..................................... 71
6.1.9. Opinions of Counsel............................................ 71
6.1.10. Notification of Trustees....................................... 72
6.1.11. Closing Fees, Expenses, etc.................................... 72
6.1.12. Satisfactory Legal Form........................................ 72
6.2. All Credit Extensions.......................................... 72
6.2.1. Compliance with Warranties, No Default, etc.................... 72
6.2.2. Credit Extension Request....................................... 74
6.2.3. Closing Date................................................... 74
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1. Organization, etc.............................................. 74
7.2. Due Authorization, Non-Contravention, etc...................... 75
7.3. Government Approval, Regulation, etc........................... 75
7.4. Validity, etc.................................................. 75
7.5. No Material Adverse Change..................................... 76
7.6. Litigation, Labor Controversies, etc........................... 76
7.7. Subsidiaries................................................... 76
7.8. Seniority of the Obligations................................... 76
7.9. Existing Letters of Credit..................................... 77
ARTICLE VIII
COVENANTS
8.1. Affirmative Covenants.......................................... 77
8.1.1. Financial Information, Reports, Notices, etc................... 77
8.1.2. Compliance with Laws, etc...................................... 79
8.1.3. Covenants Relating to Judgment Letters of Credit............... 80
8.1.4. Syndication.................................................... 82
8.2. Negative Covenants............................................. 82
8.2.1. Business Activities............................................ 82
8.2.2. Indebtedness................................................... 82
8.2.3. Financial Condition............................................ 85
8.2.4. Any Action..................................................... 86
ARTICLE IX
EVENTS OF DEFAULT
9.1. Listing of Events of Default................................... 86
9.1.1. Non-Payment of Obligations..................................... 86
9.1.2. Breach of Warranty............................................. 86
9.1.3. Non-Performance of Certain Covenants and Obligations........... 86
9.1.4. Non-Performance of Other Covenants and Obligations............. 87
9.1.5. Default on Other Indebtedness.................................. 87
9.1.6. Judgments...................................................... 87
9.1.7. Pension Plans.................................................. 88
9.1.8. Change in Control.............................................. 88
9.1.9. Bankruptcy, Insolvency, etc.................................... 88
9.1.10. Impairment of Loan Documents, etc.............................. 89
9.2. Action if Bankruptcy........................................... 90
9.3. Action if Other Event of Default............................... 90
ARTICLE X
THE AGENT
10.1. Actions........................................................ 90
10.2. Funding Reliance, etc.......................................... 91
10.3. Exculpation.................................................... 91
10.4. Successor...................................................... 92
10.5. Loans or Letters of Credit Issued by Scotiabank................ 93
10.6. Credit Decisions............................................... 93
10.7. Copies, etc.................................................... 93
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc....................................... 93
11.2. Notices........................................................ 94
11.3. Payment of Costs and Expenses.................................. 95
11.4. Indemnification................................................ 95
11.5. Survival....................................................... 97
11.6. Severability................................................... 97
11.7. Headings....................................................... 97
11.8. Execution in Counterparts, Effectiveness, etc.................. 97
11.9. Governing Law; Entire Agreement................................ 97
11.10. Successors and Assigns......................................... 97
11.11. Sale and Transfer of Loans and Notes; Participations in Loans
and Notes...................................................... 98
11.11.1. Assignments.................................................... 98
11.11.2. Participations.................................................100
11.12. Other Transactions.............................................101
11.13. Independence of Covenants......................................101
11.14. Forum Selection and Consent to Jurisdiction....................101
11.15. Waiver of Jury Trial...........................................102
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Intercompany Subordination Provisions
EXHIBIT A - Form of Revolving Loan Note
EXHIBIT B - Form of Competitive Bid Loan Note
EXHIBIT C-1 - Form of Revolving Loan Borrowing Request
EXHIBIT C-2 - Form of Competitive Bid Loan Borrowing Request
EXHIBIT D-1 - Form of Invitation for Bid Loan Offers
EXHIBIT D-2 - Form of Competitive Bid Loan Offer
EXHIBIT D-3 - Form of Competitive Bid Loan Acceptance
EXHIBIT E - Intentionally Omitted
EXHIBIT F - Form of Continuation/Conversion Notice
EXHIBIT G - Form of Lender Assignment Agreement
EXHIBIT H - Form of Compliance Certificate
EXHIBIT I - Form of ADT Limited Guaranty
EXHIBIT J - Form of Subsidiary Guarantor Guaranty
EXHIBIT K - Form of Opinion of Bermuda Counsel to ADT Limited
EXHIBIT L-1 - Form of Opinion of New York Counsel to ADT Limited, the
Borrower and the Other Obligors
EXHIBIT L-2 - Form Of Opinion of Corporate Counsel to the Borrower and
the Other Obligors
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of January 9, 1997, among ADT
OPERATIONS, INC., a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), and THE BANK OF NOVA SCOTIA ("Scotiabank"), individually and as
agent (the "Agent") for the Lenders,
W I T N E S S E T H:
WHEREAS, the Borrower and its affiliates are engaged principally in the
electronic security services business and the vehicle auction business;
WHEREAS, in connection with the extensions of credit contemplated
hereunder, the Borrower desires to replace that certain Existing Credit
Facility (as hereinafter defined);
WHEREAS, the Borrower has requested the Lenders and the Issuers (as
hereinafter defined) to extend commitments to replace the Existing Credit
Facility and to provide financing for general corporate purposes; and
WHEREAS, the Lenders and the Issuers are willing, on the terms and
subject to the conditions hereinafter set forth (including Article VI), to
extend such commitments and to make loans and issue and participate in letters
of credit pursuant thereto;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural
forms thereof):
"ADT Automotive" means ADT Automotive Holdings, Inc. (formerly known as
ADT Auctions, Inc.), a Delaware corporation and Wholly Owned Subsidiary of the
Borrower.
"ADT Finance Inc." means ADT Finance Inc., a Canadian corporation.
"ADT Limited" means ADT Limited, a company organized under the laws of
Bermuda.
"ADT Limited Guaranty" means the Guaranty executed and delivered by ADT
Limited pursuant to clause (a) of Section 6.1.4, substantially in the form of
Exhibit I hereto, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"ADT Security Services" means ADT Security Services, Inc. (formerly
known as ADT Security Systems, Inc.), a Delaware corporation.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to "control" another
Person if such Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such other Person whether by contract or otherwise.
"Agent" is defined in the preamble and includes each other Person as
shall have subsequently been appointed as a successor Agent pursuant to
Section 10.4.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the higher of
(a) the Prime Rate in effect for such day; and
(b) the Federal Funds Effective Rate in effect for such day
plus 1/2 of 1%.
For purposes hereof:
"Federal Funds Effective Rate" means, for any day, a fluctuating
rate of interest per annum equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by
the Agent from three Federal funds brokers of recognized standing
selected by it.
"Prime Rate" means the rate of interest per annum publicly
announced by the Agent from time to time as its prime rate in effect at
its principal office in New York City. The Prime Rate is not intended
to be the lowest rate of interest charged by the Agent in connection
with extensions of credit to debtors.
If for any reason the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable to ascertain the
Federal Funds Effective Rate for any reason, including the inability or
failure of the Agent to obtain sufficient quotations in accordance with the
terms hereof, the Alternate Base Rate shall be determined without regard to
clause (b) until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective as of the opening
of business on the date of such change.
"ASH" means Automated Security (Holdings) PLC.
"ASH Acquisition Date" means September 6, 1996.
"Asset Sale" is defined in Section 4.2.10 of the ADT Limited Guaranty.
"Assignee Lender" is defined in Section 11.11.1.
"Auction Business Intercompany Debt" means, with respect to any
Permitted Auction Business Sale, the net amount (if any) owed to the Borrower
or to any Subsidiary of the Borrower (other than such a Subsidiary the Capital
Stock of which, or all or substantially all of the assets of which, are sold
pursuant to such Permitted Auction Business Sale or any Subsidiary of any such
Subsidiary) by any Subsidiary of the Borrower the Capital Stock of which, or
all or substantially all of the assets of which, are sold pursuant to a
Permitted Auction Business Sale.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Agent and the Lenders pursuant to Section 6.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrowing" means, as the context may require, either a Competitive Bid
Loan Borrowing or a Revolving Loan Borrowing.
"Borrowing Request" means, as the context may require, either a
Revolving Loan Borrowing Request or a Competitive Bid Loan Borrowing Request.
"Business Day" means any day
(a) which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in New York City
and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, on which dealings in Dollars are carried on in
the London interbank market.
"Capital Expenditures" means, with respect to any Person for any
period, the sum (without duplication) of
(a) the excess of (i) the aggregate amount of all
expenditures of such Person and its Subsidiaries for fixed or capital
assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures over (ii) the aggregate amount of
net cash proceeds of Excluded Dispositions received by the Borrower,
ADT Limited or any other Subsidiary of ADT Limited during such period;
plus
(b) the aggregate amount of all Capitalized Lease Liabilities
of such Person incurred during such period;
provided, however, that the Capital Expenditures of any Person for any period
that would include a Pre-Acquisition Period will not include any Capital
Expenditures made by ASH or any of its Subsidiaries during such
Pre-Acquisition Period.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock or equity, whether now outstanding or issued after the
date hereof, including all common stock, preferred stock, partnership
interests and member interests.
"Capitalized Lease Liabilities" means, with respect to any Person, all
monetary obligations of such Person or any of its Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for purposes of this Agreement and each
other Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, with a maturity of 180 days
or less, issued or directly and fully guaranteed by the United States
Government;
(b) commercial paper, with a maturity of 180 days or less,
which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any state of the United States or of
the District of Columbia and rated A-1 or better by Standard &
Poor's or P-1 or better by Moody's, or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance, with a
maturity of 180 days or less, which is issued by either
(i) a commercial banking institution that is organized under
the laws of Canada, is a member of the Federal Reserve System or
is subject to regulation by the F.R.S. Board, and has a combined
capital and surplus and undivided profits of not less than
$500,000,000 (or the equivalent thereof in other currencies) and
(x) whose short term obligations are rated, at the time as of
which any such investment is made, A-1 or better by Standard &
Poor's or P-1 or better by Moody's or (y) whose debt is rated, at
the time as of which any investment therein is made, A or better
by Standard & Poor's or A or better by Moody's, or
(ii) any Lender; or
(d) any money market deposit accounts issued or offered by
any commercial banking institution of the stature referred to in clause
(c)(i).
"Cash Flow" means, with respect to any Person for any applicable
period, the excess of
(a) EBITDA of such Person and its Subsidiaries for such
period;
over
(b) the sum for such period of
(i) all taxes computed on the basis of income (whether local,
foreign or otherwise), to the extent paid in cash by such Person
and its Subsidiaries on a consolidated basis during such period;
plus
(ii) Capital Expenditures (other than Capital Expenditures
incurred in respect of any Business Acquisition permitted under
Section 4.2.5 or 4.2.9 of the ADT Limited Guaranty) of such
Person and its Subsidiaries paid by such Person and its
Subsidiaries during such period;
provided, however, that the Cash Flow of any Person for any period that would
include a Pre-Acquisition Period will not include any item that would be
included in the determination of the Cash Flow of ASH for such Pre-Acquisition
Period.
"Cash Flow Coverage Ratio" means, with respect to any Person at the end
of any Fiscal Quarter, the ratio computed for the period of four consecutive
Fiscal Quarters ending on the close of such Fiscal Quarter of
(a) Cash Flow of such Person and its Subsidiaries for such
period plus, to the extent deducted in determining such Cash Flow,
Capital Expenditures of such Person and its Subsidiaries paid by such
Person and its Subsidiaries during such period with Equity Proceeds, so
long as the Compliance Certificate (including any compliance
certificate delivered under the Existing Credit Facility) delivered in
connection with the Fiscal Quarter in which such Capital Expenditures
were paid indicated that such Capital Expenditures were paid with
Equity Proceeds and that the aggregate amount of such Capital
Expenditures did not exceed the Equity Proceeds Amount (as determined
immediately prior to the making of such Capital Expenditures);
to
(b) Interest Expense of such Person and its Subsidiaries for
such period;
provided, however, that the Cash Flow Coverage Ratio with respect to any
Person for any period that would include a Pre-Acquisition Period will not
include any item that would be included in the determination of the Cash Flow
Coverage Ratio with respect to ASH for such Pre-Acquisition Period.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means
(a) an event (including any event arising out of any
transaction or proposed transaction announced or contemplated on or
prior to the date hereof) as a result of which
(i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
direct or indirect "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of more than 35% of the Voting
Stock of ADT Limited; or
(ii) during any period of three consecutive years, beginning
on or after the Indenture Effective Date, individuals who either
(A) were members of the Board of Directors of ADT Limited at the
beginning of such period or (B) whose election by the Board of
Directors of ADT Limited or whose nomination for election by the
shareholders of ADT Limited was approved by a vote of 66 2/3% of
the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for
election was previously approved as provided for in this
subclause (ii)(B) cease for any reason (including as a result of
any proxy contest involving the solicitation of revocable proxies
under Section 14(a) of the Exchange Act) to constitute a majority
of such Board of Directors; or
(iii) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) possesses, directly
or indirectly, the legal right to direct the management and
policies of ADT Limited, whether through the ownership of
securities, by contract or otherwise (other than solely by virtue
of membership on the Board of Directors of ADT Limited or any
committee thereof); or
(b) the failure of ADT Limited to own, directly or
indirectly, free and clear of all Liens or other encumbrances (other
than Liens created pursuant to the Loan Documents), 100% of the
outstanding Voting Stock on a fully diluted basis of the Borrower.
"Closing Date" means the date upon which all of the conditions set
forth in Section 6.1 shall have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment Letter" means the letter dated December 31, 1996, from
Scotiabank to the Borrower, relating to this Agreement.
"Commitment Termination Event" means
(a) the occurrence with respect to the Borrower or ADT Limited
of any Event of Default described in clause (b) or (d) of Section
9.1.9; or
(b) the occurrence and continuance of any other Event of Default
and either
(i) the declaration of all outstanding Loans and other
Obligations to be due and payable pursuant to Section 9.3, or
(ii) in the absence of such declaration, the giving of notice
by the Agent, acting at the direction of the Required Lenders, to
the Borrower that the Revolving Loan Commitments have been
terminated.
"Common Shares" means the shares of common stock, par value $0.10 per
share, of ADT Limited.
"Competitive Bid Loan" means a Loan made by a Lender to the Borrower as
part of a Competitive Bid Loan Borrowing resulting from the procedures
described in Section 2.3.
"Competitive Bid Loan Acceptance" means an acceptance by the Borrower
of a Competitive Bid Loan Offer pursuant to Section 2.3.5, substantially in
the form of Exhibit D-3 attached hereto.
"Competitive Bid Loan Borrowing" means Competitive Bid Loans made by
each of the Lenders whose offer to make such Competitive Bid Loans as part of
such Borrowing has been accepted by the Borrower pursuant to Section 2.3.5.
"Competitive Bid Loan Borrowing Request" means a certificate requesting
Competitive Bid Loans, duly executed by an Authorized Officer, substantially
in the form of Exhibit C-2 attached hereto.
"Competitive Bid Loan Interest Payment Date" is defined in clause (f)
of Section 3.2.3.
"Competitive Bid Loan Maturity Date" is defined in Section 2.3.1.
"Competitive Bid Loan Note" means a promissory note of the Borrower
payable to any Lender, in the form of Exhibit B hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Lender resulting
from Loans outstanding from such Lender that were made as Competitive Bid
Loans, and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"Competitive Bid Loan Offer" means an offer by a Lender to make a
Competitive Bid Loan pursuant to Section 2.3.3, substantially in the form of
Exhibit D-2 attached hereto.
"Competitive Bid Outstanding Balance" means, at any time, the then
aggregate outstanding principal amount of all Competitive Bid Loans.
"Competitive Bid Rate" means the LIBO Rate (plus (or minus) the LIBO
Rate Bid Margin) offered by a Lender in a Competitive Bid Loan Offer in
respect of a Competitive Bid Rate Loan proposed pursuant to Section 2.3.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit H hereto.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit F hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA.
"Core Business" means any business directly related to
(a) until such time as ADT Limited and its Subsidiaries no
longer engage in any of the businesses described in this clause (a)
(whether pursuant to one or more Permitted Auction Business Sales or
otherwise), the auctioning or other distribution of
(i) vehicles held on a consignment or similar basis and
(ii) equipment which is similarly held on a consignment or
similar basis and which is related to the auctioning and
distribution of vehicles, including equipment related to the
repair and refurbishing of vehicles,
(x) exclusive, in the case of both preceding clauses (i) and (ii), of
the purchasing of items for resale (other than purchases incidental and
customary in the conduct of such business and which when added to
amounts expended in respect of all other items so purchased and still
owned (including pursuant to the conduct of any Related Business) would
not exceed $5,000,000), but (y) inclusive, in the case of the preceding
clause (i), of (1) any guaranteed residual equipment program pursuant
to which ADT Automotive or any of its Affiliates organized and
conducting its activities in the United States guarantees to a consignor
of a vehicle to be auctioned by ADT Automotive or any such Affiliate a
minimum return on such vehicle, provided that the maximum aggregate
amount of such guarantees at any one time outstanding does not exceed
$10,000,000 and (2) any short-term financing of dealer purchases of
vehicles auctioned by ADT Automotive or any of its Affiliates organized
and conducting its activities in the United States to the extent the
aggregate amount outstanding at any one time pursuant to such financing
does not exceed $40,000,000, certificates of title to such vehicles are
held by ADT Automotive or such Affiliates providing such financing and
such financing is otherwise consistent with terms given to similar
dealers by vehicle auctioneers in the ordinary course of their business,
(b) until such time as ADT Limited and its Subsidiaries no
longer engage in any of the businesses described in clause (a) above or
in any Related Business, any Related Business or
(c) services with respect to the transmission or monitoring
of information regarding the security or condition of property and any
additional information services provided through facilities used for
such transmission or monitoring.
"Covenant Termination Date" means the date on which each of the
following has occurred:
(a) all Revolving Loan Commitments have terminated,
(b) all principal of, and interest on, all Loans has been
paid in full,
(c) all fees under Section 3.3 have been paid in full,
(d) all Letters of Credit have expired or been terminated,
(e) all Reimbursement Obligations (including all interest
thereon) have been paid in full, and
(f) all other fees and expenses hereunder invoiced to the
Borrower and exceeding $3,000,000 in the aggregate have been paid in
full.
"Credit Extension" means and includes
(a) the advancing of any Loan by any Lender in connection
with a Borrowing, and
(b) the issuance, extension or renewal by any Issuer of any
Letter of Credit.
"Debt" means, with respect to any Person, the sum (without duplication)
of (i) the outstanding and stated principal amount (or, in the case of
Redeemable Capital Stock, the liquidation preference) of the Indebtedness of
such Person of the nature referred to in clauses (a), (b) (other than
obligations relative to letters of credit in support of trade obligations with
an aggregate face amount not exceeding $250,000 at any time outstanding), (c)
and (g) of the definition of "Indebtedness" and (ii) any Contingent
Liabilities of such Person in respect of any type of Indebtedness described in
the preceding clause (i); provided that the amount of any Debt that is issued
at a price that is less than the stated principal amount thereof shall be
equal to the amount of the liability in respect thereof determined in
accordance with GAAP.
"Debt to Total Capitalization Ratio" means, with respect to any Person,
the ratio of
(a) Debt of such Person and its Subsidiaries, determined on a
consolidated basis,
to
(b) Total Capitalization of such Person.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Disbursement Date" is defined in Section 4.5(a).
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Agent and the Required
Lenders.
"Dividended Note" means (i) the promissory note of ADT Security
Services, payable to the Borrower in the principal amount of $432,214,964.80,
which note was dividended by the Borrower to Holdings Inc. on December 31,
1996, in the form of an assignment thereof, together with (ii) the
Subordination Agreement dated as of January 9, 1997, among ADT Security
Services, ADT Group plc (an indirect assignee of the rights of Holdings Inc.
under the Dividended Note) and the Agent.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the
Lender Assignment Agreement or such other office of a Lender (or any successor
or assign of such Lender) within the United States as may be designated as
such from time to time by notice from such Lender to the Borrower and the
Agent.
"EBITDA" means, with respect to any Person for any applicable period,
Net Income for such Person and its Subsidiaries for such period (excluding
therefrom (x) the effect of any extraordinary or other non-recurring gain
outside the ordinary course of business and (y) any write-up in the value of
any asset) plus, to the extent deducted in determining such Net Income for
such period, the aggregate amount of (i) Interest Expense, (ii) taxes computed
on the basis of income (whether local, foreign or otherwise), (iii) the
aggregate amount of depletion, depreciation and amortization of tangible and
intangible assets, including amortization of debt issuance costs and other
financing expenses incurred (A) prior to the Effective Date or (B) in
connection with entering into this Agreement and the other Loan Documents and
(iv) without duplication, any write-off of the costs and expenses referred to
in the preceding clause (iii); provided, however, that the EBITDA of any
Person for any period that would include a Pre-Acquisition Period will not
include any item that would be included in the determination of the EBITDA of
ASH for such Pre-Acquisition Period.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 11.8.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public
health and safety and protection of the environment.
"Equity Proceeds" means the cash proceeds referred to in clause (a) of
the definition of "Equity Proceeds Amount" in the ADT Limited Guaranty.
"Equity Proceeds Amount" is defined in Section 1.1 of ADT Limited
Guaranty.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Preference Shares" means the Exchangeable Cumulative
Redeemable Preference Shares 2005, par value $1.00 per share, of ADT Limited.
"Excluded Disposition" means any Asset Sale (a) of (i) motor vehicles
purchased by the Borrower, ADT Limited or any other Subsidiary of ADT Limited
for use in the ordinary course of its business (and not for purposes of
resale) and (ii) real estate that was previously used in the operations of any
auto auction site, which operations have not produced any revenue in the 12
months prior to such transfer, or that was originally acquired in connection
with the development or proposed development of any auto auction site or real
estate consisting of any portion of any auto auction site that is not used in
connection with the operations of such auto auction site (in each case,
"Auction Real Estate") to the extent that, after giving effect to such
transfers, the aggregate Fair Market Value of all such Auction Real Estate
transferred in any Fiscal Year does not exceed $10,000,000 in the aggregate
and (b) the proceeds of which are within 12 months (or, in the case of Auction
Real Estate, 18 months) after such Asset Sale invested in assets and
properties to replace the assets and properties that were the subject of such
Asset Sale or in assets and properties that will be used in the Core
Businesses.
"Existing Credit Facility" means the Credit Agreement, dated as of
August 23, 1995 (as amended or otherwise modified), among the Borrower, the
various financial institutions party thereto, The Bank of Nova Scotia, as
Documentation Agent, and Chemical Bank, as Administrative Agent.
"Existing Letter of Credit" is defined in Section 4.1.
"Fair Market Value" means, with respect to any asset, the sale value
that would be obtained in an arm's-length transaction between an informed and
willing seller under no compulsion to sell and an informed and willing buyer.
"Federal Funds Effective Rate" is defined in the definition of the term
"Alternate Base Rate".
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (e.g. the "1996 Fiscal Year") refer to the Fiscal Year
ending on the December 31 occurring during such calendar year.
"5 3/4% Preference Shares" means the 5 3/4% Convertible Cumulative
Redeemable Preference Shares, par value $1.00 per share, of ADT Limited.
"Fronting Rate" means, with respect to any Issuer, the per annum rate
agreed to by the Borrower and such Issuer for use in determining such Issuer's
fronting fees in connection with Letters of Credit.
"Foreign Subsidiary" means a Subsidiary of ADT Limited that is
organized and existing under the laws of a jurisdiction other than the United
States (or any state thereof or the District of Columbia).
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Group N.V." means ADT Group N.V., a company organized under the laws
of the Netherlands Antilles.
"Guarantor" means each of ADT Limited and the Subsidiary Guarantors.
"Guarantees" means the ADT Limited Guaranty and the Subsidiary
Guarantor Guaranty.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Hedging Arrangements" means, interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements and currency exchange
agreements, and all other agreements or arrangements designed to protect
against fluctuations in interest rates or currency values.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"High Quality Investment" means, at any time:
(a) any certificate of deposit or bankers acceptance, with a
maturity of 180 days or less, which is issued by a commercial banking
institution that is organized under the laws of a country that is a
member of the Organization for Economic Cooperation and Development,
or any political subdivision thereof, and has a combined capital and
surplus and undivided profits of not less than $500,000,000 (or the
equivalent thereof in other currencies) and (i) whose short term
obligations have a rating, at the time any such Investment is made, of
P-1 or better by Moody's or A-1 or better by Standard & Poor's, (ii)
whose debt is rated, at the time any such Investment is made, A or
better by Moody's or A or better by Standard & Poor's or (iii) whose
short term obligations or debt is not so rated, so long as (A) such
commercial banking institution is (1) organized under the laws of a
jurisdiction other than the United Kingdom, the Channel Islands, Canada
or the United States (or any state thereof or the District of Columbia)
and (2) organized under the laws of the same jurisdiction as the
jurisdiction of incorporation of the Subsidiary of ADT Limited making
such Investment and (B) such Investment is made for ordinary course of
business cash management purposes of such Subsidiary;
(b) any deposit accounts issued or offered by any commercial
banking institution of the stature referred to in the preceding clause
(a);
(c) any floating rate note issued by a financial institution
or corporation (other than an Affiliate of the Borrower, ADT Limited or
any other Subsidiary of ADT Limited) organized and existing under the
laws of a country that is a member of the Organization for Economic
Cooperation and Development, or any political subdivision thereof,
whose debt is rated, at the time any such Investment is made, A or
better by Moody's or A or better by Standard & Poor's;
(d) any medium term note, maturing not more than one year
after the date of the acquisition thereof, issued by a corporation
(other than an Affiliate of the Borrower, ADT Limited or any other
Subsidiary of ADT Limited) organized and existing under the laws of a
country that is a member of the Organization for Economic Cooperation
and Development, or any political subdivision thereof, and with a
rating, as at the time such Investment is made, of A or better by
Moody's or A or better by Standard & Poor's;
(e) any debt instrument, maturing not more than one year
after the date of the acquisition thereof, issued by an entity (other
than an Affiliate of the Borrower, ADT Limited or any other Subsidiary
of ADT Limited) organized and existing under the laws of a country that
is a member of the Organization for Economic Cooperation and
Development, or any political subdivision thereof, which is secured by
or represents an interest in a pool of mortgage loans, credit card
receivables or motor vehicle loans and with a rating, as at the time
such Investment is made, of A or better by Moody's or A or better by
Standard & Poor's; or
(f) any bond, maturing not more than one year after the date
of the acquisition thereof, issued by a corporation (other than an
Affiliate of the Borrower, ADT Limited or any other Subsidiary of ADT
Limited) organized and existing under the laws of a country that is a
member of the Organization for Economic Cooperation and Development, or
any political subdivision thereof, and with a rating, as at the time
such Investment is made, of A or better by Moody's or A or better by
Standard & Poor's;
provided, however, that any such note, debt instrument or bond referred to in
the preceding clauses (c) through (f) is listed or admitted to trading on a
public exchange or reported on an over-the-counter market or quotations system
(whether within or outside the United States).
"Holdings B.V." means ADT Holdings B.V., a company organized under the
laws of the Netherlands.
"Holdings Inc." means ADT Holdings, Inc., a Delaware corporation.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its
obligations under Section 8.2.3 or Section 4.2.4 of the ADT Limited
Guaranty.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Arrangements;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse;
(g) all obligations of such Person relative to Redeemable
Capital Stock of such Person (including accrued and unpaid dividends);
and
(h) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Indenture Effective Date" means August 4, 1993.
"Interest Expense" means, with respect to any Person and its
Subsidiaries for any applicable period, the sum of
(a) the aggregate consolidated gross interest expense of such
Person and its Subsidiaries for such period, as determined in
accordance with GAAP, including (i) facility fees paid or owed
hereunder, (ii) all other fees paid or owed with respect to the
issuance or maintenance of Contingent Liabilities (including letters of
credit), which, in accordance with GAAP, would be included as interest
expense, (iii) net costs or benefits under Hedging Arrangements
relating to Debt and (iv) the portion of any payments made in respect
of Capitalized Lease Liabilities of such Person and its Subsidiaries
allocable to interest expense, but excluding the amortization or
write-off of debt issuance costs and other financing expenses incurred
prior to the Effective Date or in connection with the entering into of
this Agreement and the other Loan Documents;
plus
(b) with respect to ADT Limited, dividends on the Preference
Shares during such period;
provided, however, that the Interest Expense of any Person for any period that
would include a Pre-Acquisition Period will not include any item that would be
included in the determination of the Interest Expense of ASH for such
Pre-Acquisition Period.
"Interest Period" means, relative to any Loans which are LIBO Rate
Loans, (i) in the case of any Revolving Loan, the period beginning on the date
on which such LIBO Rate Loan is made or continued as, or converted into, a
LIBO Rate Loan pursuant to Section 2.2 or 2.4 and ending on the day which
numerically corresponds to such date one, two, three, six or (if available)
nine or twelve months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in each case as
the Borrower may select in its relevant notice pursuant to Section 2.2 or 2.4,
or, (ii) in the case of any Competitive Bid Loan, the period beginning on the
date on which such LIBO Rate Loan is made pursuant to Section 2.3 and ending
on the Competitive Bid Loan Maturity Date applicable thereto; provided,
however, that
(a) the Borrower shall not be permitted to select Interest
Periods with respect to Revolving Loans to be in effect at any one time
which have expiration dates occurring on more than 12 different dates;
(b) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the next preceding Business Day); and
(c) no Interest Period may end later than the Stated Maturity
Date.
"Intermediate Parent Companies" means, collectively, Holdings Inc.,
Holdings B.V., Group N.V. and each other direct or indirect parent of the
Borrower (other than ADT Limited).
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person;
(b) any Contingent Liability of such Person with respect to
any indebtedness, obligation or other liability of any other Person; and
(c) any ownership or similar interest held by such Person in
any other Person, including any Minority Interest.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other Person) and
shall, if made by the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal to
the Fair Market Value of such property.
"Invitation for Bid Loan Offers" means an invitation to the Lenders,
substantially in the form of Exhibit D-1 hereto, sent by the Agent on behalf
of the Borrower pursuant to Section 2.3.2, inviting the Lenders to submit
Competitive Bid Loan Offers in accordance with Section 2.3.3.
"Issuance Request" means a properly completed application for the
issuance of a Letter of Credit on the applicable Issuer's standard form,
executed by an Authorized Officer of the Borrower.
"Issuer" means Scotiabank (or another Lender (selected by Scotiabank)
that agrees to be an Issuer hereunder and that has a public long-term senior
unsecured debt rating of at least A- from Standard & Poor's and at least A3
from Moody's), and includes any Affiliate, unit or agency of Scotiabank (or
such other Lender) having a public long-term senior unsecured debt rating of at
least A- from Standard & Poor's and at least A3 from Moody's.
"Judgment Letter of Credit" means any Letter of Credit issued for the
benefit of any Person (each such Person, a "Judgment Payor") that makes a
payment in United States Dollars to or for the benefit of the Borrower, ADT
Limited or any of their respective Subsidiaries (each such payment, a "Judgment
Payment") in respect of the December 6, 1995 judgment of the High Court of
Justice in the Queen's Bench Division (Mr. Justice May presiding) against BDO
Binder Hamlyn (the "Judgment"), which Letter of Credit (i) shall have a Stated
Amount not exceeding the amount of such payment plus interest (whether or not
then accrued) at a rate not exceeding 10% per annum calculated from the date
such payment was made to the expiry date of such Letter of Credit and (ii)
would be capable of being drawn upon to the extent the Judgment is reversed in
whole or in part pursuant to a subsequent judgment and the applicable Judgment
Payor is entitled under such judgment to repayment of all or any portion of its
Judgment Payment. A Judgment Letter of Credit may be renewed or extended in
accordance with the provisions hereof.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit G hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 4.2.
"Letter of Credit Availability" means, at any time, the lesser of
(a) the excess of
(i) $100,000,000
over
(ii) the then Letter of Credit Outstandings (provided that
Letter of Credit Outstandings in respect of any Judgment Letter
of Credit shall not be included in such Letter of Credit
Outstandings for purposes of determining Letter of Credit
Availability at the time of any proposed issuance (subsequent to
the issuance of such Judgment Letter of Credit) of any other
Letter of Credit),
and
(b) the Revolving Loan Commitment Availability at such time;
provided, however, that, solely for the purpose of determining whether a
Judgment Letter of Credit may be issued or extended hereunder, Letter of
Credit Availability at any time shall mean the Revolving Loan Commitment
Availability at such time.
"Letter of Credit Outstandings" means, at any time, an amount equal to
the sum of
(a) the aggregate Stated Amount at such time of all Letters
of Credit then outstanding and undrawn (as such aggregate Stated Amount
shall be adjusted, from time to time, as a result of drawings, the
issuance of Letters of Credit or otherwise),
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO Rate" is defined in Section 3.2.1.
"LIBO Rate Bid Margin" means, in respect of a Competitive Bid Loan, the
margin above (or below) the applicable LIBO Rate offered for such Competitive
Bid Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%).
"LIBO Rate Margin" means, with respect to the unpaid principal amount
of each Revolving Loan maintained as a LIBO Rate Loan, subject to the proviso
to this definition, the percentage set forth opposite the "Level" below
containing the Senior Debt Rating of both Standard & Poor's and Moody's then
in effect:
Senior Debt Rating Senior Debt Rating LIBO Rate
Level (by Standard & Poor's) (by Moody's) Margin
- ----- ---------------------- ------------------ ---------
I BBB or better Baa2 or better 0.30%
II BBB- Baa3 0.30%
III BB+ Ba1 0.50%
IV BB Ba2 0.575%
V below BB below Ba2 0.625%;
provided, however, that in the event of (i) a split rating by Standard &
Poor's and Moody's which differs by one Level, the percentage corresponding to
the higher Level (i.e., the better Senior Debt Rating) shall be the LIBO Rate
Margin and (ii) a split rating by Standard & Poor's and Moody's which differs
by more than one Level, the percentage corresponding to the Level immediately
below the higher Level shall be the LIBO Rate Margin; provided further,
however, that, in the event that (i) only Standard & Poor's or only Moody's is
providing a Senior Debt Rating, the percentage set forth opposite the Level
containing the Senior Debt Rating which has been provided shall be the LIBO
Rate Margin or (ii) neither Standard & Poor's nor Moody's is providing a
Senior Debt Rating, the percentage set forth opposite Level V shall be the
LIBO Rate Margin.
"LIBO Rate Loan" means a Revolving Loan or a Competitive Bid Rate Loan,
as the case may be, bearing interest, at all times during an Interest Period
applicable to such Revolving Loan or Competitive Bid Rate Loan, at a fixed
rate of interest determined by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"LIBOR Office" means, with respect to any Lender, the office of such
Lender designated as such below its signature hereto or in the applicable
Lender Assignment Agreement, or such other office of a Lender (or any
successor or assign of such Lender) as may be designated as such from time to
time by notice from such Lender to the Borrower and the Agent.
"LIBOR Reserve Percentage" is defined in Section 3.2.1.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation of any kind or nature whatsoever.
"Loan Document" means this Agreement, the Notes, the Letters of Credit,
the ADT Limited Guaranty, the Subsidiary Guarantor Guaranty (including each
Subsidiary Guarantor Guaranty Supplement) and each other agreement, document
or instrument which is acknowledged by the Agent and any Obligor to be a Loan
Document.
"Loans" means, collectively, the Revolving Loans and the Competitive
Bid Loans.
"LYONs" means the Liquid Yield Option[Trademark] Notes due 2010 of the
Borrower, issued pursuant to the LYONs Indenture and subordinated by its terms
to the Obligations and the Indebtedness in respect of the Senior Notes and the
Senior Subordinated Notes, as the same may, subject to Section 4.2.11 of the
ADT Limited Guaranty, be amended, supplemented, amended and restated or
otherwise modified from time to time.
"LYONs Guarantee" means the subordinated guarantee of ADT Limited set
forth in the guarantee provisions of the LYONs Indenture.
"LYONs Indenture" means the Indenture dated as of July 1, 1995, among
the Borrower, ADT Limited and Bank of Montreal Trust Company, as trustee, as
the same may, subject to Section 4.2.11 of the ADT Limited Guaranty, be
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Material Related Party" means the Borrower, ADT Limited, each
Intermediate Parent Company and each Subsidiary of ADT Limited that would
satisfy the threshold set forth in clause (b) or (c) of the definition of
"Material Subsidiary" (whether or not organized and existing in the United
States (or any state thereof or the District of Columbia)).
"Material Subsidiary" means each Subsidiary of the Borrower, and each
other Subsidiary of ADT Limited organized and existing under the laws of the
United States (or any state thereof or the District of Columbia), that
(a) is designated with an asterisk in Item 2 ("Subsidiaries")
of the Disclosure Schedule;
(b) accounted for at least 5% of the consolidated gross
revenues of ADT Limited and its Subsidiaries for the most recently
completed Fiscal Quarter with respect to which, pursuant to Section
8.1.1(a) or 8.1.1(d), financial statements have been, or are required
to have been, delivered by the Borrower on or before the date as of
which any such determination is made, as reflected in such financial
statements; or
(c) has assets which represent at least 5% of the
consolidated gross assets of ADT Limited and its Subsidiaries as of the
last day of the most recently completed Fiscal Quarter with respect to
which, pursuant to Section 8.1.1(a) or 8.1.1(d), financial statements
have been, or are required to have been, delivered by the Borrower on
or before the date as of which any such determination is made, as
reflected in such financial statements.
"Minority Interest" means any equity or other beneficial ownership
interest, whether in the form of Capital Stock or otherwise, held directly or
indirectly by any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) in another Person and, as a result of
which, such person or group, as the case may be, does not "control" (as such
term is used in connection with clause (b) of the definition of "Affiliate")
such other Person.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person and its Subsidiaries for
any applicable period, the aggregate of all amounts which, in accordance with
GAAP, would be included as net income (or net loss) on a consolidated
statement of income of such Person and its Subsidiaries for such period;
provided, however, that the Net Income of any Person for any Pre-Acquisition
Period will not include any item that would be included in the determination
of the Net Income of ASH for such Pre-Acquisition Period.
"Net Sale Proceeds" means, with respect to any Recapture Asset
Disposition, the excess of
(a) the gross cash proceeds received by the Borrower, ADT
Limited or any of its other Subsidiaries as a result of such Recapture
Asset Disposition
over
(b) the sum (without duplication) of
(i) the Transaction Costs incurred in connection with such
Recapture Asset Disposition;
plus
(ii) payments made to retire Indebtedness that is secured by
the assets or properties that are the subject of such Recapture
Asset Disposition;
plus
(iii) payments to holders (other than the Borrower, ADT
Limited or any other Subsidiary of ADT Limited) of Capital Stock
in Subsidiaries of ADT Limited subject to such Recapture Asset
Disposition, so long as such payments are made on a pro rata
basis, consistent with the ownership of such Capital Stock, to
the holders of such Capital Stock;
plus
(iv) any reserve for adjustment in respect of the sale price
of receivables sold on a non-recourse basis pursuant to a
receivables financing agreement or other similar agreement;
plus
(v) appropriate amounts to be provided by the recipient of
such proceeds or any Subsidiary thereof, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities
associated with such Recapture Asset Disposition and retained by
the recipient of such proceeds or any Subsidiary thereof, as the
case may be, after such transaction, including pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Recapture Asset Disposition;
provided, however, that Net Sale Proceeds shall not include (i) any proceeds
(or portion thereof) that are received in any Fiscal Year to the extent such
proceeds (or portion thereof), together with all other such proceeds
theretofore received in such Fiscal Year, do not exceed $5,000,000 or (ii) any
proceeds of any Excluded Disposition.
"Non-Guarantors" means all Subsidiaries of ADT Limited other than the
Borrower and the Subsidiary Guarantors.
"Non-Obligors" means all Subsidiaries of the Borrower or ADT Limited
that are not Obligors.
"Non-Voting Exchangeable Shares" means the Non-Voting Exchangeable
Shares, Series A, of ADT Finance Inc., a Canadian corporation.
"Note" means, as the context may require, a Revolving Note and/or a
Competitive Bid Loan Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes, each other Loan Document and each Hedging Arrangement
with a Lender permitted under Section 8.2.3 or Section 4.2.2 of the ADT
Limited Guaranty.
"Obligors" means the Borrower, the Guarantors and each of their
respective successors, transferees and assigns.
"Organic Document" means, with respect to any Person, its certificate
of incorporation, memorandum of association, by-laws and/or other constitutive
documents, and all shareholder agreements, voting trusts and similar
arrangements to which such Person is a party that are applicable to any of its
Capital Stock.
"Participant" is defined in Section 11.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which
the Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning
of section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under section 4069 of
ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in the Lender Assignment Agreement,
as such percentage may be adjusted from time to time pursuant to Lender
Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to Section 11.11.
"Permitted Auction Business Sale" means an Asset Sale consisting of the
sale of the Capital Stock of any Subsidiary of the Borrower which is primarily
engaged, directly or through its direct or indirect Subsidiaries, in the
business of auctioning or otherwise distributing vehicles in the United States
held on a consignment or similar basis or the sale of assets (other than
Capital Stock) which are and have been used in such business, to the extent
(i) such Asset Sale is for not less than the Fair Market Value of the assets
(including Capital Stock) sold (as determined in good faith by the Board of
Directors of ADT Limited or a committee thereof, whose determination shall be
evidenced by certified written resolution of such Board or such committee) and
the consideration received by the Borrower or the relevant Subsidiary in
respect of such Asset Sale consists of at least 75% cash (including any cash
proceeds received from the sale of securities received in such Asset Sale,
provided that at the time of such Asset Sale, the Borrower or the relevant
Subsidiary has entered into a legally binding agreement for the sale of such
securities and such securities are sold within sixty days of such Asset Sale),
or Cash Equivalent Investments, and (ii) such Asset Sale does not include
assets primarily used in a Core Business other than the distributing of
vehicles in the United States held on a consignment or similar basis unless
the sale or other transfer of such assets in a separate transaction would be
permitted hereunder and under the ADT Limited Guaranty (it being acknowledged
by the parties hereto that if such transaction would not otherwise be
permitted unless within a "basket" amount, such as the amount set forth in
clause (c) of Section 4.2.10 of the ADT Limited Guaranty, the amount of such
transaction shall be applied against each such basket).
"Permitted Strategic Sale" is defined in Section 1.1 of the ADT Limited
Guaranty.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Preference Shares" means the 5 3/4% Preference Shares and the 6%
Preference Shares.
"Pre-Acquisition Period" means any period prior to the ASH Acquisition
Date.
"Quarterly Payment Date" means the last day of each March, June,
September and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"Recapture Asset Disposition" means each Permitted Strategic Sale of
Voting Stock of a Subsidiary Guarantor, each Permitted Auction Business Sale
and each Asset Sale permitted pursuant to clause (c)(ii) of Section 4.2.10 of
the ADT Limited Guaranty.
"Redeemable Capital Stock" means Capital Stock of the Borrower, ADT
Limited or any other Subsidiary of ADT Limited that, either by its terms, by
the terms of any security into which it is convertible or exchangeable or
otherwise, (i) is or upon the happening of an event or passage of time would be
required to be redeemed (for consideration other than shares of common stock
of ADT Limited) on or prior to January 7, 1999, (ii) is redeemable at the
option of the holder thereof (for consideration other than shares of common
stock of ADT Limited) at any time prior to such date or (iii) is convertible
into or exchangeable for debt securities of ADT Limited or any of its
Subsidiaries at any time prior to such anniversary.
"Reference Lenders" means Scotiabank and, in the event there are other
Lenders hereunder, such other Lenders as the Agent and the Borrower may from
time to time agree.
"Reimbursement Obligation" is defined in Section 4.6.
"Related Business" means any business directly related to the
auctioning or distribution of equipment or goods which (i) are held on a
consignment or similar basis and (ii) are being auctioned or distributed in
connection with the liquidation of businesses or lines of businesses,
exclusive of the purchasing of items for resale (other than purchases
incidental and customary in the conduct of such business and which when added
to the amounts expended in respect of all other items so purchased and still
owned (including pursuant to any business referred to in clause (a) of the
definition of Core Business) would not exceed $5,000,000).
"Release" means a "release", as such term is defined in CERCLA.
"Required Lenders" means, at any time,
(a) with respect to any provision of this Agreement other
than the declaration of the acceleration of the maturity of all or any
portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable pursuant to Section 9.3, Lenders
having Percentages aggregating at least 51%, or
(b) with respect to the declaration of the acceleration of
the maturity of all or any portion of the outstanding principal amount
of the Loans and other Obligations to be due and payable pursuant to
Section 9.3, Lenders holding at least 51% of the sum of (x) the
aggregate principal amount of outstanding Loans and (y) the Letter of
Credit Outstandings (based on the participating interests held therein).
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Revolving Loan" is defined in Section 2.1.1.
"Revolving Loan Borrowing" means Revolving Loans of the same type and,
in the case of LIBO Rate Loans, having the same Interest Period made by all
Lenders on the same Business Day in accordance with Section 2.1.
"Revolving Loan Borrowing Request" means a certificate requesting
Revolving Loans, duly executed by an Authorized Officer, substantially in the
form of Exhibit C-1 attached hereto.
"Revolving Loan Commitment" means, relative to any Lender, such
Lender's obligation to make Revolving Loans pursuant to Section 2.1.1 and to
issue (in the case of any Issuer) or participate in (in the case of all
Lenders) Letters of Credit pursuant to Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $200,000,000, as
such amount may be reduced from time to time pursuant to Section 2.1.4.
"Revolving Loan Commitment Availability" means, on any date, the excess
of
(a) the then Revolving Loan Commitment Amount,
over
(b) the sum of
(i) the outstanding principal amount of all Loans on such
date,
plus
(ii) the Letter of Credit Outstandings on such date
(including, notwithstanding any implication to the contrary, the
aggregate Letter of Credit Outstandings on such date in respect
of all Judgment Letters of Credit).
"Revolving Loan Commitment Termination Date" means the earliest of
(a) the Stated Maturity Date;
(b) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.1.4; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (b) or (c), the Revolving
Loan Commitments shall terminate automatically and without any further action.
"Revolving Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Revolving Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Scotiabank" is defined in the preamble.
"Senior Debt Rating" means the Borrower's senior, unsecured long-term
debt rating, as determined by Standard & Poor's or Moody's.
"Senior Note Guarantees" means the guarantees of ADT Limited and of
each of the Subsidiary Guarantors set forth in the guarantee provisions of the
Senior Note Indenture and any additional guarantee of the Senior Notes
executed pursuant to the "Limitation on Issuances of Guarantees of
Indebtedness and of Incurrence of Indebtedness of Certain Restricted
Subsidiaries" and the "Limitation on Liens" covenants of the Senior Note
Indenture.
"Senior Note Indenture" means the Indenture dated as of August 4, 1993,
among the Borrower, the guarantors named therein and The Chase Manhattan Bank
(National Association), as trustee, as the same may, subject to Section 4.2.11
of the ADT Limited Guaranty, be amended, supplemented, amended and restated or
otherwise modified from time to time.
"Senior Notes" means the 8 1/4% Senior Notes due 2000 of the Borrower,
issued pursuant to the Senior Note Indenture, as the same may, subject to
Section 4.2.11 of the ADT Limited Guaranty, be amended, supplemented, amended
and restated or otherwise modified from time to time.
"Senior Subordinated Note Guarantees" means the subordinated guarantee
of ADT Limited set forth in the guarantee provisions of the Senior
Subordinated Note Indenture and any additional guarantee of the Senior
Subordinated Notes executed pursuant to the "Limitation on Liens" and the
"Limitation on Issuances of Guarantees of Indebtedness" covenants of the Senior
Subordinated Note Indenture.
"Senior Subordinated Note Indenture" means the Indenture dated as of
August 4, 1993, among the Borrower, the guarantors named therein and
NationsBank of Georgia, National Association, as trustee, as the same may,
subject to Section 4.2.11 of the ADT Limited Guaranty, be amended,
supplemented, amended and restated or otherwise modified from time to time.
"Senior Subordinated Notes" means the 9 1/4% Senior Subordinated Notes
due 2003 of the Borrower, issued pursuant to the Senior Subordinated Note
Indenture, as the same may, subject to Section 4.2.11 of the ADT Limited
Guaranty, be amended, supplemented, amended and restated or otherwise modified
from time to time.
"6% Preference Shares" means the 6% Convertible Cumulative Redeemable
Preference Shares 2002, par value $1.00 per share, of ADT Limited.
"Standard & Poor's" means Standard & Poor's Ratings Group.
"Stated Amount" of each Letter of Credit means the maximum amount
available for drawing thereunder (whether or not any conditions to drawing can
then be met), taking into consideration the effect of any prior drawings made
thereunder.
"Stated Expiry Date" with respect to any Letter of Credit has the
meaning provided in Section 4.2.
"Stated Maturity Date" means January 7, 1998.
"Stockholders' Equity" means, with respect to any Person at any date,
on a consolidated basis for such Person and its Subsidiaries, the excess of
(a) (i) in the case of ADT Limited, the sum of common stock
taken at par value, share premium, contributed surplus, Non-voting
exchangeable shares and retained earnings (or accumulated deficit) of
ADT Limited at such date or (ii) in the case of any other Person, the
sum of common stock taken at par value, capital surplus and retained
earnings (or accumulated deficit) of such Person at such date;
over
(b) treasury stock of such Person and, to the extent included
in clause (a) above, minority interests in Subsidiaries of such Person
at such date[;
provided, however, that the Stockholders' Equity of any Person will not
include any item that would be included in the determination of the retained
earnings of ASH as of the ASH Acquisition Date.
"Subordinated Debt" means all Indebtedness in respect of the Senior
Subordinated Notes, the Senior Subordinated Note Guarantees, the LYONs, the
LYONs Guarantee and all other Indebtedness of the Borrower, ADT Limited or any
other Subsidiary of ADT Limited for money borrowed which is subordinated in
right of payment to the payment of the Obligations.
"Subordinated Intercompany Debt" means unsecured Indebtedness (a)
subordinated to the Obligations by provisions substantially in the form set
forth in Schedule II hereto and (b) the terms of which (including interest
rate) are not more burdensome to the obligor or obligors thereunder than those
terms generally available from independent third parties to obligors similarly
situated as such obligor or obligors.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which more than 50% of the outstanding Voting Stock is at the time directly or
indirectly owned by such Person or (ii) any partnership, joint venture or
other entity as to which such Person, directly or indirectly, owns more than a
50% ownership, equity or similar interest or has the power to direct or cause
the direction of management and policies, or the power to elect the managing
general partner (or the equivalent), of such partnership, joint venture or
other entity, as the case may be.
"Subsidiary Guarantors" means (i) the Subsidiaries of ADT Limited
organized under the laws of the United States (or any state thereof or the
District of Columbia) party from time to time to the Subsidiary Guarantor
Guaranty and (ii) each Subsidiary of ADT Limited that is required to execute
and deliver a Subsidiary Guarantor Guaranty Supplement pursuant to the terms
of Section 4.1.6 or 4.1.7 of the ADT Limited Guaranty.
"Subsidiary Guarantor Guaranty" means the Guaranty executed and
delivered by each Subsidiary Guarantor as of the Effective Date pursuant to
clause (b) of Section 6.1.4, substantially in the form of Exhibit J hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Subsidiary Guarantor Guaranty Supplement" means a supplement to the
Subsidiary Guarantor Guaranty, substantially in the form of Annex I thereto.
"Taxes" is defined in Section 5.6.
"10-K" means, with respect to any Person, its annual report on Form
10-K (or any successor form thereto) filed with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Exchange Act.
"10-Q" means, with respect to any Person, its quarterly report on Form
10-Q (or any successor form thereto) filed with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Exchange Act.
"Total Capitalization" means, with respect to any Person on any date,
the sum of
(a) Debt of such Person and its Subsidiaries at such date,
determined on a consolidated basis,
plus
(b) Stockholders' Equity of such Person at such date.
"Transaction Costs" means, with respect to any Recapture Asset
Disposition, the sum of
(a) all reasonable fees and expenses incurred in connection
with such Recapture Asset Disposition (including legal, investment
banking, brokerage and accounting and other professional fees) and all
sales commissions and disbursements incurred in connection with such
Recapture Asset Disposition which have not been paid to Affiliates of
the Borrower (unless, in the case of such Affiliates that are not
Subsidiaries of ADT Limited, such fees and expenses are incurred
pursuant to arrangements permitted under Section 4.2.12 of the ADT
Limited Guaranty);
plus
(b) all taxes actually paid or estimated (in good faith) to
be or become payable in connection with such Recapture Asset
Disposition.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Voting Stock" means, with respect to any Person, Capital Stock in
respect of the class or classes pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the board of directors, managers, trustees or other similar governing body
of such Person (irrespective of whether or not at the time the Capital Stock
of any other class or classes shall have or might have voting power by reason
of the occurrence of any contingency).
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
"Wholly Owned Subsidiary" means
(a) with respect to any Person, a Subsidiary all the Capital
Stock (other than directors' qualifying shares that are required under
applicable law) of which is owned by such Person or another Wholly
Owned Subsidiary of such Person, and
(b) with respect to ADT Limited or any other direct or
indirect parent of ADT Finance Inc.,
(i) ADT Finance Inc., if and only if and for so long as, the
Capital Stock of ADT Finance Inc. consists entirely of (A) Voting
Stock, 100% of which is owned directly or indirectly by ADT
Limited, and (B) its Non-Voting Exchangeable Shares, or
(ii) any successor corporation of ADT Finance Inc.
incorporated under the laws of Canada; provided that the Capital
Stock of such successor shall consist entirely of (A) Voting
Stock, 100% of which is owned directly or indirectly by ADT
Limited, and (B) publicly-held, non-voting preferred stock
(whether now outstanding or from time to time issued) (1) in
respect of which dividends are payable only when a dividend is
payable by ADT Limited in respect of its common stock, (2) that
is convertible, exchangeable or redeemable only for common stock
of ADT Limited, (3) that will entitle the holder thereof to
participate in any liquidation, dissolution or winding up of such
successor of ADT Finance Inc., whether voluntary or involuntary,
or any other distribution of assets of such successor of ADT
Finance Inc. among its stockholders for the purpose of winding up
its affairs, to no greater extent than the extent to which the
holders of the Non-Voting Exchangeable Shares would currently so
participate and (4) the other terms of which are not adverse to
the Lenders.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Continuation/Conversion Notice, Loan
Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section
are references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in
any Article, Section or definition to any clause are references to such clause
of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 4.2.4 of the ADT Limited
Guaranty) shall be made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with, generally
accepted accounting principles as in effect in the United States ("GAAP") on
December 31, 1994 on a basis consistent with the audited financial statements
of ADT Limited and the Borrower with respect to the Fiscal Year ending on such
date.
ARTICLE II
COMMITMENTS, COMPETITIVE BID LOANS,
BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Article V), each Lender and each Issuer, as the
case may be, severally agrees as follows:
SECTION 2.1.1. Revolving Loan Commitment. From time to time on any
Business Day occurring prior to the Revolving Loan Commitment Termination
Date, each Lender will make Loans (relative to such Lender, its "Revolving
Loans") to the Borrower equal to such Lender's Percentage of the aggregate
amount of the Revolving Loan Borrowing requested by the Borrower to be made on
such day. On the terms and subject to the conditions hereof, the Borrower may
from time to time borrow, prepay and reborrow Revolving Loans.
SECTION 2.1.2. Commitment to Issue Letters of Credit. From time to
time on any Business Day, each Issuer will issue, and each Lender will
participate in, the Letters of Credit, in accordance with Article IV.
SECTION 2.1.3. Lenders Not Permitted or Required To Make Loans Under
Certain Circumstances. No Lender shall be permitted or required to make any
Loan to the extent that, after giving effect thereto (and any concurrent
payment of Revolving Loans or Reimbursement Obligations with the proceeds
thereof),
(a) the aggregate outstanding principal amount of all Loans of
all Lenders, together with all Letter of Credit Outstandings, would
exceed the Revolving Loan Commitment Amount, or
(b) in the case of a Revolving Loan, the aggregate outstanding
principal amount of all Revolving Loans of such Lender would exceed
such Lender's Percentage of the amount equal to the Revolving Loan
Commitment Amount less the Letter of Credit Outstandings.
SECTION 2.1.4. Reduction of the Revolving Loan Commitment Amount. The
Revolving Loan Commitment Amount is subject to reduction from time to time
pursuant to this Section 2.1.4.
SECTION 2.1.4.1. Voluntary Reduction. The Borrower may, from time to
time on any Business Day, voluntarily reduce the amount of the Revolving Loan
Commitment Amount; provided, however, that all such reductions shall be made
pro rata among all the Lenders and shall require at least three Business Days'
prior notice to the Agent and be permanent, and any partial reduction of any
such Revolving Loan Commitment Amount shall be in a minimum amount of
$5,000,000 and in an integral multiple of $1,000,000.
SECTION 2.1.4.2. Mandatory Reduction. The Revolving Loan Commitment
Amount shall automatically and permanently be reduced on the date 18 months
after receipt by the Borrower, ADT Limited or any of its other Subsidiaries of
any Net Sale Proceeds with respect to any Recapture Asset Disposition by an
amount equal to (i) the amount of such Net Sale Proceeds less (ii) (A) in the
case such Recapture Asset Disposition is a Permitted Auction Business Sale,
the amount of such Net Sale Proceeds used during such 18 month period to make
payments in respect of the Dividended Note and/or for investments in
properties and assets owned by, and used in the electronic security businesses
conducted by, the Borrower and its Subsidiaries and (B) in the case of each
other Recapture Asset Disposition, the amount invested by the Borrower, ADT
Limited and any of its other Subsidiaries during such 18 month period in
properties and assets which replace the properties and assets that were the
subject of such Recapture Asset Disposition or in properties and assets used
in the Core Businesses; provided, however, that
(i) so long as no Event of Default has occurred and is
continuing, commitment reductions under this Section 2.1.4.2 shall not
be required until such Net Sale Proceeds aggregate $10,000,000 or more
(at which time the entire aggregate amount of such Net Sale Proceeds
shall be required as a mandatory commitment reduction hereunder); and
(ii) in the event that any such Net Sale Proceeds shall not
fully result in a commitment reduction under this Section 2.1.4.2
because such Net Sale Proceeds do not aggregate $10,000,000 or more,
the amount that did not result in a commitment reduction shall be
carried forward and added to Net Sale Proceeds subsequently received by
the Borrower, ADT Limited or any of its other Subsidiaries for the
purpose of determining any subsequent commitment reduction required
under this Section 2.1.4.2.
SECTION 2.2. Borrowing Procedure for Revolving Loans. By delivering a
Revolving Loan Borrowing Request to the Agent on or before 10:00 a.m., New
York City time, on a Business Day, the Borrower may from time to time
irrevocably request, on not less than three (in the case of any Revolving Loan
Borrowing of LIBO Rate Loans) nor more than five (in the case of any Revolving
Loan Borrowing) Business Days' notice, that a Borrowing be made (i) in a
minimum amount of $5,000,000 and an integral multiple of $1,000,000, (ii) in
the unused amount of the Revolving Loan Commitment Amount or (iii) in the case
of a Revolving Loan Borrowing of Base Rate Loans to fund any Reimbursement
Obligation pursuant to Section 4.5.2(e), in the amount of the Reimbursement
Obligation funded by such Revolving Loan Borrowing. On the terms and subject
to the conditions of this Agreement, each Revolving Loan Borrowing shall be
comprised of the type of Revolving Loans, and shall be made on the Business
Day, specified in such Revolving Loan Borrowing Request. On or before 11:00
a.m. (New York City time) on the Business Day so specified each Lender shall
deposit with the Agent same day funds in an amount equal to such Lender's
Percentage of the requested Revolving Loan Borrowing. Such deposit will be
made to an account which the Agent shall specify from time to time by notice
to the Lenders. To the extent funds are received from the Lenders, the Agent
shall make such funds available to the Borrower by wire transfer to the
accounts the Borrower shall have specified in its Revolving Loan Borrowing
Request. No Lender's obligation to make any Revolving Loan shall be affected
by any other Lender's failure to make any Loan.
SECTION 2.3. Competitive Bid Loans. Subject to the terms and
conditions of this Agreement (including Article VI), each Lender severally
agrees that the Borrower may request that Competitive Bid Loan Borrowings
under this Section 2.3 be made from time to time on any Business Day prior to
the date occurring one month prior to the Revolving Loan Commitment
Termination Date in the manner set forth below; provided, however, that
following the making of each Competitive Bid Loan Borrowing (and any
concurrent payment of Revolving Loans or Reimbursement Obligations with the
proceeds thereof), the aggregate amount of all Loans then outstanding shall
not exceed the amount equal to the Revolving Loan Commitment Amount less the
Letter of Credit Outstandings.
SECTION 2.3.1. Competitive Bid Loan Borrowing Request. The Borrower
may request Competitive Bid Loan Borrowings under this Section by delivering
to the Agent not later than 12:00 noon (New York City time) at least four
Business Days prior to the date of the proposed Competitive Bid Loan
Borrowing, a Competitive Bid Loan Borrowing Request (which may contain
requests for up to three different Competitive Bid Loans with three different
Competitive Bid Loan Maturity Dates, but having the same date of funding),
specifying
(a) the amount of each Competitive Bid Loan to be made as
part of such proposed Competitive Bid Loan Borrowing,
(b) the proposed date (which shall be a Business Day) and
aggregate principal amount or amounts of each Competitive Bid Loan to
be made as part of such proposed Competitive Bid Loan Borrowing (which
shall be in a minimum principal amount of $5,000,000 and in an integral
multiple of $1,000,000), and
(c) the proposed maturity date or dates (each a "Competitive
Bid Loan Maturity Date") for repayment of each Competitive Bid Loan to
be made as part of such Competitive Bid Loan Borrowing (which maturity
date or dates shall be (i) the date or dates occurring one, two, three
or six months after the date of such Competitive Bid Loan Borrowing and
(ii) not later than the Stated Maturity Date).
The Borrower shall not deliver to the Agent any Competitive Bid Loan Borrowing
Request within five Business Days after the delivery of any other Competitive
Bid Loan Request.
SECTION 2.3.2. Invitation for Bid Loan Offers. Promptly upon receipt
of a Competitive Bid Loan Borrowing Request but in no event later than 4:00
p.m. (New York City time) on the date of such receipt, the Agent shall send to
the Lenders by telecopy an Invitation for Bid Loan Offers substantially in the
form of Exhibit D-1 attached hereto, which shall constitute an invitation on
behalf of the Borrower to each Lender to submit Competitive Bid Loan Offers
offering to make the Competitive Bid Loans to which such Competitive Bid Loan
Borrowing Request relates in accordance with this Section 2.3.
SECTION 2.3.3. Submission and Contents of Bid Loan Offers.
(a) If any Lender, in its sole discretion, elects to offer to make a
Competitive Bid Loan to the Borrower as part of a proposed Competitive Bid
Loan Borrowing at a rate of interest specified by such Lender in its sole
discretion, it shall deliver to the Agent not later than 10:00 a.m. (New York
City time) on the third Business Day prior to the proposed date of Borrowing, a
Competitive Bid Loan Offer, which must comply with the requirements of this
clause, substantially in the form of Exhibit D-2 hereto; provided, however,
that Competitive Bid Loan Offers submitted by the Agent (or any affiliate of
the Agent) in the capacity of a Lender may be submitted, and may only be
submitted, if the Agent or such affiliate notifies the Borrower of the terms
of the offer or offers contained therein not later than 9:45 a.m. (New York
City time) on the third Business Day prior to the proposed date of borrowing.
Each Competitive Bid Loan Offer shall specify
(i) the proposed date of Borrowing, which shall be the same as
that set forth in the applicable Invitation for Bid Loan Offers,
(ii) the principal amount of the Competitive Bid Loan which the
Lender submitting such Competitive Bid Loan Offer would be willing to
make as part of such proposed Competitive Bid Loan Borrowing (which
amount shall be in a minimum principal amount of $5,000,000 and in an
integral multiple of $1,000,000 and which amount may exceed such
Lender's Percentage of the Revolving Loan Commitment Amount),
(iii) the LIBO Rate Bid Margin therefor, and
(iv) the identity of the quoting Lender;
provided, however, that any Competitive Bid Loan Offer submitted by a Lender
pursuant to this Section 2.3.3 shall be irrevocable, unless otherwise
consented to in writing by the Agent acting upon the instructions of the
Borrower.
(b) Any Competitive Bid Loan Offer that:
(i) is not substantially in the form of Exhibit D-2 hereto or
does not specify all of the information required in this Section 2.3.3;
(ii) contains qualifying, conditional or similar language;
(iii) contains proposed terms other than or in addition to those
set forth in the applicable Invitation for Bid Loan Offers; or
(iv) arrives after the time set forth in this Section 2.3.3
shall be disregarded by the Agent.
SECTION 2.3.4. Notice to Borrower. The Agent shall (by telephone,
promptly confirmed in writing) notify the Borrower of the terms of any
Competitive Bid Loan Offer submitted by a Lender that is in accordance with
Section 2.3.3 with all due haste after the receipt thereof. The Agent's
notice to the Borrower shall specify (a) the aggregate principal amount of
Competitive Bid Loans for which Competitive Bid Loan Offers have been received
in accordance with the terms specified in the related Competitive Bid Loan
Borrowing Request, (b) the respective principal amounts and LIBO Rate Bid
Margins so offered, and (c) the identity of such quoting Lenders.
SECTION 2.3.5. Competitive Bid Loan Acceptance. The Borrower shall,
before 11:00 a.m. (New York City time) on the third Business Day prior to the
proposed date of such proposed Competitive Bid Loan Borrowing, either
(a) irrevocably cancel the Competitive Bid Loan Borrowing
Request that requested such Competitive Bid Loan Borrowing by giving
the Agent telephonic notice, promptly confirmed in writing (and the
Agent shall promptly so notify each of the Lenders) to that effect
(and, for purposes of this Section, a failure on the part of the
Borrower to timely notify the Agent under the terms of this clause
shall be deemed to be non-acceptance of all Competitive Bid Loan Offers
so notified to the Borrower pursuant to Section 2.3.4), or
(b) (i) irrevocably accept, in whole or in part, one or more
of the Competitive Bid Loan Offers made by any Lender or Lenders
pursuant to Section 2.3.3, in its sole discretion, by giving the Agent
telephonic notice (promptly confirmed in writing by delivery to the
Agent of a Competitive Bid Loan Acceptance), and the Agent shall,
promptly upon receiving such telephonic notice from the Borrower,
notify each Lender whose Competitive Bid Loan Offer has been accepted,
in whole or in part, of (A) the amount of the Competitive Bid Loan
Borrowing to be made on such date, and (B) the amount of the
Competitive Bid Loan (which amount shall not be greater than the amount
offered by such Lender for such Competitive Bid Loan pursuant to
Section 2.3.3) to be made by such Lender as part of such Competitive
Bid Loan Borrowing, and (ii) irrevocably reject any remaining
Competitive Bid Loan Offers made by Lenders pursuant to Section 2.3.3
by giving the Agent telephonic notice, promptly confirmed in writing
(and the Agent shall promptly so notify the Lenders) to that effect;
provided, however, that
(A) the Borrower shall not accept an offer made at a
particular Competitive Bid Rate if the Borrower has decided to
reject an offer made in respect of the same Competitive Bid Loan
Borrowing with the same Competitive Bid Loan Maturity Date and a
lower Competitive Bid Rate,
(B) the aggregate principal amount of the Competitive Bid
Loan Offers accepted by the Borrower shall not exceed the
principal amount specified in the Competitive Bid Loan Borrowing
Request therefor,
(C) if the Borrower shall accept an offer or offers made at
a particular Competitive Bid Rate but the amount of such offer or
offers shall cause the total amount of offers to be accepted by
the Borrower to exceed the amount specified in the Competitive Bid
Loan Borrowing Request therefor, then the Borrower shall
(1) accept a portion of such offer or offers in an
aggregate amount equal to the amount specified in the
Competitive Bid Loan Borrowing Request less the amount of all
other offers accepted with respect to such Competitive Bid
Loan Borrowing Request, and
(2) allocate the Competitive Bid Loans in respect of
which such offers are accepted among the Lenders submitting
such offers as nearly as possible in proportion to the
aggregate amount of such offers made by each Lender
(provided, that if the available principal amount of
Competitive Bid Loans to be so allocated is not sufficient to
enable Competitive Bid Loans to be so allocated to each such
Lender in a minimum principal amount of $5,000,000, the
number of such Lenders shall be reduced by the Agent by lot
until the Competitive Bid Loans to be made by such remaining
Lenders would be in a principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof),
(D) no bid shall be accepted for a Competitive Bid Loan
unless such Competitive Bid Loan is in a minimum principal amount
of $5,000,000 and an integral multiple of $1,000,000 and is part
of a Competitive Bid Loan Borrowing in a minimum principal amount
of $5,000,000, and
(E) the Borrower may not accept any offer that is described
in clause (b) of Section 2.3.3 or that otherwise fails to comply
with the requirements of this Agreement.
A notice given by the Borrower pursuant to this clause (b) of this
Section 2.3.5 shall be irrevocable.
SECTION 2.3.6. Funding of Competitive Bid Loans. Not later than 12:00
noon (New York City time) on the date specified for each Competitive Bid Loan
Borrowing hereunder, each Lender participating therein shall deposit with the
Agent same day funds in the amount of the Competitive Bid Loan to be made by
it on such date. Such deposit will be made to an account which the Agent
shall specify from time to time by notice to the Lenders. The amount so
received by the Agent shall be made available to the Borrower by wire transfer
to the accounts the Borrower notified to the Agent in writing. As soon as
practicable after the Competitive Bid Loan Borrowing, the Agent shall notify
each Lender of the amount of the Competitive Bid Loan Borrowing, the
applicable Competitive Bid Rates accepted, the consequent Competitive Bid
Outstanding Balance, the date on which such Competitive Bid Loan Borrowing was
made and the corresponding Competitive Bid Loan Maturity Date applicable to
all Competitive Bid Loans that are part of such Competitive Bid Loan Borrowing.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Agent on or before 10:00 a.m., New
York City time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three nor more than five Business Days'
notice that all, or any portion in an aggregate minimum amount of
$5,000,000 and an integral multiple of $1,000,000, of any Revolving Loans
be, in the case of Revolving Loans which are Base Rate Loans, converted
into Revolving Loans which are LIBO Rate Loans or, in the case of Revolving
Loans which are LIBO Rate Loans, be converted into Revolving Loans which
are Base Rate Loans or continued as Revolving Loans which are LIBO Rate
Loans (in the absence of delivery of a Continuation/Conversion Notice with
respect to any Revolving Loan which is a LIBO Rate Loan at least three
Business Days before the last day of the then current Interest Period with
respect thereto, such Revolving Loan which is a LIBO Rate Loan shall, on
such last day, automatically convert to a Revolving Loan which is a Base
Rate Loan); provided, however, that (i) each such conversion or
continuation shall be pro rated among the applicable outstanding Revolving
Loans of all Lenders, and (ii) no portion of the outstanding principal
amount of any Revolving Loans may be continued as, or be converted into,
LIBO Rate Loans when any Event of Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or Affiliates or an international banking
facility created by such Lender to make or maintain such LIBO Rate Loan to the
extent such branch, Affiliate or banking facility has complied, if applicable,
with the provisions of the last paragraph of Section 5.6 as if such branch,
Affiliate or banking facility were a Lender hereunder; provided, however, that
such LIBO Rate Loan shall nonetheless be deemed to have been made and to be
held by such Lender, and the obligation of the Borrower to repay such LIBO
Rate Loan shall nevertheless be to such Lender for the account of such foreign
branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 5.1, 5.2, 5.3 or 5.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market; provided,
however, that nothing in this sentence shall affect the provisions in Article
V to the extent that such Article provides that amounts to be reimbursed by
the Borrower are to be determined on the basis of actual costs and actual
reductions incurred by one or more Lenders.
SECTION 2.6. Notes. (a) Each Lender's Revolving Loans shall be
evidenced by a Revolving Note payable to the order of such Lender in a maximum
principal amount equal to such Lender's Percentage of the original Revolving
Loan Commitment Amount.
(b) Each Lender's Competitive Bid Loans shall be evidenced by a
Competitive Bid Loan Note payable to the order of such Lender in a maximum
principal amount equal to the original Revolving Loan Commitment Amount.
(c) The Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made) appropriate notations on the grid attached to such Lender's
Notes (or on any continuation of such grid), which notations, if made, shall
evidence, inter alia, the date of, the outstanding principal amount of, and
the Interest Period (in the case of Revolving Loans), or the Competitive Bid
Loan Maturity Dates and the Competitive Bid Loan Interest Payment Dates (in
the case of Competitive Bid Loans) applicable to the Loans evidenced thereby.
Such notations shall, to the fullest extent permitted under applicable law, be
conclusive and binding on the Borrower absent manifest error; provided,
however, that the failure of any Lender to make any such notations shall not
limit or otherwise affect any Obligations of the Borrower or any other Obligor.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Revolving Loan on the Stated Maturity
Date and shall repay in full the unpaid principal amount of each Competitive
Bid Loan on the Competitive Bid Loan Maturity Date thereof. Prior to such
Stated Maturity Date or such Competitive Bid Loan Maturity Date, as the case
may be, repayments and prepayments of Loans shall be made as set forth in this
Section 3.1. Each prepayment of any Loans made pursuant to this Section shall
be without premium or penalty, except as may be required by Section 5.4.
SECTION 3.1.1. Voluntary Prepayments.
SECTION 3.1.1.1. Revolving Loans. From time to time on any Business
Day, the Borrower may make a voluntary prepayment, in whole or in part, of the
outstanding principal amount of any Revolving Loans, and may cash
collateralize, in whole or part, outstanding Letters of Credit; provided,
however, that
(a) any such prepayment shall be made pro rata among
Revolving Loans of the same type and, if applicable, having the same
Interest Period of all Lenders;
(b) all such voluntary prepayments shall require at least
three (in the case of Revolving Loans which are LIBO Rate Loans) or one
(in the case of Revolving Loans which are Base Rate Loans), but no more
than five (in the case of any Revolving Loans), Business Days' prior
written notice to the Agent;
(c) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $5,000,000 and an integral multiple of
$1,000,000 or in the aggregate principal amount of all Revolving Loans
of the same type and, in the case of Revolving Loans which are LIBO Rate
Loans, having the Interest Period of the Revolving Loans being prepaid;
and
(d) no voluntary prepayment of principal of any Revolving
Loan shall cause a reduction in the Revolving Loan Commitment Amount.
SECTION 3.1.1.2. Competitive Bid Loans. The Borrower shall have no
right to prepay, in whole or in part, the outstanding principal amount of any
Competitive Bid Loan, unless (i) the Lender that has made such Competitive Bid
Loan otherwise consents in writing or (ii) such Competitive Bid Loan is
accruing interest at such time at a rate determined on the basis of the
Alternate Base Rate pursuant to Section 5.1. Any Competitive Bid Loan may be
prepaid in whole or in part in amounts of at least $5,000,000 or any larger
integral multiple of $1,000,000 in excess thereof at any time at which such
Competitive Bid Loan shall bear interest at a rate determined on the basis of
the Alternate Base Rate pursuant to Section 5.1.
SECTION 3.1.2. Mandatory Prepayments. The Borrower shall make
mandatory prepayments as set forth in this Section 3.1.2. Each mandatory
prepayment under this Section 3.1.2 shall be applied in accordance with the
terms of this Section 3.1.2.
SECTION 3.1.2.1. Mandatory Prepayment Upon Commitment Reduction. The
Borrower shall, on each date when any reduction in the Revolving Loan
Commitment Amount shall become effective, including pursuant to Section 2.1.4,
make a mandatory prepayment (which shall be applied (or held for application,
as the case may be) by the Lenders first to the payment of the aggregate unpaid
principal amount of the Loans then outstanding, and then to the payment and/or
cash collateralization of the then outstanding Letter of Credit Outstandings)
equal to the excess, if any, of the aggregate, outstanding principal amount of
all Loans and Letter of Credit Outstandings over the Revolving Loan Commitment
Amount as so reduced; provided, however, that if (and to the extent) on the
date of any prepayment required under this Section 3.1.2.1 a LIBO Rate Loan
would otherwise be required to be prepaid on a day other than the last day of
the then current Interest Period (or, in the case of a Competitive Bid Loan,
the Competitive Bid Loan Maturity Date applicable thereto) with respect to
such Loan (after prepaying any Revolving Loans then outstanding that are Base
Rate Loans), the Borrower may (in the case of LIBO Rate Loans which are
Revolving Loans) or shall (in the case of Competitive Bid Loans) defer such
prepayment with respect to such LIBO Rate Loan until, in the case of a LIBO
Rate Loan which is a Revolving Loan, the last day of the then current Interest
Period with respect to such LIBO Rate Loan or, in the case of a Competitive
Bid Loan, the Competitive Bid Loan Maturity Date applicable thereto.
SECTION 3.1.2.2. Acceleration of Scheduled Maturity. The Borrower
shall, immediately upon any acceleration of the Stated Maturity Date or
Competitive Bid Loan Maturity Date of any Loans pursuant to Section 9.2 or
Section 9.3, repay all Loans, unless, pursuant to Section 9.3, only a portion
of all Loans is so accelerated, in which case the Borrower shall repay such
Loans so accelerated.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
SECTION 3.2.1. Rates. (a) Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may
elect that Revolving Loans comprising a Revolving Loan Borrowing accrue
interest at a rate per annum:
(i) on that portion maintained from time to time as a Base Rate
Loan, equal to the Alternate Base Rate from time to time in effect; and
(ii) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the applicable LIBO
Rate Margin.
The "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be
made, continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for any LIBO Rate
Loan will be determined by the Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Agent from the Reference Lender or Reference Lenders, as the case may be,
two Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 3.2.4.
"LIBO Rate" means, relative to any Interest Period for any LIBO Rate
Loan, the rate of interest equal to the average (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar
deposits in immediately available funds are offered to each Reference Lender's
LIBOR Office in the London interbank market as at or about 11:00 a.m. London
time two Business Days prior to the beginning of such Interest Period for
delivery on the first day of such Interest Period, and in an amount
approximately equal to the amount of each such Reference Lender's LIBO Rate
Loan (in the case of a LIBO Rate Loan which is a Revolving Loan) or the amount
of the Competitive Bid Loan Borrowing of which such LIBO Rate Loan is a part
(in the case of a LIBO Rate Loan which is a Competitive Bid Loan) and for a
period approximately equal to such Interest Period.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
any LIBO Rate Loan, the reserve percentage (expressed as a decimal) equal to
the maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to liabilities consisting of and including "Eurocurrency
Liabilities", as currently defined in Regulation D of the F.R.S. Board.
(b) Each Competitive Bid Loan shall accrue interest at a rate per
annum equal to the Competitive Bid Rate specified by the Lender making such
Competitive Bid Loan in its Competitive Bid Loan Offer with respect thereto
delivered pursuant to Section 2.3.3 above and accepted by the Borrower
pursuant to Section 2.3.5.
(c) All LIBO Rate Loans shall bear interest from and including the
first day of the applicable Interest Period to (but not including) the last
day of such Interest Period at the interest rate determined as applicable to
such LIBO Rate Loan for such Interest Period.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal
amount of any Loan is due and payable (whether on the Stated Maturity Date,
upon acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only
to the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the Alternate Base Rate plus a
margin of 2.0% (or, to the extent any such amounts constitute principal in
respect of any LIBO Rate Loan, at a rate per annum equal to the LIBO Rate
(Reserve Adjusted) with respect thereto plus a margin of 2.0% plus the LIBO
Rate Margin (or, in the case of Competitive Bid Loans, plus (or minus) the
applicable LIBO Rate Bid Margin) applicable to such amounts for the remaining
period of the applicable Interest Period then in effect).
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) in the case of any Revolving Loan, on the Stated Maturity
Date therefor;
(b) on any portion of the principal amount of any Loan that
is voluntarily or mandatorily paid or prepaid, on the date of such
voluntary or mandatory payment or prepayment;
(c) with respect to Revolving Loans which are Base Rate
Loans, on each Quarterly Payment Date occurring after the Effective
Date;
(d) with respect to Revolving Loans which are LIBO Rate
Loans, on the last Business Day of each applicable Interest Period
(and, if such Interest Period shall exceed three months, on each three
(and integral of three) month anniversary of the making of such LIBO
Rate Loan);
(e) with respect to any Revolving Loans which are Base Rate
Loans converted into Revolving Loans which are LIBO Rate Loans on a day
when interest would not otherwise have been payable pursuant to clause
(c), on the date of such conversion;
(f) with respect to Competitive Bid Loans, on each
Competitive Bid Loan Maturity Date and, with respect to Competitive Bid
Loans with a Competitive Bid Loan Maturity Date in excess of three
months after the date such Competitive Bid Loan is made, on each three
(and integral of three) month anniversary of the making of such
Competitive Bid Loan (each such date (including each Competitive Bid
Loan Maturity Date), a "Competitive Bid Loan Interest Payment Date");
and
(g) on that portion of any Loans the Stated Maturity Date of
which (or, in the case of any Competitive Bid Loans, the Competitive
Bid Loan Maturity Date of which) is accelerated pursuant to Section 9.2
or Section 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.2.4. Interest Rate Determination. Each Reference Lender
agrees to furnish to the Agent timely information for the purpose of
determining each LIBO Rate. If any one or more of the Reference Lenders shall
fail timely to furnish such information to the Agent for any such interest
rate, the Agent shall determine such interest rate on the basis of the
information furnished by the remaining Reference Lenders.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Facility Fee. The Borrower agrees to pay to the Agent
for the account of each Lender for each day during the period (including any
portion thereof when any of the Revolving Loan Commitments are suspended by
reason of the Borrower's inability to satisfy any condition of Article VI)
commencing on January 14, 1996 and continuing through the Revolving Loan
Commitment Termination Date, a facility fee on the Revolving Loan Commitment
Amount for such day, calculated on the basis of the percentage per annum set
forth opposite the "Level" below containing the Senior Debt Rating of both
Standard & Poor's and Moody's in effect for such day; provided, however, that
in the event of (i) a split rating by Standard & Poor's and Moody's which
differs by one Level, the percentage corresponding to the higher Level (i.e.,
the better Senior Debt Rating) shall be the percentage and (ii) a split rating
by Standard & Poor's and Moody's which differs by more than one Level, the
percentage corresponding to the Level immediately below the higher Level shall
be the percentage; provided further, however, that in the event that (i) only
Standard & Poor's or only Moody's is providing a Senior Debt Rating, the
percentage set forth opposite the Level containing the Senior Debt Rating
which has been provided shall be the percentage or (ii) neither Standard &
Poor's nor Moody's is providing a Senior Debt Rating, the percentage set forth
opposite Level V shall be the percentage.
Senior Debt Rating Senior Debt Rating
Level (by Standard & Poor's) (by Moody's) Percentage
- ----- ---------------------- ------------------ ----------
I BBB or better Baa2 or better 0.15%
II BBB- Baa3 0.20%
III BB+ Ba1 0.25%
IV BB Ba2 0.30%
below BB or below Ba2 or
V non-rated non-rated 0.375%
Such fee shall be payable by the Borrower in arrears on each Quarterly Payment
Date, commencing with the first such Quarterly Payment Date following the
Effective Date and on the Revolving Loan Commitment Termination Date.
SECTION 3.3.2. Letter of Credit Face Amount Fee. The Borrower agrees
to pay to the Agent, for the account of the Lenders, a fee for each Letter of
Credit for the period from and including the date of the issuance of such
Letter of Credit (which date, in the case of an Existing Letter of Credit,
shall be the Closing Date) to (but excluding) the date upon which such Letter
of Credit expires equal to the LIBO Rate Margin then in effect per annum of
the Stated Amount of such Letter of Credit. Such fee shall be calculated on a
daily basis and shall be payable by the Borrower in arrears on each Quarterly
Payment Date to occur after issuance of such Letter of Credit and on the
Revolving Loan Commitment Termination Date.
SECTION 3.3.3. Letter of Credit Issuer Fronting Fee. The Borrower
agrees to pay to the Agent, for the account of the applicable Issuer, an
issuing fee for each Letter of Credit for the period from and including the
date of issuance of such Letter of Credit (which date, in the case of an
Existing Letter of Credit, shall be the Closing Date) to (but excluding) the
date upon which such Letter of Credit expires equal to the product of the
applicable Fronting Rate multiplied by the Stated Amount of such Letter of
Credit. Such fee shall be payable by the Borrower in arrears on each
Quarterly Payment Date to occur after issuance of such Letter of Credit and on
the Revolving Loan Commitment Termination Date.
SECTION 3.3.4. Letter of Credit Administrative Expenses. The Borrower
agrees to pay to the Agent, for the account of the applicable Issuer(s), the
amounts referred to in Section 4.3.
SECTION 3.3.5. Other Fees. The Borrower agrees to pay to the Agent
for its account, or to the Agent for the account of the Lenders and/or the
Issuer(s), as the case may be, such fees as previously agreed to in writing by
the applicable parties and not otherwise set forth in this Section 3.3.
ARTICLE IV
LETTERS OF CREDIT
SECTION 4.1. Issuances and Extensions. On the terms and subject to
the conditions of this Agreement (including Article VI), the applicable Issuer
or Issuers shall issue Letters of Credit (and extend the Stated Expiry Dates
of outstanding Letters of Credit) in accordance with the Issuance Requests made
therefor pursuant to Section 4.2. Each Issuer will make available the
original of each Letter of Credit which it issues in accordance with the
Issuance Request therefor to the beneficiary thereof, and will promptly
provide each of the Lenders with a copy of such Letter of Credit (and will
notify the beneficiary under any such Letter of Credit of any extension of the
Stated Expiry Date thereof). Each Letter of Credit (as defined in the
Existing Credit Facility) outstanding under the Existing Credit Facility on
the Closing Date (each, an "Existing Letter of Credit") shall be deemed to
have been issued hereunder on the Closing Date and, on and as of the Closing
Date, each Issuer of each Existing Letter of Credit hereby releases each
Lender (as defined in the Existing Credit Facility) from all obligations under
the Existing Credit Facility in respect of any Existing Letter of Credit.
SECTION 4.2. Issuance Requests. By delivering to the Agent and the
applicable Issuer an Issuance Request on or before 12:00 noon, New York City
time, the Borrower may request, from time to time prior to the Revolving Loan
Commitment Termination Date and on not less than three nor more than ten
Business Days' notice, that such Issuer issue an irrevocable commercial or
standby letter of credit in such form as may be requested by the Borrower
(each such request to include (i) the forms of instruments to be used to make
draws thereunder and to extend or renew the term thereof and (ii) the written
confirmation of the beneficiary thereunder as to its acceptance of such forms)
and approved in every respect by such Issuer (each such letter of credit,
together with each Existing Letter of Credit, a "Letter of Credit"), for any
purpose permitted under Section 5.11. Upon receipt of an Issuance Request,
the Agent shall promptly notify the Lenders thereof. Each Letter of Credit
shall by its terms:
(a) be issued in a Stated Amount which
(i) is at least $100,000; and
(ii) does not exceed the then Letter of Credit Availability;
(b) be stated to expire on a date (its "Stated Expiry Date")
no later than the Revolving Loan Commitment Termination Date; and
(c) in the case of Letters of Credit other than Judgment
Letters of Credit and Letters of Credit to be used as credit support
for corporate insurance purposes, on or prior to its Stated Expiry Date
(i) terminate immediately upon notice to the Issuer thereof
from the beneficiary thereunder that all obligations covered
thereby have been terminated, paid, or otherwise satisfied in
full, and
(ii) reduce in part immediately and to the extent the
beneficiary thereunder has notified the Issuer thereof that the
obligations covered thereby have been paid or otherwise satisfied
in part.
So long as no Default has occurred and is continuing, by delivery to the
applicable Issuer and the Agent of an Issuance Request at least three (or, in
the case of a Judgment Letter of Credit, fifteen) but not more than sixty
Business Days prior to the Stated Expiry Date of any Letter of Credit, the
Borrower may request such Letter of Credit Issuer to extend the Stated Expiry
Date of such Letter of Credit for an additional period that does not end after
the Revolving Loan Commitment Termination Date. Notwithstanding any provision
contained in the foregoing to the contrary, the Borrower may not request the
issuance of, and no Issuer shall have an obligation to issue, (i) any Judgment
Letter of Credit at any time when, or if after giving effect to such issuance,
and as long as, there shall be outstanding in the aggregate eight Judgment
Letters of Credit or (ii) any Letter of Credit at any time when, or if after
giving effect to such issuance, and so long as, there shall be outstanding in
the aggregate thirty Letters of Credit (including Judgment Letters of Credit).
SECTION 4.3. Expenses. The Borrower agrees to pay to the Agent for
the account of the applicable Issuer(s) all standard administrative expenses
of such Issuer(s) in connection with the issuance, maintenance, modification
(if any) and administration of each Letter of Credit issued by such Issuer(s)
upon demand from time to time.
SECTION 4.4. Participation By Lenders. (a) Each Letter of Credit
issued or deemed issued pursuant to this Article IV shall, effective upon its
issuance or deemed issuance and without further action, be issued or deemed
issued on behalf of all Lenders (including the applicable Issuer) pro rata
according to their respective Percentages. Each Lender shall, to the extent
of its Percentage, be deemed irrevocably to have participated in the issuance
of such Letter of Credit and shall be responsible to reimburse promptly the
applicable Issuer for Reimbursement Obligations which have not been reimbursed
by the Borrower in accordance with Section 4.5, or which have been reimbursed
by the Borrower but must be returned, restored or disgorged by such Issuer for
any reason. Each Lender shall, to the extent of its Percentage, be entitled
to receive from the Agent a ratable portion of the letter of credit fees
received by the Agent pursuant to Section 3.3.2, with respect to each Letter
of Credit.
(b) In the event that the Borrower shall fail to reimburse any
Issuer, or if for any reason Revolving Loans shall not be made to fund any
Reimbursement Obligation, all as provided in Section 4.5 and in an amount
equal to the amount of any drawing honored by such Issuer under a Letter of
Credit issued by it, or in the event such Issuer must for any reason return or
disgorge such reimbursement, such Issuer shall promptly notify each Lender of
the unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to such Issuer,
whether or not any Default shall have occurred and be continuing, an amount
equal to its respective participation in same day or immediately available
funds at the office of such Issuer specified in such notice not later than
11:00 a.m., New York City time, on the Business Day (under the laws of the
jurisdiction of such Issuer) after the date notified by such Issuer. In the
event that any Lender fails to make available to such Issuer the amount of
such Lender's participation in such Letter of Credit as provided herein, such
Issuer shall be entitled to recover such amount on demand from such Lender
together with interest at the daily average Federal Funds Effective Rate for
three Business Days (together with such other compensatory amounts as may be
required to be paid by such Lender to the Agent pursuant to the Rules for
Interbank Compensation of the council on International Banking or the
Clearinghouse Compensation Committee, as the case may be, as in effect from
time to time) and thereafter at the Federal Funds Effective Rate plus 2.0%.
(c) Nothing in this Section shall be deemed to prejudice the right of
any Lender to recover from any Issuer any amounts made available by such
Lender to such Issuer pursuant to this Section in the event that it is
determined by a court of competent jurisdiction that the payment with respect
to a Letter of Credit by such Issuer in respect of which payment was made by
such Lender constituted gross negligence or wilful misconduct on the part of
such Issuer.
(d) Each Issuer shall distribute to each other Lender which has paid
all amounts payable by it under this Section with respect to any Letter of
Credit issued by such Issuer such other Lender's Percentage of all payments
received by such Issuer from the Borrower in reimbursement of drawings honored
by such Issuer under such Letter of Credit when such payments are received.
SECTION 4.5. Disbursements. (a) The applicable Issuer will notify
the Borrower and the Agent promptly of the presentment for payment of any
drawing under any Letter of Credit, together with notice of the amount of such
drawing and the date (a "Disbursement Date") such payment shall be made.
(b) Subject to the terms and provisions of such Letter of Credit, the
applicable Issuer shall make such payment to the beneficiary (or its designee)
of such Letter of Credit.
(c) Prior to 12:00 noon, New York City time, on the Business Day
immediately succeeding the Disbursement Date, the Borrower will reimburse the
applicable Issuer for all amounts which it has disbursed under such Letter of
Credit.
(d) To the extent the applicable Issuer is not reimbursed in full on
the Disbursement Date for all amounts it has disbursed under any Letter of
Credit, the Borrower's Reimbursement Obligation shall accrue interest from and
including such Disbursement Date to but excluding the date such Reimbursement
Obligation is paid in full (whether pursuant to a Borrowing of Base Rate Loans
under Section 4.5(e) or otherwise) at a fluctuating rate per annum equal to,
during the initial two days after such Disbursement Date, the Alternate Base
Rate and, thereafter, the Alternate Base Rate plus a margin of 2.0%, payable
on demand.
(e) In the event the applicable Issuer is not reimbursed by the
Borrower on the Disbursement Date, or if such Issuer must for any reason
return or disgorge such reimbursement, the Lenders (including such Issuer)
shall, on the terms and subject to the conditions of this Agreement, fund the
Reimbursement Obligation therefor by making, on the next Business Day,
Revolving Loans which are Base Rate Loans as provided in Section 2.1.1 (the
Borrower being deemed to have given a timely Borrowing Request therefor for
such amount); provided, however, for the purpose of determining the
availability of the Revolving Loan Commitments to make Revolving Loans
immediately prior to giving effect to the application of the proceeds of such
Revolving Loans, such Reimbursement Obligation shall be deemed not to be
outstanding at such time.
