- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 20-F
(Mark One)
/ / REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: November 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-19152
AUTOMATED SECURITY (HOLDINGS) PLC
(Exact name of Registrant as specified in its charter)
ENGLAND AND WALES
(Jurisdiction of Incorporation or Organization)
The Clock House, The Campus, Spring Way, Hemel Hempstead, Hertfordshire. HP2 7TL
England
(Address of Principal Executive Offices)
Securities Registered or to be Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
- -------------------------------------------------- --------------------------------------------------
<S> <C>
American Depositary Shares New York Stock Exchange
Ordinary Shares of 10p each* New York Stock Exchange*
</TABLE>
- ------------
* Not for trading but only in connection with the registration of American
Depositary Shares representing such Ordinary Shares, pursuant to the
requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the
Act: NONE
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act: NONE
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
<TABLE>
<S> <C>
Ordinary Shares of 10p each............................................................. 119,571,953
5% Convertible Cumulative Redeemable Preference Shares of B.P.1 each.................... 7,867,442
6% Convertible Cumulative Redeemable Preference Shares of B.P.1 each.................... 40,761,578
</TABLE>
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 which financial statement item the registrant has
elected to follow.
ITEM 17 / / ITEM 18 X
--- ---
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I. Item 1. Description of Business.......................................... 1
General........................................................ 1
Recent Developments............................................ 2
UK Operations.................................................. 3
US Operations.................................................. 4
TVX............................................................ 5
Discontinued Operations........................................ 5
Investments.................................................... 5
Suppliers...................................................... 5
Sales and Marketing............................................ 6
Competition.................................................... 6
Research and Development....................................... 6
Trademarks..................................................... 6
Government Regulation.......................................... 6
Employees...................................................... 7
Item 2. Description of Property.......................................... 7
Item 3. Legal Proceedings................................................ 7
Item 4. Control of Registrant............................................ 7
Item 5. Nature of Trading Market......................................... 8
Item 6. Exchange Controls and Other Limitations
Affecting Security Holders....................................... 9
Item 7. Taxation......................................................... 9
Item 8. Selected Consolidated Financial Data............................. 12
Item 9. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 15
Item 10. Directors and Officers of Registrant............................. 19
Item 11. Compensation of Directors and Officers........................... 21
Item 12. Options to Purchase Securities from Registrant or Subsidiaries... 21
Item 13. Interest of Management in Certain Transactions................... 22
PART III Item 15. Defaults upon Senior Securities.................................. 22
Item 16. Changes in Securities and Changes in Security for
Registered Securities............................................ 22
PART IV Item 18. Financial Statements............................................. 23
Item 19. Financial Statements and Exhibits................................ 23
Signature........................................................ 24
</TABLE>
- ------------
Omitted Items are not applicable.
<PAGE>
PART I
Automated Security (Holdings) PLC (the "Company" and, together with its
consolidated subsidiaries, "ASH" or the "Group") publishes its consolidated
financial statements in pounds sterling. In this Annual Report on Form 20-F
("Form 20-F"), references to "US dollars", "dollars" or "$" are to the currency
of the United States; references to "pounds sterling", "B.P.", "pence" or "p"
are to the currency of the United Kingdom; and references to "FFr" are to the
currency of France. Merely for the convenience of the reader, this Form 20-F
contains the translations of certain pound sterling amounts into US dollar
amounts at specified rates. These translations should not be construed as
representations that the pound sterling amounts actually represent such US
dollar amounts or could be converted into US dollars at the rates indicated.
Unless otherwise stated, the translations of pounds sterling into US dollars
have been made at B.P.1.00 = $1.53, the noon buying rate in New York City for
cable transfers in pounds sterling as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") on November 30, 1995.
The Noon Buying Rate differs from the rates used in the preparation of the
Group's Consolidated Financial Statements. See page F-2 of Consolidated
Financial Statements. On April 30, 1996 the Noon Buying Rate was B.P.1.00 =
$1.505. Unless the context otherwise indicates, references herein to a
particular year are to the Company's fiscal year ending on November 30 of that
year.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
ASH is a leading international electronic security group, primarily engaged
in the rental, sales, installation and servicing of electronic security systems
and equipment to safeguard property from a wide range of hazards. The Group's
principal markets are the United Kingdom, where it is headquartered, and the
United States.
ASH is structured in two operational units: the UK (including
Eire) and the US. The Group's current strategy is to focus its three core
businesses, Modern Security Systems and TSL in the UK and API and the Sonitrol
network in the United States. The Group's growth will be dependent on achieving
prudent financing and balancing expansion within the Group's strategy of
reducing the present high level of gearing. ASH sees opportunities for growth
not only in the traditional intruder alarm market by providing technological
upgrades, such as alarm monitoring or acoustic or visual alarm verification
systems, but also providing other security and loss prevention equipment
products, particularly in the fast growing CCTV market. During 1995 the Group
disposed of a number of peripheral businesses so as to reduce debt and enable
the Group to focus on its core businesses, ensure positive trading cash flows
and increase shareholders' funds. The Board continues to address the Group's
high level of gearing as a priority and will continue to do so until this
problem is resolved.
In the UK and Eire, ASH provides intruder alarms, various central station
monitoring services and other detection systems to customers in the commercial,
industrial, residential and public sectors. In 1995, the UK and Eire continuing
operations accounted for approximately 73% (1994: 72%) of the Group's net sales
of continuing operations. Existing customers account for a significant
percentage of both recurring and new business in the UK. On February 7, 1993,
ASH acquired Telecom Security Limited ("TSL") for B.P.6 million ($9 million)
plus a contingent deferred payment of up to B.P. 1.4million ($2 million).
Since 1989, ASH has operated in the US under the name of API Security Inc.
("API"), a company based in California which provides intruder alarms, central
station monitoring, guarding and fire alarm services. In September 1992, ASH's
US operations were expanded through the purchase of Sonitrol Corporation
("Sonitrol") and Sonitrol Management Corporation ("SMC") for $42 million in
cash. Sonitrol is the franchisor of the Sonitrol audio alarm verification
system throughout North America and the UK. In 1995, the US operations
accounted for approximately 27% (1994: 28%) of the Group's net sales from
continuing operations.
The Company is the successor to Modern Automatic Alarms Limited, which was
established in 1964. By 1979, ASH had established itself as the market leader in
the intruder alarms business in the United Kingdom. Since that time, the Group
has broadened the extent and scope of its operations. In the years 1993 through
1995, ASH spent an aggregate of approximately B.P.10.6 million (excluding
liabilities assumed of approximately B.P.6.2 million) on acquisitions and
investments in related companies. On August 31, 1994 ASH acquired certain assets
of Sonitrol of Eugene in Oregon, U.S. for an initial consideration of $2.1
million plus a deferred payment of $0.4 million.
1
<PAGE>
The Company, incorporated in England and Wales, is the holding company of
the Group, with direct and indirect interests in subsidiaries and related
companies. Its principal executive offices are located at The Clock House, The
Campus, Spring Way, Hemel Hempstead, Hertfordshire, HP2 7TL England (telephone:
44 1442 60008).
The following table shows, for each of ASH's last three full fiscal years,
net sales and income before interest, exceptional items and taxation
attributable to continuing operations, by geographical region, and to
discontinued operations:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------
<S> <C> <C> <C>
1993 1994 1995
B.P.'000 B.P.'000 B.P.'000
------- ------- -------
Net Sales
United Kingdom............................................... 95,687 106,771 108,191
United States................................................ 43,515 43,503 41,864
Continental Europe and Ireland............................... 3,934 4,029 3,678
------- ------- -------
Total from continuing operations............................... 143,136 154,303 153,733
Discontinued operations........................................ 17,639 11,768 9,616
------- ------- -------
160,775 166,071 163,349
------- ------- -------
------- ------- -------
Income before Interest, Exceptional items and Taxation
United Kingdom............................................... 15,387 18,252 15,398
United States................................................ 7,315 6,628 5,583
Continental Europe and Ireland............................... 579 (635) (741)
------- ------- -------
Total from continuing operations............................... 23,281 24,245 20,240
Discontinued operations........................................ (3,638) (308) 1,439
------- ------- -------
Total 19,643 23,937 21,679
------- ------- -------
------- ------- -------
</TABLE>
Discontinued operations for UK GAAP purposes, as shown above, comprise
Modern Vitalcall Limited and the Modern Integrated Systems businesses, and two
related companies, Microtech Security (UK) Limited and Compagnie Generale de
Protection et Securite SA.
RECENT DEVELOPMENTS
On December 21, 1995, the Group reached agreement with its principal
bankers to extend the majority of the Group's committed facilities of
B.P. 83.4 million through January 2, 1998. This new facility consolidates the
B.P. 66.3 million previously available under the Group's Multiple Option Loan
facility and the majority of the B.P. 17.1 million previously available from
bilateral facilities. Additionally, the Group had uncommitted overdraft and
working capital lines at November 30, 1995 totaling in excess of B.P. 5.6
million. The terms of the 8.28% Senior Notes were also amended by agreement
with the Prudential Insurance Company of America on December 21, 1995. The
maturity date of the Senior Notes has also been amended to January 2, 1998 and
the terms of the Senior Notes and the bank facilities are treated on an
equivalent basis. As part of the aforementioned agreement with the Group's
principal bankers and the Prudential Insurance Company of America, the Group's
indebtedness to its principal bankers and the holders of the Senior Notes is
secured by pledges over the majority of the assets of the Group.
The Directors have not recommended payment of a dividend in respect of the
Ordinary Shares for 1995 or 1994. All of the dividends on the 5% Preference
Shares and 6% Preference Shares were paid for 1994, but in 1995 only the
interim dividends have been paid on the due date. The balance of the unpaid
dividends, B.P. 1,223,000 ($1,871,190) and B.P. 197,000 ($301,410) on the 6%
Preference Shares and 5% Preference Shares, respectively have been accrued.
The Company is unlikely to be in a position to pay dividends on its Ordinary
or 5% and 6% Preference Shares to shareholders for the time being.
2
<PAGE>
UK OPERATIONS (INCLUDING EIRE)
In the UK, ASH provides intruder alarms, various central station monitoring
services and other detection systems. The UK operations consist principally of
the Group's businesses in intruder alarms (Modern Security Systems, formerly
Modern Alarms, Sonitrol and TSL). ASH has a leading share of the monitored alarm
market in the UK.
Through Modern Security Systems, Sonitrol and TSL, ASH specializes in the
rental, installation and central station monitoring of intruder alarms,
primarily for commercial, industrial and residential customers in the United
Kingdom and Eire. Alarm systems installed on a customer's premises include
control and detection devices that respond to preset conditions such as
intrusion, various hazards, environmental conditions and industrial processes.
Alarm systems provide an audible warning at the premises. In addition, alarm
systems may be connected to one or more of ASH's central stations where alarm
and supervisory signals are received and recorded by means of either a digital
communicator using a standard telephone line, long range radio transmission or
private wire circuits that are rented from the telephone company. Depending upon
the type of service, central station personnel react by either relaying alarm
information to the local police or fire departments or to specialist response
agencies, or notifying the subscriber or taking other appropriate action.
Modern Security Systems is one of the UK's market leaders in security
systems catering primarily for the industrial and commercial market, although
approximately 25% of its systems are installed for residential customers. Some
two thirds of these systems are monitored by one of the central stations which
are located in Manchester and Glasgow. The majority of TSL's systems are also
monitored and are in the residential sector. Recurring revenues from these
installations in 1995 amounted to approximately B.P.53.5 million.
In order to focus more effectively on the two main activities of customer
acquisition and customer retention, the Company devised plans which were
implemented on December 1, 1995 to reorganize Modern Security Systems into an
Upstream business concerned with sales and installation (customer acquisition)
and a Downstream business concerned with customer call receipt, customer
engineering service and alarm monitoring (customer retention). The basic Hub or
area office structure established in 1992 has been retained and the lower levels
of the organization have also largely been unchanged, so preserving the existing
links between local manager and team leader, and between team leaders and their
groups of service engineers, installation engineers or salesmen respectively.
The previous structure helped to bring on a new cadre of experienced management;
but it left spans of control too wide, giving insufficient emphasis both to
customer acquisition and customer retention. The benefits of the new structure
have already been realized in increasing focus on functional excellence, leading
to improved customer service.
As part of the reorganization, the opportunity has been taken to establish a
separate salesforce within the Upstream business, focusing on CCTV and access
control sales and marketing itself as Modern Visual. After a healthy performance
in 1995, the new Modern Visual division expects to achieve improvements in
sales in the fast growing CCTV market.
Within the Upstream business there continues to be a special team
serving our major national accounts. The marketing function supports the
Upstream business with lead generation reports, product development and market
surveys.
ASH management believe that the existing installed base presents
opportunities for growth within the present constraints of the Group's balance
sheet, especially in the form of technological upgrades from bell-only to
monitored systems and from monitored systems to acoustic or visual verification.
3
<PAGE>
To provide its services in the UK, ASH has a field organization of
installers, supervisors and maintenance personnel and central station operators
in excess of 1,000 staff. ASH has 10 operational hubs across the United Kingdom.
US OPERATIONS
ASH's US operations consist of two businesses: API Security and Sonitrol.
Together they represent one of the larger networks of electronic security
systems in the US market with approximately 220,000 systems (including franchise
operations).
API Security was purchased by ASH in 1989 and is the leading intruder alarm,
central station monitoring and fire alarm services business in Southern
California. API is one of the largest providers of security systems in Southern
California with approximately 27,500 systems and an estimated 18% share of the
industrial/commercial market based on number of systems installed in Southern
California.
Ninety eight percent of the total security systems installed and serviced by
API are for commercial customers. Over the past four years, API has extended its
activities into Northern California, principally San Francisco, as well as the
northern region of Mexico. At the same time API has consolidated its seven
central stations in California into one central monitoring superstation in Los
Angeles which has both conventional and Sonitrol monitoring capacity.
API also provides alarm response, patrol and guard services, which perform
radio-despatch alarm investigations as well as regularly scheduled facility
inspections. These services form one of the largest commercial patrol services
in Southern California.
API made a strategic decision to focus on three markets that have proved to
be profitable, demonstrated relatively low attrition rates and were markets in
which API had the ability to deliver a high level of customer service. These
markets are the upper end commercial, industrial and retail segments, including
warehousing and distribution centres servicing the western states. As part of
this strategy API exited the lower end retail market and sold its residential
portfolio in August 1994.
Customer attrition in 1995 (cancellations) reached the lowest level in more
than 8 years. This is attributable to an overall organizational commitment to
exceeding customer expectations in all aspects of customer contact.
The CCTV and access control aspect of API's business has expanded
significantly since 1990 when, following ASH's acquisition of API in 1989, the
decision was made to pursue the marketing of these products. CCTV and access
control sales now constitute almost half of the company's annual new sales
revenues. In addition API is a market leader in verification technology through
its Sonitrol, Teletrac, and remote CCTV monitoring applications.
API initiated two major programmes in 1995. One is a computer system
conversion which is expected to be complete by August 1996. This covers the all
important central monitoring and service despatch systems as well as a
completely new accounting suite. The second major programme is the relocation of
the corporate offices, monitoring station and customer support centre to a new,
lower cost facility which will be complete before May 31, 1996. The combined
impact of these two projects is expected to result in annual cost savings of
over $2 million.
In September 1992, ASH acquired Sonitrol Corporation and Sonitrol Management
Corporation (SMC) for $42 million in cash. Sonitrol Corporation is the
franchisor of the Sonitrol audio alarm verification system throughout North
America and the UK. Sonitrol Corporation has 170 franchises in North America and
Europe, covering approximately 100,000 proprietary and 90,000 conventional alarm
systems in the commercial, government, and residential sectors. ASH owns and
operates a total of 26 Sonitrol franchises focused on southern California,
Texas, Louisiana and the UK, and collects royalties generated from the other
144 Sonitrol franchises that operate in the United States and Canada.
4
<PAGE>
Sonitrol offers an audio verified alarm monitoring detection system,
considered by industry experts and law enforcement agencies to be among the
highest quality systems available. In addition to its Signature audio intrusion
system, which is the only completely proprietary security system in the
industry, Sonitrol offers a complete line of CCTV, fire and access control
products.
As franchisor, the primary operations of Sonitrol Corporation involve the
continual review and improvement of the Sonitrol product line and operating
system; development of a national marketing programme; maintenance of a national
accounts marketing team that refers major contracts to its franchisees, and
enforcement of the uniform Sonitrol operating standards.
SMC, also acquired in 1992, owns 17 Sonitrol franchises in 8 states in the
central US. In August 1994 SMC also acquired the account base, but not the
underlying franchise rights for the Sonitrol franchise in Eugene, Oregon. SMC
services approximately 12,700 alarm and non-alarm accounts, largely for
commercial and institutional customers.
In 1995 SMC consolidated its ten monitoring stations into a new superstation
in Dallas, Texas. This provides a solid platform for acquiring and supplying
contract monitoring services to its independent franchise network. The new
facility, which has the capacity to monitor in excess of 20,000 Sonitrol
customers, also allows SMC to provide a higher quality of service to its
existing customers.
TVX OPERATIONS
ASH developed the TVX system, an innovative visual verification product that
transmits a black and white picture of an alarm triggering event to a receiving
central station, allowing verification of the event. TVX is essentially a
miniature camera mounted on a microchip which can be incorporated into any
security system and is activated by a device such as an infrared motion
detector. Images are converted into an electronic pulse and transmitted
instantaneously to a 24-hour monitoring centre where an operator can visually
verify that a burglary is in progress and notify the relevant authorities. TVX
International, a subsidiary of ASH, is responsible for the development,
marketing and sale of TVX.
TVX Inc, a Colorado based joint venture between ASH (40%), Cellular, Inc
(40%) and local management (20%) was formed in 1993 to market the TVX technology
in the US. This joint venture will allow TVX International the opportunity to
market TVX's visual verification technology in conjunction with Cellular Inc's
transmission capabilities.
DISCONTINUED OPERATIONS
In September 1995 ASH concluded the disposal of Modern Vitalcall Limited, a
wholly owned subsidiary, for B.P.1.5 million. In addition, the Group sold its
remaining Integrated Systems business in November 1995 for B.P.2.4 million, ASH
also disposed of its shareholdings in two related companies, Compagnie Generale
de Protection et Securite SA (France) for B.P.4.4 million and Microtech Security
(UK) Limited for B.P.1.0 million. These four disposals realized B.P.9.3 million
but resulted in a charge to the Profit and Loss account of approximately B.P.5.7
million, compensated for by a write back to reserves in respect of goodwill
written off of B.P.8.8 million.
During 1995 these operations produced B.P.1.4 million of operating profit
compared to full year profit in 1994 of B.P.2.1 million which, combined with the
loss on discontinued operations from prior years of B.P.2.4 million, produced a
net loss in 1994 of B.P.0.3 million.
Discontinued operations in 1994 and 1993 also include the operations of
Modern Integrated Systems Limited (MIS) which provided security and protection
for larger systems including fire detection, controlled entry, perimeter
protection and integrated systems.
MIS had net sales in 1993 of B.P.7.2 million and a loss in 1994, including
warranty and contract realization provisions of B.P.2.4 million (1993: loss
B.P.5.1 million).
5
<PAGE>
INVESTMENTS
The only remaining investment at November 30, 1995 relates to a loan of
B.P.654,000 (US$1,000,000) to TVX Inc, a related company in the USA.
SUPPLIERS
Other than for Sonitrol operations ASH purchases its equipment from a number
of suppliers. Management believes that ASH is not dependent on any one supplier
for its equipment. Sonitrol operations source products from Advantor Corporation
pursuant to an agreement which is the subject of an arbitration (see Item 3.
Legal Proceedings).
SALES AND MARKETING
ASH provides services and equipment to customers in the commercial,
industrial, residential and public sectors. ASH's top ten customers did not
exceed 5% of net sales, and no single customer accounted for more than 2% of net
sales.
A typical contract provides for a rental of the alarm system with an initial
installation fee and an agreement for monitoring and maintenance services.
Initial contracts are generally for a term of five years, with automatic renewal
on an annual or biannual basis thereafter unless terminated by either party. A
substantial number of these contracts are beyond their original term and are now
rented on an automatic renewal basis. Historically, a high percentage of
customers automatically renew their contracts at the end of the initial five
year contract.
Sales of services and equipment are made by ASH's own sales force, primarily
based on recommendations and referrals made by existing customers and by third
parties, including insurance companies and law enforcement agencies. ASH also
relies on advertizing, trade shows and sponsorship to market its products. In
addition, ASH markets additional products and services to its existing
customers, which account for a significant percentage of recurring and new
business.
COMPETITION
The electronic security systems industry is generally highly competitive and
fragmented. In the intruder alarms market, there are a large number of local
installers offering a limited range of services and smaller systems to customers
in the residential and general retail sectors. In the UK and US there are only a
few large regional or national companies that offer a range of security systems,
comparable to that offered by the Group.
RESEARCH AND DEVELOPMENT
ASH believes that some limited expenditure on Group-sponsored research and
development ("R&D") is prudent in order to maintain its market position. The
principal R&D activities are undertaken in conjunction with third parties. The
Group's main involvement is to identify and specify its requirements to research
centers, original equipment manufacturers and suppliers.
The Group's principal expenditure on R&D is in respect of the TVX miniature
camera, originally developed in conjunction with Edinburgh University. Further
development of this technology has been partly underwritten by the Commission of
the European Community, with ASH and its partners receiving a grant of 3.3
million ECU (B.P.2.3 million) to assist in installing cameras at various sites
in European countries.
ASH's direct R&D expenditure was B.P.0.2 million, B.P.0.4 million and
B.P.1.3 million in 1995, 1994 and 1993 respectively.
6
<PAGE>
TRADEMARKS
The Group has several registered trademarks, none of which is of material
importance to the Group taken as a whole.
GOVERNMENT REGULATION
In many of the countries in which they conduct business, Group companies
must obtain approval from appropriate government authorities to market their
systems, primarily because of the use of radio frequency technology. ASH
believes that all of its products are in compliance with currently applicable
governmental requirements. However, there can be no assurance that all products
of the Group subject to regulation will meet the requirements of such
regulations in all countries in which the Group markets its products, nor can
there be any assurance that adverse changes or amendments to existing
regulations will not occur.
EMPLOYEES
During 1995, ASH had an average of approximately 3,006 (1994: 3,009)
employees worldwide. Approximately 2,327, 77%, of the Group's employees are
located in the United Kingdom and Eire and 679, 23%, in the United States.
None of the Group's employees are subject to collective bargaining
agreements. ASH believes that its relations with its employees are generally
satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
- -------------------------------
ASH has several central stations in the United Kingdom, Eire and the
United States. For a discussion of the role of central stations, see Item 1.
"Description of Business--UK Operations". In addition to central stations, the
Group has freehold and leasehold interests in properties in various countries,
none of which is significant to the Group as a whole. See Note 8 of Notes to
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
Except as described below, there are no pending legal proceedings involving
the Group the outcome of which the management of ASH believes would have a
material adverse effect on the financial condition or results of operations of
the Group.
Advantor Corporation ("Advantor") commenced a proceeding against Sonitrol
Corporation ("Sonitrol") and ASH, Inc. by filing a demand for commercial
arbitration with the American Arbitration Association. Advantor alleges that
Sonitrol and ASH, Inc. (collectively, the "Companies") have breached the terms
of a Trademark License and Franchise Support Agreement (the "License Agreement")
executed by Advantor and Sonitrol, which License Agreement appoints Advantor
the exclusive supplier of certain products to the Sonitrol network. ASH, Inc.
is not a party to the License Agreement. Advantor seeks damages in excess of $1
million and termination of the License Agreement. The Companies' position is
that the claims are without merit. Moreover, based on discussions with personnel
from the Companies, counsel for the Companies believes that there are good
grounds to support the defenses which may be asserted by the Companies and that
these defenses, if sustained by the evidence at the arbitration hearing, should
be sufficient to defeat recovery against the Companies.
In the ordinary course of its business, ASH receives claims relating to
customer losses incurred as a result of the alleged failure of its security
systems owing to ASH's negligence or otherwise. In its customer contracts, ASH
seeks to limit its liability for such customer losses. These liability
limitation provisions have generally been held enforceable by courts in the
United Kingdom and the United States. Management believes that the Group
maintains insurance sufficient to protect the Group against the risks associated
with claims made in respect of customer contracts or otherwise.
ITEM 4. CONTROL OF REGISTRANT
- -----------------------------
(a) As far as is known to the Company, it is not directly or indirectly
owned or controlled by another corporation or by any government.
(b) (i) As of April 30, 1996, there was no person known by the Company to
own more than 10% of the Company's Ordinary Shares. The 5% Convertible
Cumulative Redeemable Preference Shares of B.P.1
7
<PAGE>
each are also voting securities and at April 30, 1996 the Company had been
notified of the following interests in the 5% Preference Shares in excess of 10%
of this class of shares:
<TABLE>
<S> <C>
Co-operative Insurance Society...................................... 18.72%
Lloyds Bank ID Nominees Limited UKAV Continuation Fund Inc.......... 20.34%
-----
-----
</TABLE>
(ii) As of April 30, 1996 , the total amount of the voting securities owned
by the directors and officers of the Company, as a group, was:
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
TITLE OF CLASS OWNED CLASS
- -------------- ------- ----------
<S> <C> <C>
Ordinary Shares of 10p each............................ 505,973 0.42%
5% Convertible Cumulative Redeemable Preference Shares
of B.P.1 each.......................................... 3,500 0.04%
</TABLE>
(c) The Company does not know of any arrangements the operation of which may
result in a change in its control.
ITEM 5. NATURE OF TRADING MARKET
- --------------------------------
The principal trading market for the Ordinary Shares is The International
Stock Exchange of the United Kingdom and the Republic of Eire Limited (the
"London Stock Exchange"). The London Stock Exchange utilizes a classification of
equity securities based on 12 levels of normal market size, ranging from 200,000
to 500 shares. These levels of normal market size reflect the turnover by value
in each company's shares over the past 12 months. The Company's Ordinary Shares
have been allocated an initial normal market size of 10,000 shares. The normal
market size classification for each equity security is subject to quarterly
review in the light of trading volumes in the previous quarter and to
adjustment, as appropriate. UK market makers are normally required to make a two
way market in sizes of not less than the normal market size and to report all
transactions to the London Stock Exchange within three minutes. In respect of
securities with a normal market size greater than 2,000, transactions of not
more than three times normal market size are published immediately as to size
and price, but transactions in excess of three times normal market size are not
published until after 90 minutes.
The Company has a sponsored American Depositary Receipt ("ADR") facility
with The Bank of New York, as Depositary. The ADR holders hold American
Depositary Shares ("ADSs") representing Ordinary Shares which trade in the US on
the New York Stock Exchange (the "NYSE") under the symbol of ASI. Each ADS
represents two Ordinary Shares.
8
<PAGE>
The following table shows, for the fiscal quarters indicated, the highest
and lowest bid prices of the ADSs as reported on the NYSE composite tape.
<TABLE>
<CAPTION>
PENCE PER US DOLLAR PER
ORDINARY SHARE ADS (1)
-------------- --------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
----- ----- ----- -----
1994
First quarter............................................... 140.0 127.0 4.50 3.88
Second quarter.............................................. 130.0 102.0 3.92 3.19
Third quarter............................................... 112.0 93.0 3.63 2.88
Fourth quarter.............................................. 104.0 71.0 3.25 2.13
1995
First quarter............................................... 74.0 59.0 2.38 1.75
Second quarter.............................................. 65.0 49.0 2.50 1.625
Third quarter............................................... 58.0 32.0 1.875 0.938
Fourth quarter.............................................. 44.0 19.0 1.50 0.563
1996
First quarter............................................... 32.0 21.0 1.0 0.563
Second Quarter (through April 30, 1996)..................... 39.0 26.0 1.25 0.813
</TABLE>
- ------------
(1) The dollar prices reflect the actual prices per ADS.
At April 30, 1996, there were a total of 2,167 record holders of the
Company's Ordinary Shares, including those represented by the ADSs, of which 665
had registered addresses in the United States and held a total of 41,496,246
Ordinary Shares. At April 30, 1996 there were 41,486,707 ADSs held of record by
651 ADR holders. Since certain of the Company's Ordinary Shares and ADSs are
held by nominees, the number of holders may not be representative of the number
of beneficial owners.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
- --------------------------------------------------------------------------
There are currently no United Kingdom exchange control restrictions on the
payment of dividends on the Ordinary Shares or the conduct of ASH's operations.
There are no restrictions under the Company's Memorandum and Articles of
Association or under English law that limit the right of non-resident or non-UK
owners to hold or vote the Company's Ordinary Shares.
ITEM 7. TAXATION
- ----------------
The following is a summary of the principal US Federal income and UK tax
consequences of the purchase, ownership and disposition of ADSs by an Eligible
US Holder (as defined below). The summary is (i) based upon tax laws and
practice of the United Kingdom and the United States as in effect on the date of
this Form 20-F, and (ii) based in part upon representations of the Depositary,
and assumes that each obligation in the Deposit Agreement among the Company, the
Depositary and holders of ADRs and any related agreement will be performed in
accordance with its terms. Future legislative, judicial or administrative
changes could modify the conclusions expressed below.
For the purposes of the current United Kingdom-United States double tax
conventions and for the purposes of the United States Internal Revenue Code of
1986, as amended (the "Code"), Eligible US Holders of ADSs will be treated as
owners of the Ordinary Shares underlying such ADSs.
The summary does not address the UK tax consequences to an Eligible US
Holder that is resident (or in the case of an individual, resident or ordinarily
resident) for United Kingdom tax purposes in the United Kingdom or that carries
on business in the United Kingdom through a branch or agency. Such a holder may
be subject to UK tax upon a disposition of Ordinary Shares or ADSs.
GENERAL
When the Company pays a dividend on the Ordinary Shares, the Company is
required to account to the United Kingdom Inland Revenue (the "Inland Revenue")
for advance corporation tax ("ACT"). The ACT rate is one-fourth of any dividend
paid after April 5, 1994 (the equivalent of 20% of the
9
<PAGE>
dividend and the ACT). Based on the laws and practice of the United Kingdom,
under the provisions of the income tax convention between the United Kingdom
and the United States (the "Income Tax Convention"), an Eligible US Holder
will be entitled to receive from the Company at the same time as and together
with any dividend paid by the Company on the Ordinary Shares, an ACT-related
tax credit less a withholding tax ("UK Withholding Tax") currently equal to
15% of the aggregate of such credit and such dividend (the amount of such
extra cash payment is referred to herein as a "Tax Treaty Payment"). For
dividends paid after April 5, 1994, the ACT-related tax credit is an amount
equal to 20% of the sum of the dividend plus the ACT-related tax credit.
Thus, for example, receipt by an Eligible US Holder of a dividend of $80
paid after April 5, 1994 will entitle the Eligible US Holder to receive a Tax
Treaty Payment of $5 (an ACT-related tax credit of $20 less a UK withholding Tax
of $15) resulting in a net receipt after UK taxes but before US taxes of $85.
An Eligible US Holder is a record holder of ADRs that (i) is a citizen or
resident of the United States or that otherwise will be subject to US Federal
income tax on a net income basis in respect of the Ordinary Shares, (ii)
qualifies for the benefits provided by the Income Tax Convention for certain
recipients of dividend income and (iii) is entitled to use the arrangement
described below (the "Arrangement") under which the Tax Treaty Payment is paid
together with the associated dividend payment. See "An Arrangement for Direct
Receipt of Tax Treaty Payment".
QUALIFICATION FOR INCOME TAX CONVENTION BENEFITS
A shareholder will be entitled to the benefits of the Income Tax Convention
(and therefore will be entitled to receive Tax Treaty Payments) if it is a
resident of the United States for the purposes of the Income Tax Convention and
it derives and beneficially owns the dividend payable in respect of the Ordinary
Shares, unless:
(i) its holding is effectively connected with either (a) a permanent
establishment situated in the United Kingdom through which the shareholder
carries on business in the United Kingdom or (b) a fixed base in the United
Kingdom from which the shareholder performs independent personal services;
or
(ii) in the case of a shareholder that is a US corporation, the
shareholder (a) is a resident of the United Kingdom or (b) is a US
corporation at least 25% of the capital of which is held, directly or
indirectly, by persons that are not individual residents or nationals of the
United States, and (x) which has imposed on it by the United States in
respect of the dividend a tax substantially less than the tax generally
imposed by the United States on corporate profits, or (y) which receives
more than 80% of its gross income from sources outside the United States as
determined in accordance with the Income Tax Convention.
For these purposes, a partnership, an estate or a trust is a resident of the
United States only to the extent that the income derived by the partnership,
estate or trust is subject to US Federal tax as the income of a resident, either
in its hands or in the hands of its partners or beneficiaries, as the case may
be.
Special rules may apply if the shareholder (i) is exempt from tax in the
United States on dividends paid by the Company, (ii) is a US corporation which
controls, alone or with one or more associated corporations, at least 10% of the
voting stock of the Company or (iii) owns 10% or more of the Ordinary Shares,
and investors subject to those special rules are not Eligible US Holders for
purposes of this discussion.
AN ARRANGEMENT FOR DIRECT RECEIPT OF TAX TREATY PAYMENT
An Arrangement has been entered into with the Inland Revenue (based on the
"H" Arrangement, which is the usual administrative procedure operated in respect
of dividends paid on shares of UK companies represented by ADRs) under which a
shareholder that satisfies the additional requirements set forth in the next
sentence, will receive the Tax Treaty Payment to which it is entitled directly
from the Company rather than from the Inland Revenue at the same time as and
together with the payment of the associated cash dividend, without the need
for any additional action on its part.
10
<PAGE>
The additional requirements are that (a) the shareholder must be liable for
US Federal income tax on such dividends, (b) if the shareholder is an estate or
trust, all of the beneficiaries must be resident in the United States, (c) the
shareholder must not be engaged in business or performing independent personal
services through a permanent establishment or fixed base in the United Kingdom
and (d) if a shareholder is a corporation that is an investment or holding
company, 25% or more of its capital must not be owned directly or indirectly by
persons who are not individual residents or nationals of the United States.
The Tax Treaty Payment is payable by the Company to an Eligible US Holder at
the same time as and together with the payment of the associated cash dividend
only pursuant to the Arrangement, and references in this Form 20-F to any Tax
Treaty Payment that may be payable by the Company should be construed
accordingly. A shareholder that is entitled to the Tax Treaty Payment but is not
eligible to receive the Tax Treaty Payment directly from the Company pursuant to
the Arrangement, may obtain the Tax Treaty Payment by making an individual claim
to the tax authorities, within six years of the end of the UK chargeable year in
which the related dividend was paid to the tax authorities for payment of that
amount at a later date. The claim for payment must be made in the manner and at
the times described in US Revenue Procedure 80-18, 1980-1 CB 623, and US Revenue
Procedure 81-58, 1981-2 C.B. 678. The first claim by a US shareholder for a
payment under these procedures is made by sending the appropriate UK form FD 13
in duplicate to the Director of the Internal Revenue Service Center with which
such US shareholder's last US Federal income tax return was filed.
Forms may be obtained from the Foreign Operations District, Internal Revenue
Service, Assistant Commissioner (International), 950 L'Enfant Plaza South, SW,
Washington, DC 20024, Attention: Taxpayers' Service. Because a claim is not
considered made until the UK tax authorities receive the appropriate form from
the Internal Revenue Service, forms should be sent to the Internal Revenue
Service well before the end of the applicable limitation period. Any claim after
the first claim by a US shareholder for payment under these procedures should be
filed directly with the UK Inspector of Foreign Dividends, Fitz Roy House, PO
Box 46, Nottingham, England NG2 1BD.
TAXATION OF DIVIDENDS
An Eligible US Holder will realize dividend income for US Federal income tax
purposes in an amount equal to the sum of any cash dividend paid by the Company
and the ACT-related tax credit, without reduction for the UK Withholding Tax
thereon. Such dividend income will generally not be eligible for the dividends
received deduction. Subject to certain limitations, the UK Withholding Tax will
be treated as a foreign income tax that may be claimed as a credit against the
US Federal income tax liability of an Eligible US Holder. The dividend income
will, for the purposes of computing the foreign tax credit allowable under the
Code, constitute income from sources without the United States, but with certain
exceptions, will be treated separately together with other items of "passive" or
"financial services" income.
TAXATION OF CAPITAL GAINS
Eligible US Holders that are not resident or ordinarily resident in the
United Kingdom for UK tax purposes will not be liable for UK tax on capital
gains realized on the disposition of ADSs unless the holder carries on a trade,
profession or vocation in the United Kingdom through a branch or agency or, in
the case of a trade, a permanent establishment and the Shares are used in or for
the purposes of the trade, profession or vocation or are used, held or acquired
for the purposes of the branch or agency or, in the case of a trade, the
permanent establishment.
An Eligible US Holder will realize a gain or loss for US Federal income tax
purposes on the sale or exchange of an ADS in the amount of the difference
between the amount realized and the Eligible US Holder's adjusted tax basis in
the ADS. Such gain or loss will be a capital gain or loss if the ADS was held as
a capital asset.
UNITED KINGDOM INHERITANCE ACT
Under the current double estate and gift taxation convention between the US
and the UK, Ordinary Shares held by an individual shareholder who for the
purpose of the convention is domiciled in
11
<PAGE>
the US and is not domiciled in the UK nor a UK national at the date of death
or disposition, as the case maybe, will not, provided any tax chargeable in
the US is paid, be subject to UK inheritance tax on the disposition of shares
by way of gift or upon the individual's death unless the shares are part of
the business property of a permanent UK establishment of the individual or, in
the case of a shareholder who performs independent personal services, pertain
to a fixed base situated in the UK. In the exceptional case where the shares
are subject both to UK inheritance tax and to US Federal gift or estate tax,
the convention generally provides for double taxation to be relieved by means
of credit relief.
UNITED KINGDOM STAMP DUTY RESERVE TAX AND STAMP DUTY
Provided that the instrument of transfer is not executed in the United
Kingdom and remains at all times outside the United Kingdom, no UK stamp duty
will be payable on the acquisition or transfer of ADSs. Neither will an
agreement to transfer ADSs in the form of ADRs give rise to a liability to stamp
duty reserve tax.
Purchases of Ordinary Shares, as opposed to ADSs, will normally give rise to
UK stamp duty or stamp duty reserve tax at the rate of 50p per B.P.100 (or part
thereof) of the price payable for the Ordinary Shares at the time of the
transfer. This will continue when paperless transfers are introduced under CREST
in July 1996. Where Ordinary Shares are transferred to the Depositary or its
nominee, the only charge will generally be the higher charge of B.P.1.50 per
B.P.100 (or part thereof) of the market value of the Ordinary Shares so
transferred.
ITEM 8. SELECTED CONSOLIDATED FINANCIAL DATA
- --------------------------------------------
The selected consolidated financial data below has been derived from the
audited Consolidated Financial Statements of ASH, which have been examined by
ASH's independent auditors Binder Hamlyn, Chartered Accountants. The selected
consolidated financial data should be read in conjunction with, and are
qualified in their entirety by reference to, the Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 20-F.
ASH's Consolidated Financial Statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom ("UK GAAP"),
which differ in certain significant respects from accounting principles
generally accepted in the United States ("US GAAP"). In making commercial
decisions on various transactions, including acquisitions and dispositions,
management considered the presentation of these transactions in its Consolidated
Financial Statements under UK GAAP. If the Group had reported its financial
results in accordance with US GAAP, management may have made different
commercial decisions on such transactions or may have structured such
transactions differently. A summary of the significant differences between UK
GAAP and US GAAP relevant to ASH, together with reconciliations of net income
and shareholders' equity, are set forth in Note 28 of Notes to Consolidated
Financial Statements.
In October 1993, the UK Accounting Standards Board issued Financial
Reporting Standard No.3 ("FRS3") which prescribed a new format for the profit
and loss account, introduced a new primary statement, "The Statement of Total
Recognized Gains and Losses", and changed the basis of the calculation of
earnings per share. Items previously treated as extraordinary are now generally
treated as exceptional items within profit on ordinary activities before
taxation, resulting in large year on year variations in the level of income.
FRS3 also defines a discontinued business as an operation which is clearly
distinguishable, the disposal or termination of which has a material effect on
the nature and focus of the Group's activities, represents a material reduction
in the Group's operating facilities and is completed prior to the earlier of
three months from the balance sheet date or the date of approval of the UK
financial statements. The financial statements have been prepared in accordance
with FRS3.
UITF Abstract 13 was issued on June 8, 1995 and is effective for financial
statements ending on or after June 22, 1995. This Abstract requires ESOP debtors
to be reclassified as investments and for any permanent diminution in value to
be charged to the profit and loss account. The financial statements have been
prepared in accordance with UITF Abstract 13.
12
<PAGE>
ITEM 8. SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1995(1)
------------- ------------- ------------- ------------- ----- -------
(AS RESTATED) (AS RESTATED) (AS RESTATED) (AS RESTATED)
B.P. B.P. B.P. B.P. B.P. $
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA
Amounts in accordance with UK GAAP
Net Sales:
Rental and Maintenance income........ 67.7 72.8 84.7 88.5 86.1 131.8
Sales................................ 126.0 100.4 76.1 77.6 77.2 118.1
----- ----- ----- ----- ----- -------
193.7 173.2 160.8 166.1 163.3 249.9
----- ----- ----- ----- ----- -------
----- ----- ----- ----- ----- -------
Sales from Continuing Operations..... 121.5 127.3 143.1 154.3 153.7 235.2
Sales from Discontinued Operations... 72.2 45.9 17.7 11.8 9.6 14.7
----- ----- ----- ----- ----- -------
193.7 173.2 160.8 166.1 163.3 249.9
----- ----- ----- ----- ----- -------
----- ----- ----- ----- ----- -------
Income before Interest and similar
charges, Exceptional Items and
Taxation
Continuing Operations............. 25.4 20.8 23.3 24.2 20.3 31.1
Discontinued Operations........... 0.4 6.1 (3.7) (0.3) 1.4 2.1
----- ----- ----- ----- ----- -------
25.8 26.9 19.6 23.9 21.7 33.2
----- ----- ----- ----- ----- -------
----- ----- ----- ----- ----- -------
Income/(Loss) before Taxation........ (0.6) 40.7 7.3 (11.8) (7.4) (11.3)
Income/(Loss) after Taxation......... (4.2) 31.4 5.5 (12.8) (8.2) (12.6)
Net Income/(Loss).................... (4.4) 31.4 5.5 (12.8) (8.2) (12.6)
Net Income/(Loss) per Ordinary Share
(2).................................. (6.6)p 24.8p 2.3p (13.0)p (9.2)p (14.1)c
Dividends per Ordinary Share......... 4.9p 5.3p 3.05p -- -- --
----- ----- ----- ----- ----- -------
----- ----- ----- ----- ----- -------
Approximate amounts in accordance
with US GAAP:
Sales from Continuing Operations..... 131.8 135.9 160.8 166.1 163.3 249.9
Operating Income from Continuing
Operations (3)....................... (2.0) 12.0 10.9 (6.3) 4.4 6.7
Net Income/(Loss) from:
Continuing Operations............... (17.4) (1.5) (3.5) (23.6) (14.7) (22.4)
Discontinued Operations............. (0.8) 28.4 -- -- --
----- ----- ----- ----- ----- -------
Total Net Income/(Loss).............. (18.2) 26.9 (3.5) (23.6) (14.7) (22.4)
----- ----- ----- ----- ----- -------
Net Income/(Loss) per Ordinary Share:
From Continuing Operations.......... (15.4)p 1.0p (3.0)p (19.7)p (12.3)p (18.8)p
From Discontinued Operations........ (0.8)p 21.5p -- -- -- --
----- ----- ----- ----- ----- -------
Total (4)............................ (16.2)p 22.5p (3.0)p (19.7)p (12.3)p (18.8)p
----- ----- ----- ----- ----- -------
CONSOLIDATED BALANCE SHEET DATA (AT
PERIOD END)
Amounts in accordance with UK GAAP:
Total Assets......................... 336.9 281.3 296.0 275.9 269.4 412.2
Long Term Debt(5).................... 184.1 128.6 152.0 78.7 81.0 123.9
Approximate amounts in accordance
with US GAAP:
Total Assets......................... 494.4 456.1 464.5 436.0 419.6 642.0
Long Term Obligations and Redeemable
Preference Shares.................... 236.0 177.9 200.7 127.3 129.6 198.3
Ordinary Shareholders' Equity (6).... 142.6 166.3 158.3 130.9 117.2 179.3
----- ----- ----- ----- ----- -------
</TABLE>
- ------------
(1) For the convenience of the reader, pound sterling amounts have been
translated into US dollars using the Noon Buying Rate on November 30, 1995
of B.P.1.00 = $1.53.
(Footnotes continued on following page)
13
<PAGE>
(Footnotes continued from preceding page)
(2) The calculation of net income per Ordinary Share in accordance with UK GAAP
is based on the total net income including discontinued operations and the
weighted average number of Ordinary Shares outstanding during the year, as
adjusted for a one-for-forty eight bonus issue in July 1994 (1991: 112.9
million, 1992: 115.0 million, 1993: 116.5 million, 1994: 119.5 million and
1995: 119.6 million) and after taking account of preference share dividends
(1991:B.P.3,005,000, 1992: B.P.2,874,000, 1993: B.P.2,844,000, 1994:
B.P.2,839,000 and 1995: B.P.2,839,000 million).
(3) Operating income from continuing operations under US GAAP represents income
before net interest expense, including results of related companies,
exceptional items and in 1994 the provision against the investment in Arius
of B.P.20.1 million. See Note 28 of Notes to Consolidated Financial
Statements.
(4) The calculation of net income per Ordinary Share in accordance with US GAAP
is based on the weighted average number of Ordinary Shares outstanding
including common stock equivalents during the year (1991: 112.9 million,
1992: 136.6 million, 1993: 116.5 million, 1994: 119.5 million and 1995 119.6
million) and adjusted to take account of Preference Share dividends and the
one-for-forty eight bonus issue in July 1994. Under US GAAP the net income
(loss) from discontinued operations represents the results of the loss
prevention businesses and the profit on sale of these operations in 1992.
Net income (loss) from continuing operations represents the results of all
other operations. See Note 28 of Notes to Consolidated Financial Statements.
(5) Long Term Debt includes 1991: B.P.57.9 million, 1992: B.P.43.5 million,
1993: B.P.43.6 million, 1994: B.P.43.7 million and 1995: B.P.43.8 million in
respect of the net amount of Convertible Capital Bonds. Long term debt
includes 1991: B.P.33.8 million; 1992: B.P.35.6 million, and 1993: B.P.32.4
million in respect of the Stapled Units, and in 1994: B.P.35.0 million and
1995: B.P.36.7 million in respect of the 8.28% Senior Notes.
(6) Shareholders' funds, calculated in accordance with UK GAAP, include the 5%
and 6% Convertible Cumulative Redeemable Preference Shares which aggregated
B.P.51.9 million in 1991, B.P.49.3 million in 1992, B.P.48.7 million in
1993, B.P.48.6 million in 1994 and B.P.48.6 million in 1995. Ordinary
shareholders' equity, calculated in accordance with US GAAP, does not
include such amounts. See Note 28 of Notes to Consolidated Financial
Statements.
DIVIDENDS
Any interim dividend on the Company's Ordinary Shares is normally declared
by the Board of Directors in July of each year and paid in December. A final
dividend may be recommended by the Board of Directors in March following the end
of the financial year to which it relates and, after approval by the
shareholders at the Annual General Meeting in April, is usually paid in June.
The following table sets forth the amounts of interim, final and total
dividends paid on each Ordinary Share in respect of each financial year
indicated, increased by ACT but before deduction of UK withholding tax (both as
described under Item 7. "Taxation of Dividends"), and translated into US dollars
per ADS (each ADS representing two Ordinary Shares) at the Noon Buying Rate on
each of the respective payment dates.
<TABLE>
<CAPTION>
TRANSLATED INTO
PENCE PER ORDINARY US DOLLARS
SHARES PER ADS
------------------------- --------------
YEAR ENDED NOVEMBER 30, INTERIM FINAL TOTAL INTERIM FINAL TOTAL
----------------------- ------- ----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
1991............................................... 2.76 3.77 6.53 0.10 0.14 0.24
1992............................................... 3.00 3.81 6.81 0.10 0.12 0.22
1993............................................... 3.81* -- 3.81 0.12* -- 0.12
1994............................................... -- -- -- -- -- --
1995............................................... -- -- -- -- -- --
</TABLE>
- ------------
* In July 1993 the Company announced an interim dividend of 3.05p (net) with an
alternative of an enhanced scrip dividend to the value of 4.575p (net), with
substantial ACT and balance sheet benefits.
14
<PAGE>
It is the intention of the Board to adopt a dividend policy which is closely
linked to the future growth of the continuing businesses.
The payment of future dividends will depend upon the Group's earnings,
financial condition and such other factors as the Board of Directors deems
relevant. It should be noted that the Company is unlikely to be in a position to
pay dividends to Preference or Ordinary shareholders for the time being.
EXCHANGE RATES
The following table shows, for the periods and dates indicated, certain
information regarding the exchange rate for the pound sterling, based on the
Noon Buying Rate for pounds sterling expressed in US dollars per B.P.1.00.
<TABLE>
<CAPTION>
PERIOD AVERAGE
YEAR ENDED NOVEMBER 30, END RATE HIGH LOW
- ---------------------------------------------------------- ------ ------- ------ ------
<S> <C> <C> <C> <C>
1991...................................................... 1.7655 1.7679 1.9990 1.6015
1992...................................................... 1.5135 1.7849 2.0035 1.5095
1993...................................................... 1.4852 1.4994 1.5975 1.4175
1994...................................................... 1.4995 1.4931 1.5187 1.4615
1995...................................................... 1.5302 1.5797 1.6073 1.5302
1996 (through April 30)................................... 1.5050 1.5307 1.5602 1.5037
</TABLE>
- ------------
* The average of the Noon Buying Rates on the last day of each month during the
period.
Fluctuation in the exchange rate between the pound sterling and the US
dollar will affect the dollar equivalent of the pound sterling prices of the
Company's Ordinary Shares on the London Stock Exchange and, as a result, is
likely to affect the market price of ADSs in the United States.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The following discussion and analysis is based on the Consolidated Financial
Statements of the Group prepared in accordance with UK GAAP. The principal
differences between UK GAAP and US GAAP as they relate to the Group are
discussed in Note 28 of Notes to Consolidated Financial Statements. In making
commercial decisions on various transactions, including acquisitions and
dispositions, management considered the presentation of these transactions in
its Consolidated Financial Statements under UK GAAP. If the Group had reported
its financial results in accordance with US GAAP, management may have made
different commercial decisions on such transactions or may have structured such
transactions differently.
GROUP OVERVIEW
Over the last three years the results of ASH have been adversely affected by
the difficult trading conditions in both of its primary markets. In 1995 there
has been a gradual improvement in trading conditions in the UK but the economic
climate in California remains difficult.
FISCAL 1995 COMPARED WITH FISCAL 1994
In 1995 the Group reported a reduction in revenues of 1.7% from B.P.166.1
million to B.P.163.3 million. The 1995 results included B.P.9.6 million of
income from discontinued operations compared with B.P.11.8 million from these
operations in 1994. Consequently the underlying movement in revenues from
continuing operations was a slight reduction of 0.4% from B.P.154.3 million in
1994 to B.P.153.7 million in 1995, principally as a result of a 3.6% adverse
impact from the UK sterling to US dollar exchange rate. Within continuing
operations there was a growth in recurring rental and maintenance revenues with
a 1.1% improvement from B.P.81.5 million in 1994 to B.P.82.4 million in 1995.
Recurring revenues of the Group now represent some 54% of total income.
15
<PAGE>
In the UK and Eire revenues from continuing operations increased during the
year by 1.0% to B.P.111.9 million. Recurring revenues in the UK and Eire
continue to represent some 50% of total revenues.
In the US, revenues remained constant at $66.2 million. Installation sales
increased by 0.4% to $24.8 million (1994: $24.6 million) with recurring revenues
decreasing by 0.7% to B.P. $41.4 million (1994: $41.8 million).
Income before interest, exceptional items and taxation reduced by
approximately B.P.2.2 million from B.P.23.9 million in 1994 to B.P.21.7 million
in 1995. Discontinued operations reported losses of B.P.0.3 million in 1994 and
profits of B.P.1.4 million in 1995. Income before interest, exceptional items
and taxation from continuing operations consequently reduced by B.P.4.0 million
(16.5%) from B.P.24.2 million in 1994 to B.P.20.2 million in 1995.
Operating profits in UK and Eire reduced by 3.4% to B.P.18.4 million as a
result of trading losses in Telecom Security, Eire and TVX together with a
disappointing first half performance of the UK Sonitrol franchise, which
contributed B.P.0.5 million in 1995 compared with B.P.1.3 million in the
previous year. Results in the core business, Modern Security Systems, improved
by 2.6% to B.P.19.6 million on increased revenues of B.P.91.4 million at a
margin of 21.4%,which is consistent with the prior year.
Operating profits in the US fell by 13.2% to $10.0 million (1994: $11.5
million). Profits in API fell by 9.9% to $6.0 million, primarily due to the sale
of the residential portfolio in the previous year. The result of Sonitrol
Management Corporation was adversely impacted by an indifferent trading
performance together with increased communication facility costs.
Discontinued operations relate to Modern Vitalcall Limited and Integrated
Systems operations in the UK and two related companies, Compagnie Generale de
Protection et Securite SA in France and Microtech Security (UK) Limited in the
UK. During 1995 these operations produced B.P.1.4 million of operating profit
compared to full year profit in 1994 of B.P.2.1 million which, combined with the
loss on discontinued operations from prior years of B.P.2.4 million, produced a
net loss in 1994 of B.P.0.3 million.
The principal components of exceptional items in 1995 were the sale of
discontinued operations, additional charges at API Security, refinancing costs
and amounts written off in respect of the Employee Share Ownership Plan (ESOP).
Details of these exceptional charges are set out as follows.
In September 1995 ASH concluded the disposal of Modern Vitalcall Limited, a
wholly owned subsidiary, for B.P.1.5 million. In addition, the Group sold its
remaining Integrated Systems business in November 1995 for B.P.2.4 million. ASH
also disposed of its shareholdings in two associated undertakings, Compagnie
Generale de Protection et Securite SA (France) for B.P.4.4 million and Microtech
Security (UK) Limited for B.P.1.0 million. These four disposals realised B.P.9.3
million but resulted in a charge to the Profit and Loss account of approximately
B.P.5.7 million, compensated for by a write back to reserves in respect of
goodwill written off of B.P.8.8 million.
To enhance the generation of cash and profit in API Security, the Board
approved a move to smaller and less expensive premises on the expiry of the
present lease in May 1996 and the implementation of enhanced computer monitoring
and business systems. As a consequence the Group has written off the cost of
existing leasehold improvements and computer systems of B.P.2.4 million.
During 1995 the Group has incurred external refinancing costs of
professional advisers relating to assessing the various options to restructure
the Balance Sheet and thus improve shareholder value. In 1995 these costs
amounted to B.P.3.1 million (1994: B.P.1.6 million).
UITF Abstract 13 was issued on June 8, 1995 and is effective for UK
financial statements ending on or after June 22, 1995. This Abstract requires
ESOP receivables to be reclassified as investments and for any permanent
diminution in value to be charged to the Profit and Loss account. The Board
believe that a prudent method of application of this Abstract is to value the
stock held by the ESOP at market price as at November 30, 1995. As a result, the
shortfall between the market value of the ESOP's stock and the amount receivable
from the ESOP has been charged to the Profit and Loss account in 1995. The
16
<PAGE>
amount provided in earlier years (1994: B.P.450,000; 1993: B.P.200,000) has also
been reclassified as an exceptional item in the results for those years.
The net charge for exceptional items in 1994 of B.P.23.2 million related to
a write off of B.P.20.2 million in respect of the investment in Arius Inc,
B.P.450,000 in respect of the ESOP, refinancing costs of B.P.1,582,000 and
B.P.993,000 paid to the former Chairman and Chief Executive.
Net interest charges were higher in 1995 at B.P.14.9 million (1994: B.P.12.5
million). This was due to an increase in bank margin and higher interest rates
in the UK and USA.
The tax charge for 1995 was B.P.0.8 million compared to B.P.1.0 million for
the previous year. The tax charge in both 1995 and 1994 comprises mainly Advance
Corporation Tax (ACT) resulting from the preference dividends accrued or paid in
the year. ACT is presently deemed irrecoverable, although it is available for
offset against future UK mainstream corporation tax liabilities. ACT has been
accrued in full even though dividends of B.P.1,233,000 in respect of the 6%
Preference Shares for the six months to November 1995 have not been paid during
the year but have been accrued in these financial statements. Accrued ACT
written off in 1995 amounted to B.P.355,000. Based on current projections no
provision is required for deferred tax under UK accounting practice.
The net loss reduced from B.P.12.8 million in 1994 to B.P.8.2 million in
1995 primarily due to the benefit of a reduction in exceptional items of B.P.9.0
million, from B.P.23.2 million in 1994 to B.P.14.2 million in 1995 offset by a
reduction in operating profits from continuing operations of B.P.4.0 million and
an increase in profits from discontinued operations of B.P.1.7 million. Net
interest charges increased by B.P.2.3 million but taxation charges reduced by
B.P.0.2 million.
After deduction of Preference Share dividends of B.P.2.8 million in 1995 and
1994, the net loss attributable to ordinary shareholders was B.P.11.0 million in
1995 compared to loss of B.P.15.6 million in 1994. The loss per Ordinary Share
in 1995 was 9.2p compared to a loss of 13.0p per share in 1994.
FISCAL 1994 COMPARED WITH FISCAL 1993
- -------------------------------------
In 1994 the Group achieved an overall growth in revenues of 3.3% from
B.P.160.8 million to B.P.166.1 million. The results included income from
discontinued operations of B.P.11.8 million in 1994 compared with B.P.17.6
million in 1993 and consequently the underlying growth in revenues from
continuing operations was 7.8% from B.P.143.1 million in 1993 to B.P.154.3
million in 1994. The growth in recurring rental and maintenance revenues was
significant with a 4.4% improvement from B.P.78.7 million in 1993 to B.P.82.2
million in 1994. Recurring revenues of the Group represented some 53.3% of total
income.
In the UK and Eire revenues from continuing operations increased during the
year by 11.1% to B.P.110.8 million. The growth in recurring revenues of 10.6% to
B.P.54.8 million was helped by the first full year's trading of Telecom Security
("TSL") within the Group. Recurring revenues in the UK and Eire represented
49.5% of total revenues.
In the US, revenues increased by 1.5% from $65.5 million to $66.4 million
but on conversion to sterling revenues remained constant at B.P.43.5 million.
Installation sales increased by 13.8% to $24.7 million (1993: $21.7 million)
with recurring revenues decreasing by 4.7% to $41.8 million (1993: $43.8
million). The fall in recurring revenues reflected the difficult Californian
economic climate and the move by some customers from rental to outright sale.
Income before interest, exceptional items and taxation increased by
approximately B.P.4.3 million from B.P.19.6 million in 1993 to B.P.23.9 million
in 1994. Discontinued operations reported losses of B.P.3.6 million in 1993 and
B.P.0.3 million in 1994. Income before interest, exceptional items and taxation
from continuing operations consequently increased by B.P.0.9 million (4.1%) from
B.P.23.3 million in 1993 to B.P.24.2 million in 1994.
Operating profits of the principal operating companies in the UK and Eire
reduced by 1.9% to B.P.19.0 million. Results in the core business, Modern
Security Systems, continued to improve but the results were adversely affected
by the disappointing results in both Eire and TSL. Management changes have taken
place in both operations in 1995.
17
<PAGE>
Operating profits of the principal operating companies in the US increased
by 0.5% from $11.4 million to $11.5 million but fell slightly on conversion to
sterling by 1% to B.P.7.5 million (1993: B.P.7.6 million). The profit on the
sale of the API residential portfolio of B.P.1.0 million was offset by abortive
acquisition costs and the costs of closing the Florida office. The results of
Sonitrol Management Corporation were adversely impacted due to the higher
element of lower margin outright sale business compared with 1993. This was
compensated for by improved margins as a result of reduced operating costs in
API.
Operations discontinued during 1994 relate to Modern Integrated Systems. The
1994 loss of B.P.2.4 million is a result of project overrun costs, increased
provisions for warranty work and a significant downgrade on contract realization
values. In addition, operations discontinued during 1995 have also been restated
as discontinued operations in 1994 and 1993. These businesses produced operating
profits of B.P.2,121,000 in 1994 and B.P.1,332,000 in 1993. Consequently
restated losses from discontinued operations amounted to B.P.0.3 million in 1994
and B.P.3.6 million in 1993.
The final result for 1994 was impacted severely by exceptional items. The
principal component of exceptional items in 1994 relates to the provision
against the investment in Arius Inc, a related company, where the Group had a
significant shareholding. The Board had taken the decision to dispose of this
holding since it was not regarded as part of continuing core activities.
However, the announcement by Arius that it was experiencing a number of serious
financial and trading difficulties caused the Board to feel that, as a matter of
prudence, it was right to provide against the full carrying value of the
investment, together with all potential liabilities and to write off the value
of goodwill with respect to Arius previously taken to non-distributable
reserves. The effect of this decision was to write off B.P.20.2 million ($30.8
million) to the profit and loss account. Arius Inc subsequently filed for
protection under Bankruptcy Code, Chapter 7, on May 8, 1995. Exceptional items
in 1994 also include a payment to the former Chairman and Chief Executive of
B.P.993,000, refinancing costs of B.P.1,582,000 and a provision of B.P.450,000
in respect of the ESOP. The charge for exceptional items in 1993 related to
B.P.1.4 million for the fundamental reorganization and restructuring in the UK
and B.P.200,000 in respect of the ESOP.
Interest charges were higher in 1994 at B.P.12.5 million (1993: B.P.10.7
million). This was due to a significant increase in international interest rates
and a move from US dollar to sterling borrowings to simplify the Group's
currency hedging arrangements.
The tax charge for 1994 was B.P.1.0 million compared to B.P.1.8 million for
the previous year. The tax charge in both 1994 and 1993 comprises mainly Advance
Corporation Tax (ACT) resulting from the payment of preference dividends in 1994
and both preference and ordinary dividends in 1993. ACT is presently deemed
irrecoverable, although it is available for offset against future UK mainstream
corporation tax liabilities. The tax charge for 1993 was reduced due to the
payment of scrip dividends to Ordinary Shareholders. Based on projections no
provision was required for deferred tax.
Net income decreased from B.P.5.5 million in 1993 to a net loss of B.P.12.8
million in 1994 primarily due to the impact of the provision against the
investment in Arius Inc of B.P.20.2 million. After deduction of preference share
dividends of B.P.2.8 million in 1994 and 1993, the net (loss)/income
attributable to ordinary shareholders was a loss of B.P.15.6 million in 1994
compared to a profit of B.P.2.7 million in 1993. The loss per Ordinary Share in
1994 was 13.0p compared to a profit of 2.3p per share in 1993. Adjusted earnings
per Ordinary Share prior to the amount written off the investment in Arius Inc
were 3.8p per share in 1994.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1995 the Group had three main sources of debt funding: bank
facilities, including a committed Multiple Option Loan Facility (the "MOF"),
Senior Notes and Convertible Capital Bonds.
In May 1989, the Company entered into the MOF with a group of United Kingdom
and international banks led by Lloyds Bank PLC, which was originally fully
underwritten for B.P.90 million
18
<PAGE>
until May 1994 and B.P.70 million until May 1995. The acquisition of API
Security in August 1989 for $105 million was funded by drawings under the MOF.
In September 1990, API Security Inc. issued stapled units of 10.73%
Guaranteed Subordinated Serial Notes (the "Stapled Units" issue) to The
Prudential Insurance Company of America for a total consideration of $60 million
(before expenses). The net proceeds of the Stapled Units issue were used to
repay dollar borrowings drawn under the MOF in connection with the acquisition
of API.
In May 1991, the Company, through a finance subsidiary, issued B.P.60
million of 9.5% Convertible Capital Bonds due 2006 in the Euromarkets. The
proceeds of the issue were used to repay a portion of the Group's variable rate
sterling short to medium term borrowings.
In 1992, the loss prevention businesses were sold for B.P.153 million which
enabled bank debt to be largely eliminated on receipt of the proceeds on July
30, 1992. In September 1992 the Company acquired Sonitrol and SMC for B.P.26
million. In addition some B.P.15 million of 9.5% Convertible Capital Bonds were
repurchased.
In 1993 the Company acquired TSL for a consideration net of cash acquired of
B.P.4.7 million and repaid $6 million (B.P.3.9 million) in respect of the
Stapled Units.
On May 27, 1994 the Company issued $60,721,638, 8.28% Senior Notes of which
$5,643,273 was in respect of yield maintenance. The Notes were originally due
for repayment on May 27, 1999. The Notes were issued to the Prudential Insurance
Company of America to replace the Stapled Units previously issued by API
Security Inc.
At November 30, 1994 bank debt (net of cash) was broadly unchanged when
compared with 1993 at B.P.79 million. In addition, the total amount outstanding
under the Loan Notes and the Convertible Capital Bonds at B.P.78.7 million, was
also unchanged.
At November 30, 1995 the Group had available bank facilities totalling
approximately B.P.89.0 million, of which approximately B.P.83.4 million were
committed, including B.P.66.3 million under the MOF. ASH had short term debt of
approximately B.P.83.1 million at November 30, 1995 (1994: B.P.82.6 million) and
long term debt outstanding, excluding the B.P.43.8 million (1994: B.P.43.7
million) of Convertible Capital Bonds, of B.P.0.4 million (1994: B.P.Nil).
On December 21, 1995, the Group reached agreement ("the Credit Agreement")
with its principal bankers to extend the majority of the Group's committed
facilities of B.P.83.4 million through January 2, 1998. This new facility
consolidates the B.P.66.3 million previously available under the MOF facility
and the majority of the B.P.17.1 million previously available from bilateral
facilities. Additionally the Group had uncommitted overdraft and working capital
lines at November 30, 1995 totalling in excess of B.P.5.6 million. The terms of
the 8.28% Senior Notes were also amended by agreement with the Prudential
Insurance Company of America on December 21, 1995. The maturity date of the
Senior Notes has also been amended to January 2, 1998, and the terms of the
Senior Notes and the bank facilities are treated on an equivalent basis. As
part of the aforementioned agreement with the Group's principal bankers and the
Prudential Insurance Company of America, the Group's indebtedness under the
Credit Agreement and to the holders of the Senior Notes is secured by pledges
over the majority of the assets of the Group.
A significant proportion of the Group's assets are held in the United
States. The Group manages its exposure to fluctuations in US dollar exchange
rates by borrowing US dollars. The amount hedged includes all US net assets as
calculated under UK GAAP together with an element of goodwill. Exchange
movements on assets including goodwill and borrowings are offset in reserves.
During 1995 the Group disposed of a number of peripheral businesses so as to
reduce debt and enable the Group to focus on its core businesses, in the UK,
Modern Security Systems and TSL, and in the US, API and Sonitrol, to ensure
positive trading cash flows to reduce debt and increase shareholders' funds.
The Board continues to address the high level of gearing as priority and during
1995 the Group incurred significant costs relating to the various options to
ease the complexities of the balance sheet and thus improve shareholder value.
These activities will continue until this problem is resolved.
19
<PAGE>
EFFECT OF INFLATION
For each of the three years ended November 30, 1995, inflation did not have
a significant effect on Group income before interest and taxation.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
The Directors and officers of the Company at May 20, 1996 were:
<TABLE><CAPTION>
<S> <C>
Lord Lane of Horsell......................... Chairman*
Graeme A Elliot.............................. Director* and Deputy Chairman
Anthony P Dignum............................. Director and Chief Executive
Michael J Hawker............................. Director and Chairman, ASH, UK
Peter M Bertram.............................. Group Finance Director
John P Smith................................. Director & Chief Operating Officer, ASH, UK
Simon H J A Knott............................ Director*
Sir Kenneth Newman........................... Director*
C Dawson Buck................................ Director*
Ronald H Oliver.............................. Director*
Sudhakar A Pandit............................ Director*
Paul D Strudwick............................. Company Secretary
</TABLE>
- ------------
* Non-executive directors. Non-executive directors are not full-time employees
of the Group.
LORD LANE OF HORSELL joined the Board in May 1992 and became Chairman in
October 1994. He was formerly senior partner of Binder Hamlyn and holds a number
of other public company directorships.
GRAEME ELLIOT joined the Board in 1993 and became Deputy Chairman in October
1994. He holds a number of additional non-executive directorships, including The
William Hill Group Limited and NSM PLC.
ANTHONY DIGNUM has been Group Chief Executive and a member of the Board
since joining ASH in July 1995. He had previously held a number of senior
positions in retailing, including Retail Group Finance Director of Dixons Group
PLC.
MICHAEL HAWKER has been with the Group since 1965 and was appointed to the
Board in 1981. He is Chairman of the Group's UK operations, having previously
managed its Security Systems division.
PETER BERTRAM joined as Group Finance Director in 1993, and has
responsibility for financial and treasury matters.
JOHN SMITH joined the Board in 1993. He is chief operating officer of ASH,
UK. He has held a variety of positions within the Group since he joined in 1984.
SIMON KNOTT joined the Board in 1976 and is Chairman of Rights and Issues
Investment Trust Plc and is a director of a number of other United Kingdom
public companies.
SIR KENNETH NEWMAN joined the Board in 1987, prior to which he was
Commissioner of the Metropolitan Police from 1982 until his retirement in 1987.
Prior to that appointment he had served as Chief Constable of the RUC and as HM
Inspector of Constabulary for England and Wales.
DAWSON BUCK was formerly Chief Executive Officer of the Group's UK
operations, having previously managed its loss prevention businesses. Following
the sale of the loss prevention businesses to Sensormatic, he became President
of Sensormatic International, and is now a non-executive Director of ASH.
RONALD OLIVER is President of Westport Asset Management Inc, a registered
investment advisor. He was appointed to the Board on May 23, 1995.
SUDHAKAR PANDIT retired from Thorn EMI PLC in March 1995. He was previously
Finance Director of Thorn Security and Electronics. He was appointed to the
Board on May 23, 1995.
20
<PAGE>
PAUL STRUDWICK joined the Group in May 1985 and has been Company Secretary
since December 1989.
The Company's Articles of Association provide that at each Annual General
Meeting of the Company one-third (rounded down to the number nearest to
one-third) of the Directors liable to retire by rotation shall retire from
office and then be eligible for re-election by shareholders. No executive is
subject to retirement by rotation. Any new Director appointed between Annual
General Meetings must be elected at the next Annual General Meeting to continue
in office.
In accordance with these provisions Lord Lane of Horsell retires by rotation
at the next Annual General Meeting and being eligible, offers himself for
re-election. Mr R H Oliver, Mr S A Pandit and Mr A P Dignum, having been
appointed directors since the last Annual General Meeting, retire and being
eligible offer themselves for re-election.
The unexpired period of the service contract of Mr A P Dignum is 24 months.
Lord Lane of Horsell, Mr R H Oliver and Mr S A Pandit do not have service
contracts.
Mr M J Hawker, Mr C D Buck, Mr S H J A Knott and Sir Kenneth Newman will be
retiring at the Annual General Meeting.
The business of the Company is managed by the Board of Directors. The
Directors, other than the non-executive Directors, serve as executive officers
of the Company.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
- -----------------------------------------------
For the year ended November 30, 1995, the aggregate compensation of the
Directors and officers of the Company paid or accrued was B.P.884,000. The
aggregate amount set aside or accrued by the Group for the year ended November
30, 1995 to provide pension, retirement or similar benefits for all Directors
and the officers of the Company was B.P.44,000.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
- -----------------------------------------------------------------------
OPTION SCHEMES
Share Option Scheme. Under the terms of the Share Option Scheme (the
"Scheme"), full time directors and employees of the Company and its subsidiaries
may participate in the Scheme at the discretion of the Board of Directors. The
Scheme involves a participant being granted an option to subscribe for Ordinary
Shares at the higher of the nominal value and the market price of such Ordinary
Shares at the time of grant. Except in certain circumstances, options may not be
exercized before the third or on or after the tenth anniversary of their grant.
A participant may not hold options at any one time such that the aggregate
market value (calculated at the time of grant) of the Ordinary Shares which may
be acquired on the exercise of such options would exceed four times his annual
remuneration. The consideration for the grant of an option may not exceed B.P.1.
As of March 30,1996, a total of 1,804,192 Ordinary Shares were subject to option
under the Scheme at subscription prices between 130p and 269.3p per share,
exercizable by March 29, 2003.
ESOP Executive Share Option Scheme. The ESOP Executive Share Option Scheme
(the "Executive Scheme") is divided into Part A, relating to options approved by
the United Kingdom Inland Revenue, and Part B, relating to unapproved options.
Under the terms of Part A, full time directors and employees of the Company and
its subsidiaries may participate at the discretion of the Board of Directors.
Under the terms of Part B, all directors and employees of the Company and its
subsidiaries may participate at the discretion of the Board of Directors. Part A
options qualify for special tax relief under the UK Income and Corporation Tax
Act of 1988 and may not be exercized before the third or after the tenth
anniversary of their grant. Part B options do not qualify for such tax relief
and may not be exercized before the third or after the seventh anniversary of
their grant. The Part A options are included with the options granted under the
Share Option Scheme when determining the total number of options which may be
held by a participant at any one time as described above. The total number of
Part B options which may be held at any one time are subject to a separate
limit such that the aggregate
21
<PAGE>
market value (calculated at the time of grant) of the Ordinary Shares which
may be acquired on the exercise of such options may not exceed four times a
participant's annual remuneration.
As of March 30, 1996, a total of 772,000 Ordinary Shares were subject to
option under the Executive Scheme at subscription prices between 245p and 269.3p
per share, exercizable by April 30, 2000.
Sharesave Scheme 1993. ("The Sharesave Scheme") UK Resident directors and
employees of the Company and its subsidiaries may participate in the Scheme with
the qualifying length of service being at the discretion of the Board of
Directors. The scheme involves the participants entering into an Inland Revenue
approved savings contract with contracted savings of between B.P.10 and B.P.250
per month over 5 years. Options are granted at the time of entry to the
Sharesave Scheme to subscribe for Ordinary Shares at the higher of the nominal
value and 80 per cent of the middle market value of such shares on a specified
date on which invitations to apply for options are issued. Except in certain
circumstances, options may only be exercized during the six month period
commencing on the fifth anniversary of the commencement of the related savings
contract.
As of March 30, 1996 a total of 337,668 Ordinary Shares were subject to
option under the Sharesave Scheme at a subscription price of 128p per share,
exercisable by October 1, 1998.
Executive Share Option Scheme 1993. At the Annual General Meeting held April
29, 1993 the shareholders approved the introduction of the Executive Share
Option Scheme 1993 ("The 1993 Executive Scheme"). The terms of the 1993
Executive Scheme are broadly in line with the terms of the Share Option Scheme
set out above with the exception that under the 1993 Executive Scheme up to one
quarter of the grants made may be at a price which is 85 per cent of the middle
market price on a day shortly before the date of the grant, provided that
certain Inland Revenue conditions are satisfied and that the resultant price is
equal to or exceeds nominal value. At March 30, 1996 no options had been granted
under the 1994 Executive Scheme.
The following options were held by the Directors and officers as at May
20,1996:
<TABLE>
<CAPTION>
NUMBER OF ORDINARY
NAME SHARES UNDER OPTION
---- -------------------
<S> <C>
Lord Lane of Horsell..................................... --
M J Hawker............................................... 490,000
P M Bertram.............................................. 150,000
J P Smith................................................ 157,999
S H J A Knott............................................ 40,000
Sir K Newman............................................. 40,000
G A Elliot............................................... --
C D Buck................................................. 463,001
R H Oliver............................................... --
S A Pandit............................................... --
P D Strudwick............................................ 119,999
----------
Directors and officers as a group........................ 1,460,999
----------
----------
</TABLE>
WARRANTS
On September 20, 1990, as part of the Stapled Units issue, warrants were
issued in respect of 3,706,680 Ordinary Shares to The Prudential Insurance
Company of America at a price of 300p each, exercizable at any time up to
September 20, 2002.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
- -------------------------------------------------------
There have been no material transactions during the last three years to
which any Director or officer, or 10% shareholder, or any relative or spouse
thereof was a party. There is no significant outstanding indebtedness to the
Company by any Director or officer or 10% shareholder.
22
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
The Company did not pay dividends on the 6% Preference Shares and 5%
Preference Shares which were payable on November 30, 1995 and February 28,
1996, respectively, in the respective amounts of B.P. 1,223,000 ($1,871,190)
and B.P. 197,000 ($301,410).
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
- --------------------------------------------------------------------------------
None.
PART IV
ITEM 18. FINANCIAL STATEMENTS
- -----------------------------
See pages F-1 through F-46 and page S-1, incorporated herein by reference.
(a) The following financial statements, together with the report of Binder
Hamlyn thereon, are filed as part of this Form 20-F.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent chartered accountants of ASH................................... F-1
Consolidated Financial Statements:
Consolidated balance sheets as of November 30, 1994 and 1995....................... F-2
Consolidated statements of income for the years ended November 30, 1993, 1994 and
1995............................................................................. F-4
Consolidated statements of shareholders' equity for the years ended November 30,
1993, 1994 and 1995 F-5
Consolidated statements of cash flows for the years ended November 30, 1993, 1994
and 1995......................................................................... F-8
Consolidated statement of recognized gains and losses for the years ended November
30, 1993, 1994 and 1995.......................................................... F-9
Company balance sheets as of November 30, 1994 and 1995............................ F-10
Notes to Consolidated Financial Statements......................................... F-13
Report of independent chartered accountants relating to schedule..................... S-1
Schedule for the years ended November 30, 1993, 1994 and 1995:
Schedule II -- Valuation and qualifying accounts and reserves...................... S-2
</TABLE>
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
(b) The total amount of long-term debt securities of the Group authorized
under any instrument, other than the Credit Agreement dated December 21, 1995
filed as Exhibit 2.4 (a) attached hereto, the Trust Deed, dated May 31, 1991,
filed with the Securities and Exchange Commission on May 29, 1992 as Exhibit
2.1 to the Company's Annual Report on Form 20-F for the year ended November 30,
1991 and incorporated herein by reference, and the Note Agreement, dated as of
May 27, 1994, filed with the Securities and Exchange Commission on May 26, 1995
as Exhibit 2.3 (b) to the Company's Annual Report on Form 20-F for the year
ended November 30, 1994 and incorporated herein by reference, as amended by a
First Amendment agreement dated December 21, 1995, filed as Exhibit 2.4 (b)
attached hereto, and an Inter-Creditor Agreement dated December 21, 1995 filed
as Exhibit 2.4(c) attached hereto does not exceed 10% of the total assets of
the Group on a consolidated basis. ASH agrees to furnish copies of any and all
such instruments to the Securities and Exchange Commission upon request.
