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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT ( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
June 30, 1994 Number 0-3953
SENSORMATIC ELECTRONICS CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 34-1024665
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number: (305) 420-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock (Par Value $.01 Per Share) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
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
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The aggregate market value of Common Stock (par value $.01 per share) held by
non-affiliates of the Registrant as of September 2, 1994 was $2,424,612,759
based on the sales prices of such Common Stock on such date as reported by the
New York Stock Exchange.
The Registrant had outstanding 68,540,290 shares of Common Stock (par value
$.01 per share) as of September 2, 1994.
Documents incorporated by reference:
Definitive proxy statement for the Company's 1994 Annual Meeting of
Stockholders (incorporated in Part III to the extent provided in Items 10, 11,
12 and 13 hereof).
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PART I
ITEM 1. BUSINESS
Sensormatic Electronics Corporation (the "Company") is a fully integrated
supplier of electronic security systems to retail and non-retail markets
worldwide. The Company designs, manufactures, markets and services electronic
article surveillance ("EAS") and electronic asset protection ("EAP") systems
(including the reusable tags and disposable labels used with such systems),
closed circuit television ("CCTV") systems (including microprocessor-controlled
CCTV systems and exception monitoring systems) and access control systems.
These loss prevention systems are principally used to deter shoplifting, or
internal or other theft, in a wide variety of soft and hard goods retail stores
and non- retail environments such as commercial and industrial facilities, as
well as for other security applications. The Company's multiple product lines,
which have been developed for specific targeted loss prevention applications,
make use of the broad base of technology it has developed or acquired.
The Company operates in a single business segment. Certain information about
the Company's operations by geographic area is contained in the table under
Summary of Revenues below and in Note 10 of Notes to Consolidated Financial
Statements under Item 14 of this report.
As used in this report, the terms "Company" and "Sensormatic" refer to
Sensormatic Electronics Corporation and its subsidiaries unless the context
indicates otherwise.
INDUSTRY BACKGROUND
Retail and non-retail businesses utilize loss prevention products to improve
profitability. In retail environments, use of EAS products has increasingly
become a standard operating practice as such products have been proven for over
twenty years to be a cost effective method of reducing inventory shrinkage.
Inventory shrinkage is often the second largest variable operating expense of
retailers, after payroll costs. Shrinkage in retail stores will vary depending
on a number of factors, but will normally range from 1% to 5% of sales. An
effective EAS program can reduce the loss from shrinkage by over 50%, and at
the same time increase the productivity of the retailers employees by reducing
their efforts aimed at detecting shoplifting. In addition, EAS products can
increase the retailers' sales volume by allowing retailers to display their
merchandise, which was previously displayed in locked cases, behind sales
counters or protected with cables and chains, in a more attractive, open
manner.
EAS products were first used by retailers to protect soft goods (apparel
merchandise.) Due to advances in technology applications in recent years, hard
goods merchandise (which is generally packaged merchandise) can also be
economically and effectively protected by EAS products. Hard goods retailers
such as supermarkets, hypermarkets and home improvement centers, as well as
drug, mass merchandise, optical, music, hardware, book and video stores, have
increasingly become users of EAS products.
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Several of the newer applications of the technologies used by hard goods
retailers can also be used by non-retail businesses to protect assets such as
personal computers, facsimile and copy machines, telephones, artwork, limited
access files, and portable laboratory equipment and tools from loss by
unauthorized removal. Other specialized applications include the protection of
newborn infants in hospitals and patients in nursing homes and other-long-term
care facilities.
Retail and non-retail businesses also make extensive use of CCTV products to
enhance security. The Company has developed or acquired a broad range of CCTV
products for use in retail and commercial and industrial applications.
Non-retail businesses in particular are increasingly receptive to the Company's
ability to design, supply, install and service systems integrating the
combination of EAP and CCTV products as well as access control products,
another product line offered by the Company to enhance security.
COMPANY DEVELOPMENT AND GENERAL STRATEGIES
The Company's initial EAS systems were designed for use by department and
specialty store retailers to protect soft goods merchandise. As a result of
its sales and marketing expertise and the technological advantages of its
products, the Company gained and has maintained the position of world leader in
supplying EAS products for soft goods retailers.
For nearly the past decade the Company has implemented a strategy of product,
customer and geographic market diversification to substantially increase its
growth potential. Through the combination of substantial increases in
research, development and engineering activities and selected strategic
acquisitions, the Company now offers, to both retailers and non-retail users, a
broad array of products based on a number of distinct EAS technologies, as well
as CCTV, exception monitoring and access control systems.
The Company's newer EAS product lines have been developed and targeted for
specific hard goods retail applications and the Company has become the leading
supplier of EAS products to hard goods retailers. Hard goods retailers are
estimated to be a substantially larger potential user group than soft goods
retailers and have only begun to significantly use EAS products during the last
few years. Further, hard goods retailers primarily use EAS disposable labels
which are affixed to merchandise. Use of the hard goods EAS systems creates a
continuing need on the part of retailers for additional disposable labels to be
affixed to new merchandise, resulting in a major source of recurring revenues
for the Company.
CCTV products are used to protect against inventory shrinkage and other losses
due to internal or employee theft in retail businesses, and are also used for
the protection and monitoring of personnel and assets in office and
manufacturing complexes, warehouses, gaming establishments (e.g., casinos) and
numerous other non-retail facilities. Additionally, the CamEra division in the
United Kingdom (acquired in connection with the acquisition of ALPS in July
1992, discussed below) markets packaged, lower cost CCTV systems for retail and
commercial businesses. In fiscal 1994, the Company began to market such CamEra
systems in France and the
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United States. Revenues generated from all of the Company's CCTV product lines
were approximately $174 million, $97 million and $43 million in fiscal 1994,
1993 and 1992, respectively.
The Company has greatly expanded its efforts in recent years to market CCTV and
access control products to commercial, industrial and other non-retail customer
groups. This strategy is evidenced both by the expansion of the Company's
direct sales force and selected niche acquisitions including in fiscal 1994 the
acquisitions of Advanced Entry Systems, Inc. ("Advanced Entry") and Security
Specialists of San Francisco, Inc. ("Security Specialists"), two U.S. regional
electronic security systems integrators experienced in designing, supplying,
installing and servicing systems which meet the security needs of a variety of
non-retail customers.
The growth of revenue from commercial, industrial and other non-retail
customers results from the strategy of broadening the Company s customer base
by adding new proprietary CCTV and access control products and the
establishment of new distribution channels. This strategy is demonstrated by
the Company's extensive internal product research, development and engineering
activities and the acquisitions of Robot Research Inc. ("Robot Research") and
American Dynamics, CCTV systems manufacturers, and Software House, Inc.
("Software House") and Continental Instruments Corporation ("Continental"),
access control developers.
The Company is diversifying the geographic areas in which it markets its
products by expanding into new geographic areas and increasing its presence in
existing areas. The Company has greatly expanded its direct sales and service
("customer engineering") efforts in North America, Europe, and certain Asia
Pacific and Latin America countries in recent years through the acquisitions of
the ALPS' distribution organization based in the U.K. (discussed further below)
and the Company's distributors in the Scandinavian countries, Mexico and Puerto
Rico (including the Caribbean Basin). Additionally, in August 1994 the Company
announced it had reached an agreement to merge Knogo Corporation's (Knogo)
business interests and rights to products outside of the U.S. and Canada
(reporting revenues of $71 million for the fiscal year ended February 28, 1994)
into the Company in exchange for the Company's Common Stock valued at
approximately $100 million. Knogo is a U.S. -based company engaged primarily
in the business of manufacturing (primarily in Puerto Rico), marketing and
servicing EAS systems, and marketing and servicing CCTV systems. The agreement
is subject to certain conditions, including approval of Knogo's shareholders
and expiration of regulatory waiting periods. The agreement also has
provisions for break-up fees, under certain conditions, payable to either party
should the transaction fail to close.
The Company's international strategy also involves the use of distribution
agreements with independent parties, with Sensormatic maintaining a 51%
ownership control. Currently the Company utilizes this concept in Brazil, Peru
and Turkey and plans to expand it to China and certain countries in the Middle
East, Latin America, Africa and eastern Europe.
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ALPS - In July 1992, the Company acquired from Automated Security (Holdings)
PLC ("ASH"; together with its subsidiaries, the "ASH Group") the ASH Group's
European EAS, CCTV and exception monitoring loss prevention systems division
("ALPS"). With the acquisition of ALPS, previously a large European
distributor of EAS and CCTV products, the Company can offer an expanded base of
European customers a full range of EAS technologies well suited to virtually
any retail application, together with a broad range of CCTV, exception
monitoring and access control products, backed by the combined sales and
service organizations of Sensormatic and ALPS.
In connection with the acquisition of ALPS, the Company acquired the ASH
Group's interest of approximately 30% in Security Tag Systems, Inc. ("Security
Tag"), a U.S.-based manufacturer of loss prevention products. Prior to June
1993, the Company distributed Security Tag's products outside North and South
America under an exclusive distribution agreement between the Company and
Security Tag. In June 1993, the Company acquired the remaining interest in
Security Tag (approximately 70%).
Another principal strategy of the Company is to expand its base of recurring
revenues. Recurring revenues are generated by sales of disposable labels to the
hard goods retailers, maintenance agreements entered into in connection with
the sale or lease of systems and rental revenues from operating leases, a
particular focus of the marketing efforts of certain of its European and
Asia/Pacific subsidiaries. Total recurring revenues were approximately $120
million, $106 million and $69 million in fiscal 1994, 1993 and 1992,
respectively.
The Company took a major step forward in its efforts to increase future
recurring label revenues through its Universal Product Protection (UPP(SM))
program where EAS labels (or tags) are incorporated into or affixed to the
merchandise to be protected during the process of manufacturing, packaging or
distribution rather than at the retail store (also referred to as source
labeling or source tagging).
In fiscal 1994, a prominent homecenter retailer became the first major retailer
to embrace the concept of source tagging on a chainwide basis. It is expected
that by late 1994 approximately 70 manufacturers worldwide will apply the
Company's Ultra - Max(R) labels to merchandise delivered to the this retailer's
stores in the U.S. Additionally, in fiscal 1994, other top retailers from the
homecenter and discount industries met with their manufacturers to outline a
framework for source labeling.
In June 1994, the Company and Paxar Corporation ("Paxar"), a manufacturer of
fabric labels and tags for apparel and other retail markets, introduced the
initial prototypes of a combination clothing label and an EAS anti-theft label.
The Company intends to use its strategic alliance with Paxar to introduce
source labeling to the soft goods industry.
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In March 1993, the National Association of Recording Merchandisers (NARM)
recommended the Company's acousto-magnetic Ultra - Max product line as the
industry standard for use in source labeling of pre-recorded music. The
Company committed to NARM that it would cross-license its acousto-magnetic
technology to other companies supplying the music industry. In November 1993,
the six major music manufacturers objected to implementing EAS source labeling
of pre-recorded music using the Company's acousto-magnetic technology
principally on the grounds of test results obtained by the manufacturers which
they claimed showed some degradation of the sound quality of certain audio
cassette tapes from the magnetic deactivation devices. Compact discs, which
are the most susceptible to shrinkage of the pre-recorded music formats carried
by music retailers, have not been subject to any controversy over alleged
degradation in sound quality. The manufacturers also expressed concerns
relating to possible problems with label placement and automated manufacturing
processes.
NARM, together with an independent test laboratory engaged by them and two
others engaged by the Company, evaluated the manufacturers' test reports and
raised a number of issues about the testing methodology and performance
criteria used and the conclusions reached. NARM requested that the
manufacturers re-evaluate their test results and perform new tests as required,
and reconsider their conclusions, using better defined criteria and standard
test procedures.
In January 1994, all but one of the manufacturers rejected NARM's request.
NARM expressed disappointment with the manufacturers' lack of cooperation, and
continued to evaluate the viability of source labeling for music retailers.
After further consideration, NARM reconfirmed its recommendation of Ultra - Max
in June 1994 for use with, among other things, compact discs and certain types
of audio-tapes. While it is unclear whether NARM and the music manufacturers
will reach agreement in the near future, music retailers are continuing to
expand their use of the Company's acousto-magnetic Ultra - Max products. Sales
to U.S. music retailers accounted for approximately 2% of Sensormatic's total
fiscal 1994 consolidated revenues.
Principal Products and Users
Electronic Article Surveillance Products for Retail Use
The Company's EAS systems consist of electronic detection units, housed in
pedestals or overhead units or concealed in the walls, ceilings or floors, and
placed at exits of stores or departments within stores or at checkout aisles.