SECTION 4.6. Repayment/Reimbursement. The Borrower's obligation (a
"Reimbursement Obligation") under Section 4.5 to reimburse an Issuer with
respect to each disbursement thereunder (including interest thereon), and each
Lender's obligation to make participation payments in each drawing which has
not been reimbursed by the Borrower, shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff, counterclaim, or
defense to payment which the Borrower may have or have had against any Lender
or any beneficiary of a Letter of Credit, including any defense based upon the
occurrence of any Default, any draft, demand or certificate or other document
presented under a Letter of Credit proving to be forged, fraudulent, invalid
or insufficient, the failure of any disbursement thereunder to conform to the
terms of the applicable Letter of Credit (if, in the applicable Issuer's good
faith opinion, such disbursement is determined to be appropriate) or any
non-application or misapplication by the beneficiary of the proceeds of such
disbursement, or the legality, validity, form, regularity, or enforceability
of such Letter of Credit.
SECTION 4.7. Deemed Disbursements and Cash Collateralization of
Letters of Credit. Upon the occurrence and during the continuation of any
Event of Default or the occurrence of the Revolving Loan Commitment
Termination Date, an amount equal to that portion of Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit shall,
at the election of the applicable Issuer acting on instructions from the
Required Lenders, and without demand upon or notice to the Borrower, be deemed
to have been paid or disbursed (but not for purposes of Sections 3.3 and 4.5)
by such Issuer under such Letters of Credit (notwithstanding that such amount
may not in fact have been so paid or disbursed), and, upon notification by
such Issuer to the Agent and the Borrower of its obligations under this
Section (which notification shall be deemed given if the applicable Event of
Default is an Event of Default with respect to the Borrower or ADT Limited
described in clause (b) or (d) of Section 9.1.9), the Borrower shall be
immediately obligated to reimburse such Issuer the amount deemed to have been
so paid or disbursed by such Issuer. Any amounts so received by such Issuer
from the Borrower pursuant to this Section shall be held as collateral
security for the repayment of the Borrower's obligations in connection with
the Letters of Credit issued by such Issuer. At any time when the aggregate
amount held by any Issuer as collateral hereunder shall exceed the then
aggregate Letter of Credit Outstandings in respect of all Letters of Credit
issued by such Issuer, such Issuer shall return to the Borrower such excess.
At such time when all Events of Default shall have been cured or waived, each
Issuer shall return to the Borrower all amounts then on deposit with such
Issuer pursuant to this Section. Any interest on such amounts on deposit
shall be held by the applicable Issuer as additional collateral security for
the repayment of the Borrower's Obligations in connection with the Letters of
Credit issued by such Issuer or otherwise.
SECTION 4.8. Nature of Repayment/Reimbursement Obligations. With
respect to all Letters of Credit, the Borrower shall assume all risks of
the acts, omissions, or misuse of any Letter of Credit by the beneficiary
thereof. Neither any Issuer nor any Lender (except to the extent of its
own gross negligence or wilful misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness,
or legal effect of any Letter of Credit or any document submitted by
any party in connection with the application for and issuance of a
Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent, or forged;
(b) the form, validity, sufficiency, accuracy, genuineness,
or legal effect of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or
benefits thereunder or proceeds thereof in whole or in part, which may
prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex, or otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit or of the proceeds thereof.
None of the foregoing shall affect, impair, or prevent the vesting of any of
the rights or powers granted any Issuer or any Lender hereunder. In
furtherance and extension, and not in limitation or derogation, of any of the
foregoing, any action taken or omitted to be taken by any Issuer in good faith
shall be binding upon the Borrower and shall not put such Issuer under any
resulting liability to the Borrower.
SECTION 4.9. Increased Costs; Indemnity. With respect to all Letters
of Credit, if by reason of
(a) any change after the date hereof in applicable law,
regulation, rule, decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory authority
of any law, regulation, rule, decree or regulatory requirement, or
(b) compliance by any Issuer or any Lender with any
direction, request or requirement (whether or not having the force of
law) of any governmental or monetary authority, including Regulation D
of the F.R.S. Board, first issued after the date hereof:
(i) any Issuer or any Lender shall be subject to any tax
(other than taxes on net income and franchises), levy, charge or
withholding of any nature or to any variation thereof or to any
penalty with respect to the maintenance or fulfillment of its
obligations under this Article IV, whether directly or by such
being imposed on or suffered by such Issuer or any Lender;
(ii) any reserve, deposit or similar requirement is or shall
be applicable, imposed or modified in respect of any Letters of
Credit issued by any Issuer or participations therein purchased
by any Lender; or
(iii) there shall be imposed on any Issuer or any Lender any
other condition regarding this Article IV, any Letter of Credit
or any participation therein;
and the result of the foregoing is directly or indirectly to increase the
actual cost to such Issuer or such Lender of issuing, making or maintaining
any Letter of Credit or of purchasing or maintaining any participation
therein, or to actually reduce any amount receivable in respect thereof by such
Issuer or such Lender, then and in any such case such Issuer or such Lender
may, at any time after the additional cost is incurred or the amount received
is reduced, notify the Borrower thereof, and the Borrower shall pay within
fourteen days of demand thereof such amounts as such Issuer or Lender may
specify to be necessary to compensate such Issuer or Lender for such
additional cost or reduced receipt, together with interest on such amount from
the date demanded until payment in full thereof at a rate equal, during the
initial fifteen Business Days after the date of such demand, the Alternate
Base Rate, and, thereafter, the Alternate Base Rate plus a margin of 2.0%;
provided, however, that the Borrower shall have no obligation to pay any such
additional amount with respect to any day or days unless such Issuer or Lender
shall have notified the Borrower of its demand therefor within 60 days of the
date upon which such Issuer or Lender has obtained audited information with
respect to the fiscal year of such Issuer or Lender in which such day or days
occurred; provided further, however, that each such Issuer or Lender will use
all reasonable efforts to obtain such audited information in a timely manner.
The determination by such Issuer or Lender, as the case may be, of any amount
due pursuant to this Section, as set forth in a statement setting forth the
calculation thereof in reasonable detail, shall, in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto. In
addition to amounts payable as elsewhere provided in this Article IV, the
Borrower hereby agrees to protect, indemnify, pay and save each Issuer
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees and
allocated costs of internal counsel) which such Issuer may incur or be subject
to as a consequence, direct or indirect, of
(x) the issuance of the Letters of Credit, other than as a
result of the gross negligence or wilful misconduct of such Issuer as
determined by a court of competent jurisdiction, or
(y) the failure of such Issuer to honor a drawing under any
Letter of Credit as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto government or
governmental authority.
ARTICLE V
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 5.1. LIBO Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Lenders, be conclusive and binding on the Borrower) that the introduction
of, or any change in or in the interpretation of, any law makes it unlawful,
or any central bank or other governmental authority asserts that it is
unlawful, for such Lender to make, continue or maintain any Loan as, or to
convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to
make, continue or maintain any Loan as, or to convert any Loan into, a LIBO
Rate Loan shall, upon such determination, forthwith be suspended until such
Lender shall notify the Agent that the circumstances causing such suspension
no longer exist, and all LIBO Rate Loans of such Lender shall automatically
convert into Base Rate Loans at the end of the then current Interest Periods
with respect thereto or sooner, if required by such law or assertion and all
Loans of such Lender that would otherwise have been made or continued as, or
converted into, LIBO Rate Loans shall instead be made as or converted into, or
continued as, Base Rate Loans upon which interest shall be payable (i) in the
case of Revolving Loans, at the same time as the related LIBO Rate Loans and
(ii) in the case of Competitive Bid Loans, on the Competitive Bid Loan
Interest Payment Date with respect thereto.
SECTION 5.2. Deposits Unavailable. If the Agent shall have determined
that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Reference Lender or
the Reference Lenders, as the case may be, in their relevant market; or
(b) by reason of circumstances affecting the Reference
Lenders' relevant market, adequate means do not exist for ascertaining
the interest rate applicable hereunder to LIBO Rate Loans,
then, upon notice from the Agent to the Borrower and the Lenders, the
obligations of all Lenders under Section 2.2 and Section 2.4 to make or
continue any Revolving Loans as, or to convert any Revolving Loans into, LIBO
Rate Loans shall forthwith be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
SECTION 5.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees
to reimburse each Lender for any increase in the actual cost to such Lender
of, or any actual reduction in the amount of any sum receivable by such Lender
in respect of, making, continuing or maintaining (or of its obligation to make,
continue or maintain) any Loans as, or of converting (or of its obligation to
convert) any Loans into, LIBO Rate Loans arising by reason of (i) any change
(after the date hereof, in respect of LIBO Rate Loans that are Revolving
Loans, or after the date of the applicable Competitive Bid Loan Offer, in
respect of Competitive Bid Loans) in any applicable law, rule, regulation,
decree or regulatory requirement or any change (after such date) in the
interpretation or application by any judicial or regulatory authority of any
applicable law, rule, regulation, decree or regulatory requirement or (ii)
compliance by such Lender with any direction, request or requirement (whether
or not having the force of law) of any governmental or monetary authority,
including Regulation D of the F.R.S. Board, first issued after such date;
provided, however, that the Borrower shall have no obligation to pay any such
additional amount with respect to any day or days unless such Lender shall
have notified the Borrower of its demand therefor within 60 days of the date
upon which such Lender has obtained audited information with respect to the
fiscal year of such Lender in which such day or days occurred; provided
further, however, that each such Lender will use all reasonable efforts to
obtain such audited information in a timely manner. Such Lender shall promptly
notify the Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and
the additional amount required fully to compensate such Lender for such
increased cost or reduced amount. Such additional amounts shall be payable by
the Borrower directly to such Lender within fourteen days of its receipt of
such notice, and such notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 5.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Revolving Loans not being continued as, or converted
into, LIBO Rate Loans in accordance with the Continuation/Conversion
Notice therefor,
but excluding loss of margin for the period after such payment, conversion or
failure to borrow, then, upon the written notice of such Lender to the
Borrower (with a copy to the Agent), the Borrower shall, within fourteen days
of its receipt thereof, pay directly to such Lender such amount as will (in
the reasonable determination of such Lender) reimburse such Lender for such
loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 5.5. Increased Capital Costs. If after the date hereof (or,
with respect to any Competitive Bid Loan, the date of the Competitive Bid Loan
Offer with respect thereto), there shall be any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Revolving Loan Commitment, issuance of or participation in
Letters of Credit or the Loans made by such Lender is reduced to a level below
that which such Lender or such controlling Person could have achieved but for
the occurrence of any such circumstance, then, in any such case upon notice
from time to time by such Lender to the Borrower, the Borrower shall, within
fourteen days of its receipt of such notice from such Lender, pay directly to
such Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return; provided, however,
that the Borrower shall have no obligation to pay any such additional amount
with respect to any day or days unless such Lender shall have notified the
Borrower of its demand therefor within 60 days of the date upon which such
Lender has obtained audited information with respect to the fiscal year of
such Lender in which such day or days occurred; provided further, however,
that each such Lender will use all reasonable efforts to obtain such audited
information in a timely manner. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower. In determining such amount, such Lender may use any reasonable
method of averaging and attribution that it shall deem applicable.
SECTION 5.6. Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes, and other taxes, fees, duties, withholdings
and all liabilities related thereto, imposed by any taxing authority and
arising as a result of any change after the date hereof (or, in the case of
any Competitive Bid Loan, after the date of the Competitive Bid Loan Offer
with respect thereto) in any law, regulation or treaty or the interpretation
or application thereof by any relevant taxing authority, but excluding
franchise taxes and taxes imposed on or measured by any Lender's net income or
receipts (such non-excluded items being called "Taxes"). In the event that
any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount such
Lender would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder,
the Agent or such Lender may pay such Taxes and the Borrower will promptly pay
such additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such person would have received had not such Taxes been
asserted; provided, however, that the Borrower shall have no obligation to pay
any such additional amount unless such Lender shall have notified the Borrower
of its demand therefor within 60 days of the date upon which such Lender has
obtained audited information with respect to the fiscal year of such Lender
during which the payment of such additional amounts occurred; provided
further, however, that each such Lender will use all reasonable efforts to
obtain such audited information in a timely manner.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 5.6, a distribution hereunder by
the Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
Each Lender that is organized under the laws of a jurisdiction other
than the United States (or any state thereof or the District of Columbia)
shall provide its portion of the Revolving Loan Commitment through a branch or
office the income of which that relates hereto is effectively connected with
the conduct of a trade or business in the United States. On or prior to the
Effective Date (in the case of any Lender party hereto on the Effective Date
or the Agent) or the date upon which such Lender or Agent becomes a Lender or
Agent hereunder (in the case of any other Lender or Agent) and from time to
time thereafter as the Borrower may reasonably request (which request shall
not be made more than once per Fiscal Year), each Lender and Agent that is
organized under the laws of a jurisdiction other than the United States (or
any state thereof or the District of Columbia) shall execute and deliver to
the Borrower and the Agent one or more (as the Borrower or the Agent may
reasonably request) United States Internal Revenue Service Forms 4224 or such
other forms or documents (or successor forms or documents), appropriately
completed, as may be applicable to establish the extent, if any, to which a
payment to such Lender or Agent is exempt from withholding or deduction of
Taxes. If the form provided by any Lender or the Agent at the time such
Lender or the Agent first becomes a party to this Agreement indicates a
withholding or deduction of taxes at a rate in excess of zero, withholding or
deduction of taxes at such rate shall be excluded from "Taxes" as defined in
this Section 5.6; provided, however, that any increase in such rate shall not
be so excluded from "Taxes". For any period with respect to which a Lender
has failed to provide the Borrower with the appropriate form pursuant to this
Section 5.6, such Lender shall not be entitled to receive any additional
amount pursuant to this Section 5.6.
SECTION 5.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes
or any other Loan Document shall be made by the Borrower to the Agent for the
pro rata account of the Lenders entitled to receive such payment. All such
payments required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 12:00 noon, New York City time, on
the date due, in same day or immediately available funds, to such account as
the Agent shall specify from time to time by notice to the Borrower. Funds
received after that time shall be deemed to have been received by the Agent on
the next succeeding Business Day. The Agent shall promptly remit in same day
funds to each Lender its share, if any, of such payments received by the Agent
for the account of such Lender. All interest and fees shall be computed on the
basis of the actual number of days (including the first day but excluding the
last day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days (or, in the case of interest on a
Base Rate Loan (other than when calculated with respect to the Federal Funds
Effective Rate), 365 days or, if appropriate, 366 days). Whenever any payment
to be made shall otherwise be due on a day which is not a Business Day, such
payment shall (except as otherwise required by clause (b) of the definition of
the term "Interest Period" with respect to LIBO Rate Loans) be made on the
next succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 5.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Revolving Loan (other than pursuant to
the terms of Sections 5.3, 5.4 and 5.5) or any Letter of Credit in excess of
its pro rata share of payments then or therewith obtained by all Lenders, such
Lender shall purchase from the other Lenders such participations in Revolving
Loans made by them and/or Letters of Credit as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase
price to the ratable extent of such recovery together with an amount equal to
such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to
the purchasing Lender
to
(b) 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
may, to the fullest extent permitted by law, exercise all its rights of
payment (including pursuant to Section 5.9) with respect to such participation
as fully as if such Lender were the direct creditor of the Borrower in the
amount of such participation. If under any applicable bankruptcy, insolvency
or other similar law, any Lender receives a secured claim in lieu of a setoff
to which this Section applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders entitled under this Section to share in the
benefits of any recovery on such secured claim.
SECTION 5.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default, to the fullest extent permitted under applicable law, have
the right to appropriate and apply to the payment of the Obligations owing to
it (whether or not then due) any and all balances, credits, deposits, accounts
or moneys of the Borrower then or thereafter maintained with or otherwise held
by such Lender; provided, however, that any such appropriation and application
shall be subject to the provisions of Section 5.8. Each Lender agrees
promptly to notify the Borrower and the Agent after any such setoff and
application made by such Lender; provided, however, that, to the fullest extent
permitted under applicable law, the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender
under this Section are in addition to other rights and remedies (including
other rights of setoff under applicable law or otherwise) which such Lender
may have.
SECTION 5.10. Use of Proceeds. The proceeds of any Loans shall be
used for general corporate purposes, including to provide working capital and
to finance acquisitions permitted hereunder in Core Businesses. Without
limiting the foregoing, no proceeds of any Loan shall be used to acquire any
equity security of a class which is registered pursuant to Section 12 of the
Exchange Act or any "margin stock", as defined in F.R.S. Board Regulation U.
SECTION 5.11. Use of Letters of Credit. Letters of Credit shall be
used for general corporate purposes, including:
(a) as credit support for corporate insurance purposes;
(b) as credit support for working capital facilities provided to
Affiliates of the Borrower;
(c) in support of trade obligations; and
(d) in the case of Judgment Letters of Credit, in support of
obligations to Judgment Payors (as defined in the definition of
"Judgment Letters of Credit").
SECTION 5.12. Substitution of LIBOR Office or Domestic Office in
Certain Circumstances. If any Lender would otherwise (a) have its obligation
to make, continue or maintain Loans as, or convert Loans into, LIBO Rate Loans
suspended pursuant to Section 5.1 or (b) be entitled to receive additional
amounts pursuant to Section 5.3, 5.5 or 5.6, such Lender shall designate a
different Domestic Office or LIBOR Office, as the case may be, if such
designation will avoid the need for such suspension or eliminate or reduce the
amounts of such additional amounts and will not, in the sole judgement of such
Lender, be otherwise disadvantageous to such Lender.
SECTION 5.13. Substitution of Bank; Election to Terminate. If (a) the
obligation of any Lender to make, continue or maintain Loans as, or to convert
Revolving Loans into, LIBO Rate Loans has been suspended pursuant to Section
5.1 or (b) any Lender has demanded to be paid additional amounts pursuant to
Section 5.3, 5.5 or 5.6 (and the Borrower, in its reasonable judgment,
believes such Lender is likely to demand additional amounts thereunder), the
Borrower shall have the right, with the assistance of the Agent, to seek one
or more financial institutions (a "Substitute Lender"), which may be one or
more of the Lenders, to purchase the Notes and assume the Revolving Loan
Commitment of such Lender (the "Affected Lender"), and if the Borrower locates
a Substitute Lender, the Affected Lender shall, upon (i) payment to it of the
purchase price agreed between it and the Substitute Lender (or, failing such
agreement, a purchase price in the amount of the outstanding principal amount
of its Loans and accrued interest thereon to the date of payment) plus any
amount (other than principal and interest) then due to it or accrued for its
account hereunder, (ii) the written consent of each Issuer (which consent
shall be based on such Issuer's reasonable determination of the ability of
such Substitute Lender to meet the financial obligations of a Lender
hereunder) and (iii) payment by the Borrower to the Affected Lender and the
Agent of all reasonable out-of-pocket expenses in connection with such
assignment and assumption, assign all its rights and obligations under this
Agreement and the Notes (including its Revolving Loan Commitment and its
Loans) to the Substitute Lender, and the Substitute Lender shall assume such
rights and obligations, whereupon the Substitute Lender shall become a party
hereto and shall have the rights and obligations of a Lender hereunder and
under the other Loan Documents and the Affected Lender shall be released from
its obligations hereunder and under the other Loan Documents.
ARTICLE VI
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
SECTION 6.1. Closing Date. The Closing Date shall occur on the date
on which each of the conditions precedent set forth in this Section 6.1 shall
have been satisfied.
SECTION 6.1.1. Resolutions, etc. The Agent shall have received from
each Obligor a certificate, dated the Closing Date, of its Secretary or
Assistant Secretary as to
(a) resolutions of such Obligor's Board of Directors then in
full force and effect authorizing the execution, delivery and
performance of each Loan Document to be executed by it; and
(b) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
SECTION 6.1.2. Delivery of Notes. The Agent shall have received for
the account of each Lender such Lender's Revolving Note and Competitive Bid
Loan Note, each duly executed and delivered by the Borrower.
SECTION 6.1.3. Termination of Existing Credit Facility. All
obligations and liabilities of the Borrower under the Existing Credit
Facility, including all principal, all interest, all prepayment premiums, all
commitment fees and all letter of credit fees, shall have been paid in full,
whether or not then due (including, to the extent necessary, from proceeds of
the initial Credit Extension).
SECTION 6.1.4. Guarantees. The Agent shall have received
(a) the ADT Limited Guaranty, dated as of the date hereof,
duly executed by ADT Limited,
(b) the Subsidiary Guarantor Guaranty, dated as of the date
hereof, duly executed by each Subsidiary Guarantor, and
(c) evidence satisfactory to the Agent that each Material
Subsidiary and each obligor in respect of a Senior Note Guarantee has
duly executed the Subsidiary Guarantor Guaranty.
SECTION 6.1.5. Delivery of Certain Documents. The Agent shall have
received all documents referred to in Section 3.15 of the ADT Limited Guaranty.
SECTION 6.1.6. Consents, etc. The Agent shall have received true and
correct copies of all consents and approvals (if any) required for the
execution and delivery of this Credit Agreement and the other Loan Documents.
SECTION 6.1.7. Delivery of Closing Date Certificates. The Agent shall
have received
(a) a certificate in a form to be provided by the Agent,
dated the Closing Date and duly executed by the Borrower, in which
certificate the Borrower shall have represented and warranted that the
statements therein are true and correct on and as of the Closing Date,
including a statement that attached to such certificate are true,
correct and complete copies of the Dividended Note, the Senior Note
Indenture, the Senior Subordinated Note Indenture and the LYONs
Indenture and specimen copies of the Senior Notes, the Senior
Subordinated Notes and the LYONs, and
(b) a certificate in a form to be provided by the Agent,
dated the Closing Date and duly executed by ADT Limited, in which
certificate ADT Limited shall have represented and warranted that the
statements therein are true and correct on and as of the Closing Date.
SECTION 6.1.8. No Material Adverse Change. There shall not have
occurred a material adverse change in the business, results of operations,
financial condition or prospects of ADT Limited and its Subsidiaries, taken as
a whole, or the Borrower and its Subsidiaries, taken as a whole, since
December 31, 1995.
SECTION 6.1.9. Opinions of Counsel. The Agent shall have received,
dated the Closing Date and addressed to the Agent and all Lenders,
(a) an opinion of Appleby, Spurling & Kempe, special Bermuda
counsel for ADT Limited, substantially in the form of Exhibit K hereto;
(b) an opinion of Davis Polk & Wardwell, special New York
counsel to ADT Limited, the Borrower and the other Obligors,
substantially in the form of Exhibit L-1 hereto;
(c) an opinion of Kay Collyer & Boose LLP, special corporate
counsel to the Borrower and the other Obligors, substantially in the
form of Exhibit L-2 hereto; and
(d) an opinion of Jan Beck, Esq., general counsel to certain of
the Obligers, substantially in the form of Exhibit L-3 hereto.
SECTION 6.1.10. Notification of Trustees. The Agent shall have
received evidence satisfactory to it that the Borrower has notified each of
the trustees under the Senior Subordinated Note Indenture and the LYONs
Indenture that this Agreement replaces the Existing Credit Facility and
thereby constitutes, from and after the Effective Date, the "New Bank Credit
Agreement" and the "Credit Agreement" under the Senior Subordinated Note
Indenture and LYONs Indenture, respectively.
SECTION 6.1.11. Closing Fees, Expenses, etc. The Agent shall have
received for its own account, or for the account of each Lender and Issuer, as
the case may be, (i) such fees as have been previously agreed to by the
applicable parties to be due and payable on or prior to the Closing Date and
(ii) to the extent then invoiced, all fees, costs and expenses due and payable
pursuant to Section 11.3.
SECTION 6.1.12. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligor shall be satisfactory in form and substance
to the Agent and its counsel; and the Agent and such counsel shall have
received all information, approvals, opinions, documents or instruments as the
Agent or such counsel may reasonably request.
SECTION 6.2. All Credit Extensions. The obligation of each Lender to
make any Credit Extension shall be subject to the satisfaction of each of the
conditions precedent set forth in this Section 6.2.
SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Credit Extension (but, if any Default of
the nature referred to in Section 9.1.5 shall have occurred with respect to
any other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of any Borrowing to the payment of any
Indebtedness involved in such Default) the following statements shall be true
and correct
(a) the representations and warranties set forth in Article
VII (excluding, however, those contained in Section 7.6) and Article
III of the ADT Limited Guaranty (excluding, however, those contained in
Section 3.7 of the ADT Limited Guaranty) shall be true and correct with
the same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date);
(b) (i) except as disclosed by the Borrower or ADT Limited to
the Agent and the Lenders pursuant to, or as excepted from, Section
7.6 or Section 3.7 of the ADT Limited Guaranty, no labor controversy,
litigation, arbitration or governmental investigation or proceeding
shall be pending or, to the knowledge of the Borrower or ADT Limited,
threatened against ADT Limited, the Borrower or any of their respective
Subsidiaries which might reasonably be expected to materially adversely
affect the consolidated business, operations, assets, revenues,
properties or prospects of ADT Limited and its Subsidiaries or the
Borrower and its Subsidiaries or which purports to affect the legality,
validity or enforceability of this Agreement, the Notes or any other
Loan Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding disclosed pursuant to, or as excepted from, Section 7.6 or
Section 3.7 of the ADT Limited Guaranty which might reasonably be
expected to materially adversely affect the consolidated businesses,
operations, assets, revenues, properties or prospects of ADT Limited
and its Subsidiaries or the Borrower and its Subsidiaries;
(c) no Default shall have then occurred and be continuing; and
(d) except in the case of the deemed issuance of Letters of
Credit pursuant to the last sentence of Section 4.1, with respect to
the issuance, extension or renewal by an Issuer of any Letter of
Credit, no order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain such Issuer
from issuing letters of credit generally or the Letter of Credit to be
issued by it pursuant to the applicable Issuance Request and no request
or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over the Agent or the Issuer
shall prohibit or request that the Agent or the Issuer refrain from the
issuance of letters of credit generally or such Letter of Credit in
particular.
SECTION 6.2.2. Credit Extension Request. Except in the case of
Letters of Credit deemed issued pursuant to the last sentence of Section 4.1,
the Agent shall have received a Borrowing Request or Issuance Request, as the
case may be, for such Credit Extension. Each of the delivery of a Borrowing
Request or an Issuance Request and the acceptance by the Borrower of the
proceeds of any Borrowing or the issuance, deemed issuance, extension or
renewal of any Letter of Credit, as applicable, shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) or the issuance, extension or renewal of
such Letter of Credit, as applicable, the statements made in clauses (a), (b)
and (c) of Section 6.2.1 are true and correct.
SECTION 6.2.3. Closing Date. The Closing Date shall have occurred on
or prior to January 31, 1997.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement and to make Loans and issue Letters of Credit hereunder, the
Borrower represents and warrants unto the Agent and each Lender as set forth
in this Article VII.
SECTION 7.1. Organization, etc. Each of the Borrower and its
Subsidiaries that is an Obligor is a corporation duly organized and validly
existing and in good standing under the laws of the State of its
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the nature of its business or
the location of its assets requires such qualification and where the failure to
so qualify or be in good standing would reasonably be expected to have a
material adverse effect on the business, results of operations, financial
condition or prospects of the Borrower and its Subsidiaries taken as a whole.
Each of the Borrower and its Subsidiaries that is an Obligor has full power
and authority and holds all requisite governmental licenses, permits and other
approvals (i) to own and hold under lease its property and to conduct its
business substantially as currently conducted by it, except where failure to
hold such licenses, permits and other approvals would not reasonably be
expected to have a material adverse effect on the business, results of
operations, financial condition or prospects of the Borrower and its
Subsidiaries taken as a whole and (ii) to enter into and perform its
Obligations under each Loan Document to which it is a party.
SECTION 7.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this Agreement, the
Notes and each other Loan Document executed or to be executed by it, and the
execution, delivery and performance by each Subsidiary of the Borrower that is
an Obligor of each Loan Document executed or to be executed by it are within
the Borrower's and each such Obligor's corporate powers, have been duly
authorized by all necessary corporate action, and do not
(a) contravene the Borrower's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower or any such Obligor in any manner that could
reasonably be expected (i) to have a material adverse effect on the
business, results of operations, financial condition or prospects of
the Borrower and its Subsidiaries taken as a whole or (ii) to subject
any Lender, Issuer or Agent to any liability; or
(c) result in, or require the creation or imposition of, any
Lien on any of any Obligor's properties.
SECTION 7.3. Government Approval, Regulation, etc. No authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other Person is required for the
due execution, delivery or performance by the Borrower or any Subsidiary of
the Borrower that is an Obligor of this Agreement, the Notes or any other Loan
Document to which it is a party. Neither the Borrower nor any of its
Subsidiaries that is an Obligor is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company", or
a "subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 7.4. Validity, etc. This Agreement, the Notes and each other
Loan Document executed by the Borrower constitute the legal, valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting creditors'
rights generally and to general principles of equity.
SECTION 7.5. No Material Adverse Change. Since December 31, 1995,
there has been no material adverse change in the business, results of
operations, financial condition or prospects of the Borrower and its
Subsidiaries taken as a whole.
SECTION 7.6. Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of the Borrower, threatened litigation, action,
proceeding, or labor controversy affecting the Borrower or any of its
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which could reasonably be expected to materially adversely affect the
financial condition, results of operations, business or prospects of the
Borrower and its Subsidiaries, taken as a whole, or which purports to affect
the legality, validity or enforceability of this Agreement, the Notes or any
other Loan Document, except as disclosed in Item 7.6 ("Litigation") of the
Disclosure Schedule.
SECTION 7.7. Subsidiaries. The Borrower has no Subsidiaries, except
those Subsidiaries
(a) which are identified in Item 7.7 ("Existing
Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been created or acquired in
accordance with Section 4.2.5 or 4.2.9 of the ADT Limited Guaranty.
Without limiting any term or provision hereof, to the extent any Person
becomes a Subsidiary of the Borrower in accordance with (and not in
contravention of) any term or provision hereof, the ADT Limited Guaranty or
any other Loan Document, the Borrower may supplement such Item 7.7 of the
Disclosure Schedule to include such new Subsidiary by delivering a
certificate, signed by an Authorized Officer of the Borrower, certifying (i)
as to the name and place of organization of such new Subsidiary, (ii) as to the
method by which such new Subsidiary was created and (iii) that such new
Subsidiary was created without contravening any term or provision of this
Agreement, the ADT Limited Guaranty or any other Loan Document.
SECTION 7.8. Seniority of the Obligations. The Obligations of the
Borrower are senior to all Indebtedness of the Borrower in respect of the
Senior Subordinated Notes and the LYONs, and the Obligations of ADT Limited
are senior to all Indebtedness of ADT Limited in respect of the Senior
Subordinated Note Guarantee and the LYONs Guarantee, and constitute, and are
entitled to the benefits of being, (i) "Senior Indebtedness" and "Guarantor
Senior Indebtedness", as such terms are defined in the Senior Subordinated
Note Indenture, and (ii) "Senior Indebtedness" and "Guarantor Senior
Indebtedness", as such terms are defined in the LYONs Indenture.
SECTION 7.9. Existing Letters of Credit. Item 7.9 ("Existing Letters
of Credit") of the Disclosure Schedule lists each Existing Letter of Credit.
ARTICLE VIII
COVENANTS
SECTION 8.1. Affirmative Covenants. The Borrower agrees with the
Agent and each Lender that, until the Covenant Termination Date, the Borrower
will perform the obligations set forth in this Section 8.1.
SECTION 8.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender and the
Agent copies of the following financial statements, reports, notices and
information:
(a) no later than the filing of each 10-K of ADT Limited, but
in no event later than 120 days after the end of each Fiscal Year,
copies of the audited annual financial statements for such Fiscal Year
for each of the Borrower and its Subsidiaries and ADT Limited and its
Subsidiaries, in each case including therein consolidated balance sheets
for each of the Borrower and its Subsidiaries and ADT Limited and its
Subsidiaries as of the end of such Fiscal Year and consolidated
statements of income, cash flow and changes in shareholders' equity of
each of the Borrower and its Subsidiaries and ADT Limited and its
Subsidiaries for such Fiscal Year, in each case, reported on (without
any Impermissible Qualification) as to fairness of presentation,
generally accepted accounting principles and consistency by Coopers &
Lybrand, or other independent public accountants of nationally
recognized standing, together with a certificate from such accountants
stating whether, in making the examination necessary for such report,
such accountants have become aware of any Default that has occurred and
is continuing;
(b) [intentionally omitted];
(c) promptly and in any event prior to the 30th day of each
Fiscal Year, a certified copy of the annual budget of the Borrower, ADT
Limited and its other Subsidiaries, on a consolidated basis, for such
Fiscal Year, in form and scope consistent with the annual budget of the
Borrower, ADT Limited and its other Subsidiaries, on a consolidated
basis, for the 1996 Fiscal Year furnished to the Agent prior to the
Effective Date;
(d) promptly and in any event within 60 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year, quarterly
unaudited consolidated balance sheets as of the end of such Fiscal
Quarter for each of the Borrower and its Subsidiaries and ADT Limited
and its Subsidiaries, and quarterly unaudited consolidated statements
of income, cash flow and changes in shareholders' equity of each of the
Borrower and its Subsidiaries and ADT Limited and its Subsidiaries for
such Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter, in
each case, certified (subject to normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles and
consistency by the chief financial Authorized Officer of such Person;
(e) within ten Business Days of the delivery of the financial
statements required by clauses (a) and (d) of this Section, a
Compliance Certificate, executed by the chief financial Authorized
Officer of ADT Limited, (i) showing (in reasonable detail and with
appropriate calculations and computations in all respects reasonably
satisfactory to the Agent) compliance with the financial covenants set
forth in Section 8.2.3 and Sections 4.2.4, 4.2.6 and 4.2.7 of the ADT
Limited Guaranty and (ii) giving notice of the other items referred to
in the Compliance Certificate;
(f) promptly after the sending or filing thereof, copies of
all reports which ADT Limited sends to any class of its security
holders generally, and all reports and registration statements (other
than the exhibits thereto and any registration statements on Form S-8
or its equivalent) which ADT Limited or any of its Subsidiaries files
with the Securities and Exchange Commission (or any foreign equivalent)
or any national securities exchange, including, without limitation,
Form 10-Ks and 10-Qs for ADT Limited;
(g) as soon as possible and in any event within five Business
Days after any executive or financial officer of the Borrower or ADT
Limited obtains knowledge of the occurrence of any Default, a statement
of the chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower or ADT
Limited has taken and proposes to take with respect thereto;
(h) as soon as possible and in any event within five Business
Days after (x) the occurrence of any material adverse development with
respect to any litigation, action, proceeding, or labor controversy
described in Section 7.6 or Section 3.7 of the ADT Limited Guaranty or
(y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in Section 7.6 or Section 3.7 of the
ADT Limited Guaranty, notice thereof describing in reasonable detail
such development or such labor controversy, litigation, action or
proceeding;
(i) immediately upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under section
302(f) of ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Borrower furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan which could
result in the incurrence by the Borrower of any material liability, fine
or penalty, or any material increase in the contingent liability of the
Borrower with respect to any post-retirement Welfare Plan benefit,
notice thereof and copies of all documentation relating thereto; and
(j) such other information respecting the condition or
operations, financial or otherwise, of the Borrower, ADT Limited or any
other Subsidiary of ADT Limited as any Lender through the Agent may
from time to time reasonably request.
SECTION 8.1.2. Compliance with Laws, etc. The Borrower will, and will
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):
(a) except to the extent permitted under Section 4.2.9 of the
ADT Limited Guaranty, the maintenance and preservation by the Borrower
and each of its Subsidiaries that is an Obligor of its corporate
existence and qualification as a foreign corporation in each
jurisdiction where the nature of its business or the location of its
assets requires it to be so qualified, except to the extent the failure
to maintain and preserve its corporate existence or to be so qualified
could not reasonably be expected to have a material adverse effect on
the business, results of operations, financial condition or prospects of
the Borrower and its Subsidiaries, taken as a whole (it being
acknowledged that the failure of the Borrower to maintain and preserve
its corporate existence (except as permitted under Section 4.2.9 of the
ADT Limited Guaranty) shall be deemed to have such a material adverse
effect); and
(b) the payment, before the same become delinquent, of all
material taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 8.1.3. Covenants Relating to Judgment Letters of Credit. (a)
The Borrower agrees that, in the case of each draw under a Judgment Letter of
Credit (each such draw, a "Draw Event"), it will provide to the Agent a
certificate executed by its chief financial Authorized Officer (each such
certificate, a "Draw Certificate") pursuant to which it will show in reasonable
detail:
(i) to the extent it shall have received such information from
the Issuer, the amount of such draw (such amount, the "Current Draw
Amount"),
(ii) to the extent it shall have previously received such
information from the Issuer, the aggregate amount of all previous draws
under all Judgment Letters of Credit (such aggregate amount, the "Prior
Draw Amount"),
(iii) the aggregate amount (without duplication) of all cash
contributions made to the capital of the Borrower by the Borrower's
parent and of all cash proceeds of Subordinated Intercompany Debt
provided by ADT Limited or Wholly Owned Subsidiaries of ADT Limited
(other than Subsidiaries of the Borrower) and permitted pursuant to
clause (m) of Section 8.2.2, in each case since December 6, 1995 (such
aggregate amount, the "Investment Amount"), and
(iv) the aggregate amount (without duplication) counted (A) as an
Investment under clause (c) of Section 4.2.5 of the ADT Limited
Guaranty (by virtue of clause (k) of Section 4.2.2 of the ADT Limited
Guaranty) (the maximum amount permitted under such clause (c) by virtue
of such clause (k) at any time, the "Borrower Intercompany Debt
Basket"), (B) as an Investment under clause (o) of Section 4.2.5 of the
ADT Limited Guaranty (the maximum amount permitted under such clause
(o) at any time, the "General Debt Basket") or (C) as a Restricted
Borrower Distribution under clause (b)(ii) of Section 4.2.6 of the ADT
Limited Guaranty (the maximum amount permitted under such clause
(b)(ii) at any time, the "Restricted Borrower Distribution Basket"), in
each case prior to such Draw Event as a result of the immediately
succeeding sentence (such aggregate amount, the "Basket Usage Amount").
The failure of the Borrower to deliver to the Agents a Draw Certificate within
ten Business Days after notice of a Draw Event shall have been given to the
Borrower shall constitute an Event of Default.
(b) The Borrower acknowledges that, upon each Draw Event, the excess,
if any, of (i) the sum of the Current Draw Amount with respect to such Draw
Event plus the Prior Draw Amount with respect to such Draw Event over (ii) the
sum of the Investment Amount with respect to such Draw Event plus the Basket
Usage Amount with respect to such Draw Event shall, to the extent available
and as specified in the applicable Draw Certificate (or, in the absence of
such Draw Certificate, as specified by the Agent), count against the Borrower
Intercompany Debt Basket, the General Debt Basket and/or the Restricted
Borrower Distribution Basket. In the event the aggregate amount then
available under the Borrower Intercompany Debt Basket, the General Debt Basket
and/or the Restricted Borrower Distribution Basket is less than the excess
referred to in the immediately preceding sentence, the Borrower agrees that it
will use its best efforts to obtain, within ten Business Days after notice of
the applicable Draw Event shall have been given to it, a cash capital
contribution from its parent and/or cash proceeds of Subordinated Intercompany
Debt provided by ADT Limited or Wholly Owned Subsidiaries of ADT Limited
(other than Subsidiaries of the Borrower) to the extent permitted by clause
(m) of Section 8.2.2 in an aggregate amount equal to or greater than such
excess. The failure of the Borrower to obtain such amount and provide to the
Agent a certificate executed by its chief financial Authorized Officer
certifying as to its receipt of such amount within such ten day period shall
constitute an Event of Default (regardless of whether the Borrower has used
its best efforts).
SECTION 8.1.4. Syndication. Solely for the benefit of the Agent and
the Lenders on the Closing Date, the Borrower acknowledges its agreements
under the Commitment Letter with respect to the syndication of Scotiabank's
Revolving Loan Commitment, Revolving Loans and Letter of Credit Outstandings,
which agreements are incorporated herein by this reference, including its
agreements to assist Scotiabank in such syndication and to limit (as set forth
in the Commitment Letter) the arrangement of any other syndicated or
multi-bank financing for it or any of its Affiliates (exclusive of the U.K.
Credit Facility (as defined in the ADT Limited Guaranty) currently in
syndication) and the offering, placement or arrangement of any of its or its
Affiliates' debt or equity securities prior to the completion of such
syndication.
SECTION 8.2. Negative Covenants. The Borrower agrees with the Agent
and each Lender that, until the Covenant Termination Date, the Borrower will
perform the obligations set forth in this Section 8.2.
SECTION 8.2.1. Business Activities. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
for those activities conducted in respect of the Core Businesses and the
businesses identified in Item 8.2.1 ("Permitted Existing Business Activities")
of the Disclosure Schedule, and such activities as may be incidental or
related thereto; provided, however, that the Borrower will not be in default
in the observance of this Section 8.2.1 if, as part of the acquisition of a
Core Business, the Borrower or its applicable Subsidiary acquires a business
or assets that would not constitute, or be included in, a Core Business, so
long as (i) the primary purpose of such acquisition was the acquisition of
such Core Business, which acquisition could not have been consummated on as
commercially attractive terms without the acquisition of such other business
or assets, (ii) not less than 70% of the assets acquired pursuant to such
acquisition related at the time of such acquisition to such Core Business,
(iii) the Borrower or such applicable Subsidiary is diligently pursuing the
sale of such other business or assets and (iv) such business or assets do not
have, and could not reasonably be expected to have, a material adverse effect
on the business, results of operations, financial condition or prospects of
the Borrower and its Subsidiaries taken as a whole.
SECTION 8.2.2. Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and
other Obligations;
(b) Indebtedness in respect of the Senior Notes in an
aggregate principal amount not to exceed $250,000,000 at any time
outstanding;
(c) Indebtedness in respect of the Senior Subordinated Notes
in an aggregate principal amount not to exceed $350,000,000 at any time
outstanding;
(d) Indebtedness in respect of the LYONs in an aggregate
principal amount equal to $297,373,612.50 plus the amount of original
issue discount accrued thereon through the date such principal amount
is determined, less the portion of such amount represented by LYONs
which have been exchanged for Common Shares;
(e) Indebtedness in respect of the Senior Note Guarantees to
the extent the guarantor under any such Senior Note Guarantee is
subject to a Guarantee that is in full force and effect with respect to
the Indebtedness referred to in clause (a) above;
(f) (i) Indebtedness existing as of June 30, 1995; provided
that (A) such Indebtedness having a principal amount in excess of
$3,000,000 is identified in Item 8.2.2(f) ("Ongoing Indebtedness") of
the Disclosure Schedule and (B) true and correct copies of any indenture
or agreement governing such Indebtedness having a principal amount in
excess of $10,000,000 have been provided to the Agent and (ii)
Indebtedness of ADT Security Services in respect of the Dividended Note;
(g) Indebtedness of ADT Automotive, ADT Auctions, Inc., ADT
Property Holdings, Inc. and Auction Transport, Inc., each a Delaware
corporation and Wholly Owned Subsidiary of the Borrower, incurred for
cash management purposes in the ordinary course of business in an
aggregate principal amount not to exceed $60,000,000 at any time
outstanding, which Indebtedness shall include the Indebtedness of ADT
Automotive under the facility agreement dated December 1, 1991, between
it and NBD Bank (the National Bank of Detroit);
(h) obligations of the Borrower or any of its Subsidiaries
pursuant to Hedging Arrangements designed to protect the Borrower or
any of its Subsidiaries against fluctuations in interest rates in
respect of Indebtedness of the Borrower or such Subsidiary and not
entered into for purposes of speculation;
(i) obligations of the Borrower or any of its Subsidiaries
pursuant to Hedging Arrangements designed to protect the Borrower or
any of its Subsidiaries against fluctuations in currency values and
entered into in the ordinary course of business and not for purposes of
speculation;
(j) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but excluding
Indebtedness incurred through the borrowing of money or Contingent
Liabilities in respect of obligations of Persons other than the
Borrower or any of its Subsidiaries);
(k) Indebtedness in respect of Capitalized Lease Liabilities
and Indebtedness ("Capex Indebtedness") incurred to finance the
construction or acquisition of assets permitted to be acquired or
constructed pursuant to Section 4.2.7 of the ADT Limited Guaranty, to
the extent a Capitalized Lease Liability (assuming for the purposes of
this clause only that Capex Indebtedness constitutes a Capitalized
Lease Liability) could have been incurred under such Section 4.2.7;
(l) Indebtedness of the Borrower and Subsidiary Guarantors
owing to the Borrower and Subsidiary Guarantors;
(m) Indebtedness of the Borrower and Subsidiary Guarantors
owing to Wholly Owned Subsidiaries of ADT Limited (other than
Indebtedness in respect of the Dividended Note), provided that such
Indebtedness constitutes Subordinated Intercompany Debt or, to the
extent not constituting Subordinated Intercompany Debt, does not exceed
at any time outstanding $20,000,000;
(n) Indebtedness of Subsidiaries of the Borrower (other than
Subsidiary Guarantors) owing to ADT Limited;
(o) Indebtedness of Wholly Owned Subsidiaries of the Borrower
(other than Subsidiary Guarantors) owing to Wholly Owned Subsidiaries
of ADT Limited;
(p) Indebtedness consisting of guarantees, surety or
performance bonds or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets;
(q) Indebtedness in respect of surety bonds and performance
bonds provided in the ordinary course of business;
(r) Indebtedness which refinances Indebtedness permitted by
clauses (b), (c), (d), (e), (f), (g) and (k) above; provided, however,
that after giving effect to such refinancing, (i) the principal amount
of outstanding Indebtedness is not increased, (ii) in the case of
clauses (b), (c), (d), (e) or (f), neither the tenor nor the average
life thereof is reduced, (iii) the respective obligor or obligors shall
be the same on the refinancing Indebtedness as on the Indebtedness
being refinanced, (iv) the security for the refinancing Indebtedness
shall be the same as that for the Indebtedness being refinanced (except
to the extent that less security is granted to holders of refinancing
Indebtedness), (v) the holders of refinancing Indebtedness are not
afforded covenants, defaults, rights or remedies more burdensome to the
obligor or obligors than those contained in the Indebtedness being
refinanced and (vi) the refinancing Indebtedness is subordinated to the
same degree, if any, as the Indebtedness being refinanced; and
(s) other Indebtedness of the Borrower and its Subsidiaries
to the extent that the amount of such Indebtedness outstanding at any
time, when added (without duplication) to the aggregate amount of
Indebtedness outstanding at such time under clause (q) of Section 4.2.2
of the ADT Limited Guaranty, does not exceed $75,000,000;
provided, however, that (i) no Indebtedness otherwise permitted by clauses (m)
or (s) shall be permitted if, after giving effect to the incurrence thereof,
any Event of Default shall have occurred and be continuing and (ii) upon the
occurrence of a Permitted Auction Business Sale, all Auction Business
Intercompany Debt is paid in full in cash at par.
SECTION 8.2.3. Financial Condition. The Borrower will not permit:
(a) its Stockholders' Equity to be at any time less than
negative $75,000,000; and
(b) its EBITDA, as of any date, for the four consecutive
Fiscal Quarters ending on the last day of the Fiscal Quarter most
recently ended on or prior to such date to be less than $300,000,000.
SECTION 8.2.4. Any Action. The Borrower will not, and will not permit
any of its Subsidiaries to, take or omit to take any action the taking or the
omission of which would result in the failure of any Obligor fully and
properly to perform and observe all of its obligations under any Loan Document
to which it is a party.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 9.1 shall constitute an "Event
of Default".
SECTION 9.1.1. Non-Payment of Obligations. The Borrower shall (a)
default in the payment or prepayment when due of any principal of any Loan,
(b) default in the payment when due of any Reimbursement Obligation, (c)
default in the payment of any amount due pursuant to Section 4.7, (d) default
(and such default shall continue unremedied for a period of three Business
Days) in the payment when due of any interest on any Competitive Bid Loan, (e)
default (and such default shall continue unremedied for a period of three
Business Days) in the payment when due of any interest on any Revolving Loan
or (f) default (and such default shall continue unremedied for a period of
three Business Days) in the payment when due of any fee or of any other
Obligation payable hereunder or under any other Loan Document.
SECTION 9.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in
any other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower or any other Obligor to the Agent,
any Issuer or any Lender for the purposes of or in connection with this
Agreement or any such other Loan Document (including any certificates
delivered pursuant to Article VI) is or shall be incorrect when made in any
material respect.
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations.
(a) The Borrower shall default in the due performance and observance of any
of its obligations under Sections 8.2.2 and 8.2.3 or, with respect to the
Borrower, clause (a) of Section 8.1.2.
(b) ADT Limited shall default in the due performance and observance of
any of its obligations under Section 4.2 (other than Sections 4.2.1 and
4.2.20) or Sections 4.1.6 or 4.1.7 or, with respect to the Borrower and ADT
Limited, clause (a) of Section 4.1.1 of the ADT Limited Guaranty.
(c) The Borrower shall default in the due performance and observance
of any of its obligations under Section 8.2.1 or Section 8.1.1 (other than
clauses (c), (f) and (j) of Section 8.1.1), and such default shall continue
unremedied for a period of five Business Days.
(d) ADT Limited shall default in the due performance and observance of
any of its obligations under Section 4.2.1 of the ADT Limited Guaranty, and
such default shall continue unremedied for a period of five Business Days.
(e) The Borrower shall default in the due performance of any of its
obligations under Section 8.1.3 within the time periods set forth therein.
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations.
The Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan
Document executed by it, and such default shall continue unremedied for a
period of 30 days after notice thereof shall have been given to the Borrower
by the Agent or any Lender.
SECTION 9.1.5. Default on Other Indebtedness. A default shall occur
(a) in the payment when due (subject to any applicable grace period), whether
by acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 9.1.1) of the Borrower, ADT Limited or any other
Subsidiary of ADT Limited having a principal amount, individually or in the
aggregate, in excess of $15,000,000, or (b) in the performance or observance
of any obligation or condition with respect to such Indebtedness if the effect
of such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or agent
for such holders, to cause such Indebtedness to become due and payable prior
to its expressed maturity.
SECTION 9.1.6. Judgments. Any judgment or order for the payment of
money in excess of $15,000,000 shall be rendered against the Borrower, ADT
Limited or any other Subsidiary of ADT Limited and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 30 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.
SECTION 9.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan, in excess of $15,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 9.1.8. Change in Control. Any Change in Control shall occur.
SECTION 9.1.9. Bankruptcy, Insolvency, etc. The Borrower or any other
Material Related Party shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, or permit any
other Subsidiary of the Borrower or ADT Limited to apply for, the
appointment of a trustee, administrator, receiver, sequestrator or
other custodian for the Borrower or any other Material Related Party or
any property of any thereof, or make a general assignment for the
benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
administrator, receiver, sequestrator or other custodian for the
Borrower or any other Material Related Party or for a substantial part
of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within 60 days,
provided that the Borrower hereby expressly authorizes the Agent and
each Lender to appear in any court conducting any relevant proceeding
during such 60 day period to preserve, protect and defend their rights
under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement, administration,
receivership or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any other Material Related
Party, and, if any such case or proceeding is not commenced by the
Borrower, ADT Limited or any other Subsidiary of ADT Limited, such case
or proceeding shall be consented to or acquiesced in by the Borrower or
such other Material Related Party or shall result in the entry of an
order for relief or shall remain for 60 days undismissed, provided that
the Borrower hereby expressly authorizes the Agent and each Lender to
appear in any court conducting any such case or proceeding during such
60-day period to preserve, protect and defend their rights under the
Loan Documents; or
(e) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
SECTION 9.1.10. Impairment of Loan Documents, etc. (a) Any Loan
Document shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of any Obligor party thereto, except pursuant to a
transaction permitted under Section 4.2.9 of the ADT Limited Guaranty
(provided that, if, as a result of such transaction, any such Obligor shall
cease to exist, such obligation of such Obligor is expressly assumed by the
other Person party to such transaction) or a sale or transfer of the Capital
Stock of any such Obligor permitted under clause (c)(ii) of Section 4.2.10 of
the ADT Limited Guaranty or pursuant to a Permitted Auction Business Sale; or
the Borrower, any such Obligor or any other party shall, directly or
indirectly, contest in any manner such effectiveness, validity, binding nature
or enforceability.
(b) The subordination provisions contained in, or relating to, the
Senior Subordinated Note Indenture, the LYONs Indenture or the Dividended Note
shall (except in accordance with their respective terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of any holder of Senior Subordinated Notes, LYONs or
the Dividended Note or of any party to the Senior Subordinated Note Indenture
or the LYONs Indenture.
SECTION 9.2. Action if Bankruptcy. If any Event of Default described
in clause (b) or (d) of Section 9.1.9 shall occur with respect to the Borrower
or ADT Limited, the Revolving Loan Commitment (if not theretofore terminated)
shall automatically terminate, the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable and the Borrower shall immediately comply with its
obligations under Section 4.7, in each case without notice or demand.
SECTION 9.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default with respect to the Borrower or ADT
Limited described in clause (b) or (d) of Section 9.1.9) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Agent, upon
the direction of the Required Lenders, shall by notice to the Borrower declare
all or any portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable, terminate the Revolving Loan Commitment (if
not theretofore terminated) and/or demand immediate compliance of the Borrower
with its obligations under Section 4.7, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice,
demand or presentment, the Revolving Loan Commitment shall terminate and/or,
as the case may be, the Borrower shall be obligated to comply immediately with
its obligations under Section 4.7.
ARTICLE X
THE AGENT
SECTION 10.1. Actions. Each Lender hereby appoints Scotiabank as its
agent under and for purposes of this Agreement, the Notes and each other Loan
Document. Each Lender authorizes the Agent to act on behalf of such Lender
under this Agreement, the Notes and each other Loan Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by the Agent (and the Agent hereby agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
independent counsel of nationally recognized standing, with such written
instructions), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto.
Each Lender hereby indemnifies the Agent and each Issuer (which indemnities
shall survive any termination of this Agreement and shall be pro rata
according to such Lender's Percentage), from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any
kind or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Agent or any Issuer in any way relating to or arising
out of this Agreement, the Notes and any other Loan Document, including
reasonable attorneys' fees, and as to which the Agent is not reimbursed by the
Borrower; provided, however, that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, claims,
costs or expenses which are determined by a court of competent jurisdiction to
have resulted from the Agent's gross negligence or wilful misconduct. The
Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Agent shall
be or become, in the Agent's determination, inadequate, the Agent may call for
additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 10.2. Funding Reliance, etc. Unless the Agent shall have been
notified by telephone, confirmed in writing, by 5:00 p.m., New York City time,
on the day prior to a Borrowing by any Lender that is to participate in such
Borrowing that such Lender will not make available the amount which would
constitute its portion of such Borrowing on the date specified therefor, the
Agent may assume that such Lender has made such amount available to the Agent
and, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If and to the extent that such Lender shall not have
made such amount available to the Agent, such Lender and the Borrower
severally agree to repay the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date the Agent
made such amount available to the Borrower to the date such amount is repaid
to the Agent, at, in the case of the Borrower, the interest rate applicable at
the time to Loans comprising such Borrowing, and, in the case of such Lender,
the Federal Funds Effective Rate.
SECTION 10.3. Exculpation. None of the Agent, the Issuers or any of
their respective directors, officers, employees or agents shall be liable to
any Lender for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or therewith,
except for its own wilful misconduct or gross negligence, nor responsible for
any recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or any other Loan
Document, or the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, nor to make any inquiry respecting the
performance by the Borrower of its obligations hereunder or under any other
Loan Document. Any such inquiry which may be made by the Agent or an Issuer
shall not obligate the Agent or such Issuer, as the case may be, to make any
further inquiry or to take any action. The Agent and each Issuer shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which the Agent or such
Issuer believes to be genuine and to have been presented by a proper Person.
SECTION 10.4. Successor. The Agent may resign as such at any time
upon at least 30 days' prior notice to the Borrower and all Lenders. If the
Agent at any time shall resign, (i) the Required Lenders may appoint another
Lender as successor Agent which shall thereupon become the Agent hereunder and
(ii) 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 notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be one of the
Lenders or a commercial banking institution organized under the laws of the
U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least
$500,000,000; provided that if any such successor Agent is organized under the
laws of any jurisdiction other than the United States or any state thereof or
is beneficially owned or controlled by a person so organized, such successor
Agent shall execute such documents and instruments, if any, as may be required
by the United States Department of Defense. Upon the acceptance of any
appointment as the Agent hereunder by a successor Agent, such successor Agent
shall be entitled to receive from the retiring Agent such documents of
transfer and assignment as such successor Agent may reasonably request, and
shall thereupon succeed to and become vested with all rights, powers,
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 hereunder as the Agent, the provisions of
(a) this Article X shall inure to such retiring Agent's
benefit as to any actions taken or omitted to be taken by it while it
was the Agent under this Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to inure to
such retiring Agent's benefit.
SECTION 10.5. Loans or Letters of Credit Issued by Scotiabank.
Scotiabank has the same rights and powers with respect to (x) the Loans made
by it or any of its Affiliates, (y) the Notes held by it or any of its
Affiliates, and (z) its participating interests in the Letters of Credit as
any other Lender and may exercise the same as if it were not the Agent.
Scotiabank and each of Scotiabank's Affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with the Borrower or
any Subsidiary or Affiliate of the Borrower as if Scotiabank were not the
Agent hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to extend its
Revolving Loan Commitment. Each Lender also acknowledges that it will,
independently of the Agent and each other Lender, and based on such other
documents, information and investigations as it shall deem appropriate at any
time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document.
SECTION 10.7. Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the
Agent by the Borrower pursuant to the terms of this Agreement (unless
concurrently delivered to the Lenders by the Borrower). The Agent will
distribute to each Lender each document or instrument received for its account
and copies of all other communications received by the Agent from the Borrower
for distribution to the Lenders by the Agent in accordance with the terms of
this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. (a) The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing
and consented to by the Borrower and the Required Lenders; provided, however,
that no such amendment, modification or waiver shall:
(i) modify any requirement hereunder that any particular action
be taken by all the Lenders or by the Required Lenders, modify this
Section 11.1(a) or change the definition of "Required Lenders", or
release ADT Limited from its guarantee of the Obligations of the
Borrower under Section 2.1 of the ADT Limited Guaranty, unless consented
to by each Lender;
(ii) increase any Revolving Loan Commitment Amount with respect
to such Lender or the Percentage of any Lender, reduce any fees (or
extend any payment date therefor) described in Article III payable to
any Lender or extend the Revolving Loan Commitment Termination Date with
respect to any Lender, without the consent of such Lender;
(iii) extend the due date for, or reduce the amount of, any
scheduled repayment of principal of or interest on any Loan (or reduce
the principal amount of or rate of interest on any Loan), without the
consent of the holder of the Note evidencing such Loan;
(iv) affect adversely the interests, rights or obligations of
any Issuer qua Issuer, without the consent of such Issuer; or
(v) affect adversely the interests, rights or obligations of the
Agent qua Agent, without the consent of the Agent.
(b) No failure or delay on the part of the Agent, any Lender or the
holder of any Note in exercising any power or right under this Agreement or
any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No
notice to or demand on the Borrower in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or approval by the
Agent, any Lender or the holder of any Note under this Agreement or any other
Loan Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
SECTION 11.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be
in writing or by facsimile and addressed, delivered or transmitted to such
party at its address or facsimile number set forth below its signature hereto
or set forth in the Lender Assignment Agreement or at such other address or
facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid,
return receipt requested, or if properly addressed and sent by pre-paid courier
service, shall be deemed given when received; any notice, if transmitted by
facsimile, shall be deemed given when transmitted upon receipt of electronic
confirmation of transmission (it being understood and agreed that notice
transmitted by facsimile to ADT Inc. shall constitute notice to the Borrower
hereunder).
SECTION 11.3. Payment of Costs and Expenses. The Borrower agrees to
pay on demand all reasonable out-of-pocket expenses of the Agent (including
the fees and out-of-pocket expenses of counsel to the Agent (and of local
counsel, if any, who may be retained by such counsel)) in connection with
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other similar taxes which may be
payable in connection with the execution or delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes, the issuance of the Letters
of Credit, or any other Loan Documents. The Borrower also agrees to reimburse
the Agent and each Lender upon demand for all reasonable out-of-pocket
expenses (including attorneys' fees and legal expenses) incurred by the Agent
or such Lender in connection with (x) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Revolving
Loan Commitments, the Borrower hereby indemnifies, exonerates and holds the
Agent, each Issuer and each Lender and each of their respective officers,
directors, employees and agents (collectively, the "Indemnified Parties") free
and harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in connection
therewith (irrespective of whether any such Indemnified Party is a party to
the action for which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or the use
of any Letter of Credit;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article VI not to make
any Credit Extension);
(c) any investigation, litigation or proceeding related to
any environmental cleanup, audit, compliance or other matter relating
to the protection of the environment or the Release by the Borrower or
any of its Subsidiaries of any Hazardous Material; or
(d) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct and provided that an Indemnified Party
will not effect any settlement in connection with any such Indemnified
Liabilities without the prior written consent of the Borrower, which consent
shall not be unreasonably withheld or delayed. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
SECTION 11.5. Survival. The obligations of the Borrower under
Sections 4.9, 5.3, 5.4, 5.5, 5.6, 11.3 and 11.4, and the obligations of the
Lenders under Section 10.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Revolving Loan Commitments. The representations and warranties made by each
Obligor in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become
effective when counterparts hereof executed on behalf of the Borrower and each
Lender (or notice thereof satisfactory to the Agent) shall have been received
by the Agent.
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This
Agreement, the Notes, the other Loan Documents and the agreements referred to
in Sections 3.3.3, 3.3.4, 3.3.5 and 11.11.1 constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 11.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Agent
and all Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Revolving Loan Commitment to one or more other Persons in accordance with
this Section 11.11.
SECTION 11.11.1. Assignments. Any Lender,
(a) with the written consents of the Borrower, the Agent and
each Issuer (which consents shall not be unreasonably delayed or
withheld) may at any time assign and delegate to one or more commercial
banks or other financial institutions (provided that such consents shall
not, except to the extent provided in the Commitment Letter, be
required in connection with any syndication by Scotiabank of its
Revolving Loan Commitment, Revolving Loans and Letter of Credit
Outstandings in accordance with the provisions of the Commitment
Letter), and
(b) with notice to the Borrower and the Agent, but without
the consent of the Borrower or the Agent, may assign and delegate to
any of its branches, agencies or Affiliates (provided a majority of the
Capital Stock of such Affiliate is held directly or indirectly by such
Lender or such Lender's holding company) or to any other Lender
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), (x) all or any fraction of such Lender's
Competitive Bid Loans and/or (y) all or any proportionate fraction of such
Lender's Revolving Loans, Letter of Credit Outstandings and Revolving Loan
Commitment, in each case, in a minimum aggregate amount equal to the lesser of
$5,000,000 and all of its (x) Competitive Bid Loans or (y) Revolving Loans,
Letter of Credit Outstandings and Revolving Loan Commitment, as the case may
be; provided, however, that any such Assignee Lender will comply, if
applicable, with the provisions contained in the second sentence of the last
paragraph of Section 5.6; provided further, however, that, the Borrower, each
other Obligor and the Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
(i) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Borrower
and the Agent by such Lender and such Assignee Lender,
(ii) such Assignee Lender shall have executed and delivered to
the Borrower and the Agent a Lender Assignment Agreement, accepted by
the Agent, and
(iii) the processing fees described below shall have been paid.
From and after the date that the Agent accepts such Lender Assignment
Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents;
provided, that no Assignee Lender or other transferee of any Lender's rights
shall be entitled to receive any greater payment under Section 5.3, 5.5 or 5.6
than such Lender would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or at a time when the circumstances giving rise to such
greater payment did not exist, and (y) the assignor Lender, to the extent that
rights and obligations hereunder have been assigned and delegated by it in
connection with such Lender Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents. Within five
Business Days after its receipt of notice that the Agent has received an
executed Lender Assignment Agreement, the Borrower shall execute and deliver
to the Agent (for delivery to the relevant Assignee Lender) new Notes
evidencing such Assignee Lender's assigned Loans and Revolving Loan Commitment
and, if the assignor Lender has retained Loans and any Revolving Loan
Commitment hereunder, replacement Notes in the principal amount of the Loans
and such Revolving Loan Commitment retained by the assignor Lender hereunder
(such Notes to be in exchange for, but not in payment of, those Notes then
held by such assignor Lender). Each such Note shall be dated the date of the
predecessor Notes. The assignor Lender shall mark the predecessor Notes
"exchanged" and deliver them to the Borrower. Accrued interest on that part
of the predecessor Notes evidenced by the new Notes, and accrued fees, shall
be paid as provided in the Lender Assignment Agreement. Accrued interest on
that part of the predecessor Notes evidenced by the replacement Notes shall
be paid to the assignor Lender. Accrued interest and accrued fees shall be
paid at the same time or times provided in the predecessor Notes and in this
Agreement. Such assignor Lender or such Assignee Lender must also pay a
processing fee to the Agent upon delivery of any Lender Assignment Agreement
in the amount of $3,000. Any attempted assignment and delegation not made in
accordance with this Section 11.11.1 shall be null and void. Notwithstanding
any provision contained in this Section 11.11.1 to the contrary, nothing shall
prevent or prohibit any Lender from pledging its rights under this Agreement
and/or its Loans and/or Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank; provided that
no such pledge by any Lender shall relieve such Lender of any of its
obligations hereunder.
SECTION 11.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other Persons (each of such commercial banks
and other Persons being herein called a "Participant") participating interests
(or a sub-participating interest, in the case of a Lender's participating
interest in a Letter of Credit) in any of the Loans, Revolving Loan Commitment,
or other interests of such Lender hereunder; provided, however, that
(a) no participation or sub-participation contemplated in this
Section 11.11 shall relieve such Lender from its Revolving Loan
Commitment or its other obligations hereunder or under any other Loan
Document,
(b) such Lender shall remain solely responsible for the
performance of its Revolving Loan Commitment and such other obligations,
(c) the Borrower and each other Obligor and the Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each
of the other Loan Documents,
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (ii) or (iii)
of Section 11.1(a), and
(e) the Borrower shall not be required to pay any amount under
Section 5.6 that is greater than the amount which it would have been
required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that, to the extent permitted under
applicable law, each Participant, for purposes of Sections 5.3, 5.4, 5.5, 5.6,
5.8, 11.3 and 11.4, shall be considered a Lender; provided, that no
Participant shall be entitled to receive any greater payment under Section
5.3, 5.5 or 5.6 than the Lender that transferred such rights to such
Participant would have been entitled to receive with respect to such rights,
unless such transfer is made with the Borrower's prior written consent or at a
time when the circumstances giving rise to such greater payment did not exist.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender or Issuer from engaging in any
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of its Affiliates in which the
Borrower or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 11.13. Independence of Covenants. All covenants contained in
this Agreement or any other Loan Document shall be given independent effect
such that, in the event a particular action or condition is not permitted by
any of such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of a
Default or an Event of Default if such action is taken or such condition
exists.
SECTION 11.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK
OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY
BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF
ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
BORROWER HEREBY IRREVOCABLY APPOINTS KAY, COLLYER & BOOSE (THE "PROCESS
AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 1 DAG HAMMARSKJOLD PLAZA, NEW
YORK, NEW YORK, UNITED STATES (ATTENTION: ELI SCHOENFIELD), AS ITS AGENT TO
RECEIVE, ON THE BORROWER'S BEHALF AND ON BEHALF OF ITS PROPERTY, SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED
IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR
DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER IN CARE OF THE PROCESS AGENT
AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE BORROWER HEREBY IRREVOCABLY
AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF.
AS AN ALTERNATIVE METHOD OF SERVICE, THE BORROWER ALSO IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY AGREES
THAT IN THE EVENT THE PROCESS AGENT IS NO LONGER RESIDENT IN NEW YORK, NEW
YORK, IT SHALL APPOINT A SUCCESSOR PROCESS AGENT RESIDENT IN NEW YORK, NEW
YORK, REASONABLY ACCEPTABLE TO THE AGENT, WHICH SUCCESSOR PROCESS AGENT SHALL
THEREAFTER BE THE PROCESS AGENT HEREUNDER. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.15. Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE
BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ADT OPERATIONS, INC.
By: /s/ Jan S. Beck
----------------------
Title: Vice President
Address: 902 Market Street
13th Floor
Wilmington, Delaware 19899
With a copy to:
ADT Inc.
2255 Glades Road
Boca Raton, Florida 33431
Facsimile No.: 407-241-8257
Attention: President
AGENT
THE BANK OF NOVA SCOTIA, as Agent
By: /s/ Frank F. Sandler
---------------------------
Title: Relationship Manager
Address: 600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No.: 404-888-8998
Attention: Frank Sandler
LETTER OF CREDIT ISSUER
THE BANK OF NOVA SCOTIA
By: /s/ Frank F. Sandler
---------------------------
Title: Relationship Manager
Address: 600 Peachtree Street N.E
Suite 2700
Atlanta, Georgia 30308
Facsimile No.: 404-808-8998
Attention: Cleve Bushey
PERCENTAGE LENDERS
100% THE BANK OF NOVA SCOTIA
By: /s/ Frank F. Sandler
---------------------------
Title: Relationship Manager
Domestic,
LIBOR
and
Notice
Office: 600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No.: 404-888-8998
Attention: Frank Sandler
----
100% Cleve Bushey
SCHEDULE II
to the Credit Agreement
SUBORDINATION PROVISIONS TO BE CONTAINED IN
SUBORDINATED INTERCOMPANY DEBT
The following provisions and conditions shall be made a part of
each instrument evidencing or pursuant to which Subordinated Intercompany Debt
may be incurred by any Person (a "Debtor") to another Person (a "Creditor")
in accordance with the Bank Credit Agreement referred to below.
1. DEFINED TERMS.
"ADT Limited Guaranty" means the ADT Limited Guaranty referred to
in the Bank Credit Agreement.
"Bank Credit Agreement" means, collectively, the Credit Agreement
dated as of January 9, 1997, among ADT Operations, Inc., a Delaware
corporation, the financial institutions as are or may become parties thereto
(collectively, the "Lenders"), and The Bank of Nova Scotia, as agent (the
"Agent") for the Lenders, together with any related documents (including,
without limitation, any guarantees) as in effect on the date hereof and as such
agreement (and such related documents) may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time, including any
agreement extending the maturity of or refinancing or refunding all or any
portion of the Indebtedness or increasing the amount to be borrowed under such
agreement or any successor agreement, whether or not by or among the same
parties.
"Senior Indebtedness" means the principal of (and premium, if any,
on) and interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law, whether or not
allowable as a claim in such proceeding) and other amounts due on or in
connection with, any indebtedness or other obligation of any nature of the
Debtor, whether outstanding on the date hereof or hereafter created, incurred
or assumed, under or with respect to (i) the Bank Credit Agreement (ii) the
ADT Limited Guaranty, (iii) the Subsidiary Guarantor Guaranty, (iv) the Senior
Note Indenture and the Senior Subordinated Note Indenture and (v) any interest
rate or foreign exchange agreement now existing or hereafter entered into by
the Debtor with any Lender (or any Affiliate of a Lender), including in each
case, without limitation, all fees, expenses (including fees and expenses of
counsel), claims, charges and indemnity obligations.
"Senior Note Indenture" means the Senior Note Indenture referred
to in the Bank Credit Agreement.
"Senior Subordinated Note Indenture" means the Senior Subordinated
Note Indenture referred to in the Bank Credit Agreement.
"Subsidiary Guarantor Guaranty" means the Subsidiary Guarantor
Guaranty referred to in the Bank Credit Agreement.
2. SUBORDINATION PROVISIONS.
(a) No principal payment shall be made or scheduled to be
made on or with respect to any Subordinated Intercompany Debt until
the later of the scheduled repayment of all Senior Indebtedness or
the actual payment in full in cash of all such Senior Indebtedness.
(b) Each Debtor and each Creditor agrees that all payments
by any Debtor of Subordinated Intercompany Debt to any Creditor
shall be subordinate and subject in right of payment to the prior
payment in full in cash of all Senior Indebtedness.
(c) The provisions contained herein shall constitute a
continuing offer to all Persons who are or become holders of
Senior Indebtedness or any document or instrument evidencing
Senior Indebtedness (regardless of whether such Senior
Indebtedness was created or acquired after the date hereof). The
subordination provisions contained herein are made for the benefit
of all present and future holders of Senior Indebtedness and shall
be enforceable by each of them directly.
3. PRIORITY AND PAYMENT OVER IN CERTAIN EVENTS.
(a) Subordination On Dissolution, Liquidation or
Reorganization of any Debtor. Upon any payment or distribution of
assets or securities of any Debtor of any kind or character
(whether in cash, property or securities) upon any dissolution,
winding up or total or partial liquidation or reorganization of
such Debtor, whether voluntary or involuntary or in a bankruptcy,
insolvency, receivership or other proceeding, or any assignment
for the benefit of creditors or any marshalling of assets and
liabilities of any Debtor (each such event, an "Insolvency
Event"), all Senior Indebtedness shall first be paid in full in
cash, before any Creditor shall be entitled to receive, directly or
indirectly, any payment of the principal of, premium, if any, or
interest on or any other amount due with respect to any
Subordinated Intercompany Debt or to receive any distribution of
any assets or securities. Before any payment of the principal of,
premium, if any, or interest on or any other amount due with
respect to any Subordinated Intercompany Debt upon any such
Insolvency Event, any payment or distribution of assets or
securities of such Debtor of any kind or character (whether in
cash, property or securities) to which any Creditor would be
entitled but for the subordination provisions hereof, shall be
made by such Debtor or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution directly to the holders of Senior Indebtedness or
their representatives to the extent necessary to pay the Senior
Indebtedness in full in cash after giving effect to any concurrent
payment or distribution to the holders thereof.
(b) Subordination on Default in Senior Indebtedness. If
there exists any default under the documents and instruments
evidencing any Senior Indebtedness, (i) no direct or indirect
payment by or on behalf of any Debtor of any Subordinated
Intercompany Debt or any other amount due with respect to such
Subordinated Intercompany Debt shall be made and (ii) no Creditor
will accelerate or declare in default any Subordinated
Intercompany Debt or exercise any remedies with respect thereto,
unless otherwise agreed to by the requisite holders of such Senior
Indebtedness pursuant to the terms of the documents and
instruments evidencing such Senior Indebtedness.
(c) Payment After Acceleration. In the event that any
Senior Indebtedness (or any part thereof) is declared due and
payable before its stated maturity or is not paid at its stated
maturity, then and in such event the holders of Senior
Indebtedness at the time such Senior Indebtedness so becomes due
and payable shall be entitled to receive payment in full in cash
of all amounts due or to become due on or in respect of all such
Senior Indebtedness before any Creditor is entitled to receive any
payment in respect of any Subordinated Intercompany Debt.
(d) Rights and Obligations of the Creditors. If,
notwithstanding the foregoing provisions of this Section 3
prohibiting such payment or distribution, any Creditor shall have
received any payment on account of any Subordinated Intercompany
Debt at a time when such payment is prohibited by the
subordination provisions contained herein and before all Senior
Indebtedness is paid in full in cash, then such payment or
distribution shall be received and held in trust for the holders
of Senior Indebtedness and shall be paid over or delivered to such
holders remaining unpaid to the extent necessary to pay in full
all Senior Indebtedness in cash, in accordance with their terms
after giving effect to any concurrent payment or distribution to
the holders of Senior Indebtedness.
4. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS IN AN INSOLVENCY
EVENT. If the Senior Indebtedness has not been paid in full in cash at a time
at which the Debtor is subject to an Insolvency Event, (a) the holders of
Senior Indebtedness are hereby irrevocably authorized, but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution received in respect of any such Insolvency Event and give
acquittance therefor and to file claims and proofs of claim, as their interests
may appear, and (b) the appropriate Creditor shall duly and promptly take, for
the account of the holders of Senior Indebtedness as their interests may
appear, such actions as such holders may request to collect and receive all
amounts payable by such Debtor, as the case may be, in respect of any
Subordinated Intercompany Debt and to file appropriate claims or proofs of
claim in respect of any Subordinated Intercompany Debt.
5. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT TO BE IMPAIRED.
No right of any holder of Senior Indebtedness to enforce subordination as
herein provided shall at any time or in any way be prejudiced or impaired by
any failure to act by any other such holder or by any noncompliance by the
Debtor with the terms and provisions and covenants contained in any document
or instrument evidencing Senior Indebtedness (or any document related thereto)
to which it is a party regardless of any knowledge thereof a holder of Senior
Indebtedness may have or otherwise be charged with. The provisions contained
herein are intended to be for the benefit of, and shall be enforceable
directly by, each holder of Senior Indebtedness.
6. SUBROGATION. (a) Each Creditor hereby agrees that it will
not exercise any rights of subrogation until the payment in full in cash of all
Senior Indebtedness.
(b) Payments or distributions made to the holders of Senior
Indebtedness pursuant to the terms hereof shall not, as against third parties,
be construed as a discharge of the indebtedness represented by any Subordinated
Intercompany Debt.
7. LIMITATION ON OTHER ACTIONS. (a) Each Creditor hereby agrees
to forbear and not take any action, the purpose or effect of which would give
it a preference or priority over the Senior Indebtedness or the holders
thereof with respect to the assets of the Debtor.
(b) Without limiting the effect of Section 3(b), each Creditor
hereby agrees to forebear and not accelerate or declare in default any
Subordinated Intercompany Debt or exercise any remedies with respect thereto
without giving the applicable representatives of the holders of Senior
Indebtedness (which, in the case of the Bank Credit Agreement, shall be the
Agent) 45 days prior written notice.
EXHIBIT A
REVOLVING NOTE
New York, New York
$___ ____ 19__
FOR VALUE RECEIVED, the undersigned, ADT OPERATIONS, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of
____________________ (the "Lender") on _________, 19__ the principal sum of
_________________ DOLLARS ($ ________) or, if less, the aggregate unpaid
principal amount of all Revolving Loans shown on the schedule attached hereto
(and any continuation thereof) made by the Lender pursuant to that certain
Credit Agreement, dated as of January __, 1997 (together with all amendments
and other modifications, if any, from time to time thereafter made thereto,
the "Credit Agreement"), among the Borrower, the financial institutions as are
or may become parties thereto (collectively, the "Lenders"), and The Bank of
Nova Scotia ("Scotiabank"), individually and as agent (the "Agent") for the
Lenders.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of the
United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is one of the Revolving Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a statement of the terms and conditions on which the Borrower is permitted
and required to make prepayments and repayments of principal of the
Indebtedness evidenced by this Note and on which such Indebtedness may be
declared to be immediately due and payable. Unless otherwise defined, terms
used herein have the meanings provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally waive
presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
ADT OPERATIONS, INC.
By
-------------------
Title:
REVOLVING LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
Amount of Revolving Interest Amount of Principal Unpaid Principal
Loan Made Period Repaid Balance Notation
Date Interest Total Made By
- ---- ----------------------- Period ----------------------- --------------------- ----- --------
Alternate (If Ap- Alternate Alternate
Base LIBO plic- Base LIBO Base LIBO
Rate Rate able) Rate Rate Rate Rate
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
EXHIBIT B
COMPETITIVE BID LOAN NOTE
$______________ New York, New York
[Date]
FOR VALUE RECEIVED, the undersigned, ADT OPERATIONS, INC., a Delaware
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of ____________________________ (the "Lender") at the office of The
Bank of Nova Scotia located at One Liberty Plaza, New York, New York 10006,
in lawful money of the United States of America and in immediately
available funds, the aggregate unpaid principal amount of each Competitive
Bid Loan which is made by the Lender to the Borrower pursuant to Section
2.3 of the Credit Agreement, as hereinafter defined. The principal amount
of each Competitive Bid Loan evidenced hereby shall be payable on the
Competitive Bid Loan Maturity Date therefor. The Borrower further agrees
to pay interest in like money at such office on the unpaid principal amount
of each Competitive Bid Loan evidenced hereby, at the Competitive Bid Rate
with respect thereto from the borrowing date of such Competitive Bid Loan
until the due date thereof (whether at the stated maturity, by acceleration
or otherwise) and thereafter at the rates determined in accordance with
Section 3.2.2 of the Credit Agreement. Interest on each Competitive Bid
Loan evidenced hereby shall be payable on any applicable Competitive Bid
Loan Interest Payment Dates and on the Competitive Bid Loan Maturity Date.
Except as otherwise provided in Section 3.1.1.2 of the Credit Agreement,
Competitive Bid Loans evidenced by this Note may not be prepaid without the
written consent of the Lender.
The holder of this Note is authorized to endorse on the schedule attached
hereto and made a part hereof or on a continuation of such schedule which
shall be attached hereto and made a part hereof (the "Grid") the date of the
Competitive Bid Loan Borrowing, amount, Competitive Bid Rate, Competitive Bid
Loan Interest Payment Dates and Competitive Bid Loan Maturity Date in respect
of each Competitive Bid Loan made by such holder pursuant to Section 2.3 of
the Credit Agreement and each payment of principal with respect thereto. Each
such endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement shall not
affect the obligations of the Borrower in respect of such Competitive Bid Loan.
This Note is one of the Competitive Bid Loan Notes referred to in the
Credit Agreement dated as of January __, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Lender, the various other financial institutions as are or
may become parties thereto (together with the Lender, the "Lenders"), and
The Bank of Nova Scotia ("Scotiabank"), individually and as agent (the
"Agent") for the Lenders, to which reference is made for a statement of the
terms and conditions on which the Borrower is permitted or required to make
prepayments and repayments of principal of the Indebtedness evidenced by
this Note and on which such Indebtedness may be declared to be immediately
due and payable.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK.
ADT OPERATIONS, INC.
By
----------------------
Title:
SCHEDULE OF COMPETITIVE BID LOANS
___________________, Lender
ADT OPERATIONS, INC., Borrower
Credit Agreement dated January __, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Date of
Competitive Competitive
Bid Amount of Bid Loan Competitive Competitive
Loan Competitive Competitive Interest Bid Loan Bid Loan
Borrowing Bid Loan Bid Rate Payment Dates Maturity Date Payment Date Authorization
</TABLE>
EXHIBIT C-1
REVOLVING LOAN BORROWING REQUEST
The Bank of Nova Scotia,
as Agent
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: ______________
ADT Operations, Inc.
--------------------
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section 2.2 of the
Credit Agreement, dated as of January __, 1997 (together with all amendments
and other modifications, if any, from time to time made thereto, the "Credit
Agreement"), among ADT Operations, Inc., a Delaware corporation (the
"Borrower"), the financial institutions as are or may become parties thereto
(collectively, the "Lenders"), and The Bank of Nova Scotia ("Scotiabank"),
individually and as agent (the "Agent") for the Lenders. Unless otherwise
defined herein or the context otherwise requires, terms used herein have the
meanings provided in the Credit Agreement.
The Borrower hereby requests that a Revolving Loan be made in the aggregate
principal amount of $__________ on ________ __, 199_ as a [LIBO Rate Loan
having an Interest Period of [one] [two] [three] [six] [nine] [twelve] months]
[Base Rate Loan].
The Borrower hereby acknowledges that, pursuant to Section 6.2.2 of the Credit
Agreement, each of the delivery of this Borrowing Request and the acceptance
by the Borrower of the proceeds of the Borrowing requested hereby constitute a
representation and warranty by the Borrower that, on the date of such
Borrowing, and before and after giving effect thereto and to the application
of the proceeds therefrom, all statements set forth in clauses (a), (b) and
(c) of Section 6.2.1 are true and correct in all material respects.
The Borrower agrees that if prior to the time of the Borrowing requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify the Agent. Except to
the extent, if any, that prior to the time of the Borrowing requested hereby
the Agent shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such Borrowing as if then made.
Please wire transfer the proceeds of the Borrowing to the accounts of the
following persons at the financial institutions indicated respectively:
Amount to be Person to be Paid Name, Address, etc.
Transferred Name Account No. of Transferee Lender
- ------------ ----------------- --------------------
$__________ __________ ___________ ______________________
______________________
Attention:____________
$__________ __________ ___________ ______________________
______________________
Attention:____________
Balance of The Borrower _________ ______________________
such proceeds ______________________
Attention:____________
The Borrower has caused this Borrowing Request to be executed and delivered,
and the certification and warranties contained herein to be made, by its duly
Authorized Officer this ____ day of ___________, 19___.
ADT OPERATIONS, INC.
By
-----------------------------
Title:
EXHIBIT C-2
COMPETITIVE BID LOAN BORROWING REQUEST
_______ __, 199____
The Bank of Nova Scotia,
as Agent
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention:
ADT Operations, Inc.
Reference is made to the Credit Agreement, dated
as of January __, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among ADT Operations, Inc., a Delaware
corporation (the "Borrower"), the various financial institutions as are or may
become parties thereto (the "Lenders"), and The Bank of Nova Scotia
("Scotiabank"), individually and as agent (the "Agent") for the Lenders. Terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement.
This is a Competitive Bid Loan Borrowing Request(1)) pursuant to
Section 2.3.1 of the Credit Agreement requesting Competitive
Bid Loan Offers for the following Competitive Bid Loans:
Loan(1) Loan (2) Loan 3(2)
Aggregate Principal Amount $ $ $
----------- ----------- -----------
Date of Competitive
Bid Loan Borrowing
Competitive Bid Loan
Maturity Date
- ----------
(1) A Competitive Bid Loan Borrowing Request may be transmitted in
writing, by telecopy, or by telephone, immediately confirmed by
telecopy. In any case, a Competitive Bid Loan Borrowing Request
shall contain the information specified in the second paragraph of
this form.
(2) Include if applicable.
The Borrower hereby acknowledges that, pursuant to Section 6.2.2 of the Credit
Agreement, each of the delivery of this Borrowing Request and the acceptance
by the Borrower of the proceeds of the Borrowing requested hereby constitute a
representation and warranty by the Borrower that, on the date of such
Borrowing, and before and after giving effect thereto and to the application
of the proceeds therefrom, all statements set forth in clauses (a), (b) and
(c) of Section 6.2.1 are true and correct in all material respects.
The Borrower agrees that if prior to the time of the Borrowing requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify the Agent. Except to
the extent, if any, that prior to the time of the Borrowing requested hereby
the Agent shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such Borrowing as if then made.
Very truly yours,
ADT OPERATIONS, INC.
By
--------------------
Name:
Title:
EXHIBIT D-1
INVITATION FOR BID LOAN OFFERS
[NAME OF LENDER]
_______________________
_______________________
Attention: ____________
Invitation for Bid Loan Offers to ADT Operations, Inc.
Pursuant to Section 2.3.2 of the Credit Agreement, dated as of January
__, 1997 (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among ADT Operations, Inc., a Delaware corporation
(the "Borrower"), the various financial institutions as are or may become
parties thereto (the "Lenders"), and The Bank of Nova Scotia
("Scotiabank"), individually and as agent (the "Agent") for the Lenders
(capitalized terms used herein are used as defined in the Credit
Agreement), we are pleased on behalf of the Borrower to invite you to
submit Competitive Bid Loan Offers to the Borrower for the following
proposed Competitive Bid Loan(s):
*1. Date of Proposed Competitive Bid Loan Borrowing:
__________ __, 19__.
2. Principal Amount
$
3. The Competitive Bid Loan Maturity Date
will be __________ __, 199_.
4. The Competitive Bid Loan Interest Payment
Date(s) will be ________ __, 199_.
Such Competitive Bid Loan Offers should offer a LIBO Rate Bid Margin.
(*) Information to be repeated if multiple Competitive Bid Loans have
been requested in a single Competitive Bid Loan Borrowing Request.
PLEASE RESPOND TO THIS INVITATION BY NO LATER THAN 10:00 am (NEW YORK
CITY TIME) ON ____________ __, 199_.
THE BANK OF NOVA SCOTIA, as
Agent
By:____________________________
Title:
EXHIBIT D-2
COMPETITIVE BID LOAN OFFER
________ __, 199__
The Bank of Nova Scotia,
as Agent
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention:__________________
ADT Operations, Inc.
Reference is made to the Credit Agreement, dated as of January __, 1997
(as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among ADT Operations, Inc., a Delaware corporation
(the "Borrower"), the various financial institutions as are or may become
parties thereto (the "Lenders"), and The Bank of Nova Scotia
("Scotiabank"), individually and as agent (the "Agent") for the Lenders.
Terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement.
In accordance with Section 2.3.3 of the Credit
Agreement, the undersigned Lender offers to make Competitive Bid Loans
thereunder in the following amounts with the following maturity dates:
Date of Competitive Aggregate Maximum Amount: $______
Bid Loan Borrowing:
________ __, 199__
Competitive Bid Loan Maturity Date 1: Maximum Amount: $________
______ __, 199__ $_______ offered at ________*
$_______ offered at ________*
Competitive Bid Loan Maturity Date 2**: Maximum Amount: $________
_______ __, 199__ $_______ offered at ________*
$_______ offered at ________*
Competitive Bid Loan Maturity Date 3**: Maximum Amount: $________
_______ __, 199__ $_______ offered at ________*
$_______ offered at ________*
Very truly yours,
[NAME OF LENDER]
By:__________________
Name:
Title:
Telephone No.:
Telecopy No.:
* Insert the LIBO Rate Bid Maragin
** Include if applicable
EXHIBIT D-3
COMPETITIVE BID LOAN ACCEPTANCE
_________ __, 199__
The Bank of Nova Scotia,
as Agent
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: ________________
ADT Operations, Inc.
Reference is made to the Credit Agreement, dated as of January __, 1997
(as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among ADT Operations, Inc., a Delaware corporation
(the "Borrower"), the various financial institutions as are or may become
parties thereto (the "Lenders"), and The Bank of Nova Scotia
("Scotiabank"), individually and as agent (the "Agent") for the Lenders.
Terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement.
In accordance with Section 2.3.5 of the Credit Agreement, the
undersigned accepts and confirms the offers by the Lender(s) to make
Competitive Bid Loans to the undersigned on ________, 19__ under Section
2.3 of the Credit Agreement in the (respective) amount(s) set forth on the
attached list of Competitive Bid Loans offered.
Very truly yours,
ADT OPERATIONS, INC.
By:___________________
Name:
Title:
[The Borrower must attach the list of Competitive Bid Loans offered prepared
by the Agent in accordance with Section 2.3.4 with the accepted amount entered
by the Borrower to right of each Competitive Bid Loan offered].
EXHIBIT F
CONTINUATION/CONVERSION NOTICE
The Bank of Nova Scotia,
as Agent
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: ______________
ADT Operations, Inc.
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to Section
2.4 of the Credit Agreement, dated as of January __, 1997 (together with all
amendments and other modifications, if any, from time to time made thereto,
the "Credit Agreement"), among ADT Operations, Inc., a Delaware corporation
(the "Borrower"), the financial institutions as are or may become parties
thereto (collectively, the "Lenders"), and The Bank of Nova Scotia
("Scotiabank"), individually and as agent (the "Agent") for the Lenders.
Unless otherwise defined herein or the context otherwise requires, terms used
herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that on _____________________, 19___,
(1) $_________ of the presently outstanding principal amount of the
Revolving Loans,
(2) and all presently being maintained as (1)[Base Rate
Loans] [LIBO Rate Loans with Interest Periods ending on _______ __, 199__],
(3) be (2)[converted into] [continued as],
(4) (3)[LIBO Rate Loans having an Interest Period of [one]
[two] [three] [six] [nine] [twelve] months] [Base Rate Loans].
(1) Insert appropriate interest rate option.
(2) Insert and complete as appropriate.
(3) Complete as appropriate.
(4) Insert only upon conversion of a Base Rate Loan into a LIBO Rate Loan
or continuation of a LIBO Rate Loan.
(5) Insert upon conversion of a Base Rate Loan into a LIBO Rate Loan on a
date other than a Quarterly Payment Date.
(4)[The Borrower hereby:
(a) certifies and warrants that no Event of Default has occurred and is
continuing; and
(b) agrees that if prior to the time of such continuation or conversion
any matter certified to herein by it will not be true and correct at such time
as if then made, it will immediately so notify the Agent.
Except to the extent, if any, that prior to the time of the continuation or
conversion requested hereby the Agent shall receive written notice to the
contrary from the Borrower, each matter certified to herein shall be deemed
to be certified at the date of such continuation or conversion as if then
made.] (4)[The Borrower agrees to remit to the Agent for the benefit of the
Lenders, on the date of such conversion, an interest payment in the amount
of $________ pursuant to clause (e) of Section 3.2.3 of the Credit
Agreement.]
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered, and the certification and warraenties contained
herein to be made, by its Authorized Officer this _________ day of
_____________, 19___.
ADT OPERATIONS, INC.
By: ____________________
Title:
EXHIBIT G
LENDER ASSIGNMENT AND ACCEPTANCE AGREEMENT
To: ADT Operations, Inc.
902 Market Street
13th Floor
Wilmington, Delaware 19899
To:The Bank of Nova Scotia,
as Agent
One Liberty Plaza
New York, New York 10006
ADT Operations, Inc.
Gentlemen and Ladies:
We refer to the Credit Agreement, dated as of January __, 1997
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), among ADT
Operations, Inc., a Delaware Corporation (the "Borrower"), the financial
institutions as are or may become parties thereto (collectively, the
"Lenders"), and The Bank of Nova Scotia ("Scotiabank"), individually and as
agent (the "Agent") for the Lenders. Unless otherwise defined herein or
the context otherwise requires, terms used herein have the meanings
provided in the Credit Agreement.