23
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
this Annual Report on Form 20-F and has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AUTOMATED SECURITY (HOLDINGS) PLC
(REGISTRANT)
By:
/s/ P.M. BERTRAM
--------------------------------
P.M. BERTRAM
Finance Director
Dated: May 22, 1996
24
<PAGE>
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Board of Directors and Shareholders of
Automated Security (Holdings) PLC and subsidiaries
We have audited the accompanying consolidated balance sheets of Automated
Security (Holdings) PLC as of November 30, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended November 30, 1995; which, as described in
Note 1 have been prepared on the basis of accounting principles generally
accepted in the United Kingdom. These financial statements are the
responsibility of the management of Automated Security (Holdings) PLC. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements set out on pages F-2 to
F-46, present fairly, in all material respects, the financial position of
Automated Security (Holdings) PLC at November 30, 1995 and 1994 and the results
of its operations and its cash flows for each of the three years in the period
ended November 30, 1995, in conformity with accounting principles generally
accepted in the United Kingdom which differ in certain significant respects from
those generally accepted in the United States.
<TABLE>
<S> <C>
Binder Hamlyn
London, England Chartered Accountants
May 17, 1996 Registered Auditors
</TABLE>
F-1
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
NOVEMBER 30,
-----------------------------
NOTES 1994 1995 1995
----- ------- ------- -------
<S> <C> <C> <C> <C>
B.P.'000 B.P.'000 $'000
ASSETS
CURRENT:
Cash........................................... 3,934 5,936 9,082
Accounts and notes receivable, less allowances
for possible losses of B.P.2,637,000 and
B.P.2,230,000.................................. 4(a) 25,818 21,830 33,400
Inventories.................................... 5 8,095 4,600 7,038
Prepayments and accrued income................. 4(b) 3,286 3,195 4,888
------- ------- -------
TOTAL CURRENT ASSETS........................... 41,133 35,561 54,408
------- ------- -------
Long-term accounts and notes receivable, less
allowances for possible losses of B.P.Nil and
B.P.718,000.................................. 4(a) 4,122 5,651 8,646
Investment in related companies................ 6 3,035 (453) (693)
Other investments.............................. 7(a) 646 654 1,001
Investment--own shares......................... 7(b) 3,680 614 939
Property and equipment--net.................... 8 223,255 227,386 347,901
------- ------- -------
TOTAL OTHER ASSETS............................. 234,738 233,852 357,794
------- ------- -------
TOTAL ASSETS................................... 275,871 269,413 412,202
------- ------- -------
------- ------- -------
</TABLE>
The figures relating to the year ended November 30, 1995 have been expressed
in US dollars ($), solely for the purpose of convenience using the Noon Buying
Rate in New York City for cable transfers in foreign currencies as announced for
customs purposes by the Federal Reserve Bank of New York in effect on November
30, 1995. This was $1.53 = B.P.1.00.
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------
NOTES 1994 1995 1995
----- ------- ------- --------
<S> <C> <C> <C> <C>
B.P.'000 B.P.'000 $'000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt............................... 9 82,568 83,104 127,149
Accounts payable--trade....................... 14,307 13,094 20,034
Other current liabilities..................... 11 32,518 26,618 40,726
Rentals received in advance................... 28,575 27,763 42,477
------- ------- --------
TOTAL CURRENT LIABILITIES..................... 157,968 150,579 230,386
OTHER LIABILITIES:
Long-term debt................................ 12 78,712 80,965 123,876
Non-current liabilities....................... 13 3,908 5,385 8,239
------- ------- --------
TOTAL LIABILITIES............................. 240,588 236,929 362,501
------- ------- --------
COMMITMENTS AND CONTINGENCIES................. 8,12, 21 & 24
SHAREHOLDERS' EQUITY:
Ordinary Shares............................... 21 11,957 11,957 18,294
Redeemable Preference Shares.................. 21 48,631 48,629 74,403
Additional paid-in capital.................... 20 5,729 5,610 8,583
Non-distributable reserves.................... 20 (90,681) (82,432) (126,121)
Retained earnings............................. 20 59,647 48,720 74,542
------- ------- --------
TOTAL SHAREHOLDERS' EQUITY.................... 35,283 32,484 49,701
------- ------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... 275,871 269,413 412,202
------- ------- --------
------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------
1993 1994
NOTES (AS RESTATED) (AS RESTATED) 1995 1995
----- ------------- ------------- ------- -------
B.P.'000 B.P.'000 B.P.'000 $'000
<S> <C> <C> <C> <C> <C>
NET SALES
Continuing operations...................... 143,136 154,303 153,733 235,211
Discontinued operations.................... 17,639 11,768 9,616 14,712
------------- ------------- ------- -------
17 160,775 166,071 163,349 249,923
Cost of sales.............................. 15 105,768 108,235 105,511 161,431
------------- ------------- ------- -------
Gross profit on sales...................... 55,007 57,836 57,838 88,492
General and administrative expenses........ 15 35,776 34,660 36,169 55,339
------------- ------------- ------- -------
OPERATING INCOME/(LOSS)
Continuing operations...................... 17 23,416 24,399 20,826 31,863
Discontinued operations.................... 17 (4,185) (1,223) 843 1,290
------------- ------------- ------- -------
19,231 23,176 21,669 33,153
------------- ------------- ------- -------
Share of related companies' results........ 15 412 761 10 15
Interest income............................ 1,269 181 173 265
Interest expense........................... 17 (12,023) (12,695) (15,035) (23,003)
Exceptional items.......................... 16 (1,578) (23,177) (14,225) (21,764)
------------- ------------- ------- -------
INCOME/(LOSS) BEFORE TAXES ON INCOME....... 17 7,311 (11,754) (7,408) (11,334)
TAXES ON INCOME............................ 18 1,800 1,000 800 1,224
------------- ------------- ------- -------
NET INCOME/(LOSS).......................... 5,511 (12,754) (8,208) (12,558)
------------- ------------- ------- -------
EARNINGS/(LOSS) PER ORDINARY SHARE
Basic...................................... 1 2.3p (13.0)p (9.2)p (14.1)ct.
------------- ------------- ------- -------
------------- ------------- ------- -------
Fully diluted.............................. 1 2.3p (13.0)p (9.2)p (14.1)ct.
ADJUSTED EARNINGS PER ORDINARY SHARE....... 1 2.5p 4.2p (1.9)p (2.9)ct.
------------- ------------- ------- -------
------------- ------------- ------- -------
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic...................................... 116.5m 119.5m 119.6m 119.6m
Fully diluted.............................. 116.5m 119.5m 119.6m 119.6m
------------- ------------- ------- -------
------------- ------------- ------- -------
</TABLE>
F-4
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
6% CONVERTIBLE
5% CONVERTIBLE CUMULATIVE CUMULATIVE
REDEEMABLE
REDEEMABLE PREFERENCE SHARES PREFERENCE SHARES
ORDINARY SHARES 10P PAR VALUE B.P.1 PAR VALUE B.P.1 PAR VALUE
-------------------------------- ------------------------------- -------------------
AUTHORIZED ISSUED PAR VALUE AUTHORIZED ISSUED PAR VALUE AUTHORIZED ISSUED
'000 '000 B.P.'000 '000 '000 B.P.'000 '000 '000
---------- ------- --------- ---------- ------ --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1992.......... 200,000 113,487 11,349 15,000 8,558 8,558 42,000 40,769
Net income for the year.............
Shares (converted) issued*.......... 3,590 359 (603) (603) (2)
Shares issue expenses...............
Revaluations and realization
adjustments.........................
Goodwill written off................
Goodwill transferred to Profit and
Loss account on disposals..........
Dividends:
on Ordinary Shares.................
less: Paid by bonus issue..........
on 5% Preference Shares (5p).......
on 6% Preference Shares (6p).......
Currency translation adjustments....
Amortization of CCB costs
transferred to additional paid in
capital........................
---------- ------- --------- ----- ------ ----- ------ ------
BALANCE, NOVEMBER 30, 1993.......... 200,000 117,077 11,708 15,000 7,955 7,955 42,000 40,767
---------- ------- --------- ----- ------ ----- ------ ------
---------- ------- --------- ----- ------ ----- ------ ------
<CAPTION>
ADDITIONAL NON-
PAID-IN DISTRIBUTABLE RETAINED
CAPITAL RESERVES EARNINGS TOTAL
PAR VALUE ---------- ------------- -------- ------
B.P.'000 B.P.'000 B.P.'000 B.P.'000 B.P.'000
--------- ---------- ------------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1992.......... 40,769 5,818 (82,269) 72,894 57,119
Net income for the year............. 5,511 5,511
Shares (converted) issued*.......... (2) 600 (321) 33
Shares issue expenses............... (279) (279)
Revaluations and realization
adjustments......................... (38) 38 --
Goodwill written off................ (4,951) (4,951)
Goodwill transferred to Profit and
Loss account on disposals.......... 314 314
Dividends:
on Ordinary Shares................. (3,473) (3,473)
less: Paid by bonus issue.......... 3,038 3,038
on 5% Preference Shares (5p)....... (398) (398)
on 6% Preference Shares (6p)....... (2,446) (2,446)
Currency translation adjustments.... (458) (458)
Amortization of CCB costs
transferred to additional paid in
capital............................. (119) 119 --
--------- ----- ------ -------- ------
BALANCE, NOVEMBER 30, 1993.......... 40,767 6,020 (87,402) 74,962 54,010
--------- ----- ------ -------- ------
--------- ----- ------ -------- ------
</TABLE>
- ------------
* Shares converted at prices ranging between 130p and 267p.
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
5% CONVERTIBLE CUMULATIVE 6% CONVERTIBLE CUMULATIVE
REDEEMABLE PREFERENCE SHARES REDEEMABLE PREFERENCE SHARES
ORDINARY SHARES 10P PAR VALUE
B.P.1 PAR VALUE B.P.1 PAR VALUE
------------------------------ ----------------------------- -----------------------------
AUTHORIZED ISSUED PAR VALUE AUTHORIZED ISSUED PAR VALUE AUTHORIZED ISSUED PAR VALUE
---------- ------- --------- ---------- ------ --------- ---------- ------ ---------
'000 '000 B.P.'000 B.P.'000 '000 B.P.'000 B.P.'000 '000 '000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1993....... 200,000 117,077 11,708 15,000 7,955 7,955 42,000 40,767 40,767
Net loss for the year............
Shares (converted) issued*....... 2,494 249 (87) (87) (4) (4)
Shares issue expenses............
Goodwill written off.............
Goodwill transferred to Profit
and Loss account on Arius Inc...
Dividends:
on 5% Preference Shares (5p).....
on 6% Preference Shares (6p).....
Currency translation
adjustments......................
Transfer from revaluation reserve
to retained earnings............
Amortization of CCB costs
transferred to additional paid
in capital.....................
---------- ------- --------- ------ ----- ----- ----- ------ ---------
BALANCE, NOVEMBER 30, 1994....... 200,000 119,571 11,957 15,000 7,868 7,868 42,000 40,763 40,763
---------- ------- --------- ------ ----- ----- ----- ------ ---------
---------- ------- --------- ------ ----- ----- ----- ------ ---------
<CAPTION>
ADDITIONAL NON-
PAID-IN DISTRIBUTABLE RETAINED
CAPITAL RESERVES EARNINGS TOTAL
---------- ------------- -------- -------
'000 B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1993....... 6,020 (87,402) 74,962 54,010
Net loss for the year............ (12,754) (12,754)
Shares (converted) issued*....... (157) 1
Shares issue expenses............ (14) (14)
Goodwill written off............. (20,193) (20,193)
Goodwill transferred to Profit
and Loss account on Arius Inc... 17,365 17,365
Dividends:
on 5% Preference Shares (5p)..... (393) (393)
on 6% Preference Shares (6p)..... (2,446) (2,446)
Currency translation
adjustments...................... (293) (293)
Transfer from revaluation reserve
to retained earnings............ (158) 158 --
Amortization of CCB costs
transferred to additional paid
in capital....................... (120) 120 --
----- ------ -------- -------
BALANCE, NOVEMBER 30, 1994....... 5,729 (90,681) 59,647 35,283
----- ------ -------- -------
----- ------ -------- -------
</TABLE>
- ------------
* Shares converted at prices ranging between 165p and 267p.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
<TABLE><CAPTION>
5% CONVERTIBLE CUMULATIVE 6% CONVERTIBLE CUMULATIVE
REDEEMABLE PREFERENCE SHARES REDEEMABLE PREFERENCE SHARES
ORDINARY SHARES 10P PAR VALUE B.P.1 PAR VALUE B.P.1 PAR VALUE
-------------------------------- ------------------------------- -------------------------------
AUTHORIZED ISSUED PAR VALUE AUTHORIZED ISSUED PAR VALUE AUTHORIZED ISSUED PAR VALUE
'000 '000 B.P.'000 '000 '000 B.P.'000 '000 '000 B.P.'000
---------- ------- --------- ---------- ------ --------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1994.. 200,000 119,571 11,957 15,000 7,868 7,868 42,000 40,763 40,763
Net loss for the year......
Shares (converted)
issued*..................... 1 (1) (1) (1) (1)
Shares issue expenses......
Goodwill written off.......
Goodwill transferred to
Profit and Loss
account.....................
Dividends:
on 5% Preference Shares
(5p).......................
on 6% Preference Shares
(6p).......................
Currency translation
adjustments...............
Amortization of CCB costs
transferred to additional
paid in capital..........
---------- ------- --------- ------ ------ ----- ------ ------ ---------
BALANCE, NOVEMBER 30, 1995.. 200,000 119,572 11,957 15,000 7,867 7,867 42,000 40,762 40,762
---------- ------- --------- ------ ------ ----- ------ ------ ---------
---------- ------- --------- ------ ------ ----- ------ ------ ---------
<CAPTION>
NON-
ADDITIONAL DISTRIBU-
PAID-IN TABLE RETAINED
CAPITAL RESERVES EARMINGS TOTAL
---------- --------- -------- ------
B.P.'000 B.P.'000 '000 '000
---------- --------- -------- ------
<S> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1994.. 5,729 (90,681) 59,647 35,283
Net loss for the year...... (8,208) (8,208)
Shares (converted)
issued*................... 2 --
Shares issue expenses...... (1) (1)
Goodwill written off....... (232) (232)
Goodwill transferred to
Profit and Loss
account................ 8,843 8,843
Dividends:
on 5% Preference Shares
(5p)....................... (393) (393)
on 6% Preference Shares
(6p)....................... (2,446) (2,446)
Currency translation
adjustments................. (362) (362)
Amortization of CCB costs
transferred to additional
paid in capital.......... (120) 120 --
----- --------- -------- ------
BALANCE, NOVEMBER 30, 1995.. 5,610 (82,432) 48,720 32,484
----- --------- -------- ------
----- --------- -------- ------
</TABLE>
- ------------
* Shares converted at prices ranging between 162p and 267p.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOWS
<TABLE><CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------
1993 1994 1995 1995
------- ------- ------- -------
B.P.'000 B.P.'000 B.P.'000 $'000
<S> <C> <C> <C> <C>
Continuing operations................................... 67,475 63,400 50,012 76,519
Reorganization.......................................... (1,793) -- -- --
Discontinued activities and disposal costs.............. (10,484) 1,869 1,027 1,571
------- ------- ------- -------
NET CASH INFLOW FROM OPERATING ACTIVITIES............... 55,198 65,269 51,039 78,090
------- ------- ------- -------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received..................................... 767 164 161 246
Interest paid (including Stapled Unit charges)........ (11,616) (10,662) (14,973) (22,908)
Dividends paid........................................ (9,293) (2,159) (2,839) (4,344)
Dividends from associated undertaking................. -- 106 -- --
Payments on currency hedging instruments.............. -- (5,349) -- --
------- ------- ------- -------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE.................................... (20,142) (17,900) (17,651) (27,006)
------- ------- ------- -------
Taxation
UK (including Advance Corporation Tax)................ (2,769) (1,071) (505) (773)
Overseas.............................................. -- (88) 6 9
------- ------- ------- -------
TAXATION PAID........................................... (2,769) (1,159) (499) (764)
------- ------- ------- -------
INVESTING ACTIVITIES
Purchase of tangible fixed assets..................... (59,020) (43,603) (38,502) (58,908)
Purchase of subsidiary undertakings (net of cash and
cash equivalents acquired).......................... (4,709) (1,480) -- --
Purchase of associated undertakings................... (10) (2,946) (232) (355)
Loans to associated undertakings...................... -- (983) --
Payment on guarantee to associate undertaking......... -- -- (1,921) (2,939)
Purchase of investments............................... (226) (101) -- --
Sale of tangible fixed assets......................... 1,822 1,964 1,108 1,695
Sale of subsidiary and associated undertakings........ 6,962 -- 8,677 13,276
------- ------- ------- -------
NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES..... (55,181) (47,149) (30,870) (47,231)
------- ------- ------- -------
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING.............. (22,894) (939) 2,019 3,089
------- ------- ------- -------
FINANCING
Issue of Ordinary Shares.............................. 33 -- -- --
Share issue expenses.................................. (279) (14) (1) (2)
Repayment of Stapled Units............................ (3,940) -- -- --
(Decrease)/increase in borrowings..................... 26,134 5,870 (614) (939)
------- ------- ------- -------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING................ 21,948 5,856 (615) (941)
------- ------- ------- -------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (Note
1)..................................................... (946) 4,917 1,404 2,148
------- ------- ------- -------
Note 1:
INCREASE/(DECREASE) IN CASH EQUIVALENTS................. (1,063) 1,677 (574) (878)
INCREASE/(DECREASE) IN CASH............................. 117 3,240 1,978 3,026
------- ------- ------- -------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS........ (946) 4,917 1,404 2,148
------- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------
1993 1994 1995
------ ------- ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
NET INCOME/(LOSS) FOR THE YEAR.................................... 5,511 (12,754) (8,208)
Currency translation differences on foreign currency net
investments excluding goodwill.................................. 911 (2,429) 1,415
Currency translation differences on foreign currency hedging...... (1,369) 2,136 (1,777)
------ ------- ------
TOTAL RECOGNIZED GAINS AND LOSSES FOR THE YEAR.................... 5,053 (13,047) (8,570)
------ ------- ------
------ ------- ------
</TABLE>
A note of historical cost profits and losses has not been presented since
the amounts involved are not materially different from those shown on F-4.
F-9
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
NOTES 1994 1995
----- ------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000
ASSETS
CURRENT:
Cash.............................................................. 2,404 3,194
Amounts owed by subsidiary companies.............................. 153,879 176,180
Other accounts receivable......................................... 500 484
Prepayments and accrued income.................................... 194 218
------- -------
TOTAL CURRENT ASSETS.............................................. 156,977 180,076
------- -------
Investment in subsidiary and related companies.................... 22 188,263 182,847
Other investments................................................. 7(a) 646 654
Investment--own shares............................................ 7(b) 3,680 614
------- -------
TOTAL OTHER ASSETS................................................ 192,589 184,115
------- -------
TOTAL ASSETS...................................................... 349,566 364,191
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES--(CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
NOTES 1994 1995
----- ------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt......................................... 22 84,735 100,822
Other current liabilities............................... 22 10,698 7,371
------- -------
TOTAL CURRENT LIABILITIES............................... 95,433 108,193
OTHER LIABILITIES:
Long-term debt.......................................... 22 35,019 36,707
Non-current liabilities................................. 22 45,476 45,319
------- -------
TOTAL LIABILITIES....................................... 175,928 190,219
------- -------
COMMITMENTS AND CONTINGENCIES........................... 8, 12, 21 & 24
SHAREHOLDERS' EQUITY:
Ordinary Shares......................................... 21 11,957 11,957
Redeemable Preference Shares............................ 21 48,631 48,629
Additional paid-in capital.............................. 20 5,729 5,610
Non-distributable reserves.............................. 20 105,312 105,312
Retained earnings....................................... 20 2,009 2,464
------- -------
TOTAL SHAREHOLDERS' EQUITY.............................. 173,638 173,972
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. 349,566 364,191
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF OPERATIONS
Automated Security (Holdings) PLC is the holding company of a group
operating in the electronic security sector which designs, markets, installs,
maintains and monitors electronic security systems to safeguard life and
property from a wide range of hazards. The Group's principal markets are the
United Kingdom with some 73% of sales and the United States with 27% of sales.
Substantially all of the customers in the US and some 75% of customers in the UK
are in the commercial, industrial and public sectors. The balance of services
are provided in the private, residential sector.
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of financial statements
As in previous accounting periods, the financial statements have been
prepared under United Kingdom generally accepted accounting principles using the
historical cost convention, with the exception that certain property has been
revalued.
Consolidation
The consolidated financial statements incorporate Automated Security
(Holdings) PLC ("Automated Security (Holdings)") and its subsidiaries (the
"Group") for the year ended November 30. When subsidiaries are acquired or
disposed of during an accounting period, unless they are accounted for as a
pooling-of-interest, the consolidated statement of income includes the results
only for that part of the period during which they are subsidiaries.
Goodwill
Goodwill, being the excess of the consideration on the acquisition of
businesses over the fair value of the net assets acquired, is written off direct
to non-distributable reserves at the date of acquisition.
Investments
Fixed asset investments, excluding related companies, are included at cost
less amounts provided where, in the opinion of the directors, there is a
permanent diminution in value.
A company is treated as being a related company if, not being a subsidiary
company, the Group is in a position to exercise significant influence over the
company and the investment is considered to be long-term.
The results and net assets of related companies are accounted for using the
equity method. Accordingly, the consolidated statement of income includes the
Group's share of income before taxes and taxes on income for the part of the
accounting period during which the companies are treated as related. Premiums on
the acquisition of related companies are written off to non-distributable
reserves at the date of acquisition.
The amounts at which investments in related companies are included in the
consolidated balance sheet therefore comprise the cost of the investment less
premium on acquisition together with the Group's share of retained profits or
losses since the date of acquisition less any amounts provided where, in the
opinion of the directors, there is a permanent diminution in value.
Development expenditure and distribution rights
Expenditure on development and distribution rights is written off as it is
incurred.
F-12
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Inventories
Inventories are valued at the lower of cost and net realizable value on the
FIFO basis. Cost of products manufactured and distributed by the Group consists
of direct material and labor costs,
together with appropriate overheads.
Property and equipment
The cost of equipment on contract hire installed by Group companies is
capitalized as an operating lease. Costs comprise materials, labor and
attributable overheads relating to identifiable and recoverable equipment. All
other costs are written off as they are incurred.
Depreciation and amortization
Property and equipment is depreciated on a straight line basis at the
following annual rates:
<TABLE>
<S> <C>
Equipment on contract hire:
Burglar alarms............................. 7%-10%
Communication centre equipment............. 10%-20%
Freehold buildings......................... 2.5%
Leasehold premises and improvements........ over unexpired period of lease
Motor vehicles............................. 25%
Other assets............................... 10% to 33.3%
</TABLE>
No depreciation is provided on freehold land.
Equipment leased to customers
Equipment leased to customers under finance leases is deemed to be sold at
normal selling value which is taken to net sales at the inception of the lease.
Debtors under finance leases represent outstanding amounts due under these
agreements less finance charges allocated to future periods. Finance lease
income is recognized over the primary period of the lease so as to produce a
constant rate of return on the net cash investments.
Equipment leased to customers under operating leases is capitalized in
accordance with the accounting policy on property and equipment (see above).
Operating lease income is accounted for on a straight line basis with any rental
increases recognized during the period to which they relate.
Operating Leases
Rentals paid under operating leases are charged against income on a straight
line basis over the period of the lease.
Deferred taxation
Deferred taxation is provided on the liability method in respect of timing
differences between profits as computed for taxation purposes and profits as
stated in the financial statements except to the extent that it is expected that
the liability will not be payable in the foreseeable future. Timing differences
arise mainly from the excess of tax allowances on property and equipment over
the corresponding depreciation charged in the financial statements.
F-13
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Foreign exchange
Foreign currency assets and liabilities of United Kingdom companies and the
financial statements of overseas subsidiaries and related companies are
translated into sterling at the rates of exchange ruling at the balance sheet
date. The results of overseas subsidiaries and related companies have been
translated at the average exchange rate ruling during the year with the
adjustment between average rates and the rates ruling at the balance sheet date
being taken to reserves. The differences arising from the translation of net
equity interests including goodwill in overseas subsidiaries and related
companies, and of matching foreign currency loans and foreign currency swap
facilities, are dealt with through reserves. All other exchange differences are
dealt with in the profit and loss account.
Pensions
The Group operates a funded defined benefit plan for UK employees, based on
final pensionable salary, with assets held in funds administered by the Trustees
of the plan. The cost of providing pensions is spread on a systematic and
rational basis over the period during which the Group benefits from the members'
services.
The pension costs and any necessary provisions are assessed in accordance
with the advice of an independent qualified actuary. Variations from the regular
cost are spread over the average remaining service lives of current employees.
Outside the UK, the Group in general operates defined contribution plans for
certain executives, the costs of which are recognized on the basis of
contributions payable.
Employees' Share Ownership Plan Trust
The Group operates an Employees' Share Ownership Plan ("ESOP') Trust for
directors and employees. The ESOP Trust holds shares in the Company and is
financed by a loan from the Company. In prior years the net amount due from the
Trust was shown in other debtors but following the publication of UITF Abstract
13 in 1995, this balance is now classified as an investment in "own shares' and
the comparative figures have been restated accordingly.
Provision is made for the diminution in the market value of the shares held
by the ESOP Trust.
Earnings per share
Earnings per ordinary share are calculated on a basic and fully diluted
basis. The basic calculation is based on total net income including discontinued
operations and the weighted average number of ordinary shares in issue during
the year.
Adjusted earnings per ordinary share is calculated by dividing the net
income attributable to ordinary shareholders prior to the charge for the amount
written off fixed asset investments and the loss on sale of subsidiary and
related companies by the weighted average number of ordinary shares in issue
throughout the year. Adjusted earnings have been shown to illustrate the
earnings prior to these exceptional non-recurring charges.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-14
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. RESTATEMENT OF PRIOR YEAR RESULTS
The results of prior years have been restated in two respects to accord with
current accounting procedures. The results of the operations sold during 1995
have been reclassified as discontinued operations. Revenue from continuing
operations has therefore been reduced by B.P.11,768,000 in 1994 and
B.P.10,394,000 in 1993 and operating profit from continuing operations has been
reduced by B.P.2,121,000 in 1994 and B.P.1,332,000 in 1993.
The amounts provided in respect of the ESOP of B.P.450,000 in 1994 and
B.P.200,000 in 1993 have also been reclassified in the comparative figures from
general and administrative expenses to exceptional items.
3. ACQUISITIONS
There were no acquisitions of businesses during the year ended November 30,
1995.
During the year ended November 30, 1994 the group acquired certain assets of
Sonitrol of Eugene in the United States for an initial cash consideration of
B.P.1,480,000($2,070,000) and a deferred consideration of B.P.289,000
($452,000).
During the year ended November 30, 1993 the Group acquired Telecom Security
in the UK for an initial cash consideration of B.P.6.9 million and an accrued
future consideration of B.P.1.4 million.
These companies are all in the Security Systems business and the
acquisitions were accounted for as purchases. The results of operations have
been included in the financial statements since their respective dates of
acquisition.
4(A) ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------------------------
1994 1995
-------------------------- --------------------------
WITHIN OVER WITHIN OVER
1 YEAR 1 YEAR TOTAL 1 YEAR 1 YEAR TOTAL
------ ------ ------ ------ ------ ------
B.P.'000 B.P.'000 B.P.'000 B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C> <C> <C> <C>
Trade receivables.......................... 22,511 -- 22,511 19,225 -- 19,225
Finance lease.............................. 3,652 4,122 7,774 2,602 6,136 8,738
------ ------ ------ ------ ------ ------
26,163 4,122 30,285 21,827 6,136 27,963
Provision for doubtful..................... (2,637) -- (2,637) (2,230) (718) (2,948)
------ ------ ------ ------ ------ ------
23,526 4,122 27,648 19,597 5,418 25,015
Other...................................... 2,292 -- 2,292 2,233 233 2,466
------ ------ ------ ------ ------ ------
25,818 4,122 29,940 21,830 5,651 27,481
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
F-15
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4(A) ACCOUNTS AND NOTES RECEIVABLE--(CONTINUED)
Finance lease receivables at November 30, 1995 comprised:
<TABLE><CAPTION>
B.P.'000
<S> <C>
Future minimum lease payments..................................... 10,233
Maintenance costs................................................. (346)
Provision for doubtful debts...................................... (1,024)
Residual value.................................................... --
Initial direct costs capitalized.................................. --
Unearned income................................................... (1,149)
------
Finance lease receivables......................................... 7,714
------
------
</TABLE>
Finance lease interest receivable of B.P.489,000 (1994: B.P.448,000; 1993:
B.P.867,000) is included in turnover and profit before interest. Finance lease
rentals receivable in the year were approximately B.P.3.4 million (1994: B.P.2.9
million; 1993: B.P.3.4 million).
The future minimum lease payments at November 30, 1995 are receivable as
follows:-
<TABLE><CAPTION>
B.P.'000
<S> <C>
Within one year................................................... 3,439
Between 1-2 years................................................. 2,983
Between 2-3 years................................................. 2,194
Between 3-4 years................................................. 1,259
Between 4-5 years................................................. 358
After more than 5 years........................................... --
------
10,233
------
------
</TABLE>
4 (B) PREPAYMENTS AND ACCRUED INCOME
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1994 1995
----- -----
B.P.'000 B.P.'000
<S> <C> <C>
3,286 3,195
----- -----
----- -----
</TABLE>
Included in prepayments is a pension prepayment of B.P.87,000 (1994:
B.P.151,000).
5. INVENTORIES
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1994 1995
----- -----
B.P.'000 B.P.'000
<S> <C> <C>
Work in progress............................................ 3,388 1,079
Raw materials and components................................ 738 13
Finished goods.............................................. 3,969 3,508
----- -----
8,095 4,600
----- -----
----- -----
</TABLE>
F-16
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENT IN RELATED COMPANIES
<TABLE>
<CAPTION>
OTHER SHARE
INVESTMENTS NET ASSETS TOTAL
----------- ---------- ------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
At December 1, 1994............................ 327 2,708 3,035
Additions...................................... -- 232 232
Premium on acquisition......................... -- (232) (232)
Exchange adjustments........................... -- (24) (24)
Disposals...................................... -- (3,409) (3,409)
Share net income............................... -- (55) (55)
--- ---------- ------
At November 30, 1995........................... 327 (780) (453)
--- ---------- ------
--- ---------- ------
</TABLE>
Share of Net Assets/Liabilities:
<TABLE>
<CAPTION>
PERCENTAGE
HELD INVESTMENT
ACCOUNTS ------------ --------------
PREPARED TO 1994 1995 1994 1995
------------ ---- ---- ----- -----
% % B.P.'000 B.P.'000
<S> <C> <C> <C> <C> <C>
TVX Inc............................................ September 30 41 40 (170) (780)
Compagnie Generale de Protection et Securitie SA... -- 40 -- 2,740 --
Microtech Security (UK) Limited.................... -- 25 -- 138 --
Arius Inc.......................................... In Chapter 7 43 43 -- --
----- -----
2,708 (780)
----- -----
----- -----
</TABLE>
No share of profits has been incorporated in respect of Arius Inc and full
provision was made in 1994 for all the Group's investment, loans and liabilities
in respect of this company.
Other investments at November 30, 1995 comprise 48.5% of the Redeemable
Preferred Stock par value $0.01, of TVX Inc.
7. OTHER INVESTMENTS
(A) LOANS
<TABLE><CAPTION>
B.P.'000
<S> <C>
At December 1, 1994................................................. 646
Exchange adjustments................................................ 8
-----
At November 30, 1995................................................ 654
-----
-----
</TABLE>
Other investments at November 30, 1995 and November 30, 1994 relate to loans
to TVX Inc.
F-17
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. OTHER INVESTMENTS--(CONTINUED)
(B) OWN SHARES
<TABLE>
<CAPTION>
GROUP AND COMPANY B.P.'000
- -----------------
<S> <C>
COST
At December 1, 1994 (as previously stated)......................... --
Transferred from other debtors..................................... 5,930
------
At December 1, 1994 (as restated) and at November 30, 1995......... 5,930
------
PROVISIONS
At December 1, 1994 (as previously stated)......................... --
Transferred from other debtors..................................... (2,250)
------
At December 1, 1994 (as restated).................................. (2,250)
Charge for the year................................................ (3,066)
------
At November 30, 1995............................................... (5,316)
------
NET BOOK VALUE
At November 30, 1995............................................... 614
------
------
At November 30, 1994............................................... 3,680
------
------
</TABLE>
Own shares held relate to the ESOP Trust. The Company has loans outstanding
from the Trust of B.P.5.9 million and its principal assets are investments in
the Company's shares. At November 30, 1995 the ESOP Trust held the following
shares in the company:-
<TABLE>
<CAPTION>
MARKET VALUE
AT NOVEMBER 30,
1995
------------------
NO. PER SHARE B.P.'000
----------
<S> <C> <C> <C>
Ordinary Shares of 10p each...................................... 2,124,582 24p 510
5% Convertible Cumulative Redeemable Preference Shares of B.P.1
each........................................................... 70,000 38.5p 27
6% Convertible Cumulative Redeemable Preference Shares of B.P.1
each........................................................... 200,000 38.5p 77
-----
614
-----
</TABLE>
The ESOP executive share option scheme (the 'Scheme') involves a participant
being granted an option to subscribe for Ordinary Shares of the Company at a
price based on the market price of such Ordinary Shares at the date of the
grant. All directors and employees of the Group may participate in the Scheme at
the discretion of the Board of directors. The maximum number of shares which may
be granted to any recipient is restricted by reference to a formula based upon
the annual remuneration of the individual director or employee. The options are
exercisable during a period between three and ten years after the date of the
grant (and in certain cases between three and seven years from the date of the
grant ) with the last date for such exercise varying between 1996 and 2000. The
prices at which the options are exercisable are in the range of B.P.2.45 per
share to B.P.2.693 per share. At November 30, 1995 there were 722,000 Ordinary
Shares subject to option under the Scheme.
The costs of the ESOP have been met by the Trust and the ESOP has not waived
any dividends due on the Company's shares.
F-18
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
8. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
EQUIPMENT MOTOR
ON VEHICLES,
LAND AND CONTRACT COMMUNICATION FIXTURES
BUILDINGS HIRE CENTRES & PLANT TOTAL
--------- --------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000 B.P.'000 B.P.'000
COST OR VALUATION
Balance, November 30, 1992............... 5,126 268,472 -- 15,365 288,963
Transfers................................ -- (8,616) 6,524 2,092 --
Exchange rate adjustment................. 14 128 16 14 172
On acquisition........................... 455 5,145 -- 283 5,883
Additions................................ 532 51,204 2,692 4,592 59,020
Disposals................................ (311) (15,954) (1,091) (5,812) (23,168)
--------- --------- ------ --------- -------
Balance, November 30, 1993............... 5,816 300,379 8,141 16,534 330,870
Exchange rate adjustment................. (69) (2,980) (235) (361) (3,645)
Additions................................ 24 41,090 659 1,830 43,603
Disposals................................ (627) (15,256) (104) (2,800) (18,787)
Other movements (see note (b))........... -- (9,987) -- -- (9,987)
--------- --------- ------ --------- -------
Balance, November 30, 1994............... 5,144 313,246 8,461 15,203 342,054
Exchange rate adjustment................. 50 2,345 3 138 2,536
Reclassification......................... 255 -- (255) -- --
Additions................................ 8 35,919 288 2,287 38,502
Disposals................................ (61) (17,913) (3,830) (5,245) (27,049)
--------- --------- ------ --------- -------
Balance, November 30, 1995............... 5,396 333,597 4,667 12,383 356,043
--------- --------- ------ --------- -------
--------- --------- ------ --------- -------
ACCUMULATED DEPRECIATION
Balance, November 30, 1992............... 69 81,502 -- 6,489 88,060
Transfers................................ -- (2,812) 1,949 863 --
Charged in the year...................... 168 36,804 864 3,099 40,935
Exchange rate adjustment................. (5) (111) 7 9 (100)
Disposals................................ (6) (15,954) (770) (3,486) (20,216)
--------- --------- ------ --------- -------
Balance, November 30, 1993............... 226 99,429 2,050 6,974 108,679
Charged in the year...................... 315 34,361 1,206 3,069 38,951
Exchange rate adjustment................. (2) (795) (75) (187) (1,059)
Disposals................................ (90) (15,256) (103) (2,336) (17,785)
Other movements (see note (b))........... -- (9,987) -- -- (9,987)
--------- --------- ------ --------- -------
Balance, November 30, 1994............... 449 107,752 3,078 7,520 118,799
Charged in the year (see note (a)) 394... 394 28,308 2,514 3,396 34,612
Exchange rate adjustment................. 5 865 6 76 952
Disposals................................ (14) (17,252) (3,828) (4,612) (25,706)
--------- --------- ------ --------- -------
Balance, November 30, 1995............... 834 119,673 1,770 6,380 128,657
--------- --------- ------ --------- -------
--------- --------- ------ --------- -------
NET BOOK VALUE
Balance, November 30, 1993............... 5,590 200,950 6,091 9,560 222,191
--------- --------- ------ --------- -------
--------- --------- ------ --------- -------
Balance, November 30, 1994............... 4,695 205,494 5,383 7,683 223,255
--------- --------- ------ --------- -------
--------- --------- ------ --------- -------
Balance, November 30, 1995............... 4,562 213,924 2,897 6,003 227,386
--------- --------- ------ --------- -------
--------- --------- ------ --------- -------
</TABLE>
F-19
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
8. PROPERTY AND EQUIPMENT-- (CONTINUED)
(A) The depreciation provision for the year includes B.P.1,351,000 in
Communication Centres and B.P.997,000 in Motor Vehicles, Fixtures and Plant in
respect of accelerated depreciation leasehold improvements, computer equipment
and business systems at API.
(B) Other movements in equipment on contract hire relate to the elimination
of balances in respect of systems which have been fully depreciated and where
the related contract has been cancelled in previous years.
(C) The net book value of fixed assets includes B.P.Nil (1994: 181,000;
1993: B.P.355,000) in respect of assets held under finance leases. The
depreciation charge in respect of these assets was B.P.82,000 (1994: B.P.99,000;
1993: B.P.174,000).
(D) LAND AND BUILDINGS
<TABLE>
<CAPTION>
1994 1995
----- -----
<S> <C> <C>
B.P.'000 B.P.'000
The net book values of land and buildings comprise:
Freehold buildings.......................................... 2,173 2,128
----- -----
Leaseholds over 50 years.................................... 954 1,136
Other leaseholds............................................ 1,568 1,298
----- -----
Total leaseholds............................................ 2,522 2,434
----- -----
Total land and buildings.................................... 4,695 4,562
----- -----
----- -----
</TABLE>
The amount attributable to freehold land included above is B.P.709,000
(1994: B.P.709,000).
The analysis of the gross book value is as follows:
<TABLE>
<S> <C> <C>
Cost........................................................ 3,534 3,786
1992 Valuation.............................................. 1,610 1,610
----- -----
Gross Value................................................. 5,144 5,396
----- -----
----- -----
</TABLE>
The net book value of land and buildings, determined by reference to their
historical costs, is as follows:
<TABLE>
<S> <C> <C>
Cost........................................................ 5,144 5,396
Depreciation................................................ (449) (834)
----- -----
Net book value at historical cost........................... 4,695 4,562
----- -----
----- -----
</TABLE>
(E) CAPITAL COMMITMENTS OUTSTANDING ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1994 1995
----- -----
B.P.'000 B.P.'000
<S> <C> <C>
Contracts placed............................................. 228 475
----- -----
----- -----
Expenditure authorized but not contracted for................ 706 1,972
----- -----
----- -----
</TABLE>
F-20
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
9. SHORT-TERM DEBT
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1994 1995
------ ------
B.P.'000 B.P.'000
<S> <C> <C>
Bank loans and overdrafts (unsecured) (see note 12)....... 82,278 82,992
Current portion of long-term debt (see note 12)........... 290 112
------ ------
82,568 83,104
------ ------
------ ------
</TABLE>
10. DIVIDENDS
The Directors have not recommended payment of a dividend in respect of the
Ordinary Shares for 1995 or 1994. All of the preference dividends were paid for
1994 but in 1995 only the interim dividends have been paid on the due date. The
balance of the preference dividends has been accrued but it should be noted that
the Company is unlikely to be in a position to pay Preference or Ordinary
dividends to shareholders for the time being.
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1994 1995
----- -----
B.P.'000 B.P.'000
<S> <C> <C>
Interim dividends:
Ordinary Shares: Nil (1994: Nil) per Share.................. -- --
Preference Share dividends.................................. 1,420 1,420
----- -----
1,420 1,420
----- -----
Final Dividends:
Ordinary Shares: Proposed Nil (1994: Nil) per Share......... -- --
Preference Share dividends.................................. 1,419 1,419
----- -----
1,419 1,419
----- -----
Total dividends............................................. 2,839 2,839
----- -----
----- -----
</TABLE>
11. OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1994 1995
------ ------
B.P.'000 B.P.'000
<S> <C> <C>
Corporation tax payable................................... 2,690 2,797
Other creditors........................................... 9,781 3,684
Accruals.................................................. 16,063 16,868
Other taxes and social security........................... 3,984 3,269
------ ------
32,518 26,618
------ ------
------ ------
</TABLE>
F-21
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
12. LONG-TERM DEBT
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1994 1995
------ ------
B.P.'000 B.P.'000
<S> <C> <C>
8.28% Senior Notes........................................ 35,019 36,707
9.5% Convertible Capital Bonds 2006....................... 43,693 43,813
Unsecured bank loans...................................... -- 409
Obligations under finance lease contracts................. 290 148
------ ------
79,002 81,077
Less: current portion (see note 9)........................ (290) (112)
------ ------
78,712 80,965
------ ------
------ ------
</TABLE>
(A) BANK LOANS
At November 30, 1995 the Group had bank facilities totalling approximately
B.P.89.0 million, of which approximately B.P.83.4 million were committed
including B.P.66.3 million under the Multiple Option Facility which was
previously underwritten by the banks concerned until May 14, 1996. All of the
maturity dates of the committed facilities have been extended to January 2, 1998
by a Credit Agreement dated December 21, 1995 which gives security to the banks
over the majority of the assets of the Group. Of these facilities, the Group has
drawn down amounts in both pounds sterling and US dollars. The average rates of
interest charged in 1995 were 7.7% for sterling borrowings and 7.4% for US
dollar borrowings. All other loans are at variable rates of interest ranging
between 7% and 9 %. The average rate of interest paid on short term borrowings
during the year was 7.6% (1994: 5.2%; 1993: 5.0%).
(B) SCHEDULED MATURITIES OF LONG TERM DEBT ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1994 1995
------ ------
B.P.'000 B.P.'000
<S> <C> <C>
Repayable:
Within one year (see note 9)............................................. 290 112
Between one and two years................................................ -- 36
Between two and three years.............................................. -- --
]Between three and four years (8.28% Senior Notes--see note (c))......... -- 36,707
Between four and five years (1994: 8.28% Senior Notes, see note (c))..... 35,019 --
After five years (1994: Convertible Capital Bonds, see note (e))......... 43,693 44,222
------ ------
79,002 81,077
------ ------
------ ------
</TABLE>
(C) 8.28% SENIOR NOTES
On May 27, 1994 the Company issued $60,721,638, 8.28% Senior Notes of which
$5,643,273 was in respect of yield maintenance. The Notes were due for repayment
on May 27, 1999. The notes were issued to The Prudential Insurance Company of
America to replace the Stapled Units previously issued by API Security Inc, a
subsidiary company. The effective interest rate including yield maintenance is
10.73% per annum. The maturity date of the Senior Notes has been amended to
January 2, 1998 by agreement dated December 21, 1995 when it was agreed that the
Noteholders would share in the security given to the banks.
F-22
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
12. LONG-TERM DEBT-- (CONTINUED)
(D) CONVERTIBLE CAPITAL BONDS
On May 31, 1991 ASH Capital Finance (Jersey) Limited, a subsidiary of
Automated Security (Holdings) issued B.P.60 million 9.5 per cent Convertible
Capital Bonds due 2006, which are guaranteed on a subordinated basis by
Automated Security (Holdings). The Bonds are convertible on and after July 10,
1991 into fully paid 2 per cent Exchangeable Redeemable Preference Shares in ASH
Capital Finance (Jersey) Limited ("Preference Shares"), guaranteed on a
subordinated basis by Automated Security (Holdings). The Preference Shares are
redeemable at their paid-up value of 1p each and are exchangeable for fully paid
Ordinary Shares in Automated Security (Holdings) at a price of 250p per Ordinary
Share, subject to adjustment under certain circumstances.
Under the terms of the issue, Automated Security (Holdings) may require
conversion of any outstanding Bond if 85% of issue has been previously converted
or purchased and cancelled, in which case the bondholders may elect for
redemption in lieu of conversion. In addition, Automated Security (Holdings)
also has the right at any date after May 31, 1996 to require the redemption of
all bonds.
The balance at November 30, 1995 is shown net of unamortized issue costs of
B.P.1,126,000 (1994: B.P.1,246,000) in accordance with FRS4.
13. NON-CURRENT LIABILITIES
<TABLE>
<CAPTION>
------
<S> <C>
B.P.'000
Balance, November 30, 1993........................................ 12,769
Exchange adjustments.............................................. (66)
Other creditors................................................... 2,551
Utilized/paid during the year:
- --Arising on acquisitions......................................... (547)
- --Maintenance and warranties...................................... (1,350)
- --Currency hedging payments....................................... (5,349)
Transferred to property and equipment............................. (4,100)
------
Balance, November 30, 1994........................................ 3,908
Exchange adjustments.............................................. 13
Other creditors................................................... 1,774
Utilized/paid during the year:
- --Arising on acquisitions......................................... (33)
- --Maintenance and warranties...................................... (277)
------
Balance, November 30, 1995........................................ 5,385
------
------
</TABLE>
The Group had various hedging arrangements to offset any gains or losses on
the translation of net equity interest in overseas subsidiaries, principally in
the United States. These hedging arrangements previously included currency
loans, forward exchange contracts and currency swaps. Throughout 1995 and at
November 30, 1995 hedging arrangements relate only to US$ loans.
As part of the hedging arrangements in previous years the Company entered
into a callable currency swap with a bank whereby the company had a right at
November 30, 1993 to receive some B.P.18.2 million and an obligation to pay US
$35 million. The swap was cancelled on April 20, 1994. Gains and losses on the
translation of net equity interests in overseas subsidiaries and matching
foreign
F-23
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
13. NON-CURRENT LIABILITIES-- (CONTINUED)
currency loans, forward contracts and swap facilities are recorded as a charge
or credit directly to shareholders' equity.
Other non-current liabilities may be analyzed as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1994 1995
----- -----
B.P.'000 B.P.'000
<S> <C> <C>
Acquisition reorganization costs............................ 503 470
Future maintenance provisions............................... 854 590
----- -----
Total provisions............................................ 1,357 1,060
Other creditors............................................. 2,551 4,325
----- -----
3,908 5,385
----- -----
----- -----
</TABLE>
During 1994 the provision for cancelled contracts was transferred to
depreciation on equipment on contract hire in property and equipment. See note
8. The amounts shown above as provisions of B.P.1,060,000 in 1995 and
B.P.1,357,000 in 1994 are described as "provisions for liabilities and charges"
under UK GAAP.
14. DERIVATIVE FINANCIAL INSTRUMENTS
As part of the Group's currency hedging arrangements discussed above the
company previously used a US dollar currency swap facility to manage its
exposure to fluctuations in US dollar exchange rates. This facility was repaid
in April 1994 and the Group no longer uses any derivative instruments for
currency hedging. US dollar assets are now matched using US currency loans and
the Group has no derivative financial instruments.
F-24
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
15. COST OF SALES AND EXPENSE ANALYSIS
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
COST OF SALES
Continuing Operations.......................................... 89,554 98,739 99,310
Discontinued Operations........................................ 16,214 9,496 6,201
------- ------- -------
105,768 108,235 105,511
------- ------- -------
------- ------- -------
GENERAL AND ADMINISTRATIVE EXPENSES
Continuing Operations.......................................... 30,166 33,740 39,081
Discontinued Operations........................................ 5,610 3,495 2,572
------- ------- -------
35,776 37,235 41,653
------- ------- -------
------- ------- -------
General and administrative expenses comprise:
Continuing operations:
Distribution costs......................................... 13,959 14,592 12,878
Administrative expenses.................................... 16,207 19,148 26,203
------- ------- -------
30,166 33,740 39,081
------- ------- -------
Discontinued operations:
Distribution costs........................................... 1,250 589 267
Administrative expenses...................................... 4,360 2,906 2,305
------- ------- -------
5,610 3,495 2,572
------- ------- -------
Total.......................................................... 35,776 37,235 41,653
------- ------- -------
------- ------- -------
SHARE OF RELATED COMPANIES
Continuing Operations.......................................... (135) (154) (586)
Discontinued Operations........................................ 547 915 596
------- ------- -------
412 761 10
------- ------- -------
------- ------- -------
NET INCOME IS RESTATED AFTER CHARGING/(CREDITING):
Depreciation................................................... 40,935 34,851 34,612
Capitalized in respect of equipment on contract hire........... (51,204) (41,090) (35,919)
Hire of plant and machinery.................................... 843 887 842
Other operating lease and hire charges......................... 6,502 9,243 9,402
(Profit)/loss on disposal property and equipment............... 621 (962) (239)
Auditors' remuneration......................................... 386 410 400
Currency exchange (gains)losses................................ (127) 10 (26)
Development expenditure........................................ 1,250 430 191
EU grant receivable............................................ (287) (356) --
------- ------- -------
------- ------- -------
</TABLE>
Finance lease interest receivable of B.P.489,000 (1994: B.P.448,000; 1993:
B.P.867,000) is included in sales and profit before interest. Finance lease
rentals receivable in the year were approximately B.P.3.4 million (1994: B.P.2.9
million; 1993: 3.4 million). Included within cost of sales is the cost of assets
for rental under finance leases of approximately B.P.3.0 million (1994: 3.5
million; 1993: 2.6 million). The remuneration paid to the auditors in respect of
non-audit services during 1995 amounted to B.P.251,000 (1994: B.P.308,000; 1993:
B.P.245,000).
F-25
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
16. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
(AS RESTATED) (AS RESTATED)
1993 1994 1995
------------- ------------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
Exceptional operating expenses............. -- (2,575) (5,484)
Loss on sale of discontinued operations.... -- -- (5,675)
Restructuring and reorganization costs..... (1,378) -- --
Amounts written off fixed asset
investments................................ (200) (20,602) (3,066)
------ ------------- -------
Analyzed as follows:....................... (1,578) (23,177) (14,225)
------ ------------- -------
------ ------------- -------
Restructuring and reorganization........... (1,378) -- --
Amount paid to former Chairman............. -- (993) --
Refinancing costs.......................... -- (1,582) (3,136)
API Security costs......................... -- -- (2,348)
Amounts written off ESOP................... (200) (450) (3,066)
Amounts written off investments and
loans...................................... -- (862) --
Other provisions........................... -- (1,925) --
Profit on sale of subsidiary and related
companies based on the consolidated
carrying value........................... -- -- 3,168
Less: Goodwill on acquisition of subsidiary
and related companies previously written
off to reserves.......................... -- (17,365) (8,843)
------ ------------- -------
(1,578) (23,177) (14,225)
------ ------------- -------
------ ------------- -------
</TABLE>
Exceptional operating expenses in 1995 relate to refinancing costs of
B.P.3,136,000 and costs in API Security of B.P.2,348,000. Refinancing costs
relate to fees to professional advisers and other third parties in connection
with the refinancing of the Group. The additional charges at API Security relate
to the write off of existing computer systems and leasehold improvements of $3.7
million as a result of the Board's decision to move to smaller and less
expensive premises on expiry of the present lease in May 1996 and the
implementation of enhanced computer monitoring and business systems.
The 1995 loss on the sale of discontinued operations relates to the sale of
a subsidiary undertaking, Modern Vitalcall Limited, the business of Modern
Integrated Systems and the Group's investment in two associated undertakings,
Compagnie Gnrale de Protection et Scurit SA and Microtech Security (UK) Limited.
The total consideration receivable amounted to B.P.9.3 million of which B.P.0.1
million is receivable in 1996 and B.P.0.5 million is in the form of Loan Notes.
As part of the Company's share option schemes the group established the
Automated Security (Holdings) PLC Employees' Share Ownership Plan ('ESOP'). The
ESOP has a loan of B.P.5.9 million from the Company and its assets consist
principally of investments in the Company's shares.
In accordance with Urgent Issues Task Force Abstract 13, issued on June 8,
1995, the amount receivable from the ESOP is reclassified as a fixed asset
investment (see note 7b) and any permanent diminution in value is charged to the
profit and loss account. The Board believes that a prudent method of application
of this Abstract is to value the shares held by the ESOP at the market prices as
at November 30, 1995. Consequently the shortfall between the market value of the
ESOP's shares and the amount receivable from the ESOP has been charged to the
profit and loss account in the current year. The provisions made in previous
years (1994: B.P.450,000 and 1993: B.P.200,000) have been reclassified as
exceptional items in the above analysis.
F-26
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
16. EXCEPTIONAL ITEMS-- (CONTINUED)
Exceptional items in 1994 also include B.P.993,000 paid to the former
Chairman on termination of his employment within the Group and B.P.1,582,000 of
refinancing costs.
Exceptional items in 1993 also relate to the refocusing and fundamental
reorganization carried out within the security systems segment, and the closure
of the Group's manufacturing operations.
17. BUSINESS SEGMENT INFORMATION
Set out below is information with respect to the Group's principal business
segments and geographical regions. The Group's principal business relates
entirely to Security Systems. Security Systems provides intruder alarms, various
central station monitoring services, integrated security systems and other
detection systems to customers in commercial, industrial, residential and public
sectors.
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
Business segments
Net sales..................................... 160,775 166,071 163,349
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
1993 1994
(AS RESTATED) (AS RESTATED) 1995
------------- ------------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
Income before taxes:
Security systems........................... 22,793 25,306 25,506
Corporate.................................. (3,562) (2,130) (3,837)
Share of profits of related companies...... 412 761 10
Net interest............................... (10,754) (12,514) (14,862)
Exceptional items.......................... (1,578) (23,177) (14,225)
------------- ------------- -------
7,311 (11,754) (7,408)
------------- ------------- -------
------------- ------------- -------
Interest payable comprises:
On loans repayable:
--after five years....................... 8,747 6,331 4,389
--wholly within five years............... 3,276 6,364 10,646
------------- ------------- -------
12,023 12,695 15,035
------------- ------------- -------
------------- ------------- -------
Interest receivable........................ 1,269 181 173
------------- ------------- -------
------------- ------------- -------
Business Segments
Identifiable assets:
Security Systems........................... 271,694 267,812 268,505
Related companies and investments.......... 18,905 3,681 201
Corporate.................................. 5,410 4,378 707
------------- ------------- -------
296,009 275,871 269,413
------------- ------------- -------
------------- ------------- -------
Depreciation charged in the year........... 40,935 34,851 34,612
------------- ------------- -------
------------- ------------- -------
Capital expenditure in the year*........... 59,020 43,603 38,502
------------- ------------- -------
------------- ------------- -------
</TABLE>
- -------------------
*Capital expenditure includes the cost of equipment rented to customers under
operating leases.
F-27
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
17. BUSINESS SEGMENT INFORMATION-- (CONTINUED)
<TABLE>
<CAPTION>
1993 1994
(AS RESTATED) (AS RESTATED) 1995
------------- ------------- -------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
Geographical Analysis
Net Sales:
Continuing operations
UK............................................ 95,687 106,771 108,191
USA........................................... 43,515 43,503 41,864
Eire....................................... 3,934 4,029 3,678
------------- ------------- -------
143,136 154,303 153,733
Discontinued operations....................... 17,639 11,768 9,616
------------- ------------- -------
160,775 166,071 163,349
------------- ------------- -------
------------- ------------- -------
Income Before Taxes:
Continuing operations:
UK............................................ 15,387 18,252 15,398
USA........................................... 7,315 6,628 5,583
Eire....................................... 579 (635) (741)
------------- ------------- -------
23,281 24,245 20,240
Discontinued operations....................... (3,638) (308) 1,439
------------- ------------- -------
19,643 23,937 21,679
Exceptional items............................. (1,578) (23,177) (14,225)
Interest payable (net)........................ (10,754) (12,514) (14,862)
------------- ------------- -------
7,311 (11,754) (7,408)
------------- ------------- -------
------------- ------------- -------
Identifiable Assets:
UK............................................ 199,616 195,994 191,704
USA........................................... 86,075 68,964 69,980
Eire....................................... 10,318 10,913 7,729
------------- ------------- -------
296,009 275,871 269,413
------------- ------------- -------
------------- ------------- -------
</TABLE>
18. TAXES ON INCOME
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
The charge of income taxes consists of the following:
Current tax: UK....................................... -- -- --
Overseas................................. 112 (64) 65
Share of tax charge of related companies.............. 45 78 173
Deferred tax.......................................... -- -- --
Advance Corporation Tax written off as presently
irrecoverable......................................... 2,270 710 705
Prior year adjustments................................ (627) 276 (143)
----- ----- -----
1,800 1,000 800
----- ----- -----
----- ----- -----
</TABLE>
Advance Corporation Tax (ACT) written off in 1995 includes ACT of
B.P.355,000 in respect of accrued Preference Dividends. No tax is payable in
respect of the sale of discontinued operations in 1995.
F-28
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
18. TAXES ON INCOME-- (CONTINUED)
A reconciliation of the difference between the statutory UK rate and the
Group's effective tax rate is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
B.P.'000 B.P.'000 B.P.'000
"Expected" income tax at UK statutory rate of
33%............................................... 2,413 (3,879) (2,445)
Movement in potential liability for deferred
tax............................................... 44 (558) (354)
Tax reallocation on fair value adjustments........ (314) -- --
Advance Corporation Tax written off............... 2,270 710 705
Adjustments relating to prior periods............. (627) 276 (143)
Permanent differences............................. (1,519) 4,602 2,903
Other differences, individually not significant... (467) (151) 134
------ ------ ------
1,800 1,000 800
------ ------ ------
------ ------ ------
</TABLE>
In accordance with the Group's accounting policy no provision for deferred
taxation was required in 1993, 1994 or 1995. Permanent differences principally
related to the results of overseas operations which did not incur a tax charge
under UK GAAP.
The total potential liability for deferred tax under UK GAAP is as follows:-
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1994 1995
------ ------
B.P.'000 B.P.'000
<S> <C> <C>
Accelerated capital allowances on property and
equipment................................................. 13,137 12,438
Other timing differences.................................. (1,725) (1,456)
------ ------
11,412 10,982
Less: Advance Corporation Tax............................. (6,439) (6,363)
------ ------
Potential deferred tax.................................... 4,973 4,619
------ ------
------ ------
</TABLE>
The total potential liability for deferred tax under US GAAP is as follows:-
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
----------------- -----------------
1994 1994 1995 1995
------ ------- ------ -------
B.P.'000 B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C> <C>
Deferred tax assets:
Losses.................................. 21,383 24,484
Valuation allowances.................... (7,116) (6,088)
------ ------
14,267 18,396
Short term temporary differences........ 1,725 1,456
Valuation allowance..................... -- --
------ ------
1,725 1,456
Advance Corporation Tax................. 10,500 11,205
Valuation allowance..................... (4,061) (4,842)
------ ------
6,439 6,363
Deferred tax liabilities................ (38,367) (43,041)
------- -------
Net deferred tax liability.............. (15,936) (16,826)
------- -------
------- -------
</TABLE>
F-29
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. PENSIONS
The Group operates a contributory defined benefits plan (the "Plan")
available for all full-time permanent employees in the UK who have attained the
age of 18. The benefits are related to final pensionable salary and pensionable
service. The amount charged for the Plan in the year ended November 30, 1995 was
B.P.1,181,000 (1994: B.P.1,160,000, 1993: B.P.1,098,000) net of member
contributions. Including member contributions the charge was B.P.1,772,000 in
1995, B.P.1,705,000 in 1994 and B.P.1,654,000 in 1993.
The latest actuarial valuation of the plan was carried out at April 1, 1994
using the Projected Unit method, to assess the finances of the Plan and to
determine pensions costs. For the valuation, certain long term assumptions were
employed, the most important being:
(i) Investment return: 8.5% per annum compound
(ii) Dividend increases: average of 4.0% per annum
(iii) Pensionable salary growth: 6.5% per annum compound
(iv) Increases to pensions in payment in excess of GMP's: 0.7% per annum
compound
(v) Increases to deferred pensions: 5% per annum compound.
At April 1, 1994, the market value of the assets of the UK Pension Fund was
B.P.30.2 million. The actuarial value of the assets amounted to 119% of the
value of the accrued liabilities of the Fund after allowing for the assumed
increases in pensionable salary. The surplus assets in the Fund are being used
to reduce the Group's long-term contributions to the Fund. The effect upon Group
profit is not significant. Overseas, the Group in general operates defined
contribution plans for certain executives, the costs of which are recognised on
the basis of contributions payable. The contributions in the year ended November
30, 1995 were B.P.382,000 (1994: B.P.557,000, 1993: B.P.705,000).
The amount charged to income in respect of all pension plans was
B.P.1,563,000 in 1995, B.P.1,717,000 in 1994 and B.P.1,803,000 in 1993.
Under UK GAAP, the cost of providing pension benefits may be calculated by
the use of any actuarial method which is appropriate and whose assumptions
reflect the long-term nature of the assets and liabilities involved. Under US
GAAP, the cost of providing these benefits are calculated in accordance with
Statement of Financial Accounting Standards No. 87 which requires the use of the
projected unit method and a discount rate (being the rate of interest at which
pension liabilities could effectively be settled) which reflects current market
rates.
Including members' contributions, the pension expense for the UK defined
benefits plan in accordance with US GAAP on this basis is as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1993 1994 1995
------ ------ ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Service costs of benefits earned during the year................... 1,696 2,031 2,207
Interest costs on projected benefit obligations.................... 1,687 2,246 3,079
Actual return on assets............................................ 1,571 (2,919) (4,570)
Deferred asset gain/(loss)......................................... (3,760) 298 1,428
Net amortization................................................... 460 (146) (86)
------ ------ ------
1,654 1,510 2,058
------ ------ ------
------ ------ ------
</TABLE>
F-30
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. PENSIONS--(CONTINUED)
The actuarial present value of benefit obligations and the funded status of
the UK plan in accordance with US GAAP are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------
1993 1994 1995
------- ------- -------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Accumulated benefit obligations:
Vested........................................................ 20,750 28,400 23,700
Non-vested.................................................... -- -- --
------- ------- -------
Total accumulated benefit obligations........................... 20,750 28,400 23,700
------- ------- -------
------- ------- -------
Total projected benefit obligations............................. 24,157 33,378 27,300
Plan assets at fair value....................................... (26,773) (30,848) (36,593)
------- ------- -------
Excess of obligations over assets............................... (2,616) 2,530 (9,293)
Unrecognised transition asset................................... 1,461 1,217 974
Unrecognised prior service cost................................. (779) (681) (1,424)
Unrecognised (loss)/gain........................................ 1,634 (3,412) 9,780
------- ------- -------
Net pension provision/(prepayment).............................. (300) (346) 37
------- ------- -------
------- ------- -------
</TABLE>
The main actuarial assumption underlying this valuation is as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1993 1994 1995
---- ---- ----
% % %
<S> <C> <C> <C>
Discount rate............................................................ 9.0 9.0 8.0
---- ---- ----
Return on assets......................................................... 10.0 10.0 8.5
Compensation increases................................................... 8.0 8.0 6.5
---- ---- ----
---- ---- ----
</TABLE>
The effect of applying US GAAP in the calculation of the UK pension expense
compared with the results in accordance with UK GAAP is Nil in 1993, a reduction
in 1994 of B.P.195,000 and a charge of B.P.286,000 in 1995. These amounts were
not considered sufficiently material to record as a significant difference
between UK GAAP and US GAAP in note 28.
F-31
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. RESERVES
<TABLE>
<CAPTION>
B.P.'000
<S> <C>
(A) ADDITIONAL PAID-IN CAPITAL
At November 30, 1994................................................................ 5,729
Share premiums recieved............................................................. 2
Expenses of issue................................................................... (1)
Amortized Convertible Capital Bond issue costs transferred from retained earnings... (120)
-----
At November 30, 1995................................................................ 5,610
-----
-----
</TABLE>
<TABLE>
<CAPTION>
GROUP COMPANY
------- -------
B.P.'000 B.P.'000
<S> <C> <C>
(B) NON-DISTRIBUTABLE RESERVES
At November 30, 1994..................................................... (90,681) 105,312
Goodwill in the year written off......................................... (232) --
Goodwill of subsidiary and associated undertakings transferred to profit
and loss account....................................................... 8,843 --
Exchange adjustments on:
Net investments including goodwill..................................... 3,387 --
Hedging arrangements................................................... (1,777) --
Goodwill............................................................... (1,972) --
------- -------
At November 30, 1995..................................................... (82,432) 105,312
------- -------
------- -------
</TABLE>
Non-distributable reserves of the Company at November 30, 1995 and 1994
comprise Special Reserves of B.P.82,118,000, Merger Reserves of B.P.23,114,000
and Other Reserves of B.P.80,000.
<TABLE>
<CAPTION>
GROUP COMPANY
------- -------
B.P.'000 B.P.'000
<S> <C> <C>
(C) RETAINED EARNINGS
At November 30, 1994..................................................... 59,647 2,009
Result for year.......................................................... (11,047) 335
Convertible Capital Bonds issue costs transferred to additional paid in
capital.................................................................. 120 120
------- -------
At November 30, 1995..................................................... 48,720 2,464
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1994 1995
------- -------
B.P.'000 B.P.'000
<S> <C> <C>
Amounts transferred to/(from) retained earnings in 1995 originated from:
The Company.............................................................. (13,917) 335
Subsidiary companies..................................................... (2,253) (11,327)
Related companies........................................................ 577 (55)
------- -------
At November 30, 1995..................................................... (15,593) (11,047)
------- -------
------- -------
</TABLE>
F-32
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21. SHARE CAPITAL
<TABLE>
<CAPTION>
1994 1995
------- -------
B.P.'000 B.P.'000
<S> <C> <C>
AUTHORISED
ORDINARY SHARES:
200,000,000 Ordinary Shares of 10p each.................................. 20,000 20,000
------- -------
------- -------
REDEEMABLE PREFERENCE SHARES:
15,000,000 5% Convertible Cumulative Redeemable Preference Shares
of B.P.1 each.......................................................... 15,000 15,000
42,000,000 6% Convertible Cumulative Redeemable Preference Shares
of B.P.1 each.......................................................... 42,000 42,000
------- -------
57,000 57,000
------- -------
------- -------
ISSUED
ORDINARY SHARES:
119,571,953, Ordinary Shares of 10p each (1994: 119,571,379)............. 11,957 11,957
------- -------
------- -------
REDEEMABLE PREFERENCE SHARES:
7,867,442, 5% Conv. Cum. Redeemable Pref. Shares of B.P.1 each (1994:
7,867,490)............................................................... 7,868 7,867
40,761,578, 6% Conv. Cum. Redeemable Pref. Shares of B.P.1 each (1994:
40,763,032).............................................................. 40,763 40,762
------- -------
48,631 48,629
------- -------
------- -------
</TABLE>
Shares issued during the year:
(i) Holders of 1,454, 6% Preference Shares exercised their conversion
rights on May 31, 1995 and were duly allotted 545 Ordinary Shares of 10p
each (B.P.54.50 nominal value) on the basis of 375p nominal of Ordinary
Shares for every B.P.100 nominal of Preference Shares held.
(ii) Holders of 48, 5% Preference Shares exercised their conversion
rights on May 31, 1995 and were duly allotted 29 Ordinary Shares of 10p each
(B.P.2.90 nominal value) on the basis of one Ordinary Share for every
B.P.1.6196 nominal of Preference Shares held.
(iii) Details of Rights and Share Options are as follows:
(a) The rights attached to the 5% Convertible Cumulative Redeemable
Preference Shares are summarized as follows:
(i) The right to a cumulative preference dividend of 5% per
annum, payable half-yearly on February 28 and August 31 in each year
in respect of the six month periods ended on November 30 and May 31
immediately prior to such dates;
(ii) The right during such period as the conversion rights are
exercisable to one vote per Preference Share but thereafter only in
the event that the cumulative dividend is in arrears or in certain
other limited circumstances;
(iii) The right in the month of May in each of the years 1987 to
1999 (or, if later, on the 28th day after the despatch of the
accounts of the Group in respect of the previous year) to convert
into Ordinary Shares of Automated Security (Holdings) at an effective
conversion price of B.P.1.6196 per Ordinary Share;
F-33
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21. SHARE CAPITAL--(CONTINUED)
(iv) Redemption at the option of Automated Security (Holdings) by
not later than May 31 in the years 2000 to 2005 and redemption in any
event on May 31, 2005;
(v) There is no premium payable on redemption.
(b) The rights attached to the 6% Convertible Cumulative Redeemable
Preference Shares are summarized as follows:
(i) The rights to a cumulative preference dividend of 6% per
annum, payable half-yearly on May 31 and November 30 in respect of
six month periods ending on those dates;
(ii) The right to vote in the event that the cumulative dividend
is in arrears for six months or more or in certain other limited
circumstances;
(iii) The right on May 31 in each of the years 1991 to 2006
inclusive to convert into Ordinary Shares of Automated Security
(Holdings) at an effective conversion price of B.P.2.67 per share;
(iv) Redemption at the option of Automated Security (Holdings) at
any date after May 31, 2006 and redemption in any event on May 31,
2009;
(v) There is no premium payable on redemption.
(c) The rights of the holders of the 5% Preference Shares to
dividends and capital are in priority to any payment to the holders of
the 6% Preference Shares. The rights of the shareholders of the 5% and 6%
Preference Shares are in priority to any payment to the holders of the
Ordinary Shares.
(d) At November 30, 1995 Automated Security (Holdings) had
outstanding options in respect of the following Ordinary Shares of 10p
each:
<TABLE>
<CAPTION>
PRICE AT WHICH
DATE OF GRANT NUMBER OF SHARES PERIOD OF OPTION EXCERCIZABLE
----------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Share option
scheme: July 10, 1987 159,079 3 to 10 years 256.75p
March 28, 1988 349,329 3 to 10 years 238.15p
July 27, 1988 211,804 3 to 10 years 242.67p
September 8, 1989 411,476 3 to 10 years 269.30p
April 30, 1990 190,000 3 to 10 years 266.00p
March 7, 1991 136,000 3 to 10 years 232.00p
March 23, 1992 183,000 3 to 10 years 130.00p
March 29, 1993 220,000 3 to 10 years 149.00p
---------
1,860,688
---------
---------
Sharesave
scheme: August 23, 1993 355,727 5 years 128.00p
---------
---------
</TABLE>
F-34
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21. SHARE CAPITAL--(CONTINUED)
Changes in the options outstanding for each of the three years in the
period ended November 30, 1995 are summarized as follows:-
<TABLE>
<CAPTION>
SHARE OPTION SHARESAVE
SCHEME SCHEME
SHARES SHARES
------------ ---------
<S> <C> <C>
November 30, 1992.................................... 4,309,514 --
Granted.............................................. 220,000 618,710
Excersised........................................... (25,000) --
Lapsed............................................... (928,091) (13,130)
------------ ---------
November 30, 1993.................................... 3,576,423 605,580
Granted.............................................. -- --
Exercised............................................ -- --
Lapsed............................................... (848,341) (73,915)
------------ ---------
November 30, 1994.................................... 2,728,082 531,665
Granted.............................................. -- --
Exercised............................................ -- --
Lapsed............................................... (867,394) (175,938)
------------ ---------
November 30, 1995.................................... 1,860,688 355,727
------------ ---------
</TABLE>
(e) On September 20, 1990 as part of the Stapled Unit transaction,
warrants were issued in respect of 3,706,680 Ordinary Shares to The
Prudential Insurance Company of America at a price of 300p each
exercizable at any time up to September 20, 2002.
(f) The Convertible Capital Bonds are capable, in certain
circumstances, of being exchanged into 18 million fully paid Ordinary
Shares in Automated Security (Holdings) at a price of 250p per share (see
note 12 (d)).
22. ADDITIONAL NOTES TO THE COMPANY BALANCE SHEETS
<TABLE>
<CAPTION>
COMPANY
---------------------------------
SHARES IN SHARES IN
SUBSIDIARY RELATED
COMPANIES COMPANIES TOTAL
--------- --------- -------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
INVESTMENTS IN SUBSIDIARY AND RELATED COMPANIES
Cost
At November 30, 1994........................................... 182,847 5,416 188,263
Disposals...................................................... -- (5,416) (5,416)
--------- --------- -------
At November 30, 1995........................................... 182,847 -- 182,847
--------- --------- -------
--------- --------- -------
</TABLE>
<TABLE>
<CAPTION>
COMPANY
-----------------
NOVEMBER 30,
-----------------
1994 1995
------ -------
B.P.'000 B.P.'000
<S> <C> <C>
SHORT TERM DEBT
Bank loans and overdrafts (see note 12)................................... 84,735 100,822
------ -------
------ -------
</TABLE>
F-35
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
22. ADDITIONAL NOTES TO THE COMPANY BALANCE SHEETS--(CONTINUED)
Certain Group bank borrowings are held under an offset facility,
consequently the short-term debt of the Company may exceed that of the Group.
<TABLE>
<S> <C> <C>
LONG-TERM DEBT
8.28% Senior Notes (see note 12)........................................... 35,019 36,707
------ ------
------ ------
</TABLE>
<TABLE>
<CAPTION>
COMPANY
---------------
NOVEMBER 30,
---------------
1994 1995
------ -----
B.P.'000 B.P.'000
<S> <C> <C>
OTHER CURRENT LIABILITIES
Amounts owed to subsidiary companies........................................ 2,243 1,201
Corporation tax payable..................................................... 355 355
Other creditors............................................................. 3,869 1,937
Accruals.................................................................... 4,231 3,878
------ -----
10,698 7,371
------ -----
------ -----
</TABLE>
<TABLE>
<CAPTION>
COMPANY
----------------
NOVEMBER 30,
----------------
1994 1995
------ ------
B.P.'000 B.P.'000
<S> <C> <C>
NON-CURRENT LIABILITIES
Provisions................................................................. 277 --
Amounts owed to subsidiary company......................................... 45,199 45,319
------ ------
45,476 45,319
------ ------
------ ------
</TABLE>
The amount owed to a subsidiary company by the Company, included in
non-current liabilities, relates to a debenture, net of issue costs, owed to ASH
Capital Finance (Jersey) Limited in respect of the Convertible Capital Bond
issue. The Company's obligations under this debenture are subordinated on a
winding up to its liabilities to its other unsecured creditors. The principal is
scheduled to be repaid in 2006.
F-36
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
23. GOODWILL
<TABLE>
<CAPTION>
COST OF
GOODWILL EXCHANGE
ELIMINATED ADJUSTMENTS TOTAL
---------- ----------- -------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Eliminated to November 30, 1993............................... 196,496 7,482 203,978
Acquisitions in the year
- -- Related companies.......................................... 17,466 -- 17,466
- -- Other businesses acquired.................................. 1,769 -- 1,769
Adjustments to previous year's acquisitions................... 535 -- 535
Share of goodwill movements of related companies.............. 423 -- 423
Transferred to profit and loss account........................ (17,365) -- (17,365)
Exchange adjustments.......................................... -- (4,516) (4,516)
---------- ----------- -------
Eliminated to November 30, 1994............................... 199,324 2,966 202,290
Investment in associated undertaking.......................... 232 -- 232
Transferred to profit and loss account........................ (8,843) -- (8,843)
Exchange adjustments.......................................... -- 1,972 1,972
---------- ----------- -------
Eliminated to November 30, 1995............................... 190,713 4,938 195,651
---------- ----------- -------
---------- ----------- -------
</TABLE>
24. COMMITMENTS AND CONTINGENCIES
(a) Automated Security (Holdings) has guaranteed advances by bankers to
subsidiary companies. At November 30, 1995 the net advances subject to these
guarantees totalled B.P.666,000 (1994: B.P.1,525,000). Interlocking guarantees
have been given to the Group's main UK clearing bank by Automated Security
(Holdings) and its UK subsidiary companies.
(b) Automated Security (Holdings) has guaranteed contract bonds and Letters
of Credit on behalf of subsidiary undertakings of B.P.1,492,000 (1994:
B.P.2,693,000).
(c) Automated Security (Holdings) has provided a guarantee in respect of
B.P.44.9 million Convertible Capital Bonds issued by ASH Capital Finance
(Jersey) Limited on May 31, 1991 (see note 12 (d)).
(d) Operating lease commitments at November 30, 1995 are payable as follows:
<TABLE>
<CAPTION>
LAND
AND
BUILDINGS OTHER TOTAL
--------- ------ ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
1996.............................................................. 3,051 8,210 11,261
1997.............................................................. 1,937 2,857 4,794
1998.............................................................. 1,220 758 1,978
1999.............................................................. 1,038 539 1,577
2000.............................................................. 941 186 1,127
Thereafter........................................................ 7,936 300 8,236
--------- ------ ------
16,123 12,850 28,973
--------- ------ ------
--------- ------ ------
</TABLE>
F-37
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
24. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
(e) Operating lease payments to be made in the year ending November 30, 1996
are in respect of commitments expiring:
<TABLE>
<CAPTION>
LAND
AND
BUILDINGS OTHER TOTAL
--------- ----- ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Within one year.................................................... 706 2,984 3,690
Between one and five years......................................... 1,499 5,126 6,625
After more than five years......................................... 846 100 946
--------- ----- ------
3,051 8,210 11,261
--------- ----- ------
--------- ----- ------
</TABLE>
The operating lease expense for the years ended November 30, 1995, 1994 and
1993 was B.P.9,402,000, B.P.9,243,000 and B.P.6,502,000 respectively.