These units are used in conjunction with specially designed and sensitized
reusable tags and disposable labels, which are affixed to the merchandise to be
protected. After the protected merchandise has been purchased, its tag or
label is then removed or deactivated by a sales person using a specially
designed detacher or deactivator, enabling the merchandise to be taken through
the controlled zone without incident. Alternatively, if the label is not to be
deactivated, the merchandise is passed around the controlled zone by the sales
person. However, if the protected merchandise passes through a
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controlled zone with the tag or label still affixed and active, the tag or
label will be identified by the electronic detectors, causing an alarm to
sound, a light to activate and/or other suitable control devices to be set into
operation.
Soft Goods Retailers - The Company's traditional EAS system, based on high
radio frequency technology, is marketed for use primarily by soft goods
department, specialty and other retail stores, for the protection of clothing
and other soft goods merchandise. Various models of reusable soft or hard
plastic tags are available for use with these traditional EAS systems.
Introduced in 1973, the Company's Alligator(R) tag became the most widely
recognized hard plastic reusable tag. Introduced in the mid-1980's, the
smaller, lighter MicroGator(R) tag has surpassed the Alligator tag as the
industry standard. In June 1994 the Company introduced Super Tag(TM), which
has a patented rotary clamp intended to make unauthorized removal more
difficult than conventional tags. The Security Tag EAS systems for use
primarily by smaller soft goods retailers and based on a low radio frequency
technology, consist of antennae which transmit a scanning signal, a reusable
tag containing an active frequency divider which is tuned to receive the
scanning signal and to transmit a presence signal at a designated frequency,
and a control unit which activates an alarm when a presence signal is detected.
The Company's Sensor - Ink(R) and Inktag(R) products are designed to be used
separately or in conjunction with the Company's existing reusable tags to
provide an incremental level of security for soft goods retailers.
Unauthorized removal of tags affixed to merchandise with Sensor - Ink and
Inktag causes vials of ink inside the unit to break and stain the would-be
shoplifter and merchandise, identifying the shoplifter as well as rendering the
merchandise unfit for use.
The Company also markets to soft goods retailers its TellTag(R) product line
providing the highest level of EAS protection for high value apparel
merchandise. The TellTag product line is comprised of electronic detectors and
reusable "intelligent" tags which contain an internal alarm. This alarm is
activated when unauthorized removal of the tag from the garment is attempted
and is effective in providing protection against unauthorized removal of EAS
tags in fitting rooms.
Hard Goods Retailers - The sale of new EAS products to hard goods retailers has
been a prime factor in the growth of the Company in the last several years.
These retailers include supermarkets, hypermarkets and home improvement
centers, as well as drug, mass merchandise, optical, hardware, book, music and
video stores. The Company's success in supplying products to these retailers
is attributable to its broad array of new products, each designed and marketed
to meet the particular needs of a specific application.
The Company believes that the revenues and earnings potential of supplying
products to hard goods retailers is significantly greater than supplying
products to soft goods retailers. Unlike apparel merchandise which is
protected with reusable plastic tags, hard
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goods merchandise is protected with self-adhesive stick-on labels which leave
the store with the merchandise. Use of these hard goods EAS systems creates a
continuing need on the part of the retailers for additional disposable labels
to be affixed to new merchandise, resulting in a major source of recurring
revenues to the Company.
Following is a brief description of the Company's hard goods EAS product lines:
The Ultra - Max product line, which utilizes a proprietary acousto-magnetic
technology, is marketed primarily to music stores, drugstores, home improvement
centers, mass merchandise stores and specialty hard goods retailers. Hard
goods retailers use the Ultra - Max product line in conjunction with the
Rattler(R) label. Additionally, soft goods retailers are using Ultra - Max
with Ultra - Gator(R) products. Its success with retailers is attributable to
its unique features, which include freedom from false alarms, unobstructed
coverage of wide exits, a high "pick rate" or ability to detect labels or tags
and ease of deactivation. The system's sophisticated electronic capability can
distinguish and filter out items which can cause false alarms, a problem which
may be encountered by retailers using competitive products. Ultra - Max
disposable labels are deactivated by sales clerks upon checkout. The Ultra -
Max product line includes a variety of label deactivation devices, including
the Speed Station(R) deactivator, which doubles as a bagging station, allowing
merchandise to be conveniently bagged and, upon completion of bagging,
permitting all labels affixed to the bagged merchandise to be simultaneously
deactivated. This allows the customer to utilize an EAS system without slowing
down the checkout process to deactivate individual items.
The AisleKeeper(R) product line, which uses a proprietary magnetostrictive
technology, was developed specifically for use in supermarkets and
hypermarkets. These businesses generally contain the retail industry's
harshest environment for EAS systems, as the checkout aisle area where systems
are usually placed can be in close proximity to bar code scanners, point of
sale terminals, conveyor belts and metal counters, all of which may adversely
impact the effectiveness of the electronics in many EAS systems. Further, the
systems are subjected to physical damage caused by shopping carts passing
through the aisles and harsh chemical cleaning solutions. The AisleKeeper
system, which consists of two transceiver pedestals (containing transmitting
and reception coils, a shield and alarm circuits) that are covered with durable
plastic to resist staining and physical damage, and has rubber bumpers on the
edges and a wear bumper along the pedestal face, successfully addresses these
environmental problems. The AisleKeeper label is a thin micromagnetic wire
encapsulated in transparent tape attached to protected merchandise which is
passed around the system during the checkout process or, with certain versions,
may be deactivated by means of a deactivation pad which fits in the conveyor
belt.
The Standard and Enhanced Magnetic product lines, utilizing an electromagnetic
technology, are used extensively in video rental, book retail and library
applications. In use, video cassettes or books with labels affixed are passed
around the EAS system by the salesperson at the point of sale.
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The System One(R) product line, using a low radio frequency technology, is
comprised of electronic detectors, hard reusable tags or soft disposable
self-adhesive labels for use with hard goods merchandise (and in certain
environments, with soft goods merchandise) and is marketed to smaller
independent retailers. Bar coded price information, promotional and
merchandising details can be printed on the label.
SUMMARY - The Company has the broadest and most flexible line of EAS systems,
tags, labels and accessories, such as applicators and deactivators, for use by
soft and hard goods retailers. To date, the Company has sold or leased
worldwide approximately 223,000 EAS systems and approximately 911 million
reusable tags, and sold approximately 1.5 billion, 1.1 billion and 750 million
disposable labels in fiscal 1994, 1993 and 1992, respectively. Revenues
generated by the marketing of EAS product lines to retailers in fiscal 1994,
1993 and 1992 were $406 million, $330 million and $220 million, respectively.
CCTV and Exception Monitoring Systems for Retail Use
The Company's SensorVision(R) systems, which are microprocessor-based CCTV
systems, are used to protect against inventory shrinkage and other losses due
to internal or employee theft in retail businesses, and are also used in
commercial, industrial and other non-retail environments (see Non-Retail Users
below). The SensorVision systems, including the highly acclaimed SpeedDome(R),
consist of special ceiling domes, which conceal small, high resolution, high
speed cameras, and monitoring and control consoles specially designed for the
programming, identification and recording of monitored activities or areas.
The SensorVision systems can be programmed to monitor merchandise and cash
handling at point- of-sale stations in retail environments (as well as
warehouse, shipping and other activities in retail and non-retail environments)
in an "unattended mode". The systems can also be interfaced with cash
registers to monitor and electronically record predetermined "exception"
transactions (such as cash or credit card sales over specified dollar amounts,
customer sales credits, and purchases by pre-identified employees) by utilizing
the Company's Point of Sale Exception Monitoring (POS/EM(R)) products; such
exception monitoring applications include supermarkets and hypermarkets, as
well as other retail environments where cash registers are used. Additionally,
the SensorVision systems are often used in conjunction with EAS systems to
produce a more effective and comprehensive overall loss prevention program.
To date, the Company has sold or leased approximately 63,000 CCTV domes,
principally to retailers in the United States. Revenues generated by the
marketing of all CCTV product lines to retailers (including exception
monitoring systems, but excluding CamEra(TM) systems (see Non-Retail Users
below)) in fiscal 1994, 1993 and 1992 were $73 million, $41 million and $25
million, respectively.
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Non-Retail Users
The Company's products and technologies are also being used in non-retail
environments. The Company's U.S.-based Commercial/Industrial Group markets EAP
systems, SensorVision and other CCTV systems and access control systems to U.S.
commercial, industrial and other non-retail customers. These Sensormatic
products are marketed primarily for the protection, monitoring and control of
people and assets in large-scale office and manufacturing complexes,
warehouses, hospitals and nursing homes, nurseries, transportation centers,
colleges and universities, casinos, nuclear power plants and numerous other
non-retail facilities. Assets which are protected or controlled by the
Company's EAP products include limited access files, computer magnetic tapes
and disks, portable computers, facsimile and copy machines and other portable
office equipment, hospital portable equipment, garments and supplies, and many
other valuable items. Non-retail businesses are increasingly receptive to
systems integrating combinations of these various products, furnished and
serviced by a single supplier. In order to improve its system integration
capabilities and expand its direct sales to non-retail businesses, the Company
acquired Advanced Entry and Security Specialists during fiscal 1994 and intends
to acquire several similar U.S. regional systems integrators in the next few
years.
The Company is committed to broadening its electronic security product lines
for non-retail users by adding new proprietary products and distribution
methods. This commitment is evidenced by its extensive internal product
research, development and engineering activities as well as the
acquisitions of American Dynamics, Continental, Robot Research, Advanced Entry,
Security Specialists and Software House.
American Dynamics, a leading U.S. manufacturer of CCTV components, was acquired
in February 1991. It markets its products principally to non- retail users
through a network of manufacturer's representatives in the United States and
through selected distributors in Europe. Such products include large
switching systems capable of controlling hundreds of cameras from a central
location, sophisticated video motion detectors, and quad splitters which allow
the display of images from up to four cameras on a single monitor.
Robot Research, a U.S. based manufacturer and marketer of sophisticated CCTV
display and Transmission Systems, was acquired in September 1993. It is a
leader in the design, manufacture and sale of digital video signal processing
equipment and has gained worldwide recognition in the field of security,
productivity management and other visual communication applications. Robot
Research markets its products by a network of manufacturer representatives who
sell to dealers and distributors worldwide. The Company also utilizes Robot
Research's and America Dynamics' products in the design and configuration of
large, sophisticated CCTV systems which it markets through the
Commercial/Industrial Group in the U.S. and specialized international sales
efforts.
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Continental, a supplier of proprietary electronic access control systems, was
acquired in July 1989. Its electronic access control product line is marketed
to small and medium sized industrial businesses and is distributed through a
network of dealers in the United States and Europe. Sensormatic, using one of
the Continental products as a technology platform, has developed a
sophisticated access control system for sale to large commercial and industrial
businesses having multiple locations and thousands of employees which it
markets through the Commercial/Industrial Group in the U.S. and specialized
international sales efforts.
Software House, a leading U.S. designer and marketer of mid-range to high-end
access control products, was acquired in July 1994. It designs, develops,
markets and services midrange to high-end access control systems for use in
office buildings, airports and universities. Software House markets its
products through distributors and system integrators. The Company intends to
utilize Software House's products in the design and configuration of large,
sophisticated access control systems which it will market through the
Commercial/Industrial Group in the U.S. and specialized international sales
efforts.
Advanced Entry and Security Specialists, two U.S. regional electronic Security
system integrators, were acquired in fiscal 1994. These companies specialize
in integrating products from a variety of manufacturers to meet the particular
security needs of a customer. Advanced Entry and Security Specialists sell,
install and service such integrated systems and integrate the application of
these products at the customer's facility. These companies have been fully
integrated into the direct sales and service organization of the
Commercial/Industrial Group.
Revenues generated from the sale of CCTV, EAP and access control systems
(including installation revenues) by the Commercial/Industrial Group in the
U.S. and specialized international sales efforts in fiscal 1994, 1993 and 1992
were $120 million, $65 million and $28 million, respectively, (including
CamEra(TM) systems to non-retail users, discussed below).
The Company's CamEra systems (acquired in connection with the acquisition of
ALPS) consist principally of packaged, low cost CCTV systems, primarily for use
by smaller retail and commercial businesses. A typical CamEra system consists
of one or two stationary cameras, a monitor and a video cassette recorder, and
may be interfaced with the Company's exception monitoring products which are
similar in nature to the POS/EM product. In fiscal 1994, the Company began to
market these systems in France and the United States. To date, 29,000 CamEra
systems have been installed. Revenues generated from the marketing of CamEra
systems to retail and non-retail users in fiscal 1994 and 1993, primarily in
the United Kingdom, were approximately $48 and $31 million, respectively.