This Lender Assignment and Acceptance Agreement (this "Agreement") is
delivered to you pursuant to clause (ii) of Section 11.11.1 of the Credit
Agreement and also constitutes notice to each of you, pursuant to clause (i)
of Section 11.11.1 of the Credit Agreement, of the assignment and delegation
to _______________ (the "Assignee") of __% of the Competitive Bid Loans and
__% of the Revolving Loans, Revolving Loan Commitments, and Letter of Credit
Outstandings (collectively, the "Assigned Portion") of _____________ (the
"Assignor") outstanding under the Credit Agreement as of ____________ (the
"Assignment Date"). From and after the Assignment Date, the Assignor's and the
Assignee's Percentages for the purposes of the Credit Agreement and each other
Loan Document are set forth opposite such Person's name on the signature pages
hereof.
The Assignee is entitled to receive all payments on account of interest,
principal and fees with respect to the Assigned Portion made during the period
from and after the Assignment Date.
The Assignee hereby acknowledges and confirms that it has received a
copy of the Credit Agreement and the exhibits related thereto, together
with copies of the documents which were required to be delivered under the
Credit Agreement as a condition to the making of the Credit Extensions
thereunder. The Assignee further confirms and agrees that in becoming a
Lender and in making its Commitments and Loans under the Credit Agreement,
such actions have and will be made without recourse to, or representation
or warranty by the Agent.
The Assignor represents and warrants that (a) it is legally authorized to
enter into and deliver this Agreement, (b) this Agreement constitutes its
legal, valid and binding obligation and (c) it is the legal and beneficial
owner of the Assigned Portion, free and clear of any Lien. Except as set forth
in the previous sentence, the Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made pursuant to or in connection with this Agreement, or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto, including
the financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by any Lender of any of its obligations under the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto. The Assignee represents and warrants
that (a) it is legally authorized to enter into and deliver this Agreement and
(b) this Agreement constitutes its legal, valid and binding obligation. The
Assignee independently and without reliance upon the Assignor, any other
Lender or the Agent, and based on such documents and information as it deems
appropriate, has made its own credit determination in entering into this
Agreement, and the Assignee shall continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, the other Loan
Documents and the other instruments and documents delivered in connection
therewith. The Assignee hereby appoints and authorizes the Agent to act as
such and exercise all their rights and obligations, in each case pursuant to
and in accordance with the terms of the Credit Agreement and the other Loan
Documents.
Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Agent
(a) the Assignee
(i) shall be deemed automatically to have become a party to the
Credit Agreement, have all the rights and obligations of a "Lender" under
the Credit Agreement and the other Loan Documents as if it were an original
signatory thereto to the extent specified in the second paragraph hereof;
and
(ii) agrees to be bound by the terms and conditions set forth in the
Credit Agreement and the other Loan Documents as if it were an original
signatory thereto; and
(b) the Assignor shall be released from its obligations under the Credit
Agreement and the other Loan Documents to the extent specified in the second
paragraph hereof.
The Assignor and the Assignee hereby agree that the [Assignor]
[Assignee] will pay to the Agent the $3,000 processing fee referred to in
Section 11.11.1 of the Credit Agreement upon the delivery hereof.
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned Loans and Commitments and requests the
Agent to acknowledge receipt of this document:
(A) Address for Notices:
Institution Name:
Attention:
Domestic Office:
Telephone:
Facsimile:
LIBOR Office:
Telephone:
Facsimile:
(B) Payment Instructions:
The Assignee agrees to furnish the Internal Revenue Service form
referred to in the last paragraph of Section 5.6 (if so required) of the
Credit Agreement no later than the date of acceptance hereof by the Agent.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
This Agreement may be executed by the Assignor and Assignee in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute one and the
same agreement.
Adjusted Percentage [ASSIGNOR]
___%
By_______________________
Title:
Percentage [ASSIGNEE]
___%
By_______________________
Title:
(1)[Consented to this ___ day
of __________, 19__:
ADT OPERATIONS, INC.
By__________________________]
Title:
(2)[Consented to this ___ day
of __________, 19__:
THE BANK OF NOVA SCOTIA,
as Agent
By__________________________]
Title:
[(2)[Consented to this ___ day
of __________, 19__:
________________________,
as Issuer
By__________________________]
Title:]
(1) Include if appropriate.
EXHIBIT H
[Form of Compliance Certificate]
COMPLIANCE CERTIFICATE
ADT Operations, Inc.
ADT Limited
This Compliance Certificate is delivered pursuant to clause (e)
of Section 8.1.1 of the Credit Agreement, dated as of January 9, 1997 (together
with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among ADT Operations, Inc.,
a Delaware corporation (the "Borrower"), the various financial institutions as
are or may become parties thereto (collectively, the "Lenders"), and The Bank
of Nova Scotia, individually and as agent (the "Agent") for the Lenders. The
Guaranty of ADT Limited, dated as of January 9, 1997, is referred to herein as
the "ADT Limited Guaranty". Unless otherwise defined herein or the context
otherwise requires, terms used herein or in any of the Attachments hereto have
the meanings provided in the Credit Agreement or the ADT Limited Guaranty.
This Compliance Certificate relates to the _____ Fiscal Quarter
(the "Computation Period"), commencing on ________, _____ and ending on
___________, ____ (such latter date being the "Computation Date"). Each of
the Borrower and ADT Limited hereby certifies, represents and warrants that:
(a) Default.
Except as described below, as of the Computation Date, no Default or
Event of Default has occurred and is continuing.
(b) Stockholders' Equity of the Borrower.
As of the Computation Date, Stockholders' Equity of the Borrower was
$__________. The minimum amount of Stockholders' Equity of the
Borrower required by clause (a) of Section 8.2.3 of the Credit
Agreement as of such date is negative $75,000,000.
(c) Stockholders' Equity of ADT Limited.
As of the Computation Date, Stockholders' Equity of ADT Limited was
$__________. The minimum amount of Stockholders' Equity of ADT Limited
required by clause (a) of Section 4.2.4 of the ADT Limited Guaranty as
of such date is $__________.
(d) Borrower's EBITDA.
The Borrower's EBITDA for the four Fiscal Quarters ending on the
Computation Date was $__________. The minimum EBITDA of the Borrower
required by clause (b) of Section 8.2.3 of the Credit Agreement for
such period is $300,000,000.
(e) ADT Limited's Cash Flow Coverage Ratio.
ADT Limited's Cash Flow Coverage Ratio for the four Fiscal Quarters
ending on the Computation Date was to 1.0, as computed on Attachment 1
hereto. The minimum Cash Flow Coverage Ratio of ADT Limited required
by clause (b) of Section 4.2.4 of the ADT Limited Guaranty for such
period is 1.5 to 1.0.
(f) ADT Limited's Debt to Total Capitalization Ratio.
As of the Computation Date, ADT Limited's Debt to Total Capitalization
Ratio was ____ to 1.0, as computed on Attachment 2 hereto. The maximum
Debt to Total Capitalization Ratio of ADT Limited permitted by clause
(c) of Section 4.2.4 of the ADT Limited Guaranty as of such date is 0.5
to 1.0.
(g) Business Acquisitions.
The aggregate amount of expenditures of ADT Limited and its
Subsidiaries in respect of Business Acquisitions during the portion of
ADT Limited's Fiscal Year ended on the Computation Date is $__________.
(h) Capitalized Lease Liabilities.
The aggregate amount of Capitalized Lease Liabilities incurred by ADT
Limited and its Subsidiaries during the portion of ADT Limited's Fiscal
Year ended on the Computation Date is $__________. The maximum amount
of Capitalized Lease Liabilities permitted to be incurred under the ADT
Limited Guaranty during this Fiscal Year is $30,000,000.
(i) Distributions.
(i) The sum of (A) the aggregate amount of Restricted Distributions (other
than Restricted Distributions permitted under Section 1012(b)(ii)
of the Senior Note Indenture) declared during the Computation
Period and (B) the aggregate amount of payments, prepayments,
redemptions or repurchases (other than payments, prepayments,
redemptions or repurchases permitted under Section 1012(b)(iv), (v)
and (vi) of the Senior Note Indenture [(which amounted to
$__________ during the Computation Period)](1)), referred to in
Section 4.2.6(c) of the ADT Limited Guaranty that were made during
the Computation Period was $__________. The maximum amount of such
Restricted Distributions and such payments, prepayments,
redemptions or repurchases permitted by such Sections during the
Computation Period is $ , as computed on Attachment 3 hereto (Item
II(F)).
(ii) The aggregate amount of Restricted Borrower Distributions declared
during the Computation Period was $__________. The maximum amount
of Restricted Borrower Distributions permitted under Section
4.2.6(b) of the ADT Limited Guaranty during such period is
$__________.
(j) Equity Proceeds Amount.
As of the Computation Date, the Equity Proceeds Amount was $__________,
as computed on Attachment 4 hereto.
(k) Asset Dispositions, etc.
(i) The net book value of all assets sold or transferred pursuant to
clause (c)(ii) of Section 4.2.10 of the ADT Limited Guaranty (or
clause (c)(ii) of Section 4.2.10 of the ADT Limited Guaranty (as
defined in the Existing Credit Facility)) since the Existing Credit
Facility Effective Date through the Computation Date was
$__________. The maximum aggregate net book value of such assets
that may be sold or transferred since the Existing Credit F acility
Effective Date pursuant to such clause (c)(ii) is $130,000,000.
(ii) As of the Computation Date, the amount of Net Sale Proceeds
received by the Borrower, ADT Limited or any of ADT Limited's other
Subsidiaries in respect of Recapture Asset Dispositions during the
period of 18 months ending on the Computation Date less (A) in the
case of a Recapture Asset Disposition that is a Permitted Auction
Business Sale, the amount of such Net Sale Proceeds used during
such 18 month period to make payments in respect of the Dividended
Note and/or for investments in properties and assets owned by, and
used in the electronic security businesses conducted by, the
Borrower and its Subsidiaries and (B) in the case of each other
Recapture Asset Disposition, the portion thereof invested by the
Borrower, ADT Limited and any of ADT Limited's other Subsidiaries
during such 18 month period in properties and assets which will
replace the properties and assets that were the subject of such
Recapture Asset Disposition or in properties and assets used in the
Core Businesses was $__________.
(1) Include if applicable.
(l) Consolidations, Mergers, etc.
All Permitted Business Acquisitions, Permitted Auction Business Sales
and all liquidations, dissolutions, consolidations, mergers, purchases,
or other types of acquisitions of the types described in Section 4.2.9
of the ADT Limited Guaranty and all acquisitions or creations of
Subsidiaries of ADT Limited which have occurred during the Computation
Period are disclosed in reasonable detail in Attachment 5 hereto.
IN WITNESS WHEREOF, the undersigned have caused this Compliance
Certificate to be delivered by their respective chief financial Authorized
Officers this ___ day of __________, ____.
ADT OPERATIONS, INC.
By:_______________________________
Title:
ADT LIMITED
By:_______________________________
Title:
ATTACHMENT 1
(to__/__/__ Compliance
Certificate)
ADT LIMITED'S CASH FLOW COVERAGE RATIO
for the _____ Fiscal Quarter,
ending on __________,____
(the "Computation Date")
<TABLE>
<S> <C> <C>
I. ADT Limited's Cash Flow:
------------------------
A. EBITDA (as defined in the Credit Agreement) of ADT
Limited and its Subsidiaries for the period of four consecutive
Fiscal Quarters ending on the Computation Date (such period,
the "Calculation Period"): $_______
B. (i) All taxes computed on the basis of income
(whether local, foreign or otherwise), to the extent
paid in cash by ADT Limited and its Subsidiaries
during the Calculation Period: $_______
(ii) Capital Expenditures (other than Capital
Expenditures incurred in respect of any Business
Acquisition permitted under Section 4.2.5 or 4.2.9
of the ADT Limited Guaranty) of ADT Limited
and its Subsidiaries paid by ADT Limited and its
Subsidiaries during the Calculation Period: $_______
(iii) The sum of Items I(B)(i) and I(B)(ii): $_______
C. CASH FLOW: The excess of Item I(A) over Item I(B) (iii): $_______
D. CAPITAL EXPENDITURES OF ADT LIMITED AND ITS
SUBSIDIARIES PAID DURING THE CALCULATION
PERIOD WITH EQUITY PROCEEDS, TO THE EXTENT
INCLUDED IN ITEM I(B)(ii): $_______
E. ADJUSTED CASH FLOW: The sum of Item I(C) and Item
I(D): $_______
II. ADT Limited's Cash Flow Coverage Ratio:
A. Adjusted Cash Flow of ADT Limited and its Subsidiaries for
the Calculation Period (see Item I(E) above): $_______
B. Interest Expense (as defined in the Credit Agreement) of ADT
Limited and its Subsidiaries for the Calculation Period: $_______
C. ADT LIMITED'S CASH FLOW COVERAGE RATIO: The
ratio of Item II(A) to Item II(B): _______ to 1.0
</TABLE>
ATTACHMENT 2
(to __/__/__ Compliance
Certificate)
ADT LIMITED'S DEBT TO TOTAL CAPITALIZATION RATIO
for the ______ Fiscal Quarter,
ending on __________, ____
(the "Computation Date")
<TABLE>
<S> <C> <C>
ADT Limited's Debt to Total Capitalization Ratio:
- -------------------------------------------------
A. As at the Computation Date, the
aggregate amount of Debt (as defined in
its Subsidiaries, determined on a consolidated basis: $_______
B. As at the Computation Date, Stockholders' Equity (as defined
in the Credit Agreement) of ADT Limited $_______
C. TOTAL CAPITALIZATION: The sum of
Items A and B: $_______
D. ADT LIMITED'S DEBT TO TOTAL
CAPITALIZATION RATIO: The ratio of
Item A to Item C: _____ to 1.0
</TABLE>
ATTACHMENT 3
(to __/__/__ Compliance
Certificate)
RESTRICTED DISTRIBUTIONS
for the ______ Fiscal Quarter,
ending on __________, ____
(the "Computation Date")
<TABLE>
<S> <C> <C>
I. Restricted Payment Basket Amount:
---------------------------------
A. 50% of the aggregate Consolidated Adjusted Net Income (as
defined in the Senior Note Indenture) of ADT Limited accrued on
a cumulative basis during the period (taken as one accounting
period) from August 4, 1993 to the last day of the Fiscal Quarter
immediately preceding the Fiscal Quarter as to which this
Compliance Certificate is being delivered (or, if such aggregate
cumulative Consolidated Adjusted Net Income shall be a loss,
100% of such loss): $_______
B. The aggregate net cash proceeds received by ADT Limited after
August 4, 1993 from the issuance or sale (other than to a
Restricted Subsidiary (as defined in the Senior Note Indenture))
of shares of its Capital Stock (other than Redeemable Capital
Stock) or warrants, options or rights to purchase such shares of
Capital Stock (other than Redeemable Capital Stock): $_______
C. The aggregate net cash proceeds received by ADT Limited after
August 4, 1993 (other than from the Borrower or another
Restricted Subsidiary (as defined in the Senior Note Indenture))
upon the exercise of options, warrants or rights to purchase
shares of Capital Stock of ADT Limited (other than Redeemable
Capital Stock): $_______
D. The aggregate net cash proceeds received by ADT Limited after
August 4, 1993 from the issuance or sale (other than to the
Borrower or another Restricted Subsidiary (as defined in the
Senior Note Indenture)) of debt securities or Redeemable Capital
Stock that have been converted into or exchanged for Capital
Stock of ADT Limited (other than Redeemable Capital Stock),
together with the aggregate cash received by ADT Limited at the
time of such conversion or exchange: $_______
E. Subtotal: The sum of Items I(A), (B), (C) and (D), treating the
amount of Item I(A) as a negative number if such amount is in
respect of an aggregate cumulative loss: $_______
F. The aggregate amount of all Restricted Payments (as defined in
the Senior Note Indenture) (other than Restricted Payments
permitted under Section 1012(b)(ii), (iv), (v) and (vi) of the
Senior Note Indenture) declared or paid during the period from
August 4, 1993 to the last day of the Fiscal Quarter immediately
preceding the Fiscal Quarter as to which this Compliance
Certificate is being delivered: $_______
G. RESTRICTED PAYMENT BASKET AMOUNT: The excess of
Item I(E) over Item I(F): $_______
II Adjustment to Restricted Payment Basket Amount:
-----------------------------------------------
A. Aggregate amount expended on Permitted Business Acquisitions
(other than the ASH Transaction to the extent the aggregate
consideration therefor did not exceed $425,000,000) after the
Existing Credit Facility Effective Date in excess of the applicable
Annual Limits (or, during the effectiveness of the Existing Credit
Facility, the applicable Annual Limits (as defined under the
Existing Credit Facility)): $_______
B. Aggregate amount of Capital Expenditures made after the
Existing Credit Facility Effective Date and designated in Item
I(D) of Attachment 1 of this Compliance Certificate and each
Compliance Certificate (including any Compliance Certificate (as
defined under the Existing Credit Facility)) delivered since the
Existing Credit Facility Effective Date: $_______
C. The sum of Items II(A) and (B): $_______
D. The portion of Item II(C) which resulted in a decrease of the
Restricted Payment Basket Amount: $_______
E. ADJUSTMENT: The excess of Item II(C) over Item II(D): $_______
F. ADJUSTED RESTRICTED PAYMENT BASKET AMOUNT:
The excess of Item I(G) over Item II(E): $_______
</TABLE>
ATTACHMENT 4
(to __/__/__ Compliance
Certificate)
EQUITY PROCEEDS AMOUNT
for the _________ Fiscal Quarter
ending on ____________, ____
(the "Computation Date")
<TABLE>
<S> <C> <C>
A. The Equity Proceeds Amount as of the last day of the Fiscal
Quarter immediately preceding the Fiscal Quarter as to which this
Compliance Certificate is being delivered: $_______
B. (i) the aggregate net cash proceeds received by ADT
Limited during the Computation Period from the
issuance or sale (other than to a Subsidiary of ADT
Limited) of shares of its Capital Stock (other than
Redeemable Capital Stock) or warrants, options or
rights to purchase such shares of Capital Stock (other
than Redeemable Capital Stock): $_______
(ii) The aggregate net cash proceeds received by ADT
Limited during the Computation Period (other than
from the Borrower or any other Subsidiary of ADT
Limited) upon the exercise of options, warrants or
rights to purchase shares of Capital Stock of ADT
Limited (other than Redeemable Capital Stock): $_______
(iii) The aggregate net cash proceeds received by ADT
Limited during the Computation Period from the
issuance or sale (other than to the Borrower or any
other Subsidiary of ADT Limited) of debt securities or
Redeemable Capital Stock that have been converted
into or exchanged for Capital Stock of ADT Limited
(other than Redeemable Capital Stock), together with
the aggregate cash received by ADT Limited at the
time of such conversion or exchange: $_______
C. The sum of Items A, B(i), (ii), and (iii): $_______
D. The amount of each Restricted Payment (as defined under the
Senior Note Indenture) made after ADT Limited shall have
received cash proceeds of the type referred to in Item B (whether
during or prior to the Computation Period) which, pursuant to the
terms of the Senior Note Indenture, decreases the Restricted
Payment Basket Amount: $_______
E. The greater of (i) zero and (ii) the excess of Item C over Item D: $_______
F. The amount expended during the Computation Period on
Permitted Business Acquisitions (other than the ASH Transaction
to the extent the aggregate consideration therefor did not exceed
$425,000,000) in excess of the applicable Annual Limit (or,
during the effectiveness of the Existing Credit Facility, the
applicable Annual Limit (as defined under the Existing Credit
Facility)): $_______
G. The amount of Capital Expenditures made during the Computation
Period with the cash proceeds referred to in Item B (whether
received during or prior to the Computation Period) and
designated in Item I(D) of Attachment 1 of this Compliance
Certificate: $_______
H. EQUITY PROCEEDS AMOUNT AS OF THE
COMPUTATION DATE: The excess of (i) Item E over (ii) the
sum of Items F and G: $_______
(2) The Equity Proceeds Amount as of September 30, 1996 to be inserted in
the first Compliance Certificate delivered under the Credit
Agreement.
</TABLE>
ATTACHMENT 5
(to __/__/__ Compliance
Certificate)
CONSOLIDATIONS, MERGERS, ETC.
for the _____ Fiscal Quarter,
ending on __________, ____
(the "Computation Date")
EXHIBIT I
GUARANTY,
dated as of January __, 1997,
made by
ADT LIMITED
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.1. Certain Terms...................................... 1
1.2. Credit Agreement Definitions....................... 6
ARTICLE II
GUARANTY PROVISIONS
2.1. Guaranty........................................... 6
2.2. Guaranty Absolute, etc............................. 7
2.3. Stay of Acceleration, Reinstatement, etc........... 8
2.4. Waiver, etc........................................ 9
2.5. Subrogation........................................ 9
2.6. Successors, Transferees and Assigns; Transfers of
Notes, etc......................................... 10
2.7. Payments Free and Clear of Taxes, etc.............. 10
2.8. Judgment........................................... 12
2.9. Consent to Jurisdiction; Waiver of Immunities...... 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Organization, etc.................................. 14
3.2. Due Authorization, Non-Contravention, etc.......... 14
3.3. Government Approval, Regulation, etc............... 15
3.4. Validity, etc...................................... 15
3.5. Financial Information.............................. 15
3.6. No Material Adverse Change......................... 15
3.7. Litigation, Labor Controversies, etc............... 15
3.8. Subsidiaries....................................... 16
3.9. Ownership of Properties............................ 16
3.10. Taxes.............................................. 16
3.11. Pension and Welfare Plans.......................... 17
3.12. Environmental Warranties........................... 17
3.13. Regulations G, U and X............................. 19
3.14. No Defaults........................................ 19
3.15. Delivery of Organizational Chart................... 20
3.16. Accuracy of Information............................ 20
3.17. Restricted Payment Basket Amount; Equity Proceeds
Amount............................................. 21
3.18. Restricted Borrower Distributions.................. 21
ARTICLE IV
COVENANTS, ETC.
4.1. Affirmative Covenants.............................. 21
4.1.1. Compliance with Laws, etc.......................... 21
4.1.2. Maintenance of Properties.......................... 22
4.1.3. Insurance.......................................... 22
4.1.4. Books and Records.................................. 22
4.1.5. Environmental Covenant............................. 23
4.1.6. Guaranty Supplements............................... 23
4.1.7. Maintenance of Adequate Guarantees................. 23
4.2. Negative Covenants................................. 24
4.2.1. Business Activities................................ 24
4.2.2. Indebtedness....................................... 24
4.2.3. Liens.............................................. 27
4.2.4. Financial Condition................................ 29
4.2.5. Investments........................................ 30
4.2.6. Restricted Payments, etc........................... 33
4.2.7. Capital Expenditures, etc.......................... 37
4.2.8. [Intentionally Omitted.]........................... 37
4.2.9. Consolidation, Merger, etc......................... 37
4.2.10. Asset Dispositions, etc............................ 39
4.2.11. Modification of Certain Documents.................. 40
4.2.12. Transactions with Affiliates....................... 40
4.2.13. Negative Pledges, Restrictive Agreements, etc...... 41
4.2.14. Accounting Changes................................. 42
4.2.15. Ability to Amend; Restrictive Agreements........... 43
4.2.16. [Intentionally Omitted.]........................... 43
4.2.17. Activities of Certain Subsidiaries................. 43
4.2.18. Ownership of Certain Subsidiaries.................. 44
4.2.19. Certain Intercompany Indebtedness.................. 44
4.2.20. Any Action......................................... 44
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1. Loan Document................................. .... 44
5.2. Binding on Successors, Transferees and Assigns;
Assignment......................................... 44
5.3. Amendments, etc.................................... 45
5.4. Addresses for Notices.............................. 45
5.5. No Waiver; Remedies................................ 45
5.6. Captions........................................... 45
5.7. Setoff............................................. 45
5.8. Independence of Covenants.......................... 46
5.9. Severability....................................... 46
5.10. Governing Law...................................... 46
5.11. Waiver of Jury Trial............................... 47
DISCLOSURE SCHEDULE
GUARANTY
THIS GUARANTY (this "Guaranty"), dated as of January __, 1997,
made by ADT LIMITED, a company organized under the laws of Bermuda ("ADT
Limited"), in favor of each of the Lender Parties (as defined below),
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date
hereof (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "Credit Agreement"), among ADT
Operations, Inc., a Delaware corporation (the "Borrower"), the financial
institutions as are or may become parties thereto (collectively, the
"Lenders"), The Bank of Nova Scotia ("Scotiabank"), individually and as agent
(the "Agent") for the Lenders, the Lenders have extended Commitments to make
Credit Extensions to the Borrower; and
WHEREAS, as a condition precedent to the making of the initial
Credit Extension under the Credit Agreement, ADT Limited is required to execute
and deliver this Guaranty; and
WHEREAS, ADT Limited has duly authorized the execution, delivery
and performance of this Guaranty; and
WHEREAS, it is in the best interests of ADT Limited to execute this
Guaranty inasmuch as ADT Limited will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrower by
the Lenders pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt
of which is hereby acknowledged, and in order to enable the Borrower to obtain
more favorable interest rates and terms, ADT Limited agrees, for the benefit
of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"ADT Limited" is defined in the preamble.
"Agent" is defined in the first recital and includes each other
Person which may be appointed as any successor agent pursuant to the Credit
Agreement.
"Annual Limit" is defined in subclause (a)(i) of the definition of
"Permitted Business Acquisition" in Section 1.1.
"ASH Transaction" means, collectively, (i) the acquisition by ADT
Limited on September 6, 1996 of the entire Capital Stock of ASH pursuant to
a stock-for-stock exchange in which the stockholders of ASH received Common
Shares and (ii) in connection with such acquisition, (A) the repayment of
certain Indebtedness of ASH and its Subsidiaries and (B) the guaranty by ADT
Limited of certain Indebtedness of ASH and its Subsidiaries in an aggregate
principal amount not exceeding $70,000,000, which Indebtedness remained
outstanding following such acquisition, and the assumption by ADT Limited of
certain obligations to deliver Common Shares upon the conversion of such
Indebtedness.
"Asset Sale" is defined in Section 4.2.10.
"Borrower" is defined in the first recital.
"Business Acquisition" means the acquisition, by purchase or
otherwise, of all or substantially all of the assets (or any part of the assets
constituting all or substantially all of a business or line of business) of any
Person, whether such acquisition is direct or indirect, including through the
acquisition of the business of, or Capital Stock of, such Person.
"Credit Agreement" is defined in the first recital.
"Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule I, as it may be amended, supplemented or otherwise modified from
time to time by ADT Limited with the written consent of the Agent and the
Required Lenders.
"Equity Proceeds Amount" means, with respect to any proposed
Permitted Business Acquisition in excess of the Annual Limit or any addition
to Cash Flow in respect of Capital Expenditures in connection with the
computation of the Cash Flow Coverage Ratio of ADT Limited,
(a) an amount equal to
(i) the aggregate net cash proceeds received by ADT
Limited after the Indenture Effective Date from the issuance
or sale (other than to a Subsidiary of ADT Limited) of
shares of its Capital Stock (other than Redeemable Capital
Stock) or warrants, options or rights to purchase such
shares of Capital Stock (other than Redeemable Capital
Stock),
plus
(ii) the aggregate net cash proceeds received by ADT
Limited after the Indenture Effective Date (other than from
the Borrower or any other Subsidiary of ADT Limited) upon the
exercise of options, warrants or rights to purchase shares of
Capital Stock of ADT Limited (other than Redeemable Capital
Stock),
plus
(iii) the aggregate net cash proceeds received by ADT
Limited after the Effective Date from the issuance or sale
(other than to the Borrower or any other Subsidiary of ADT
Limited) of debt securities or Redeemable Capital Stock that
have been converted into or exchanged for Capital Stock of
ADT Limited (other than Redeemable Capital Stock), together
with the aggregate cash received by ADT Limited at the time
of such conversion or exchange,
as decreased from time to time by
(b) (i) the amount of each Restricted Payment (as defined
under the Senior Note Indenture) made after ADT Limited shall have
received the cash proceeds referred to in the preceding clause (a)
which, pursuant to the terms of the Senior Note Indenture,
decreases the Restricted Payment Basket Amount; provided that any
such decrease to the Equity Proceeds Amount shall not result in
the Equity Proceeds Amount being less than zero,
(ii) the amount expended after the Existing Credit Facility
Effective Date on Permitted Business Acquisitions (other than the
ASH Transaction to the extent the aggregate consideration therefor
did not exceed $425,000,000) in excess of the Annual Limit (or,
during the effectiveness of the Existing Credit Facility, the
applicable Annual Limits (as defined under the Existing Credit
Facility)), and
(iii) the amount of Capital Expenditures made after the
Existing Credit Facility Effective Date with the cash proceeds
referred to in the preceding clause (a) and designated as such
pursuant to the Compliance Certificate (including any compliance
certificate delivered under the Existing Credit Facility)
delivered in connection with the Fiscal Quarter in which such
Capital Expenditures were paid.
"Existing Credit Facility Effective Date" means August 23, 1995.
"Lender Party" means, as the context may require, any Lender, any
Issuer or the Agent and each of their respective successors, transferees and
assigns.
"Lenders" is defined in the first recital.
"Other Taxes" is defined in clause (b) of Section 2.7.
"Permitted Business Acquisition" means any Business Acquisition of
a Core Business, exclusive, however, of (i) acquisitions of Minority Interests
and (ii) acquisitions of Capital Stock in any Related Business, so long as
(a) the aggregate amount of expenditures of ADT Limited and
its Subsidiaries in respect of such Business Acquisition (such
amount, the "Subject Amount"), when added to the aggregate amount
of all expenditures of ADT Limited and its Subsidiaries in respect
of Business Acquisitions during the Fiscal Year in which such
Subject Amount would be expended, does not exceed the sum of (i)
$130,000,000 (the "Annual Limit") and (ii) the Equity Proceeds
Amount, as determined immediately prior to the making of such
expenditure, and
(b) in the event the Subject Amount (which amount shall
include, in the event such Business Acquisition is to be
consummated in a series of related transactions, the aggregate
amount of all expenditures of ADT Limited and its Subsidiaries in
respect of such related transactions) would exceed $50,000,000,
the Agent shall have received a certificate executed by the chief
financial Authorized Officer of ADT Limited certifying and, if
reasonably requested by the Agent, showing (in reasonable detail
and with appropriate calculations and computations in all respects
reasonably satisfactory to the Agent) that on a historical pro
forma basis (after giving effect to such Business Acquisition and
all transactions related thereto (including all Indebtedness that
would be assumed or incurred as a result of such acquisition) and
all Business Acquisitions consummated prior thereto during the
applicable periods thereunder) as of the last day of the most
recently completed Fiscal Quarter with respect to which, pursuant
to Section 8.1.1(a) or 8.1.1(d) of the Credit Agreement (or Section
8.1.1(d) of the Existing Credit Facility), financial statements
have been, or are required to have been, delivered by the
Borrower, ADT Limited and the Borrower would be in compliance with
Section 4.2.4 as of the last day of such Fiscal Quarter and
Section 8.2.3 of the Credit Agreement as of the last day of such
Fiscal Quarter (or, if such last day of such Fiscal Quarter is
September 30, 1996, Section 8.2.3 of the Existing Credit Facility).
"Permitted Strategic Holder" means any Person (other than an
Affiliate of ADT Limited) whose purchase of Voting Stock is in the best
interest of the Subsidiary whose Voting Stock is being purchased (as
determined in good faith by the Board of Directors of ADT Limited or a
committee thereof, whose determination shall be conclusive and evidenced by a
certified written resolution of such Board or committee).
"Permitted Strategic Sale" means a sale by any Subsidiary of ADT
Limited of Voting Stock of any Subsidiary (other than the Borrower or an
Intermediate Parent Company) to any Permitted Strategic Holder; provided,
however, that (a) after giving effect to such transaction, the aggregate
percentage of the Voting Stock of such Subsidiary so sold shall not exceed 19%
(or, in the case of any Subsidiary of an Intermediate Parent Company that is
required to file a consolidated tax return under United States Federal tax
laws and regulations, such lesser percentage as will not cause such Subsidiary
to become an unconsolidated subsidiary under such laws and regulations) of all
Voting Stock of such Subsidiary outstanding immediately after such sale and
(b) the consideration received in such sale (i) shall be 100% cash (including
any cash proceeds received from the sale of securities received in such
Permitted Strategic Sale, provided that at the time of such Permitted Strategic
Sale, ADT Limited or the relevant Subsidiary has entered into a legally
binding agreement for the sale of such securities and such securities are sold
within 60 days of such Permitted Strategic Sale) and (ii) shall be not less
than the Fair Market Value of the Voting Stock sold (as determined in good
faith by the Board of Directors of ADT Limited or a committee thereof, whose
determination shall be conclusive and evidenced by a certified written
resolution of such Board or committee).
"Process Agent" is defined in clause (a) of Section 2.9.
"Restricted Distribution" is defined in Section 4.2.6(a).
"Restricted Borrower Distribution" is defined in Section 4.2.6(b).
"Restricted Payment Basket Amount" means, at any date, the amount
available on such date under clause (C) of Section 1012(a) of the Senior Note
Indenture for the making of Restricted Payments (as defined thereunder).
"Taxes" is defined in clause (a) of Section 2.7.
"U.K. Credit Facility" is defined in clause (d)(ii) of Section
4.2.2.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Guaranty,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. ADT Limited hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the
Borrower and each other Obligor now or hereafter existing, whether
for principal, interest, Reimbursement Obligations, fees, expenses
or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362(a)
of the United States Bankruptcy Code, 11 U.S.C. Section 362(a),
and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section
506(b)); and
(b) indemnifies and holds harmless each Lender Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender
Party or such holder, as the case may be, in enforcing any rights
under this Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of
collection, and ADT Limited specifically agrees that it shall not be necessary
or required that any Lender Party or any holder of any Note exercise any
right, assert any claim or demand or enforce any remedy whatsoever against the
Borrower or any other Obligor (or any other Person) before or as a condition
to the obligations of ADT Limited hereunder.
SECTION 2.2. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Borrower and each other Obligor have been paid in full, all obligations of ADT
Limited hereunder shall have been paid in full and all Commitments shall have
terminated. ADT Limited guarantees that the Obligations of the Borrower and
each other Obligor and their respective Subsidiaries will be paid strictly in
accordance with the terms of the Credit Agreement and each other Loan Document
under which they arise, without regard (to the fullest extent permitted under
applicable law) to any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of any Lender Party
or any holder of any Note with respect thereto (and ADT Limited hereby waives
to the fullest extent it may do so any right or rights it may have under any
such law, regulation or order). Without limiting the generality of the
foregoing, the liability of ADT Limited under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of genuineness, validity, legality or
enforceability of the Credit Agreement, any Note, any Letter of
Credit or any other Loan Document (other than this Guaranty) or of
any of the Obligations (other than the Obligations of ADT Limited
hereunder);
(b) the failure of any Lender Party or any holder of any
Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person (including any other guarantor) under the
provisions of the Credit Agreement, any Note, any Letter of
Credit, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor (including any other Guarantor) of, or collateral
securing, any Obligations of the Borrower or any other
Obligor;
(c) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations of the
Borrower or any other Obligor (other than ADT Limited), or any
other extension, compromise or renewal of any Obligation of the
Borrower or any other Obligor (other than ADT Limited);
(d) any reduction, limitation, impairment or termination of
the Obligations of the Borrower or any other Obligor (other than
ADT Limited) for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be
subject to (and ADT Limited hereby waives any right to or claim
of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, the Obligations of the
Borrower, any other Obligor (other than ADT Limited) or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Credit Agreement, any Note, any Letter of Credit or
any other Loan Document (other than this Guaranty);
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty (or any other Guarantee), held by any Lender Party or any
holder of any Note securing any of the Obligations of the Borrower
or any other Obligor; or
(g) any other circumstance which might otherwise constitute
a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any other guarantor (or
any other Guarantor).
SECTION 2.3. Stay of Acceleration, Reinstatement, etc. ADT
Limited agrees that, if acceleration of the time for payment of any amount
payable by the Borrower under the Credit Agreement, the Notes or any other
Loan Document or of compliance by the Borrower with its obligations under
Section 4.7 of the Credit Agreement is, in either case, stayed upon the
occurrence with respect to the Borrower of any Event of Default described in
clause (b) or (d) of Section 9.1.9 of the Credit Agreement, all such amounts
and obligations otherwise subject to acceleration or compliance under the terms
of the Credit Agreement shall nonetheless be payable and performed by ADT
Limited hereunder forthwith on demand by the Agent made at the request of the
requisite proportion of the Lenders specified in Section 9.3 of the Credit
Agreement. ADT Limited agrees that this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment (in
whole or in part) of any of the Obligations is rescinded or must otherwise be
restored by any Lender Party or any holder of any Note, upon the insolvency,
bankruptcy or reorganization of the Borrower, any other Obligor (other than
ADT Limited) or otherwise, all as though such payment had not been made.
SECTION 2.4. Waiver, etc. ADT Limited hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of
the Obligations of the Borrower or any other Obligor and this Guaranty and any
requirement that any Agent, any other Lender Party or any holder of any Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the
Borrower, any other Obligor or any other Person (including any other guarantor
and any other Guarantor) or entity or any collateral securing the Obligations
of the Borrower or any other Obligor, as the case may be.
SECTION 2.5. Subrogation. ADT Limited hereby agrees that it will
not exercise any rights which it may now or hereafter acquire against the
Borrower or any other Obligor that arise from the existence, payment,
performance or enforcement of ADT Limited's obligations under this Guaranty
or any other Loan Document, including any right of subrogation, reimbursement,
exoneration, or indemnification, any right to participate in any claim or
remedy of the Lender Parties against the Borrower or any other Obligor or any
collateral which any Agent now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including the right to take or receive from the Borrower or any other
Obligor, directly or indirectly, in cash or other property or by set-off or
in any manner, payment or security on account of such claim or other rights,
until the Obligations have been paid in full in cash and the Commitments have
been terminated. If any amount shall be paid to ADT Limited in violation of
the preceding sentence and the Obligations shall not have been paid in cash in
full and the Commitments have not been terminated, such amount shall be deemed
to have been paid to ADT Limited for the benefit of, and held in trust for,
the Lender Parties, and shall forthwith be paid to the Lender Parties to be
credited and applied to the Obligations, whether matured or unmatured. ADT
Limited acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Credit Agreement and that the
agreement set forth in this Section is knowingly made in contemplation of such
benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of
Notes, etc. This Guaranty shall:
(a) be binding upon ADT Limited, and its successors,
transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Agent
and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan held by it to any
other Person or entity, and such other Person or entity shall thereupon become
vested with all rights and benefits in respect thereof granted to such Lender
under any Loan Document (including this Guaranty) or otherwise, subject,
however, to the provisions of Section 11.11 and Article X of the Credit
Agreement.
SECTION 2.7. Payments Free and Clear of Taxes, etc. ADT Limited
hereby agrees that:
(a) Any and all payments made by ADT Limited hereunder
shall be made in accordance with Section 5.6 of the Credit
Agreement 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 Party or any holder of a
Note, taxes imposed on its income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Lender Party
or such holder, as the case may be, is organized and by any
political subdivision thereof and, in the case of each Lender,
taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction of such Lender's Domestic Office or LIBOR Office
and any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If ADT
Limited shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Lender Party or any
holder of a Note
(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) such Lender Party or such holder, as the
case may be, receives an amount equal to the sum it would
have received had no such deductions been made,
(ii) ADT Limited shall make such deductions, and
(iii) ADT Limited shall pay the full amount deducted
to the relevant taxation authority or other authority in
accordance with applicable law.
(b) ADT Limited shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with
respect to, this Guaranty (hereinafter referred to as "Other
Taxes").
(c) ADT Limited hereby indemnifies and holds harmless each
Lender Party and each holder of a Note for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under
this Section) paid by such Lender Party or such holder, as the
case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, ADT Limited will furnish to the Agent the original or
a certified copy of a receipt evidencing payment thereof. If no
Taxes or Other Taxes are payable in respect of any payment
hereunder to any Lender Party or any holder of a Note, ADT Limited
will furnish to the Agent upon its reasonable request (which
request shall not be made more than once per Fiscal Year) a
certificate from each appropriate taxing authority, or an opinion
of counsel acceptable to the Agent, in either case stating that
such payment is exempt from or not subject to Taxes or Other Taxes.
(e) Without prejudice to the survival of any other
agreement of ADT Limited hereunder, the agreements and obligations
of ADT Limited contained in this Section 2.7 shall survive the
payment in full of the principal of and interest on the Loans.
SECTION 2.8. Judgment. ADT Limited hereby agrees that to the
fullest extent permitted by applicable law:
(a) if, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder in United
States Dollars into another currency, ADT Limited agrees that the
rate of exchange used shall be that at which in accordance with
normal banking procedures the Agent could purchase United States
Dollars with such other currency on the Business Day preceding
that on which final judgment is given; and
(b) the obligation of ADT Limited in respect of any sum due
from it to any Lender Party or any holder of a Note hereunder
shall, notwithstanding any judgment in a currency other than
United States Dollars, be discharged only to the extent that on
the Business Day following receipt by such Lender Party or such
holder, as the case may be, of any sum adjudged to be so due in
such other currency such Lender Party or such holder, as the case
may be, may, in accordance with normal banking procedures,
purchase United States Dollars with such other currency; in the
event that the United States Dollars so purchased are less than
the sum originally due to such Lender Party in United States
Dollars, ADT Limited, as a separate obligation and notwithstanding
any such judgment, hereby indemnifies and holds harmless such
Lender Party and such holder against such loss, and if the United
States Dollars so purchased exceed the sum originally due to such
Lender Party or such holder in United States Dollars, such Lender
Party or such holder, as the case may be, shall remit to ADT
Limited such excess.
SECTION 2.9. Consent to Jurisdiction; Waiver of Immunities. ADT
Limited hereby acknowledges and agrees that:
(a) It has irrevocably submitted to the jurisdiction of the
courts of the State of New York and of the United States District
Court for the Southern District of New York for the purposes of
any action or proceeding arising out of or relating to this
Guaranty, and ADT Limited hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and
determined in such New York state or federal court. ADT Limited
hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. ADT Limited hereby
irrevocably appoints Kay, Collyer & Boose (the "Process Agent"),
with an office on the date hereof at 1 Dag Hammarskjold Plaza, New
York, New York, United States (Attention: Eli Schoenfield), as
its agent to receive on behalf of ADT Limited and its property
service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding. Such
service may be made by mailing or delivering a copy of such
process to ADT Limited in care of the Process Agent at the Process
Agent's above address, and ADT Limited hereby irrevocably
authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, ADT Limited also
irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process
to ADT Limited at its address specified on the signature page
hereof. ADT Limited hereby agrees that in the event the Process
Agent is no longer resident in New York, New York, it shall
appoint a successor Process Agent resident in New York, New York
reasonably acceptable to the Agent, which successor Process Agent
shall thereafter be the Process Agent hereunder. ADT Limited
agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section shall affect the right of any
Lender Party or any holder of any Note to serve legal process in
any other manner permitted by law or affect the right of any
Lender Party or any holder of any Note to bring any action or
proceeding against ADT Limited or any of its properties in the
courts of any other jurisdictions.
(c) To the extent that ADT Limited has or hereafter may
acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, ADT Limited
hereby irrevocably waives, to the fullest extent permitted under
applicable law, such immunity in respect of its obligations under
this Guaranty.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
ADT Limited hereby represents and warrants unto each Lender Party
as set forth in this Article III.
SECTION 3.1. Organization, etc. Each of ADT Limited and its
Subsidiaries that is an Obligor or a Material Related Party is a company or
corporation, as the case may be, duly organized and validly existing and, to
the extent applicable, in good standing under the laws of the jurisdiction of
its organization, is duly qualified to do business and is, to the extent
applicable, in good standing as a foreign corporation in each jurisdiction
where the nature of its business requires such qualification and where the
failure to so qualify or be in good standing would reasonably be expected to
have a material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its Subsidiaries taken as
a whole. Each of ADT Limited and its Subsidiaries that is an Obligor or a
Material Related Party has full power and authority and holds all requisite
governmental licenses, permits and other approvals (i) to own and hold under
lease its property and to conduct its business substantially as currently
conducted by it, except where failure to hold such licenses, permits and other
approvals would not reasonably be expected to have a material adverse effect
on the business, results of operations, financial condition or prospects of
ADT Limited and its Subsidiaries taken as a whole and (ii) to enter into and
perform its obligations under each Loan Document, if any, to which it is a
party.
SECTION 3.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by ADT Limited of this Guaranty and each
other Loan Document executed or to be executed by it, and the execution,
delivery and performance by each other Obligor of each Loan Document executed
or to be executed by it, are within ADT Limited's and each such Obligor's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene ADT Limited's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting ADT Limited or any such Obligor (including the Companies
Act 1981 of Bermuda) in any manner that could reasonably be
expected (i) to have a material adverse effect on the business,
results of operations, financial condition or prospects of ADT
Limited and its Subsidiaries taken as a whole, (ii) to impair the
ability of any Lender, Issuer or Agent to enforce the Obligations
or (iii) to subject any Lender, Issuer or Agent to any liability;
or
(c) result in, or require the creation or imposition of,
any Lien on any of ADT Limited's or any Obligor's properties.
SECTION 3.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by ADT Limited or any other Obligor
of this Guaranty or any other Loan Document to which it is a party. Neither
ADT Limited nor any other Obligor is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
SECTION 3.4. Validity, etc. This Guaranty constitutes, and each
other Loan Document executed by ADT Limited will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of ADT
Limited enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting creditors' rights generally and to
general principles of equity; and each Loan Document executed pursuant hereto
by each other Obligor will, on the due execution and delivery thereof by such
Obligor, be the legal, valid and binding obligation of such Obligor enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
affecting creditors' rights generally and to general principles of equity.
SECTION 3.5. Financial Information. The financial statements set
forth in the 10-K of ADT Limited for the 1995 Fiscal Year and in the 10-Qs of
ADT Limited for the first three Fiscal Quarters of the 1996 Fiscal Year and
all financial statements of ADT Limited and its Subsidiaries furnished to the
Agent and the Lenders pursuant to clauses (a) and (d) of Section 8.1.1 of the
Credit Agreement have, in each case, been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition
of the corporations covered thereby, as at the dates thereof, and the results
of their operations for the periods then ended.
SECTION 3.6. No Material Adverse Change. Since December 31,
1995, there has been no material adverse change in the business, results of
operations, financial condition or prospects of ADT Limited and its
Subsidiaries taken as a whole.
SECTION 3.7. Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of ADT Limited, threatened litigation, action,
proceeding, or labor controversy affecting ADT Limited or any of its
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which could reasonably be expected to materially adversely affect
the financial condition, results of operations, business or prospects of ADT
Limited and its Subsidiaries, taken as a whole (provided that no representation
is being made with respect to the effect on such financial condition, results
of operations, business or prospects of any litigation, action or proceeding
described in the first two paragraphs under the caption "Certain Litigation
Against the Company" in the Preliminary Proxy Statement of ADT Limited filed
with the Securities and Exchange Commission on January 8, 1997, provided to
the Agent prior to the date hereof, including any amendment to the complaint
referred to therein provided to the Agent prior to the Closing Date relating
to the scheduling of the special meeting of ADT Limited's shareholders
referred to in any such amendment), or which purports to affect the legality,
validity or enforceability of this Guaranty, or any other Loan Document,
except as disclosed in Item 3.7 ("Litigation") of the Disclosure Schedule.
SECTION 3.8. Subsidiaries. ADT Limited has no Subsidiaries,
except those Subsidiaries
(a) which are identified in Item 3.8 ("Existing
Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been created or acquired in
accordance with Section 4.2.5 or 4.2.9.
Without limiting any term or provision hereof, to the extent any Person
becomes a Subsidiary of ADT Limited in accordance with (and not in
contravention of) any term or provision hereof or of any other Loan Document,
ADT Limited may supplement such Item 3.8 of the Disclosure Schedule to include
such new Subsidiary by delivering a certificate, signed by an Authorized
Officer, certifying (i) as to the name and place of organization of such new
Subsidiary, (ii) as to the method by which such new Subsidiary was created and
(iii) that such new Subsidiary was created without contravening any term or
provision hereof or of any other Loan Document.
SECTION 3.9. Ownership of Properties. ADT Limited and each of
its Subsidiaries owns good and marketable title to, or valid leases of, all of
its properties and assets necessary to conduct its business substantially as
currently conducted by it.
SECTION 3.10. Taxes. ADT Limited and each of its Subsidiaries,
and each other Obligor, has filed all material tax returns and reports required
by law to have been filed by it and has paid all material taxes and
governmental charges thereby shown to be owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 3.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and
delivery of the Credit Agreement and prior to the date of any Credit Extension
thereunder, no steps have been taken to terminate any Pension Plan which
termination could result in the incurrence by ADT Limited or any member of the
Controlled Group of any material liability, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction
has occurred with respect to any Pension Plan which might result in the
incurrence by ADT Limited or any member of the Controlled Group of any
material liability, fine or penalty. Except as disclosed in Item 3.11
("Employee Benefit Plans") of the Disclosure Schedule, neither ADT Limited nor
any member of the Controlled Group has any material contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
SECTION 3.12. Environmental Warranties. Except as set forth in
Item 3.12 ("Environmental Matters") of the Disclosure Schedule,
(a) all facilities and property (including underlying
groundwater) owned or leased by ADT Limited or any of its
Subsidiaries have been, and continue to be, owned or leased by ADT
Limited and its Subsidiaries in material compliance with all
Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for
information received by ADT Limited or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, which could reasonably be expected to
have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited
and its Subsidiaries or the Borrower and its Subsidiaries, or
(ii) complaints, notices or inquiries to ADT Limited
or any of its Subsidiaries regarding potential liability
under any Environmental Law, which could reasonably be
expected to have a material adverse effect on the business,
results of operations, financial condition or prospects of
ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries;
(c) there have been no Releases of Hazardous Materials at,
on or under any property now or previously owned or leased by ADT
Limited or any of its Subsidiaries that, singly or in the
aggregate, have, or may reasonably be expected to have, a material
adverse effect on the business, results of operations, financial
condition or prospects of ADT Limited and its Subsidiaries or the
Borrower and its Subsidiaries;
(d) ADT Limited and its Subsidiaries have been issued and
are in compliance with all permits, certificates, approvals,
licenses and other authorizations relating to environmental
matters and necessary for their businesses, except where the
failure to have been issued any such permit, certificate,
approval, license or other authorization or to have complied with
any of the foregoing would not, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries;
(e) no property now or previously owned or leased by ADT
Limited or any of its Subsidiaries is listed or proposed for
listing (with respect to owned property only) on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-up
that is reasonably likely to lead to material claims against ADT
Limited or such Subsidiary thereof for any remedial work, damage
to natural resources or personal injury, including claims under
CERCLA;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by ADT Limited or any of
its Subsidiaries that, singly or in the aggregate, have, or may
reasonably be expected to have, a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries;
(g) neither ADT Limited nor any Subsidiary of ADT Limited
has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or
which is the subject of federal, state or local enforcement
actions or other investigations which is reasonably likely to lead
to material claims against ADT Limited or such Subsidiary thereof
for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased
by ADT Limited or any Subsidiary of ADT Limited that, singly or in
the aggregate, have, or may reasonably be expected to have, a
material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its
Subsidiaries or the Borrower and its Subsidiaries; and
(i) no conditions exist at, on or under any property now
owned or leased (or, to the best knowledge of ADT Limited and its
Subsidiaries after due inquiry, any property previously owned or
leased) by ADT Limited or any Subsidiary of ADT Limited which
would give rise to liability under any Environmental Law or for
personal injury or property or other damage, which liability could
reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries.
SECTION 3.13. Regulations G, U and X. Neither ADT Limited nor
any Subsidiary of ADT Limited is engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock, and no proceeds of any
Loans will be used for a purpose which violates, or would be inconsistent
with, F.R.S. Board Regulation G, U or X. Terms for which meanings are
provided in F.R.S. Board Regulation G, U or X or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.
SECTION 3.14. No Defaults. Neither ADT Limited nor any
Subsidiary of ADT Limited is in violation of, or in default under, any term or
provision of its Organic Documents or any contract, agreement, indenture,
instrument, law, governmental regulation or court decree or order applicable
to it, such that such violations or defaults in the aggregate would reasonably
be expected to have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited and its
Subsidiaries, taken as a whole.
SECTION 3.15. Delivery of Organizational Chart. The Agent has
been furnished on or prior to the Effective Date a detailed organizational
chart of ADT Limited and all its Subsidiaries (other than Non-Guarantors
identified in Item 3.15 ("Existing Subsidiaries") of the Disclosure Schedule
that do not conduct any business activities and that do not have assets with a
Fair Market Value in excess of $10,000), certified by the chief financial
Authorized Officer of ADT Limited. Such chart indicates each Subsidiary of
ADT Limited that is or is required to be a Subsidiary Guarantor as of the
Effective Date and indicates with respect to each such Subsidiary Guarantor
that is a Material Subsidiary, its respective percentages of consolidated
gross revenues and consolidated gross assets of the Borrower and its
Subsidiaries for the 1995 Fiscal Year.
SECTION 3.16. Accuracy of Information. (a) All information (other
than financial projections) taken as a whole, prepared by ADT Limited, any
Subsidiary of ADT Limited or any other Obligor, or any Affiliate of any such
Person, or heretofore or contemporaneously furnished by or on behalf of ADT
Limited, any Subsidiary of ADT Limited or any other Obligor, or any Affiliate
of any such Person, in writing to any Agent or any Lender for purposes of or
in connection with this Guaranty, the Credit Agreement or any other Loan
Document or any transaction contemplated hereby or thereby (including in
connection with the Existing Credit Facility and each Loan Document referred
to therein) is, and all other such information (other than financial
projections) taken as a whole, hereafter furnished by or on behalf of ADT
Limited, any Subsidiary of ADT Limited or any other Obligor, or any Affiliate
of any such Person, to any Agent or any Lender will be, true, complete and
accurate in every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of the Credit
Agreement by such Agent and such Lender (it being acknowledged that, with
respect to any specific financial statement included in such information, such
financial statement shall have been true, complete and accurate in every
material respect on the date or for the period expressly set forth therein and
not necessarily on any other date or for any other period), and such
information taken as a whole does not and will not contain any untrue
statement of a material fact and is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading, and (b) all financial projections heretofore or
contemporaneously furnished by or on behalf of ADT Limited, any Subsidiary of
ADT Limited or any other Obligor, or any Affiliate of any such Person, to any
Agent or any Lender, have been, and all such financial projections hereafter
furnished by or on behalf of ADT Limited, any Subsidiary of ADT Limited or any
other Obligor, or any Affiliate of any such Person, to the Agent or any Lender
shall be, prepared in good faith based upon reasonable assumptions.
SECTION 3.17. Restricted Payment Basket Amount; Equity Proceeds
Amount. As of September 30, 1996, the Restricted Payment Basket Amount was
not greater than $135,000,000 and, as of December 31, 1996, the Equity
Proceeds Amount was not greater than $54,000,000.
SECTION 3.18. Restricted Borrower Distributions. As of September
30, 1996, the amount available for Restricted Borrower Distributions was not
greater than $38,000,000.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Affirmative Covenants. ADT Limited covenants and
agrees that, until the Covenant Termination Date, ADT Limited will, unless the
Required Lenders shall otherwise consent in writing, perform and observe the
obligations set forth in this Section.
SECTION 4.1.1. Compliance with Laws, etc. ADT Limited will, and
will 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):
(a) except to the extent permitted under Section 4.2.9, the
maintenance and preservation by ADT Limited and each of its
Subsidiaries that is an Obligor or a Material Related Party of its
corporate existence and qualification as a foreign corporation in
each jurisdiction where the nature of its business or the location
of its assets requires it to be so qualified, except to the extent
the failure to maintain and preserve its corporate existence or to
be so qualified could not reasonably be expected to have a
material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its
Subsidiaries (it being acknowledged that the failure of ADT
Limited or the Borrower to maintain and preserve its corporate
existence (except as permitted under Section 4.2.9) shall be
deemed to have such a material adverse effect); and
(b) the payment, before the same become delinquent, of all
material taxes, assessments and governmental charges imposed upon
it or upon its property except to the extent being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION 4.1.2. Maintenance of Properties. ADT Limited will, and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep
its material properties in good repair, working order and condition, and make
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times
unless ADT Limited determines in good faith that the continued maintenance of
any of its properties is no longer economically desirable.
SECTION 4.1.3. Insurance. ADT Limited will, and will cause each
of its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts as is customary in the
case of similar businesses and will, upon request of the Agent, furnish to each
Lender at reasonable intervals a certificate of an Authorized Officer of ADT
Limited setting forth the nature and extent of all insurance maintained by ADT
Limited and its Subsidiaries in accordance with this Section.
SECTION 4.1.4. Books and Records. ADT Limited will, and will
cause each of its Subsidiaries to, keep books and records which accurately
reflect all of its business affairs and transactions and permit the Agent or
any of its representatives, at reasonable times and intervals (but not more
often than once per Fiscal Quarter, unless an Event of Default shall have
occurred and be continuing (in which case, and during such period, each Lender
shall have the rights of the Agent under this Section)) to visit all of its
offices, to discuss its financial matters with its officers and independent
public accountant (provided a representative of ADT Limited or such Subsidiary
is given prior notice of, and the opportunity to be present during, such
discussion) and, subject to appropriate agreements of confidentiality and to
any restrictions imposed under applicable law (including regulations
promulgated by the United States Department of Defense), to examine any of
its books or other corporate records. ADT Limited shall pay any fees of such
independent public accountant incurred in connection with the Agent's or any
Lender's exercise of its rights pursuant to this Section. In addition, ADT
Limited shall pay the reasonable out-of-pocket expenses arising from the
Agent's visit to the offices of ADT Limited or any of its Subsidiaries in
connection with the exercise of its rights pursuant to this Section to the
extent of one such visit per Fiscal Year.
SECTION 4.1.5. Environmental Covenant. ADT Limited will, and
will cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, apply for and
keep all necessary permits, approvals, certificates, licenses and
other authorizations relating to environmental matters in effect
where the failure to so keep in effect could reasonably be
expected to have a material adverse effect on the business,
results of operations, financial condition or prospects of ADT
Limited and its Subsidiaries or the Borrower and its Subsidiaries
and remain in material compliance therewith, and handle all
Hazardous Materials in material compliance with all applicable
Environmental Laws and in a manner so as to minimize potential
liability;
(b) immediately notify the Agent and provide copies upon
receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or
compliance with Environmental Laws, which claims or other alleged
conditions could reasonably be expected to have a material adverse
effect on the business, results of operations, financial condition
or prospects of ADT Limited and its Subsidiaries or the Borrower
and its Subsidiaries; and
(c) provide such information and certifications which the
Agent may reasonably request from time to time to evidence
compliance with this Section 4.1.5.
SECTION 4.1.6. Guaranty Supplements. ADT Limited will cause each
Material Subsidiary and each Subsidiary subject to a Senior Note Guarantee to
be a Guarantor. In furtherance of the foregoing, ADT Limited will, in the
event any Person becomes a Material Subsidiary, notify the Agent of such event
or condition and will cause such new Material Subsidiary to execute and
deliver to the Agent as soon as practicable (but in no event later than thirty
days after the occurrence of such event or condition) a Subsidiary Guarantor
Guaranty Supplement, together with such certificates and legal opinions as the
Agent may reasonably request.
SECTION 4.1.7. Maintenance of Adequate Guarantees. If at any time
the Subsidiary Guarantors subject to the obligations of the Subsidiary
Guarantor Guaranty do not account on a consolidated basis for at least 90% of
the consolidated gross revenues of the Borrower and its Subsidiaries and at
least 90% of the consolidated gross assets of the Borrower and its Subsidiaries
(collectively, the "90% Test"), as reflected in the consolidated statement of
income and consolidated balance sheet most recently delivered, or required to
be delivered, pursuant to Section 8.1.1(a) or 8.1.1(d) of the Credit Agreement,
ADT Limited will cause such Non-Guarantors organized under the laws of the
United States (or any state thereof or the District of Columbia) as are
necessary to meet the 90% Test to execute and deliver to the Agent as soon as
practicable (but in no event later than thirty days after the occurrence of
such event or condition) a Subsidiary Guarantor Guaranty Supplement, together
with such certificates and legal opinions as the Agent may reasonably request.
SECTION 4.2. Negative Covenants. ADT Limited covenants and
agrees that, until the Covenant Termination Date, ADT Limited will not,
without the prior written consent of the Required Lenders, do anything
prohibited in this Section.
SECTION 4.2.1. Business Activities. ADT Limited will not, and
will not permit any of its Subsidiaries to, engage in any business activity,
except for those activities conducted in respect of the Core Businesses and the
businesses identified in Item 4.2.1 ("Permitted Existing Business Activities")
of the Disclosure Schedule, and such activities as may be incidental or related
thereto; provided, however, that ADT Limited will not be in default in the
observance of this Section 4.2.1 if, as part of the acquisition of a Core
Business, ADT Limited or its applicable Subsidiary acquires a business or
assets that would not constitute, or be included in, a Core Business, so long
as (i) the primary purpose of such acquisition was the acquisition of such Core
Business, which acquisition could not have been consummated on as commercially
attractive terms without the acquisition of such other business or assets,
(ii) not less than 70% of the assets acquired pursuant to such acquisition
related at the time of such acquisition to such Core Business, (iii) ADT
Limited or such applicable Subsidiary is diligently pursuing the sale of such
other business or assets and (iv) such business or assets do not have, and
could not reasonably be expected to have, a material adverse effect on the
business, results of operations, financial condition or operations of ADT
Limited and its Subsidiaries taken as a whole.
SECTION 4.2.2. Indebtedness. ADT Limited will not, and will not
permit any of its Subsidiaries (other than the Borrower and its Subsidiaries)
to, create, incur, assume or suffer to exist or otherwise become or be liable
in respect of any Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Obligations hereunder;
(b) Indebtedness in respect of the Senior Note Guarantees,
the Senior Subordinated Note Guarantees and the LYONs Guarantee to
the extent the guarantor under any such Senior Note Guarantee,
Senior Subordinated Note Guarantee or LYONs Guarantee is subject
to a Guarantee that is in full force and effect with respect to
Indebtedness in respect of the Obligations;
(c) Indebtedness existing as of June 30, 1995; provided that
(i) such Indebtedness having a principal amount in excess of
$3,000,000 is identified in Item 4.2.2(c) ("Ongoing Indebtedness")
of the Disclosure Schedule and (ii) true and correct copies of any
indenture or agreement governing such Indebtedness having a
principal amount in excess of $10,000,000 have been provided to
the Agent;
(d) (i) Indebtedness of ADT Canada, Inc., a Wholly Owned
Subsidiary of ADT Limited organized under the laws of Ontario,
incurred for working capital purposes in an aggregate amount not to
exceed at any time outstanding Canadian $75,000,000 and guarantees
thereof by ADT Limited or any of its Subsidiaries and (ii)
Indebtedness of ADT Finance plc, a Wholly Owned Subsidiary of ADT
Limited organized under the laws of England, in an aggregate
amount not to exceed at any time outstanding Pound
Sterling90,000,000 and guarantees thereof by ADT Limited, ADT (UK)
Holdings Limited, each Subsidiary of ADT (UK) Holdings Limited and
each other Subsidiary of ADT Limited (other than an Intermediate
Parent Company, the Borrower, any Subsidiary of the Borrower or
any other Subsidiary of ADT Limited which conducts the major
portion of its business in the United States or substantially all
of the property or assets of which are located in the United
States) (the agreements governing the Indebtedness and guarantees
described in this subclause (ii) being herein collectively
referred to as the "U.K. Credit Facility");
(e) obligations of ADT Limited or any of its Subsidiaries
pursuant to Hedging Arrangements designed to protect ADT Limited or
any of its Subsidiaries against fluctuations in interest rates in
respect of Indebtedness of ADT Limited or such Subsidiary and not
entered into for purposes of speculation;
(f) obligations of ADT Limited or any of its Subsidiaries
pursuant to Hedging Arrangements designed to protect ADT Limited or
any of its Subsidiaries against fluctuations in currency values and
entered into in the ordinary course of business and not for
purposes of speculation;
(g) unsecured Indebtedness incurred in the ordinary course
of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and
services, but excluding Indebtedness incurred through the
borrowing of money or Contingent Liabilities in respect of
obligations of Persons other than ADT Limited or any of its
Subsidiaries);
(h) Indebtedness in respect of Capitalized Lease
Liabilities and Indebtedness ("Capex Indebtedness") incurred to
finance the construction or acquisition of assets permitted to be
acquired or constructed pursuant to Section 4.2.7, to the extent a
Capitalized Lease Liability (assuming for the purposes of this
clause only that Capex Indebtedness constitutes a Capitalized
Lease Liability) could have been incurred under Section 4.2.7;
(i) Indebtedness of Subsidiaries of ADT Limited owing to ADT
Limited;
(j) Indebtedness of Wholly Owned Subsidiaries of ADT Limited
owing to Wholly Owned Subsidiaries of ADT Limited (other than the
Borrower and the Subsidiary Guarantors);
(k) Indebtedness of Wholly Owned Subsidiaries of ADT
Limited (other than the Intermediate Parent Companies) owing to the
Borrower or any Subsidiary Guarantor in an aggregate amount not to
exceed at any time outstanding $175,000,000;
(l) Indebtedness of ADT Limited owing to Wholly Owned
Subsidiaries of ADT Limited in an aggregate amount not to exceed at
any time outstanding $75,000,000;
(m) Indebtedness consisting of guarantees, surety or
performance bonds or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of
assets;
(n) Indebtedness in respect of surety bonds and performance
bonds provided in the ordinary course of business;
(o) Indebtedness which refinances Indebtedness permitted by
clauses (b), (c), (d) and (h) above; provided, however, that after
giving effect to such refinancing, (i) the principal amount of
outstanding Indebtedness is not increased, (ii) in the case of
clauses (b) and (c) above, neither the tenor nor the average life
thereof is reduced, (iii) the respective obligor or obligors shall
be the same on the refinancing Indebtedness as on the Indebtedness
being refinanced, (iv) except in the case of clause (d)(ii) above,
the security for the refinancing Indebtedness shall be the same as
that for the Indebtedness being refinanced (except to the extent
that less security is granted to holders of refinancing
Indebtedness), (v) the holders of refinancing Indebtedness are not
afforded covenants, defaults, rights or remedies more burdensome
to the obligor or obligors than those contained in the
Indebtedness being refinanced and (vi) the refinancing
Indebtedness is subordinated to the same degree as the
Indebtedness being refinanced;
(p) Indebtedness in respect of the Preference Shares and
Exchangeable Preference Shares outstanding on the Existing Credit
Facility Effective Date; and
(q) other Indebtedness of ADT Limited and its Subsidiaries
to the extent that the amount of such Indebtedness outstanding at
any time, when added (without duplication) to the aggregate amount
of Indebtedness outstanding at such time under clause (s) of
Section 8.2.2 of the Credit Agreement, does not exceed $75,000,000;
provided, however, that (i) no Indebtedness otherwise permitted by clauses (i),
(k) and (q) shall be permitted if, after giving effect to the incurrence
thereof, any Event of Default shall have occurred and be continuing and (ii) no
Indebtedness permitted by clause (i) or (k) shall be permitted unless evidenced
by promissory notes or other written loan documents that provide that the
Indebtedness evidenced thereby may not be forgiven or satisfied for any
consideration other than payment in full in cash at par.
SECTION 4.2.3. Liens. ADT Limited will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets (including Capital Stock of
Subsidiaries of ADT Limited), whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) Liens granted prior to the Existing Credit Facility
Effective Date to secure payment of Indebtedness of the type
permitted and described in clause (c) of Section 4.2.2 and clause
(f) of Section 8.2.2 of the Credit Agreement and Liens securing
refinancings thereof permitted by clause (o) of Section 4.2.2 and
clause (r) of Section 8.2.2 of the Credit Agreement, respectively;
(c) (i) Liens granted to secure payment of Indebtedness of
the type permitted and described in clause (h) of Section 4.2.2
and clause (k) of Section 8.2.2 of the Credit Agreement and
covering only those assets acquired with the proceeds of such
Indebtedness and Liens with respect to such assets securing
refinancings of such Indebtedness permitted by clause (o) of
Section 4.2.2 and clause (r) of Section 8.2.2 of the Credit
Agreement, respectively and (ii) Liens granted to secure
obligations under the U.K. Credit Facility and covering only
assets of the obligors and guarantors thereunder and Liens with
respect to such assets securing refinancings of such Indebtedness
permitted by clause (o) of Section 4.2.2;
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums
not overdue or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal
bonds;
(g) judgment Liens (i) in an aggregate amount not in excess
of $15,000,000, (ii) as to which enforcement proceedings shall not
have commenced and there shall not have been a period of 30
consecutive days during which such judgment was not stayed or
(iii) the payment of which is covered in full (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
(h) Liens with respect to assets of a Subsidiary of ADT
Limited (other than the Borrower) granted to secure Indebtedness
owing to the Borrower or a Wholly Owned Subsidiary of the Borrower
that is a Guarantor;
(i) Liens with respect to assets of a Subsidiary of ADT
Limited (other than the Borrower or any of its Subsidiaries or an
Intermediate Parent Company) granted to secure Indebtedness owing
to ADT Limited or a Wholly Owned Subsidiary of ADT Limited;
(j) Liens (i) existing at the time that a Person becomes a
Subsidiary of ADT Limited in a transaction permitted hereunder or
(ii) assumed in connection with an acquisition of assets permitted
hereunder; provided, however, that any such Lien covers only assets
that were subject to such Lien prior to the related transaction
and was not created, assumed or incurred in contemplation of such
transaction;
(k) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect
with the business of ADT Limited or any of its Subsidiaries and
incurred in the ordinary course of business;
(l) the Lien inherent in the right of any bank to set off
deposits against debts owed to such bank;
(m) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(n) Liens arising by operation of law incurred in the
ordinary course of business and which Liens, singly or in the
aggregate, do not interfere in any material respect with the
business of ADT Limited or any of its Subsidiaries; and
(o) other Liens securing Indebtedness in an aggregate amount
not to exceed $15,000,000 at any time outstanding.
SECTION 4.2.4. Financial Condition. ADT Limited will not permit:
(a) its Stockholders' Equity to be at any time less than
the sum, at such time, of (i) $1,134,300,000 plus (ii) 50% of the
Net Income of ADT Limited for each Fiscal Year commencing with the
1995 Fiscal Year (less, for each such Fiscal Year, cash dividends
on Preference Shares to the extent permitted hereunder) as shall
have been completed on or prior to such time (in each case with no
reduction for net losses, if any, for such Fiscal Year);
(b) its Cash Flow Coverage Ratio, as at the end of any
Fiscal Quarter, to be less than 1.5 to 1.0;
(c) its Debt to Total Capitalization Ratio, as at the end
of any Fiscal Quarter, to be greater than 0.5 to 1.0.
SECTION 4.2.5. Investments. ADT Limited will not, and will not
permit any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) (i) Investments existing on June 30, 1995 and
identified in Item 4.2.5(a) ("Ongoing Investments") of the
Disclosure Schedule and (ii) Investments acquired in the ASH
Transaction (including the sale of such Investments by ADT Limited
to ADT (UK) Holdings Limited, the sale of certain of such
Investments by ASH and its Subsidiaries to the Borrower and its
Subsidiaries and the sale by ADT Business Holdings, Inc. to
Sonitrol Management Corp. of all of the Capital Stock of
Mid-Atlantic Security, Inc., in each case prior to the date
hereof);
(b) Cash Equivalent Investments and High Quality
Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 4.2.2 or Section 8.2.2 of the
Credit Agreement;
(d) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 4.2.7;
(e) Investments by way of contributions to capital by ADT
Limited or any of its Subsidiaries to any Wholly Owned Subsidiary
of ADT Limited to the extent the Person making such Investment
would be allowed to make and maintain a loan or advance to such
Wholly Owned Subsidiary under Section 4.2.2 or Section 8.2.2 of
the Credit Agreement; provided that, solely for purposes of
determining under this Section 4.2.5 or Section 4.2.2 or under
Section 8.2.2 of the Credit Agreement whether such Person may make
and maintain any such loan or advance, the aggregate amount of
Investments pursuant to this clause (e) shall be taken into
account as if such Investments were a loan or advance;
(f) loans or advances to, or guarantees on behalf of,
employees of ADT Limited or any of its Subsidiaries made in the
ordinary course of business not to exceed at any time $500,000 per
employee or $5,000,000 in the aggregate for all such employees;
(g) Investments which are Permitted Business Acquisitions;
(h) accounts arising from sales of goods or services on
trade credit terms in the ordinary course of business of ADT
Limited and its Subsidiaries;
(i) negotiable instruments held for collection, lease,
utility and other similar deposits, or stock, obligations or
securities received in settlement of debts owing to ADT Limited or
any of its Subsidiaries as a result of a composition or
readjustment of debt or a reorganization of any debtor or ADT
Limited or any of its Subsidiaries or of foreclosure, perfection
or enforcement of any Lien, in each case as to debt that arose in
the ordinary course of business;
(j) Investments consisting of non-cash consideration
received in the sale or other disposition of assets or Capital
Stock effected in compliance with Section 4.2.10;
(k) (i) the exchange of Common Shares for Non-Voting
Exchangeable Shares (and payment of cash in lieu of fractional
shares) pursuant to the terms of Non-Voting Exchangeable Shares as
in effect on the Existing Credit Facility Effective Date and (ii)
the acquisition of Common Shares to the extent (A) the acquisition
of such Common Shares is not prohibited by any provision hereof or
of any other Loan Document (including Section 4.2.6(a)) and (B)
the aggregate number of Common Shares held by Subsidiaries of ADT
Limited does not exceed at any time nine percent of the Voting
Stock of ADT Limited outstanding at such time;
(l) the obligation of ADT Limited to exchange Common Shares
for LYONs (and payment of cash in lieu of fractional shares)
pursuant to the terms of the LYONs Indenture in effect on the
Existing Credit Facility Effective Date;
(m) Investments in any Wholly Owned Subsidiary of ADT
Limited that provides insurance in the ordinary course of business
and on reasonable terms solely to ADT Limited or any of its
Subsidiaries for the purpose of insuring ADT Limited or such
Subsidiary against liability that would not be covered by
insurance policies required to be maintained pursuant to Section
4.1.3 as a result of reasonable and customary deductibles
thereunder, to the extent such Investments are necessary or
appropriate to maintain such insurance;
(n) advances or loans made in connection with Hedging
Arrangements permitted hereunder or under the Credit Agreement; and
(o) other Investments of a type not otherwise permitted
pursuant to the immediately preceding clauses, including
Investments in Minority Interests and Related Businesses, to the
extent the aggregate amount of such Investments, when added
(without duplication) to the aggregate amount expended since the
Existing Credit Facility Effective Date in connection with
Business Acquisitions permitted under clause (f) of Section 4.2.9
(or clause (f) of Section 4.2.9 of the ADT Limited Guaranty (as
defined in the Existing Credit Facility)), does not exceed at any
one time $25,000,000;
provided, however, that
(i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" or "High Quality Investment", as the case may be, may
continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements;
(ii) Investments made by the Borrower and the Subsidiary
Guarantors after the Existing Credit Facility Effective Date in
Subsidiaries of ADT Limited (other than the Borrower and the
Subsidiary Guarantors) may not exceed in the aggregate at any time
$175,000,000;
(iii) no Investment otherwise permitted by clause (g) shall
be permitted to be made if an Event of Default described in
Section 9.1.1, 9.1.3 (to the extent resulting from a default in
the observance of any obligation under Section 4.2.4 or Section
8.2.3 of the Credit Agreement), 9.1.5 or 9.1.9 of the Credit
Agreement shall have occurred and be continuing or would occur
upon giving effect thereto;
(iv) no Investment otherwise permitted by clause (e), (f),
(m) or (o) shall be permitted to be made if an Event of Default
shall have occurred and be continuing or would occur upon giving
effect thereto; and
(v) without limiting any of the restrictions set forth in
this Section 4.2.5, no Investment shall be permitted to be made if
such Investment would not be permitted by the terms of the Senior
Note Indenture.
SECTION 4.2.6. Restricted Payments, etc. (a) ADT Limited will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of Capital Stock of ADT
Limited (other than dividends or distributions payable in shares
of Capital Stock of ADT Limited or in rights, warrants or options
to purchase such Capital Stock, but excluding dividends or
distributions payable in Redeemable Capital Stock or in options,
warrants or other rights to purchase Redeemable Capital Stock,
provided that dividends on Redeemable Capital Stock may be paid in
shares of such Redeemable Capital Stock),
(ii) purchase, redeem, retire or otherwise acquire for
value, or make any payment on account of the purchase, redemption,
retirement or other acquisition for value of, any Capital Stock of
ADT Limited or any warrants, rights or options to purchase or
acquire any such Capital Stock, or
(iii) declare or pay any dividend on, or make any
distribution to holders of, any Capital Stock of any Subsidiary of
ADT Limited (other than (A) with respect to any such Capital Stock
held by ADT Limited or any of its Wholly Owned Subsidiaries or (B)
with respect to the Voting Stock of any Subsidiary, made on a pro
rata basis, consistent with the ownership interests in such Voting
Stock, to the owners of such Voting Stock) or purchase, redeem or
otherwise acquire or retire for value, or make any payment on
account of the purchase, redemption, retirement or other
acquisition for value of, any outstanding Capital Stock of any
Subsidiary of ADT Limited (other than any such Capital Stock held
by ADT Limited or any of its Wholly Owned Subsidiaries) or any
warrants, rights or options to purchase or acquire any such
outstanding Capital Stock
(such payments or any other actions described in (but not excluded from) the
foregoing clauses (i) thorough (iii) being herein referred to as "Restricted
Distributions"), unless such Restricted Distribution would be permitted by the
terms of the Senior Note Indenture as in effect on the Existing Credit Facility
Effective Date; provided, however, that
(x) no Restricted Distribution otherwise permitted pursuant
to this Section 4.2.6(a) (other than any exchange of shares of the
Capital Stock of BAA plc for Exchangeable Preference Shares
pursuant to the terms of the Bye-Laws of ADT Limited as in effect
on the Existing Credit Facility Effective Date, the payment of any
Restricted Distribution within 60 days after the date of
declaration thereof, if at such date of declaration such
declaration was permitted hereunder, and any exchange of shares of
Non-Voting Exchangeable Shares for Common Shares in accordance
with the terms of the Articles of Incorporation of ADT Finance
Inc. as in effect on the Existing Credit Facility Effective Date)
shall be permitted if an Event of Default (including a default in
the observance by the Borrower of its obligations under clause (a)
of Section 8.2.3 of the Credit Agreement) shall have occurred and
be continuing or would occur upon giving effect to such Restricted
Distribution; and
(y) no Restricted Distribution otherwise permitted pursuant
to this Section 4.2.6(a) shall be permitted if such Restricted
Distribution would, pursuant to the terms of the Senior Note
Indenture, decrease the Restricted Payment Basket Amount to an
amount which is less than the excess of (1) the sum of (A) the
aggregate amount expended on Permitted Business Acquisitions
(other than the ASH Transaction to the extent the aggregate
consideration therefor did not exceed $425,000,000) after the
Existing Credit Facility Effective Date in excess of the
applicable Annual Limits (or, during the effectiveness of the
Existing Credit Facility, the applicable Annual Limits (as defined
under the Existing Credit Facility)) and (B) the aggregate amount
of Capital Expenditures made after the Existing Credit Facility
Effective Date with the cash proceeds referred to in clause (a) of
the definition of Equity Proceeds Amount and designated as such
pursuant to the Compliance Certificate (including any compliance
certificate delivered under the Existing Credit Facility)
delivered in connection with the Fiscal Quarter in which such
Capital Expenditures were paid over (2) the portion (if any) of
such sum which resulted in a decrease of the Restricted Payment
Basket Amount.
(b) ADT Limited will not, and will not permit any of its
Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of Capital Stock of the
Borrower (other than (A) dividends or distributions payable in
shares of Capital Stock of the Borrower or in rights, warrants or
options to purchase such Capital Stock, but excluding dividends or
distributions payable in Redeemable Capital Stock or in options,
warrants or other rights to purchase Redeemable Capital Stock,
provided that dividends on Redeemable Capital Stock may be paid in
shares of such Redeemable Capital Stock and (B) the dividend of
the Dividended Note), or
(ii) purchase, redeem, retire or otherwise acquire for
value, or make any payment on account of the purchase, redemption,
retirement or other acquisition for value of, any Capital Stock of
the Borrower or any warrants, rights or options to purchase or
acquire any such Capital Stock
(such payments or any other actions described in (but not excluded from) the
foregoing clauses (i) and (ii) being herein referred to as "Restricted Borrower
Distributions"), unless the amount of such Restricted Borrower Distribution
(which amount, in the case of a Restricted Borrower Distribution to be made
in property, shall equal the Fair Market Value thereof (as determined, in the
case of any property with an aggregate value in excess of $15,000,000, in good
faith by the Board of Directors of the Borrower, whose determination shall be
evidenced by a certified written resolution of such Board)), when added to the
aggregate amount of all such Restricted Borrower Distributions declared since
the Existing Credit Facility Effective Date, would not exceed 50% of the
aggregate Net Income of the Borrower accrued on a cumulative basis during the
period (taken as one accounting period) from the Existing Credit Facility
Effective Date to the last day of the most recently completed Fiscal Quarter
with respect to which, pursuant to Section 8.1.1(a) or 8.1.1(d) of the Credit
Agreement (or Section 8.1.1(d) of the Existing Credit Facility), financial
statements have been delivered to the Agent on or prior to the date of the
proposed Restricted Borrower Distribution; provided, however, that no
Restricted Borrower Distribution otherwise permitted pursuant to this Section
4.2.6(b) shall be permitted if an Event of Default (including a default in the
observance by the Borrower of its obligations under clause (a) of Section
8.2.3 of the Credit Agreement) shall have occurred and be continuing or would
occur upon giving effect to such Restricted Borrower Distribution.
(c) ADT Limited will not, and will not permit any of its
Subsidiaries to, directly or indirectly,
(i) make any payment of interest on the Senior Notes or any
Subordinated Debt (other than Subordinated Debt originally issued
to ADT Limited or a Wholly Owned Subsidiary of ADT Limited (or
otherwise acquired by ADT Limited or such Wholly-Owned Subsidiary,
to the extent that the consideration paid by ADT Limited or a
Wholly-Owned Subsidiary resulted in a decrease of the Restricted
Payment Basket Amount) and held by ADT Limited or a Wholly Owned
Subsidiary of ADT Limited) on any day other than the date such
payment is required to be made as set forth in the Senior Notes,
the Senior Note Indenture, the Senior Subordinated Note Indenture,
the LYONs, the LYONs Indenture or the other documents and
instruments memorializing such Subordinated Debt, or which, in the
case of any Subordinated Debt (including Subordinated Debt held by
ADT Limited or a Wholly Owned Subsidiary of ADT Limited), would
violate the subordination provisions thereof; or
(ii) make any payment or prepayment of principal of, or
redeem, purchase, repurchase or defease, the Senior Notes or any
Subordinated Debt (other than Subordinated Debt originally issued
to ADT Limited or a Wholly Owned Subsidiary of ADT Limited (or
otherwise acquired by ADT Limited or such Wholly-Owned Subsidiary,
to the extent that the consideration paid by ADT Limited or such
Wholly-Owned Subsidiary resulted in a decrease of the Restricted
Payment Basket Amount) and held by ADT Limited or a Wholly Owned
Subsidiary of ADT Limited, except, prior to the occurrence of a
Permitted Auction Business Sale, Subordinated Debt in respect of
the Dividended Note) on any day other than the date any such
payment, prepayment, redemption or repurchase is required to be
made as set forth in Sections 1010 and 1016 of the Senior Note
Indenture, Sections 1010 and 1016 of the Senior Subordinated Note
Indenture, Section 3.09 of the LYONs Indenture or in the other
documents and instruments memorializing the Senior Notes or such
Subordinated Debt, or which, in the case of any Subordinated Debt
(including Subordinated Debt held by ADT Limited or a Wholly Owned
Subsidiary of ADT Limited), would violate the subordination
provisions thereof; provided, however, that ADT Limited and its
Subsidiaries may, to the extent the subordination provisions of
the Senior Subordinated Note Indenture, the LYONs Indenture or any
other document or instrument memorializing Subordinated Debt would
not be violated thereby, make any payment or prepayment of
principal of, or redeem or repurchase, the Senior Notes or any
Subordinated Debt if permitted by the terms of the Senior Note
Indenture; provided further, however, that no payment, prepayment,
redemption or repurchase otherwise permitted pursuant to the
immediately preceding proviso shall be permitted if (x) an Event of
Default shall have occurred and be continuing or would occur upon
giving effect to such payment, prepayment, redemption or repurchase
or (y) such payment, prepayment, redemption or repurchase would,
pursuant to the terms of the Senior Note Indenture, decrease the
Restricted Payment Basket Amount to an amount which is less than
the excess of (1) the sum of (A) the aggregate amount expended on
Permitted Business Acquisitions (other than the ASH Transaction to
the extent the aggregate consideration therefor did not exceed
$425,000,000) after the Existing Credit Facility Effective Date in
excess of the applicable Annual Limits (or, during the
effectiveness of the Existing Credit Facility, the applicable
Annual Limits (as defined under the Existing Credit Facility)) and
(B) the aggregate amount of Capital Expenditures made after the
Existing Credit Facility Effective Date with the cash proceeds
referred to in clause (a) of the definition of Equity Proceeds
Amount and designated as such pursuant to the Compliance
Certificate (including any compliance certificate delivered under
the Existing Credit Facility) delivered in connection with the
Fiscal Quarter in which such Capital Expenditures were paid over
(2) the portion (if any) of such aggregate amount which resulted
in a decrease of the Restricted Payment Basket Amount.
SECTION 4.2.7. Capital Expenditures, etc. ADT Limited will not,
and will not permit any of its Subsidiaries to, make Capital Expenditures,
except (i) Capital Expenditures in connection with conducting the Core
Businesses and (ii) Capital Expenditures incurred in respect of Business
Acquisitions permitted under Sections 4.2.5 and 4.2.9; provided, however, that
no Capitalized Lease Liabilities otherwise permitted to be incurred pursuant
to this Section shall be permitted to be incurred if the aggregate amount of
all such Capitalized Lease Liabilities incurred during any Fiscal Year would
exceed $30,000,000.
SECTION 4.2.8. [Intentionally Omitted.]
SECTION 4.2.9. Consolidation, Merger, etc. ADT Limited will not,
and will not permit any of its Subsidiaries to, liquidate or dissolve, or
amalgamate or consolidate with, or merge into or with, any other Person, or
otherwise enter into or consummate any Business Acquisition not constituting
an Investment, except
(a) any Subsidiary of ADT Limited that is a direct or
indirect parent of the Borrower may liquidate or dissolve
voluntarily into, and may amalgamate or consolidate with or merge
into, ADT Limited or any Wholly Owned Subsidiary of ADT Limited
that is an indirect parent of the Borrower, and any assets or
Capital Stock of any Subsidiary of ADT Limited that is an indirect
parent of the Borrower may be purchased or otherwise acquired by
ADT Limited or any Wholly Owned Subsidiary of ADT Limited that is
an indirect parent of the Borrower;
(b) any Subsidiary of the Borrower may liquidate or dissolve
voluntarily into, and may merge with or into, the Borrower or any
Wholly Owned Subsidiary of the Borrower, and any assets or Capital
Stock of any Subsidiary of the Borrower may be purchased or
otherwise acquired by the Borrower or any Wholly Owned Subsidiary
of the Borrower;
(c) any Non-Guarantor that is not a Subsidiary of the
Borrower may liquidate or dissolve voluntarily into, and may merge
with or into, ADT Limited or any Wholly Owned Subsidiary of ADT
Limited, and any assets or Capital Stock of any such Non-Guarantor
may be purchased or otherwise acquired by ADT Limited or any Wholly
Owned Subsidiary of ADT Limited;
(d) ADT Limited may (i) amalgamate with or merge with or
into a newly-formed corporation having no assets or liabilities,
which amalgamation or merger shall be solely for the purpose of
reincorporating ADT Limited under the laws of Canada or any
political subdivision thereof, the United Kingdom or any political
subdivision thereof or the United States of America, any state
thereof or the District of Columbia or (ii) continue,
redomesticate or otherwise become subject to the laws of a
jurisdiction other than Bermuda, to the same extent as if it had
been incorporated in such jurisdiction; provided, however, that in
the case of clauses (i) and (ii) above, (A) the surviving entity
shall be a corporation duly organized and validly existing under
the laws of Canada or any political subdivision thereof, the
United Kingdom or any political subdivision thereof or the United
States of America, any state thereof or the District of Columbia
and shall, in either case, expressly assume all the obligations of
ADT Limited hereunder and this Guaranty shall remain in full force
and effect; (B) immediately before and immediately after giving
effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; (C) immediately after giving
effect to such transaction, Stockholders' Equity of the surviving
entity is at least equal to the Stockholders' Equity of ADT
Limited immediately before such transaction less customary and
reasonable transaction costs; (D) each Guarantor, unless it is the
other party to the transactions described above, shall have
confirmed that its Guaranty shall remain in full force and effect;
and (E) the surviving entity shall have delivered, or caused to be
delivered, to the Lenders an officers' certificate and an opinion
of counsel, each stating that this provision has been complied
with and that all conditions precedent herein provided for
relating to such transaction have been satisfied;
(e) ADT Limited or any Subsidiary of ADT Limited may enter
into or consummate any Permitted Business Acquisition; and
(f) ADT Limited or any Subsidiary of ADT Limited may enter
into or consummate any Business Acquisition of a Related Business
to the extent the aggregate amount of expenditures of ADT Limited
and its Subsidiaries in respect of such Business Acquisition, when
added (without duplication) to (i) the aggregate amount of all
expenditures of ADT Limited and its Subsidiaries in respect of
Business Acquisitions made pursuant to this clause (f) (or clause
(f) of Section 4.2.9 of the ADT Limited Guaranty (as defined in
the Existing Credit Facility)) since the Existing Credit Facility
Effective Date and (ii) the aggregate amount of Investments
outstanding under clause (o) of Section 4.2.5, does not exceed
$25,000,000.
SECTION 4.2.10. Asset Dispositions, etc. ADT Limited will not,
and will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other rights
with respect to, all or any substantial part of its assets (including accounts
receivable, Capital Stock of Subsidiaries of ADT Limited and other
Investments) to any Person (an "Asset Sale"), unless
(a) such Asset Sale is permitted by Section 4.2.9; or
(b) such Asset Sale is a Permitted Strategic Sale or
Permitted Auction Business Sale; or
(c) with respect to assets other than the Capital Stock of
the Borrower and any Intermediate Parent Company
(i) such Asset Sale is in the ordinary course of
business; or
(ii) (A) if such Asset Sale consists of the sale or
transfer of the Capital Stock of a Subsidiary of ADT
Limited, all but not less than all of the Capital Stock of
such Subsidiary is so sold or transferred, (B) such Asset
Sale is for not less than the Fair Market Value of the
assets sold (as determined in good faith by the Board of
Directors of ADT Limited or a committee thereof, whose
determination shall be evidenced by a certified written
resolution of such Board or such committee) and the
consideration received by ADT Limited or the relevant
Subsidiary in respect of such Asset Sale (other than in
connection with a sale or disposition of the Capital Stock
of Nu-Swift plc held by ADT Limited on the Effective Date)
consists of at least 75% cash (including any cash proceeds
received from the sale of securities received in such Asset
Sale, provided that at the time of such Asset Sale, ADT
Limited or the relevant Subsidiary has entered into a
legally binding agreement for the sale of such securities
and such securities are sold within sixty days of such Asset
Sale), or Cash Equivalent Investments and (C) the net book
value of such assets, together with the net book value of
all other assets subject to an Asset Sale permitted under
this clause (ii) (or clause (c)(ii) of Section 4.2.10 of the
ADT Limited Guaranty (as defined in the Existing Credit
Facility)) since the Existing Credit Facility Effective
Date, does not exceed $130,000,000; or
(d) each party to such Asset Sale is either ADT Limited or a
Subsidiary of ADT Limited (other than the Borrower, any Subsidiary
Guarantor or any Intermediate Parent Company); or
(e) all parties to such Asset Sale are either the Borrower
or a Subsidiary Guarantor.
SECTION 4.2.11. Modification of Certain Documents. ADT Limited
will not, and will not permit any of its Subsidiaries to, consent to any
amendment, supplement or other modification of any of the terms or provisions
contained in, or applicable to, the Senior Notes, any Subordinated Debt
(including Subordinated Debt in respect of the Dividended Note, but excluding
other Subordinated Intercompany Debt), or any document or instrument
evidencing or applicable thereto (including the Senior Note Indenture, the
Senior Subordinated Note Indenture and the LYONs Indenture), other than any
amendment, supplement or other modification which extends the date or reduces
the amount of any required repayment or redemption or which does not adversely
affect any of the Lender Parties.