The aggregate minimum rentals to be received in the future under non
cancellable sub leases for land and buildings as at November 30, 1995 was
B.P.1.1 million (1994: B.P.1.1 million). The Group has also provided for future
rentals in respect of surplus properties, at November 30, 1995 these provisions
amounted to B.P.1.8 million (1994: B.P.1.8 million).
(f) Finance lease commitments at November 30, 1995 are payable as follows:
<TABLE>
<CAPTION>
B.P.'000
<S> <C>
1996................................................................................. 121
1997................................................................................. 37
Thereafter........................................................................... --
-----
Total lease payments................................................................. 158
Less: interest portion of payments................................................... (10)
-----
148
-----
-----
</TABLE>
25. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires disclosure of
the estimated fair values of financial instruments for which it is practicable
to estimate the value.
With regard to cash and cash equivalents, loans, short term debt, non-trade
accounts receivables and payables and long term bank debt, terms of these
financial instruments are similar to those available in the current market.
Accordingly, carrying values approximate fair values.
The fair value of the Group's long term unlisted investments in related
companies and other investments has been reviewed and the Directors consider
that in total these investments are stated at their approximate fair value based
on this review.
The fair value of the Group's 9.5% Convertible Capital Bonds is based on the
quoted market prices for these bonds at November 30. At November 30, 1995, 1994
and 1993 the restated carrying amount of these bonds was B.P.43.8 million,
B.P.43.7 million and B.P.43.6 million and their fair value was B.P.32.1 million,
B.P.32.3 million and B.P.43.9 million respectively. As mentioned in note 14 the
Group does not use derivative financial instruments to manage its foreign
currency or interest rate risks.
F-38
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26. CASH FLOWS
(a) Reconciliation of Operating Profit to Net Inflows from Operating
Activities
<TABLE>
<CAPTION>
1993 1994
(AS RESTATED) (AS RESTATED) 1995
------------- ------------- ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Operating profit............................................. 19,643 21,362 16,195
Disposal costs............................................... -- -- (251)
(Profit)/loss on disposal of fixed assets.................... 673 (962) (239)
Depreciation................................................. 40,935 34,851 34,612
Share of results of associated undertakings.................. (367) (683) (10)
Reorganization............................................... (1,793) -- --
Decrease/(increase) in stocks................................ 3,674 587 1,888
Decrease/(increase) in debtors............................... (3,569) 7,377 433
Increase/(decrease) in creditors and rentals in advance...... (2,963) 4,651 (1,279)
Decrease in provisions....................................... (1,035) (1,914) (310)
------------- ------------- ------
Net cash inflow from operating activities.................... 55,198 65,269 51,039
------------- ------------- ------
------------- ------------- ------
</TABLE>
(b) Analysis of changes in cash and cash equivalents during the year
<TABLE><CAPTION>
1993 1994 1995
------ ------ -----
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
At December 1....................................................... (353) (1,312) 3,621
Effect of foreign exchange rate changes............................. (13) 16 (11)
Net cash inflow/(outflow)........................................... (946) 4,917 1,404
------ ------ -----
At November 30...................................................... (1,312) 3,621 5,014
------ ------ -----
------ ------ -----
</TABLE>
(c) Analysis of balances of cash and cash equivalents as shown in the balance
sheet
<TABLE><CAPTION>
1993 1994 1995
------ ----- -----
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Cash at bank and in hand............................................. 716 3,934 5,936
Bank overdrafts and other short term borrowings...................... (2,028) (313) (922)
------ ----- -----
(1,312) 3,621 5,014
------ ----- -----
------ ----- -----
</TABLE>
The Group's statement of cash flows is prepared in accordance with UK
Financial Reporting Standard (FRS1), the objectives and principles of which are
substantially consistent with Statement of Financial Accounting Standards No.
95, "Statement of Cash Flows" ("SFAS95"), under US GAAP, and International
Accounting Standard 7 ("IAS 7") . The principal differences between the
standards relate to classification.
Cash flows from taxation and returns from investments and servicing of
finance under FRS1 would be included as operating activities under SFAS95. Under
FRS1, net cash and cash equivalents comprise cash, investments and short-term
deposits which were within 3 months of maturity when acquired and short-term
borrowings repayable within 3 months from the date of their advance. Under
SFAS95, short-term borrowings repayable and overdraft balances would not be
included in cash and cash equivalents, and only investments and short-term
deposits with an original maturity of 3 months or less are included in cash and
cash equivalents.
F-39
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26. CASH FLOWS--(CONTINUED)
Under US GAAP definitions cash and cash equivalents would therefore be as
follows:
<TABLE>
<CAPTION>
B.P.'000
<S> <C>
1993................................................................................ 716
1994................................................................................ 3,934
1995................................................................................ 5,936
-----
-----
</TABLE>
(d) Analysis of changes in financing during the year
<TABLE>
<CAPTION>
SHARE CAPITAL CONVERTIBLE LOANS AND
INCLUDING ADDITIONAL CAPITAL OTHER STAPLED SENIOR
PAID IN CAPITAL BONDS BORROWINGS UNITS NOTES
-------------------- ----------- ---------- ------- ------
B.P.'000 B.P.'000 B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C> <C> <C>
At November 30, 1992................ 66,494 43,455 52,016 39,612 --
Exchange adjustments................ -- -- 815 673 --
Bank overdrafts and other short term
borrowings.......................... -- -- 1,076 -- --
Cash inflows from financing......... 33 -- 26,134 (3,940) --
Share issue expenses................ (279) -- -- -- --
Amortization of issue expenses...... (119) 119 -- 164 --
Other movements..................... 321 -- -- (83) --
------- ----------- ---------- ------- ------
At November 30, 1993................ 66,450 43,574 80,041 36,426 --
Exchange adjustments................ -- -- (1,628) (508) (1,322)
Bank overdrafts and other short term
borrowings.......................... -- -- (1,715) -- --
Cash inflows from financing......... -- -- 5,870 -- --
CCB conversion...................... 1 (1) -- -- --
Share issue expenses................ (14) -- -- -- --
Amortization of issue expenses...... (120) 120 -- 79 66
Transfer to Senior Notes............ -- -- -- (35,903) 35,903
Yield maintenance accrual........... -- -- -- -- 372
Other movements..................... -- -- -- (94) --
------- ----------- ---------- ------- ------
At November 30, 1994................ 66,317 43,693 82,568 -- 35,019
Exchange adjustments................ -- -- 986 -- 854
Bank overdrafts and other short term
borrowings.......................... -- -- 609 -- --
Cash outflows from financing........ -- -- (614) -- --
Share issue expenses................ (1) -- -- -- --
Amortization of issue expenses...... (120) 120 -- -- 120
Yield maintenance accrual........... -- -- -- -- 714
------- ----------- ---------- ------- ------
At November 30, 1995................ 66,196 43,813 83,549 -- 36,707
------- ----------- ---------- ------- ------
------- ----------- ---------- ------- ------
</TABLE>
No amount was paid or received in restructuring the Stapled Units into 8.28%
Senior Notes in May 1994.
(e) Acquisitions
There were no acquisitions of business in 1995 but the Group invested a
further B.P.232,000 in TVX Inc, a related company.
F-40
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26. CASH FLOWS--(CONTINUED)
On August 31, 1994 the Group acquired certain assets of Sonitrol of Eugene
in Oregon for an initial consideration of $2,070,000 and deferred consideration
of $452,000. In addition the Group paid deferred consideration of B.P.1,510,000
in respect of the acquisition of Compagnie Gnrale de Protection et Scurit SA, a
related company, and B.P.1,436,000 in respect of Arius Inc.
In 1993 the Group acquired Telecom Security Limited in the UK for an initial
consideration of B.P.6,980,000 including costs, and additional deferred
consideration of B.P.1,420,000. The Group also made a further minor acquisition
for a total cost of some B.P.200,000.
Assets acquired:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
At book value
Intangible assets.................................................. -- 1,769 --
Property and equipment............................................. 2,513 -- --
Inventories........................................................ 412 -- --
Accounts receivable................................................ 574 -- --
Cash at bank....................................................... 2,471 -- --
Accounts payable................................................... (4,324) -- --
Long term liabilities.............................................. (406) -- --
------ ------ ------
1,240 1,769 --
FAIR VALUE ADJUSTMENTS:
Intangible fixed assets............................................ -- (1,769) --
Property and equipment............................................. 2,371 --
Inventories........................................................ -- -- --
Accounts receivable................................................ -- -- --
Accounts payable................................................... (1,369) -- --
Long term liabilities.............................................. (64) -- --
------ ------ ------
Fair value of net assets acquired.................................. 2,178 -- --
Consideration
- -cash paid......................................................... (7,180) (1,480) --
- -deferred consideration............................................ (1,420) (289) --
------ ------ ------
Goodwill arising from acquisitions in the current year............. (6,422) (1,769) --
Adjustments in respect of prior year's acquisitions................ 2,155 (535) --
Accrued consideration in respect of prior year's acquisitions...... (684) -- --
------ ------ ------
(4,951) (2,304) --
------ ------ ------
------ ------ ------
</TABLE>
Fair value adjustments relate to intangibles eliminated in line with Group
accounting policies, the estimated value of property and equipment, allowances
for obsolete inventories and doubtful accounts receivable, provisions for
maintenance and reorganization costs of businesses acquired. Adjustments in
respect of prior year's acquisitions relate in 1994 to the estimated value of
assets and liabilities in Telecom Security Limited and in 1993 principally to
the estimated value of property and equipment in Sonitrol Management Corporation
in the United States. Apart from the consideration shown above, the acquisitions
had no material effect on the Group's cash flows.
F-41
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26. CASH FLOWS--(CONTINUED)
(f) Disposals
During 1995 the Group disposed of Modern Vitalcall Limited, a subsidiary
company; the business of Modern Integrated Systems and interests in two related
companies, Compagnie Gnrale de Protection et Scurit SA and Microtech Security
(UK) Limited. The total consideration receivable was B.P.9.3 million of which
B.P.0.1 million is receivable in 1996 and B.P.0.5 million is in the form of Loan
Notes.
There were no disposals of business in 1994. During 1993 the Group disposed
of its interests in Hepburn Technology Limited, a related company.
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Net assets sold:
Property and equipment............................................... -- -- 474
Investments in related companies..................................... 85 -- 3,409
Inventories.......................................................... -- -- 1,651
Accounts receivable.................................................. -- -- 2,981
Accounts payable..................................................... -- -- (1,499)
Rentals received in advance.......................................... -- -- (1,464)
----- ----- ------
85 -- 5,552
----- ----- ------
----- ----- ------
</TABLE>
The businesses sold during 1995 generated B.P.1,278,000 of the Group's net
operating cash flows, paid B.P.1,000 in respect of net returns on investments
and servicing of finance, and utilized B.P.33,000 for investing activities.
F-42
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
27. EMPLOYEES AND DIRECTORS
EMPLOYEES
<TABLE>
<CAPTION>
1993 1994 1995
NUMBER NUMBER NUMBER
------ ------ ------
<S> <C> <C> <C>
Employee numbers
Average number of persons employed:
Engineers and sales staff....................................... 2,303 2,202 2,227
Office staff and manaagement.................................... 927 807 779
------ ------ ------
3,230 3,009 3,006
------ ------ ------
------ ------ ------
Employee costs
<CAPTION>
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Wages and salaries................................................ 57,434 59,862 57,117
Social Security................................................... 5,866 4,935 4,875
Pension contributions............................................. 1,803 1,717 1,563
------ ------ ------
65,103 66,514 63,555
------ ------ ------
------ ------ ------
DIRECTORS
1993 1994 1995
------ ------ ------
<CAPTION>
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
Directors' emoluments:............................................
Salaries and benefits in kind..................................... 1,378 1,055 775
Pension contributions............................................. 363 38 28
Compensation for loss of office................................... 222 1,231 --
Pension paid to previous director................................. -- -- 9
------ ------ ------
1,963 2,324 812
------ ------ ------
------ ------ ------
</TABLE>
Lord Lane of Horsell was Chairman during 1995. In 1994 the office of
Chairman was held by two directors and their emoluments (excluding pension
contributions and compensation for loss of office) during the period they
occupied the position of Chairman were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C>
T V Buffett (until October 18, 1994).............................. 334 279 --
Lord Lane of Horsell (from October 18, 1994)...................... -- 4 50
------ ------ ------
</TABLE>
The highest paid director in 1995 received B.P.173,000. The former Chairman
was the highest paid director in 1994 and 1993.
Details of share options granted to executive directors are disclosed in
Part I Item 11. It is not possible to quantify the benefit arising, if any.
F-43
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
27. EMPLOYEES AND DIRECTORS--(CONTINUED)
The number of directors whose total emoluments, excluding pension
contributions, compensation for loss of office and the emoluments of a director
who discharged his duties outside the United Kingdom are as follows:-
<TABLE>
<CAPTION>
1993 1994 1995
NUMBER NUMBER NUMBER
------ ------ ------
<S> <C> <C> <C>
B.P. 5,001-B.P. 10,000............................................ -- 1 --
B.P. 10,001-B.P. 15,000............................................ -- -- 2
B.P. 15,001-B.P. 20,000............................................ 3 3 1
B.P. 20,001-B.P. 25,000............................................ 2 1 1
B.P. 25,001-B.P. 30,000............................................ 2 1 2
B.P. 30,001-B.P. 35,000............................................ -- 1 --
B.P. 50,001-B.P. 55,000............................................ -- -- 1
B.P. 90,001-B.P. 95,000............................................ 1 -- --
B.P. 95,001-B.P.100,000............................................ -- -- 1
B.P.100,001-B.P.105,000............................................ 1 -- --
B.P.110,001-B.P.115,000............................................ -- 1 --
B.P.120,001-B.P.125,000............................................ -- 1 --
B.P.160,001-B.P.165,000............................................ -- -- 1
B.P.165,001-B.P.170,000............................................ -- -- 1
B.P.170,001-B.P.175,000............................................ -- 1 1
B.P.215,001-B.P.220,000............................................ 1 -- --
B.P.275,001-B.P.280,000............................................ -- 1 --
B.P.330,001-B.P.335,000............................................ 1 -- --
-- - --
-- - --
</TABLE>
28. SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP
The consolidated financial statements of the Group are prepared in
conformity with UK generally accepted accounting principles (UK GAAP) which
differs in certain significant respects from US GAAP. Differences which have a
significant effect on consolidated net income or shareholders' equity are
discussed below. While this is not a comprehensive summary of all differences
between UK GAAP and US GAAP, other differences are not likely to have a
significant effect on the consolidated net income or shareholders' equity of the
Group.
Intangible assets
US GAAP requires that intangible assets are amortized over their estimated
useful life which may not exceed 40 years. Under UK GAAP the cost of goodwill,
and other intangible assets, which are considered to be similar in nature to
goodwill, may be written off directly to reserves in the year in which the
assets are acquired. In the tables below the intangible assets which are
substantially comprised of goodwill, subscriber contracts and customer lists,
and franchise contracts are amortized over estimated useful lives which range
from 15 to 40 years. The average useful life of each class of asset is estimated
to be 15 years for subscriber contracts, 30 years for customer lists and 40
years for franchise contracts.
F-44
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
28. SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP--(CONTINUED)
Deferred income taxes
Under UK GAAP, deferred taxation is provided on the liability method for all
timing differences except where the directors consider that no liability will
arise in the foreseeable future. Following the issuance of Statement of
Financial Accounting Standards No. 109: "Accounting for Income Taxes", US GAAP
provides for the use of the liability method but requires that provisions be
made for all temporary differences. The tables below incorporate adjustments to
shareholders' equity and net income to reflect full provision for deferred
taxation on all temporary differences under the liability method. Temporary
differences arise mainly from the difference between the tax basis of property
and equipment and intangible assets and their corresponding carrying amounts in
the financial statements.
Pensions
Since 1989, as permitted under UK GAAP, the accounting policy of the Group
has been to account for pension costs on a long-term basis spreading the
expected pension costs over the service lives of employees, using assumptions as
advised by an actuary. Under US GAAP, the calculations need to be made using
market rates of interest which were higher than the long-term assumptions made
by the actuary.
A further difference is that under UK GAAP a cost variation is calculated by
spreading the surplus (the difference between the actuarial value of the assets
and the liabilities) over the service lives of the employees, whereas US GAAP
calculates this variation in a particular way--as the expected investment return
on the assets at market value, plus amortization of the surplus (the difference
between the market value of the assets and the actuarial value of the
liabilities), less interest at the market rate on the actuarial value of the
liabilities.
Related companies
In the tables below, estimated adjustments have been made in respect of
related companies accounted for by the Group under the equity method, where such
related companies adopt accounting policies which conform with UK GAAP which
differ significantly from those required under US GAAP. These adjustments relate
primarily to the accounting treatment for goodwill and intangible assets (see
discussion above on intangible assets).
Sale of subsidiary and related companies
Under UK GAAP goodwill on acquisition of subsidiaries and related companies
is written off to reserves. On sale of these companies the goodwill previously
written off is recharged in full to the profit and loss account. Under US GAAP
the goodwill on acquisition is carried in the balance sheet and amortized over
its estimated useful life. On sale of these companies the profit on sale is
therefore higher under US GAAP by the amount of the amortization previously
charged to income.
Discontinued activities
The results of discontinued activities are separated on the profit and loss
account under both UK accounting practice and US GAAP. Under UK GAAP a
discontinued operation refers to an operation that was material and whose sale
or termination has a material effect on the nature and focus of the operations
and represents a material reduction in its operating facilities. Under US GAAP,
only the closure, sale or disposal of a separately identifiable segment of a
business qualifies as a discontinued activity.
F-45
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
28. SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP--(CONTINUED)
Redeemable Preference Shares
The 5% and 6% Convertible Cumulative Redeemable Preference Shares (the
"Preference Shares") of Automated Security (Holdings) PLC are convertible into
Ordinary Shares, at the option of the holder, in the month of May in each of the
years 1987 to 1999 (for the 5% Preference Shares) and on May 31 in each of the
years 1991 to 2006 ( for the 6% Preference Shares). Automated Security
(Holdings) PLC has the option between May 31, 2000 and May 31, 2005 (for the 5%
Preference Shares) and June 1, 2006 to May 31, 2009 (for the 6% Preference
Shares) to redeem the Preference Shares at par and in any event must redeem on
May 31, 2005 (for the 5% Preference Shares) or May 31, 2009 (for the 6%
Preference Shares). Under UK GAAP the Preference Shares form part of
shareholders' equity whereas under US GAAP they are classified as a separate
non-current liability. Accordingly, for the purposes of the reconciliation the
total amount of the Preference Shares has been excluded from shareholders'
equity and the dividends on the Preference Shares have been deducted to compute
net income attributable to Ordinary Shareholders.
Earnings per share
The earnings per share calculation under UK GAAP is set out in the
accounting policies. Under US GAAP, primary earnings per Ordinary Share is
calculated by dividing the profit attributable to ordinary shareholders by the
weighted average number of shares in issue during the year. The weighted average
number of shares includes common stock equivalents including all convertible
preference shares and convertible unsecured loan stock calculated under the "If
Converted Method" and share options using the "Treasury Stock Method". The
profit attributable to ordinary shareholders comprises the estimated net income
in accordance with US GAAP and the dividends and interest (net of tax) of
preference shares and loan stock which have been included in calculating the
common stock equivalents. Fully diluted earnings per share have not been
presented as they do not vary significantly from primary earnings per share.
Pre-acquisition tax losses
Under UK GAAP contingent tax assets on acquired businesses are recognized at
the date of acquisition only to the extent that their recoverability can be
foreseen with reasonable certainty. Any subsequent benefits which arise are
recognized as a reduction in the tax charge. Under US GAAP such benefits are
treated as a retrospective reduction of the goodwill arising on the acquisition.
Employees' share ownership plan
Automated Security (Holdings) PLC has advanced funds to the Automated
Security (Holdings) PLC Employees' Share Ownership Plan Trust ("ESOP"). Under UK
GAAP following the introduction of UITF Abstract 13 the net balance due from the
ESOP has been shown in investments for both 1994 and 1995; previously these
balances were shown in long term accounts and notes receivable. Under US GAAP
these receivables are shown as a deduction from shareholders' equity.
Recently Issued Accounting Pronouncements
(i) In March 1995, the Financial Accounting Standards Board issued 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 provides guidance on when to assess and how to measure impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiables to be disposed of. This
F-46
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
28. SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP--(CONTINUED)
Statement is effective for financial statements for fiscal years beginning after
December 15, 1995. The Company has not yet assessed the future impact of
adopting SFAS 121.
(ii) In October 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 establishes accounting and disclosure
standards for stock-based employee compensation arrangements. The Statements is
effective for fiscal years beginning after December 15, 1995. The Company has
decided that, upon implementation of SFAS 123, it will continue to account for
stock-based compensation arrangements in accordance with the accounting method
prescribed by APB Opinion No. 25, which is an alternative allowed under SFAS
123.
The following is a summary of the adjustments (gross of tax) to net income
and shareholders' equity which would have been required if the Group had applied
US GAAP instead of UK GAAP.
<TABLE><CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------
1993 1994 1995 1995
------ ------- ------- ----------
(IN THOUSANDS EXCEPT PER SHARE
DATA) US DOLLARS
POUNDS STERLING
<S> <C> <C> <C> <C>
NET INCOME
Net income/(loss) under UK GAAP..................... 5,511 (12,754) (8,208) (12,558)
Adjustments:
Amortization of subscriber contracts and customer
lists............................................... (3,588) (3,656) (3,903) (5,972)
Amortization of franchise contracts............... (283) (278) (269) (411)
Amortization of goodwill.......................... (3,488) (3,445) (3,887) (5,947)
Depreciation and sales of revalued assets......... 44 158 --
Deferred income taxes............................. 5 (558) 354 542
------ ------- ------- ----------
Pre-acquisition tax losses........................ (314) -- -- --
Related companies................................. (259) (247) (484) (741)
Effect on profit on disposal and provisions
against subsidiaries and related companies...... 314 -- 2,470 3,779
Employee Share Ownership Plan provisions.......... 200 450 3,066 4,691
Deferred tax effect of above adjustments.......... 1,207 (423) (956) (1,463)
------ ------- ------- ----------
Net loss in accordance with US GAAP............... (651) (20,753) (11,817) (18,080)
Preference Share dividends........................ (2,844) (2,839) (2,839) (4,344)
------ ------- ------- ----------
Net loss in accordance with US GAAP attributable
to Ordinary Shareholders............................ (3,495) (23,592) (14,656) (22,424)
------ ------- ------- ----------
------ ------- ------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
Shareholders' equity under UK GAAP............................. 35,283 32,484 49,700
Adjustments:
Goodwill..................................................... 98,598 93,636 143,263
Deferred income taxes........................................ (4,973) (4,619) (7,067)
Subscriber contracts and customer lists...................... 50,088 46,902 71,760
Franchise contracts.......................................... 10,298 10,261 15,699
Related companies............................................ 4,861 -- --
Redeemable Preference Shares................................. (48,631) (48,629) (74,402)
Employee Share Ownership Plan................................ (3,680) (614) (939)
Deferred tax effect of above adjustments..................... (10,963) (12,207) (18,677)
------- ------- --------
Shareholders' equity in accordance with US GAAP................ 130,881 117,214 179,337
------- ------- --------
------- ------- --------
</TABLE>
F-47
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
28. SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP--(CONTINUED)
The gross amount of subscriber contracts and customer lists subject to
amortization at November 30, 1995 was B.P.63.8 million. The gross amount of
franchise contracts subject to amortization at November 30, 1995 was B.P.11.1
million.
The following is a summary of certain income statement captions reported in
the consolidated statements of income as adjusted by the significant adjustments
which would have been required if the Group had applied US GAAP instead of UK
GAAP.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------
1993 1994 1995 1995
-------- -------- -------- ----------
(IN THOUSANDS EXCEPT PER SHARE
DATA) US DOLLARS
POUNDS STERLING
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS UNDER US GAAP
NET SALES......................................... 160,775 166,071 163,349 249,923
Cost of sales..................................... (105,768) (106,889) (105,511) (161,432)
-------- -------- -------- ----------
Gross profit on sales............................. 55,007 59,182 57,838 88,491
General and administrative expenses............... (38,340) (43,792) (49,712) (76,059)
Share of results of related companies............. 153 933 (474) (725)
Loss on closure of subsidiaries and major
operations........................................ (4,816) (2,429) -- --
Profit/(loss) on sale and provisions against
related companies and investments............... 260 (20,152) (3,205) (4,903)
Exceptional items................................. (1,378) -- -- --
-------- -------- -------- ----------
OPERATING INCOME.................................. 10,886 (6,258) 4,447 6,804
Interest expense, net............................. (10,635) (12,514) (14,862) (22,739)
-------- -------- -------- ----------
INCOME BEFORE TAXES ON INCOME..................... 251 (18,772) (10,415) (15,935)
TAXES ON INCOME................................... (902) (1,981) (1,402) (2,145)
-------- -------- -------- ----------
NET LOSS.......................................... (651) (20,753) (11,817) (18,080)
Preference Share dividends........................ (2,844) (2,839) (2,839) (4,344)
-------- -------- -------- ----------
NET LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS.... (3,495) (23,592) (14,656) (22,424)
-------- -------- -------- ----------
-------- -------- -------- ----------
Net loss per Ordinary Share in accordance with US
GAAP.............................................. (3.0p) (19.7p) (12.3p) (18.8p)
-------- -------- -------- ----------
Weighted average shares outstanding (millions).... 116.5 119.5 119.6 119.6
-------- -------- -------- ----------
</TABLE>
F-48
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
28. SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP--(CONTINUED)
The following is a summary of certain balance sheet captions reported in the
consolidated balance sheets, together with the related amounts as adjusted by
the significant adjustments which would have been required if the Group had
applied US GAAP instead of UK GAAP.
<TABLE>
<CAPTION>
AS REPORTED IN THE AS ADJUSTED
CONSOLIDATED BALANCE TO CONFORM WITH
SHEETS US GAAP
------------------------ ------------------
1994
(AS RESTATED) 1995 1994 1995
------------- ------- ------- -------
B.P.'000 B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C> <C>
Current assets...................................... 37,453 35,561 37,453 35,561
Intangible assets................................... -- -- 158,984 150,799
Property and equipment.............................. 223,255 227,386 223,255 227,386
Other assets........................................ 15,163 6,466 16,344 5,852
------- ------- ------- -------
Total assets........................................ 275,871 269,413 436,036 419,598
------- ------- ------- -------
------- ------- ------- -------
Current liabilities and deferred income............. 157,968 150,579 157,968 68,100
Liabilities due after more than one year............ 3,908 5,830 19,844 105,135
Convertible Capital Bonds........................... 43,693 43,813 43,693 43,813
Senior Notes........................................ 35,019 36,707 35,019 36,707
Redeemable Preference Shares........................ -- -- 48,631 48,629
------- ------- ------- -------
Total liabilities................................... 240,588 236,929 305,155 302,384
Ordinary Shares..................................... 11,957 11,957 11,957 11,957
Redeemable Preference Shares........................ 48,631 48,629 -- --
Reserves............................................ (25,305) (28,102) 118,924 105,257
------- ------- ------- -------
Total shareholders' equity.......................... 35,283 32,484 130,881 117,214
------- ------- ------- -------
Total liabilities and shareholders' equity.......... 275,871 269,413 436,036 419,598
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The following is an analysis of the change in total shareholders' equity
using US GAAP.
<TABLE>
<CAPTION>
B.P.'000
-------
<S> <C>
Balance at November 30, 1993..................................... 158,287
Loss for the year................................................ (23,592)
Currency translation adjustments................................. (3,962)
Share issue expenses............................................. (14)
Shares converted/issued.......................................... 92
Movement in ESOP receivable...................................... 70
-------
Balance at November 30, 1994..................................... 130,881
Loss for the year................................................ (14,656)
Currency translation adjustments................................. 988
Share issue expenses............................................. (1)
Shares converted/issued.......................................... 2
-------
Balance at November 30, 1995..................................... 117,214
-------
-------
</TABLE>
F-49
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
29. PRINCIPAL SUBSIDIARY AND RELATED COMPANIES
Subsidiary undertakings
<TABLE>
<CAPTION>
COUNTRY OF
REGISTRATION/ NATURE OF
INCORPORATION BUSINESS
------------- --------
<S> <C> <C>
API Security Inc USA Electronic Security
*ASH Capital Finance (Jersey) Limited Jersey Investment
*Automated Security Limited England Holding Company
Modern Security Systems Limited Eire Electronic Security
Modern Security Systems Limited England Electronic Security
Telecom Security Limited England Electronic Security
TVX Limited England Electronic Security
Sonitrol Corporation USA Electronic Security
Sonitrol Management Corporation USA Electronic Security
</TABLE>
The Group owns 100% of the Ordinary Share Capital of the above subsidiaries
which operate in their country of incorporation except for ASH Capital Finance
(Jersey) Limited which operates in England.
All are indirect subsidiaries of Automated Security (Holdings) PLC except
where marked*.
RELATED COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
TVX Inc USA Electronic Security
</TABLE>
DETAILS OF THE ISSUED CAPITAL AND DEBT SECURITIES OF RELATED COMPANY
TVX Inc--
2,900,000 Shares of Common Stock, par value US $0.01 (39.9% held by the Group).
1,000,000 Shares of Redeemable Preferred Stock, par value US $0.01 (48.5% held
by the Group).
F-50
<PAGE>
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Board of Directors of
AUTOMATED SECURITY (HOLDINGS) PLC
London, England
The audit referred to in our report to the Board, dated May 17, 1996
relating to the consolidated financial statements of Automated Security
(Holdings) PLC which is contained in this Form 20-F, included the audit of the
financial statement schedule set out in page S-2 for each of the three years in
the period ended November 30, 1995.
In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ Binder Hamlyn
Binder Hamlyn
London, England Chartered Accountants
May 17, 1996 Registered Auditors
S-1
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE><CAPTION>
BALANCE AT ACQUISITION/ RESERVED BALANCE
BEGINNING DISPOSAL OF CHARGED TO ITEMS AT END
OF PERIOD SUBSIDIARIES EXPENSES WRITTEN OFF OF PERIOD
---------- ------------ ---------- ----------- ---------
B.P.'000 B.P.'000 B.P.'000 B.P.'000 B.P.'000
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Period ended:
November 30, 1994........................ 3,611 402 3,102 (3,500) 3,615
November 30, 1994........................ 3,615 -- 1,382 (2,360) 2,637
November 30, 1995........................ 2,637 (119) 1,640 (1,210) 2,948
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
2.4(a) Credit Agreement dated December 21, 1995, between
the Company, certain subsidiaries of the Company,
Lloyds Bank PLC, Midland Bank PLC and Certain
Banks and Financial Institutions
2.4(b) First Amendment Agreement, dated December 21,
1995 relating to a Note Agreement, dated May 27, 1994,
between the Company and The Prudential Insurance
Company of America.
2.4(c) Inter-Creditor Agreement dated December 21, 1995
between the Company, Lloyds Bank PLC, Certain
Bank and Financial Institutions and U.S. Loan
Note Holders
EXHIBIT 2.4(a)
CONFORMED COPY
DATED 21st December 1995
AUTOMATED SECURITY (HOLDINGS) PLC
- and -
CERTAIN SUBSIDIARIES OF AUTOMATED SECURITY (HOLDINGS) PLC
- and -
THE BANKS
- and -
LLOYDS BANK Plc
as Agent
- and -
MIDLAND BANK plc
as Working Capital Bank
----------------
CREDIT AGREEMENT
----------------
WILDE SAPTE
London
<PAGE>
TABLE OF CONTENTS
Clause Heading Page Number
- ------ ------- -----------
1 DEFINITIONS AND INTERPRETATION .................................... 1
1.1 Definitions ....................................................... 1
1.2 Clause Headings ................................................... 19
1.3 Interpretation .................................................... 19
2. CONDITIONS PRECEDENT .............................................. 20
3. FACILITIES ........................................................ 21
3.1 Facilities ........................................................ 21
3.2 Obligations Several ............................................... 22
3.3 Rights Several .................................................... 22
3.4 Additional Borrowers .............................................. 22
4. PURPOSE ........................................................... 23
4.1 Purpose of the Term Loan Facility ................................. 23
4.2 Purpose of the Revolving Loan Facility, the Overdraft
Facility and the Engagements Facility ............................. 23
4.3 Undertaking by the Borrowers ...................................... 24
4.4 No Liability ...................................................... 24
5. THE TERM LOAN FACILITY AND THE REVOLVING LOAN FACILITY ............ 24
5.1 Utilisation of the Term Loan Facility ............................. 24
5.2 Utilisation of the Revolving Loan Facility ........................ 24
5.3 Drawdown of Advances .............................................. 25
5.4 Participations and Payments ....................................... 25
5.5 Drawdown Indemnity ................................................ 26
5.6 Initial Funding ................................................... 26
6. THE OVERDRAFT FACILITY AND THE UNCOMMITTED ENGAGEMENTS
FACILITY .......................................................... 27
6.1 Nature of Overdraft Facility ...................................... 27
6.2 Utilisation of Overdraft Facility ................................. 28
6.3 Utilisation of Uncommitted Engagements Facility ................... 28
7. AVAILABILITY OP ALTERNATIVE CURRENCIES ............................ 30
7.1 Non-Availability .................................................. 30
7.2 Effect of Notice .................................................. 30
8. INTEREST .......................................................... 30
8.1 Amount ............................................................ 30
8.2 Interest Periods .................................................. 31
8.3 Default Interest .................................................. 32
8.4 Interest under the Overdraft Facility ............................. 32
8.5 Engagements Commission ............................................ 33
8.6 Calculation and Payment of Interest ............................... 33
8.7 Market Disruption ................................................. 34
8.8 Agent's Determination ............................................. 35
9. REPAYMENT AND REDUCTION ........................................... 35
9.1 Repayment of the Term Loan ........................................ 35
9.2 Repayment of Revolving Advances ................................... 35
9.3 Repayment of the Overall Facility ................................. 36
9.4 Reduction of Commitments .......................................... 36
<PAGE>
9.5 Mandatory Repayment from Disposal Proceeds and Equity Raisings .... 36
9.6 Voluntary Repayment of the Term Loan .............................. 38
10. CANCELLATION ...................................................... 38
10.1 Voluntary Cancellation ............................................ 38
10.2 Mandatory Cancellation ............................................ 39
11. CHANGES IN CIRCUMSTANCES .......................................... 39
11.1 Illegality ........................................................ 39
11.2 Inacased Costs .................................................... 40
11.3 Certificates ...................................................... 42
12. PAYMENTS .......................................................... 42
12.1 Time and Place .................................................... 42
12.2 Business Days ..................................................... 42
12.3 Indemnity and Breakage Costs ...................................... 43
12.4 Grossing-up ....................................................... 43
12.5 Mitigation ........................................................ 45
12.6 Prepayment Right .................................................. 45
12.7 Accounts .......................................................... 46
12.8 Borrower's Payments ............................................... 46
12.9 Banks' Payments ................................................... 46
12.10 Appropriation ..................................................... 47
12.11 Currency of Account ............................................... 47
13. REPRESENTATIONS AND WARRANTIES .................................... 47
13.1 Acknowledgement of Reliance ....................................... 47
13.2 Representations and Warranties .................................... 47
13.3 Repetition ........................................................ 50
14. UNDERTAKINGS ...................................................... 50
14.1 Information Undertakings .......................................... 50
14.2 Positive Covenants ................................................ 52
14.3 Negative Covenants ................................................ 53
14.4 Financial Undertakings ............................................ 56
15. DEFAULT ........................................................... 58
15.1 Defaults .......................................................... 58
15.2 Acceleration etc .................................................. 61
16. SET-OFF AND PRO RATA PAYMENTS ..................................... 61
16.1 Set-Off ........................................................... 61
16.2 Pro Rata Sharing .................................................. 62
17. THE AGENT AND THE BANKS ........................................... 63
17.1 Appointment and Duties ............................................ 63
17.2 Payments and Information Received ................................. 64
17.3 Defaults .......................................................... 64
17.4 Assumptions ....................................................... 64
17.5 Legal Procecdings ................................................. 65
17.6 No Liability ...................................................... 65
17,7 Credit Decisions .................................................. 65
17.8 Advisers .......................................................... 65
17.9 Relationship with Banks ........................................... 66
17.10 Agent's position as a Bank ........................................ 66
17.11 Indemnity ......................................................... 66
17.12 Resignation ....................................................... 66
17.13 Change of Office .................................................. 67
<PAGE>
17.14 Scope of Duties ................................................... 67
17.15 Consents .......................................................... 68
17.16 Evidence .......................................................... 68
17.17 Distribution of Proceeds of Enforcement ........................... 68
17.18 Net Limits ........................................................ 69
18. FEES AND EXPENSES ................................................. 69
18.1 Expenses .......................................................... 69
18.2 Agency Fees ....................................................... 70
18.3 Commitment Fee .................................................... 70
18.4 Deferred Fee ...................................................... 70
18.5 Facility Fee ...................................................... 70
18.6 Success Fee ....................................................... 71
18.7 Documentary Taxes Indemnity ....................................... 71
18.8 VAT ............................................................... 71
18.9 Indemnity Payments ................................................ 72
19. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE ........................ 72
19.1 Severance ......................................................... 72
19.2 Waivers ........................................................... 72
20. NOTICES ........................................................... 73
20.1 Method ............................................................ 73
20.2 Delivery .......................................................... 73
20.3 Addresses ......................................................... 73
20.4 Deemed Receipt .................................................... 74
20.5 Notices to the Banks .............................................. 74
21. ASSIGNMENTS AND TRANSFERS ......................................... 74
21.1 Benefit of Agreement .............................................. 74
21.2 Assignments and Transfers by the Borrowers ........................ 74
21.3 Assignments and Transfers by Banks ................................ 75
21.4 Disclosure of Information ......................................... 76
22. COUNTERPARTS ...................................................... 76
23. LAW ............................................................... 76
24. CURRENCY INDEMNITY ................................................ 77
SCHEDULE 1 THE BANKS ................................................... 78
SCHEDULE 2 DRAWDOWN NOTICE ............................................. 80
SCHEDULE 3 MANDATORY LIQUID ASSET COSTS FORMULA ........................ 81
SCHEDULE 4 FORM OF TRANSFER CERTIFICATE ................................ 83
SCHEDULE 5 THE GROUP ................................................... 87
SCHEDULE 6 DEED OF ACCESSION ........................................... 88
<PAGE>
THIS AGREEMENT is made on the 21st day of December 1995
BY:
(1) AUTOMATED SECURITY (HOLDINGS) PLC, a company incorporated under the laws
of England and Wales with registered number 321639 having its registered
office at The Clock House, The Campus, Hemel Hempstead, Hertfordshire HP2
7TL (the "Company");
(2) THE COMPANIES listed in Part A of Schedule 5;
(3) THE BANKS as defined below;
(4) LLOYDS BANK Plc of P.O. Box 560 Regent House, St. John's Road, Bedminster,
Bristol BS99 1PQ as the Agent (as such term is more particularly defined
below); and
(5) MIDLAND BANK plc of 3 Lower Thames Street, London, EC3R 6HA as the Working
Capital Bank (as such term is more particularly defined below).
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement the following expressions shall have the following
meanings (except where the context otherwise requires):
"Accounts" means:
(i) in relation to the Company, the audited consolidated accounts
(including all additional information and notes thereto) of the
Company and its Subsidiaries together with the relative directors,
report and auditors report; and
(ii) in relation to each Material Subsidiary from time to time, accounts
(including all additional information and notes thereto) to the
extent required by applicable laws audited together with the
relative directors' report and auditors' report;
"Additional Margin" means during the pe4od from and including the date
hereof to but excluding 30th June 1996 an additional margin of 1.00 per
cent. per annum on the amount by which the aggregate of the Overdraft
Outstandings and all Advances exceed (pound)81,641,000 computed on a
day-to-day basis with the Term Loan being taken into account on the basis
of an exchange rate of US$1.5916 to (pound)1;
<PAGE>
"Advance" means a Term Advance or a Revolving Advance;
"Agent" means Lloyds Bank Plc in its capacity as agent and each successor
Agent appointed from time to time under Clause 17.12;
"AIB" means Allied Irish Banks p.l.c.;
"AIB Facility" means the facility made available under the facility letter
dated 27th March 1995 between AIB and Modern Security Systems Limited (a
company incorporated in Ireland) (as amended from time to time);
"Alternative Currency" means US Dollars or any other currency other than
Sterling which is freely transferable and freely convertible into Sterling
of which deposits are readily available to each of the Banks in the London
Inter-Bank Market;
"Application Account" has the meaning ascribed to such term in Clause
9.5.6;
"API" means API Security Inc., a company incorporated under the laws of
State of California, having its principal office at 8550 Higuera Street,
Culver City CA 90232;
"ASC" means Automated Security Corporation, a company incorporated under
the laws of the State of Delaware, having its principal office at 8550
Higuera Street, Culver City CA 90232;
"ASHI" means Automated Security Holdings Inc, a company incorporated under
the laws of the State of Delaware;
"ASH Jersey" means ASH Capital Finance (Jersey) Limited;
"Auditors" means, in relation to each of the members of the Group, Binder
Hamlyn or, as the case may be, Arthur Andersen, or such other firm of
chartered accountants of international standing as shall have been duly
appointed as auditors of the relative company;
"Banks" means each of the banks and financial institutions listed in
Schedule 1, their respective successors in title and each Bank Transferee
and "Bank" shall be construed accordingly;
"Bank Transferee" has the meaning attributed thereto in Clause 21;
"Borrowers" means all and each of the Company, the companies listed in
part A of Schedule 5 and any other member of the Group that becomes a
party to the Agreement pursuant to Clause 3.4 and "Borrower" shall be
construed accordingly;
"Business Day" means a day on which banks and foreign exchange markets are
open in London for the transaction of business of the nature required by
this Agreement and also, in relation to a day on which payments are
required to be made in an
<PAGE>
Alternative Currency, in the place where the main domestic market for such
Alternative Currency is situated;
"Capital Expenditure" has the meaning attributed to it by Generally
Accepted Accounting Principles and, for the avoidance of doubt, shall not
include Vehicle Leases;
"Certified Copy" means, in relation to any document, a copy of such
document bearing the endorsement "Certified a true, complete and accurate
copy of the original, which has not been amended otherwise than by a
document, a Certified Copy of which is attached hereto" signed and dated
by a duly authorised officer of the company in question;
"Change of Control" means a change in the ownership of the issued share
capital of the Company, where any person (whether alone or together with
any associated person or persons) becomes the beneficial owner of shares
in the issued share capital of the Company carrying the right to exercise
more than 50 per cent. of the votes exercisable at a general meeting of
the Company (for the purposes of this definition, "associated person"
means, in relation to any person, a person who is either (a) acting in
concert (as defined in the City Code on Take-Overs and Mergers) with such
aforesaid person or (ii) a "connected person" as defined in Section 839 of
the Income and Corporation Taxes Act 1988 of such aforesaid person);
"Charging Group Members" means the Company and each of its Subsidiaries
from time to time which has granted, or is by the terms hereof to grant, a
Guarantee and Debenture and "Charging Group Member" shall be construed
accordingly;
"Committed Proportions" means in relation to reductions of the Term Loan
Facility and the Revolving Loan Facility, X% and in relation to the
Overdraft Facility Y% where:
X%= Total Sterling Commitments less Total Overdraft Commitments
----------------------------------------------------------- x100
Total Sterling Commitments
Y%= Total Overdraft Commitments
---------------------------- x 100;
Total Sterling Commitments
"Commitment" means, in relation to each Bank, its Term Loan Commitment,
its Revolving Loan Commitment and its Overdraft Commitment;
"Conditions Precedent" means each of the conditions set out in Clause 2;
"Convertible Capital Bonds" means the (pound)60,000,000 9 1/2 per cent.
Convertible Capital Bonds due 2006 issued by ASH Jersey and guaranteed on
a subordinated basis by the Company;
"Deed of Accession" means a deed substantially in the form set out in
Schedule 6;
"Default" means any of the events specified in Clause 15.1;
<PAGE>
"Default Occurrence" means any event, occurrence or omission which with
the passing of time, giving of notice or satisfaction of any other
condition, in each case, under Clause 15.1 would be a Default;
"Depreciation" has the meaning attributed to it by Generally Accepted
Accounting Principles and, for the avoidance of doubt, includes any losses
on cancelled contracts;
"Disposal" means a sale, transfer, or other disposal (including by way of
lease or otherwise) after the date hereof of all or any part of the assets
or property of any member of the Group whether by one transaction or a
series of transactions;
"Disposal Proceeds" means, in respect of a Disposal, the gross
consideration receivable by such company for such Disposal less all costs
and expenses including Tax directly incurred in respect of such Disposal
(which shall not include the success fees referred to in Clause 18.6 or in
clause 3 of the First Amendment and any yield premium payable in respect
of the US Loan Notes);
"Dormant Company" means a company which is dormant within the meaning of
Section 250(3) of the Companies Act 1985, the gross assets of which do not
exceed (pound)5,000 in value;
"Drawdown Date" means any date, being a Business Day, on which an Advance
is made, or is proposed to be made pursuant to a Drawdown Notice;
"Drawdown Notice" means a notice substantially in the form set out in
Schedule 2;
"EBITDA" means, for any period, the consolidated profit on ordinary
trading activities of the Group for that period before Taxation and Total
Debt Costs,
PLUS:
(i) the amount of Depreciation charged by the Group in such period;
(ii) the amount of intangible assets amortised or written off through the
Company's consolidated profit and loss account during such period;
and
(iii) to the extent not taken account of in (ii) above, the amount of the
most recent book value of an asset written off through the said
profit and loss account during such period on a Disposal of such
asset where the Disposal Proceeds in respect of such Disposal are
applied in accordance with the terms of this Agreement;
LESS:
(i) profit attributable to minority interests; and
<PAGE>
(ii) profit made on the Disposal (other than a Disposal permitted under
Clause 14.3(b)(i) to (iii)) of an asset in such period by a member
of the Group,
and for the avoidance of doubt, taking no account of:
(a) extraordinary items; and
(b) interest receivable and similar income;
"Encumbrance" means any mortgage, charge, assignment for the purpose of
security, pledge, lien, rights of set-off, arrangements for retention of
title to goods, or hypothecation or trust arrangement for the purpose of,
or which has the effect of, granting security or other security interest
of any kind whatsoever or any agreement, whether expressed to be
conditional or otherwise, to create any of the same or any agreement
having a commercial effect substantially similar to any of the foregoing
or any agreement to sell or otherwise dispose of any asset on terms
whereby such asset is or may be leased to or re-acquired or acquired by
any member of the Group;
"Engagement" means any performance guarantee, bond or other instrument of
suretyship or payment (in any case, not being a direct credit substitute
to which the Bank of England from time to time attributes a credit
conversion factor of 100 per cent. for the purpose of risk asset weighting
calculations pursuant to 89/647/EC of 18th December 1989, or any successor
thereto) issued, undertaken or made or, as the case may be, to be issued,
undertaken or made, by the Working Capital Bank under the Uncommitted
Engagements Facility;
"Engagement Amount" means, in respect of an Engagement, the maximum amount
of the aggregate actual and/or contingent liabilities of the Working
Capital Bank under such Engagement;
"Environment" means all or any of the following media; air (including air
within buildings or other structures and whether above or below ground),
land (including buildings and any other structures or erections in, on or
under it and any soil and anything below the surface of land), land
covered with water and water (including sea, ground and surface water);
"Environmental Laws" means all statutes, treaties and conventions,
directives, regulations and all codes of practice or conduct, circulars
and guidance notes having legal or judicial import or effect whether of a
criminal, civil or administrative nature, and the rules of common law,
relating to or concerning:
(i) pollution or contamination of the Environment;
(ii) harm, whether actual or potential to mankind, living organisms or
ecological systems;
(iii) the generation, manufacture, processing, distribution, use
(including abuse), treatment, storage, disposal, transport or
handling of Hazardous Materials; and
<PAGE>
(iv) the emission, leak, release or discharge into the Environment of
noise, vibntion, dust, flames, gas, odours, smoke, steam, effluvia,
heat, light, radiation (of any kind), infection, electricity or any
Hazardous Material and any matter or thing capable of constituting a
nuisance or any actionable tort of any kind in respect of such
matters;
"Excluded Disposal" means a Disposal referred to in any of Clauses
14.3(b)(i)-(v);
"Existing Facilities" means each of the facilities referred to in Clauses
4.1.1 (a)-(c) inclusive and 4.2.2;
"FASB" means the Financial Accounting Standards Board;
"Facilities" means all and each of the Term Loan Facility, the Revolving
Loan Facility, the Overdraft Facility and the Uncommitted Engagements
Facility and "Facility" shall be construed accordingly;
"Fees Letter" means the letter of even date herewith from the Agent to the
Borrowers relating to certain fees payable to the Agent and the Security
Trustee by the Company in relation to this Agteement and the Intercreditor
Agreement, being described on its face as the Fees Letter;
"Final Repayment Date" means 2nd January 1998 PROVIDED THAT if by 2nd
January 1998 either:
(i) the Company (and/or other members of the Group) has received the
Sterling Equivalent (calculated as at the date of receipt) of
US$100,000,000 in respect of the subscription for a new issue of
share capital (a "New Equity Raising") and applied the same in the
Sharing Proportions, in repayment of the Facilities and the US Loan
Notes; or
(ii) a member of the Group makes a Disposal which raises Disposal
Proceeds of at least US$50,000,000 (or its equivalent) ("Major
Disposal") and such Disposal Proceeds are applied in accordance with
Clause 9.5;
then the Final Repayment Date shall be 2nd April 1998;
"Finance Lease" means any lease, hire agreement, credit sale agreement,
purchase agreement, conditional sale agreement or instalment sale and
purchase agreement which should be treated in accordance with SSAP 21 or
FASB 13 as appropriate (or any successor thereto) as a finance lease or in
the same way as a finance lease;
"Finance Lease Expenditure" means the capital value of any assets the
subject of a Finance Lease to which a company within the Group is a party;
"Financial Year" in relation to a company has the meaning ascribed to such
expression by section 223 of the Companies Act 1985;
<PAGE>
"First Amendment" means the document referred to in Clause 2(a)(viii);
"Financing Documents" means this Agreement, the Side Letter, the
Intercreditor Agreement, the Security Documents and the Fees Letter;
"FRS" together with a number means the financial reporting standard issued
by the Accounting Standards Board and identified by reference to that
number;
"Generally Accepted Accounting Principles" means, in relation to a
company, accounting principles, concepts, bases and policies generally
adopted and accepted in the jurisdiction of its incorporation;
"General Terms" means the general terms and conditions of Midland Bank
plc, in the agreed form;
"Group" means the Company and each of its Subsidiaries from tune to time;
"Guarantee" means a guarantee in the agreed form;
"Guarantee and Debenture" means a guarantee and debenture in the agreed
form;
"Hazardous Materials" means any element or substance, whether natural or
artificial, and whether consisting of gas, liquid, solid or vapour,
whether on its own or in any combination with any other element or
substance, which is listed, identified, defined or determined by any
Environmental Law to be, to have been, or to be capable of being or
becoming harmful to mankind or any living organism or damaging to the
Environment;
"Indebtedness" means, in relation to any person, its obligation (whether
present or future, actual or contingent and whether incurred as principal
or surety) for the payment or repayment of money (whether in respect of
interest, principal or otherwise) incurred in respect of any of
(i) monies borrowed or raised;
(ii) any bond, note, loan stock, debenture or similar instrument;
(iii) acceptance credit, bill discounting, note purchase, factoring
facilities or documentary credit facilities;
(iv) payment obligations under Finance Leases;
(v) guarantees, bonds, stand-by letters of credit or other similar
instruments issued in connection with the pefformance of contracts;
(vi) interest rate or currency swap agreements or any other hedging
instrument in respect of interest rates or currencies;
<PAGE>
(vii) any arrangement entered into primarily as a method of raising
finance pursuant to which any asset disposed of by a member of the
Group is to be or may be re-acquired or acquired by a member of the
Group (whether following the exercise of an option or otherwise);
and
(viii) counter-indemnities, guarantees or other assurances against
financial loss in respect of the liability or obligation of any
person falling within any of paragraphs (i) to (vii) above;
"Intercreditor Agreement" means the intercreditor agreement executed, or
to be executed, by the Company, the Agent, the Banks, the Working Capital
Bank and the US Loan Note Holders;
"Interest Date" means the last day of an Interest Period;
"Interest Period" means each period determined in accordance with Clause
8.2 or, as the case may be, Clause 8.3 for the purpose of calculating
interest on Advances or overdue amounts respectively;
"Issue Date" means any date, being a Business Day on which an Engagement
is issued, or is to be issued, pursuant to an Engagement Request;
"Jersey Debenture" means the debenture dated 23rd August 1991 between the
Company and ASH Jersey setting out the terms and conditions of the loan of
(pound)58,250,000 made by ASH Jersey to the Company;
"Lending Office" means, in relation to each Bank, the lending office
details of which are set out in Schedule 1 or the relative Transfer
Certificate or such other lending office in the United Kingdom through
which its Commitment is maintained and through which its Participation is
made and maintained under this Agreement;
"LIBOR" in relation to any Advance or overdue sum means, on any day, the
London Interbank Offered Rate for deposits in the specified currency,
being determined by the Agent to be either:
(i) the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of 0.005 per cent. per
annum) of the offered quotations for the specified term which appear
on the relevant page (being currently page "LIBP" in the case of
Sterling and page "LIBO" in the case of Alternative Currencies) of
the Reuter Monitor Money Rates Service for the display of the London
Interbank Offered Rates in such currency of leading banks (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 the London Interbank Offered Rates in such currency of
leading banks as the Agent after consultation with the Banks and the
Company shall select) as at 11.00 a.m. if the relative currency is
Sterling, on the first day of the relative Interest Period or, where
the relative currency is an Alternative Currency, 2 Business Days
prior to such first day; or
<PAGE>
(ii) if less than two quotations for the specified currency or the
specified term appear on such display, or if no such display rate is
then available for such period or currency and, at such time, the
Agent has not selected any alternative service as contemplated in
(i) above, the arithmetic mean (rounded upwards, if not already such
a multiple, to the nearest whole multiple of 0.005 per cent. per
annum) of the respective rates notified to the Agent by each of the
Reference Banks as the rate at which it is offered deposits in an
amount approximately equal to the relevant Advance or overdue sum in
the specified currency and for the specified term by prime banks in
the London Interbank Market at 11.00 a.m. if the relative currency
is Sterling, on the first day of the relative Interest Period or,
where the relative currency is an Alternative Currency, 2 Business
Days prior to such first day,
and for the purpose of the definition "specified currency" means the
currency of such Advance or, as the case may be, overdue sum and
"specified term" means the term of such Advance or, as the case may be,
the period in respect of which LIBOR falls to be determined on that day in
relation to such overdue sum;
"Loan" means the Term Loan or the Revolving Loan;
"Major Disposal" has the meaning ascribed to such term in the definition
of Final Repayment Date;
"Majority Banks" means a majority in number of the Banks whose Sterling
Commitments comprise at least 51 per cent. of the Total Sterling
Commitments;
"Majority Creditors" means a majority in number (on the basis that an
institution can be counted once only) of the Banks, the Working Capital
Bank and the US Loan Notes Holders whom are owed not less than 51 per
cent. of the aggregate indebtedness under the Facilities and the US Loan
Notes;
"Mandatory Liquid Asset Costs" means, in relation to each Bank, the
additional cost to such Bank of compliance with the reserve asset ratio
from time to time required by the Bank of England expressed as a rate per
cent. per annum, in accordance with the formula set out in Schedule 3,
"Margin" means 1.50 per cent. per annum PROVIDED THAT the Margin shall
reduce to:
(i) 1.25 per cent. per annum as and from the date upon which the Total
Sterling Commitments are reduced to an amount not greater than
(pound)50,000,000;
(ii) 1.00 per cent. per annum as and from the date upon which the Total
Sterling Commitments are reduced to an amount not greater than
(pound)45,000,000; and
<PAGE>
(iii) 0.75 per cent. per annum as and from the date upon which the Total
Sterling Commitments are reduced to an amount not greater than
(pound)30,000,000;
"Material Adverse Effect" means a material adverse effect on:
(i) ability of any member of the Group to perform its payment
obligations under any of the Financing Documents; or
(ii) the financial or business condition of the Group taken as a whole;
"Material Subsidiary" means any Subsidiary of the Company whose gross
assets or turnover is greater than (pound)50,000 and the book value of the
assets of which exceeds 10 per cent. of the book value of the assets of
the Group or the net profits of which exceed 10 per cent. of the net
profits of the Group or the turnover of which exceeds 10 per cent. of the
turnover of the Group PROVIDED THAT if the aggregate Material Subsidiaries
and the Company do not account for at least 80 per cent. of the aggregate
book value of the assets of the Group and at least 80 per cent. of the
aggregate net profits of the Group and at least 80 per cent. of the
aggregate turnover of the Group, then the 10 per cent. requirement
referred to above shall be deemed to decrease in 1 per cent. increments to
the extent necessary in order that such 80 per cent. levels are satisfied
by the Material Subsidiaries and the Company (the said book values, net
profits and turnover to be determined at any relevant time by reference to
such Subsidiary's most recent annual audited financial statements and the
Group's then most recent annual Accounts delivered to the Agent under
Clause 14.1(a));
"New Equity Raising" has the meaning ascribed to such term in the
definition of Final Repayment Date;
"Original Sterling Amount" means:
(i) in relation to any Advance or any Engagement denominated in
Sterling, the amount of such Advance or, as the case may be, the
Engagement Amount of such Engagement; and
(ii) in relation to any Advance or any Engagement denominated in an
Alternative Currency, the Sterling Equivalent of such Advance or, as
the case may be, the Engagement Amount of such Engagement calculated
in respect of the Drawdown Date of such Advance or, as the case may
be, the Issue Date of such Engagement;
"Overdraft Commitment" means, in relation to each Bank, the principal
amount described as such set opposite its name in Schedule 1 or the
Schedule to any relative Transfer Certificate, in each case as reduced or
cancelled under the terms of this Agreement;
"Overdraft Facility" means the overdraft facility referred to in Clause
3.1.1 (a)(iii);
<PAGE>
"Overdraft Facility Limit" means, subject to Clauses 9 and 10,
(pound)3,609,782;
"Overdraft Outstandings" means, at any time, the aggregate of all amounts
of principal outstanding by way of overdraft under the Overdraft Facility
at such time less all credit balances which may be taken into account by a
Bank with an Overdraft Commitment for providing overdrafts on a net basis
for risk exposure purposes according to the Bank of England's requirements
from time to time;
"Participation" means in relation to a Bank and an Advance or a Loan, the
part of such Advance or such Loan, as the case may be, made available or
to be made available by such Bank and thereafter the part of such Advance
or such Loan, as the case may be, owing to such Bank from time to time;
"Permitted Encumbrance" means:
(a) any Encumbrances created under the Financing Documents;
(b) any liens arising in the ordinary course of trading activities;
(c) any agreement for retention of title to goods or any agreement to
sell or otherwise dispose of any asset on terms whereby such asset
is or may be leased or re-acquired or acquired, in each case,
arising in the ordinary course of trade;
(d) any rights of set-off arising by operation of law or as a result of
operating banking facilities entered into in the ordinary course of
trade on a net limit basis for cash management purposes;
(e) an Encumbrance over an asset of a company which becomes a Subsidiary
of the Parent (other than by reason of its incorporation) after the
date hereof being an Encumbrance which is in existence at the time
at which such company becomes such a Subsidiary but only if (i) such
Encumbrance was not created in contemplation of such company
becoming such a Subsidiary, (ii) the principal amount secured by
such Encumbrance has not been and shall not be increased and (iii)
such Encumbrance is discharged within 6 months of the date on which
such company becomes such a Subsidiary;
(f) an Encumbrance over an asset acquired by a Group Company after the
date hereof and subject to which such asset is acquired but only if
(i) such Encumbrance was not created in contemplation of its
acquisition by a Group Company, (ii) the amount thereby secured has
not been increased in contemplation of; or since the date of, its
acquisition by a Group Company and (iii) such Encumbrance is
discharged within 6 months of the date of its acquisition by a Group
Company;
(g) any Encumbrance which has been disclosed to the Agent prior to the
date of this Agreement and where the amount thereby secured has not
been increased above the amount so secured as at the date of such
disclosure;
<PAGE>
(h) any Encumbrance created after the date hereof over all or any of the
assets of Modern Security Systems Limited (a company incorporated in
Ireland) as security for a banking facility made available to such
company and which is committed for a period of at least 364 days;
and
(i) any other Encumbrances securing indebtedness, where the aggregate
value of assets the subject of such Encumbrances does not exceed
(pound)1,000,000;
"Permitted Indebtedness" means:
(i) Indebtedness outstanding under the Financing Documents;
(ii) Indebtedness outstanding under the US Loan Notes;
(iii) Indebtedness under the AIB Facility or a replacement committed
banking facility therefor on substantially the same terms and
conditions not exceeding the aggregate of (aa) the facility amount
of the AIB Facility at the date hereof and (bb) 10 per cent. of the
amount referred to in (aa) above;
(iv) Indebtedness under the Sanwa Facility or a replacement committed
banking facility therefor on substantially the same terms and
conditions not exceeding the aggregate of (aa) the facility amount
of the Sanwa Facility at the date hereof and (bb) 10 per cent. of
the amount referred to in (aa) above;
(v) Indebtedness between companies within the Group;
(vi) Indebtedness under (a) Finance Leases existing at the date hereof)
any Vehicle Lease, and (c) Finance Leases entered into after the
date hereof by members of the Group as lessees where the Finance
Lease Expenditure under such Finance Leases does not exceed, in
aggregate, (pound)2,000,000;
(vii) Indebtedness under agreements entered into, or to be entered into,
by the Company for the purpose of hedging the Company's interest
rate or other liabilities in relation to all or any part of the Term
Loan Facility and/or the US Loan Notes;
(viii)Indebtedness incurred by members of the Group under sale and
repurchase arrangements entered into in the ordinary course of trade
of the Group in respect of leases, or upgrades of existing leases,
in each case, entered into after the date hereof; and
(ix) Indebtedness payable on demand or within one year of the date of
incurrence and which is incurred by members of the Group
incorporated outside the United Kingdom for working capital purposes
where the
<PAGE>
aggregate principal amount of such Indebtedness does not exceed
(pound)1,000,000;
"PRICOA" means The Prudential Insurance Company of America;
"Oualifying Bank" means an institution which is recognised by the United
Kingdom Inland Revenue as carying on through its Lending Office for the
purposes hereof a bona fide banking business in the United Kingdom for the
purposes of section 349(3) of the Income and Corporation Taxes Act 1988;
"Quarter Day" means each of 28th February, 31st May, 31st August and 30th
November;
"Recurring UK Annual Rental Income" means, in respect of a period, the
annual UK rental income as stated in the Accounts of the Company for such
period which, for the avoidance of doubt, includes line revenue;
"Reference Banks" means the principal London offices of Midland Bank plc,
ABN AMRO Bank N.V. and Lloyds Bank Plc and such other Bank or Banks as
the Agent may (with the agreement of the Majority Banks and the Company)
select from time to time.
"Refinancing Date" means the date on which all of the Conditions Precedent
are satisfied;
"Relevant Date" has the meaning attributed to it in Clause 18.6;
"Revolving Advance" means an advance drawn down under the Revolving Loan
Facility and thereafter the principal amount of each such advance from
time to time outstanding;
"Revolving Commitment Period" means the period from and including the date
hereof to but excluding the date falling one month prior to the Final
Repayment Date;
"Revolving Facility Limit" means, subject to Clauses 9 and 10,
(pound)56,345,842;
"Revolving Loan" means, at any time, the aggregate of all Revolving
Advances then outstanding under the Revolving Loan Facility;
"Revolving Loan Commitment" means, in relation to each Bank, the principal
amount described as such set opposite its name in Schedule 1 or the
Schedule to any relative Transfer Certificate, in each case as reduced or
cancelled under the terms of this Agreement;
"Revolving Loan Facility" means the revolving loan facility referred to in
Clause 3.1.1(a)(ii);
"Sanwa" means Sanwa Bank California;
<PAGE>
"Sanwa Facility" means the facilities made available under the facility
agreement dated 27th September 1994 and 21st August 1995 between Sanwa and
API, as amended from time to time;
"SC" means Sonitrol Corporation, a company incorporated under the laws of
the State of Delaware, having its principal office at 1800 Diagonal Road
Suite, 180 Alexandria VA 22314;
"Security Documents" means:
(i) each Guarantee and Debenture executed by a company within the Group;
(ii) each Guarantee executed by ASC, ASHI, SMC and SC;
(iii) each Share Pledge executed by ASC and ASHI; and
(iv) any guarantees and documents creating security executed and
delivered after the date hereof as security for any of the
obligations and liabilities of any Borrower and the other companies
within the Group under any of the Financing Documents;
"Security Period" means the period starting on the date hereof and ending
on the date on which all of the obligations and liabilities of the members
of the Group under each of the Financing Documents are discharged in full
and none of the Agent, the Working Capital Bank and the Banks has any
continuing obligation in relation to the Facilities;
"Security Trustee" means Lloyds Bank Plc in its capacity as such as
appointed under the Intercreditor Agreement and any successor appointed
pursuant to Clause 3 of the Intercreditor Agreement;
"Share Pledge" means a pledge of shares, in the agreed form, executed, or
to be executed by each of ASC (under which it pledges to the Security
Trustee the shares of SC, ASHI and SMC) and ASHI (under which it pledges
to the Security Trustee 10 per cent of the shares of API);
"Sharing Proportions" has the meaning ascribed to such term in the
Intercreditor Agreement;
"Side Letter" has the meaning attributed to such term in Clause 2(a)(vii);
"SMC" means Sonitrol Management Corporation, a company incorporated under
the laws of the State of Delaware, having its principal office at 8 Campus
Circle Suite 150 Westlake TX 76262;
"SSAP" together with a number means the statement of standard accounting
practice issued by the Accounting Standards Board and identified by
reference to such number;
<PAGE>
"Sterling", "Pounds" and "(pound)" means the lawful currency for the
time being of the United Kingdom;
"Sterling Commitments" means, in respect of a Bank, at any time, the
aggregate of:
(i) the Revolving Loan Commitments and the Overdraft Commitments of such
Bank at such time; and
(ii) the equivalent in Sterling of the Term Loan Commitments of such Bank
at such time on the basis of an exchange rate of US$l.5916 to
(pound)1;
"Sterling Equivalent" means, in relation to an amount in an Alternative
Currency on the day on which the calculation falls to be made, the amount
of Sterling which could be purchased with such amount of such Alternative
Currency on the basis of the Agent's spot buying rate for Sterling with
such Alternative Currency at or about 11.00 a.m. on the second Business
Day immediately prior to that date;
"Subsidtary" has the meaning ascribed to it by section 736 of the
Companies Act 1985 and "Subsidiaries" shall be construed accordingly;
"Tangible Net Worth" means the aggregate amount of the paid up share
capital of the Company including amounts standing to the credit of the
share premium account and any capital redemption reserves plus or minus
the aggregate amount standing in the Group's capital and revenue reserves
(on a consolidated basis):
(a) adjusted as may be appropriate to take account of any variation in
such share capital account and share premium account since the date
to which such accounts shall have been made up;
(b) deducting any amounts attributable to any intangible asset included
as an asset in the consolidated balance sheet including amounts
attributable to goodwill;
(c) excluding any capital accounts or reserves derived from any writing
up of book value of any assets of a member of the Group above
historic cost less accumulated Depreciation at any time after 30th
November 1994;
(d) adding or deducting, as the case may be, any credit or debit balance
(but not to the extent that the same arises as a result of any
extraordinary items) on the Company's consolidated profit and loss
account attributable to the period in relation to which the
calculation falls to be made;
(e) deducting any profit made on a Disposal (other than a Disposal
permitted under Clause 14.3(b)(i) to (iii)) of any asset by a member
of the Group; and
<PAGE>
(f) adding the amount written off the most recent book value of an asset
on the Disposal of such asset where the Disposal Proceeds in respect
of such Disposal are applied in accordance with the terms of this
Agreement;
"Tax" includes all present and future taxes, charges, imposts, duties,
levies, deductions, withholdings or fees of any kind whatsoever, or any
amount payable on account of or as security for any of the foregoing, in
each case payable at the instance of or imposed by any statutory,
governmental, international, state, federal, provincial, local or
municipal authority, agency, body or department whatsoever or monetary
agency or European Community institution, in each case whether in the
United Kingdom or elsewhere, together with any penalties, additions,
fines, surcharges or interest relating thereto and "Taxes" and "Taxation"
shall be construed accordingly;
"Tax Liability" means in respect of any person:
(a) any liability or any increase in the liability of that person to
make any payment or payments of or in respect of Tax;
(b) the loss or setting-off against income, profits or gains or against
any Tax liability of any relief, allowance, deduction or credit in
respect of Tax which would otherwise have been available to that
person; and
(c) the loss or setting-off against any Tax liability of a right to
repayment of Tax which would otherwise have been available to that
person.
For the purposes of this definition any question of whether or not any
relief, allowance, deduction, credit or right to repayment of Tax has been
lost or set-off, and if so, the date on which that loss or set-off took
place, shall be conclusively determined by the relevant person's auditors;
"Tax on Overall Net Income" means, in relation to a Bank, Tax (other than
Tax deducted or withheld from any payment) imposed on such Bank on its net
income by the jurisdiction in which either its Lending Office or its head
office is situated;
"Term Advance" means the advance drawn down under the Term Loan Facility
and thereafter the principal amount of each such advance from time to time
outstanding and each advance into which a Term Advance is split pursuant
to Clause 8.2.4;
"Term Loan" means, at any time, the aggregate of all Term Advances then
outstanding under the Term Loan Facility;
"Term Loan Commitment" means, in relation to each Bank, the principal
amount described as such set opposite its name in Schedule 1 or the
Schedule to any relative Transfer Certificate, in each case as reduced or
cancelled under the terms of this Agreement;
"Term Loan Facility" means the term loan facility referred to in Clause
3.1.1 (a)(i);
<PAGE>
"Total Debt Costs" means, in relation to a period of time, the aggregate
of:
(i) all interest, fees, commissions and other periodic financing charges
accrued due in relation to Indebtedness by any member of the Group
during such period excluding (a) the fees and commissions payable
pursuant to Clause 18 and Clause 3 of the First Amendment, (b) all
bank charges and transmission costs incurred in connectionn with the
Overdraft Facility and any overdraft provided under the Existing
Facilities, and (c) any professional fees incurred in connection
with this Agreement and the US Loan Notes;
(ii) all amounts accrued due by members of the Group during such period
under interest rate protection agreements (less any amounts accrued
due to members of the Group during such period under interest rate
protection agreements); and
(iii) the interest element of all rentals or, as the case may be, other
payments accrued due in such period under any Finance Lease (not
being Vehicle Leases) to which any member of the Group is a party;
less, all interest and other similar income accrued to members of the
Group during such period;
"Total Gross Debt" means the aggregate of
(i) the Term Loan;
(ii) the Revolving Loan;
(iii) the Overdraft Outstandings;
(iv) the amount of the US Loan Notes as shown in the Company's balance
sheet;
(v) Indebtedness of members of the Group relating to the payment or
repayment of principal in respect of paragraphs (i) to (iii)
inclusive in the definition of Indebtedness but not including
the items referred to at (i)-(iv) above;
(vi) the amount of the Convertible Capital Bonds as shown in the
Company's balance sheet; and
(vii) the capital element of all rentals or, as the case may be, other
payments payable under all Finance Leases (not being Vehicle Leases)
to which any member of the Group is a party,
PROVIDED THAT any amount standing to the credit of an Application Account
(as defined herein or the US Loan Notes Instrument) and the Disposal
Proceeds of the Disposals of Modern Vitalcall Limited and Modern
Integrated Services shall be
<PAGE>
assumed to have been applied against the Facilities and the US Loan Notes
as required by the terms of this Agreement, the Existing Facilities and
the US Loan Note Instrument;
"Total Overdraft Commitments" means the aggregate of the Banks' Overdraft
Commitments;
"Total Revolving Loan Commitments" means the aggregate of the Banks'
Revolving Loan Commitments;
"Total Sterling Commitments" means the aggregate of the Banks' Sterling
Commitments;
"Total Term Loan Commitments" means the aggregate of the Banks' Term Loan
Commitments;
"Transfer Certificate" means a transfer certificate in substantially the
form set out in Schedule 4;
"UITF" means together with a number the Urgent Issues Task Force issued by
the Accounting Standard Board and identified by reference to such number;
"Uncommitted Engagements Facility" means the engagements facility referred
to in Clause 3.1.1(b);
"Uncommitted Engagements Facility Limit" means, subject to Clauses 9 and
10, (pound)1,500,000;
"US Dollars" and "US$" means the lawful currency for the time being of the
United States of America;
"US Loan Note Holders" means the holders for the tune being of the US Loan
Notes;
"US Loan Notes" means the Company's $60,721,638, 8.28 per cent. senior
notes due 1998;
"US Loan Notes Instrument" means the Note Agreement dated as of May 27,
1994 between the Company and PRICOA as amended by the First Amendment;
"VAT" means value added tax as provided for in the Value Added Tax Act
1994 and legislation (whether delegated or otherwise) supplemental thereto
or in any primary or secondary legislation promulgated by the European
Community or any official body or agency thereof and any similar or
turnover Tax replacing or introduced in addition to any of the same;
"Vehicle Leases" means all types of leases of vehicles accounted for in
the Company's Accounts at the date of this Agreement as not being Finance
Leases
<PAGE>
whether or not such accounting treatment continues after the date of this
Agreement; and
"Working Capital Bank" means Midland Bank plc.
1.2 Clause Headings
Clause headings are for convenience of reference only and shall not affect
the construction of any of this Agreement.
1.3 Interpretation
In this Agreement, unless the context otherwise requires:
(a) references to this Agreement include the Schedules;
(b) references to Clauses and Schedules are to be construed as
references to the Clauses of, and Schedules to, this Agreement as
amended from time to time;
(c) references to any person shall be construed so as to include that
person's assigns, transferees or successors in tide;
(d) references to statutes and other legislation shall include all
re-enactments and amendments thereof;
(c) references to (or to any specified provisions of) any Financing
Document or any other document shall be construed as references to
such Financing Document, that provision or that document as amended
or novated or supplemented, as the case may be, from time to time;
(d) references to a document being in the "agreed form" are to the form
of such document as is initialled by Messrs. Wilde Sapte on behalf
of the Agent and Messrs. Clifford Chance on behalf of the Company as
being in the agreed form for the purposes of this Agreement;
(g) accounting terms shall be construed so as to be consistent with
Generally Accepted Accounting Principles;
(h) references to the singular shall include the plural and vice versa
and references by way of male, female or neuter pronoun shall
include references to all genders;
(i) the words "including" and "in particular" shall be construed as
being by way of illustration or emphasis only and shall not be
construed as, nor shall they take effect as, limiting the generality
of any foregoing words; and
<PAGE>
(j) save where the contrary is indicated, where there is a reference in
this Agreement to any amount, limit or threshold specified in
Sterling, in ascertaining whether or not such amount, limit or
threshold has been attained, broken or achieved, as the case may be,
non-Sterling amounts shall be counted on the basis of the Sterling
Equivalent thereof
2. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement, none of the Agent,
the Banks and the Working Capital Bank shall be under any obligation
whatsoever to make the Facilities available unless each of the following
conditions are fulfilled on or prior to 22nd December 1995:
(a) the Agent shall have received each of the following in form and
substance satisfactory to it:
(i) a Certified Copy of the certificate of incorporation (and any
relative certificate of incorporation on change of name) and
the memorandum and articles of association (or the equivalent
constitutional documents) of each company listed in Part A of
Schedule 5;
(ii) a Certified Copy of the board minutes and resolutions of each
company listed in Part A of Schedule 5 approving and
authorising the execution, delivery and performance of each of
the Financing Documents to which such company is a party on
the terms and conditions thereof and authorising a person or
persons to sign or otherwise attest the due execution of such
documents and any other documents to be executed or delivered
by such company pursuant thereto together with a certificate
of a duly authorised officer of such company setting out the
names and signatures of the persons authorised to sign such
documents on behalf of such company;
(iii) Certified Copies of all consents, licences, approvals or
authorisations of any governmental or other authority, bureau
or agency required by each company listed in Part A of
Schedule 5 in connection with the execution, delivery,
performance, validity or enforceability of the Financing
Documents or any document to be delivered thereunder;
(iv) the Fees Letter duly accepted by the Company together with the
fees payable on the date hereof pursuant to Clause 18;
(v) a legal opinion from Messrs. O'Sullivan Graev & Karabell LLP;
(vi) a legal opinion from Messrs. Mourant du Feu & Jeune;
<PAGE>
(vii) a letter from the Company addressed to the Agent, the Banks
and the Working Capital Bank regarding certain ancillary
matters (the "Side Letter"); and
(viii)a first amendment in respect of the US Loan Notes Instrument
duly executed by the parties thereto together with a copy of
the Effective Date Notice (as defined therein); and
(b) the Security Trustee shall have received each of the following in
form and substance satisfactory to it:
(i) a Guarantee and Debenture duly executed by each of the Company
and the companies listed in Part A of Schedule 5;
(ii) a Guarantee duly executed by each of ASC, SMC, ASHI and SC;
(iii) a Share Pledge duly executed by ASC in respect of all the
shares of SMC, SC and ASHI;
(iv) a Share Pledge duly executed by ASHI over not more than 10 per
cent of the shares of API; and
(v) the Intercreditor Agreement duly executed by the parties
thereto;
together with, in each case, all documents deliverable therewith.
3. FACILITIES
3.1 Facilities
3.1.1 Upon and subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties in Clause 13:
(a) the Banks agree to make available:
(i) to the Company a US Dollar term loan facility in the maximum
principal amount of US$40,000,000;
(ii) to the Company a multi-currency revolving loan facility in the
maximum principal amount of (pound)56,345,842; and
(iii) to the Borrowers a Sterling overdraft facility in the maximum
principal amount of (pound)3,609,782; and
<PAGE>
(b) the Working Capital Bank agrees to make available to the Borrowers
an uncommitted multi-currency engagements facility in the maximum
principal amount of (pound)1,500,000.
3.1.2 For the avoidance of doubt, it is hereby declared that, notwithstanding
any other provision of this Agreement:
(i) the Term Loan shall not, at any time, exceed the Total Term Loan
Commitments;
(ii) the Original Sterling Amount of all Revolving Advances shall not, at
any time, exceed the Total Revolving Loan Commitments;
(iii) the Overdraft Outstandings shall not, at any time, exceed the Total
Overdraft Commitments; and
(iv) the Original Sterling Amount of all the Engagements shall not, at
any time, exceed the Uncommitted Engagements Facility Limit.