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MARKETING AND SALES
General
The Company operates under the name Sensormatic(R) throughout the world. The
Company markets its products directly throughout North America, Europe and
certain Asia/Pacific countries, and through its 51% owned subsidiaries in
Brazil, Peru and Turkey. In over 30 other countries, the Company sells its
products to distributors for resale or lease principally to retailers. For
each of the three fiscal years in the period ended June 30, 1994, no single
customer accounted for 10% or more of the Company's consolidated revenues.
Marketing
Sensormatic markets its EAS products primarily to soft goods (apparel
merchandise) retailers and hard goods (packaged merchandise) retailers through
its worldwide direct sales organization (see Sales and Service Organizations).
Historically, Sensormatic has marketed its traditional EAS products to high end
soft goods retailers (for example, large department stores and national chains)
throughout the world. Security Tag EAS systems are primarily targeted at
smaller, independent soft goods retail customers. Sensormatic's traditional
and Security Tag EAS systems, the TellTag product line and the Sensor - Ink
tag, Inktag, and related accessories, all used primarily by soft goods
retailers, generated approximately 25% of fiscal 1994 consolidated sales and
lease revenues.
With the introduction of the MicroLabel(R) product in the late 1980's, however,
the traditional EAS system can be used by hard goods retailers. The
AisleKeeper and the Standard and Enhanced Magnetic product lines, used
primarily by hard goods retailers, generated approximately 14% of fiscal 1994
consolidated sales and lease revenues, while the Ultra - Max product line, used
by both soft and hard goods retailers, generated approximately 22% of fiscal
1994 consolidated sales and lease revenues.
The Company's CCTV, EAP and access control systems are marketed by the
Commercial/Industrial Group in the U.S. and specialized international sales
effort (see Commercial/Industrial Group). The Company's CamEra products are
marketed through specialized sales organizations in France, the United Kingdom
and the U.S. The Company's CCTV systems are used by both retail customers and
non-retail customers (i.e., commercial, industrial and other non-retail
customers) and generated approximately 26% of fiscal 1994 consolidated
revenues.
Sales Revenues
The Company's sales revenues are predominantly generated by direct sales and
sales-type leases of new equipment. Additionally, the Company generates sales
revenues by: (i) export sales of new equipment to distributors in foreign
countries; (ii) sales to third-party leasing companies of selected operating
leases (predominantly newly signed leases) and related equipment by certain of
the Company's European subsidiaries; (iii) sales of
11
<PAGE> 13
selected new equipment to dealers, primarily in the United States; and (iv)
sales of leased equipment to existing customers converting from lease to
purchase.
The Company sells its products on a current, deferred or installment payment
basis. Substantially all deferred payment obligations are payable within one
year. Installment contract obligations are payable monthly over terms
generally up to five years. Both obligations are generally subject to stated
or imputed interest at prevailing market rates and are generally secured by the
purchased equipment. The Company's sales- type leases consist of
non-cancelable leases of new equipment with terms of 60 months or greater. The
Company believes that the marketing of equipment on flexible terms, including
long-term financing, provides it with a competitive advantage.
The Company's sales of selected operating leases to third party financing
institutions by certain of its European subsidiaries are generally made on a
non-recourse basis, under agreements with such financing institutions providing
for: (i) sales from time to time as agreed to by the parties of selected leases
(predominantly newly signed leases) entered into by the Company directly with
its retail customers, together with the related equipment; and (ii) the
remarketing of such equipment on a nonpriority basis upon termination of the
original lease. During the term of the lease, the Company recognizes revenues
related to its maintenance and service on all equipment sold to the financing
institutions (see Rental and Other Revenues).
Rental and Other Revenues
The Company also leases equipment under non-cancelable operating leases. Such
leases are generally for terms of 36 to 54 months. Currently, substantially all
of the Company's lease revenues are generated by certain of its European
subsidiaries. Additionally, the Company generates revenues from the
maintenance and servicing of its equipment.
Non-cancelable operating leases in existence at June 30, 1994 provide for
minimum future lease revenues aggregating approximately $156 million over the
next several years (see Note 1e. of Notes to Consolidated Financial
Statements). Additionally, the Company has unearned maintenance fees in the
amount of approximately $22 million at June 30, 1994, which will be recognized
as revenue in future periods.
Summary of Revenues
The following table summarizes the results of the Company's marketing and sales
efforts for each of the five fiscal years in the period ended June 30, 1994 and
the month ended June 30, 1992.
12
<PAGE> 14
SUMMARY OF REVENUES
(Dollars in millions)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------------------------
June 30, 1994 (1) June 30, 1993 (1) May 31, 1992 (1)
----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Sales (2)
- - ---------
United States $ 290.9 44% $ 197.6 41% $ 175.4 57%
International Subsidiaries 239.7 37 182.1 37 65.5 21
Export to International
Distributors 26.8 4 18.4 4 11.7 4
------- --- ------- --- ------- ---
557.4 85 398.1 82 252.6 82
Rentals and other (3)
- - ---------------------
International Subsidiaries'
Rentals 44.6 7 44.3 9 28.7 9
United States Installation and
Maintenance Fees 30.3 5 21.4 4 18.0 6
International Subsidiaries'
Installation and
Maintenance Fees 21.7 3 21.7 5 8.8 3
Other 2.0 - 1.8 - 1.8 -
------- --- ------- --- ------- ---
98.6 15 89.2 18 57.3 18
------- --- ------- --- ------- ---
Total 656.0 100% $ 487.3 100% $ 309.9 100%
======= === ======= === ======= ===
Total revenues (4)
- - ------------------
United States $ 323.2 49% $ 220.7 45% $ 195.6 63%
International Subsidiaries 306.0 47 248.1 51 102.6 33
Export Sales to International
Distributors 26.8 4 18.5 4 11.7 4
------- --- ------- --- ------- ---
Total $ 656.0 100% $ 487.3 100% $ 309.9 100%
======= === ======= === ======= ===
<CAPTION>
YEAR ENDED
---------------------------------------------------
May 31, 1991 May 31, 1990
----------------- -----------------
<S> <C> <C> <C> <C>
Sales (2)
- - ---------
United States $ 131.4 55% $ 111.4 58%
International Subsidiaries 51.4 21 36.8 19
Export to International
Distributors 8.9 4 5.4 3
------- --- ------- ---
191.7 80 153.6 80
Rentals and other (3)
- - ---------------------
International Subsidiaries'
Rentals 26.6 11 21.2 11
United States Installation and
Maintenance Fees 12.0 5 10.0 5
International Subsidiaries'
Installation and
Maintenance Fees 7.3 3 5.2 3
Other 1.6 1 1.3 1
------- --- ------- ---
47.5 20 37.7 20
------- --- ------- ---
Total $ 239.2 100% $ 191.3 100%
======= === ======= ===
Total revenues (4)
- - ------------------
United States $ 145.0 61% $ 122.5 64%
International Subsidiaries 85.2 35 63.2 33
Export Sales to International
Distributors 9.0 4 5.6 3
------ --- ------- ---
Total $ 239.2 100% $ 191.3 100%
======= === ======= ===
</TABLE>
(1) For additional information relating to revenues, see "Revenues" under
Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(2) Total sales for the month ended June 30, 1992 were $15.2 consisting of
$5.4 United States (26%); $8.5 international subsidiaries (41%); and
$1.2 export to international distributors (6%).
(3) Total rentals and other for the month ended June 30, 1992 were $5.8
consisting of $3.4 international subsidiaries' rentals (16%); $1.2
United States installation and maintenance fees (6%); $1.0 international
subsidiaries' installation and maintenance fees (5%); and $0.1 other.
(4) Total revenues for the month ended June 30, 1992 were $21.0 consisting
of $6.8 United States (32%); $13.0 international subsidiaries (62%); and
$1.2 export sales to international distributors (6%).
13
<PAGE> 15
Sales and Service Organizations
The Company, at June 30, 1994, employed worldwide a total of over 2,300 sales
and customer engineering personnel to market and service its products
throughout North America, Europe and certain Asia/Pacific countries (see
International Operations). At June 30, 1994, the Company's products were also
marketed and serviced elsewhere in the world by over 325 sales and customer
engineering personnel employed by international distributors (see International
Operations). Sales and service personnel for the Company's products are
presently directed from offices located throughout the United States and in
more than 54 countries. The Company believes that a major factor in its
success has been the high quality of its extensive and experienced sales and
service organization.
Over the past several years, the Company has restructured its sales force to
establish specialized sales groups to market its products to particular types
of users. For example, in the United States, specialized sales groups have
been created to increase penetration of the supermarket industry and to focus
on non-retail users (see Commercial/Industrial Group discussion). In Europe,
such sales specialization has been concentrated, to date, on self-service
stores and hypermarkets, and certain CCTV and exception monitoring systems
primarily for smaller retail and commercial businesses. In fiscal 1994, the
Company began to develop a specialized sales effort and identify specific
dealers aimed at marketing its products to the commercial, industrial and
non-retail customers in Europe and certain other parts of the world. The
Company will continue to specialize its sales force and believes such
specialization will accelerate its success in marketing to the targeted user
groups.
Commercial/Industrial ("CI") Group
The Company's new product development and marketing efforts directed to
commercial, industrial and other non-retail users are a further outgrowth of
the Company's strategic plan. The Company's CI Group includes a U.S. direct
sales effort (including the sales efforts of the recently acquired Advanced
Entry and Security Specialists) aimed at large multi-location businesses, and
manages the marketing and sales activities of Continental, American Dynamics,
Robot Research and Software House. The CI Group markets on a direct basis and
through dealers and manufacturer representatives. The CI Group offers EAP
systems, SensorVision and other CCTV systems, and access control systems to
various customers, including a number of the largest companies in the United
States. In March 1994, the Company became a Sponsor and the Official
Electronic Security Supplier of the 1996 Olympic Games in Atlanta. The
Company's involvement in the Olympics will heighten its visibility and
recognition in the commercial and industrial marketplace.
International Operations
The Company presently sells, leases and services its products through
wholly-owned subsidiaries operating in Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Hungary, Italy, Mexico, The
Netherlands, New Zealand, Norway,
14
<PAGE> 16
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
Company's products are also marketed and serviced through exclusive
distributors in Argentina, Chile, Columbia, Indonesia, Japan, Saudi Arabia,
South Africa, Taiwan, Venezuela and a number of other countries. The Company
also markets EAS and CCTV products in Brazil, Peru and Turkey through its 51%
owned subsidiaries. Sales and service personnel for the Company's products are
now based in more than 54 countries.
For the fiscal year ended June 30, 1994, approximately 51% of the Company's
revenues were derived from all such non-U.S. operations. For the year ended
June 30, 1994, revenues of international subsidiaries amounted to $306 million
while revenues from international distributors aggregated $27 million (see
Summary of Revenues table above). (For additional information regarding the
Company's operations by geographic area, see Note 10. of Notes to Consolidated
Financial Statements.)
The growth of the Company's European subsidiaries' leasing business has been
financed by its expanded use of third party financing institutions, thus
enabling the Company to sell operating and sales-type leases to the financing
institutions. Additionally, the Company has provided and intends to continue
to provide working capital, if required, for all its subsidiaries' sales and
service organizations, either from U.S. sources or through the guaranteeing of
non-U.S. bank credit lines. The Company has a committed line of credit
agreement with a group of financial institutions which provides for aggregate
unsecured borrowings of $100 million of which up to $50 million may be borrowed
by its international subsidiaries.
The Company's international business is subject to the usual inherent risks of
operating internationally, including currency restrictions, currency
fluctuations and changes in international laws and regulations. The Company
has adopted certain hedging practices intended to minimize the effect of
foreign currency fluctuations with respect to certain foreign currency
denominated intercompany transactions over which the Company has no control
(see Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview and Note 1g. of Notes to Consolidated Financial
Statements).
SEASONAL ASPECTS OF THE BUSINESS
Although the business of the Company is not necessarily seasonal, it has been
the Company's experience, with respect to its retail customers, that new orders
and installations generally decrease during the December through February
period. The Company believes this is attributable to the preoccupation of
retail store management with the Christmas selling season and year-end
inventory analysis during this period. In August 1992, the Board of Directors
approved a change in the Company's fiscal year-end from May 31 to June 30,
effective in the first quarter of fiscal 1993. The Company believes such
change has resulted in quarterly reporting periods which are more closely in
line with the seasonal purchasing patterns of the Company's customers.
15
<PAGE> 17
BACKLOG
As of June 30, 1994 and June 30, 1993, the Company had a backlog of orders for
sales of approximately $56 million and $44 million, and had a backlog of orders
for operating leases providing for future lease revenues aggregating
approximately $16 million and $11 million, respectively.
Backlog includes only firm orders which are expected to be installed or
delivered within one year. Backlog at any time is not necessarily indicative
of the level of business to be expected in the ensuing period.