SECTION 4.2.12. Transactions with Affiliates. ADT Limited will
not, and will not permit any of its Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of its other
Affiliates unless such arrangement or contract is fair and equitable to ADT
Limited or such Subsidiary and is an arrangement or contract of the kind which
would be entered into by a prudent Person in the position of ADT Limited or
such Subsidiary with a Person which is not one of its Affiliates; provided,
however, that the foregoing restriction shall not apply to (i) any arrangement
or contract between or among ADT Limited, the Borrower or any Guarantor that
is a Wholly Owned Subsidiary of the Borrower or (ii) any other arrangement
expressly permitted hereunder.
SECTION 4.2.13. Negative Pledges, Restrictive Agreements, etc.
ADT Limited will not, and will not permit any of its Subsidiaries to, enter
into any agreement (excluding this Guaranty and any other Loan Document)
(a) prohibiting the creation or assumption of any Lien to
secure the Obligations upon its properties, revenues or assets,
whether now owned or hereafter acquired; or
(b) restricting the ability of any such Subsidiary to make
any payments, directly or indirectly, to ADT Limited by way of
dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges,
expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any
such Subsidiary to make any payment, directly or indirectly, to
ADT Limited;
except
(i) (A) any indenture or agreement governing
Indebtedness permitted by clause (b), (c) or (d)(i) of
Section 4.2.2 or clause (b), (c), (d), (e), (f) or (g) of
Section 8.2.2 of the Credit Agreement, as in effect on the
Existing Credit Facility Effective Date, (B) the U.K. Credit
Facility to the extent that the U.K. Credit Facility
prohibits the creation or assumption of any Lien which
secures the Obligations on the property, revenues or assets
of ADT Limited and its Subsidiaries (other than the Borrower
and its Subsidiaries) or requires any obligor under the U.K.
Credit Facility to maintain a certain level of net worth and
(C) any refinancings of any of the foregoing permitted by
clause (o) of Section 4.2.2 or clause (r) of Section 8.2.2
of the Credit Agreement;
(ii) any agreement governing any Indebtedness
permitted by clause (h) of Section 4.2.2 or clause (k) of
Section 8.2.2 of the Credit Agreement as to the assets
financed with the proceeds of such Indebtedness and any
refinancings thereof permitted by clause (o) of Section
4.2.2 or clause (r) of Section 8.2.2 of the Credit Agreement;
(iii) any customary encumbrance or restriction with
respect to a Subsidiary of ADT Limited imposed pursuant to an
agreement entered into for a sale or disposition permitted
hereunder of all or substantially all of the Capital Stock
or assets of such Subsidiary, so long as such encumbrance or
restriction, by its terms, terminates on the earlier of the
termination of such agreement or the consummation of such
agreement;
(iv) customary restrictions on transfers of property
subject to Liens permitted pursuant to Section 4.2.3;
(v) restrictions on transfers of property by reason
of, or existing under, (A) applicable law or (B) customary
non-assignment provisions of any agreement entered into by
any Subsidiary in the ordinary course of business or any
lease governing a leasehold interest of any Subsidiary
entered into in the ordinary course of business;
(vi) usual and customary restrictions pursuant to any
agreement relating to Indebtedness of any Foreign Subsidiary
permitted pursuant to Section 4.2.2 and incurred for working
capital purposes, which restrictions may include requirements
for the maintenance of net worth or other balance sheet
conditions, restrictions on mergers and transfers of assets,
restrictions on investments, restrictions on transactions
with affiliates and requirements to maintain specified
levels of cash flow or cash flow coverage ratios; provided
that such restrictions are agreed to in good faith and,
where applicable, based upon reasonable assumptions; and
(vii) restrictions contained in Indebtedness (A)
existing at the time a Person becomes a Subsidiary of ADT
Limited in a transaction permitted hereunder or (B) assumed
in connection with an acquisition of assets permitted
hereunder; provided such Indebtedness was not incurred and
such restrictions were not created in contemplation of any
such transaction.
SECTION 4.2.14. Accounting Changes. ADT Limited will not, and
will not permit any of its Subsidiaries to, change its Fiscal Year from twelve
consecutive calendar months ending on December 31.
SECTION 4.2.15. Ability to Amend; Restrictive Agreements. ADT
Limited will not, and will not permit any of its Subsidiaries to, enter into,
or accept the obligations under, any agreement (i) prohibiting (including,
except with respect to (x) any agreement governing Indebtedness permitted by
clause (b) or (c) of Section 4.2.2 or clause (b), (c), (d), (e), (f) or (g) of
Section 8.2.2 of the Credit Agreement, as in effect on the Existing Credit
Facility Effective Date, or (y) any agreement governing Indebtedness permitted
under clause (o) of Section 4.2.2 or clause (r) of Section 8.2.2 of the Credit
Agreement that refinances Indebtedness referred to in the preceding clause (x),
subjecting to any condition) the ability of ADT Limited or any of its
Subsidiaries to amend or otherwise modify this Guaranty or any other Loan
Documents or (ii) containing any provision that would contravene any provision
of any Loan Document.
SECTION 4.2.16. [Intentionally Omitted.]
SECTION 4.2.17. Activities of Certain Subsidiaries. (a) ADT
Limited will not permit any of the Intermediate Parent Companies to engage in
any business activity or incur any obligation, except (i) the ownership of the
Capital Stock of their respective Subsidiaries, (ii) the making of payments
under intercompany Indebtedness permitted by Section 4.2.2, (iii) the making
of capital contributions to their respective Subsidiaries to the extent
permitted under Section 4.2.5 and (iv) the receipt of Distributions permitted
under Section 4.2.6 and the receipt of proceeds from, or the receiving of
payments under, intercompany Indebtedness permitted by Section 4.2.2 and
Section 8.2.2 of the Credit Agreement, in each case to the extent such
proceeds or payments are concurrently used (A) to repay Indebtedness of such
Intermediate Parent Company to the extent such Indebtedness is permitted under
Section 4.2.2 or (B) to make a loan, advance or Distribution to its parent or
ADT Limited, to the extent such loan, advance or Distribution is permitted
under Section 4.2.5 or 4.2.6, as applicable.
(b) ADT Limited will not permit any Subsidiary of it that is (i)
a Non-Obligor and (ii) an obligee in respect of Indebtedness set forth under
the caption "Continuing Indebtedness - Intercompanies" in Item 4.2.2(c)
("Ongoing Indebtedness") of the Disclosure Schedule to receive any payments
under any such Indebtedness, except to the extent such payments are used
within a reasonable period of time, directly or indirectly, (A) to repay
Indebtedness owing to an Obligor or (B) to make a loan, advance or
Distribution to an Obligor, to the extent such loan, advance or Distribution is
permitted under Section 4.2.5 or 4.2.6, as applicable. ADT Limited will not
permit any of its Subsidiaries that is subject to the subordination provisions
of any Subordinated Intercompany Debt (including Indebtedness in respect of the
Dividended Note) to take or omit to take any action the taking or the omission
of which would result in the failure of such Subsidiary fully and properly to
perform and observe all of its obligations in respect of such subordination
provisions.
SECTION 4.2.18. Ownership of Certain Subsidiaries. Except
pursuant to a transaction permitted pursuant to Section 4.2.9 or 4.2.10, ADT
Limited will not permit:
(a) any Subsidiary of Holdings N.V. now existing to not be
at any time a Wholly Owned Subsidiary of ADT Limited except to the
extent disclosed in Item 3.8 ("Existing Subsidiaries") of the
Disclosure Schedule; and
(b) any Subsidiary of the Borrower now existing to not be at
any time a Wholly Owned Subsidiary of the Borrower.
SECTION 4.2.19. Certain Intercompany Indebtedness. Without
limiting the effect of Section 4.2.11, ADT Limited will not, and will not
permit any of its Subsidiaries, to amend or modify the terms of any
Indebtedness referred to in clause (ii) of the proviso to Section 4.2.2, which
terms provide for satisfaction of such Indebtedness in cash at par.
SECTION 4.2.20. Any Action. ADT Limited will not, and will not
permit any of its Subsidiaries to, take or omit to take any action the taking
or the omission of which would result in the failure of the Borrower or any
other Obligor fully and properly to perform and observe all of its obligations
under the Credit Agreement or any other Loan Document to which it is a party.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including, without
limitation, Article XI thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of, Section 2.6, this
Guaranty shall be binding upon ADT Limited and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Lender
Party and each holder of a Note and their respective successors, transferees
and assigns (to the fullest extent provided pursuant to Section 2.6); provided,
however, that ADT Limited may not assign any of its obligations hereunder
without the prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by ADT Limited
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent and consented to by the applicable Lenders under
Section 11.1 of the Credit Agreement, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 5.4. Addresses for Notices. All notices and other
communications hereunder to ADT Limited shall be in writing or by facsimile
and mailed, telegraphed, transmitted or delivered to it, addressed to it at the
address set forth below its signature hereto or at such other address as shall
be designated by ADT Limited in a written notice to the Agent at the address
specified in the Credit Agreement complying as to delivery with the terms of
this Section. Any notice, if mailed and properly addressed with postage
prepaid, return receipt requested, or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any notice if
transmitted by facsimile, shall be deemed given when transmitted upon receipt
of electronic confirmation of transmission (it being understood and agreed that
notice transmitted by facsimile to ADT Inc. shall constitute notice to ADT
Limited hereunder).
SECTION 5.5. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.2 and Section 2.4, no failure on the part of any
Lender Party or any holder of a Note to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder 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 5.6. Captions. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of,
any rights of any Lender Party or any holder of a Note under applicable law,
each Lender Party and each such holder shall, upon the occurrence of any Event
of Default, to the fullest extent permitted under applicable law, have the
right to appropriate and apply to the payment of the obligations of ADT
Limited owing to it hereunder, whether or not then due, any and all balances,
credits, deposits, accounts or moneys of ADT Limited then or thereafter
maintained with such Lender Party or such holder; provided, however, that any
such appropriation and application shall be subject to the provisions of
Section 5.8 of the Credit Agreement.
SECTION 5.8. Independence of Covenants. All covenants contained
in this Guaranty or any other Loan Document shall be given independent effect
such that, in the event a particular action or condition is not permitted by
any of such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of a Default
or an Event of Default if such action is taken or such condition exists.
SECTION 5.9. Severability. Wherever possible each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Guaranty.
SECTION 5.10. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE AGENT (OR ANY OTHER LENDER PARTY) SHALL BE
BROUGHT AND MAINTAINED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE
FOUND. FOR PURPOSES OF ANY SUCH LITIGATION INVOLVING THIS GUARANTY, ADT
LIMITED HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND EXPRESSLY CONSENTS AND ACKNOWLEDGES THE TERMS AND
AGREEMENTS SET FORTH IN SECTION 2.9 HEREOF.
SECTION 5.11. Waiver of Jury Trial. ADT LIMITED AND, BY ITS
ACCEPTANCE HEREOF, THE AGENT (ON BEHALF OF THE LENDER PARTIES) HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS GUARANTY. ADT LIMITED ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS
ENTERING INTO THE CREDIT AGREEMENT AND MAKING CREDIT EXTENSIONS (INCLUDING THE
INITIAL CREDIT EXTENSION) TO THE BORROWER THEREUNDER.
IN WITNESS WHEREOF, ADT Limited has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
ADT LIMITED
By:
------------------------
Title:
Address: Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
With a copy to:
ADT Inc.
2255 Glades Road
Boca Raton, Florida 33431
Facsimile No.: 407-241-8257
Attention: President
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Agent
By:
-------------------
Title:
EXHIBIT J
SUBSIDIARY GUARANTOR GUARANTY
THIS SUBSIDIARY GUARANTOR GUARANTY (together with all amendments
and other modifications made from time to time, this "Guaranty"), dated as of
January _____, 1997, made by each Person (such capitalized term and all other
capitalized terms not otherwise defined herein to have the meanings provided
for in Article I) identified on the signature pages hereto and each Additional
Subsidiary Guarantor (collectively, the "Subsidiary Guarantors"), in favor of
each of the Lender Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January ____,
1997 (together with all amendments and other modifications, if any, from time
to time thereafter made thereto, the "Credit Agreement"), among ADT
Operations, Inc., a Delaware corporation (the "Borrower"), the financial
institutions as are or may become parties thereto (collectively, the
"Lenders"), and The Bank of Nova Scotia ("Scotiabank"), individually and as
agent (the "Agent") for the Lenders, the Lenders have extended Commitments to
make Credit Extensions to or on behalf of the Borrower;
WHEREAS, as a condition precedent to the occurrence of the Closing
Date under the Credit Agreement, each Subsidiary Guarantor is required to
execute and deliver this Guaranty;
WHEREAS, each Subsidiary Guarantor has duly authorized the
execution, delivery and performance of this Guaranty; and
WHEREAS, it is in the best interests of each Subsidiary Guarantor
to execute this Guaranty inasmuch as each Subsidiary Guarantor will derive
substantial direct and indirect benefits from the Credit Extensions made from
time to time to or on behalf of the Borrower by the Lenders;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, each Subsidiary Guarantor agrees, for the
benefit of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Agent" is defined in the first recital.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Guaranty" is defined in the preamble.
"Lender" is defined in the first recital.
"Lender Party" means, as the context may require, any Lender, any
Issuer or the Agent and each of their respective successors, transferees and
assigns.
"Lenders" is defined in the first recital.
"Other Taxes" is defined in clause (b) of Section 2.7.
"Scotiabank" is defined in the first recital.
"Subsidiary Guarantor" is defined in the preamble.
"Taxes" is defined in clause (a) of Section 2.7.
"U.C.C." means the Uniform Commercial Code as in effect in the
State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Guaranty,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Each Subsidiary Guarantor hereby
absolutely, unconditionally and irrevocably, jointly and severally,
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the
Borrower and each other Obligor now or hereafter existing, whether
for principal, interest, Reimbursement Obligations, fees, expenses
or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362(a)
of the United States Bankruptcy Code, 11 U.S.C. Section 362(a),
and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section
506(b)); and
(b) indemnifies and holds harmless each Lender Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender
Party or such holder, as the case may be, in enforcing any rights
under this Guaranty;
provided, however, that each Subsidiary Guarantor shall be liable under this
Guaranty for the maximum amount of such liability that can be hereby incurred
without rendering this Guaranty, as it relates to such Subsidiary Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount. This Guaranty constitutes a
guaranty of payment when due and not of collection, and each Subsidiary
Guarantor specifically agrees that it shall not be necessary or required that
any Lender Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against the Borrower or any
other Obligor (or any other Person) before or as a condition to the
obligations of such Subsidiary Guarantor hereunder.
SECTION 2.2. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Borrower and each other Obligor have been paid in full, all obligations of each
Subsidiary Guarantor hereunder shall have been paid in full and all
Commitments shall have terminated. Each Subsidiary Guarantor guarantees that
the Obligations of the Borrower and each other Obligor and their respective
Subsidiaries will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, without regard
(to the fullest extent permitted under applicable law) to any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of any Lender Party or any holder of any Note with respect
thereto (and each Subsidiary Guarantor hereby waives to the fullest extent it
may do so any right or rights it may have under any such law, regulation or
order). Without limiting the generality of the foregoing, the liability of
each Subsidiary Guarantor under this Guaranty shall be absolute, unconditional
and irrevocable irrespective of:
(a) any lack of genuineness, validity, legality or
enforceability of the Credit Agreement or any other Loan Document
(other than, in respect of such Subsidiary Guarantor, this
Guaranty) or of any of the Obligations (other than the Obligations
of such Subsidiary Guarantor hereunder);
(b) the failure of any Lender Party or any holder of any
Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person (including any other Subsidiary Guarantor)
under the provisions of the Credit Agreement or any other
Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor (including any other Subsidiary Guarantor) of, or
collateral securing, any Obligations of the Borrower or any
other Obligor;
(c) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations of the
Borrower or any other Obligor (other than such Subsidiary
Guarantor), or any other extension, compromise or renewal of any
Obligation of the Borrower or any other Obligor (other than such
Subsidiary Guarantor);
(d) any reduction, limitation, impairment or termination of
the Obligations of the Borrower or any other Obligor (other than
such Subsidiary Guarantor) for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall
not be subject to (and each Subsidiary Guarantor hereby waives any
right to or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting,
the Obligations of the Borrower, any other Obligor (other than
such Subsidiary Guarantor) or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Credit Agreement or any other Loan Document (other
than, in respect of such Subsidiary Guarantor, this Guaranty);
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release of or addition to, or consent to departure from, any other
guaranty (including the ADT Limited Guaranty), held by any Lender
Party or any holder of any Note securing any of the Obligations of
the Borrower or any other Obligor; or
(g) any other circumstances which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, the Borrower, any other Obligor, any surety or any
other guarantor (or any other Guarantor).
SECTION 2.3. Stay of Acceleration, Reinstatement, etc. Each
Subsidiary Guarantor agrees that, if acceleration of the time for payment of
any amount payable by the Borrower under the Credit Agreement, the Notes or
any other Loan Document or of compliance by the Borrower with its obligations
under Section 4.7 of the Credit Agreement is, in either case, stayed upon the
occurrence with respect to the Borrower of any Event of Default described in
clause (b) or (d) of Section 9.1.9 of the Credit Agreement, all such amounts
and obligations otherwise subject to acceleration or compliance under the
terms of the Credit Agreement shall nonetheless be payable and performed by
such Subsidiary Guarantor hereunder forthwith on demand by the Agent made at
the request of the requisite proportion of the Lenders specified in Section
9.3 of the Credit Agreement. Each Subsidiary Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be,
if at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by any Lender Party or any holder of
any Note, upon the insolvency, bankruptcy or reorganization of the Borrower,
any other Obligor (other than such Subsidiary Guarantor) or otherwise, all as
though such payment had not been made.
SECTION 2.4. Waiver, etc. Each Subsidiary Guarantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations of the Borrower or any other Obligor and this
Guaranty and any requirement that the Agent, any other Lender Party or any
holder of any Note protect, secure, perfect or insure any security interest or
Lien, or any property subject thereto, or exhaust any right or take any action
against the Borrower, any other Obligor or any other Person (including any
other guarantor and any other Guarantor) or entity or any collateral securing
the Obligations of the Borrower or any other Obligor, as the case may be.
SECTION 2.5. Subrogation. Each Subsidiary Guarantor hereby
agrees that it will not exercise any rights which it may now or hereafter
acquire against the Borrower or any other Obligor that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under this Guaranty or any other Loan Document, including any
right of subrogation, reimbursement, exoneration, or indemnification, any
right to participate in any claim or remedy of the Lender Parties against the
Borrower or any other Obligor or any collateral which the Agent now has or
hereafter acquires, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including the right to take
or receive from the Borrower or any other Obligor, directly or indirectly, in
cash or other property or by set-off or in any manner, payment or security on
account of such claim or other rights, until the Obligations have been paid in
full in cash and the Commitments have been terminated. If any amount shall be
paid to such Subsidiary Guarantor in violation of the preceding sentence and
the Obligations shall not have been paid in cash in full and the Commitments
have not been terminated, such amount shall be deemed to have been paid to
such Subsidiary Guarantor for the benefit of, and held in trust for, the
Lender Parties, and shall forthwith be paid to the Lender Parties to be
credited and applied upon the Obligations, whether matured or unmatured. Each
Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Credit Agreement
and that the agreement set forth in this Section is knowingly made in
contemplation of such benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of
Notes, etc. This Guaranty shall:
(a) be binding upon each Subsidiary Guarantor and its
successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Agent
and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan held by it to any
other Person or entity, and such other Person or entity shall thereupon become
vested with all rights and benefits in respect thereof granted to such Lender
under any Loan Document (including this Guaranty) or otherwise, subject,
however, to the provisions of Section 11.11 and Article X of the Credit
Agreement.
SECTION 2.7. Payments Free and Clear of Taxes, etc. Each
Subsidiary Guarantor hereby agrees that:
(a) Any and all payments made by such Subsidiary Guarantor
hereunder shall be made in accordance with Section 5.6 of the
Credit Agreement 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 Party or any holder of a
Note, taxes imposed on its net income and franchise taxes imposed
on it (such non-excluded items being hereinafter referred to as
"Taxes"). If any such Subsidiary Guarantor shall be required by
law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender Party or any holder of a Note
(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) such Lender Party or such holder, as the
case may be, receives an amount equal to the sum it would
have received had no such deductions been made,
(ii) such Subsidiary Guarantor shall make such
deductions, and
(iii) such Subsidiary Guarantor shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) Such Subsidiary Guarantor shall pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Guaranty (hereinafter referred to
as "Other Taxes").
(c) Such Subsidiary Guarantor hereby indemnifies and holds
harmless each Lender Party and each of holder of a Note for the
full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section) paid by such Lender Party
or such holder, as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted.
(d) Without prejudice to the survival of any other
agreement of such Subsidiary Guarantor hereunder, the agreements
and obligations of such Subsidiary Guarantor contained in this
Section 2.7 shall survive the payment in full of the principal of
and interest on the Loans.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Subsidiary
Guarantor hereby represents and warrants for itself unto each Lender Party as
to all matters contained in Article VII of the Credit Agreement and Article III
of the ADT Limited Guaranty, in each case insofar as applicable to such
Subsidiary Guarantor or such Subsidiary Guarantor's properties, together with
all related definitions and ancillary provisions, all of which are hereby
incorporated into this Section 3.1 as those specifically set forth herein. In
addition, each Subsidiary Guarantor hereby represents and warrants for itself
unto each Lender Party as further set forth in this Article III.
SECTION 3.1.1. Organization, etc. Such Subsidiary Guarantor and
each of its Subsidiaries is a corporation duly organized and validly existing
and in good standing under the laws of the State of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of its business or the location of its
assets requires such qualification and where the failure to so qualify or be
in good standing would reasonably be expected to have a material adverse
effect on the business, results of operations, financial condition or
prospects of the Borrower and its Subsidiaries taken as a whole. Such
Subsidiary Guarantor and each of its Subsidiaries has full power and authority
and holds all requisite governmental licenses, permits and other approvals (i)
to own and hold under lease its property and to conduct its business
substantially as currently conducted by it, except where failure to hold such
licenses, permits and other approvals would not reasonably be expected to have
a material adverse effect on the business, results of operations, financial
condition or prospects of the Borrower and its Subsidiaries taken as a whole
and (ii) to enter into and perform its obligations under this Guaranty and
each other Loan Document to which it is a party.
SECTION 3.1.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by such Subsidiary Guarantor of this
Guaranty and each other Loan Document executed or to be executed by it and
such Subsidiary Guarantor's participation in the consummation of the
Transaction are within such Subsidiary Guarantor's corporate powers, have been
duly authorized by all necessary corporate action, and do not
(a) contravene such Subsidiary Guarantor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting such Subsidiary Guarantor in any manner that could
reasonably be expected (i) to have a material adverse effect on
the business, results of operations, financial condition or
prospects of the Borrower and its Subsidiaries taken as a whole,
(ii) to impair the ability of any Lender, any Issuer or the Agent
to enforce the Obligations or (iii) to subject any Lender, any
Issuer or the Agent to any liability; or
(c) result in, or require the creation or imposition of,
any Lien on any of such Subsidiary Guarantor's properties.
SECTION 3.1.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by such Subsidiary Guarantor of
this Guaranty or any other Loan Document to which it is a party. No
Subsidiary Guarantor is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 3.1.4. Validity, etc. This Guaranty constitutes, and each
other Loan Document executed by such Subsidiary Guarantor will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of such Subsidiary Guarantor enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting enforceability
of creditors' rights generally and to general principles of equity.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Affirmative Covenants. Each Subsidiary Guarantor
covenants and agrees that, until the Covenant Termination Date, such
Subsidiary Guarantor will perform, comply with and be bound by all the
agreements, covenants and obligations contained in Article VIII of the Credit
Agreement and Article IV of the ADT Limited Guaranty applicable to such
Subsidiary Guarantor or such Subsidiary Guarantor's properties. Each such
agreement, covenant and obligation contained in each such Article and all
related definitions and ancillary provisions are hereby incorporated into this
Guaranty as though specifically set forth herein.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including, without
limitation, Article XI thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of, Section 2.6, this
Guaranty shall be binding upon each Subsidiary Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
each Lender Party and each holder of a Note and their respective successors,
transferees and assigns (to the full extent provided pursuant to Section 2.6);
provided, however, that no Subsidiary Guarantor may assign any of its
obligations hereunder without the prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by any Subsidiary
Guarantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by each Subsidiary Guarantor and the Agent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 5.4. Addresses for Notices to the Subsidiary Guarantor.
All notices and other communications hereunder to any Subsidiary Guarantor
shall be in writing or by facsimile and addressed, delivered or transmitted to
it in care of the Borrower at the address and facsimile number and in the
manner provided for in Section 11.2 of the Credit Agreement.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.2 and Section 2.4, no failure on the part of any
Lender Party or any holder of a Note to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder 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 5.6. Headings. The various headings used in this Guaranty
are for convenience of reference only and shall not affect the construction of
this Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of,
any rights of any Lender Party or any holder of a Note under applicable law,
each Lender Party and each such holder shall, upon the occurrence of any
Event of Default, to the fullest extent permitted under applicable law, have
the right to appropriate and apply to the payment of the obligations of any
Subsidiary Guarantor owing to it hereunder, whether or not then due, any and
all balances, credits, deposits, accounts or moneys of such Subsidiary
Guarantor then or thereafter maintained with such Lender Party or such holder;
provided, however, that any such appropriation and application shall be
subject to the provisions of Section 5.8 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible, each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Guaranty.
SECTION 5.9. Execution in Counterparts. This Guaranty may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SECTION 5.10. Governing Law; Entire Agreement. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO
THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL,
WITH RESPECT THERETO.
SECTION 5.11. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES OR ANY SUBSIDIARY GUARANTOR
SHALL BE BROUGHT AND MAINTAINED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH SUBSIDIARY GUARANTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. EACH SUBSIDIARY GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH
SUBSIDIARY GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY SUBSIDIARY GUARANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY.
SECTION 5.12. Waiver of Jury Trial. THE LENDER PARTIES AND EACH
SUBSIDIARY GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE LENDER PARTIES OR ANY SUBSIDIARY GUARANTOR. EACH SUBSIDIARY
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER PARTIES ENTERING INTO THE CREDIT AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
SECTION 5.13. Additional Subsidiary Guarantors. Upon
execution and delivery by the Agent and any other Person (each such Person
being an "Additional Subsidiary Guarantor") of an instrument in the form of
Annex I attached hereto, such Additional Subsidiary Guarantor shall become a
Subsidiary Guarantor hereunder with the same force and effect as if originally
named as a Subsidiary Guarantor herein. The execution and delivery of any
such instrument shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any
Additional Subsidiary Guarantor as a party to this Guaranty.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
ADT GENERAL HOLDINGS, INC.
By:
----------------------
Title:
ADT SECURITY SERVICES, INC.
(formerly known as ADT
SECURITY SYSTEMS, INC.)
By:
----------------------
Title:
ADT SECURITY SYSTEMS,
WEST, INC.
By:
----------------------
Title:
ADT AUTOMOTIVE, INC.
By:
----------------------
Title:
ADT AUTOMOTIVE HOLDINGS, INC.
By:
----------------------
Title:
AA PROPERTY HOLDINGS, INC.
By:
----------------------
Title:
ADT INVESTMENTS, INC.
By:
----------------------
Title:
AAAA DEALERS SERVICES, INC.
By:
----------------------
Title:
ADT BUSINESS HOLDINGS, INC.
By:
----------------------
Title:
ADT PROPERTY HOLDINGS, INC.
By:
----------------------
Title:
ADT SECURITY SYSTEMS
MANUFACTURING, INC.
By:
----------------------
Title:
MID-ATLANTIC SECURITY, INC.
By:
----------------------
Title:
ADT AUTOMOTIVE SERVICES, INC.
By:
----------------------
Title:
AUCTION TRANSPORT, INC.
By:
----------------------
Title:
BRITISH CAR AUCTIONS, INC.
By:
----------------------
Title:
CCTC INTERNATIONAL, INC.
By:
----------------------
Title:
ADT SPECIALTY AUCTIONS, INC.
By:
----------------------
Title:
FLYING LION INC.
By:
----------------------
Title:
TRI-CITY AUTO AUCTION, INC.
By:
----------------------
Title:
ADT SERVICES, INC.
By:
----------------------
Title:
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Agent
By:
-----------------------------
Title:
ANNEX I
to
Subsidiary Guarantor Guaranty
SUBSIDIARY GUARANTOR GUARANTY SUPPLEMENT
THIS SUBSIDIARY GUARANTOR GUARANTY SUPPLEMENT (this "Supplement"),
dated as of _____________, 199_, to the Subsidiary Guarantor Guaranty, dated
as of January ___, 1997 (as amended or otherwise modified through the date
hereof, the "Subsidiary Guaranty"), made by each Person identified on the
signature pages thereto, certain other Persons who subsequently became a party
thereto by executing an agreement in substantially the form hereof (each an
"Additional Subsidiary Guarantor" and, together with each Person identified on
the signature pages of the Guaranty, the "Subsidiary Guarantors"), in favor of
The Bank of Nova Scotia ("Scotiabank"), as documentation agent (the
"Documentation Agent") for each of the Lender Parties (such capitalized term
and all other capitalized terms used in this Supplement without being defined
shall have the meaning provided for in the Subsidiary Guaranty).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January ___,
1997 (together with all amendments and other modifications, if any, from time
to time made thereto, the "Credit Agreement"), among ADT Operations, Inc., a
Delaware corporation (the "Borrower"), the financial institutions as are or
may become parties thereto (collectively, the "Lenders"), and The Bank of Nova
Scotia ("Scotiabank"), individually and as agent (the "Agent") for the
Lenders, the Lenders have extended Commitments to make Credit Extensions to or
on behalf of the Borrower;
WHEREAS, it is in the best interests of the undersigned (the "New
Additional Subsidiary Guarantor") to execute this Supplement inasmuch as the
New Additional Subsidiary Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made by the Lenders pursuant to the Credit
Agreement; and
WHEREAS, the New Additional Subsidiary Guarantor desires to become
an Additional Subsidiary Guarantor under the Subsidiary Guaranty pursuant to
Section 5.13 thereof;
NOW, THEREFORE, for good and valuable consideration the receipt
of which is hereby acknowledged, the New Additional Subsidiary Guarantor
agrees, for the benefit of each Lender Party, as follows:
SECTION 1. Additional Subsidiary Guarantor. In accordance with
Section 5.13 of the Subsidiary Guaranty, the New Additional Subsidiary
Guarantor by its signature hereto shall become a Subsidiary Guarantor under
the Subsidiary Guaranty with the same force and effect as if originally named
as a Subsidiary Guarantor therein, and each reference to a "Subsidiary
Guarantor" or an "Additional Subsidiary Guarantor" in the Subsidiary Guaranty
shall be deemed to include the New Additional Subsidiary Guarantor. The New
Additional Subsidiary Guarantor hereby agrees to all the terms and provisions
of the Subsidiary Guaranty applicable to it as an Additional Subsidiary
Guarantor thereunder.
SECTION 2. Guaranty. Without limiting the terms of Section 1, the
New Additional Subsidiary Guarantor hereby absolutely, unconditionally and
irrevocably, jointly and severally,
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the
Borrower and each other Obligor, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which
would become due but for the operation of the automatic stay under
Section 362(a) of the United States Bankruptcy Code, 11 U.S.C.
Section 362(a), and the operation of Sections 502(b) and 506(b) of
the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b)); and
(b) indemnifies and holds harmless each Lender Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender
Party or such holder, as the case may be, in enforcing any rights
under this Supplement or the Subsidiary Guaranty;
provided, however, that the New Additional Subsidiary Guarantor shall be
liable under this Supplement and the Subsidiary Guaranty for the maximum
amount of such liability that can be incurred without rendering this Supplement
and the Subsidiary Guaranty, as it relates to the New Additional Subsidiary
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer, and not for any greater amount. This Supplement and the
Subsidiary Guaranty constitute a guaranty of payment when due and not of
collection, and the New Additional Subsidiary Guarantor specifically agrees
that it shall not be necessary or required that any Lender Party or any holder
of any Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the Borrower or any other Obligor (or any other
Person) before or as a condition to the obligations of the New Additional
Subsidiary Guarantor under this Supplement or the Subsidiary Guaranty.
SECTION 3. Warranties, etc. The New Additional Subsidiary
Guarantor hereby represents and warrants unto each Lender Party, as of the
date hereof, as follows:
(a) each of the representations and warranties set forth in
Article III of the Subsidiary Guaranty as applied to such New
Additional Subsidiary Guarantor are true and correct; and
(b) the execution, delivery and performance by the New
Additional Subsidiary Guarantor of this Supplement are within its
corporate powers, have been duly authorized by all necessary
corporate action and constitute the legal, valid and binding
obligation of the New Additional Subsidiary Guarantor enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting enforceability of creditors,
rights generally and to general principles of equity.
SECTION 4. Subsidiary Guaranty Remains in Full Force and Effect.
Except as expressly supplemented hereby, the Subsidiary Guaranty shall remain
in full force and effect in accordance with its terms.
SECTION 5. Governing Law. THIS SUPPLEMENT SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
SECTION 6. Severability. Wherever possible each provision of this
Supplement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Supplement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Supplement.
SECTION 7. Execution in Counterparts. This Supplement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute but one and the same
agreement.
SECTION 8. Consent to Jurisdiction. If the New Additional
Subsidiary Guarantor is organized under the laws of a jurisdiction outside of
the United States, such New Additional Subsidiary Guarantor shall consent to
the jurisdiction of New York courts (including the appointment of an agent to
receive summons and complaints in connection with any litigation) on terms
reasonably satisfactory to the Agent.
SECTION 9. Expenses. Without limiting the provisions of the
Credit Agreement, the New Additional Subsidiary Guarantor agrees to reimburse
the Agent for all reasonable out-of-pocket expenses incurred in connection with
this Supplement, including the reasonable fees and expenses of counsel of the
Agent.
SECTION 10. Notices. The address and facsimile number for all
notices to be delivered to the New Additional Subsidiary Guarantor in
connection with the Subsidiary Guaranty is as set forth in Section 5.4 of the
Subsidiary Guaranty.
SECTION 11. Subsidiary Guaranty. This Supplement hereby
incorporates by reference the provisions of the Subsidiary Guaranty, which
provisions are deemed to be a part hereof, and this Supplement shall be deemed
to be a part of the Subsidiary Guaranty.
IN WITNESS WHEREOF, the New Additional Subsidiary Guarantor
has duly executed this Supplement to the Subsidiary Guaranty as of the day and
year first above written.
[NAME OF NEW ADDITIONAL
SUBSIDIARY GUARANTOR]
By
-----------------------
Title:
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Agent
By
------------------------
Title:
EXHIBIT K
[LETTERHEAD OF APPLEBY, SPURLING & KEMPE]
______________, 1997
The Bank of Nova Scotia,
as the Agent for the Lenders,
One Liberty Plaza,
New York, N.Y. 10006,
U.S.A.
- and -
Each of the Lenders party to the Credit
Agreement referred to below
Dear Sirs,
Re: ADT LIMITED (the "Company")
We have been instructed by the Company to address this opinion to
you in connection with the Guaranty, dated as of the 9th January, 1997 (the
"Guaranty"), entered into by the Company in connection with the US$200,000,000
Credit Agreement, dated as of the 9th January, 1997 (the "Credit Agreement")
among ADT Operations, Inc (the "Borrower''), the certain commercial lending
institutions as are or may become parties thereto (collectively, the
"Lenders"), The Bank of Nova Scotia, individually and as Agent for the Lenders
(the "Agent"). This opinion is given pursuant to Section 6.1.9(b) of the
Credit Agreement.
Unless otherwise defined herein, terms defined in the Guaranty,
have the same meanings when used in this opinion.
For the purposes of this opinion, we have been supplied with and
have reviewed, and relied upon the following documents:
(a) a copy of the executed Credit Agreement;
(b) a copy of the executed Guaranty;
(c) certified copies of the Certificate of Incorporation,
Memorandum of Association and Bye-laws of the Company; and
(d) a certified copy of the Resolutions of the Board of
Directors of the Company passed on the 6th January, 1997 (the
"Certificate"), approving the Guaranty and the Credit Agreement
and authorizing the execution and delivery of the Guaranty on
behalf of the Company.
We have also relied upon our searches of documents of public record
maintained by the Registrar of Companies in Bermuda and of the Cause Book of
the Supreme Court of Bermuda made on the 8th January, 1997 (the "Searches").
In giving this opinion, we have assumed:
(a) the capacity, power and authority of each of the parties to
the Credit Agreement;
(b) the due execution and delivery of the Credit Agreement by
each of the parties thereto;
(c) the conformity to original documents of all documents
submitted to us as copies and the authenticity and completeness of
all original documents;
(d) that the information disclosed by our Searches has not been
materially altered and that the Searches did not fail to disclose
any material information which had been delivered for filing or
registration, but was not disclosed or did not appear on the
public file at the time of the Searches;
(e) that the Guaranty and the Credit Agreement are legal, valid,
binding and enforceable under the laws of the State of New York, by
which they are expressed to be governed;
(f) the truth, accuracy and completeness of all factual
representations and warranties made in the Certificate, the
Guaranty and the Credit Agreement;
(g) the genuineness of all signatures on the documents which we
have examined; and
(h) that there are no provisions of the laws of any
jurisdiction, other than Bermuda, which would have any implication
in relation to the opinion expressed herein.
The opinion is limited to Bermuda law as applied by the Bermuda
Courts. We have made no investigation of the laws of any jurisdiction
other than Bermuda and neither express nor imply any opinion as to any
other law, in particular the laws of the United States of America.
Based upon the foregoing, subject to the qualifications set out
below, to matters not disclosed to us and matters of fact which would affect
the conclusions set out below, and having regard to such legal considerations
as we deem relevant, we are of the opinion that insofar as the present laws of
Bermuda are concerned:
(1) The Company is a company duly incorporated and validly
existing under and in compliance with Bermuda law.
(2) The Company has the corporate power and authority to enter
into and perform the Guaranty and has taken all necessary action
to authorise the execution, delivery and performance of the
Guaranty.
(3) The Guaranty has been duly executed and validly delivered.
(4) The obligations of the Company as set out in the Guaranty
constitute legal, valid and binding obligations of the Company.
(5) The Company having been designated as non-resident for the
purposes of the Exchange Control Act 1972, it is not necessary for
the consent of any authority or agency of Bermuda to be obtained
to enable the Company to enter into and perform its obligations
set out in the Guaranty.
(6) The obligations of the Company under the Guaranty will rank
at least pari passu in priority of payment with all other unsecured
unsubordinated indebtedness of the Company other than indebtedness
which is preferred by virtue of any provision of Bermuda law of
general application.
(7) The execution, delivery and performance of the Guaranty by
the Company (i) does not and will not violate the Certificate of
Incorporation, Bye-laws or Memorandum of Association of the
Company; (ii) conflict with any law or governmental rule or
regulation of Bermuda (including the Companies Act of 1981 of
Bermuda); and (iii) as far as can be ascertained from the Searches
does not and will not violate or conflict with any judgment,
order, decree, injunction or award of any authority, agency or
court in Bermuda to which the Company is subject.
(8) As far as can be ascertained from the Searches, no
litigation, arbitration or administrative proceeding of or before
any court, arbitrator or governmental instrumentality of or in
Bermuda is, to the best of our knowledge, pending with respect to
the Credit Agreement, the Guaranty or the transactions
contemplated thereby.
(9) The Company will be permitted to make all payments under the
Guaranty free of any deduction or withholding therefrom in Bermuda
and such payments will not be subject in the hands of the Lenders
or the Agents to any Tax imposed by the government of Bermuda or
any taxing authority thereof or therein.
(10) The entry into, performance and enforcement of the Guaranty
will not give rise to any registration fee or to any stamp, excise
or other similar tax imposed by the government of Bermuda or any
taxing authority thereof or therein.
(11) It is not necessary or advisable under the laws of Bermuda
in order to ensure the validity, effectiveness or enforceability
of the Guaranty that the Guaranty be filed, registered or recorded
in any public office or elsewhere in Bermuda.
(12) The choice of the laws of the State of New York to govern the
Guaranty is a proper, valid and binding choice of law and will be
recognised and applied by the Courts of Bermuda assuming that such
choice of law is a valid and binding choice of law under the laws
of the State of New York.
(13) The submission by the Company to the non-exclusive
jurisdiction of the courts of New York pursuant to Section 5 of
the Guaranty is valid and binding upon the Company, assuming that
such submission is accepted by the courts of New York, and is not
subject to revocation.
(14) A final and conclusive judgment obtained in the courts of
the State of New York under which a sum of money is payable, not
being a sum payable in respect of taxes or other charges of a like
nature or in respect of a fine or other penalty or in respect of
Multiple Damages (as defined in The Protection of Trading Interest
Act 1981), would be enforced as a debt against the Company by an
action in the Supreme Court of Bermuda without a re-examination of
the merits of the case under the Common Law Doctrine of
Obligation, provided that such judgment was not obtained by fraud
or that its enforcement would not be contrary to public policy in
Bermuda or that the proceedings in which the same was obtained
were not contrary to natural justice.
(15) It is not necessary under the laws of Bermuda (a) in order to
enable the Agents or the Lenders to enforce their rights under the
Guaranty or (b) by reason of the execution of the Guaranty or the
Credit Agreement or the performance by the Lenders of their
obligations under the Credit Agreement, that the Lenders or the
Agents be licensed or qualified or otherwise entitled to carry on
business in Bermuda.
(16) None of the Agents or the Lenders is or will be deemed to be
resident, domiciled, carrying on business or subject to taxation in
Bermuda by reason only of the entry into, performance and/or
enforcement of the Company Guaranty or the Credit Agreement.
Our reservations as follows:
A. We express no opinion as to whether specific performance or
injunctive relief, being equitable remedies, would necessarily be available in
respect of any of the obligations of the
Company as set out in the Guaranty.
B. We express no opinion as to the validity or the binding effect of
any obligations set out in the Credit Agreement or the Guaranty which provides
for the payment of a higher rate of interest on overdue amounts than on amounts
which are current. A Bermuda court, even if it were applying the laws of the
State of New York, might not give effect to such a provision if it could be
established that the amount expressed as being payable was such that the
provision was in the nature of a penalty; that is to say a requirement for a
stipulated sum to be paid irrespective of, or necessarily greater than, the
loss likely to be sustained.
C. The obligations of the Company under the Guaranty will be subject
to any laws from time to time in effect relating to bankruptcy or liquidation
or any other laws or other legal procedures affecting generally the
enforcement of creditors' rights and may also be the subject of the statutory
limitation of the time within which such proceedings may be brought.
D. The registration of a New York Court judgment in the Supreme Court
of Bermuda involves the conversion of the judgment debt into Bermuda dollars,
but the Controller of Foreign Exchange has indicated that the present policy
is to give the consents necessary for any Bermuda dollar award made by the
Supreme Court of Bermuda as aforesaid to be converted into external currency.
E. Any provision in the Guaranty that certain calculations and/or
certificates will be conclusive and binding will not be effective if such
calculations are fraudulent or erroneous on their face and will not
necessarily prevent juridical enquiries into the merits of any claim by an
aggrieved party.
F. To the extent that the Credit Agreement, Guaranty or the
transactions contemplated thereunder, create or give rise to the creation of
any charge over any assets of the Company, or create a charge on property in
Bermuda which is acquired by a Company incorporated outside of Bermuda, such
Charge will be registrable under Part V of the Companies Act, 1981 of Bermuda.
The fee payable for registration of a Charge (securing a sum greater than
US$1,000,000) is $425.00. Registration is not compulsory and there is no time
limit within which it must be effected. However, to the extent that matters of
priority of competing charges over such assets are determined in accordance
with Bermuda law, any charge registered under the said Act will have priority
based on the date that it is registered and not on the date of its creation
and will have such priority over any unregistered charge and on any charge
which is subsequently registered under the said Act in each case, which
pertains to such assets.
G. A Bermuda court may refuse to give effect to any provisions of the
Guaranty in respect of costs of unsuccessful litigation brought before the
court or where that court has itself made an order for costs.
H. We express no opinion as to any law other than Bermuda law and none
of the opinions expressed herein relates to compliance with or matters governed
by the laws of any jurisdiction except Bermuda. Where an obligation is to be
performed in a jurisdiction other than Bermuda, the Courts of Bermuda may
refuse to enforce it to the extent that such performance would be illegal or
contrary to public policy under the laws of such other jurisdiction.
I. The Searches showed a cause of action in which the Company is named
as defendant. The Acton was commenced in 1991 under action number 01299. The
Plaintiff is Laidlaw Investments (Barbados) Ltd. We are unable to verify
whether this litigation is proceeding, or has been discontinued, and whether
if it proceeded any judgment was rendered against the Company, whether this
judgment would have any material effect on the Company.
This opinion is issued on the basis that it will be governed by and construed
in accordance with the laws of Bermuda and that any legal proceedings with
respect thereto will be brought in the Courts of Bermuda. It is issued solely
for your benefit for the purpose of the transactions described in the Credit
Agreement and the Guaranty and it is not to be relied upon by any other Person
(other than permitted assigns under the Credit Agreement), or for any other
purpose, without our prior written consent.
Yours faithfully,
EXHIBIT L-1
[LETTERHEAD OF DAVIS POLK & WARDWELL]
____________, 1997
The Bank of Nova Scotia,
as Agent
One Liberty Plaza
New York, New York 10006
-and-
Each of the Lenders party to the
Credit Agreement referred to below
Dear Sirs:
We have participated in the preparation of the $US200,000,000
Credit Agreement, dated as of January 9, 1997 (the "Credit Agreement"), among
ADT Operations, Inc. (the "Borrower"), the financial institutions parties
thereto as lenders (collectively, the "Lenders") and The Bank of Nova Scotia,
individually, as issuer of letters of credit thereunder and as agent for the
Lenders (the "Agent"). Unless otherwise defined herein, terms used herein have
the meanings provided in the Credit Agreement. This opinion is given pursuant
to Section 6.1.9(b) of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
These documents, records, certificates and instruments include the following
(in each case dated as of the date of the Credit Agreement unless otherwise
indicated):
(a) An executed copy of the Credit Agreement;
(b) An executed copy of each of the Notes issued on January 14,
1997 (the "Notes");
(c) An executed copy of the ADT Limited Guaranty; and
(d) An executed copy of the Subsidiary Guarantor Guaranty.
The documents referred to in items (a) through (d) above are
referred to herein collectively as the "Credit Documents". The Borrower, ADT
Limited and the Subsidiary Guarantors are collectively referred to as the
"Credit Parties".
On the basis of the foregoing, and in reliance thereon, and
subject to the limitations, qualifications, assumptions and exceptions set
forth herein, we are of the opinion that as of the date hereof:
1. Each Credit Document (other than the Notes) constitutes a
valid and binding agreement of each Credit Party party thereto, and each Note
constitutes a valid and binding obligation of the Borrower, in each case
enforceable against such Credit Party or the Borrower, as the case may be, in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principles
of equity.
2. None of the execution and delivery on the date hereof by any
Credit Party of any Credit Document to which it is a party or the performance
by such Credit Party of its obligations thereunder (a) conflicts with, results
in a breach or violation of, or constitutes a default under, any of the terms,
conditions or provisions of (i) any agreement or instrument listed on Schedule
1 hereto (each a "Designated Agreement") or (ii) the Delaware General
Corporation Law or any federal or New York State law, statute, rule or
regulation binding on any Credit Party which in our experience is normally
applicable to general business corporations and to transactions of the type
contemplated by the Credit Documents or (b) results in the creation of any
Lien upon any assets of any Credit Party under any Designated Agreement.
3. Neither the making of the Loans nor the issuance of the
Letters of Credit as provided in the Credit Agreement violates Regulation G, U
or X of the Board of Governors of the Federal Reserve System.
4. No governmental consents, approvals, authorizations,
registrations, declarations or filings (other than those that have been duly
obtained and are in full force and effect and routine filings with the
Securities and Exchange Commission) are required to be made or obtained by any
Credit Party under the Delaware General Corporation Law or any federal or New
York State law in connection with (a) the making of the Loans or the issuance
of the Letters of Credit under the Credit Agreement, (b) the execution,
delivery and performance by each Credit Party thereto of any of the Credit
Documents or (c) the legality, validity, binding effect or enforceability of
any Credit Document.
5. No Credit Party is an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
6. No Credit Party is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
7. The obligations of the Borrower and ADT Limited under the
Credit Documents constitute "Senior Indebtedness" and "Guarantor Senior
Indebtedness", respectively, in each case as defined in each of the Senior
Subordinated Note Indenture and the LYONS Indenture.
The foregoing opinion is subject to the following
qualifications:
(a) Our opinion is subject to the effect of, and we express no
opinion as to the possible application to the transactions contemplated by the
Credit Documents of, any applicable fraudulent conveyance, fraudulent transfer
or similar law.
(b) We express no opinion as to provisions in the Credit
Documents which purport to create rights of set-off in favor of participants
or which provide for set-off to be made otherwise than in accordance with
applicable laws.
(c) We have assumed (i) the genuineness of all signatures of all
parties to any Credit Document, (ii) that each Person that is a party to any
Credit Document has full power, authority and legal right under its charter
and other governing documents and laws applicable to it to execute, deliver
and perform its obligations under the Credit Documents to which it is a party,
(iii) that the execution, delivery and performance by each Credit Party of
each Credit Document to which it is a party have been duly authorized by all
necessary corporate action and do not conflict with the charter or other
governing documents of such Credit Party and (iv) that each of the Credit
Documents constitutes a valid and binding agreement of each Person party
thereto that is not a Credit Party, enforceable against each such Person in
accordance with its terms.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the Delaware General Corporation Law.
In giving the foregoing opinion, we express no opinion as to the effect (if
any) of any law of any jurisdiction (except the State of New York) in which
any Lender is located which limits the rate of interest that such Lender may
charge or collect.
This opinion is rendered solely to you and is solely for your
benefit (and the benefit of your permitted assigns under the Credit Agreement)
in connection with the above matter. This opinion may not be relied upon by
you for any other purpose or relied upon by any other Person without our prior
written consent.
Very truly yours,
Schedule 1
Company and Facility
Purchase Agreement dated January 20, 1993 among the shareholders of Skyline
Auto Exchange, Inc., Hatfield Auto Auction, Inc., Hatfield Auto
Transport, Inc., Keystone Recon Center, Inc., Johnst on Auto Auction,
Inc., Dothan Auto Exchange Inc. and Anglo Ameri can Auto Auctions Inc.
ADT Limited guaranty dated as of March, 1993 of Anglo American Auto Auctions
Inc.'s payment and performance under the Purchase Agreement dated
January 20, 1993 among the shareholders of Skyline Auto Exchange, Inc.,
Hatfield Auto Auction, Inc., Hatfield Auto Transport, Inc., Keystone Recon
Center, Inc., Johnston Auto Auction, Inc., Dothan Auto Exchange Inc. and
Anglo American Auto Auctions Inc.
ADT Limited guaranty dated February 7, 1992, of Anglo American AutoAuctions,
Inc.'s facility with NBD Bank, N.A.
ADT Limited guarantee and waiver dated as of July 11, 1992, of P.I. Management
Services Limited's obligations to Stork Limited and Sentry Financial
Corporation
Senior Note Indenture
Senior Subordinated Note Indenture
LYONS Indenture
EXHIBIT L-2
[LETTERHEAD OF KAY COLLYER & BOOSE LLP]
______________, 1997
The Bank of Nova Scotia,
as Agent
One Liberty Plaza
New York, New York 10006
-and -
Each of the Lenders
party to the Credit
Agreement referred to below
Dear Sirs:
We have acted as counsel to ADT Operations, Inc., a Delaware
corporation (the "Borrower"), in connection with the US $200,000,000 Credit
Agreement dated as of January 9, 1997 (the "Credit Agreement") among the
Borrower, the financial institutions parties thereto (collectively, the
"Lenders") and The Bank of Nova Scotia, individually and as agent (in such
capacity, the "Agent") for the Lenders. Unless otherwise defined herein, terms
used herein have the respective meanings provided in the Credit Agreement.
In this connection, we have examined originals, or certified or
photostatic copies, of such documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary for
purposes of this opinion, including without limitation:
(a) the Credit Agreement;
(b) each of the Notes;
(c) the ADT Limited Guaranty;
(d) the Subsidiary Guarantor Guaranty; and
(e) the Subordination Agreement.
The documents referred to in items (a) through (e) above are
referred to herein collectively as the "Credit Documents". The Borrower, ADT
Limited and each Subsidiary Guarantor are collectively referred to as the
"Credit Parties".
We have assumed the genuineness of all signatures, the
authenticity of all documents tendered to us as originals, the conformity to
original documents of all documents submitted to us as certified, photostatic
or facsimile copies and the corporate authority of any individual executing
such documents.
Based upon the foregoing and such other investigations of fact and
law as we have deemed appropriate, it is our opinion that:
1. Each of the Credit Parties organized under the laws of the
State of Delaware (the "Delaware Credit Parties"), which Delaware Credit
Parties are set forth on Exhibit A attached hereto, is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware with corporate power and authority under such laws to (a)
own, lease and operate its properties and conduct its business and (b)
execute, deliver and perform the Credit Documents to which it is a party.
2. Each Delaware Credit Party is qualified to do business as a
foreign corporation and is in good standing in each other jurisdiction in
which, to our knowledge, its properties or business require such
qualification, provided that any failure to be so qualified does not create a
materially adverse effect on the Delaware Credit Parties taken as a whole.
3. The execution and delivery by the Delaware Credit Parties of
the Credit Documents to which they are parties, and the performance by such
Delaware Credit Parties of their respective obligations thereunder, do not and
will not result in any violation of the charter and by-laws of any of the
Delaware Credit Parties.
4. The Credit Documents executed by the Delaware Credit Parties
have been duly executed and delivered by such Delaware Credit Parties.
5. The execution, delivery and performance by the Delaware
Credit Parties of the Credit Documents executed by such Delaware Credit
Parties have been duly authorized.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware.
This opinion is made as the date hereof and we assume no
obligation to update or supplement this opinion to reflect any facts or
circumstances which may hereafter come to our attention or any changes in law
which may hereafter occur. This opinion is rendered solely to you and is
solely for your benefit (and the benefit of your permitted assigns under the
Credit Agreement) in connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by any other Person
without our prior written consent.
Very truly yours,
KAY COLLYER & BOOSE LLP
EXHIBIT A
DELAWARE CREDIT PARTIES
Corporate
AAAA Dealer Services, Inc.
AA Property Holdings, Inc.
ADT Automotive Holdings, Inc.
ADT Automotive, Inc.
ADT Automotive Services, Inc.
ADT Business Holdings, Inc.
ADT General Holdings, Inc.
ADT Investments, Inc.
ADT Operations, Inc.
ADT Property Holdings, Inc.
ADT Security Services, Inc.
ADT Security Systems, Manufacturing, Inc.
ADT Security Systems, West, Inc.
ADT Services, Inc.
British Car Auctions, Inc.
CCTC International, Inc.
Flying Lion, Inc.
Mid-Atlantic Security, Inc.
EXHIBIT L-3
[ADT LOGO]
___________, 1997
The Bank of Nova Scotia,
as Agent
One Liberty Plaza
New York, New York 10006
Dear Sirs:
I have participated in the preparation of the US$200,000,000
Credit Agreement, dated as of January 9, 1997 (the "Credit Agreement"), among
ADT Operations, Inc. (the "Borrower"), the financial institutions parties
thereto (the "Lenders") and The Bank of Nova Scotia, individually, as issuer
of letters of credit thereunder and as agent for the Lenders ( in such
capacity, the "Agent"). Unless otherwise defined herein, terms used herein
have the meanings provided in the Credit Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as in my judgment are
necessary or appropriate to enable me to render the opinions expressed below.
These documents, records, certificates and instruments include the following
(in each case dated as of the date of the Credit Agreement unless otherwise
indicated):
(a) An executed copy of the Credit Agreement;
(b) An executed copy of the Note;
(c) An executed copy of the ADT Limited Guaranty; and
(d) An executed copy of the Subsidiary Guarantor Guaranty.
The documents referred to in items (a) through (d) above are
referred to herein collectively as the "Credit Documents". The Borrower, ADT
Limited and each Subsidiary Guarantor are collectively referred to as the
"Credit Parties".
On the basis of the foregoing, and in reliance thereon, and
subject to the limitations, qualification, assumptions and exceptions set
forth herein, I am of the opinion that as of the date hereof:
1. To the best of my knowledge, neither the execution and
delivery on the date hereof by the Credit Parties of the Credit Documents to
which they are parties, the consummation on the date hereof of the
transactions contemplated thereby nor the performance by such Credit Parties
of their obligations thereunder conflicts with, results in a breach or
violation of, or constitutes a default under, any of the terms, conditions or
provisions of any order, writ, injunction, or decree of any court or
governmental authority applicable to ADT Limited or any of its Subsidiaries.
2. To the best of my knowledge, there is no litigation, action,
proceeding or labor controversy pending or threatened against any Credit Party
in which an injunction or order has been entered preventing the making of the
Loans or the issuance or maintenance of the Letters of Credit, or which
questions the validity or enforceability of any of the Credit Documents or the
transactions contemplated thereby.
I am a member of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and federal
laws of the United States of America.
This opinion is rendered solely to you and is solely for your
benefit (and the benefit of your permitted assigns under the Credit Agreement)
in connection with the above matter. This opinion may not be relied upon by
you for any other purpose or relied upon by any other Person without my prior
written consent.
Sincerely,
Jan S. Beck
ADT, Inc.
Vice President and General Counsel
[ADT LOGO]
VIA FEDERAL EXPRESS
___________, 1997
Each of the Lenders party
from time to time to the Credit
Agreement referred to below
- and -
The Bank of Nova Scotia,
as Agent for the Lenders
One Liberty Plaza
New York, New York 10006
Ladies and Gentlemen:
This letter is being delivered to you pursuant to clause (d) of
Section 6.1.9 of the US$200,000,000 Credit Agreement, dated as of January 9,
1997 (the "Credit Agreement"), among ADT Operations, Inc., a Delaware
corporation (the "Borrower"), the various financial institutions as are or may
become parties thereto (collectively, the "Lenders") and The Bank of Nova
Scotia, individually and as agent (the "Agent") for the Lenders. Unless
otherwise defined herein or the context otherwise requires, capitalized terms
used herein have the meanings provided in the Credit Agreement.
I have acted as general counsel to ADT Group plc, a company
organized under the laws of England ("ADT Group plc"), and ADT Security
Services, Inc. (formerly known as ADT Security Systems, Inc.), a Delaware
corporation (together with ADT Group plc, the "Subject Companies"), in
connection with the Subordination Agreement, dated as of January 9, 1997 (the
"Subordination Agreement"), made by the Subject Companies in favor of the
holders from time to time of Senior Indebtedness (as defined in the
Subordination Agreement), and, in that regard, I have examined originals, or
certified or photostatic copies, of such documents, corporate records,
certitudes of public officials and other instruments as I have deemed
necessary for purposes of this letter, including, without limitation, the
Subordination Agreement.
In my examination of the Subordination Agreement, I have
assumed the authenticity of all its documents submitted to me as originals,
the genuineness of all signatures, the conformity to original documents
submitted to me as certified copies of photocopies and the authenticity of the
originals of such letter documents.
Based upon the foregoing examination of documents and
assumptions and upon such other investigation as I have deemed necessary, I am
of the opinion that:
1. ADT Group plc is a company duly incorporated and validly
existing under and in compliance with English law.
2. Each of the Subject Companies has the corporate power and
authority to enter into and perform the Subordination Agreement and has taken
all necessary action to authorize the execution, delivery and performance of
the Subordination Agreement.
3. The Subordination Agreement has been duly executed and validly
delivered by ADT Group plc.
4. The Subordination Agreement executed and delivered by each of
the Subject Companies constitutes a legal, valid and binding obligation of
each Subject Company, enforceable against it in accordance with its terms.
5. The choice of the laws of the State of New York to govern the
Subordination Agreement is a proper, valid and binding choice of law and will
be recognized and applied by the courts of England assuming that such choice
of law is a valid and binding choice of law under the laws of the State of New
York.
6. The submission by ADT Group plc to the jurisdiction of the
courts of New York pursuant to Section 16 of the Subordination Agreement is
valid and binding upon ADT Group plc, assuming that such submission is
accepted by the courts of New York.
This opinion letter is being furnished to you for your use in
connection with the transactions contemplated by the Subordination Agreement
and may not be relied upon by any other person without my prior written
consent.
Very truly yours,
Jan S. Beck
Vice President and General Counsel
EXHIBIT 10.18
[CONFORMED COPY]
GUARANTY,
dated as of January 9, 1997,
made by
ADT LIMITED
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.1. Certain Terms...................................... 1
1.2. Credit Agreement Definitions....................... 6
ARTICLE II
GUARANTY PROVISIONS
2.1. Guaranty........................................... 6
2.2. Guaranty Absolute, etc............................. 7
2.3. Stay of Acceleration, Reinstatement, etc........... 8
2.4. Waiver, etc........................................ 9
2.5. Subrogation........................................ 9
2.6. Successors, Transferees and Assigns; Transfers
of Notes, etc...................................... 10
2.7. Payments Free and Clear of Taxes, etc.............. 10
2.8. Judgment........................................... 12
2.9. Consent to Jurisdiction; Waiver of Immunities...... 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Organization, etc.................................. 14
3.2. Due Authorization, Non-Contravention, etc.......... 14
3.3. Government Approval, Regulation, etc............... 15
3.4. Validity, etc...................................... 15
3.5. Financial Information.............................. 15
3.6. No Material Adverse Change......................... 15
3.7. Litigation, Labor Controversies, etc............... 15
3.8. Subsidiaries....................................... 16
3.9. Ownership of Properties............................ 16
3.10. Taxes.............................................. 16
3.11. Pension and Welfare Plans.......................... 17
3.12. Environmental Warranties........................... 17
3.13. Regulations G, U and X............................. 19
3.14. No Defaults........................................ 19
3.15. Delivery of Organizational Chart................... 20
3.16. Accuracy of Information............................ 20
3.17. Restricted Payment Basket Amount; Equity Proceeds
Amount............................................. 21
3.18. Restricted Borrower Distributions.................. 21
ARTICLE IV
COVENANTS, ETC.
4.1. Affirmative Covenants.............................. 21
4.1.1. Compliance with Laws, etc.......................... 21
4.1.2. Maintenance of Properties.......................... 22
4.1.3. Insurance.......................................... 22
4.1.4. Books and Records.................................. 22
4.1.5. Environmental Covenant............................. 23
4.1.6. Guaranty Supplements............................... 23
4.1.7. Maintenance of Adequate Guarantees................. 23
4.2. Negative Covenants................................. 24
4.2.1. Business Activities................................ 24
4.2.2. Indebtedness....................................... 24
4.2.3. Liens.............................................. 27
4.2.4. Financial Condition................................ 29
4.2.5. Investments........................................ 30
4.2.6. Restricted Payments, etc........................... 33
4.2.7. Capital Expenditures, etc.......................... 37
4.2.8. [Intentionally Omitted.]........................... 37
4.2.9. Consolidation, Merger, etc......................... 37
4.2.10. Asset Dispositions, etc............................ 39
4.2.11. Modification of Certain Documents.................. 40
4.2.12. Transactions with Affiliates....................... 40
4.2.13. Negative Pledges, Restrictive Agreements, etc...... 41
4.2.14. Accounting Changes................................. 42
4.2.15. Ability to Amend; Restrictive Agreements........... 43
4.2.16. [Intentionally Omitted.]........................... 43
4.2.17. Activities of Certain Subsidiaries................. 43
4.2.18. Ownership of Certain Subsidiaries.................. 44
4.2.19. Certain Intercompany Indebtedness.................. 44
4.2.20. Any Action......................................... 44
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1. Loan Document...................................... 44
5.2. Binding on Successors, Transferees and Assigns;
Assignment......................................... 44
5.3. Amendments, etc.................................... 45
5.4. Addresses for Notices.............................. 45
5.5. No Waiver; Remedies................................ 45
5.6. Captions........................................... 45
5.7. Setoff............................................. 45
5.8. Independence of Covenants.......................... 46
5.9. Severability....................................... 46
5.10 Governing Law...................................... 46
5.11 Waiver of Jury Trial............................... 47
DISCLOSURE SCHEDULE
GUARANTY
THIS GUARANTY (this "Guaranty"), dated as of January 9, 1997,
made by ADT LIMITED, a company organized under the laws of Bermuda ("ADT
Limited"), in favor of each of the Lender Parties (as defined below),
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date
hereof (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "Credit Agreement"), among ADT
Operations, Inc., a Delaware corporation (the "Borrower"), the financial
institutions as are or may become parties thereto (collectively, the
"Lenders"), The Bank of Nova Scotia ("Scotiabank"), individually and as agent
(the "Agent") for the Lenders, the Lenders have extended Commitments to make
Credit Extensions to the Borrower; and
WHEREAS, as a condition precedent to the making of the initial
Credit Extension under the Credit Agreement, ADT Limited is required to execute
and deliver this Guaranty; and
WHEREAS, ADT Limited has duly authorized the execution, delivery
and performance of this Guaranty; and
WHEREAS, it is in the best interests of ADT Limited to execute this
Guaranty inasmuch as ADT Limited will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrower by
the Lenders pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt
of which is hereby acknowledged, and in order to enable the Borrower to obtain
more favorable interest rates and terms, ADT Limited agrees, for the benefit
of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"ADT Limited" is defined in the preamble.
"Agent" is defined in the first recital and includes each other
Person which may be appointed as any successor agent pursuant to the Credit
Agreement.
"Annual Limit" is defined in subclause (a)(i) of the definition of
"Permitted Business Acquisition" in Section 1.1.
"ASH Transaction" means, collectively, (i) the acquisition by ADT
Limited on September 6, 1996 of the entire Capital Stock of ASH pursuant to
a stock-for-stock exchange in which the stockholders of ASH received Common
Shares and (ii) in connection with such acquisition, (A) the repayment of
certain Indebtedness of ASH and its Subsidiaries and (B) the guaranty by ADT
Limited of certain Indebtedness of ASH and its Subsidiaries in an aggregate
principal amount not exceeding $70,000,000, which Indebtedness remained
outstanding following such acquisition, and the assumption by ADT Limited of
certain obligations to deliver Common Shares upon the conversion of such
Indebtedness.
"Asset Sale" is defined in Section 4.2.10.
"Borrower" is defined in the first recital.
"Business Acquisition" means the acquisition, by purchase or
otherwise, of all or substantially all of the assets (or any part of the assets
constituting all or substantially all of a business or line of business) of any
Person, whether such acquisition is direct or indirect, including through the
acquisition of the business of, or Capital Stock of, such Person.
"Credit Agreement" is defined in the first recital.
"Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule I, as it may be amended, supplemented or otherwise modified from
time to time by ADT Limited with the written consent of the Agent and the
Required Lenders.
"Equity Proceeds Amount" means, with respect to any proposed
Permitted Business Acquisition in excess of the Annual Limit or any addition
to Cash Flow in respect of Capital Expenditures in connection with the
computation of the Cash Flow Coverage Ratio of ADT Limited,
(a) an amount equal to
(i) the aggregate net cash proceeds received by ADT
Limited after the Indenture Effective Date from the issuance
or sale (other than to a Subsidiary of ADT Limited) of
shares of its Capital Stock (other than Redeemable Capital
Stock) or warrants, options or rights to purchase such
shares of Capital Stock (other than Redeemable Capital
Stock),
plus
(ii) the aggregate net cash proceeds received by ADT
Limited after the Indenture Effective Date (other than from
the Borrower or any other Subsidiary of ADT Limited) upon the
exercise of options, warrants or rights to purchase shares of
Capital Stock of ADT Limited (other than Redeemable Capital
Stock),
plus
(iii) the aggregate net cash proceeds received by ADT
Limited after the Effective Date from the issuance or sale
(other than to the Borrower or any other Subsidiary of ADT
Limited) of debt securities or Redeemable Capital Stock that
have been converted into or exchanged for Capital Stock of
ADT Limited (other than Redeemable Capital Stock), together
with the aggregate cash received by ADT Limited at the time
of such conversion or exchange,
as decreased from time to time by
(b) (i) the amount of each Restricted Payment (as defined
under the Senior Note Indenture) made after ADT Limited shall have
received the cash proceeds referred to in the preceding clause (a)
which, pursuant to the terms of the Senior Note Indenture,
decreases the Restricted Payment Basket Amount; provided that any
such decrease to the Equity Proceeds Amount shall not result in
the Equity Proceeds Amount being less than zero,
(ii) the amount expended after the Existing Credit Facility
Effective Date on Permitted Business Acquisitions (other than the
ASH Transaction to the extent the aggregate consideration therefor
did not exceed $425,000,000) in excess of the Annual Limit (or,
during the effectiveness of the Existing Credit Facility, the
applicable Annual Limits (as defined under the Existing Credit
Facility)), and
(iii) the amount of Capital Expenditures made after the
Existing Credit Facility Effective Date with the cash proceeds
referred to in the preceding clause (a) and designated as such
pursuant to the Compliance Certificate (including any compliance
certificate delivered under the Existing Credit Facility)
delivered in connection with the Fiscal Quarter in which such
Capital Expenditures were paid.
"Existing Credit Facility Effective Date" means August 23, 1995.
"Lender Party" means, as the context may require, any Lender, any
Issuer or the Agent and each of their respective successors, transferees and
assigns.
"Lenders" is defined in the first recital.
"Other Taxes" is defined in clause (b) of Section 2.7.
"Permitted Business Acquisition" means any Business Acquisition of
a Core Business, exclusive, however, of (i) acquisitions of Minority Interests
and (ii) acquisitions of Capital Stock in any Related Business, so long as
(a) the aggregate amount of expenditures of ADT Limited and
its Subsidiaries in respect of such Business Acquisition (such
amount, the "Subject Amount"), when added to the aggregate amount
of all expenditures of ADT Limited and its Subsidiaries in respect
of Business Acquisitions during the Fiscal Year in which such
Subject Amount would be expended, does not exceed the sum of (i)
$130,000,000 (the "Annual Limit") and (ii) the Equity Proceeds
Amount, as determined immediately prior to the making of such
expenditure, and
(b) in the event the Subject Amount (which amount shall
include, in the event such Business Acquisition is to be
consummated in a series of related transactions, the aggregate
amount of all expenditures of ADT Limited and its Subsidiaries in
respect of such related transactions) would exceed $50,000,000,
the Agent shall have received a certificate executed by the chief
financial Authorized Officer of ADT Limited certifying and, if
reasonably requested by the Agent, showing (in reasonable detail
and with appropriate calculations and computations in all respects
reasonably satisfactory to the Agent) that on a historical pro
forma basis (after giving effect to such Business Acquisition and
all transactions related thereto (including all Indebtedness that
would be assumed or incurred as a result of such acquisition) and
all Business Acquisitions consummated prior thereto during the
applicable periods thereunder) as of the last day of the most
recently completed Fiscal Quarter with respect to which, pursuant
to Section 8.1.1(a) or 8.1.1(d) of the Credit Agreement (or Section
8.1.1(d) of the Existing Credit Facility), financial statements
have been, or are required to have been, delivered by the
Borrower, ADT Limited and the Borrower would be in compliance with
Section 4.2.4 as of the last day of such Fiscal Quarter and
Section 8.2.3 of the Credit Agreement as of the last day of such
Fiscal Quarter (or, if such last day of such Fiscal Quarter is
September 30, 1996, Section 8.2.3 of the Existing Credit Facility).
"Permitted Strategic Holder" means any Person (other than an
Affiliate of ADT Limited) whose purchase of Voting Stock is in the best
interest of the Subsidiary whose Voting Stock is being purchased (as
determined in good faith by the Board of Directors of ADT Limited or a
committee thereof, whose determination shall be conclusive and evidenced by a
certified written resolution of such Board or committee).
"Permitted Strategic Sale" means a sale by any Subsidiary of ADT
Limited of Voting Stock of any Subsidiary (other than the Borrower or an
Intermediate Parent Company) to any Permitted Strategic Holder; provided,
however, that (a) after giving effect to such transaction, the aggregate
percentage of the Voting Stock of such Subsidiary so sold shall not exceed 19%
(or, in the case of any Subsidiary of an Intermediate Parent Company that is
required to file a consolidated tax return under United States Federal tax
laws and regulations, such lesser percentage as will not cause such Subsidiary
to become an unconsolidated subsidiary under such laws and regulations) of all
Voting Stock of such Subsidiary outstanding immediately after such sale and
(b) the consideration received in such sale (i) shall be 100% cash (including
any cash proceeds received from the sale of securities received in such
Permitted Strategic Sale, provided that at the time of such Permitted Strategic
Sale, ADT Limited or the relevant Subsidiary has entered into a legally
binding agreement for the sale of such securities and such securities are sold
within 60 days of such Permitted Strategic Sale) and (ii) shall be not less
than the Fair Market Value of the Voting Stock sold (as determined in good
faith by the Board of Directors of ADT Limited or a committee thereof, whose
determination shall be conclusive and evidenced by a certified written
resolution of such Board or committee).
"Process Agent" is defined in clause (a) of Section 2.9.
"Restricted Distribution" is defined in Section 4.2.6(a).
"Restricted Borrower Distribution" is defined in Section 4.2.6(b).
"Restricted Payment Basket Amount" means, at any date, the amount
available on such date under clause (C) of Section 1012(a) of the Senior Note
Indenture for the making of Restricted Payments (as defined thereunder).
"Taxes" is defined in clause (a) of Section 2.7.
"U.K. Credit Facility" is defined in clause (d)(ii) of Section
4.2.2.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Guaranty,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. ADT Limited hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the
Borrower and each other Obligor now or hereafter existing, whether
for principal, interest, Reimbursement Obligations, fees, expenses
or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362(a)
of the United States Bankruptcy Code, 11 U.S.C. Section 362(a),
and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section
506(b)); and
(b) indemnifies and holds harmless each Lender Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender
Party or such holder, as the case may be, in enforcing any rights
under this Guaranty.
This Guaranty constitutes a guaranty of payment when due and not of
collection, and ADT Limited specifically agrees that it shall not be necessary
or required that any Lender Party or any holder of any Note exercise any
right, assert any claim or demand or enforce any remedy whatsoever against the
Borrower or any other Obligor (or any other Person) before or as a condition
to the obligations of ADT Limited hereunder.
SECTION 2.2. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Borrower and each other Obligor have been paid in full, all obligations of ADT
Limited hereunder shall have been paid in full and all Commitments shall have
terminated. ADT Limited guarantees that the Obligations of the Borrower and
each other Obligor and their respective Subsidiaries will be paid strictly in
accordance with the terms of the Credit Agreement and each other Loan Document
under which they arise, without regard (to the fullest extent permitted under
applicable law) to any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of any Lender Party
or any holder of any Note with respect thereto (and ADT Limited hereby waives
to the fullest extent it may do so any right or rights it may have under any
such law, regulation or order). Without limiting the generality of the
foregoing, the liability of ADT Limited under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of genuineness, validity, legality or
enforceability of the Credit Agreement, any Note, any Letter of
Credit or any other Loan Document (other than this Guaranty) or of
any of the Obligations (other than the Obligations of ADT Limited
hereunder);
(b) the failure of any Lender Party or any holder of any
Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person (including any other guarantor) under the
provisions of the Credit Agreement, any Note, any Letter of
Credit, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor (including any other Guarantor) of, or collateral
securing, any Obligations of the Borrower or any other
Obligor;
(c) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations of the
Borrower or any other Obligor (other than ADT Limited), or any
other extension, compromise or renewal of any Obligation of the
Borrower or any other Obligor (other than ADT Limited);
(d) any reduction, limitation, impairment or termination of
the Obligations of the Borrower or any other Obligor (other than
ADT Limited) for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be
subject to (and ADT Limited hereby waives any right to or claim
of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, the Obligations of the
Borrower, any other Obligor (other than ADT Limited) or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Credit Agreement, any Note, any Letter of Credit or
any other Loan Document (other than this Guaranty);
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty (or any other Guarantee), held by any Lender Party or any
holder of any Note securing any of the Obligations of the Borrower
or any other Obligor; or
(g) any other circumstance which might otherwise constitute
a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any other guarantor (or
any other Guarantor).
SECTION 2.3. Stay of Acceleration, Reinstatement, etc. ADT
Limited agrees that, if acceleration of the time for payment of any amount
payable by the Borrower under the Credit Agreement, the Notes or any other
Loan Document or of compliance by the Borrower with its obligations under
Section 4.7 of the Credit Agreement is, in either case, stayed upon the
occurrence with respect to the Borrower of any Event of Default described in
clause (b) or (d) of Section 9.1.9 of the Credit Agreement, all such amounts
and obligations otherwise subject to acceleration or compliance under the terms
of the Credit Agreement shall nonetheless be payable and performed by ADT
Limited hereunder forthwith on demand by the Agent made at the request of the
requisite proportion of the Lenders specified in Section 9.3 of the Credit
Agreement. ADT Limited agrees that this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment (in
whole or in part) of any of the Obligations is rescinded or must otherwise be
restored by any Lender Party or any holder of any Note, upon the insolvency,
bankruptcy or reorganization of the Borrower, any other Obligor (other than
ADT Limited) or otherwise, all as though such payment had not been made.
SECTION 2.4. Waiver, etc. ADT Limited hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of
the Obligations of the Borrower or any other Obligor and this Guaranty and any
requirement that any Agent, any other Lender Party or any holder of any Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the
Borrower, any other Obligor or any other Person (including any other guarantor
and any other Guarantor) or entity or any collateral securing the Obligations
of the Borrower or any other Obligor, as the case may be.
SECTION 2.5. Subrogation. ADT Limited hereby agrees that it will
not exercise any rights which it may now or hereafter acquire against the
Borrower or any other Obligor that arise from the existence, payment,
performance or enforcement of ADT Limited's obligations under this Guaranty
or any other Loan Document, including any right of subrogation, reimbursement,
exoneration, or indemnification, any right to participate in any claim or
remedy of the Lender Parties against the Borrower or any other Obligor or any
collateral which any Agent now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including the right to take or receive from the Borrower or any other
Obligor, directly or indirectly, in cash or other property or by set-off or
in any manner, payment or security on account of such claim or other rights,
until the Obligations have been paid in full in cash and the Commitments have
been terminated. If any amount shall be paid to ADT Limited in violation of
the preceding sentence and the Obligations shall not have been paid in cash in
full and the Commitments have not been terminated, such amount shall be deemed
to have been paid to ADT Limited for the benefit of, and held in trust for,
the Lender Parties, and shall forthwith be paid to the Lender Parties to be
credited and applied to the Obligations, whether matured or unmatured. ADT
Limited acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Credit Agreement and that the
agreement set forth in this Section is knowingly made in contemplation of such
benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of
Notes, etc. This Guaranty shall:
(a) be binding upon ADT Limited, and its successors,
transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Agent
and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan held by it to any
other Person or entity, and such other Person or entity shall thereupon become
vested with all rights and benefits in respect thereof granted to such Lender
under any Loan Document (including this Guaranty) or otherwise, subject,
however, to the provisions of Section 11.11 and Article X of the Credit
Agreement.
SECTION 2.7. Payments Free and Clear of Taxes, etc. ADT Limited
hereby agrees that:
(a) Any and all payments made by ADT Limited hereunder
shall be made in accordance with Section 5.6 of the Credit
Agreement 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 Party or any holder of a
Note, taxes imposed on its income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Lender Party
or such holder, as the case may be, is organized and by any
political subdivision thereof and, in the case of each Lender,
taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction of such Lender's Domestic Office or LIBOR Office
and any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If ADT
Limited shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Lender Party or any
holder of a Note
(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) such Lender Party or such holder, as the
case may be, receives an amount equal to the sum it would
have received had no such deductions been made,
(ii) ADT Limited shall make such deductions, and
(iii) ADT Limited shall pay the full amount deducted
to the relevant taxation authority or other authority in
accordance with applicable law.
(b) ADT Limited shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with
respect to, this Guaranty (hereinafter referred to as "Other
Taxes").
(c) ADT Limited hereby indemnifies and holds harmless each
Lender Party and each holder of a Note for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under
this Section) paid by such Lender Party or such holder, as the
case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, ADT Limited will furnish to the Agent the original or
a certified copy of a receipt evidencing payment thereof. If no
Taxes or Other Taxes are payable in respect of any payment
hereunder to any Lender Party or any holder of a Note, ADT Limited
will furnish to the Agent upon its reasonable request (which
request shall not be made more than once per Fiscal Year) a
certificate from each appropriate taxing authority, or an opinion
of counsel acceptable to the Agent, in either case stating that
such payment is exempt from or not subject to Taxes or Other Taxes.
(e) Without prejudice to the survival of any other
agreement of ADT Limited hereunder, the agreements and obligations
of ADT Limited contained in this Section 2.7 shall survive the
payment in full of the principal of and interest on the Loans.
SECTION 2.8. Judgment. ADT Limited hereby agrees that to the
fullest extent permitted by applicable law:
(a) if, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder in United
States Dollars into another currency, ADT Limited agrees that the
rate of exchange used shall be that at which in accordance with
normal banking procedures the Agent could purchase United States
Dollars with such other currency on the Business Day preceding
that on which final judgment is given; and
(b) the obligation of ADT Limited in respect of any sum due
from it to any Lender Party or any holder of a Note hereunder
shall, notwithstanding any judgment in a currency other than
United States Dollars, be discharged only to the extent that on
the Business Day following receipt by such Lender Party or such
holder, as the case may be, of any sum adjudged to be so due in
such other currency such Lender Party or such holder, as the case
may be, may, in accordance with normal banking procedures,
purchase United States Dollars with such other currency; in the
event that the United States Dollars so purchased are less than
the sum originally due to such Lender Party in United States
Dollars, ADT Limited, as a separate obligation and notwithstanding
any such judgment, hereby indemnifies and holds harmless such
Lender Party and such holder against such loss, and if the United
States Dollars so purchased exceed the sum originally due to such
Lender Party or such holder in United States Dollars, such Lender
Party or such holder, as the case may be, shall remit to ADT
Limited such excess.
SECTION 2.9. Consent to Jurisdiction; Waiver of Immunities. ADT
Limited hereby acknowledges and agrees that:
(a) It has irrevocably submitted to the jurisdiction of the
courts of the State of New York and of the United States District
Court for the Southern District of New York for the purposes of
any action or proceeding arising out of or relating to this
Guaranty, and ADT Limited hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and
determined in such New York state or federal court. ADT Limited
hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. ADT Limited hereby
irrevocably appoints Kay, Collyer & Boose (the "Process Agent"),
with an office on the date hereof at 1 Dag Hammarskjold Plaza, New
York, New York, United States (Attention: Eli Schoenfield), as
its agent to receive on behalf of ADT Limited and its property
service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding. Such
service may be made by mailing or delivering a copy of such
process to ADT Limited in care of the Process Agent at the Process
Agent's above address, and ADT Limited hereby irrevocably
authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, ADT Limited also
irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process
to ADT Limited at its address specified on the signature page
hereof. ADT Limited hereby agrees that in the event the Process
Agent is no longer resident in New York, New York, it shall
appoint a successor Process Agent resident in New York, New York
reasonably acceptable to the Agent, which successor Process Agent
shall thereafter be the Process Agent hereunder. ADT Limited
agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section shall affect the right of any
Lender Party or any holder of any Note to serve legal process in
any other manner permitted by law or affect the right of any
Lender Party or any holder of any Note to bring any action or
proceeding against ADT Limited or any of its properties in the
courts of any other jurisdictions.
(c) To the extent that ADT Limited has or hereafter may
acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, ADT Limited
hereby irrevocably waives, to the fullest extent permitted under
applicable law, such immunity in respect of its obligations under
this Guaranty.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
ADT Limited hereby represents and warrants unto each Lender Party
as set forth in this Article III.
SECTION 3.1. Organization, etc. Each of ADT Limited and its
Subsidiaries that is an Obligor or a Material Related Party is a company or
corporation, as the case may be, duly organized and validly existing and, to
the extent applicable, in good standing under the laws of the jurisdiction of
its organization, is duly qualified to do business and is, to the extent
applicable, in good standing as a foreign corporation in each jurisdiction
where the nature of its business requires such qualification and where the
failure to so qualify or be in good standing would reasonably be expected to
have a material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its Subsidiaries taken as
a whole. Each of ADT Limited and its Subsidiaries that is an Obligor or a
Material Related Party has full power and authority and holds all requisite
governmental licenses, permits and other approvals (i) to own and hold under
lease its property and to conduct its business substantially as currently
conducted by it, except where failure to hold such licenses, permits and other
approvals would not reasonably be expected to have a material adverse effect
on the business, results of operations, financial condition or prospects of
ADT Limited and its Subsidiaries taken as a whole and (ii) to enter into and
perform its obligations under each Loan Document, if any, to which it is a
party.
SECTION 3.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by ADT Limited of this Guaranty and each
other Loan Document executed or to be executed by it, and the execution,
delivery and performance by each other Obligor of each Loan Document executed
or to be executed by it, are within ADT Limited's and each such Obligor's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene ADT Limited's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting ADT Limited or any such Obligor (including the Companies
Act 1981 of Bermuda) in any manner that could reasonably be
expected (i) to have a material adverse effect on the business,
results of operations, financial condition or prospects of ADT
Limited and its Subsidiaries taken as a whole, (ii) to impair the
ability of any Lender, Issuer or Agent to enforce the Obligations
or (iii) to subject any Lender, Issuer or Agent to any liability;
or
(c) result in, or require the creation or imposition of,
any Lien on any of ADT Limited's or any Obligor's properties.
SECTION 3.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by ADT Limited or any other Obligor
of this Guaranty or any other Loan Document to which it is a party. Neither
ADT Limited nor any other Obligor is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
SECTION 3.4. Validity, etc. This Guaranty constitutes, and each
other Loan Document executed by ADT Limited will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of ADT
Limited enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting creditors' rights generally and to
general principles of equity; and each Loan Document executed pursuant hereto
by each other Obligor will, on the due execution and delivery thereof by such
Obligor, be the legal, valid and binding obligation of such Obligor enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
affecting creditors' rights generally and to general principles of equity.
SECTION 3.5. Financial Information. The financial statements set
forth in the 10-K of ADT Limited for the 1995 Fiscal Year and in the 10-Qs of
ADT Limited for the first three Fiscal Quarters of the 1996 Fiscal Year and
all financial statements of ADT Limited and its Subsidiaries furnished to the
Agent and the Lenders pursuant to clauses (a) and (d) of Section 8.1.1 of the
Credit Agreement have, in each case, been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition
of the corporations covered thereby, as at the dates thereof, and the results
of their operations for the periods then ended.
SECTION 3.6. No Material Adverse Change. Since December 31,
1995, there has been no material adverse change in the business, results of
operations, financial condition or prospects of ADT Limited and its
Subsidiaries taken as a whole.
SECTION 3.7. Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of ADT Limited, threatened litigation, action,
proceeding, or labor controversy affecting ADT Limited or any of its
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which could reasonably be expected to materially adversely affect
the financial condition, results of operations, business or prospects of ADT
Limited and its Subsidiaries, taken as a whole (provided that no representation
is being made with respect to the effect on such financial condition, results
of operations, business or prospects of any litigation, action or proceeding
described in the first two paragraphs under the caption "Certain Litigation
Against the Company" in the Preliminary Proxy Statement of ADT Limited filed
with the Securities and Exchange Commission on January 8, 1997, provided to
the Agent prior to the date hereof, including any amendment to the complaint
referred to therein provided to the Agent prior to the Closing Date relating
to the scheduling of the special meeting of ADT Limited's shareholders
referred to in any such amendment), or which purports to affect the legality,
validity or enforceability of this Guaranty, or any other Loan Document,
except as disclosed in Item 3.7 ("Litigation") of the Disclosure Schedule.
SECTION 3.8. Subsidiaries. ADT Limited has no Subsidiaries,
except those Subsidiaries
(a) which are identified in Item 3.8 ("Existing
Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been created or acquired in
accordance with Section 4.2.5 or 4.2.9.
Without limiting any term or provision hereof, to the extent any Person
becomes a Subsidiary of ADT Limited in accordance with (and not in
contravention of) any term or provision hereof or of any other Loan Document,
ADT Limited may supplement such Item 3.8 of the Disclosure Schedule to include
such new Subsidiary by delivering a certificate, signed by an Authorized
Officer, certifying (i) as to the name and place of organization of such new
Subsidiary, (ii) as to the method by which such new Subsidiary was created and
(iii) that such new Subsidiary was created without contravening any term or
provision hereof or of any other Loan Document.
SECTION 3.9. Ownership of Properties. ADT Limited and each of
its Subsidiaries owns good and marketable title to, or valid leases of, all of
its properties and assets necessary to conduct its business substantially as
currently conducted by it.
SECTION 3.10. Taxes. ADT Limited and each of its Subsidiaries,
and each other Obligor, has filed all material tax returns and reports required
by law to have been filed by it and has paid all material taxes and
governmental charges thereby shown to be owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 3.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and
delivery of the Credit Agreement and prior to the date of any Credit Extension
thereunder, no steps have been taken to terminate any Pension Plan which
termination could result in the incurrence by ADT Limited or any member of the
Controlled Group of any material liability, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction
has occurred with respect to any Pension Plan which might result in the
incurrence by ADT Limited or any member of the Controlled Group of any
material liability, fine or penalty. Except as disclosed in Item 3.11
("Employee Benefit Plans") of the Disclosure Schedule, neither ADT Limited nor
any member of the Controlled Group has any material contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
SECTION 3.12. Environmental Warranties. Except as set forth in
Item 3.12 ("Environmental Matters") of the Disclosure Schedule,
(a) all facilities and property (including underlying
groundwater) owned or leased by ADT Limited or any of its
Subsidiaries have been, and continue to be, owned or leased by ADT
Limited and its Subsidiaries in material compliance with all
Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for
information received by ADT Limited or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, which could reasonably be expected to
have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited
and its Subsidiaries or the Borrower and its Subsidiaries, or
(ii) complaints, notices or inquiries to ADT Limited
or any of its Subsidiaries regarding potential liability
under any Environmental Law, which could reasonably be
expected to have a material adverse effect on the business,
results of operations, financial condition or prospects of
ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries;
(c) there have been no Releases of Hazardous Materials at,
on or under any property now or previously owned or leased by ADT
Limited or any of its Subsidiaries that, singly or in the
aggregate, have, or may reasonably be expected to have, a material
adverse effect on the business, results of operations, financial
condition or prospects of ADT Limited and its Subsidiaries or the
Borrower and its Subsidiaries;
(d) ADT Limited and its Subsidiaries have been issued and
are in compliance with all permits, certificates, approvals,
licenses and other authorizations relating to environmental
matters and necessary for their businesses, except where the
failure to have been issued any such permit, certificate,
approval, license or other authorization or to have complied with
any of the foregoing would not, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries;
(e) no property now or previously owned or leased by ADT
Limited or any of its Subsidiaries is listed or proposed for
listing (with respect to owned property only) on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-up
that is reasonably likely to lead to material claims against ADT
Limited or such Subsidiary thereof for any remedial work, damage
to natural resources or personal injury, including claims under
CERCLA;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by ADT Limited or any of
its Subsidiaries that, singly or in the aggregate, have, or may
reasonably be expected to have, a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries;
(g) neither ADT Limited nor any Subsidiary of ADT Limited
has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or
which is the subject of federal, state or local enforcement
actions or other investigations which is reasonably likely to lead
to material claims against ADT Limited or such Subsidiary thereof
for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased
by ADT Limited or any Subsidiary of ADT Limited that, singly or in
the aggregate, have, or may reasonably be expected to have, a
material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its
Subsidiaries or the Borrower and its Subsidiaries; and
(i) no conditions exist at, on or under any property now
owned or leased (or, to the best knowledge of ADT Limited and its
Subsidiaries after due inquiry, any property previously owned or
leased) by ADT Limited or any Subsidiary of ADT Limited which
would give rise to liability under any Environmental Law or for
personal injury or property or other damage, which liability could
reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its Subsidiaries or the Borrower and its
Subsidiaries.
SECTION 3.13. Regulations G, U and X. Neither ADT Limited nor
any Subsidiary of ADT Limited is engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock, and no proceeds of any
Loans will be used for a purpose which violates, or would be inconsistent
with, F.R.S. Board Regulation G, U or X. Terms for which meanings are
provided in F.R.S. Board Regulation G, U or X or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.
SECTION 3.14. No Defaults. Neither ADT Limited nor any
Subsidiary of ADT Limited is in violation of, or in default under, any term or
provision of its Organic Documents or any contract, agreement, indenture,
instrument, law, governmental regulation or court decree or order applicable
to it, such that such violations or defaults in the aggregate would reasonably
be expected to have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited and its
Subsidiaries, taken as a whole.
SECTION 3.15. Delivery of Organizational Chart. The Agent has
been furnished on or prior to the Effective Date a detailed organizational
chart of ADT Limited and all its Subsidiaries (other than Non-Guarantors
identified in Item 3.15 ("Existing Subsidiaries") of the Disclosure Schedule
that do not conduct any business activities and that do not have assets with a
Fair Market Value in excess of $10,000), certified by the chief financial
Authorized Officer of ADT Limited. Such chart indicates each Subsidiary of
ADT Limited that is or is required to be a Subsidiary Guarantor as of the
Effective Date and indicates with respect to each such Subsidiary Guarantor
that is a Material Subsidiary, its respective percentages of consolidated
gross revenues and consolidated gross assets of the Borrower and its
Subsidiaries for the 1995 Fiscal Year.