3.2 Obligations Several
3.2.1 The obligations of each of the Banks and the Working Capital Bank under
this Agreement are several.
3.2.2 The failure of any of the Agent, the Banks and the Working Capital Bank to
carry out its obligations under this Agreement shall not relieve any other
party hereto of any of its obligations and liabilities under this
Agreement.
3.2.3 None of the Banks, the Agent and the Working Capital Bank shall be
responsible for the obligations of any other Bank, the Working Capital
Bank or the Agent under this Agreement.
3.3 Rights Several
3.3.1 Without prejudice to the provisions of this Agreement relating to or
requiring action by all or any of the Banks, the rights of each of the
Banks, the Working Capital Bank and the Agent are several and all amounts
due, and obligations owed, to each of them are separate and independent
debts or, as the case may be, obligations.
3.3.2 Each Bank, the Working Capital Bank and the Agent may, except as otherwise
stated in this Agreement, separately enforce its rights under this
Agreement.
3.4 Additional Borrowers
3.4.1 The Company may, on giving written notice to the Agent, nominate a member
of the Group incorporated in England and Wales as an additional Borrower
for the purposes of the Overdraft Facility and the Engagement Facility.
<PAGE>
3.4.2 A company wishing to become an additional Borrower shall execute and
deliver a Deed of Accession to the Agent together with all the documents
referred to in the Schedule to such Deed of Accession, each in form and
substance satisfactory to the Agent.
3.4.3 A company shall accede hereto as a Borrower on the Agent counter-signing
the relevant Deed of Accession.
4. PURPOSE
4.1 Purpose of the Term Loan Facility
4.1.1 The proceeds of the Term Loan Facility shall be used to refinance:
(a) the facilities made available under the facility agreement dated 19th May
1989 made between the Company, Lloyds Bank Plc as tender agent and
facility agent, certain banks and tender panel members (as amended);
(b) the bilateral facility made available under the facility agreement dated
28th March 1995 between ABN Amro Bank N.V. and the Company (as amended);
and
(c) the bilateral facility made available under two letters dated 10th October
1989 and 23rd October 1991 respectively addressed by Barclays Bank PLC to
the Company (as amended).
4.1.2 The Term Loan Facility is available for utilisation by way of a single
Term Advance.
4.1.3 Each of the parties hereto agrees that upon the first Term Advance being
made each of the facilities referred to in Clauses 4.1.1 (a)-(c) inclusive
shall be automatically discharged and cancelled and subject to Clauses
5.6.9 and 5.6.10, for the avoidance of doubt, all obligations and
liabilities of the Banks and the Company in respect thereof shall be
automatically discharged.
4.2 Purpose of the Revolving Loan Facility, the Overdraft Facility and the
Engagements Facility
4.2.1 The proceeds of Revolving Advances may be used:
(i) for the same purpose as the Term Loan Facility;
(ii) for the general working capital purposes of the Group (but not to
make prepayment of the Term Loan); and
(iii) to repay maturing Revolving Advances.
4.2.2 The Overdraft Facility shall be used to refinance the overdraft and
ancillary facilities made available pursuant to two letters dated 24th
February 1994 and 1st September
<PAGE>
1994 respectively (as amended) addressed by Midland Bank plc to certain
members of the Group but not to make prepayments of the Term Loan.
4.2.3 Each of the parties hereto agrees that upon the first drawing of a Term
Advance the facilities made available under the two letters referred to in
Clause 4.2.2 shall be automatically discharged and cancelled and, for the
avoidance of doubt, the future rights and obligations of the Company and
Midland Bank plc in respect thereof shall be automatically discharged.
4.2.4 The Uncommitted Engagements Facility shall be used for the general working
capital purposes of the Group.
4.3 Undertaking by the Borrowers
Each Borrower undertakes that it will use the Facilities only as permitted
by this Clause 4.
4.4 No Liability
None of the Agent, the Working Capital Bank nor any of the Banks shall be
concerned as to the use or application of the proceeds of the Advances or
the use or applications of amounts made available under the Overdraft
Facility or the Uncommitted Engagements Facility.
5. THE TERM LOAN FACILITY AND THE REVOLVING LOAN FACILITY
5.1 Utilisation of the Term Loan Facility
Subject to the other terms of this Agreement, the Term Loan Facility shall
be drawn down in one Term Advance of US$40,000,000 when requested by the
Company by means of a Drawdown Notice in accordance with Clause 5.3.
5.2 Utilisation of the Revolving Loan Facility
Subject to the other terms of this Agreement, Revolving Advances shall be
made to the Company at any time during the Revolving Commitment Period
when requested by the Company by means of a Drawdown Notice in accordance
with Clause 5.3.
5.2.2 Any portion of the Revolving Loan Facility which shall remain unused at
the close of business in London on the last day of the Revolving
Commitment Period shall be automatically cancelled at that time and the
Revolving Facility Limit and the Total Revolving Loan Commitments will be
reduced accordingly.
5.2.3 Revolving Advances may be denominated in Sterling or an Alternative
Currency but shall, unless the Agent shall agree otherwise, be in an
Original Sterling Amount of at least (pound)5,000,000 and be an integral
multiple of:
(i) if in Sterling, (pound)1,000,000;
<PAGE>
(ii) if in US Dollars, US$1,000,000; and
(iii) if in any other Alternative Currency, such other multiple as the
Agent and the Company may agree.
5.2.4 No Revolving Advance shall be made if it would result in Revolving
Advances being outstanding with more than 4 different Interest
Dates.
5.3 Drawdown of Advances
5.3.1 Subject to Clause 5.6, whenever the Company wishes an Advance to be
made, it shall give a Drawdown Notice to the Agent to be received
not later than 3.30 p.m. (London time), in the case of an
Alternative Currency, three (3) Business Days prior to, but in the
case of Sterling, one (1) Business Day prior to, the relative
Drawdown Date or such shorter period as the Agent may allow PROVIDED
THAT no Drawdown Notice maybe served in respect of an Advance and no
Advance will be made:
(a) unless the Conditions Precedent shall have been satisfied; or
(b) if a Default or Default Occurrence has occurred and is
continuing or if a Default would occur on the making of such
Advance; or
(c) unless the representations and warranties deemed to be
repeated pursuant to Clause 13.3 on the relative Drawdown Date
are, or will be, true and accurate on the date on which the
relative Drawdown Notice is served and on the relative
Drawdown Date; or
(d) in respect of a Revolving Advance, if the making of such
Revolving Advance would cause the aggregate Original Sterling
Amount of all Revolving Advances to be greater than the
Revolving Facility Limit.
5.3.2 Subject always to the other terms of this Agreement, a
Drawdown Notice shall be irrevocable and the Company shall be
obliged to borrow in accordance with its terms.
5.3.3 Advances shall be made only on a Business Day.
5.4 Participations and Payments
5.4.1 Subject always to the other terms of this Agreement (including Clause
5.6), each Bank acting through its Lending Office, agrees to contribute
its Participation in each Advance, in, subject to Clause 7, the currency
of such Advance, the amount of its Participation being that proportion
which its unutilised Term Loan Commitment or Revolving Loan Commitment, as
the case may be, bears to the unutilised part of the Total Term Loan
Commitments or the Total Revolving Loan Commitments, as the case may be,
on the relative Drawdown Date.
5.4.2 Subject to Clause 5.6, each Bank shall on the relative Drawdown Date
advance to the Company its Participation in the requested Advance by
making available to the
<PAGE>
Agent to such account as the Agent may have previously specified for this
purpose, not later than 11.00 am. (London time) (or 11.00a.m. local time
in the principal financial centre of the relevant Alternative Currency) on
such date in immediately available funds, an amount in the relevant
currency equal to such Participation and, subject to receiving the same,
the Agent will advance such amount to the Company or, as its directs, as
requested in the relative Drawdown Notice.
5.5 Drawdown Indemnity
If for any reason any Advance (or part thereof) is not made to the Company
on a Drawdown Date in accordance with the relative Drawdown Notice, the
Company shall indemnify each of the Banks in accordance with Clause 12.3.
5.6 Initial Funding
5.6.1 This Clause 5.6 applies notwithstanding any other provision hereof.
5.6.2 As at the date of this Agreement, there are advances (the "Existing
Advances") outstanding under those of the Existing Facilities referred to
in Clauses 4.1.1 (a)-(c) inclusive which mature on, respectively, 15th
January 1996, 3rd, 4th and 9th April 1996. The Existing Advances are to be
refinanced with the proceeds of the Term Advance of US$40,000,000 and the
first Revolving Advances in an aggregate amount up to the Revolving
Facility Limit (together the "First Advances"). On the Refinancing Date,
the Existing Advances shall be deemed to be refinanced with the proceeds
of the First Advances by the Banks on the basis that each Bank refinances
that part of the Existing Advances owed to such Bank and that the Interest
Periods relating to such Bank's Participation in the First Advances have
Interest Dates which are the same as those parts of the Existing Advances
which it refinances.
5.6.3 In respect of any part of the First Advances with an Interest Date of 3rd
or 4th April 1996, on such date, that part shall be deemed to be
refinanced with a Participation of the relevant Banks in an Advance with a
Interest Period expiring on 9th April 1996.
5.6.4 In respect of any part (the "Short Term Part") of the First Advances with
a corresponding Interest Date of 15th January 1996, on such date, the
Short Term Part shall be deemed to be refinanced with a Participation of
the relevant Banks in an Advance with an Interest Period expiring on 31st
March 1996. On 31st March 1996 the Short Term Part, to the extent not
applied in repayment and permanent reduction, of the Facilities shall be
deemed to be refinanced with a Participation of the relevant Banks in an
Advance with an Interest Period expiring on 30th June 1996.
5.6.5 The provisions of Clauses 5.6.2, 5.6.3 and 5.6.4 shall have automatic
effect and shall not require the service of any Drawdown Notice by the
Company.
5.6.6 On and from 9th April 1996 all Advances, other than those forming all or
part of the Short Term Part, shall be made and funded in accordance with
the other terms of this Agreement.
<PAGE>
5.6.7 If, prior to 30th June 1996, the Agent serves notice under Clause 15.1,
the Banks shall promptly make such payments amongst themselves in order to
make their Participations in Advances what they would have been but for
Clauses 5.6.2 to 5.6.6 inclusive on the basis of the then current exchange
rates.
5.6.8 Prior to 30th June 1996, all prepayments of the Loans shall be applied as
they would have been if the relevant prepayment was made after 30th June
1996.
5.6.9 Interest on the First Advances (other than the Short Term Part) at the
rate currently applicable to the Existing Advances shall be paid on 5th
January 1996 and on the Interest Dates relating thereto and shall be
deemed to have accrued from the date on which the interest periods current
at the date hereof for the Existing Advances commenced.
5.6.10 Any commitment commission accrued but unpaid on undrawn amounts under the
Existing Facilities shall be paid by the Company on the date or dates it
would have been payable pursuant to the terms of the Existing Facilities.
5.6.11 Each of the Banks hereby authorise, and instruct the Facility Agent, to
transfer on the Refinancing Date, to the credit of any current account of
the Company which forms part of the Overdraft Facility, any monies
standing to the credit of a suspense account held with the Facility Agent
in connection with the Existing Facilities.
6. THE OVERDRAFT FACILITY AND THE UNCOMMITTED ENGAGEMENTS FACILITY
6.1 Nature of Overdraft Facility
6.1.1 The Overdraft Facility is made available to the Borrowers in accordance
with this Clause 6 and the General Terms.
6.1.2 No utilisation of the Overdraft Facility may be made prior to the
Refinancing Date and on the Refinancing Date all amounts outstanding under
the overdraft facilities forming part of the Existing Facilities shall be
deemed to have been made available under the Overdraft Facility and shall
automatically be treated thereafter as outstanding under the Overdraft
Facility.
6.1.3 A Borrower wishing to utilise the Overdraft Facility shall complete such
mandate and other documents as the relevant Bank shall reasonably require.
6.1.4 The Overdraft Facility shall cease to be available on the Final Repayment
Date or such earlier date on which it is cancelled or terminated in
accordance with the terms hereof.
6.2 Utilisation or Overdraft Facility
6.2.1 Subject to the other terms of this Agreement, each Bank, to the extent of
its Overdraft Commitment, agrees to make the Overdraft Facility available
on a
<PAGE>
revolving basis to the Borrowers to be utilised on any Business Day by way
of overdraft on usual banking terms PROVIDED THAT, subject to Clause
6.2.2, no demand for repayment shall be made in respect thereof other than
in accordance with Clause 15.2.
6.2.2 Notwithstanding Clause 6.2.1, as and from any date on which the Overdraft
Outstandings exceed the Overdraft Facility Limit all amounts outstanding
under the Overdraft Facility shall automatically become repayable on
demand made by the Bank which makes available the relevant overdraft under
the Overdraft Facility.
6.2.3 No utilisation of the Overdraft Facility under Clause 6.2.1 shall be made
if it would result in the amounts outstanding by way of overdraft under
the Overdraft Outstandings exceeding the Overdraft Facility Limit.
6.2.4 For the avoidance of doubt, a Bank may, without liability, return cheques
unpaid and reflise to honour direct debits, Bankers Automated Clearing
System facilities, standing orders and any other payment orders if the
payment of such items would result in a breach of Clause 6.2.3.
6.3 Utilisation or the Uncommitted Engagements Facility
6.3.1 The Uncommitted Engagements Facility is uncommitted and the Working
Capital Bank shall not be obliged to issue, or enter into, any Engagement.
6.3.2 The Engagements Facility shall be available on normal banking terms
applicable to engagements and be subject to the General Terms.
6.3.3 Without prejudice to Clause 7.1 each Engagement will be denominated in
Sterling or an Alternative Currency.
6.3.4 An Engagement will only be issued or entered into on a Business Day.
6.3.5 Each Borrower hereby unconditionally and irrevocably agrees and undertakes
to the Working Capital Bank as follows.
(a) it will at all times indemnify the Working Capital Bank and keep the
Working Capital Bank indemnified from and against all actions,
suits, proceedings, claims, demands, liabilities, damages, costs,
expenses, losses and charges whatsoever in relation to or arising
out of any Engagement entered into, or issued, at the request of
such Borrower and such Borrower will pay the Working Capital Bank on
demand the amount of all payments made (whether directly or by way
of set-off, counterclaim or otherwise howsoever) and all losses,
costs and expenses suffered or incurred from time to time by the
Working Capital Bank under or by reason or in consequence of any
such Engagement and any of the aforesaid indemnities relating
thereto;
(b) save in the case of negligence, fraud or willful default on the part
of the Working Capital Bank:
<PAGE>
(i) the Working Capital Bank is hereby irrevocably authorised by
each Borrower to comply with the terms of any demand served or
purporting to be served on the Working Capital Bank pursuant
to any Engagement without any reference to, or lurther
authority from, any Borrower and without any enquiry by the
Working Capital Bank into the justificationfor such. demand or
the validity thereof; and
(ii) each Borrower further agrees that any payment which the
Working Capital Bank shall make in accordance or purporting to
be in accordance with such a demand shall be binding on each
Borrower and be accepted by such Borrower as conclusive and
binding evidence that the Working Capital Bank was liable to
comply with the terms of such demand and was liable to do so
in the manner and for the amount in which the Working Capital
Bank effected such compliance;
(c) save as specifically provided in Clause 6.3.5(b) the liability of
each Borrower under this Clause 6.3.5 shall not be discharged,
lessened or impaired by any time being given or by any thing being
done or other circumstance whatsoever which, but for this provision,
would or might operate to exonerate or discharge such Borrower; and
(d) the indemnity contained in this Clause 6.3.5 shall constitute and be
a continuing security to the Working Capital Bank and the said
indemnity shall extend to each Engagement as it may, from time to
time, be varied, modified, amended or extended.
6.3.6 Each Borrower hereby agrees that it shall pay to the Working Capital Bank
interest on the amount of each payment, loss, cost and expense made,
suffered or incurred from time to time by the Working Capital Bank under
or by reason or in consequence of any Engagement entered into or issued at
the request of such Borrower and any of the indemnities contained in
Clause 6.3.5 from and including the date upon which such payment, loss,
cost or expense is made, suffered or incurred as aforesaid up to and
including the date upon which payment or reimbursement of such amount is
demanded from such Borrower. The amount of such interest shall be
calculated in accordance with the provisions of Clause 8.3. For the
avoidance of doubt, interest on sums demanded under the provisions of
Clause 6.3.5 shall also accrue in accordance with Clause 8.3.
7. AVAILABILITY OF ALTERNATIVE CURRENCIES
7.1 Non-Availability
If, before 10.00 a.m. (London time) on the second Business Day prior to
the Drawdown Date relative to an Advance which it is proposed be
denominated in an Alternative Currency, the Agent receives notice from a
Bank that:
<PAGE>
(i) it is reasonably unable to obtain sufficient funds necessary to
find its Participation in such Advance in the ordinary course of
business in the London Inter-Bank Market; or
(ii) central bank or other governmental authorisation in the country of
the proposed Alternative Currency is required to permit its use by
such Bank for the making of such Advance and the authorisation has
not been obtained or is not in full force and effect; or
(iii) the use of the proposed Alternative Currency is restricted or
prohibited by any request, directive, regulation or guideline of any
governmental body, agency, department or regulatory or other
authority (whether or not having the force of law) in accordance
with which such Bank is accustomed to act;
the Agent shall give notice to the Company to that effect before 10.30
a.m.(London time) on the second Business Day prior to such Drawdown Date.
7.2 Effect of Notice
7.2.1 If the Agent delivers a notice under Clause 7.1, then the Company may
elect by notice served on the Agent by 10.30 a.m. (London time) on the
Business Day prior to such Drawdown Date that the relevant Advance shall
not be made in which event, such Advance will not be made.
7.2.2 If the Company does not elect as set out in Clause 7.2.1, the relevant
Advance shall be denominated in Sterling and, in respect of such Advance,
there shall be substituted in the definition of "LIBOR" contained in
Clause 1.1 for the time "11.00 a.m." the time "12.00 noon".
8. INTEREST
8.1 Amount
Interest shall accrue on each Term Advance in respect of the period from
and including the relative Drawdown Date to, but excluding the Final
Repayment Date and on each Revolving Advance in respect of the period from
and including the relative Drawdown Date to, but excluding, the relative
Interest Date at the rate, in each case, determined by the Agent to be the
aggregate of:
(i) the Margin from time to time;
(ii) LIBOR; and
(iii) in the case of Advances denominated in Sterling, the Mandatory
Liquid Asset Costs.
<PAGE>
8.2 Interest Periods
8.2.1 Subject to Clause 5.6, Interest Periods in respect of Advances may be of
1, 2, 3 or 6 months' duration or such other period (not exceeding 12
months) as the Banks may agree with the Company.
8.2.2 The Company shall, subject to Clause 8.2.6, in each Drawdown Notice select
the Interest Period of the Advance to which such Drawdown Notice relates.
8.2.3 In respect of Term Advances, interest shall be calculated by reference to
successive Interest Periods. Each succeeding Interest Period relative to a
Term Advance shall commence on the last day of the preceding Interest
Period for such Advance. The Borrower shall at least three (3) Business
Days prior to the last day of the current Interest Period applicable to a
Term Advance notify the Agent in writing of the next Interest Period
applicable to such Advance.
8.2.4 The Company may by notice in writing to the Agent at least three (3)
Business Days prior to an Interest Date relating thereto, elect that a
Term Advance be split into two Term Advances of at least US$10,000,000
each. With effect from such Interest Date, such notice shall take effect
in accordance with its terms.
8.2.5 If the relanve Interest Periods for 2 Term Advances end on the same day,
subject to the other terms hereof; as from such day, such Term Advances
shall be deemed to be a single Term Advance.
8.2.6 No Interest Period for an Advance shall extend beyond the Final Repayment
Date and if an Interest Period selected purports so to do, it shall
nevertheless expire on the Final Repayment Date.
8.2.7 If the Company fails to select an Interest Period for an Advance, the
Company shall, subject to Clause 8.2.6, be deemed to have selected an
Interest Period of 3 months.
8.2.8 Any Interest Period which commences on the last Business Day in a month or
on a Business Day for which there is no numerically corresponding day in
the month in which that Interest Period is to end, shall (subject to
Clause 8.2.6) end on the last Business Day in that later month.
8.2.9 Any Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day or, if that day
falls in the following month, on the immediately preceding Business Day.
8.3 Default Interest
8.3.1 If a Borrower fails to pay any sum payable under any Financing Document on
its due date, a Borrower shall pay default interest on such sum (or, as
the case may be, the amount thereof for the time being due and unpaid) to
the Agent for the account of the Agent and the Banks or the Working
Capital Bank, as the case may be, from the due date to the date of actual
payment in full calculated by reference to successive Interest Periods
(each of such duration as the Agent may from time to time select
<PAGE>
and the first beginning on the relative due date) at the rate per annum
being the aggregate of:
(i) 1 per cent. per annum;
(ii) the Margin from time to time;
(iii) LIBOR; and
(iv) in the case of sums denominated in Sterling, the Mandatory Liquid
Asset Costs.
8.3.2 So long as the default continues, such rate shall be recalculated in
accordance with the provisions of this Clause 8.3 on the last day of
each such Interest Period and unpaid interest then payable but
unpaid under this Clause shall be compounded at the end of each
Interest Period.
8.4 Interest under the Overdraft Facility
8.4.1 Interest on all amounts outstanding by way of overdraft under the
Overdraft Facility shall accrue at the rate per annum which is the
aggregate of:
(i) the Margin from time to time; and
(ii) the most recently published base rate of the Bank making
available the relevant overdraft.
8.4.2 Interest under Clause 8.4.1 on amounts outstanding by way of
overdraft shall be paid by the relevant Borrower to the Bank making
available the relevant overdraft on such Bank's usual quarterly
charging days and (if not such a quarterly charging day) the Final
Repayment Date.
8.4.3 Each Bank making available an overdraft under the Overdraft Facility
is hereby authorised by each Borrower to debit all interest payable
by such Borrower under this Clause 8.4 to the current account held
by such Borrower with such Bank and such Bank shall notify such
Borrower of the amount debited in accordance with the normal
practice of such Bank.
8.5 Engagements Commission
Commission in respect of each Engagement entered into or issued
under the Uncommitted Engagements Facility shall:
(i) accrue from day to day on the Engagement Amount of such
Engagement at a rate per annum equal to the higher of:
(a) the Margin from time to time; and
<PAGE>
(b) the Working Capital Bank's standard charges for the
relevant Engagement;
(ii) be calculated on the basis of actual days elapsed and a 360
days' year in the case of an Engagement denominated in a
currency other than Sterling, but if such Engagement is
denominated in Sterling, a 365 days' year; and
(iii) be paid in Sterling on the Working Capital Bank's normal
charging days for the relevant Engagement.
8.6 Calculation and Payment of Interest
8.6.1 Promptly following the beginning of each Interest Period and, in the
circumstances of the Margin reducing, on the date on which such reduction
becomes effective, the Agent will notify the relevant Borrower of the rate
and amount of interest payable for such Interest Period (but in the case
of such interest calculated under Clause 8.3, any such notification need
not be made more frequently than weekly). Such notification shall set out
in reasonable detail the basis of computation of the amount of interest so
payable.
8.6.2 Interest due from a Borrower to any of the Agent, the Working Capital Bank
and the Banks under this Agreement shall:
(i) accrue from day to day at the appropriate rate calculated under this
Clause 8;
(ii) except as otherwise provided in this Agreement (and, in particular,
Clauses 8.4 and 8.6.3), be paid by the relevant Borrower to the
Agent for the account of the Banks or the Agent, as the case may be,
in arrear on each Interest Date, save that in the case of any
Interest Period which is for longer than 6 months, such Borrower
shall pay interest 6 monthly in arrear and on the relative Interest
Date;
(iii) be calculated on the basis of the actual number of days elapsed and,
in the case of Sterling, a 365 day year or, in the case of an
Alternative Currency, a 360 day year or, if different, such number
of days as is market practice for the relevant currency; and
(iv) be payable after as well as before judgment.
8.6.3 The Additional Margin, if any, shall be payable on 30th June 1996 to the
Banks, pro rata to their Commitments.
8.7 Market Disruption
If:
(i) no relevant rate appears on the Reuter Monitor Money Rates Service
for the purposes of paragraph (a) in the definition of LIBOR and the
Agent
<PAGE>
determines that at or about 11.00 a.m.(London time), in the case of
Sterling, or, in the case of an Alternative Currency, 2 Business
Days before, the first day of an Interest Period none of the
Reference Banks is offering to leading banks in the London
Inter-Bank Market deposits in Sterling or an Alternative Currency,
as appropriate, for the required period; or
(ii) no relevant rate appears on the Reuter Monitor Money Rates Service
for the purposes of paragraph (a) in the definition of LIBOR and
before the close of business in London in the case of an Alternative
Currency, 2 Business Days before, or in the case of Sterling, on the
first day of an Interest Period the Agent has been notified by each
of a group of Banks the aggregate of whose Commitments, as the case
may be, is equal to at least 33 per cent. of the Term Loan
Commitments or the Revolving Loan Commitments, as the case may be,
that the rate at which such deposits are being so offered does not
accurately reflect the cost to it of obtaining such deposits; or
(iii) by reasons of circumstances generally affecting the London
Inter-Bank Market, reasonable and adequate means do not exist for
ascertaining LIBOR for any Advance for any relative Interest Period;
then:
(a) the Agent shall promptly give notice to the Company in writing of
such event (a "market disruption notice");
(b) the Agent and the Company shall discuss an alternative basis for
calculating the relative rate of interest for the relative Advance
(the "Affected Advance") on the basis that the net return to the
Banks shall be no less than it would have been had such event not
occurred ("alternative basis");
(c) the Company shall either:
(i) in the case of (i) or (iii) above, immediately withdraw the
Drawdown Notice relating to the Affected Advance or, in any
case, throughout any period in relation to which a market
disruption notice is in effect (subject always to Clause
8.7(d)) pay interest to the Agent for the account of each of
the Banks on each Bank's Participation in the Affected Advance
at the rate per annum determined by the Agent to be the
aggregate of:
(1) the Margin during such period;
(2) the rate notified by each Bank to the Agent to be the
rate which expresses as a percentage rate per annum the
cost to such Bank of funding from whatever
<PAGE>
sources it may reasonably select its Participation in
the Affected Advance; and
(3) where the Affected Advance is denominated in Sterling,
Mandatory Liquid Asset Costs; or
(ii) if it has not promptly withdrawn the Drawdown Notice relating
to the Affected Advance, at any time that a market disruption
notice is in force and an alternative basis has not been
agreed upon giving the Agent 10 days' prior written notice,
prepay the Affected Advance, together with interest accrued
calculated in accordance with Clause 8.7(c)(i) thereon but
without prejudice to Clause 12.3; and
(d) if the Company and the Agent (with the consent of the Banks) shall
agree an alternative basis, then such agreement shall take effect in
accordance with its terms and shall be deemed to take effect under
this Agreement.
8.8 Agent's Determination
The determination by the Agent of any interest, conmission and fees
payable under this Clause 8 shall, save for manifest error, be conclusive
and binding on the Borrowers.
9. REPAYMENT
9.1 Repayment of the Term Loan
9.1.1 The Company shall repay the Term Loan in full on the Final Repayment Date.
9.1.2 No amount repaid or prepaid in relation to the Term Loan may be
reborrowed.
9.2 Repayment of Revolving Advances
9.2.1 Each Revolving Advance shall, subject to the other terms hereof; be repaid
in full on the Interest Date relating to such Revolving Advance.
9.2.2 For the avoidance of doubt, all Revolving Advances will be repaid on or
before the Final Repayment Date.
9.2.3 Subject to the other terms hereof; monies may be reborrowed under the
Revolving Loan Facility during the Revolving Commitment Period.
9.2.4 If all or part of an existing Revolving Advance is to be repaid from the
proceeds of all or part of a new Revolving Advance denominated in the same
currency as such existing Revolving Advance, then as between each Bank and
the Company, the amount to be repaid by the Company shall be set off
against the amount to be advanced by such Bank in relation to the new
Revolving Advance and the person to whom
<PAGE>
the smaller amount is to be paid shall pay to the other party a sum equal
to the difference between the two amounts.
9.3 Repayment of the Overdraft Facility
Each Borrower shall, on the Final Repayment Date, repay all amounts
outstanding by way of overdraft under the Overdraft Facility to the
relevant Bank.
9.4 Reduction of Commitments
On any repayment or prepayment of the Term Loan, the Total Term Loan
Commitments will be reduced pro rata accordingly.
9.5 Mandatory Repayment from Disposal Proceeds and Equity Raisings
9.5.1 Subject to the othcr provisions of this Clause 9.5, any Disposal Proceeds
received by a member of the Group of a Disposal (not being an Excluded
Disposal) shall immediately upon receipt by the relevant member be applied
as follows:
(i) the first US$80,000,000 (on the basis of an exchange rate of
US$1.5916 to (pound)1) in aggregate of such Disposal Proceeds
received by members of the Group shall be paid in repayment to the
Banks and the US Loan Note Holders, in the Sharing Proportions for
application against amounts due under the Facilities and the US Loan
Notes;
(ii) after the application referred to in (i) above, the Company shall be
entitled to retain an aggregate amount of such Disposal Proceeds not
exceeding US$2,500,000 (on the basis of an exchange rate of
US$l.5916 to (pound)1); and
(iii) after the applications referred to in (i) and (ii) above, 80 per
cent. of all Disposal Proceeds shall be paid to the Banks and the US
Loan Note Holders in the Sharing Proportions for application against
amounts due under the Facilities and the US Loan Notes.
9.5.2 The proceeds of any new issue of share capital of the Company or its
Subsidiaries to any person not being a member of the Group (net of all
costs and expenses of issuing the same which expenses shall not include
the success fees payable pursuant to Clause 18.6 and clause 3 of the First
Amendment or any yield premium on the US Loan Notes) shall be applied
immediately upon receipt of the same as follows:
(i) first, in repayment of the AIB Facility; and
(ii) thereafter, such proceeds shall be paid to the Banks and the US Loan
Note Holders in the Sharing Proportions, for applications against
amounts due under the Facilities and the US Loan Notes.
<PAGE>
9.5.3 The Disposal Proceeds arising from a Disposal of the issued share capital
of, or all the assets of, Modern Security Systems Limited (a company
incorporated in Ireland) shall promptly upon receipt be applied as
follows:
(i) first, in repayment of the AIB Facility;
(ii) second, an amount not exceeding IR(pound)l,720,000 less any amount
repaid under (i) above shall be paid to the Banks for application
first against amounts due under the Facilities; and
(iii) thereafter, such proceeds shall be paid to the Banks and the US Loan
Note Holders in the Sharing Proportions for application against
amounts due under the Facilities and the US Loan Notes.
9.5.4 For the purposes of this Clause 9 amounts due under the Facilities and the
US Loan Notes include, for the avoidance of doubt, all principal monies,
interest, the success fee referred to in Clause 18.6 and clause 3 of the
First Amendment and any yield premium on the US Loan Notes.
9.5.5 In respect of any Disposal Proceeds or proceeds of the issue of share
capital by a member of the Group, the US Loan Note Holders may elect that
the US Loan Notes or all the Banks may elect that the Facilities, as the
case may be, shall not be repaid out of all or part of such Disposal
Proceeds or proceeds of issue in which case in Clauses 9.5.1 to 9.5.3
inclusive, any reference to payment of an amount to the Banks and the US
Loan Note Holders in the Sharing Proportions shall in relation to such
part of such Disposal Proceeds be deemed to be a reference to a payment of
the whole amount to the Banks for application against amounts due under
the Facilities or to the US Loan Note Holders for application against
amounts due under the US Loan Notes, as the case may be.
9.5.6 Any amount received by the Banks pursuant to this Clause 9.5 for
application against amounts due under the Facilities shall be applied as
follows:
(i) first, against the amount of the success fee, if any, payable under
Clause 18.6 which is then due and payable;
(ii) second, against, on the one hand, the Term Loan, or at the
Company's option, the Revolving Loan, and on the other hand, amounts
outstanding under the Overdraft Facility in the Committed
Proportions; and
(iii) third, as the Banks may determine,
PROVIDED THAT if a date on which an amount is received by the Banks
pursuant to this Clause 9.5 for application against the Term Loan or the
Revolving Loan is not an Interest Date for that part of the Term Loan and
the Revolving Loan to be repaid such amount may at the Company's option be
placed to the credit of an interest bearing account (an "Application
Account") of the Company held with a Bank (which account the company shall
at the request of the Majority Banks charge in favour of the Banks on
terms reasonably satisfactory to the Banks) and released
<PAGE>
from such account to make the relevant repayments on the immediately
succeeding relevant Interest Date or Dates.
9.5.7 On any sum being applied in accordance with Clause 9.5.6, the Term Loan
Commitments or, as the case may be, the Revolving Loan Commitments and the
Overdraft Commitments will be reduced by the amount of such sum in
accordance with the Committed Proportions.
9.6 Voluntary Repayment of the Term Loan
9.6.1 Without prejudice to the other provisions of this Agreement, the Company
may, without penalty but only if it permanently reduces the Overdraft
Facility pro rata to the Committed Proportions at the same time as making
such prepayment, prepay, on an Interest Date relating thereto, all or part
of a Term Advance, but, if in part, in minimum amounts of US$2,000,000
and multiples of US$1,000,000
9.6.2 The Company shall give written notice of any prepayment under this Clause
9.6 at least 30 days prior to the proposed date of prepayment. Any such
notice shall be irrevocable and shall specify the amount of the prepayment
and the date upon which it is to be made.
10. CANCELLATION
10.1 Voluntary Cancellation
On giving not less than 5 days' prior irrevocable written notice to the
Agent, the Company may cancel all or part of the Revolving Loan Facility
and Overdraft Facility for the time being undrawn (but if in part in
minimum amounts of (pound)1,000,000 and multiples of (pound)500,000 or the
unutilised part thereof) but only if the Revolving Credit Facility and the
Overdraft Facility are cancelled pro rata to the Committed Proportions.
Amounts so cancelled shall cease to be available for borrowing hereunder
and the Revolving Facility Limit and the Overdraft Facility Limit and the
Revolving Loan Commitments and the Overdraft Commitments will be reduced
accordingly.
10.2 Mandatory Cancellation
10.2.1 The Facilities will be permanently reduced pro rata by:
(a) (pound)1,200,000 on 31st March 1996; and
(b) (pound)2,250,000 on 30th June 1996;
and the Revolving Facility Limit, the Overdraft Facility Limit and the
Commitments will be reduced accordingly.
<PAGE>
10.2.2 On any cancellation pursuant to Clause 10.2.1, the Borrowers shall,
subject to Clause 12.3, make such prepayments as are necessary to ensure
that there is full compliance with Clause 3.1.2.
11. CHANGES IN CIRCUMSTANCES
11.1 Illegality
11.1.1 If by reason of the introduction of, or any change in, any applicable law
or any regulation or regulatory requirement of the Bank of England or of
any other governmental, monetary or other authority (whether in the United
Kingdom or elsewhere) or any change in the interpretation or application
thereof it becomes unlawfull or it is prohibited for any of the Banks to
maintain its Commitment or its Participation, or otherwise give effect to
all or any of its obligations as contemplated by this Agreement, the
relative Bank shall promptly, upon becoming aware of the same, inform the
Agent and the Agent shall forthwith inform the Borrower to that effect,
whereupon such Bank's Commitment shall forthwith be reduced to zero and
its obligation to permit its Participation in the Advances to remain
outstanding shall forthwith terminate and the Borrower shall, within such
period (if any) as may be allowed by the relevant law, regulation or
regulatory requirement, prepay to the Agent for the account of such Bank
such Bank's Participation in Advances together with accrued interest
thereon (subject to the provisions of Clause 12.3 below if such prepayment
is made otherwise than on an Interest Date) and, if such Bank has an
Overdraft Commitment, repay all amounts outstanding to such Bank on any
overdraft under the Overdraft Facility. Without prejudice to the
foregoing, each Bank confirms that if it informs the Agent as aforesaid it
shall, as between itself and the Borrower, thereafter use reasonable
endeavours to avoid or mitigate the effects of such unlawfulness or
prohibition and such Bank and the Agent will enter into negotiations in
good faith with the Borrower with a view to finding a means of avoiding or
mitigating the effects of such unlawfulness or prohibition including the
transfer of the Lending Office to another jurisdiction or the transfer of
its rights and obligations to another financial institution PROVIDED THAT
neither such Bank nor the Agent shall be obliged to continue such
negotiations for a period exceeding 30 days.
11.1.2 If, by reason of any of the matters stated in Clause 11.1.1 it becomes
unlawful or it is prohibited for the Working Capital Bank to issue or
leave outstanding any Engagement issued or to be issued by the Working
Capital Bank, the Uncommitted Engagements Facility shall cease to be
available and the Company shall use its best endeavours to procure the
release of each Guarantee outstanding at such time.
11.2 Increased Costs
If; after the date hereof:
(a) the implementation, introduction, abolition, withdrawal or any
change in:
(i) any applicable law, regulation, practice or concession; or
<PAGE>
(ii) any official directive, regulatory requirement, request or
guidance (whether or not having the force of law but if not
having the force of law, one which applies generally to a
class or category of financial institutions of which the
relevant Bank forms part and compliance with which is in
accordance with the general practice of banks to which it
applies of the Bank of England, the European Community or of
any other governmental, monetary or other authority (whether
in the United Kingdom or elsewhere) having jurisdiction over
the relative Bank; or
(b) any change in the interpretation or application thereof,
shall:
(i) subject any Bank to any Tax Liability in connection with its
Commitment or Participation in the Facilities or any part
thereof or in connection with any of the Financing Documents
other than Tax on the Overall Net Income of any Bank; or
(ii) change the basis or timing of Taxation of any Bank in respect
of payments of principal, interest or any other amount paid,
payable or to become payable in connection with its Commitment
or Participation in the Facilities or in connection with any
of the Financing Documents (or the treatment for Taxation
purposes of such payments); or
(iii) change the basis or timing of the treatment of any of the
Banks for Taxation purposes in respect of any principal,
interest or other amounts paid, payable or to become payable
by such Bank on, or otherwise in respect of, deposits or loans
from third parties used to effect or maintain its
Participation or any part thereof or in connection with any of
the Financing Documents; or
(iv) impose, modify or deem applicable any reserve, cash ratio,
special deposit, capital adequacy or liquidity requirement or
any other analogous requirement, or require the making of any
special deposits against or in respect of any assets or
liabilities of any Bank for which such Bank is not entitled to
be fully compensated under Clause 8.1(c); or
(v) change the manner in which any of the Banks allocates capital
resources to its obligations under or in relation to the
Facilities so that it is unable to obtain the rate of return
on its overall capital which it would have been able to obtain
but for any of its entering into, performing its obligations
and assuming or maintaining its Commitment or its
Participation in the Facilities;
<PAGE>
and the result of any of the foregoing is either to increase
the cost to any of the Banks of making available its
Commitment or its Participation in the Facilities or any part
thereof or of carrying out any of the transactions provided
for or contemplated by any of the Financing Documents or to
reduce the amount of any payment received or receivable by
such Bank or to reduce its return from the Facilities, then
and in any such case:
(aa) such Bank shall notify the Company and the Agent;
(bb) the Company shall pay (as additional interest) from time
to time to such Bank for the account of such Bank within
5 Business Days of demand all amounts which such Bank
certifies (in a certificate which shall set out in
reasonable detail so far as is practicable the basis of
the computation of such amounts) to be necessary to
compensate such Bank for the additional cost or
reduction;
(cc) without prejudice to the foregoing, each Bank confirms
that if it notifies the Company and the relative
Borrower as aforesaid such Bank shall take such steps as
such Bank considers reasonable to reduce or avoid the
additional cost or reduction including the transfer of
its Lending Office to another jurisdiction or the
transfer of its rights and obligations to another
financial institution and, if the Company so requests,
such Bank shall consult with the Company and the Agent
with a view to finding a means of reducing or avoiding
the additional cost or reduction PROVIDED THAT neither
such Bank nor the Agent shall be obliged to continue
such negotiations for a period of longer than 30 days;
and
(dd) without prejudice to the Company's obligation to pay to
the relative Bank the due amount under this Clause 11.2,
the relative Borrower, may, at any time alter receipt of
such notification, so long as the circumstances giving
rise to such additional cost or, as the case may be,
reduction are continuing, on giving not less than 10
Business Days' notice to the Agent (which shall be
irrevocable) prepay to the Agent for the account of the
relative Bank all (but not part only) of such Bank's
Participation in all Advances together with accrued
interest thereon (subject always to the provisions of
Clause 12.3). In such event, such Bank's Commitment
shall be reduced to zero.
<PAGE>
Any of such notification and certification referred to in any
of paragraphs (aa) and (bb) of this Clause 11.2 may be made at
any time after the date on which the dvent occurs which gives
rise to such additional cost or reduction as aforesaid.
11.3 Certificates
The certificate or notification of the Agent or, as the case may be, the
relevant Bank as to any of the matters referred to in Clauses 11.1 and
11.2 above shall, save for any manifest error, be conclusive and binding
on the Borrowers.
12. PAYMENTS
12.1 Time and Place
12.1.1 All payments to be made by a Borrower for the account of the Agent or the
Banks, as the case may be, in relation to this Agreement or the Fees
Letter shall be made on the due date in immediately available funds:
(i) if in Sterling, by not later than 2.00 p.m. (London time) to the
appropriate account in London of the Agent; and
(ii) if in an Alternative Currency, by such time as the Agent shall
stipulate to the appropriate account of the Agent in the principal
financial centre of the country of such Alternative Currency;
which account, in either case, shall have been previously specified by the
Agent.
12.1.2 All payments to be made by a Borrower to a Bank in relation to the
Overdraft Facility shall be made in accordance with usual procedures for
operation of overdraft facilities.
12.1.3 All payments to be made by a Borrower to the Working Capital Bank shall
be paid as the Working Capital Bank shall direct.
12.2 Business Days
If, but for this Clause 12.2, any sum would become due for payment under
this Agreement on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day PROVIDED THAT if the next
succeeding Business Day falls in the next calendar month, then such
payment shall be made on the immediately preceding Business Day.
12.3 Indemnity aud Breakage Costs
12.3.1 Each Borrower agrees to indemnify each Bank and the Working Capital Bank
on demand against any loss or expense (including any loss or expense
sustained or incurred or to be sustained or incurred by any Bank in
liquidating or employing
<PAGE>
deposits acquired or contracted for to effect or maintain its
Participation in the Advances or the Overdraft Outstandings or any part
thereof) which such Bank or the Working Capital Bank has sustained or
incurred as a consequence of any of:
(i) an Advance not being made, following the service of a Drawdown
Notice by reason of the non-fulfilment of any of the Conditions
Precedent or otherwise (save as may arise as a result of the failure
of such Bank to comply with its obligations hereunder);
(ii) a default by a Borrower on the payment on the due date of any sum
due under this Agreement; and
(iii) the repayment of the Term Loan or any Revolving Advance and/or the
Overdraft Outstandings or the termination of the Facilities, in each
case, pursuant to Clause 15.
12.3.2 If any prepayment or repayment of an Advance is made otherwise than on an
Interest Date, the Company shall on demand pay to the Agent, for the
account of the Banks, such additional amount as the Agent may certify is
necessary to compensate the Banks or any of them for any loss or expense
on account of funds borrowed, contracted for or utilised to fund the
amounts so repaid or prepaid. Any certifications issued by the Agent
pursuant to this Clause 12.3 shall be conclusive and binding on the
Company save in the case of manifest error.
12.4 Grossing-Up
12.4.1 Subject to Clause 12.4.2, all sums payable by a Borrower to any of the
Agents, the Working Capital Bank and the Banks pursuant to or in
connection with any of the Financing Documents shall be paid in full
without any set-off or counterclaim whatsoever and free and clear of all
deductions or withholdings whatsoever save only as may be required by law.
12.4.2 If any deduction or withholding is required by law in respect of any
payment due from a Borrower to any of the Agent, the Banks or the Working
Capital Bank pursuant to or in connection with any of the Financing
Documents, such Borrower shall:
(a) ensure or procure that the deduction or withholding is made and that
it does not exceed the minimum legal requirement therefor;
(b) pay, or procure the payment of, the full amount deducted or
withheld to the relevant Taxation or other authority in accordance
with the applicable law;
(c) increase the payment in respect of which the deduction or
withholding is required so that the net amount received by the
relative payee after the deduction or withholding (and after taking
account of any further deduction or withholding which is required
to be made as a consequence of the increase) shall be equal to the
amount which the relative payee
<PAGE>
would have been entitled to receive in the absence of any
requirement to make any deductions or withholdings; and
(d) promptly deliver or procure the delivery to the relative payee of
receipts evidencing each of the deductions or withholdings which has
been made.
12.4.3 If the Agent is obliged to make any deduction or withholding from any
payment to any of the Banks (an "agency payment") which represents an
amount or amounts received by the Agent from any Borrower under any of the
Financing Documents, the Company shall pay directly to the relative Bank
such sum (an "agency compensating sum") as will, after taking into account
any deduction or withholding which the Company is obliged to make from the
agency compensating sum, enable such Bank to receive, on the due date for
payment of the agency payment, an amount equal to the agency payment which
such Bank would have received in the absence of any obligation to make any
deductions or withholdings.
12.4.4 A Borrower shall not be required to pay an additional amount under this
Clause 12.4 if the relevant Bank either:
(a) is not at the date hereof a Qualifying Bank; or
(b) ceases after the date hereof to be a Qualifyng Bank otherwise than
as a consequence of a change in any applicable law, regulation,
practice, concession, regulatory requirement or request (whether or
not having the force of law) of the Bank of England, the European
Community or of any other governmental, monetary or other authority;
and, in either case, the obligation to deduct or withhold would not have
arisen if the relevant Bank had been a Qualifying Bank.
12.4.5(a) If any of the Banks determines, in its absolute discretion, that it
has received, realised, utilised and retained a Tax benefit by
reason of any deduction or withholding in respect of which a
Borrower has made an increased payment or paid an agency
compensating sum under this Clause 12.4, such Bank shall, provided
that the Agent and each Bank has received all amounts which are then
due and payable by the obligors under any of the Financing
Documents, pay to such Borrower (to the extent that such Bank can do
so without prejudicing the amount of such benefit or repayment and
the right of such Bank, to obtain any other benefit, relief or
allowance which may be available to it) such amount, if any, as such
Bank, in its absolute discretion shall determine, will leave such
Bank in no worse position than it would have been in if the
deduction or withholding had not been required PROVIDED THAT:
(i) each Bank shall have an absolute discretion as to the time at
which and the order and manner in which it realises or
utilises any Tax benefit and shall not be obliged to arrange
its business or its Tax affairs in any particular way in order
to be eligible for any credit or refund or similar benefit;
<PAGE>
(ii) no Bank shall be obliged to disclose any information regarding
its business, Tax affairs or Tax computations; and
(iii) if a Bank has made a payment to a Borrower pursuant to this
Clause 12.4.5 on account of any Tax benefit and it
subsequently transpires that such Bank did not receive that
Tax benefit, or received a lesser Tax benefit, such Borrower
shall, on demand, pay to such Bank such sum as the relative
Bank may determine as being necessary to restore its after-Tax
position to that which it would have been had no adjustment
under this Clause (iii) been necessary. Any sums payable by a
Borrower to a Bank under this Clause (iii) shall be subject to
the provisions of Clause 18.8.
(b) No Bank shall be obliged to make any payment under this Clause
12.4.5 if, by doing so, it would contravene the terms of any
applicable law or any notice, direction or requirement of any
governmental or regulatory authority (whether or not having the
force of law).
12.5 Mitigation
If, in respect of any Bank or the Working Capital Bank, circumstances
arise which would, or would upon the giving of notice, result in an
increase in the amount of any payment to be made to it or for its account
pursuant to Clause 12.4 (Grossing up), then, without in any way limiting,
reducing or otherwise qualifying the rights of such Bank or the Working
Capital Bank, as the case may be, or the obligations of each Borrower
under Clause 12.4 such Bank or the Working Capital Bank, as the case may
be, shall promptly upon becoming aware of the same notify the Agent
thereof and, in consultation with the Agent and the Company and to the
extent that it can do so without prejudice to its own position, take
reasonable steps to mitigate the effects of such circumstances including
the transfer of its Lending Office.
12.6 Prepayment Right
If the Company is required to make an increased payment for the account of
a Bank under Clause 12.4.2 or 12.4.3 (but only so long as such requirement
exists), subject to giving the Agent and such Bank not less than 10 days'
prior written notice (which shall be irrevocable), the Company may prepay
such Bank's Participation in the Advances together with accrued interest
thereon PROVIDED THAT any such prepayment shall be subject to the
provisions of Clause 12.3. In such circumstances, the Commitment of the
relevant Bank will be reduced to zero.
12.7 Accounts
Each Bank shall maintain in accordance with its usual practice an account
or accounts, which account or accounts shall, in the absence of manifest
error, as between the Borrowers and such Bank be conclusive evidence of
the amounts from
<PAGE>
time to time advanced by, owing to, paid and repaid to such Bank under
this Agreement.
12.8 Borrower's Payments
12.8.1 The Agent may assume that a Borrower will make all payments due under
this Agreement on the due date and the Agent may, in reliance
upon such assumption, make available to each Bank on any payment
date an amount equal to such Bank's pro-rata share of such assumed
payment.
12.8.2 If a Borrower does not in fact make such payment to the Agent, each Bank
shall forthwith on demand by the Agent repay to the Agent the amount made
available to such Bank (together with interest thereon at the rate
determined by the Agent as being its cost of funding such payment).
12.9 Banks' Payments
12.9.1 The Agent may assume that each Bank has made its Participation in an
Advance available to the Agent on the relative Drawdown Date and the Agent
may in reliance upon such assumption, make available to the Company a
corresponding amount.
12.9.2 If such corresponding amount is not in fact made available to the Agent
by such Bank, the Agent shall be entitled to recover such corresponding
amount (together with interest thereon at the rate determined by the Agent
as being its cost of funds in the circumstances) on demand from the
Company.
12.9.3 Where the Agent has made available an amount to the Company in reliance
upon the assumption contained in Clause 12.9.1 but a Bank has not made its
Participation in the relevant Advance available to the Agent then, unless
that Bank notified the Agent in writing prior to the relevant Drawdown
Date that it would not be making its Participation in such Advance
available, that Bank shall:
(a) if the Company does not refund the corresponding amount to the Agent
within 3 Business Days, reimburse the Agent for such amount
(together with interest thereon at the rate determined by the Agent
as being its cost of funds in the circumstances) on demand; and
(b) indemnify the Agent from and against all losses, costs, charges and
expenses which the Agent may incur or sustain by reason of that Bank
not having made its Participation in the relevant Advance available.
12.10 Appropriation
If a Borrower shall pay a sum in relation to the Facilities which is less
than the total amount due and payable by it under this Agreement on the
day on which such sum is paid such Borrower hereby waives any rights it
may have to make any appropriation thereof as between any amounts so due
and payable and the sum so paid shall be applied in or towards
satisfaction of principal, interest, fees and other sums which are due or
overdue for payment on that day in such order as the Majority Banks may
<PAGE>
determine PROVIDED THAT each Bank shail receive its pro rata share of any
such sum.
12.11 Currency of Account
All payments to be made by the Company in respect of an Advance, whether
of interest or principal, shall be made in the currency in which such
Advance is denominated. All payments to be made under any indemnity or
reimbursement provision of this Agreement relating to costs, losses and
expenses shall be paid in the currency in which the relative costs, losses
or expenses were incurred.
13. REPRESENTATIONS AND WARRANTIES
13.1 Acknowledgement of Reliance
Each of the Borrowers hereby acknowledges that each of the Agent, the
Banks and the Working Capital Bank have entered into this Agreement and
accepted the security granted under the Security Documents in full
reliance on the representations and warranties made or deemed to be made
and repeated under this Clause 13.
13.2 Representations and Warranties
The Company hereby represents and warrants to each of the Banks, the
Working Capital Bank and the Agent that:
(a) each member of the Group is a limited company incorporated under the
laws of its jurisdiction of incorporation and it possesses the
capacity to sue and be sued in its own name and has the power to
carry on its business and to own its property and other assets;
(b) each member of the Group has power to execute, deliver and perform
its obligations under the Financing Documents to which it is a party
and to carry out the transactions contemplated by such Financing
Documents and all necessary corporate, shareholder and other action
has been or will be taken to authorise the execution, delivery and
performance of the same;
(c) the obligations of each member of the Group under the Financing
Documents to which it is a party, constitute its legal, valid and
binding obligations and are in full force and effect;
(d) the execution, delivery and performance by each member of the Group
of the Financing Documents to which it is a party does not:
(i) contravene any applicable law or regulation or any order of
any governmental or other official authority, body or agency
or any judgment, order or decree of any court having
jurisdiction over it; or
<PAGE>
(ii) conflict with, or result in any breach of any of the terms of;
or constitute a default under, any agreement or other
instrument to which it is a party or any licence or other
authorisation to which it is subject or by which it or any of
its property is bound; or
(iii) contravene or conflict with the provisions of its Memorandum
and Articles of Association or equivalent constitutional
documents;
(e) save as disclosed to the Agent prior to the date hereof; each member of
the Group has not taken any action nor have any steps been taken or legal
proceedings started or, to the best of the Company's knowledge,
information and belief; threatened against a member of the Group for
winding-up, dissolution or re-organisation, the enforcement of any
Encumbrance over its assets or for the appointment of a receiver,
administrative receiver, or administrator, trustee or similar officer of
it or of any or all of its assets or revenues;
(f) save as disclosed to the Agent prior to the date hereof; each member of
the Group is not (nor would be with any of the giving of notice, lapse of
time, determination of materiality and other condition) in breach of or in
default under any deed, instrument or any agreement to which it is a party
or which is binding on it or any of its assets to an extent or in a manner
which has, or could reasonably be expected to have, a Material Adverse
Effect;
(g) no action, litigation, arbitration or administrative proceeding has been
commenced, or is pending or, to the best of the Company's knowledge,
information and belief; threatened, against any member of the Group and
nor is there subsisting any unsatisfied judgment or award given against
any of them by any court, board of arbitration or other body which, in
each case, has or could reasonably be expected to have, a Material Adverse
Effect;
(h) (i) each of the latest Accounts required to be delivered pursuant to
Clause 14.1(a) is prepared in accordance with Generally Accepted
Accounting Principles and gives a true and fair view of the
financial position of the relative company as at the date to which
the same were prepared and for the period then ended; and
(ii) each set of interim accounts and management accounts required to be
delivered under Clauses 14.1(b), (c) and (d) shows with reasonable
accuracy the financial condition of the member of the Group in
respect of which they were prepared during the period to which they
relate;
<PAGE>
(i) no Encumbrance (other than Permitted Encumbrances) exists over all or any
part of the present or future revenues or assets of any member of the
Group;
(j) all licences, consents, exemptions, clearances, filings, registrations and
authorisations which are or may be necessary to enable each member of the
Group:
(i) to carry on its business are in full force and effect to the extent
that failure to obtain or make the same would have a Material
Adverse Effect; and
(ii) to perform its obligations under the Financing Documents to which it
is a party and the flilfilment of the transactions contemplated by
such documents or which are required in connection with the
execution, delivery, validity, enforceability or admissibility in
evidence of the Financing Documents are in full force and effect;
(k) the accounting reference date of each member of the Group is 30th November
other than TVX Inc which has an accounting reference date of 30th
September;
(l) each of the members of the Group has complied in all material respects
with all Taxation laws in all jurisdictions in which it is subject to
Taxation and has complied in all material respects with its obligations to
pay Taxes due and payable by it and no material clalms are being asserted
against it in respect of Taxes save for assessments in relation to the
ordinary course of its business or claims contested in good faith and in
respect of which adequate provision has been made and disclosed in the
latest Accounts or information delivered to the Agent hereunder;
(m) the Company has no Subsidiaries other than those listed in Schedule 5;
(n) each of the members of the Group has complied in all material respects
with all existing Environmental Laws and there are and have been in
relation to such companies no actual or, to the best of the Company's
information, knowledge and belief; pending or threatened, prosecutions,
suits, claims, proceedings, arbitrations or legal actions of any kind
under, or which allege a violation of, any existing Environmental Laws or
which allege environmental damage (whether caused by disposal, discharge,
ownership, operation, transportation, storage or any other action or
omission) which could result in a member of the Group incurring a
liability in excess of (pound)100,000;
(o) the execution of the Financing Documents by the relevant members of the
Group and the exercise of each of their respective rights and performance
of each of their respective obligations hereunder and thereunder will not
<PAGE>
result in the creation of any Encumbrance over or in respect of any of
their present or future revenues, assets or undertakings; and
(p) since 30th November 1994, there has been no change in the business or
financial condition of any member of the Group which has had, or could
reasonable be expected to have, a Material Adverse Effect.
13.3 Repetition
The representations and warranties set out in Clause 13.2 shall survive
the execution of this Agreement and (save for the representations and
warranties made under Clauses 13.2(e),(f), (g), (i), (j), (l), (m), (n),
(o) and (p)) shall be deemed to be repeated by the Company on each
Drawdown Date, each Issue Date and each Interest Date as if made with
reference to the facts and circumstances existing at that time.
14. UNDERTAKINGS
14.1 Information Undertakings
The Company hereby undertakes and agrees with the Agent, the Banks and the
Working Capital Bank that throughout the Security Period it shall unless
the Majority Creditors shall otherwise agree:
(a) as soon as the same become available, but in any event within 150
days (in the case of the Accounts of the Company) or 210 days (in
the case of the Accounts of each Material Subsidiary) after the end
of each of its Financial Years, as the case may be, deliver to the
Agent for distribution to the Banks, copies in sufficient numbers
for all of them, of the Accounts of itself and each Material
Subsidiary for the relevant Financial Year together with a copy of
the management letter (if any) addressed by the Auditors to the
directors of the Company;
(b) as soon as the same becomes available, but in any event within 90
days after the end of the first half of each of its Financial Years,
deliver to the Agent for distribution to the Banks, copies, in
sufficient numbers for all of them, of its unaudited interim
accounts for such half year;
(c) as soon as the same become available, but in any event within 50
days (or, in respect of the last 3 months in a Financial Year of the
Company, 90 days,) after the end of each period of 3 months ending
on a Quarter Day, deliver to the Agent for distribution to the
Banks, copies in sufficient numbers for all of them of quarterly
management accounts of the Group in a format satisfactory to the
Agent (including a profit and loss account and cashflow forecast)
and attaching an information schedule (in the agreed form) setting
out EBITDA, Total Debt Costs and Recurring UK Rental Income for such
three-month period together with details of
<PAGE>
progress on any proposed asset disposals and contracts taken on or
terminated durins such period;
(d) as soon as the same become available, but in any event within 45
days after the last day of each month, monthly management accounts
(other than for the month of December) of the Group for such month
including a statement of profit and loss, a cashflow statement, a
cashflow forecast for the balance of the then current Financial
Year of the Company and an update on the matters referred to in the
Side Letter;
(e) deliver to the Agent within 50 days of each Quarter Day (or 90 days
in respect of any Quarter Day which is the last Quarter Day in a
Financial Year of the Company), a certificate executed by two
directors of the Company certifying that as at such Quarter Day, the
Company is in compliance with the financial undertakings set out in
Clause 14.4.1 or, as the case may be, is not in compliance with any
of the same and, in any event, including a calculation relating to
such financial undertakings;
(f) procure that in relation to each set of the Company's Accounts
delivered to the Agent pursuant to Clause 14.1(a) above, there is
delivered at the same time a cenificate of the Auditors addressed to
the Agent and the Banks stating, in their opinion, whether or not
the Company is, on the basis of such Accounts, in compliance with
the financial undertakings set out in Clause 14.4.1 as at the last
day of the Financial Year of the Company to which such Accounts
relate;
(g) within a reasonable time following transmission thereof, deliver to
the Agent (a) copies of all such financial statements, proxy
material, notices and reports as it shall send to its public
shareholders or its creditors generally (or any class thereof) and
(b) copies of all registration statements (without exhibits),
prospectuses and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding
to the functions of the Securities and Exchange Commission), The
International Stock Exchange of the United Kingdom and the Republic
of Ireland Limited or any stock exchange except where the Company
shall, at the expense of the Company, provide the Agent with an
opinion of counsel that doing so would cause the Company to subject
itself to requirements of US Federal or state securities laws or UK
securities laws to which it would not otherwise be subject;
(h) furnish to the Agent such information, documents and records about
the business, financial condition, operations and prospects of any
member of the Group as the Agent may from time to time reasonably
require;
(i) ensure that all Accounts and other financial information submitted
to the Agent have been prepared in accordance with Generally
Accepted Accounting Principles;
(j) promptly notify the Agent of;
<PAGE>
(i) any Default and any Default Occurrence;
(ii) any litigation, arbitration or administrative proceeding commenced
against any member of the Group involving a potential claim
of (pound)100,000 or greater;
(iii) any Encumbrance (other than a Permitted Encumbrance) of which the
Company becomes aware attaching to the assets or revenues of any
member of the Group; and
(iv) any occurrence (including without limitation any third party claim
or liability) of which the Company becomes aware which may have a
mat erial adverse effect on the ability of any of the members of the
Group to perform its obligations under any of the Financing
Documents.
14.2 Positive Covenants
The Company hereby undertakes and agrees with the Agent, each Bank and the
Working Capital Bank that, throughout the Security Period, it shall and it
shall procure that each of the companies in the Group shall unless the
Majority Creditors shall otherwise agree:
(a) to the extent legally possible, procure that any company which,
after the date hereof becomes a Material Subsidiary (other than a
company incorporated in a State of the United States of America)
executes and delivers to the Agent, a Guarantee and Debenture (or
its equivalent under the laws of a foreign jurisdiction) immediately
on becoming such a Material Subsidiary;
(b) at all times:
(i) comply with all laws and regulations applicable to it and
which are necessary in relation to the conduct of its business
generally and to obtain, effect and maintain in ful1 force and
effect all governmental and other regulatory consents,
licences, exemptions, clearances, filings, registrations and
authorisations required by law for the conduct of its business
generally save where, in each case, failure to comply, obtain,
effect or maintain would not have a Material Adverse Effect;
and
(ii) obtain, effect and maintain in full force and effect all
governmental and other regulatory consents, licences,
exemptions, clearances, filings, registrations and
authorisations required in connection with the validity,
enforceability or, as the case may be, admissibility in
evidence of the Financing Documents;
<PAGE>
(c) pay and discharge all Taxes and governmental charges prior to the
date on which the same become overdue unless, and only to the extent
that, such Taxes and charges shall be contested in good faith by
appropriate proceedings, pending determination of which payment may
lawfully be withheld, and there shall be set aside adequate reserves
with respect to any such Taxes or charges so contested in accordance
with Generally Accepted Accounting Principles;
(d) effect and maintain with financially reputable insurers (including
self-insurance) such insurance over and in respect of its assets and
business and in such manner and to such extent as is reasonable and
customary for a business enterprise engaged in the same or a similar
business and in the same or a similar location;
(e) conduct its business in compliance with all Environmental Laws
applicable to it, including without limitation, those relating to
the generation, handling, use, treatment, storage and disposal of
Hazardous Materials except where the failure so to conduct would
not individually or in the aggregate, have a Material Adverse
Effect;
(f) remain as sole issuer and obligor of the US Loan Notes; and
(g) procure that, upon the discharge and cancellation of the Sanwa
Facility, ASHI shall forthwith execute a Share Pledge pledging to
the Security Trustee the remaining 90% of the shares of API which
are not subject to a Share Pledge and provide to the Security
Trustee, in form and substance satisfactory to it, a legal opinion
from US Counsel in respect thereof unless, in any case, the Sanwa
Facility is replaced by a banking facility substantially on the same
terms and conditions as the Sanwa Facility and which includes a
prohibition on the execution of such a Share Pledge or provides that
such execution would be an event of default (howsoever described).
14.3 Negative Covenants
The Company hereby undertakes with the Agent, each Bank and the Working
Capital Bank that during the Security Period it shall not and the Company
shall procure that none of the companies in the Group shall unless the
Majority Creditors otherwise agree:
(a) other than Permitted Encumbrances, create or permit to subsist any
Encumbrance over any of its undertaking and assets from time to
time;
(b) make a Disposal of all or any of its undertakings and assets, other
than:
(i) a Disposal in the ordinary course of trade of the relative
member of the Group on arm's length terms;
<PAGE>
(ii) a Disposal to a member of the Group which has granted a
Debenture and Guarantee;
(iii) a Disposal of an asset where the proceeds of such Disposal are
used to purchase an asset in direct replacement of such
first-mentioned asset;
(iv) a Disposal of damaged, obsolete or redundant assets in the
ordinary course of business;
(v) a Disposal of a lease under sale and repurchase arrangements
entered into in the ordinary course of trade of the Group in
respect of leases, or upgrades of leases, in each case,
entered into after the date hereof,
(vi) a Disposal permitted in the Side Letter; and
(vii) a Disposal on arm's length terms of an asset at or above its
value stated in the relevant company's most recent Accounts
for a consideration not exceeding (pound)50,000 where such
Disposal would not result in the aggregate consideration
received for all Disposals of assets not included in (i)-(vi)
above exceeding (pound)250,000 in any Financial Year of the
Company;
(c) make or threaten to make any change in its business as at present
conducted, which would result in a substantial change in the nature
of the business carried on by the Group as a whole or carry on any
other business which is substantial in relation to the business of
the Group as at present conducted;
(d) merge or consolidate with any other person other than a member of
the Group that has granted a Guarantee and Debenture;
(e) make, or permit to remain outstanding, any loans or grant any credit
(but excluding:
(i) amounts of credit allowed by the relative company in the
ordinary course of its trading activities;
(ii) loans made by one member of the Group that has granted a
Guarantee and Debenture to another such member;
(iii) loans made by one member of the Group that has not granted a
Guarantee and Debenture to another such member;
(iv) loans made by one member of the Group that has not granted a
Guarantee and Debenture to another member of the Group that
has granted a Guarantee and Debenture;
<PAGE>
(v) loans made by one member of the Group to other members of the
Group (not falling within paragraphs (ii), (iii) and (iv)
above) which either (a) are in existence at the date hereof,
or (b) are made after the date hereof where the aggregate net
amount of such loans does not exceed (pounds)1,000,000;
(vi) a loan of up to (pound)751,000 in aggregate made by the
Company to ASH Jersey;
(vii) loans or credit of up to $2,000,000 in aggregate made
available to TVX Inc; and
(viii)loans made by members of the Group to their employees not
exceeding in aggegate (pounds)500,000);
(f) other than Permitted Indebtedness, incur or permit to subsist any
Indebtedness;
(g) in respect of the Company only, without the prior consent of the
majority Creditors, make or pay any dividend or other distribution
in relation to any shares forming part of its issued share capital
unless;
(i) no Default or Default Occurrence is then continuing; and
(ii) the ratio of Total Gross Debt to EBITDA for the period of 12
months ending on the most recent Quarter Date prior to the
making or paying of the relevant dividend or distribution is
to be made is not greater than 1.5:1 as certified to the Agent
and the Banks by the Auditors;
(h) after the date of this Agreement, give any indemnity to potential
purchasers in relation to the costs of their due diligences
exercises exceeding, in aggregate, (pound)200,000;
(i) make or agree to make any payment or repayment or otherwise
discharge any of the obligations or liabilities of the Company under
the Jersey Debenture or otherwise in respect of the Loan (as defined
in the Jersey Debenture) except in respect of the payment of
interest;
(j) make any variation, amendment, modification or supplement in respect
of:
(i) the Jersey Debenture which relates to Clause 3 (Repayment),
Clause 4 (Prepayment) or Clause 8 (Subordination); or
(ii) the subordination provisions of the guarantee issued by the
Company in favour of the holders of the Convertible Capital
Bonds; nor
<PAGE>
(k) save as otherwise permitted or required by this Agreement,
voluntarily prepay, repay, redeem or purchase all or any of the US
Loan Notes.
14.4 Financial Undertakings
14.4.1 The Company hereby undertakes with each of the Agent, the Banks and the
Working Capital Bank to ensure that unless the Majority Creditors agree
otherwise.
(a) EBITDA minus Capital Expenditure to Total Debt Costs
the ratio of EBITDA minus Capital Expenditure to Total Debt Costs
for each period of 12 months ending on a date specified in Column A
below shall not be less than the ratio set out in Column B below
opposite such date:
Column A Column B
-------- --------
30 November 1995 0.67:1
29 February 1996 0.54:1
31 May 1996 0.64:1
31 August 1996 0.61:1
30 November 1996 0.71:1
28 February 1997 0.70:1
31 May 1997 0.73:1
31 August 1997 0.77:1
30 November 1997 0.83:1
(b) Total Gross Debt to EBITDA
the ratio of Total Gross Debt to EBITDA for each period of 12 months
ending on a date specified in Column A below shall not be greater
than the ratio set out in Column B opposite such date:
Column A Column B
-------- --------
30 November 1995 3.35:1
29 February 1996 3.63:1
31 May 1996 3.37:1
31 August 1996 3.40:1
30 November 1996 3.27:1
28 February 1997 3.38:1
31 May 1997 3.24:1
31 August 1997 3.21:1
30 November 1997 3.03:1
(c) Recurring US Annual Rental Income
the Recurring US Annual Rental Income for each period of 12 months
ending on each Quarter Day shall not be less than (pound)50,000,000;
and
<PAGE>
(d) Minimum Tangible Net Worth
Tangible Net Worth shall at all times be at least equal to
(pound)25,000,000.
14.4.2 If the directors of any of the companies in the Group determine at any
time during the Security Period to change the accounting reference date of
any member of the Group or if any of the accounting principles applies in
the preparation of any Accounts shall be different from the accounting
principles applies in respect of the same as at the date of this Agreement
or if as a result of the introduction or implementation of any SSAP, FRS,
FASB or UITF or any change in any of them or in the applicable law such
accounting principles are required to be changed or, adjustments are
required because of a change in the accounting treatment of the
capitalisation of equipment on contract hire, the Company or the Agent, as
the case may be, shall promptly give written notice to the Agent or the
Company, as the case may be, of such change, determination or
requirements, as the case may be. Thereafter, if the Agent believes that
the financial covenants set out in this Clause 14.4 need to be amended,
the Company and the Agent, acting on the instructions of the majority
Banks will negotiate in good faith to replace the existing financial
covenants with financial covenants which provide the Banks and the US Loan
Note Holders with substantially the same protections as the financial
covenants set out in this Clause 14.4 (but which are not materially more
onerous). If the Company and the Agent cannot agree such amended financial
covenants, or in default of such nomination the Agent shall request the
President for the time being of the Institute of Chartered Accountants in
England and Wales to nominate a firm of chartered accountants. Such
accountants in England and Wales to nominate a firm of chartered
accountants. Such accountants shall act as experts and not arbitrators and
their decision shall be final and binding on the parties hereto. The costs
of such experts shall be paid by the Company. Any such amendment financial
covenants shall apply in respect of this Agreement and the US Loan Notes.
14.4.3 The calculation of ratios and other amounts under this Clause 14.4 shall
be made by reference to the latest Accounts, interim accounts, management
accounts and other financial information of the members of the Group but
adjusted to reflect any movement from the assumed interest rates and
exchange rates set out in Clause 14.4.4.
14.4.4 For the purpose of Clause 14.4.3
(a) the assumed interest rates for each of the Financial Years of the
Company ending 30th November 1996 and 30th November 1997 are as
follows:
(i) in respect of Sterling Indebtedness, 6.75% plus a margin of
1.5% per annum;
(ii) in respect of US Dollars Indebtedness, 6% plus a margin of
1.5% per annum; and
<PAGE>
(iii) in respect of US Dollars deposits, 5% per annum.
(b) the assumed US$:(pound) exchange rate for the Financial Year of the
Company ending 30th November 1996 is US$1.60 to (pound)1.
(c) the assumed US$:(pound) exchange rate for the Financial Year ending
30th November 1997 is US$1.55 to (pound)1.
14.4.5 On the occurrence of a New Equity Raising or a Major Disposal the Company
agrees that the financial undertakings set out in this Clause 14.4 shall
be recalculated as a result of such occurrence after consultation between
the Company, the Banks, the Working Capital Bank and the US Loan Note
Holders and be reset to reflect the change in the Company's financial
position as a result thereof on the basis that while reflecting such
change, the reset financial covenants will provide the Banks and the US
Loan Note Holders with substantially the same protections as the financial
covenants set out in this Clause 14.4.
15. DEFAULT
15.1 Defaults
There shall be a Default if:
(a) any amount payable under this Agreement is not paid by a Borrower on
the date, at the place and in the currency at which it is expressed
to be payable unless such payment is caused solely by technical
delays in the transmission of funds and such amount is paid within
three (3) Business Days of its due date; or
(b) any member of the Group fails to comply with any of its obligations
and undertakings under any of the Financing Documents (other than
the obligations and undertakings referred to in the foregoing Clause
15.1(a)) and, if, in the opinion of the Majority Creditors, capable
of remedy, such failure is not remedied within fifteen (15) Business
Days after notice of such failure has been given by the Agent to the
Company; or
(c) any representation, warranty or statement made or deemed to be
repeated by any member of the Group under any of the Financing
Documents or in any notice, certificate or statement of fact
referred to in or delivered under any of the Financing Documents is
or proves to have been incorrect when made or deemed to have been
repeated; or
(d) any of the Financing Documents is not or ceases to be in full force
and effect or the validity or enforceability of any of the terms of
any of the Financing Documents shall be contested by any of the
members of the Group; or
<PAGE>
(e) any Indebtedness in excess of, in aggregate, (pound)1,000,000 of any
of the members of the Group:
(i) is declared to be or otherwise becomes due and payable prior
to its specified maturity; or
(ii) is not paid when due or within any applicable grace period in
any agreement or instrument relating to the relevant
Indebtedness;
or any creditor or creditors of members of the Group become entitled
to declare any such Indebtedness due and payable prior to its
specified maturity; or
(f) a creditor or encumbrancer attaches or takes possession of, or a
distress, execution, sequestration or other process is levied or
enforced upon or sued out against, any of the undertaking and assets
(having a value of at least (pound)500,000) of any of the members of
the Group and, if capable of discharge, such possession is not
terminated or such attachment or process is not discharged within 14
days; or
(g) any of the members of the Group (other than a Dormant Company):
(i) suspends payment of its debts or is unable or admits its
inability to pay its debts as they fall due; or
(ii) commences negotiations with one or more of its creditors with
a view to the general readjustment or rescheduling of all or
part of its Indebtedness which it would otherwise not be able
to pay as it falls due; or
(iii) proposes or enters into any composition or other arrangement
for the benefit of its creditors generally or any class of
creditors; or
(h) other than in respect of a petition for winding-up which is proved
to the satisfaction of the Majority Creditors to be either frivolous
or vexatious and which is discharged within 21 days of such petition
being served, any of the members of the Group takes any action or
any legal proceedings are started or other legal steps taken for:
(i) any of the members of the Group (other than a Dormant Company)
to be adjudicated or found bankrupt or insolvent; or
(ii) the winding-up or dissolution of any of the members of the
Group (other than (a) in respect of a Dormant Company or (b)
in connection with a solvent reconstruction, the terms of
which have been previously approved in writing by the majority
Creditors); or
<PAGE>
(iii) the appointment of a trustee, receiver, administrative
receiver, or similar officer of any of the members of the
Group (other than a Dormant Company) or the whole or any part
of their respective undertaking and assets; or
(i) any adjudication, order or, as the case may be, appointment is made
under or in relation to any of the proceedings referred to in Clause
15.1(h); or
(j) an application is made to the court for an administration order
under the Insolvency Act 1986 with respect to any of the members of
the Group (other than a Dormant Company); or
(k) any event occurs or proceeding is taken with respect to any member
of the Group (other than a Dormant Company) in any jurisdiction to
which it is subject which has an effect equivalent or similar to any
of the events mentioned in Clause 15.1(f),(g),(h),(i) or (j); or
(l) any of the members of the Group (other than a Dormant Company)
suspends, ceases or threatens to suspend or cease to carry on its
business; or
(m) at any time there occurs a change in the financial condition or
business condition of any of the members of the Group which (in the
reasonable opinion of the Majority Creditors) has, or could
reasonably be expected to have, a Material Adverse Effect (as
defined hereunder and under the US Loan Notes Instrument); or
(n) without the prior consent of the Majority Creditors, the Company
makes any redemption of, or purchases, any of its share capital or
the Convertible Capital Bonds or otherwise reduces its share
capital; or
(o) there occurs a Change of Control; or
(p) a final judgment for the payment of money in any amount in excess of
(pound)1,000,000 (or the equivalent in other currency) net of
insurance proceeds received, is rendered against the Company or any
Material Subsidiary and, within 14 days after entry thereof, such
judgment is not discharged or dismissed or execution thereof stayed
pending appeal, or within 14 days after the expiration of any such
stay such judgment is not discharged; or
(q) an Event of Default occurs under, and as such term is defined in,
the US Loan Notes Instrument.
15.2 Acceleration etc.
15.2.1 At any time when any Default remains unremedies the Agent shall is
instructed by, in relation to a Default referred to in Clause 15.1(a), the
Majority Banks and in relation to all other Defaults, the Majority
Creditors by notice to the Company
<PAGE>
cancel the Term Loan Facility and/or the Revolving Loan Facility and/or
the Overdraft Facility in whole or in part and:
(a) require the Borrowers immediately to repay the Term Loan, the
Revolving Loan and the Overdraft Outstanding together with accrued
interest thereon and immediately to pay all other sums payable under
this Agreement, whereupon the same shall become immediately due and
payable; or
(b) place the Term Loan, the Revolving Loan and all overdrafts made
available under the Overdraft Facilities on demand, whereupon the
same and all other sums payable hereunder shall become repayable on
demand made by the Agent on the instructions of the Majority
Creditors.
Upon the service of any such notice by the Agent the Banks' obligations
shall be terminated and each of the Banks' Commitments shall be cancelled
and reduced to zero.
15.2.2 Forthwith upon the Agent serving notice under Clause 15.2.1, each
Borrower shall in respect of each Engagement entered into or issues at its
request:
(i) use its best endeavours to procure the release of the Working
Capital Bank from, such Engagement; and
(ii) without prejudice to (i) above, pay to the credit of such account as
the working Capital Bank issuing such Engagement shall stipulate an
amount equal to the maximum actual and contingent liabilities of the
Working Capital Bank under such Engagement and charge the same to
the Working Capital Bank on such terms as the Working Capital Bank
may stipulate.