COMPETITION
The loss prevention industry is highly competitive. There are many
alternatives available to deter theft, in addition to the use of EAS and CCTV
systems, including, among other things, guards and private detective services,
mirrors, burglar alarms and other magnetic and electronic devices, and services
combining some or all of the above elements. To the Company's knowledge, there
are several other companies that market, directly or through distributors, EAS
equipment to retail stores, of which Checkpoint Systems, Inc. ("Checkpoint"),
Knogo Corporation ("Knogo"), and, Minnesota, Mining and Manufacturing Company
("3M") in the U.S., and Actron (part of ADT - Britannia), Checkpoint, Esselte
Meto, Knogo (see Company Development and General Strategies) Nedap B.V. and 3M
in Europe, are the Company's principal competitors. With respect to CCTV
products, there are numerous companies, including Burle Industries, Inc.,
Panasonic, Pelco and Vicon Industries, Inc. that market directly or through
distributors such equipment to both retail and non-retail customers; however,
to the Company's knowledge, there is no single principal competitor marketing
CCTV products.
There can be no assurance that other firms with greater financial and other
resources may not enter into, or expand their direct competition with the
Company. The Company competes in marketing EAS, CCTV, EAP and access control
systems principally on the basis of product performance, multiple technologies
and service.
PRODUCT RESEARCH, DEVELOPMENT AND ENGINEERING
The Company has significantly increased its research, development, and
engineering expenditures during the past decade. The increased in these
activities has resulted in the continued broadening of the product lines
offered by the Company resulting in the expansion of the applications and
customer base for the Company's products. A large portion of the Company's
recent growth in revenue can be attributed to the products and technologies
resulting from these efforts.
The Company has significantly strengthened its research, development, and
engineering activities by increasing its investment in sophisticated
engineering equipment, expanding key consulting relationships throughout the
world, and substantially increasing its professional engineering staff, with
particular emphasis on magnetic materials research and software development
16
<PAGE> 18
skills. Several of the Company's EAS products depend on the use of magnetic
materials. Software is a major element in the Company's new product designs
and manufacturing processes. At June 30, 1994, the Company employed a staff of
223 on the engineering payroll of which 174 were degreed engineers, including
47 with advanced Masters and Ph.D. degrees.
Another important source of new products and technologies has been the
Company's strategic acquisitions of companies and products during the last few
years. The Company will continue to make acquisitions of related businesses or
products consistent with its overall product and marketing strategies.
In fiscal 1994, 1993 and 1992, the Company spent approximately $20 million, $16
million, and $13 million, respectively, for the engineering support of products
currently in production (including certain amounts recorded as product costs),
and on research and product development activities (separately aggregating
approximately $15 million, $12 million, and $10 million in fiscal 1994, 1993
and 1992, respectively) for the development of new and improved products. A
further increase in research and product development and engineering support
is expected in fiscal 1995 (to approximately $25 million) as the Company
continues to invest in new product development activities.
MANUFACTURING
The Company manufactures most of its products in facilities located in Puerto
Rico and Florida and has developed over the years a highly integrated
manufacturing capability. The Company's manufacturing strategy is to rely
primarily on in-house capability and to vertically integrate manufacturing
processes to the extent possible and economically practical. This integration
and in-house capability provides significant control over costs, quality and
responsiveness to the demands of the market which results in a distinct
competitive advantage.
The Company utilizes independent suppliers in procuring various component
products and materials required to manufacture its products. Certain of the
magnetic material for the Ultra - Max labels and tags is purchased from a
single vendor under a supply agreement. The Company also contracts with
independent parties for the manufacture of certain products, such as the Aisle
Keeper and Standard Magnetic Labels made to the Company's specifications.
Additionally, certain OEM equipment and mechanical and component parts,
supplies and accessories (such as cables, cameras, VCRs and television monitors
related to the SensorVision system), are purchased from independent suppliers.
With respect to products developed or acquired in the future, the Company may
manufacture such products or, if deemed appropriate, may contract for the
manufacture of such products.
Certain of the tags used with the Security Tag EAS systems are manufactured by
a Hong Kong based supplier under a manufacturing agreement. Additionally, the
CamEra CCTV accessories and components are purchased, under the Company's
specifications, from approximately 10-15 large international electronics
manufacturers.
17
<PAGE> 19
The Company has improved, and expects to continue to improve, its production
efficiencies through increased automation and improved cost reducing product
designs. Such increased automation, particularly to increase capacity and
lower production costs of disposable labels, will require additional capital
expenditures for new production equipment. In July 1993, the Company moved its
63,000 square foot U.S. manufacturing facility , primarily used in the
manufacture of labels, to a newly constructed 120,000 square foot facility in
Boca Raton, Florida. The Company is in the process of constructing a 100,000
square foot addition to this facility which is required to meet its current and
anticipated label manufacturing needs (principally the Ultra - Max label).
Additionally, in early fiscal 1994, the Company completed the process of
consolidating the majority of its 270,000 square foot Puerto Rico
manufacturing operations into a 325,000 square foot facility located in
Aguadilla, Puerto Rico. Over 70% of the value of EAS and CCTV products sold by
the Company is currently produced in Puerto Rico, contributing significantly to
the relatively low effective tax rate enjoyed by the Company due to the
favorable income tax status of the Puerto Rico operations.
In February 1994 the Company announced plans to begin manufacturing operations
in an 80,000 square foot leased facility located in Cork, Ireland. This
facility will allow the Company to manufacture certain EAS and CCTV products
(including tags and labels) closer to its large European customer base.
Additionally, the Company finalized an agreement with the Industrial
Development Agency of Ireland with respect to wage and training tax credits and
rent subsidies.
WORKING CAPITAL ITEMS
The Company has historically had a high level of receivables outstanding
measured as a percentage of revenues. This results in part from its strategy
to use its financial strength as a marketing tool in obtaining new business by,
for example, offering to customers flexible, deferred payment arrangements
(substantially all of which mature within one year) or longer term installment
sales financing or leasing arrangements (subject to stated or imputed interest)
to facilitate purchases. Additionally, the Company has experienced an
historical pattern of delayed payments by certain of its major retail customers
which has extended its receivable aging profile.
During fiscal 1993, the Company increased its efforts to reduce receivables by,
among other things: (i) implementing an enhanced invoicing and accounts
receivable system; (ii) employing the use of third party servicing agents to
enhance the efficiency of its billing and collection practices; (iii) expanding
the number and use of relationships with third party financing institutions
which the Company can sell and assign receivables and sales-type leases
(generally with varying amounts of recourse to the Company - see Note 2 of
Notes to Consolidated Financial Statements); and (iv) generally increasing its
collection efforts. The results of such ongoing efforts have been to reduce
the average time required to collect receivables and to provide the Company
with the flexibility
18
<PAGE> 20
to convert its receivables into cash as needed. The Company received net
proceeds of $271 million and $143 million upon the sale and assignment of
receivables and sales-type leases in fiscal 1994 and 1993, respectively.
PATENT AND RELATED RIGHTS
The Company owns or is the exclusive licensee of over 166 patents issued by the
United States Patent Office. These patents cover a variety of inventions
including the Company's traditional EAS system as well as its electromagnetic,
acousto-magnetic, CCTV and low radio frequency systems. Patents corresponding
to many of these United States patents have been issued or are pending in
various foreign countries. The Company is a non-exclusive licensee under
certain patents issued in the United States and various foreign countries
relating to the manufacture, use and sale of certain labels for use with its
electromagnetic systems, for which license the Company pays royalties. The
Company has over 50 patent applications pending in the United States for
various other inventions relating to its products. Patent applications for
some of these inventions are also pending in other countries. There can be no
assurance that any patents will be issued to the Company on any of its pending
applications.
The Company does not make any representation as to the scope, validity or value
of any patents which have been or may be issued or licensed to it or as to the
possible infringement by its products on patents owned by others. Although the
Company's patent program is important, the Company believes that because of its
technical knowledge and experience and the abilities of its established and
experienced sales and service organization, it is not dependent upon patent
protection to maintain its leadership in the electronic security industry.
GOVERNMENTAL REGULATION
The Company's traditional EAS systems generate microwaves and are subject to
the Radiation Control for the Health and Safety Act of 1968. The United States
Department of Health, Education and Welfare ("HEW") conducted rule-making
proceedings and adopted standards for certain microwave equipment. The Bureau
of Radiological Health ("BRH") of HEW tested a traditional EAS system in
January 1976 and notified the Company that no such proceedings with respect to
the Company's equipment were contemplated. BRH conducted additional tests of
various EAS systems in 1979 and concluded that the finding of both its earlier
and more recent tests confirmed the BRH position that "emissions from the
Sensormatic devices fall well below current U.S. exposure guidelines for
permissible exposure of humans to microwave radiation."
The Department of Health and Human Services, successor to HEW, and other U.S.
and local governmental authorities have continued to consider the safe emission
levels for microwave and electronic magnetic fields ("EMF") generated by
equipment such as radio and television transmitters, cellular telephones,
household appliances and power lines. The EMF emissions from the Company's EAS
systems are similar to the levels from other such equipment and are well
19
<PAGE> 21
within the levels permitted by the current safety standards applicable to such
equipment. Although there can be no assurance that rules or regulations
establishing more restrictive standards will not be adopted in the U.S., the
Company believes that the EMF levels generated by its EAS systems will remain
within any new safety standards which may be established.
Certification of the Company's EAS systems is required under applicable
regulations of the U.S. Federal Communications Commission ("FCC"). The Company
has obtained such certification of its presently marketed equipment.
Application for certification of new equipment will be made as such equipment
is developed by the Company. There can be no assurance that such future
applications will be approved.
In an order adopted in May 1990, the FCC issued new regulations relative to the
certification of radio equipment operating in the 902 to 928 MHz frequency
range where the Company's traditional EAS systems operate. The new regulations
permit the use of low power, short range wireless equipment in this frequency
range for new consumer and other devices. A number of such devices have been
certified pursuant to these regulations. The Company is not aware of any
reported interference complaints over the past four years with its traditional
EAS systems from such devices.
Additionally, to further ensure that the FCC's regulations are unlikely to
affect its business, the Company has redesigned its traditional EAS systems to
employ an advanced spread spectrum modulation technique that effectively
time-randomizes the actual frequency of operation, thus minimizing the
possibility for co-user frequency interference.
In a Notice of Proposed Rulemaking ("NPRM") dated April 9, 1993, the FCC
requested comments on a proposed regulation that would establish a Location and
Monitoring Service ("LMS") for vehicles, people and other objects to be
operated in the 902 to 928 MHz band under a licensed, priority FCC regulation.
The Company and many other unlicensed users of this band have filed Comments
and Reply Comments strenuously objecting to this proposed FCC rulemaking. The
FCC continues to study this issue to find a suitable compromise for all
parties. If the FCC should adopt new Rules as a result of this NPRM, however,
the Company's earlier effort in redesigning its traditional EAS systems should
ensure that the possibility for co-user frequency interference is minimized.
FCC regulations are subject to change or amendment generally, and there can be
no assurance that adverse changes or amendments will not take place or that
future adverse rulings by the FCC will not be rendered.
Internationally, as in the United States, the sale and use of the Company's EAS
systems are subject to regulation by governmental authorities having
jurisdiction over electronic and communication equipment use. Such systems are
in compliance with the applicable requirements under the regulations of
government authorities in countries in which the Company markets such products
through its subsidiaries and in many other countries. In addition, in view of
the political and economic changes taking place in the European
20
<PAGE> 22
Union ("EU") markets and the Company's high level of business activity in the
EU, the Company actively monitors the development of evolving new technical
standards that are currently being issued by CENELEC (Committee on European
Normalization of Electrical Standards) and ETSI (European Telecommunications
Standards Institute). There can be no assurance that all products of the
Company subject to regulations will meet the requirements of such regulations
in all countries in which the Company desires its products to be marketed, nor
can there be any assurance that adverse changes or amendments to existing
regulations will not take place, nor that future adverse rulings by the
regulating authorities of such foreign countries will not be rendered.
EMPLOYEES
As of June 30, 1994, the Company employed approximately 5,500 persons worldwide
of whom 2,336 were engaged in field sales and customer engineering activities;
2,247 in production; 673 in administrative and 244 in research, development and
engineering. The Company is not a party to collective bargaining agreements.
Item 2. Properties
In the United States, the Company owns or leases facilities in Florida, Puerto
Rico, California, Massachusetts, New York and Texas for executive, marketing,
product development, manufacturing and warehousing activities. The Company
also leases space in various locations throughout the United States for sales
and customer engineering offices and warehouse space in order to most
effectively serve its customers. The Company is in the process of constructing
a 100,000 square foot addition to its Florida manufacturing facility to meet
its current and anticipated label manufacturing needs (principally the Ultra -
Max label).