SECTION 3.16. Accuracy of Information. (a) All information (other
than financial projections) taken as a whole, prepared by ADT Limited, any
Subsidiary of ADT Limited or any other Obligor, or any Affiliate of any such
Person, or heretofore or contemporaneously furnished by or on behalf of ADT
Limited, any Subsidiary of ADT Limited or any other Obligor, or any Affiliate
of any such Person, in writing to any Agent or any Lender for purposes of or
in connection with this Guaranty, the Credit Agreement or any other Loan
Document or any transaction contemplated hereby or thereby (including in
connection with the Existing Credit Facility and each Loan Document referred
to therein) is, and all other such information (other than financial
projections) taken as a whole, hereafter furnished by or on behalf of ADT
Limited, any Subsidiary of ADT Limited or any other Obligor, or any Affiliate
of any such Person, to any Agent or any Lender will be, true, complete and
accurate in every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of the Credit
Agreement by such Agent and such Lender (it being acknowledged that, with
respect to any specific financial statement included in such information, such
financial statement shall have been true, complete and accurate in every
material respect on the date or for the period expressly set forth therein and
not necessarily on any other date or for any other period), and such
information taken as a whole does not and will not contain any untrue
statement of a material fact and is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading, and (b) all financial projections heretofore or
contemporaneously furnished by or on behalf of ADT Limited, any Subsidiary of
ADT Limited or any other Obligor, or any Affiliate of any such Person, to any
Agent or any Lender, have been, and all such financial projections hereafter
furnished by or on behalf of ADT Limited, any Subsidiary of ADT Limited or any
other Obligor, or any Affiliate of any such Person, to the Agent or any Lender
shall be, prepared in good faith based upon reasonable assumptions.
SECTION 3.17. Restricted Payment Basket Amount; Equity Proceeds
Amount. As of September 30, 1996, the Restricted Payment Basket Amount was
not greater than $135,000,000 and, as of December 31, 1996, the Equity
Proceeds Amount was not greater than $54,000,000.
SECTION 3.18. Restricted Borrower Distributions. As of September
30, 1996, the amount available for Restricted Borrower Distributions was not
greater than $38,000,000.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Affirmative Covenants. ADT Limited covenants and
agrees that, until the Covenant Termination Date, ADT Limited will, unless the
Required Lenders shall otherwise consent in writing, perform and observe the
obligations set forth in this Section.
SECTION 4.1.1. Compliance with Laws, etc. ADT Limited will, and
will 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):
(a) except to the extent permitted under Section 4.2.9, the
maintenance and preservation by ADT Limited and each of its
Subsidiaries that is an Obligor or a Material Related Party of its
corporate existence and qualification as a foreign corporation in
each jurisdiction where the nature of its business or the location
of its assets requires it to be so qualified, except to the extent
the failure to maintain and preserve its corporate existence or to
be so qualified could not reasonably be expected to have a
material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its
Subsidiaries (it being acknowledged that the failure of ADT
Limited or the Borrower to maintain and preserve its corporate
existence (except as permitted under Section 4.2.9) shall be
deemed to have such a material adverse effect); and
(b) the payment, before the same become delinquent, of all
material taxes, assessments and governmental charges imposed upon
it or upon its property except to the extent being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION 4.1.2. Maintenance of Properties. ADT Limited will, and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep
its material properties in good repair, working order and condition, and make
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times
unless ADT Limited determines in good faith that the continued maintenance of
any of its properties is no longer economically desirable.
SECTION 4.1.3. Insurance. ADT Limited will, and will cause each
of its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts as is customary in the
case of similar businesses and will, upon request of the Agent, furnish to each
Lender at reasonable intervals a certificate of an Authorized Officer of ADT
Limited setting forth the nature and extent of all insurance maintained by ADT
Limited and its Subsidiaries in accordance with this Section.
SECTION 4.1.4. Books and Records. ADT Limited will, and will
cause each of its Subsidiaries to, keep books and records which accurately
reflect all of its business affairs and transactions and permit the Agent or
any of its representatives, at reasonable times and intervals (but not more
often than once per Fiscal Quarter, unless an Event of Default shall have
occurred and be continuing (in which case, and during such period, each Lender
shall have the rights of the Agent under this Section)) to visit all of its
offices, to discuss its financial matters with its officers and independent
public accountant (provided a representative of ADT Limited or such Subsidiary
is given prior notice of, and the opportunity to be present during, such
discussion) and, subject to appropriate agreements of confidentiality and to
any restrictions imposed under applicable law (including regulations
promulgated by the United States Department of Defense), to examine any of
its books or other corporate records. ADT Limited shall pay any fees of such
independent public accountant incurred in connection with the Agent's or any
Lender's exercise of its rights pursuant to this Section. In addition, ADT
Limited shall pay the reasonable out-of-pocket expenses arising from the
Agent's visit to the offices of ADT Limited or any of its Subsidiaries in
connection with the exercise of its rights pursuant to this Section to the
extent of one such visit per Fiscal Year.
SECTION 4.1.5. Environmental Covenant. ADT Limited will, and
will cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, apply for and
keep all necessary permits, approvals, certificates, licenses and
other authorizations relating to environmental matters in effect
where the failure to so keep in effect could reasonably be
expected to have a material adverse effect on the business,
results of operations, financial condition or prospects of ADT
Limited and its Subsidiaries or the Borrower and its Subsidiaries
and remain in material compliance therewith, and handle all
Hazardous Materials in material compliance with all applicable
Environmental Laws and in a manner so as to minimize potential
liability;
(b) immediately notify the Agent and provide copies upon
receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or
compliance with Environmental Laws, which claims or other alleged
conditions could reasonably be expected to have a material adverse
effect on the business, results of operations, financial condition
or prospects of ADT Limited and its Subsidiaries or the Borrower
and its Subsidiaries; and
(c) provide such information and certifications which the
Agent may reasonably request from time to time to evidence
compliance with this Section 4.1.5.
SECTION 4.1.6. Guaranty Supplements. ADT Limited will cause each
Material Subsidiary and each Subsidiary subject to a Senior Note Guarantee to
be a Guarantor. In furtherance of the foregoing, ADT Limited will, in the
event any Person becomes a Material Subsidiary, notify the Agent of such event
or condition and will cause such new Material Subsidiary to execute and
deliver to the Agent as soon as practicable (but in no event later than thirty
days after the occurrence of such event or condition) a Subsidiary Guarantor
Guaranty Supplement, together with such certificates and legal opinions as the
Agent may reasonably request.
SECTION 4.1.7. Maintenance of Adequate Guarantees. If at any time
the Subsidiary Guarantors subject to the obligations of the Subsidiary
Guarantor Guaranty do not account on a consolidated basis for at least 90% of
the consolidated gross revenues of the Borrower and its Subsidiaries and at
least 90% of the consolidated gross assets of the Borrower and its Subsidiaries
(collectively, the "90% Test"), as reflected in the consolidated statement of
income and consolidated balance sheet most recently delivered, or required to
be delivered, pursuant to Section 8.1.1(a) or 8.1.1(d) of the Credit Agreement,
ADT Limited will cause such Non-Guarantors organized under the laws of the
United States (or any state thereof or the District of Columbia) as are
necessary to meet the 90% Test to execute and deliver to the Agent as soon as
practicable (but in no event later than thirty days after the occurrence of
such event or condition) a Subsidiary Guarantor Guaranty Supplement, together
with such certificates and legal opinions as the Agent may reasonably request.
SECTION 4.2. Negative Covenants. ADT Limited covenants and
agrees that, until the Covenant Termination Date, ADT Limited will not,
without the prior written consent of the Required Lenders, do anything
prohibited in this Section.
SECTION 4.2.1. Business Activities. ADT Limited will not, and
will not permit any of its Subsidiaries to, engage in any business activity,
except for those activities conducted in respect of the Core Businesses and the
businesses identified in Item 4.2.1 ("Permitted Existing Business Activities")
of the Disclosure Schedule, and such activities as may be incidental or related
thereto; provided, however, that ADT Limited will not be in default in the
observance of this Section 4.2.1 if, as part of the acquisition of a Core
Business, ADT Limited or its applicable Subsidiary acquires a business or
assets that would not constitute, or be included in, a Core Business, so long
as (i) the primary purpose of such acquisition was the acquisition of such Core
Business, which acquisition could not have been consummated on as commercially
attractive terms without the acquisition of such other business or assets,
(ii) not less than 70% of the assets acquired pursuant to such acquisition
related at the time of such acquisition to such Core Business, (iii) ADT
Limited or such applicable Subsidiary is diligently pursuing the sale of such
other business or assets and (iv) such business or assets do not have, and
could not reasonably be expected to have, a material adverse effect on the
business, results of operations, financial condition or operations of ADT
Limited and its Subsidiaries taken as a whole.
SECTION 4.2.2. Indebtedness. ADT Limited will not, and will not
permit any of its Subsidiaries (other than the Borrower and its Subsidiaries)
to, create, incur, assume or suffer to exist or otherwise become or be liable
in respect of any Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Obligations hereunder;
(b) Indebtedness in respect of the Senior Note Guarantees,
the Senior Subordinated Note Guarantees and the LYONs Guarantee to
the extent the guarantor under any such Senior Note Guarantee,
Senior Subordinated Note Guarantee or LYONs Guarantee is subject
to a Guarantee that is in full force and effect with respect to
Indebtedness in respect of the Obligations;
(c) Indebtedness existing as of June 30, 1995; provided that
(i) such Indebtedness having a principal amount in excess of
$3,000,000 is identified in Item 4.2.2(c) ("Ongoing Indebtedness")
of the Disclosure Schedule and (ii) true and correct copies of any
indenture or agreement governing such Indebtedness having a
principal amount in excess of $10,000,000 have been provided to
the Agent;
(d) (i) Indebtedness of ADT Canada, Inc., a Wholly Owned
Subsidiary of ADT Limited organized under the laws of Ontario,
incurred for working capital purposes in an aggregate amount not to
exceed at any time outstanding Canadian $75,000,000 and guarantees
thereof by ADT Limited or any of its Subsidiaries and (ii)
Indebtedness of ADT Finance plc, a Wholly Owned Subsidiary of ADT
Limited organized under the laws of England, in an aggregate
amount not to exceed at any time outstanding Pound
Sterling90,000,000 and guarantees thereof by ADT Limited, ADT (UK)
Holdings Limited, each Subsidiary of ADT (UK) Holdings Limited and
each other Subsidiary of ADT Limited (other than an Intermediate
Parent Company, the Borrower, any Subsidiary of the Borrower or
any other Subsidiary of ADT Limited which conducts the major
portion of its business in the United States or substantially all
of the property or assets of which are located in the United
States) (the agreements governing the Indebtedness and guarantees
described in this subclause (ii) being herein collectively
referred to as the "U.K. Credit Facility");
(e) obligations of ADT Limited or any of its Subsidiaries
pursuant to Hedging Arrangements designed to protect ADT Limited or
any of its Subsidiaries against fluctuations in interest rates in
respect of Indebtedness of ADT Limited or such Subsidiary and not
entered into for purposes of speculation;
(f) obligations of ADT Limited or any of its Subsidiaries
pursuant to Hedging Arrangements designed to protect ADT Limited or
any of its Subsidiaries against fluctuations in currency values and
entered into in the ordinary course of business and not for
purposes of speculation;
(g) unsecured Indebtedness incurred in the ordinary course
of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and
services, but excluding Indebtedness incurred through the
borrowing of money or Contingent Liabilities in respect of
obligations of Persons other than ADT Limited or any of its
Subsidiaries);
(h) Indebtedness in respect of Capitalized Lease
Liabilities and Indebtedness ("Capex Indebtedness") incurred to
finance the construction or acquisition of assets permitted to be
acquired or constructed pursuant to Section 4.2.7, to the extent a
Capitalized Lease Liability (assuming for the purposes of this
clause only that Capex Indebtedness constitutes a Capitalized
Lease Liability) could have been incurred under Section 4.2.7;
(i) Indebtedness of Subsidiaries of ADT Limited owing to ADT
Limited;
(j) Indebtedness of Wholly Owned Subsidiaries of ADT Limited
owing to Wholly Owned Subsidiaries of ADT Limited (other than the
Borrower and the Subsidiary Guarantors);
(k) Indebtedness of Wholly Owned Subsidiaries of ADT
Limited (other than the Intermediate Parent Companies) owing to the
Borrower or any Subsidiary Guarantor in an aggregate amount not to
exceed at any time outstanding $175,000,000;
(l) Indebtedness of ADT Limited owing to Wholly Owned
Subsidiaries of ADT Limited in an aggregate amount not to exceed at
any time outstanding $75,000,000;
(m) Indebtedness consisting of guarantees, surety or
performance bonds or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of
assets;
(n) Indebtedness in respect of surety bonds and performance
bonds provided in the ordinary course of business;
(o) Indebtedness which refinances Indebtedness permitted by
clauses (b), (c), (d) and (h) above; provided, however, that after
giving effect to such refinancing, (i) the principal amount of
outstanding Indebtedness is not increased, (ii) in the case of
clauses (b) and (c) above, neither the tenor nor the average life
thereof is reduced, (iii) the respective obligor or obligors shall
be the same on the refinancing Indebtedness as on the Indebtedness
being refinanced, (iv) except in the case of clause (d)(ii) above,
the security for the refinancing Indebtedness shall be the same as
that for the Indebtedness being refinanced (except to the extent
that less security is granted to holders of refinancing
Indebtedness), (v) the holders of refinancing Indebtedness are not
afforded covenants, defaults, rights or remedies more burdensome
to the obligor or obligors than those contained in the
Indebtedness being refinanced and (vi) the refinancing
Indebtedness is subordinated to the same degree as the
Indebtedness being refinanced;
(p) Indebtedness in respect of the Preference Shares and
Exchangeable Preference Shares outstanding on the Existing Credit
Facility Effective Date; and
(q) other Indebtedness of ADT Limited and its Subsidiaries
to the extent that the amount of such Indebtedness outstanding at
any time, when added (without duplication) to the aggregate amount
of Indebtedness outstanding at such time under clause (s) of
Section 8.2.2 of the Credit Agreement, does not exceed $75,000,000;
provided, however, that (i) no Indebtedness otherwise permitted by clauses (i),
(k) and (q) shall be permitted if, after giving effect to the incurrence
thereof, any Event of Default shall have occurred and be continuing and (ii) no
Indebtedness permitted by clause (i) or (k) shall be permitted unless evidenced
by promissory notes or other written loan documents that provide that the
Indebtedness evidenced thereby may not be forgiven or satisfied for any
consideration other than payment in full in cash at par.
SECTION 4.2.3. Liens. ADT Limited will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets (including Capital Stock of
Subsidiaries of ADT Limited), whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) Liens granted prior to the Existing Credit Facility
Effective Date to secure payment of Indebtedness of the type
permitted and described in clause (c) of Section 4.2.2 and clause
(f) of Section 8.2.2 of the Credit Agreement and Liens securing
refinancings thereof permitted by clause (o) of Section 4.2.2 and
clause (r) of Section 8.2.2 of the Credit Agreement, respectively;
(c) (i) Liens granted to secure payment of Indebtedness of
the type permitted and described in clause (h) of Section 4.2.2
and clause (k) of Section 8.2.2 of the Credit Agreement and
covering only those assets acquired with the proceeds of such
Indebtedness and Liens with respect to such assets securing
refinancings of such Indebtedness permitted by clause (o) of
Section 4.2.2 and clause (r) of Section 8.2.2 of the Credit
Agreement, respectively and (ii) Liens granted to secure
obligations under the U.K. Credit Facility and covering only
assets of the obligors and guarantors thereunder and Liens with
respect to such assets securing refinancings of such Indebtedness
permitted by clause (o) of Section 4.2.2;
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums
not overdue or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal
bonds;
(g) judgment Liens (i) in an aggregate amount not in excess
of $15,000,000, (ii) as to which enforcement proceedings shall not
have commenced and there shall not have been a period of 30
consecutive days during which such judgment was not stayed or
(iii) the payment of which is covered in full (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
(h) Liens with respect to assets of a Subsidiary of ADT
Limited (other than the Borrower) granted to secure Indebtedness
owing to the Borrower or a Wholly Owned Subsidiary of the Borrower
that is a Guarantor;
(i) Liens with respect to assets of a Subsidiary of ADT
Limited (other than the Borrower or any of its Subsidiaries or an
Intermediate Parent Company) granted to secure Indebtedness owing
to ADT Limited or a Wholly Owned Subsidiary of ADT Limited;
(j) Liens (i) existing at the time that a Person becomes a
Subsidiary of ADT Limited in a transaction permitted hereunder or
(ii) assumed in connection with an acquisition of assets permitted
hereunder; provided, however, that any such Lien covers only assets
that were subject to such Lien prior to the related transaction
and was not created, assumed or incurred in contemplation of such
transaction;
(k) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect
with the business of ADT Limited or any of its Subsidiaries and
incurred in the ordinary course of business;
(l) the Lien inherent in the right of any bank to set off
deposits against debts owed to such bank;
(m) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(n) Liens arising by operation of law incurred in the
ordinary course of business and which Liens, singly or in the
aggregate, do not interfere in any material respect with the
business of ADT Limited or any of its Subsidiaries; and
(o) other Liens securing Indebtedness in an aggregate amount
not to exceed $15,000,000 at any time outstanding.
SECTION 4.2.4. Financial Condition. ADT Limited will not permit:
(a) its Stockholders' Equity to be at any time less than
the sum, at such time, of (i) $1,134,300,000 plus (ii) 50% of the
Net Income of ADT Limited for each Fiscal Year commencing with the
1995 Fiscal Year (less, for each such Fiscal Year, cash dividends
on Preference Shares to the extent permitted hereunder) as shall
have been completed on or prior to such time (in each case with no
reduction for net losses, if any, for such Fiscal Year);
(b) its Cash Flow Coverage Ratio, as at the end of any
Fiscal Quarter, to be less than 1.5 to 1.0;
(c) its Debt to Total Capitalization Ratio, as at the end
of any Fiscal Quarter, to be greater than 0.5 to 1.0.
SECTION 4.2.5. Investments. ADT Limited will not, and will not
permit any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) (i) Investments existing on June 30, 1995 and
identified in Item 4.2.5(a) ("Ongoing Investments") of the
Disclosure Schedule and (ii) Investments acquired in the ASH
Transaction (including the sale of such Investments by ADT Limited
to ADT (UK) Holdings Limited, the sale of certain of such
Investments by ASH and its Subsidiaries to the Borrower and its
Subsidiaries and the sale by ADT Business Holdings, Inc. to
Sonitrol Management Corp. of all of the Capital Stock of
Mid-Atlantic Security, Inc., in each case prior to the date
hereof);
(b) Cash Equivalent Investments and High Quality
Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 4.2.2 or Section 8.2.2 of the
Credit Agreement;
(d) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 4.2.7;
(e) Investments by way of contributions to capital by ADT
Limited or any of its Subsidiaries to any Wholly Owned Subsidiary
of ADT Limited to the extent the Person making such Investment
would be allowed to make and maintain a loan or advance to such
Wholly Owned Subsidiary under Section 4.2.2 or Section 8.2.2 of
the Credit Agreement; provided that, solely for purposes of
determining under this Section 4.2.5 or Section 4.2.2 or under
Section 8.2.2 of the Credit Agreement whether such Person may make
and maintain any such loan or advance, the aggregate amount of
Investments pursuant to this clause (e) shall be taken into
account as if such Investments were a loan or advance;
(f) loans or advances to, or guarantees on behalf of,
employees of ADT Limited or any of its Subsidiaries made in the
ordinary course of business not to exceed at any time $500,000 per
employee or $5,000,000 in the aggregate for all such employees;
(g) Investments which are Permitted Business Acquisitions;
(h) accounts arising from sales of goods or services on
trade credit terms in the ordinary course of business of ADT
Limited and its Subsidiaries;
(i) negotiable instruments held for collection, lease,
utility and other similar deposits, or stock, obligations or
securities received in settlement of debts owing to ADT Limited or
any of its Subsidiaries as a result of a composition or
readjustment of debt or a reorganization of any debtor or ADT
Limited or any of its Subsidiaries or of foreclosure, perfection
or enforcement of any Lien, in each case as to debt that arose in
the ordinary course of business;
(j) Investments consisting of non-cash consideration
received in the sale or other disposition of assets or Capital
Stock effected in compliance with Section 4.2.10;
(k) (i) the exchange of Common Shares for Non-Voting
Exchangeable Shares (and payment of cash in lieu of fractional
shares) pursuant to the terms of Non-Voting Exchangeable Shares as
in effect on the Existing Credit Facility Effective Date and (ii)
the acquisition of Common Shares to the extent (A) the acquisition
of such Common Shares is not prohibited by any provision hereof or
of any other Loan Document (including Section 4.2.6(a)) and (B)
the aggregate number of Common Shares held by Subsidiaries of ADT
Limited does not exceed at any time nine percent of the Voting
Stock of ADT Limited outstanding at such time;
(l) the obligation of ADT Limited to exchange Common Shares
for LYONs (and payment of cash in lieu of fractional shares)
pursuant to the terms of the LYONs Indenture in effect on the
Existing Credit Facility Effective Date;
(m) Investments in any Wholly Owned Subsidiary of ADT
Limited that provides insurance in the ordinary course of business
and on reasonable terms solely to ADT Limited or any of its
Subsidiaries for the purpose of insuring ADT Limited or such
Subsidiary against liability that would not be covered by
insurance policies required to be maintained pursuant to Section
4.1.3 as a result of reasonable and customary deductibles
thereunder, to the extent such Investments are necessary or
appropriate to maintain such insurance;
(n) advances or loans made in connection with Hedging
Arrangements permitted hereunder or under the Credit Agreement; and
(o) other Investments of a type not otherwise permitted
pursuant to the immediately preceding clauses, including
Investments in Minority Interests and Related Businesses, to the
extent the aggregate amount of such Investments, when added
(without duplication) to the aggregate amount expended since the
Existing Credit Facility Effective Date in connection with
Business Acquisitions permitted under clause (f) of Section 4.2.9
(or clause (f) of Section 4.2.9 of the ADT Limited Guaranty (as
defined in the Existing Credit Facility)), does not exceed at any
one time $25,000,000;
provided, however, that
(i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" or "High Quality Investment", as the case may be, may
continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements;
(ii) Investments made by the Borrower and the Subsidiary
Guarantors after the Existing Credit Facility Effective Date in
Subsidiaries of ADT Limited (other than the Borrower and the
Subsidiary Guarantors) may not exceed in the aggregate at any time
$175,000,000;
(iii) no Investment otherwise permitted by clause (g) shall
be permitted to be made if an Event of Default described in
Section 9.1.1, 9.1.3 (to the extent resulting from a default in
the observance of any obligation under Section 4.2.4 or Section
8.2.3 of the Credit Agreement), 9.1.5 or 9.1.9 of the Credit
Agreement shall have occurred and be continuing or would occur
upon giving effect thereto;
(iv) no Investment otherwise permitted by clause (e), (f),
(m) or (o) shall be permitted to be made if an Event of Default
shall have occurred and be continuing or would occur upon giving
effect thereto; and
(v) without limiting any of the restrictions set forth in
this Section 4.2.5, no Investment shall be permitted to be made if
such Investment would not be permitted by the terms of the Senior
Note Indenture.
SECTION 4.2.6. Restricted Payments, etc. (a) ADT Limited will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of Capital Stock of ADT
Limited (other than dividends or distributions payable in shares
of Capital Stock of ADT Limited or in rights, warrants or options
to purchase such Capital Stock, but excluding dividends or
distributions payable in Redeemable Capital Stock or in options,
warrants or other rights to purchase Redeemable Capital Stock,
provided that dividends on Redeemable Capital Stock may be paid in
shares of such Redeemable Capital Stock),
(ii) purchase, redeem, retire or otherwise acquire for
value, or make any payment on account of the purchase, redemption,
retirement or other acquisition for value of, any Capital Stock of
ADT Limited or any warrants, rights or options to purchase or
acquire any such Capital Stock, or
(iii) declare or pay any dividend on, or make any
distribution to holders of, any Capital Stock of any Subsidiary of
ADT Limited (other than (A) with respect to any such Capital Stock
held by ADT Limited or any of its Wholly Owned Subsidiaries or (B)
with respect to the Voting Stock of any Subsidiary, made on a pro
rata basis, consistent with the ownership interests in such Voting
Stock, to the owners of such Voting Stock) or purchase, redeem or
otherwise acquire or retire for value, or make any payment on
account of the purchase, redemption, retirement or other
acquisition for value of, any outstanding Capital Stock of any
Subsidiary of ADT Limited (other than any such Capital Stock held
by ADT Limited or any of its Wholly Owned Subsidiaries) or any
warrants, rights or options to purchase or acquire any such
outstanding Capital Stock
(such payments or any other actions described in (but not excluded from) the
foregoing clauses (i) thorough (iii) being herein referred to as "Restricted
Distributions"), unless such Restricted Distribution would be permitted by the
terms of the Senior Note Indenture as in effect on the Existing Credit Facility
Effective Date; provided, however, that
(x) no Restricted Distribution otherwise permitted pursuant
to this Section 4.2.6(a) (other than any exchange of shares of the
Capital Stock of BAA plc for Exchangeable Preference Shares
pursuant to the terms of the Bye-Laws of ADT Limited as in effect
on the Existing Credit Facility Effective Date, the payment of any
Restricted Distribution within 60 days after the date of
declaration thereof, if at such date of declaration such
declaration was permitted hereunder, and any exchange of shares of
Non-Voting Exchangeable Shares for Common Shares in accordance
with the terms of the Articles of Incorporation of ADT Finance
Inc. as in effect on the Existing Credit Facility Effective Date)
shall be permitted if an Event of Default (including a default in
the observance by the Borrower of its obligations under clause (a)
of Section 8.2.3 of the Credit Agreement) shall have occurred and
be continuing or would occur upon giving effect to such Restricted
Distribution; and
(y) no Restricted Distribution otherwise permitted pursuant
to this Section 4.2.6(a) shall be permitted if such Restricted
Distribution would, pursuant to the terms of the Senior Note
Indenture, decrease the Restricted Payment Basket Amount to an
amount which is less than the excess of (1) the sum of (A) the
aggregate amount expended on Permitted Business Acquisitions
(other than the ASH Transaction to the extent the aggregate
consideration therefor did not exceed $425,000,000) after the
Existing Credit Facility Effective Date in excess of the
applicable Annual Limits (or, during the effectiveness of the
Existing Credit Facility, the applicable Annual Limits (as defined
under the Existing Credit Facility)) and (B) the aggregate amount
of Capital Expenditures made after the Existing Credit Facility
Effective Date with the cash proceeds referred to in clause (a) of
the definition of Equity Proceeds Amount and designated as such
pursuant to the Compliance Certificate (including any compliance
certificate delivered under the Existing Credit Facility)
delivered in connection with the Fiscal Quarter in which such
Capital Expenditures were paid over (2) the portion (if any) of
such sum which resulted in a decrease of the Restricted Payment
Basket Amount.
(b) ADT Limited will not, and will not permit any of its
Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of Capital Stock of the
Borrower (other than (A) dividends or distributions payable in
shares of Capital Stock of the Borrower or in rights, warrants or
options to purchase such Capital Stock, but excluding dividends or
distributions payable in Redeemable Capital Stock or in options,
warrants or other rights to purchase Redeemable Capital Stock,
provided that dividends on Redeemable Capital Stock may be paid in
shares of such Redeemable Capital Stock and (B) the dividend of
the Dividended Note), or
(ii) purchase, redeem, retire or otherwise acquire for
value, or make any payment on account of the purchase, redemption,
retirement or other acquisition for value of, any Capital Stock of
the Borrower or any warrants, rights or options to purchase or
acquire any such Capital Stock
(such payments or any other actions described in (but not excluded from) the
foregoing clauses (i) and (ii) being herein referred to as "Restricted Borrower
Distributions"), unless the amount of such Restricted Borrower Distribution
(which amount, in the case of a Restricted Borrower Distribution to be made
in property, shall equal the Fair Market Value thereof (as determined, in the
case of any property with an aggregate value in excess of $15,000,000, in good
faith by the Board of Directors of the Borrower, whose determination shall be
evidenced by a certified written resolution of such Board)), when added to the
aggregate amount of all such Restricted Borrower Distributions declared since
the Existing Credit Facility Effective Date, would not exceed 50% of the
aggregate Net Income of the Borrower accrued on a cumulative basis during the
period (taken as one accounting period) from the Existing Credit Facility
Effective Date to the last day of the most recently completed Fiscal Quarter
with respect to which, pursuant to Section 8.1.1(a) or 8.1.1(d) of the Credit
Agreement (or Section 8.1.1(d) of the Existing Credit Facility), financial
statements have been delivered to the Agent on or prior to the date of the
proposed Restricted Borrower Distribution; provided, however, that no
Restricted Borrower Distribution otherwise permitted pursuant to this Section
4.2.6(b) shall be permitted if an Event of Default (including a default in the
observance by the Borrower of its obligations under clause (a) of Section
8.2.3 of the Credit Agreement) shall have occurred and be continuing or would
occur upon giving effect to such Restricted Borrower Distribution.
(c) ADT Limited will not, and will not permit any of its
Subsidiaries to, directly or indirectly,
(i) make any payment of interest on the Senior Notes or any
Subordinated Debt (other than Subordinated Debt originally issued
to ADT Limited or a Wholly Owned Subsidiary of ADT Limited (or
otherwise acquired by ADT Limited or such Wholly-Owned Subsidiary,
to the extent that the consideration paid by ADT Limited or a
Wholly-Owned Subsidiary resulted in a decrease of the Restricted
Payment Basket Amount) and held by ADT Limited or a Wholly Owned
Subsidiary of ADT Limited) on any day other than the date such
payment is required to be made as set forth in the Senior Notes,
the Senior Note Indenture, the Senior Subordinated Note Indenture,
the LYONs, the LYONs Indenture or the other documents and
instruments memorializing such Subordinated Debt, or which, in the
case of any Subordinated Debt (including Subordinated Debt held by
ADT Limited or a Wholly Owned Subsidiary of ADT Limited), would
violate the subordination provisions thereof; or
(ii) make any payment or prepayment of principal of, or
redeem, purchase, repurchase or defease, the Senior Notes or any
Subordinated Debt (other than Subordinated Debt originally issued
to ADT Limited or a Wholly Owned Subsidiary of ADT Limited (or
otherwise acquired by ADT Limited or such Wholly-Owned Subsidiary,
to the extent that the consideration paid by ADT Limited or such
Wholly-Owned Subsidiary resulted in a decrease of the Restricted
Payment Basket Amount) and held by ADT Limited or a Wholly Owned
Subsidiary of ADT Limited, except, prior to the occurrence of a
Permitted Auction Business Sale, Subordinated Debt in respect of
the Dividended Note) on any day other than the date any such
payment, prepayment, redemption or repurchase is required to be
made as set forth in Sections 1010 and 1016 of the Senior Note
Indenture, Sections 1010 and 1016 of the Senior Subordinated Note
Indenture, Section 3.09 of the LYONs Indenture or in the other
documents and instruments memorializing the Senior Notes or such
Subordinated Debt, or which, in the case of any Subordinated Debt
(including Subordinated Debt held by ADT Limited or a Wholly Owned
Subsidiary of ADT Limited), would violate the subordination
provisions thereof; provided, however, that ADT Limited and its
Subsidiaries may, to the extent the subordination provisions of
the Senior Subordinated Note Indenture, the LYONs Indenture or any
other document or instrument memorializing Subordinated Debt would
not be violated thereby, make any payment or prepayment of
principal of, or redeem or repurchase, the Senior Notes or any
Subordinated Debt if permitted by the terms of the Senior Note
Indenture; provided further, however, that no payment, prepayment,
redemption or repurchase otherwise permitted pursuant to the
immediately preceding proviso shall be permitted if (x) an Event of
Default shall have occurred and be continuing or would occur upon
giving effect to such payment, prepayment, redemption or repurchase
or (y) such payment, prepayment, redemption or repurchase would,
pursuant to the terms of the Senior Note Indenture, decrease the
Restricted Payment Basket Amount to an amount which is less than
the excess of (1) the sum of (A) the aggregate amount expended on
Permitted Business Acquisitions (other than the ASH Transaction to
the extent the aggregate consideration therefor did not exceed
$425,000,000) after the Existing Credit Facility Effective Date in
excess of the applicable Annual Limits (or, during the
effectiveness of the Existing Credit Facility, the applicable
Annual Limits (as defined under the Existing Credit Facility)) and
(B) the aggregate amount of Capital Expenditures made after the
Existing Credit Facility Effective Date with the cash proceeds
referred to in clause (a) of the definition of Equity Proceeds
Amount and designated as such pursuant to the Compliance
Certificate (including any compliance certificate delivered under
the Existing Credit Facility) delivered in connection with the
Fiscal Quarter in which such Capital Expenditures were paid over
(2) the portion (if any) of such aggregate amount which resulted
in a decrease of the Restricted Payment Basket Amount.
SECTION 4.2.7. Capital Expenditures, etc. ADT Limited will not,
and will not permit any of its Subsidiaries to, make Capital Expenditures,
except (i) Capital Expenditures in connection with conducting the Core
Businesses and (ii) Capital Expenditures incurred in respect of Business
Acquisitions permitted under Sections 4.2.5 and 4.2.9; provided, however, that
no Capitalized Lease Liabilities otherwise permitted to be incurred pursuant
to this Section shall be permitted to be incurred if the aggregate amount of
all such Capitalized Lease Liabilities incurred during any Fiscal Year would
exceed $30,000,000.
SECTION 4.2.8. [Intentionally Omitted.]
SECTION 4.2.9. Consolidation, Merger, etc. ADT Limited will not,
and will not permit any of its Subsidiaries to, liquidate or dissolve, or
amalgamate or consolidate with, or merge into or with, any other Person, or
otherwise enter into or consummate any Business Acquisition not constituting
an Investment, except
(a) any Subsidiary of ADT Limited that is a direct or
indirect parent of the Borrower may liquidate or dissolve
voluntarily into, and may amalgamate or consolidate with or merge
into, ADT Limited or any Wholly Owned Subsidiary of ADT Limited
that is an indirect parent of the Borrower, and any assets or
Capital Stock of any Subsidiary of ADT Limited that is an indirect
parent of the Borrower may be purchased or otherwise acquired by
ADT Limited or any Wholly Owned Subsidiary of ADT Limited that is
an indirect parent of the Borrower;
(b) any Subsidiary of the Borrower may liquidate or dissolve
voluntarily into, and may merge with or into, the Borrower or any
Wholly Owned Subsidiary of the Borrower, and any assets or Capital
Stock of any Subsidiary of the Borrower may be purchased or
otherwise acquired by the Borrower or any Wholly Owned Subsidiary
of the Borrower;
(c) any Non-Guarantor that is not a Subsidiary of the
Borrower may liquidate or dissolve voluntarily into, and may merge
with or into, ADT Limited or any Wholly Owned Subsidiary of ADT
Limited, and any assets or Capital Stock of any such Non-Guarantor
may be purchased or otherwise acquired by ADT Limited or any Wholly
Owned Subsidiary of ADT Limited;
(d) ADT Limited may (i) amalgamate with or merge with or
into a newly-formed corporation having no assets or liabilities,
which amalgamation or merger shall be solely for the purpose of
reincorporating ADT Limited under the laws of Canada or any
political subdivision thereof, the United Kingdom or any political
subdivision thereof or the United States of America, any state
thereof or the District of Columbia or (ii) continue,
redomesticate or otherwise become subject to the laws of a
jurisdiction other than Bermuda, to the same extent as if it had
been incorporated in such jurisdiction; provided, however, that in
the case of clauses (i) and (ii) above, (A) the surviving entity
shall be a corporation duly organized and validly existing under
the laws of Canada or any political subdivision thereof, the
United Kingdom or any political subdivision thereof or the United
States of America, any state thereof or the District of Columbia
and shall, in either case, expressly assume all the obligations of
ADT Limited hereunder and this Guaranty shall remain in full force
and effect; (B) immediately before and immediately after giving
effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; (C) immediately after giving
effect to such transaction, Stockholders' Equity of the surviving
entity is at least equal to the Stockholders' Equity of ADT
Limited immediately before such transaction less customary and
reasonable transaction costs; (D) each Guarantor, unless it is the
other party to the transactions described above, shall have
confirmed that its Guaranty shall remain in full force and effect;
and (E) the surviving entity shall have delivered, or caused to be
delivered, to the Lenders an officers' certificate and an opinion
of counsel, each stating that this provision has been complied
with and that all conditions precedent herein provided for
relating to such transaction have been satisfied;
(e) ADT Limited or any Subsidiary of ADT Limited may enter
into or consummate any Permitted Business Acquisition; and
(f) ADT Limited or any Subsidiary of ADT Limited may enter
into or consummate any Business Acquisition of a Related Business
to the extent the aggregate amount of expenditures of ADT Limited
and its Subsidiaries in respect of such Business Acquisition, when
added (without duplication) to (i) the aggregate amount of all
expenditures of ADT Limited and its Subsidiaries in respect of
Business Acquisitions made pursuant to this clause (f) (or clause
(f) of Section 4.2.9 of the ADT Limited Guaranty (as defined in
the Existing Credit Facility)) since the Existing Credit Facility
Effective Date and (ii) the aggregate amount of Investments
outstanding under clause (o) of Section 4.2.5, does not exceed
$25,000,000.
SECTION 4.2.10. Asset Dispositions, etc. ADT Limited will not,
and will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other rights
with respect to, all or any substantial part of its assets (including accounts
receivable, Capital Stock of Subsidiaries of ADT Limited and other
Investments) to any Person (an "Asset Sale"), unless
(a) such Asset Sale is permitted by Section 4.2.9; or
(b) such Asset Sale is a Permitted Strategic Sale or
Permitted Auction Business Sale; or
(c) with respect to assets other than the Capital Stock of
the Borrower and any Intermediate Parent Company
(i) such Asset Sale is in the ordinary course of
business; or
(ii) (A) if such Asset Sale consists of the sale or
transfer of the Capital Stock of a Subsidiary of ADT
Limited, all but not less than all of the Capital Stock of
such Subsidiary is so sold or transferred, (B) such Asset
Sale is for not less than the Fair Market Value of the
assets sold (as determined in good faith by the Board of
Directors of ADT Limited or a committee thereof, whose
determination shall be evidenced by a certified written
resolution of such Board or such committee) and the
consideration received by ADT Limited or the relevant
Subsidiary in respect of such Asset Sale (other than in
connection with a sale or disposition of the Capital Stock
of Nu-Swift plc held by ADT Limited on the Effective Date)
consists of at least 75% cash (including any cash proceeds
received from the sale of securities received in such Asset
Sale, provided that at the time of such Asset Sale, ADT
Limited or the relevant Subsidiary has entered into a
legally binding agreement for the sale of such securities
and such securities are sold within sixty days of such Asset
Sale), or Cash Equivalent Investments and (C) the net book
value of such assets, together with the net book value of
all other assets subject to an Asset Sale permitted under
this clause (ii) (or clause (c)(ii) of Section 4.2.10 of the
ADT Limited Guaranty (as defined in the Existing Credit
Facility)) since the Existing Credit Facility Effective
Date, does not exceed $130,000,000; or
(d) each party to such Asset Sale is either ADT Limited or a
Subsidiary of ADT Limited (other than the Borrower, any Subsidiary
Guarantor or any Intermediate Parent Company); or
(e) all parties to such Asset Sale are either the Borrower
or a Subsidiary Guarantor.
SECTION 4.2.11. Modification of Certain Documents. ADT Limited
will not, and will not permit any of its Subsidiaries to, consent to any
amendment, supplement or other modification of any of the terms or provisions
contained in, or applicable to, the Senior Notes, any Subordinated Debt
(including Subordinated Debt in respect of the Dividended Note, but excluding
other Subordinated Intercompany Debt), or any document or instrument
evidencing or applicable thereto (including the Senior Note Indenture, the
Senior Subordinated Note Indenture and the LYONs Indenture), other than any
amendment, supplement or other modification which extends the date or reduces
the amount of any required repayment or redemption or which does not adversely
affect any of the Lender Parties.
SECTION 4.2.12. Transactions with Affiliates. ADT Limited will
not, and will not permit any of its Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of its other
Affiliates unless such arrangement or contract is fair and equitable to ADT
Limited or such Subsidiary and is an arrangement or contract of the kind which
would be entered into by a prudent Person in the position of ADT Limited or
such Subsidiary with a Person which is not one of its Affiliates; provided,
however, that the foregoing restriction shall not apply to (i) any arrangement
or contract between or among ADT Limited, the Borrower or any Guarantor that
is a Wholly Owned Subsidiary of the Borrower or (ii) any other arrangement
expressly permitted hereunder.
SECTION 4.2.13. Negative Pledges, Restrictive Agreements, etc.
ADT Limited will not, and will not permit any of its Subsidiaries to, enter
into any agreement (excluding this Guaranty and any other Loan Document)
(a) prohibiting the creation or assumption of any Lien to
secure the Obligations upon its properties, revenues or assets,
whether now owned or hereafter acquired; or
(b) restricting the ability of any such Subsidiary to make
any payments, directly or indirectly, to ADT Limited by way of
dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges,
expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any
such Subsidiary to make any payment, directly or indirectly, to
ADT Limited;
except
(i) (A) any indenture or agreement governing
Indebtedness permitted by clause (b), (c) or (d)(i) of
Section 4.2.2 or clause (b), (c), (d), (e), (f) or (g) of
Section 8.2.2 of the Credit Agreement, as in effect on the
Existing Credit Facility Effective Date, (B) the U.K. Credit
Facility to the extent that the U.K. Credit Facility
prohibits the creation or assumption of any Lien which
secures the Obligations on the property, revenues or assets
of ADT Limited and its Subsidiaries (other than the Borrower
and its Subsidiaries) or requires any obligor under the U.K.
Credit Facility to maintain a certain level of net worth and
(C) any refinancings of any of the foregoing permitted by
clause (o) of Section 4.2.2 or clause (r) of Section 8.2.2
of the Credit Agreement;
(ii) any agreement governing any Indebtedness
permitted by clause (h) of Section 4.2.2 or clause (k) of
Section 8.2.2 of the Credit Agreement as to the assets
financed with the proceeds of such Indebtedness and any
refinancings thereof permitted by clause (o) of Section
4.2.2 or clause (r) of Section 8.2.2 of the Credit Agreement;
(iii) any customary encumbrance or restriction with
respect to a Subsidiary of ADT Limited imposed pursuant to an
agreement entered into for a sale or disposition permitted
hereunder of all or substantially all of the Capital Stock
or assets of such Subsidiary, so long as such encumbrance or
restriction, by its terms, terminates on the earlier of the
termination of such agreement or the consummation of such
agreement;
(iv) customary restrictions on transfers of property
subject to Liens permitted pursuant to Section 4.2.3;
(v) restrictions on transfers of property by reason
of, or existing under, (A) applicable law or (B) customary
non-assignment provisions of any agreement entered into by
any Subsidiary in the ordinary course of business or any
lease governing a leasehold interest of any Subsidiary
entered into in the ordinary course of business;
(vi) usual and customary restrictions pursuant to any
agreement relating to Indebtedness of any Foreign Subsidiary
permitted pursuant to Section 4.2.2 and incurred for working
capital purposes, which restrictions may include requirements
for the maintenance of net worth or other balance sheet
conditions, restrictions on mergers and transfers of assets,
restrictions on investments, restrictions on transactions
with affiliates and requirements to maintain specified
levels of cash flow or cash flow coverage ratios; provided
that such restrictions are agreed to in good faith and,
where applicable, based upon reasonable assumptions; and
(vii) restrictions contained in Indebtedness (A)
existing at the time a Person becomes a Subsidiary of ADT
Limited in a transaction permitted hereunder or (B) assumed
in connection with an acquisition of assets permitted
hereunder; provided such Indebtedness was not incurred and
such restrictions were not created in contemplation of any
such transaction.
SECTION 4.2.14. Accounting Changes. ADT Limited will not, and
will not permit any of its Subsidiaries to, change its Fiscal Year from twelve
consecutive calendar months ending on December 31.
SECTION 4.2.15. Ability to Amend; Restrictive Agreements. ADT
Limited will not, and will not permit any of its Subsidiaries to, enter into,
or accept the obligations under, any agreement (i) prohibiting (including,
except with respect to (x) any agreement governing Indebtedness permitted by
clause (b) or (c) of Section 4.2.2 or clause (b), (c), (d), (e), (f) or (g) of
Section 8.2.2 of the Credit Agreement, as in effect on the Existing Credit
Facility Effective Date, or (y) any agreement governing Indebtedness permitted
under clause (o) of Section 4.2.2 or clause (r) of Section 8.2.2 of the Credit
Agreement that refinances Indebtedness referred to in the preceding clause (x),
subjecting to any condition) the ability of ADT Limited or any of its
Subsidiaries to amend or otherwise modify this Guaranty or any other Loan
Documents or (ii) containing any provision that would contravene any provision
of any Loan Document.
SECTION 4.2.16. [Intentionally Omitted.]
SECTION 4.2.17. Activities of Certain Subsidiaries. (a) ADT
Limited will not permit any of the Intermediate Parent Companies to engage in
any business activity or incur any obligation, except (i) the ownership of the
Capital Stock of their respective Subsidiaries, (ii) the making of payments
under intercompany Indebtedness permitted by Section 4.2.2, (iii) the making
of capital contributions to their respective Subsidiaries to the extent
permitted under Section 4.2.5 and (iv) the receipt of Distributions permitted
under Section 4.2.6 and the receipt of proceeds from, or the receiving of
payments under, intercompany Indebtedness permitted by Section 4.2.2 and
Section 8.2.2 of the Credit Agreement, in each case to the extent such
proceeds or payments are concurrently used (A) to repay Indebtedness of such
Intermediate Parent Company to the extent such Indebtedness is permitted under
Section 4.2.2 or (B) to make a loan, advance or Distribution to its parent or
ADT Limited, to the extent such loan, advance or Distribution is permitted
under Section 4.2.5 or 4.2.6, as applicable.
(b) ADT Limited will not permit any Subsidiary of it that is (i)
a Non-Obligor and (ii) an obligee in respect of Indebtedness set forth under
the caption "Continuing Indebtedness - Intercompanies" in Item 4.2.2(c)
("Ongoing Indebtedness") of the Disclosure Schedule to receive any payments
under any such Indebtedness, except to the extent such payments are used
within a reasonable period of time, directly or indirectly, (A) to repay
Indebtedness owing to an Obligor or (B) to make a loan, advance or
Distribution to an Obligor, to the extent such loan, advance or Distribution is
permitted under Section 4.2.5 or 4.2.6, as applicable. ADT Limited will not
permit any of its Subsidiaries that is subject to the subordination provisions
of any Subordinated Intercompany Debt (including Indebtedness in respect of the
Dividended Note) to take or omit to take any action the taking or the omission
of which would result in the failure of such Subsidiary fully and properly to
perform and observe all of its obligations in respect of such subordination
provisions.
SECTION 4.2.18. Ownership of Certain Subsidiaries. Except
pursuant to a transaction permitted pursuant to Section 4.2.9 or 4.2.10, ADT
Limited will not permit:
(a) any Subsidiary of Holdings N.V. now existing to not be
at any time a Wholly Owned Subsidiary of ADT Limited except to the
extent disclosed in Item 3.8 ("Existing Subsidiaries") of the
Disclosure Schedule; and
(b) any Subsidiary of the Borrower now existing to not be at
any time a Wholly Owned Subsidiary of the Borrower.
SECTION 4.2.19. Certain Intercompany Indebtedness. Without
limiting the effect of Section 4.2.11, ADT Limited will not, and will not
permit any of its Subsidiaries, to amend or modify the terms of any
Indebtedness referred to in clause (ii) of the proviso to Section 4.2.2, which
terms provide for satisfaction of such Indebtedness in cash at par.
SECTION 4.2.20. Any Action. ADT Limited will not, and will not
permit any of its Subsidiaries to, take or omit to take any action the taking
or the omission of which would result in the failure of the Borrower or any
other Obligor fully and properly to perform and observe all of its obligations
under the Credit Agreement or any other Loan Document to which it is a party.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including, without
limitation, Article XI thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of, Section 2.6, this
Guaranty shall be binding upon ADT Limited and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Lender
Party and each holder of a Note and their respective successors, transferees
and assigns (to the fullest extent provided pursuant to Section 2.6); provided,
however, that ADT Limited may not assign any of its obligations hereunder
without the prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by ADT Limited
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent and consented to by the applicable Lenders under
Section 11.1 of the Credit Agreement, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 5.4. Addresses for Notices. All notices and other
communications hereunder to ADT Limited shall be in writing or by facsimile
and mailed, telegraphed, transmitted or delivered to it, addressed to it at the
address set forth below its signature hereto or at such other address as shall
be designated by ADT Limited in a written notice to the Agent at the address
specified in the Credit Agreement complying as to delivery with the terms of
this Section. Any notice, if mailed and properly addressed with postage
prepaid, return receipt requested, or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any notice if
transmitted by facsimile, shall be deemed given when transmitted upon receipt
of electronic confirmation of transmission (it being understood and agreed that
notice transmitted by facsimile to ADT Inc. shall constitute notice to ADT
Limited hereunder).
SECTION 5.5. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.2 and Section 2.4, no failure on the part of any
Lender Party or any holder of a Note to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder 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 5.6. Captions. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of,
any rights of any Lender Party or any holder of a Note under applicable law,
each Lender Party and each such holder shall, upon the occurrence of any Event
of Default, to the fullest extent permitted under applicable law, have the
right to appropriate and apply to the payment of the obligations of ADT
Limited owing to it hereunder, whether or not then due, any and all balances,
credits, deposits, accounts or moneys of ADT Limited then or thereafter
maintained with such Lender Party or such holder; provided, however, that any
such appropriation and application shall be subject to the provisions of
Section 5.8 of the Credit Agreement.
SECTION 5.8. Independence of Covenants. All covenants contained
in this Guaranty or any other Loan Document shall be given independent effect
such that, in the event a particular action or condition is not permitted by
any of such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of a Default
or an Event of Default if such action is taken or such condition exists.
SECTION 5.9. Severability. Wherever possible each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Guaranty.
SECTION 5.10. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE AGENT (OR ANY OTHER LENDER PARTY) SHALL BE
BROUGHT AND MAINTAINED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE
FOUND. FOR PURPOSES OF ANY SUCH LITIGATION INVOLVING THIS GUARANTY, ADT
LIMITED HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND EXPRESSLY CONSENTS AND ACKNOWLEDGES THE TERMS AND
AGREEMENTS SET FORTH IN SECTION 2.9 HEREOF.
SECTION 5.11. Waiver of Jury Trial. ADT LIMITED AND, BY ITS
ACCEPTANCE HEREOF, THE AGENT (ON BEHALF OF THE LENDER PARTIES) HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS GUARANTY. ADT LIMITED ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS
ENTERING INTO THE CREDIT AGREEMENT AND MAKING CREDIT EXTENSIONS (INCLUDING THE
INITIAL CREDIT EXTENSION) TO THE BORROWER THEREUNDER.
IN WITNESS WHEREOF, ADT Limited has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
ADT LIMITED
By: /s/ Stephen J. Ruzika
--------------------------------
Title: Chief Financial Officer &
Executive Vice President
Address: Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
With a copy to:
ADT Inc.
2255 Glades Road
Boca Raton, Florida 33431
Facsimile No.: 407-241-8257
Attention: President
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Agent
By: /s/ Frank F. Sandler
---------------------------
Title: Relationship Manager
EXHIBIT 10.19
[CONFORMED COPY]
SUBSIDIARY GUARANTOR GUARANTY
THIS SUBSIDIARY GUARANTOR GUARANTY (together with all amendments
and other modifications made from time to time, this "Guaranty"), dated as of
January 9, 1997, made by each Person (such capitalized term and all other
capitalized terms not otherwise defined herein to have the meanings provided
for in Article I) identified on the signature pages hereto and each Additional
Subsidiary Guarantor (collectively, the "Subsidiary Guarantors"), in favor of
each of the Lender Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January 9,
1997 (together with all amendments and other modifications, if any, from time
to time thereafter made thereto, the "Credit Agreement"), among ADT
Operations, Inc., a Delaware corporation (the "Borrower"), the financial
institutions as are or may become parties thereto (collectively, the
"Lenders"), and The Bank of Nova Scotia ("Scotiabank"), individually and as
agent (the "Agent") for the Lenders, the Lenders have extended Commitments to
make Credit Extensions to or on behalf of the Borrower;
WHEREAS, as a condition precedent to the occurrence of the Closing
Date under the Credit Agreement, each Subsidiary Guarantor is required to
execute and deliver this Guaranty;
WHEREAS, each Subsidiary Guarantor has duly authorized the
execution, delivery and performance of this Guaranty; and
WHEREAS, it is in the best interests of each Subsidiary Guarantor
to execute this Guaranty inasmuch as each Subsidiary Guarantor will derive
substantial direct and indirect benefits from the Credit Extensions made from
time to time to or on behalf of the Borrower by the Lenders;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, each Subsidiary Guarantor agrees, for the
benefit of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Agent" is defined in the first recital.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Guaranty" is defined in the preamble.
"Lender" is defined in the first recital.
"Lender Party" means, as the context may require, any Lender, any
Issuer or the Agent and each of their respective successors, transferees and
assigns.
"Lenders" is defined in the first recital.
"Other Taxes" is defined in clause (b) of Section 2.7.
"Scotiabank" is defined in the first recital.
"Subsidiary Guarantor" is defined in the preamble.
"Taxes" is defined in clause (a) of Section 2.7.
"U.C.C." means the Uniform Commercial Code as in effect in the
State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Guaranty,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Each Subsidiary Guarantor hereby
absolutely, unconditionally and irrevocably, jointly and severally,
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the
Borrower and each other Obligor now or hereafter existing, whether
for principal, interest, Reimbursement Obligations, fees, expenses
or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362(a)
of the United States Bankruptcy Code, 11 U.S.C. Section 362(a),
and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section
506(b)); and
(b) indemnifies and holds harmless each Lender Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender
Party or such holder, as the case may be, in enforcing any rights
under this Guaranty;
provided, however, that each Subsidiary Guarantor shall be liable under this
Guaranty for the maximum amount of such liability that can be hereby incurred
without rendering this Guaranty, as it relates to such Subsidiary Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount. This Guaranty constitutes a
guaranty of payment when due and not of collection, and each Subsidiary
Guarantor specifically agrees that it shall not be necessary or required that
any Lender Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against the Borrower or any
other Obligor (or any other Person) before or as a condition to the
obligations of such Subsidiary Guarantor hereunder.
SECTION 2.2. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Borrower and each other Obligor have been paid in full, all obligations of each
Subsidiary Guarantor hereunder shall have been paid in full and all
Commitments shall have terminated. Each Subsidiary Guarantor guarantees that
the Obligations of the Borrower and each other Obligor and their respective
Subsidiaries will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, without regard
(to the fullest extent permitted under applicable law) to any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of any Lender Party or any holder of any Note with respect
thereto (and each Subsidiary Guarantor hereby waives to the fullest extent it
may do so any right or rights it may have under any such law, regulation or
order). Without limiting the generality of the foregoing, the liability of
each Subsidiary Guarantor under this Guaranty shall be absolute, unconditional
and irrevocable irrespective of:
(a) any lack of genuineness, validity, legality or
enforceability of the Credit Agreement or any other Loan Document
(other than, in respect of such Subsidiary Guarantor, this
Guaranty) or of any of the Obligations (other than the Obligations
of such Subsidiary Guarantor hereunder);
(b) the failure of any Lender Party or any holder of any
Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or
any other Person (including any other Subsidiary Guarantor)
under the provisions of the Credit Agreement or any other
Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor (including any other Subsidiary Guarantor) of, or
collateral securing, any Obligations of the Borrower or any
other Obligor;
(c) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations of the
Borrower or any other Obligor (other than such Subsidiary
Guarantor), or any other extension, compromise or renewal of any
Obligation of the Borrower or any other Obligor (other than such
Subsidiary Guarantor);
(d) any reduction, limitation, impairment or termination of
the Obligations of the Borrower or any other Obligor (other than
such Subsidiary Guarantor) for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall
not be subject to (and each Subsidiary Guarantor hereby waives any
right to or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting,
the Obligations of the Borrower, any other Obligor (other than
such Subsidiary Guarantor) or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Credit Agreement or any other Loan Document (other
than, in respect of such Subsidiary Guarantor, this Guaranty);
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release of or addition to, or consent to departure from, any other
guaranty (including the ADT Limited Guaranty), held by any Lender
Party or any holder of any Note securing any of the Obligations of
the Borrower or any other Obligor; or
(g) any other circumstances which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, the Borrower, any other Obligor, any surety or any
other guarantor (or any other Guarantor).
SECTION 2.3. Stay of Acceleration, Reinstatement, etc. Each
Subsidiary Guarantor agrees that, if acceleration of the time for payment of
any amount payable by the Borrower under the Credit Agreement, the Notes or
any other Loan Document or of compliance by the Borrower with its obligations
under Section 4.7 of the Credit Agreement is, in either case, stayed upon the
occurrence with respect to the Borrower of any Event of Default described in
clause (b) or (d) of Section 9.1.9 of the Credit Agreement, all such amounts
and obligations otherwise subject to acceleration or compliance under the
terms of the Credit Agreement shall nonetheless be payable and performed by
such Subsidiary Guarantor hereunder forthwith on demand by the Agent made at
the request of the requisite proportion of the Lenders specified in Section
9.3 of the Credit Agreement. Each Subsidiary Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be,
if at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by any Lender Party or any holder of
any Note, upon the insolvency, bankruptcy or reorganization of the Borrower,
any other Obligor (other than such Subsidiary Guarantor) or otherwise, all as
though such payment had not been made.
SECTION 2.4. Waiver, etc. Each Subsidiary Guarantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations of the Borrower or any other Obligor and this
Guaranty and any requirement that the Agent, any other Lender Party or any
holder of any Note protect, secure, perfect or insure any security interest or
Lien, or any property subject thereto, or exhaust any right or take any action
against the Borrower, any other Obligor or any other Person (including any
other guarantor and any other Guarantor) or entity or any collateral securing
the Obligations of the Borrower or any other Obligor, as the case may be.
SECTION 2.5. Subrogation. Each Subsidiary Guarantor hereby
agrees that it will not exercise any rights which it may now or hereafter
acquire against the Borrower or any other Obligor that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under this Guaranty or any other Loan Document, including any
right of subrogation, reimbursement, exoneration, or indemnification, any
right to participate in any claim or remedy of the Lender Parties against the
Borrower or any other Obligor or any collateral which the Agent now has or
hereafter acquires, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including the right to take
or receive from the Borrower or any other Obligor, directly or indirectly, in
cash or other property or by set-off or in any manner, payment or security on
account of such claim or other rights, until the Obligations have been paid in
full in cash and the Commitments have been terminated. If any amount shall be
paid to such Subsidiary Guarantor in violation of the preceding sentence and
the Obligations shall not have been paid in cash in full and the Commitments
have not been terminated, such amount shall be deemed to have been paid to
such Subsidiary Guarantor for the benefit of, and held in trust for, the
Lender Parties, and shall forthwith be paid to the Lender Parties to be
credited and applied upon the Obligations, whether matured or unmatured. Each
Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Credit Agreement
and that the agreement set forth in this Section is knowingly made in
contemplation of such benefits.
SECTION 2.6. Successors, Transferees and Assigns; Transfers of
Notes, etc. This Guaranty shall:
(a) be binding upon each Subsidiary Guarantor and its
successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Agent
and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan held by it to any
other Person or entity, and such other Person or entity shall thereupon become
vested with all rights and benefits in respect thereof granted to such Lender
under any Loan Document (including this Guaranty) or otherwise, subject,
however, to the provisions of Section 11.11 and Article X of the Credit
Agreement.
SECTION 2.7. Payments Free and Clear of Taxes, etc. Each
Subsidiary Guarantor hereby agrees that:
(a) Any and all payments made by such Subsidiary Guarantor
hereunder shall be made in accordance with Section 5.6 of the
Credit Agreement 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 Party or any holder of a
Note, taxes imposed on its net income and franchise taxes imposed
on it (such non-excluded items being hereinafter referred to as
"Taxes"). If any such Subsidiary Guarantor shall be required by
law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender Party or any holder of a Note
(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) such Lender Party or such holder, as the
case may be, receives an amount equal to the sum it would
have received had no such deductions been made,
(ii) such Subsidiary Guarantor shall make such
deductions, and
(iii) such Subsidiary Guarantor shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) Such Subsidiary Guarantor shall pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Guaranty (hereinafter referred to
as "Other Taxes").
(c) Such Subsidiary Guarantor hereby indemnifies and holds
harmless each Lender Party and each of holder of a Note for the
full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section) paid by such Lender Party
or such holder, as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted.
(d) Without prejudice to the survival of any other
agreement of such Subsidiary Guarantor hereunder, the agreements
and obligations of such Subsidiary Guarantor contained in this
Section 2.7 shall survive the payment in full of the principal of
and interest on the Loans.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Subsidiary
Guarantor hereby represents and warrants for itself unto each Lender Party as
to all matters contained in Article VII of the Credit Agreement and Article III
of the ADT Limited Guaranty, in each case insofar as applicable to such
Subsidiary Guarantor or such Subsidiary Guarantor's properties, together with
all related definitions and ancillary provisions, all of which are hereby
incorporated into this Section 3.1 as those specifically set forth herein. In
addition, each Subsidiary Guarantor hereby represents and warrants for itself
unto each Lender Party as further set forth in this Article III.
SECTION 3.1.1. Organization, etc. Such Subsidiary Guarantor and
each of its Subsidiaries is a corporation duly organized and validly existing
and in good standing under the laws of the State of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of its business or the location of its
assets requires such qualification and where the failure to so qualify or be
in good standing would reasonably be expected to have a material adverse
effect on the business, results of operations, financial condition or
prospects of the Borrower and its Subsidiaries taken as a whole. Such
Subsidiary Guarantor and each of its Subsidiaries has full power and authority
and holds all requisite governmental licenses, permits and other approvals (i)
to own and hold under lease its property and to conduct its business
substantially as currently conducted by it, except where failure to hold such
licenses, permits and other approvals would not reasonably be expected to have
a material adverse effect on the business, results of operations, financial
condition or prospects of the Borrower and its Subsidiaries taken as a whole
and (ii) to enter into and perform its obligations under this Guaranty and
each other Loan Document to which it is a party.
SECTION 3.1.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by such Subsidiary Guarantor of this
Guaranty and each other Loan Document executed or to be executed by it and
such Subsidiary Guarantor's participation in the consummation of the
Transaction are within such Subsidiary Guarantor's corporate powers, have been
duly authorized by all necessary corporate action, and do not
(a) contravene such Subsidiary Guarantor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting such Subsidiary Guarantor in any manner that could
reasonably be expected (i) to have a material adverse effect on
the business, results of operations, financial condition or
prospects of the Borrower and its Subsidiaries taken as a whole,
(ii) to impair the ability of any Lender, any Issuer or the Agent
to enforce the Obligations or (iii) to subject any Lender, any
Issuer or the Agent to any liability; or
(c) result in, or require the creation or imposition of,
any Lien on any of such Subsidiary Guarantor's properties.
SECTION 3.1.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by such Subsidiary Guarantor of
this Guaranty or any other Loan Document to which it is a party. No
Subsidiary Guarantor is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 3.1.4. Validity, etc. This Guaranty constitutes, and each
other Loan Document executed by such Subsidiary Guarantor will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of such Subsidiary Guarantor enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting enforceability
of creditors' rights generally and to general principles of equity.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Affirmative Covenants. Each Subsidiary Guarantor
covenants and agrees that, until the Covenant Termination Date, such
Subsidiary Guarantor will perform, comply with and be bound by all the
agreements, covenants and obligations contained in Article VIII of the Credit
Agreement and Article IV of the ADT Limited Guaranty applicable to such
Subsidiary Guarantor or such Subsidiary Guarantor's properties. Each such
agreement, covenant and obligation contained in each such Article and all
related definitions and ancillary provisions are hereby incorporated into this
Guaranty as though specifically set forth herein.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including, without
limitation, Article XI thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of, Section 2.6, this
Guaranty shall be binding upon each Subsidiary Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
each Lender Party and each holder of a Note and their respective successors,
transferees and assigns (to the full extent provided pursuant to Section 2.6);
provided, however, that no Subsidiary Guarantor may assign any of its
obligations hereunder without the prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by any Subsidiary
Guarantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by each Subsidiary Guarantor and the Agent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 5.4. Addresses for Notices to the Subsidiary Guarantor.
All notices and other communications hereunder to any Subsidiary Guarantor
shall be in writing or by facsimile and addressed, delivered or transmitted to
it in care of the Borrower at the address and facsimile number and in the
manner provided for in Section 11.2 of the Credit Agreement.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.2 and Section 2.4, no failure on the part of any
Lender Party or any holder of a Note to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder 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 5.6. Headings. The various headings used in this Guaranty
are for convenience of reference only and shall not affect the construction of
this Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of,
any rights of any Lender Party or any holder of a Note under applicable law,
each Lender Party and each such holder shall, upon the occurrence of any
Event of Default, to the fullest extent permitted under applicable law, have
the right to appropriate and apply to the payment of the obligations of any
Subsidiary Guarantor owing to it hereunder, whether or not then due, any and
all balances, credits, deposits, accounts or moneys of such Subsidiary
Guarantor then or thereafter maintained with such Lender Party or such holder;
provided, however, that any such appropriation and application shall be
subject to the provisions of Section 5.8 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible, each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Guaranty.
SECTION 5.9. Execution in Counterparts. This Guaranty may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SECTION 5.10. Governing Law; Entire Agreement. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO
THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL,
WITH RESPECT THERETO.
SECTION 5.11. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES OR ANY SUBSIDIARY GUARANTOR
SHALL BE BROUGHT AND MAINTAINED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH SUBSIDIARY GUARANTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. EACH SUBSIDIARY GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH
SUBSIDIARY GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY SUBSIDIARY GUARANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY.
SECTION 5.12. Waiver of Jury Trial. THE LENDER PARTIES AND EACH
SUBSIDIARY GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE LENDER PARTIES OR ANY SUBSIDIARY GUARANTOR. EACH SUBSIDIARY
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER PARTIES ENTERING INTO THE CREDIT AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
SECTION 5.13. Additional Subsidiary Guarantors. Upon
execution and delivery by the Agent and any other Person (each such Person
being an "Additional Subsidiary Guarantor") of an instrument in the form of
Annex I attached hereto, such Additional Subsidiary Guarantor shall become a
Subsidiary Guarantor hereunder with the same force and effect as if originally
named as a Subsidiary Guarantor herein. The execution and delivery of any
such instrument shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any
Additional Subsidiary Guarantor as a party to this Guaranty.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
ADT GENERAL HOLDINGS, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
ADT SECURITY SERVICES, INC.
(formerly known as ADT
SECURITY SYSTEMS, INC.)
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
ADT SECURITY SYSTEMS,
WEST, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
ADT AUTOMOTIVE, INC.
By: /s/ Larry C. Reese
----------------------------
Title: Senior Vice President
ADT AUTOMOTIVE HOLDINGS, INC.
By: /s/ Larry C. Reese
----------------------------
Title: Vice President
AA PROPERTY HOLDINGS, INC.
By: /s/ Larry C. Reese
----------------------------
Title: President
ADT INVESTMENTS, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
AAAA DEALERS SERVICES, INC.
By: /s/ Larry C. Reese
----------------------------
Title: President
ADT BUSINESS HOLDINGS, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
ADT PROPERTY HOLDINGS, INC.
By: /s/ Steven J. Levine
----------------------------
Title: Secretary
ADT SECURITY SYSTEMS
MANUFACTURING, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
MID-ATLANTIC SECURITY, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
ADT AUTOMOTIVE SERVICES, INC.
By: /s/ Larry C. Reese
----------------------------
Title: President
AUCTION TRANSPORT, INC.
By: /s/ Richard H. Miller
----------------------------
Title: President
BRITISH CAR AUCTIONS, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
CCTC INTERNATIONAL, INC.
By: /s/ Ann M. Olbert
----------------------------
Title: Treasurer
ADT SPECIALTY AUCTIONS, INC.
By: /s/ Larry C. Reese
----------------------------
Title: President
FLYING LION INC.
By: /s/ Larry C. Reese
----------------------------
Title: President
TRI-CITY AUTO AUCTION, INC.
By: /s/ Larry C. Reese
----------------------------
Title: President
ADT SERVICES, INC.
By: /s/ Steven J. Levine
----------------------------
Title: President
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Agent
By: /s/ Frank F. Sandler
----------------------------
Title: Relationship Manager
ANNEX I
to
Subsidiary Guarantor Guaranty
SUBSIDIARY GUARANTOR GUARANTY SUPPLEMENT
THIS SUBSIDIARY GUARANTOR GUARANTY SUPPLEMENT (this "Supplement"),
dated as of _____________, 199_, to the Subsidiary Guarantor Guaranty, dated
as of January 9, 1997 (as amended or otherwise modified through the date
hereof, the "Subsidiary Guaranty"), made by each Person identified on the
signature pages thereto, certain other Persons who subsequently became a party
thereto by executing an agreement in substantially the form hereof (each an
"Additional Subsidiary Guarantor" and, together with each Person identified on
the signature pages of the Guaranty, the "Subsidiary Guarantors"), in favor of
The Bank of Nova Scotia ("Scotiabank"), as documentation agent (the
"Documentation Agent") for each of the Lender Parties (such capitalized term
and all other capitalized terms used in this Supplement without being defined
shall have the meaning provided for in the Subsidiary Guaranty).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January 9,
1997 (together with all amendments and other modifications, if any, from time
to time made thereto, the "Credit Agreement"), among ADT Operations, Inc., a
Delaware corporation (the "Borrower"), the financial institutions as are or
may become parties thereto (collectively, the "Lenders"), and The Bank of Nova
Scotia ("Scotiabank"), individually and as agent (the "Agent") for the
Lenders, the Lenders have extended Commitments to make Credit Extensions to or
on behalf of the Borrower;
WHEREAS, it is in the best interests of the undersigned (the "New
Additional Subsidiary Guarantor") to execute this Supplement inasmuch as the
New Additional Subsidiary Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made by the Lenders pursuant to the Credit
Agreement; and
WHEREAS, the New Additional Subsidiary Guarantor desires to become
an Additional Subsidiary Guarantor under the Subsidiary Guaranty pursuant to
Section 5.13 thereof;
NOW, THEREFORE, for good and valuable consideration the receipt
of which is hereby acknowledged, the New Additional Subsidiary Guarantor
agrees, for the benefit of each Lender Party, as follows:
SECTION 1. Additional Subsidiary Guarantor. In accordance with
Section 5.13 of the Subsidiary Guaranty, the New Additional Subsidiary
Guarantor by its signature hereto shall become a Subsidiary Guarantor under
the Subsidiary Guaranty with the same force and effect as if originally named
as a Subsidiary Guarantor therein, and each reference to a "Subsidiary
Guarantor" or an "Additional Subsidiary Guarantor" in the Subsidiary Guaranty
shall be deemed to include the New Additional Subsidiary Guarantor. The New
Additional Subsidiary Guarantor hereby agrees to all the terms and provisions
of the Subsidiary Guaranty applicable to it as an Additional Subsidiary
Guarantor thereunder.
SECTION 2. Guaranty. Without limiting the terms of Section 1, the
New Additional Subsidiary Guarantor hereby absolutely, unconditionally and
irrevocably, jointly and severally,
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the
Borrower and each other Obligor, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which
would become due but for the operation of the automatic stay under
Section 362(a) of the United States Bankruptcy Code, 11 U.S.C.
Section 362(a), and the operation of Sections 502(b) and 506(b) of
the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b)); and
(b) indemnifies and holds harmless each Lender Party and
each holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender
Party or such holder, as the case may be, in enforcing any rights
under this Supplement or the Subsidiary Guaranty;
provided, however, that the New Additional Subsidiary Guarantor shall be
liable under this Supplement and the Subsidiary Guaranty for the maximum
amount of such liability that can be incurred without rendering this Supplement
and the Subsidiary Guaranty, as it relates to the New Additional Subsidiary
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer, and not for any greater amount. This Supplement and the
Subsidiary Guaranty constitute a guaranty of payment when due and not of
collection, and the New Additional Subsidiary Guarantor specifically agrees
that it shall not be necessary or required that any Lender Party or any holder
of any Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the Borrower or any other Obligor (or any other
Person) before or as a condition to the obligations of the New Additional
Subsidiary Guarantor under this Supplement or the Subsidiary Guaranty.
SECTION 3. Warranties, etc. The New Additional Subsidiary
Guarantor hereby represents and warrants unto each Lender Party, as of the
date hereof, as follows:
(a) each of the representations and warranties set forth in
Article III of the Subsidiary Guaranty as applied to such New
Additional Subsidiary Guarantor are true and correct; and
(b) the execution, delivery and performance by the New
Additional Subsidiary Guarantor of this Supplement are within its
corporate powers, have been duly authorized by all necessary
corporate action and constitute the legal, valid and binding
obligation of the New Additional Subsidiary Guarantor enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting enforceability of creditors,
rights generally and to general principles of equity.
SECTION 4. Subsidiary Guaranty Remains in Full Force and Effect.
Except as expressly supplemented hereby, the Subsidiary Guaranty shall remain
in full force and effect in accordance with its terms.
SECTION 5. Governing Law. THIS SUPPLEMENT SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
SECTION 6. Severability. Wherever possible each provision of this
Supplement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Supplement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Supplement.
SECTION 7. Execution in Counterparts. This Supplement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute but one and the same
agreement.
SECTION 8. Consent to Jurisdiction. If the New Additional
Subsidiary Guarantor is organized under the laws of a jurisdiction outside of
the United States, such New Additional Subsidiary Guarantor shall consent to
the jurisdiction of New York courts (including the appointment of an agent to
receive summons and complaints in connection with any litigation) on terms
reasonably satisfactory to the Agent.
SECTION 9. Expenses. Without limiting the provisions of the
Credit Agreement, the New Additional Subsidiary Guarantor agrees to reimburse
the Agent for all reasonable out-of-pocket expenses incurred in connection with
this Supplement, including the reasonable fees and expenses of counsel of the
Agent.
SECTION 10. Notices. The address and facsimile number for all
notices to be delivered to the New Additional Subsidiary Guarantor in
connection with the Subsidiary Guaranty is as set forth in Section 5.4 of the
Subsidiary Guaranty.
SECTION 11. Subsidiary Guaranty. This Supplement hereby
incorporates by reference the provisions of the Subsidiary Guaranty, which
provisions are deemed to be a part hereof, and this Supplement shall be deemed
to be a part of the Subsidiary Guaranty.
IN WITNESS WHEREOF, the New Additional Subsidiary Guarantor
has duly executed this Supplement to the Subsidiary Guaranty as of the day and
year first above written.
[NAME OF NEW ADDITIONAL
SUBSIDIARY GUARANTOR]
By
----------------------------
Title:
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Agent
By
----------------------------
Title:
EXHIBIT 10.20
CONFORMED COPY
Pound Sterling90,000,000
FACILITY AGREEMENT
ADT FINANCE PLC
as Borrower
ADT (UK) HOLDINGS PLC
and
OTHERS
as Guarantors
THE BANK OF NOVA SCOTIA
as Arranger
THE BANK OF NOVA SCOTIA
as Agent
and
OTHERS
Clifford Chance
London
CONTENTS
Clause Page No.
PART 1
DEFINITIONS AND INTERPRETATION
1. Definitions and Interpretation............................. 2
PART 2
THE FACILITIES
2. The Facilities............................................. 14
3. Additional Guarantors...................................... 14
4. Utilisation of the Term Facility........................... 15
5. Utilisation of the Overdraft Facility...................... 16
PART 3
INTEREST
6. Interest Periods........................................... 17
7. Payment and Calculation of Interest........................ 17
8. Alternative Interest Rates/Market Disruption............... 18
9. Alternative Interest Rates/Substitute Basis or Repayment... 18
PART 4
REPAYMENT, CANCELLATION AND PREPAYMENT
10. Repayment.................................................. 20
11. Cancellation and Prepayment................................ 20
PART 5
RISK ALLOCATION
12. Taxes...................................................... 21
13. Tax Receipts............................................... 22
14. Changes in Circumstances................................... 23
PART 6
REPRESENTATIONS, COVENANTS AND EVENTS OF DEFAULT
15. Representations............................................ 26
16. Financial Information...................................... 28
17. Financial Condition........................................ 30
18. Covenants.................................................. 32
19. Events of Default.......................................... 34
PART 7
GUARANTEE
20. Guarantee and Indemnity.................................... 37
PART 8
DEFAULT INTEREST AND INDEMNITY
21. Default Interest and Indemnity............................. 40
PART 9
PAYMENTS
22. Currency of Account and Payment............................ 42
23. Payments................................................... 42
24. Set-Off.................................................... 43
25. Sharing.................................................... 43
PART 10
FEES, COSTS AND EXPENSES
26. Fees....................................................... 45
27. Costs and Expenses......................................... 45
PART 11
AGENCY PROVISIONS
28. The Agent, the Arranger and the Banks...................... 47
PART 12
ASSIGNMENTS AND TRANSFERS
29. Assignments and Transfers.................................. 51
PART 13
MISCELLANEOUS
30. Calculations and Evidence of Debt.......................... 54
31. Remedies and Waivers, Partial Invalidity................... 54
32. Notices.................................................... 55
33. Amendments................................................. 56
34. Counterparts............................................... 57
35. Law........................................................ 57
THE SCHEDULES
The First Schedule : The Banks
The Second Schedule : Form of Transfer Certificate
The Third Schedule : Condition Precedent Documents
The Fourth Schedule : Notice of Drawdown
The Fifth Schedule : Associated Costs Rate
The Sixth Schedule : Existing US Subsidiaries
The Seventh Schedule : Accession Agreement
THIS AGREEMENT is made on 17 March 1997
BETWEEN
(1) ADT FINANCE PLC (the "Borrower");
(2) ADT (UK) HOLDINGS PLC, MODERN SECURITY SYSTEMS LIMITED, ADT GROUP PLC
and ELECTRIC PROTECTION SERVICES LIMITED (each an "Initial Guarantor");
(3) THE BANK OF NOVA SCOTIA (the "Agent");
(4) THE BANK OF NOVA SCOTIA (the "Arranger"); and
(5) THE BANKS (as defined below).
It is agreed as follows.
PART 1
DEFINITIONS AND INTERPRETATION
1. Definitions and Interpretation
1.1 Definitions In this Agreement the following terms have the meanings
given to them in this Clause 1.1.
"Accession Agreement" means the accession agreement substantially in the form
set out in the Seventh Schedule, and containing such conditions precedent as
shall reasonably be specified by the Agent, duly executed and unconditionally
delivered to the Agent by the parties thereto pursuant to Clause 3 (Additional
Guarantors).
"Additional Guarantor" means any member of the ADT Group which becomes an
additional guarantor pursuant to the provisions of Clause 3 (Additional
Guarantors) or Section 4.1.6 of the Group Parent Guarantee.
"ADT Group" means the Group Parent and each of its subsidiaries for the time
being.
"Agreed Subordination Conditions" means the agreed subordination provisions to
be delivered to the Agent pursuant to paragraph C.2. of the Third Schedule.
"Amount" means in relation to a Term Advance, its Original Amount as reduced
by the amount (if any) of such Term Advance which has been repaid.
"Associated Costs Rate" means, in relation to any Term Advance or unpaid sum,
the rate determined in accordance with the Fifth Schedule (Associated Costs
Rate).
"Available Term Commitment" means, in relation to a Bank at any time and save
as otherwise provided herein, such Bank's Term Commitment at such time less
the aggregate amount of its portions of the Term Advance.
"Available Term Facility" means, at any time, the aggregate amount of the
Available Term Commitments at such time.
"Bank" means any of the Term Banks and the Overdraft Bank.
"Basle Paper" means the paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988 and prepared by the Basle
Committee on Banking Regulations and Supervision, as amended in November 1991.
"Beneficiaries" means the Agent, the Arranger and the Banks.
"Capital Adequacy Requirement" means a request or requirement relating to the
maintenance of capital by banks, including one which makes any change to, or
is based on any alteration in, the interpretation of the Basle Paper or which
increases the amounts of capital required by banks thereunder, other than a
request or requirement made by way of implementation of the Basle Paper in the
manner in which it is being implemented at the date hereof.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's capital stock or equity, whether now outstanding or issued after the
date hereof.
"Capitalised Lease Liabilities" means, with respect to any person, all
monetary obligations of such person under any leasing or similar arrangement
which, in accordance with UK GAAP, would be classified as capitalised leases,
and the amount of such obligations shall be the capitalised amount thereof,
determined in accordance with UK GAAP, and the stated maturity thereof shall
be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment or penalty.
"Change in Control" means an event (including, without limitation, an event
arising out of any transaction or proposed transaction which may have been
announced on or prior to the date hereof) as a result of which:
(i) any "person" or "group" (as such terms are used in Sections 13 (d) and
14 (d) of the Exchange Act) is or becomes the direct or indirect
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of more than 35% of the Voting Stock of the Group Parent;
or
(ii) during any period of three consecutive years, beginning on or after the
Indenture Effective Date, individuals who either (A) were members of the
Board of Directors of the Group Parent at the beginning of such period
or (B) whose election by the Board of Directors of the Group Parent or
whose nomination for election by the shareholders of the Group Parent
was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period or
whose election or nomination for election was previously approved as
provided for in this sub-paragraph (ii) (B), cease for any reason
(including as a result of any proxy contest involving the
solicitation of revocable proxies under Section 14 (a) of the
Exchange Act) to constitute a majority of such Board of Directors; or
(iii) any "person" or "group" (as such terms are used in Section 13 (d) and 14
(d) of the Exchange Act) possesses, directly or indirectly, the legal
right to direct the management and policies of the Group Parent, whether
through the ownership of securities, by contract or otherwise (other
than solely by virtue of membership of the Board of Directors of the
Group Parent or any committee thereof);
"Closing Date" means 26 March 1997.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
person (but excludes any liability under any such guarantee of obligations
under or in respect of a lease which obligations do not constitute Capitalised
Lease Liabilities). The amount of any person's obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount (or maximum principal amount, if
larger) of the debt, obligation or other liability guaranteed thereby.
"Core Business" means any business directly related to
(a) the auctioning or other distribution of
(i) vehicles held on a consignment or similar basis; and
(ii) equipment which is similarly held on a consignment or
similar basis and which is related to the auctioning and
distribution of vehicles, including equipment related to the
repair and refurbishing of vehicles;
(b) any Related Business or
(c) services with respect to the transmission or monitoring of
information regarding the security or condition of property and
any additional information services provided through facilities
used for such transmission or monitoring.
"Double Tax Treaty Bank" means a Bank whose Facility Office is outside the
United Kingdom and which is resident in a jurisdiction which has a double tax
treaty with the United Kingdom under which payment of interest by the Borrower
to the Facility Office may be made without deduction or withholding of United
Kingdom income tax.
"Event of Default" means any circumstances described as such in Clause 19
(Events of Default).
"Existing Indebtedness" means as provided in Annex I to this Agreement;
"Existing US Subsidiaries" means those subsidiaries listed in the Sixth
Schedule (Existing US Subsidiaries).
"Exchange Act" means the Securities and Exchange Act of 1934 of the United
States, as amended.
"Facilities" means the Term Facility and the Overdraft Facility granted to the
Borrower in this Agreement.
"Facility Office" means, in relation to the Agent or any Bank, the office
identified with its signature below (or, in the case of a Transferee, at the
end of the Transfer Certificate to which it is a party as Transferee) or such
other office as it may from time to time select.
"Final Maturity Date" means the day which is sixty months after the date
hereof.
"Finance Documents" means this Agreement, the Overdraft Facility Supplemental
Letter, the Group Parent Guarantee, any Accession Agreement and any other
agreement, deed, letter, certificate or statement entered into or provided by
any Obligor pursuant to the terms thereof or otherwise in connection therewith
(excluding, for the avoidance of doubt, Transfer Certificates).
"Group" means the Parent and each of its subsidiaries for the time being other
than the Existing US Subsidiaries.
"Group Guarantors" means each Guarantor which is a member of the Group for the
time being.
"Group Obligor" means each Obligor which is a member of the Group for the time
being.
"Group Parent" means ADT Limited, a company organised under the laws of
Bermuda.
"Group Parent Guarantee" means the guarantee to be entered into by the Group
Parent in favour of the Beneficiaries pursuant to D.1. of the Third Schedule.
"Guarantors" means the Initial Guarantors and the Additional Guarantors.
"Hedging Arrangements" means, interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and currency exchange agreements,
and all other agreements or arrangements under which the payment obligations
are calculated by reference to fluctuations in interest rates, currency values
or specified reference assets.
"Impermissible Qualification" means in relation to the opinion or
certification of any independent auditor as to any financial statement of any
Obligor, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of
which would be to cause such Obligor to be in default of any of
its obligations under Clause 17 or Section 4.2.4 of the Group
Parent Guarantee.
"Indebtedness" of any person means, without duplication, indebtedness in
respect of:
(a) all obligations of such person for borrowed money or in
respect of any financial accommodation and all obligations
of such person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn,
and banker's acceptances issued for the account of or
accepted by such person;
(c) all obligations of such person as lessee under leases which
have been or should be, in accordance with UK GAAP, recorded
as Capitalised Lease Liabilities;
(d) all other items which, in accordance with UK GAAP, would be
included as liabilities on the liability side of the balance
sheet of such person as of the date at which Indebtedness is
to be determined;
(e) net liabilities of such person under all Hedging
Arrangements;
(f) whether or not so included as liabilities in accordance with
UK GAAP, all obligations of such person to pay the deferred
purchase price of property or services, and indebtedness
(excluding prepaid interest thereon) secured by an
encumbrance on property owned or being purchased by such
person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such person or
is limited in recourse;
(g) all obligations of such person relative to Redeemable
Capital Stock of such person (including accrued and unpaid
dividends); and
(h) all Contingent Liabilities of such person in respect of any
of the foregoing.
For all purposes of this Agreement, the Indebtedness of any person shall
include the Indebtedness of any partnership or joint venture in which such
person is a general partner or a joint venturer.
"Information Memorandum" means the information memorandum prepared in
connection with this Agreement and dated October, 1996.
"Initial Guarantors" means each of the Initial Guarantors party to this
Agreement and the Group Parent.
"Instructing Group" means:
(a) before any Term Advances have been made hereunder, a Bank or
group of Banks, whose Available Term Commitments, together with
in the case of the Overdraft Bank, the Overdraft Commitment,
amount in aggregate to more than 51 per cent. of the Available
Term Facility and Overdraft Facility;
(b) thereafter, a Bank or group of Banks to whom in aggregate more
than 51 per cent. of the Loan is (or, immediately prior to its
repayment, was then) owed provided that the Overdraft Bank be
treated for the purpose of this sub-paragraph (b) as though the
amount it has advanced to the Borrower is the same as the
Overdraft Commitment.
"Interest Period" means, save as otherwise provided herein, any of those
periods mentioned in 6.1 (Interest Periods for Term Advances) or 6.2 (Duration
of Interest Periods for Term Advances) (as applicable).
"Intragroup Indebtedness" means any Indebtedness (excluding for these purposes
amounts only falling within sub-paragraph (d) of the definition of
Indebtedness or sub-paragraph (h) thereof insofar as the relevant Contingent
Indebtedness relates to Indebtedness under such sub-paragraph (d)) of any
Group Obligor which is owed to or incurred from any member of the ADT Group
(other than from another Obligor).
"LIBOR" means, in relation to any amount owed by an Obligor hereunder on which
interest for a given period is to accrue, the rate per annum determined by the
Agent to be equal to the arithmetic mean (rounded if necessary upwards to 5
decimal places) of the offered quotations which appear on the relevant page
(as defined in Clause 1.6 (Screen Rates)) for such period at or about 11.00
a.m. (London time) on the Quotation Date for such period.
"Loan" means the aggregate principal amount for the time being outstanding
hereunder, including without limitation, under the Overdraft Facility.
"Margin" means 0.50 per cent. per annum.
"Non-Guarantors" means any subsidiaries of the Parent other than the Existing
US Subsidiaries.
"Notice of Drawdown" means a notice substantially in the form set out in the
Fourth Schedule (Notice of Drawdown).
"Obligors" means the Borrower and the Guarantors.
"Original Amount" means, in relation to any Term Advance, the amount thereof
requested in the Notice of Drawdown relating thereto (as the same may be
reduced pursuant to Clause 4.3 (Reduction of Available Term Commitments)).
"Original Financial Statements" means:
(a) in relation to the Borrower, its audited financial statements for
its financial year ended 31 December 1995;
(b) in relation to ADT Group Plc, its audited financial statements
for its financial year ended 31 December 1995;
(c) in relation to Modern Security Systems Limited, its audited
financial statements for its financial year ended 30 November
1995;
(d) in relation to Automated Security (Holdings) plc, its audited
financial statements for its financial year ended 30 November
1995; and
(e) in relation to Electric Protection Services Limited, its audited
financial statements for its year ended 31 December 1995.
"Overdraft Bank" means the Bank listed in Part 2 of the First Schedule (The
Banks) or any financial institution to which it has made an assignment or
transfer in accordance with the provisions of Clause 29.4 (Assignment by
Banks) or Clause 29.5 (Transfers by Banks).
"Overdraft Commitment" means, in relation to the Overdraft Bank at any time
and save as otherwise provided herein, the amount set opposite its name under
the heading "Overdraft Commitment" in Part 2 of the First Schedule (The Banks).
"Overdraft Facility" means the overdraft facility granted by the Overdraft
Bank to the Borrower pursuant to Clause 2.1(b).
"Overdraft Facility Supplemental Letter" means the letter from the Overdraft
Bank to the Borrower of even date herewith setting out their agreement on all
the matters referred to in Clause 5 (Utilisation of the Overdraft Facility).
"Parent" means ADT (UK) Holdings plc.
"Permitted Indebtedness" means, without duplication:
(a) any Indebtedness arising under the Finance Documents;
(b) Existing Indebtedness;
(c) obligations of any member of the Group pursuant to Hedging
Arrangements designed to protect any member of the Group against
fluctuations in interest rates in respect of Indebtedness of such
member of the Group and not entered into for purposes of
speculation;
(d) obligations of any member of the Group pursuant to Hedging
Arrangements designed to protect such member of the Group against
fluctuations in currency values and entered into in the ordinary
course of business and not for purposes of speculation;
(e) Indebtedness incurred in the ordinary course of business
(including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but
excluding Indebtedness incurred through the borrowing of money
or Contingent Liabilities in respect of obligations of persons
other than members of the Group);
(f) Indebtedness in respect of Capitalised Lease Liabilities and
Indebtedness ("Capex Indebtedness") incurred to finance the
construction or acquisition of assets by a member of the Group
permitted to be acquired or constructed pursuant to Section 4.2.7
of the Group Parent Guarantee, to the extent a Capitalised Lease
Liability (assuming for the purposes of this clause only that
Capex Indebtedness (as defined in the Group Parent Guarantee)
constitutes a Capitalised Lease Liability) could have been
incurred under such Section 4.2.7;
(g) Indebtedness of any member of the Group owing to one or more
members of the ADT Group;
(h) Indebtedness in respect of surety bonds and performance bonds
provided in the ordinary course of business;
(i) Indebtedness which refinances Indebtedness permitted by
sub-paragraphs (b) and (f) above; provided, however, that after
giving effect to such refinancing, (i) the principal amount of
outstanding Indebtedness is not increased, (ii) in the case of
sub-paragraph (b), neither the tenor nor the average life of the
relevant facility is reduced, (iii) the respective obligor or
obligors shall be the same on the refinancing Indebtedness as on
the Indebtedness being refinanced, (iv) any encumbrance for the
refinancing Indebtedness shall be the same as that for the
Indebtedness being refinanced (except to the extent that less
security is granted to holders of refinancing Indebtedness), (v)
the holders of refinancing Indebtedness are not afforded
covenants, defaults, rights or remedies more burdensome to the
obligor or obligors than those contained in the Indebtedness
being refinanced and (vi) the refinancing Indebtedness is
subordinated to the same degree, if any, as the Indebtedness
being refinanced;
(j) other Indebtedness of any member of the Group to the extent that
the amount of such Indebtedness outstanding at any time does not
exceed Pound Sterling10,000,000;
(k) dividends of any member of the Group, declared and not yet paid;
(l) liabilities of any member of the Group in respect of taxes; and
(m) interest, fees, commissions, costs, expenses and indemnities
payable or incurred in relation to any of the foregoing.
"Potential Event of Default" means any event which would become (with the
passage of time or the giving of notice or both) an Event of Default.
"Quotation Date" means, in relation to any period for which an interest rate
is to be determined hereunder, the day on which quotations would ordinarily be
given by prime banks in the London Interbank Market for deposits in sterling
for delivery on the first day of that period Provided that, if, for any such
period, quotations would ordinarily be given on more than one date, the
Quotation Date for that period shall be the last of those dates.
"Redeemable Capital Stock" means Capital Stock of the Borrower, the Group
Parent or any other subsidiary of the Group Parent that, either by its terms,
by the terms of any security into which it is convertible or exchangeable or
otherwise, (i) is or upon the happening of an event or passage of time would
be required to be redeemed (for consideration other than shares of common
stock of the Group Parent) on or prior to 31 March 2003, (ii) is redeemable at
the option of the holder thereof (for consideration other than shares of
common stock of the Group Parent) at any time prior to such date or (iii) is
convertible into or exchangeable for debt securities of the Group Parent or
any of its subsidiaries at any time prior to such anniversary.