16. SET-OFF AND PRO RATA PAYMENTS
16.1 Set-Off
Each Borrower hereby authorises each of the Agent, the Banks and the
Working Capital Bank to apply any credit balance on any account of such
Borrower with any of the Agent, the Banks and the Working Capital Bank in
satisfaction of any sum due and payable from such Borrower pursuant to the
terms of the Financial Documents. For this purpose each of the Agent, the
Banks and the Working Capital Bank is authorised to purchase at its spot
rate of exchange with the monies standing to the credit of any such
account such other currencies as may be necessary to effect such
application.
16.2 Pro Rata Sharing
16.2.1 If any Bank (the "Sharing Bank") shall at any time obtain (whether by way
of voluntary or involuntary payment right of set-off, or otherwise) a
proportion in
<PAGE>
respect of its Participation in the Advances which is greater than the
proportion obtained by the Bank or Banks respectively obtaining the
smallest proportion of its Participation in the Advances, including a nil
receipt, (the amount so obtained by the Sharing Bank which represents such
excess being herein called "the excess amount")
then:
(i) the Sharing Bank shall promptly pay to the Agent, for the account of
the Banks, an amount equal to the excess amount, whereupon the Agent
shall notify the Company of such amount and its receipt by the
Agent;
(ii) the Agent shall treat such payment as if it were a payment by the
Borrowers on account of sums owned to the Banks; and
(iii) as between the Company and the Sharing Bank the excess amount shall
be treated as not having been paid, while as between the Company and
each Bank it shall be treated as having been paid to the extent any
monies are received by such Bank.
If, because of the liquidation of the Company, or for any other reason
affecting the Company, the provisions of paragraph (iii) above cannot be
given effect to as between the Banks on the one hand and the Company on
the other hand then, as between the Banks, the Sharing Bank shall be
treated as having purchased from each other Bank an amount of the
Participations of that Bank in Advances which is equal to that part of the
excess amount which is paid to that Bank and the Sharing Bank shall,
accordingly, be entitled to receive all dividends and other payments
received by that Bank in respect of such Participations, as the case may
be, deemed to have been purchased by it.
16.2.2 Each Bank shall forthwith notify the Agent of any such receipt or
recovery by it other than by payment through the Agent.
16.2.3 If any excess amount subsequently has to be wholly or partly refunded to
the Company by any Sharing Bank which has paid an amount equal thereto the
Agent under Clause 16.2.1, each Bank to which any part of that amount was
distributed shall on request from the Sharing Bank repay to the Sharing
Bank such Bank's pro rata share of the amount which has to be so refunded
by the Sharing Bank. Each Bank shall on request supply to the Agent such
information as the Agent may from time to time request for the purpose of
this Clause 16.2. Notwithstanding the foregoing provisions of this Clause
16.2, no Sharing Bank shall be obliged to share any excess amount which it
receives or recovers pursuant to legal proceedings taken by it to recover
any sums owing to it under this Agreement with any other party which has a
legal right to, but does not, either join in such proceedings or commence
and diligently pursue separate proceedings to enforce its rights in the
same or another court, unless the proceedings instituted by the Sharing
Bank are instituted by it without prior notice having been given to such
party through the Agent and an opportunity to such party to join in such
proceedings.
16.2.4 Nothing in this Agreement shall oblige the Agent or any Bank to apply any
credit balance or other benefit received from the Borrower against the
liabilities of the
<PAGE>
Borrower under this Agreement in priority to any other liabilities of the
Borrower to the Agent or that Bank.
17. THE AGENT AND THE BANKS
17.1 Appointment and Duties
17.1.1 Each Bank hereby irrevocably appoints the Agent to act as its agent in
connection with the administration of the Facilities and for such
purposes irrevocably authorizes and the Agent to take such action and to
exercise and carry out all the discretions, authorities, rights, powers
and duties as are specifically delegated to the Agent in the Financing
Documents together with such powers and discretions as are incidental
thereto.
17.1.2 The Agent shall have no duties or responsibilities except those
expressly set out in the Financing Documents. As to any matters not
expressly provided for by this Agreement, the Agent shall, subject to
the provisions hereof or thereof, act hereunder or thereunder or in
connection herewith or therewith in accordance with the instructions of
the Majority Banks (but in the absence of any such instructions shall
not be obliged to act) and any such instructions and any action taken by
the Agent in accordance therewith shall be binding upon all the Banks.
17.1.3 The Agent may:
(a) act as agent or trustee or in a fiduciary or other capacity on
behalf of any other group of banks or financial institutions
providing facilities to any member of the Group or any
associated company of a member of the Group or any associated
company of a member of the Group without regard to the effect of
exercising or omitting to exercise its discretions, authorities,
rights, powers and duties in such capacity in the interests of
the Banks and may act or omit to act in such capacity as freely
in all respects as if the Agent had not been appointed to act as
agent for the Banks; and
(b) subscribe for, hold or be or become beneficially entitled to, or
dispose of, shares of securities, or options or other rights to
and interests in shares or securities in any member of the Group
or any associated company of a member of the Group (and, in each
case, may do so without liability to account).
17.1.4 For so long as Lloyds Bank Plc is the Agent, the Capital Markets Group
of Lloyds Bank Plc shall be treated as a separate entity from any other
of the divisions of the Agent or its Subsidiaries and, notwithstanding
the generality of the foregoing, in the event that any of the Agent's
divisions (including its Capital Market Group) or similar units or
Subsidiaries should act for any member of the Group in any a capacity
(whether as bankers or otherwise) in relation to any other matter, any
information given by any member of the Group to such divisions, similar
units or Subsidiaries
<PAGE>
shall be treated as confidential and the Agent shall, as between itself
and the Banks, not be obliged to disclose the same to any Bank or any
other person.
17.1.5 For the purposes of this Agreement, the Agent shall be deemed not to
have any actual knowledge or actual notice of the contents of any
information obtained by it or supplied to it by or on behalf of any
member of the Group other than the contents of information obtained by
or supplied to it as Agent for the Banks pursuant to or in connection
with this Agreement.
17.2 Payments and Information Received
The Agent will promptly account to the Lending Office of each Bank for
such Bank's due proportion of all sums received by the Agent for such
Bank's account, whether by way of repayment or prepayment of principal
or payment of interest, fees or otherwise. The Agent shall provide the
Banks with all information and copies of all notices which by the terms
of this Agreement are to be provided or given to the Banks. The Agent
may retain for its own use and benefit (and shall not be liable to
account to any of the Banks for all or any part of) any sums received by
it by way of agency or management or arrangement fees or by way of
reimbursements of expenses incurred by it.
17.3 Defaults
The Agent shall not be obliged to take any steps to ascertain whether
any Default (other than a default in repayment of principal or in
payment of interest, fees or other sums due pursuant to this Agreement)
or Default Occurrence has happened or exists and, until the Agent shall
have received express notice to the contrary from a Borrower or any
Bank, the Agent shall be entitled to assume that no Default (other than
as aforesaid) or Default Occurrence has happened or exists. Upon receipt
of such notice the Agent shall promptly inform the Banks.
17.4 Assumptions
The Agent shall be entitled to rely on any communication or document
believed by it to be genuine and correct and to have been communicated
or signed by the person by whom it purports to be communicated or signed
and shall not be liable to any of the parties to this Agreement for any
of the consequences of such reliance.
17.5 Legal Proceedings
The Agent shall not be obliged to take or commence any legal action or
proceeding against a Borrower or any other person arising out of or in
connection with the Financing Documents until it shall have been
indemnified or secured to its satisfaction against any and all costs,
claims and expenses (including, but to limited to, any costs award which
may be made against it as a result of any such legal action or
proceeding not being successful) which it may expend or incur in such
legal action or proceeding.
<PAGE>
17.6 No Liability
Neither the Agent nor any of its directors, employees or agents shall be
liable for any action taken or omitted to be taken by it or any of them
under or in connection with the Financing Documents unless caused by its
or their gross negligence or wilful misconduct. The Agent shall not be
responsible for any statements, representations or warranties in this
the Financing Documents or for any information supplied or provided or
hereafter to be supplied or provided to any of the Banks and the Working
Capital Bank by the Agent, in respect of a Borrower or any other person
or for any other matter relating to the Facilities or the Financing
Documents or for the execution, effectiveness, genuineness, validity,
enforceability or sufficiency of such documents or any of the other
documents referred to herein or therein or for the recoverability of all
or any of the Loans or any of the other sums to become due and payable
pursuant hereto.
17.7 Credit Decisions
17.7.1 Each Bank and the Working Capital Bank acknowledges that it has,
independently and without reliance on the Agent and based on such
documents and information as it deemed appropriate, made its own
analysis of the transaction reached its own decision to enter into, this
Agreement and made its own investigation of the financial condition and
affairs of the Borrowers and its own appraisal of the creditworthiness
of the Borrowers.
17.1.2 Save as specifically provided herein, the Agent shall not be under nay
duty or obligation, either initially or on a continuing basis, to
provide any Bank or the Working Capital Bank with any credit information
or other information with respect to the financial condition of the
Company or the Borrower of which is otherwise relevant to the
Facilities.
17.7.3 Each Bank and the Working Capital Bank further acknowledges and confirms
that it will, independently and without reliance on the Agent and based
on such documents and information as it shall deem appropriate at the
time, make its own decisions in taking or not taking action under the
Financing Documents.
17.8 Advisers
The Agent shall be entitled to obtain and rely on the advice of any
professional advisers selected by it given in connection with the
Financing Documents or any of the matters contemplated hereby or
thereby, and shall not be liable to any of the Banks and the Working
Capital Bank for any of the consequences of such reliance.
17.9 Relationship with Banks
17.9.1 In performing its functions and duties under this Agreement, the Agent
shall act solely as the agent for the Banks and shall not assume or be
deemed to have assumed any obligation as agent or trustee for, or any
relationship of agency or trust with or the Borrowers.
<PAGE>
17.9.2 Neither the Agent nor any Bank nor the Working Capital Bank shall be
under any liability or responsibility of any kind to the Borrowers or
any of the other Banks arising out of or in relation to any failure or
delay in performance or breach by an other Bank or Banks and the Working
Capital Bank or, as the case may be, a Borrower of any of its or their
respective obligations pursuant to the Financing Documents.
17.10 Agent's position as a Bank
With respect to its own Participation in the Loans, the Agent shall have
the same rights and powers under and in respect of the Financing
Documents as though it were not also acting as agent and/or trustee for
the Banks. The Agent may, without liability to account, accept deposits
from, lend money to and generally engage in any kind of banking or trust
business with or for any Borrower as if it were not the agent or the
trustee for the Banks.
17.11 Indemnity
Each of the Banks agrees to indemnify the Agent (to the extent not
reimbursed by the Borrower) rateably according to the Banks' respective
Commitments from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
and disbursements of any kind or nature whatsoever (except in respect of
any agency, management or other fee due to the Agent) which may be
imposed on, incurred by or asserted against the Agent in its capacity as
agent for the Banks or in any way relating to or arising out of the
Financing Documents or any action taken or omitted by the Agent in
enforcing or preserving the rights of the Banks under the Financing
Documents, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or wilful misconduct.
17.12 Resignation
17.12.1 Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by giving to the
Company and each of the Banks not less than 60 days' notice of its
intention to do so. Upon receipt of such notice of resignation the Banks
shall appoint as successor Agent any bank or financial institution
selected by the Company and the Majority Banks which is willing and able
to act as such agent for the Banks.
17.12.2 If no such successor Agent selected by the Company and the Majority
Banks shall have accepted such appointment within 20 days after the
Agent's giving of notice of resignation then the Majority Banks after
consultation with the Company shall have the right to appoint such a
successor Agent.
17.12.3 If no such successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within 40 days after the
Agent's giving of notice of resignation then the resigning Agent may,
after consultation with the
<PAGE>
Company, appoint as its successor any reputable and experience bank or
other financial institution with an office in London.
17.12.4 Any such appointment shall take effect upon notice thereof (which notice
shall specify the bank in London to which payments shall be made
thereafter) being given to the Company and each Bank. Thereafter, the
resigning Agent shall be discharged from any further obligation under
the Financing Documents and its successor and each of the other parties
hereto and thereto shall have the same rights and obligations inter se
as they would have had if such success had been a party to the Financing
Documents in place of the resigning Agent. The resigning Agent shall
make over to its successor all such records as its successor requires to
carry out its duties.
17.13 Change of Office
The Agent may from time to time in its sole discretion by written notice
to the Company and each Bank designate a different office in the United
Kingdom from which its duties as the Agent will thereafter be performed.
17.14 Scope of Duties
The Agent may (except where the same is required by the express
provisions of this Agreement to be authorised by all the Banks or the
Majority Creditors) grant waivers, vary the terms of the Financing
Documents and do or omit to do all such acts and things in connection
therewith as may be authorised in writing by the Majority Banks. Any
such waiver, variation, act or omission so authorised and effected by
the Agent shall be binding on all the Banks and the Agent shall be under
no liability whatsoever in respect of any such waiver, consent,
variation, act or omission. Except with the prior written agreement of
all the Banks, nothing in this Clause shall authorise (as between the
Agent and the Banks) (i) any change in the rate at which any interest or
commission is payable under this Agreement, (ii) any extension of the
date for, or alteration in the amount or currency of, the payment of any
principal, interest, fees or any other amount payable under this
Agreement, (iii) "Majority Banks" in Clause 1.1, (v) any variation of
Clause 8, 9 or 15 and this Clause 17 or (vi) any provision of this
Agreement which requires the consent of all the Banks.
17.15 Consents
The Agent may at any time upon the application and at the cost of the
Borrowers and without any consent of any of the Banks (only if and so
far as its reasonable opinion the interests of the Banks shall not be
materially prejudiced thereby) give any consent, approval or license
required on the Agent under the terms of this Agreement, save where this
Agreement expressly requires that such consent, approval or license
should be given only with the approval of, or on the instructions of,
the Banks, the Majority Banks or the Majority Creditors.
<PAGE>
17.16 Evidence
The Agent may accept a certificate signed by any director of the
secretary of the Company or any Borrower as to any fact or matter on
which the Agent may need or wish to be satisfied as sufficient evidence
thereof and a like certificate that any assets in the opinion of the
person so certifying have a particular value or produce a particular
income or are suitable for a particular purpose as sufficient evidence
that they have that value or produce that income or are so suitable and
the Agent shall not be bound in any such case to call for further
evidence or be responsible for any loss that may be occasioned by its
failing to do so.
17.17 Distribution of Proceeds of Enforcement
17.17.1 In this Clause 17.17 the following expressions shall have the following
meanings:
"Bank Outstandings" means, in respect of a Bank (which expression for
the purposes of this Clause 17.17 shall include the Working Capital
Bank), the aggregate amount owed to such Bank by way of principal,
interest, commission and fees in respect of the Facilities, including
all amounts actually or contingently owed to the Working Capital Bank at
such time under, or in respect of, the uncommitted Engagements Facility;
and
"Total Outstandings" means the aggregate of the Bank Outstandings of
each Bank.
17.17.2 Subject to the terms of the Intercreditor Agreement on the enforcement
of all or any of the Security Documents, any amount of enforcement
proceeds paid to the Agent pursuant to the Intercreditor Agreement shall
be applied as follows. The Agent shall be entitled to deduct from the
proceeds of such enforcements its costs, charges and expenses incurred
in connection with such enforcement together an amount equal to all sums
due to the Agent hereunder before distributing to each Bank an amount
equal to the remaining proceeds multiplied by:
Bank Outstanding of such Bank
Total Outstandings
where Bank Outstandings, the Working Capital Bank's Outstandings and the
Total Outstandings are all calculated as at the date of enforcement.
17.17.3 The Agent shall notify each Bank of any proposed distribution and the
proposed date of distribution and each Bank shall provide to the Agent a
calculation of what is due to it in respect of the sums referred to in
Clause 17.17.1. The Agent shall send copies of all such calculations to
all other Banks and, in the absence of manifest error, the Agent shall
make the distributions on the basis of such calculations.
17.17.4 If any continent liability incurred in the calculation of Bank's
Outstandings finally matures or is settled for less than the contingent
amount provided for in the relevant calculations then the relevant Bank
shall notify the Agent of that fact and such adjustment shall be made by
payment by such Bank to the Agent for distribution amongst the Banks as
may be necessary to put the Banks into the position they
<PAGE>
would have been in (but taking no account of the time cost of money) had
the original distribution been made on the basis of the actual as
opposed to the contingent liability.
17.17.5 The Agent may, at its discretion, accumulate proceeds of realisations on
an interest bearing account in its own name until there is a minimum of
(pound)500,000 to distribute under Clause 17.17.2.
17.18 Net Limits
For the avoidance of doubt, any credit balances taken into account by a
Bank when operating a net limit in respect of any overdraft under the
Overdraft Facility shall not be subject to Clause 16.2 and shall, on the
enforcement of the Security Documents, be applied first in reduction of
the relevant overdraft provided under the Overdraft Facility to the
extent taken into account in operating the net limit.
18. FEES AND EXPENSES
18.1 Expenses
The Company shall, on demand, pay all expenses (including, but not
limited to, legal, valuation and accounting fees) and any VAT thereon
incurred by:
(i) the Agent and the Banks in connection with the negotiation,
preparation and execution of any of the Financing Documents and
the other documents contemplated hereby and thereby now or at
any time hereafter;
(ii) the Agent, the Banks and the Working Capital Bank in connection
with the granting of any release, waiver or consent or in
connection with any variation of any Financing Document; and
(iii) the Agent, the Banks and the Working Capital Bank in enforcing,
perfecting, protecting or preserving (or attempting so to do)
any of their rights, or in suing for or recovering any sum due
from a Borrower or any other person under any Financing
Document.
18.2 Agency Fees
The Company shall pay to the Agent agency fees in accordance with the terms of
the Fees Letter. For the avoidance of doubt, all liabilities and obligations of
the Company under the Fees Letter are hereby deemed to be incurred under this
Agreement.
18.3 Commitment Fee
18.3.1 The Company shall pay a commitment fee in Sterling in respect of the
Revolving Loan Facility and (for so long as it is not payable on demand)
the Overdraft Facility to the Agent for the account of the Banks (pro
rata to their Revolving Loan
<PAGE>
Commitments and Overdraft Commitments) at a rate equal to half the
Margin on the difference from time to time between (i) the Total
Revolving Loan Commitments and the Total Overdraft Commitments and (ii)
the Revolving Loan and the Overdraft Outstandings.
18.3.2 Such fees shall accrue day to day on the basis of a 365 day year and the
number of days elapsed in respect of each successive period of 3 months
from the date hereof and shall be paid on the relevant Bank's usual
quarterly charging days.
18.4 Deferred Fee
18.4.1 Subject to Clause 18.4.2 the Borrowers shall pay a fee in Sterling to
the Agent, for the accounts of the Banks and the Working Capital Bank,
pro rata to their Commitments and in the case of the Working Capital
Bank the amount of the Uncommitted Engagements Facility, on 2nd January
1996 equal to 1.00 per cent. of the aggregate amount of the Facilities
as at 31st December 1995.
18.4.2 Payment of the fee referred to in Clause 18.4.1 may be deferred until
29th February 1995 PROVIDED THAT if such fee is paid in the period set
out in Column A below, it shall be increased by the amount set out in
Column B below opposite the relative period:
Column A Column B
-------- --------
(pound)
03.01.96 to 31.09.96 50,000
01.02.96 to 29.02.96 100,000
18.5 Facility Fee
The Company shall following the raising of New Equity or the occurrence of a
Majority Disposal, pay to the Agent, for the account of the Banks and
the Working Capital Bank, pro rata to their Commitments and in the case
of the Working Capital Bank the amount of the Uncommitted Engagements
Facility, a facility fee in Sterling equal to 1.00 per cent. per annum
of the aggregate available amount of the Facilities. Such fee shall
accrue from day to day, be calculated on the basis of a year of 365 days
and be paid in arrear of each 31st May and 30th November and on the
Final Repayment Date.
18.6 Success Fee
The Company shall pay to the Agent, for the account of the Banks and the
Working Capital Bank, pro rata to their Total Sterling Commitments, a
success fee in Sterling calculated as follows:
(i) if a New Equity Raising occurs by 30th April 1996, a success fee
of (pound)100,000 shall be payable on the date the proceeds
thereof are received by the Company; or
<PAGE>
(ii) if a New Equity Raising or a Major Disposal or a Change of
Control occurs on a date (the "Relevant Date") (but in the case
of a New Equity Raising being after 30th April 1996) in the
period set out in Column A below, a success fee equal to the
percentage per annum, set out in Column B below opposite the
relative period, of the average aggregate available amount of
the Facilities for the period from the date of this Agreement to
the Relevant Date shall be payable on the Relevant Date:
Column A Column B
-------- --------
the date of this Agreement to 30th September 1996 1.00%
1st October 1996 to 31st December 1996 1.50%
1st January 1997 to 31st March 1997 2.00%
1st April 1997 and thereafter 3.00% or
(iii) if no New Equity Raising, Major Disposal or Change of Control
has occurred by the Final Repayment Date, a success fee equal to
3 per cent. per annum of the average aggregate available amount
of the Facilities for the period from the date of this Agreement
to the Final Repayment Date shall be payable on the Final
Repayment Date.
18.7 Documentary Tax Indemnity
All stamp, documentary, registration or other like duties or Taxes,
including any penalties, additions, fines, surcharges or interest
relating thereto, which are imposed or charged on or in connection with
any of the Financing Documents shall be paid by the Company PROVIDED
THAT the Agent shall be entitled but not obliged to pay any such duties
or Taxes (whether or not they are its primary responsibility), whereupon
the Company shall on demand indemnify the Agent against those duties or
Taxes and against any costs and expenses so incurred by the Agent in
discharging them.
18.8 VAT
18.8.1 All payments made under the Financing Documents are calculated without
regard to Value Added Tax. If any such payment constitutes the whole or
any part of the consideration for a taxable or deemed taxable supply
(whether that supply is taxable pursuant to the exercise of an option or
otherwise) by the Agent or a Bank, the amount of that payment shall be
increased by an amount equal to the amount of VAT which is chargeable in
respect of the taxable supply in question.
18.8.2 No payment or other consideration to be made or furnished by any of the
Agent, the Bank or the Working Capital Bank to a Borrower pursuant to or
in connection with the Financing Documents or any transaction or
document contemplated herein may be increased or added to by reference
to (or as a result of any increase in the rate of) any VAT which shall
be or may become chargeable in respect of any taxable supply.
<PAGE>
18.9 Indemnity Payments
Where in the Financing Documents a Borrower has an obligation to
indemnify or reimburse any of the Agent, the Banks and the Working
Capital Bank in respect of any loss or payment, the calculation of the
amount payable by way of indemnity or reimbursement shall take account
of the actual Tax treatment in the hands of such person (as determined
by the relevant person's auditors) of the amount payable by way of
indemnity or reimbursement together with the loss or payment in respect
of which the amount is payable.
19. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE
19.1 Severance
If at any time any provision of this Agreement 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.
19.2 Waivers
No failure to exercise, nor any delay in exercising, on the part of any
of the Agent, the Banks or the Working Capital Bank, any right or remedy
hereunder 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 herein provided are cumulative and not exclusive of
any rights or remedies provided by law.
20. NOTICES
20.1 Method
Each communication to be made hereunder shall be made in writing but,
unless otherwise stated, may be made by telex, facsimile transmission or
letter.
20.2 Delivery
Any communication or document to be made or delivered by one person to
another pursuant to this Agreement shall (unless the one has by 15 days'
written notice to the other specified another address) be made or
delivered to that other person, in the case of the Borrowers, at the
address given in Clause 20.3 or the relative Deeds of Accession, the
Agent and the Working Capital Bank at the respective addresses given in
the Clause 20.3, in the case of the Banks at the respective addresses
given in Schedule 1 or, as the case may be, the Schedule of the relative
Transfer Certificate.
<PAGE>
20.3 Addresses
The addresses referred to in Clause 20.2 above are:
(A) the Borrowers:
The Clockhouse
The Campus
Hemel Hempstead
Hertfordshire HPQ 7TL
Attention: P. Bertram and A. Thompson
Fax: 01442 62129/60121
(B) the Agent:
Lloyds Bank Plc
Bank House
Wine Street
Bristol BS1 2AN
Attention: Loans Administration
Ans: LYOD LN
Telex: 888301
Fax: 01272 233367
(C) the Working Capital Bank:
Midland Bank plc
St. Magnus House
3 Lower Thames Street
London EC3R 6HA
Attention: Mrs. K. L. Bidwell
Tel: 0171 260 5654
Fax: 0171 260 5791
20.4 Deemed Receipt
20.4.1 Any notice given by the Agent shall be deemed to have been received:
(a) if sent by telex with the relevant answerback appearing at the
beginning and end of the relevant telex on the Business Day on
which transmitted;
(b) if sent by facsimile transmission, one Business Day after the
date it was transmitted;
(C) in the case of a written notice lodged by hand, at the time of
actual delivery; or
<PAGE>
(d) if posted, on the second Business Day following the day on which
it was properly dispatched by first class mail postage prepaid.
20.4.2 Any notice given to the Agent shall be deemed to have been given only on
actual receipt.
20.5 Notices to the Banks
Any notice to be given by a Borrower to the Banks or any of them may be
given by serving such notice on the Agent together with a written
instruction that such notice is to be treated as notice to one or more
specified Banks. In the absence of such written instructions it shall be
deemed to be a notice to the Agent alone.
21. ASSIGNMENT AND TRANSFERS
21.1 Benefit of Agreement
This Agreement shall be binding upon and enure to the benefit of each
party hereto and its successors and assigns.
21.2 Assignment and Transfers by the Borrowers
A Borrower shall not be entitled to assign or transfer all or any of its
rights, benefits and obligations under this Agreement.
21.3 Assignments and Transfers by Banks
21.3.1 Any Bank with the prior written consent of the company, such consent not
to be unreasonably withheld or delayed, may at any time assign all or
any of its rights and benefits under any of the Financial Documents or
any Bank may transfer in accordance with Clause 21.3.3 below all or any
of its rights, benefits and obligations under any of the Financing
Documents, in each case, to any person that is a Qualifying Bank.
21.3.2 If any Bank assigns all or any of its rights and benefits under any of
the Financing Documents in accordance with Clause 23.3.1, then, unless
and until the assignee has confirmed to the Agent, the Working Capital
Bank and other Banks that it shall be under the same obligations towards
each of them as it would have been under if it had been a party hereto
as a Bank, the Agent, the Working Capital Bank 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 hereto.
21.3.3 If any Bank (the "Existing Bank") wishes to transfer all or any part of
its Commitment or Participations in Advances to another bank or
financial institution (the "Bank Transferee"), such transfer may be
effected by way of a novation by the delivery to, and the execution by,
the Agent of a duly completed Transfer Certificate.
<PAGE>
21.3.4 On the date specified in the Transfer Certificate:
(i) to the extent that in the Transfer Certificate the Existing Bank
seeks to transfer its Commitment or Participations, the
Borrowers and the Existing Bank shall each be released from
further obligations to each other under this Agreement and their
respective rights against each other shall be cancelled (such
rights and obligations being referred to in this Clause 21.3.4
as "Discharged Rights and Obligations");
(ii) the Borrowers and the Bank Transferee shall each assume
obligations towards each other and/or acquire rights against
each other which differ from the Discharged Rights and
Obligations only insofar as the Borrower and the Bank Transferee
have assumed and/or acquired the same in place of the Borrower
and the Existing Bank;
(iii) the Agent, the Borrowers, the Working Capital Bank, the Bank
Transferee and the other Banks shall acquire the same rights and
assume the same obligations among themselves as they would have
acquired and assumed had the Bank Transferee been a party
hereunder as a Bank with the rights and/or the obligations
acquired or assumed by it as a result of the transfer;
(iv) a proportion of the Existing Bank's rights under the Security
Documents equal to the proportion of the Existing Bank's rights
under this Agreement being transferred, shall automatically be
transferred to the Bank Transferee; and
(v) a proportion of the Existing Bank's rights and obligations under
the Intercreditor Agreement equal to the proportion of the
Existing Bank's rights under this Agreement being transferred
shall automatically be transferred to the Bank Transferee in
accordance with the terms of the Intercreditor Agreement.
21.3.5 The Agent will promptly complete Transfer Certificates on request by an
Existing Bank and upon payment by such Existing Bank of a fee of
(pound)750 to the Agent. The Working Capital Bank, the Borrowers and
each of the Banks hereby irrevocably authorize the Agent to execute any
duly completed Transfer Certificate on its behalf provided that such
authorisation does not extend to the execution of a Transfer Certificate
on behalf of either the Existing Bank or the Bank Transferee named
therein.
21.3.6 The Agent shall promptly notify the Company of the receipt and execution
on its behalf by the Agent of any Transfer Certificate.
21.3.7 A Borrower shall be under no obligation to pay any greater amount under
this Agreement following an assignment or transfer by a Bank of any of
its rights or obligations pursuant to the foregoing provisions of this
Clause 21 where, in the circumstances existing at the time of such
assignment or transfer, such greater amount would not have been payable
but for the assignment or transfer.
<PAGE>
21.4 Disclosure of Information
The Agent and the Banks may not disclose any information furnished or
made available to them hereunder by the Borrowers unless such
information is available in the public domain PROVIDED THAT such
information may be disclosed to each other, their professional advisers
and to any actual or potential assignee, transferee or sub-participant
subject to the condition that each of the same undertakes to the Company
to keep confidential any such information and not disclose it save in
accordance with the provisions of this Clause 21.4.
22. COUNTERPARTS
This Agreement may be executed in any number of counterparts and all
such counterparts when executed and taken together shall constitute one
and the same Agreement.
23. LAW
This Agreement shall be governed by, and construed in all respects in
accordance with, English law.
24. CURRENCY INDEMNITY
Any payment or payments made to or for the account of or received by the
Agent, the Working Capital Bank or any Bank in respect of any monies or
liabilities due, arising or incurred by any Borrower to the Agent, the
Working Capital Bank or any Bank in a currency (the "Currency of
Payment") other than the currency in which the payment should have been
made pursuant to this Agreement (the "Currency of Obligation") in
whatever circumstances (including, without limitation, as a result of a
judgment against such Borrower) and for whatever reason shall constitute
a discharge to such Borrower to the extent of the Currency of Obligation
amount which the Agent, the Working Capital Bank or Bank, as the case
may be, is able on the date or dates of receipt of such payment or
payments (or if not a Business Day on the next succeeding Business Day)
to purchase with the Currency of Payment amount in the London foreign
exchange market. If the amount of the Currency of Obligation which the
Agent, the Working Capital Bank or that Bank is so able to purchase
falls short of the amount originally due to the Agent, the Working
Capital Banks or that Bank, as the case may be, under this Agreement,
then such Borrower shall indemnify and hold the Agent, the Working
Capital Banks or that Bank, as the case may be, harmless against any
loss or damage arising as a result thereof by paying to the Agent, the
Working Capital Bank or that Bank, as the case may be, that amount in
the Currency of Obligation certified by the Agent, the Working Capital
Bank or that Bank, as the case may be, as necessary so to indemnify it.
It is hereby declared that this indemnity shall constitute a separate
and independent obligation from the other obligations contained in this
Agreement, shall give rise to a
<PAGE>
separate and independent cause of action, shall apply irrespective of
any indulgence granted from time to time and shall continue in full
force and effect notwithstanding any judgment or order for a liquidated
sum or sums in respect of amounts due under this Agreement or under any
such judgment or order. The certificate of the Agent, the Working
Capital Bank or the relevant Bank, as the case may be, as to the amount
of any such loss or damage as aforesaid shall, in the absence of
manifest error, be conclusive and binding on each Borrower.
IN WITNESS whereof the parties hereto have caused this Agreement to be duly
executed on the date set out above.
<PAGE>
SCHEDULE 1
THE BANKS
<TABLE>
<CAPTION>
Term Loan Revolving Loan Overdraft
Bank and Address for Commitment Commitment Commitment
Lending Office Notices US$ (pound) (pound)
- -------------- ------- --- ------- -------
<S> <C> <C> <C> <C>
Lloyds Banks Plc Lloyds Banks Plc 4,883,665 6,879,355 --
Corporate Banking Division Corporate Banking Division
St. Georges House St. Georges House
6-8 Eastcheap 6-8 Eastcheap
London EC3M 1LL London EC3M 1LL
Attention: Nigel Robinson
Telephone: 0171-418 3532
Fax: 0171-489 8315
ABN AMRO Bank N.V. ABN AMRO Bank N.V. 13,953,615 19,655,705 --
101 Moorgate 101 Moorgate
London EC2M 6SB London EC2M 6SB
Attention: Paul Hodgson
Telephone: 0171-477 5128
Fax: 0171-638 3832
Midland Bank plc Midland Bank plc 4,651,109 6,551,767 3,609,782
St. Magnus House St. Magnus House
3 Lower Thames Street 3 Lower Thames Street
London EC3R 6HA London EC3R 6HA
Attention: Stephen Long/
Kathy Bidwell
Telephone: 0171-260 5646/
0171-260 5650
Fax: 0171-260 5791
National Westminster Bank Plc National Westminster Bank Plc 4,651,109 6,551,767 --
135 Bishopsgate 135 Bishopsgate
London EC2M 3UR London EC2M 3UR
Attention: Steve Hearne
Telephone: 0171-375 5000
Fax: 0171-375 5035
The Bank of Tokyo, Ltd. The Bank of Tokyo, Ltd. 2,325,555 3,275,883 --
12-15 Finsbury Circus Finsbury Circus House
London EC2M 7BT 12-15 Finsbury Circus
London EC2M 7BT
Attention: Manager - Loans
Administration
Telephone: 0171-216 1122
Telex: 946178 TOH LAD G
Fax: 0171-216 1188
<PAGE>
<CAPTION>
Term Loan Revolving Loan Overdraft
Bank and Address for Commitment Commitment Commitment
Lending Office Notices US$ (pound) (pound)
- -------------- ------- --- ------- -------
<S> <C> <C> <C> <C>
The Fuji Bank, Limited The Fuji Bank, Limited 2,325,555 3,275,883 --
River Plate House River Plate House
7-11 Finsbury Circus 7-11 Finsbury Circus
London EC2M 7DH London EC2M 7DH
Attention: Stephen Odell/
Robert Pettitt
Telephone: 0171-588 2211
Fax: 0171-588 1400
BHF Bank A.G. BHF Bank A.G. 2,325,555 3,275,883 --
61 Queen Street 61 Queen Street
London EC4R 1AE London EC4R 1AE
Attention: P. Firth/
Christine Youds
Telephone: 0171-634 2300
Fax: 0171-220 7140
Banco Central Banco Central 1,162,777 1,637,942 --
Hispanoamericano S.A. Hispanoamericano S.A.
15 Austin Friars 15 Austin Friars
London EC2N 2DJ London EC2N 2DJ
Attention: Robert Soper/
Glenn Francis
Telephone: 0171-588 0181
Fax: 0171-588 5825
Banco Bilbao Vizcaya, S.A. Banco Bilbao Vizcaya, S.A. 930,222 1,310,353 --
100 Cannon Street 100 Cannon Street
London EC4N 6EH London EC4N 6EH
Attention: George Silva-Rozzi
Telephone: 0171-623 3060
Fax: 0171-929 4718
Barclays Bank PLC Barclays Bank PLC 2,790,838 3,931,303 --
Piccadilly Business Centre Piccadilly Business Centre
1/3 Arlington Street 1/3 Arlington Street
London SW1A 1RA London SW1A 1RA
Attention: Peter Chappel
Telephone: 0171-930 2383
Fax: 0171-441 6650
</TABLE>
<PAGE>
SCHEDULE 2
DRAWDOWN NOTICE
To: Lloyds Bank Plc
Bank House
Wine Street
Bristol BS1 2AN
Date
Dear Sirs,
Credit Agreement dated * made between (1) Automated Security (Holdings) PLC (2)
the Banks (3) Lloyds Bank Plc (as Agent), inter alios, and (4) Midland Bank plc
(as Working Capital Bank) (the "Credit Agreement")
Words and expressions defined in the Credit Agreement shall have the same
meanings when used herein. We hereby give you notice of the following proposed
borrowing of an Advance under the Credit Agreement.
The relevant details are as follows:
1. Facility:
2. Amount of Advance:
3. Currency of Advance:
4. Proposed Drawdown Date:
5. Duration of Interest Period:
6. Payment Instructions:
We confirm that no Default or Default Occurrence has occurred and is continuing
and that the representations and warranties deemed to be made on the proposed
Drawdown Date pursuant to Clause 13.3 of the Credit Agreement will be true and
correct on such Drawdown Date.
SIGNED
For and on behalf of
AUTOMATED SECURITY (HOLDINGS) PLC
(a company incorporated in England and Wales
under number 321639)
<PAGE>
SCHEDULE 3
MANDATORY LIQUID ASSET COSTS FORMULA
(1) The additional rate relative to an Advance shall, subject as hereinafter
provided, be calculated in accordance with the following formula:
BY + L(Y-X) + S(Y-Z)% per annum
--------------------
100 - (B+S)
Where on the day of the application of the formula:
B = The percentage of the Agent's eligible liabilities which the
Bank of England then requires the Agent to Hold on a
non-interest-bearing deposit account in accordance with its the
Company ratio requirements.
Y = The rate at which Sterling deposits in an amount comparable with
such Advance are offered by the Agent to leading banks in the
London Inter-Bank Market at or about 11.00 a.m. on such day for
the relevant period.
L = The percentage of eligible liabilities which (as a result of the
requirements of the Bank of England) the Agent maintains as
secured money with members of the London Discount Market
Association or in certain marketable or callable securities
approved by the Bank of England, which percentage shall (in the
absence of evidence that any other figure is appropriate) be
conclusively presumed to be 5 per cent.
X = The rate at which secured Sterling deposits in an amount
comparable to such Advance may be placed by the Agent with
members of the London Discount Market Association at or about
11.00 a.m. on such day for the relevant period or, if greater,
the rate at which Sterling bills of exchange (of an amount
comparable to such Advance and of a tenor equal to the relevant
period) eligible for rediscounting at the Bank of England can be
discounted in the London Discount Market at or about 11.00 a.m.
on that day.
S = The percentage of the Agent's eligible liabilities which the
Bank of England requires the Agent to place as a special
deposit.
Z = The percentage interest rate per annum allowed by the Bank of
England on special deposits.
(2) For the purposes of this Schedule 3:
(i) "eligible liabilities" and "special deposits" shall bear the
meanings ascribed to them from time to time by the Bank of
England; and
(ii) "relevant period" in relation to each Interest Period means:
<PAGE>
(a) if it is 3 monthly or less, that Interest Period; or
(b) if it is more than 3 months, 3 months.
(3) In the application of the above formula, B, Y, L, X, S and Z will be
included in this formula as figures and not as percentages, e.g., if B =
0.5% and Y = 15%, BY will be calculated as 0.5 x 15 and not as 0.5% x
15%.
(4) The additional rate computed by the Agent in accordance with this
Schedule 3 shall, if not so already, be rounded upward to 4 decimal
places.
(5) In the event of a change in circumstances (including the imposition of
alternative or additional official requirements) which renders the above
formula inapplicable, the Agent shall notify Newco of the manner in
which the additional rate shall thereafter be determined which shall
reflect the additional costs following such change incurred by the Banks
at such time and from time to time.
<PAGE>
SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
TRANSFER CERTIFICATE
To: Lloyds Bank Plc
and the other parties
to the Credit Agreement (as defined below)
This transfer certificate ("Transfer Certificate") relates to a credit agreement
dated * and made by (1) Automated Security (Holdings) PLC, (2) certain other
companies, (3) certain banks (4) Lloyds Bank Plc (as Agent) and (5) Midland Bank
plc (as Working Capital Bank) (the "Credit Agreement" which term shall include
any amendments or supplements thereto).
Terms defined in the Credit Agreement shall, unless otherwise defined, have the
same meanings when used in this Transfer Certificate.
I. *[Details of Existing Bank] (the "Existing Bank"):
1. confirms that to the extent that details appears in the Schedule
to this Transfer Certificate under the headings "Existing Bank's
Commitment" and "Participation in the Advances," those details
accurately summarize its Commitment and its Participation in the
Advances all or part of which is to be transferred; and
2. requests [Details of Bank Transferee] (the "Bank Transferee") to
accept and procure, in accordance with Clause 21.3 of the Credit
Agreement (i) the substitution for the Existing Bank by the Bank
Transferee in respect of the amount specified in the Schedule
hereto of its Commitment and its Participation in the Advances,
and (ii) the transfer of that proportion of the Existing Bank's
rights and obligations under the Security Documents and the
Intercreditor Agreement as determined by Clause 21.3 of the
Credit Agreement, by signing this Transfer Certificate.
II. The Bank Transferee hereby requests each of the Borrowers, the Banks,
the Working Capital Bank and the Agent to accept this executed Transfer
Certificate as being delivered under and for the purposes of Clause 21
of the Credit Agreement so as to take effect in accordance with the
terms of that Clause on [date of transfer] being the date on or before
which an executed copy of this Transfer Certificate is delivered to the
Agent.
III. The Bank Transferee:
1. represents and warrants that as at the date hereof is (i) a
Qualifying Bank, and (ii) an authorized institution under the
Banking Act 1987;
<PAGE>
2. confirms that it has received a copy of the Credit Agreement and
the Intercreditor Agreement together with such other documents
and information as it has requested in connection with this
transaction;
3. confirms that it has not relied and will not rely on the
Existing Bank to check or enquire on its behalf into the
legality, validity, effectiveness, adequacy, accuracy or
completeness of any such documents or information and the
Existing Bank will not support any losses suffered by the Bank
Transferee pursuant to this transaction;
4. agrees that it has not relied and will not rely on any of the
Existing Bank, the Agent, the Working Capital Bank and the Banks
to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or
nature of the Borrowers or any other party to the Financing
Documents; and
5. confirms that its Lending Office is in the United Kingdom.
IV. The Bank Transferee undertakes with the Existing Bank and each of the
other parties to the Credit Agreement and the Intercreditor Agreement
that it will perform, in accordance with their terms, all those
obligations which, by the terms of the Credit Agreement and the
Intercreditor Agreement, will be assumed by it upon delivery of the
executed copy of this Transfer Certificate to the Agent.
V. On execution of this Transfer Certificate by the Agent on their behalf,
the Borrowers, the Banks, the Working Capital Bank and the Agent and the
other parties to the Intercreditor Agreement accept the Bank Transferee
as a part y to the Credit Agreement in substitution for the Existing
Bank with respect to all those rights and obligations which, by the
terms of the Credit Agreement, will be assumed by the Bank Transferee
after delivery of the executed copy of this Transfer Certificate to the
Agent.
VI. None of the Existing Bank, the Banks, the Working Capital Bank and the
Agent and the other parties to the Intercreditor Agreement:
1. makes any representation or warranty or assumes any
responsibility with respect to the legality, validity,
effectiveness, adequacy or enforceability of any of the
Financing Documents; or
2. assumes any responsibility for the financial condition of the
Borrowers or any other party to any of the Financing Documents
or any other document or for the performance and observance by
the Borrowers or any other party to the Credit Agreement or any
other document and any and all conditions and warranties,
whether express or implied by law or otherwise, are excluded
(save as aforesaid).
VII. The Bank Transferee confirms that its Lending Office and address for
notices for the purposes of the Credit Agreement and the Intercreditor
Agreement are as set out in the Schedule hereto.
<PAGE>
VIII. The Existing Bank hereby gives notice to the Bank Transferee (and the
Bank Transferee hereby acknowledges and agrees with the Existing Bank)
that the Existing Bank is under no obligation to re-purchase (or in any
other manner to assume, undertake or discharge any obligation or
liability in relation to) the transferred Commitment and/or
Participation at any time after this Transfer Certificate shall have
taken effect.
IX. Following the date upon which this Transfer Certificate shall have taken
effect, without limiting the provisions hereof, each of the Bank
Transferee and the Existing Bank hereby acknowledges and confirms to the
other that in relation to the relative Commitment and/or Participation
(or part thereof) hereby transferred variations, amendments or
alterations to any of the terms of any of the Financing Documents
arising in connection with any renegotiation or rescheduling of the
obligations hereunder shall apply to and be binding on the Bank
Transferee alone.
X. This Transfer Certificate shall be construed in accordance with, and
governed by, English law.
*[Bank Transferee]
By:__________________________________
(Duly Authorised)
*[Existing Bank]
By:_________________________________
(Duly Authorised)
The Agent on behalf of itself and all other parties to the Credit Agreement and
the Intercreditor Agreement.
By:__________________________________
(Duly Authorised)
Dated:
<PAGE>
THE SCHEDULE
Existing Bank's Commitment Amount of Commitment Transferred
Participation in the Amount of Participation
Advances Transferred
[Bank Transferee]
Lending Office Address for notices
* *
Attention: *
Telex: *
Answerback: *
<PAGE>
SCHEDULE 5
THE GROUP
PART A
CHARGING GROUP MEMBERS
Company Jurisdiction of Incorporation Registered No.
- ------- ----------------------------- --------------
Automated Security (Holdings) PLC England and Wales 00321639
ASH Capital Finance (Jersey) Jersey, Channel Islands
Limited
Automated Security Limited England and Wales 02467427
Modern Security Systems Limited England and Wales 00822246
Telecom Security Limited England and Wales 01977016
TVX Limited England and Wales 01111792
Automated Loss Prevention Systems England and Wales 02486617
Limited
Automated Security (Properties) England and Wales 00894721
Limited
PART B
OTHER GROUP COMPANIES
All those companies listed in the attached Group Structure diagram other than
the companies referred to in Part A of this Schedule 5.
<PAGE>
SCHEDULE 6
FORM OF DEED OF ACCESSION
THIS DEED is made this[_____] day of [_______] 19[__] by [____________________]
(the "New Party") in favour of the other parties to the Credit Agreement (as
defined below).
WHEREAS:
(A) This Deed is supplemental to a credit agreement ("the Credit Agreement")
dated [ _______ ] 19[__] made between (1) Automated Security (Holdings)
PLC Limited, (2) certain other companies, (3) certain banks (4) Lloyds
Bank Plc as agent and (5) Midland Bank plc as working capital bank.
(B) The New Party wishes to accede to the Credit Agreement as a Borrower.
(C) It is a term of the Credit Agreement, that in order to accede as a
Borrower, the New Party must enter into this Deed.
NOW THIS DEED WITNESSETH AS FOLLOWS
(1) Words and expressions defined in the Credit Agreement shall have the
same meanings when used herein.
(2) The New Party hereby:
(i) agrees to be bound by all the terms and conditions of the Credit
Agreement insofar as they relate to a Borrower as if the New
Party was a party to the Credit Agreement in such capacity; and
(ii) represents and warrants to the Agents and the Banks in the terms
of [Clauses 13.2(a)-(g)] but such representations and warranties
shall be given so as to apply, mutatis mutandis, to the New
Party only.
(3) The New Party confirms that it has delivered to the Agent the documents
specified in the Schedule hereto.
(4) The New Party hereby agrees that it shall accede to the Credit Agreement
immediately upon the Agent counter-signing this Deed.
IN WITNESS WHEREOF the New Party has caused this Deed to be duly executed the
day and year first above written.
<PAGE>
THE COMMON SEAL of )
[ ] )
was hereunto affixed in )
the presence of: )
Director
Director/Secretary
We hereby agree, on behalf of all parties to the Credit Agreement, that the New
Party shall, from the date of our signature, accede to the Credit Agreement as
if it were a Borrower named therein and a party thereto.
SIGNED
- ---------------------------
for and on behalf of
Lloyds Bank Plc
as Agent
Date: [ ]
SCHEDULE
(a) a Certified Copy of memorandum and articles of association of the New
Party;
(b) a Certified Copy of the resolution of the Board of Directors of the New
Party approving the transactions contemplated by this Deed and the
Guarantee and Debenture referred to below and authorizing the execution
of this Deed, the said Guarantee and Debenture and any other documents
contemplated by the Credit Agreement;
(c) Certified Copies of all other resolutions, authorizations, approvals,
consents and licenses, corporate, official or otherwise, necessary or
desirable, to enable the New Party to give effect to the transactions
contemplated by this Deed and the said Guarantee and Debenture and for
the validity and enforceability of this Deed and the said Guarantee and
Debenture; and
(d) a Guarantee and Debenture.
<PAGE>
The Company
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
AUTOMATED SECURITY )
(HOLDINGS) PLC )
The Borrowers
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
ASH CAPITAL FINANCE )
(JERSEY) LIMITED )
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
AUTOMATED SECURITY )
LIMITED )
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
MODERN SECURITY SYSTEMS )
LIMITED )
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
TELECOM SECURITY )
LIMITED )
<PAGE>
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
TVX LIMITED )
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
AUTOMATED LOSS PREVENTION )
SYSTEMS LIMITED )
SIGNED by )
PETER BERTRAM ) PETER BERTRAM
for and on behalf of )
AUTOMATED SECURITY )
(PROPERTIES) LIMITED )
The Agent
SIGNED by )
LESLEY TINSLEY ) LESLEY TINSLEY
for and on behalf of )
LLOYDS BANK Plc )
The Banks
SIGNED by )
N ROBINSON ) N ROBINSON
for and on behalf of )
LLOYDS BANK Plc )
<PAGE>
SIGNED by )
P F HODGSON ) P F HODGSON
for and on behalf of )
ABN AMRO BANK N.V. )
SIGNED by )
PAUL THOMPSON ) PAUL THOMPSON
for and on behalf of )
MIDLAND BANK plc )
SIGNED by )
STEVEN CHARLES HEARN ) STEVEN CHARLES HEARN
for and on behalf of )
NATIONAL WESTMINSTER )
BANK Plc )
SIGNED by )
DAVID MOSS ) DAVID MOSS
for and on behalf of )
THE BANK OF TOKYO, LTD )
SIGNED by )
R PETTITTE ) R PETTITTE
for and on behalf of )
THE FUJI BANK, LIMITED )
SIGNED by )
MICHAEL DUTFIELD ) MICHAEL DUTFIELD
for and on behalf of )
BHF - BANK AG )
<PAGE>
SIGNED by )
W K SCOTT and ) W K SCOTT
R G SOPER ) R G SOPER
for and on behalf of )
BANCO CENTRAL )
HISPANOAMERICANO S.A. )
SIGNED by )
JOSE ANTONIO LOPEZ RUIZ and) JOSE ANTONIO LOPEZ RUIZ
JUAN PEREZ CALOT ) JUAN PEREZ CALOT
for and on behalf of )
BANCO BILBAO VIZCAYA, S.A. )
SIGNED by )
A ALDERSON ) A ALDERSON
for and on behalf of )
BARCLAYS BANK PLC )
The Working Capital Bank
SIGNED by )
PAUL THOMPSON ) PAUL THOMPSON
for and on behalf of )
MIDLAND BANK plc )
<PAGE>
JOINT AND SEVERAL
GENERAL CONTINUING GUARANTY
OF
AUTOMATED SECURITY CORPORATION,
SONITROL MANAGEMENT CORPORATION,
SONITROL CORPORATION
AND
AUTOMATED SECURITY HOLDINGS INC.
JOINT AND SEVERAL GENERAL CONTINUING GUARANTY, dated as of December
21, 1995 (as amended from time to time, the "Guaranty"), by Automated Security
Corporation, a Delaware corporation, Sonitrol Management Corporation, a Delaware
corporation, Sonitrol Corporation, a Delaware corporation, and Automated
Security Holdings Inc., a Delaware corporation (each individually a "Guarantor"
and all collectively the "Guarantors"), in favor of (i) Lloyds Bank Plc, as
security trustee (in such capacity, the "Security Trustee") for the banks, the
agent, the working capital lender and the other lenders that either now or in
the future are parties to the Credit Agreement referred to below (collectively,
the "Banks") and the holders of the US Loan Notes referred to below pursuant to
the terms of the Inter-Creditor Agreement referred to below (collectively, the
"U.S. Loan Note Holders", (ii) the Banks and (iii) the U.S. Loan Note Holders
(each of the Security Trustee, the Banks and the U.S. Loan Note Holders being a
"Beneficiary" and all collectively the "Beneficiaries").
R E C I T A L S
A. Pursuant to a Credit Agreement dated as of December 21, 1995 (as
amended from time to time, the "Credit Agreement") by and among Automated
Security (Holdings) PLC, a company incorporated under the laws of England and
Wales ("Holdings"), the Companies listed in Part A of Schedule 5 of the Credit
Agreement (collectively with Holdings, the "Borrowers") and the Banks, the Banks
have agreed to make certain U.S. Dollar-denominated and Sterling-denominated
credit facilities available to the Borrowers, subject to the terms and
conditions set forth therein.
B. The U.S. Loan Note Holders are the holders of certain 8.28% senior
notes (as amended from time to time, the "U.S. Loan Notes") issued by Holdings
pursuant to a note agreement dated 27th May 1994 with The Prudential Insurance
Company of America as amended by a First Amendment dated on or about the date
hereof made between the same parties (as so amended and as otherwise amended
from time to time, the "U.S. Loan Note Agreement").
C. Pursuant to an Inter-Creditor Agreement dated December 21, 1995 (as
amended from time to time, the "Inter-Creditor Agreement") by and among
Holdings, the Security Trustee, the Banks and the U.S. Loan Note Holders, the
Beneficiaries have appointed the Security Trustee to act as its agent and
trustee in connection with this Guaranty.
Guaranty
1
<PAGE>
D. Each Guarantor is a direct or indirect Subsidiary of Holdings.
E. In consideration of the provisions of the credit facilities
evidenced by the Credit Agreement and the U.S. Loan Notes and the terms thereof
and of the Inter-Creditor Agreement, the Guarantors have agreed, at the request
of the Borrowers, to guaranty unconditionally any and all of the obligations of
the Borrowers to the Beneficiaries as provided herein.
A G R E E M E N T
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Guarantor agrees as follows:
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
Section 1.1. Definitions. The following terms with initial capital
letters have the following meanings:
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended from time to time, or any successor statute.
"Banks" is defined in the Preamble.
"Beneficiaries" is defined in the Preamble (and for the avoidance of
doubt shall include all Banks and U.S. Loan Note Holders as defined in the
Inter-Creditor Agreement).
"Borrowers" is defined in the Recitals.
"Business Day" shall have the meaning set forth in the Credit
Agreement.
"Collateral" is defined in Section 2.2.
"Credit Agreement" is defined in the Recitals.
"Default" shall have the meaning set forth in the Inter-Creditor
Agreement.
"Default Rate" means the lessor of (i) the rate per annum calculated
in the manner set forth in Clause 8.3 of the Credit Agreement (provided that
determinations therein specified to be made by the Agent shall be made for
purposes hereof by the Security Trustee) and (ii) the maximum rate allowed by
applicable law.
Guaranty
2
<PAGE>
"Financing Documents" means the Credit Agreement, the U.S. Loan Notes,
the U.S. Loan Note Agreement, the Inter-Creditor Agreement and all other
Financing Documents (as defined in the Credit Agreement) and Financing
Agreements (as defined in the Inter-Creditor Agreement).
"Funding Guarantor" is defined in Section 2.10.
"Guarantor" and "Guarantors" is defined in the Preamble.
"Guaranty" is defined in the Preamble.
"Holdings" is defined in the Recitals.
"Inter-Creditor Agreement" is defined in the Recitals.
"Material Adverse Effect" shall have the meaning set forth in the
Credit Agreement and "Material Adverse Change" means a change that has had or
will have a Material Adverse Effect.
"Maximum Net Worth" is defined in Section 2.10.
"Net Worth" is defined in Section 2.10.
"Obligations" is defined in Section 2.1.
"Obligor" means each of the Borrowers, the Guarantors and the Other
Guarantors.
"Other Guarantor" is defined in Section 2.2.
"Other Guaranty" is defined in Section 2.2.
"Person" means an individual, a corporation, a partnership, a trust,
an unincorporated organization, joint venture or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"Remaining Guarantor" is defined in Section 2.10.
"Security Trustee" is defined in the Preamble.
"Subordinated Debt" is defined in Section 2.8.
"U.S. Loan Note Agreement" is defined in the Recitals.
"U.S. Loan Note Holders" is defined in the Preamble.
"U.S. Loan Notes" is defined in the Recitals.
Guaranty
3
<PAGE>
Section 1.2. Related Matters.
1.2.1. Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting,
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Guaranty
refer to this Guaranty as a whole (including the Preamble, the Recitals, the
Schedules and the Exhibits) and not to any particular provision of this
Guaranty. Article, section, subsection, exhibit, schedule, recital and preamble
references in this Guaranty are to this Guaranty unless otherwise specified.
References in this Agreement to any agreement, other document or law "as
amended" or "as amended from time to time," or to amendments of any document or
law, shall include any amendments, supplements, replacements, renewals, waivers
or other modifications not prohibited by the Note Documents. References in this
Agreement to any law (or any part thereof) include any rules and regulations
promulgated thereunder (or with respect to such part) by the relevant
governmental authority, as amended from time to time.
1.2.2. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of New York (other than
choice of law rules that would require the application of the laws of any other
jurisdiction). No reference herein to any provision of California law shall be
construed as a waiver of or otherwise impair the foregoing choice of New York
law.
1.2.3. Headings. The Article and Section headings used in this
Guaranty are for convenience of reference only and shall not affect the
construction hereof.
1.2.4. Severability. If any provision of this Guaranty shall be held
to be invalid, illegal or unenforceable under Applicable Law in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability, which shall not affect any other
provisions hereof or the validity, legality or enforceability of such provision
in any other jurisdiction.
ARTICLE 2.
GUARANTY
Section 2.1. Guaranty. The Guarantors unconditionally jointly and
severally guaranty and promise to pay to the order of the Security Trustee, for
the benefit of the Beneficiaries, on demand, in lawful money of the United
States of America, any and all Obligations of the Borrowers from time to time
owed to the Beneficiaries. The term "Obligations" is used herein in its most
comprehensive sense and includes any and all present and future obligations and
liabilities of the Borrowers of every type and description under any of the
Financing Documents to the Beneficiaries, or any of them, or any of their
successors or assigns, or any Person entitled to indemnification under the
Guaranty
4
<PAGE>
Financing Documents, whether for principal, interest, letter of credit or other
reimbursement obligations, cash collateral cover, fees, expenses, indemnities or
other amounts (including attorney's fees and expenses), including without
limitation all Bank Liabilities (as defined in the Inter-Creditor Agreement) and
all Note Holder Liabilities (as defined in the Inter-Creditor Agreement),
in each case whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the commencement of a
proceeding under the Bankruptcy Code (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding, and
whether or not recovery of any such obligation or liability may be barred by a
statute of limitations or such obligation or liability may otherwise be
unenforceable. All Obligations shall be conclusively presumed to have been
created in reliance on this Guaranty. All payments hereunder shall be made on
the same basis as payments by the Borrowers under Section 12.4 of the Credit
Agreement.
Section 2.2. Continuing and Irrevocable Guaranty. This is a continuing
guaranty of the Obligations and may not be revoked and shall not otherwise
terminate unless and until the Obligations have been indefeasibly paid and
performed in full. If notwithstanding the foregoing any Guarantor shall have any
right under Applicable Law to terminate this Guaranty prior to indefeasible
payment in full of the Obligations, no such termination shall be effective until
noon the next Business Day after the Security Trustee shall receive written
notice thereof, signed by such Guarantor. Any such termination shall not affect
this Guaranty in relation to (a) any Obligation that was incurred or arose prior
to the effective time of such notice, (b) any Obligation incurred or arising
after such effective time where such Obligation is incurred or arises either
pursuant to commitments existing at such effective time or incurred for the
purpose of protecting or enforcing rights against any Borrower, any Guarantor or
other Guarantor of or other Person directly or indirectly liable on the
Obligations or any portion thereof (an "Other Guarantor") or any security
("Collateral") given for the Obligations or any other guaranties of the
Obligations or any portion thereof (an "Other Guaranty"), (c) any renewals,
extensions, readvances, modifications or rearrangements of any of the foregoing
or (d) the liability of any other Guarantor hereunder. Without limiting the
generality of the foregoing, if any part of the Obligations arises under
revolving credit facilities, then even if the Borrowers are no longer entitled
to further credit (as a result of the purported termination hereof or
otherwise), no termination of this Guaranty shall in any event be effective to
reduce the obligations of any Guarantor hereunder with respect to any extensions
of credit that may thereafter be made to the Borrowers by the Beneficiaries to
the extent that the outstanding amount of such credit (including letter of
credit and other contingent exposure), together with all other Obligations then
outstanding, does not exceed the aggregate amount of all Obligations outstanding
as of the time any termination of this Guarantor becomes effective.
Guaranty
5
<PAGE>
Section 2.3. Nature of Guaranty. The liability of each Guarantor
hereunder is independent of and not in consideration of or contingent upon the
liability of any Borrower or any other Obligor and a separate action or actions
may be brought and prosecuted against any Guarantor, whether or not any action
is brought or prosecuted against any Borrower or any other Obligor or whether
any Borrower or any other Obligor is joined in any such action or actions. This
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
of payment (and not merely of collection) without regard to:
2.3.1. the legality, validity or enforceability of any of the
Financing Document, any of the Obligations, any Lien or Collateral or any Other
Guaranty;
2.3.2. any defense (other than payment), set-off or counterclaim that
may at any time be available to any Borrower or any other Obligor against, and
any right of set-off at any time held by, any Beneficiary; or
2.3.3. any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor or any other Obligor), whether or not similar to any
of the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of any Borrower or any other Obligor, in bankruptcy
or in any other instance.
Section 2.4. Authorization. Each Guarantor authorizes each
Beneficiary, without notice to or further assent by such Guarantor, and without
affecting any Guarantor's liability hereunder (regardless of whether any
subrogation or similar right that such Guarantor may have or any other right or
remedy of such Guarantor is extinguished or impaired), from time to time to:
2.4.1. permit any Borrower to increase or create Obligations, or
terminate, release, compromise, subordinate, extend, accelerate or otherwise
change the amount or time, manner or place of payment of, or rescind any demand
for payment or acceleration of, the Obligations or any part thereof (including
increasing or decreasing the rate of interest thereon), or otherwise amend the
terms and conditions of any of the Financing Documents or any provision thereof;
2.4.2. take and hold Collateral from any Borrower or any other Person,
perfect or refrain from perfecting a Lien on such Collateral, and exchange,
enforce, subordinate, release (whether intentionally or unintentionally), or
take or fail to take any other action in respect of, any such Collateral or Lien
or any part thereof;
2.4.3. exercise in such manner and order as it elects in its sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration of,
any of the remedies or rights of such Beneficiary against any Borrower or any
other Obligor in respect of any Obligations or any Collateral;
2.4.4. release, add or settle with any Obligor in respect of this
Guaranty, any Other Guaranty or the Obligations;
Guaranty
6
<PAGE>
2.4.5. accept partial payments on the Obligations and apply any and
all payments or recoveries from any Obligor or Collateral to such of the
Obligations as each Beneficiary may elect in its sole discretion, whether or not
such Obligations are secured or guaranteed;
2.4.6. refund at any time, at such Beneficiary's sole discretion, any
payments or recoveries received by such Beneficiary in respect of any
Obligations or Collateral; and
2.4.7. otherwise deal with any Borrower, any other Obligor and any
Collateral as such Beneficiary may elect in its sole discretion.
Section 2.5. Certain Waivers. Each Guarantor waives:
2.5.1. the right to require the Beneficiaries to proceed against any
Borrower or any other Obligor, to proceed against or exhaust any Collateral or
to pursue any other remedy in any Beneficiary's power whatsoever and the right
to have the property of the Borrowers or any other Obligor first applied to
the discharge of the Obligations;
2.5.2. all rights and benefits under any applicable law purporting to
reduce a guarantor's obligations in proportion to the obligation of the
principal or providing that the obligation of a surety or guarantor must neither
be larger nor in other respects more burdensome than that of the principal;
2.5.3. the benefit of any statute of limitations affecting the
Obligations or any Guarantor's liability hereunder and of Section 359.5 of the
California Code of Civil Procedure;
2.5.4. any requirement of marshaling or any other principle of
election of remedies and all rights and defenses arising out of an election of
remedies by any Beneficiary, even though that election of remedies, such as
nonjudicial foreclosure with respect to the security for a guaranteed
obligation, has destroyed any Guarantor's rights of subrogation and
reimbursement against any Borrower by the operation of Section 580d of the
California Code of Civil Procedure or otherwise;
2.5.5. any right to assert against any Beneficiary any defense (legal
or equitable), set-off, counterclaim and other right that any Guarantor may now
or any time hereafter have against any Borrower or any other Obligor;
2.5.6. presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or nonperformance,
protest, acceptance and notice of acceptance of this Guaranty, and all other
notices of any kind, including (i) notice of the existence, creation or
incurrence of new or additional Obligations, (ii) notice of any action taken or
omitted by the Beneficiaries in reliance hereon, (iii) notice of any default by
the Borrowers or any other Obligor, (iv) notice that
Guaranty
7
<PAGE>
any portion of the Obligations is due, (v) notice of any action against any
Borrower or any other Obligor, or any enforcement of other action with respect
to any Collateral, or the assertion of any right of any Beneficiary hereunder;
2.5.7 all defenses that at any time may be available to any Guarantor
by virtue of any valuation, stay, moratorium or other law now or hereafter in
effect;
2.5.8. any rights, defenses and other benefits any Guarantor may have
by reason of any failure of any Beneficiary to hold a commercially reasonable
public or private foreclosure sale or otherwise to comply with applicable law in
connection with a disposition of the Collateral; and
2.5.9. without limiting the generality of the foregoing or any other
provision hereof, all rights and benefits under California Civil Code Sections
2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899, and 3433 or any similar
provisions of applicable law.
Section 2.6. Subrogation; Certain Agreements.
2.6.1 EACH GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION,
INDEMNITY, CONTRIBUTION OR REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS
TO ENFORCE ANY POWER, RIGHT OR REMEDY THAT ANY BENEFICIARY MAY NOW OR HEREAFTER
HAVE IN RESPECT OF THE OBLIGATIONS AGAINST ANY BORROWER OR ANY OTHER OBLIGOR,
ANY AND ALL BENEFITS OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL, WHETHER
REAL OR PERSONAL PROPERTY, NOW OR HEREAFTER HELD BY ANY BENEFICIARY, AND ANY AND
ALL OTHER RIGHTS AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) ANY GUARANTOR
MAY HAVE AGAINST ANY BORROWER OR ANY OTHER OBLIGOR, UNDER APPLICABLE LAW OR
OTHERWISE, AT LAW OR IN EQUITY, BY REASON OF ANY PAYMENT HEREUNDER, UNLESS AND
UNTIL THE OBLIGATIONS SHALL HAVE BEEN PAID IN FULL. Without limitation, the
Guarantors shall exercise no voting rights, shall file no claim, and shall not
participate or appear in any bankruptcy or insolvency case involving any
Borrower with respect to the Obligations unless and until all the Obligations
shall have been paid in full. If, notwithstanding the foregoing, any amount
shall be paid to any Guarantor on account of any such rights at any time, such
amount shall be held in trust for the benefit of the Beneficiaries and shall
forthwith be paid to the Security Trustee to be held as Collateral or credited
and applied in accordance with the terms of the Inter-Creditor Agreement and the
other Financing Documents upon the Obligations, whether matured, unmatured,
absolute or contingent, in the discretion of the Security Trustee.
2.6.2. Each Guarantor assumes the responsibility for being and keeping
itself informed of the financial condition of each Borrower and each other
Obligor and of all other circumstances bearing upon the risk of nonpayment of
the Obligations that
Guaranty
8
<PAGE>
diligent inquiry would reveal, and agrees that the Beneficiaries shall have no
duty to advise any Guarantor of information regarding such condition or any such
circumstances.
Section 2.7. Bankruptcy No Discharge.
2.7.1. Without limiting Section 2.3., this Guaranty shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against any Borrower or any other Obligor, including
(i) any discharge of, or bar or stay against collecting, all or any part of the
Obligations in or as a result of any such proceeding, whether or not assented to
by any Beneficiary, (ii) any disallowance of all or any portion of any
Beneficiary's claim for repayment of the Obligations, (iii) any use of cash or
other collateral in any such proceeding, (iv) any agreement or stipulation as to
adequate protection in any such proceeding, (v) any failure by any Beneficiary
to file or enforce a claim against any Borrower or any other Obligor or its
estate in any bankruptcy or reorganization case, (vi) any amendment,
modification, stay or cure of any Beneficiary's rights that may occur in any
such proceeding, (vii) any election by any Beneficiary under Section 1111(b)(2)
of the Bankruptcy Code, or (viii) any borrowing or grant of a Lien under Section
364 of the Bankruptcy Code. Each Guarantor understands and acknowledges that by
virtue of this Guaranty, it has specifically assumed any and all risks of any
such proceeding with respect to each Borrower and each other Obligor.
2.7.2. Notwithstanding anything to the contrary herein contained, this
Guaranty (and any Lien on the Collateral securing this Guaranty or the
Obligations) shall continue to be effective or be reinstated, as the case may
be, if at any time any payment, or any part thereof, of any or all of the
Obligations is rescinded, invalidated, declared to be fraudulent or preferential
or otherwise required to be restored or returned by any Beneficiary in
connection with any bankruptcy, reorganization or similar proceeding involving
any Borrower, any other Obligor or otherwise, if the proceeds of any Collateral
are required to be returned by such Beneficiary under any such circumstances, or
if any Beneficiary elects to return any such payment or proceeds or any part
thereof in its sole discretion, all as though such payment had not been made or
such proceeds not been received. Without limiting the generality of the
foregoing, if prior to any such rescission, invalidation, declaration,
restoration or return, this Guaranty shall have been canceled or surrendered (or
if any Lien or Collateral shall have been released or terminated in connection
with such cancellation or surrender), this Guaranty (and such Lien and
Collateral) shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the Guarantors in respect of the amount of the affected payment
or application of proceeds (or such Lien or Collateral).
Section 2.8. Subordination.
2.8.1. Each Guarantor hereby absolutely subordinates, both in right of
payment and in time of payment, any and all present or future obligations and
liabilities
Guaranty
9
<PAGE>
of any Borrower and each other Obligor to such Guarantor ("Subordinated Debt"),
to the prior payment in full in cash of the Obligations, whether or not such
Subordinated Debt constitutes or arises out of any subrogation, reimbursement,
contribution, indemnity or similar right attributable to this Guaranty. If,
whether or not at any Beneficiary's request, any Guarantor shall receive, prior
to payment in full in cash of all Obligations, payment of any sum from any
Borrower or any other Obligor upon any Subordinated Debt, any such sum shall be
received by such Guarantor as trustee for the Beneficiaries and shall forthwith
be paid over to the Security Trustee on account of the Obligations, without
reducing or affecting in any manner the liability of any Guarantor under this
Guaranty.
2.8.2. Each Guarantor shall file in any bankruptcy or reorganization
or similar proceeding in which the filing of claims is required by applicable
law, all claims that such Guarantor may have against any Borrower or other
Obligor (or its nominee) relating to any Subordinated Debt. If the Guarantor
does not file any such claim, the Security Trustee (or its nominee) as
attorney-in-fact for the Guarantor is hereby authorized to do so in the name of
such Guarantor. Each Guarantor agrees that, in connection with any such
proceeding, it shall not contest or oppose the treatment of claims of the
Beneficiaries in any plan of reorganization or otherwise and it shall vote any
claims that exist by virtue of this Guaranty or the Subordinated Debt in
connection with any plans of reorganization or otherwise, as may be requested by
the Security Trustee.
2.8.3. Each Guarantor hereby grants the Security Trustee a power of
attorney for the purposes set forth in this Section 2.8. Such power of attorney
is coupled with an interest and cannot be revoked.
Section 2.9. Maximum Liability of Guarantors. The obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any applicable provisions of
comparable state law.
Section 2.10. Right of Contribution. In order to provide for just and
equitable contribution among the Guarantors and any Other Guarantors (for
purposes of this Section only, each Guarantor and each Other Guarantor is
referred to as a "Guarantor"), in connection with the execution of this
Guaranty, the Guarantors have agreed among themselves that if any Guarantor
satisfies some or all of the Obligations (a "Funding Guarantor"), the Funding
Guarantor shall be entitled to contribution from the other Guarantors that have
positive Maximum Net Worth (as defined below) for all payments made by the
Funding Guarantor in satisfying the Obligations, so that each Guarantor that
remains obligated under this Guaranty or any Other Guaranty at the time
that a Funding Guarantor makes such payment (a "Remaining Guarantor") and has a
positive Maximum Net Worth shall bear a portion of such payment equal to the
percentage that such Remaining Guarantor's Maximum Net Worth bears to the
aggregate Maximum Net Worth of all Remaining Guarantors that have positive
Maximum Net Worth.
Guaranty
10
<PAGE>
As used herein, "Net Worth" means, with respect to any Guarantor, the
amount, as of the respective date of calculation, by which the sum of a Person's
assets (including subrogation, indemnity, contribution, reimbursement and
similar rights that the Guarantor may have), determined on the basis of a "fair
valuation" or their "fair saleable value" (whichever is the applicable test
under Section 548 and other relevant provisions of the Bankruptcy Code and the
relevant state fraudulent conveyance or transfer laws), is greater than the
amount that will be required to pay all of such Person's debts, in each case
matured or unmatured, contingent or otherwise, as of the date of calculation,
but excluding liabilities arising under this Guaranty or any Other Guaranty and
excluding, to the maximum extent permitted by applicable law with the objective
of avoiding rendering such Person insolvent, liabilities subordinated to the
Obligations arising out of loans or advances made to such Person by any other
Person. "Maximum Net Worth" means, with respect to any Guarantor, the greatest
of the Net Worth of such Guarantor calculated as of the following dates: (A) the
date on which such Person becomes a Guarantor, (B) the date on which such
Guarantor expressly reaffirms this Guaranty or the Other Guaranty to which it
is a party, (C) the date on which demand for payment is made on such Guarantor
hereunder or under such Other Guaranty, (D) the date on which payment is made by
such Guarantor hereunder or thereunder or (E) the date on which any judgment,
order or decree is entered requiring such Guarantor to make payment hereunder or
in respect hereof or under or in respect of such Other Guaranty. The meaning of
the terms "fair valuation" and "fair saleable value" and the calculation of
assets and liabilities shall be determined and made in accordance with the
relevant provisions of the Bankruptcy Code and applicable state fraudulent
conveyance or transfer laws.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
Each Guarantor represents and warrants that all representations and
warranties made with respect to it, its assets and its obligations in Section
13.2 of the Credit Agreement are true and correct and makes the following
additional representations and warranties, all of which shall survive until
termination of this Guaranty pursuant to Section 2.2.
Section 3.1. Financial Benefit. Each Guarantor hereby acknowledges and
warrants it has derived or expects to derive a financial advantage from each
loan or other extension of credit and each renewal, extension, release of
Collateral, or other relinquishment of legal rights, made or granted or to be
made or granted by the Beneficiaries in connection with the Obligations. After
giving effect to this Guaranty and the other Financing Documents to which any
Guarantor is a party, and the transactions contemplated hereby and thereby, each
Guarantor is not Insolvent or left with assets or capital that is unreasonably
small in relation to its business or the Obligations. "Insolvent" means, with
respect to any Guarantor, that (a) determined on the basis of a "fair valuation"
or their "fair saleable value" (whichever is the applicable test under
Guaranty
11
<PAGE>
Section 548 and other relevant provisions of the Bankruptcy Code and the
relevant state fraudulent conveyance or transfer laws) the sum of such
Guarantor's assets is less than its debts, or (b) such Guarantor is generally
not paying its debts as they become due.
Section 3.2. Review of Documents; Understanding With Respect to
Waivers. Each Guarantor hereby acknowledges that it has copies of and is fully
familiar with the Credit Agreement, the U.S. Loan Notes and each other Financing
Document. Each Guarantor warrants and agrees that each waiver set forth in this
Guaranty is made with such Guarantor's full knowledge of its significance and
consequences and after opportunity to consult with counsel of its own choosing
and that, under the circumstances, each such waiver is reasonable and should not
be found contrary to public policy or law.
ARTICLE 4.
MISCELLANEOUS
Section 4.1. Expenses. Each Guarantor shall pay to the Security
Trustee any and all costs and expenses, (including attorneys' fees and
expenses), that any Beneficiary may incur in connection with (a) the collection
of all sums guaranteed hereunder or (b) the exercise or enforcement of any of
the rights, powers or remedies of the Beneficiaries under this Guaranty or
applicable law. All such amounts and all other amounts payable hereunder shall
be payable on demand, together with interest at the Default Rate, from and
including the due date to and excluding the date of payment.
Section 4.2. Amendments and Other Modifications. No amendment of any
provision of this Guaranty (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
the Security Trustee. Any waiver or consent relating to any provision of this
Guaranty shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on any Guarantor in any case
shall entitle such Guarantor to any other or further notice or demand in similar
or other circumstances.
Section 4.3. Cumulative Remedies; Failure or Delay. The rights and
remedies provided for under this Guaranty are cumulative and are not exclusive
of any rights and remedies that may be available to the Beneficiaries under
applicable law or otherwise. No failure or delay on the part of any Beneficiary
in the exercise of any power, right or remedy under this Guaranty shall impair
such power, right or remedy or shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude other or
further exercise of such or any other power, right or remedy.
Section 4.4. Notices, Etc. All notices and other communications under
this Guaranty shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid),
or by prepaid telex,
Guaranty
12
<PAGE>
telecopy or telegram, and shall be deemed given when received by the intended
recipient thereof. Unless otherwise specified in a notice given in accordance
with the foregoing provisions of this Section, all notices and other
communications shall be given to the parties hereto at their respective
addresses (or to their respective telex or telecopier numbers) indicated on
Schedule 4.4.
Section 4.5. Successors and Assigns. This Guaranty and each amendment
hereof shall be binding upon and, subject to the next sentence, inure to the
benefit of each Guarantor, the Beneficiaries and their respective successors and
assigns. The Guarantor shall not assign any of its rights or obligations
hereunder without the prior written consent of the Security Trustee. The benefit
of this Guaranty shall automatically pass with any assignment of the Obligations
(or any portion thereof), to the extent of such assignment.
Section 4.6. Choice of Forum.