The Company's international subsidiaries own or lease office and warehouse
space for their operations. The principal facilities are located in Australia,
Belgium, Canada, France, Germany, The Netherlands, Singapore, Spain, Sweden and
the United Kingdom. Additionally, in fiscal 1994 the Company entered into a
lease for an 80,000 square foot manufacturing facility in Cork, Ireland.
The Company considers its key properties identified above as suitable to its
business and, in general, adequate for its current and near-term needs. It
currently utilizes all such properties fully except the facility in Ireland
which is in the start-up phase. In fiscal 1995, the Company will begin
constructing a 180,000 square foot facility in Boca Raton, Florida to
consolidate its research and product development and engineering support
personnel and equipment.
21
<PAGE> 23
Item 3. Legal Proceedings
An action was commenced on November 22, 1993 against the Company and Ronald G.
Assaf, its Chairman of the Board, President and Chief Executive Officer, in the
United States District Court for the Southern District of Florida, by Bayer
Silver, alleging that favorable public statements by the Company concerning its
growth and the quality of its products were false. The suit arises out of the
controversy resulting from the Company's Ultra - Max product being named the
recommended standard for electronic article surveillance protection of
pre-recorded music by the National Association of Recording Merchandisers
("NARM"), and the rejection of NARM's recommendations announced by the music
manufacturers on November 11, 1993. The suit alleges that the Company's
statements at various times between January 8, 1993 and November 11, 1993,
relating to the suitability of its Ultra - Max system for the music recording
industry, and favorable to the Company's prospects for implementing and
benefiting from the source labeling program being promoted by NARM, were false
and misleading.
The plaintiff, who claims to be a stockholder of the Company who purchased 400
shares of the Company's Common Stock during the period in question, seeks class
certification and unspecified compensatory damages for himself and other
putative class members who purchased the Company's common stock in the period
from January 8, 1993 through November 11, 1993. The Company believes in the
appropriateness of its public statements with respect to NARM and the
suitability of the Company's Ultra - Max system for the music industry. The
Company is vigorously defending against this suit.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
22
<PAGE> 24
Executive Officers of the Registrant
The following table sets forth information as of September 2, 1994 with respect
to the executive officers of the Company.
<TABLE>
<CAPTION>
Year
First
Became
Executive
Name Age Officer Offices
- - ---- --- ------- -------
<S> <C> <C> <C>
Ronald G. Assaf 59 1967 Chairman of the Board of
Directors, President and Chief
Executive Officer
C. Dawson Buck 48 1992 Senior Vice President and
President of Sensormatic International
John F. Daut 59 1988 Vice President of Manufacturing
Walter A. Engdahl 56 1993 Vice President- Corporate Counsel and Secretary
Miguel A. Flores 40 1988 Vice President and Treasurer
Olin S. Giles 54 1985 Vice President of Engineering
Dennis C. Gillette 55 1980 Senior Vice President
Jerry T. Kendall 51 1993 Vice President of Corporate Marketing
James E. Lineberger 57 1974 Chairman of the Executive
Committee and Director
Michael E. Pardue 44 1986 Executive Vice President,
Chief Operating Officer, Chief
Financial Officer and Director
Terry W. Price 50 1991 Group Vice President - Commercial/Industrial
Lawrence J. Simmons 43 1988 Vice President of Finance and
Chief Accounting Officer
Gerd Witter 50 1983 President of Sensormatic Europe
</TABLE>
The terms of office of each of the above officers, pursuant to the By-Laws of
the Company, will continue until the next Annual Meeting of the Board of
Directors (to be held after the next Annual Meeting of Stockholders) and until
a successor is elected and qualified.
23
<PAGE> 25
Ronald G. Assaf, a founder of the Company, has been a Director of the Company
since 1967 and Chairman of the Board of Directors since October 1971 and served
as President and Chief Executive Officer of the Company from 1974 to January
1986. In January 1988, Mr. Assaf was appointed Co-Chief Executive Officer and
in July 1988 was reappointed to the positions of President and Chief Executive
Officer. Additionally, Mr. Assaf is a member of the Board of Directors of
Automated Security (Holdings) PLC ("ASH") and Hilite Industries Inc.
C. Dawson Buck joined Sensormatic as Chief Executive Officer of Securitag
(U.K.) Ltd., a subsidiary acquired from ASH on July 29, 1992 and was appointed
Senior Vice President and President of Sensormatic International Division in
August 1992. Prior to joining Sensormatic, Mr. Buck was the Chief Executive
Officer of the UK operations of ASH, having joined ASH in 1975 and serving in
various management capacities including managing ASH's Loss Prevention
business. Additionally, Mr. Buck has been a member of the Board of Directors
of ASH since 1988.
John F. Daut joined the Company in December 1988 as Vice President of
Manufacturing. Prior to his joining the Company, Mr. Daut had over 31 years of
experience in manufacturing at IBM, including Site General Management.
Walter A. Engdahl joined the Company in November 1983 as Corporate Counsel.
Mr. Engdahl was appointed Vice President - Corporate Counsel in February 1992.
In November 1993, Mr. Engdahl was appointed Secretary of the Company. He is a
member of the Bars of both Florida and New York.
Miguel A. Flores joined the Company in October 1983 and served in various
financial management capacities, including Director of Finance. In November
1988, Mr. Flores was appointed Treasurer and Secretary of the Company. In
November 1993, Mr. Flores relinquished his duties as Secretary and was
appointed Vice President and Treasurer of the Company. He is a Certified
Public Accountant.
Olin S. Giles joined the Company in May 1985 as Vice President of Engineering
and served as Vice President of Operations from July 1987 to October 1988, when
he was reappointed as Vice President of Engineering.
Dennis C. Gillette joined the Company in August 1970 and served in various
sales and marketing capacities. Mr. Gillette was appointed Vice President of
Marketing, Eastern Region in October 1980 and served as Vice President of Sales
from January 1984 until February 1986 when he was appointed Vice President of
Sales and Marketing. In September 1988, he was appointed Senior Vice President
of the Company.
24
<PAGE> 26
Jerry T. Kendall joined Sensormatic as Senior Vice President - Sales, Marketing
and Service of Security Tag Systems, Inc. ("Security Tag"), which was acquired
by the Company during fiscal 1993, and was appointed Vice President of
Marketing in September 1993. Prior to joining Sensormatic, Mr. Kendall served
in various sales and marketing capacities at Security Tag from January 1990
to April 1991 and from January 1992 to September 1993. During the interim, Mr.
Kendall held the position of Executive Vice President with Computone Corp., a
public company. Prior to joining Security Tag, he served as a private
consultant to various high-tech companies.
James E. Lineberger has been a Director of the Company since 1968 and Chairman
of the Executive Committee since 1974. From January 1988 to July 1988, Mr.
Lineberger served as Co-Chief Executive Officer of the Company. He has been a
partner of Lineberger & Co. and its predecessors, private investment firms,
since 1974. Additionally, Mr. Lineberger serves as Chairman of the Board of
Directors of Hilite Industries Inc.
Michael E. Pardue joined the Company in 1978 and served in various financial
management capacities until his appointment as Corporate Controller in 1980. In
February 1986, Mr. Pardue was appointed Vice President of Finance and the
Company's Chief Financial Officer. Mr. Pardue was appointed Executive Vice
President and Chief Operating Officer in September 1988 and continues to serve
as Chief Financial Officer. In August 1992, Mr. Pardue was appointed to the
Company's Board of Directors.
Terry W. Price joined the Company in April 1991 as Group Vice President -
Commercial/Industrial. In his capacity, Mr. Price oversees the Company's
Commercial/Industrial Group. Prior to joining the Company he served as
President and Chief Executive Officer of AmeriSystems, a telecommunications
firm, for more than 5 years.
Lawrence J. Simmons joined the Company in December 1983 and served in various
financial management capacities until his appointment as Corporate Controller
in 1986. In November 1988, Mr. Simmons was appointed Vice President of Finance
and Chief Accounting Officer. He is a Certified Public Accountant.
Gerd Witter joined the Company in April 1979 as General Manager of its German
subsidiary. Mr. Witter served as Director of European Operations from July 1981
until March 1983 when he was appointed Vice President of European Operations.
Mr. Witter was appointed President of Sensormatic Europe in September 1988.
None of the above executive officers has any family relationship with any other
director or executive officer of the Company.
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<PAGE> 27
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol SRM. Trading on such exchange commenced on May 16, 1991.
Previously, the Company's Common Stock was traded in the over-the-counter
market on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") National Market System, under the symbol SNSR. The following
table sets forth for each quarterly period during the two fiscal years ended
June 30, 1994 and 1993, the high and low sales prices for the Common Stock as
reported by the NYSE. Such prices have been adjusted to reflect a
three-for-two stock split effected in November 1993.
<TABLE>
<CAPTION>
Sales Prices
--------------------------------
High Low
------------- ------------
1994
- - ----
<S> <C> <C>
First Quarter 30 5/12 24
Second Quarter 35 27 3/4
Third Quarter 38 7/8 33
Fourth Quarter 34 5/8 27 1/2
1993
- - ----
First Quarter 18 1/6 15 1/6
Second Quarter 21 11/12 15
Third Quarter 26 11/12 20
Fourth Quarter 30 24 7/12
</TABLE>
As of September 2, 1994, there were 4,649 shareholders of record of the
Company's Common Stock.
The Company paid regular semiannual cash dividends of $.017 per share of Common
Stock from December 1978 through January 1990, regular quarterly cash dividends
of $.05 per share from April 1990 through November 1993 and has paid a regular
quarterly cash dividend of $.055 per share since February 1994. The
declaration and payment of future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition, contractual debt covenants and capital
requirements.
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<PAGE> 28
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Years ended June 30, Years Ended May 31,
-------------------------------- ----------------------------------------------
1994 (1) 1993 (1)(4) 1992 1991 (1)(2) 1990
----------- ----------- -------- ------------ --------
(In millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Total revenues $ 656.0 $ 487.3 $ 309.9 $ 239.2 $ 191.3
======== ======== ======== ======== ========
Operating income $ 104.8 $ 71.0 $ 43.6 $ 29.3 $ 22.8
======== ======== ======== ======== ========
Income from continuing
operations and net income $ 72.1 $ 54.1 $ 31.5 $ 24.7 $ 20.0
======== ======== ======== ======== ========
Primary earnings
per common share:
Continuing operations and
net income $ 1.16 $ .97 $ .73 $ .60 $ .48
======== ======== ======== ======== ========
Fully diluted earnings
per common share:
Continuing operations and
net income $ 1.13 $ .93 $ .73 $ .60 $ .48
======== ======== ======== ======== ========
Cash dividends per
common share $ .21 $ .15(5) $ .20 $ .20 $ .123
======== ======== ======== ======== ========
At period end:
Total assets $1,155.5 $ 926.9 $ 467.3 $ 421.8 $ 265.1
======== ======== ======== ======== ========
Total debt (3) $ 219.2 $ 308.4 $ 150.6 $ 148.7 $ 20.0
======== ======== ======== ======== ========
Total stockholders' equity $ 727.7(3) $ 489.8 $ 255.7 $ 222.2 $ 199.8
======== ======== ======== ======== ========
</TABLE>
(Continued on the following page.)
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<PAGE> 29
Item 6. Selected Financial Data (Cont'd)
(1) In fiscal 1993, the Company acquired ALPS and the outstanding common
stock of Security Tag and in fiscal 1991, it acquired the outstanding
common stock of American Dynamics. (see Note 11 of Notes to
Consolidated Financial Statements).
(2) In fiscal 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (see Note 8f of Notes to Consolidated Financial
Statements).
(3) In fiscal 1994, approximately $114 million of the $115 million
principal amount of 7% convertible subordinated debentures, issued in
fiscal 1991, were converted to approximately 7.3 million shares of
Common Stock and in fiscal 1993, the Company issued $135 million
aggregated principal amount of 8.21% Senior Notes (see Notes 6 and 7
of Notes to Consolidated Financial Statements).
(4) Selected financial data for and as of the end of the one month ended
June 30, 1992 is as follows: total revenues - $21.0; operating loss -
$3.3; loss from continuing operations and net loss - $2.5; primary and
fully diluted loss per common share for continuing operations and net
loss - $.06; total assets - $462.2; total debt - $150.3 and total
stockholders' equity - $258.3.
(5) Fourth quarter dividend of $.05 per share of Common Stock was declared
in July 1993.
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<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's consolidated financial statements present a consolidation of its
worldwide operations. This discussion supplements the detailed information
presented in the Consolidated Financial Statements and Notes thereto and is
intended to assist the reader in understanding the financial results and
condition of the Company.
In August 1992, the Company changed its fiscal year-end from May 31 to June 30.