"Reference Banks" means the principal London office of The Bank of Nova Scotia
and such other bank or banks as may be appointed as such by the Agent after
consultation with the Borrower.
"Related Business" means any business directly related to the auctioning or
distribution of equipment or goods which (i) are held on a consignment or
similar basis and (ii) are being auctioned or distributed in connection with
the liquidation of businesses or lines of businesses, exclusive of the
purchasing of items for resale (other than purchases incidental and customary
in the conduct of such business and which when added to the amounts expended
in respect of all other items so purchased and still owned (including pursuant
to any business referred to in clause (a) of the definition of Core Business)
would not exceed U.S.$5,000,000).
"Repayment Date" means in relation to the Term Advance, the Final Maturity
Date.
"Subordinated Intragroup Indebtedness" means Intragroup Indebtedness in
respect of which the claims of the creditor against the relevant Group Obligor
have been subordinated and postponed, by execution of a document substantially
on the terms of the Agreed Subordination Conditions, to the claims of the
Beneficiaries under the Finance Documents.
"Term Advance" means, save as otherwise provided herein, an advance made or to
be made by the Term Banks under the Term Facility and includes any division of
a Term Advance pursuant to Clause 6.3.
"Term Bank" means:
(a) any financial institution named in Part 1 of the First Schedule
(The Banks) (other than one which has ceased to be a party hereto
in accordance with the terms hereof); or
(b) any financial institution to which an assignment or transfer has
been made in accordance with the provisions of Clause 29.4
(Assignments by Banks) or Clause 29.5 (Transfers by Banks).
"Term Commitment" means, in relation to any Term Bank at any time and save as
otherwise provided herein, the amount set opposite its name under the heading
"Term Commitment" in Part 1 of the First Schedule (The Banks).
"Term Facility" means the term loan facility granted by the Term Banks to the
Borrower pursuant to Clause 2.1(a).
"Term Loan" means the aggregate principal amount for the time being
outstanding under the Term Facility.
"Transfer Certificate" means a certificate substantially in the form set out
in the Second Schedule (Form of Transfer Certificate) signed by a Bank and a
Transferee whereby:
(a) such Bank seeks to procure the transfer to such Transferee of all
or, save in the case of the Overdraft Bank, a part of such Bank's
rights, benefits and obligations hereunder as contemplated in
Clause 29.3 (Assignments and Transfers by Banks); and
(b) such Transferee undertakes to perform the obligations it will
assume as a result of delivery of such certificate to the Agent as
is contemplated in Clause 29.5 (Transfers by Banks).
"Transfer Date" means, in relation to any Transfer Certificate, the date for
the making of the transfer as specified in the schedule to such Transfer
Certificate.
"Transferee" means a bank or other financial institution to which a Bank seeks
to transfer all or part of such Bank's rights, benefits and obligations
hereunder.
"UK GAAP" means generally accepted accounting principles in England and Wales
from time to time.
"US GAAP" means generally accepted accounting principles in the United States
from time to time.
"United States" means the United States of America, its fifty States and the
District of Columbia.
1.2 Interpretation Any reference in this Agreement to:
the "assets" of any person shall be construed as a reference to the whole or
any part of its business, undertakings, property, accounts, revenues, goodwill
and shareholdings whether now or hereafter acquired and any other assets
whatsoever;
the "Agent" or any "Bank" shall be construed so as to include its and any
subsequent successors, Transferees and assigns in accordance with their
respective interests;
the "Arranger" shall be construed to include any person which is expressed to
be an arranger or co-arranger and which is or becomes (through a Transfer
Certificate or otherwise) a party hereto;
a "business day" shall be construed as a reference to a day (other than a
Saturday or Sunday) on which banks generally are open for business in London;
an "encumbrance" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation of any kind or nature whatsoever;
a "holding company" of a company or corporation shall be construed as a
reference to any company or corporation of which the first-mentioned company
or corporation is a subsidiary;
"indebtedness" shall be construed so as to include any obligation (whether
incurred as principal or as surety) for the payment or repayment of money,
whether present or future, actual or contingent;
"loans" shall be construed so as to include, without limitation, any
transaction or arrangement pursuant to which any Indebtedness is or may be
owed by one person to another person;
a "month" is a reference to a period starting on one day in a calendar month
and ending on the numerically corresponding day in the next succeeding
calendar month save that, where any such period would otherwise end on a day
which is not a business day, it shall end on the next succeeding business day,
unless that day falls in the calendar month succeeding that in which it would
otherwise have ended, in which case it shall end on the immediately preceding
business day Provided that, if a period starts on the last business day in a
calendar month or if there is no numerically corresponding day in the month in
which that period ends, that period shall end on the last business day in that
later month (and references to "months" shall be construed accordingly);
a "person" shall be construed as a reference to any person, firm, company,
corporation, government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two or more
of the foregoing;
"repay" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include "prepay" (or, as the case may be, the
corresponding derivative form thereof);
"subsidiary" means:
(a) a subsidiary within the meaning of Section 736 of the Companies
Act 1985, as amended by Section 144 of the Companies Act 1989; and
(b) in relation to consolidated accounts, a subsidiary undertaking
within the meaning of Section 21 of the Companies Act 1989;
"tax" shall be construed so as to include any tax, levy, impost, duty or other
charge of a similar nature (including any penalty or interest payable in
connection with any failure to pay or any delay in paying any of the same);
"VAT" shall be construed as a reference to value added tax including any
similar tax which may be imposed in place thereof from time to time;
a "wholly-owned subsidiary" of a company or corporation shall be construed as
a reference to any company or corporation which has no other members except
that other company or corporation and that other company's or corporation's
wholly-owned subsidiaries or persons acting on behalf of that other company or
corporation or its wholly-owned subsidiaries; and
the "winding-up", "dissolution" or "administration" of a company or
corporation shall be construed so as to include any equivalent or analogous
proceedings under the law of the jurisdiction in which such company or
corporation is incorporated or any jurisdiction in which such company or
corporation carries on business including the seeking of liquidation,
winding-up, reorganisation, dissolution, administration, arrangement,
adjustment, protection or relief of debtors.
1.3 Currency Symbols "Pound Sterling" and "sterling" denote lawful
currency of the United Kingdom and "$ and "dollars" denote lawful currency of
the United States.
1.4 Save where the contrary is indicated, any reference in this Agreement to:
(i) this Agreement, any other Finance Document or any other agreement
or document shall be construed as a reference to this Agreement,
such other Finance Document or, as the case may be, such other
agreement or document as the same may have been, or may from time
to time be, amended, varied, novated or supplemented; and
(ii) a statute shall be construed as a reference to such statute as the
same may have been, or may from time to time be, amended or
re-enacted.
1.5 Headings Clause, Part and Schedule headings are for ease of reference
only.
1.6 Screen Rates For the purposes of the definition of "LIBOR":
(a) "relevant page" means page 3750 of the Telerate Screen Service for
the display of London Interbank Offered Rates for sterling (or, if
such page or such service shall cease to be available, such other
page or such other service (as the case may be) for the purpose of
displaying London Interbank Offered Rates for such currency as the
Agent, after consultation with the Banks and the Borrower, shall
select); and
(b) if no quotation for the relevant period is displayed and the Agent
has not selected an alternative service on which one or more such
quotations are displayed, "LIBOR" shall mean the arithmetic mean
(rounded if necessary, upwards to 5 decimal places) of the rates
(as notified to the Agent) at which each of the Reference Banks was
offering to prime banks in the London Interbank Market deposits in
sterling and for such period at or about 11.00 a.m. (London time)
on the Quotation Date for such period.
1.7 Group Parent Guarantee Definitions Unless otherwise defined herein or
the context otherwise requires, capitalised terms used in this Facility
Agreement have the meanings provided in the Group Parent Guarantee.
PART 2
THE FACILITIES
2. The Facilities
2.1 Grant of the Facilities Upon the terms and subject to the conditions
hereof, the following facilities are granted to the Borrower:
(a) a sterling term loan facility by the Term Banks in an aggregate
amount of Pound Sterling85,000,000; and
(b) a sterling overdraft facility by the Overdraft Bank in an
aggregate amount of Pound Sterling5,000,000.
2.2 Purpose and Application of the Term Facility The Term Facility is
intended for general corporate purposes of the Group and, accordingly, the
Borrower shall apply all amounts raised by it hereunder in or towards
satisfaction of such purpose and neither the Agent, the Arranger and the Term
Banks nor any of them shall be obliged to concern themselves with such
application. Each Group Obligor shall ensure that no amount raised by it
hereunder shall be used to give financial assistance (as such term is defined
in the Companies Act 1985 or any analogous provision of any similar law
applicable to any Obligor) directly or indirectly for any purpose which would
be unlawful or would prejudice in any way whatsoever the validity or
enforceability of any of the obligations of the Obligors under any of the
Finance Documents.
2.3 Purpose and Application of the Overdraft Facility The Overdraft
Facility is intended for general corporate purposes of the Borrower, members
of the Group and its UK affiliates and, accordingly, the Borrower shall apply
all amounts raised by it hereunder in or towards satisfaction of its general
corporate financing requirements and neither the Agent, the Arranger and the
Overdraft Bank nor any of them shall be obliged to concern themselves with
such application.
2.4 Condition Precedent Documents Save as the Banks may otherwise agree,
the Borrower may not deliver any Notice of Drawdown hereunder unless the Agent
has confirmed to the Borrower that it has received all of the documents listed
in the Third Schedule (Condition Precedent Documents) and that each is, in
form and substance, satisfactory to the Agent. The Agent will promptly give
the Borrower and the Banks notice of such satisfaction.
2.5 Banks' Obligations Several The obligations of each Bank hereunder are
several and the failure by a Bank to perform its obligations hereunder shall
not affect the obligations of the Borrower or the Guarantors towards any other
party hereto nor shall any other party be liable for the failure by such Bank
to perform its obligations hereunder.
3. Additional Guarantors
3.1 Maintenance of Adequate Guarantees If at any time the Group Obligors do
not account for at least 90% of the consolidated gross revenues of the Group
and at least 90% of the consolidated gross assets of the Group (collectively,
the "90% Test"), as reflected in the consolidated statements of income and
consolidated balance sheets most recently delivered pursuant to Clauses 16.1
or, as the case may be, 16.2 of this Agreement, the Parent will cause such
Non-Guarantors as are necessary to meet the 90% Test to execute and deliver to
the Agent as soon as practicable (but in no event later than sixty days after
the end of the Financial Quarter in which such event or condition occurs) an
Accession Agreement together with the conditions precedent specified therein
in form and substance satisfactory to the Agent.
3.2 Delivery of Accession Agreement Upon delivery to the Agent of any
Accession Agreement referred to in Clause 3.1 and subject to the Agent having
confirmed to the Parent that it has received, in form and substance
satisfactory to it, all the conditions precedent specified therein, this
Agreement shall henceforth be read and construed as if each person which is a
party to such Accession Agreement as an Additional Guarantor were a party
hereto having all the rights and obligations of a Guarantor hereunder and all
references in this Agreement to "Guarantors", "Additional Guarantors", "Group
Obligor" and "Obligor" shall be construed accordingly.
3.3 Execution by Agent Each of the Arranger and the Banks authorises the
Agent to execute on its behalf any Accession Agreement relating to the
introduction of an Additional Guarantor.
3.4 Execution by Parent Each of the Group Obligors authorises the Parent to
designate Additional Guarantors and to execute on behalf of such Obligor an
Accession Agreement relating to the introduction of any such Additional
Guarantor. Each Group Obligor agrees that it shall be bound by paragraph 5 of
such Accession Agreement.
3.5 Release of Guarantors Unless a Potential Event of Default or Event of
Default has occurred and is continuing unwaived, upon the sale of a Guarantor,
which is a subsidiary of the Parent, to a person which is not a member of the
ADT Group, the Agent shall release such Guarantor from its obligations under
this Agreement.
3.6 Automated Security (Holdings) plc Notwithstanding Clause 3.1, the
Parent will cause Automated Security (Holdings) plc to execute and deliver to
the Agent as soon as practicable (but in no event later than thirty days after
the date hereof) an Accession Agreement together with the conditions precedent
specified therein in form and substance satisfactory to the Agent.
4. Utilisation of the Term Facility
4.1 Drawdown Conditions - Term Facility Save as otherwise provided herein,
the Term Advance will be made by the Banks to the Borrower in one single
advance if:
(a) not later than 10.00 a.m. on the proposed date for the making of
the Term Advance, the Agent has received from the Borrower a
Notice of Drawdown therefor, receipt of which shall oblige the
Borrower to borrow the amount therein requested on the date
therein stated upon the terms and subject to the conditions
contained herein;
(b) the proposed date for the making of the Term Advance is on or
before the Closing Date;
(c) the proposed amount of the Term Advance is Pound
Sterling85,000,000; and
(d) no Event of Default or Potential Event of Default has occurred and
is continuing unwaived and the representations set out in Clause
15 (Representations) are true on and as of the proposed date for
the making of the Term Advance.
4.2 Each Bank's Participation - Term Facility Each Bank will participate
through its Facility Office in the Term Advance made pursuant to Clause 4.1
(Drawdown Conditions) in the proportion borne by its Available Term Commitment
to the Available Term Facility immediately prior to the making of the Term
Advance.
4.3 Reduction of Available Term Commitment If a Bank's Available Term
Commitment is reduced in accordance with the terms hereof after the Agent has
received the Notice of Drawdown for the Term Advance, then the amount of the
Term Advance shall be reduced accordingly.
5. Utilisation of the Overdraft Facility
Drawdown Conditions - Overdraft Facility The Overdraft Bank makes
available to the Borrower the Overdraft Facility, subject to the interest
provisions, commitment commission and other terms as set out in the Overdraft
Facility Supplemental Letter provided that the Overdraft Bank may only cancel
the Overdraft Facility if the Agent makes a declaration in accordance with
Clause 19.18, and provided further that if the Agent makes such a declaration,
the Overdraft Bank has the right to make a demand for repayment of any amounts
outstanding under the Overdraft Facility only if the Agent makes a demand for
the repayment of the Term Advances. The terms of the Overdraft Facility
Supplemental Letter shall be deemed to be incorporated as part of this
Agreement.
PART 3
INTEREST
6. Interest Periods
6.1 Interest Periods for Term Advances The period for which a Term Advance
is outstanding shall be divided into successive periods each of which (other
than the first) shall start on the last day of the preceding such period.
6.2 Duration of Interest Periods for Term Advances The duration of each
Interest Period in respect of a Term Advance shall, save as otherwise provided
herein, be one, three or six months or any other period agreed to by all the
Term Banks, in each case as the Borrower may by not less than one business
day's prior notice to the Agent select Provided that:
(a) if the Borrower fails to give such notice of its selection in
relation to an Interest Period, the duration of that Interest
Period shall, subject to paragraph (b) below, be three months;
(b) any Interest Period which would otherwise end during the month
preceding, or extend beyond, the Final Maturity Date shall be of
such duration that it shall end on the Final Maturity Date; and
(c) if all the Term Banks determine that interest periods of twelve
months are available in the market at the time, the Borrower shall
be entitled to select an Interest Period of twelve months.
6.3 Division of Term Advance The Borrower may, by not less than one
business day's prior notice to the Agent or in the Notice of Drawdown
therefor, direct that the Term Advance shall, at the beginning of any Interest
Period relating thereto, be divided into (and thereafter, save as otherwise
provided herein, treated in all respects as) two or more Term Advances having
such Original Amounts (in aggregate equalling the Original Amount of the Term
Advance) as shall be specified by the Borrower in such notice Provided that
the Borrower shall not be entitled to make such a direction if:
(a) as a result of so doing there would be more than four outstanding
Term Advances; or
(b) any Term Advance thereby coming into existence would have an
Original Amount of less than Pound Sterling5,000,000.
7. Payment and Calculation of Interest
7.1 Payment of Interest On the last day of each Interest Period (and, in
the case of any Interest Period in excess of six months, on the last day of
the first six months of such Interest Period) the Borrower shall pay accrued
interest on the Term Advance to which such Interest Period relates.
7.2 Calculation of Interest The rate of interest applicable to a Term
Advance from time to time during an Interest Period relating thereto shall be
the rate per annum which is the sum of the Margin, the Associated Costs Rate
(save in the case of a Double Tax Treaty Bank which does not incur the costs
of complying with the reserve asset requirements of the Bank of England) in
respect of such Interest Period and LIBOR on the Quotation Date therefor.
8. Alternative Interest Rates/Market Disruption
If in respect of any Term Advance:
(a) LIBOR is to be calculated in accordance with paragraph (b) of
Clause 1.6 (Screen Rates) and the Agent determines that at or
about 11.00 a.m. (London time) on the Quotation Date for an
Interest Period in respect of the Term Advance none of the
Reference Banks was offering to prime banks in the London
Interbank Market deposits in sterling for the proposed duration of
such Interest Period; or
(b) before 11.30 a.m. (London time) on the Quotation Date for an
Interest Period in respect of the Term Advance, the Agent has been
notified by a Term Bank or each of a group of Term Banks to whom
in aggregate fifty per cent. or more of the Term Advance is (or,
in the case of the Term Advance being undrawn, if the Term Advance
were then made, would be) owed that the rate at which such
deposits were being so offered does not accurately reflect the
cost to it of obtaining such deposits,
then, notwithstanding the provisions of Clause 6 (Interest Periods) and Clause
7 (Payment and Calculation of Interest):
(i) if paragraph (a) above applies, the duration of that
Interest Period shall be one month or, if less, such
that it shall end on the Final Maturity Date; and
(ii) if either paragraph (a) or (b) above applies, the rate
of interest applicable to the Term Advance from time
to time during such Interest Period shall be the rate
per annum which is the sum of the Margin, the
Associated Costs Rate (save in the case of a Double Tax
Treaty Bank which does not incur the costs of
complying with the reserve asset requirements of the
Bank of England) in respect of such Interest Period
and the rate per annum determined by the Agent to be
the arithmetic mean (rounded if necessary upwards to
five decimal places) of the rates notified by each
Term Bank to the Agent before the last day of such
Interest Period to be those which express as a
percentage rate per annum the cost to each Term Bank
of funding from whatever sources it may reasonably
select its portion of the Term Advance during such
Interest Period.
9. Alternative Interest Rates/Substitute Basis or Repayment If either of
those events mentioned in paragraphs (a) and (b) of Clause 8 (Alternative
Interest Rates/Market Disruption) occurs in relation to a Term Advance, then:
(a) the Agent shall notify the Borrower and the Term Banks of such
event;
(b) thereupon the Agent, the Borrower and the Term Banks shall enter
into negotiations with a view to agreeing a substitute basis (1)
for determining the rates of interest from time to time
applicable to the Term Advance and/or (2) upon which the Term
Advance may be maintained (whether in sterling or some other
currency) thereafter and any such substitute basis that is agreed
shall take effect in accordance with its terms and be binding on
the Obligors and the Term Bank agreeing thereto;
(c) if a substitute basis has not been agreed within 30 days of such
notification, each Term Bank has the right to stipulate in its
absolute discretion the rate of interest applicable to its
portion of the Term Advance, and that rate shall be binding on the
Borrower, provided that the Borrower has the right to prepay the
Term Advance in whole or in part, which right shall be exercised
in such a way that the order in which the Term Banks are prepaid
in respect of their portions of the Term Advance, shall be the
same as the order of onerousness of the interest rates stipulated
by each of the Term Banks, and such prepayments shall become due
and payable on the last day of the Term Advance's then current
Interest Period or the period by reference to which interest is
determined; and
(d) while Clause 8 or this Clause 9 is in operation, their operation
shall be subject to a weekly review by the Agent and the
Borrower, with a view to reverting to normal interest provisions.
PART 4
REPAYMENT, CANCELLATION AND PREPAYMENT
10. Repayment
Repayment of Term Loan The Borrower shall repay the Term Loan in full
on the Final Maturity Date.
11. Cancellation and Prepayment
11.1 Mandatory Cancellation of Term Facility If the Agent has not on the
Closing Date received a Notice of Drawdown in respect of the Term Facility
complying in all respects with Clause 4.1 (Drawdown Conditions - Term
Facility) (or the Term Facility is not for any reason whatsoever drawn in
accordance with the provisions hereof in the full amount on the Closing Date)
the whole of the Term Facility or, if part only of the Term Facility is drawn,
the portion of the Term Facility that remains undrawn as at the Closing Date
and the Term Commitment of each Term Bank shall be reduced to zero on the
Closing Date.
11.2 Optional Cancellation of Overdraft Facility The Borrower may, at any
time by giving to the Overdraft Bank (with a copy to the Agent) not less than
ten business days' prior notice to that effect, cancel the whole or any part
of the Overdraft Facility.
11.3 Optional Prepayment of Term Advance The Borrower may, if it has given
to the Agent not less than ten business days' prior notice to that effect,
prepay the whole of the Term Advance or any part of the Term Advance (in a
minimum amount of Pound Sterling5,000,000 or the balance of the Term Loan
outstanding, if less) plus accrued interest (and other amounts that may be due
under the Finance Documents) on any business day; any prepayment so made shall
satisfy pro tanto the Borrower's obligations under Clause 10 (Repayment).
11.4 Notice of Cancellation or Prepayment Any notice of cancellation or
prepayment given by the Borrower pursuant to Clause 11.2 (Optional
Cancellation of Overdraft Facility) or Clause 11.3 (Optional Prepayment of
Term Advance) shall be irrevocable, shall specify the date upon which such
cancellation or prepayment is to be made and the amount of such cancellation
or prepayment and, in the case of a notice of prepayment, shall oblige the
Borrower to make such prepayment on such date.
11.5 Repayment of a Term Bank's Share of the Term Loan If any Term Bank
claims indemnification from the Borrower under Clause 12.1 (Tax Gross-up) or
Clause 12.2 (Tax Indemnity) or Clause 14.1 (Increased Costs) and within thirty
days thereafter the Agent receives from the Borrower at least ten business
days' prior notice (which shall be irrevocable) of the Borrower's intention to
repay such Term Bank's share of the Term Loan, the Borrower shall on the last
day of each of the then current Interest Periods repay such Term Bank's
portion of the Term Advance; any repayment so made shall reduce rateably the
remaining obligations of the Borrower under Clause 10 (Repayment).
11.6 No Other Repayments and no Reborrowing The Borrower shall not repay all
or any part of the Term Loan except at the times and in the manner expressly
provided for in this Agreement and shall not be entitled to reborrow any such
amount repaid.
PART 5
RISK ALLOCATION
12. Taxes
12.1 Tax Gross-up All payments to be made by any of the Obligors to any Bank
or the Agent hereunder shall be made free and clear of and without deduction
for or on account of tax unless such Obligor is required to make such a
payment subject to the deduction or withholding of tax (not being a tax
imposed on and calculated by reference to the net income paid to and received
by such Bank or the Agent by the jurisdiction in which it is incorporated or
in which its Facility Office (if any) is located), in which case the sum
payable by such Obligor in respect of which such deduction or withholding is
required to be made shall be increased to the extent necessary to ensure that,
after the making of the required deduction or withholding, such Bank or the
Agent receives and retains (free from any liability in respect of any such
deduction or withholding) a net sum equal to the sum which it would have
received and so retained had no such deduction or withholding been made or
required to be made.
12.2 Tax Indemnity Without prejudice to the provisions of Clause 12.1 (Tax
Gross-up), if any Bank (or the Agent on its behalf) or the Agent is required
to make any payment on account of tax (not being a tax imposed on and
calculated by reference to the net income paid to and received by its Facility
Office by the jurisdiction in which it is incorporated or in which its
Facility Office is located) or otherwise on or in relation to any sum received
or receivable hereunder by such Bank (or the Agent on its behalf) or the Agent
(including any sum received or receivable under this Clause 12) or any
liability in respect of any such payment is asserted, imposed, levied or
assessed against such Bank (or the Agent on its behalf) or the Agent, the
Borrower shall, upon demand of the Agent, promptly indemnify such Bank or the
Agent against such payment or liability, together with any interest,
penalties, costs and expenses payable or incurred in connection therewith but
only to the extent necessary to put such Bank or the Agent in the same
economic position that it would have been in had no such tax been imposed.
12.3 Claims by Banks A Bank intending to make a claim pursuant to Clause
12.2 (Tax Indemnity) shall notify the Agent of the event by reason of which it
is entitled to do so, whereupon the Agent shall notify the Borrower thereof
Provided that (i) nothing herein shall require such Bank to disclose any
confidential information relating to the organisation of its affairs and (ii)
if a Bank notifies the Agent of a claim under Clause 12.2 after the date
falling 60 days after the date on which such Bank receives its audited annual
accounts such Bank shall not be entitled to claim indemnification for any
event or occurrence which occurred during the financial year to which such
audited annual accounts relate.
12.4 Double Tax Treaty Banks
(i) The Borrower shall take promptly such action (including, without
limitation, the provision of certificates and/or the making of
claims to any relevant taxation or other authority) as the Agent
or any Double Tax Treaty Bank may reasonably require for the
purpose of compliance with the requirements of the relevant double
tax treaty.
(ii) Subject to the Borrower being in compliance with Clause 12.4(i),
no Obligor shall be liable, otherwise than by reason or result of
a change of law or treaty or any change in its interpretation or
administration, to make the additional payments to the Double Tax
Treaty Bank as contemplated by this Clause 12.
13. Tax Receipts
13.1 Notification of Requirement to Deduct Tax If, at any time, either of
the Obligors is required by law to make any deduction or withholding from any
sum payable by it hereunder (or if thereafter there is any change in the rates
at which or the manner in which such deductions or withholdings are
calculated), such Obligor shall promptly notify the Agent.
13.2 Evidence of Payment of Tax If any of the Obligors makes any payment
hereunder in respect of which it is required to make any deduction or
withholding, it shall pay the full amount required to be deducted or withheld
to the relevant taxation or other authority within the time allowed for such
payment under applicable law and shall deliver to the Agent for each Bank,
within thirty days after it has made such payment to the applicable authority
(or, if later, within 10 business days of receipt), an original receipt (or a
certified copy thereof) issued by such authority evidencing the payment to
such authority of all amounts so required to be deducted or withheld in
respect of that Bank's share of such payment.
13.3 If any Bank:
(a) (if it has a Facility Office in the United Kingdom) is not or
ceases to be a bank as defined in the Income and Corporation
Taxes Act 1988 for the purposes of Section 349 of that Act which
is within the charge to UK corporation tax as regards any
interest received by it under this Agreement (a "Section 349
Bank") or
(b) (if it does not have a Facility Office in the United Kingdom) is
not or ceases to be a Double Tax Treaty Bank
then it shall promptly notify the Agent upon becoming aware of the same who
shall promptly notify the Borrower and the Borrower shall not be liable to pay
to such Bank under Clauses 12 or 13 any amount in excess of the amount it
would have been obliged to pay if such Bank (i) was or had not ceased to be a
Section 349 Bank or, as the case may be, (ii) was or had not ceased to be a
Double Tax Treaty Bank Provided that this Clause 13.3 shall not apply (and
the Borrower shall be obliged to comply with its obligations under Clauses 12
and 13) if after the date hereof there shall have been any change in, or in
the interpretation or application of, any relevant law, directive, treaty
(including, without limitation, any applicable double tax treaty) or
regulation or the practice of the United Kingdom Inland Revenue and as a
result thereof the relevant Bank ceases to be a Section 349 Bank or Double Tax
Treaty Bank or the Borrower would be required to make a deduction or
withholding on account of tax irrespective of whether the recipient of the
relevant payment is or is not a Section 349 Bank or Double Tax Treaty Bank.
13.4 If any Bank receives the benefit or any tax credit, refund or allowance
resulting from a payment which includes an additional amount paid by the
Borrower under Clauses 12 or 13, it shall, to the extent that it can do so
without prejudice to the retention of the relevant benefit, pay to the
Borrower such part of that benefit as will leave that Bank (after such
payment) in no more or less favourable a position than it would have been in
if no additional amount had been required to be paid provided that:
(a) the Bank shall be the sole judge of the amount of any such
benefit and of the date on which it is received;
(b) the Bank shall have a discretion as to the order and manner in
which it employs or claims tax credits, refunds and allowances
available to it and, in particular, shall be entitled to arrange
its tax affairs in whatever manner it thinks fit; and
(c) the Bank shall not be obliged to disclose to the Borrower any
information regarding its tax affairs or tax computations.
14. Changes in Circumstances
14.1 Increased Costs If, by reason of (i) any change in law or in its
interpretation or administration and/or (ii) compliance with any Capital
Adequacy Requirement or any other request from or requirement of any central
bank (other than the requirements of the Bank of England reflected in the
Associated Costs Rate and other than as covered by Clause 12) or other fiscal,
monetary or other authority:
(a) a Bank or any holding company of such Bank is unable to obtain
the rate of return on its capital which it would have been able
to obtain but for such Bank's entering into or assuming or
maintaining a commitment or performing its obligations (including
its obligation to participate in the making of Term Advances or
maintain the Overdraft Facility) under this Agreement;
(b) a Bank or any holding company of such Bank incurs a cost as a
result of such Bank's entering into or assuming or maintaining a
commitment or performing its obligations (including its
obligation to participate in the making of Term Advances or
maintain the Overdraft Facility) under this Agreement;
(c) there is any increase in the cost to a Bank or any holding
company of such Bank of funding or maintaining all or any of the
loans comprised in a class of loans formed by or including such
Bank's share of the Term Advances or funding and maintaining the
Overdraft Facility; or
(d) a Bank or any holding company of such Bank becomes liable to make
any payment on account of tax or otherwise (not being a tax
imposed on and calculated by reference to the net income paid to
and received by such Bank's Facility Office by the jurisdiction
in which it is incorporated or in which its Facility Office is
located) on or calculated by reference to the amount of such
Bank's share of the Term Advances, its funding the Overdraft
Facility and/or to any sum received or receivable by it
hereunder,
then the Borrower shall, from time to time on demand of the Agent, within
fourteen days of such demand pay to the Agent for the account of that Bank
amounts sufficient to hold harmless and indemnify that Bank or such Bank's
holding company from and against, as the case may be, (1) such reduction in
the rate of return on capital, (2) such cost, (3) such increased cost (or such
proportion of such increased cost as is, in the opinion of that Bank,
attributable to its participating in the funding or maintaining of Term
Advances or, as the case may be, the Overdraft Facility), or (4) such
liability.
14.2 Exceptions Clause 14.1 shall not apply to any cost, reduction,
increased cost or liability:
(a) attributable to any breach by the relevant Bank (or its holding
company) of any applicable law or any request or requirement of
any central bank or other fiscal, monetary or other authority; or
(b) relating to tax on a Bank's (or its holding company's) overall
net income.
14.3 Increased Costs Claims A Bank intending to make a claim pursuant to
Clause 14.1 (Increased Costs) shall notify the Agent of the event by reason of
which it is entitled to do so, whereupon the Agent shall notify the Borrower
thereof Provided that (i) nothing herein shall require such Bank to disclose
any confidential information relating to the organisation of its affairs and
(ii) if a Bank notifies the Agent of a claim under Clause 14.1 after the date
falling 60 days after the date on which such Bank receives its audited annual
accounts such Bank shall not be entitled to claim indemnification in respect
of the financial year to which such audited annual accounts relate.
14.4 Illegality If, at any time, it is unlawful for a Bank to make, fund or
allow to remain outstanding all or part of its share of the Term Advances or
to make or fund the Overdraft Facility, then that Bank shall, promptly after
becoming aware of the same, deliver to the Borrower through the Agent a notice
to that effect and:
(a) such Bank shall not thereafter be obliged to participate in the
making of any Term Advances and the amount of its Available Term
Commitment or in the case of the Overdraft Bank its Overdraft
Commitment, shall be immediately reduced to zero; and
(b) if the Agent on behalf of such Bank so requires, the Borrower
shall on such date as the Agent shall have specified (or, if
later, any date which the Borrower shall notify and which falls
prior to the date upon which such illegality is to occur) repay
such Bank's share of any outstanding Term Advances or in the case
of the Overdraft Bank any amounts outstanding under the Overdraft
Facility together with accrued interest thereon and all other
amounts owing to such Bank hereunder and, in the case of Term
Advances, any repayment so made shall reduce rateably the
remaining obligations of the Borrower under Clause 10
(Repayment).
14.5 Mitigation If circumstances are such that a Bank intends to claim
indemnification from the Borrower under Clause 12.2 (Tax Indemnity) or Clause
14.1 (Increased Costs) or if Clause 12.1 or 14.4 applies to a Bank such Bank
shall, after consultation with the Agent and the Borrower and to the extent
that it can do so lawfully and without prejudice to its own position, take
such steps as it considers reasonable (including a change in its Facility
Office or the transfer of its rights, benefits and obligations hereunder to
another financial institution acceptable to the Borrower and willing to
participate in the Facility) with a view to mitigating the effect of such
circumstances on the Borrower.
PART 6
REPRESENTATIONS, COVENANTS AND EVENTS OF DEFAULT
15. Representations
Each of the Group Obligors makes each of the representations and warranties
set out in Clause 15 and acknowledges that the Agent, the Arranger and the
Banks have entered into this Agreement in reliance on those representations
and warranties.
15.1 Status and Due Authorisation It is a corporation duly incorporated,
validly existing and registered under the laws of the jurisdiction in which it
is incorporated and is duly qualified to do business as a foreign corporation
in each jurisdiction where the nature of its business or the location of its
assets requires such qualification and where the failure to so qualify would
reasonably be expected to have a material adverse effect on the business,
results of operations, financial condition or prospects of the Group taken as
a whole. It has full power and authority and holds all requisite governmental
licenses, permits and other approvals (a) to own and hold under lease its
property and to conduct its business substantially as currently conducted by
it, except where failure to hold such licenses, permits and other approvals
would not reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects of the Group
taken as a whole and (b) to enter into and perform its obligations under this
Agreement. All corporate and other action required to authorise its execution
of the Finance Documents to which it is a party and its performance of its
obligations thereunder has been taken or done.
15.2 No Immunity In any proceedings taken in its jurisdiction of
incorporation in relation to the Finance Documents to which it is a party, it
will not be entitled to claim for itself or any of its assets immunity from
suit, execution, attachment or other legal process.
15.3 Validity and Admissibility in Evidence All acts, conditions and things
required to be done, fulfilled and performed in order (a) to enable it
lawfully to enter into, exercise its rights under and perform and comply with
the obligations expressed to be assumed by it in the Finance Documents to
which it is a party, (b) to ensure that the obligations expressed to be
assumed by it in the Finance Documents to which it is a party are legal, valid
and binding and (c) to make the Finance Documents to which it is a party
admissible in evidence in its jurisdiction of incorporation have been done,
fulfilled and performed.
15.4 No Filing or Stamp Taxes Under the laws of its jurisdiction of
incorporation in force at the date hereof, it is not necessary that the
Finance Documents to which it is a party be filed, recorded or enrolled with
any court or other authority in such jurisdiction or that any stamp,
registration or similar tax be paid on or in relation to the Finance Documents
to which it is a party.
15.5 Government Approval No authorisation or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
or other person is required for the due execution, delivery or performance by
it of the Finance Documents to which it is a party.
15.6 Binding Obligations The obligations expressed to be assumed by it in
the Finance Documents to which it is a party are legal, valid and binding
obligations enforceable in accordance with the terms thereof subject to any
limitations arising from administration, bankruptcy, insolvency, liquidation,
reorganisation or similar laws generally affecting the rights of creditors and
general principles of equity.
15.7 No Material Proceedings No litigation, action, proceeding or
administrative proceeding of or before any court or agency or labour dispute
affecting any member of the Group or any of their respective properties,
businesses, assets or revenues which could reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
business or prospects of the Group taken as a whole or which purports to
affect the legality, validity or enforceability of any of the Finance
Documents has been started or, to the knowledge of the Parent, threatened.
15.8 Original Financial Statements The Original Financial Statements of the
Borrower and the Initial Guarantors (other than the Group Parent) were
prepared in accordance with UK GAAP and consistently applied and give (in
conjunction with the notes thereto) a true and fair view of the financial
condition of the Borrower and the Initial Guarantors (other than the Group
Parent) at the date as of which they were prepared and the results of the
Borrower's and the Initial Guarantors' (other than the Group Parent)
consolidated (except in the case of the Borrower) operations during the
financial year then ended.
15.9 No Material Adverse Change Since 31 December 1995, there has been no
material adverse change in the business, results of operations, financial
condition or prospects of the Group taken as a whole.
15.10 Information Memorandum The factual information contained in the
Information Memorandum was, to the best of the Group Obligors' knowledge,
correct in all material respects as at the date thereof and did not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained in the Information
Memorandum not materially misleading in the light of the circumstances under
which such statements were made. All statements of opinion, estimates and
projections contained in the Information Memorandum were made or prepared in
good faith based on reasonable assumptions but, as regards any forecasts
contained in the Information Memorandum, no representation or warranty is
given other than that, as at the date such forecasts were generated, (a) such
forecasts were based on the good faith estimates and assumptions of the
management of the Borrower and the Group Parent, and (b) such estimates and
assumptions were believed by such managements to be reasonable.
15.11 No Obligation to Create Security Its execution of the Finance Documents
to which it is a party and its exercise of its rights and performance of its
obligations hereunder will not result in the existence of nor oblige any
member of the Group to create any encumbrance over all or any of its present
or future revenues or assets.
15.12 Execution of the Finance Documents Its execution and delivery of the
Finance Documents to which it is a party and its exercise of its rights and
performance of its obligations hereunder do not and will not:
(a) conflict with any agreement, mortgage, bond or other instrument
or treaty to which it is a party or which is binding upon it or
any of its assets;
(b) conflict with its constitutive documents and rules and
regulations; or
(c) conflict with any applicable law, regulation or official or
judicial order.
in each case, in a manner that could reasonably be expected to have a material
adverse effect on the business, results of operations, financial condition or
prospects of the ADT Group taken as a whole or (in the case of (a) and (c)
only) which might reasonably be expected to give rise to a claim or claims
being made against one of the Beneficiaries.
15.13 Ownership of the Borrower The Borrower is a wholly-owned subsidiary of
the Parent.
15.14 Ownership of the Parent The Parent is a wholly-owned subsidiary of the
Group Parent.
15.15 Intragroup Indebtedness to be Subordinated No Group Obligor has any
Intragroup Indebtedness outstanding which is not Subordinated Intragroup
Indebtedness.
15.16 Repetition of Warranties The representations and warranties in Clause
15 shall survive the execution hereof and the making of the Term Advance under
this Agreement and shall be deemed to be repeated (save for the
representations and warranties contained in Clauses 15.7, 15.10, 15.11 and
15.12 which shall not be repeated) on the date on which the Term Advance is
made and on the first day of each Interest Period, by reference to the facts
and circumstances then existing.
16. Financial Information
16.1 Annual Statements The Parent will furnish, or will cause to be
furnished, to the Agent for the Banks no later than the filing of each 10-K of
the Group Parent, but in no event later than 120 days after the end of each
Financial Year:
(i) copies of the audited consolidated annual financial statements
(including balance sheet, profit and loss and cashflow
statements) for such Financial Year for the Borrower, the Parent
and the Group Parent, as of the end of such Financial Year;
(ii) copies of the audited (consolidated where applicable) annual
financial statements for such Financial Year for each Group
Guarantor (other than the Parent); and
(iii) in each case, audited by and reported on (without any
Impermissible Qualification) as to fairness of presentation,
generally accepted accounting principles and, except to the
extent required to comply with UK GAAP or, as the case may be, US
GAAP, consistency by Coopers & Lybrand or other independent
accountants of internationally recognised standing, together with
a certificate from such accountants stating whether, in making
the examination necessary for such report, such accountants have
become aware of any previously unnotified Event of Default or
Potential Event of Default that has occurred and is continuing
unwaived.
16.2 Quarterly Statements The Parent will furnish, or will cause to be
furnished, to the Agent for the Banks promptly and in any event within 60 days
after the end of each of the first three Financial Quarters of each Financial
Year, quarterly unaudited consolidated financial statements (including balance
sheet, profit and loss and cashflow statements) as of the end of such
Financial Quarter for each of the Borrower, the Parent and the Group Parent
for such Financial Quarter and for the period commencing at the end of the
previous Financial Year and ending with the end of such Financial Quarter,
in each case, certified (subject to normal year-end adjustments and any
changes made in accordance with Clause 16.7) as to fairness of
presentation, generally accepted accounting principles and consistency by
the finance director or chief financial officer of such person.
16.3 Compliance Certificates The Parent will furnish, or will cause to be
furnished to the Agent within ten business days of the delivery of the
financial statements required by Clauses 16.1 and 16.2, a compliance
certificate, executed by the finance director or, as the case may be, chief
financial officer of the Parent in the form of the exhibit hereto, (i) showing
(in reasonable detail and with appropriate calculations and computations in
all respects reasonably satisfactory to the Agent) compliance with the
financial covenants set forth in Clauses 17.1 and 17.2 and/or (ii) giving
notice of any Event of Default or Potential Event of Default.
16.4 Notice of Significant Events The Parent shall deliver, or will cause to
be delivered as soon as possible and in any event within five business days
after:
(i) any executive or financial officer of the Borrower, the Parent or
the Group Parent obtains knowledge of the occurrence of any Event
of Default or Potential Event of Default, a statement of the
finance director of the Parent setting forth details of such
Event of Default or Potential Event of Default and the action
which the Borrower or the Parent has taken and/or proposes to
take with respect thereto; or
(ii) a request from the Agent, confirmation from the Parent that, save
as previously notified to the Agent or as notified in such
confirmation, no Event of Default or Potential Event of Default
has occurred; or
(iii) (a) the occurrence of any material adverse development with
respect to any litigation, action, proceeding or (b) the
commencement of any labour controversy, litigation, action,
proceeding of the type described in Clause 15.7 (No Material
Proceedings), notice thereof describing in reasonable detail such
development or such labour controversy, litigation, action or
proceeding.
16.5 Other Financial Information The Parent shall:
(a) furnish, or cause to be furnished, promptly after the sending or
filing thereof, copies of all reports which the Group Parent
sends to any class of its security holders generally, and all
reports and registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or its
equivalent) which any member of the ADT Group files with the
Securities and Exchange Commission (or any foreign equivalent) or
any national securities exchange including, without limitation,
Form 10-Ks and 10-Qs for the Group Parent;
(b) from time to time on the request of the Agent, furnish or cause
to be furnished, to the Agent such information about the business
and financial condition of all or any of the Obligors (or any of
their respective subsidiaries) as the Agent may reasonably
require.
16.6 Requirements as to Financial Statements Each of the Obligors shall
ensure that each set of financial statements delivered by it pursuant to
Clause 16.1 or 16.2 is prepared on the same basis as was used in the
preparation of its Original Financial Statements and in accordance with
accounting principles generally adopted in such Original Financial Statements
and, except to the extent required to comply with UK GAAP or, as the case may
be, US GAAP, consistently applied.
16.7 Accounting and Financial Determinations All accounting terms used in
the Finance Documents shall be interpreted and all accounting determinations
and computations under the Finance Documents shall be made in accordance with
UK GAAP as applied in the Original Financial Statements of the Borrower or, as
the case may be, US GAAP consistent with and as applied in the audited
financial statements of the Group Parent for the financial year ended 31
December 1995.
17. Financial Condition
17.1 Financial Condition of the Borrower The Borrower shall ensure that Net
Worth shall not as at the end of any Financial Year be less than Pound
Sterling300,000,000.
17.2 Financial Condition of the Group The Parent shall ensure that EBITDA in
respect of the four consecutive Financial Quarters the last of which ends
during a Financial Year specified in Column 1 is not less than the amount
specified in Column 2 for such Financial Year:
Column 1 Column 2
Financial Year Amount
Pound Sterling
1997 45,000,000
1998 50,000,000
1999 55,000,000
2000 60,500,000
2001 66,000,000
2002 72,000,000
17.3 Testing of Financial Covenants
(i) The covenant contained in Clause 17.1 will be tested at the
end of each Financial Year by reference to the annual
statements delivered pursuant to Clause 16.1 (Annual
Statements);
(ii) The covenant contained in Clause 17.2 will be tested as of
the dates specified by reference to quarterly statements
delivered pursuant to Clause 16.2 (Quarterly Statements) and
by reference to the annual statements delivered pursuant to
Clause 16.1 (Annual Statements).
17.4 Definitions of Financial Terms The expressions used in this Clause 17
(Financial Condition) shall have the following meanings:
(i) "EBITDA" means for any Relevant Period, the aggregate of the
profit on ordinary activities of the Parent and its
consolidated subsidiaries before (or, if already taken into
account in calculating such profit of the Parent and its
consolidated subsidiaries after making the required
adjustment):
(a) any provision on account of taxation (excluding VAT);
(b) any interest, commissions, discounts and other fees
incurred by the Parent or any of its consolidated
subsidiaries in respect of Indebtedness;
(c) any amount attributable to depreciation on tangible
fixed assets or amortisation of intangible fixed
assets; and
(d) other exceptional gains outside the ordinary course of
business;
as determined from the relevant financial statements
delivered under Clause 16.1 or as the case may be, 16.2;
(ii) "Financial Quarter" means each of those periods of
approximately three calendar months in any financial year of
the Group ending on any Quarter Date;
(iii) "Financial Year" means each period of twelve calendar months
ending on December 31; references to a Financial Year with a
number corresponding to any calendar year refer to the
Financial Year ending on the December 31 occurring during
such calendar year;
(iv) "Net Worth" means:
(a) the stated share capital fully paid up and the
additional paid in capital of the Borrower;
(b) plus the aggregate amount standing to the credit of
the Borrower's capital and revenue reserves (including
any share premium account and capital redemption
reserve fund);
(c) plus or minus the amount standing to the credit or
debit, as the case may be, of the accumulated
consolidated profit and loss account of the Borrower;
(d) less any dividend or other distribution declared,
recommended or made by the Borrower to the extent such
dividend or distribution is not provided for in such
accounts;
(e) less the amount of any writing up of the book value of
any assets of the Borrower after the date hereof or,
in the case of a company becoming a subsidiary of the
Borrower after the date hereof, after the date of its
becoming a subsidiary;
(f) less the amount of any sums required to be set aside
for taxation payable by the Borrower and not provided
for in such accounts except in respect of unprovided
deferred taxation;
(g) less any amounts attributable to goodwill or other
intangible assets of the Borrower but after adding
back any amortised goodwill,
as determined from the relevant financial statements
delivered under Clause 16.1;
(v) "Quarter Date" means each of 31 March, 30 June, 30 September
and 31 December;
(vi) "Relevant Period" means the period of four Financial
Quarters ending on the date on which the relevant
calculation falls to be made.
18. Covenants
18.1 Positive Covenants
(i) Validity and Admissibility Each Group Obligor shall ensure
that any act, condition or thing which is required to be
done, fulfilled or performed in order (a) to enable it
lawfully to enter into, exercise its rights under and
perform the obligations expressed to be assumed by it in
each of the Finance Documents to which it is a party, (b) to
ensure that the obligations expressed to be assumed by it in
each of the Finance Documents to which it is party are
legal, valid and binding, and (c) to make each of the
Finance Documents to which it is party admissible in
evidence in its jurisdiction of incorporation, is done
fulfilled or performed.
(ii) Claims Pari Passu Each Group Obligor shall ensure that at
all times the claims of the Agent, the Arranger and the
Banks against it under this Agreement rank at least pari
passu with the claims of all its other unsecured creditors
save those whose claims are preferred by any bankruptcy,
insolvency, liquidation or other similar laws of general
application.
(iii) Compliance with Laws Each Group Obligor shall comply in all
material respects with all applicable laws, rules,
regulations and orders, such compliance to include (without
limitation):
(a) except as permitted by Section 4.2.9 of the Group
Parent Guarantee, the maintenance and preservation by
each Group Obligor of its corporate existence and
qualification as a foreign corporation in each
jurisdiction where the nature of its business or the
location of its assets requires it to be so qualified,
except to the extent the failure to maintain and
preserve its corporate existence or to be so qualified
could not reasonably be expected to have a material
adverse effect on the business, results of operations,
financial condition or prospects of the Group taken as
a whole (it being acknowledged that the failure of the
Borrower to maintain and preserve its corporate
existence except as permitted by Section 4.2.9 of the
Group Parent Guarantee shall be deemed to have such a
material adverse effect); and
(b) the payment before the same become overdue of all
material taxes, assessments and governmental charges
imposed upon it or upon its property except to the
extent being diligently contested in good faith by
appropriate proceedings and for which adequate
reserves shall have been set aside on its books.
18.2 Negative Covenants
(i) Business Activities Save as agreed by an Instructing Group,
no member of the Group shall engage in any business
activity, except for those activities conducted in respect
of the Core Businesses and existing businesses and such
activities as may be incidental or related thereto;
provided, however, that the Borrower will not be in default
of this Clause 18.2(i) if, as part of the acquisition of a
Core Business, the relevant member of the Group acquires a
business or assets that would not constitute, or be included
in, a Core Business, so long as (a) the primary purpose of
such acquisition was the acquisition of such Core Business,
which acquisition could not have been consummated on as
commercially attractive terms without the acquisition of
such other business or assets, (b) not less than 70% of the
assets acquired pursuant to such acquisition related at the
time of such acquisition to such Core Business, (c) the
relevant member of the Group is diligently pursuing the sale
of such other business or assets and (d) such business or
assets do not have, and could not reasonably be expected to
have, a material adverse effect on the business, results of
operations, financial condition or prospects of the Group
taken as a whole.
(ii) Indebtedness The Parent shall not, and shall not permit any
other member of the Group, without the prior written consent
of an Instructing Group, to create, incur, assume or suffer
to exist or otherwise become or be liable in respect of any
Indebtedness, other than Permitted Indebtedness.
19. Events of Default
Each of Clause 19.1 to Clause 19.17 describes circumstances which constitute
an Event of Default for the purposes of the Finance Documents. Clause 19.18
and Clause 19.19 deal with the rights of the Agent and the Banks after the
occurrence of an Event of Default.
19.1 Failure to Pay Any of the Obligors shall (a) default in the payment or
prepayment when due of the principal of the Loan or (b) default (and such
default shall continue unremedied for a period of three business days) in the
payment when due of any interest on the Loan and any other payments under the
Finance Documents.
19.2 Misrepresentation Any representation or statement made (or deemed to be
repeated) by any of the Obligors in any of the Finance Documents is or proves
to have been incorrect or misleading when made (or deemed to be repeated) in
any material respect.
19.3 Specific Covenants Any of the Group Obligors fails duly to perform or
comply with any of the obligations expressed to be assumed by it in Clauses 17
(Financial Condition), Clause 18.1(ii) (Pari Passu), Clause 18.1(iii)(a)
(Compliance with Laws) or Clause 18.2 (Negative Covenants) (other than Clause
18.2(i) (Business Activities)), the Borrower fails duly to perform or comply
with any of the obligations expressed to be assumed by it in Clause 2.2
(Purpose and Application of the Term Facility) or the Group Parent fails duly
to perform or comply with any of the obligations expressed to be assumed by it
under Sections 4.2 (other than Sections 4.2.1 and 4.2.20) or Section 4.1.6 or
Section 4.1.1(a) of the Group Parent Guarantee.
19.4 Specific Remediable Covenants Any of the Obligors fails duly to perform
or comply with any of the obligations expressed to be assumed by it in Clause
16.1, 16.3, 16.4 (Financial Information), Clause 18.1(i) (Validity and
Admissibility) and Clause 18.2(i) (Business Activities) or Sections 4.1.7 and
4.2.1 of the Group Parent Guarantee and such failure shall continue unremedied
for a period of five business days.
19.5 Other Obligations Any of the Obligors fails duly to perform or comply
with any other obligation expressed to be assumed by it in any of the Finance
Documents and such failure is not remedied within thirty days after the Agent
has given notice thereof to such Obligor.
19.6 Cross Default Any Indebtedness in excess of, in aggregate, Pound
Sterling10,000,000(or its equivalent in any other currency) of any member of
the Group or any other member of the ADT Group is not paid when due or within
any applicable grace period, any Indebtedness in excess of, in aggregate,
Pound Sterling10,000,000(or its equivalent in any other currency) of any
member of the Group or any other member of the ADT Group is declared to be or
otherwise becomes due and payable prior to its specified maturity or any
creditor or creditors of any member of the Group, or any other member of the
ADT Group becomes entitled to declare any Indebtedness in excess of, in
aggregate, Pound Sterling10,000,000(or its equivalent in any other currency)
of any member of the Group due and payable prior to its specified maturity.
19.7 Insolvency and Rescheduling Any Material Related Party is unable to pay
its debts as they fall due, admits in writing its inability to pay its debts
as they fall due, commences negotiations with any one or more of its creditors
with a view to the readjustment or rescheduling of all or any part of its
indebtedness or makes a general assignment for the benefit of or a composition
with its creditors.
19.8 Winding-up Any Material Related Party takes any corporate action or
other steps are taken or legal proceedings are started for its winding-up (but
which are not discharged within 28 days), dissolution, administration or
re-organisation (other than, except in the case of the Borrower, pursuant to a
solvent winding-up or reorganisation details of which have been notified to
the Agent at least 30 days prior to the proposed winding-up or reorganisation)
or for the appointment of a liquidator, receiver, administrator,
administrative receiver, conservator, custodian, trustee or similar officer of
it or of all or any substantial part of its assets.
19.9 Execution or Distress Any execution or distress is levied against, or
an encumbrancer takes possession of, the whole or any substantial part of the
assets of any Material Related Party.
19.10 Judgments Any judgment or order for the payment of money in excess of
Pound Sterling10,000,000 shall be rendered against any Material Related Party
and either (a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (b) there shall be a period of 30
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.
19.11 Analogous Events Any event occurs which under the laws of any
jurisdiction has a similar or analogous effect to any of those events
mentioned in Clause 19.7 (Insolvency and Rescheduling), Clause 19.8
(Winding-up) or Clause 19.9 (Execution or Distress).
19.12 Ownership of the Borrower The Borrower ceases to be a wholly-owned
subsidiary of the Parent.
19.13 Ownership of the Guarantor Any of the Group Guarantors cease to be a
wholly-owned subsidiary of the Parent.
19.14 Ownership of the Parent The Parent ceases to be a wholly-owned
subsidiary of the Group Parent.
19.15 Change in Control Any Change in Control shall occur.
19.16 Repudiation Any of the Obligors repudiates any of the Finance Documents
or does or causes to be done any act or thing evidencing an intention to
repudiate any of the Finance Documents.
19.17 Illegality At any time it is or becomes unlawful for any of the
Obligors to perform or comply with any or all of its payment obligations under
any of the Finance Documents or any of the payment obligations of any of the
Obligors under any of the Finance Documents are not or cease to be legal,
valid and binding.
19.18 Acceleration and Cancellation Upon the occurrence of an Event of
Default or at any time thereafter if the same is still continuing, the Agent
may (and, if so instructed by an Instructing Group, shall) by written notice
to the Borrower:
(a) declare the Term Advances to be immediately due and payable
(whereupon the same shall become so due and payable together with
accrued interest thereon and any other sums then owed by the
Borrower hereunder) or declare the Term Advances to be due and
payable on demand of the Agent; and/or
(b) declare that any undrawn portion of the Term Facility shall be
cancelled, whereupon the same shall be cancelled and the Available
Term Commitment of each Bank shall be reduced to zero.
19.19 Term Advances Due on Demand If, pursuant to Clause 19.18 (Acceleration
and Cancellation), the Agent declares the Term Advances to be due and payable
on demand of the Agent, then, and at any time thereafter, the Agent may (and,
if so instructed by an Instructing Group, shall) by written notice to the
Borrower:
(a) require repayment of the Term Advances on such date as it may
specify in such notice (whereupon the same shall become due and
payable on such date together with accrued interest thereon and
any other sums then owed by the Borrower hereunder) or withdraw
its declaration with effect from such date as it may specify in
such notice; and/or
(b) select as the duration of any Interest Period which begins whilst
such declaration remains in effect a period of six months or less.
PART 7
GUARANTEE
20. Guarantee and Indemnity
20.1 Guarantee The Group Guarantors irrevocably and unconditionally
guarantee to the Agent, the Arranger and the Banks the due and punctual
observance and performance of all the terms, conditions and covenants on the
part of the Borrower contained in the Finance Documents and agrees to pay to
the Agent from time to time on demand any and every sum or sums of money which
the Borrower is at any time liable to pay to the Agent, the Arranger and the
Banks or any of them under or pursuant to the Finance Documents and which has
become due and payable but has not been paid at the time such demand is made.
20.2 Indemnity The Group Guarantors irrevocably and unconditionally agree as
a primary obligation to indemnify the Agent, the Arranger and the Banks from
time to time on demand by the Agent from and against any loss incurred by the
Agent, the Arranger and the Banks or any of them as a result of any of the
obligations of the Borrower under or pursuant to the Finance Documents being
or becoming void, voidable, unenforceable or ineffective as against the
Borrower for any reason whatsoever, whether or not known to the Agent, the
Arranger and the Banks or any of them or any other person, the amount of such
loss being the amount which the person or persons suffering it would otherwise
have been entitled to recover from the Borrower.
20.3 Additional Security The obligations of the Group Guarantors herein
contained shall be in addition to and independent of every other security
which the Agent, the Arranger and the Banks or any of them may at any time
hold in respect of any of the Borrower's obligations under the Finance
Documents.
20.4 Continuing Obligations The obligations of the Group Guarantors herein
contained shall constitute and be continuing obligations notwithstanding any
settlement of account or other matter or thing whatsoever and shall not be
considered satisfied by any intermediate payment or satisfaction of all or any
of the obligations of the Borrower under the Finance Documents and shall
continue in full force and effect until final payment in full of all amounts
owing by the Borrower under the Finance Documents and total satisfaction of
all the Borrower's actual and contingent obligations under the Finance
Documents.
20.5 Obligations not Discharged Neither the obligations of the Group
Guarantors herein contained nor the rights, powers and remedies conferred in
respect of the Group Guarantors upon the Agent, the Arranger and the Banks or
any of them by this Agreement or by law shall be discharged, impaired or
otherwise affected by:
(a) the winding-up, dissolution, administration or re-organisation of
the Borrower or any other person or any change in its status,
function, control or ownership;
(b) any of the obligations of any of the Obligors or any other person
under the Finance Documents or under any other security taken in
respect of any of its obligations hereunder being or becoming
illegal, invalid, unenforceable or ineffective in any respect;
(c) time or other indulgence being granted or agreed to be granted to
any Obligor in respect of its obligations under any of the Finance
Documents;
(d) any amendment to, or any variation, waiver or release of, any
obligation of any Obligor under any of the Finance Documents or
under any other security;
(e) any failure to take, or fully to take, any security contemplated
hereby or otherwise agreed to be taken in respect of any Obligor's
obligations under any of the Finance Documents;
(f) any failure to realise or fully to realise the value of, or any
release, discharge, exchange or substitution of, any security
taken in respect of any Obligor's obligations under any of the
Finance Documents; or
(g) any other act, event or omission which, but for this Clause 20.5,
might operate to discharge, impair or otherwise affect any of the
obligations of any Group Guarantor herein contained or any of the
rights, powers or remedies conferred upon the Agent, the Arranger
and the Banks or any of them by any of the Finance Documents or by
law.
20.6 Settlement Conditional Any settlement or discharge between any of the
Group Guarantors and the Agent, the Arranger and the Banks or any of them
shall be conditional upon no security or payment to the Agent, the Arranger
and the Banks or any of them by the Borrower or any Guarantor or any other
person on behalf of the Borrower or, as the case may be, any Guarantor being
avoided or reduced by virtue of any provisions or enactments relating to
bankruptcy, insolvency, liquidation or similar laws of general application for
the time being in force and, if any such security or payment is so avoided or
reduced, the Agent, the Arranger and the Banks shall each be entitled to
recover the value or amount of such security or payment from the Group
Guarantors subsequently as if such settlement or discharge had not occurred.
20.7 Exercise of Rights Neither the Agent, the Arranger and the Banks nor
any of them shall be obliged before exercising any of the rights, powers or
remedies conferred upon them in respect of the Group Guarantors by any of the
Finance Documents or by law:
(a) to make any demand of the Borrower or any other Obligor;
(b) to take any action or obtain judgment in any court against the
Borrower or any other Obligor;
(c) to make or file any claim or proof in a winding-up or dissolution
of the Borrower or any other Obligor; or
(d) to enforce or seek to enforce any other security taken in respect
of any of the obligations of the Borrower or any other Obligor
under any of the Finance Documents;
save that notice of non-payment shall first be given to the Borrower provided
that if no such notice is given to the Borrower prior to the exercise of such
rights, powers or remedies, that does not preclude the Agent, the Arranger and
the Banks or any of them, giving notice to the Borrower and thereafter
exercising such rights, powers or remedies.
20.8 Deferral of Group Guarantor's Rights The Group Guarantors agree that,
so long as any amounts are or may be owed by the Borrower under any of the
Finance Documents or the Borrower is under any actual or contingent
obligations under any of the Finance Documents, the Group Guarantors shall not
exercise any rights which the Group Guarantors may at any time have by reason
of performance by it of its obligations hereunder:
(a) to be indemnified by the Borrower; and/or
(b) to claim any contribution from any other guarantor of the
Borrower's obligations under any of the Finance Documents; and/or
(c) to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Agent, the Arranger
and the Banks under any of the Finance Documents or of any other
security taken pursuant to, or in connection with, any of the
Finance Documents by all or any of the Agent, the Arranger and the
Banks,
Provided that the restrictions contained in (a) and (b) above shall only apply
after the occurrence of an Event of Default but shall apply irrespective of
when the claim for contribution or indemnification under this Clause 20.8
arose.
20.9 Suspense Accounts All moneys received, recovered or realised by a Bank
by virtue of Clause 20.1 (Guarantee) or Clause 20.2 (Indemnity) may, in that
Bank's discretion, be credited to a suspense or impersonal account and may be
held in such account for so long as such Bank thinks fit pending the
application from time to time (as such Bank may think fit) of such moneys
in or towards the payment and discharge of any amounts owing by any of the
Obligors to such Bank under any of the Finance Documents. If and when the
aggregate of all moneys held on suspense or impersonal account exceeds the
aggregate amount payable by the Borrower under the Finance Documents to
such Bank, such Bank shall, as soon as practicable thereafter, apply any
amount held in such suspense or impersonal account in satisfaction of the
amounts payable by the Obligors under the Finance Documents.
PART 8
DEFAULT INTEREST AND INDEMNITY
21. Default Interest and Indemnity
21.1 Default Interest Periods If any sum due and payable by any of the
Obligors under any of the Finance Documents is not paid on the due date
therefor in accordance with the provisions of Clause 23 (Payments) or if any
sum due and payable by any of the Obligors under any judgment of any court in
connection herewith is not paid on the date of such judgment, the period
beginning on such due date or, as the case may be, the date of such judgment
and ending on the date upon which the obligation of such Obligor to pay such
sum (the balance thereof for the time being unpaid being herein referred to as
an "unpaid sum") is discharged shall be divided into successive periods, each
of which (other than the first) shall start on the last day of the preceding
such period and the duration of each of which shall (except as otherwise
provided in this Clause 21) be selected by the Agent.
21.2 Default Interest During each such period relating thereto as is
mentioned in Clause 21.1 (Default Interest Periods) an unpaid sum shall bear
interest at the rate per annum which is the sum from time to time of two per
cent., the Margin, the Associated Costs Rate in respect thereof at such time
and LIBOR on the Quotation Date therefor Provided that:
(a) if, for any such period, LIBOR cannot be determined, the rate of
interest applicable to such unpaid sum shall be the rate per annum
which is the sum of two per cent., the Margin, the Associated
Costs Rate (save in the case of a Double Tax Treaty Bank which
does not incur the costs of complying with the reserve asset
requirements of the Bank of England) in respect thereof at such
time and the rate per annum determined by the Agent to be equal to
the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-sixteenth of one
per cent.) of the rates notified by each of the Reference Banks
to the Agent before the last day of such period to be those
which express as a percentage rate per annum the cost to it of
funding from whatever sources it may select its portion of such
unpaid sum for such period; and
(b) if such unpaid sum is all or part of a Term Advance which became
due and payable on a day other than the last day of an Interest
Period relating thereto, the first such period applicable thereto
shall be of a duration equal to the unexpired portion of that
Interest Period and the rate of interest applicable thereto from
time to time during such period shall be that which exceeds by two
per cent. the rate which would have been applicable to it had it
not so fallen due.
21.3 Payment of Default Interest Any interest which shall have accrued under
Clause 21.2 (Default Interest) in respect of an unpaid sum shall be due and
payable and shall be paid by the Obligor owing such unpaid sum at the end of
the period by reference to which it is calculated.
21.4 Broken Periods If any Bank or the Agent on its behalf receives or
recovers all or any part of such Bank's share of a Term Advance otherwise than
on the last day of an Interest Period relating to that Term Advance, the
Borrower shall pay to the Agent within fourteen days of its receipt of written
notice from the Agent for account of such Bank an amount equal to the amount
(if any) by which (a) the additional interest which would have been payable on
the amount so received or recovered had it been received or recovered on the
last day of that Interest Period (less Margin and Associated Costs) exceeds
(b) the amount of interest which in the opinion of the Agent would have been
payable to the Agent on the last day of that Interest Period in respect of a
sterling deposit equal to the amount so received or recovered placed by it
with a prime bank in London for a period starting on the third business day
following the date of such receipt or recovery and ending on the last day of
that Interest Period.
21.5 Borrower's Indemnity The Borrower undertakes to indemnify:
(a) each of the Agent, the Arranger and the Banks against any cost,
claim, loss, expense (including legal fees) or liability together
with any VAT thereon, which any of them may sustain or incur as a
consequence of the occurrence of any Event of Default or any
default by the Borrower in the performance of any of the
obligations expressed to be assumed by it in any of the Finance
Documents; and
(b) each Bank against any loss it may suffer or incur as a result of
its funding or making arrangements to fund its portion of a Term
Advance requested by the Borrower under any of the Finance
Documents but not made by reason of the operation of any one or
more of the provisions hereof (other than default by or gross
negligence of such Bank or the Agent).
21.6 Unpaid Sums as Term Advances Any unpaid sum shall (for the purposes of
this Clause 21, Clause 14.1 (Increased Costs)and the Fifth Schedule
(Associated Costs Rate)) be treated as an advance and accordingly in this
Clause 21, Clause 14.1 (Increased Costs) and the Fifth Schedule (Associated
Costs Rate)) the term "Term Advance" includes any unpaid sum and the term
"Interest Period", in relation to an unpaid sum, includes each such period
relating thereto as is mentioned in Clause 21.1 (Default Interest Periods).
PART 9
PAYMENTS
22. Currency of Account and Payment
22.1 Currency of Account Sterling is the currency of account and payment for
each and every sum at any time due from any of the Obligors under any of the
Finance Documents Provided that:
(a) each payment in respect of costs and expenses shall be made in the
currency in which the same were incurred; and
(b) each payment pursuant to Clause 12.2 (Tax Indemnity) or Clause
14.1 (Increased Costs) shall be made in the currency specified by
the party claiming thereunder.
22.2 Currency Indemnity If any sum due from any of the Obligors under this
Agreement or any order or judgment given or made in relation hereto has to be
converted from the currency (the "first currency") in which the same is
payable hereunder or under such order or judgment into another currency (the
"second currency") for the purpose of (a) making or filing a claim or proof
against such Obligor, (b) obtaining an order or judgment in any court or other
tribunal or (c) enforcing any order or judgment given or made in relation
hereto, the Borrower shall indemnify and hold harmless each of the persons to
whom such sum is due from and against any loss suffered or incurred as a
result of any discrepancy between (i) the rate of exchange used for such
purpose to convert the sum in question from the first currency into the second
currency and (ii) the rate or rates of exchange at which such person may in
the ordinary course of business purchase the first currency with the second
currency upon receipt of a sum paid to it in satisfaction, in whole or in
part, of any such order, judgment, claim or proof.
23. Payments
23.1 Payments to the Agent On each date on which this Agreement requires an
amount denominated in sterling to be paid by any of the Obligors or any of the
Banks under any of the Finance Documents, such Obligor or, as the case may be,
such Bank shall make the same available to the Agent by payment in sterling
and in immediately available, freely transferable, cleared funds to The Bank
of Nova Scotia, London, Sort Code 30-16-61 (or such other account or bank as
the Agent may have specified for this purpose).
23.2 Alternative Payment Arrangements If, at any time, it shall become
impracticable (by reason of any action of any governmental authority or any
change in law, exchange control regulations or any similar event) for any of
the Obligors to make any payments under any of the Finance Documents in the
manner specified in Clause 23.1 (Payments to the Agent), then such Obligor may
agree with each or any of the Banks alternative arrangements for the payment
direct to such Bank of amounts due to such Bank under any of the Finance
Documents Provided that, in the absence of any such agreement with any Bank,
such Obligor shall be obliged to make all payments due to such Bank in the
manner specified herein. Upon reaching such agreement such Obligor and such
Bank shall immediately notify the Agent thereof and shall thereafter promptly
notify the Agent of all payments made direct to such Bank.
23.3 Payments by the Agent Save as otherwise provided herein, each payment
received by the Agent for the account of another person pursuant to Clause
23.1 (Payments to the Agent) shall be made available by the Agent to such
other person (in the case of a Bank, for the account of its Facility Office)
for value the same day by transfer to such account of such person with such
bank in London as such person shall have previously notified to the Agent.
23.4 No Set-off All payments required to be made by any of the Obligors
under any of the Finance Documents shall be calculated without reference to
any set-off or counterclaim and shall be made free and clear of and without
any deduction for or on account of any set-off or counterclaim.
23.5 Clawback Where a sum is to be paid under any of the Finance Documents
to the Agent for account of another person, the Agent shall not be obliged to
make the same available to that other person until it has been able to
establish to its satisfaction that it has actually received such sum, but if
it does so and it proves to be the case that it had not actually received such
sum, then the person to whom such sum was so made available shall on request
refund the same to the Agent together with an amount sufficient to indemnify
the Agent against any cost or loss it may have suffered or incurred by reason
of its having paid out such sum prior to its having received such sum.
23.6 Non Business Days If a payment would otherwise fall due on a day which
is not a business day, it shall instead be due on the next succeeding business
day.
24. Set-Off
24.1 Contractual Set-off On or after the occurrence of an Event of Default
(if the same is still continuing), each of the Obligors authorises each Bank
to apply any credit balance to which such Obligor is entitled on any account
of such Obligor with that Bank in satisfaction of any sum due and payable from
such Obligor to such Bank under any of the Finance Documents but unpaid; for
this purpose, each Bank is authorised to purchase with the moneys standing to
the credit of any such account such other currencies as may be necessary to
effect such application.
24.2 Set-off not Mandatory No Bank shall be obliged to exercise any right
given to it by Clause 24.1 (Contractual Set-off).
25. Sharing
25.1 Redistribution of Payments If, at any time, the proportion which any
Bank (a "Recovering Bank") has received or recovered (whether by payment, the
exercise of a right of set-off or combination of accounts or otherwise) in
respect of its portion of any payment (a "relevant payment") to be made under
this Agreement by any of the Obligors for account of such Recovering Bank and
one or more other Banks is greater (the portion of such receipt or recovery
giving rise to such excess proportion being herein called an "excess amount")
than the proportion thereof so received or recovered by the Bank or Banks so
receiving or recovering the smallest proportion thereof, then:
(a) such Recovering Bank shall inform the Agent of such receipt or
recovery and pay to the Agent an amount equal to such excess
amount;
(b) there shall thereupon fall due from such Obligor to such
Recovering Bank an amount equal to the amount paid out by such
Recovering Bank pursuant to paragraph (a) above, the amount so due
being, for the purposes hereof, treated as if it were an unpaid
part of such Recovering Bank's portion of such relevant payment;
and
(c) the Agent shall treat the amount received by it from such
Recovering Bank pursuant to paragraph (a) above as if such amount
had been received by it from such Obligor in respect of such
relevant payment and shall pay the same to the persons entitled
thereto (including such Recovering Bank) pro rata to their
respective entitlements thereto.
25.2 Repayable Recoveries If any sum (a "relevant sum") received or
recovered by a Recovering Bank in respect of any amount owing to it by any of
the Obligors becomes repayable and is repaid by such Recovering Bank, then:
(a) each Bank which has received a share of such relevant sum by
reason of the implementation of Clause 25.1 (Redistribution of
Payments) shall, upon request of the Agent, pay to the Agent for
account of such Recovering Bank an amount equal to its share of
such relevant sum; and
(b) there shall thereupon fall due from such Obligor to each such Bank
an amount equal to the amount paid out by it pursuant to paragraph
(a) above, the amount so due being, for the purposes hereof,
treated as if it were the sum payable to such Bank against which
such Bank's share of such relevant sum was applied.
PART 10
FEES, COSTS AND EXPENSES
26. Fees
26.1 Arrangement Fee The Borrower shall pay to the Arranger the fees
specified in the letter of even date herewith from the Arranger to the
Borrower at the times, and in the amounts, specified in such letter.
26.2 Agency Fee The Borrower shall pay to the Agent for its own account the
agency fees specified in the letter of even date herewith from the Agent to
the Borrower at the times, and in the amounts, specified in such letter.
27. Costs and Expenses
27.1 Transaction Expenses The Borrower shall, from time to time on demand of
the Agent, reimburse each of the Agent and the Arranger for all reasonable
"out-of-pocket" costs and expenses (including, but not limited to, reasonable
legal expenses, printing and publicity costs, telex, telephone and facsimile
costs) together with any VAT thereon incurred by it in connection with the
negotiation, preparation and execution of each of the Finance Documents and
the completion of the transactions therein contemplated.
27.2 Preservation and Enforcement of Rights The Borrower shall, from time to
time on demand of the Agent, reimburse the Agent, the Arranger and the Banks
for all costs and expenses (including legal fees) together with any VAT
thereon incurred in or in connection with the preservation and/or enforcement
of any of the rights of the Agent, the Arranger and the Banks under any of the
Finance Documents.
27.3 Stamp Taxes The Borrower shall pay all stamp, registration and other
taxes to which any of the Finance Documents or any judgment given in
connection herewith is or at any time may be subject and shall, from time to
time on demand of the Agent, indemnify the Agent, the Arranger and the Banks
against any liabilities, costs, claims and expenses resulting from any failure
to pay or any delay in paying any such tax.
27.4 Agent's Costs The Borrower shall, from time to time on demand of the
Agent (and without prejudice to the provisions of Clause 27.2 (Preservation
and Enforcement of Rights) and Clause 33.2 (Amendment Costs) reimburse the
Agent for its out of pocket costs and expenses (including telephone, fax,
copying and travel costs) incurred by the Agent in connection with its taking
such action as it may deem appropriate or in complying with any instructions
from an Instructing Group or any request by the Obligors or either of them in
connection with:
(a) the granting or proposed granting of any waiver or consent
requested hereunder by the Obligors or any of them;
(b) any actual, potential or suspected breach by the Obligors or any
of them of its obligations under any of the Finance Documents;
(c) the occurrence of any event which is an Event of Default or a
Potential Event of Default; or
(d) any amendment or proposed amendment to any of the Finance
Documents requested by the Obligors or any of them.
27.5 Banks' Liabilities for Costs If the Borrower fails to perform any of
its obligations under this Clause 27, each Bank shall, in the proportion borne
by its share of the Loan (or, if no Term Advances have been made, its
Available Term Commitment or, in the case of the Overdraft Bank, its Overdraft
Commitment) to the amount of the Loan (or, if no Term Advances have been made,
the aggregate of the Available Term Facility and the Overdraft Facility) for
the time being (or, if the Loan has been repaid in full, immediately prior to
the final repayment thereof), indemnify each of the Agent and the Arranger
against any loss incurred by any of them as a result of such failure and the
Borrower shall forthwith reimburse each Bank for any payment made by it
pursuant to this Clause 27.5.
PART 11
AGENCY PROVISIONS
28. The Agent, the Arranger and the Banks
28.1 Appointment of the Agent The Arranger and each Bank hereby appoints the
Agent to act as its agent in connection with the Finance Documents and
authorises the Agent to exercise such rights, powers, authorities and
discretions as are specifically delegated to the Agent by the terms of the
Finance Documents together with all such rights, powers, authorities and
discretions as are reasonably incidental thereto.
28.2 Agent's Discretions The Agent may:
(a) assume, unless it has, in its capacity as agent for the Banks,
received notice to the contrary from any other party to any of the
Finance Documents, that (i) any representation made by any of the
Obligors in connection with any of the Finance Documents is true,
(ii) no Event of Default or Potential Event of Default has
occurred, (iii) none of the Obligors is in breach of or default
under its obligations under any of the Finance Documents and (iv)
any right, power, authority or discretion vested herein upon an
Instructing Group, the Banks or any other person or group of
persons has not been exercised;
(b) assume that the Facility Office of each Bank is that identified
with its signature below (or, in the case of a Transferee, at the
end of the Transfer Certificate to which it is a party as
Transferee) until it has received from such Bank a notice
designating some other office of such Bank to replace its Facility
Office and act upon any such notice until the same is superseded
by a further such notice;
(c) engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or services
may to it seem necessary, expedient or desirable and rely upon any
advice so obtained;
(d) rely as to any matters of fact which might reasonably be expected
to be within the knowledge of any of the Obligors upon a
certificate signed by or on behalf of such Obligor;
(e) rely upon any communication or document believed by it to be
genuine;
(f) refrain from exercising any right, power or discretion vested in
it as agent hereunder unless and until instructed by an
Instructing Group as to whether or not such right, power or
discretion is to be exercised and, if it is to be exercised, as to
the manner in which it should be exercised; and
(g) refrain from acting in accordance with any instructions of an
Instructing Group to begin any legal action or proceeding arising
out of or in connection with this Agreement until it shall have
received such security as it may require (whether by way of
payment in advance or otherwise) for all costs, claims, losses,
expenses (including legal fees) and liabilities together with any
VAT thereon which it will or may expend or incur in complying with
such instructions.
28.3 Agent's Obligations The Agent shall:
(a) promptly inform each Bank of the contents of any notice or
document received by it in its capacity as Agent from any of the
Obligors under any of the Finance Documents;
(b) promptly notify each Bank of the occurrence of any Event of
Default or any default by any of the Obligors in the due
performance of or compliance with its obligations under any of the
Finance Documents of which the Agent has notice from any other
party hereto or the Group Parent;
(c) save as otherwise provided herein, act as agent under any of the
Finance Documents in accordance with any instructions given to it
by an Instructing Group, which instructions shall be binding on
the Arranger and the Banks; and
(d) if so instructed by an Instructing Group, refrain from exercising
any right, power or discretion vested in it as agent under any of
the Finance Documents.
28.4 Excluded Obligations Notwithstanding anything to the contrary expressed
or implied herein, neither the Agent nor the Arranger shall:
(a) be bound to enquire as to (i) whether or not any representation
made by any of the Obligors in connection with any of the Finance
Documents is true, (ii) the occurrence or otherwise of any Event
of Default or Potential Event of Default, (iii) the performance by
any of the Obligors of its obligations under any of the Finance
Documents or (iv) any breach of or default by any of the Obligors
of or under its obligations under any of the Finance Documents;
(b) be bound to account to any Bank for any sum or the profit element
of any sum received by it for its own account;
(c) be bound to disclose to any other person any information relating
to any member of the Group if such disclosure would or might in
its opinion constitute a breach of any law or regulation or be
otherwise actionable at the suit of any person; or
(d) be under any obligations other than those for which express
provision is made herein.
28.5 Indemnification Each Bank shall, from time to time on demand by the
Agent, indemnify the Agent, in the proportion its share of the Loan (or, if no
Term Advances have been made, its Available Term Commitment or in the case of
the Overdraft Bank, its Overdraft Commitment) bears to the amount of the Loan
(or, if no Term Advances have been made, the aggregate of the Available Term
Facility and the Overdraft Facility) at the time of such demand (or, if the
Loan has then been repaid in full, immediately prior to the final repayment
thereof), against any and all costs, claims, losses, expenses (including legal
fees) and liabilities together with any VAT thereon which the Agent may incur,
otherwise than by reason of its own gross negligence or wilful misconduct, in
acting in its capacity as agent under the Finance Documents.
28.6 Exclusion of Liabilities Neither the Agent and the Arranger nor any of
them accepts any responsibility for the accuracy and/or completeness of any
information supplied by any of the Obligors in connection herewith or for the
legality, validity, effectiveness, adequacy or enforceability of any of the
Finance Documents and neither the Agent and the Arranger nor any of them shall
be under any liability as a result of taking or omitting to take any action in
relation to any of the Finance Documents, save in the case of gross negligence
or wilful misconduct.
28.7 No Actions Each of the Banks agrees that it will not assert or seek to
assert against any director, officer or employee of the Agent or the Arranger
any claim it might have against any of them in respect of the matters referred
to in Clause 28.6 (Exclusion of Liabilities).
28.8 Business with the Group The Agent and the Arranger may accept deposits
from, lend money to and generally engage in any kind of banking or other
business with any member of the Group.
28.9 Resignation The Agent may resign its appointment hereunder at any time
without assigning any reason therefor by giving not less than thirty days'
prior written notice to that effect to each of the other parties hereto
Provided that no such resignation shall be effective until a successor for the
Agent is appointed in accordance with the succeeding provisions of this Clause
28.
28.10 Successor Agent If the Agent gives notice of its resignation pursuant
to Clause 28.9 (Resignation), then any reputable and experienced bank or other
financial institution may, after consultation with the Borrower, be appointed
as a successor to the Agent by an Instructing Group during the period of such
notice but, if no such successor is so appointed, the Agent may appoint such
a successor itself.
28.11 Rights and Obligations If a successor to the Agent is appointed under
the provisions of Clause 28.10 (Successor Agent), then (a) the retiring Agent
shall be discharged from any further obligation hereunder but shall remain
entitled to the benefit of the provisions of this Clause 28 and (b) its
successor and each of the other parties hereto shall have the same rights and
obligations amongst themselves as they would have had if such successor had
been a party hereto.
28.12 Own Responsibility It is understood and agreed by each Bank that it has
itself been, and will continue to be, solely responsible for making its own
independent appraisal of and investigations into the financial condition,
creditworthiness, condition, affairs, status and nature of each member of the
Group and each member of the ADT Group and, accordingly, each Bank warrants to
the Agent and the Arranger that it has not relied on and will not hereafter
rely on the Agent and the Arranger or any of them:
(a) to check or enquire on its behalf into the adequacy, accuracy or
completeness of any information provided by any of the Obligors in
connection with this Agreement or the transactions herein
contemplated (whether or not such information has been or is
hereafter circulated to such Bank by the Agent and the Arranger or
any of them); or
(b) to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or nature
of any member of the Group or any member of the ADT Group.
28.13 Agency Division Separate In acting as agent under the Finance Documents
for the Banks, the Agent shall be regarded as acting through its agency
division which shall be treated as a separate entity from any other of its
divisions or departments and, notwithstanding the foregoing provisions of this
Clause 28, any information received by some other division or department of
the Agent may be treated as confidential and shall not be regarded as having
been given to the Agent's agency division.
28.14 Confidential Information Notwithstanding anything to the contrary
expressed or implied herein and without prejudice to the provisions of Clause
28.13 (Agency Division Separate), the Agent shall not as between itself and
the Banks be bound to disclose to any Bank or other person any information
which is supplied by any member of the Group or any member of the ADT Group to
the Agent in its capacity as agent hereunder for the Banks and which is
identified by such member of the Group or, as the case may be, of the ADT
Group at the time it is so supplied as being confidential information
Provided that the Agent shall disclose any information which in the reasonable
opinion of the Agent indicates that an Event of Default or Potential Event of
Default has occurred and may disclose to a Bank any information in respect of
which that Bank has given a confidentiality undertaking in a form satisfactory
to the Agent and the relevant member of the Group or, as the case may be, of
the ADT Group.
PART 12
ASSIGNMENTS AND TRANSFERS
29. Assignments and Transfers
29.1 Binding Agreement This Agreement shall be binding upon and enure to the
benefit of each party hereto and its or any subsequent successors, Transferees
and assigns.
29.2 No Assignments and Transfers by the Obligors None of the Obligors shall
be entitled to assign or transfer all or any of its rights, benefits and
obligations under any of the Finance Documents.
29.3 Assignments and Transfers by Banks Any Bank may, at any time, with the
prior written consent of the Borrower (such consent not to be unreasonably
withheld or delayed) assign all or, save in the case of the Overdraft Bank,
any of its rights and benefits under any of the Finance Documents or transfer
in accordance with Clause 29.5 (Transfers by Banks) all or, save in the case
of the Overdraft Bank, any of its rights, benefits and obligations under any
of the Finance Documents to any Section 349 Bank, in each case (as that term
is defined in Clause 13.3) or Double Tax Treaty Bank but not to any other
person Provided that no such consent of the Borrower as is referred to in this
Clause 29.3 shall be required:
(i) for an assignment or transfer by a Bank to an Affiliate of the Bank
Provided that no Obligor shall be liable to pay any amounts under Part 5
to any such Affiliate in excess of any amount which would have been
payable in the absence of the assignment or transfer to such Affiliate
if such liability:
(a) arises at the time of the assignment or transfer or as a result
only of circumstances existing at such time or would arise as a
result of any then current final budgetary proposals or other
final proposals from any central bank or other fiscal or monetary
authority; and
(b) would not have arisen but for such assignment or transfer; or
(ii) if at the time of such transfer or assignment an Event of Default has
occurred and is continuing unwaived.
29.4 Assignments by Banks If any Bank assigns all or, save in the case of
the Overdraft Bank, any of its rights and benefits under any of the Finance
Documents in accordance with Clause 29.3 (Assignments and Transfers by Banks),
then, unless and until the assignee has agreed with the Agent, the Arranger,
the Borrower and the other Banks that it shall be under the same obligations
towards each of them as it would have been under if it had been an original
party to the Finance Documents as a Bank (whereupon such assignee shall become
a party to the Finance Documents as a "Bank"), the Agent, the Arranger, the
Borrower and the other Banks shall not be obliged to recognise such assignee
as having the rights against each of them which it would have had if it had
been such a party to the Finance Documents.
29.5 Transfers by Banks If any Bank wishes to transfer all or, save in the
case of the Overdraft Bank, any of its rights, benefits and/or obligations
under any of the Finance Documents as contemplated in Clause 29.3 (Assignments
and Transfers by Banks), then such transfer may be effected by the delivery to
the Agent of a duly completed and duly executed Transfer Certificate in which
event, on the later of the Transfer Date specified in such Transfer
Certificate and the fifth business day after (or such earlier business day
endorsed by the Agent on such Transfer Certificate falling on or after) the
date of delivery of such Transfer Certificate to the Agent:
(a) to the extent that in such Transfer Certificate the Bank party
thereto seeks to transfer its rights, benefits and obligations
under any of the Finance Documents, each of the Group Obligors and
such Bank shall be released from further obligations towards one
another under any of the Finance Documents and their respective
rights against one another shall be cancelled (such rights and
obligations being referred to in this Clause 29.5 as "discharged
rights and obligations");
(b) each of the Group Obligors and the Transferee party thereto shall
assume obligations towards one another and/or acquire rights
against one another which differ from such discharged rights and
obligations only insofar as such Obligor and such Transferee have
assumed and/or acquired the same in place of such Obligor and such
Bank;
(c) the Agent, the Arranger, such Transferee and the other Banks shall
acquire the same rights and benefits and assume the same
obligations between themselves as they would have acquired and
assumed had such Transferee been an original party to the Finance
Documents as a Bank with the rights, benefits and/or obligations
acquired or assumed by it as a result of such transfer; and
(d) such Transferee shall become a party hereto as a Term Bank or the
Overdraft Bank, as the case may be.
29.6 Transfer Fees On the date upon which a transfer takes effect pursuant
to Clause 29.5 (Transfers by Banks) the Transferee in respect of such transfer
shall pay to the Agent for its own account a transfer fee of Pound
Sterling750.
29.7 Disclosure of Information
(a) Save as allowed under Clause 28.14 and 29.7(b), or as requested by any
regulatory authority, bank examiner or statutory auditors, or as required by
an order of any court of competent jurisdiction, or in pursuance to any
procedure for disclosure of documents in any proceedings before any such
court, or pursuant to any law or regulation having the force of law in any
country, the Agent, the Arranger and the Banks shall not, without the
Borrower's prior written consent, disclose any confidential information which
is not at the time of transmission public knowledge made available to it in
relation to any of the Finance Documents save to such of its officers,
employees, agents and advisers as are required in the course of their duties
to receive and consider the same.
(b) Any Bank may disclose to any actual or potential assignee or Transferee
or to any person who may otherwise enter into contractual relations with such
Bank in relation to any of the Finance Documents such information (the
"Information Material") about the Obligors, the Group or the ADT Group as
such Bank shall consider appropriate provided that such Bank shall obtain from
the person to whom the Information Material is provided an undertaking to keep
the Information Material secret and confidential and not without the
Borrower's prior written consent, disclose to any third party any of the
Information Material except that (x) such person may disclose the Information
Material to such officers, employees, agents and advisers as are required in
the course of their duties to receive and consider the same, and (y) the
foregoing shall not apply to any disclosure (i) required or requested to be
made to any regulatory authority, bank examiner or statutory auditors; or (ii)
required by an order of any court of competent jurisdiction, or in pursuance
of any procedure for disclosure of documents in any proceedings before any
such court, or pursuant to any law or regulation having the force of law in
any country.
PART 13
MISCELLANEOUS
30. Calculations and Evidence of Debt
30.1 Basis of Accrual Interest and commitment commission shall accrue from
day to day and shall be calculated on the basis of a year of 365 days (or, in
any case where market practice differs, in accordance with market practice)
and the actual number of days elapsed.
30.2 Quotations If on any occasion a Reference Bank or Bank fails to supply
the Agent with a quotation required of it under the foregoing provisions of
this Agreement, the rate for which such quotation was required shall be
determined from those quotations which are supplied to the Agent.
30.3 Evidence of Debt Each Bank shall maintain in accordance with its usual
practice accounts evidencing the amounts from time to time lent by and owing
to it hereunder.
30.4 Control Accounts The Agent shall maintain on its books a control
account or accounts in which shall be recorded (a) the amount of any Term
Advance made or arising hereunder and each Bank's share therein, (b) the
amount of all principal, interest and other sums due or to become due from any
of the Obligors to any of the Banks hereunder and each Bank's share therein
and (c) the amount of any sum received or recovered by the Agent hereunder and
each Bank's share therein.
30.5 Prima Facie Evidence In any legal action or proceeding arising out of
or in connection with this Agreement, the entries made in the accounts
maintained pursuant to Clause 30.3 (Evidence of Debt) and Clause 30.4 (Control
Accounts) shall be prima facie evidence of the existence and amounts of the
specified obligations of the Obligors.
30.6 Certificates of Banks A certificate of a Bank as to (a) the amount by
which a sum payable to it hereunder is to be increased under Clause 12.1 (Tax
Gross-up) or (b) the amount for the time being required to indemnify it
against any such cost, payment or liability as is mentioned in Clause 12.2
(Tax Indemnity) or Clause 14.1 (Increased Costs) shall, in the absence of
manifest error, be prima facie evidence of the existence and amounts of the
specified obligations of the Obligors.
30.7 Agent's Certificates A certificate of the Agent as to the amount at any
time due from the Borrower hereunder or the amount which, but for any of the
obligations of the Borrower hereunder being or becoming void, voidable,
unenforceable or ineffective, at any time would have been due from the
Borrower hereunder shall, in the absence of manifest error, be conclusive for
the purposes of Part 7 (Guarantee).
31. Remedies and Waivers, Partial Invalidity
31.1 Remedies and Waivers No failure to exercise, nor any delay in
exercising, on the part of the Agent, the Arranger and the Banks or any of
them, any right or remedy under any of the Finance Documents shall operate as
a waiver thereof, nor shall any single or partial exercise of any right or
remedy prevent any further or other exercise thereof or the exercise of any
other right or remedy. The rights and remedies in the Finance Documents
provided are cumulative and not exclusive of any rights or remedies provided
by law.
31.2 Partial Invalidity If, at any time, any provision hereof is or becomes
illegal, invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions hereof nor the legality, validity or enforceability of
such provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
32. Notices
32.1 Communications in Writing Each communication to be made hereunder shall
be made in writing and, unless otherwise stated, shall be made by fax, telex
or letter Provided that the Borrower shall indemnify each of the Agent, the
Managers and the Banks against any cost, claim, loss, expense (including legal
fees) or liability together with any VAT thereon which any of them may sustain
or incur as a consequence of any telefax communication originating from the
Borrower not being actually received by or delivered to the intended recipient
thereof or any telefax communication purporting to originate from the Borrower
being made or delivered fraudulently.
32.2 Delivery Any communication or document to be made or delivered by one
person to another pursuant to this Agreement shall (unless that other person
has by fifteen days' written notice to the Agent specified another address) be
made or delivered to that other person at the address identified with its
signature below (or, in the case of a Transferee, at the end of the Transfer
Certificate to which it is a party as Transferee) and shall be deemed to have
been made or delivered when despatched (in the case of any communication made
by fax or telex) or (in the case of any communication made by letter) when
left at that address or (as the case may be) ten days after being deposited in
the post postage prepaid in an envelope addressed to it at that address
Provided that any communication or document to be made or delivered to the
Agent shall be effective only when received by the Agent and then only if the
same is expressly marked for the attention of the department or officer
identified with the Agent's signature below (or such other department or
officer as the Agent shall from time to time specify for this purpose).