4.6.1. Each of the Guarantors 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 proceeding, and to settle any disputes,
which may arise out of or in connection with this Guaranty (and the other
Financing Documents) and, for such purposes, irrevocably submits to the
jurisdiction of such courts. Each of the Guarantors irrevocably agrees that the
courts of the State of New York and the courts of the United States of America
in New York shall have jurisdiction to hear and determine any suit, action or
proceeding, and to settle any disputes, which may arise out of or in connection
with this Guaranty (and the other Financing Documents) and, for such purposes,
irrevocably submits to the jurisdiction of such courts. Each of the Guarantors
irrevocably waives any objection which it might now or hereafter have to the
courts referred to in this Section 4.6.1 being nominated as the forum to hear
and determine any suit, action or proceeding, and to settle any disputes, which
may arise out of or in connection with this Guaranty and the Financing Documents
and agrees not to claim that any such court is not a convenient or appropriate
forum.
IN ANY ACTION AGAINST ANY GUARANTOR, SERVICE OF PROCESS MAY BE MADE
UPON SUCH GUARANTOR BY DELIVERY OR BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO ITS ADDRESS INDICATED IN SCHEDULE 4.4., WHICH SERVICE
SHALL BE DEEMED SUFFICIENT FOR PERSONAL JURISDICTION AND SHALL BE DEEMED
EFFECTIVE UPON RECEIPT, IN THE CASE OF DELIVERY, AND 10 DAYS AFTER MAILING, IN
THE CASE OF MAILING. Each Guarantor hereby irrevocably appoints CT Corporation
Systems (the "Process Agent"), with offices on the date hereof in New York, New
York, as Process Agent to receive for and on behalf of such Guarantor service of
process in the County of New York relating to this Agreement. SERVICE OF PROCESS
IN ANY ACTION OR PROCEEDING AGAINST ANY GUARANTOR MAY BE MADE ON THE PROCESS
AGENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER
Guaranty
13
<PAGE>
METHOD OF SERVICE PROVIDED FOR UNDER APPLICABLE LAWS IN EFFECT IN THE STATE OF
NEW YORK, AND THE PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT SUCH
SERVICE FOR AND ON BEHALF OF SUCH GUARANTOR AND TO ADMIT SERVICE WITH RESPECT
THERETO. SUCH SERVICE UPON THE PROCESS AGENT SHALL BE DEEMED EFFECTIVE PERSONAL
SERVICE ON SUCH GUARANTOR, SUFFICIENT FOR PERSONAL JURISDICTION, 10 DAYS AFTER
MAILING, AND SHALL BE LEGAL AND BINDING UPON SUCH GUARANTOR FOR ALL PURPOSES,
NOTWITHSTANDING ANY FAILURE OF THE PROCESS AGENT TO MAIL COPIES OF SUCH LEGAL
PROCESS TO SUCH GUARANTOR, OR ANY FAILURE ON THE PART OF SUCH GUARANTOR TO
RECEIVE THE SAME. Each Guarantor confirms that it has instructed the Process
Agent to mail to such Guarantor, upon service of process being made on the
Process Agent pursuant to this Section, a copy of the summons and complaint or
other legal process served upon it, by registered mail, return receipt
requested, at such Guarantor's address set forth in Schedule 4.4., or to such
other address as such Guarantor may notify the Process Agent in writing. Each
Guarantor agrees that it will at all times maintain a process agent to receive
service of process in the County of New York on its behalf with respect to this
Agreement. If for any reason the Process Agent or any successor thereto shall no
longer serve as such process agent or shall have changed its address without
notification thereof to the Beneficiaries, such Guarantor, immediately after
gaining knowledge thereof, irrevocably shall appoint a substitute process agent
acceptable to the Security Trustee in the County of New York and advise the
Security Trustee thereof.
4.6.2. The submission to the jurisdiction of the courts referred to in
Section 4.6.1 shall not (and shall not be construed as to) limit the right of
the Beneficiaries or any of them to take proceedings against any of the
Guarantors 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.
Section 4.7. Set-Off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuation of any Default, each
Beneficiary, each holder or transferee of any Obligations or any Person with any
interest therein is hereby irrevocably authorized by each Guarantor, at any time
or from time to time, without notice to such Guarantor or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate and
to apply any and all deposits (general or special, including certificates of
deposit, whether matured or unmatured, but not including trust accounts) and any
other indebtedness, in each case whether direct or indirect or contingent or
matured or unmatured at any time held or owing by such Beneficiary, such holder,
such transferee or such other Person, to or for the credit or the account of
such Guarantor, against and on account of the obligations of such Guarantor to
the Beneficiaries, such holder, such transferee, or such other Person under this
Guaranty or the other Financing Documents to which such Guarantor is a party,
irrespective of whether or not such Beneficiary, such
Guaranty
14
<PAGE>
holder, such transferee or such other Person shall have made any demand for
payment and although such obligations may be contingent and unmatured.
Section 4.8. Currency of Obligations and Payments. The dollar is the
currency of account and payment for each and every sum at any time due from the
Guarantors hereunder; provided that any amount of Obligations expressed to be
payable in a currency other than dollars shall be paid in that other currency.
If any sum due from any Guarantor under this Guaranty (or any sum due from any
Borrower under any Financing Document in respect of which any Guarantor is
obligated hereunder) or any order or judgment given or made in relation thereto
has to be converted from the currency (the "first currency") in which the same
is payable thereunder or under such order or judgment into another currency (the
"second currency") for the purpose of (i) making or filing a claim or proof
against such Guarantor, (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, the Guarantors shall indemnify and hold harmless the
Beneficiaries 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 such person may in the ordinary course of business
purchase the first currency with the second currency upon receipt of a sum paid
to in satisfaction, in whole or in part, of any such order, judgment, claim or
proof.
Section 4.9. Application of Payments and Collections. In the case of
any payments by or collection from any Guarantor hereunder, the proceeds of such
payment or collection shall be applied in the manner set forth in Clause 5 of
the Inter-Creditor Agreement.
Section 4.10. Execution in Counterparts. This Guaranty may be executed
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Guaranty.
Section 4.11. Complete Agreement. This Guaranty, together with the
exhibits and schedules hereto and other Financing Documents, is intended by the
parties as the final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
Section 4.12. Limitation of Liability. No claim shall be made by any
Guarantor against any Beneficiary or the affiliates, directors, officers,
employees or agents of any Beneficiary for any special, indirect, consequential
or punitive damages in respect of any claim for breach of contract or under any
other theory of liability arising out of or related to the transactions
contemplated by this Guaranty, or any act, omission or event occurring in
connection therewith; and each Guarantor waives, releases and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
Guaranty
15
<PAGE>
Section 4.13. WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND THE
BENEFICIARIES (BY ACCEPTANCE HEREOF) WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION UNDER THIS GUARANTY OR ANY ACTION ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
Guaranty
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Guaranty as of the date set forth above.
GUARANTORS
AUTOMATED SECURITY
CORPORATION, a Delaware
corporation
By:/s/ Peter Bertram
--------------------------------
Name: PETER BERTRAM
Title: Director
SONITROL MANAGEMENT
CORPORATION, a Delaware
corporation
By:/s/ Peter Bertram
--------------------------------
Name: PETER BERTRAM
Title: Director
SONITROL MANAGEMENT
CORPORATION, a Delaware
corporation
By:/s/ Peter Bertram
--------------------------------
Name: PETER BERTRAM
Title: Director
AUTOMATED SECURITY
HOLDINGS INC., a Delaware
corporation
By:/s/ Peter Bertram
--------------------------------
Name: PETER BERTRAM
Title: Director
Guaranty
17
<PAGE>
Agreed and accepted on behalf of
the Beneficiaries by:
LLOYDS BANK Plc
By:/s/ L.H. Tinsley
--------------------------------
Name: L.H. TINSLEY
Address: St. Georges House
6-8, Eastcherp, EC3
Guaranty
18
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of December 21, 1995 (as amended from time
to time, the "Agreement"), by and among Automated Loss Prevention Systems
Limited, a company incorporated in England and Wales ("ALPSL"), Automated
Security Corporation, a Delaware corporation ("ASC") and Automated Security
Holdings Inc., a Delaware corporation ("ASHI" and together with ALPSL and ASC
each individually a "Pledgor" and collectively the "Pledgors") and Lloyds Bank
Plc, as security trustee (in such capacity, the "Security Trustee") for the
banks, the agent, the working capital lender and the other lenders that either
now or in the future are parties to the Credit Agreement referred to below
(collectively, the "Banks") and the holders of the US Loan Notes referred to
below pursuant to the terms of the Inter-Creditor Agreement referred to below
(collectively, the "U.S. Loan Note Holders"). The Banks, the U.S. Loan Note
Holders and the Security Trustee are collectively referred to herein as the
"Secured Parties."
R E C I T A L S
A. Pursuant to a Credit Agreement dated as of December 21, 1995 (as
amended from time to time, the "Credit Agreement") by and among Automated
Security (Holdings) PLC, a company incorporated under the laws of England and
Wales ("Holdings"), the Companies listed in Part A of Schedule 5 of the Credit
Agreement (collectively with Holdings, the "Borrowers") and the Banks, the Banks
have agreed to make certain U.S. Dollar-denominated and Sterling-denominated
credit facilities available to the Borrowers, subject to the terms and
conditions set forth therein.
B. The U.S. Loan Note Holders are the holders of certain 8.28% senior
notes (as amended from time to time, the "U.S. Loan Notes") issued by Holdings
pursuant to a note agreement dated 27th May 1994 with The Prudential Insurance
Company of America as amended by a First Amendment dated on or about the date
hereof made between the same parties (as so amended and as otherwise amended
from time to time the "U.S. Loan Note Agreement").
C. Pursuant to an Inter-Creditor Agreement dated December 21, 1995 (as
amended from time to time, the "Inter-Creditor Agreement") by and among
Holdings, the Security Trustee, the Banks and the U.S. Loan Note Holders, the
Beneficiaries have appointed the Security Trustee to act as its agent and
trustee in connection with this Agreement.
D. Each Pledgor is a direct or indirect Subsidiary of Holdings.
E. ALPSL is one of the Borrower under the Credit Agreement.
F. Pursuant to a Joint and Several General Continuing Guaranty, dated
as of December 21, 1995 (as amended from time to time, the "Guaranty") by ASC,
ASHI and other Guarantors thereunder in favor of the Secured Parties, ASC and
ASHI have jointly and severally agreed to guaranty the obligations of the
Borrowers under
Pledge Agreement
1
<PAGE>
the Credit Agreement and the obligations of Holdings under the U.S. Loan Notes
and the U.S. Loan Note Agreement.
G. The Pledgors are the owners of certain shares of capital stock of
certain indirect Subsidiaries of Holdings, as described on Schedule A (the
"Pledged Stock"). It is a condition to the extension of the foregoing credit
facilities that the Pledged Stock be pledged to the Secured Parties as set forth
herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
Section 1.1. Definitions.
The following terms with initial capital letters have the following
meanings:
"Acceleration" is defined in Section 5.1.
"Agreement" is defined in the Preamble.
"Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and ordinances of
any Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, judgments and decrees of any Governmental Authority.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended from time to time, or any successor statute.
"Banks" is defined in the Preamble.
"Borrowers" is defined in the Recitals.
"Charges" means all federal, state, country, city, municipal or other
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the Recitals.
Pledge Agreement
2
<PAGE>
"Default" shall mean any Default as defined in the Inter-Creditor
Agreement, including any Default (as defined in the Credit Agreement) or any
Event of Default (as defined in the U.S. Loan Note Agreement).
"Default Occurrence" means any Default Occurrence (as defined in the
Credit Agreement) or any other event or condition that, with the giving of
notice or lapse of time, or both, would, unless cured or waived, become a
Default.
"Default Rate" means the lesser of (i) the rate per annum calculated
in the manner set forth in Clause 8.3 of the Credit Agreement (provided that
determinations therein specified to be made by the Agent shall be made for
purposes hereof by the Security Trustee) and (ii) the maximum rate allowed by
applicable law.
"Financing Documents" means the Credit Agreement, the U.S. Loan Notes,
the U.S. Loan Note Agreement, the Inter-Creditor Agreement and all other
Financing Documents (as defined in the Credit Agreement) and Financing
Agreements (as defined in the Inter-Creditor Agreement).
"Governmental Approval" means any authorization, approval, permit or
license of or by or filing with any Governmental Authority.
"Governmental Approval" means any nation, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of government, including any tribunal or
arbitrator(s) of competent jurisdiction.
"Guaranty" is defined in the Recitals.
"Holdings" is defined in the Recitals.
"Inter-Creditor Agreement" is defined in the Recitals.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement or any lease in the nature thereof) and any agreement to give or
refrain from giving any of the foregoing.
"Material Adverse Effect" shall have the meaning set forth in the
Credit Agreement and "Material Adverse Change" means a change that has had or
will have a Material Adverse Effect.
"Person" means an individual, a corporation, a partnership, a trust,
an unincorporated organization or any other entity or organization, including a
Governmental Authority.
"Pledged Collateral" is defined in Section 4.1.
Pledge Agreement
3
<PAGE>
"Pledged Stock" is defined in the Recitals.
"Pledgor" and "Pledgors" are defined in the Preamble.
"Proceeds" is defined in Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" is defined in the Preamble.
"Securities Act" is defined in Section 4.8.
"Security Interest" is defined in Section 2.1.
"Security Trustee" is defined in the Preamble.
"UCC" means the Uniform Commercial Code (as amended from time to time)
of the State of New York.
"U.S. Loan Note Agreement" is defined in the Recitals.
"U.S. Loan Note Holders" is defined in the Preamble.
"U.S. Loan Notes" is defined in the Recitals.
Section 1.2. Related Matters.
1.2.1. Terms Used in the UCC. Unless the context clearly otherwise
requires, all lower-case terms used and not otherwise defined herein that are
used or defined in Article 9 or 8 (or any equivalent subpart) of the UCC have
the same meanings herein.
1.2.2. Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, and "including" is not
limiting. The words "hereof," "herein," "hereby," "hereunder" and similar terms
in this Agreement refer to this Agreement as a whole (including the Preamble,
the Recitals and all Schedules and Exhibits) and not to any particular provision
of this Agreement. Article, section, subsection, exhibit, recital, preamble and
schedule references in this Agreement are to this Agreement unless otherwise
specified. References in this Agreement to any agreement, other document or law
"as amended" or "as amended from time to time," or to amendments of any document
or law, shall include any amendments, supplements, replacements, renewals,
waivers or other modifications not prohibited by the Financing Documents.
References in this Agreement to any law (or any part thereof) include any rules
and regulations promulgated thereunder (or with respect to such part) by the
relevant Governmental Authority, as amended from time to time.
Pledge Agreement
4
<PAGE>
1.2.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, (other than
choice of law rules that would require the application of the laws of any other
jurisdiction).
1.2.4. Headings. The Article and Section Headings used in this
Agreement are for convenience of reference only and shall not affect the
construction hereof.
1.2.5. Severability. If any provision of this Agreement or any Lien or
other right hereunder shall be held to be invalid, illegal or unenforceable
under Applicable Law in any jurisdiction, such provision, Lien or other right
shall be ineffective only to the extent of such invalidity, illegality or
unenforceability, which shall not affect any other provisions herein or any
other Lien or right granted hereby or the validity, legality or enforceability
of such provision, Lien or right in any other jurisdiction.
ARTICLE 2.
THE SECURITY INTEREST; SECURED OBLIGATIONS
Section 2.1. Security Interest. To secure the payment and performance
of the Secured Obligations as and when due, each Pledgor hereby conveys,
pledges, assigns and transfers to the Security Trustee, and grants to the
Security Trustee, as trustee and representative for the equal and ratable
benefit of the Secured Parties, a security interest (the "Security Interest")
in, all right, title, claim and interest of such Pledgor in and to the following
property, whether now owned and existing or hereafter acquired or arising, and
wherever located (such property being, collectively, the "Collateral"):
2.1.1. The Pledged Stock and all certificates and instruments
representing or evidencing the Pledged Stock;
2.1.2. Any and all securities issued by any issuer of any Pledged
Stock, or any successor thereto, that any Pledgor acquires or has the right to
acquire from time to time in any manner in substitution for or in addition to
any of the foregoing and any and all certificates and instruments representing
or evidencing such securities;
2.1.3. Any and all proceeds and products of any of the foregoing,
whether now held and existing or hereafter acquired or arising, including any
and all cash, securities, instruments and other property from time to time paid,
payable or otherwise distributed in respect of or in exchange for any or all of
the foregoing (collectively, the "Proceeds"). "Proceeds" shall include (i) any
options, warrants, securities or other property issued or delivered by the
issuer of or obligor on any Collateral as a stock dividend or distribution in
connection with any reclassification, increase or reduction of capital or issued
or delivered in connection with any merger or
Pledge Agreement
5
<PAGE>
other reorganization and (ii) any property received upon the liquidation or
dissolution of any issuer of or obligor on any Collateral or upon or in respect
of any distribution of capital.
Section 2.2. Secured Obligations. The Security Interest shall secure
for the equal and ratable benefit of the Secured Parties, the due and punctual
payment and performance of any and all present and future obligations and
liabilities of each Pledgor of every type or description to any Secured Party,
or any of its successors or assigns, or any Person entitled to indemnification
under the Credit Agreement, the U.S. Loan Notes, the U.S. Loan Note Agreement,
the Guaranty or the other Financing Documents,
(a) arising under or in connection with the Credit Agreement, the U.S.
Loan Notes, the U.S. Loan Note Agreement, the Guaranty or the other Financing
Documents, whether for principal, interest, letter of credit or other
reimbursement obligations, cash collateral cover, fees, expenses, indemnities or
other amounts (including attorney's fees and expenses); or
(b) arising under or in connection with this Agreement or any other
Financing Document, including for reimbursement of amounts that may be advanced
or expended by the Security Trustee (i) to satisfy amounts required to be paid
by any Pledgor under this Agreement or any other Financing Document for claims
and Charges, together with interest thereon to the extent provided, or (ii) to
maintain or preserve any Collateral or to create, perfect, continue or protect
any Collateral or the Security Interest therein, or its priority;
in each case whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the commencement of a
proceeding under the Bankruptcy Code (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding, and
whether or not recovery of any such obligation or liability may be barred by a
statute of limitations or such obligation or liability may otherwise be
unenforceable (all obligations and liabilities described in this Section 2.2 are
collectively referred to as the "Secured Obligations").
ARTICLE 3.
WARRANTIES AND REPRESENTATIONS
Each Pledgor represents and warrants that all representations and
warranties made with respect to it, its assets and its obligations in Section
13.2 of the Credit Agreement are true and correct and makes the following
additional representations and warranties, all of which shall survive until
termination of this Agreement pursuant to Section 6.7.
Pledge Agreement
6
<PAGE>
Section 3.1. Authorization, Binding Effect, No Conflict, Etc.
3.1.1. The execution, delivery and performance by each Pledgor of this
Agreement and each other Financing Documents to which it is a party have been
duly authorized by all necessary corporate action. This Agreement and each such
other Financing Documents has been duly executed and delivered by each Pledgor
party thereto and such agreements are the legal, valid and binding obligations
of such Pledgor, enforceable against it in accordance with their respective
terms, except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally. The execution, delivery and performance by any
Pledgor of this Agreement and each other Financing Document to which such
Pledgor is a party, the consummation of the transactions contemplated hereby or
thereby, or the exercise by the Security Trustee of any of the voting and other
rights or remedies hereunder, do not and will not (a) violate any provision of
the charter or bylaws of such Pledgor, (b) conflict with, result in a breach of
or constitute (or, with the giving of notice or lapse of time or both,
constitute) a default under, or require the approval or consent of any Person
pursuant to, any contractual obligation of such Pledgor or violate any provision
of Applicable Law binding on such Pledgor, or (c) result in the creation or
imposition of any Lien of any nature whatsoever upon any of such Pledgor's
assets except for Liens created under this Agreement and the other Financing
Documents. Except for filings and recordings in connection with the perfection
of Liens created by the Financing Documents, all of which have been made and are
in full force and effect, no Governmental Approval is or will be required in
connection with the execution, delivery and performance by any Pledgor of this
Agreement or any other Financing Documents to which any Pledgor is a party, the
consummation of the transactions contemplated hereby or thereby, or the exercise
by the Security Trustee of any of the voting and other rights or remedies
hereunder, or to ensure the legality, validity or enforceability hereof or
thereof, except as may be required in connection with the disposition of
Collateral by laws affecting the offering and sale of securities generally.
Section 3.2. Title to Collateral: Validity and Perfection of Security
Interest; Absence of Other Liens.
3.2.1. Each Pledgor has good and marketable title to all Collateral.
The Security Interest constitutes a valid and, upon delivery of all Pledged
Collateral to the Secured Party pursuant to Section 4.1. hereof, perfected Lien
in all of the Collateral and secures payment and performance of the Secured
Obligations.
3.2.2. The Collateral is free and clear of all Liens other than the
Security Interest and other Liens in favor of Security Trustee.
Section 3.3. Regarding the Pledged Stock. Schedule 3.3. sets forth the
number of authorized and the number of issued shares of each class of capital
stock of each issuer of Pledged Stock. All outstanding capital stock of each
such issuer has been duly authorized, validly issued and is fully paid and
non-assessable. There are no
Pledge Agreement
7
<PAGE>
outstanding options, warrants, convertible securities or other rights,
contingent or absolute, to acquire any capital stock of any such issuer.
ARTICLE 4.
COVENANTS AND AGREEMENTS
Section 4.1. Delivery of Pledged Collateral, Etc.
4.1.1. On the date hereof, each Pledgor is delivering to the Security
Trustee all Collateral consisting of certificated securities, instruments or the
like the physical possession of which is necessary in order for the Security
Interest to be perfected or delivery of which was requested by the Security
Trustee to assure the priority of the Security Interest therein (such Collateral
being "Pledged Collateral"). Each Pledgor shall deliver to the Security Trustee
promptly after acquisition thereof all Pledged Collateral acquired after the
date hereof. All Pledged Collateral shall be in suitable form for transfer by
delivery, or be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Security
Trustee. The Security Trustee shall have the right, at any time in its
discretion and without notice to any Pledgor, to transfer to or to register in
the name of the Security Trustee or its nominee any or all of the Collateral,
subject only to the revocable rights specified in Section 4.7.1. In addition,
the Security Trustee shall have the right at any time to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
4.1.2. Without limitation of Section 4.1.1., if any Pledgor receives
or becomes entitled to receive any securities issues by any issuer of Pledged
Stock, or any successor thereto, in any manner in substitution for or in
addition to the Pledged Stock, or if any Pledgor shall become entitled to
receive or shall receive any securities or other property in addition to, in
substitution of, as a conversion of, or in exchange for, any of the Pledged
Stock or any other Collateral, such Pledgor shall receive the same as the agent
for the Security Trustee, and shall hold the same in trust for and deliver the
same promptly to the Security Trustee in the exact form in which received,
together with appropriate instruments of transfer or assignments in blank, to be
held by the Security Trustee as Collateral hereunder.
Section 4.2. Further Assurances. Each Pledgor shall, at its own
expense, perform on request of the Security Trustee, such acts as may be
necessary or advisable in the opinion of the Security Trustee, or that the
Security Trustee may request at any time, to assure the attachment, perfection
and first priority of the Security Interest, to exercise the rights and remedies
of the Secured Parties hereunder or to carry out the intent of this Agreement.
Section 4.3. Power of Attorney. Each Pledgor hereby irrevocably
appoints the Security Trustee and its employees and agents as such Pledgor's
true and lawful attorneys-in-fact, with full power of substitution, to do (a)
all things required to be
Pledge Agreement
8
<PAGE>
done by such Pledgor under this Agreement or the other Financing Documents, and
(b) to do all things that the Security Trustee may deem necessary or advisable
to assure the attachment, perfection and first priority of the Security Interest
or otherwise to exercise the rights and remedies of the Secured Parties
hereunder or carry out the intent of this Agreement, in each case irrespective
of whether a Default or Default Occurrence then exists (except as otherwise
provided herein) and at the Pledgor's expense. Without limitation, the Security
Trustee and its officers and agents shall be entitled to affix, by facsimile
signature or otherwise, the general or special endorsement of any Pledgor, in
such manner as the Security Trustee shall deem advisable, to any Collateral that
has been delivered to or obtained by the Security Trustee without appropriate
endorsement or assignment, which endorsement shall be effective for all
purposes.
Section 4.4. Payments of Charges and Claims. Each Pledgor shall pay
(a) all Charges imposed upon any Collateral, and (b) all claims that have become
due and payable and, under Applicable Law, have or may become Liens upon any
Collateral, in each case before any penalty shall be incurred with respect
thereto; provided that, unless foreclosure, levy or similar proceedings shall
have commenced, such Pledgor need not pay or discharge any such Charges to
claims so long as the validity or amount thereof is being contested in good
faith and by appropriate proceedings and so long as adequate reserves therefore
have been established in accordance with generally accepted accounting
principles. If any Pledgor fails to pay or obtain the discharge of any Charge,
claim or Lien required to be paid or discharged under this Section and asserted
against any material portion of the Collateral, the Security Trustee may, at any
time and from time to time, in its sole discretion and without waiving or
releasing any obligation of such Pledgor under this Agreement or the other
Financing Documents or waiving any Default or Event of Default, make such
payment, obtain such discharge or take such other action with respect thereto as
the Security Trustee deems advisable; provided, however, that the Security
Trustee shall in any event first have given such Pledgor written notice of its
intent to do the same and such Pledgor shall not have, within 15 days of such
notice, paid such claim or obtained to the Security Trustee's satisfaction the
release of the claim or Lien to which such notice relates.
Section 4.5. Duty of Care.
4.5.1 The Secured Parties shall have no duty of care with respect to
the Collateral, except that each Secured Party shall have an obligation to
exercise reasonable care with respect to Collateral in its possession; provided
that (i) each Secured Party shall be deemed to have exercised reasonable care if
Collateral in its possession is accorded treatment substantially comparable to
that which such Secured Party accords its own property or treatment
substantially in accordance with actions requested by any Pledgor in writing,
although the Secured Party shall not be obligated to comply with any such
requests, and (ii) the Secured Parties shall have no obligation to take any
actions to preserve rights against other parties with respect to any Collateral.
Without limitation, the Secured Parties shall have no duty with respect to
Pledge Agreement
9
<PAGE>
calls, conversions, presentments, maturities, notices or other matters relating
to Collateral, or to maximize interest or other returns with respect thereto.
4.5.2 Each Pledgor hereby agrees to indemnify and hold harmless each
Secured Party and its directors, officers, employees and agents against any and
all claims, actions, liabilities, costs and expenses of any kind or nature
whatsoever (including reasonable fees and disbursements of counsel) that may be
imposed on, incurred by, or asserted against any of them, in any way relating to
or arising out of this Agreement or any action taken or omitted by them
hereunder, except to the extent a court holds in a final and nonappealable
judgment that they directly resulted from the gross negligence or willful
misconduct of such Persons against and from all such obligations and
liabilities.
4.5.3 The Security Trustee may at any time deliver or redeliver the
Collateral or any part thereof to any Pledgor and the receipt of any of the same
by such Pledgor shall be complete and full acquittance for the Collateral so
delivered, and the Security Trustee thereafter shall be discharged from any
liability or responsibility therefor.
Section 4.6 Sale of Collateral; Further Encumbrances. No Pledgor shall
(a) except for dispositions with the prior written consent of the Security
Trustee ("Permitted Sales"), sell, lease or otherwise dispose of any Collateral,
or any interest therein, or (b) grant or suffer to exist any Lien in or on any
Collateral. Concurrently with any Permitted Sale, the Security Interest shall
automatically be released from the Collateral so disposed of; provided, however
that the Security Interest shall continue in the Proceeds thereof. If any
Collateral, or any interest therein, is disposed of in violation of these
provisions, the Security Interest shall continue in such Collateral or interest
notwithstanding such disposition, the Person to which the Collateral or interest
is being transferred shall be bound by this Agreement, and the Pledgor shall
deliver all Proceeds thereof to the Security Trustee to be held as Collateral
hereunder.
Section 4.7 Voting and Other Consensual Rights; Distributions.
4.7.1. So long as no Default shall exist:
4.7.1.1. Each Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to any Collateral, for any purpose
not inconsistent with the terms of this Agreement and the other Financing
Documents; provided, however, that such Pledgor shall not exercise any such
right if it would result in a Default or a Default Occurrence or have a Material
Adverse Effect. Within 10 days of exercising any such right in a manner material
to the Secured Parties, the Pledgor shall give notice to the Security Trustee of
such exercise and the action taken or approved in connection therewith.
4.7.1.2. Except as otherwise provided herein, each Pledgor shall
be entitled to receive and retain and use free of the Security Interest any and
all cash
Pledge Agreement
10
<PAGE>
and other property paid or otherwise distributed in respect to the Collateral;
provided, however, that any and all (A) dividends and other distributions paid
or payable other than in cash and (B) cash paid upon or in respect of any of the
Collateral upon or in respect of the liquidation or dissolution of any issuer
thereof or upon or in respect of any distribution of capital or redemption or
exchange of any Collateral shall be delivered to the Security Trustee, in the
exact form received, to be held as Collateral hereunder.
4.7.2. So long as a Default shall exist, at the sole option of the
Security Trustee, any or all rights of the Pledgors to exercise voting and other
consensual rights and to receive cash and other property distributed in respect
of Collateral as permitted above by this Section, shall cease, at the option of
the Security Trustee, and the Security Trustee, if and when it notified the
Pledgors of the exercise of such option, shall have the sole right to exercise
any or all such voting and other consensual rights and receive and to hold as
Collateral any or all such cash and other property.
4.7.3. All cash and other property required to be delivered to the
Security Trustee hereunder shall, if received by any Pledgor, be received in
trust for the benefit of the Secured Parties, be segregated from the other
property of the Pledgors, and promptly be delivered to the Security Trustee in
the same form as so received (with any appropriate endorsements of assignments).
4.7.4. The Security Trustee shall execute and deliver (or cause to be
executed and delivered) to the Pledgors all proxies and other instruments as any
Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to this Section.
Section 4.8. Registration Rights.
4.8.1. Each Pledgor agrees that, at any time following the occurrence
of an Acceleration, upon request of the Security Trustee and without expense to
the Secured Parties, it shall at its own expense:
4.8.1.1. use its best efforts to obtain all necessary
Governmental Approvals for the sale by the Security Trustee of the Collateral or
any part thereof;
4.8.1.2. prepare, cause to be filed and use its best efforts to
cause to become effective with respect to the Collateral, or any part thereof,
one or more registration statements under the Securities Act of 1933, as amended
(or any similar statute from time to time in effect, the "Securities Act"), on
Form S-1 (or such other form for which the respective issuer of the Collateral
then qualifies and which is available for the sale of the Collateral in
accordance with the intended method of disposition thereof) or one or more
qualifications for exemption from registration or similar documents under the
Securities Act relating to any public offering or sale by the Security Trustee
of such Collateral;
Pledge Agreement
11
<PAGE>
4.8.1.3. prepare, cause to be filed and use its best efforts to
cause to become effective with respect to the Collateral, or any part thereof,
such qualification statements or similar documents (including any offering
circular) as may be necessary to have such Collateral qualified or registered
under the securities laws of such other jurisdictions (including the applicable
state securities of "Blue Sky" law), and to obtain such Governmental Approvals
for the sale of such Collateral, as the Security Trustee may request in
connection with any such offering or sale;
4.8.1.4. include in any such registration statement,
qualification statement or similar document all appropriate information relating
to the transaction or transactions in which the Security Trustee proposes to
offer or sell such Collateral;
4.8.1.5. cause to be filed such pre-effective and post-effective
amendments to each such registration statement, qualification statement or
similar document as may be necessary to prevent any statement therein contained
from being untrue or misleading, and such filing, qualification or registration
to be kept effective for such period as the Security Trustee may deem
appropriate to facilitate the sale or other disposition of such Collateral;
4.8.1.6. furnish the Security Trustee with such numbers of copies
of each such registration statement, qualification statement or similar
document, and any amendments thereto as the Security Trustee may request;
4.8.1.7. furnish to the Security Trustee a legal opinion of
counsel acceptable to the Security Trustee as to such matters regarding such
offering or sale as the Security Trustee may reasonable request; and
4.8.1.8. do such further acts and things as the Security Trustee
may deem necessary to advisable to effectuate the offering and sale by the
Security Trustee of such Collateral in compliance with Applicable Law.
4.8.2. Each Pledgor agrees to indemnify and hold harmless the Secured
Parties and each underwriter (within the meaning of the Securities Act) acting
in the transaction, and each Person controlling (within the meaning of the
Securities Act) any Secured Party or underwriter, from and against any and all
claims, actions, liabilities, costs and expenses (including legal fees and
expenses) based upon or arising out of any actual or alleged untrue statement of
a material fact contained in any such registration statement, qualification
statement or similar document, or part thereof, or any actual or alleged
omission to state a material fact required to be stated in any such document, or
part thereof, or necessary to make the statements contained therein not
misleading; provided, however, that no Pledgor shall have any liability to any
Person under the foregoing indemnity on account of any actual or alleged untrue
or misleading statement contained in, or any actual or alleged omission from,
any information furnished in writing to such Pledgor by such Person specifically
for use in such document and included thereon in reliance therein.
Pledge Agreement
12
<PAGE>
4.8.3. If the indemnification provided for in this Section 4.8. is
unavailable to or otherwise insufficient to hold harmless an indemnified party
hereunder in respect of any claims, actions, liabilities, costs or expenses
referred to herein, then each Pledgor, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such claims, actions, liabilities, costs or expenses in such
proportion as is appropriate to reflect the relative fault of such Pledgor, any
Secured Party and each underwriter in connection with the statements or
omissions that resulted in such claims, actions, liabilities, costs or expenses,
as well as any other relevant equitable considerations.
4.8.4. Each Pledgor agrees that (i) exercise of registration and other
rights provided in this Section 4.8 is not required in connection with any
exercise of remedies under Article 5 of this Agreement, (ii) such rights may be
exercised or not exercised in the sole discretion of the Security Trustee and
(iii) any request for exercise of such rights may be withdrawn in whole or in
part at any time by the Security Trustee in its sole discretion.
ARTICLE 5.
DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
Section 5.1. Remedies Upon Default. If upon or after the occurrence of
any Default, the Security Trustee elects to exercise remedies under this
Agreement (the occurrence of any such election or other event shall be referred
to as an "Acceleration"), then, whether or not all the Secured Obligations shall
have become immediately due and payable:
5.1.1. In addition to all its other rights, powers and remedies under
this Agreement and Applicable Law, each Secured Parties shall have, and may
exercise, any and all of the rights, powers and remedies of any secured part
under the UCC, all of which rights, powers and remedies shall be cumulative and
not exclusive, to the extent permitted by Applicable Law.
5.1.2. The Security Trustee shall have the right, all at the Security
Trustee's sole option and as the Security Trustee in its discretion may deem
necessary or advisable, to do any or all of the following:
5.1.2.1. to foreclose the Security Interest by any available
judicial procedure or without judicial process; and
5.1.2.2. to exercise any and all other rights, powers, privileges
and remedies of any owner of the Collateral, including rights of conversion,
exchange or subscription or other rights or upon the exercise by any Pledgor or
the Security Trustee of any right, power or privilege pertaining to the
Collateral, the right to deposit and deliver any and all of the Collateral to
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Security
Pledge Agreement
13
<PAGE>
Trustee may determine to be appropriate, all without liability except to account
for property actually received by it, but the Security Trustee shall have no
duty to the Pledgors to exercise any such right, power or privilege and shall
not be responsible for any failure to do so or delay in so doing.
5.1.3. The Security Trustee shall have the right to sell or
otherwise dispose of all or any Collateral at public or private sale or sales,
with such notice as may be required by Section 5.3., in lots or in bulk, at any
exchange, over the counter or at any of the Security Trustee's offices or
elsewhere, for cash or on credit, with or without representations or warranties,
all as the Security Trustee, in its discretion, may deem advisable. The
Collateral need not be present at any such sales. If sale of all or any part of
the Collateral is made on credit or for future delivery, the Collateral so sold
may be retained by the Security Trustee until the sale price is paid by the
purchaser thereof, but the Secured Parties shall not incur any liability in case
any such purchaser shall fail to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may be sold again upon like notice.
The Security Trustee shall not be obligated to make any sale of the Collateral
regardless of notice of sale having been given. The Security Trustee may
purchase all or any part of the Collateral at public or, if permitted by
Applicable Law, private sale, and in lieu of actual payment of the purchase
price, the Security Trustee may apply against such purchase price any amount of
the Secured Obligations. Each Pledgor agrees that any sale of Collateral
conducted by the Security Trustee in accordance with the foregoing provisions of
this Section and Section 5.2. shall be deemed to be a commercially reasonable
sale under Section 9-504 of the UCC.
5.1.4. The Security Trustee shall not be required to register or
qualify any of the Collateral that constitutes securities under applicable state
or federal securities laws in connection with any sale or other disposition
thereof if such disposition is effected in a manner that complies with all
applicable federal and state securities laws. The Security Trustee shall be
authorized at any such disposition (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to persons who will represent and
agree that they are "accredited investors" or "qualified institutional buyers"
under Applicable Law and purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof. If any such
Collateral is sold at private sale, each Pledgor agrees that if such Collateral
is sold in a manner that the Security Trustee in good faith believes to be
reasonable under the circumstances then existing, then (A) the sale shall be
deemed to be commercially reasonable in all respects, (B) such Pledgor shall not
be entitled to a credit against the Secured Obligations in any amount in excess
of the purchase price, and (C) the Secured Parties shall not incur any liability
or responsibility to any Pledgor in connection therewith, notwithstanding the
possibility that a substantially higher price might have been realized at a
public sale. Each Pledgor recognizes that a ready market may not exist for such
Collateral if it is not regularly traded on a recognized securities exchange,
and that a sale by the Security Trustee of any such Collateral for an amount
substantially less than the price that might have been achieved had the
Collateral been
Pledge Agreement
14
<PAGE>
so traded may be commercially reasonable in view of the difficulties that may be
encountered in attempting to sell Collateral that is privately traded.
Section 5.2. Application of Proceeds.
5.2.1. Any cash proceeds received by the Security Trustee in respect
of any sale of, collection from, or other realization upon, all of any part of
the Collateral following the occurrence of an Acceleration or otherwise
(including insurance proceeds) may be held by the Security Trustee as Collateral
and/or then or at any time thereafter applied as provided in the Inter-Creditor
Agreement (or as otherwise determined by the Security Trustee if the
Inter-Creditor Agreement is no longer in effect).
5.2.2. Each Pledgor and any other Person then obligated therefor shall
pay to the Security Trustee on demand any deficiency with regard to the Secured
Obligations that may remain after such sale, collection or realization of, from
or upon the Collateral.
5.2.3. Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Security Trustee. The application of proceeds by the Security Trustee shall be
without prejudice to the Security Trustee's rights as against any Pledgor or
other Persons with respect to any Secured Obligations that may then be or remain
unpaid.
5.2.4. If at any time after an Acceleration any Pledgor receives any
collections upon or other Proceeds of any Collateral, whether in the form of
cash, notes or otherwise, such Proceeds shall be received in trust for the
Secured Parties and such Pledgor shall keep all such Proceeds separate and apart
from all other funds and property so as to be capable of identification as the
property of the Secured Parties and promptly deliver such Proceeds to the
Security Trustee in the identical form received.
Section 5.3. Notice. Unless the Collateral is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market, the Security Trustee will send or otherwise make available to each
Pledgor reasonable notice of the time and place of any public sale or of the
time on or after which any private sale of any Collateral is to be made. Each
Pledgor agrees that any notice required to be given by the Security Trustee of a
sale or other disposition of Collateral, or any other intended action by the
Security Trustee, that is received in accordance with the provisions set forth
in Section 6.4. five days prior to such proposed action shall constitute
commercially reasonable and fair notice thereof to the Pledgers. The Security
Trustee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Each Pledgor hereby
waives any right to receive notice of any public or private sale of any
Collateral or other security for the Secured Obligations except as expressly
provided for in this Section.
Pledge Agreement
15
<PAGE>
ARTICLE 6.
GENERAL
Section 6.1. Security Trustee's Expenses, Including Attorneys' Fees.
Regardless of the occurrence of a Default or Default Occurrence, the Pledgors
jointly and severally agree to pay to the Security Trustee any and all advances,
charges, costs and expenses, including the fees and expenses of counsel and any
experts or agents, that the Security Trustee may incur in connection with (a)
the administration of this Agreement, (b) the creation, perfection or
continuation of the Security Interest or protection of its priority or the
Collateral, including the discharging of any prior or junior Lien or adverse
claim against the Collateral or any part thereof that is not permitted hereby or
by the Financing Documents, (c) the custody, preservation or sale of, collection
from, or other realization upon, any of the Collateral, (d) the exercise or
enforcement of any of the rights, powers or remedies of the Security Trustee
under this Agreement or under Applicable Law (including attorneys' fees and
expenses incurred by the Security Trustee in the collection of Collateral
deposited with the Security Trustee and amounts incurred in connection with the
operation, maintenance or foreclosure of the Security Interest) or any workout
or restructuring or insolvency or bankruptcy proceeding or (e) the failure by
any Pledgor to perform or observe any of the provisions hereof. All such amounts
and all other amounts payable hereunder shall be payable on demand, together
with interest at the Default Rate, from and including the due date to and
excluding the date of payment.
Section 6.2. Amendments and Other Modifications. No amendment of any
provision of this Agreement (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
the Security Trustee. Any waiver or consent relating to any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on any Pledgor in any case shall
entitle such Pledgor to any other or further notice or demand in similar or
other circumstances.
Section 6.3. Cumulative Remedies; Failure or Delay.
The rights and remedies provided for under this Agreement are
cumulative and are not exclusive of any rights and remedies that may be
available to the Secured Parties under Applicable Law, the other Financing
Documents or otherwise. No failure or delay on the part of the Security Trustee
in the exercise of any power, right or remedy under this Agreement shall impair
such power, right or remedy or shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude other or
further exercise of such or any other power, right or remedy.
Section 6.4. Notices, Etc. All notices and other communications under
this Agreement shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid) or
by prepaid telex,
Pledge Agreement
16
<PAGE>
telecopy or telegram, and shall be deemed given when received by the intended
recipient thereof. Unless otherwise specified in a notice given in accordance
with the foregoing provisions of this Section 6.4, notices and other
communications shall be given to the parties hereto at their respective
addresses (or to their respective telex telecopier numbers) indicated on
Schedule 6.4.
Section 6.5. Successors and Assigns. This Agreement shall be binding
upon and, subject to the next sentence, inure to the benefit of each Pledgor and
the Security Trustee and their respective successors and assigns. No Pledgor
shall assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Security Trustee. The benefits of this Agreement
shall pass automatically with any assignment of the Secured Obligations (or any
portion thereof), to the extent of such assignment.
Section 6.6. Payments Set Aside. Notwithstanding anything to the
contrary herein contained, this Agreement, the Secured Obligations and the
Security Interest shall continue to be effective or reinstated, as the case may
be, if at any time any payment, or any part thereof, of any or all of the
Secured Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by any Secured
Party in connection with any bankruptcy, reorganization or similar proceeding
involving any Pledgor, any other party liable with respect to the Secured
Obligations or otherwise, if the proceeds of any Collateral are required to be
returned by such Secured Party under any such circumstances, or if any Secured
Party elects to return any such payment or proceeds or any part thereof in its
sole discretion, all as though such payment had not been made or such proceeds
not been received. Without limiting the generality of the foregoing, if prior to
any such rescission, invalidation, declaration, restoration or return, this
Agreement shall have been cancelled or surrendered or the Security Interest or
any Collateral shall have been released or terminated in connection with such
cancellation or surrender, this Agreement and the Security Interest and such
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the Pledgors in respect of the amount of the affected payment or
application of proceeds, the Security Interest or such Collateral.
Section 6.7. Continuing Security Interest; Termination. This Agreement
shall create a continuing security interest in the Collateral and, except as
provided below, the Security Interest and all agreements, representations and
warranties made herein shall survive until, and this Agreement shall terminate
only upon, the indefeasible payment in full of the Secured Obligations.
Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Pledgors set forth in Sections 4.8.2 and 6.1
shall survive the payment of all other Secured Obligations and the termination
of this Agreement.
Pledge Agreement
17
<PAGE>
Section 6.8. Choice of Forum
6.8.1. Each of the Pledgors 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 proceeding, and to settle any disputes, which
may arise out of or in connection with this Agreement (and the other Financing
Documents) and, for such purposes, irrevocably submits to the jurisdiction of
such courts. Each of the Pledgors irrevocably agrees that the courts of the
State of New York and the courts of the United States of America in New York
shall have jurisdiction to hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of or in connection with this
Agreement (and the other Financing Documents) and, for such purposes,
irrevocably submits to the jurisdiction of such courts. Each of the Pledgors
irrevocably waives any objection which it might now or hereafter have to the
courts referred to in this Section 6.8.1 being nominated as the forum to hear
and determine any suit, action or proceeding, and to settle any disputes, which
may arise out of or in connection with this Agreement and the Financing
Documents and agrees not to claim that any such court is not a convenient or
appropriate forum.
IN ANY ACTION AGAINST ANY PLEDGOR, SERVICE OF PROCESS MAY BE MADE UPON
SUCH PLEDGOR OR BY DELIVERY OR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ITS ADDRESS INDICATED IN SCHEDULE 6.4, WHICH SERVICE SHALL BE
DEEMED SUFFICIENT FOR PERSONAL JURISDICTION AND SHALL BE DEEMED EFFECTIVE UPON
RECEIPT, IN THE CASE OF DELIVERY, AND 10 DAYS AFTER MAILING, IN THE CASE OF
MAILING. Each Pledgor hereby irrevocably appoints CT Corporation Systems (the
"Process Agent"), with offices on the date hereof in New York, New York as
Process Agent to receive for and on behalf of such Pledgor service of process in
the County of New York relating to this Agreement. SERVICE OF PROCESS IN ANY
ACTION OR PROCEEDING AGAINST ANY PLEDGOR MAY BE MADE ON THE PROCESS AGENT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER METHOD
OF SERVICE PROVIDED FOR UNDER APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK, AND THE PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT SUCH
SERVICE FOR AND ON BEAHLF OF SUCH PLEDGOR AND TO ADMIT SERVICE WITH RESPECT
THERETO. SUCH SERVICE UPON THE PROCESS AGENT SHALL BE DEEMED EFFECTIVE PERSONAL
SERVICE ON SUCH PLEDGOR, SUFFICIENT FOR PERSONAL JURISDICTION, 10 DAYS AFTER
MAILING, AND SHALL BE LEGAL AND BINDING UPON SUCH PLEDGOR FOR ALL PURPOSES,
NOTWITHSTANDING ANY FAILURE OF THE PROCESS AGENT TO MAIL COPIES OF SUCH LEGAL
PROCESS TO SUCH PLEDGOR, OR ANY FAILURE ON THE PART OF SUCH PLEDGOR TO RECEIVE
THE SAME. Each Pledgor confirms that it has instructed the Process Agent to mail
such Pledgor, upon service of process being made on the Process Agent pursuant
to this Section, a copy of the summons and complaint or other legal process
served upon it, be registered mail, return receipt
Pledge Agreement
18
<PAGE>
requested, at such Pledgor's address set forth in Schedule 6.4., or to such
other address as such Pledgor may notify the Process Agent in writing. Each
Pledgor agrees that it will at all time maintain a process agent to receive
service of process in the County of New York on its behalf with respect to this
Agreement. If for any reason the Process Agent or any successor thereto shall no
longer serve as such process agent or shall have changed its address without
notification thereof to the Beneficiaries, such Pledgor, immediately after
gaining knowledge thereof, irrevocably shall appoint a substitute process agent
acceptable to the Security Trustee in the County of New York and advise the
Security Trustee thereof.
6.8.2. The submission to the jurisdiction of the courts referred to in
Section 6.8.1. shall not (and shall not be construed as to) limit the right of
the Beneficiaries or any of them to take proceedings against any of the Pledgors
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.
Section 6.9. Waiver and Estoppel. Except as otherwise provided in this
Agreement, each Pledgor hereby waives: (a) presentment, protest, notice of
dishonor, release, compromise, settlement, extension or renewal and any other
notice of or with respect to the Secured Obligations and hereby ratifies and
confirms whatever the Security Trustee may do in this regard; (b) notice prior
to taking possession or control of any Collateral; (C) any bond or security that
might be required by any court prior to allowing the Security Trustee to
exercise any of their rights, powers or remedies; (d) the benefit of all
valuation, appraisement, redemption and exemption laws; (e) any rights to
require marshalling of the Collateral upon any sale or otherwise to direct the
order in which the Collateral shall be sold; (f) any set-off; and (g) any rights
to require the Security Trustee to proceed against any Person, proceed against
or exhaust any Collateral or any other security interests or guaranties or
pursue any other remedy in the Security Trustee power, or to pursue any of such
rights in particular order or manner, and any defenses arising by reason of any
disability or defense of any Person.
Section 6.10. Nature of Agreement. This Agreement is independent of
and not in consideration of or contingent upon the liability of any Borrower or
any other Person and foreclosure or other action may be taken against all or any
Collateral and a separate action or actions may be brought and prosecuted
against any Pledgor, whether or not any foreclosure or other action is taken
with respect to any other collateral or action is brought or prosecuted against
any Borrower or any other obligor or whether any Borrower or any other obligor
is joined in any such action or actions. This Agreement shall be construed as
continuing, absolute and unconditional without regard to:
6.10.1. the legality, validity or enforceability of the Credit
Agreement, the U.S. Loan Notes or any other Financing Document, any of the
Secured
Pledge Agreement
19
<PAGE>
Obligations, any Lien or other collateral or any guaranty of the Secured
Obligations or any part thereof;
6.10.2. any defense (other than payment), set-off or counterclaim that
may at any time be available to any Borrower or any other obligor against, and
any right of setoff at any time held by, any Secured Party; or
6.10.3. any other circumstance whatsoever (with or without notice to
or knowledge of any Pledgor or any other obligor), whether or not similar to any
of the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of any Borrower or any other obligor for the
Secured Obligations, in bankruptcy or in any other instance.
Section 6.11. Authorization. Each Pledgor authorizes each Secured
Party, without notice to or further assent by such Pledgor, and without
affecting any Pledgor's liability hereunder or the Security Interest (regardless
of whether any subrogation or similar right that such Pledgor may have or any
other right or remedy of such Pledgor is extinguished or impaired), from time to
time to:
6.11.1. permit any Borrower to increase or create Secured Obligations,
or terminate, release, compromise, subordinate, extend, accelerate or otherwise
change the amount or time, manner or place of payment of, or rescind any demand
for payment or acceleration of, the Secured Obligations or any part thereof
(including increasing or decreasing the rate of interest thereon), or otherwise
amend the terms and conditions of the Credit Agreement, the U.S. Loan Notes, any
other Financing Document or any provision thereof;
6.11.2. take and hold other collateral from any Borrower or any other
Person, perfect or refrain from perfecting a Lien on such other collateral, and
exchange, enforce, subordinate, release (whether intentionally or
unintentionally), or take or fail to take any other action in respect of, any
such other collateral or Lien or any part thereof;
6.11.3. exercise in such manner and order as it elects in its sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration of,
any of the remedies or rights of such Secured Party against any Borrower of any
other Person in respect of any Secured Obligations or any other collateral;
6.11.4. release, add or settle with any Person in respect of this
Agreement, any guaranty or the Secured Obligations;
6.11.5. accept partial payments on the Secured Obligations and apply
any and all payments or recoveries from any Person or other collateral to such
of the Secured Obligations as any Secured Party may elect in its sole
discretion, whether or not such Secured Obligations are otherwise secured or
guaranteed;
Pledge Agreement
20
<PAGE>
6.11.6. refund at any time, at such Secured Party's sole discretion,
any payments or recoveries received by such Secured Party in respect of any
Secured Obligations or other collateral; and
6.11.7. otherwise deal with any Borrower, any other obligor and any
other collateral as such Secured Party may elect in its sole discretion.
Section 6.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
Section 6.13. Complete Agreement. This Agreement, together with the
exhibits and schedules hereto and other Financing Documents, is intended by the
parties as a final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
Section 6.14. Limitation of Liability. No claim shall be made by any
Pledgor against the Secured Parties or the affiliates, directors, officers,
employees or agents of the Secured Parties for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or under any other theory of liability arising out of or related to the
transactions contemplated by this Agreement and the other Financing Documents,
or any act, omission or event occurring in connection therewith; and each
Pledgor hereby waives, release and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
Section 6.15. WAIVER OF TRIAL BY JURY. EACH PLEDGOR AND THE SECURITY
TRUSTEE WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS AGREEMENT OR
ANY OTHER FINANCING DOCUMENT OR ANY ACTION ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION
OR ACTIONS.
Pledge Agreement
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first set forth above.
Pledgors:
Automated Loss Prevention Systems, Limited
a company incorporated in England and Wales
By:/s/ Peter Bertram
---------------------------------------------
Name: PETER BERTRAM
Title: Group Finance Director
Automated Security Corporation, a Delaware
corporation
By:/s/ Peter Bertram
---------------------------------------------
Name: PETER BERTRAM
Title: Director
Automated Security Holdings Inc., a Delaware
corporation
By:/s/ Peter Bertram
---------------------------------------------
Name: PETER BERTRAM
Title: Director
Security Trustee:
Lloyds Bank Plc
By:/s/ L.H. Tinsley
---------------------------------------------
Name: L.H. TINSLEY
Title: Director, Capital Markets Group
Pledge Agreement
22
<PAGE>
SCHEDULE A
PLEDGED STOCK
1. 1,000 shares of Common Stock , $0.01 par value per share, of Sonitrol
Management Corporation, a Delaware corporation, constituting 100% of the
issued and outstanding shares of such Common Stock.
2. 759 share of Common Stock, $0.01 par value per share, of Sonitrol
Corporation, a Delaware corporation, constituting 100% of the issued and
outstanding shares of such Common Stock.
3. 1 share of Common Stock, $1.00 part value per share, of API Security, Inc.,
a Delaware corporation, constituting 9.1% of the issued and outstanding
shares of such Common Stock.
4. 458 shares of Common Stock, $0.01 par value per share, of Automated
Security Corporation, a Delaware corporation, 100% of the issued and
outstanding shares of such Common Stock.
5. 11 shares of Common Stock, $1.00 par value per share, of Automated Security
Holdings, Inc., a Delaware corporation, constituting 100% of the issued and
outstanding shares of such Common Stock.
Existing Liens - Schedule
1
<PAGE>
SCHEDULE 3.3
CAPITALIZATION OF ISSUERS OF PLEDGED STOCK
1. Issuer: Sonitrol Management Corporation
Number of Authorized Shares: 1,000 shares of Common Stock
Number of Issued and Outstanding Shares: 1,000 shares of Common Stock
2. Issuer: Sonitrol Corporation
Number of Authorized Shares: 1,000 shares of Common Stock
Number of Issued and Outstanding Shares: 759 shares of Common Stock
3. Issuer: API Security, Inc.
Number of Authorized Shares: 100 shares of Common Stock
Number of Issued and Outstanding Shares: 11 shares of Common Stock
4. Issuer: Automated Security Corporation
Number of Authorized Shares: 1,000 shares of Common Stock
Number of Issued and Outstanding Shares: 458 shares of Common Stock
5. Issuer: Automated Security Holding, Inc.
Number of Authorized Shares: 100 shares of Common Stock
Number of Issued and Outstanding Shares: 11 shares of Common Stock
Pledge Agreement - Schedule
1
<PAGE>
SCHEDULE 4.4.
ADDRESSES
1. If to Automated Security Corporation:
Automated Security Corporation
8550 Higuera Street, Culver City, CA 90232
Attention:
Telex:
Facsimile:
2. If to Sonitrol Management Corporation:
Sonitrol Management Corporation
8 Campus Circle, Suite 150
Westland, TX 76262
Attention:
Telephone:
Facsimile:
3. If to Sonitrol Corporation
Sonitrol Corporation
1800 Diagonal Road, Suite 180
Alexandria, VA 22314
Attention:
Telephone:
Facsimile:
4. If to Automated Security Holdings Inc.:
Automated Security Holdings Inc.
[Address]
Attention:
Telephone:
Facsimile:
5. If to the Beneficiaries:
Lloyds Bank Plc
Corporate Banking Division
St. Georges House
6-8 Eastcheap
London EC3M ILL
Attention: Nigel Robinson
Telephone: 0171-418 3532
Facsimile: 0171-489 8315
Guaranty
Instructions
1
<PAGE>
CONFORMED COPY
DATED 21st December 1995
TELECOM SECURITY LIMITED
-and-
LLOYDS BANK Plc
as Security Trustee
-----------------------
GUARANTEE AND DEBENTURE
-----------------------
WILDE SAPTE
1 Fleet Place
London ED4M 7WS
Tel. 071 246 7000
Fax. 071 246 7777
<PAGE>
VOLUME I
Document Parties
- -------- -------
Credit documentation
1. Conformed copy of Credit Agreement ASH, certain subsidiaries of ASH,
Lloyds as Agent, Midland as Working
Capital Bank, certain other banks
and financial institutions
2. Conformed copy of Inter-Creditor ASH, Lloyds as Security Trustee,
Agreement Lloyds as Agent, Midland as Working
Capital Bank, certain other banks
and PRICOA
<PAGE>
TABLE OF CONTENTS
Clause Heading Page Number
- ------ ------- -----------
1. DEFINITIONS AND INTERPRETATION ...................................... 1
2. GUARANTEE ........................................................... 3
3. MORTGAGES, FIXED CHARGES AND FLOATING CHARGE ........................ 3
4. NEGATIVE PLEDGE ..................................................... 5
5. FURTHER ASSURANCE ................................................... 5
6. DEBTS AND CREDIT BALANCES ........................................... 6
7. CONVERSION OF FLOATING CHARGE AND AUTOMATIC CRYSTALLISATION ......... 7
8. INSURANCE ........................................................... 7
9. UNDERTAKINGS BY THE CHARGOR ......................................... 8
10. POWERS OF THE SECURITY TRUSTEE ...................................... 10
11. APPOINTMENT OF RECEIVER ............................................. 11
12. POWER OF ATTORNEY ................................................... 12
13. PROTECTION OF PURCHASERS ............................................ 13
14. CONSOLIDATION OF ACCOUNTS AND SET-OFF ............................... 13
15. CURRENCY ............................................................ 13
16. APPLICATION ......................................................... 14
17. NOTICES ............................................................. 14
18. NEW ACCOUNTS ........................................................ 15
19. CONTINUING SECURITY ................................................. 15
20. REMEDIES CUMULATIVE ETC ............................................. 15
21. PROVISIONS SEVERABLE ................................................ 16
22. THE SECURITY TRUSTEE'S DISCRETION ................................... 16
23. AMENDMENTS .......................................................... 16
24. LAW ................................................................. 16
25. AMENDMENTS TO SECURED DOCUMENTS ..................................... 17
26. TRUST ............................................................... 17
27. ASSIGNMENT .......................................................... 17
SCHEDULE 1 - GUARANTEE PROVISIONS PURSUANT TO CLAUSE 2 .................... 18
SCHEDULE 2 - THE LEGALLY MORTGAGED PROPERTY ............................... 22
<PAGE>
AUTOMOTED SECURITY (HOLDINGS) PLC
CERTAIN BANKS AND FINANCIAL INSTITUTIONS
CREDIT AGREEMENT
DATED 21ST DECEMBER 1995
Table of Contents - VOLUME I
Parties
- -------
ASH Capital Finance (Jersey) Limited ASH Jersey
Automated Loss Prevention Systems Limited ALPS
Automated Security Corporation ASC
Automated Security Holdings Inc. ASHI
Automated Security (Holdings) PLC ASH
Automated Security Limited ASL
Automated Security (Properties) Limited ASP
Modern Security Systems Limited MSSL
Sonitrol Corporation SC
Sonitrol Management Corporation SMC
Telecom Security Limited TSL
TVX Limited TVX
ABN Amro N.V. ABN
Allied Irish Banks p.l.c. AIB
Banco Bilbao Vizcaya, S.A. Bilbao
Barclays Bank PLC Barclays
BHF-Bank AG BHF
Lloyds Bank Plc Lloyds
Midland Bank plc Midland
National Westminster Bank Plc NatWest
Prudential Insurance Company of America PRICOA
The Bank of Tokyo, Ltd Tokyo
The Fuji Bank, Limited Fuji
All documents dated 21st December 1995 unless otherwise stated.
<PAGE>
THIS GUARANTEE AND DEBENTURE dated the 21st day of December 1995 is granted
BY:
(1) TELECOM LIMITED, a company incorporated under the laws of England and Wales
with registered number 1977016 (the "Chargor")
IN FAVOUR OF:
(2) LLOYDS BANK Plc, acting from its office at P.O. Box 560, Regent House, St
John's Road, Bedminster, Bedford, BS99 1PQ as agent and trustee for the
Secured Parties (the "Security Trustee") pursuant to the Intercreditor
Agreement (as such term is defined below).
NOW THIS DEED WITNESSETH as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Guarantee and Debenture, unless the context otherwise requires or
unless otherwise defined or provided for in this Guarantee and Debenture,
words and expressions shall have the same meanings as is attributed to them
under the Credit Agreement (as such term is defined below). In addition,
the following words and expressions shall have the respective meanings
ascribed to them:
"Banks" means all and each of the Banks and the Engagements Bank as such
terms are defined in the Credit Agreement;
"Credit Agreement" means a credit agreement of even date and made between
(1) Automated Security (Holdings) PLC, (2) Certain subsidiaries of
Automated Security (Holdings) PLC, (3) Certain banks, (4) Lloyds Bank Plc
as agent and (5) Midland Bank plc as engagements bank; and
"Charged Property" means the property, assets and income of the Chargor
mortgaged or charged to the Security Trustee (whether by way of legal
mortgage, fixed or floating charge) by or pursuant to this Guarantee and
Debenture and each and every part thereof;
"Credit Balances" has the meaning ascribed to that term in Clause 3.1(e);
"Debts" has the meaning ascribed to that term in Clause 3.1(d);
"Demand" means (i) the service of a notice by the Agent under Clause 15 of
the Credit Agreement, or (ii) the service of a notice by the US Loan Note
Holders under paragraph 7(a) of the US Loan Notes Instrument;
"Floating Charge Property" has the meaning ascribed to that term in Clause
3.1(i);
"Guarantee" means the guarantee given by the Chargor in the terms of Clause
2.1 subject to and with the benefit of the provisions set forth in Schedule
1;
<PAGE>
"Intercreditor Agreement" means an intercreditor agreement executed or to
be executed by the Security Trustee, the parties to the Credit Agreement
and the US Loan Note Holders;
"Legally Mortgaged Property" has the meaning ascribed to that term in
Clause 3.1(a);
"Receiver" means an administrative receiver or a receiver appointed
pursuant to the provisions of this Guarantee and Denbenture or pursuant to
any applicable law and such expression shall include, without limitation, a
receiver and manager;
"Secured Documents" means all and each of the Credit Agreement, the Fees
Letter, the US Loan Notes Instrument, the US Loan Notes, this Guarantee and
Debenture and any other Security Document executed by the Chargor;
"Secured Obligations" means the actual, contingent, present and/or future
obligations and liabilities of the Chargor to any of the Secured Parties
under, or pursuant to, all or any of the Secured Documents;
"Secured Parties" means all and each of the Security Trustee, the Banks,
the Agent and the US Loan Note Holders;
Security Trustee's Rate" means, in respect of a particular day and
particular sum, the rate per annum at which the Security Trustee offered
deposits in Sterling in the amount of such sum for a one month period to
prime banks in the London inter-bank market at or about 11:00 a.m. (London
time) on such day;
"US Loan Notes" means $60,721,638.12, 8.28 per cent senior notes due 1998;
"US Loan Note Holders" means the holders for the time being of the US Loan
Notes; and
"US Loan Notes Instrument" means the Note Agreement dated as of May 27,
1994 between Automated Security (Holdings) PLC and The Prudential Insurance
Company of America as amended by the First Amendment dated on or about the
date hereof made between the same parties.
1.2 In this Guarantee and Debenture:
(a) references to Clauses and Schedules are to be construed as references
to the Clauses of, and Schedules to, this Guarantee and Debenture,
references to sub-Clauses shall unless otherwise specifically stated
be construed as references to the sub-Clauses of the Clause in which
the reference appears and references to this Guarantee and Debenture
include its Schedules;
(b) references to this Guarantee and Debenture (or to any specified
provisions of this Guarantee and Debenture) or any other document
shall be
<PAGE>
construed as references to this Guarantee and Debenture, that
provision or that document as in force for the time being and as
amended in accordance with its terms, or, as the case may be, with the
agreement of the relevant parties;
(c) words importing the singular shall include the plural and vice versa;
(d) references to a person shall be construed as including references to
an individual, firm, company, corporation, unincorporated body of
persons or any state or any agency thereof;
(e) references to any statute or statutory provision include any statute
or statutory provision which amends, extends, consolidates or replaces
the same, or which has been amended, extended, consolidated or
replaced by the same, and shall include any orders, regulations,
instruments or other subordinate legislation made under the relevant
statute;
(f) the words "other" and "otherwise" shall not be construed ejusdem
generis with any foregoing words where a wider construction is
possible; and
(g) the words "including" and "in particular" shall be construed as being
by way of illustration or emphasis only and shall not be construed as,
nor shall they take effect as, limiting the generality of any
foregoing words.
2. GUARANTEE
2.1 The Chargor hereby guarantees to the Security Trustee as agent and trustee
for the Secured Parties that it shall on demand, after the making of a
Demand, pay to the Security Trustee in the currency in which the same falls
due for payment, all moneys which are now or at any time hereafter shall
have become due or owing by any company within the Group (other than
itself) from time to time to any or all of the Secured Parties under or
pursuant to the terms of all or any of the Secured Documents.
2.2 The Guarantee given pursuant to Clause 2.1 is given subject to, and with
the benefit of the provisions set forth in Schedule 1.
2.3 The Chargor hereby covenants with the Security Trustee as agent and trustee
for the Secured Parties that it shall on demand, after the making of a
Demand, to the extent that the same have fallen due pursuant to the terms
of the Secured Documents and have not been paid, pay to the Security
Trustee all costs and expenses incurred by the Security Trustee in relation
to this Guarantee and Debenture and the protection or enforcement of the
Security Trustee's rights hereunder.
3. MORTGAGES, FIXED CHARGES AND FLOATING CHARGE
<PAGE>
3.1 The Chargor, with full title guarantee, as continuing security for the
payment of the Secured Obligations hereby charges in favour of the Security
Trustee (as agent and trustee for the Secured Parties):
(a) by way of legal mortgage all estates or interests in the freehold,
leasehold and other immovable property described in Schedule 2 and the
proceeds of sale thereof and all buildings and trade and other
fixtures on any such property belonging to the Chargor (the "Legally
Mortgaged Property")
(b) by way of fixed charge all estates or interests in any freehold,
leasehold and other immovable property now or at any time during the
continuance of this security belonging to the Chargor (other than the
Legally Mortgaged Property) and the proceeds of sale thereof and all
buildings and trade and other fixtures from time to time on any such
property belonging to the Chargor;
(c) by way of fixed charge all plant, machinery, vehicles, computers and
office and other equipment owned by the Chargor both present and
future;
(d) by way of fixed charge all book debts and other debts now and from
time to time due or owing to the Chargor (the "Debts") and (subject to
the provisions of Clause 6.2 hereof) all moneys which the Chargor
receives in respect thereof;
(e) by way of fixed charge (but subject to the provisions of Clause 6.2
hereof) all balances standing to the credit of any current, deposit or
other account of the Chargor with the Secured Parties (including,
inter alia, any account designated a realisations account for the
proceeds of disposals of any of the assets of the Chargor) or with
other bankers, financial institutions or similar third parties (the
"Credit Balances");
(f) by way of fixed charge all stocks, shares, debentures, bonds, notes,
loan capital of:
(i) any Subsidiary of the Chargor; and
(ii) any other body corporate;
and all rights to subscribe for, redeem, convert other securities into
or otherwise acquire any of the same which may now or hereafter belong
to the Chargor, together with all dividends, interest and other income
and all other rights of whatsoever kind deriving from or incidental to
any of the foregoing;
(g) by way of fixed charge the goodwill of the Chargor and its uncalled
capital now or at any time hereafter in existence;
(h) by way of fixed charge all copyrights, patents, patent applications,
licences, trade marks, tradenames, know-how and inventions or other
<PAGE>
rights of every kind deriving therefrom now or at any time hereafter
belonging to the Chargor and all fees, royalties and other rights of
every kind deriving from such copyrights, patents, trade marks,
tradenames, know-how and inventions; and
(i) by way of floating charge the whole of the Chargor's undertaking and
all its property, assets and rights, whatsoever and wheresoever,
present and future, other than any property or assets from time to
time or for the time being effectively mortgaged or charged to the
Security Trustee by way of fixed charge by this Clause 3 or any other
Security Document (hereinafter collectively referred to as the
"Floating Charge Property").
3.2 The security constituted by or pursuant to this Guarantee and Debenture
shall be in addition to and shall be independent of every bill, note,
guarantee, mortgage, pledge or other security which the Security Trustee or
any other Secured Party may at any time hold in respect of any of the
Secured Obligations and it is hereby declared that no prior security held
by the Security Trustee or any other Secured Party over the Charged
Property or any part thereof shall merge in the security created hereby or
pursuant hereto.
4. NEGATIVE PLEDGE
The Chargor hereby covenants that without the prior written consent of the
Security Trustee it shall not nor shall it agree or purport to:
(a) create or permit to subsist any Encumbrance (other than a Permitted
Encumbrance) whether in any such case ranking in priority to or pari
passu with or after the security created by this Guarantee and
Debenture save to the extent permitted or required under the Credit
Agreement or the US Loan Notes Instrument; or
(b) sell, discount, factor, transfer, lease, lend or otherwise dispose of,
whether by means of one or a number of transactions related or not and
whether at one time or over a period of time, the whole or any part of
its undertaking or assets except as permitted under the Credit
Agreement or the US Loan Notes Instrument.
5. FURTHER ASSURANCE
5.1 The Chargor hereby applies to the Chief Land Registrar for the registration
against the registered titles specified in Schedule 2 of the following:
(a) a restriction in the following terms:
"except under an order of the Registrar no charge or other security
interest is to be registered or noted without the consent of the
proprietor for the time being of charge number [ ]";
<PAGE>
(b) a notice that under the provisions of this Guarantee and Debenture the
Secured Parties are under an obligation to make further advances.
5.2 The Chargor shall from time to time and to the extent it is able to do so
without breaching any provision of any other agreement binding upon it, at
the request of the Security Trustee and at the Chargor's cost, execute in
favour of the Security Trustee, or as it may direct, such further or other
legal assignments, transfers, mortgages, charges or other documents as in
any such case the Security Trustee shall stipulate over the Chargor's
estate or interest in any property or assets of whatsoever nature or tenure
and wheresoever situate, for the purpose of more effectively providing
security to the Security Trustee on the terms of, or as intended to be
created by, this Guarantee and Debenture for the payment or discharge of
the Secured Obligations. Without prejudice to the generality of the
foregoing, such assignments, transfers, mortgages, charges or other
documents shall be in such form as the Security Trustee shall stipulate and
may contain provisions such as are herein contained or provisions to the
like effect and/or such other provisions of whatsoever kind as the Security
Trustee shall consider requisite for the improvement or perfection of the
security constituted by or pursuant to this Guarantee and Debenture. The
obligations of the Chargor under this Clause shall be in addition to and
not in substitution for the covenants for further assurance deemed to be
included herein by virtue of the Law of Property (Miscellaneous Provisions)
Act 1994.
5.3 The Chargor shall immediately after the execution of this Guarantee and
Debenture (or upon becoming possessed thereof at any time hereafter)
deposit with the Security Trustee all deeds, certificates and other
documents constituting or evidencing title to its real property comprised
within the Charged Property or any part thereof and to any of the assets
and rights charged under Clause 3.1(e).
6. DEBTS AND CREDIT BALANCES
6.1 With reference to the Debts the Chargor shall collect in the Debts and
shall, in the absence of specific written instructions from the Security
Trustee to the contrary, pay into the Chargor's current account with the
Security Trustee and/or if so directed by the Security Trustee into a
special or specifically designated account with the Security Trustee either
in the name of the Chargor or the Security Trustee or into such other
account as the Security Trustee may direct all moneys which the Chargor may
receive in respect of the Debts and shall not without the prior consent in
writing of the Security Trustee sell, factor, discount or otherwise charge
or assign the Debts in favour of any other person or purport to do so and
the Chargor shall if called upon to do so by the Security Trustee from time
to time execute legal assignments of the Debts to the Security Trustee in
forms approved by the Security Trustee.
6.2 Prior to the security hereby created becoming enforceable, in the absence
of any written directions to the contrary from the Security Trustee to pay
such moneys into any other account, any moneys in respect of the Debts
received by the Chargor and paid into any current account with the Security
Trustee in accordance with the
<PAGE>
requirements of Clause 6.1 hereof shall upon being paid into such current
account be released from the fixed charge created by Clause 3.1(d) hereof
and shall become subject to the floating charge created by Clause 3.1(i) .
Such release from the fixed charge shall not affect and shall be entirely
without prejudice to the continuance of the said fixed charge on all other
Debts of the Chargor outstanding from time to time and on all moneys which
the Chargor receives in respect thereof.
6.3 With reference to the Credit Balances the Chargor agrees to inform the
Security Trustee as soon as any Credit Balance with any third party comes
into existence and if so directed by the Security Trustee the Chargor shall
transfer any such Credit Balance into the Chargor's account with the
Security Trustee or into a specifically designated account with the
Security Trustee in the name of the Chargor or the Security Trustee or in
the joint names of the Chargor and the Security Trustee and shall not
without the prior consent in writing of the Security Trustee sell or
otherwise charge or assign any Credit Balance in favour of any person or
purport to do so.
7. CONVERSION OF FLOATING CHARGE AND AUTOMATIC CRYSTALLISATION
7.1 If, at any time, the Security Trustee believes that any assets of the
Chargor are in danger of being seized or sold under any form of distress,
execution or other similar process then without prejudice to the provisions
of Clause 7.2 the Security Trustee may, by notice in writing to the
Chargor, convert the floating charge created by this Guarantee and
Debenture into a fixed charge in relation to the assets specified in such
notice (which assets need not be exclusively those assets which are in
danger of seizure or sale) and the Security Trustee shall further be
entitled (but not bound) to take possession of or appoint a Receiver of
such assets.
7.2 If the Chargor charges, pledges or otherwise encumbers (whether by way of
fixed or floating security) any of the property, assets and income
comprising the Floating Charge Property or attempts so to do without the
prior consent in writing of the Security Trustee or if any creditor or
other person levies any distress, execution, sequestration or other process
against any of the said property, assets and income then in the absence of
any notice or other action by the Security Trustee pursuant to Clause 7.1
the floating charge hereby created shall automatically operate as a fixed
charge forthwith upon the occurrence of such event, but only in respect of
the assets, property or income in respect of which or against which such
action was taken.
8. INSURANCE
8.1 The Chargor shall at all times during the subsistence of the security
constituted by or pursuant to this Guarantee and Debenture comply with all
covenants, undertakings and conditions as to insurance of any part of the
Charged Property imposed by the terms of any lease, agreement for lease or
any tenancy under which the Chargor
<PAGE>
derives its estate or interest therein and, subject to the foregoing and so
far as not inconsistent with the said terms, the Chargor shall at all such
times:
(a) cause all buildings, trade and other fixtures and all plant,
machinery, vehicles, computers and office and other equipment and all
stock in trade forming part of the Charged Property to be insured and
to be kept insured in such insurance office, in such amounts and
against such risks as the Security Trustee may require from time to
time, but otherwise in such insurance office of repute as shall have
been selected by the Chargor or with Lloyd's underwriters on the
equivalent basis as insurances are maintained by prudent companies
carrying on businesses comparable with that of the Chargor and on a
comparable scale as regards the property and assets insured, the
insured risks and the classes of risk to be covered and the amount of
the insurance cover;
(b) cause the interest of the Security Trustee and the other Secured
Parties in all parts of the Charged Property that are for the time
being insured otherwise than in the joint names of the Security
Trustee and the Chargor to be noted by endorsement on the policy or
policies of insurance relating thereto;
(c) duly and punctually pay all premiums and other moneys due and payable
under all such insurances as aforesaid and promptly upon request by
the Security Trustee produce to the Security Trustee the premium
receipts or other evidence of the payment thereof; and
(d) on demand by the Security Trustee, deposit all policies and other
contracts of insurance relating to the Charged Property or any part
thereof with the Security Trustee or produce the same to the Security
Trustee for inspection.
8.2 If default shall be made by the Chargor in complying with Clause 8.1 the
Security Trustee may but shall not be obliged to effect or renew any such
insurance as is mentioned in that Clause either in its own name or in its
name and that of the Chargor jointly or in the name of the Chargor with an
endorsement of the Security Trustee's interest. The moneys expended by the
Security Trustee on so effecting or renewing any such insurance shall be
reimbursed by the Chargor to the Security Trustee on demand and until so
reimbursed shall carry interest at the rate of two (2) per cent. above the
Security Trustee's Rate from time to time from the date of payment to the
date of reimbursement (after as well as before any judgment).
8.3 All claims and moneys received or receivable under any such insurances as
aforesaid shall (subject to the rights and claims of any lessor or landlord
of any part of the Charged Property) at the direction of the Security
Trustee be applied in making good the loss or damage in respect of which
the same has been received or in or towards the discharge of the Secured
Obligations.