Accordingly, the financial statements presented are for the Company's fiscal
years ended June 30, 1994 and 1993 and May 31, 1992 and for the month ended
June 30, 1992 (June 1992). (See Transition Period below.)
OVERVIEW
CONSOLIDATED REVENUES increased 35% in fiscal 1994 compared to fiscal 1993, and
57% and 30% in fiscal 1993 and 1992, respectively, over the prior years,
representing an annual compounded growth rate of 40% over the last three fiscal
years. This growth rate is largely attributable to the successful
implementation of a strategy of product, customer and geographic market
diversification aimed at substantially increasing the Company's growth
potential. New EAS and CCTV products and product enhancements introduced over
the last several years have allowed the Company to broaden its customer base to
include hard goods retailers and non-retail businesses. The acquisition in
July 1992 of Automated Loss Prevention Systems (ALPS), previously a large
European distributor of EAS and CCTV products, and other niche acquisitions
were a result of the Company's diversification strategy. This has resulted in
more than 50% of fiscal 1994 revenues being generated from outside of the
United States (compared to an average of approximately 40% per year over the
previous five years).
The diversification strategy has also been accomplished through the
introduction of a broad array of new products which resulted from the Company's
extensive research, development and engineering activities as well as selected
strategic acquisitions over the last several fiscal years. The Company
invested $20 million in fiscal 1994 and anticipates investing approximately $25
million in fiscal 1995 in research and product development and engineering
support activities primarily to continue broadening the product lines offered
by the Company and expanding the applications and customer base for the
Company's existing product lines. Introduction of such new products into the
market place will be made in accordance with its strategic marketing plans.
Additionally, the Company has made certain strategic acquisitions including
Security Tag Systems, Inc. (Security Tag), a U.S.-based manufacturer and
marketer of loss
29
<PAGE> 31
prevention products, Software House, Inc. (Software House), a premier developer
of high-end access control and integrated security systems, and Robot Research
Inc. (Robot Research), a U.S. manufacturer of sophisticated CCTV equipment.
The acquisition of ALPS significantly broadened the Company's presence and
direct distribution capacity in Europe, increased its share of total EAS
product sales in every European country in which the Company does business, and
confirmed the Company's leadership position in supplying EAS products to
retailers worldwide. Furthermore, the CamEra division of ALPS, which markets
CCTV and exception monitoring systems directly to end-users in the United
Kingdom and sells more CCTV systems to end-users than any other supplier in the
U.K., added new product lines to Sensormatic's already broad and diverse
product offering (in fiscal 1994 the Company began marketing CamEra's products
in the United States and France).
The acquisitions of Software House and Robot Research, as well as American
Dynamics and Continental Instruments Corporation in fiscal 1991 and 1990,
respectively, broadened the Company's customer base by adding new proprietary
products and distribution channels aimed at non-retail customers.
In August 1994, the Company announced it had reached an agreement to merge
Knogo Corporation's (Knogo) business interests and rights to products outside
of the U.S. and Canada (reporting revenues of $71 million for the fiscal year
ended February 28, 1994) into the Company in exchange for Sensormatic Common
Stock valued at approximately $100 million. Knogo is a U.S.-based company
engaged primarily in the business of manufacturing (primarily in the U.S.),
marketing and servicing EAS systems and marketing and servicing CCTV systems.
This agreement is subject to certain conditions, including approval of Knogo's
shareholders and expiration of regulatory waiting periods. The agreement also
has provisions for break-up fees, under certain conditions, payable to either
party should the transaction fail to close. (See Note 13. of Notes to
Consolidated Financial Statements.)
Another principal strategy of the Company is to expand its base of recurring
revenues. Recurring revenues are generated by sales of disposable labels to
the hard goods retailers, maintenance agreements entered into in connection
with the sale or lease of systems, and rental revenues from operating leases.
In fiscal 1994, recurring revenues were approximately $120 million compared to
approximately $106 million and $69 million in fiscal 1993 and 1992,
respectively. The sale of disposable labels to the hard goods retailers is the
fastest growing component of the recurring revenue stream, growing from less
than $4 million in fiscal 1988 to approximately $57 million in fiscal 1994, an
annual compounded growth rate of over 55%.
The Company took a major step in its efforts to increase future recurring label
revenues through the introduction of its Universal Product Protection
(UPP(SM)) program in fiscal
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<PAGE> 32
1993. Under this program (also referred to as source labeling or tagging), EAS
labels (or tags) are incorporated into or affixed to the merchandise to be
protected during the process of manufacturing, packaging or distribution rather
than at the retail store. In fiscal 1994, a prominent homecenter retailer
became the first major retailer to embrace the concept of source tagging on a
chainwide basis. It is expected that by late 1994 approximately 70
manufacturers worldwide will apply the Company's Ultra-Max(R) labels to
merchandise delivered to this retailer's stores in the U.S. Additionally, in
fiscal 1994, other top retailers from the homecenter and discount industries
met to outline their framework for source labeling with their manufacturers.
In March 1993, the National Association of Recording Merchandisers (NARM)
recommended the Company's acousto-magnetic Ultra-Max product line as the
industry standard for use in source labeling of pre-recorded music. The
Company committed to NARM that it would cross-license its acousto-magnetic
technology to other companies supplying the music industry. In November 1993,
the six major music manufacturers objected to implementing EAS source labeling
of pre-recorded music using the Company's acousto-magnetic technology
principally on the grounds of test results obtained by the manufacturers which
they claimed showed some degradation of the sound quality of certain audio
cassette tapes from the magnetic deactivation devices. Compact discs, which
are the most susceptible to shrinkage of the pre-recorded music formats carried
by music retailers, have not been subject to any controversy over alleged
degradation in sound quality. After further consideration, NARM reconfirmed
its recommendation of Ultra-Max in June 1994 for use with, among other things,
compact discs and certain types of audio-tapes. While it is unclear whether
NARM and the music manufacturers will reach agreement in the future, music
retailers are continuing to expand their use of the Company's acousto-magnetic
Ultra-Max products. Sales to U.S. music retailers accounted for approximately
2% of Sensormatic's total fiscal 1994 consolidated revenues. (See Part I, Item
1, Company Development and General Strategies, for additional discussion.)
OPERATING INCOME in fiscal 1994 increased 48% over fiscal 1993. Growth in
operating income outpaced the revenue growth, primarily as a result of improved
gross margins on product sales, which increased to 54% in fiscal 1994 from 53%
in fiscal 1993, and a reduction in selling and customer service, administration
and research, development and engineering expenses as a percentage of revenue
to 41% in fiscal 1994 from 42% in fiscal 1993. The overall result was that
operating income as a percentage of total revenues increased to 16% compared to
15% in fiscal 1993.
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<PAGE> 33
CURRENCY RISKS. The Company uses the U.S. dollar as the reporting currency for
financial statement purposes. It conducts business in numerous countries
around the world (primarily in Western European countries which have relatively
stable economies and currencies) through its international subsidiaries which
use local country currencies to denominate their transactions. Therefore, the
Company is subject to certain risks associated with fluctuating foreign
currencies.
The three major areas of currency risks that the Company is exposed to are: (a)
the translation of revenues and expenses denominated in foreign currencies, for
reporting purposes; (b) the translation of assets and liabilities denominated
in foreign currencies, for reporting purposes; and (c) the settlement of
intercompany sales of products invoiced in local currencies by a U.S. dollar
based subsidiary to international subsidiaries (transaction exposure). The
Company monitors its currency exposures but, with the exception of certain
transaction exposures, has decided not to hedge either of its translation
exposures due to the high economic costs of such a program and the long-term
nature of its investments in its international subsidiaries. The Company has a
policy of purchasing forward exchange contracts and options designated to hedge
its transaction exposure arising from intercompany product purchase commitments
in order to reduce the impact of currency fluctuations on the Company's
financial performance.
The translation of revenues and expenses denominated in foreign currencies
(i.e., the income statements of international subsidiaries) is affected by
fluctuations in the average U. S. dollar exchange rate relative to these
foreign currencies, from period to period. While changes in the statements
caused by fluctuating rates are not indicative of any underlying changes in the
operations of the international subsidiaries, they do affect the comparability
of reported operating results from period to period. In fiscal 1994 and 1992,
operating income reported by international subsidiaries (primarily in France,
Germany, Spain and the United Kingdom) was lower by approximately $5 million
and $1 million, respectively, due to the stronger average U. S. dollar when
compared to the respective prior fiscal year (no effect in fiscal 1993). The
exposure to currency changes in future periods may be mitigated by operating
decisions such as pricing, sourcing of raw material purchases and currency of
invoicing. The Company's translation exposure is primarily in France, Germany,
Spain and the United Kingdom.
The translation of assets and liabilities denominated in foreign currencies
(i.e., the balance sheets of international subsidiaries) is affected by
fluctuations in the currency exchange rates, from date to date, affecting the
comparability of the Company's financial position from period to period. The
resulting changes in the statements do not indicate any underlying changes in
the financial position of the international subsidiaries but merely adjust
the carrying
32
<PAGE> 34
value of the net assets of these subsidiaries at current U.S. dollar exchange
rates. Because of the long-term nature of the Company's investment in these
subsidiaries (aggregating approximately $250 million and $230 million at June
30, 1994 and 1993, respectively, primarily located in 15 countries in Europe),
the translation adjustments resulting from these exchange rate fluctuations are
excluded from results of operations and recorded in a separate component of
consolidated stockholders equity. The fiscal 1994 translation increase of $16
million in consolidated stockholders equity resulted primarily from the
translation of the balance sheets denominated in French francs, German marks
and British pounds reflecting the weaker U.S. dollar relative to such
currencies at June 30, 1994 compared to June 30, 1993. The fiscal 1993
decrease of $71 million resulted primarily from the translation of the balance
sheets denominated in Spanish pesetas and British pounds, reflecting a stronger
U.S. dollar relative such currencies (which suffered devaluations in fiscal
1993 of approximately 25%) at June 30, 1993 compared to June 30, 1992 and the
substantial increase in the Company's net assets in those countries due to the
ALPS acquisition. The Company's balance sheet translation exposure is
primarily in France, Germany, Spain and the United Kingdom due to the
relatively large investments in subsidiaries located in these countries. The
effects of currency movements will not deter the Company's expansion of its
international subsidiaries because of the long-term nature of its investments
and operating activities in those stable countries.
The Company maintains a formal currency hedging policy to manage its
transaction exposure arising from intercompany product purchase commitments.
The Company recognizes that hedging certain transaction exposures may not
necessarily economically improve the settlement of the underlying transaction
(i.e., forego possible foreign exchange gains), however hedging reduces risk by
making the outcome more certain. The policy provides senior management with the
flexibility and information (including regular reporting of hedges outstanding
and anticipated commitments) to manage the identified transaction exposure,
within a minimum and maximum set of parameters, in order to react to changing
economic circumstances. The policy also provides for the use of forward
exchange contracts (forward contracts) and options to sell the currencies
received from the international subsidiaries in settlement of intercompany
product purchases. The Company utilizes forward contracts to hedge between 60%
and 90% of its intercompany commitments and normally uses options to hedge
between 10% and 20% of its exposure, over a rolling 18 month period. Such
period corresponds with the purchase commitment provisions of the Company's
License Agreements with its international subsidiaries. The hedge positions
are monitored and adjusted on a regular basis to reflect changes to commitment
amounts. Historically, inventory purchases by international subsidiaries
closely approximate the amounts of
33
<PAGE> 35
the hedged commitments. The Company's transaction exposure primarily relates
to the French franc, German mark and British pound currencies.
Forward contracts and options are subject to the risk of gain or loss from
changes in exchange rates, but these gains or losses are effectively offset by
losses or gains on the designated hedged commitments. Forward contracts
represent a contractual obligation of the Company to sell a specific amount of
a local currency at a specific exchange rate while options give the Company the
right to sell the currency, but do not contractually obligate it to do so (for
example, if future currency rates fluctuate in a way to make it economically
beneficial not to exercise the option to sell the currency at the specified
rate, the Company would elect to let the option expire).
The Company believes its policy to hedge its transaction exposures has been
successful as foreign exchange losses were minimal in fiscal 1994, 1993 and
1992. The Company also recognizes that possible foreign exchange gains were
foregone as a result of its hedging policy in order to reduce its overall risk
to fluctuating currencies by making the outcome more certain. (See Notes 1g.
and 12. of Notes to Consolidated Financial Statements.)
INTEREST RATE RISKS. The Company is subject to the risk of fluctuating
interest rates in the normal course of business on various assets, (consisting
primarily of cash and marketable securities, receivables under installment
contract obligations and net investment in sales-type leases) and debt. The
Company does not normally enter into interest rate swap agreements except with
respect to its management of the interest rate exposure associated with the
sale of receivables under installment contract obligations and in isolated
situations, such as to reduce the interest expense on the $135 million 8.21%
Senior Notes by taking advantage of lower prevailing short-term interest rates
(see Notes 1., 2., 6. and 12. of Notes to Consolidated Financial Statements).