32.3 English Language Each communication and document made or delivered by
one party to another pursuant to this Agreement shall be in the English
language or accompanied by a translation thereof into English certified (by an
officer of the person making or delivering the same) as being a true and
accurate translation thereof.
32.4 Copies to ADT, Inc.A notice to the Borrower or any other Group Obligor
shall be copied to ADT, Inc. at the address specified below (or such other
address as may be specified with 15 days' written notice) provided that
failure to provide such a copy to ADT, Inc. shall not in any way whatsoever
prejudice the validity of the communication to the Borrower or such other
Group Obligor:
ADT, Inc.
PO Box 5035
Boca Raton
Florida 33431-0385
USA
Attention: General Counsel
Fax No: 00 1 561 988 3892
33. Amendments
33.1 Amendment Procedures The Agent shall if it has the prior written
consent of an Instructing Group and the Borrower, from time to time agree in
writing to amend the Finance Documents or to waive, prospectively or
retrospectively, any of the requirements of the Finance Documents and any
amendments or waivers so agreed shall be binding on all the Banks, the
Arranger and the Obligors Provided that:
(a) no such waiver or amendment shall subject any party hereto to any
new or additional obligations without the consent of such party;
(b) without the prior written consent of any Bank affected thereby, no
such amendment or waiver shall:
(i) reduce the proportion of any amount received or
recovered (whether by way of set-off, combination of
accounts or otherwise) in respect of any amount due
from the Borrower hereunder to which any Bank is
entitled;
(ii) change the principal amount of or currency of any Term
Advance, or defer any Repayment Date; or
(iii) change the Margin, change the amount or currency or
defer the date for any payment of interest, fees or
any other amount payable hereunder to all or any of
the Agent, the Arranger and the Banks;
(c) without the prior written consent of all the Banks, no such
amendment or waiver shall:
(i) amend or waive any provision relating to the rate of
interest applicable to any Term Advance under Part 3
(Interest), the release of a Group Guarantor other
than in accordance with the terms of Clause 20
(Guarantee and Indemnity), Clause 25 (Sharing) or this
Clause 33;
(ii) amend the definition of Instructing Group; or
(iii) amend any provision which contemplates the need for
the consent or approval of all the Banks; and
(d) notwithstanding any other provisions hereof, the Agent shall not
be obliged to agree to any such amendment or waiver if the same
would:
(i) amend or waive any provision of this Clause 33, Clause
27 (Costs and Expenses) or Part 11 (Agency
Provisions); or
(ii) otherwise amend or waive any of the Agent's rights
hereunder or subject the Agent or the Arranger to any
additional obligations hereunder.
33.2 Amendment Costs If any Obligor requests any amendment or waiver in
accordance with Clause 33.1 (Amendment Procedures) then the Borrower shall, on
demand of the Agent, reimburse the Agent and the Arranger for reasonable costs
and expenses (including legal fees) together with any VAT thereon incurred by
the Agent and the Arranger in responding to or complying with such request.
34. Counterparts
This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same Agreement.
35. Law
This Agreement shall be governed by, and shall be construed in
accordance with, English law.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
THE FIRST SCHEDULE
The Banks
Part 1
Term Banks
Bank Term Commitment (Pound Sterling)
The Bank of Montreal 15,000,000
The Bank of Nova Scotia 20,000,000
The Fuji Bank, Limited 15,000,000
Midland Bank plc 10,000,000
NationsBank N.A. 15,000,000
Credit Lyonnais 10,000,000
Part 2
Overdraft Bank
Bank Overdraft Commitment ( Pound Sterling)
Midland Bank plc 5,000,000
THE SECOND SCHEDULE
Form of Transfer Certificate
To: The Bank of Nova Scotia
TRANSFER CERTIFICATE
relating to the agreement (as from time to time amended, varied, novated or
supplemented, the "Facility Agreement") dated 17 March 1997 whereby a Pound
Sterling85,000,000 term and a Pound Sterling5,000,000 overdraft facility was
made available to ADT Finance plc as borrower under the guarantee of ADT
Limited and others as guarantors by a group of banks on whose behalf The Bank
of Nova Scotia acted as agent in connection therewith.
1. Terms defined in the Facility Agreement shall, subject to any contrary
indication, have the same meanings herein. The terms Bank, Transferee, Bank's
Participation and Amount Transferred are defined in the schedule hereto.
2. The Bank confirms that the Bank's Participation is an accurate summary
of its participation in the Facility Agreement and requests the Transferee to
accept and procure the transfer to the Transferee of a percentage of the
Bank's Participation (equal to the percentage that the Amount Transferred is
of the aggregate of the component amounts (as set out in the schedule hereto)
of the Bank's Participation) by counter-signing and delivering this Transfer
Certificate to the Agent at its address for service of notices specified in
the Facility Agreement.
3. The Transferee hereby requests the Agent to accept this Transfer
Certificate as being delivered to the Agent pursuant to and for the purposes
of Clause 29.5 (Transfers by Banks) of the Facility Agreement so as to take
effect in accordance with the terms thereof on the Transfer Date or on such
later date as may be determined in accordance with the terms thereof.
4. The Transferee confirms that it has received a copy of the Facility
Agreement together with such other information as it has required in
connection with this transaction and that it has not relied and will not
hereafter rely on the Bank to check or enquire on its behalf into the
legality, validity, effectiveness, adequacy, accuracy or completeness of any
such information and further agrees that it has not relied and will not rely
on the Bank to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or nature of the
Borrower or the Guarantors.
5. The Transferee hereby undertakes with the Bank and each of the other
parties to the Facility Agreement that it will perform in accordance with
their terms all those obligations which by the terms of the Facility Agreement
will be assumed by it after delivery of this Transfer Certificate to the Agent
and satisfaction of the conditions (if any) subject to which this Transfer
Certificate is expressed to take effect.
6. The Bank makes no representation or warranty and assumes no
responsibility with respect to the legality, validity, effectiveness, adequacy
or enforceability of the Facility Agreement or any document relating thereto
and assumes no responsibility for the financial condition of the Borrower or
the Guarantors or for the performance and observance by the Borrower or the
Guarantors of any of its obligations under the Facility Agreement or any
document relating thereto and any and all such conditions and warranties,
whether express or implied by law or otherwise, are hereby excluded.
7. The Bank hereby gives notice that nothing herein or in the Facility
Agreement (or any document relating thereto) shall oblige the Bank to (a)
accept a re-transfer from the Transferee of the whole or any part of its
rights, benefits and/or obligations under the Facility Agreement transferred
pursuant hereto or (b) support any losses directly or indirectly sustained or
incurred by the Transferee for any reason whatsoever including the
non-performance by the Borrower, the Guarantors or any other party to the
Facility Agreement (or any document relating thereto) of its obligations under
any such document. The Transferee hereby acknowledges the absence of any such
obligation as is referred to in (a) or (b) above.
8. The Transferee represents that it is either (a) a bank for the purposes
of section 840A of the Taxes Act 1988 and that it will be beneficially
entitled to, and within the charge to corporation tax as regards, any interest
it will receive following this transfer or (b) a Double Tax Treaty Bank.
9. This Transfer Certificate and the rights, benefits and obligations of
the parties hereunder shall be governed by and construed in accordance with
English law.
THE SCHEDULE
1. Bank:
2. Transferee:
3. Transfer Date:
4. Bank's Participation:
Bank's Term Commitment Portion Transferred
Bank's Overdraft Commitment Portion Transferred
100%
5. Amount Transferred:
Term Advances:
Amount of Bank's Participation Portion Transferred
Overdraft Facility:
Amount of Bank's Participation Portion Transferred
100%
[Transferor Bank] [Transferee Bank]
By: By:
Date: Date:
Administrative Details of Transferee
Address:
Contact Name:
Account for Payments:
Telex:
[Fax:]
Telephone:
THE THIRD SCHEDULE
Condition Precedent Documents
A. Corporate Documents
1. In relation to each of the Obligors:
(a) a copy, certified a true copy by a duly authorised officer of such
Obligor, of the constitutional documents of such Obligor;
(b) a copy, certified a true copy by a duly authorised officer of such
Obligor, of a board resolution of such Obligor approving the
execution, delivery and performance of the Finance Documents to
which it is a party and the terms and conditions thereof and
authorising a named person or persons to sign the Finance
Documents to which it is a party and any documents to be delivered
by such Obligor pursuant thereto; and
(c) a certificate of a duly authorised officer of such Obligor setting
out the names and signatures of the persons authorised to sign, on
behalf of such Obligor, the Finance Documents to which it is a
party and any documents to be delivered by such Obligor pursuant
thereto.
2. Group Structure List.
B. Financial Information
1. A copy, certified a true copy by a duly authorised officer of the
Borrower, of the Original Financial Statements of the Borrower.
2. A copy, certified a true copy by a duly authorised officer of the
relevant Initial Guarantor (other than the Parent) and Automated Security
(Holdings) plc of the Original Financial Statements of each of the Initial
Guarantors (other than the Parent) and Automated Security (Holdings) plc.
3. A copy, certified a true copy by a duly authorised officer of the Group
Parent, of the audited financial statements of the Group Parent for its
financial year ended 31 December 1995.
C. Miscellaneous Matters
1. Certificate from a director of the Parent confirming that the Group
Obligors account for at least 90% of the consolidated gross revenues of the
Group and at least 90% of the consolidated gross assets of the Group.
2. Document setting out Agreed Subordination Conditions.
3. Subordination agreements in respect of Subordinated Intragroup
Indebtedness outstanding as at the date hereof.
4. A certificate from a director of the Group Parent confirming that no
waivers are necessary under the guarantee issued by the Group Parent on 9
January 1997 (in respect of the US$200 million Credit Facility) and related
facility documentation.
D. Credit Support
1. The Group Parent Guarantee duly executed.
2. Certificate from a director of the Parent confirming that the Term
Facility will be used inter alia to repay on or before the Closing Date
the Pound Sterling15,000,000 outstanding under the on-demand facility
letter dated 3 January 1997 between the Agent and the Borrower.
E. Legal Opinions
Legal Opinions, dated the Closing Date, of:
(i) Appleby, Spurling & Kempe, Bermuda counsel to ADT Limited;
(ii) Clifford Chance, UK counsel to the Agent; and
(iii) such other legal opinions as the Agent may reasonably
request.
THE FOURTH SCHEDULE
Notice of Drawdown
From: ADT Finance Plc
To: The Bank of Nova Scotia
Dated:
Dear Sirs,
1. We refer to the agreement (as from time to time amended, varied, novated
or supplemented, the "Facility Agreement") dated 17 March 1997 and made
between ADT Finance Plc as borrower, ADT (UK) Holdings plc and others as
guarantors, The Bank of Nova Scotia as arranger and as agent and the financial
institutions named therein as banks. Terms defined in the Facility Agreement
shall have the same meaning in this notice.
2. We hereby give you notice that, pursuant to the Facility Agreement and
on [date of proposed Term Advance], we wish to borrow a Term Advance in the
amount of Pound Sterling[ ] upon the terms and subject to the conditions
contained therein.
3. The initial Interest Period of the Term Advance should be
months.
4. We confirm that, at the date hereof, the representations set out in
Clause 15 (Representations) (other than those in Clause 15.7, 15.10, 15.11 and
15.12) of the Facility Agreement are true and no Event of Default or Potential
Event of Default has occurred and is continuing unwaived.
4. The proceeds of this drawdown should be credited to [insert account
details].
Yours faithfully
.............................
for and on behalf of
ADT Finance Plc
THE FIFTH SCHEDULE
Associated Costs Rate
1. For the purposes of this Agreement, the cost of compliance with existing
requirements of the Bank of England in respect of Term Advances denominated in
sterling will be calculated by the Agent in relation to each Term Advance on
the basis of rates to be supplied by each of the Reference Banks by reference
to the circumstances existing on the first day of each Interest Period in
respect of such Term Advance and, if any such Interest Period exceeds three
months, at three calendar monthly intervals from the first day of such
Interest Period during its duration in accordance with the following formula:
AB + C(B - E) + D(B - F) per cent. per annum
100 - (A + D)
Where:
A is the percentage of eligible liabilities which such Reference
Bank is from time to time required to maintain as an interest free
cash deposit with the Bank of England to comply with cash ratio
requirements.
B is the percentage rate per annum at which sterling deposits are
offered by such Reference Bank, in accordance with its normal
practice, for a period equal to (a) the relevant Interest Period
(or, as the case may be, remainder of such Interest Period) in
respect of the relevant Term Advance or (b) three months,
whichever is the shorter, to a leading bank in the London
Interbank Market at or about 11.00 a.m. (London time) in a sum
approximately equal to the amount of such Term Advance.
C is the percentage of eligible liabilities which such Reference
Bank is from time to time required by the Bank of England to
maintain as secured money with members of the London Discount
Market Association ("LDMA") and/or as secured call money with
money brokers and gilt edged market makers.
D is the percentage of eligible liabilities which such Reference
Bank is required from time to time to maintain as interest bearing
special deposits with the Bank of England.
E is the percentage rate per annum at which members of the LDMA are
offered sterling deposits in a sum approximately equal to the
amount of the relevant Term Advance as a callable fixture from
such Reference Bank for such period as determined in accordance
with B above at or about 11.00 a.m. (London time).
F is the percentage rate per annum payable by the Bank of England to
such Reference Bank on interest bearing special deposits.
2. For the purposes of this Schedule "eligible liabilities" and "special
deposits" shall bear the meanings ascribed to them from time to time by the
Bank of England.
3. The percentages used in A, C and D above shall be those required to be
maintained on the first day of the relevant period as determined in accordance
with B above.
4. In application of the above formula, A, B, C, D, E and F will be
included in the formula as figures and not as percentages e.g. if A is 0.5 per
cent. and B is 12 per cent., AB will be calculated as 0.5 x 12 and not as 0.5
per cent. x 12 per cent.
5. Calculations will be made on the basis of a 365 day year (or, if market
practice differs, in accordance with market practice).
6. A negative result obtained by subtracting E from B or F from B shall be
taken as zero.
7. The arithmetic mean of the resulting figures for each Reference Bank
shall be calculated and shall then be rounded upwards, to five decimal places.
8. Additional amounts calculated in accordance with this Schedule are
payable on the last day of the Interest Period to which they relate.
9. The determination of the Associated Costs Rate by the Agent in relation
to any period shall, in the absence of manifest error, be conclusive and
binding on all of the parties hereto.
10. The Agent may from time to time, after consultation with the Borrower
and the Banks, determine and notify to all the parties hereto any amendments
or variations which are required to be made to the formula set out above in
order to comply with any requirements from time to time imposed by the Bank of
England in relation to Term Advances denominated in sterling (including any
requirements relating to sterling primary liquidity) and, any such
determination shall, in the absence of manifest error, be conclusive and
binding on all the parties hereto.
THE SIXTH SCHEDULE
Existing US Subsidiaries
Automated Security Corp (Delaware)
Sonitrol Management Corp
Mid-Atlantic Security, Inc.
Sonitrol Corp
Arius Inc. (Delaware)
Automated Security Holdings Inc.
API Security Inc.
THE SEVENTH SCHEDULE
Accession Agreement
THIS ACCESSION AGREEMENT is made on the [ ] day of [
], 19 [ ]
BETWEEN
(1) ADT (UK) Holdings plc on behalf of itself and as agent for and on behalf
of the Obligors (the "Parent");
(2) [Additional Guarantor] (the "Additional Guarantor"); and
(3) The Bank of Nova Scotia on behalf of itself as agent and on behalf of
the Arranger and the Banks (the "Agent").
WHEREAS
[(1)] By an agreement [together with the supplemental agreements referred to
in (2) below,] the "Facility Agreement") dated 17 March, 1997 pursuant
to which term and overdraft facilities were made available to the
Borrower named therein by a group of banks on whose behalf the Agent
acted as agent in connection therewith;
[(2)] The Facility Agreement has been supplemented by, inter alia, the
following agreements:
[List of Accession Agreements]; and
(3) Pursuant to Clause 3 of the Facility Agreement, the Parent wishes to
designate the Additional Guarantor as a guarantor.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
Save as otherwise defined herein, terms defined in the Facility Agreement
shall bear the same meaning herein.
2. Additional Guarantor
The Additional Guarantor hereby irrevocably and unconditionally guarantees in
the terms of Clause 20 of the Facility Agreement as if that Clause were set
out in full in this Agreement mutatis mutandis.
The Facility Agreement shall henceforth be read and construed as if the
Additional Guarantor were party to the Facility Agreement having all the
rights and obligations of a Guarantor thereunder and all references to
"Guarantors", "Additional Guarantors" "Group Obligor" and "Obligor" shall be
construed accordingly.
3. Conditions Precedent
The following are the conditions precedent referred to in Clause 2 hereof
which are required to be delivered to the Agent in relation to the Additional
Guarantor:
3.1 [Corporate Authorisations]
3.2 [Government or other consents (in the case of a non-UK Additional
Guarantor)]
3.3 [other documents or evidence (in the case of a non-UK Additional
Guarantor)]
3.4 [legal opinions]
4. Representations
[Appropriate representations to be agreed](1)
- ----------
(1) The Agent may stipulate reasonable representations having regard to the
provisions of Clause 15 and the jurisdiction of incorporation of the
Additional Guarantor.
5. Guarantors
Each of the Guarantors acknowledge, confirm and agree that their obligations
set out in Part 7 of the Facility Agreement shall not be reduced, discharged
or in any way impaired by the accession of the Additional Guarantor.
6. Counterparts
This Agreement may be signed in counterparts, all of which taken together
shall constitute a single agreement.
7. Law
This Agreement shall be governed by, and construed in accordance with, English
law.
[8. Jurisdiction (Only in the case of a non-UK Additional Guarantor)]
8.1 English Courts The Additional Guarantor irrevocably agrees for the
benefit of each of the Agent, the Arranger and the Banks that the courts of
England shall have jurisdiction to hear and determine any suit, action or
proceedings, and to settle any disputes, which may arise out of or in
connection with the Finance Documents (respectively "Proceedings" and
"Disputes") and, for such purposes, irrevocably submits to the jurisdiction of
such courts.
8.2 Appropriate Forum The Additional Guarantor irrevocably waives any
objection which it might now or hereafter have to the courts referred to in
Clause 8.1 (English Courts) being nominated as the forum to hear and determine
any Proceedings and to settle any Disputes and agrees not to claim that any
such court is not a convenient or appropriate forum.
8.3 Service of Process The Additional Guarantor agrees that the process by
which any Proceedings are begun may be served on it by being delivered in
connection with any Proceedings in England, to [ ] at [ ]
or other its registered office for the time being. If the appointment of the
person mentioned in this Clause 8.3 ceases to be effective in respect of the
Additional Guarantor, the Additional Guarantor shall immediately appoint a
further person in England to accept service of process on its behalf in
England and, failing such appointment within 15 days, the Agent shall be
entitled to appoint such a person by notice to the Additional Guarantor.
Nothing contained herein shall affect the right to serve process in any other
manner permitted by law.
8.4 Non-exclusive Submission The submission to the jurisdiction of the
courts referred to in Clause 8.1 (English Courts) shall not (and shall not be
construed so as to) limit the right of the Agent, the Arranger and the Banks
or any of them to take Proceedings against the Additional Guarantor in any
other court of competent jurisdiction nor shall the taking of Proceedings in
any one or more jurisdictions preclude the taking of Proceedings in any other
jurisdiction (whether concurrently or not) if and to the extent permitted by
applicable law.
8.5 Waiver of Immunity To the extent that the Additional Guarantor may in
any jurisdiction claim for itself or its assets immunity from suit, execution,
attachment (whether in aid of execution, before judgment or otherwise) or
other legal process and to the extent that in any such jurisdiction there may
be attributed to itself or its assets such immunity (whether or not claimed),
the Additional Guarantor hereby irrevocably agrees not to claim and hereby
irrevocably waives such immunity to the full extent permitted by the laws of
such jurisdiction.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
The Parent
for itself and on behalf of each Group Obligor
[ADT (UK) HOLDINGS PLC]
By:
The Additional Guarantor
[ ]
By:
The Agent
THE BANK OF NOVA SCOTIA
By:
THE EXHIBIT
Form of Compliance Certificate
COMPLIANCE CERTIFICATE
ADT (UK) Holdings plc
This Compliance Certificate is delivered pursuant to Clause 16.3 of the
Facility Agreement, dated 17 March, 1997 (together with all amendments and
other modifications, if any, from time to time thereafter made thereto, the
"Facility Agreement"), between ADT Finance plc (the "Borrower"), ADT (UK)
Holdings plc and others as guarantors, various financial institutions
(collectively, the "Banks") and The Bank of Nova Scotia as the Agent and the
Arranger for the Banks.
Unless otherwise defined herein or the context otherwise requires, terms used
herein or in any of the Attachments hereto have the meanings provided in the
Facility Agreement and where not so defined, the Guarantee of ADT Limited,
dated as of [ ] March 1997 (the "ADT Limited Guarantee").
This Compliance Certificate is delivered in connection with the
Financial Quarter commencing on [ ] and ending on [
] (such latter date being the "Computation Date"). ADT (UK) Holdings
plc hereby certifies, represents and warrants that:
(a) Net Worth of the Borrower
As of the Financial Year ending [ ], Net Worth of the Borrower
was Pound Sterling[ ] (calculated by reference to the annual
statements delivered pursuant to Clause 16.1). The minimum level of Net
Worth of the Borrower required by Clause 17.1 of the Facility Agreement
as of such date is Pound Sterling300,000,000.
(b) EBITDA
EBITDA for the four consecutive Financial Quarters ending on the
Computation Date was Pound Sterling[ ] (calculated by
reference to the statements delivered pursuant to Clause 16.2 and Clause
16.1). The minimum EBITDA required by Clause 17.2 of the Facility
Agreement for such period is Pound Sterling[ ].
(c) Event of Default or Potential Event of Default
As of the Computation Date, no Event of Default or Potential Event of
Default has occurred or is continuing/*
As of the Computation Date, the following Event of Default or Potential
Event of Default has occurred or is continuing*
[Insert details below]
IN WITNESS WHEREOF, the undersigned has caused this Compliance
Certificate to be delivered by the duly authorised chief financial
officer*/finance director* this [ ] day of [ ].
ADT (UK) HOLDINGS PLC
By:...................................
Title:
*(Delete as applicable)
The Borrower
ADT FINANCE PLC
By: TW GODFRAY
DIRECTOR
Address: 19/21 Denmark Street
Wokingham
Berkshire
RG40 2QE
Attention: Mr. T.W. Godfray
Fax: 01734 796622
The Initial Guarantors
ADT (UK) HOLDINGS PLC
By: TW GODFRAY
DIRECTOR
Address: 19/21 Denmark Street
Wokingham
Berkshire
RG40 2QE
Attention: Mr. T.W. Godfray
Fax: 01734 796622
MODERN SECURITY SYSTEMS LIMITED
By:
Address: 19/21 Denmark Street
Wokingham
Berkshire
RG40 2QE
Attention: Mr. T.W. Godfray
Fax: 01734 796622
ADT GROUP PLC
By: TW GODFRAY
DIRECTOR
Address: 19/21 Denmark Street
Wokingham
Berkshire
RG40 2QE
Attention: Mr. T.W. Godfray
Fax: 01734 796622
ELECTRIC PROTECTION SERVICES LIMITED
By: TW GODFRAY
DIRECTOR
Address: 19/21 Denmark Street
Wokingham
Berkshire
RG40 2QE
Attention: Mr. T.W. Godfray
Fax: 01734 796622
The Arranger
THE BANK OF NOVA SCOTIA
By: JOHN HEEDS
Address: 33 Finsbury Square
London EC2A 1BB
Attention: Sue Ward/Marian Staples
Fax: 0171 826 5857
Tlx: 885188
The Agent
THE BANK OF NOVA SCOTIA
By: JOHN HEEDS
Address: 33 Finsbury Square
London EC2A 1BB
Attention: Sue Ward/Marian Staples
Fax: 0171 826 5857
Tlx: 885188
The Lead Managers
THE BANK OF NOVA SCOTIA
By: JOHN HEEDS
Address: 33 Finsbury Square
London EC2A 1BB
Attention: Sue Ward/Marian Staples
Fax: 0171 826 5857
Tlx: 885188
THE BANK OF MONTREAL
By: KANU MODI
Address: 430 Park Avenue
New York
New York
10022
Attention: Sarah Kim/Kanu Modi
Fax: 001 212 605 1454
Tlx:
THE FUJI BANK, LIMITED
By: RICHARD W. ALLEN
(SENIOR MANAGER CORPORATE FINANCE GROUP)
Address: River Plate House
7-11 Finsbury Circus
London EC2M 7DH
Attention: Martin Pasfield, Manager, Credit & Loans Dept.
Fax: 0171 588 1400
Tlx: 886352/886317
MIDLAND BANK PLC
By: PETER C. BULL
(CORPORATE BANKING MANAGER)
Address: P.O. Box 181
27-32 Poultry
London EC2P 2BX
Attention: The Manager, Corporate Support
Fax: 0171 260 4303
Tlx: 892572 Answerback: MIDIFT G
NATIONSBANK, N.A.
By: DAVID J. RIORDAN
Sr. VICE PRESIDENT
Address: New Broad Street House
35 New Broad Street
London EC2M 1NH
Attention: Nick Garrett
Fax: 0171 2828 6831
Tlx: 883181 NCNB G
The Managers
CREDIT LYONNAIS
By: CECILE VERROEST
CORPORATE BANKING MANAGER
Address: P.O. Box 81, Broadwalk House
5 Appold Street
London EC2A 2JP
Attention: Loans Administration Dept.
Credit Lyonnais CEPAC
30 Cannon Street
London EC4M 6YE
Fax: 0171 634 8353
Tlx: 885479 Answerback: CRELYOG
The Overdraft Bank
MIDLAND BANK PLC
By: PETER C. BULL
(CORPORATE BANKING MANAGER)
Address: P.O. Box 181
27-32 Poultry
London EC2P 2BX
Attention: The Manager, Corporate Support
Fax: 0171 260 4303
Tlx: 892572 Answerback: MIDIFT G
AJI$02$6.48
EXHIBIT 10.21
ADT LIMITED
GUARANTEE
in respect of a Pound Sterling90,000,000
facility made available to ADT Finance Plc
Clifford Chance
London
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS............................. 1
1.1. Certain Terms............................................... 1
1.2. Interpretation.............................................. 18
1.3. Facility Agreement Definitions.............................. 18
ARTICLE II
GUARANTEE PROVISIONS......................... 18
2.1. Guarantee................................................... 18
2.2. Continuing Security and Preservation of Rights.............. 19
2.3. Settlement Conditional...................................... 20
2.4. Deferral of ADT Limited's Rights............................ 20
2.5. [Intentionally Omitted]..................................... 21
2.6. Successors, Transferees and Assigns......................... 21
2.7. Payments Free and Clear of Taxes, etc....................... 21
2.8. Judgment.................................................... 22
2.9. Consent to Jurisdiction; Waiver of Immunities............... 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES.................... 24
3.1. Organisation, etc........................................... 24
3.2. Due Authorisation, Non-Contravention, etc................... 24
3.3. Government Approval, Regulation, etc........................ 24
3.4. Validity, etc............................................... 25
3.5. Financial Information....................................... 25
3.6. No Material Adverse Change.................................. 25
3.7. Litigation.................................................. 25
3.8. Ownership of Properties..................................... 25
3.9. Taxes....................................................... 25
3.10. Pension and Welfare Plans................................... 25
3.11. Environmental Warranties.................................... 26
3.12. Regulations G, U and X...................................... 27
3.13. No Defaults................................................. 27
3.14. Delivery of Organisational Chart............................ 27
3.15. Restricted Payment Basket Amount............................ 27
3.16. Guarantee Ranks Pari Passu.................................. 27
3.17. Seniority of the Obligations................................ 27
ARTICLE IV
COVENANTS, ETC............................ 28
4.1. Affirmative Covenants....................................... 28
4.1.1. Compliance with Laws, etc................................... 28
4.1.2. Maintenance of Properties................................... 28
4.1.3. Insurance................................................... 28
4.1.4. Books and Records........................................... 28
4.1.5. Environmental Covenant...................................... 29
4.1.6. Guarantee Supplements....................................... 29
4.1.7. Financial Information....................................... 32
4.2. Negative Covenants.......................................... 33
4.2.1. Business Activities......................................... 33
4.2.2. Indebtedness................................................ 34
4.2.3. Encumbrances................................................ 36
4.2.4. Financial Condition......................................... 37
4.2.5. Investments................................................. 38
4.2.6. Restricted Payments, etc.................................... 40
4.2.7. Capital Expenditures, etc................................... 43
4.2.8. [Intentionally Omitted.].................................... 43
4.2.9. Consolidation, Merger, etc.................................. 43
4.2.10. Asset Dispositions, etc..................................... 44
4.2.11. Modification of Certain Documents........................... 45
4.2.12. Transactions with Affiliates................................ 45
4.2.13. Negative Pledges, Restrictive Agreements, etc............... 45
4.2.14. Accounting Changes.......................................... 46
4.2.15. Ability to Amend; Restrictive Agreements.................... 46
4.2.16. [Intentionally Omitted.].................................... 47
4.2.17. Activities of Certain Subsidiaries.......................... 47
4.2.18. [Intentionally Omitted.].................................... 47
4.2.19. [Intentionally Omitted.].................................... 47
4.2.20. Any Action.................................................. 47
ARTICLE V
MISCELLANEOUS PROVISIONS...................... 47
5.1. Finance Document............................................ 47
5.2. Binding on Successors, Transferees and Assigns; Assignment.. 47
5.3. Amendments, etc............................................. 47
5.4. Addresses for Notices....................................... 48
5.5. No Waiver; Remedies......................................... 48
5.6. Captions.................................................... 48
5.7. Setoff...................................................... 48
5.8. Independence of Covenants................................... 48
5.9. Severability................................................ 48
5.10. Governing Law............................................... 48
THIS GUARANTEE (this "Guarantee"), dated as of 25 March 1997, made by ADT
LIMITED, a company organized under the laws of Bermuda ("ADT Limited"), in
favour of each of the Beneficiaries (as defined below),
WITNESSETH as follows:-
WHEREAS
(A) Pursuant to a Facility Agreement, dated as of 17 March 1997 (together
with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Facility Agreement"), among ADT Finance
plc (the "Borrower"), ADT (UK) Holdings plc and others as guarantors,
the financial institutions as are or may become parties thereto
(collectively, the "Banks"), The Bank of Nova Scotia as arranger and
agent (the "Agent"), for the Banks, the Banks have agreed to make
available to the Borrower the Facilities; and
(B) As a condition precedent to the making available of the Facilities under
the Facility Agreement, ADT Limited is required to execute and deliver
this Guarantee;
NOW, ADT Limited agrees, for the benefit of each of the Beneficiaries, as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms when used in this Guarantee,
including its preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms thereof):
"5 3/4% Preference Shares" means the 5 3/4% Convertible Cumulative Redeemable
Preference Shares, par value $1.00 per share, of ADT Limited.
"6% Preference Shares" means the 6% Convertible Cumulative Redeemable
Preference Shares 2002, par value $1.00 per share, of ADT Limited.
"ADT Finance Inc." means ADT Finance Inc., a Canadian corporation.
"ADT Limited" is defined in the preamble.
"Affiliate" of any person means any other person which, directly or
indirectly, controls, is controlled by or is under common control with such
person (excluding any trustee under or any committee with responsibility for
administering, any Plan). A person shall be deemed to "control" another
person if such person possesses, directly or indirectly power:
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies of
such other person whether by contract or otherwise.
"Agent" is defined in the first recital and includes each other person which
may be appointed as any successor agent pursuant to the Facility Agreement.
"Annual Limit" is defined in subclause (a)(i) of the definition of "Permitted
Business Acquisition" in Section 1.1.
"ASH Acquisition" means the acquisition of the entire Capital Stock of
Automated Security (Holdings) PLC.
"ASH Acquisition Date" means September 6, 1996.
"ASH Group" means Automated Security (Holdings) PLC and each of its
subsidiaries at the ASH Acquisition Date.
"ASH Transaction" means, collectively, (i) the acquisition by ADT Limited on
the ASH Acquisition Date of the entire Capital Stock of Automated Security
(Holdings) plc pursuant to a stock-for-stock exchange in which the
stockholders of Automated Security (Holdings) plc received Common Shares and
(ii) in connection with such acquisition, (A) the repayment of certain
Indebtedness of Automated Security (Holdings) plc and its subsidiaries and (B)
the guaranty by ADT Limited of certain Indebtedness of Automated Security
(Holdings) plc and its subsidiaries in an aggregate principal amount not
exceeding $70,000,000, which Indebtedness remained outstanding following such
acquisition, and the assumption by ADT Limited of certain obligations to
deliver Common Shares upon the conversion of such Indebtedness.
"Asset Sale" is defined in Section 4.2.10.
"Banks" is defined in the first recital.
"Beneficiaries" means, as the context may require, any Bank, or the Agent and
each of their respective successors, transferees and assigns.
"Borrower" is defined in the first recital.
"Business Acquisition" means the acquisition, by purchase or otherwise, of all
or substantially all of the assets (or any part of the assets constituting all
or substantially all of a business or line of business) of any person, whether
such acquisition is direct or indirect, including through the acquisition of
the business of, or Capital Stock of, such person.
"Capital Expenditures" means, with respect to any person for any period, the
sum (without duplication) of
(a) the excess of (i) the aggregate amount of all expenditures of such
person and its subsidiaries for fixed or capital assets made
during such period which, in accordance with GAAP, would be
classified as capital expenditures, over (ii) the aggregate amount
of net cash proceeds of Excluded Dispositions received by ADT
Limited or any subsidiary of ADT Limited during such period;
plus
(b) the aggregate amount of all Capitalised Lease Liabilities of such
person incurred during such period.
Provided that in the case of ADT Limited, to the extent that Capital
Expenditures of ADT Limited includes any Capital Expenditure made by the
ASH Group during the Pre-Acquisition Period, such Capital Expenditure of
the ASH Group shall not be included.
"Capitalised Lease Liabilities" means, with respect to any person, all
monetary obligations of such person or any of its subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP, would be
classified as capitalised leases, and for the purposes of this Guarantee and
each other Finance Document, the amount of such obligations shall be the
capitalised amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may
be terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, with a maturity of 180 days or less,
issued or directly and fully guaranteed by the United States
Government;
(b) commercial paper, with a maturity of 180 days or less, which is
issued by
(i) a corporation (other than an Affiliate of any Obligor)
organised under the laws of any state of the United
States or of the District of Columbia and rated A-1 or
better by Standard & Poor's or P-1 or better by
Moody's or
(ii) any Bank (or its holding company);
(c) any certificate of deposit or banker's acceptance, with a maturity
of 180 days or less, which is issued by either
(i) a commercial banking institution that is organised
under the laws of Canada, is a member of the Federal
Reserve System or is subject to regulation by the
F.R.S. Board, and has a combined capital and surplus
and undivided profits of not less than $500,000,000
(or the equivalent thereof in other currencies) and
(x) whose short term obligations are rated, at the
time as of which any such investment is made, A-1 or
better by Standard & Poor's or P-1 or better by
Moody's or (y) whose debt is rated, at the time as of
which any investment therein is made, A or better by
Standard & Poor's or A or better by Moody's, or
(ii) any Bank; or
(d) any money market deposit accounts issued or offered by any
commercial banking institution of the stature referred to in
clause (c)(i).
"Cash Flow" means, with respect to any person for any applicable period, the
excess of
(a) EBITDA of such person and its subsidiaries for such period;
over
(b) the sum for such period of
(i) all taxes computed on the basis of income (whether
local, foreign or otherwise), to the extent paid in
cash by such person and its subsidiaries on a
consolidated basis during such period;
plus
(ii) Capital Expenditures (other than Capital Expenditures
incurred in respect of any Business Acquisition
permitted under Section 4.2.5 or 4.2.9) of such person
and its subsidiaries paid by such person and its
subsidiaries during such period.
Provided that in the case of ADT Limited, to the extent that the Cash
Flow of ADT Limited includes Cash Flow of the ASH Group for the
Pre-Acquisition Period, such Cash Flow of the ASH Group shall not be
included.
"Cash Flow Coverage Ratio" means, with respect to any person at the end of any
Financial Quarter, the ratio computed for the period of four consecutive
Financial Quarters ending on the close of such Financial Quarter of
(a) Cash Flow of such person and its subsidiaries for such period
plus, to the extent deducted in determining such Cash Flow,
Capital Expenditures of such person and its subsidiaries paid by
such person and its subsidiaries during such period with Equity
Proceeds, so long as the Compliance Certificate delivered in
connection with the Financial Quarter in which such Capital
Expenditures were paid (or, for any such Financial Quarter ending
prior to the date hereof, the compliance certificate relating
thereto, which was delivered pursuant to the guarantee given by
ADT Limited in connection with either the US$300 million Credit
Facility or the US$200 million Credit Facility) indicated that
such Capital Expenditures were paid with Equity Proceeds and that
the aggregate amount of such Capital Expenditures did not exceed
the Equity Proceeds Amount (as determined immediately prior to the
making of such Capital Expenditures);
to
(b) Interest Expense of such person and its subsidiaries for such
period.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
modified from time to time.
"Common Shares" means the shares of common stock, par value $0.10 per share,
of ADT Limited.
"Compliance Certificate" means a certificate substantially in the form of the
Exhibit hereto.
"Controlled Group" means all members of a controlled group of corporations and
all members of a controlled group of traders or businesses (whether or not
incorporated) under common control which, together with ADT Limited, are
treated as a single employer under section 414(b) or 414(c) of the Code or
section 4001 of ERISA.
"Debt" means, with respect to any person, the sum (without duplication) of (i)
the outstanding and stated principal amount (or, in the case of Redeemable
Capital Stock, the liquidation preference) of the Indebtedness of such person
of the nature referred to in clauses (a), (b) (other than obligations relative
to letters of credit in support of trade obligations with an aggregate face
amount not exceeding $250,000 at any time outstanding), (c) and (g) of the
definition of "Indebtedness" and (ii) any Contingent Liabilities of such
person in respect of any type of Indebtedness described in the preceding
clause (i); provided that the amount of any Debt that is issued at a price
that is less than the stated principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in accordance with GAAP.
"Debt to Total Capitalisation Ratio" means, with respect to any person, the
ratio of:
(a) Debt of such person and its subsidiaries determined on a
consolidated basis;
to
(b) Total Capitalisation of such person.
"Dividended Note" means (i) the promissory note of ADT Security Services,
Inc., payable to ADT Operations, Inc. in the principal amount of
$432,214,964.80, which note was distributed by ADT Operations, Inc. to
Holdings Inc. on 31 December 1996, in the form of an assignment thereof,
together with (ii) the Subordination Agreement dated as of 9 January 1997,
among ADT Security Services, Inc., ADT Group plc (an indirect assignee of the
rights of Holdings Inc. under the Dividended Note) and The Bank of Nova Scotia
as the agent under the US$200 million Credit Facility.
"EBITDA" means, with respect to any person for any applicable period, Net
Income for such person and its subsidiaries for such period (excluding
therefrom (x) the effect of any extraordinary or other non-recurring gain
outside the ordinary course of business and (y) any write-up in the value of
any asset) plus, to the extent deducted in determining such Net Income for
such period, the aggregate amount of (i) Interest Expense, (ii) taxes computed
on the basis of income (whether local, foreign or otherwise), (iii) the
aggregate amount of depletion, depreciation and amortisation of tangible and
intangible assets, including amortisation of debt issuance cost and other
financing expenses incurred (A) prior to the Closing Date or (B) in connection
with entering into this Guarantee and the other Finance Documents and (iv)
without duplication, any write-off of the costs and expenses referred to in
the preceding clause (iii).
Provided that in the case of ADT Limited, to the extent that EBITDA of ADT
Limited includes EBITDA of the ASH Group for the Pre-Acquisition Period, such
EBITDA of the ASH Group shall not be included.
"Environmental Laws" means all applicable federal laws, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public
health and safety and protection of the environment.
"Equity Proceeds" means the cash proceeds referred to in clause (a) of the
definition of "Equity Proceeds Amount".
"Equity Proceeds Amount" means, with respect to any proposed Permitted
Business Acquisition in excess of the Annual Limit or any addition to Cash
Flow in respect of Capital Expenditures in connection with the computation of
the Cash Flow Coverage Ratio of ADT Limited,
(a) an amount equal to
(i) the aggregate net cash proceeds received by ADT Limited
after the Indenture Effective Date from the issuance or sale
(other than to a subsidiary of ADT Limited) of shares of its
Capital Stock (other than Redeemable Capital Stock) or
warrants, options or rights to purchase such shares of
Capital Stock (other than Redeemable Capital Stock),
plus
(ii) the aggregate net cash proceeds received by ADT Limited
after the Indenture Effective Date (other than from ADT
Operations, Inc. or any other subsidiary of ADT Limited)
upon the exercise of options, warrants or rights to purchase
shares of Capital Stock of ADT Limited (other than
Redeemable Capital Stock),
plus
(iii) the aggregate net cash proceeds received by ADT Limited
after 9 January 1997 from the issuance or sale (other than
to ADT Operations, Inc. or any other subsidiary of ADT
Limited) of debt securities or Redeemable Capital Stock that
have been converted into or exchanged for Capital Stock of
ADT Limited (other than Redeemable Capital Stock), together
with the aggregate cash received by ADT Limited at the time
of such conversion or exchange,
as decreased from time to time by
(b) (i) the amount of each Restricted Payment (as defined under the
Senior Note Indenture) made after ADT Limited shall have
received the cash proceeds referred to in the preceding
clause (a) which, pursuant to the terms of the Senior Note
Indenture, decreases the Restricted Payment Basket Amount;
provided that any such decrease to the Equity Proceeds
Amount shall not result in the Equity Proceeds Amount being
less than zero,
(ii) the amount expended after 23 August 1995 on Permitted
Business Acquisitions (other than the ASH Transaction to the
extent the aggregate consideration therefor did not exceed
$425,000,000) in excess of the Annual Limit (or, during the
effectiveness of the US$300 million Credit Facility, the
applicable Annual Limits (as defined under the US$300
million Credit Facility)), and
(iii) the amount of Capital Expenditures made after 23 August
1995 with the cash proceeds referred to in the preceding
clause (a) and designated as such pursuant to the Compliance
Certificate (including any compliance certificate delivered
under the guarantees given by ADT Limited in connection with
the US$300 million Credit Facility or the US$200 million
Credit Facility) delivered in connection with the Financial
Quarter in which such Capital Expenditures were paid.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA also refer to any successor sections.
"Exchangeable Preference Shares" means the Exchangeable Cumulative Redeemable
Preference Shares 2005, par value $1.00 per share, of ADT Limited.
"Excluded Disposition" means any Asset Sale (a) of (i) motor vehicles
purchased by ADT Limited or any subsidiary of ADT Limited for use in the
ordinary course of its business (and not for purposes of resale) and (ii) real
estate that was previously used in the operations of any auto auction site,
which operations have not produced any revenue in the 12 months prior to such
transfer, or that was originally acquired in connection with the development
or proposed development of any auto auction site or real estate consisting of
any portion of any auto auction site that is not used in connection with the
operations of such auto auction site (in each case, "Auction Real Estate") to
the extent that, after giving effect to such transfers, the aggregate Fair
Market Value of all such Auction Real Estate transferred in any Financial Year
does not exceed $10,000,000 in the aggregate and (b) the proceeds of which are
within 12 months (or, in the case of Auction Real Estate, 18 months) after
such Asset Sale invested in assets and properties to replace the assets and
properties that were the subject of such Asset Sale or in assets and
properties that will be used in the Core Businesses.
"Facility Agreement" is defined in the first recital.
"Fair Market Value" means, with respect to any asset, the sale value that
would be obtained in an arm's-length transaction between an informed and
willing seller under no compulsion to sell and an informed and willing buyer.
"Foreign Subsidiary" means a subsidiary of ADT Limited that is organised and
existing under the laws of a jurisdiction other than the United States (or any
state thereof or the District of Columbia).
"F.R.S. Board" means the Board of Governors of the Federal Reserve System or
any successor thereto.
"GAAP" means generally accepted accounting principles in the United States of
America from time to time consistently applied on a basis consistent with the
audited financial statements of ADT Limited or its relevant subsidiary.
"Guarantor Assets" means, in respect of each Guarantor which became a
Guarantor pursuant to the provisions of Section 4.1.6, an amount equal to the
aggregate of:
(i) the amount of cash received by such Guarantor in respect of the
transaction which resulted in such Guarantor being required to be
a Guarantor pursuant to Section 4.1.6 (whether in respect of an
Investment made by any member of the Group in it and/or such
Guarantor incurring Indebtedness from any member of the Group); and
(ii) 100% of the fair market value of any asset received by such
Guarantor as part of the transaction which resulted in such
Guarantor being required to be a Guarantor pursuant to Section
4.1.6 less the amount of cash paid or the fair market value of any
assets transferred by such Guarantor to the relevant disposing
entity in consideration therefor
Provided that in any calculation of the aggregate of (a) the consolidated
assets of the Group Obligors or, as the case may be, the Group and (b) the
Guarantor Assets, no item shall be taken into account more than once (by way
of illustration only, for example, if the Guarantor referred to in
sub-paragraph (i) above incurred Indebtedness from a member of the Group then
to the extent that such Indebtedness appears as an asset in the balance sheet
of such member of the Group, the amount referred to in sub-paragraph (i) above
shall be disregarded in such calculation).
"Hazardous Materials" means:
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation and
Recovery Act,;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended or hereafter amended.
"High Quality Investment" means, at any time:
(a) any certificate of deposit or bankers acceptance, with a maturity
of 180 days or less, which is issued by a commercial banking
institution that is organised under the laws of a country that is
a member of the Organisation for Economic Cooperation and
Development, or any political subdivision thereof, and has a
combined capital and surplus and undivided profits of not less
than $500,000,000 (or the equivalent thereof in other currencies)
and (i) whose short term obligations have a rating, at the time
any such Investment is made, of P-1 or better by Moody's or A-1 or
better by Standard & Poor's, (ii) whose debt is rated, at the time
any such Investment is made, A or better by Moody's or A or better
by Standard & Poor's or (iii) whose short term obligations or debt
is not so rated, so long as (A) such commercial banking
institution is (1) organised under the laws of a jurisdiction
other than the United Kingdom, the Channel Islands, Canada or the
United States (or any state thereof or the District of Columbia)
and (2) organised under the laws of the same jurisdiction as the
jurisdiction of incorporation of the subsidiary of ADT Limited
making such Investment and (B) such Investment is made for
ordinary course of business cash management purposes of such
subsidiary;
(b) any deposit accounts issued or offered by any commercial banking
institution of the stature referred to in the preceding clause
(a);
(c) any floating rate note issued by a financial institution or
corporation (other than an Affiliate of ADT Limited or any other
subsidiary of ADT Limited) organised and existing under the laws
of a country that is a member of the Organisation for Economic
Cooperation and Development, or any political subdivision thereof,
whose debt is rated, at the time any such Investment is made, A or
better by Moody's or A or better by Standard & Poor's;
(d) any medium term note, maturing not more than one year after the
date of the acquisition thereof, issued by a corporation (other
than an Affiliate of ADT Limited or any subsidiary of ADT Limited)
organised and existing under the laws of a country that is a
member of the Organisation for Economic Cooperation and
Development, or any political subdivision thereof, and with a
rating, as at the time such Investment is made, of A or better by
Moody's or A or better by Standard & Poor's;
(e) any debt instrument, maturing not more than one year after the
date of the acquisition thereof, issued by an entity (other than
an Affiliate of ADT Limited or any subsidiary of ADT Limited)
organised and existing under the laws of a country that is a
member of the Organisation for Economic Cooperation and
Development, or any political subdivision thereof, which is
secured by or represents an interest in a pool of mortgage
loans, credit card receivables or motor vehicle loans and with
a rating, as at the time such Investment is made, of A or
better by Moody's or A or better by Standard & Poor's; or
(f) any bond, maturing not more than one year after the date of the
acquisition thereof, issued by a corporation (other than an
Affiliate of ADT Limited or any subsidiary of ADT Limited)
organised and existing under the laws of a country that is a
member of the Organisation for Economic Cooperation and
Development, or any political subdivision thereof, and with a
rating, as at the time such Investment is made, of A or better
by Moody's or A or better by Standard & Poor's;
provided, however, that any such note, debt instrument or bond referred
to in the preceding clauses (c) through (f) is listed or admitted to
trading on a public exchange or reported on an over-the-counter market
or quotations system (whether within or outside the United States).
"Holdings Inc." means ADT Holdings, Inc., a Delaware corporation.
"Indebtedness" of any person means, without duplication, indebtedness in
respect of:
(a) all obligations of such person for borrowed money and all
obligations of such person evidenced by bonds, debentures, notes
or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such person;
(c) all obligations of such person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as
Capitalised Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such
person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such person under all Hedging Arrangements;
(f) whether or not so included as liabilities in accordance with GAAP,
all obligations of such person to pay the deferred purchase price
of property or services, and indebtedness (excluding prepaid
interest thereon) secured by an encumbrance on property owned or
being purchased by such person (including indebtedness arising
under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such
person or is limited in recourse;
(g) all obligations of such person relative to Redeemable Capital
Stock of such person (including accrued and unpaid dividends); and
(h) all Contingent Liabilities of such person in respect of any of the
foregoing.
For all purposes of this Agreement, the Indebtedness of any person shall
include the Indebtedness of any partnership or joint venture in which such
person is a general partner or a joint venturer.
"Indenture Effective Date" means 4 August 1993.
"Interest Expense" means, with respect to any person and its subsidiaries for
any applicable period, the sum of
(a) the aggregate consolidated gross interest expense of such person
and its subsidiaries for such period, as determined in accordance
with GAAP, including (i) facility fees paid or owed hereunder or
under the Facility Agreement, (ii) all other fees paid or owed
with respect to the issuance or maintenance of Contingent
Liabilities (including letters of credit), which, in accordance
with GAAP, would be included as interest expense, (iii) net costs
or benefits under Hedging Arrangements relating to Debt and (iv)
the portion of any payments made in respect of Capitalised Lease
Liabilities of such person and its subsidiaries allocable to
interest expense, but excluding the amortization or write-off of
debt issuance costs and other financing expenses incurred prior to
the Closing Date or in connection with the entering into of this
Guarantee and the other Finance Documents;
plus
(b) with respect to ADT Limited, dividends on the Preference Shares
during such period.
Provided that, in the case of ADT Limited, to the extent that the Interest
Expense of ADT Limited includes Interest Expense of the ASH Group for the
Pre-Acquisition Period, such Interest Expense of the ASH Group shall not be
included.
"Intermediate Parent Company" means any company (other than ADT Limited) in
respect of which the Parent is a subsidiary.
"Investment" means, relative to any person,
(a) any loan or advance made by such person to any other person;
(b) any Contingent Liability of such person with respect to any
indebtedness, obligation or other liability of any other person;
and
(c) any ownership or similar interest held by such person in any other
person, including any Minority Interest.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other person) and
shall, if made by the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal to
the Fair Market Value of such property.
"LYONs" means the Liquid Yield Option Notes due 2010 of ADT Operations, Inc
issued pursuant to the LYONs Indenture and subordinated by its terms to the US
Credit Facility Obligations and the Indebtedness in respect of the Senior
Notes and the Senior Subordinated Notes (as the same may be amended,
supplemented, amended and restated or otherwise modified from time to time).
"LYONs Guarantee" means the subordinated guarantee of ADT Limited set forth in
the guarantee provisions of the LYONs Indenture.
"LYONs Indenture" means the indenture dated as of 1 July, 1995 among ADT
Operations, Inc., ADT Limited and Bank of Montreal Trust Company as trustee
(as the same may be amended, supplemented, amended and restated or otherwise
modified from time to time).
"Material Related Party" means each Obligor and each subsidiary of ADT Limited
that would satisfy the threshold set forth in clause (b) or (c) of the
definition of "Material Subsidiary" (whether or not organized and existing in
the United States (or any state thereof or the District of Columbia)).
"Material Subsidiary" means each subsidiary of ADT Limited organised and
existing under the laws of the United States (or any state thereof or the
District of Columbia), that
(a) [intentionally omitted];
(b) accounted for at least 5% of the consolidated gross revenues of
ADT Limited and its subsidiaries for the most recently completed
Financial Quarter with respect to which, pursuant to Section
4.1.7, financial statements have been, or are required to have
been, delivered by ADT Limited on or before the date as of which
any such determination is made, as reflected in such financial
statements; or
(c) has assets which represent at least 5% of the consolidated gross
assets of ADT Limited and its subsidiaries as of the last day of
the most recently completed Financial Quarter with respect to
which, pursuant to Section 4.1.7, financial statements have been,
or are required to have been, delivered by ADT Limited on or
before the date as of which any such determination is made, as
reflected in such financial statements.
"Minority Interest" means any equity or other beneficial ownership interest,
whether in the form of Capital Stock or otherwise, held directly or indirectly
by any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) in another person and, as a result of which, such person
or group, as the case may be, does not "control" (as such term is used in
connection with clause (b) of the definition of "Affiliate") such other person.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means with respect to any person and its subsidiaries for any
applicable period, the aggregate of all amounts which, in accordance with
GAAP, would be included as net income (or net loss) on a consolidated
statement of income of such person and its subsidiaries for such period
provided that, in the case of ADT Limited, to the extent that the Net Income
of ADT Limited includes Net Income of the ASH Group for the Pre-Acquisition
Period, such Net Income of the ASH Group shall not be included.
"Non-Voting Exchangeable Shares" means the Non-Voting Exchangeable Shares,
Series A, of ADT Finance Inc., a Canadian corporation.
"Pension Plan" means a "pension plan", as such term is defined in section 3(2)
of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which ADT Limited or
any corporation, trade or business that is, along with ADT Limited a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the remaining of section 4063 of
ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA.
"Permitted Auction Business Sale" means an Asset Sale consisting of the sale
of the Capital Stock of any subsidiary of ADT Operations, Inc. which is
primarily engaged, directly or through its direct or indirect subsidiaries, in
the business of auctioning or otherwise distributing vehicles in the United
States held on a consignment or similar basis or the sale of assets (other
than Capital Stock) which are and have been used in such business, to the
extent (i) such Asset Sale is for not less than the Fair Market Value of the
assets (including Capital Stock) sold (as determined in good faith by the
Board of Directors of ADT Limited or a committee thereof, whose
determination shall be evidenced by certified written resolution of such
Board or such committee) and the consideration received by ADT Operations,
Inc. or the relevant subsidiary in respect of such Asset Sale consists of
at least 75% cash (including any cash proceeds received from the sale of
securities received in such Asset Sale, provided that at the time of such
Asset Sale, ADT Operations, Inc. or the relevant subsidiary has entered
into a legally binding agreement for the sale of such securities and such
securities are sold within sixty days of such Asset Sale), or Cash
Equivalent Investments, and (ii) such Asset Sale does not include assets
primarily used in a Core Business other than the distributing of vehicles
in the United States held on a consignment or similar basis unless the sale
or other transfer of such assets in a separate transaction would be
permitted hereunder (it being acknowledged by the parties hereto that if
such transaction would not otherwise be permitted unless within a "basket"
amount, such as the amount set forth in clause (d) of Section 4.2.10, the
amount of such transaction shall be applied against each such basket).
"Permitted Business Acquisition" means any Business Acquisition of a Core
Business, exclusive, however, of (i) acquisitions of Minority Interests and
(ii) acquisitions of Capital Stock in any Related Business, so long as
(a) the aggregate amount of expenditures of ADT Limited and its
subsidiaries in respect of such Business Acquisition (such amount,
the "Subject Amount"), when added to the aggregate amount of all
expenditures of ADT Limited and its subsidiaries in respect of
Business Acquisitions during the Financial Year in which such
Subject Amount would be expended, does not exceed the sum of (i)
$130,000,000 (the "Annual Limit") and (ii) the Equity Proceeds
Amount, as determined immediately prior to the making of such
expenditure, and
(b) in the event the Subject Amount (which amount shall include, in
the event such Business Acquisition is to be consummated in a
series of related transactions, the aggregate amount of all
expenditures of ADT Limited and its subsidiaries in respect of
such related transactions) would exceed $50,000,000, the Agent
shall have received a certificate executed by the chief financial
authorized officer of ADT Limited certifying and, if reasonably
requested by the Agent, showing (in reasonable detail and with
appropriate calculations and computations in all respects
reasonably satisfactory to the Agent) that on a historical pro
forma basis (after giving effect to such Business Acquisition and
all transactions related thereto (including all Indebtedness that
would be assumed or incurred as a result of such acquisition) and
all Business Acquisitions consummated prior thereto during the
applicable periods thereunder) as of the last day of the most
recently completed Financial Quarter with respect to which,
pursuant to Clause 16.1 or 16.2 of the Facility Agreement,
financial statements have been, or are required to have been,
delivered by the Parent, ADT Limited and the Borrower would be in
compliance with Section 4.2.4 and Clause 17 of the Facility
Agreement as of the last day of such Financial Quarter.
"Permitted Existing Business Activities" means as provided in Annex 1 to this
Guarantee.
"Permitted Strategic Holder" means any person (other than an Affiliate of ADT
Limited) whose purchase of Voting Stock is in the best interest of the
subsidiary whose Voting Stock is being purchased (as determined in good faith
by the Board of Directors of ADT Limited or a committee thereof, whose
determination shall be conclusive and evidenced by a certified written
resolution of such Board or committee).
"Permitted Strategic Sale" means a sale by any subsidiary of ADT Limited of
Voting Stock of any subsidiary (other than any Obligor or an Intermediate
Parent Company) to any Permitted Strategic Holder; provided, however, that (a)
after giving effect to such transaction, the aggregate percentage of the
Voting Stock of such subsidiary so sold shall not exceed 19% (or, in the case
of any subsidiary of an Intermediate Parent Company that is required to file a
consolidated tax return under United States Federal tax laws and regulations,
such lesser percentage as will not cause such subsidiary to become an
unconsolidated subsidiary under such laws and regulations) of all Voting Stock
of such subsidiary outstanding immediately after such sale and (b) the
consideration received in such sale (i) shall be 100% cash (including any cash
proceeds received from the sale of securities received in such Permitted
Strategic Sale, provided that at the time of such Permitted Strategic Sale,
ADT Limited or the relevant subsidiary has entered into a legally binding
agreement for the sale of such securities and such securities are sold within
60 days of such Permitted Strategic Sale) and (ii) shall be not less than the
Fair Market Value of the Voting Stock sold (as determined in good faith by the
Board of Directors of ADT Limited or a committee thereof, whose determination
shall be conclusive and evidenced by a certified written resolution of such
Board or committee).
"Plan" means any Pension Plan or Welfare Plan.
"Preference Shares" means the 5 3/4% Preference Shares and the 6% Preference
Shares.
"Pre-Acquisition Period" means the period prior to the ASH Acquisition Date.
"Process Agent" is the person identified in clause (d) of Section 2.9.
"Redeemable Capital Stock" means Capital Stock of ADT Limited or any other
subsidiary of ADT Limited that, either by its terms, by the terms of any
security into which it is convertible or exchangeable or otherwise, (i) is or
upon the happening of an event or passage of time would be required to be
redeemed (for consideration other than shares of common stock of ADT Limited)
on or prior to 31 March 2003, (ii) is redeemable at the option of the holder
thereof (for consideration other than shares of common stock of ADT Limited)
at any time prior to such date or (iii) is convertible into or exchangeable
for debt securities of ADT Limited or any of its subsidiaries at any time
prior to such anniversary.
"Release" means a "release" as such term is defined in CERCLA.
"Relevant ADT Group Member" means any member of the ADT Group:
(a) (i) which after 31 December 1996 has incurred, and at the
relevant time has outstanding, any Indebtedness from any
member of the Group or a Guarantor;
(ii) in which any member of the Group or a Guarantor has made any
Investment after 31 December 1996; or
(iii) which has received any asset (or interest therein) from any
member of the Group or a Guarantor after 31 December 1996
other than against payment in cash of the fair market value
thereof or by a transfer of assets whose fair market value
is at least equal to that of the asset (or interest therein)
so received;
(b) which is not a Guarantor;
(c) which is not ADT Operations, Inc. or a subsidiary of ADT
Operations, Inc. or a subsidiary of ADT Limited which conducts the
major portion of its business in the United States or
substantially all of the assets of which are located in the United
States; and
(d) which is not a member of the Group.
"Resource Conservation and Recovery Act" means the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq, as in effect from time to time.
"Restricted Distribution" is defined in Section 4.2.6(a).
"Restricted Payment Basket Amount" means, at any date, the amount available on
such date under clause (C) of Section 1012(a) of the Senior Note Indenture for
the making of Restricted Payments (as defined thereunder).
"Senior Note Guarantees" means the guarantees of ADT Limited and certain of
its subsidiaries set forth in the guarantee provisions of the Senior Note
Indenture and any additional guarantee of the Senior Notes executed pursuant
to the "Limitation on Issuances of Guarantees of Indebtedness and of
Incurrence of Indebtedness of Certain Restricted Subsidiaries" and the
"Limitation on Liens" covenants of the Senior Note Indenture.
"Senior Note Indenture" means the indenture dated 4 August, 1993 among ADT
Operations, Inc., the guarantors named therein and The Chase Manhattan Bank
(National Association) as trustee (as the same may be amended, supplemented,
amended and restated or otherwise modified from time to time).
"Senior Notes" means the 8 1/4% Senior Notes due 2000 of ADT Operations, Inc.
issued pursuant to the Senior Note Indenture (as the same may be amended,
supplemented, amended and restated or otherwise modified from time to time).
"Senior Subordinated Note Guarantees" means the subordinated guarantee of ADT
Limited set forth in the guarantee provisions of the Senior Subordinated Note
Indenture and any additional guarantee of the Senior Subordinated Notes
executed pursuant to the "Limitation on Liens" and the "Limitation on
Issuances of Guarantees of Indebtedness" covenants of the Senior Subordinated
Note Indenture.
"Senior Subordinated Note Indenture" means the indenture dated 4 August 1993
among ADT Operations, Inc. the guarantors named therein and Nations Bank of
Georgia, National Association, as trustee (as the same may be amended,
supplemented, amended and restated or otherwise modified from time to time).
"Senior Subordinated Notes" means the 9 1/4% Senior Subordinated Notes due
2003 of ADT Operations, Inc. issued pursuant to the Senior Subordinated Note
Indenture (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time).
"Standard & Poor's" means Standard & Poor's Ratings Group.
"Stockholders' Equity" means, with respect to any person at any date, on a
consolidated basis for such person and its subsidiaries, the excess of:
(a) (i) in the case of ADT Limited, the sum of common stock taken at
par value, share premium, contributed surplus, Non-Voting
Exchangeable Shares and retained earnings (or accumulated deficit)
of ADT Limited at such date or (ii) in the case of any other
person, the sum of common stock taken at par value, capital
surplus and retained earnings (or accumulated deficit) of such
person at such date;
over
(b) treasury stock of such person and, to the extent included in
clause (a) above, minority interests in subsidiaries of such
person at such date,
provided that, in the case of ADT Limited, to the extent that the Stockholders
Equity of ADT Limited includes retained earnings of the ASH Group as of the
ASH Acquisition Date (whether or not included in the determination of
"retained earnings" or its equivalent under UK GAAP) such retained earnings
shall not be included.
"Subordinated Debt" means all Indebtedness in respect of the Senior
Subordinated Notes, the Senior Subordinated Note Guarantees, the LYONs, the
LYONs Guarantee and all other Indebtedness of ADT Limited or any other
subsidiary of ADT Limited for money borrowed which is subordinated in right
of payment to the payment of the US Credit Facility Obligations.
"Subordinated Intercompany Debt" means unsecured Indebtedness (a) subordinated
to the US Credit Facility Obligations and (b) the terms of which (including
interest rate) are not more burdensome to the obligor or obligors thereunder
than those terms generally available from independent third parties to
obligors similarly situated as such obligor or obligors.
"Total Capitalisation" means, with respect to any person on any date, the sum
of
(a) Debt of such person and its subsidiaries at such date, determined
on a consolidated basis,
plus
(b) Stockholders' Equity of such person at such date.
"US Credit Facility Obligations" means all obligations (monetary or otherwise)
of ADT Operations, Inc. and each other Obligor (as defined in the US$200
million Credit Facility) arising under or in connection with the Loan
Documents and each Hedging Arrangement (both as defined in the US$200 million
Credit Facility).
"US$200 million Credit Facility" means a credit agreement dated 9 January 1997
between ADT Operations, Inc. as borrower and the Lenders as defined therein
which replaced the US$300 million Credit Facility including, any amendment,
amendment and restatement, refinancing, extension, renewal or replacement
thereof, to the extent any increase to the principal amount thereof does not
exceed US$500,000,000.
"US$300 million Credit Facility" means a credit agreement dated 23 August 1995
between ADT Operations, Inc. as borrower and the Lenders as defined therein,
replaced by the US$200 million Credit Facility.
"Voting Stock" means, with respect to any person, Capital Stock in respect of
the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers, trustees or other similar governing body of such
person (irrespective of whether or not at the time the Capital Stock of any
other class or classes shall have or might have voting power by reason of the
occurrence of any contingency).
"Welfare Plan" means a "welfare plan", as such term is defined in Section 3(1)
of ERISA.
"Wholly Owned Subsidiary" means
(a) with respect to any person, a subsidiary all the Capital Stock
(other than directors' qualifying shares that are required under
applicable law) of which is owned by such person or another Wholly
Owned Subsidiary of such person, and
(b) with respect to ADT Limited or any other direct or indirect parent
of ADT Finance Inc.,
(i) ADT Finance Inc., if and only if and for so long as,
the Capital Stock of ADT Finance Inc. consists
entirely of (A) Voting Stock, 100% of which is owned
directly or indirectly by ADT Limited, and (B) its
Non-Voting Exchangeable Shares, or
(ii) any successor corporation of ADT Finance Inc.
incorporated under the laws of Canada; provided that
the Capital Stock of such successor shall consist
entirely of (A) Voting Stock, 100% of which is owned
directly or indirectly by ADT Limited, and (B)
publicly-held, non-voting preferred stock (whether now
outstanding or from time to time issued) (1) in
respect of which dividends are payable only when a
dividend is payable by ADT Limited in respect of its
common stock, (2) that is convertible, exchangeable or
redeemable only for common stock of ADT Limited, (3)
that will entitle the holder thereof to participate in
any liquidation, dissolution or winding up of such
successor of ADT Finance Inc., whether voluntary or
involuntary, or any other distribution of assets of
such successor of ADT Finance Inc. among its
stockholders for the purpose of winding up its
affairs, to no greater extent than the extent to which
the holders of the Non-Voting Exchangeable Shares
would currently so participate and (4) the other terms
of which are not adverse to the Banks.
SECTION 1.2. Interpretation Any reference in this Guarantee, unless the
context otherwise requires, to :
the "assets" of any person shall be construed as a reference to the whole or
any part of its business, undertakings, property, accounts, receivables,
goodwill and shareholdings whether now or hereafter acquired and any other
assets whatsoever.
"subsidiary" means with respect to any person, (i) any corporation of which
more than 50% of the outstanding Voting Stock is at the time directly or
indirectly owned by such person or (ii) any partnership, joint venture or
other entity as to which such person, directly or indirectly, owns more than a
50% ownership, equity or similar interest or has the power to direct or cause
the direction of management and policies, or the power to elect the managing
general partner (or the equivalent), of such partnership, joint venture or
other entity, as the case may be.
SECTION 1.3. Facility Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, capitalised terms used in this Guarantee,
including its preamble and recitals, have the meanings provided in the
Facility Agreement.
ARTICLE II
GUARANTEE PROVISIONS
SECTION 2.1. Guarantee. In consideration of the Beneficiaries entering into
the Facility Agreement ADT Limited hereby:
(a) guarantees to the Agent as agent for the Banks the due and
punctual observance and performance by the Borrower of its
obligations under the Facility Agreement and promises to pay to
the Agent as agent for the Banks from time to time on demand all
sums from time to time due and payable (but unpaid) by the
Borrower under the Facility Agreement; and
(b) agrees as a primary obligation to indemnify the Agent as agent for
the Banks from time to time on demand from and against any loss
incurred by any of the Beneficiaries as a result of any of the
obligations of the Borrower under the Facility Agreement being or
becoming void, voidable, unenforceable or ineffective for any
reason whatsoever, whether or not known to the relevant
Beneficiaries, the amount of such loss being the amount which the
relevant Beneficiaries would otherwise have been but are not
entitled to recover from the Borrower or any other Obligor.
The Agent shall not be obliged before exercising any of the rights, powers or
remedies conferred upon it in respect of ADT Limited hereby or by law:
(i) to make any demand of the Borrower;
(ii) to take any action or obtain judgment in any court against the
Borrower or any other Obligor;
(iii) to make or file any claim or proof in a winding-up or dissolution
of the Borrower or any other Obligor; or
(iv) to enforce or seek to enforce any security taken in respect of any
of the obligations of the Borrower or any other Obligor under the
Facility Agreement;
save that notice of non-payment shall first be given to the Borrower
provided that if no such notice is given to the Borrower prior to the
exercise of such rights, powers or remedies, that does not preclude the
Agent giving notice to the Borrower and thereafter exercising such
rights, powers or remedies.
SECTION 2.2. Continuing Security and Preservation of Rights. The obligations
of ADT Limited herein contained shall constitute and be continuing obligations
notwithstanding any settlement of account or other matter or thing whatsoever,
and in particular but without limitation, shall not be considered satisfied by
any intermediate payment or satisfaction of all or any of the obligations of
any of the Obligors under the Facility Agreement and shall continue in full
force and effect until final payment in full of all amounts owing by the
Obligors thereunder and total satisfaction of all the Borrower's actual and
contingent obligations thereunder.
The obligations of ADT Limited herein contained shall be in addition to and
independent of every other security which the Agent as agent for the Banks may
at any time hold in respect of any of any Obligor's obligations under the
Facility Agreement.
Neither the obligations of ADT Limited herein contained nor the rights, powers
and remedies conferred in respect of ADT Limited upon the Beneficiaries by the
Facility Agreement or by law shall be discharged, impaired or otherwise
affected by:
(i) the winding-up, dissolution, administration or reorganisation of
any Obligor or any change in its status, function, control or
ownership;
(ii) any of the obligations of any Obligor under the Facility Agreement
or under any other security relating to the Facility Agreement
being or becoming illegal, invalid, unenforceable or ineffective
in any respect;
(iii) time or other indulgence being granted or agreed to be granted to
any Obligor in respect of its obligations under the Facility
Agreement or under any such other security;
(iv) any amendment to, or any variation, waiver or release of any
obligation of any Obligor (other than, in respect of any
amendment, variation, waiver or release of the obligations of ADT
Limited agreed or consented to in accordance with the provisions
of the Finance Documents, to the extent of such amendment,
variation, waiver or release) under the Facility Agreement or
under any such other security;
(v) any failure to take, or fully to take, any security contemplated
by the Facility Agreement or otherwise agreed to be taken in
respect of any Obligor's obligations under the Facility Agreement;
(vi) any failure to realise or fully to realise the value of, or any
release, discharge, exchange or substitution of any such security
or taken in respect of any Obligor's obligations under the
Facility Agreement; or
(vii) any other act, event or omission which, but for this Section 2.2,
might operate to discharge, impair or otherwise affect any of the
obligations of ADT Limited herein contained or any of the rights,
powers or remedies conferred upon the Beneficiaries by the
Facility Agreement or by law.
SECTION 2.3. Settlement Conditional. Any settlement or discharge between ADT
Limited and any of the Beneficiaries shall be conditional upon no security or
payment to any of the Beneficiaries by the Borrower, any Obligor or ADT
Limited or any other person on behalf of the Borrower, any Obligor or ADT
Limited being avoided or reduced by virtue of any provisions or enactments
relating to bankruptcy, insolvency, liquidation or similar laws of general
application for the time being in force and, if any such security or payment
is so avoided or reduced, the Beneficiaries shall each be entitled to recover
the value or amount of such security or payment from ADT Limited subsequently
as if such settlement or discharge had not occurred.
SECTION 2.4. Deferral of ADT Limited's Rights. ADT Limited agrees that, so
long as any amounts are or may be owed by any of the Obligors under the
Facility Agreement or any of the Obligors is under any actual or contingent
obligations under the Facility Agreement, ADT Limited shall not exercise any
rights which ADT Limited may at any time have by reason of performance by it
of its obligations hereunder:
(i) to be indemnified by the Borrower;
(ii) to claim any contribution from any other guarantor of the
Borrower's obligations under the Facility Agreement; and/or
(iii) to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Beneficiaries under
the Facility Agreement or of any other security taken pursuant to,
or in connection with, the Facility Agreement by the
Beneficiaries,
Provided that the restrictions contained in (i) and (ii) above shall only
apply after the occurrence of an Event of Default but shall apply irrespective
of when the claim for contribution or indemnification under this Section 2.4
arose.
SECTION 2.5. [Intentionally Omitted]
SECTION 2.6. Successors, Transferees and Assigns. This Guarantee shall:
(a) be binding upon ADT Limited, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Agent and each
other Beneficiary.
Without limiting the generality of clause (b), any Bank may assign or
otherwise transfer (in whole or in part) all or any of its rights or benefits
under any Finance Document (including this Guarantee) to any other person or
entity, and such other person or entity shall thereupon become vested with all
such rights and benefits, subject, however, to the provisions of the Facility
Agreement.
SECTION 2.7. Payments Free and Clear of Taxes, etc.
(a) Tax Gross-up All payments to be made by ADT Limited to any person
hereunder shall be made free and clear of and without deduction
for or on account of tax unless ADT Limited is required to make
such a payment subject to the deduction or withholding of tax (not
being a tax imposed on and/or calculated by reference to the net
income paid to and received by such person by the jurisdiction in
which it is incorporated or in which its Facility Office (if any)
or other relevant office is located), in which case the sum
payable by ADT Limited in respect of which such deduction or
withholding is required to be made shall be increased to the
extent necessary to ensure that, after the making of the
required deduction or withholding, such person receives and
retains (free from any liability in respect of any such
deduction or withholding) a net sum equal to the sum which it
would have received and so retained had no such deduction or
withholding been made or required to be made.
(b) Tax Indemnity Without prejudice to the provision of paragraph (a)
above, if any person or the Agent on its behalf is required to
make any payment on account of tax (not being a tax imposed on and
calculated by reference to the net income paid to and received by
its Facility Office by the jurisdiction in which it is
incorporated or in which its Facility Office is located) or
otherwise on or in relation to any sum received or receivable
hereunder by such person or the Agent on its behalf (including any
sum received or receivable under this Section 2.7) or any
liability in respect of any such payment is asserted, imposed,
levied or assessed against such person or the Agent on its behalf,
ADT Limited shall, upon demand of the Agent, promptly indemnify
such person against such payment or liability, together with any
interest, penalties, costs and expenses payable or incurred in
connection therewith.
(c) Claims by Banks A Bank intending to make a claim pursuant to
paragraph (b) above shall notify the Agent of the event by reason
of which it is entitled to do so, whereupon the Agent shall notify
ADT Limited thereof Provided that (i) nothing herein shall
require such Bank to disclose any confidential information
relating to the organisation of its affairs and (ii) if a Bank
notifies the Agent of a claim under Section 2.7(b) after the date
falling 60 days after the date on which such Bank receives its
audited annual accounts such Bank shall not be entitled to claim
indemnification for any event or occurrence which occurred during
the financial year to which such audited annual accounts relate.
(d) Notification of Requirement to Deduct Tax If, at any time ADT
Limited is required by law to make any deduction or withholding
from any sum payable by it hereunder (or if thereafter there is
any change in the rates at which or the manner in which such
deductions or withholdings are calculated), ADT Limited shall
promptly notify the Agent.
(e) Evidence of Payment of Tax If ADT Limited makes any payment
hereunder in respect of which it is required to make any deduction
or withholding, it shall pay the full amount required to be
deducted or withheld to the relevant taxation or other authority
within the time allowed for such payment under applicable law and
shall deliver to the Agent for each relevant Bank, within thirty
days after it has made such payment to the applicable authority
(or, if later, within 10 business days of receipt), an original
receipt (or a certified copy thereof) issued by such authority
evidencing the payment to such authority of all amounts so
required to be deducted or withheld in respect of that Bank's
share of such payment.
SECTION 2.8. Judgment. ADT Limited hereby agrees that to the fullest extent
permitted by applicable law:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in sterling into another
currency, ADT Limited agrees that the rate of exchange used shall
be that at which in accordance with normal banking procedures the
Agent could purchase Sterling with such other currency on the
business day preceding that on which final judgment is given; and
(b) the obligation of ADT Limited in respect of any sum due from it to
any Beneficiary hereunder shall, notwithstanding any judgment in a
currency other than Sterling, be discharged only to the extent
that on the business day following receipt by such Beneficiary, as
the case may be, of any sum adjudged to be so due in such other
currency such Beneficiary may, in accordance with normal banking
procedures, purchase sterling with such other currency; in the
event that the sterling so purchased are less than the sum
originally due to such Beneficiary in sterling, ADT Limited, as
a separate obligation and notwithstanding any such judgment,
hereby indemnifies and holds harmless such Beneficiary against
such loss, and if the sterling so purchased exceeds the sum
originally due to such Beneficiary in sterling, such Beneficiary
shall remit to ADT Limited such excess.
SECTION 2.9. Consent to Jurisdiction; Waiver of Immunities.
(a) English Courts - Each of the parties hereto irrevocably agrees for
the benefit of each of the Beneficiaries that the courts of
England shall have jurisdiction to hear and determine any suit,
action or proceedings, and to settle any disputes, which may arise
out of or in connection with this Guarantee (respectively
"Proceedings" and "Disputes") and, for such purposes, irrevocably
submits to the non-exclusive jurisdiction of such courts.
(b) Appropriate Forum - ADT Limited irrevocably waives any objection
which it might now or hereafter have to the courts referred to in
paragraph (a) above being nominated as the forum to hear
and determine any Proceedings and to settle any Disputes and
agrees not to claim that any such court is not a convenient or
appropriate forum.
(c) Service of Process - ADT Limited agrees that the process by which
any Proceedings are begun may be served on it by being delivered
in connection with any Proceedings in England, to ADT Finance plc
at 19/21 Denmark Street, Wokingham, Berkshire RG40 2QE or other
its registered office for the time being. If the appointment of
the person mentioned in this paragraph (c) ceases to be effective
in respect of ADT Limited, ADT Limited shall immediately appoint a
further person in England to accept service of process on its
behalf in England and, failing such appointment within 15 days,
the Agent shall be entitled to appoint such a person by notice to
ADT Limited. Nothing contained herein shall affect the right to
serve process in any other manner permitted by law.
(d) Non-exclusive Submission - The submission to the jurisdiction of
the courts referred to in paragraph (a) above shall not
(and shall not be construed so as to) limit the right of the
Beneficiaries or any of them to take Proceedings against ADT
Limited in any other court of competent jurisdiction nor shall the
taking of Proceedings in any one or more jurisdictions preclude
the taking of Proceedings in any other jurisdiction (whether
concurrently or not) if and to the extent permitted by applicable
law.
(e) Waiver of Immunity - To the extent that ADT Limited may in any
jurisdiction claim for itself or its assets immunity from suit,
execution, attachment (whether in aid of execution, before
judgment or otherwise) or other legal process and to the extent
that in any such jurisdiction there may be attributed to itself or
its assets such immunity (whether or not claimed), ADT Limited
hereby irrevocably agrees not to claim and hereby irrevocably
waives such immunity in respect of its obligations under this
Guarantee to the full extent permitted by the laws of such
jurisdiction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
ADT Limited hereby represents and warrants to each Beneficiary as set forth in
this Article III.
SECTION 3.1. Organisation, etc. Each of ADT Limited and its subsidiaries
that is an Obligor or a Material Related Party is a company or corporation, as
the case may be, duly organised and validly existing and, to the extent
applicable, in good standing under the laws of the jurisdiction of its
organisation, is duly qualified to do business and is, to the extent
applicable, in good standing as a foreign corporation in each jurisdiction
where the nature of its business requires such qualification and where the
failure to so qualify or be in good standing would reasonably be expected to
have a material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its subsidiaries taken as
a whole. Each of ADT Limited and its subsidiaries that is an Obligor or a
Material Related Party has full power and authority and holds all requisite
governmental licenses, permits and other approvals (i) to own and hold under
lease its property and to conduct its business substantially as currently
conducted by it, except where failure to hold such licenses, permits and other
approvals would not reasonably be expected to have a material adverse effect
on the business, results of operations, financial condition or prospects of
ADT Limited and its subsidiaries taken as a whole and (ii) to enter into and
perform its obligations under each Finance Document, if any, to which it is a
party.
SECTION 3.2. Due Authorisation, Non-Contravention, etc. The execution,
delivery and performance by ADT Limited of this Guarantee and each other
Finance Document executed or to be executed by it, and the execution, delivery
and performance by each other Obligor of each Finance Document executed or to
be executed by it, are within ADT Limited's and each such Obligor's corporate
powers, have been duly authorised by all necessary corporate action, and do
not
(a) contravene ADT Limited's or any such Obligor's constitutive
documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting ADT
Limited or any such Obligor (including the Companies Act 1981 of
Bermuda) in any manner that could reasonably be expected (i) to
have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited and
its subsidiaries taken as a whole, (ii) to impair the ability of
any Bank or the Agent to enforce any of the obligations of ADT
Limited or any other Obligor hereunder or under any other of the
Finance Documents or (iii) to subject any Bank or the Agent to any
liability; or
(c) result in, or require the creation or imposition of, any
encumbrance on any of ADT Limited's or any Obligor's properties.
SECTION 3.3. Government Approval, Regulation, etc. No authorisation or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other person is required for the due
execution, delivery or performance by ADT Limited or any other Obligor of this
Guarantee or any other Finance Document to which it is a party.
SECTION 3.4. Validity, etc. This Guarantee constitutes, and each other
Finance Document executed by ADT Limited will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of ADT
Limited enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganisation, moratorium or similar laws
from time to time in effect affecting creditors' rights generally and to
general principles of equity.
SECTION 3.5. Financial Information. The audited financial statements of ADT
Limited for is financial year ended 31 December 1995 and all financial
statements of ADT Limited furnished pursuant to Section 4.1.7(a) and (b) have,
in each case, been prepared in accordance with GAAP consistently applied, and
present fairly the consolidated financial condition of ADT Limited, as at the
dates thereof, and the results of its operations for the periods then ended.
SECTION 3.6. No Material Adverse Change. Since 31 December, 1995, there has
been no material adverse change in the business, results of operations,
financial condition or prospects of ADT Limited and its subsidiaries taken as
a whole.
SECTION 3.7. Litigation. There is no pending or, to the knowledge of ADT
Limited, threatened litigation, action, proceeding, or labour controversy
affecting ADT Limited or any of its subsidiaries, or any of their respective
properties, businesses, assets or revenues, which could reasonably be expected
to materially adversely affect the financial condition, results of operations,
business or prospects of ADT Limited and its subsidiaries, taken as a whole
(provided that no representation is being made with respect to the effect on
such financial condition, results of operations, business or prospects of any
litigation, action or proceeding described in the first two paragraphs under
the caption "Certain Litigation Against the Company" in the Preliminary Proxy
Statement of ADT Limited filed with the Securities and Exchange Commission on
8 January 1997, provided to The Bank of Nova Scotia as the agent under the
US$200 million Credit Facility prior to 9 January 1997, including any
amendment to the complaint referred to therein provided to The Bank of Nova
Scotia as the agent under the US$200 million Credit Facility prior to 9
January 1997 relating to the scheduling of the special meeting of ADT
Limited's shareholders referred to in any such amendment), or which purports
to affect the legality, validity or enforceability of this Guarantee, or any
other Finance Document.
SECTION 3.8. Ownership of Properties. ADT Limited and each of its
subsidiaries owns good and marketable title to, or valid leases of, all of its
material properties and material assets necessary to conduct its business
substantially as currently conducted by it.
SECTION 3.9. Taxes. ADT Limited and each of its subsidiaries has filed all
material tax returns and reports required by law to have been filed by it and
has paid when due all material taxes and governmental charges thereby shown to
be owing, except any such taxes or charges which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books.
SECTION 3.10. Pension and Welfare Plans. During the twelve-consecutive-month
period prior to the date of the execution and delivery of the Facility
Agreement and prior to the date of any Advance thereunder, no steps have been
taken to terminate any Pension Plan which termination could result in the
incurrence by ADT Limited or any member of the Controlled Group of any
material liability, and no contribution failure has occurred with respect
to any Pension Plan sufficient to give rise to an encumbrance under section
302(f) of ERISA. No condition exists or event or transaction has occurred
with respect to any Pension Plan which might result in the incurrence by
ADT Limited or any member of the Controlled Group of any material
liability, fine or penalty. Except as disclosed to the Agent prior to the
date hereof, neither ADT Limited nor any member of the Controlled Group has
any material contingent liability with respect to any post-retirement
benefit under a Welfare Plan, other than liability for continuation
coverage described in Part 6 of Title I of ERISA.
SECTION 3.11. Environmental Warranties.
(a) All facilities and property (including underlying groundwater)
owned or leased by ADT Limited or any of its subsidiaries have
been, and continue to be, owned or leased by ADT Limited and its
subsidiaries in material compliance with all Environmental Laws;
(b) There have been no past, and there are no pending or threatened
(i) claims, complaints, notices or requests for
information received by ADT Limited or any of its
subsidiaries with respect to any alleged violation of
any Environmental Law, which could reasonably be
expected to have a material adverse effect on the
business, results of operations, financial condition
or prospects of ADT Limited and its subsidiaries taken
as a whole, or
(ii) complaints, notices or inquiries to ADT Limited or
any of its subsidiaries regarding potential liability
under any Environmental Law, which could reasonably be
expected to have a material adverse effect on the
business, results of operations, financial
condition or prospects of ADT Limited and its
subsidiaries taken as a whole;
(c) ADT Limited and its subsidiaries have been issued and are in
compliance with all permits, certificates, approvals, licenses and
other authorisations relating to environmental matters and
necessary for their businesses, except where the failure to have
been issued any such permit, certificate, approval, license or
other authorisation or to have complied with any of the foregoing
would not, singly or in the aggregate, reasonably be expected to
have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited and
its subsidiaries taken as a whole;
(d) Neither ADT Limited nor any subsidiary of ADT Limited has directly
transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, on any
similar list or which is the subject of federal, state or local
enforcement actions or other investigations which is reasonably
likely to lead to material claims against ADT Limited or such
subsidiary thereof for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA; and
(e) No conditions exist at, on or under any property now owned or
leased (or, to the best knowledge of ADT Limited and its
subsidiaries after due inquiry, any property previously owned or
leased) by ADT Limited or any subsidiary of ADT Limited which
would give rise to liability under any Environmental Law or for
personal injury or property or other damage, which liability could
reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its subsidiaries taken as a whole.
SECTION 3.12. Regulations G, U and X. Neither ADT Limited nor any subsidiary
of ADT Limited is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock, and no proceeds of any Loans will be
used for a purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board
Regulation G, U or X or any regulations substituted therefor, as from time to
time in effect, are used in this Section with such meanings.
SECTION 3.13. No Defaults. Neither ADT Limited nor any subsidiary of ADT
Limited is in violation of, or in default under, any term or provision of its
constitutive documents or any contract, agreement, indenture, instrument, law,
governmental regulation or court decree or order applicable to it, such that
such violations or defaults in the aggregate would reasonably be expected to
have a material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its subsidiaries, taken as
a whole.
SECTION 3.14. Delivery of Organisational Chart. The Agent has been furnished
on or prior to drawdown under the Facility Agreement a detailed organisational
chart of ADT Limited and all its subsidiaries (other than those that do not
conduct any business activities and that do not have assets with a Fair Market
Value in excess of $10,000), certified by the chief financial authorised
officer of ADT Limited.
SECTION 3.15. Restricted Payment Basket Amount. As of 31 December 1996, the
Restricted Payment Basket Amount was not greater than $140,000,000.
SECTION 3.16. Guarantee Ranks Pari Passu. The obligations of ADT Limited
under this Guarantee rank at least pari passu with its obligations under any
other unsecured, unsubordinated guarantees granted by it in respect of the
Indebtedness of any member of the ADT Group (the "other guarantees") and all
Indebtedness of ADT Limited which is subordinated to claims under any of the
other guarantees is subordinated, to the same extent, to claims under this
Guarantee.
SECTION 3.17. Seniority of the Obligations. The obligations of ADT Limited
under the Guarantee are senior to all Indebtedness of ADT Limited in respect
of the Senior Subordinated Note Guarantee and the LYONs Guarantee, and
constitute, and are entitled to the benefits of being, (i) "Guarantor Senior
Indebtedness", as such term is defined in the Senior Subordinated Note
Indenture, and (ii) "Guarantor Senior Indebtedness", as such term is defined
in the LYONs Indenture.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Affirmative Covenants. ADT Limited covenants and agrees that,
so long as any amount is outstanding (actually or contingently) hereunder, ADT
Limited will, unless an Instructing Group shall otherwise consent in writing,
perform and observe the obligations set forth in this Section.
SECTION 4.1.1. Compliance with Laws, etc. ADT Limited will, and will 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):
(a) except to the extent permitted under Section 4.2.9, the
maintenance and preservation by ADT Limited and each of its
subsidiaries that is an Obligor or a Material Related Party of its
corporate existence and qualification as a foreign corporation in
each jurisdiction where the nature of its business or the location
of its assets requires it to be so qualified, except to the extent
the failure to maintain and preserve its corporate existence or to
be so qualified could not reasonably be expected to have a
material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its
subsidiaries taken as a whole (it being acknowledged that the
failure of ADT Limited or the Borrower to maintain and preserve
its corporate existence (except as permitted under Section
4.2.9) shall be deemed to have such a material adverse effect);
and
(b) the payment, before the same become delinquent, of all material
taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent being diligently contested
in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 4.1.2. Maintenance of Properties. ADT Limited will, and will cause
each of its subsidiaries to, maintain, preserve, protect and keep its material
properties in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times unless ADT Limited
determines in good faith that the continued maintenance of any of its
properties is no longer economically desirable.
SECTION 4.1.3. Insurance. ADT Limited will, and will cause each of its
subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business (including
business interruption insurance) against such casualties and contingencies and
of such types and in such amounts as is customary in the case of similar
businesses and will, upon request of the Agent, furnish to the Agent for the
Banks at reasonable intervals a certificate of an authorised officer of ADT
Limited setting forth the nature and extent of all insurance maintained by ADT
Limited and its subsidiaries in accordance with this Section.
SECTION 4.1.4. Books and Records. ADT Limited will, and will cause each of
its subsidiaries to, keep books and records which accurately reflect all of
its business affairs and transactions and permit the Agent or its duly
authorised representatives, at reasonable times and intervals (but not more
often than once per Financial Quarter, unless an Event of Default shall have
occurred and be continuing unwaived (in which case, and during such period,
each Bank shall have the rights of the Agent under this Section)) to visit all
of its offices, to discuss its financial matters with its officers and
independent public accountant (provided a representative of ADT Limited or
such subsidiary is given prior notice of, and the opportunity to be present
during, such discussion) and, subject to appropriate agreements of
confidentiality and to any restrictions imposed under applicable law
(including regulations promulgated by the United States Department of
Defense), to examine any of its books or other corporate records. ADT Limited
shall pay any fees of such independent public accountant incurred in
connection with the Agent's or any Bank's exercise of its rights pursuant to
this Section. In addition, ADT Limited shall pay the reasonable out-of-pocket
expenses arising from the Agent's visit to the offices of ADT Limited or any
of its subsidiaries in connection with the exercise of its rights pursuant to
this Section to the extent of one such visit per Financial Year.
SECTION 4.1.5. Environmental Covenant. ADT Limited will, and will cause each
of its subsidiaries to,
(a) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, apply for and keep all
necessary permits, approvals, certificates, licenses and other
authorisations relating to environmental matters in effect where
the failure to so keep in effect could reasonably be expected to
have a material adverse effect on the business, results of
operations, financial condition or prospects of ADT Limited and
its subsidiaries taken as a whole and remain in material
compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws and in
a manner so as to minimize potential liability;
(b) immediately notify the Agent and provide copies upon receipt of
all written claims, complaints, notices or inquiries relating to
the condition of its facilities and properties or compliance with
Environmental Laws, which claims or other alleged conditions could
reasonably be expected to have a material adverse effect on the
business, results of operations, financial condition or prospects
of ADT Limited and its subsidiaries taken as a whole; and
(c) provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with
this Section 4.1.5.
SECTION 4.1.6. Guarantee Supplements.