9. UNDERTAKINGS BY THE CHARGOR
<PAGE>
9.1 The Chargor hereby undertakes with the Security Trustee and the Secured
Parties that it will at all times while there shall subsist any security
constituted by or pursuant to this Guarantee and Debenture:
(a) keep all buildings, trade and other fixtures, fixed and other plant
and machinery forming part of the Charged Property in good and
substantial repair and permit the Security Trustee, its officers,
employees and agents free access at all reasonable times to view the
state and condition thereof, provided that the Security Trustee shall
have given the Chargor reasonable prior notice of its desire to
exercise its rights under this sub-Clause and requested access
accordingly;
(b) preserve, maintain and renew as and when necessary all copyrights,
licences, patents, trade marks and other rights required in connection
with its business:
(c) observe and perform all covenants and stipulations from time to time
affecting its freehold or leasehold property or the mode of user or
enjoyment of the same and not without the prior consent in writing of
the Security Trustee enter into any onerous or restrictive obligations
affecting any such property or make any structural or material
alteration thereto or do or suffer to be done on any such property
anything which is "development" as defined in section 55 of the Town
and Country Planning Act 1990 nor do or suffer or omit to be done any
act, matter or thing whereby any provision of any Act of Parliament,
order or regulation from time to time in force affecting any such
property is infringed;
(d) observe and perform all covenants reserved by or contained in any
lease, agreement for lease or tenancy agreement under which any part
of the Charged Property may be held and will not, without the consent
of the Security Trustee vary, surrender, cancel, assign or otherwise
dispose of or permit to be forfeited any leasehold interest forming
part of the Charged Property or agree any rent review;
(e) not without the prior consent of the Security Trustee part with
possession of the whole or any part of, or confer on any other person
any right or licence to occupy, or grant any licence to assign or
sub-let land or buildings forming part of the Charged Property;
(f) not without the prior written consent of the Security Trustee allow
any person other than itself to be registered under the Land
Registration Act 1925 as proprietor of the Charged Property or any
part thereof or create or permit to arise any overriding interest (as
specified in section 70(1) of the Land Registration Act 1925)
affecting such property and the reasonable costs incurred by the
Security Trustee of lodging a caution against registration of the
title to such property or a land charge (if unregistered) or any part
thereof, shall be an expense properly incurred in relation to this
security; and
<PAGE>
(g) indemnify the Security Trustee (and as a separate covenant any
Receiver or Receivers appointed by it) against all existing and future
rents, taxes, rates, duties, fees, renewal fees, charges, assessments,
impositions and outgoings whatsoever (whether imposed by deed or
statute or otherwise and whether in the nature of capital or revenue
and even though of a wholly novel character) which now or at any time
during the continuance of the security constituted by or pursuant to
this Guarantee and Debenture are properly payable in respect of the
Charged Property or any part thereof or by the owner or occupier
thereof.
9.2 If any such sums as are referred to in Clause 9.1(g) shall be paid by the
Security Trustee (or any Receiver or Receivers) the same shall be
reimbursed by the Chargor to the Security Trustee on demand and until so
reimbursed shall bear interest at the rate of two (2) per cent. above the
Security Trustee's Rate from time to time from the date of payment to the
date of reimbursement (after as well as before any judgment).
10. POWERS OF THE SECURITY TRUSTEE
10.1 At any time after the making of a Demand, or if requested by the Chargor,
the Security Trustee may exercise without further notice and without any of
the restrictions contained in section 103 of the Law of Property Act 1925,
whether or not it shall have appointed a Receiver, all the powers conferred
on mortgagees by the Law of Property Act 1925 and all the powers and
discretions conferred by this Guarantee and Debenture.
10.2 The statutory powers of leasing, letting, entering into agreements for
leases or lettings and accepting and agreeing to accept surrenders of
leases conferred by sections 99 and 100 of the said Act shall not be
exercisable by the Chargor in relation to any part of the Charged Property
without the prior written consent of the Security Trustee. In addition to
such statutory powers the Security Trustee shall have power after serving
the notice referred to in Clause 10.1 to lease or make agreements for
leases at a premium or otherwise and accept surrenders of leases and
generally without any restriction on the kinds of leases and agreements for
leases that the Security Trustee may make and generally without the
necessity for the Security Trustee to comply with any restrictions imposed
by or the other provisions of the said sections 99 and 100. The Security
Trustee may delegate such powers to any person and no such delegation shall
preclude the subsequent exercise or such powers by the Security Trustee
itself or preclude the Security Trustee from making a subsequent delegation
thereof to some other person and any such delegation may be revoked.
10.3 The restriction on the right of consolidating mortgage securities contained
in section 93 of the Law of Property Act 1925 shall not apply to this
Guarantee and Debenture.
<PAGE>
10.4 So far as permitted by law, neither the Security Trustee nor any Receiver
shall by reason of it or any Receiver entering into possession of any part
of the Charged Property when entitled so to do be liable to account as
mortgagee in possession or be liable for any loss or realisation or for any
default or omission for which a mortgagee in possession might be liable.
11. APPOINTMENT OF RECEIVER
11.1 At any time after the making of a Demand, or if requested by the Chargor or
after the application to the court for an administration order in relation
to the Chargor under the Insolvency Act 1986 the Security Trustee may
appoint one or more persons to be a Receiver or Receivers of the Charged
Property or any part thereof.
11.2 Subject to Section 45 of the Insolvency Act 1986, the Security Trustee may
remove any Receiver previously appointed hereunder, and appoint another
person or other persons as Receiver or Receivers, either in the place of a
Receiver so removed or who has otherwise ceased to act or to act jointly
with a Receiver or Receivers previously appointed hereunder.
11.3 If at any time and by virtue of any such appointment(s) any two or more
persons shall hold office as Receivers of the same assets or income, each
one of such Receivers shall be entitled (unless the contrary shall be
stated in any of the deed(s) or other instrument(s) appointing them) to
exercise all the powers and discretions hereby conferred on Receivers
individually and to the exclusion of the other or others of them.
11.4 Every such appointment or removal, and every delegation, appointment or
removal by the Security Trustee in the exercise of any right to delegate
its powers or to remove delegates herein contained, may be made in writing
under the hand of any officer of the Security Trustee.
11.5 Every Receiver shall have:
(a) all the powers conferred by the Law of Property Act 1925 on mortgagees
in possession and receivers appointed under that Act:
(b) all the powers specified in Schedule1of the Insolvency Act 1986; and
(c) all the powers of the Security Trustee hereunder.
11.6 In making any sale or other disposal of any of the Charged Property in the
exercise of their respective powers, the Receiver or the Security Trustee
may accept, as and by way of consideration for such sale or other disposal,
cash, shares, loan capital or other obligations, including without
limitation consideration fluctuating according to or dependent upon profit
or turnover and consideration the amount whereof is to be determined by a
third party. Any such consideration may be receivable in a lump sum or by
instalments.
<PAGE>
11.7 All moneys received by any Receiver appointed under this Guarantee and
Debenture shall be applied in the following order: (1) in the payment or
the costs, charges and expenses of and incidental to the Receiver's
appointment and the payment of his remuneration; (2) in the payment and
discharge of any outgoings paid and liabilities incurred by the Receiver in
the exercise of any of the powers of the Receiver; (3) in providing for the
matters (other than the remuneration of the Receiver) specified in the
first three paragraphs of Section 109(8) of the Law of Property Act 1925;
(4) in or towards payment of any debts or claims which are required by law
to be paid in preference to the Secured Obligations but only to the extent
to which such debts or claims have such preference; (5) in or towards the
satisfaction of the Secured Obligations in accordance with the terms of the
Intercreditor Agreement, and (6) any surplus shall be paid to the Chargor
or other person entitled thereto. The provisions of this Clause and Clause
11.9 shall take effect as and by way of variation and extension to the
provisions of the said Section 109(8), which provisions as so varied and
extended shall be deemed incorporated herein.
11.8 Every Receiver shall be the agent of the Chargor which shall be solely
responsible for his acts and defaults and for the payment of his
remuneration.
11.9 Every Receiver shall be entitled to remuneration for his services at a rate
to be fixed by agreement between him and the Security Trustee (or, failing
such agreement, to be conclusively fixed by the Security Trustee)
commensurate with the work and responsibilities involved upon the basis of
charging from time to time adopted in accordance with his current practice
or the current practice of his firm and without being limited to the
maximum rate specified in section 109(6) of the Law of Property Act 1925.
12. POWER OF ATTORNEY
12.1 The Chargor hereby irrevocably appoints the following, namely:
(a) the Security Trustee;
(b) each and every person to whom the Security Trustee shall from time to
time have delegated the exercise of the power of attorney conferred by
this Clause; and
(c) any Receiver appointed hereunder and for the time being holding office
as such;
jointly and also severally to be its attorney or attorneys and in its name
and otherwise on its behalf to do all acts and things and to sign, seal,
execute, deliver, perfect and do all deeds, instruments, documents, acts
and things which may be required for carrying out any obligation imposed on
the Chargor by or pursuant to this Guarantee and Debenture (including but
not limited to the obligations of the Chargor under Clause 5.1 and the
statutory covenant referred to in such Clause) and, following the making of
a Demand, for carrying any sale, lease or other dealing by the Security
Trustee or such Receiver into effect, for conveying or transferring
<PAGE>
any legal estate or other interest in land or other property or otherwise
howsoever, for getting in the Charged Property, and generally for enabling
the Security Trustee and the Receiver to exercise the respective powers
conferred on them by or pursuant to this Guarantee and Debenture or by law.
The Security Trustee shall have full power to delegate the power conferred
on it by this Clause, but no such delegation shall preclude the subsequent
exercise of such power by the Security Trustee itself or preclude the
Security Trustee from making a subsequent delegation thereof to some other
person; any such delegation may be revoked by the Security Trustee at any
time.
12.2 The power of attorney hereby granted is as regards the Security Trustee,
its delegates and any such Receiver (and as the Chargor hereby
acknowledges) granted irrevocably and for value as part of the security
constituted by this Guarantee and Debenture to secure proprietary interests
in and the performance of obligations owed to the respective donees within
the meaning of the Powers of Attorney Act 1971.
13. PROTECTION OF PURCHASERS
No purchaser or other person dealing with the Security Trustee or its
delegate or any Receiver appointed hereunder shall be bound to see or
enquire whether the right of the Security Trustee or such Receiver to
exercise any of its or his powers has arisen or become exercisable or be
concerned to see whether any such delegation by the Security Trustee shall
have lapsed for any reason or been revoked.
14. CONSOLIDATION OF ACCOUNTS AND SET-OFF
In addition to any general lien or similar rights to which they may be
entitled by operation of law, each of the Secured Parties shall have the
right at any time and without notice to the Chargor to combine or
consolidate all or any of the Chargor's then existing accounts with and
liabilities to each of such Secured Parties and to set off or transfer any
sum or sums standing to the credit of any one or more of such accounts in
or towards satisfaction of any of the liabilities of the Chargor to each of
such Secured Parties on any other account or in any other respect. The
liabilities referred to in this Clause may be actual, contingent, primary,
collateral, several or joint liabilities, and the accounts, sums and
liabilities referred to in this Clause may be denominated in any currency.
15. CURRENCY
For the purpose of or pending the discharge of any of the Secured
Obligations the Security Trustee may, in its sole discretion, convert any
moneys received, recovered or realised in any currency under this Guarantee
and Debenture (including the proceeds of any previous conversion under this
Clause) from their existing currency of denomination into any other
currency in which the Secured Obligations are
<PAGE>
denominated at such rate or rates of exchange and at such time as the
Security Trustee thinks fit.
16. APPLICATION
The Chargor shall have no rights in respect of the application by the
Secured Parties of any sums received, recovered or realised by the Security
Trustee under this Guarantee and Debenture.
17. NOTICES
17.1 Without prejudice to any other method of service of notices and
communications provided by law, a demand or notice under this Guarantee and
Debenture shall be in writing signed by an officer or agent of the Security
Trustee and may be served on the Chargor by hand, by post or by facsimile
transmission. Any such notice or communication shall be sent to the address
or number of the Chargor as set out below:
Telecom Security Limited
The Clockhouse
The Campus
Hemel Hempstead
Hertfordshire HPQ 7TL
Facsimile Number: 01442 62129/60121
For the attention of: P Bertram and A Thompson
17.2 Any such notice or communication given by the Security Trustee shall he
deemed to have been received:
(a) if sent by facsimile transmission, with a confirmed receipt of
transmission from the receiving machine, on the business day on which
transmitted or the following business day if transmission is completed
after 5.30 pm;
(b) in the case of a written notice lodged by hand, on the business day of
actual delivery or the following business day if delivered after
normal business hours; and
(c) if posted, on the second business day following the day on which it
was properly dispatched by first class mail postage prepaid.
17.3 Any notice given to the Security Trustee shall he deemed to have been given
only on actual receipt.
<PAGE>
18. NEW ACCOUNTS
If the Security Trustee or any other of the other Secured Parties receives
or is deemed to be affected by notice whether actual or constructive of any
subsequent charge or other interest affecting any part of the Charged
Property and/or the proceeds of sale thereof, then each of the Secured
Parties may open a new account or accounts with the Chargor. If any of the
Secured Parties do not open a new account or accounts they shall
nevertheless be treated as if they had done so at the time when the notice
was, or was deemed to be, received and as from that time all payments made
to the Secured Parties shall be credited or be treated as having been
credited to the new account or accounts and shall not operate to reduce the
amount secured by this Guarantee and Debenture at the time when the
Security Trustee or any other of the Secured Parties (as the case may be)
received or was deemed to have received such notice.
19. CONTINUING SECURITY
The security constituted by this Guarantee and Debenture shall be
continuing and shall not be considered as satisfied or discharged by any
intermediate payment or settlement of the whole or any part of the Secured
Obligations and shall be binding until all the Secured Obligations have
been discharged in full to the satisfaction of the Security Trustee and all
of the Secured Parties have ceased to have any obligation whether actual or
contingent to make any credit or accommodation available to any company
within the Group under or pursuant to the Financing Documents.
20. REMEDIES CUMULATIVE ETC.
20.1 The rights, powers and remedies provided in this Guarantee and Debenture
are cumulative and are not, nor are they to be construed as, exclusive of
any rights, powers or remedies provided by law or otherwise.
20.2 No failure on the part of the Security Trustee to exercise, or delay on its
part in exercising, any of its respective rights, powers and remedies
provided by this Guarantee and Debenture or by law (collectively the
"Rights") shall operate as a waiver thereof, nor shall any single or
partial waiver of any of the Rights preclude any further or other exercise
of that one of the Rights concerned or the exercise of any other of the
Rights.
20.3 The Chargor hereby agrees to indemnify the Security Trustee, the Secured
Parties and any Receiver against all losses, actions, claims, costs,
charges, expenses and liabilities incurred by the Security Trustee, the
Secured Parties and by any Receiver (including any substitute delegate
attorney as aforesaid) in relation to this Guarantee and Debenture or the
Secured Obligations (including, without limitation, the costs, charges and
expenses incurred in the carrying of this Guarantee and Debenture into
effect or in the exercise of any of the rights, remedies and powers
conferred hereby or in the perfection or enforcement of the security
constituted hereby or pursuant
<PAGE>
hereto or in the perfection or enforcement of any other security for or
guarantee in respect of the Secured Obligations) or occasioned by any
breach by the Chargor of any of its covenants or obligations under this
Guarantee and Debenture. The Chargor shall so indemnify the Security
Trustee, the Secured Parties and any Receiver on demand and shall pay
interest on the sum demanded at the rate per annum of two (2) per cent.
above the Security Trustee's Rate from time to time from the date on which
the same were demanded by the Security Trustee, any Secured Parties or any
Receiver, as the case may be, and any sum so demanded together with any
interest, shall be a charge upon the Charged Property in addition to the
moneys hereby secured.
21. PROVISIONS SEVERABLE
Every provision contained in this Guarantee and Debenture shall be
severable and distinct from every other such provision and if at any time
any one or more of such provisions is or becomes invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
such provisions shall not in any way be affected thereby.
22. THE SECURITY TRUSTEE'S DISCRETION
22.1 Save where expressly stated to the contrary herein, any liberty or power
which may be exercised or any determination which may be made hereunder by
the Security Trustee may be exercised or made in the absolute and
unfettered discretion of the Security Trustee which shall not be under any
obligation to give reasons therefor.
22.2 A certificate by an officer of the Security Trustee as to any sums payable
to the Security Trustee hereunder shall, save in the case of manifest
error, be conclusive and binding.
23. AMENDMENTS
No amendments or waiver of any provision of this Guarantee and Debenture
and no consent to any departure by the Chargor therefrom shall in any event
be effective unless the same shall be in writing and signed or approved in
writing by the Security Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which it was given.
24. LAW
This Guarantee and Debenture shall be governed by and construed in
accordance with the provisions of English law.
<PAGE>
25. AMENDMENTS TO SECURED DOCUMENTS
This Guarantee and Debenture shall remain in full force and effect
notwithstanding any amendments or variations from time to time of the
Secured Documents and all references to the Secured Documents herein shall
be taken as referring to the Secured Documents as amended or varied from
time to time (including, without limitation, any increase in the amount of
the Secured Obligations).
26. TRUST
The Security Trustee shall hold the benefit of the covenants, mortgages and
charges given by the Chargor hereto upon trust for the Secured Parties.
27. ASSIGNMENT
The Secured Parties shall have a full and unfettered right to assign or
otherwise transfer the whole or any part of the benefit of this Guarantee
and Debenture to any person to whom all or any part of its rights, benefits
and obligations under the Credit Agreement or the US Loan Notes, as the
case may be, are assigned or transferred in accordance with the provisions
of the Credit Agreement or the US Loan Notes, as the case may be, and the
expression "the Security Trustee" wherever used herein shall be deemed to
include the assignees and other successors, whether immediate or
derivative, of the Security Trustee, who shall be entitled to enforce and
proceed upon this Guarantee and Debenture in the same manner as if named
herein. The Security Trustee shall be entitled to disclose any information
concerning the Chargor to any such assignee or other successor or any
participant or proposed assignee, successor or participant.
IN WITNESS whereof the Chargor has executed this Guarantee and Debenture as
a deed and the Security Trustee has executed this Guarantee and Debenture
under hand with the intention that it be delivered the day and year first
before written.
<PAGE>
SCHEDULE 1
GUARANTEE PROVISIONS PURSUANT TO CLAUSE 2
1.1 This Guarantee is a continuing security and shall remain in full force and
effect until all moneys, obligations and liabilities referred to in Clause
2 of this Guarantee and Debenture have been paid, discharged or satisfied
in full notwithstanding the liquidation or other incapacity or any change
in the constitution of any company with the Group or in the name and style
of any of them or any settlement of account or other mater whatsoever.
1.2 This Guarantee is in addition to and shall not merge with or otherwise
prejudice or affect or be prejudiced by any other right, remedy, guarantee,
indemnity or security and may be enforced without first having recourse to
the same or any other bill, note, mortgage, charge, pledge or lien now or
hereafter held by or available to the Security Trustee or the other Secured
Parties.
1.3 Notwithstanding that this Guarantee ceases to be continuing for any reason
whatever the Security Trustee and any of the other Secured Parties may
continue any accounts of any company within the Group or open one or more
new accounts and the liability of the Chargor hereunder shall not in any
manner be reduced or affected by any subsequent transactions or receipts or
payments into or out of any such accounts.
1.4 If any purported obligation or liability of any company within the Group to
any of the Secured Parties which if valid would have been the subject of
this Guarantee is not or ceases to be valid or enforceable against any
company within the Group on any ground whatsoever whether or not known to
the Secured Parties including but not limited to any defect in or want of
powers of any company within the Group or irregular exercise thereof or
lack of authority by any person purporting to act on behalf of any company
within the Group or any legal or other limitation (whether under the
Limitation Acts or otherwise), disability, incapacity or any change in the
constitution of or any amalgamation, reconstruction or liquidation of any
company within the Group, the Chargor shall nevertheless be liable to the
Secured parties in respect of that purported obligation or liability as if
the same were fully valid and enforceable and the Chargor was the principal
debtor in respect thereof. The Chargor hereby agrees to keep the Secured
Parties fully indemnified against all damages, loss, costs and expenses
arising from any failure of any company within the Group to carry out any
such purported obligation or liability.
1.5 The liability of the Chargor shall not be affected nor shall this Guarantee
and Debenture be discharged or diminished by reason of:
(a) any present or future bill, note guarantee, indemnity, mortgage,
charge, pledge, lien or other security or right or remedy held by or
available to the Secured Parties becoming wholly or in part void,
voidable or unenforceable on any ground whatsoever or by the Secured
Parties from
<PAGE>
time to time dealing with, exchanging, varying, realising, releasing
or failing to perfect or enforce any of the same; or
(b) the Secured parties compounding with, discharging, releasing or
varying the liability of or granting any time, indulgence or
concession to any company within the Group or any other person or
renewing, determining, varying or increasing any bill, promissory note
or other negotiable instrument, accommodation, facility or transaction
in any manner whatsoever or concurring in, accepting or varying any
compromise, arrangement or settlement or omitting to claim or enforce
payment from any company within the Group or any other person; or
(c) any act or omission which would have discharged or affected the
liability of the Chargor had it been principal debtor instead of
guarantor or by anything done or omitted which bur for this provision
might operate to exonerate the Chargor.
1.6 The Chargor warrants to the Secured Parties that it has not taken or
received and undertakes that it will not take or receive the benefit of any
security from any company within the Group in connection with this
Guarantee and Debenture. If any such security is taken the Chargor hereby
declares that such security and all moneys at any time received in respect
thereof shall be held on trust for the Secured Parties and as security for
the liabilities of the Chargor under this Guarantee.
1.7 The Chargor hereby agrees to pay interest to the Security Trustee for the
account of the Secured Parties on all sums demanded under this Guarantee
and Debenture from the date of demand until actual payment (as well after
as before any judgment) at the rate of two (2) per cent. above the Security
Trustee's Rate calculated on a day to day basis. Such interest shall be
compounded monthly in accordance with the usual practice of the Security
Trustee but without prejudice to the right of the Security Trustee to
require payment of such interest.
1.8 Until the Secured Obligations have been paid, discharged or satisfied in
full, the Chargor hereby waives all rights of subrogation and indemnity
against any company within the Group and agrees not to share in any
security held or moneys received by the Security Trustee or any other
Secured Party on account of the Secured Obligations or (unless so
instructed by the Security Trustee) to claim or prove in competition with
the Secured Parties in the liquidation of any company within the Group in
respect of any moneys paid by the Chargor to the Security Trustee or any
other Secured Party under this Guarantee and Debenture. If the Chargor
receives any payment or other benefit or exercises any set-off or
counter-claim or otherwise acts in breach of this Clause anything so
received and any benefit derived directly or indirectly by the Chargor
therefrom shall be held in trust for the Secured Parties and as security
for the liabilities of the Chargor under this Guarantee and Debenture.
1.9 Any money received in connection with this Guarantee and Debenture may be
placed to the credit of a suspense account with a view to preserving the
right of each of the Secured Parties to prove for the whole of its claim
against any company within the Group or any other person liable or may be
applied by the Secured Parties
<PAGE>
in or towards satisfaction of such of the moneys, obligations or
liabilities of the Chargor under this Guarantee and Debenture as the
Security Trustee may from time to time conclusively determine.
1.10 Any release, discharge or settlement between the Chargor and the Security
Trustee shall be conditional upon no security disposition or payment to the
Secured Parties by any company within the Group or any other person being
void, set aside or ordered to be refunded pursuant to any enactment or law
relating to bankruptcy, liquidation or insolvency or for any reason
whatever and if such condition shall not be fulfilled the Security Trustee
shall be entitled to enforce this Guarantee and Debenture subsequently as
if such release, discharge or settlement had not occurred and any such
payment had not been made.
1.11 Unless and until the Secured Parties are satisfied in their absolute
discretion as to the solvency of the Chargor the Secured Parties shall be
entitled to retain any security constituted by or pursuant to Clause 3 of
this Guarantee and Debenture for a period of up to six months after the
payment, discharge or satisfaction of all moneys, obligations and
liabilities that are or may become due, owing or incurred to or in favour
of the Secured Parties from each company within the Group or the Chargor
and notwithstanding any such payment, discharge or satisfaction, in the
event of an act of bankruptcy by or the commencement of winding-up of the
person making such payment or effecting such discharge or satisfaction at
any time within the said period of six months, the Security Trustee shall
be entitled to retain any such security for such further period as the
Security Trustee may determine.
1.12 If this Guarantee is determined or called in by demand made by the Security
Trustee, then the Secured Parties may open a new account or accounts with
any or all companies within the Group; if the Secured Parties do not open a
new account or accounts they shall nevertheless be treated as if they had
done so at the time of determination or calling in and as from that time
all payments made to the Secured Parties shall be credited or be treated as
having been credited to the new account or accounts and shall not operate
to reduce the amount for which this Guarantee is available as security at
that time.
1.13 The Security Trustee shall not be obliged before taking steps to enforce
this Guarantee:
(a) to take action or obtain judgment in any court against any company
within the Group or any other person; or
(b) to make or file any claim in a bankruptcy or liquidation of any
company within the Group or any other person; or
(c) to make, enforce or seek to enforce any claim against any company
within the Group or any other person under any security or other
document, agreement or arrangement.
1.14 All sums due and payable by the Chargor under this Guarantee and Debenture
shall be made in full without set-off or counter-claim and free and clear
of and (subject as
<PAGE>
provided in the next sentence) without deduction for or on account of any
future or present Taxes. If:
(a) the Chargor is required by any law to make any deduction or
withholding from any sum payable by the Chargor to the Security
Trustee hereunder; or
(b) the Security Trustee or any other Secured Party is required by law to
make any payment on account of tax (other than tax on its overall net
income) or otherwise, on or in relation to any amount received or
receivable by the Secured Parties hereunder;
then the sum payable by the Chargor in respect of which such deduction,
withholding or payment is required to be made shall be increased to the
extent necessary to ensure that, after the making of such deduction,
withholding or payment, (and after taking account of any deduction,
withholding or payment which is required to be made as a result of the
increase) the Security Trustee receives and retains a net sum equal to the
sum which it and the other Secured Parties would have received and so
retained had no such deduction, withholding or payment been made.
1.15 This Guarantee and Debenture is and will remain the property of the
Security Trustee.
<PAGE>
SCHEDULE 2
THE LEGALLY MORTGAGED PROPERTY
<PAGE>
EXECUTED as a Deed by )
TELECOM SECURITY )
LIMITED ) PETER BERTRAM, Director
acting by two Directors or )
one Director and its Secretary ) P D STRUDWICK, Secretary
SIGNED for and on behalf of )
LLOYDS BANK Plc ) LESLEY TINSLEY
EXHIBIT 2.4(b)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of December 21, 1995 (the "First Amendment) by
and between AUTOMATED SECURITY (HOLDINGS) PLC, a limited company incorporated
under the laws of England and Wales (herein called the "Company") and THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "Noteholder") as the sole holder of
notes issued by the Company under a Note Agreement, dated as of May 27, 1994
(herein called the Company under a Note Agreement, dated as of May 27, 1994
(herein called the "Note Agreement") between the Company and the Noteholder.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Amended Note Agreement (as hereinafter
defined).
W I T N E S S E T H :
WHEREAS, the Noteholder holds all outstanding Notes; and
WHEREAS, the parties hereto mutually desire to amend the terms of the Note
Agreement;
NOW, THEREFORE, in consideration thereof, the Company and the Noteholder
agree as follows:
1. Amendment of Note Agreement. The Company and the Noteholder hereby
agree that effective as of the date (the "Effective Date") on which the
Noteholder shall have executed and delivered the notice attached hereto as
Exhibit A (the "Effective Date Notice"), without any other further action, the
Note Agreement shall be considered amended and restated as provided in Exhibit B
hereto. The Note Agreement as amended and restated in accordance with this
Agreement is herein referred to as the Amended Note Agreement.
2. Effective Date and Conditions Precedent. The obligation of the
Noteholder to deliver the Effective Date Notice shall be subject to the
satisfaction, on or before December 29, 1995, of the following conditions:
2A. Opinion of Noteholder's Special Counsel, The Noteholder shall have
received from White & Case, who are acting as special counsel for the Noteholder
in connection with this First Amendment, a favorable opinion satisfactory to the
Noteholder as to such matters incident to the matters herein contemplated as the
Noteholder may reasonably request. Such opinion shall also state that, based
upon such investigation and inquiry as is deemed relevant and appropriate by
such counsel, the opinion referred to in paragraph 2B is satisfactory in form
and scope to such counsel and, while such investigation and inquiry into the
matters covered by such opinion (other than to certain specified matters) were
not sufficient to enable such counsel independently to render such opinion,
nothing has come to the attention of such counsel which has caused it to
question the legal conclusions expressed in the opinion referred to in
<PAGE>
paragraph 2B and such counsel believes that the Noteholder is justified in
relying on such opinion.
2B. Opinion of Company's Counsel. The Noteholder shall have received from
(i) O'Sullivan Graev & Karabell, LLP-special United States counsel for the
Company and (ii) Clifford Chance, special English counsel for the Company,
favorable opinions satisfactory to it and in respect of the matters described
in, respectively, Exhibits C and D attached hereto.
2C. New Notes. The Noteholder shall have received an amended and restated
Note, substantially in the form of Exhibit E attached hereto, in substitution of
its existing Note dated May 27, 1994.
2D. Representations and Warranties; No Default. The representations and
warranties contained in paragraph 8 of the Amended Note Agreement shall be true
on and as of the Effective Date; there shall exist on the Effective Date no
Event of Default or Default; and the Company shall have delivered to the
Noteholder an Officer's Certificate, dated the Effective Date, to both such
effects.
2E. Security Documents; Intercreditor Agreement. The Company and each
Subsidiary of the Company listed on Exhibit J hereto shall have executed and
delivered a Guarantee and Debenture substantially in the form of Exhibit F
hereto, each of ASC, SMC and SC shall have executed a Subsidiary Guarantee
substantially in the form of Exhibit G hereto, each of ASC and Automated Loss
Prevention Systems Limited shall have executed a Share Pledge substantially in
the form of Exhibit H hereto, and the parties to the Intercreditor Agreement
substantially in the form of Exhibit I hereto shall have executed and delivered
such agreement, and all such agreements shall be in full force and effect and
the Noteholder shall have received executed copies of each such agreement.
2F. Proceedings. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and the Security
Documents and all documents incidental thereto shall be satisfactory in
substance and form to the Noteholder, and the Noteholder shall have received all
such counterpart originals or certified or other copies of such documents as it
may reasonably request.
2G. Bank Agreements. The Noteholder shall have received certified copies
of the Bank Credit Agreement, together with evidence satisfactory to the
Noteholder that the Bank Credit Agreement shall be effective on the Effective
Date.
FIRST AMENDMENT TO
NOTE AGREEMENT
2
<PAGE>
2H. Side Letter. The Noteholder shall have received a letter from the
Company addressed to the Noteholder, in form and substance satisfactory to the
Noteholder, regarding certain ancillary matters.
3. Success Fee. The Company shall pay to the Noteholder, a success fee in
Sterling calculated as follows:
(i) if a New Equity Raising occurs by April 30, 1996, a success fee
of (pound)43,000 shall be payable to the date the proceeds thereof are
received by the Company; or
(ii) if a New Equity Raising or a Major Disposal or a Change of
Control occurs on a date (the "Relevant Date") (but in the case of a New
Equity Raising being after April 30, 1996) in the period set out in Column
A below, a success fee equal to the percentage per annum, set out in
Column B below opposite the relative period, of the average outstanding
principal amount of the Notes for the period from the Effective Date to
the Relevant Date shall be payable on the Relevant Date:
Column A Column B
-------- --------
the Effective Date
to September 30, 1996 1.00%
October 1, 1996 to
December 31, 1996 1.50%
January 1, 1997 to
March 31, 1997 2.00%
April 1, 1997 and thereafter 3.00%; or
(iii) if no New Equity Raising, Major Disposal or Change of Control
has occurred by the Final Maturity Date, a success fee equal to 3% of the
average outstanding principal amount of the Notes from the period of the
Effective Date to the Final Maturity Date shall be payable on the Final
Maturity Date.
4. Governing Law. The first Amendment shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
5. Counterparts. This First Amendment may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this First Amendment to produce or
account for more than one such counterpart.
FIRST AMENDMENT TO
NOTE AGREEMENT
3
<PAGE>
IN WITNESS WHEREOF THE PARTIES HERETO have caused this First Amendment to
be executed as of the day and year first above written.
AUTOMATED SECURITY (HOLDINGS) PLC
By /s/ Peter Bertram
------------------------
Name: Peter Bertram
Title: Director
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Anthony F. Torre
--------------------------
Name: Anthony F. Torre
Title: Vice President
FIRST AMENDMENT TO
NOTE AGREEMENT
4
<PAGE>
EXHIBIT A TO FIRST AMENDMENT
December , 1995
Automated Security (Holdings) Plc
The Clock House
The Campus
Hemel Hempstead, Herts., HP2 7TL
Dear Sirs,
re Effective Date Notice
We hereby inform you, that the First Amendment dated as of December 31,
1995 is effective as of December , 1995.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By______________________
Name:
Title:
EXHIBIT A TO FIRST AMENDMENT
EFFECTIVE DATE NOTICE
<PAGE>
EXHIBIT B TO FIRST AMENDMENT
================================================================================
AUTOMATED SECURITY (HOLDINGS) PLC
$60,721,638.12
8.28% SENIOR NOTES
-----------------
NOTE AGREEMENT
-----------------
Dated as of May 27, 1994 and
Amended and Restated December 31, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
Clause Page
------ ----
1. [intentionally omitted] ............................................. 1
2. [intentionally omitted] ............................................. 1
3. [intentionally omitted] ............................................. 1
4. PREPAYMENTS OF NOTES ................................................ 1
4A. Mandatory Prepayment of Notes ................................. 1
4B. Optional Prepayment of Notes With
Yield-Maintenance Amount ................................ 1
4C. Partial Payments Pro Rata ..................................... 2
4D. Retirement of Notes ........................................... 3
4E. Redemption for Taxation Reasons ............................... 3
4F. Prepayment upon a Change of Control ........................... 4
5. AFFIRMATIVE COVENANTS OF THE COMPANY ................................ 5
5A. Financial Statements .......................................... 5
5B. Inspection of Property ........................................ 7
5C. Consents ...................................................... 7
5D. Insurance ..................................................... 7
5E Maintenance of Status and Business ............................ 7
5F. Prompt Payment of Taxes ....................................... 8
5G. Maintenance of Property and Leases ............................ 8
5H. Use of Proceeds ............................................... 8
5I. Environmental Matters ......................................... 9
5J. Financial Records ............................................. 9
5K. Share Pledge .................................................. 9
6. NEGATIVE COVENANTS .................................................. 9
6A. Tangible Net Worth; Rental Income ............................. 9
6B. Interest Coverage ............................................. 9
6C. Net Borrowings ................................................ 10
6D. Borrowings .................................................... 10
6E. Merger and Consolidation; Assumption .......................... 11
6F. Negative Pledge ............................................... 12
6G. Restriction on Disposals ...................................... 13
6H. Proceeds of New Capital ....................................... 14
6I. Change of Business ............................................ 15
6J. Granting Credit ............................................... 15
6K. Dividends ..................................................... 16
6L. Indemnities ................................................... 16
6M. Jersey Debenture; Convertible Capital Bonds ................... 16
6N. Bank Indebtedness; Bank Credit Agreement ...................... 16
7. EVENTS OF DEFAULT ................................................... 17
7A. Acceleration .................................................. 17
7B. Recission of Acceleration ..................................... 19
(i)
<PAGE>
7C. Other Remedies ................................................ 20
8. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY ............ 20
8A. Organization .................................................. 20
8B. Powers and Authority .......................................... 20
8C. Financial Statements .......................................... 20
8D. Actions Pending ............................................... 21
8E. Defaults ...................................................... 21
8F. Conflicting Agreements and Other Matters ...................... 21
8G. Governmental Consent .......................................... 21
8H. Existing Liens ................................................ 21
8I. Disclosure .................................................... 22
8J. Title to Properties ........................................... 22
8K. Taxes ......................................................... 22
8L. Offering of the Notes ......................................... 22
8M. Regulation G, Etc ............................................. 23
8N. Pension Plans ................................................. 23
8O. Environmental Compliance ...................................... 24
8P. Legal Validity ................................................ 24
8Q. Holding Company and Investment Company ........................ 24
8R. Indebtedness .................................................. 24
9. [intentionally omitted] ............................................. 24
10. DEFINITIONS ......................................................... 24
10A. Yield-Maintenance Terms ....................................... 24
10B. Other Terms ................................................... 26
11. MISCELLANEOUS ....................................................... 37
11A. Payments ...................................................... 37
11B. Expenses ...................................................... 37
11C. Consent To Amendments ......................................... 37
11D. Form, Registration, Transfer and Exchange of Notes;
Lost Notes .............................................. 38
11E. Adjustment of Covenants ....................................... 39
11F. Persons Deemed Owners ......................................... 40
11G. Survival of Representations; Entire Agreement ................. 40
11H. Successors and Assigns ........................................ 40
11I. Disclosure to Other Persons ................................... 40
11J. Notices ....................................................... 41
11K. Descriptive Holdings .......................................... 41
11L. Satisfaction Requirement ...................................... 41
11M. Governing Law ................................................. 41
11N. Jurisdiction; Service of Process .............................. 41
11O. Gross-up ...................................................... 42
11P. Judgment Currency Indemnity ................................... 44
11Q. Severability .................................................. 44
11R. Counterparts .................................................. 44
(ii)
<PAGE>
AUTOMATED SECURITY (HOLDINGS) PLC
THE CLOCK HOUSE
THE CAMPUS
HEMEL HEMPSTEAD HP2 7TL
May 27, 1994
as amended and restated
December 31, 1995
The Prudential Insurance Company
of America
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
U.S.A.
Ladies and Gentlemen:
The undersigned, Automated Security (Holdings) PLC (the "Company"), hereby
agrees with you (the "Purchaser") as follows:
1. [intentionally omitted]
2. [intentionally omitted]
3. [intentionally omitted]
4. PREPAYMENTS OF NOTES.
4A. Mandatory Prepayment of Notes. The Company shall repay the outstanding
principal amount of the Notes, together with all interest accrued but unpaid
thereon, on the Final Maturity Date.
4B. Optional Prepayment of Notes With Yield-Maintenance Amount. The Notes
shall be subject to prepayment, in whole at any time or from time to time in
part (in multiples of $1,000,000 except for prepayments arising in accordance
with paragraph 6G or 6H), at the option of the Company (or as provided below in
connection with paragraphs 6G and 6H, at the option of the Noteholders, at 100%
of the principal amount so prepaid plus interest of the Noteholders), at 100% of
the principal amount so prepaid plus interest thereon to the prepayment date and
the Yield-Maintenance Amount, if any, with respect to each Note. The Company
shall give the holder of each Note irrevocable written notice of any prepayment
pursuant to this paragraph 4B not less than 30 Business Days nor more than 60
Business Days prior to the prepayment date, specifying such prepayment date and
the principal amount of the Notes, and of the Notes held by such holder, to be
prepaid on such date and
<PAGE>
stating that such prepayment is to be made pursuant to this paragraph 4B;
provided that in the case of a prepayment arising in accordance with paragraph
6G and 6H, notice of such prepayment shall be given no less than 5 Business Days
prior to the prepayment date and the prepayment date shall occur no later than 5
Business Days after the event giving rise to the obligation to prepay the Notes
in accordance with paragraph 6G and 6H. Notice of prepayment having been given
as aforesaid, the principal amount of the Notes specified in such notice,
together with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, shall become due and payable on such
prepayment date; provided that in the case of a prepayment arising in accordance
with paragraph 6G and 6H, the Notes held by any Noteholder shall not be prepaid
if such Noteholder shall inform the Company at least 2 Business Days prior the
prepayment date that such Noteholder elects not to have its Notes prepaid.
Promptly after the Yield-Maintenance Amount, if any, can be calculated with
respect to the Notes to be prepaid, the Company shall notify each of the
Noteholders by facsimile (with confirmation in writing by overnight courier) of
the amount thereof payable to such Noteholder, showing the Company's computation
thereof in reasonable detail.
4C. Partial Payments Pro Rata. (a) Upon any partial prepayment of the
Notes pursuant to paragraph 4B, the principal amount so prepaid shall be
allocated among the Notes (including, for the purpose of this paragraph 4C only,
all Notes purchased or otherwise acquired and held by the Company or any other
member of the Group of Affiliates) in proportion to the respective outstanding
principal amounts thereof; provided, however, in respect of any prepayment
obligation arising under paragraph 6G and 6H, if any Noteholder elects not to
accept prepayment of its Notes, then the partial prepayment shall be made pro
rata among the remaining Noteholders who have not so elected.
(b) Upon any prepayment of Notes pursuant to paragraph 6G and 6H, the
amounts distributed to Noteholders in accordance with Sharing Proportions shall
be applied by each Noteholder receiving such proceeds in the following order of
application:
(i) first, against the amount of any success fee, if any payable to
such Noteholder in accordance with paragraph 3 of the First Amendment;
(i) second, against any unpaid but accrued interest to the date of
prepayment on the principal amount of the Notes held by such Noteholder
prepaid under clause (iv) below;
(iii) third, against Yield-Maintenance Amounts, if any, due to such
Noteholder in relation to the principal amount of the Notes being prepaid
under clause (iv) below;
(iv) fourth, against the principal amount of the Notes held by such
Noteholder; and
2
<PAGE>
(v) fifth, as such Noteholder shall determine.
4D. Retirement of Notes. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than as provided in paragraph
4A or by prepayment pursuant to paragraph 4B, 4E or 4F or upon acceleration of
such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire,
directly or indirectly, Notes held by any holder unless the Company or such
Subsidiary or Affiliate shall have offered to prepay or otherwise retire or
purchase or acquire, as the case may be, the same proportion of the aggregate
principal amount of the Notes held by each other holder of the Notes at the time
outstanding upon the same terms and conditions. Any Notes so prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates shall not be deemed to be outstanding for any
purpose under this Agreement except as provided in paragraph 4C.
4E. Redemption for Taxation Reasons. (a) If the company would, on the
occasion of the next payment in respect of the Notes, be required to pay an
Additional Payment as a result of a Special Tax Event (as defined below) which
exceeds, in the aggregate, 10% of the aggregate amount of the interest payment
then due and payable on account of such Notes, and after using reasonable
efforts the Company is unable to avoid the circumstances which necessitates the
payment of such Additional Payment, then the Company shall be entitled to
exercise its rights under this paragraph 4E to prepay all outstanding Notes with
respect to which the Company will be required to make an Additional Payment in
accordance with paragraph 4E(b) below.
(b) The company shall give the holder of each Note with respect to which
the Company would, on the occasion of the next payment in respect of the Notes,
be required to make an Additional Payment and which it wishes to redeem pursuant
to this paragraph 4E(b) irrevocable written notice of any prepayment pursuant to
this paragraph 4E(b) not less than 30 days (nor more than 60 days) prior to the
prepayment date, specifying (i) the amount of the Notes, and the Notes held by
the Noteholder, that are to be prepaid pursuant to this paragraph 4E(b), (ii)
the circumstances that would necessitate the payment of an Additional Payment,
the amount of such Additional Payment and the steps taken by the Company to
avoid the necessity of making such payment (the Company hereby agrees to take
reasonable steps in attempting to avoid the necessity of making such prepayment)
and (iii) the required prepayment date, which shall be a Business Day. Notice of
prepayment having been given as aforesaid, the principal amount of the Notes to
be prepaid pursuant to this paragraph 4E(b), together with interest thereon to
the prepayment date and together with the Modified Yield-Maintenance Amount, if
any, shall become due and payable on such prepayment date; provided, that if no
later than 5 days prior to the required prepayment date any Noteholder who shall
have received such notice notifies the Company that such Noteholder waives any
right it has to receive Additional Payments arising out of the circumstances
described in the notice from the Company, then the Notes held by such Noteholder
shall not be
3
<PAGE>
prepaid pursuant to this paragraph 4E(b) but shall remain outstanding. Any such
waiver from a Noteholder shall apply only to Additional Payments arising out of
the circumstances described in the notice from the Company and shall not be
treated as a waiver by such Noteholder of its right to receive Additional
Payments which arise under any other circumstances or are in any other amount,
it being understood that the Company is entitled to deliver to all applicable
Noteholders a new notice under this paragraph 4E(b) with respect to any such
other Additional Payments. Any waiver made by a Noteholder hereunder is
revocable upon at least 60 days notice; provided that prior to the expiration of
such period such Noteholder shall not be entitled to such Additional Payment
which was the subject of such waiver.
(c) For purposes of this paragraph 4E "Special Tax Event" shall mean a
Change in Tax Law which in the opinion of the Company shall require Additional
Payments. Such opinion shall be evidenced by an Officer's Certificate of the
Company and supported by a written opinion of independent tax counsel of
recognized standing in the relevant taxing jurisdiction (which counsel shall be
reasonably satisfactory to the Required Holders), each of which shall be
delivered to the relevant holders of Notes not later than 10 Business Days prior
to the date fixed for prepayment.
4F. Prepayment upon a Change of Control. (a) Within 5 Business Days
following the date a Responsible Officer obtains knowledge of any Change of
Control, the Company shall give written notice of such Change of Control (a
"Change of Control Notice") to each Noteholder, which shall (i) describe the
facts and circumstances of such Change of Control in reasonable detail, (ii)
refer to this paragraph 4F(a) and the rights of the Noteholders hereunder, (iii)
inform each Noteholder that unless they instruct the Company otherwise, the
Company shall prepay the entire unpaid principal amount of Notes held by each
Noteholder, together with any accrued and unpaid interest thereon from and
including the immediately preceding interest payment date, to but excluding the
prepayment date selected by the Company, together with Yield-Maintenance Amount,
if any, with respect to each Note (showing in such offer the amount of interest
which would be paid on such prepayment date and an estimate of the
Yield-Maintenance Amount together with the calculation of such estimated
amount), which prepayment shall be on a date specified in the Change of Control
Notice, which date shall be a Business Day not more than 20 days after the date
of such Change of Control Notice (the "Change of Control Prepayment Date") and
(iv) request each Noteholder to notify the Company in writing by a stated date,
which date is not less than 10 days after such Noteholder's receipt of the
Change of Control Notice, if such Noteholder does not wish its Notes to be so
prepaid. Promptly after the date on which the Yield-Maintenance Amount can be
calculated, the Company shall notify each Noteholder in writing which has not
rejected such prepayment of the precise amount of the Yield-Maintenance Amount,
showing the Company's computation thereof in reasonable detail.
(b) On the Change of Control Prepayment Date the entire unpaid principal
amount of the Notes held by each holder of Notes who has not notified the
Company that such Noteholder does not wish its Notes to be prepaid (in
4
<PAGE>
accordance with paragraph 4F(a)(iv) above, together with any accrued and unpaid
interest thereon from and including the immediately preceding interest payment
date or the Date of Closing, as the case may be, to but excluding the Change of
Control Prepayment Date and together with the Yield-Maintenance Amount, if any,
with respect to each such Note, shall become due and payable.
(c) The Company will promptly provide any holder of a Note with all
information which it may reasonably request in order to enable such holder to
evaluate the effect of a Change of Control on such Noteholder's investment in
the Notes, including without limitation copies of all such documents as may have
been sent to the shareholders of the Company by or on behalf of the Company or
any Person which has made an offer which, if accepted, would give rise to a
Change of Control.
5. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and agrees
that unless Majority Creditors shall otherwise agree and so long as any Note is
outstanding:
5A. Financial Statements. The Company covenants that it will deliver to
each Noteholder in duplicate (or such less number as any Noteholder shall
request):
(i) as soon as the same become available, but in any event within
150 days (in the case of the Accounts of the Company) or 210 days (in the
case of the Accounts of each Significant Subsidiary) after the end of each
of its Financial Years, as the case may be, the Accounts of itself and
each Significant Subsidiary for the relevant Financial Year together with
a copy of the management letter (if any) addressed by the Auditors to the
directors of the Company;
(ii) as soon as the same becomes available, but in any event within
90 days after the end of the first half of each of its Financial Years,
its unaudited interim accounts for such half year;
(iii) as soon as the same become available, but in any event within
50 days (or, in respect of the last 3 months in a Financial Year of the
Company, 90 days), after the end of each period of 3 months ending on a
Quarter Day, quarterly management accounts of the Group in a format
satisfactory to the Required Holder(s) (including a profit and loss
account and cashflow forecast) and attaching an information schedule (in
the agreed form) setting out EBITDA, Total Debt Costs and Recurring UK
Rental Income for such three-month period together with details of
progress on any proposed asset disposals and contracts taken on or
terminated during such period;
(iv) as soon as the same become available, but in any event within
45 days after the last day of each month, monthly management
5
<PAGE>
accounts (other than for the month of December) of the Group for such
month including a statement of profit and loss, a cashflow statement, a
cashflow forecast for the balance of the then current Financial Year of
the Company and an update on matters referred to in the Side Letter;
(v) within a reasonable time following transmission thereof, (a) all
such financial statements, proxy material, notices and reports as it shall
send to its public shareholders or its creditors generally (or any class
thereof) and (b) all registration statements (without exhibits),
prospectuses and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission), The International
Stock Exchange of the United Kingdom and the Republic of Ireland Limited
or any stock exchange except where the Company shall, at the expense of
the Company, provide the Noteholders with an opinion of counsel that doing
so would cause the Company to subject itself to requirements of US Federal
or state securities laws or UK securities laws to which it would not
otherwise be subject; and
(vi) prompt notice of any litigation, arbitration or administrative
proceeding commenced against any member of the Group involving a potential
claim of (pound)100,000 or greater.
Together with each delivery of financial statements required by clause (iii)
above, the Company will deliver to each Noteholder an Officer's Certificate
demonstrating (with computations in reasonable detail) compliance by the Company
and its Subsidiaries with the provisions of paragraph 6 and stating that there
exists no Event of Default or Default, or, if any Event of Default or Default
exists, specifying the nature and period of existence thereof and what action
the Company proposes to take with respect thereto. Together with each delivery
of financial statements required by clauses (i) and (ii) above, the Company will
deliver to each Noteholder an Officer's Certificate demonstrating, with
computations in reasonable detail, compliance by the Group with the provisions
of paragraphs 6A, 6B, 6C, 6D, 6F, 6G, 6H and 6I and stating that there exists no
Event of Default or Default, or, if any Event of Default or Default exists,
specifying the nature and period of existence thereof and what action the
Company proposes to take with respect thereto. Together with each delivery of
financial statements required by clause (i) above, the Company will also deliver
to each Noteholder a certificate of the accountants referred to in that clause
stating that, in making the audit necessary to the certification of such
financial statements, they have obtained no knowledge of any Event of Default or
Default, or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be disclosed in the
course of an audit conducted in accordance with generally accepted auditing
standards. The Company also covenants that forthwith upon a Responsible Officer
of the Company obtaining actual knowledge of an Event of Default or Default, it
will deliver to each Noteholder an Officer's Certificate specifying the
6
<PAGE>
nature and period of existence thereof and what action the Company proposes to
take with respect thereto.
If and to the extent required by Rule 144A(d)(4)(i) under the Securities
Act in connection with a resale of the Notes exempt from the registration
requirements of the Securities Act pursuant to Rule 144A, the Company shall
provide (x) to any Noteholder, promptly, at the request of such Noteholder, such
additional information regarding the Company as is specified in Rule
144A(d)(4)(i) and (y) to a prospective transferee of any Note designated by a
Noteholder, which transferee is qualified to purchase the Note under Rule
144A(d)(l), the information described in the foregoing sub-paragraph (x).
5B. Inspection of Property. The Company covenants that it will comply with
any reasonable written request of any Noteholder to visit and inspect, at such
Noteholder's expense (except upon the occurrence of a Default or an Event of
Default), any of the properties of the Company and its Subsidiaries and to
discuss the affairs, finances and accounts of any of such corporations with the
principal officers of the Company and its independent public accountants, all at
such reasonable times and as often as such Noteholder may reasonably request. At
the request of any Noteholder wishing to have discussions with the independent
accountants of the Company in accordance with this paragraph 5B, the Company in
good faith shall instruct such accountants to hold such discussions; provided
that the Company shall not be held responsible for the failure of its
accountants to hold such discussions in accordance with such instructions. Each
Noteholder agrees that any non-public materials and information obtained by such
Noteholders as a result of any such visit, inspection or discussion shall be
treated in a confidential manner consistent with the provisions of paragraph
llI.
5C. Consents. The Company shall obtain, comply with the terms of and do all
that is necessary to maintain in full force and effect (and promptly supply to
any Noteholder at such Noteholder's request certified copies of) all
authorizations, approvals, licenses and consents required to enable it lawfully
to enter into and perform its obligations under this Agreement, the Notes, the
Security Documents or to ensure the legality, validity, binding effect or
admissability in evidence in New York of this Agreement, the Notes and the
Security Documents.
5D. Insurance. The Company shall, and shall cause each of its Subsidiaries
to, effect and maintain with financially sound and reputable insurers (including
self-insurance) such insurance over and in respect of its respective assets and
business and in such manner and to such extent as is reasonable and customary
for a business enterprise engaged in the same or a similar business and in the
same or similar location.
5E. Maintenance or Status and Business. The Company shall:
(i) do all such things as are necessary to maintain its corporate
existence, and cause each of its Subsidiaries to maintain their
7
<PAGE>
corporate existence, except, in the case of its Subsidiaries, where the
failure to do so would not have, individually or in the aggregate, a
Material Adverse Effect and except as otherwise permitted by paragraph 6G
hereof;
(ii) ensure that it, and each of its Subsidiaries, has the right and
is duly qualified to conduct its business as it is conducted in all
applicable jurisdictions and will obtain and maintain all rights necessary
for the conduct of its business, except where the failure to do so would
not result in a Material Adverse Effect; and
(iii) at all times comply and cause each of its Subsidiaries to comply
with all laws and with all rules, regulations and orders made by any
governmental authority applicable to it or to any of its Subsidiaries or to
its Property or Property of any of its Subsidiaries, except where the
failure to do so would not result in a Material Adverse Effect.
5F. Prompt Payment of Taxes. The Company covenants that it will promptly
pay and discharge, and that it will cause each of its Subsidiaries promptly to
pay and discharge, or cause to be paid and discharged, prior to the earliest
date on which any penalty or interest is incurred or begins to accrue, all
lawful taxes, assessments and governmental charges or levies imposed upon any of
its income, profits, Property or business unless, and only to the extent that,
(x) (i) such taxes, assessments and governmental charges or levies are being
contested in good faith by appropriate proceedings, (ii) adequate reserves have
been established in accordance with U.K. GAAP, and (iii) title to or the right
to use Property of the Company is not materially adversely affected thereby or
(y) nonpayment of such taxes, assessments and governmental charges or levies
would not be expected to result in a Material Adverse Effect.
5G. Maintenance of Property and Leases. The Company will maintain, and will
cause each of its Subsidiaries to maintain, all the Property used in its or any
Subsidiary's business in good operating condition, reasonable wear and tear
excepted, except for Property the uninsured loss of which would not have a
Material Adverse Effect. The Company will comply at all times, and will cause
each of its Subsidiaries to comply at all times, with the provisions of all
material leases to which it or any Subsidiary is a party or under which it
occupies Property except where the failure so to comply would not result in a
Material Adverse Effect.
5H. Use of Proceeds. The Company does not own or have any present intention
of acquiring any "margin stock" as defined in Regulation G (12 CFR Part 207) of
the Board of Governors of the Federal Reserve System the (herein called "margin
stock"). Neither the Company nor any agent acting on its behalf will take any
action which might cause this Agreement or the Notes to violate Regulation G,
Regulation T or any other Regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act, in each case as the same may now
or hereafter be in effect.
8
<PAGE>
5I. Environmental Matters. The Company: (i) shall conduct, and shall cause
each of its Subsidiaries to conduct, its business in compliance with all
Environmental Laws applicable to it, including without limitation, those
relating to the generation, handling, use, treatment, storage and disposal of
Hazardous Materials by the Company and its Subsidiaries, except where the
failure so to conduct would not individually or in the aggregate, have a
Material Adverse Effect and (ii) shall take, and shall cause each of its
Subsidiaries to take, appropriate action to respond to any non-compliance with
Environmental Laws or any environmental claim, except where the failure so to
take would not individually or in the aggregate, have a Material Adverse Effect.
5J. Financial Records. The Company will, and will cause each of its
Subsidiaries to, keep proper books of account in accordance with generally
accepted accounting principles of the applicable jurisdiction, except in respect
of any of its Subsidiaries where the failure to do so, individually or in the
aggregate, would not have a Material Adverse Effect.
5K. Share Pledge. The Company shall procure that, upon the discharge of the
Sanwa Facility, ASC shall forthwith execute a Share Pledge pledging to the
Security Trustee the remaining 90% of the shares of API which are not subject to
a Share Pledge and provide to the Security Trustee, in form and substance
satisfactory to the Required Holder(s), a legal opinion in respect thereof
unless, in any case, the Sanwa Facility is replaced by a banking facility
substantially on the same terms and conditions as the Sanwa Facility and which
includes a prohibition on the execution of such a Share Pledge or provides that
such execution would be an event of default (howsoever described).
6. NEGATIVE COVENANTS. The Company covenants and agrees that unless
Majority Creditors shall otherwise agree and so long as any Note is outstanding:
6A. Tangible Net Worth; Rental Income. Tangible Net Worth shall at all
times be at least equal to (pound)25,000,000. The Recurring UK Annual Rental
Income for each period of 12 months ending on each Quarter Day shall not be less
than (pound)50,000,000.
6B. Interest Coverage. The ratio of EBITDA minus Capital Expenditure to
Total Debt Costs for each period of 12 months ending on a date specified in
Column A below shall not be less than the ratio set out in Column B below
opposite such date:
Column A Column B
-------- --------
30 November 1995 0.67 : 1
29 February 1996 0.54 : 1
31 May 1996 0.64 : 1
31 August 1996 0.61 : 1
30 November 1996 0.71 : 1
28 February 1997 0.70 : 1
9
<PAGE>
31 May 1997 0.73 : 1
31 August 1997 0.77 : 1
30 November 1997 0.83 : 1
6C. Net Borrowings. The ratio of Total Gross Debt to EBITDA for each period
of 12 months ending on a date specified in Column A below shall not be greater
than the ratio set out in Column B below opposite such date:
Column A Column B
-------- --------
30 November 1995 3.35 : 1
29 February 1996 3.63 : 1
31 May 1996 3.37 : 1
31 August 1996 3.40 : 1
30 November 1996 3.27 : 1
28 February 1997 3.38 : 1
31 May 1997 3.24 : 1
31 August 1997 3.21 : 1
30 November 1997 3.03 : 1
6D. Borrowings. The Company will not, and will not permit any Subsidiary
to, create, assume, guarantee, incur, permit or suffer to exist or in any manner
be or become liable in respect of any Borrowings other than Borrowings which
without duplication are:
(i) Bank Indebtedness;
(ii) the Notes;
(iii) Borrowings under the AIB Facility or a replacement committed
banking facility therefor on substantially the same terms and conditions
not exceeding the aggregate of (aa) the facility amount of the AIB Facility
at the Effective Date and (bb) 10% of the amount referred to in (aa) above;
(iv) Borrowings under the Sanwa Facility or a replacement committed
banking facility therefor on substantially the same terms and conditions
not exceeding the aggregate of (aa) the facility amount of the Sanwa
Facility at the Effective Date and (bb) 10% of the amount referred to in
(aa) above;
(v) Borrowings between members of the Group;
(vi) Borrowings under (a) Finance Leases existing at the Effective
Date (b) any Vehicle Lease, and (c) Finance Leases entered into after the
Effective Date by members of the Group as lessees where the Finance Lease
Expenditure under such Finance Leases does not exceed, in aggregate,
(pound)2,000,000;
10
<PAGE>
(vii) Borrowings under agreements entered into, or to be entered into,
by the Company for the purpose of hedging the Company's interest rate or
other liabilities in relation to all or any part of the Term Loan Facility
(as defined in the Bank Credit Agreement) and/or the Notes;
(viii) Borrowings incurred by members of the Group under sale and
repurchase arrangements entered into in the ordinary course of trade of
members of the Group in respect of leases, or upgrades of existing leases,
in each case, entered into after the Effective Date; and
(ix) Borrowings payable on demand or within one year of the date of
incurrence and which is incurred by members of the Group incorporated
outside the United Kingdom for working capital purposes where the aggregate
principal amount of such Borrowings does not exceed (pound)1,000,000.
6E. Merger and Consolidation; Assumption. The Company covenants that:
(i) it will not consolidate with or merge with or into or transfer all
or substantially all of its assets, business or undertaking to any other
Person unless:
(a) the Company is the surviving entity, or
(b) the surviving entity or the transferee is a solvent
Subsidiary of the Company which has granted a Guarantee and Debenture,
is organized and existing under the laws of the United States or any
state thereof or of the United Kingdom and has expressly assumed, by
an instrument in form and substance reasonably satisfactory to the
Required Holders, all of the obligations of the Company hereunder and
under the Notes and each of the obligors under each of the Security
Documents have confirmed its obligations thereunder with respect to
the obligations as assumed under the Notes and this Agreement,
and, in either case, immediately prior to and after giving effect to such
consolidation, merger or transfer, there exists no Default or Event of
Default and each Noteholder shall have received, at the sole cost and
expense of the Company, an opinion of counsel, which counsel and which
opinion (as to both form and substance) shall be reasonably satisfactory to
the Required Holders; and
(ii) it shall not allow any other member of the Group to merge or
consolidate with any Person other than another member of the Group which
has granted a Guarantee and Debenture.
11
<PAGE>
6F. Negative Pledge. So long as any of the Notes are outstanding, the
Company shall ensure that neither it nor any of its Subsidiaries shall create or
permit to subsist any Lien over all or any of its present or future revenues or
assets other than:
(a) any Liens created under the Finance Documents (as defined in the
Bank Credit Agreement);
(b) any Liens arising in the ordinary course of trading activities;
(c) any agreement for retention of title to goods or any agreement to
sell or otherwise dispose of any asset on terms whereby such
asset is or may be leased or reacquired or acquired, in each
case, arising in the ordinary course of trade;
(d) any rights of set-off arising by operation of law or as a result
of operating banking facilities entered into in the ordinary
course of trade on a net limit basis for cash management
purposes;
(e) any Lien over an asset of a company which becomes a Subsidiary of
the Company (other than by reason of its incorporation) after the
Effective Date being a Lien which is in existence at the time at
which such company becomes such a Subsidiary but only if (i) such
Lien was not created in contemplation of such company becoming
such a Subsidiary, (ii) the principal amount secured by such Lien
has not been and shall not be increased and (iii) such Lien is
discharged within 6 months of the date on which such company
becomes such a Subsidiary;
(f) any Lien over an asset acquired by a member of the Group after
the Effective Date and subject to which such asset is acquired
but only if (i) such Lien was not created in contemplation of its
acquisition by such member, (ii) the amount thereby secured has
not been increased in contemplation of, or since the date of, its
acquisition by such member, and (iii) such Lien is discharged
within 6 months of the date of its acquisition by such member;
(g) any Lien which has been disclosed to the Purchaser prior to the
Effective Date and where the amount thereby secured has not been
increased above the amount so secured as at the date of such
disclosure;
(h) any Lien created after the Effective Date over all or any of the
assets of Modern Security Systems Limited (a
12
<PAGE>
company incorporated in Ireland) as security for a banking
facility made available to such company and which is committed
for a period of at least 364 days; and
(i) any other Liens securing Borrowings, where the aggregate value of
assets the subject of such Liens does not exceed
(pound)1,000,000.
6G. Restriction on Disposals. (a) Neither the Company nor any Subsidiary
shall make a Disposal of all or any of its Rental Income or assets from time to
time other than
(i) a Disposal on arm's length terms by the relative member of the
Group in the ordinary course of its trade;
(ii) a Disposal to a member of the Group which has granted a Debenture
and Guarantee;
(iii) a Disposal of an asset where the proceeds of such Disposal are
used to purchase an asset in direct replacement of such first-mentioned
asset;
(iv) a Disposal of damaged, obsolete or redundant assets in the
ordinary course of business;
(v) a Disposal of a lease under sale and repurchase arrangements
entered into in the ordinary course of trade of the Group in respect of
leases, or upgrades of leases, in each case, entered into after the
Effective Date;
(vi) a Disposal permitted in the Side Letter; and
(vii) a Disposal on arm's length terms of an asset at or above its
value stated in the relevant company's most recent accounts for a
consideration not exceeding (pound)50,000 where such Disposal would not
result in the aggregate consideration received for all Disposals of assets
not included in (i)-(vi) above exceeding (pound)250,000 in any Financial
Year of the Company.
(b) Subject to the other provisions of this paragraph 6G, any Disposal
Proceeds received by a member of the Group of a Disposal (not being an Excluded
Disposal) shall immediately upon receipt by the relevant member be applied as
follows:
(i) the first US$80,000,000 (on the basis of an exchange rate of
US$1.5916 to (pound)1) in aggregate of such Disposal Proceeds received by
members of the Group shall be paid in repayment of the Bank Indebtedness
and the Notes, in the Sharing Proportions;
13
<PAGE>
(ii) after the application referred to in (i) above, the Company shall
be entitled to retain an aggregate amount of such Disposal Proceeds not
exceeding US$2,500,000 (on the basis of an exchange rate of US$l.59l6 to
(pound)1); and
(iii) after the applications referred to in (i) and (ii) above, 80% of
all Disposal Proceeds shall be used to prepay the Bank Indebtedness and the
Notes in the Sharing Proportions.
(c) The Disposal Proceeds arising from a Disposal of the issued share
capital of, or all the assets of Modern Security Systems Limited (a company
incorporated in Ireland) shall promptly upon receipt be applied as follows:
(i) first, in repayment of the AIB Facility up to a maximum principal
amount equal to the commitments of AIB thereunder as at the Effective Date
and any accrued but unpaid interest on such principal amount;
(ii) second, an amount not exceeding IR(pound)l,720,000 less any
amount repaid under (i) above shall be used to prepay Bank Indebtedness;
and
(iii) thereafter, such proceeds shall be used to prepay Bank
Indebtedness and the Notes in the Sharing Proportions.
(d) For the purposes of this paragraph 60, amounts due under the Bank
Credit Agreement and on the Notes include, for the avoidance of doubt, all
principal monies, interest, the success fee referred to in Clause 18.6 of the
Bank Credit Agreement and paragraph 3 of the First Amendment and any
Yield-Maintenance Amount.
(e) In the event that any Noteholder elects in accordance with paragraph 4C
that its Notes not be prepaid or the Banks elect in accordance with the Bank
Credit Agreement that the Bank Indebtedness not be prepaid with particular
Disposal Proceeds, then any reference in this paragraph 60 to prepayment of Bank
Indebtedness and the Notes in the Sharing Proportions shall be deemed to be
adjusted accordingly.
6H. Proceeds of New Capital. The proceeds of any new issue of share capital
of the Company or its Subsidiaries to any person not being a member of the Group
(net of all costs and expenses of issuing the same which expenses shall not
include the success fees payable pursuant to Clause 18.6 of the Bank Credit
Agreement and paragraph 3 of the First Amendment or any Yield-Maintenance
Amount) shall be applied immediately upon receipt of the same as follows:
(i) first, in repayment of the AIlS Facility up to a maximum
principal amount equal to the commitments of AIB thereunder as
at the Effective Date
14
<PAGE>
and any accrued but unpaid interest on such principal amount; and
(ii) thereafter, such proceeds shall be used to repay the Bank
Indebtedness and the Notes in the Sharing Proportions.
For the purposes of this paragraph 6H, amounts due under the Bank Credit
Agreement and on the Notes include, for the avoidance of doubt, all principal
monies, interest, the success fee referred to in Clause 18.6 of the Bank Credit
Agreement and paragraph 3 of the First Amendment and any Yield-Maintenance
Amount. In the event that any Noteholder elects in accordance with paragraph 4C
that its Notes not be prepaid or the banks elect in accordance with the Bank
Credit Agreement that the Bank Indebtedness not be prepaid with particular
proceeds of the issue of share capital by a member of the Group, then any
reference in this paragraph 6H to prepayment of Bank Indebtedness and the Notes
in the Sharing Proportions shall be deemed to adjusted accordingly.
6I. Change of Business. The Company shall not, nor allow any Subsidiary to,
make or threaten to make any change in its business as conducted as at the
Effective Date, which would result in a substantial change in the nature of the
business carried on by the Group as a whole nor carry on any other business
which is substantial in relation to the business of the Group as at conducted as
at the Effective Date.
6J. Granting Credit. After the Effective Date, the Company shall not, nor
allow any Subsidiary to, make, or permit to remain outstanding, any loans or
grant any credit other than:
(i) amounts of credit allowed by the Company or any Subsidiary in the
ordinary course of its trading activities;
(ii) loans made to a member of the Group by another member of the
Group that has granted a Guarantee and Debenture;
(iii) loans made by one member of the Group that has not granted a
Guarantee and Debenture to another such member;
(iv) loans made by one member of the Group that has not granted a
Guarantee and Debenture to another member of the Group that has granted a
Guarantee and Debenture;
(v) loans made by one member of the Group to other members of the
Group (not falling within paragraphs (ii), (iii) and (iv) above) which
either (a) are in existence as at the Effective Date, or (b) are made after
such date where the aggregate net amount of such loans does not exceed
(pound)1,000,000;
15
<PAGE>
(vi) a loan of up to (pound)751,000 in aggregate made by the Company
to ASH Jersey;
(vii) loans or credit of up to $2,000,000 in aggregate made available
to TVX, Inc.; and
(viii) loans made by members of the Group to their employees not
exceeding (pound)500,000 in the aggregate.
6K. Dividends. The Company shall not make or pay any dividend or other
distribution in relation to any shares forming part of its issued share capital
unless:
(i) no Default or Event of Default has occurred and is continuing; and
(ii) the ratio of Total Gross Debt to EBITDA for the period of 12
months ending on the most recent Quarter Date prior to the making or
payment of the relevant dividend or distribution is to be made is not
greater than 1.5:1 as certified to the Noteholders by the Auditors.
6L. Indemnities. After the Effective Date, the Company shall not, and shall
not allow any Subsidiary to, give any indemnity to potential purchasers of
assets in relation to the costs of their due diligence exercises in aggregate
amounts exceeding (pound)200,000.
6M. Jersey Debenture; Convertible Capital Bonds. (a) The Company shall not
make or agree to make any payment or repayment or otherwise discharge any of the
obligations or liabilities of the Company under the Jersey Debenture or
otherwise in respect of the Loan (as defined in the Jersey Debenture) except in
respect of the payment of interest.
(b) The Company shall not make any variation, amendment, modification or
supplement in respect of:
(i) the Jersey Debenture which relates to Clause 3 (Repayment), Clause
4 (Prepayment) or Clause S (Subordination) thereof; or
(ii) the subordination provisions of the guarantee issued by the
Company in favor of the holders of the Convertible Capital Bonds.
6N. Bank Indebtedness; Bank Credit Agreement. The Company shall not, save
as otherwise permitted or required by this Agreement, voluntarily prepay, repay
or redeem any of the Bank Indebtedness. The Company shall not modify any
provision of the Bank Credit Agreement without the consent of the Required
Holder(s) unless such modification is in accordance with the terms of the
Intercreditor Agreement.
16
<PAGE>
7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or premium
on any Note when the same shall become due, either by the terms thereof or
otherwise as herein provided and, if such default in payment is caused
solely by technical delays in the transmission of funds, such default
continues for 3 Business Days after the due date; or
(ii) the Company defaults in the payment of any interest on any Note
or any amounts payable under the terms of the First Amendment and, if such
default in payment is caused solely by technical delays in the transmission
of funds, such default continues for 3 Business Days after the due date; or
(iii) (a) the Company or any Subsidiary defaults in any payment of
principal of, or premium or interest on any other obligation for Borrowings
beyond any period of grace provided with respect thereto; or (b) the
Company or any Subsidiary fails to perform or observe any other agreement,
term or condition contained in any agreement under which any such
obligation is created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such failure or
other event is either (x) to cause, or (y) to permit the holder or holders
of such obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due prior to any stated maturity;
provided, with respect to both clauses (a) and (b), that the aggregate
amount of all obligations as to which such a payment default shall occur
and be continuing or such a failure or other event causing or permitting
acceleration shall occur and be continuing exceeds (pound)1,000,000 (or the
equivalent in other currency); or
(iv) any representation or warranty made by the Company herein or in
the First Amendment or in any writing furnished in connection with or
pursuant hereto or thereto or any representation made by any other member
of the Group in any Security Document to which it is party shall be false
or incorrect in any material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement contained in
the last sentence of the first paragraph of paragraph 5A or paragraphs 6A,
6B, 6C, 6E, 6G, 6I, 6M or 6N; or
(vi) the Company fails to perform or observe any other agreement, term
or condition contained herein or any member of the
17
<PAGE>
Group fails to perform or observe any agreement, term or condition
contained in any Security Document to which it is party and, in any such
case, such failure shall not be remedied within 15 Business Days after any
Responsible Officer of the Company obtains actual knowledge thereof; or
(vii) the Company makes a general assignment for the benefit of
creditors or is generally not paying its debts as such debts become due; or
(viii) any decree or order for relief in respect of the Company or any
Significant Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or other similar law, whether now or hereafter in effect
(herein called the "Bankruptcy law") of any jurisdiction; or
(ix) the Company or any Significant Subsidiary petitions or applies to
any tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, administrator, receiver, custodian, liquidator or similar
official of the Company or any Significant Subsidiary, or of any
substantial part of the assets of the Company or any Significant
Subsidiary, or the Company or any Significant Subsidiary commences a
voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to the Company or any Significant Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Significant Subsidiary and the
Company or such Significant Subsidiary by any act or omission clearly
indicates its approval thereof, consent thereto or acquiescence therein, or
an encumbrancer takes possession thereof, or an order, judgment or decree
is entered appointing any such trustee, administrator, receiver, custodian,
liquidator or similar official, or approving the petition in any such
proceedings, or a distress or execution is levied upon or sued out against
any substantial part of the assets of the Company or of any Significant
Subsidiary and such order, judgment, decree or proceeding remains unstayed
and in effect for more than 21 days; or
(xi) an effective resolution is adopted by or other equivalent action
is taken by, or any order, judgment or decree is entered in any proceedings
against, the Company or any Significant Subsidiary decreeing the
dissolution of the Company or any Significant Subsidiary, (other than in
connection with a winding-up for the purpose of a reconstruction or
amalgamation the terms of which have previously been approved in writing by
the holders of 66 2/3% of the Notes, or, in the case of a Subsidiary, a
voluntary solvent winding-up in connection with the transfer of all or the
major part of the business, undertakings and assets of such Subsidiary to
the Company or a Significant Subsidiary),
18
<PAGE>
and such resolution, action, order, judgment or decree remains unstayed and
in effect for more than 21 days; or
(xii) a final judgment for the payment of money in an amount in excess
of (pound)1,000,000 (or the equivalent in other currency) net of insurance
proceeds received, is rendered against the Company or any Significant
Subsidiary and, within 14 days after entry thereof, such judgment is not
discharged or dismissed or execution thereof stayed pending appeal, or
within 14 days after the expiration of any such stay, such judgment is not
discharged; or
(xiii) any of the Security Documents ceases to be in full force and
effect; or
(xiv) at any time there occurs a change in the financial condition or
business condition of any of the members of the Group which (in the
reasonable opinion of the Required Holder(s)) has, or could reasonably be
expected to have, a Material Adverse Effect; or
(xv) without the prior consent of the Required Holder(s), the Company
makes any redemption of, or purchases, any of its share capital or the
Convertible Capital Bonds or otherwise reduces its share capital;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A and such event is continuing, any holder of a Note may, by
notice in writing to the Company, declare all of the Notes held by such holder
to be, or Required Holder(s) may, by notice in writing to the Company, declare
all Notes to be, and each such Note and the outstanding principal thereof shall
thereupon be and become, immediately due and payable together with interest
accrued thereon and together with the Yield-Maintenance Amount, if any, with
respect to each such Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company and (b) if such event
is not an Event of Default specified as such in clause (i) or (ii) of this
paragraph 7A and such event is continuing, the Required Holder(s) with the
consent of the Majority Creditors may at its or their option, by notice in
writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
7B. Rescission of Acceleration. The provisions of paragraph 7A are subject
to the condition that if the principal of, and accrued interest on, and
Yield-Maintenance Amount payable with respect to, all or any outstanding Notes
have been declared immediately due and payable (i) in accordance with paragraph
7A(b), the holder or holders of such Notes may, or (ii) in accordance with
paragraph 7A(b) the holder or holders of at least 66 2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed
19
<PAGE>
with the Company, rescind and annul such declaration and the consequences
thereof, provided that at any time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or Yield-Maintenance Amount on the Notes which has become due and
payable solely by reason of such declaration under paragraph 7A(___) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to paragraph 11C;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
7C. Other Remedies. No remedy conferred in this Agreement upon the holder
of any Note is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at law or in equity or by statute
or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY. The Company
represents, covenants and warrants:
8A. Organization. The Company is a limited company duly incorporated and
validly existing under the laws of England and Wales, each of its Significant
Subsidiaries is duly incorporated and validly existing under the laws of the
jurisdiction in which it is incorporated, and the Company and each of its
Significant Subsidiaries has the corporate power to own its property and to
carry on its business as now being conducted.
8B. Powers and Authority. The Company has the corporate power and authority
to enter into and perform, and has taken all necessary action to authorize The
entry into, performance and delivery of, the First Amendment, the Security
Documents to which it is party and the transactions contemplated thereby.
8C. Financial Statements. The Company has furnished the Purchaser with the
following financial statements, identified by a principal financial officer of
the Company: Report and Accounts for the Company for the year ended November 30,
1994. Such financial statements (including any related schedules and/or notes)
are true and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles in the United Kingdom consistently
followed throughout the periods involved and show all liabilities, direct and
contingent, of the Company and its Subsidiaries
20
<PAGE>
required to be shown in accordance with such principles. The balance sheets
present a true and fair view of the condition of the Company and its
Subsidiaries as at the dates thereof, and the statements of income and
statements of changes in financial position present a true and fair view of the
results of the operations of the Company and its Subsidiaries for the periods
indicated. There has been no Material Adverse Effect since November 30, 1994.
8D. Actions Pending. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or any properties or rights of the Company or any of its
Subsidiaries by or before any court, arbitrator or administrative or
governmental body which is expected to result in a Material Adverse Effect.
8E. Defaults. No default has occurred and is continuing, and no event has
occurred which constitutes a default (or would so constitute but for a waiver),
under (or which with the passage of time or notice would constitute a default
under) any agreement evidencing Borrowings of the Company or any of its
Significant Subsidiaries (including this Agreement).
8F. Conflicting Agreements and Other Matters. The execution, delivery and
performance by the company of the Note Agreement and the Notes will not cause
the Company or any Significant Subsidiary to be unable to pay its debts and will
not contravene or constitute a default (whether or not waived), or result in the
creation of any Lien in respect of any Property of the Company or any of its
Subsidiaries, under (1) the Memorandum and Articles of Association of the
Company or any such Subsidiary; (2) any obligation under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other agreement or
instrument to which the Company or any such Subsidiary is a party or by which
the Company or any such Subsidiary or any of their respective Properties is
bound except to the extent that such contravention, default or creation of a
Lien would not have, individually or in the aggregate, a Material Adverse
Effect; (3) any law, statute, rule or regulation of any governmental body
applicable to either the Company or any such Subsidiary; or (4) any order of any
court, arbitrator or governmental body applicable to either the Company or any
such Subsidiary.