After giving effect to the interest swap agreements approximately 90% of the
Company's outstanding debt bears interest at fluctuating rates, which allows
the Company to take advantage of lower prevailing short-term interest rates.
An increase in short term interest rates would result in higher interest
expense. However, the Company maintains a short average maturity on its
invested cash and marketable securities to mitigate this risk. The Company
believes its expected future operating results would more than adequately cover
any incremental interest expense caused by higher interest rates. In addition,
the Company has no financial debt covenants affected by an increase in interest
expense.
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<PAGE> 36
DERIVATIVES. Interest rate swap agreements and currency forward contracts and
options ("derivatives") contain an element of risk that the counterparty may be
unable to perform. However, the Company minimizes such risk by limiting the
counterparties used to major financial institutions with investment grade
credit ratings. The Company monitors its counterparty credit risks by
maintaining open communications with the counterparties used and monitoring
their respective credit ratings and related economic news.
The Company does not enter into speculative derivative transactions. The
derivative instruments it does own are not held as investments, and it is the
Company's intent to hold such instruments for their respective terms.
Therefore, changes in their fair values will have no effect on the Company's
operations, cash flows or financial position (see Note 12. of Notes to
Consolidated Financial Statements for additional discussion, including how the
fair values were determined).
FINANCIAL CONDITION
The financial condition of the Company remained strong in fiscal 1994. During
fiscal 1994, cash and marketable securities decreased $63 million primarily due
to: (a) increased inventory available for sale ($56 million) and total
receivables and net investment in sales-type leases ($75 million); (b) capital
expenditures ($52 million); (c) an increase in revenue equipment and inventory
available for lease ($17 million) and (d) the payment of dividends on Common
Stock ($13 million); offset in part by (a) increased short-term borrowings and
other debt ($31 million); and (b) proceeds from issuance of Common Stock
pursuant to employee benefit plans ($17 million).
Total receivables and net investment in sales-type leases increased from $255
million at June 30, 1993 to $309 million at June 30, 1994 principally as a
result of the higher level of business in fiscal 1994; offset in part by an
increase in sales of receivables and sales-type leases to third party financing
institutions (described further below).
The Company has historically had a high level of receivables outstanding
measured as a percentage of revenues. This results in part from the strategy
of using its financial strength as a marketing tool in obtaining new business.
For example, the Company offers flexible, deferred payment arrangements
(substantially all of which mature within one year), or longer term installment
sales financing or leasing arrangements (subject to stated or imputed interest)
to facilitate purchases. Additionally, the Company has experienced an
historical pattern of delayed payments by certain of its major retail customers
which has extended its receivables aging profile.
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<PAGE> 37
During fiscal 1993 the Company increased its efforts to reduce receivables by,
among other things: (a) implementing an enhanced invoicing and accounts
receivable system; (b) using third party servicing agents to enhance the
efficiency of its billing and collection practices; (c) expanding the number
and use of relationships with third party financing institutions to sell
receivables and sales-type leases (see Note 2. of Notes to Consolidated
Financial Statements); and (d) generally increasing its collection efforts.
The results of these ongoing efforts have been to reduce the average time
required to collect receivables and to provide the Company with the flexibility
to convert its receivables into cash as needed. The Company received proceeds
of $271 million and $143 million from the sale and assignment of receivables
and sales-type leases in fiscal 1994 and 1993, respectively (net of repurchases
due to customer non-payment of approximately $13 million and $9 million,
respectively).
The Company believes its allowance for doubtful accounts is adequate after
taking into account the aging of its receivables and net investment in
sales-type leases (including those repurchased from financing institutions due
to customer non-payment), the payment history of its customers, the Company's
security interest position in equipment financed under deferred terms and
installment sales contracts, its ability to re-market such equipment if needed,
the prospects of its collection efforts and its relationship with major retail
accounts.
Inventories at June 30, 1994 increased $61 million over June 30, 1993 to meet
increased forecasted production and sales levels and reduce the risk of
inventory shortages resulting from the rapid growth in market demand. Other
property, plant and equipment increased $40 million primarily due to the
purchases of a new Puerto Rico manufacturing facility and additional production
equipment in Florida and Puerto Rico. The Company's adoption of FASB 109 in
the first quarter of fiscal 1994 (see Note 5. of Notes to Consolidated
Financial Statements) and an increase in receivables due from third party
financing institutions were the primary causes of the $81 million increase in
deferred charges and other assets.
Total stockholders' equity at June 30, 1994 increased $238 million over the
June 30, 1993 balance, to $728 million, principally as a result of the
conversion of $114 million of outstanding principal amount of 7% convertible
subordinated debentures (Debentures) into approximately 7.3 million shares of
Common Stock, the issuance of 1.1 million shares of Common Stock (aggregating
$31 million) in connection with acquisitions, net income and the translation
adjustment resulting from the weaker U. S. dollar (approximately $16 million).
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<PAGE> 38
Total debt decreased $89 million over the June 30, 1993 balance, to $219
million, primarily as a result of the conversion of the Debentures into Common
Stock, partially offset by an increase in short-term credit line borrowings and
other debt. The debt-to-total capitalization ratio was .23 to 1 at June 30,
1994 compared to .39 to 1 at June 30, 1993.
The Company believes it is well positioned to meet anticipated capital
requirements for fiscal 1995, including capital expenditures for new production
equipment and a facility to consolidate the Company's research and product
development and engineering support personnel and equipment (approximately $28
million), and expenditures for research and product development and engineering
support (approximately $25 million). Such capital requirements and other
expenditures will be funded through operating activities, existing cash and
marketable securities and existing worldwide credit lines (see Note 6. of Notes
to Consolidated Financial Statements).
Additionally, future niche acquisitions, a fundamental element of the Company's
diversification and growth strategy, will be funded, when possible, through the
issuance of shares of Sensormatic Common Stock. Accordingly, in February 1994,
the Company filed a shelf registration statement with the Securities and
Exchange Commission under which the Company is able to issue up to 4.5 million
shares of its Common Stock (approximately 3.2 million shares remain available).
RESULTS FROM OPERATIONS
REVENUES
Consolidated revenues for fiscal 1994 were $656 million, a 35% increase from
$487 million in fiscal 1993. The revenue growth in 1994 resulted principally
from: (a) increased Ultra - Max volume primarily from hard goods retailers and
source labeling; (b) increased CCTV product volume from retailers; (c)
increased volume from the Commercial/Industrial Group, primarily CCTV systems;
and (d) revenues generated from Security Tag products (acquired and
consolidated effective June 1993); offset in part by the foreign exchange
effect on the international subsidiaries' local currency revenues when
translated into U.S. dollars for financial statement purposes caused by the
stronger average U.S. dollar (relative to the international subsidiaries' local
currencies, in the aggregate) throughout fiscal 1994 compared to fiscal 1993
(approximately $34 million).
Consolidated revenues from the EAS product lines for retail customers increased
23% to $406 million in fiscal 1994 compared to $330 million in fiscal 1993.
This increase resulted principally from a 50% volume increase from the Ultra -
Max product line and the addition of revenue from Security Tag EAS and
Inktag(R) product lines; offset in part by a near 20% decline in revenues
(compared to last year) from the traditional microwave product line. Revenues
from the CCTV
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<PAGE> 39
product lines for retailers exceeded $72 million compared to $40 million in
fiscal 1993, while revenues from the Commercial/Industrial Group (including
installation revenues) increased 100%, to $78 million compared to $39 million
in fiscal 1993, due primarily to the sale of CCTV products. Revenues from the
Company's CamEra(TM) systems increased 55% to $48 million in fiscal 1994
compared to $31 million in fiscal 1993. The Company generated $174 million of
revenue in fiscal 1994 from all of its CCTV products and systems combined,
worldwide.
International revenues were $333 million, $267 million and $114 million in
fiscal 1994, 1993 and 1992, respectively, and included revenues of the European
subsidiaries of $275 million, $232 million and $96 million, respectively. The
increase in European revenues in fiscal 1993 was led primarily by the inclusion
of revenues generated from ALPS EAS and CamEra CCTV products for eleven months
in fiscal 1993 ($79 million) and an increase of over 115% in revenues from the
AisleKeeper(R) and Ultra - Max product lines compared to fiscal 1992.
In fiscal 1993, consolidated revenues increased $177 million (57%) compared to
fiscal 1992 principally as a result of the inclusion of revenues generated from
ALPS products, increased worldwide revenues in every EAS product line for the
hard goods retailers, increased revenues from the sale of CCTV products to
retailers and increased revenues from the Commercial/Industrial Group. In
fiscal 1992, consolidated revenues increased by $71 million (30%) compared to
fiscal 1991 principally as a result of increased worldwide revenues in
practically every EAS product line, increased revenues from the sale of CCTV
products to retailers, and increased revenues from the Commercial/Industrial
Group including revenues generated by American Dynamics (acquired in February
1991); offset in part by the foreign exchange effect caused by the stronger
average U.S. dollar(approximately $7 million).
OPERATING COSTS AND EXPENSES
Operating costs and expenses in fiscal 1994 decreased to 84% of consolidated
revenues, compared with 85% in fiscal 1993 and 86% in fiscal 1992, resulting in
improved operating margins.
Gross margin on product sales in fiscal 1994 increased to 54% from 53% in
fiscal 1993, primarily from improved gross margins on certain EAS and CCTV
product lines resulting from improved manufacturing efficiencies and the
inclusion of the manufacturer's gross margin (as a result of the acquisition of
Security Tag) on the Security Tag product line; offset in part by a relative
increase in sales of lower margin products (such as CCTV products and labels)
compared to fiscal 1993. Gross margin on product sales in fiscal 1993
increased from 51% in fiscal 1992, which had improved from 49% in fiscal 1991.
Numerous gross margin improvement programs put in place throughout these
years, including increased manufacturing
38
<PAGE> 40
automation, cost reducing product design programs and improved cost control
monitoring (with respect to, for example, departmental budgets, manpower
increases, employee medical benefit costs and purchasing of raw materials),
together with increased production volumes have resulted in the improvements in
manufacturing costs.
Depreciation expense on revenue equipment declined slightly in fiscal 1994
compared to fiscal 1993 as the increased use of sales-type leases in Europe
reduced the growth of equipment on operating leases. Depreciation expense on
revenue equipment increased in fiscal 1993 and 1992, when compared to their
respective prior years, principally as a result of the increase in equipment on
lease. Gross margins on rental revenues increased in fiscal 1994 and fiscal
1993 and decreased slightly in fiscal 1992, compared to the respective prior
year, as a result of changes in the mix of products leased.
Total selling and customer service, administrative, research, development and
engineering expenses (operating expenses) for fiscal 1994 decreased to 41%,
as a percentage of total consolidated revenues, from 42% in fiscal 1993.
Operating expenses in fiscal 1994 increased 31% over fiscal 1993 primarily as a
result of higher selling and customer service expenses due to the greater level
of business in fiscal 1994 ($52 million in the aggregate); and an increase in
research, development and engineering expenses ($4 million); offset in part by
the foreign exchange effect caused by the stronger average U.S. dollar
(approximately $14 million). Operating expenses in fiscal 1993 and 1992
increased 60% and 28% over the respective prior fiscal year primarily as a
result of the higher level of business (including the ALPS acquisition in
fiscal 1993) and an increase in research, development and engineering expenses
of 20% and 37% over the respective prior years; offset in part by the foreign
exchange effect caused by the stronger average U.S. dollar in fiscal 1992
compared to the prior year.
OTHER INCOME (EXPENSES)
Interest income declined by $3 million in fiscal 1994 due primarily to a
decline in long-term interest rates throughout the year earned on net
investment in sales-type leases and receivables under installment contract
obligations. In fiscal 1993 interest income increased by $10 million
principally due to interest income earned on net investment in sales-type
leases (primarily leases acquired in connection with the ALPS acquisition) and
receivables under installment contract obligations. In fiscal 1992, interest
income increased by $5 million due to higher average cash balances available
for investing throughout the year (including net proceeds from the Debentures
issued in May 1991).
39
<PAGE> 41
Interest expense increased by $4 million, $7 million and $9 million in fiscal
1994, 1993 and 1992, respectively, due to higher levels of borrowings
(primarily resulting from the acquisition of ALPS, the Debentures issued in May
1991 and increased net short-term bank borrowings primarily by the Company's
European subsidiaries). As previously mentioned, the Company entered into
three-year interest rate swaps in fiscal 1993 to lower its current interest
expense on the $135 million 8.21% Senior Notes by exchanging their fixed
interest rate for a floating interest rate based on six month LIBOR rates
(throughout the term of the swap agreements) in order to take advantage of the
lower prevailing short-term interest rates. The interest expense on the Senior
Notes was lowered to an effective rate of approximately 6.8% in both fiscal
1994 and 1993 through the use of these swap agreements.