(a) If: (i) the aggregate amount of:
(x) all Indebtedness incurred by members of the ADT
Group (which are not members of the Group or
Guarantors) from any member of the Group or a
Guarantor since the date hereof;
(y) all Investments made by any member of the Group
or a Guarantor in any member of the ADT Group
(which is not a member of the Group or a
Guarantor) since the date hereof; and
(z) the fair market value of all assets received by
any member of the ADT Group (which is not a
member of the Group or a Guarantor) from any
member of the Group or a Guarantor since the
date hereof less the amount of cash paid or the
fair market value of any assets transferred by
such member of the ADT Group to the relevant
disposing entity in consideration therefor
has exceeded the greater of (1) Pound
Sterling102,500,000; and (2) 10% of the consolidated
gross assets of the Group as reflected in the balance
sheet most recently delivered pursuant to Clause 16.1
or, as the case may be, 16.2 of the Facility
Agreement; or
(ii) each of the consolidated gross assets (plus the
aggregate of the Guarantor Assets) and consolidated
gross revenues of the Group Obligors (plus the
aggregate of the gross revenues of any members of the
ADT Group which are not Group Obligors and which have
become Additional Guarantors in accordance with this
Section 4.1.6), immediately following the transaction
or arrangement which results in a member of the ADT
Group becoming a Relevant ADT Group Member and after
giving pro forma effect thereto, is (x) in the case
of consolidated gross assets, less than the greater of
90% of the consolidated gross assets of the Group at
the date hereof and 90% of the consolidated gross
assets of the Group (plus the aggregate of the
Guarantor Assets) as reflected in the balance sheet
most recently delivered pursuant to Clause 16.1 or, as
the case may be, 16.2 of the Facility Agreement or (y)
in the case of consolidated gross revenues, less than
the greater of 90% of the consolidated gross revenues
of the Group at the date hereof and 90% of the
consolidated gross revenues of the Group (plus the
aggregate of the gross revenues of any members of the
ADT Group which are not Group Obligors and which have
become Additional Guarantors in accordance with this
Section 4.1.6) as reflected in the profit and loss
statement most recently delivered pursuant to Clause
16.1 or, as the case may be, 16.2 of the Facility
Agreement,
ADT Limited will subject to section 4.1.6(b) and unless otherwise
agreed by the Agent, cause each member of the ADT Group which
becomes a Relevant ADT Group Member at such time or at any time
thereafter to enter into a guarantee of obligations under the
Finance Documents in such form, together with such supporting
documentation, (including, without limitation, constitutive
documentation, corporate authorities, approvals and legal
opinions) as the Agent may reasonably specify, such guarantee to
be entered into no later than 60 days after the end of the then
current Financial Quarter.
(b) If a member of the ADT Group has become a Relevant ADT Group
Member (the "Potential Guarantor") as a result of a transaction or
arrangement (the "Relevant Transaction") involving a Guarantor,
which is not a member of the Group (the "Existing Guarantor"),
then the Potential Guarantor will only be required to provide the
guarantee referred to in Section 4.1.6(a) if:
(i) at the time the Existing Guarantor became a Guarantor (or at
the time any subsequent Indebtedness was incurred by the
Existing Guarantor from any member of the Group or any other
Guarantor, or any subsequent Investment was made in the
Existing Guarantor by any member of the Group or any other
Guarantor, or the Existing Guarantor received any further
assets from any member of the Group or any other Guarantor)
it was intended that the Relevant Transaction would be
entered into; or
(ii) without prejudice to Section 4.1.6(b)(i), the Existing
Guarantor is ADT Limited and
(x) the aggregate of the cash received by ADT Limited by
incurring Indebtedness from and receiving Investments
in ADT Limited made by (plus the aggregate fair market
value of any assets transferred by members of the
Group to ADT Limited) members of the Group, in each
case, after the date hereof
exceeds
(y) the aggregate of the cash received by members of the
Group by way of repayment of Indebtedness by, by
incurring Indebtedness from and receiving Investments
in members of the Group made by (plus the aggregate
fair market value of any assets transferred by ADT
Limited to members of the Group) ADT Limited, in each
case, after the date hereof
by more than $20,000,000
(c) ADT Limited will ensure that at all times after the threshold
referred to in Section 4.1.6(a)(i) has been exceeded each
transaction or arrangement entered between any member of the Group
(or any Obligor) and any member of the ADT Group referred to in
paragraph (a) of the definition of "Relevant ADT Group Member"
which is not (or is not required under Section 4.1.6 to become) an
Obligor, is entered into on arm's length terms.
SECTION 4.1.7. Financial Information.
(a) Annual Statements ADT Limited will furnish, or will cause to be
furnished to the Agent for the Banks no later than the filing of
each 10-K of ADT Limited, but in no event later than 120 days
after the end of each Financial Year, copies of its audited
consolidated financial statements (including balance sheet, profit
and loss and cashflow statements) for such Financial Year, as of
the end of such Financial Year audited by and reported on (without
any Impermissible Qualification) as to fairness of presentation,
generally accepted accounting principles and consistency by
Coopers & Lybrand or other independent accountants of
internationally recognised standing, together with a certificate
from such accountants stating whether, in making the examination
necessary for such report, such accountants have become aware of
any previously unnotified Event of Default or Potential Event of
Default (other than one relating to the Group or any member
thereof) that has occurred and is continuing unwaived.
(b) Quarterly Statements ADT Limited will furnish, or will cause to
be furnished, to the Agent for the Banks promptly and in any event
within 60 days after the end of each of the first three Financial
Quarters of each Financial Year, quarterly unaudited consolidated
financial statements (including balance sheet, profit and loss and
cashflow statements) as of the end of such Financial Quarter for
ADT Limited for such Financial Quarter and for the period
commencing at the end of the previous Financial Year and ending
with the end of such Financial Quarter, certified (subject to
normal year-end adjustments) as to the fairness of presentation,
generally accepted accounting principles and consistency by the
finance director of ADT Limited.
(c) Compliance Certificates ADT Limited will furnish, or will cause
to be furnished, to the Agent within ten business days of the
delivery of the financial statements required by paragraphs (a)
and (b) above a Compliance Certificate, executed by the finance
director or chief financial officer of ADT Limited, (i) showing
(in reasonable detail and with appropriate calculations and
computations calculations of the financial covenants set forth in
Section 4.2.4 and (ii) giving notice of any previously unnotified
Event of Default or Potential Event of Default (other than one
relating to the Group or any member thereof).
(d) Notice of Significant Events ADT Limited shall deliver, or will
cause to be delivered as soon as possible and in any event within
five business days after (i) any executive or financial officer of
ADT Limited obtains knowledge of the occurrence of any Event of
Default or Potential Event of Default (other than one relating to
the Group or any member thereof), a statement of the chief
financial authorised officer of ADT Limited setting forth details
of such Event of Default or Potential Event of Default and the
action which the relevant Obligor has taken and proposes to take
with respect thereto or (ii) (a) the occurrence of any material
adverse development with respect to any litigation, action,
proceeding or (b) the commencement of any labour controversy,
litigation, action, proceeding of the type described in Section
3.7, which, in each case, might reasonably be expected to have a
material adverse effect on the business, results of operations,
financial condition or prospects of ADT Limited and its
subsidiaries taken as a whole notice thereof describing in
reasonable detail such development or such labour controversy
litigation, action or proceeding.
(e) Other Financial Information ADT Limited shall:
(i) furnish, or cause to be furnished, promptly after the
sending or filing thereof, copies of all reports which it
sends to any class of its security holders generally, and
all reports and registration statements (other than the
exhibits thereto and any registration statements on Form
S-8 or its equivalent) which any member of the ADT Group
files with the Securities and Exchange Commission (or any
foreign equivalent) or any national securities exchange
including, without limitation, Form 10-Ks and 10-Qs for ADT
Limited;
(ii) from time to time on the request of the Agent, furnish or
cause to be furnished to the Agent such information about
the business and financial condition of ADT Limited (or any
of its subsidiaries) as the Agent may reasonably require.
(f) Requirements as to Financial Statements ADT Limited shall ensure
that:
(i) each set of financial statements delivered by it pursuant
to Section 4.1.7 (a) or (b) is prepared on the same basis
as was used in the preparation of its audited financial
statements for its financial year ended 31 December 1995
and in accordance with accounting principles generally
adopted in such audited financial statements for its
financial year ended 31 December 1995 and consistently
applied; and
(ii) each set of financial statements delivered by it pursuant
to Section 4.1.7 (a) or (b) is certified by a duly
authorised officer of ADT Limited as giving a true and fair
view of the financial condition of the ADT Group as at the
end of the period to which those financial statements
relate and of the results of the ADT Group's operations
during such period.
SECTION 4.2. Negative Covenants. ADT Limited covenants and agrees that, so
long as any amount is outstanding (actually or contingently hereunder), ADT
Limited will not, without the prior written consent of an Instructing Group,
do anything prohibited in this Section.
SECTION 4.2.1. Business Activities. ADT Limited will not, and will not
permit any of its subsidiaries to, engage in any business activity, except for
those activities conducted in respect of the Core Business and the Permitted
Existing Business Activities, and such activities as may be incidental or
related thereto; provided, however, that ADT Limited will not be in default in
the observance of this Section 4.2.1 if, as part of the acquisition of a Core
Business, ADT Limited or its applicable subsidiary acquires a business or
assets that would not constitute, or be included in, a Core Business, so long
as (i) the primary purpose of such acquisition was the acquisition of such
Core Business, which acquisition could not have been consummated on as
commercially attractive terms without the acquisition of such other business
or assets, (ii) not less than 70% of the assets acquired pursuant to such
acquisition related at the time of such acquisition to such Core Business,
(iii) ADT Limited or such applicable subsidiary is diligently pursuing the
sale of such other business or assets and (iv) such business or assets do not
have, and could not reasonably be expected to have, a material adverse effect
on the business, results of operations, financial condition or operations of
ADT Limited and its subsidiaries taken as a whole.
SECTION 4.2.2. Indebtedness. ADT Limited will not, and will not permit any
of its subsidiaries which are not members of the Group, to, create, incur,
assume or suffer to exist or otherwise become or be liable in respect of any
Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of any obligations under any Finance
Document;
(b) Indebtedness in respect of the Senior Note Guarantees, the Senior
Subordinated Note Guarantees and the LYONs Guarantee;
(c) Indebtedness existing as of 30 June, 1995; provided that such
Indebtedness having a principal amount in excess of $3,000,000 is
disclosed to the Agent prior to the date hereof;
(d) Indebtedness of ADT Canada, Inc., an Ontario corporation and a
wholly owned subsidiary of ADT Limited, incurred for working
capital purposes in an aggregate amount not to exceed at any time
outstanding Canadian $75,000,000 and guarantees thereof by ADT
Limited or any of its subsidiaries;
(e) obligations of ADT Limited or any of its subsidiaries pursuant to
Hedging Arrangements designed to protect ADT Limited or any of its
subsidiaries against fluctuations in interest rates in respect of
Indebtedness of ADT Limited or such subsidiary and not entered
into for purposes of speculation;
(f) obligations of ADT Limited or any of its subsidiaries pursuant to
Hedging Arrangements designed to protect ADT Limited or any of its
subsidiaries against fluctuations in currency values and entered
into in the ordinary course of business and not for purposes of
speculation;
(g) unsecured Indebtedness incurred in the ordinary course of business
(including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but
excluding Indebtedness incurred through the borrowing of money or
Contingent Liabilities in respect of obligations of persons other
than ADT Limited or any of its subsidiaries);
(h) Indebtedness in respect of Capitalised Lease Liabilities and
Indebtedness ("Capex Indebtedness") incurred to finance the
construction or acquisition of assets permitted to be acquired or
constructed pursuant to Section 4.2.7, to the extent a Capitalised
Lease Liability (assuming for the purposes of this clause only
that Capex Indebtedness constitutes a Capitalised Lease Liability)
could have been incurred under Section 4.2.7;
(i) Indebtedness of subsidiaries of ADT Limited owing to ADT Limited;
(j) Indebtedness of ADT Limited or of its subsidiaries owing to other
subsidiaries of ADT Limited;
(k) [intentionally omitted];
(l) [intentionally omitted];
(m) Indebtedness arising by reason of any indemnity for
misrepresentation or performance bond provided in respect of the
sale of any subsidiary of ADT Limited;
(n) Indebtedness in respect of surety bonds and performance bonds
provided in the ordinary course of business;
(o) Indebtedness which refinances Indebtedness permitted by clauses
(b), (c), (d) and (h) above; provided, however, that after giving
effect to such refinancing, (i) the principal amount of
outstanding Indebtedness is not increased, (ii) in the case of
clauses (b) and (c) above, neither the tenor nor the average life
thereof is reduced, (iii) the respective obligor or obligors shall
be the same on the refinancing Indebtedness as on the Indebtedness
being refinanced, (iv) the security for the refinancing
Indebtedness shall be the same as that for the Indebtedness being
refinanced (except to the extent that less security is granted to
holders of refinancing Indebtedness), (v) the holders of
refinancing Indebtedness are not afforded covenants, defaults,
rights or remedies more burdensome to the obligor or obligors than
those contained in the Indebtedness being refinanced and (vi) the
refinancing Indebtedness is subordinated to the same degree as the
Indebtedness being refinanced;
(p) Indebtedness in respect of the Preference Shares and Exchangeable
Preference Shares outstanding on the Closing Date;
(q) Indebtedness incurred by ADT Operations, Inc. (and certain of its
subsidiaries and other subsidiaries of ADT Limited as obligated
thereunder from time to time) under, by virtue of or in relation
to the US$200 million Credit Facility and, without duplication,
Contingent Liabilities of ADT Limited and various of the
subsidiaries of ADT Operations, Inc. and other subsidiaries of ADT
Limited in relation thereto (including and together with
Indebtedness under notes and other instruments issued thereunder
or relating thereto and Hedging Arrangements permitted thereby)
and Indebtedness incurred by one or more of such persons in
respect of any amendment, amendment and restatement,
refinancing, extension, renewal or replacement of any thereof
to the extent that the principal amount thereof does not exceed
US$500,000,000; and
(r) other Indebtedness of ADT Limited and its subsidiaries to the
extent that the amount of such Indebtedness outstanding at any
time, when added (without duplication) to the aggregate amount of
Indebtedness outstanding at such time under sub-paragraph (j) of
the definition of "Permitted Indebtedness" of the Facility
Agreement, does not exceed $75,000,000;
provided, however, that no Indebtedness otherwise permitted by sub-clause (r)
above shall be permitted if, after giving effect to the incurrence thereof,
any Event of Default shall have occurred and be continuing.
SECTION 4.2.3. Encumbrances. ADT Limited will not, and will not permit any
of its subsidiaries to, create, incur, assume or suffer to exist any
encumbrance upon any of its property, revenues or assets (including Capital
Stock of subsidiaries of ADT Limited), whether now owned or hereafter
acquired, except:
(a) encumbrances securing any obligation under any Finance Document;
(b) encumbrances granted prior to 23 August 1995 to secure
Indebtedness of the type permitted and described in clause (c) of
Section 4.2.2 and encumbrances securing refinancings thereof
permitted by clause (o) of Section 4.2.2 and sub-paragraph (i) of
the definition of "Permitted Indebtedness" of the Facility
Agreement respectively;
(c) encumbrances granted to secure Indebtedness of the type permitted
and described in clause (h) of Section 4.2.2 and sub-paragraph (f)
of the definition of "Permitted Indebtedness" of the Facility
Agreement and covering only those assets acquired with the
proceeds of such Indebtedness and encumbrances with respect to
such assets securing refinancings of such Indebtedness permitted
by clause (o) of Section 4.2.2, respectively;
(d) encumbrances for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books;
(e) encumbrances of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books;
(f) encumbrances incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases and
contracts (other than for borrowed money) entered into in the
ordinary course of business or to secure obligations on surety or
appeal bonds;
(g) judgment encumbrances (i) in an aggregate amount not in excess of
$15,000,000, (ii) as to which enforcement proceedings shall not
have commenced and there shall not have been a period of 30
consecutive days during which such judgment was not stayed or
(iii) the payment of which is covered in full (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
(h) encumbrances with respect to assets of a subsidiary of ADT Limited
(other than any member of the Group) granted to secure
Indebtedness owing to the Borrower or any other Obligor or any of
the Obligors under the US $200 million Credit Facility or under
any other Indebtedness described at clause (q) of Section 4.2.2;
(i) encumbrances with respect to assets of a subsidiary of ADT Limited
(other than any member of the Group) granted to secure
Indebtedness owing to ADT Limited or a wholly owned subsidiary of
ADT Limited;
(j) encumbrances (i) existing at the time that a person becomes a
subsidiary of ADT Limited in a transaction permitted hereunder or
(ii) assumed in connection with an acquisition of assets permitted
hereunder; provided, however, that any such encumbrance covers
only assets that were subject to such encumbrance prior to the
related transaction and was not created, assumed or incurred in
contemplation of such transaction;
(k) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the
business of ADT Limited or any of its subsidiaries and incurred in
the ordinary course of business;
(l) the encumbrance inherent in the right of any bank to set off
deposits against debts owed to such bank;
(m) encumbrances in favour of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(n) encumbrances arising by operation of law incurred in the ordinary
course of business and which encumbrances, singly or in the
aggregate, do not interfere in any material respect with the
business of ADT Limited or any of its subsidiaries;
(o) encumbrances created by ADT Operations, Inc. or any of its
subsidiaries to secure Indebtedness referred to in Section
4.2.2(q); and
(p) other encumbrances securing Indebtedness in an aggregate amount
not to exceed $15,000,000 at any time outstanding.
SECTION 4.2.4. Financial Condition. ADT Limited will not permit:
(a) its Stockholders' Equity to be at any time less than the
sum, at such time, of (i) $1,134,300,000 plus (ii) 50% of
the Net Income of ADT Limited for each Financial Year
commencing with the Financial Year ending 31 December 1995
(less, for each such Financial Year, cash dividends on
Preference Shares to the extent permitted hereunder) as
shall have been completed on or prior to such time (in each
case with no reduction for net losses, if any, for such
Financial Year);
(b) its Cash Flow Coverage Ratio, as at the end of any
Financial Quarter, to be less than 1.5 to 1.0;
(c) its Debt to Total Capitalisation Ratio, as at the end of
any Financial Quarter, to be greater than 0.5 to 1.0.
SECTION 4.2.5. Investments. ADT Limited will not, and will not permit any of
its subsidiaries to, make, incur, assume or suffer to exist any Investment in
any other person, except:
(a) (i) Investments existing on 30 June 1995 and disclosed to the
Agent prior to the date hereof and (ii) Investments acquired in
the ASH Transaction (including the sale of such Investments by ADT
Limited to ADT (UK) Holdings plc, the sale of certain of such
Investments by the ASH Group to ADT Operations, Inc. and its
subsidiaries and the sale by ADT Business Holdings, Inc. to
Sonitrol Management Corp. of all of the Capital Stock of
Mid-Atlantic Security, Inc., in each case prior to the date of the
US$200 million Credit Facility;
(b) Cash Equivalent Investments and High Quality Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 4.2.2 or Clause 18.2(ii) of the Facility
Agreement;
(d) without duplication, Investments permitted as Capital Expenditures
pursuant to Section 4.2.7;
(e) Investments by way of contributions to capital by ADT Limited or
any of its subsidiaries to any member of the ADT Group;
(f) loans or advances to, or guarantees on behalf of, employees of ADT
Limited or any of its subsidiaries made in the ordinary course of
business not to exceed at any time $500,000 per employee or
$5,000,000 in the aggregate for all such employees;
(g) Investments which are Permitted Business Acquisitions;
(h) accounts arising from sales of goods or services on trade credit
terms in the ordinary course of business of ADT Limited and its
subsidiaries;
(i) negotiable instruments held for collection, lease, utility and
other similar deposits, or stock, obligations or securities
received in settlement of debts owing to ADT Limited or any of its
subsidiaries as a result of a composition or readjustment of debt
or a reorganisation of any debtor or ADT Limited or any of its
subsidiaries or of foreclosure, perfection or enforcement of any
encumbrance, in each case as to debt that arose in the ordinary
course of business;
(j) Investments consisting of non-cash consideration received in the
sale or other disposition of assets or Capital Stock effected in
compliance with Section 4.2.10;
(k) (i) the exchange of Common Shares for Non-Voting Exchangeable
Shares (and payment of cash in lieu of fractional shares) pursuant
to the terms of Non-Voting Exchangeable Shares as in effect on the
Closing Date and (ii) the acquisition of Common Shares to the
extent (A) the acquisition of such Common Shares is not prohibited
by any provision of any Finance Document) and (B) the aggregate
number of Common Shares held by subsidiaries of ADT Limited does
not exceed at any time nine percent of the Voting Stock of ADT
Limited outstanding at such time;
(l) the obligation of ADT Limited to exchange Common Shares for LYONs
(and payment of cash in lieu of fractional shares) pursuant to the
terms of the LYONs Indenture in effect on the Closing Date;
(m) Investments in any wholly owned subsidiary of ADT Limited that
provides insurance in the ordinary course of business and on
reasonable terms solely to ADT Limited or any of its subsidiaries
for the purpose of insuring ADT Limited or such subsidiary against
liability that would not be covered by insurance policies required
to be maintained pursuant to Section 4.1.3 as a result of
reasonable and customary deductibles thereunder, to the extent
such Investments are necessary or appropriate to maintain such
insurance;
(n) advances or loans made in connection with Hedging Arrangements
permitted hereunder, under the Facility Agreement or the Loan
Documents (as defined in the US$200 million Credit Facility);
(o) other Investments of a type not otherwise permitted pursuant to
the immediately preceding clauses, including Investments in
Minority Interests and Related Businesses, to the extent the
aggregate amount of such Investments, when added (without
duplication) to the aggregate amount expended since the Closing
Date in connection with Business Acquisitions permitted under
clause (e) of Section 4.2.9, does not exceed at any one time
$25,000,000;
(p) Investments by ADT Operations, Inc. and its subsidiaries in the
Capital Stock of ADT Limited to the extent that (i) the aggregate
amount of Capital Stock of ADT Limited held by subsidiaries of ADT
Limited (including, without limitation, ADT Operations, Inc. and
its subsidiaries) does not exceed at any time nine per cent of the
Voting Stock of ADT Limited outstanding at such time and (ii) for
the avoidance of doubt, such Investment is not otherwise
prohibited hereunder, including pursuant to Section 4.2.; and
(q) in relation to ADT Group plc, the Dividended Note:
provided, however, that
(i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" or "High Quality Investment", as the case may
be, may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such
requirements;
(ii) no Investment otherwise permitted by clause (g) shall be
permitted to be made if an Event of Default described in
Clauses 19.1, 19.3 (to the extent resulting from a default
in the observance of any obligation under Section 4.2.4)
19.6, 19.7, 19.8, 19.9 or 19.11 of the Facility Agreement,
shall have occurred and be continuing or would occur upon
giving effect thereto;
(iii) no Investment otherwise permitted by clause (o) shall be
permitted to be made if an Event of Default shall have
occurred and be continuing or would occur upon giving
effect thereto; and
(iv) without limiting any of the restrictions set forth in this
Section 4.2.5, no Investment shall be permitted to be made
if such Investment would not be permitted by the terms of
the Senior Note Indenture.
SECTION 4.2.6. Restricted Payments, etc. (a) ADT Limited will not, and will
not permit any of its subsidiaries to, directly or indirectly,
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of Capital Stock of ADT Limited (other than
dividends or distributions payable in shares of Capital Stock of
ADT Limited or in rights, warrants or options to purchase such
Capital Stock, but excluding dividends or distributions payable in
Redeemable Capital Stock or in options, warrants or other rights
to purchase Redeemable Capital Stock, provided that dividends on
Redeemable Capital Stock may be paid in shares of such Redeemable
Capital Stock),
(ii) purchase, redeem, retire or otherwise acquire for value, or make
any payment on account of the purchase, redemption, retirement or
other acquisition for value of, any Capital Stock of ADT Limited
or any warrants, rights or options to purchase or acquire any such
Capital Stock, or
(iii) declare or pay any dividend on, or make any distribution to
holders of, any Capital Stock of any subsidiary of ADT Limited
(other than (A) with respect to any such Capital Stock held by ADT
Limited or any of its Wholly Owned Subsidiaries or (B) with
respect to the Voting Stock of any subsidiary, made on a pro rata
basis, consistent with the ownership interests in such Voting
Stock, to the owners of such Voting Stock) or purchase, redeem or
otherwise acquire or retire for value, or make any payment on
account of the purchase, redemption, retirement or other
acquisition for value of, any outstanding Capital Stock of any
subsidiary of ADT Limited (other than any such Capital Stock held
by ADT Limited or any of its Wholly Owned Subsidiaries) or any
warrants, rights or options to purchase or acquire any such
outstanding Capital Stock
(such payments or any other actions described in (but not excluded
from) the foregoing clauses (i) through (iii) being herein
referred to as "Restricted Distributions"), unless such Restricted
Distribution would be permitted by the terms of the Senior Note
Indenture as in effect on 23 August 1995; provided, however, that
(x) no Restricted Distribution otherwise permitted pursuant to
this Section 4.2.6(a) (other than any exchange of shares of
the Capital Stock of BAA plc for Exchangeable Preference
Shares pursuant to the terms of the Bye-Laws of ADT Limited
as in effect on 23 August 1995, the payment of any
Restricted Distribution within 60 days after the date of
declaration thereof, if at such date of declaration such
declaration was permitted hereunder, and any exchange of
shares of Non-Voting Exchangeable Shares for Common Shares
in accordance with the terms of the Articles of
Incorporation of ADT Finance Inc. as in effect on 23 August
1995) shall be permitted if an Event of Default (including
a default in the observance by the Borrower of its
obligations under Clause 17.1 of the Facility Agreement)
shall have occurred and be continuing or would occur upon
giving effect to such Restricted Distribution; and
(y) no Restricted Distribution otherwise permitted pursuant to
this Section 4.2.6(a) shall be permitted if such Restricted
Distribution would, pursuant to the terms of the Senior
Note Indenture, decrease the Restricted Payment Basket
Amount to an amount which is less than the excess of (1)
the sum of (A) the aggregate amount expended on Permitted
Business Acquisitions (other than the ASH Transaction to
the extent the aggregate consideration therefor did not
exceed $425,000,000) after 23 August 1995 in excess of
applicable Annual Limits (or during the effectiveness of
the US$300 million Credit Facility, the applicable Annual
Limits (as defined under the US$300 million Credit
Facility), and (B) the aggregate amount of Capital
Expenditures made after 23 August 1995 with the cash
proceeds referred to in clause (a) of the definition of
Equity Proceeds Amount and designated as such pursuant to
the Compliance Certificate (including any compliance
certificate delivered under the guarantees given by ADT
Limited in connection with the US$300 million Credit
Facility or the US$200 million Credit Facility) delivered
in connection with the Financial Quarter in which such
Capital Expenditures were paid over (2) the portion (if
any) of such sum which resulted in a decrease of the
Restricted Payment Basket Amount.
(b) ADT Limited will not, and will not permit any of its subsidiaries
to, directly or indirectly,
(i) make any payment of interest on the Senior Notes or any
Subordinated Debt (other than Subordinated Debt originally
issued to ADT Limited or a wholly owned subsidiary of ADT
Limited (or otherwise acquired by ADT Limited or such
wholly owned subsidiary, to the extent that the
consideration paid by ADT Limited or a wholly owned
subsidiary resulted in a decrease of the Restricted Payment
Basket Amount) and held by ADT Limited or a wholly owned
subsidiary of ADT Limited) on any day other than the date
such payment is required to be made as set forth in the
Senior Notes, the Senior Note Indenture, the Senior
Subordinated Note Indenture, the LYONs, the LYONs Indenture
or the other documents and instruments memorializing such
Subordinated Debt, or which, in the case of any
Subordinated Debt (including Subordinated Debt held by ADT
Limited or a wholly owned subsidiary of ADT Limited), would
violate the subordination provisions thereof; or
(ii) make any payment or prepayment of principal of, or redeem,
purchase, repurchase or defease, the Senior Notes or any
Subordinated Debt (other than Subordinated Debt originally
issued to ADT Limited or a wholly owned subsidiary of ADT
Limited (or otherwise acquired by ADT Limited or such
wholly owned subsidiary, to the extent that the
consideration paid by ADT Limited or such wholly owned
subsidiary resulted in a decrease of the Restricted Payment
Basket Amount) and held by ADT Limited or a wholly owned
subsidiary of ADT Limited), except, prior to the occurrence
of a Permitted Auction Business Sale, Subordinated Debt in
respect of the Dividended Note) on any day other than the
date any such payment, prepayment, redemption or repurchase
is required to be made as set forth in Sections 1010 and
1016 of the Senior Note Indenture, in Sections 1010 and
1016 of the Senior Subordinated Note Indenture, Section
3.09 of the LYONs Indenture or in the other documents and
instruments memorialising the Senior Notes or such
Subordinated Debt, or which, in the case of any
Subordinated Debt (including Subordinated Debt held by ADT
Limited or a Wholly Owned Subsidiary of ADT Limited), would
violate the subordination provisions thereof; provided,
however, that ADT Limited and its subsidiaries may, to the
extent the subordination provisions of the Senior
Subordinated Note Indenture, the LYONs Indenture or any
other document or instrument memorialising Subordinated
Debt would not be violated thereby, make any payment or
prepayment of principal of, or redeem or repurchase the
Senior Notes or any Subordinated Debt if permitted by the
terms of the Senior Note Indenture; provided further,
however, that no payment, prepayment, redemption or
repurchase otherwise permitted pursuant to the immediately
preceding proviso shall be permitted if (x) an Event of
Default shall have occurred and be continuing or would
occur upon giving effect to such payment, prepayment,
redemption or repurchase or (y) such payment, prepayment,
redemption or repurchase would, pursuant to the terms of
the Senior Note Indenture, decrease the Restricted Payment
Basket Amount to an amount which is less than the excess of
(1) the sum of (A) the aggregate amount expended on
Permitted Business Acquisitions (other than the ASH
Transaction to the extent the aggregate consideration
therefor did not exceed $425,000,000) after 23 August 1995
in excess of the applicable Annual Limits (or, during the
effectiveness of the US$300 million Credit Facility, the
applicable Annual Limits (as defined under the US$300
million Credit Facility) and (B) the aggregate amount of
Capital Expenditures made after 23 August 1995 with the
cash proceeds referred to in clause (a) of the definition of
Equity Proceeds Amount and designated as such pursuant to
the Compliance Certificate (including any compliance
certificate delivered under the guarantees given by ADT
Limited in connection with the US$300 million Credit
Facility or the US$200 million Credit Facility) delivered in
connection with the Financial Quarter in which such Capital
Expenditures were paid over (2) the portion (if any) of
such aggregate amount which resulted in a decrease of the
Restricted Payment Basket Amount.
SECTION 4.2.7. Capital Expenditures, etc. ADT Limited will not, and will not
permit any of its subsidiaries to, make Capital Expenditures in any Financial
Year, except (i) Capital Expenditures in connection with conducting the Core
Businesses and (ii) Capital Expenditures incurred in respect of Business
Acquisitions permitted under Sections 4.2.5 and 4.2.9; provided, however, that
no Capitalised Lease Liabilities otherwise permitted to be incurred pursuant
to this Section shall be permitted to be incurred if the aggregate amount of
all such Capitalised Lease Liabilities incurred during any Financial Year
would exceed $30,000,000.
SECTION 4.2.8. [Intentionally Omitted.]
SECTION 4.2.9. Consolidation, Merger, etc. ADT Limited will not, and will
not permit any of its subsidiaries to, liquidate or dissolve, or amalgamate or
consolidate with, or merge into or with, any other person, or otherwise enter
into or consummate any Business Acquisition not constituting an Investment,
except
(a) any subsidiary of the Borrower may liquidate or dissolve
voluntarily into, and may merge with or into, the Borrower or any
wholly owned subsidiary of the Borrower, and any assets or Capital
Stock of any subsidiary of the Borrower may be purchased or
otherwise acquired by the Borrower or any wholly owned subsidiary
of the Borrower;
(b) any subsidiary of ADT Limited that is not a member of the Group
may liquidate or dissolve voluntarily into, and may merge with or
into, ADT Limited or any wholly owned subsidiary of ADT Limited,
and any assets or Capital Stock of any such subsidiary may be
purchased or otherwise acquired by ADT Limited or any wholly owned
subsidiary of ADT Limited;
(c) ADT Limited may (i) amalgamate with or merge with or into a
newly-formed corporation having no assets or liabilities, which
amalgamation or merger shall be solely for the purpose of
reincorporating ADT Limited under the laws of Canada or any
political subdivision thereof, the United Kingdom or any political
subdivision thereof or the United States of America, any state
thereof or the District of Columbia or (ii) continue,
redomesticate or otherwise become subject to the laws of a
jurisdiction other than Bermuda, to the same extent as if it had
been incorporated in such jurisdiction; provided, however, that in
the case of clauses (i) and (ii) above, (A) the surviving entity
shall be a corporation duly organised and validly existing under
the laws of Canada or any political subdivision thereof, the
United Kingdom or any political subdivision thereof or the United
States of America, any state thereof or the District of Columbia
and shall, in either case, expressly assume all the obligations of
ADT Limited hereunder and this Guarantee shall remain in full force
and effect; (B) immediately before and immediately after giving
effect to such transaction, no Event of Default shall have
occurred and be continuing; (C) immediately after giving effect to
such transaction, Stockholders' Equity of the surviving entity is
at least equal to the Stockholders' Equity of ADT Limited
immediately before such transaction less customary and reasonable
transaction costs; (D) each Guarantor, unless it is the other
party to the transactions described above, shall have confirmed
that its Guarantee shall remain in full force and effect; and (E)
the surviving entity shall have delivered, or caused to be
delivered, to the Banks an officers' certificate and an opinion of
counsel, each stating that this provision has been complied with
and that all conditions precedent herein provided for relating to
such transaction have been satisfied;
(d) ADT Limited or any subsidiary of ADT Limited may enter into or
consummate any Permitted Business Acquisition; and
(e) ADT Limited or any subsidiary of ADT Limited may enter into or
consummate any Business Acquisition of a Related Business to the
extent the aggregate amount of expenditures of ADT Limited and its
subsidiaries in respect of such Business Acquisition, when added
(without duplication) to (i) the aggregate amount of all
expenditures of ADT Limited and its subsidiaries in respect of
Business Acquisitions made pursuant to this clause (e) since the
Closing Date plus any such amounts incurred since 23 August 1995
and (ii) the aggregate amount of Investments outstanding under
clause (o) of Section 4.2.5, does not exceed $25,000,000.
SECTION 4.2.10. Asset Dispositions, etc. ADT Limited will not, and will not
permit any of its subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or any substantial part of its assets (including accounts receivable,
Capital Stock of subsidiaries of ADT Limited and other Investments) to any
person (an "Asset Sale"), unless
(a) such Asset Sale is permitted by Section 4.2.9; or
(b) such Asset Sale is a Permitted Strategic Sale or Permitted Auction
Business Sale; or
(c) such Asset Sale is in the ordinary course of business; or
(d) (A) if such Asset Sale consists of the sale or transfer of the
Capital Stock of a subsidiary of ADT Limited, all but not less
than all of the Capital Stock of such subsidiary is so sold or
transferred, (B) such Asset Sale is for not less than the Fair
Market Value of the assets sold (as determined in good faith by
the Board of Directors of ADT Limited or a committee thereof,
whose determination shall be evidenced by a certified written
resolution of such Board or such committee) and the consideration
received by ADT Limited or the relevant subsidiary in respect of
such Asset Sale (other than in connection with a sale or
disposition of the Capital Stock of Nu-Swift plc held by ADT
Limited on 9 January 1997) consists of at least 75% cash
(including any cash proceeds received from the sale of securities
received in such Asset Sale, provided that at the time of such
Asset Sale, ADT Limited or the relevant subsidiary has entered
into a legally binding agreement for the sale of such securities
and such securities are sold within sixty days of such Asset
Sale), or Cash Equivalent Investments and (C) the net book value
of such assets, together with the net book value of all other
assets subject to an Asset Sale permitted under this clause (d)
since the Closing Date plus $10,100,000 does not exceed
$130,000,000; or
(e) without prejudice to the provisions of Section 4.1.6(a) such Asset
Sale is to another member of the ADT Group,
provided that in the case of the disposal of any Capital Stock of any Obligor
or any Intermediate Parent Company, clauses (a) to (e) of this Section 4.2.10.
shall not apply and such disposal shall only be made with the prior written
consent of an Instructing Group.
SECTION 4.2.11. Modification of Certain Documents. ADT Limited will not, and
will not permit any of its subsidiaries to, consent to any amendment,
supplement or other modification of any of the terms or provisions contained
in, or applicable to, the Senior Notes, any Subordinated Debt (including
Subordinated Debt in respect of the Dividended Note, but excluding other
Subordinated Intercompany Debt), or any document or instrument evidencing or
applicable thereto (including the Senior Note Indenture, the Senior
Subordinated Note Indenture and the LYONs Indenture), other than any
amendment, supplement or other modification which extends the date or reduces
the amount of any required repayment or redemption or which does not adversely
affect any of the Beneficiaries.
SECTION 4.2.12. Transactions with Affiliates. ADT Limited will not, and will
not permit any of its subsidiaries to, enter into, or cause, suffer or permit
to exist any arrangement or contract with any of its other Affiliates unless
such arrangement or contract is fair and equitable to ADT Limited or such
subsidiary and is an arrangement or contract of the kind which would be
entered into by a prudent person in the position of ADT Limited or such
subsidiary with a person which is not one of its Affiliates; provided,
however, that the foregoing restriction subject to the provisions of Section
4.1.6(c) shall not apply to (i) any arrangement or contract between or among
Obligors; (ii) any arrangement or contract permitted between or among members
of the ADT Group which are not Obligors or (iii) any other arrangement
expressly permitted hereunder.
SECTION 4.2.13. Negative Pledges, Restrictive Agreements, etc. ADT Limited
will not, and will not permit any of its subsidiaries to, enter into any
agreement (excluding this Guarantee and any other Finance Document and the
US$200 million Credit Facility)
(a) prohibiting the creation or assumption of any encumbrance to
secure the obligations under the Finance Documents upon its
properties, revenues or assets, whether now owned or hereafter
acquired; or
(b) restricting the ability of any such subsidiary to make any
payments, directly or indirectly, to ADT Limited by way of
dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges,
expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any
such subsidiary to make any payment, directly or indirectly, to
ADT Limited;
except
(i) any indenture or agreement governing Indebtedness permitted
by clause (b), (c) or (d) of Section 4.2.2 as in effect on
the date hereof, and any refinancings thereof permitted by
clause (o) of Section 4.2.2;
(ii) any agreement governing any Indebtedness permitted by
clause (h) of Section 4.2.2 or sub-paragraph (f) of the
definition of "Permitted Indebtedness" of the Facility
Agreement as to the assets financed with the proceeds of
such Indebtedness and any refinancings thereof permitted by
clause (o) of Section 4.2.2 or sub-paragraph (i) of the
definition of "Permitted Indebtedness" of the Facility
Agreement;
(iii) any customary encumbrance or restriction with respect to a
subsidiary of ADT Limited imposed pursuant to an agreement
entered into for a sale or disposition permitted hereunder
of all or substantially all of the Capital Stock or assets
of such subsidiary, so long as such encumbrance or
restriction, by its terms, terminates on the earlier of the
termination of such agreement or the consummation of such
agreement;
(iv) customary restrictions on transfers of property subject to
encumbrances permitted pursuant to Section 4.2.3;
(v) restrictions on transfers of property by reason of, or
existing under, (A) applicable law or (B) customary
non-assignment provisions of any agreement entered into by
any subsidiary in the ordinary course of business or any
lease governing a leasehold interest of any subsidiary
entered into in the ordinary course of business;
(vi) usual and customary restrictions pursuant to any agreement
relating to Indebtedness of any Foreign Subsidiary
permitted pursuant to Section 4.2.2 and incurred for
working capital purposes, which restrictions may include
requirements for the maintenance of net worth or other
balance sheet conditions, restrictions on mergers and
transfers of assets, restrictions on investments,
restrictions on transactions with affiliates and
requirements to maintain specified levels of cash flow or
cash flow coverage ratios; provided that such restrictions
are agreed to in good faith and, where applicable, based
upon reasonable assumptions; and
(vii) restrictions contained in Indebtedness (A) existing at the
time a person becomes a subsidiary of ADT Limited in a
transaction permitted hereunder or (B) assumed in
connection with an acquisition of assets permitted
hereunder; provided such Indebtedness was not incurred and
such restrictions were not created in contemplation of any
such transaction.
SECTION 4.2.14. Accounting Changes. ADT Limited will not, and will not
permit any of its subsidiaries to, change its Financial Year from twelve
consecutive calendar months ending on December 31. For the avoidance of doubt
ADT Limited will permit Automated Security (Holdings) plc and its subsidiaries
(as that term is defined in the Facility Agreement) to change its financial
year from twelve consecutive calendar months on 30 November to twelve
consecutive calendar months ending on 31 December except for the first period
after such change which period will be thirteen consecutive calendar months.
SECTION 4.2.15. Ability to Amend; Restrictive Agreements. ADT Limited will
not, and will not permit any of its subsidiaries to, enter into, or accept the
obligations under, any agreement (i) prohibiting (including, except with
respect to (x) any agreement governing Indebtedness permitted by clause (b) or
(c) of Section 4.2.2 or the definition of "Existing Indebtedness" in the
Facility Agreement, as in effect on the Closing Date, or (y) any agreement
governing Indebtedness permitted under clause (o) of Section 4.2.2 or sub-
paragraph (i) of the definition of "Permitted Indebtedness" of the Facility
Agreement that refinances Indebtedness referred to in the preceding clause
(x), subjecting to any condition) the ability of ADT Limited or any of its
subsidiaries to amend or otherwise modify this Guarantee or any other
Finance Documents or (ii) containing any provision that would contravene
any provision of any Finance Document.
SECTION 4.2.16. [Intentionally Omitted.]
SECTION 4.2.17. Activities of Certain Subsidiaries. ADT Limited will not
permit any of the Intermediate Parent Companies to engage in any business
activity or incur any obligation, except (i) the ownership of the Capital
Stock of their respective Subsidiaries, (ii) the making of payments under
intercompany Indebtedness owing to ADT Limited, (iii) the making of capital
contributions to their respective subsidiaries to the extent permitted under
Section 4.2.5 and (iv) the receipt of Distributions permitted under Section
4.2.6 and the receipt of proceeds from, or the receiving of payments under,
intercompany Indebtedness permitted by Section 4.2.2 and Clause 18.2(ii) of
the Facility Agreement, in each case to the extent such proceeds or payments
are concurrently used (A) to repay Indebtedness of such Intermediate Parent
Company owing to ADT Limited or (B) to make a loan, advance or distribution to
its parent (so long as such parent makes a loan, advance or distribution,
directly or indirectly, in the same amount to ADT Limited) or ADT Limited, to
the extent such loan, advance or distribution is permitted under Section 4.2.5
or 4.2.6, as applicable.
SECTION 4.2.18. [Intentionally Omitted.]
SECTION 4.2.19. [Intentionally Omitted.]
SECTION 4.2.20. Any Action. ADT Limited will not, and will not permit any of
its subsidiaries to, take or omit to take any action the taking or the
omission of which would result in the failure of the Borrower or any other
Obligor fully and properly to perform and observe all of its obligations under
the Facility Agreement or any other Finance Document to which it is a party.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Finance Document. This Guarantee is a Finance Document executed
pursuant to the Facility Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with
the terms and provisions thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.6, this Guarantee shall be
binding upon ADT Limited and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Beneficiary and their
respective successors, transferees and assigns (to the fullest extent provided
pursuant to Section 2.6); provided, however, that ADT Limited may not assign
any of its obligations hereunder without the prior written consent of all
Banks.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guarantee, nor consent to any departure by ADT Limited herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent and consented to by the applicable Banks under Clause 33 of the Facility
Agreement, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. The Banks
shall consider requests for such waivers and consents in good faith and shall
act reasonably when deciding whether or not to grant their consent to such
requests.
SECTION 5.4. Addresses for Notices. All notices and other communications
hereunder to ADT Limited shall be in writing or by facsimile and mailed,
telegraphed, transmitted or delivered to it, addressed to it at the address
set forth below its signature hereto or at such other address as shall be
designated by ADT Limited in a written notice to the Agent at the address
specified in the Facility Agreement complying as to delivery with the terms of
this Section. Any notice, if mailed and properly addressed with postage
prepaid, return receipt requested, or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any notice if
transmitted by facsimile, shall be deemed given when transmitted upon receipt
of electronic confirmation of transmission.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.2 and Section 2.4, no failure on the part of any Beneficiary to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder 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 5.6. Captions. Section captions used in this Guarantee are for
convenience of reference only, and shall not affect the construction of this
Guarantee.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights of
any Beneficiary under applicable law, each Beneficiary shall, upon the
occurrence of any Event of Default, to the fullest extent permitted under
applicable law, have the right to appropriate and apply to the payment of the
obligations of ADT Limited owing to it hereunder, whether or not then due, any
and all balances, credits, deposits, accounts or moneys of ADT Limited then or
thereafter maintained with such Beneficiary; provided, however, that any such
appropriation and application shall be subject to the provisions of Clause 25
of the Facility Agreement.
SECTION 5.8. Independence of Covenants. All covenants contained in this
Guarantee or any other Finance Document shall be given independent effect such
that, in the event a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not, unless
expressly so provided in such first covenant, avoid the occurrence of an Event
of Default if such action is taken or such condition exists.
SECTION 5.9. Severability. Wherever possible each provision of this
Guarantee shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guarantee shall be
prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Guarantee.
SECTION 5.10. Governing Law. This Guarantee shall be governed by and
construed in accordance with English law.
THE EXHIBIT
COMPLIANCE CERTIFICATE
ADT Limited
This Compliance Certificate is delivered pursuant to Clause (c) of
Section 4.1.7 of the Guarantee of ADT Limited, dated 25 March 1997 (the
"ADT Limited Guarantee")
Unless otherwise defined herein or the context otherwise requires, terms used
herein or in any of the Attachments hereto have the meanings provided in the
ADT Limited Guarantee and where not so defined, the facility agreement between
ADT Finance plc (the "Borrower"), ADT (UK) Holdings plc and others as
guarantors, various financial institutions (collectively, the "Banks") and The
Bank of Nova Scotia as Agent and Arranger for the Banks (the "Facility
Agreement").
This Compliance Certificate is delivered in connection with the
Financial Quarter commencing on [ ] and ending on [
] (such latter date being the "Computation Date"). ADT Limited
hereby certifies, represents and warrants that:
(a) Stockholders' Equity of ADT Limited
As of the Computation Date, the Stockholders' Equity of ADT Limited was
$[ ]. The minimum amount of Stockholders' Equity of ADT
Limited required by Clause (a) of Section 4.2.4 of the ADT Limited
Guarantee as of such date is $[ ].
(b) ADT Limited's Cash Flow Coverage Ratio
ADT Limited's Cash Flow Coverage Ratio for the four consecutive
Financial Quarters ending on the Computation Date was [ ] to 1.0,
as computed on Attachment 1 hereto. The minimum Cash Flow Coverage
Ratio of ADT Limited required by Clause (b) of Section 4.2.4 of the ADT
Limited Guarantee for such period is 1.5 to 1.0.
(c) ADT Limited's Debt to Total Capitalisation Ratio
As of the Computation Date, ADT Limited's Debt to Total Capitalisation
Ratio was [ ] to 1.0, as computed on Attachment 2 hereto. The maximum
Debt to Total Capitalisation Ratio of ADT Limited permitted by Clause
(c) of Section 4.2.4 of the ADT Limited Guarantee as of such date is 0.5
to 1.0.
(d) Event of Default or Potential Event of Default
As of the Computation Date, no Event of Default or Potential Event of
Default relating to the ADT Group (other than one relating to the Group
or any member thereof) has occurred or is continuing/*
As of the Computation Date, the following Event of Default or Potential
Event of Default relating to the ADT Group (other than one relating to
the Group or any member thereof) (for which no previous notification has
been given to the Agent) has occurred or is continuing*
[Insert details below]
IN WITNESS WHEREOF the undersigned has caused this Compliance
Certificate to be delivered by the finance director*/the chief financial
authorised officer* this [ ] day of [ ].
ADT LIMITED
By: ......................................
Title:
(* Delete as applicable)
ATTACHMENT 1
(to ___/ ___/ ___ Compliance
Certificate)
ADT LIMITED'S CASH FLOW COVERAGE RATIO
for the ________ Financial Quarter,
ending on _________________/ ____
(the "Computation Date")
I. ADT Limited's Cash Flow:
A. EBITDA (as defined in the ADT Limited Guarantee) of ADT
Limited and its subsidiaries for the period of four
consecutive Financial Quarters ending on the Computation
Date (such period, the "Calculation Period"): $___________
B. i) All taxes computed on the basis of income (whether
local, foreign or otherwise), to the extent paid in
cash by ADT Limited and its subsidiaries on a
consolidated basis during the Calculation Period: $___________
ii) Capital Expenditures (other than Capital Expenditures
incurred in respect of any Business Acquisition permitted
under Section 4.2.5 or 4.2.9 of the ADT Limited
Guarantee) of ADT Limited and its subsidiaries paid by
ADT Limited and its subsidiaries during the Calculation
Period: $___________
iii) The sum of Items I(B)(i) and I(B)(ii): $___________
C. CASH FLOW: The excess of Item (I(A) over Item I(B) (iii): $___________
D. CAPITAL EXPENDITURES OF ADT LIMITED AND ITS
SUBSIDIARIES PAID DURING THE CALCULATION
PERIOD WITH EQUITY PROCEEDS, TO THE EXTENT
INCLUDED IN ITEM I(B)(ii): $___________
E. ADJUSTED CASH FLOW: The sum of Item I(C) and Item I(D) $___________
II. ADT Limited's Cash Flow Coverage Ratio:
A. Adjusted Cash Flow of ADT Limited and its subsidiaries for
the Calculation Period (see Item I(E) above): $___________
B. Interest Expense (as defined in the ADT Limited Guarantee) of
ADT Limited and its subsidiaries for the Calculation Period: $___________
C. ADT LIMITED'S CASH FLOW COVERAGE RATIO:
The ratio of Item II(A) to Item II(B): ____ to 1.0
ATTACHMENT 2
(to ___/ ___/ ___ Compliance
Certificate)
ADT LIMITED'S DEBT TO TOTAL CAPITALISATION RATIO
for the ________ Financial Quarter,
ending on _________________/ ____
(the "Computation Date")
ADT Limited's Debt to Total Capitalisation Ratio:
A. As at the Computation Date, the aggregate amount of Debt
(as defined in the ADT Limited Guarantee) of ADT Limited
and its subsidiaries, determined on a consolidated basis: $___________
B. As at the Computation Date, Stockholders' Equity (as\
defined in the ADT Limited Guarantee) of ADT Limited. $___________
C. TOTAL CAPITALISATION: The sum of Items A and B: $___________
D. ADT LIMITED'S DEBT TO TOTAL
CAPITALISATION RATIO: The Ratio of Item A to Item C: _____ to 1.0
AS WITNESS the hand of the duly authorised representative of ADT
Limited hereto the day and year first before written
ADT LIMITED
By:
ANNEX 1
Permitted Existing Business Activities
AUCTION GROUP
Employee Mortgage Financing
Sale of Salvage Title Information
Operation of Restaurants/Snack Bars at Auction Sites
Auctioneering of Other Equipment and Goods
Sale of Service Contracts
Lease and Sub-lease of Real Property
Insurance Appraisal/Adjustment Services
Computer and Internet Related Services
SECURITY GROUP
Guarding Services
Mobile Patrol Services
Management of Correctional Institutions
Document Destruction
Armoured Vehicle Cash-in-Transit Services, Wage Packeting and Coin
Rolling
Reprographic and Photocopying Services
Store Detective Services
Sale and Lease of Professional Video Equipment and Supplies
Computer and Internet Related Services
OTHER
Human Resource and Management and Temporary Staff Consultancy Services
Electrical Contracting
EXHIBIT 10.22
[Letterhead of The Bank of Nova Scotia]
To: ADT Finance Plc
19/21 Denmark Street
Wokingham
Berkshire
RG40 2QE
Dear Sirs
On Demand Facility
We, The Bank of Nova Scotia, acting through its London branch at Scotia House,
33 Finsbury Square, London EC2A 1BB, are pleased to make available to you, in
contemplation of the confirmation of a Pound Sterling90,000,000 Facility
Agreement among you, ADT (U.K.) Holdings Limited and others as guarantors (the
"Permanent Facility") and as a temporary portion of the Permanent Facility
pending confirmation thereof, a sterling on demand facility on the terms set
forth in this Facility Letter.
1. Definitions and Interpretation
(a) In this letter the following terms have the meanings given to
them in this paragraph 1(a):
"Associated Costs Rate" means the rate necessary to cover any
monetary control, liquidity or reserve asset costs where applicable as
determined by us from time to time.
"Business Day" shall be construed as a reference to a day
(other than a Saturday or Sunday) on which banks generally are open for
business in London.
"Finance Documents" means (i) this Facility Letter, (ii) the
guarantees of even date herewith entered into by ADT Limited, ADT (UK)
Holdings Limited, Modern Security Systems Limited, ADT Group plc, Electric
Protection Services Limited and Automated Security (Holdings) plc in our
favour in respect of your obligations under this Facility Letter, and (iii)
any other agreement, deed, letter, certificate or statement entered into or
provided by you or any Group Guarantor pursuant to the terms thereof or
otherwise in connection therewith.
"Group Guarantors" means ADT Limited, ADT (UK) Holdings
Limited, Modern Security Systems Limited, ADT Group plc, Electric Protection
Services Limited and Automated Security (Holdings) plc, each of which has
entered into a guarantee of even date herewith in our favour in respect of
your obligations under this Facility Letter.
"LIBOR" means, in relation to any amount owed by you hereunder
on which interest for a given period is to accrue, the rate per annum
determined by us to be equal to the arithmetic mean (rounded if necessary
upwards to 5 decimal places) of the offered quotations which appear on the
relevant page (as defined in paragraph 1(b)) for such period at or about 11.00
a.m. (London time) on the first day of such period.
"Loan" means the aggregate principal amount for the time being
outstanding hereunder.
" Pound Sterling" and "sterling" denotes lawful currency of the
United Kingdom.
(b) For the purposes of the definition of "LIBOR":
(i) "relevant page" means page 3750 of the Telerate Screen
Service for the display of London Interbank Offered rates for sterling (or, if
such page or such service shall cease to be available, such other page or such
other service (as the case may be) for the purpose of displaying London
Interbank Offered Rates for such currency as we shall, after consultation with
you, select); and
(ii) if no quotation for the relevant period is displayed and
we have not selected an alternative service on which one or more such
quotations are displayed, "LIBOR" shall mean the rate at which we are offering
to prime banks in the London Interbank Market deposits in sterling and for
such period at or about 11.00 a.m. (London time) on the first day of such
period.
2. The Facility
(a) Subject to the terms of this Facility Letter, we grant to you
a sterling on demand facility in an aggregate amount of Pound
Sterling27,000,000.
(b) You shall ensure that no amount raised by you hereunder shall
be used to give financial assistance (as such term is defined in the Companies
Act 1985 or any analogous provision of any similar law applicable to any Group
Guarantor) directly or indirectly for any purpose which would be unlawful or
would prejudice in any way whatsoever the validity or enforceability of your
obligations or any of the obligations of the Group Guarantors under any of the
Finance Documents.
3. Availability of the Facility
Subject to Paragraph 4, you may drawdown the facility in one
amount by giving notice to us not later than 10.00 a.m. on the proposed date
of drawdown. Any portion of the facility which is not drawndown on such date
is cancelled.
4. Condition Precedent Documents
We will only make available to you the facility once we have
confirmed to you that we have received all of the documents listed in the
Schedule (Condition Precedent Documents) and that each is, in form and
substance, satisfactory to us. We will promptly give you notice of such
satisfaction.
5. Termination
(a) You may terminate this agreement at any time upon the
repayment of all amounts outstanding hereunder including all interest accrued
and other charges, costs and expenses.
(b) We may terminate the whole or any part of this facility by
giving you notice at any time at our discretion following which no further
advances shall be made under this facility.
6. Repayment
Notwithstanding any other provision in this Facility Letter,
upon our written demand you shall pay to us at The Bank of Nova Scotia, direct
chaps code: 30-16-61 in sterling and in immediately available, freely
transferable funds all amounts outstanding hereunder including all interest
accrued and other charges, costs and expenses. Any part of the Loan which you
repay, whether voluntarily or pursuant to our demand, cannot be drawn down
again. If notice of our demand has been received (or deemed to have been
received) by you on or prior to 9.30 a.m. on any Business Day, you shall be
obliged to pay the amount so demanded on such Business Day or if received (or
deemed received) later than 9.30 a.m., on the next succeeding Business Day.
7. Interest
(a) You shall pay interest on the Loan on the last day of each
interest period at the rate which is the sum of 0.50 per cent. per annum in
respect of such interest period, the Associated Costs Rate in respect of such
interest period and LIBOR. The duration of interest periods under this
facility shall be one month or such shorter period as may be agreed by us and
you. Other than in the case of the first interest period, each interest
period will commence on the last day of the previous interest period. If at
the end of any interest period you do not repay the Loan, then you may select
another interest period.
(b) If you fail to pay any amount when due (in respect of
principal or interest or otherwise), you shall be liable to pay interest on
such unpaid sum upon our demand. Such interest shall be calculated from the
date when such amount was due until the date of actual payment at an interest
rate as well after as before judgment equal to the sum from time to time of
2.50 per cent. per annum, the Associated Costs Rate in respect thereof at such
time and LIBOR on the first day of such periods as we may reasonably select.
(c) Computations of interest shall be made by us on the basis of a
year of 365 days and the actual number of days elapsed.
8. Undertaking
Without prejudice to Paragraph 6, you undertake to notify us
immediately in the event that any external indebtedness for borrowed money of
yourself in excess, in aggregate, of Pound Sterling10,000,000 (or its
equivalent) is not paid when due, any such indebtedness of yourself in excess,
in aggregate, of Pound Sterling10,000,000 (or its equivalent) is declared to
be or otherwise becomes due and payable prior to its specified maturity or any
creditor or creditors of yourself becomes entitled to declare any such
indebtedness of yourself in excess, in aggregate, of Pound Sterling10,000,000
(or its equivalent) due and payable prior to its specified maturity.
9. Indemnity
If any amount advanced under Paragraph 2(a) above is repaid
otherwise than on the last day of the interest period relating thereto, you
shall pay us the shortfall (if any) between (i) interest (less 0.50 pr cent.
per annum and Associated Costs Rate) which would have been payable by you on
the repaid amount for the rest of such interest period and (ii) interest on
the repaid amount if re-lent in the London Interbank Market for the rest of
such interest period.
10. Costs, Fees and Payments
(a) You shall reimburse us on demand for all reasonable expenses
(including legal fees) inclusive of value added tax incurred by us in
connection with the negotiation, preparation and execution of this Facility
Letter and for all expenses (including legal fees) inclusive of value added
tax incurred by us in contemplation of or otherwise in connection with the
enforcement, preservation or protection of any of our rights in respect
thereof.
(b) Without prejudice to anything else herein contained you shall
indemnify us on demand against any losses, premium, penalties and expenses
which we may sustain or incur as a consequence of payment of any amount
otherwise than on the due date therefor or in the manner herein prescribed.
(c) All payments made by you hereunder shall be made in sterling
and shall be paid in full without set-off or counterclaim.
11. Taxes
All payments to be made by you hereunder shall be free and
clear of and without deduction or withholding for any tax or other matter
other than as required by law; if you are required by law to make any
deduction or withholding on account of tax (other than a tax imposed on and
calculated by reference to our overall net income) or otherwise from any such
payment, the sum due from you in respect of such payment shall be increased to
the extent necessary to ensure that, after the making of such deduction or
withholding, we receive a net sum equal to the sum which we would have
received had no deduction or withholding been made.
12. No Waiver
No failure by us to exercise, nor any delay in exercising any
of our rights or remedies hereunder shall operate as a waiver of those rights
or remedies. Nor shall any single or partial exercise of any right or remedy
prevent any further or other exercise thereof or the exercise of any other
right or remedy.
13. Set-Off
You hereby authorise us to apply any credit balance to which
you are entitled on any of your accounts with us in satisfaction of any sum
due to us by you but unpaid and to purchase sterling with the monies standing
to the credit of any such account if necessary to effect such application. We
shall not be obliged to exercise our rights under this clause but we shall
confirm any such application which is made by us to you in writing promptly
thereafter.
14. Currency of Account
Sterling is the currency of account and payment for each and
every sum at any time due from you hereunder. If for any reason any sum due
from you pursuant to the terms of this letter or any order or judgment given
or made in relation hereto has to be converted from the currency (the "first
currency") in which the same is payable hereunder or under such order or
judgement into another currency ("second currency") for the purpose of (i)
making or filing a claim or proof against you, (ii) obtaining an order or
judgment in any court or other tribunal or (iii) enforcing any order or
judgment given or made in relation hereto, you shall indemnify us and hold us
harmless from and against any loss suffered as a result of any discrepancy
between (a) the rate of exchange used for such purpose to convert the sum in
question from the first currency into the second currency and (b) the rate or
rates of exchange at which we may in the ordinary course of business purchase
the first currency with the second currency upon receipt of a sum paid to us
in satisfaction, in whole or in part, of any such order, judgment, claim or
proof.
15. Assignment
We shall not assign the whole or any part of this Facility
Letter without your prior written consent (such consent not to be unreasonably
withheld or delayed). However, if at the time of such transfer or assignment,
a written demand for payment has been made pursuant to Clause 6, but such
payment has not been received within the time specified in Clause 6, no such
consent as is referred to in this Clause 15 shall be required. The
expressions "we", "us" and "our" wherever used herein shall be deemed to
include our assignees and other successors, who shall be entitled to enforce
and proceed upon this Facility Letter in the same manner as if named herein.
We shall be entitled to impart any information concerning you to any such
assignee or other successor or any participant or proposed assignee, successor
or participant provided that we shall obtain from the person to whom such
information is provided an undertaking to keep such information secret and
confidential.
16. Notices and Demands
Any notice or demand to be given or made by us or you hereunder
may be given or made by fax or by letter, in the case of us to our office
detailed above and in the case of you to your registered office or principal
place of business for the time being. Any such notice or demand shall be
deemed to be received when despatched (in the case of any communication made
by fax) or (in the case of any communication made by letter when left at that
address or (as the case may be) ten days after being deposited in the post
postage prepaid in an envelope addressed to it at that address. If a notice
is received or deemed to be received after 5.00 p.m. London time, it shall be
treated as being received prior to 9.30 a.m. on the next succeeding Business
Day.
17. Law
This letter shall be governed by and construed in accordance
with the laws of England.
If you have any questions regarding any of provisions set out
above, please contact John Heeds who will be pleased to discuss the contents
of this letter with you further.
If the foregoing correctly reflects the agreement between you
and us, please indicate your acceptance of and agreement to the terms of this
letter by executing below a copy of this letter and returning it to us (for
the attention of John Heeds). When we receive the copy of this letter
executed by you, this letter shall be binding upon and inure to the benefit of
you and us and your and our respective successors.
Yours faithfully,
/s/ John Heeds
-----------------------
The Bank of Nova Scotia
Accepted and agreed
this 3 day of January, 1997
/s/ T.W. Godfray
-----------------------
ADT Finance Plc
By: Mr. T.W. Godfray
Title:Director
SCHEDULE
Condition Precedent Documents
A. Corporate Documents
1. In relation to ADT Finance Plc and each of the Group
Guarantors:
(a) a copy, certified a true copy by a duly authorised
officer of the relevant company, of the constitutional
documents of ADT Finance Plc and each of the Group Guarantors;
(b) a copy, certified a true copy by a duly authorised
officer of ADT Finance Plc, of a board resolution of ADT
Finance Plc approving the execution, delivery and performance
of this Facility Letter and the terms and conditions thereof
and authorising a named person or persons to sign this Facility
Letter and any documents to be delivered by ADT Finance Plc
pursuant thereto; and
(c) a certificate of a duly authorised officer of the
relevant company setting out the names and signatures of the
persons authorised to sign, on behalf of ADT Finance Plc and
each of the Group Guarantors, this Facility Letter and any
documents to be delivered by ADT Finance Plc and each of the
Group Guarantors pursuant thereto.
2. In relation to each of the Group Guarantors a copy, certified
a true copy by a duly authorised officer of such Group Guarantor of a board
resolution approving the execution, delivery and performance of the guarantee
of even date herewith by such Group Guarantor in favour of the Bank of Nova
Scotia.
B. Credit Support
Guarantees of even date herewith given by each of ADT Limited,
ADT (UK) Holdings Limited, Modern Security Systems Limited, ADT Group plc,
Electric Protection Services Limited and Automated Security (Holdings) plc in
favour of The Bank of Nova Scotia.
C. Legal Opinions
Legal Opinion, of even dates herewith, of:
(i) Appleby, Spurling & Kemps, Bermuda counsel to ADT Limited;
and
(ii) Clifford Chance, UK counsel to The Bank of Nova Scotia.
EXHIBIT 10.23
THIS GUARANTEE (this "Guarantee"), dated as of 3 January 1997, made by ADT
Limited (the "Guarantor") a company organised under the laws of Bermuda of PO
Box 5035, Boca Raton, Florida 33431, USA in favour of The Bank of Nova Scotia
(the "Bank") acting through its London branch at 33 Finsbury Square, London
EC2A 1BB in respect of the obligations of ADT Finance plc (the "Principal") of
19/21 Denmark Street, Wokingham, Berkshire RG40 2QE under a facility letter
(the "Facility Letter") of even date herewith provided by the Bank.
WITNESSETH as follows:
1. Facility Letter Definitions
Unless otherwise defined herein or the context otherwise
requires, terms used in this Guarantee have the meanings provided in the
Facility Letter.
2. The Principal's Obligations
In this Guarantee the expression "the Principal's Obligations"
means all monies now or at any time hereafter becoming due or owing by the
Principal to the Bank under or pursuant to the Facility Letter.
3. Guarantee
3.1. In consideration of the Bank entering into the Facility
Letter, the Guarantor hereby guarantees to the Bank, forthwith on
demand being made in writing by the Bank on the Guarantor, the
payment and discharge of the Principal's Obligations.
3.2. In the event of, and notwithstanding, the commencement of
winding up of the Principal, this Guarantee shall extend to and be in
respect of all monies and liabilities which would have been owing or
have been incurred by the Principal to the Bank if such event had
occurred at the time when the Bank makes demand hereunder.
4. Indemnity
For the same consideration the Guarantor hereby agrees as a
primary obligor to indemnify the Bank against any loss which the Bank may
incur in the event of the whole or any part of the Principal's Obligations
being invalid or being or becoming irrecoverable, unenforceable or void or
being avoided for any reason whatsoever, irrespective of whether such reason
was or ought to have been known to the Bank or its officers, employees, agents
or professional advisers. The amount of such loss shall be the amount which
the Bank would otherwise have been entitled to recover from the Principal.
5. Continuing Security
The Guarantor shall not be entitled to determine this Guarantee
by notice and until the Principal's Obligations shall have been paid or
discharged in full, this Guarantee shall be a continuing security for all the
Principal's Obligations and shall not be discharged by any intermediate
discharge or payment of or on account of the Principal's Obligations or any of
them or any settlement of accounts between the Bank and the Principal or any
other person. No demand made by the Bank hereunder shall prejudice or
restrict the right of the Bank to make further or other demands.
6. Interest
The Guarantor shall pay interest on any amount for the time
being due from the Guarantor to the Bank under this Guarantee from the date of
a demand for payment hereunder until payment in full, at the rate (as well
after as before judgment) calculated in accordance with Clause 7(b) of the
Facility Letter.
7. Representations
The Guarantor makes the representations and warranties set out
in Clauses 7.1 ad 7.2 and acknowledges that the Bank has entered into
this Guarantee in reliance on those representations and warranties.
7.1. The obligations to be assumed by the Guarantor in this
Guarantee are legal and valid obligations binding on the Guarantor in
accordance with the terms hereof.
7.2. The obligations of the Guarantor under this Guarantee rank at
least pari passu with its obligations under the guarantee dated 23
August 1995 (in respect of the credit agreement dated 23 August 1995
between ADT Operations, Inc. as borrower and the Lenders as defined
therein) and any guarantee which may be issued by the Guarantor in
respect of any facility which may replace such credit agreement.
8. Opening of New Accounts
If for any reason this Guarantee ceases to be a continuing
security, the Bank may either continue any then existing account or open one
or more fresh accounts for the Principal, but in either case the obligations
of the Guarantor under this Guarantee shall remain unaffected by, and be
computed without regard to, any payment into or out of any such account after
this Guarantee has ceased to be a continuing security.
9. Dealings with the Principal
The liability of the Guarantor hereunder shall not be impaired,
discharged or otherwise affected by (i) any determination, variation,
discharge, release or increase of, or composition or arrangement relating to
the Principal's Obligations or of or relating to any agreement relating
thereto; or (ii) the grant by the Bank to the Principal or any other person
of any time or indulgence; or (iii) any dealing, exchange, renewal, variation,
release, discharge, compositions, arrangements, modification or abstaining
from perfecting or enforcing or claiming in relation to any securities,
guarantees or rights which the Bank may now or hereafter have in respect to
the Principal's Obligations; or (iv) the Bank's obtaining or failure to obtain
any other guarantee or security (whether contemporaneously with this Guarantee
or otherwise); or (v) any other act, event or omission which but for this
provision would or might operate to impair, discharge or otherwise affect the
obligations of the Guarantor hereunder.
10. Discharges and Releases Avoided
Any discharge or release by the Bank of the Guarantor in
respect of liabilities under this Guarantee or of any security relating
thereto, notwithstanding that this Guarantee may have been returned to the
Guarantor and any agreement between the Guarantor and the Bank concerning any
such liabilities or security shall be void, and deemed to have been given or
entered into by the Bank on the express condition that it would be void, if
any act or thing in reliance upon or on the faith of which the Bank gave such
discharge or release or entered into that agreement shall be subsequently
avoided by or in pursuance of any provision or rule of law.
11. Claims of the Guarantor against the Principal
11.1. Until the Principal's Obligations shall have been paid or
discharged in full, and notwithstanding any payment of monies
recoverable from the Guarantor hereunder or any purported release or
cancellation of this Guarantee, the Guarantor will not by virtue of
such payment or by any other means or on any other ground, except with
the prior written consent of the Bank or as provided below (i) make or
enforce any claim (whether by way of set-off, counterclaim or
otherwise) or right against the Principal or prove in competition with
the Bank, whether in respect of any payment hereunder made by the
Guarantor or otherwise (other than in the ordinary course of
business); or (ii) be entitled to claim, or have the benefit of, any
set-off, counterclaim or proof against, or dividend, composition or
payment by, the Principal; or (iii) be entitled to claim or otherwise
obtain the benefit (by way of subrogation or otherwise) of any
security or guarantee or indemnity at any time held by the Bank for or
in respect of any of the Principal's Obligations; or (iv) claim or
enforce any right of contribution against any co-surety; provided that
the restrictions contained in (i), (ii) and (iv) above shall apply
only after demand has been made hereunder, but shall apply
irrespective of when the claim for contribution or indemnity under
this Clause 11.1 is made.
11.2. If the Guarantor shall have any right of proof in the
winding-up of the Principal which does not derive from a payment made
hereunder, the Guarantor shall not (except where the Bank otherwise
requires) exercise that right.
11.3. If while the Guarantor shall remain under liability to the
Bank hereunder, any monies or other property or assets shall be
received or recovered by the Guarantor in pursuance of any of the
foregoing provisions of this Clause or in breach of any such
provisions, such monies or other property or assets shall (save as
provided herein) be held upon trust to pay or transfer the same to the
Bank to the extent of such liability.
11.4. The Bank shall not be obliged before exercising any of the
rights, powers or remedies conferred upon it in respect of the Guarantor by
any of the Finance Documents or by law:
(a) to make any demand of the Principal or any other Group
Guarantor;
(b) to take any action or obtain judgment in any court against
the Principal or any other Group Guarantor;
(c) to make or file any claim or proof in a winding-up or
dissolution of the Principal or any other Group Guarantor; or
(d) to enforce or seek to enforce any other security taken in
respect of any of the obligations of the Principal or any
other Group Guarantor under any of the Finance Documents;
save that notice of non-payment shall first be given to the Principal provided
that if no such notice is given to the Principal prior to the exercise of such
rights, powers or remedies, that does not preclude the Bank giving notice to
the Principal and thereafter exercising such rights, powers or remedies.
12. Set-Off
Without prejudice to and in addition to any other remedy of
set-off, combination or consolidation of accounts which the Bank may have, at
any time after a demand hereunder the Bank shall be entitled without prior
notice to the Guarantor, if at the relevant time the Principal's Obligations
and all other monies payable hereunder shall not have been fully paid or
otherwise discharged, to set off the liability of the Guarantor hereunder
against any monies in whatsoever currency standing to the credit of the
Guarantor in any current or other account with the Bank and to combine any
such account with any other such account.
13. Suspense Account
The Bank may at any time place and keep to the credit of a
separate suspense account any monies received under this Guarantee for so long
and in such manner as the Bank may determine without any obligation to apply
such monies or any part of them in or towards the discharge of the Principal's
Obligations. In the event of any proceedings in or analogous to liquidation,
composition or arrangement of or concerning the Principal, the Bank may
notwithstanding any payment made under this Guarantee approve and agree to
accept any dividend or composition in respect of the whole or any part of the
Principal's Obligations in the same manner as if this Guarantee had not been
given. If and when the aggregate of all monies held on suspense or impersonal
account exceeds the aggregate amount payable by the Principal under the
Finance Documents to the Bank, the Bank shall, as soon as practicable
thereafter, apply any amount held in such suspense or impersonal account in
satisfaction of the amounts payable by the Principal and the Group Guarantors
under the Finance Documents.
14. Other Means of Payment
The Bank may make demand under this Guarantee (i) before making
demand on any other surety or enforcing any other security for the Principal's
Obligations and (ii) for the payment of the ultimate balance after resorting
to other means of payment or for the balance due at any time notwithstanding
that the Bank has not resorted to other means of payment (in which case the
Guarantor shall not be entitled to any benefit from such other means of
payment so long as any of the Principal's Obligations remain outstanding).
15. Accounts Settled
Any accounts settled or stated by or between the Principal and
the Bank may be adduced by the Bank and shall be accepted by the Guarantor as
conclusive evidence (save in the absence of manifest error) of the amount
thereby appearing as due from the Principal to the Bank.
16. Payment Free of Deduction
The Guarantor will pay all monies due under this Guarantee free
and clear of and without deduction for or on account of either any set-off or
counterclaim or any and all present or future taxes, levies, imposts, charges,
fees, deductions or withholdings other than as required by law. If any sums
payable hereunder shall be or become subject to any deduction or withholding
on account of tax (other than a tax imposed on and calculated by reference to
our overall net income), the amount of such payments shall be increased so that
the net amount received by the Bank shall equal the amount which, but for such
deduction or withholding, would have been received by the Bank hereunder.
17. Effectiveness of Security
This Guarantee is in addition to and is not prejudiced, or to
be prejudiced, by any other guarantee or security for the Principal's
Obligations or any of them which is/are now or may hereafter be held by the
Bank whether from the Guarantor or otherwise.
18. Currency Conversions
18.1. The Guarantor's liability hereunder shall be to pay the Bank
the full amount of the Principal's Obligations in each currency in
which they are for the time being denominated. Provided that if and
to the extent that the Guarantor shall not pay such amount in such
currency the Bank may accept payment of all or part of such amount in
any other currency and/or require the Guarantor, in substitution for
its liability to pay such amount in such currency, to pay an amount in
sterling which is equivalent to the amount of such currency remaining
unpaid (and in either case the provisions of Clause 18.2 below shall
apply).
18.2. The equivalent on any day in one currency of any amount
denominated in another currency shall be an amount in the first
currency equal to the amount which the Bank would have received if the
Bank had on such day (or, if such day shall not be a business day, on
the next succeeding business day) made a purchase of the first
currency with such amount of such other currency at the then
prevailing spot rate of exchange of the Bank less all costs, charges
and expenses normally incurred by the Bank or on its behalf in
connection with such a purchase.
19. Costs and Expenses
The Guarantor shall pay all legal and other costs and expenses
(together with any value added tax or other taxes in respect thereof) incurred
by the Bank in connection with the preservation of rights under and
enforcement of this Guarantee.
20. Provisions Severable
Each of the provisions contained in this Guarantee shall be
severable and distinct from one another and if any one or more of such
provisions is now or hereafter becomes invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Guarantee shall not in any way be affected, prejudiced or impaired thereby.
21. Benefit and Interpretation of Guarantee
21.1. The Bank shall not assign the whole or any part of the benefit
of this Guarantee without our prior written consent such consent not be
unreasonably withheld or delayed. The expression "the Bank" wherever
used herein shall be deemed to include the assignees and other
successors of the Bank, who shall be entitled to enforce and proceed
upon this Guarantee in the same manner as if named herein. The Bank
shall be entitled to impart any information concerning the Guarantor to
any such assignee or other successor or any participant or proposed
assignee, successor or participant provided that we shall obtain from
the person to whom such information is provided an undertaking to keep
such information secret and confidential.
21.2. Any reference in this Guarantee to a "person" shall be
construed as a reference to any person, firm, company, corporation,
government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two
or more of the foregoing.
22. Notices and Demands
Any notice or demand to be given or made by the Bank hereunder
may be given to or made of the Guarantor by fax or by letter at its registered
office or principal place of business for the time being. Any such notice or
demand shall be deemed to be given when despatched (in the case of a
communication made by fax) or (in the case of any communication made by
letter) when left at that address or ( as the case may be) ten days after
being deposited in the post postage prepaid in an envelope addressed to it
at that address.
23. Law and Jurisdiction
23.1. This Guarantee shall be governed by, and construed in
accordance with, English law.
23.2. The Guarantor hereby agrees for the benefit of the Bank, and
without prejudice to the right of the Bank to take proceedings in
relation hereto before any other court of competent jurisdiction, that
the courts of England shall have jurisdiction to hear and determine
any suit, action or proceeding that may arise out of or in connection
with this Guarantee and for such purposes irrevocably submits to the
jurisdiction of such courts.
AS WITNESS the hands of the duly authorised representatives of
the parties hereto the day and year first before written.
The Guarantor
ADT LIMITED
By: Stephen J. Ruzika
ADT LIMITED
Exhibit 11.1
Computation of Earnings per Common Share
Year ended December 31 1996 1995 1994
$m $m $m
Net (loss) income available to common
shareholders - primary and fully diluted
(loss) earnings per common share (695.4) 20.9 66.0
=========== =========== ===========
Year ended December 31 1996 1995 1994
Number Number Number
Weighted average number of common
shares in issue 137,114,415 135,362,172 133,645,302
Weighted average number of common stock
equivalents in issue resulting from:
- Executive share option schemes - 2,919,596 1,603,887
- Non-voting exchangeable shares - 1,690 899,172
----------- ----------- -----------
Weighted average number of common shares
in issue as used in the computation
of primary (loss) earnings per
common share 137,114,415 138,283,458 136,148,361
Executive share option schemes - 662,110 279,204
----------- ----------- -----------
Weighted average number of common shares
in issue as used in the computation
of fully diluted earnings
per common share 137,114,415 138,945,568 136,427,565
=========== =========== ===========
Year ended December 31 1996 1995 1994
$ $ $
Primary (loss) earnings per common share -
net income (5.07) 0.15 0.48
=========== =========== ===========
Fully diluted earnings per common share -
net income - 0.15 0.48
=========== =========== ===========
Notes
(i) A certain number of common stock equivalents resulting from the
assumed exercise of executive share options are anti-dilutive in the
calculation of primary and fully diluted (loss) earnings per common
share in all years presented. The effect on primary loss per common
share resulting from the assumed exercise of the warrant granted to
Republic, which vested in September 1996, is anti-dilutive in 1996.
The number of common stock equivalents resulting from the assumed
exercise of warrants are anti-dilutive in the calculation of primary
and fully diluted earnings per common share in 1994. All warrants
not converted into common shares at June 30, 1994 lapsed in accordance
with the terms of the warrant issue.
(ii) The effect on fully diluted earnings per common share resulting from
the assumed exchange of Liquid Yield Option Notes, which were issued
in July 1995, is anti-dilutive in 1996 and 1995. The effect on fully
diluted earnings per common share resulting from the assumed
conversion of convertible capital bonds is anti-dilutive in all years
presented. The effect on fully diluted earnings per common share
resulting from the assumed conversion of convertible redeemable
preference shares is anti-dilutive in all years presented.
ADT LIMITED
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE COMPANY
United States Group (All Delaware unless stated)
ADT Holdings, Inc.
ADT Operations, Inc.
ADT Investments, Inc.
ADT Property Holdings, Inc.
ADT Title Holding Company I
ADT Title Holding Company II
ADT General Holdings, Inc.
ADT Aviations, Inc.
ADT Travel Services, Inc.
ADT Maintenance Services, Inc.
FCI Liquidations, Inc.
ADT Services, Inc.
ADT Automotive Holdings, Inc.
AA Property Holdings, Inc.
ADT Automotive Services, Inc.
ADT Automotive Services of Guam, Inc. (Guam)
Flying Lion, Inc.
Auction Transport, Inc. (Missouri)
British Car Auctions, Inc.
WGV Liquidations, Inc.
ADT Automotive, Inc.
Tri-City Auto Auction, Inc. (Washington)
AAAA Dealer Services, Inc.
ADT Specialty Auctions, Inc. (Michigan)
Dealers Auto Auction of Puerto Rico, Inc. (Puerto Rico)
ADT Security Services, Inc.
ADT Security Systems, West, Inc.
ADT Security Systems, Manufacturing, Inc.
Electro Signal Lab, Inc.
CCTC International, Inc.
ADT Business Holdings, Inc.
ALS Investments, Inc.
Mid-Atlantic Security, Inc.
ADT, Inc. (Florida)
Adaptive Design Technologies, Inc. (Florida)
Automated Security Corp.
Sonitrol Management Corp.
Sonitrol Corp.
Automated Security Holdings, Inc.
API Security, Inc.
Limited Apache, Inc. (Massachusetts)
United Kingdom Group (All UK unless stated)
ADT
ADT (UK) Holdings PLC
ADT Group PLC
Britannia Security Group Limited
Britannia Security Systems Limited
Britannia Access Systems Limited
Britannia Monitoring Services Limited
Capitol Alarms Limited
Electric Protection Services Limited
Ariel Burglary and Fire Protection Company Limited
Audio Education Limited
AEL Video (Ireland) Limited (Ireland)
D.C.S. Alarms Limited
D J Security Alarms Limited
D J Security Alarms (Wales) Limited
Britannia Photovision Limited
Photovision Rentals Limited
Britannia Security Systems (Midlands) Limited
Advanced Alarm Systems Limited
Britannia Security Systems (Southern) Limited
Eyelevel Electronics Limited
Chiltern Security Limited
Hertfordshire Security Systems Limited
James Deacon Security Limited
Mather and Platt Alarms Limited
PPR Alarms Limited
Priory Security Services Limited
Region Protection (Notts) Limited
Security Systems (Rental) Limited
K S Lift Services Limited
Steeplock Limited
Phoenix Security Services Limited
Security Watch Limited
Shield Protection Limited
Sovereign Security Systems Limited
Ultra Security Alarms Limited
Willow (Wales) Limited
Britannia Security CI Limited (Channel Islands)
Thameside Lock and Safe Company Limited
Access Control Systems Limited
Total Lift Services Limited
Tustin Machine Tools Limited
White Group Electronics Limited
ADT (UK) Limited
Redhill Security Services Limited
Taskman Security Services Limited
ADT Finance plc
Show Contracts Limited
ADT Linen Services Limited
ADT Pension Fund Limited
ADT Security Systems Limited
ADT Trustees Limited
American District Telegraph Services International Limited
The City Laundry (Norwich) Limited
Cleaners Limited
Cleaners (South West) Limited
Finesnatch Limited
General Cleaning Contractors Limited
HMC Factors Limited
Home Improvement Holdings Limited
Industrial Cleaners (UK) Limited
Libas International Limited
The Mirror Laundries Limited
The Motor Auctions Group Limited
The Motor Auctions (Derby) Limited
The Motor Auctions (London) Limited
The Motor Auctions (Scotland) Limited
The Commercial Motor Auctions Limited
Tyne Car Auction Limited
Pritchard Insurance Services Limited
Pritchard Laundries Limited
Prospect Cleaning Supplies Limited
U.C.P. Universal Consumer Products Limited
Prospect House Investments Limited
Prospect House No. 5 Limited
Prospect House No. 7 Limited
Sky Signs Limited
Splendour Cleaning Services Limited
S&W Bedrooms Limited
Hawley International Finance Limited
Lesters Health Care Services Limited
Prospect Cleaning Supplies Limited
ADT Properties Limited
ADT Securities Limited
Auto Auctions (Scotland) Limited
B.C.A. (Auctions) Limited
Markden No. 1 Limited
Markden No. 2 Limited
Markden No. 3 Limited
Markden No. 4 Limited
Markden No. 5 Limited
Markden No. 6 Limited
B.C.A. (Mobile Homes) Limited
M1 Motor Auctions Limited
M3 Car Auctions Limited
B.C.A. Sports Management Limited
British Car Auctions (Aviation) Limited
B.C.A. Vehicle Preparation Limited
British Car Auctions (Flying) Limited
ADT Aviation Limited
Coin Machine Sales Limited
Auto Auctions Limited
Bedford Car Auctions Limited
Wealdpoint Limited
The Expedier Development Company Limited
W & S Freeman Limited
Frome Motor Auction Sales Limited
Huddersfield Motor Auctions Limited
M1 Car Auctions Limited
M25 Motor Auctions Limited
Vic Engineering Limited
Measham Motor Auctions Limited
Midland Counties Motor Auctions Limited
Snap Printing Limited
Shepton Holdings Limited
Pritchard Services Group Investments Limited
Pritchard Services Group B.V. (Netherlands)
Stapp Limited
Wholematch Limited
Farnham Limited
Applied Maintenance Systems Limited
Kean & Scott Limited
Dicerule Limited
ODL Limited
OKD Limited
OMK Limited
Progressive Securities Investment Trust Limited
Prospect House No. 11 Limited
Live-In-Style Furniture Limited
Provincial Limited
Basingkirk Estates Limited
Tunite Limited
Kaldistone Limited
Screentone Limited
Streets Machine Operating Company Limited
Community Action Trust Crimestoppers Limited
ADT Travel Group
Countrywide Leisure Holdings Limited
Gailey Caravan and Leisure Limited
ADT Travel Limited
ADT Travel Holdings Limited
Johnson and Sons Limited
ADT UK Investments Limited
Automated Security (Holdings) PLC
Automated Security Limited
Sonitrol Limited
Stretford Security Services, Ltd.
ASH Capital Finance (Jersey) Ltd.
Automated Loss Prevention Systems Ltd.
Loss Prevention Ltd.
AS (Overseas) Ltd.
Automated Loss Prevention Systems International Ltd.
Automated Loss Prevention Systems BV (Netherlands)
Security Centres (Scotland) Ltd.
Communication & Tracking Services Ltd.
Automated Security (Properties) Ltd.
Ford Electronic Services Ltd.
Modern Integrated Systems Ltd.
Donald Campbell Associates Ltd.
Modern Alarms Ltd
Group Sonitrol Security Systems Ltd
Lander Urban Renewal Ltd
Automated Security Information Systems Technology Limited
Securis Products Ltd
Modern Automated Security Ltd.
Modern Homepack Ltd.
Brocks Alarms Ltd.
Modern Alarms (Scotland) Ltd
ASH Group Services Ltd.
Modern Security Systems (Products) Ltd.
Modern Security Systems Ltd.
Modern Automatic Alarms (NI) Ltd.
Combat Alarms Ltd.
Automated Security (Equipment) Ltd.
ATG Manufacturing Ltd.
Security Alarms Ltd.
Modern Automatic Alarms Ltd.
Abbey Security International Ltd.
Abbey Security Management Ltd.
Cheshire Alarm Services Ltd.
Constable's Alarm Co. Ltd.
Modern Telecom Ltd.
Cellularm Ltd.
Modern Carecall Ltd.
Vital Communications International Ltd.
Modern Telecom Security Ltd.
The British Security Consortium Ltd.
ASH Rentals Ltd.
Telecom Security Ltd.
Automated Security Investments Ltd.
Automated Security (International) Ltd (IOM)
Divison 7 (Spain)
Automated Security International BV (Netherlands)
Modern Security Systems (IOM) Ltd
Security Centres Holdings International Ltd (IOM)
Modern Alarms Ltd (IOM)
Somerset Holdings Ltd (BVI)
IAMASCO Plc (Ireland)
Modern Security Systems Ltd (Ireland)
Abel Alarms Ireland Ltd (Ireland)
ABA Electronics Ltd (Ireland)
Knightwatch Alarms, Ltd (Ireland)
Knightline Ltd (Ireland)
Knightlock Ltd. (Ireland)
Knightvision Ltd. (Ireland)
Renalarms Ltd. (Ireland)
Security Control Risk & Monitoring Ltd. (Ireland)
Huet Security Ltd (Ireland)
Securitag Ltd (Ireland)
Security Centres Holdings Ltd
Security Centres (UK) Holdings Ltd.
Security Centres (UK) Ltd
Security Centres Investments Ltd.
Non US and Non UK Group
Melksham Limited (Jersey)
Langport Limited (Turks and Caicos)
Newington Limited (Bahamas)
Ruskin Limited (Jersey)
Brent Limited (Bahamas)
Itoba Limited (Jersey)
Waveney Investments Limited (Turks & Caicos)
ADT Management Services Limited (Jersey)
Exbury Limited (Jersey)
Rokol Limited (Bermuda)
Camron (Bermuda) Insurance Limited (Bermuda)
Camron Finance (Bermuda) Limited (Bermuda)
Serleni World Holdings, Inc. (Panama)
Finser International Holidays, Inc. (Panama)
Linksview Limited (Jersey)
Sandalwood (Ireland)
Tinwald Limited (Jersey)
Cawich Limited (Bermuda)
ADT Finance NV (Netherlands Antilles)
Electro-Protective Limited (Bermuda)
ADT Group NV (Netherlands Antilles)
Hawley Group Canada Limited (Canada)
ADT Canada Holdings Limited (Canada)
ADT Finance, Inc. (Canada)
ADT Finance S.A. (Luxembourg)
ADT Luxembourg S.A. (Luxembourg)
Exeter Holdings, Inc. (Barbados)
ADT Security Systems Holdings B.V. (Netherlands)
ADT Security Systems S.A. (France)
ADT Greece S.A. (Greece)
ADT Security Systems S.A. (Belgium)
ADT Security Systems B.V. (Netherlands)
ADT Limited (Ireland)
Allied Alarms & Safes Limited (Ireland)
ACE Alarm Systems Limited (Ireland)
Allied Security Products Limited (Ireland)
Allied Metal Products Limited (Ireland)
Allied Alarms Limited (Ireland)
ADT Prosegur de Securidad (Spain)
ADT Canada Holdings B.V. (Netherlands)
ADT Security Services Canada, Inc. (Canada)
ADT Holdings B.V. (Netherlands)
ADT Finance B.V. (Netherlands)
ADT Services AG (Switzerland)
ADT Monitoring Services AG (Switzerland)
ADT Franchising AG (Switzerland)
919551 Ontario, Inc. (Canada)
921150 Ontario, Inc. (Canada)
Flying Lion Limited (Bermuda)
Holyhead Holdings Limited (New Zealand)
Key Contact Limited (New Zealand)
Command Investments Pty Limited (Australia)
ADT Security Systems Limited (Australaia)
ADT Holdings Co. No. 1 Limited (New Zealand)
ADT Holding Co. No. 2 Limited (New Zealand)
Command Nominees Limited (New Zealand)
Securacopy Services (1992) Limited (New Zealand)
Seekers Communications Limited (New Zealand)
ADT Holding Co. No. 3 Limited (Wackenhut Corrections Corporation Limited) (New
Zealand)
Enlist Consulting Limited (New Zealand)
ADT LIMITED
Exhibit 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (File No 333-21425) and on Form S-8 (File No 33-38249) and on Form
S-8 (File No 33-26970) and on Form S-8 (File No 333-03975) of ADT Limited of
our report dated March 26, 1997, on our audits of the consolidated financial
statements and the consolidated financial statement schedules of ADT Limited
as at December 31, 1996 and 1995, and for the years ended December 31, 1996,
1995 and 1994, which report is included in this Annual Report on Form 10-K.
Coopers & Lybrand
Hamilton, Bermuda
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND
THE CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 215,900
<SECURITIES> 0
<RECEIVABLES> 229,200
<ALLOWANCES> 18,500
<INVENTORY> 39,200
<CURRENT-ASSETS> 582,800
<PP&E> 2,483,000
<DEPRECIATION> 969,400
<TOTAL-ASSETS> 2,730,400
<CURRENT-LIABILITIES> 640,800
<BONDS> 910,100
0
0
<COMMON> 14,100
<OTHER-SE> 745,700
<TOTAL-LIABILITY-AND-EQUITY> 2,730,400
<SALES> 0
<TOTAL-REVENUES> 1,704,000
<CGS> 0
<TOTAL-COSTS> 920,000
<OTHER-EXPENSES> 982,000<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,000
<INCOME-PRETAX> (708,500)
<INCOME-TAX> (21,800)
<INCOME-CONTINUING> (686,700)
<DISCONTINUED> 0
<EXTRAORDINARY> (8,400)
<CHANGES> 0
<NET-INCOME> (695,100)
<EPS-PRIMARY> (5.07)
<EPS-DILUTED> (5.07)
<FN>
(1) REPRESENTS RESTRUCTURING AND OTHER NON-RECURRING CHARGES OF
237.3 MILLION AND A CHARGE FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS OF $744.7 MILLION.
</TABLE>