8G. Governmental Consent. Neither the nature of the Company nor any of its
businesses or properties, nor any relationship between the Company and any other
Person, nor any circumstance in connection with this Agreement, the Security
Documents or the Notes, is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings after the
Closing Date with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of the First
Amendment or the Security Documents or fulfillment of or compliance with the
terms and provisions thereof.
8H. Existing Liens. Liens on the assets of the Company and its Significant
Subsidiaries (other than Liens arising under the Security Documents
21
<PAGE>
or as disclosed under paragraph 6F(g)) do not secure Borrowings in excess of
(pound)1,000,000 (or the equivalent in other currency).
8I. Disclosure. Neither this Agreement, the First Amendment nor any other
document, certificate or written statement furnished to you by or on behalf of
the Company in connection herewith or therewith contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in the light of the circumstances under
which they were made, not misleading. There is no fact peculiar to the Company
or any of its Subsidiaries which has or in the future may (so far as the Company
can now foresee) have a Material Adverse Effect and which has not been set forth
in this Agreement, the First Amendment or in the other documents, certificates
and written statements furnished to the Purchaser prior to the Effective Date in
connection with the transactions contemplated hereby.
8J. Title to Properties. The Company has good and indefeasible title to its
real properties (other than properties which it leases) and good title to all of
its other properties and assets, including the properties and assets reflected
in the balance sheet as at November 30, 1994 referred to in paragraph 8C (other
than properties and assets disposed of in the ordinary course of business),
subject to no Lien of any kind except Liens permitted by paragraph 6F. All
leases necessary for the conduct of the business of the Company are valid and
subsisting and are in full force and effect except where the absence of which
would not result in a Material Adverse Effect.
8K. Taxes. The Company has filed all relevant tax returns and has complied
in all material respects with its obligation to pay all taxes as shown on such
returns and on all assessments received by it to the extent that such taxes have
become due, except (i) such taxes as are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with U.K. GAAP or (ii) any taxes with respect to which U.K. GAAP does
not require the Company to set aside on its books reserves (or the Company has
set aside such reserves) and where the failure to pay such taxes could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
8L. Offering of the Notes. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect
thereto with, any Person other than institutional investors, and neither the
Company nor any agent acting on its behalf has taken or will take any action
which would require the registration of the Notes under the provisions of
section 5 of the Securities Act or under the provisions of any securities or
Blue Sky law of any applicable jurisdiction. The Notes are not of the same class
as securities of the Company listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a US automated inter-dealer
quotation system.
22
<PAGE>
8M. Regulation G, Etc. The Company does not own or have any present
intention of acquiring any "margin stock" as defined in Regulation G (12 CFR
Part 207) of the Board of Governors of the Federal Reserve System herein called
"margin stock"). Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or the Notes to
violate Regulation G, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act in such
case as in effect now or as the same may hereafter be in effect.
8N. Pension Plans. Each Plan is in substantial compliance with ERISA and
the Code except to the extent that any failure to substantially comply does not
cause the Company or its Subsidiaries to incur a material liability; as of the
Effective Date, no Plan is a single employer plan or multiemployer plan, as
defined by ERISA Section 4001, which is subject to Title IV of ERISA; no Plan is
insolvent or in reorganization; all contributions required to be made with
respect to all Plans and Foreign Pension Plans have been timely made; neither
the Company nor its Subsidiaries nor any ERISA Affiliate has incurred any
material liability to or on account of a Plan, including a plan maintained or
contributed to by an ERISA Affiliate, pursuant to Section 409, 502(i), 502(1),
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a) (29) of
the Code: neither the Company nor its Subsidiaries has incurred any material
liability to or on account of a Plan pursuant to Section 4971, 4975 or 4980 of
the Code and neither the Company nor its Subsidiaries, nor any ERISA Affiliate,
where applicable, expects to incur any liability (including any indirect,
contingent, or secondary liability) under any of the foregoing Sections with
respect to any Plan, including a plan maintained by an ERISA Affiliate except
with respect to Code Sections 4971, 4975 or 4980; no proceedings have been
instituted to terminate or appoint a trustee to administer any Plan; no
condition exists which presents a material risk to the Company or any of its
Subsidiaries or any ERISA Affiliate, where applicable, of incurring a liability
to or on account of a Plan pursuant to the foregoing provisions of ERISA and the
Code; no Lien imposed under the Code or ERISA on the assets of the Company or
any of its Subsidiaries or any ERISA Affiliate exists or is likely to arise on
account of any Plan, including a plan maintained or contributed to by an ERISA
Affiliate; and the Company and its Subsidiaries may cease contributions to or
terminate any employee benefit plan maintained by any of them without incurring
any material liability in an amount that would affect the ability of the Company
or its Subsidiaries to meet it obligations under this Agreement. Each Foreign
Pension Plan has been maintained in substantial compliance with its terms and
with the requirements of any and all applicable laws, statutes, rules,
regulations and orders, except to the extent that any failure to substantially
comply does not cause the Company or its Subsidiaries to incur a material
liability. Neither the Company nor any of its Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any Foreign
Pension Plan. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Pension Plan, determined as of the end of the
Company's most recently ended Financial Year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets
23
<PAGE>
of such Foreign Pension Plan allocable to such benefit liabilities by an amount
that would significantly affect the financial condition of the Company and its
Subsidiaries, taken as a whole, or the Company's ability to perform its
obligations under this Agreement.
8O. Environmental Compliance. The Company and its Subsidiaries and their
respective properties and facilities have complied with all laws, including
Environmental Laws, regulations and orders relating to the protection of the
environment except where failure so to comply would not have a Material Adverse
Effect.
8P. Legal Validity. This Agreement, each Note and the First Amendment
constitutes, and each of the Security Documents will (when executed by the other
parties thereto) constitute, the legal, valid and binding obligation of the
Company or the Subsidiary party thereto, as the case may be, enforceable in
accordance with its respective terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
8Q. Holding Company and Investment Company. The Company is not, and is not
directly or indirectly controlled by any person which is, required to register
as an "investment company" within the meaning of the Investment Company Act of
1940. The Company is not a "holding company" or a "subsidiary" or an "affiliate"
of a "holding company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
8R. Indebtedness. As of the Effective Date, the Subsidiaries of the Company
have no Borrowings other than Borrowings described in clauses (i) through (ix),
inclusive, of paragraph 6D.
9. [intentionally omitted]
10. DEFINITIONS. For the purpose of this Agreement, the terms defined in
paragraphs 1 and 2 shall have the respective meanings specified therein, and the
following terms shall have the meanings specified with respect thereto below:
10A. Yield-Maintenance Terms.
"Called Principal" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B, 4E or 4F or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
"Discounted Value" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled
24
<PAGE>
Payments with respect to such Called Principal from their respective scheduled
due dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (applied on
a semiannual basis) equal to the Reinvestment Yield with respect to such Called
Principal.
"Modified Yield-Maintenance Amount" shall mean the Yield Maintenance Amount
computed using a Reinvestment Yield in which a spread of 0.75% (75 basis points)
is added to the implied yield to maturity for actively traded US Treasury
securities determined as set forth in the definition of "Reinvestment Yield".
"Reinvestment Yield" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of 10:00
A.M. (New York City time) on the Business Day next preceding the Settlement Date
with respect to such Called Principal, on the display designated as "Page 678"
on the Telerate Service (or such other display as may replace Page 678 on the
Telerate Service) for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H. 15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. Such
implied yield shall be determined, if necessary, by (a) converting U.S Treasury
bill quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between reported yields.
"Remaining Average Life" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of years (calculated
to the nearest one-twelfth year) which will elapse between the Settlement Date
with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
25
<PAGE>
paragraph 4B, 4E or 4F or is declared to be immediately due and payable pursuant
to paragraph 7A, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any Note, a premium
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on). The Settlement Date with respect to
such Called Principal. The Yield-Maintenance Amount shall in no event be less
than zero.
l0B. Other Terms.
"Accounts" shall mean
(i) in relation to the Company, the audited consolidated accounts
(including all additional information and notes thereto) of the Company and
its Subsidiaries together with the relative directors' report and auditors'
report; and
(ii) in relation to each Significant Subsidiary from time to time,
accounts (including all additional information and notes thereto) to the
extent required by applicable laws audited together with the directors'
report and auditors' report.
"Additional Payment" shall have the meaning specified in paragraph llO.
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, a corporation,
except a Subsidiary. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"AIB" shall mean Allied Irish Banks plc.
"AIB Facility" shall mean the facility made available under the facility
letter dated 27th March 1995 between AIB and Modern Security Systems Limited (a
company incorporated in Ireland) (as amended from time to time).
"API" shall mean API Security Inc., a company incorporated under the laws
of the State of California, having its principal office at 8550 Higuera Street,
Culver City, California 90232.
"ASC" shall mean Automated Security Corporation, a company incorporated
under the laws of the State of Delaware, having its principal office at 8550
Higuera Street, Culver City, California 90232.
26
<PAGE>
"Auditors" shall mean, in relation to each member of the Group, Binder
Hamlyn or, as the case may be, Arthur Andersen, or such other firm of chartered
accountants of international standing as shall have been duly appointed as
auditors of the relative company.
"Bank Credit Agreement" shall mean the Credit Agreement as defined in the
Guarantee and Debenture.
"Bank Indebtedness" shall mean Borrowings arising under the Bank Credit
Agreement.
"Bankruptcy Law" shall have the meaning specified in clause (viii) of
paragraph 7A.
"Borrowings" shall mean, in relation to any Person, its obligation
(whether present or future, actual or contingent and whether incurred as
principal or surety) for the payment or repayment of money (whether in respect
of interest, principal or otherwise) incurred in respect of any of:
(i) monies borrowed or raised;
(ii) any bond, note, loan stock, debenture or similar instrument;
(iii) acceptance credit, bill discounting, note purchase, factoring
facilities or documentary credit facilities;
(iv) payment obligations under Finance Leases;
(v) guarantees, bonds, stand-by letters of credit or other similar
instruments issued in connection with the performance of contracts;
(vi) interest rate or currency swap agreements or any other hedging
instrument in respect of interest rates or currencies;
(vii) any arrangement entered into primarily as a method of raising
finance pursuant to which any asset disposal of by a member of the Group is
to be or may be re-acquired or acquired by a member of the Group (whether
following the exercise of an option or otherwise); and
(viii) counter-indemnities, guarantees or other assurances against
financial loss in respect of the liability or obligation of any Person
falling within any of paragraphs (i) to (vii) above.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City and London are required or authorized
to be closed.
27
<PAGE>
"Capital Expenditure" has the meaning attributed to it by generally
accepted accounting principles and, for the avoidance of doubt, shall not
include Vehicle Leases.
"Change of Control" shall mean a change in the ownership of the issued
share capital of the Company, where any Person (whether alone or together with
any associated person or persons) becomes the beneficial owner of shares in the
issued share capital of the Company carrying the right to exercise more than 50%
of the votes exercisable at a general meeting of the Company (for the purposes
of this definition, "associated person" means, in relation to any Person, a
Person who is either (a) acting in concert (as defined in the City Code on
Take-Overs and Mergers) with such aforesaid Person or (b) a "connected person"
as defined in Section 839 of the U.K. Income and Corporation Taxes Act 1988 of
such aforesaid person).
"Change in Tax Law" means any change in law, treaty, rule or regulation, or
in the interpretation of any thereof, as any such law, treaty, rule, regulation
or interpretation is in effect on the Effective Date, relating to the
withholding or deduction of tax imposed by the United Kingdom on payments of the
type made under this Agreement or on the Notes.
"Closing Date" shall mean May 27, 1994.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Convertible Capital Bonds" shall mean any amount outstanding in respect of
the (pound)60 million 9 1/2% Convertible Capital Bonds due 2006 issued by ASH
Capital Finance (3ersey) Limited and guaranteed on a subordinated basis by the
Company.
"Depreciation" shall have the meaning attributed to it by generally
accepted accounting principles and, for the avoidance of doubt, includes losses
on canceled contracts.
"Disposal" shall mean a sale, transfer, or other disposal (including by way
of lease or otherwise) after the Effective Date of all or any part of the assets
or property of any member of the Group whether by one transaction or a series of
transactions.
"Disposal Proceeds" shall mean, in respect of a Disposal, the gross
consideration receivable by such company for such Disposal less all costs and
expenses including Tax directly incurred in respect of such Disposal (which
shall not include the success fees referred to in Clause 18.6 of the Bank Credit
Agreement or in paragraph 3 of the First Amendment or any Yield-Maintenance
Amount).
28
<PAGE>
"Dollar" or "$" shall each mean the lawful currency of the United States of
America.
"EBITDA" shall mean, for any period, the consolidated profit on ordinary
trading activities of the Group for that period before Taxation and Total Debt
Costs
PLUS:
(i) the amount of Depreciation charged by the Group in such period;
(ii) the amount of intangible assets amortised or written off through
the Company's consolidated profit and loss account during such period; and
(iii) to the extent not taken account of in (ii) above, the amount of
the most recent book value of an asset written off through the said profit
and loss account during such period on a Disposal of such asset where the
Disposal Proceeds in respect of such Disposal are applied in accordance
with the terms of this Agreement;
LESS:
(i) profit attributable to minority interests; and
(ii) profit made on the Disposal (other than a Disposal permitted
under clauses (i) to (iii) of paragraph 6G(a)) of an asset in such period
by a member of the Group,
and for the avoidance of doubt, taking no account of
(a) extraordinary items; and
(b) interest receivable and similar income.
"Effective Date" shall have the meaning provided in the First Amendment.
"Event of Default" shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "Default" shall mean any of such events,
whether or not any such requirement has been satisfied.
"Environmental Laws" shall mean all international, European Union,
national, federal, state, provincial, county, borough or local statutes, laws,
regulations, orders, consents, decrees, directives, judgements, licenses, codes,
ordinances or other requirements relating to public health, Hazardous Materials,
29
<PAGE>
or the environment including, without limitation, conservation, waste
management, removal and remedial cost recovery, and pollution including without
limitation, regulation of discharges, releases, and emissions of Hazardous
Material to the air, land, water and groundwater) applicable to the Group's
business, operations and facilities (whether or not now or previously owned by
any member of the Group).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA as in effect at the date of
this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Company or any of its Subsidiaries would be
deemed to be a "single employer" (1) within the meaning of Section 414 (b), (c),
(m) or (o) of the Code or (ii) as a result of the Company or a Subsidiary being
or having been a general partner of such person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Disposal" shall mean a Disposal referred to in any of clauses (i)
to (v) inclusive of paragraph 6G(a).
"Final Maturity Date" means, save as set out in the Side Letter, January 2,
1998, provided that if by January 2, 1998 either:
(i) the Company (and/or other members of the Group) has received the
Sterling Equivalent (calculated as at the date of receipt) of
US$100,000,000 in respect of the subscription for a new issue of share
capital (a "New Equity Raising") and applied the same in the Sharing
Proportions, in repayment of the Bank Indebtedness and the Notes; or
(ii) a member of the Group makes a Disposal which raises Disposal
Proceeds of at least US$50,000,000 (or its equivalent) ("Major Disposal")
and such Disposal Proceeds are applied in accordance with paragraph 6G(b);
then the Final Maturity Date shall be April 2, 1998.
"Finance Lease" shall mean any lease, hire agreement, credit sale
agreement, purchase agreement, conditional sale agreement or instalment sale and
purchase agreement which should be treated in accordance with SSAP 21 or FASB 13
as appropriate (or any successor thereto) as a finance lease or in the same way
as a finance lease.
"Finance Lease Expenditure" shall mean the capital value of any assets the
subject of a Finance Lease to which a company within the Group is a party.
30
<PAGE>
"Financial Year" in relation to any company shall have the meaning ascribed
to such term by section 223 of the U.K. Companies Act 1985, as amended.
"First Amendment" shall mean the First Amendment Agreement, dated December
21, 1995 between the Noteholder and the Company.
"Foreign Pension Plan" shall mean any plan, fund (including without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Company or any one or
more of its Subsidiaries primarily for the benefit of employees of the Company
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"Group" shall mean Automated Security (Holdings) PLC and all of its
Subsidiaries from time to time.
"Guarantee and Debenture" shall mean a Guarantee and Debenture
substantially in the form of Exhibit F to the First Amendment executed and
delivered by a member of the Group.
"Hazardous Materials" shall mean (a) petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, polychlorinated biphenyls, and radon gas; (b)
any waste which would be characterized as hazardous under Directive 91/689/EEC
or the annexes thereto; and (c) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any Environmental Law.
"Intercreditor Agreement" shall mean the intercreditor agreement
substantially in the form of Exhibit I to the First Amendment.
"Jersey Debenture" shall mean the debenture dated 23rd August 1991 between
the Company and ASH Capital Finance (Jersey) Limited setting out the terms and
conditions of the loan of (pound)58,250,000 made by ASH Capital Finance (Jersey)
Limited to the Company.
"Lien" shall mean any mortgage, charge, assignment for the purpose of
security, pledge, lien, rights of set-off, arrangements for retention of title
to goods, or hypothecation or trust arrangement for the purpose of, or which has
the effect of, granting security or other security interest of any kind
whatsoever or any agreement, whether expressed to be conditional or otherwise,
to create any of the same or any agreement having a commercial effect
substantially similar to any of the foregoing or any agreement to sell or
otherwise dispose of any asset on terms where such asset is or may be leased to
or re-acquired or acquired by any member of the Group.
31
<PAGE>
"Major Disposal" shall have the meaning provided in the definition of Final
Maturity Date.
"Majority Creditors" shall mean a majority in number (on the basis that an
institution can be counted only once) of the Banks (as defined in the Bank
Credit Agreement), the Working Capital Bank (as defined in the Bank Credit
Agreement) and the Noteho1ders whom are owed not less than 51% of the aggregate
indebtedness under the Bank Credit Agreement and the Notes.
"Material Adverse Effect" shall mean a material adverse change effecting
(i) the financial or business condition of the Group taken as a whole or (ii)
the ability of the Company or any Subsidiary to perform its respective
obligations under the Note Agreement or the Notes and the Security Documents.
"New Equity Raising" shall have the meaning provided to such term in the
definition of Final Maturity Date.
"Notes" shall mean the $60,721,638.12 aggregate principal amount of senior
notes of the Company, issued in accordance with the terms of this Agreement on
May 27, 1994 dated the date of issue thereof, originally maturing on May 27,
1999, and amended by the terms of the First Amendment to mature on the Final
Maturity Date, bearing interest on the unpaid principal balance thereof from the
date thereof until the principal thereof shall become due and payable at the
rate of 8.28% per annum and to bear interest on overdue principal, premium and
interest at the rate specified therein, and otherwise to be substantially in the
form attached to the First Amendment as Exhibit E. The term "Notes" as used
herein shall include each Note delivered pursuant to any provision of this
Agreement and each Note delivered in substitution or exchange for any such Note
pursuant to any such provision. The term "Note" shall mean any one of the Notes.
"Noteholder" shall mean at any time, any Person then registered as the
bolder of any Note.
"Officer's Certificate" shall mean a certificate signed in the name of the
Company by a Responsible Officer.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
"Plan" shall mean an employee pension benefit plan, as defined by Section
3(2) of ERISA, subject to Title IV of ERISA, which is maintained or contributed
to by (or to which there is an obligation to contribute of) the Company or any
of its Subsidiaries on behalf of participants who are or were employed by any of
them in the United States and each such plan for the five year period
immediately following the latest date on which the Company, or such Subsidiary,
maintained, contributed to or had an obligation to contribute to such plan.
32
<PAGE>
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Quarter Day" shall mean each of February 28, May 31, August 31 and
November 30.
"Recurring UK Annual Rental Income" shall mean, in respect of a period, the
UK annual rental income as stated in the Accounts of the Company for such period
which, for the avoidance of doubt, includes line revenue.
"Rental Income" shall mean that portion of the Group's turnover in respect
of rental, maintenance and monitoring income for current or future periods.
"Required Holder(s)" shall mean the holder or holders of at least 66% of
the aggregate principal amount of the Notes from time to time outstanding.
"Responsible Officer" shall mean the Chief Executive Officer, any executive
director, the Finance Director or the Company Secretary of the Company.
"Sanwa Facility" shall mean the facilities made available under the
facility agreement dated 27th September 1994 and 21 August 1995 between Sanwa
Bank California and API, each as amended from time to time.
"SC" shall mean Sonitrol Corporation, a company incorporated under the laws
of the State of Delaware, having its principal office at 1800 Diagonal Road
Suite, 180 Alexandria VA 22314.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Documents" shall mean
(i) each Guarantee and Debenture executed by a member of the Group;
(ii) each Subsidiary Guarantee executed by ASC, SMC and SC;
(iii) each Share Pledge executed by ASC and Automated Loss Prevention
Systems Limited; and
(iv) any guarantees and documents creating security executed and
delivered after the Effective Date as security for any of the obligations
and liabilities of the Company under the Notes or the Note Agreement.
33
<PAGE>
"Security Trustee" shall mean Lloyds Bank Plc in its capacity as such as
appointed under the Intercreditor Agreement and any successor appointed pursuant
to Clause 3.11 of the Intercreditor Agreement.
"Share Pledge" shall mean a pledge of shares substantially in the form of
Exhibit H to the First Amendment, executed, or to be executed by each of ASC
(under which it pledges to the Security Trustee 10% of the shares of API and the
shares of SC and SMC) and Automated Loss Prevention Systems Limited (under which
it pledges to the Security Trustee the shares of ASC).
"Sharing Proportions" shall have meaning provided to such term in the
Intercreditor Agreement.
"Side Letter" shall mean the letter delivered to the Noteholder pursuant to
paragraph 21 of the First Amendment.
"Significant Subsidiary" shall mean any member of the Group whose gross
assets or turnover is greater than (pound)50,000 and the book value of the
assets of which exceeds ten percent of the book value of the assets of the Group
or the net profits of which exceed ten percent of the net profits of the Group
or the turnover of which exceeds ten percent of the turnover of the Group;
provided that, if in the aggregate Significant Subsidiaries and the Company do
not account for at least 80% of the aggregate book value of the assets of the
Group and at least 80% of the aggregate net profits of the Group and at least
80% of the aggregate turnover of the Group, then the 10% requirement referred to
above shall be deemed to decrease in 1% increments to the extent necessary in
order that such 80% levels are satisfied by the Significant Subsidiaries and the
Company (the said book value, net profits and turnover to be determined at any
relevant time by reference to such Subsidiary's most recent annual audited
financial statements and the Group's then most recent audited annual Accounts
delivered to the Noteholders under paragraph 5A).
"SMC" means Sonitrol Management Corporation, a company incorporated under
the laws of the State of Delaware, having its principal office at 8 Campus
Circle Suite 150 Westlake TX 76262.
"SSAP" together with a number means the statement of standard accounting
practice issued by the Accounting Standards Board and identified by reference to
such number.
"Sterling" or "(pound)" shall mean pounds sterling, the lawful currency of
the United Kingdom.
"Sterling Equivalent" means, in relation to an amount in a currency other
than Sterling (an "Alternative Currency") on the day on which the calculation
falls to be made, the amount of Sterling which could be purchased with such
amount of such Alternative Currency on the basis of the spot buying rate for
Sterling quoted by Lloyds Bank plc with such Alternative Currency at
34
<PAGE>
or about 11.00 a.m. in London on the second Business Day immediately prior
to that date.
"Subsidiary" shall mean a subsidiary within the meaning of Section 736 of
the Companies Act 1985 of the United Kingdom and "Subsidiaries" shall be
construed accordingly.
"Subsidiary Guarantee" shall mean a Subsidiary Guarantee substantially in
the form of Exhibit G to the First Amendment.
"Tangible Net Worth" shall mean the aggregate amount of the paid up share
capital of the Company including amounts standing to the credit of the share
premium account and any capital redemption reserves plus or minus the aggregate
amount standing in the Group's capital and revenue reserves (on a consolidated
basis):
(a) adjusted as may be appropriate to take account of any variation in
such share capital account and share premium account since the date to
which such accounts shall have been made up;
(b) deducting any amounts attributable to any intangible asset
included as an asset in the consolidated balance sheet including amounts
attributable to goodwill;
(c) excluding any capital accounts or reserves derived from any
writing up of book value of any assets of a member of the Group above
historic cost less accumulated Depreciation at any time after November 30,
1994;
(d) adding or deducting, as the case may be, any credit or debit
balance (but not to the extent that the same arises as a result of any
extraordinary items) on the Company's consolidated profit and loss account
attributable to the period in relation to which the calculation falls to be
made;
(e) deducting any profit made on a Disposal (other than a Disposal
permitted under clauses (i) to (iii) of paragraph 6G(a)) of any asset by a
member of the Group; and
(f) adding the amount written off the most recent book value of an
asset on the Disposal of such asset where the Disposal Proceeds in respect
of such Disposal are applied in accordance with the terms of this
Agreement.
"Total Debt Costs" shall mean, in relation to a period of time the
aggregate of:
(i) all interest, fees, commissions and other periodic financing
charges accrued due in relation to Borrowings due by any member
35
<PAGE>
of the Group during such period excluding (a) the fees and commissions
payable pursuant to Clause 18 of the Bank Credit Agreement and paragraph 3
of the First Amendment, (b) all bank charges and transmission costs
incurred in connection with the Overdraft Facility (as defined in the Bank
Credit Agreement) and any overdraft provided under the Existing Facilities
(as defined in the Bank Credit Agreement), and (c) any professional fees
incurred in connection with the Bank Credit Agreement and this Agreement;
(ii) all amounts accrued due by members of the Group during such
period under interest rate protection agreements (1ess any amounts accrued
due to members of the Group during such period under interest rate
protections agreements); and
(iii) the interest element of all rentals or, as the case may be,
other payments accrued due in such period under any Finance Lease (not
being Vehicle Leases) to which any member of the Group is a party;
less,
all interest and other similar income accrued to members of the Group
during such period.
"Total Gross Debt" shall mean the aggregate of:
(i) the aggregate principal amount of Bank Indebtedness;
(ii) the amount of the Notes as shown in the balance sheet of the
Company;
(iii) Borrowings of members of the Group relating to the payment or
repayment of principal in respect of paragraphs (i) to (iii) inclusive in
the definition of Borrowings but not including the items referred to at (i)
and (ii) above;
(vi) the amount of the Convertible Capital Bonds as shown in the
Company's balance sheet; and
(vii) the capital element of all rentals or, as the case may be, other
payments payable under all Finance Leases (not being Vehicle Leases) to
which any member of the Group is a party,
PROVIDED THAT any amount standing to the credit of an Application Account (as
defined in the Bank Credit Agreement) and the Disposal Proceeds of the Disposals
of Modern Vitalcall Limited and Modern Integrated Services shall be assumed to
have been applied against the Bank Indebtedness and the Notes as required by the
terms of this Agreement.
36
<PAGE>
"Transferee" shall mean any direct or indirect transferee of all or any
part of any Note purchased by you under this Agreement.
"Vehicle Leases" shall mean all types of leases of vehicles accounted for
in the Company's Accounts as at the Effective Date as not being Finance Leases
whether or not such accounting treatment continues after such date.
11. MISCELLANEOUS
11A. Payments. The Company agrees that, so long as you shall hold any
Note, it will make payments on the Notes which comply with the terms of this
Agreement by wire transfer of immediately available funds for credit to your
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as you may designate in
writing. Each Noteholder agrees that, before disposing of any Note, it will make
a notation thereon (or on a schedule attached thereto) of the date to which
interest thereon has been paid; provided, that the failure to make such a
notation shall not affect the validity of any purported transfer of a Note. The
Company agrees to afford the benefits of this paragraph 11A to any Transferee of
the Notes.
11B. Expenses. The Company agrees to pay, and save you and any Noteholder
harmless against liability for the payment of, all out-of-pocket expenses
arising in connection herewith, including (i) all document production and
duplication charges and the fees and expenses of any special counsel engaged by
you or any Noteholder in connection with this Agreement, the First Amendment,
the Security Documents and the transactions contemplated hereby or thereby and
any subsequent proposed modification of, or proposed consent under, this
Agreement, the Notes or the Security Documents, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the costs
and expenses, including reasonable attorneys' fees, incurred by you or any
Noteholder in enforcing any rights under this Agreement or the Security
Documents or in responding to any subpoena or other legal process issued in
connection with this Agreement or the transactions contemplated hereby or by
reason of your or any Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case.
11C. Consent To Amendments. This Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) except
that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change the maturity of
any Note, or change the principal of, or the rate or time of payment of interest
or any premium payable with respect to any Note, or affect the time, amount or
allocation of any required prepayments, or reduce the proportion of the
principal amount of the Notes required with respect to any consent. The Company
will not, nor will it allow any Subsidiary to, directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
37
<PAGE>
additional interest, fee or otherwise, to any Noteholder or to any Person due
Indebtedness under the Bank Credit Agreement as consideration for or as an
inducement to the entering into any waiver or amendment of any of the terms and
provisions hereof or of the Bank Credit Agreement or the Security Documents
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such Noteholder did not consent to such waiver or amendment. Each
Noteholder at any time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under the Notes shall operate as a waiver of any rights of any holder of such
Note. As used herein and in the Notes, the term "this Agreement" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes. The
Notes are issuable as registered notes without coupons in denominations of at
least $1,000,000 and any integral multiple of $100,000. The Company shall keep
at its principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for registration
of transfer of any Note at the principal office of the Company, the Company
shall, at its expense, execute and deliver one or more new Notes of like tenor
and of a like aggregate principal amount, registered in the name of such
transferee or transferees. Upon the transfer of any Notes, the transferee or
transferees shall succeed to the rights and obligations of the transferor
hereunder and under the Notes and under the Intercreditor Agreement upon
execution and delivery to the Security Trustee (as defined in the Intercreditor
Agreement) of an Agreement of Accession in the form of Exhibit J hereto. At the
option of the holder of any Note, such Note may be exchanged for other Notes of
like tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note of such
holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of any
Note of the loss, theft, destruction or mutilation of any such Note and, in the
case of any such loss, theft or destruction, upon receipt of such holder's
unsecured indemnity agreement, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note of like tenor in lieu of the lost, stolen, destroyed or mutilated Note. Any
transfer of any Note must be effected in accordance with
38
<PAGE>
Rule 144, Rule 144A, Regulation S or any other applicable exemption from the
registration requirements of the Securities Act.
11E. Adjustment of Covenants. (a) If the directors of any of the companies
in the Group determine at any time to change the accounting reference date of
any member of the Group of if any of the accounting principles applied in the
preparation of any Accounts shall be different from the accounting principles
applied in respect of the same as at the date of this Agreement or if as a
result of the introduction or implementation of any SSAP, FRS, FASB or UITF or
any change in any of them or in the applicable law such accounting principles
are required to be changed or, adjustments are required because of a change in
the accounting treatment of the capitalization of equipment on contract hire,
the Company or Required Holder(s) shall promptly give written notice to the
Noteholders or the Company, as the case may be, of such change, determination or
requirement, as the case may be. Thereafter, if Required Holder(s) believe that
any of the financial covenants set out in paragraph 6 need to be amended, the
Company and the Noteholders will negotiate in good faith to replace the existing
financial covenants with financial covenants which provide the Noteholders with
substantially the same protections as the financial covenants set out in
paragraph 6 (but which are not materially more onerous). If the Company and the
Noteholders cannot agree such amended covenants within 30 days then the Company
and the Noteholders shall jointly nominate a firm of chartered accountants to
settle the amended financial covenants, or in default of such nomination any
Noteholder may request the President for the time being of the Institute of
Chartered Accountants in England and Wales to nominate a firm of chartered
accountants. Such accountants shall act as experts and not arbitrators and their
decision shall be final and binding on the Company and the Noteholders. The
costs of such experts shall be paid by the Company.
(b) The calculation of ratios and other amounts under paragraph 6 shall be
made by reference to the latest Accounts, interim accounts, management accounts
and other financial information of the members of the Group but adjusted to
reflect any movement from the assumed interest rates and exchange rates set out
in clause (c) of this paragraph 11E.
(c) For the purpose of clause (c) of this paragraph 11E:
(i) the assumed interest rates for each of the Financial years of
the Company ending November 30, 1996 and November 30, 1997 are as follows:
(x) in respect of Indebtedness denominated in Sterling, 6.75%
plus a margin of 1.5% per annum;
(y) in respect of Indebtedness denominated in Dollars, 6% plus
a margin of 1.5% per annum; and
(z) in respect of Dollar deposits, 5% per annum.
39
<PAGE>
(ii) the assumed $/(pound) exchange rate for the Financial Year of
the Company ending November 30, 1996 is $1.60 to (pound)1; and
(iii) the assumed $/(pound) exchange rate for the Financial Year
ending November 30, 1997 is $1.55 to (pound)1.
(d) On the occurrence of a New Equity Raising or a Major Disposal the
company agrees that the financial undertakings set out in paragraph 6 shall be
recalculated as a result of such occurrence after consultation between the
Company and the Noteholders and be reset to reflect the change in the Company's
financial position as a result thereof but on the basis that while reflecting
such change, the reset financial covenants will provide the Noteholders with
substantially the same protection as the financial covenants set out in
paragraph 6.
11F. Persons Deemed Owners. Prior to due presentment for registration of
transfer, the Company may treat the Person in whose name any Note is registered
as the owner and holder of such Note for the purpose of receiving payments of
principal of and premium, if any, and interest on such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant participation in
such Note to any Person on such terms and conditions as may be determined by
such Noteholder in its sole and absolute discretion, provided that any such
participation shall be in a principal amount of at least $1,000,000.
11G. Survival of Representations; Entire Agreement. All representations
and warranties contained herein or made in writing by or on behalf of the
Company in connection herewith shall survive the execution and delivery f this
Agreement the transfer by you of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any Transferee,
regardless of any investigation made at any time by or on behalf of you or any
Transferee. Subject to the preceding sentence, this Agreement (and the Officer's
Certificate delivered pursuant to paragraph 3C hereof) embody the entire
agreement and understanding between the Purchaser and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
11H. Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee).
11I. Disclosure to Other Persons. The Company acknowledges that the holder
of any Note may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company in connection with or pursuant to this
Agreement, to (i) such holder's directors, officers, employees,
40
<PAGE>
agents and professional consultants, (ii) any other holder of any Note, (iii)
any Person to which such holder offers to sell such Note or any part thereof,
(iv) any Person to which such holder sells or offers to sell a participation in
all or any part of a Note, (v) any federal or state regulatory authority having
jurisdiction over such holder, (vi) the National Association of Insurance
Commissioners or any similar organization or (vii) any other Person to which
such delivery or disclosure may be necessary or appropriate (a) in compliance
with any law, rule, regulation or order applicable to such holder, (b) in
response to any subpoena or other legal process or (c) in connection with any
litigation to which such holder is a party.
11J. Notices. All written communications provided for hereunder shall be
sent by first class mail or nationwide overnight delivery service (with charges
prepaid) and (i) if to a Purchaser, addressed to such Purchaser at the address
specified for such communications in the Purchaser Schedule attached hereto, or
at such other address as such Purchaser shall have specified to the Company in
writing, (ii) if to any other holder of any Note, addressed to such other holder
at such address as such other holder shall have specified to the Company in
writing or, if any such other holder shall not have no specified an address to
the Company, then addressed to such other holder in care of the last holder of
such Note which shall have so specified an address to the Company, (iii) if to
the Company, addressed to it at The Clock House, The Campus, Hemel Hempstead
HP27TL, Attention: Adrian Thompson/Peter Bertram, or at such other address as
the Company shall have specified to the holder of each Note in writing;
provided, however, that any such communication to the Company may also, at the
option of the holder of any Note, be delivered by any other means either to the
Company at its address specified above or to any officer of such Person.
11K. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11L. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to a Purchaser, or to the Required Holder(s), the
determination of such satisfaction shall be made by such Purchaser, or the
Required Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
11M. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York.
11N. Jurisdiction; Service of Process. The Company hereby irrevocably and
unconditionally agrees that any suit, action or proceeding with respect to this
Agreement or any Note, or any action or proceeding to execute or otherwise
enforce any judgment in respect of any breach thereof, brought by any holder of
a Note against the Company or any of their respective Property,
41
<PAGE>
may be brought by such holder of a Note in the United States District Court for
the Southern District of New York or any New York State Court siting in New York
City as such holder of a Note may in its sole discretion elect, and, by the
execution and delivery of this Agreement, irrevocably submits to the
jurisdiction of each such court; and agrees that process served either
personally or by registered mail shall, to the extent permitted by law,
constitute adequate service of process in any such suit. Without limiting the
foregoing, the Company hereby appoints, in the case of any such action or
proceeding brought in the courts of or in the State of New York, CT Corporation
System, with offices on the Effective Date at 1633 Broadway, New York, New York
10019, to receive, for it and on its behalf, service of process in the State of
New York with respect thereto, provided any of the Company may appoint any other
Person, reasonably acceptable to the Required Holder(s), with offices in the
State of New York to replace such agent for service of process upon delivery to
the Noteholders of a reasonably acceptable agreement of such new agent agreeing
so to act. In addition, the Company hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of venue in any suit, action or proceeding arising out of or relating to
this Agreement or any Note, brought in the said courts, and hereby irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Nothing herein shall in any way
be deemed to limit the ability of any holder of a Note to serve any such writs,
process or summonses, in any manner permitted by applicable law or to obtain
jurisdiction over the Company, in such other jurisdiction, and in such manner,
as may be permitted by applicable law.
11O. Gross-up. All payments whatsoever by the Company under this Agreement
or the Notes shall be made by the Company from either the United Kingdom, the
United States or the jurisdiction in which the Company is organized in the
lawful currency of the United States of America free and clear of, and without
reduction or liability for or on account of, tax unless any withholding or
deduction for or on account of tax is required by law.
If the Company shall be obligated by law to make any such withholding or
deduction for any tax (excluding any taxes imposed by the United States of
America or a political subdivision or taxing authority thereof or therein)
imposed by the United Kingdom or the jurisdiction in which the Company is
organized, then the Company will promptly (i) notify the affected holder of a
Note of such requirement, (ii) pay over to the government or taxing authority
imposing such tax the full amount required to be deducted, withheld or otherwise
paid by the Company (including the full amount required to be deducted or
withheld from or otherwise paid by the Company in respect of any Additional
payment (as defined below) required to be made pursuant to clause (iv) hereof),
(iii) furnish such holder with the original receipt of such payment from such
government or taxing authority (or such other evidence sufficient under Treasury
Regulations 1.904-2(a)(2) under the Internal Revenue Code of 1986, as amended
(or any successor or subsequent provisions)), and (iv) save as provided below,
pay to each Person entitled under this Agreement or the Notes to receive the
payment from which the amount referred to in clause (ii) has been so deducted,
withheld
42
<PAGE>
or otherwise paid such additional amount as is necessary in order that the
amount received by such Person after such required deduction or withholding
(including any required deduction or withholding on or with respect to such
additional amount), shall equal the amount such Person would have received had
no such deduction or withholding been made (the "Additional Payment"), provided
that no Additional Payment shall be payable with respect to any amount payable
under this Agreement or the Notes to any Person if:
(1) so long as no Change in Tax Law has occurred which changes the ability
or right of such holder to file such form or changes the substance of such
form, such holder fails to file a validly completed and executed Form FD13
with the United States Internal Revenue Service prior to the relevant
interest payment date in sufficient time such that the company shall
actually have received a direction to pay gross from the United Kingdom
Inspector of Foreign Dividends,
(2) such holder fails to be a resident of the United States of America
within the meaning of the income tax treaty between the United States of
America and the United Kingdom (but only to the extent the amount of such
deduction or withholding exceeds that which would have been required had
such Person been resident in the United States of America), or
(3) such tax would not have been imposed but for the existence of any
present or former connection between such holder and the United Kingdom,
other than the mere ownership of, or receipt of payments under the Notes.
The provisions of clause (1) above shall not be applicable to a holder of a Note
which is a Purchaser so long as such holder files within 30 days after the
Closing Date a validly completed and duly executed Inland Revenue Form FD13 with
the Internal Revenue Service as required to establish their entitlement to an
exemption from U.K. withholding tax under the income tax treaty currently in
force between the United States and the United Kingdom. If the Company fails to
pay any withheld or deducted taxes imposed by the United Kingdom or the
jurisdiction in which the Company is organized in accordance with clause (ii) of
this paragraph 11O in accordance with applicable law, then the Company will
indemnify and hold harmless the affected Person and reimburse such Person on an
after-tax-basis for the amount of such taxes, penalties, interest and additions
to tax imposed on and paid by such Person.
Each holder of a Note agrees that, upon the written request of the Company
and to the extent it is legally entitled to do so, it will file any forms,
certificates, documents, applications or returns, or other reasonably required
evidence as specified in such request (collectively, "Forms"), which are
required to be filed by such holder to avoid or to reduce any taxes
indemnifiable by the Company under this paragraph 11O, provided that the filing
of any such Form does not require the holder to reveal any confidential or
proprietary tax return
43
<PAGE>
or other information and does not require the holder to incur any unreasonable
expense.
If the Company is required to pay an Additional Payment with respect to
any taxes pursuant to this paragraph 11O to or on behalf of a holder of a Note
and such holder subsequently receives a refund of such taxes, then such holder
shall reimburse the Company the amount of such refund net of any taxes payable
by the holder in respect of the receipt thereof; provided, however, that no such
amount shall be payable (x) while a Default or Event of Default shall have
occurred and be continuing and (y) to the extent such amount exceeds the amount
of the taxes to which such refund relates.
The obligations of the Company and the Noteholders under this paragraph
11O shall survive the payment of the Notes.
11P. Judgment Currency Indemnity. Any payment on account of any amount
that is payable hereunder in Dollars which is made to or of the account of any
Noteholder in the lawful currency of any other jurisdiction ("currency"),
whether as a result of any judgment or order or the enforcement thereof or the
realization of any security or the liquidation of the Person obligated to make
such payment shall constitute a discharge of the such Person's obligation under
this Agreement or the Notes only to the extent of the amount of dollars which
such Noteholder could purchase in the London foreign exchange markets with the
amount of other Currency in accordance with normal banking procedures at the
rate of exchange prevailing on the first day (other than a Saturday) on which
banks in London are generally open for business following receipt of the payment
first referred to above. If the amount of Dollars that could be so purchased is
less than the amount of Dollars originally due to such Noteholder, the Person
obligated hereunder to make such payment shall indemnify and save harmless such
Noteholder from and against all loss or damage arising out of or as a result of
such deficiency. This indemnity shall constitute an obligation separate and
independent from the other obligations contained in this Agreement or the Notes,
shall give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by such Noteholder from time to time and
shall continue in full force and effect notwithstanding any judgment or order
for a liquidated sum in respect of an amount due hereunder or under any judgment
or order.
11Q. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11R. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
44
<PAGE>
PURCHASER SCHEDULE
Note Denominations
Principal and Registered
Purchaser Amount Numbers
--------- ------ -------
THE PRUDENTIAL INSURANCE $60,721,638.12 $60,721,638.12(R-1)
COMPANY OF AMERICA
(1) All payments on account of the above Note numbered R-1 (and any replacement
or substitute Notes therefor) shall be made by wire transfer of immediately
available funds for credit to:
Account No. 050-54-526
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, NY 10015 U.S.A.
ABA No. 021000238
Each such wire transfer shall set forth payment with respect to Automated
Security (Holdings) PLC Senior Notes due 1998 referencing "Security Number " and
the due date and application (as among principal, Yield-Maintenance Amount and
interest) of the payment being made and a notice setting forth the above details
shall be contemporaneously delivered to:
The Prudential Insurance Company
of America
c/o Investment Operations Group
Three Gateway Center
100 Mullberry Street
Newark, New Jersey 07102-4069
Attn: Manager
Fax: (201) 802-7551
Address for all other communications and notices:
The Prudential Insurance Company
of America
c/o Private Placement Service
Management
Four Gateway Center, 6th Floor
<PAGE>
100 Mullberry Street
Newark, New Jersey 07102-4069
Attn: Investment Information & Accounting
Tel: (201) 802-3685
Fax: (201) 802-7452
with a copy to:
White & Case
7-11 Moorgate
London EC2R 6HH
England
Attn: Senior Partner
Tel (44) 71 726 6361
Fax: (44) 71 726 4314
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 22-1211670
<PAGE>
EXHIBIT J TO NOTE AGREEMENT
AGREEMENT OF ACCESSION
To the Parties to the
Intercreditor Agreement
(as defined below)
This Agreement of Accession relates to an Inter-Creditor Agreement dated
December 31, 1995 amount Automated Security (Holdings) plc ("ASH"), Lloyds Bank
Plc, as Security Trustee and Agent and certain financial institutions named
therein (the "Intercreditor Agreement").
[Name of transferee of Note] (the "Transferee") has assumed all right
title and interest of [name of transferor] in a Note in Principal amount equal
to $________ (the "Transferred Note") issued by ASH under the terms of a Note
Agreement, dated as of May 27, 1994 and amended and restated December 21, 1995
(the "Note Agreement").
The Transferee hereby conforms that it has received a copy of the
Intercreditor Agreement and the Note Agreement. The Transferee undertakes with
each of the parties to the Intercreditor Agreement that it has accepted the
Transferred Note subject to the terms of the Note Agreement and the
Intercreditor Agreement and that it hereby accedes to and accepts all the rights
and obligations of a Noteholder under the terms of the Intercreditor Agreement
and the Note Agreement.
IN WITNESS WHEREOF, this Agreement of Accession has been executed as a
deed this __ day of __________, 199_.
[Transferee]
By___________________
By___________________
EXHIBIT J
FORM OF DEED OF ACCESSION
<PAGE>
EXHIBIT C TO FIRST AMENDMENT
OPINION OF US COUNSEL TO
THE COMPANY
The opinion shall be addressed to the Noteholder, and may contain such
customary assumptions and indicate such investigations as are deemed necessary
and appropriate by the Company's special US counsel and are acceptable to the
Noteholder.
The opinion shall express a favorable opinion as to:
(1) Each of ASC, SMC and SC has been duly incorporated, is an existing
corporation in good standing under the laws of the State of Delaware and has
corporate power and authority to enter into the Security Documents to which it
is party and to perform its obligations thereunder.
(2) Each of the First Amendment and the Note Agreement as amended by the
First Amendment constitutes valid and legally binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(3) Each of the Security Documents which by its terms is governed by New
York law constitutes a valid and legally binding obligation of the Subsidiaries
party thereto, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(4) All regulatory consents, authorizations, approvals and filings
required to be obtained or made by the Company or any Subsidiary under the
Federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware for the execution, delivery and
performance of the First Amendment and the Security Documents have been obtained
or made.
EXHIBIT C
FORM OF OPINION OF
US COUNSEL FOR THE COMPANY
<PAGE>
EXHIBIT D TO FIRST AMENDMENT
OPINION OF ENGLISH COUNSEL
TO THE COMPANY
The opinion shall be addressed to the Noteholder, and may contain such
customary assumptions and indicate such investigations as are deemed necessary
and appropriate by the Company's special English counsel and are acceptable to
the Noteholder.
The opinion shall express a favorable opinion as to:
(1) The Company is a public limited company incorporated and validly
existing under the law of England and has power under its Memorandum of
Association to enter into the First Amendment and the Security Documents to
which it is party and to perform thereunder and under the Note Agreement as
amended by the First Amendment.
(2) Each Subsidiary which is executing a Debenture and Guarantee (each an
"English Subsidiary") is a limited company incorporated and validly existing
under the law of England and has power under its Memorandum of Association to
enter into the Security Documents to which it is party and to perform
thereunder.
(3) The execution by the Company of the First Amendment and the Security
Documents to which it is party and the performance by it of its obligations
thereunder has been duly authorized by the Company and each such agreement has
been duly executed and delivered by the Company.
(4) The execution by each English Subsidiary of the Security Documents to
which it is party and the performance by it of its obligations thereunder has
been duly authorized by such English Subsidiary and each such agreement has been
duly executed and delivered by the English Subsidiary party thereto.
(5) The execution by the Company of the First Amendment and the Security
Documents to which it is party and the performance by it of its obligations
thereunder does not conflict with, nor result in any breach of, nor constitute a
default under, nor result in the creation of any Lien upon any of the properties
or assets of the Company pursuant to (a) any provision of its Memorandum or
Articles of Association, (b) any statute, law, rule or regulation of England,
(c) any judgment, decree, writ, injunction, order or award of any English
arbitrator, court or governmental authority binding upon the Company or any of
its assets or (d) any material agreement or other instrument to which the
Company is a party or by which the Company may be bound.
(6) The execution by each English Subsidiary of the Security Documents to
which it is party and the performance by it of its obligations thereunder does
not conflict with, nor result in any breach of, nor constitute a default under,
nor result in the creation of any Lien upon any of the properties or assets of
such English Subsidiary pursuant to (a)
EXHIBIT D
FORM OF OPINION OF ENGLISH
COUNSEL FOR THE COMPANY
<PAGE>
any provision of its Memorandum or Articles of Association, (b) any statute,
law, rule or regulation of England, (c) any judgment, decree, writ, injunction,
order or award of any English arbitrator, court or governmental authority
binding upon the Company or any of its assets or (d) any material agreement or
other instrument to which such English Subsidiary is a party or by which such
English Subsidiary may be bound.
(7) Each of the Security Documents which by its terms is governed by
English law constitutes a valid and legally binding obligation of the Company or
the Subsidiary party thereto, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(8) No approval or consent of, or filing or registration with, any
governmental body in England and Wales is necessary to connection with (i) the
execution and delivery by the Company of the First Amendment (ii) the execution
and delivery of the Security Documents other than ___________.
(9) There is no reason why the choice of New York law as the governing law
of the first Amendment should not be recognized and given effect by the courts
of England.
(9) The courts of England will enforce a judgment obtained in a court of
the State of New York or a court of the United States of America located in New
York.
(10) No United Kingdom stamp duty, stamp duty reserve tax or other similar
tax is payable in connection with the execution, delivery or performance of the
First Amendment or the Security Documents.
EXHIBIT D
FORM OF OPINION OF ENGLISH
COUNSEL FOR THE COMPANY
<PAGE>
EXHIBIT E TO FIRST AMENDMENT
AUTOMATED SECURITY (HOLDINGS) PLC
8.28% SENIOR NOTES
No. R- December __, 1995
PPN GO528# AA 0
FOR VALUE RECEIVED, the undersigned, AUTOMATED SECURITY (HOLDINGS) PLC
(herein called the "Company"), a corporation organized and existing under the
laws of England and Wales, hereby promises to pay to
----------------------
or its registered assigned, the principal sum of
[amount in words]
($--------------)
on the Final Maturity Date (as defined in the Agreement referred to below) (or
such lesser principal amount of this note as is outstanding on that date) with
interest computed on the basis of a 360-day year of twelve 30 day months (a) on
the unpaid balance thereof at the rate of 8.28% per annum from November 27,
1995, payable semiannually on the 27th day of May and November in each year,
commencing with May 27, 1996 until the principal hereof shall have become due
and payable, and (b) on any overdue payment (including any overdue repayment or
prepayment) of principal, any overdue payment of Yield-Maintenance Amount and,
to the extent permitted by applicable law, any overdue payment of interest,
payable semiannually as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the greater
of (i) 10.28% or (ii) 2% over the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time in New York City as its
Prime Rate.
Payments of principal, Yield-Maintenance Amount, if any, and interest are
to be made at the office of Morgan Guaranty Trust Company of New York, 23 Wall
Street, New York, New York 10015 or such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of a series of senior notes of the Company (herein called
the "Notes") issued pursuant to a Note Agreement, dated as of May 27, 1994 as
amended and restated on December __, 1995 (herein called the
<PAGE>
"Agreement" between the Company and the original Purchasers of the Notes named
in the Purchaser Schedule attached thereto and is entitled to the benefits
thereof. This Note is subject to optional prepayment, in whole or from time to
time in part, with a Yield-Maintenance Amount, all as more fully set forth in
the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer, duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing, a
new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of transfer,
the Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and the Company shall not be affected by any notice to the contrary.
If an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
This Note has the benefit of the Security Documents, as defined in the
Agreement.
This Note shall be governed by the laws of the State of New York.
AUTOMATED SECURITY (HOLDINGS) PLC
By _____________________
Name:
Title:
2
EXHIBIT 2.4(c)
CONFORMED COPY
DATED 21st December 1995
AUTOMATED SECURITY (HOLDINGS) PLC
- and -
LLOYDS BANK Plc
as Security Trustee
- and -
LLOYDS BANK Plc
as Agent
- and -
THE BANKS
- and -
MIDLAND BANK plc
as Working Capital Bank
- and -
THE US LOAN NOTE HOLDERS
------------------------
INTER-CREDITOR AGREEMENT
------------------------
<PAGE>
THIS INTER-CREDITOR AGREEMENT is dated 21st December 1995 and made
BETWEEN:
(1) AUTOMATED SECURITY (HOLDINGS) PLC, a company incorporated under the laws of
England and Wales with registered number 321639, whose registered office is
at The Clock House, The Campus, Hemel Hempstead, Hertfordshire, HP2 7TL
(the "Company");
(2) LLOYDS BANK Plc of P.O. Box 560, Regent House, St. John's Row, Bedminster,
Bristol, BS99 1PQ as the Security Trustee (as such term is more
particularly defined below);
(3) LLOYDS BANK Plc of P.O. Box 560, Regent House, St. John's Row, Bedminster,
Bristol, BS99 1PQ as the Agent;
(4) THE BANKS as defined below;
(5) MIDLAND BANK plc of Magnus House, 3 Lower Thames Street, London EC3R 6HA as
the Working Capital Bank; and
(6) THE US LOAN NOTE HOLDERS as defined below being at the date hereof THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement the following expressions shall have the following
meanings (except where the context otherwise requires):
"Adjusted Bank Principal Liabilities" means the Bank Liabilities in so far
as they relate to principal amounts outstanding under the Credit Agreement
adjusted so that all amounts of success fees paid after the date hereof are
deemed to have been applied against such principal amounts;
"Adjusted Note Principal Liabilities" means the Note Holder Liabilities in
so far as they relate to amounts of principal of the US Loan Notes adjusted
so that all amounts of success fees and yield maintenance premiums paid
after the date hereof are deemed to have been applied against the principal
amount of the US Loan Notes;
"Bank Liabilities" means all present and future sums, liabilities and
obligations (whether actual, contingent, present and/or future) payable or
owing by the Company to the Banks under the Credit Agreement and the
Security Documents;
<PAGE>
"Banks" means all and each of the Agent, the Banks and the Working Capital
Banks (as such terms are defined in the Credit Agreement);
"Credit Agreement" means a credit agreement of even date and made between
(1) Automated Security (Holdings) PLC, (2) certain Subsidiaries of
Automated Security (Holdings) PLC, (3) the Banks (as defined therein), (4)
Lloyds Bank Plc as agent and (5) Midland Bank plc as Working Capital Bank;
"Creditors" means all and each of the Banks and the US Loan Note Holders;
"Default" means a Default or an Event of Default as defined in any of the
Financing Agreements and any other event whatsoever which would (whether
with the giving of notice or otherwise) have the effect of causing any of
the Liabilities to become immediately due and payable;
"Fees Letter" means a letter addressed by the Security Trustee to the
Company and described on its face as the Fees Letter;
"Financing Agreements" means all and each of the Credit Agreement, the US
Loan Notes and the US Loan Notes Instrument;
"Liabilities" means the aggregate of the Bank Liabilities and the Note
Holder Liabilities; and
"Majority Creditors" means those Creditors (on the basis that an
institution can be counted only once) being a majority in number and who
are owed not less than 51 per cent of the Liabilities;
"Note Holder Liabilities" means all present and future sums, liabilities
and obligations (whether actual, contingent, present or future) payable or
owing by the Company in respect of the US Loan Notes to any of the US Loan
Note Holders under the US Loan Note Instrument or the US Loan Notes;
"Required Holder(s)" has the meaning attributed thereto in the US Loan Note
Instrument;
"Security Documents" means the Security Documents as defined in the Credit
Agreement and the US Loan Note Instrument;
"Security Trustee" means Lloyds Bank Plc in its capacity as security agent
and security trustee for all and each of the Banks, the Agent and the US
Loan Note Holders and each successor security Trustee appointed under
Clause 3.1;
"Sharing Proportions" means, in relation to the Banks as a whole and the US
Loan Note Holders as a whole, those proportions as determined and as
adjusted from time to time pursuant to Clause 6, and "Sharing Proportion"
shall be construed accordingly;
<PAGE>
"US Loan Notes" means the Company's $60,721,638, 8.28 per cent senior notes
due 1998;
"US Loan Note Holders" means the holders for the time being of the US Loan
Notes; and
"US Loan Notes Instrument" means the Note Agreement dated as of May 27,
1994 between the Company and The Prudential Insurance Company of America as
amended by a First Amendment dated on or about the date hereof made between
the same parties.
1.2 Terms defined in the Credit Agreement have the same meanings in this
Agreement except as otherwise defined herein.
1.3 Unless the context or the express provisions of this Agreement otherwise
requires:
(a) words importing the singular shall include the plural and vice versa;
(b) the term "assets" includes properties and revenues;
(c) all references to documents include all variations and replacements
thereof and supplements thereto but with prejudice to any restrictions
on the same;
(d) all references to a party include references to its permitted assigns
and transferees and its successors in title and (where applicable) to
any replacement or additional trustee or agent; and
(e) headings are for convenience only and shall not affect the
construction hereof.
2. UNDERTAKINGS OF THE COMPANY AND THE CREDITORS
2.1 From and after the date hereof and so long as any of the Liabilities are or
may be outstanding, except with the prior consent of the Majority Creditors
(subject to Clause 7.1.3), the Company and each other member of the Group
will not secure all or any part of the Liabilities otherwise than by the
Security Document.
2.2 Each Creditor undertakes that, without the prior consent of the Majority
Creditors (subject to Clause 7.1.3), it shall not take, accept or receive
the benefit of any security interest from the Company or any other member
of the Group unless first or at the same time there is conferred on the
other Creditors the benefit of such security interest.
<PAGE>
3. SECURITY TRUSTEE
3.1 Each Creditor hereby irrevocably appoints the Security Trustee to act as
its agent and trustee in connection with the Security Documents and this
Agreement and, subject to the other terms hereof, for such purposes
irrevocably authorises the Security Trustee to take such action and to
exercise and carry out all the discretions, authorities, rights, powers and
duties as are specifically delegated to the Security Trustee in each of
this Agreement and the Security Documents together with such powers and
discretions as are incidental thereto. The Security Trustee shall have no
duties or responsibilities except those expressly set out in this Agreement
and the Security Documents.
3.2 The Security Trustee shall, subject to the other terms hereof, act
hereunder and under the Security Documents in accordance with the
instructions of the Majority Creditors and any such instructions given
pursuant to this sub-Clause 3.2 and any action taken by the Security
Trustee in connection therewith shall be binding upon all the Creditors.
3.3 The Security Trustee shall not be obliged to take any steps to ascertain
whether any Default (as defined in the Credit Agreement or the US Loan
Notes Instrument) has happened or exists and, until the Security Trustee
shall have received express notice to the contrary from a Creditor, the
Security Trustee shall be entitled to assume that no Default (as so
defined) has happened or exists.
3.4 The Security Trustee will be entitled to rely on any communication or
document believe by it to be genuine and correct and to have been
communicated or signed by the person by whom it purports to be communicated
or signed and shall not be liable to any of the parties to this Agreement
for any of the consequences of such reliance.
3.5 The Security Trustee shall not be obliged to take or commence any legal
action or proceeding against any person, body or corporation arising out of
or in connection with this Agreement or the Security Documents until it
shall have been indemnified or secured to its satisfaction against any and
all costs, claims and expenses (including, but not limited to, legal fees
and expenses which it may expend or incur in such legal action or
proceeding).
3.6 Neither the Security Trustee nor any of its directors, employees or agents
shall be liable for any action taken or omitted to be taken by it or any of
them under or in connection with this Agreement or the Security Documents
unless caused by its or their negligence or wilful misconduct. The Security
Trustee shall not be responsible for any statements, representations or
warranties in this Agreement or the Security Documents or for any
information supplied or provided or hereafter to be supplied or provided to
the Creditors, in respect of any matter relating to this Agreement, the
Security Documents or for the execution, effectiveness, genuineness,
validity, enforceability or sufficiency of such documents or any of the
other documents referred to herein or therein or for the recoverability of
any of the Bank Liabilities or the Note Holder Liabilities or any of the
other sums to become due and payable pursuant hereto.
<PAGE>
3.7 Each Creditor acknowledges that it has, independently and without reliance
on the security Trustee and based on such documents and information as is
deemed appropriate, made its own analysis of the transactions contemplated
by the Financing Agreements, reached its own decision to enter into the
relevant Financing Agreements and made its own investigation of the
financial condition and affairs of each member of the Group and its own
appraisal of the credit worthiness of each member of the Group. Save as
specifically provided herein the Security Trustee shall not be under any
duty or obligation, either initially or on a continuing basis, to provide
any Creditor with any credit information or other information with respect
to the financial condition of any member of the Group. Each Creditor
further acknowledges that it will, independently and without reliance on
the Security Trustee and based on such documents and information as it
shall deem appropriate at the time, make its own decisions in taking or not
taking action under this Agreement and the Security Documents.
3.8 The Security Trustee shall be entitled to obtain and rely on the advice of
any professional advisers selected by it given in connection with this
Agreement and the Security Documents or any of the matters contemplated
hereby or thereby, and shall not be liable to the Creditors or any of them
for any of the consequences of such reliance.
3.9 With respect to its own participations in any of the Bank Liabilities or
the Note Holder Liabilities, the Security Trustee shall have the same
rights and powers under and in respect of this Agreement and the Security
Documents as though it was not also acting as agent and trustee for the
Creditors. The Security Trustee may, without liability to account, accept
deposits from, lend money to and generally engage in any kind of banking or
trust business with or for the Company as if it was not the agent and
trustee for the Creditors.
3.10 The Creditors agree to indemnify the Security Trustee (to the extent not
reimbursed by members of the Group) rateably according to that part of the
aggregate of the Bank Liabilities and the Note Holder Liabilities owed to
each Creditor from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Security Trustee in its capacity as
agent and trustee for the Creditors or in any way relating to or arising
out of this Agreement and the Security Documents or any action taken or
omitted by the Security Trustee in enforcing or preserving the rights of
the Creditors under this Agreement and the Security Documents provided that
no damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Security Trustee's negligence or wilful
misconduct PROVIDED THAT no Creditor shall be liable in the aggregate to
the Security Trustee for an amount in excess of the Principal Bank
Liabilities or the Principal Note Holder Liabilities owed to such Creditor.
3.11 Subject to the appointment and acceptance of a successor Security Trustee
as provided below, the Security Trustee may resign at any time by giving to
the Agent
<PAGE>
and the US Loan Note Holder not less than thirty (30) days' notice of its
intention to do so. Upon receipt of such notice or resignation the
Creditors shall appoint as successor Security Trustee any bank or financial
institution selected by the Majority Creditors which is willing and able to
act as such agent for the Creditors. If no such successor Security Trustee
is selected within thirty (30) days after such Security Trustee's giving of
notice of resignation then the Security Trustee shall have the right to
appoint such a successor Security Trustee. Any such appointment shall take
effect upon notice thereof being given to the Agent and the US Loan Note
Holder. Thereafter, the resigning Security Trustee shall be discharged from
any further obligation under this Agreement and the Security Documents and
its successor and each of the other parties hereto and thereto shall have
the same rights and obligations inter se as they would have had if such
successor had been a party to this Agreement and the Security Documents in
place of the resigning Security Trustee. The resigning Security Trustee
shall make over to its successor all such records as its successor requires
to carry out its duties.
3.12 The Security Trustee may from time to time in its sole discretion by
written notice to the Agent and the US Loan Note Holder designate a
different office in the United Kingdom from which its duties as the
Security Trustee will thereafter be performed.
3.13 The Security Trustee shall accept without investigation, requisition or
objection such title as any person may have to the undertaking, property
and assets the subject of the Security Documents and shall not be bound or
concerned to examine or enquire into nor be liable for any defect or
failure in the title of any person whether such effect or failure was known
to the Security Trustee or might have been discovered upon examination or
enquiry and whether capable of remedy or not nor for any failure on the
part of the Security Trustee to give notice to any third party of the
Security Documents or otherwise perfect or register the security thereby
created.
3.14 Each of the Creditors hereby confirms and agrees that it does not wish to
be registered in accordance with Rule 146 of the Land Registration Rules
1925 as the joint proprietor of any mortgage or charge created pursuant to
any Security Documents and accordingly authorises the Security Trustee to
hold such mortgage or charge in its sole name as Trustee for the Creditors
and hereby requests HM Land Registry to register the Security Trustee as
the sole proprietor of any such mortgage or charge.
3.15 The Security Trustee may:
(a) act as agent or trustee or in a fiduciary or other capacity on behalf
of any other group of banks or financial institutions providing
facilities to any member of the Group or any associated company of a
member of the Group or any associated company of a member of the Group
without regard to the effect of exercising or omitting to exercise its
discretions, authorities, rights, powers and duties in such capacity
in the interests of the Creditors and may act or omit to act in such
capacity as freely in all
<PAGE>
respects as if the Security Trustee had not been appointed to act as
agent for the creditors; and
(b) subscribe for, hold or be or become beneficially entitled to, or
dispose of, shares or securities, or options or other rights to and
interests in shares or securities in any member of the group or any
associated company of a member of the Group (and, in each case, may do
so without liability to account).
3.16 For so long as Lloyds Bank Plc is the Security Trustee, the Capital Markets
Group of Lloyds Bank Plc shall be treated as a separate entity from any
other of the divisions of the Security Trustee or its Subsidiaries and,
notwithstanding the generality of the foregoing, in the event that any of
the Security Trustee's divisions (including its Capital Markets Group) or
similar units or Subsidiaries should act of any member of the Group in any
capacity (whether as bankers or otherwise) in relation to any other matter,
any information given by any member of the Group to such divisions, similar
units or Subsidiaries shall be treated as confidential and the Security
Trustee shall, as between itself and the Creditors, not be obliged to
disclose the same to any Creditor or any other person.
3.17 For the purposes of this Agreement, the Security Trustee shall be deemed
not to have any actual knowledge or actual notice of the contents of any
information obtained by it or supplied to it by or on behalf of any member
of the Group other than the contents of information obtained by or supplied
to it as Security Trustee for the Creditors pursuant to or in connection
with this Agreement.
4. ENFORCEMENT
At any time after the Liabilities have become immediately due and payable
pursuant to Clause 15.2 of the Credit Agreement and paragraph 7A of the US
Loan Notes Instrument, the Security Trustee shall enforce the Security
Documents as directed by the Majority Creditors.
5. DISTRIBUTION OF ENFORCEMENT PROCEEDS
5.1 On the enforcement (whether successful or not) of any or all of the
Security Documents, the Security Trustee shall be entitled to deduct from
the proceeds of each enforcement (which expression shall include all
amounts realized or recovered by the Security Trustee on or after such
enforcement) its costs, charges and expenses incurred in connection with
such enforcement.
5.2 Each Creditor and the Security Trustee hereby agrees that any credit
balance held with a Bank which is taken into account by such Bank when
providing an overdraft under the terms of the Credit Agreement up to a net
limit may be set-off and applied against any debit balance on the relevant
overdraft at any time after such debit balance becomes immediately due and
payable and the Creditors (other than
<PAGE>
such Bank) and the Security Trustee shall have no claim to, or interest in,
any credit balance so applied.
5.3 After making any deductions allowed by Clause 5.1, all proceeds of
enforcement of the Security Documents shall be applied:
(i) first, by distributing such proceeds to the Agent for the account of
itself and the Banks up to an aggregate amount not exceeding the
amount in Sterling by which the aggregate principal amount outstanding
under the Credit Agreement (as at the date the Agent serves notice
under Clause 15.2.1 of the Credit Agreement) exceeds (pound)81,641,000
(and for these purposes amounts denominated in currencies other than
Sterling will be taken into account on the basis of the Sterling
Equivalent thereof as at such date) PROVIDED THAT the proceeds
distributed under this sub-Clause (i) shall not exceed
(pound)5,000,000 and FURTHER PROVIDED THAT this Clause (i) shall be of
no further force or effect following the reduction of the Facilities
contemplated by sub-Clauses (a) and (b) of Clause 10.2.1 of the Credit
Agreement;
(ii) secondly, after the application referred to in (i) above, by
distributing such proceeds to the Agent for the account of the Banks
for application against the Bank Liabilities and to the US Loan Note
Holders for application against the Note Holder Liabilities pro rata
to the Adjusted Bank Principal Liabilities and the Adjusted Note
Principal Liabilities (calculated in Sterling using the relevant spot
rate of exchange at the time of distribution) PROVIDED THAT after the
first of either the Bank Liabilities or the Note Holder Liabilities
having been discharged in full then all proceeds shall go solely to
the payment of whichever of the Bank Liabilities or the Note Holder
Liabilities which remains undischarged; and
(iii)thirdly, after the discharge in full of the Liabilities, by
distributing the remaining proceeds of enforcement to the person or
persons next entitled to them.
5.4 The Security Trustee shall notify the Creditors of any proposed
distribution and the proposed date of distribution.
5.5 If any future and/or contingent liability included in any calculation of
the Liabilities finally matures or is settled for less than the future
and/or contingent amount provided for in the relevant calculation, the
relevant Creditor shall notify the Security Trustee of that fact and such
adjustment shall be made by payment by such Creditor to the Security
Trustee for distribution amongst the other Creditors as may be necessary to
put the Creditors into the position they would have been in (but taking no
account of the time cost of money) had the original distribution been made
on the basis of the actual as opposed to the future and/or contingent
liability.
5.6 The Security Trustee may, at its discretion, accumulate proceeds of
enforcement and/or disposals on an interest bearing account in its own name
until there is a minimum of (pound)1,000,000 to distribute under Clause
5.3.
<PAGE>
6. SHARING PROPORTIONS ADJUSTMENTS
6.1 At the time of any relevant distribution, the Sharing Proportions shall be
determined as follows:
(i) the Sharing Proportion of the Banks (rounded to four decimal places)
shall be calculated as follows:
Maximum principal available amount
of the Facilities immediately prior to the
distribution
--------------------------------------------- x100
The principal amount of the US Loan Notes
and the maximum principal available amount
of the Facilities immediately prior to the
distribution
(ii) The Sharing Proportion of the US Loan Note Holders (rounded to four
decimal places) shall be calculated as follows:
Principal amount of US Loan Notes
immediately prior to the distribution
--------------------------------------------- x100
The principal amount of the US Loan
Notes and the maximum principal available
amount of the Facilities immediately
prior to the distribution
6.2 For the avoidance of doubt, in calculating for the purposes of Clause 6.1
the principal amount of the US Loan Notes, no account shall be taken of
any yield maintenance premium payable in respect of the US Loan Notes.
6.3 In determining the proportions in Clauses (i) and (ii) of Clause 6.1, with
respect to any principal amount in US Dollars, the Sterling Equivalent
thereof calculated as at the date of the relevant distribution shall be
used.
7. DECISIONS IF THE MAJORITY CREDITORS
7.1.1 In relation to any matter that requires the consent or approval or waiver
or any other type of decision (the "Consent") of the Majority Creditors,
the Company shall inform the Banks (through the Agent) and the US Loan
Note Holders of the Consent that is required. Once they have considered
the relevant matter, each Bank (through the Agent) and each US Loan Note
Holder will inform the Security Trustee whether or not they are prepared
to give the relevant Consent. As soon as practicable, the
<PAGE>
Security Trustee will inform the Company, the Agent and the US Loan Note
Holders whether or not the Majority Creditors have given the relevant
Consent.
7.1.2 If the Creditors are requested to amend the financial covenants in the
Credit Agreement and the US Loan Notes Instrument the Security Trustee
will convene such meetings as are necessary for the purpose of considering
the proposed amendments and will inform the Company of the decision of the
Majority Creditors as and when such decision is made. In the event that
amended financial covenants are agreed by the Majority Creditors each of
the parties hereto agrees to amend the Credit Agreement and the US Loan
Notes Instrument accordingly.
7.1.3 Notwithstanding any other provision of this Agreement, without the consent
of the Required Holder(s), the Majority Creditors shall not consent to the
securing by any member of the Group of any part of the Liabilities unless
the Note Holder Liabilities are secured on a pro rata basis.
8. AMENDMENTS TO THE FINANCING AGREEMENTS
8.1 The US Loan Note Holders hereby undertake with the Banks that, while the
Bank Liabilities are outstanding, they shall not consent to any amendment
or variation of the maturity or interest rate of the US Loan Notes or
paragraphs 4A, 4B, 4F, 5, 6, 7, 8, 11C and 11E and so far as it relates to
any of the same, paragraph 10 of the Loan Note Instrument without the
prior consent of the Majority Banks.
8.2 The Banks hereby undertake with the US Loan Note Holders that while the
Note Holder Liabilities are outstanding, they shall not consent to any
amendment or variation of Clauses 8, 9, 13, 14 and 15 and, in so far as it
relates to any of the same, Clause 1 of the Credit Agreement without the
prior consent of the Required Holders.
9. REPAYMENT AND PREPAYMENTS
For the avoidance of doubt, it is hereby agreed that all repayment and
prepayment provisions contained in the Financing Documents may not be
waived by the Majority Creditors.
10. RELEASES
The Security Trustee is hereby authorized to release assets from the
Security Documents which are or are to be the subject of a Disposal in
circumstances where such Disposal is permitted pursuant to the terms of
the Credit Agreement and the US Loan Notes Instrument.
11. MISCELLANEOUS
11.1 The Company enters into this Agreement for the purpose of acknowledging
and agreeing to the arrangements set out herein and none of the
undertakings given by
<PAGE>
the Banks and the US Loan Note Holders is given to the Company or shall be
enforceable by the Company.
11.2 If any provision of this Agreement is prohibited or unenforceable in any
jurisdiction in relation to any party hereto, such prohibition or
unenforceability shall not invalidate the remaining provisions hereof or
affect the validity of enforceability of such provision in any other
jurisdiction or in relation to any of the other parties hereto.
11.3 This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the
same instrument.
11.4 All notices or other communications under this Agreement shall be made by
letter, telex or facsimile and shall be deemed to be duly given or made
when delivered (in the case of a letter) or when received (in the case of
telex or facsimile) by the relevant party at its address, telex number or
facsimile number as may be notified by the relevant party to the other
parties for the purpose of this Clause 16.4 and in the case of notices to
and from the Agent and the Security Trustee specifying their respective
capacities.
11.5 This Agreement overrides anything in the terms of the Credit Agreement and
the US Loan Note Instrument to the contrary.
11.6 The Company agrees to pay the Security Trustee a fee in accordance with
the terms of the Fees Letter.
12. ASSIGNMENT AND TRANSFER
12.1 So long as any of the Liabilities are or may be outstanding, each US Loan
Note Holder may assign or transfer to any person the whole or any part of
its rights and obligations in respect of the Note Holder Liabilities or
any interest therein in accordance with its ability to do so under the
relevant Financing Agreement if, and only if, the assignee or transferee
previously or simultaneously agrees with the then parties hereto to be
bound by the provisions of this Agreement as a US Loan Note Holder by
executing an Agreement of Accession attached as Exhibit J to the US Loan
Note Instrument.
12.2 The parties hereto confirm that any person becoming a Bank under and as
such term is defined in the Credit Agreement (by the execution of transfer
certificates or otherwise) shall thereupon become a party hereto. Each
party hereto makes an irrevocable offer in such terms to each such person
which may be accepted by such person by becoming a Bank or a Bank, without
the need for any further action. In addition each party hereto (including
parties subsequently becoming bound by this Agreement) irrevocably
authorizes the Agent to agree on its behalf with any other person intended
to become a party hereto by the execution of a Transfer Certificate (as
defined in the Credit Agreement) so as to bind such person to the terms of
this Agreement as a Bank. The parties hereto agree that this authorisation
is given to
<PAGE>
secure the interests of the parties under this Agreement and is
accordingly irrevocable.
13. TRUSTS
The perpetuity period for each trust created by this Agreement shall be
eighty (80) years.
14. GOVERNING LAW AND JURISDICTION
14.1 This Agreement is governed by the laws of England.
14.2 All the parties irrevocably agree that the courts of England are to have
exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement and that accordingly any suit, action or
proceeding (together in this Clause referred to as "Proceedings") arising
out of or in connection with this Agreement shall be brought in such
courts.
14.3 Each party to this Agreement consents generally in respect of any
Proceedings arising out of or in connection with this Agreement to the
giving of any relief or the issue of any process in connection with such
Proceedings including, without limitation, the making, enforcement or
execution against any property or assets whatsoever of any order or
judgment which may be made or given in such Proceedings.
IN WITNESS whereof this Agreement has been duly executed by the parties hereto
the day and year first above written.
<PAGE>
The Company
SIGNED for and on behalf of ) PETER BERTRAM
AUTOMATED SECURITY )
(HOLDINGS) PLC )
The Security Trustee
SIGNED by and for and on behalf of ) LESLEY TINSLEY
LLOYDS BANK Plc )
The Agent
SIGNED for and on behalf of ) LESLEY TINSLEY
LLOYDS BANK Plc )
The Banks
SIGNED for and on behalf of ) N ROBINSON
LLOYDS BANK Plc )
SIGNED for and on behalf of ) P F HODGSON
ABN AMRO BANK N.V. )
SIGNED for and on behalf of ) PAUL THOMPSON
MIDLAND BANK plc )
<PAGE>
SIGNED for and on behalf of ) STEVEN CHARLES HEARN
NATIONAL WESTMINSTER )
BANK Plc )
SIGNED for and on behalf of ) DAVID MOSS
THE BANK OF TOKYO, LTD )
SIGNED for and on behalf of ) R PETTITTE
THE FUJI BANK, LIMITED )
SIGNED for and on behalf of ) MICHAEL DUTFIELD
BHF-BANK AG )
SIGNED for and on behalf of ) W K SCOTT
BANCO CENTRAL ) R G SOPER
HISPANOAMERICANO S.A. )
SIGNED for and on behalf of ) JOSE ANTONIO LOPEZ RUIZ
BANCO BILBAO VIZCAYA, S.A. ) JUAN PEREZ CALOT
<PAGE>
SIGNED for and on behalf of ) A ALDERSON
BARCLAYS BANK PLC )
The Working Capital Bank
SIGNED for and on behalf of ) PAUL THOMPSON
MIDLAND BANK plc )
The US Loan Note Holders
SIGNED for and on behalf of ) ANTHONY F TORRE
THE PRUDENTIAL INSURANCE )
COMPANY OF AMERICA )