INCOME TAXES
The effective consolidated tax rate on income from continuing operations was
25% for fiscal 1994 and 1993 and 23% for 1992. The increase in the effective
tax rate from fiscal 1992 was principally due to increases in the profitability
of the international subsidiaries which are subject to statutory tax rates
generally higher than the U.S. rate, an increase in amortization of costs in
excess of net assets acquired (substantially all of which is non-deductible for
income tax purposes) and an increase in U.S. earnings not qualifying for the
U.S./Puerto Rico "Section 936" tax benefits (see Note 5. of Notes to
Consolidated Financial Statements). In addition to the items noted above, U.S.
and Puerto Rico tax law changes related to the Company's operations in Puerto
Rico will exert upward pressure on the Company's effective tax rate beginning
in fiscal 1995.
NET INCOME
Consolidated net income for fiscal 1994, 1993 and 1992 increased $18 million,
$23 million and $7 million compared to their respective prior years,
representing an annual compounded rate of growth of 43% over the last three
fiscal years, due principally to the factors discussed above.
TRANSITION PERIOD
Revenues for the one-month transition period ended June 30, 1992 were $21
million reflecting the low volume of business historically experienced in June
by the Company's U.S. operations. The June operating loss of $3.3 million was
primarily due to the low level of revenues relative to the normal level of
fixed operating costs and expenses for the one month period. Other expenses,
net, of $1.2 million included one-time expenses of approximately $0.8 million
associated with a terminated acquisition and the settlement of a long standing
litigation. The benefit from income taxes of $2.1 million included the
calculated tax benefits resulting from
40
<PAGE> 42
the June net operating losses incurred by the Company's U.S. operations; offset
in part by the income tax provision on earnings from the Company's Puerto Rico
and international operations.
41
<PAGE> 43
Item 8. Financial Statements and Supplementary Data
See Item 14 for a list of the Sensormatic Electronics Corporation Consolidated
Financial Statements and Schedules and Supplementary Information filed as part
of this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
Part III
The information required by Item 10 (Directors and Executive Officers of the
Registrant) (other than information as to executive officers of the Company,
which is set forth in Part I under the caption "Executive Officers of the
Registrant"), Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) is incorporated by reference to the Company's
definitive proxy statement for the 1994 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission on or before October 28,
1994.
Part IV
Item 14. Exhibits, Financial Statements and Supplementary Data,
Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this
report:
(1)(2) Financial Statements
The financial statements, financial statement schedules and
supplementary information listed in the accompanying Index To
Financial Statements.
(3) Exhibits
The exhibits listed in the accompanying Index To Exhibits.
(b) Reports on Form 8-K:
On August 24, 1994, the Company filed a Current Report on Form 8-K
with respect to the entering of an agreement providing for the merger
of Knogo Corporation's (Knogo) business interests outside of the U.S.
and Canada into the Company in exchange for the Company's Common Stock
valued at approximately $100 million. The agreement is subject to
certain conditions, including approval of Knogo's shareholders and
expiration of regulatory waiting periods. The agreement also has
provisions for break-up fees, under certain conditions, payable to
either party should the transaction fail to close.
42
<PAGE> 44
SENSORMATIC ELECTRONICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
(Item 14(a)(1) and (2))
<TABLE>
<CAPTION>
Reference
- - ---------
<S> <C>
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets at June 30, 1994 and 1993 F-2
Consolidated Statements of Operations for the years
ended June 30, 1994, 1993 and May 31, 1992
and the month ended June 30, 1992 F-3
Consolidated Statements of Cash Flows for the years
ended June 30, 1994, 1993 and May 31, 1992
and the month ended June 30, 1992 F-4-5
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1994, 1993 and May 31, 1992
and the month ended June 30, 1992 F-6-7
Notes to Consolidated Financial Statements F-8-27
Supplementary Information:
Consolidated Quarterly Financial Information
(Unaudited) F-28
Consolidated Financial Statement Schedules at June 30, 1994 and 1993 or the years ended June 30,
1994 and 1993, month ended June 30, 1992 and year ended May 31, 1992:
Schedule II - Amounts Receivable From Related
Parties and Underwriters,
Promoters and Employees Other
Than Related Parties S-1-2
Schedule VIII - Valuation and Qualifying Accounts S-3
Schedule IX - Short-Term Borrowings S-4
Schedule X - Supplementary Income Statement
Information S-5
All other schedules have been omitted since the required information is not present or is not present
in amounts sufficient to require submission of the schedules, or because the information required
is included in the Consolidated Financial Statements or notes thereto.
</TABLE>
43
<PAGE> 45
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Sensormatic Electronics Corporation
We have audited the accompanying consolidated balance sheets of Sensormatic
Electronics Corporation as of June 30, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended June 30, 1994, for the one month
ended June 30, 1992, and the year ended May 31, 1992. Our audits also included
the financial statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with 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 referred to above present
fairly, in all material respects, the consolidated financial position of
Sensormatic Electronics Corporation at June 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended June 30, 1994, the one month ended June 30, 1992,
and the year ended May 31, 1992, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
As discussed in Note 5. to the consolidated financial statements, in 1994 the
Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
West Palm Beach, Florida
August 8, 1994
F-1
<PAGE> 46
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993
(In thousands,except par value amounts)
<TABLE>
<CAPTION>
1994 1993
---------- ---------
ASSETS
<S> <C> <C>
Cash and marketable securities (including
marketable securities of $33,618 in 1994 and
$28,798 in 1993) $ 54,542 $ 117,899
Accounts receivable, net 127,571 128,137
Receivables under deferred terms and
installment contract obligations, net 71,321 61,201
Net investment in sales-type leases 109,607 65,240
Inventories, net 163,906 102,759
Revenue equipment, less accumulated
depreciation of $36,183 in 1994 and
$26,832 in 1993 58,326 53,867
Other property, plant and equipment, net 107,152 67,236
Deferred charges, patents and other assets,
less accumulated amortization of $13,114 in
1994 and $10,810 in 1993 120,061 39,177
Costs in excess of net assets acquired, less
accumulated amortization of $17,930 in 1994
and $8,815 in 1993 343,017 291,338
---------- ---------
$1,155,503 $ 926,854
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 40,884 $ 27,462
Accrued liabilities 143,067 84,576
Accrued and deferred income taxes payable 24,687 16,670
Debt 219,173 194,224
7% convertible subordinated debentures - 114,165
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 10,000
shares authorized, none issued
Common stock, $.01 par value, 125,000
shares authorized, 67,612 and 58,079 shares
outstanding in 1994 and 1993, respectively 546,577 392,891
Retained earnings 237,553 178,018
Treasury stock, 1,162 shares in 1994 and
1,974 in 1993, at cost (7,274) (14,757)
Currency translation adjustments (45,603) (61,495)
Notes receivable from stock sales (3,561) (4,900)
---------- ---------
Total stockholders' equity 727,692 489,757
---------- ---------
$1,155,503 $ 926,854
========== =========
</TABLE>
The notes to consolidated financial statements on pages F-8 to F-27 are an
integral part of these statements.
F-2
<PAGE> 47
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1994, 1993 AND MAY 31, 1992
AND MONTH ENDED JUNE 30, 1992
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June
1994 1993 1992 1992
-------- -------- -------- --------
Revenues:
<S> <C> <C> <C> <C>
Sales $557,393 $398,122 $252,628 $ 15,178
Rentals 46,566 46,021 30,460 3,562
Other 52,007 43,176 26,790 2,252
-------- -------- -------- --------
Total revenues 655,966 487,319 309,878 20,992
Operating costs and expenses:
Costs of sales 256,003 188,138 124,208 8,777
Depreciation on revenue equipment 14,974 15,394 10,515 1,193
Selling and customer service 212,237 160,681 92,905 10,092
Administrative 39,696 31,396 24,603 3,100
Research, development and
engineering 18,023 13,739 11,460 936
Amortization of intangible assets 10,246 6,963 2,625 219
-------- -------- -------- --------
Total operating costs and
expenses 551,179 416,311 266,316 24,317
-------- -------- -------- --------
Operating income (loss) 104,787 71,008 43,562 (3,325)
Other income (expenses):
Interest income 14,262 17,114 7,597 551
Interest expense (22,711) (18,656) (11,436) (1,303)
Other, net (373) 2,518 1,303 (477)
-------- -------- -------- --------
Total other income (expenses) (8,822) 976 (2,536) (1,229)
-------- -------- -------- --------
Income (loss) before income taxes 95,965 71,984 41,026 (4,554)
Provision for (benefit from) income
taxes 23,900 17,900 9,500 (2,100)
-------- -------- -------- --------
Net income (loss) $ 72,065 $ 54,084 $ 31,526 $ (2,454)
======== ======== ======== ========
Primary earnings (loss) per
common share $ 1.16 $ .97 $ .73 $ (.06)
======== ======== ======== ========
Fully diluted earnings (loss)
per common share $ 1.13 $ .93 $ .73 $ (.06)
======== ======== ======== ========
</TABLE>
The notes to consolidated financial statements on pages F-8 to F-27 are an
integral part of these statements.
F-3
<PAGE> 48
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1993 AND MAY 31, 1992
AND MONTH ENDED JUNE 30, 1992
(In thousands)
<TABLE>
<CAPTION>
June
1994 1993 1992 1992
-------- -------- -------- --------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $ 72,065 $ 54,084 $ 31,526 $ (2,454)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation 22,603 21,446 14,533 1,567
Amortization 11,681 7,917 3,262 273
Other non-cash charges to operations, net 11,502 9,508 5,335 1,288
Net changes in operating assets and
liabilities, net of effects of acquisitions:
Inventories (56,333) (6,299) (1,973) 8,102
Net investment in sales-type leases (42,269) (9,824) - -
Accounts receivable, receivables under
deferred terms and installment contract
obligations, and receivables from financing
institutions (33,126) (40,465) (58,389) (41)
Other assets (31,345) 1,541 141 -
Accrued liabilities 13,506 14,320 4,263 (197)
Accounts payable 10,801 (2,778) 3,123 (3,964)
Income taxes 7,473 12,631 505 (1,455)
-------- -------- -------- --------
Net cash provided by (used in) operating
activities (13,442) 62,081 2,326 3,119
-------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures (51,835) (26,735) (15,041) (578)
Purchases of marketable securities (18,178) (8,921) (52,718) -
Maturities of marketable securities 13,294 24,262 11,488 2,873
Increase in revenue equipment and
inventory available for lease (17,033) (35,177) (23,492) (4,249)
Acquisitions (net of cash acquired of $1,135 in
1994 and $8,223 in 1993) (11,467) (299,342) (2,023) -
Other, net 4,666 3,324 864 -
-------- -------- -------- --------
Net cash used in investing activities (80,553) (342,589) (80,922) (1,954)
-------- -------- -------- --------
</TABLE>
(Continued on the following page.)
F-4
<PAGE> 49
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
YEARS ENDED JUNE 30, 1994, 1993 AND MAY 31, 1992
AND MONTH ENDED JUNE 30, 1992
(In thousands)
<TABLE>
<CAPTION>
June
1994 1993 1992 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Bank borrowings and other debt 30,500 128,271 2,848 -
Proceeds from issuances of common stock
under employee benefit plans and for
acquisitions 17,167 212,154 6,602 -
Cash dividends (12,530) (10,588) (8,227) -
Repayments of bank borrowings and other
debt (10,329) (109,934) (3,808) (1,069)
Issuance of Senior Notes, net - 134,111 - -
-------- -------- -------- --------
Net cash provided by (used in)
financing activities 24,808 354,014 (2,585) (1,069)
-------- -------- -------- --------
Effect of exchange rate changes on cash 1,009 (487) 162 958
-------- -------- -------- --------
Net increase (decrease) in cash (68,178) 73,019 (81,019) 1,054
Cash at beginning of period 89,101 16,082 96,047 15,028
-------- -------- -------- --------
Cash at end of period 20,924 89,101 15,028 16,082
Marketable securities at end of period 33,618 28,798 47,664 44,404
-------- -------- -------- --------
Cash and marketable securities at end
of period $ 54,542 $117,899 $ 62,692 $ 60,486
======== ======== ======== ========
</TABLE>
The notes to consolidated financial statements on pages F-8 to F-27
are an integral part of these statements.
F-5
<PAGE> 50
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1994, 1993 AND MAY 31, 1992
AND MONTH ENDED JUNE 30, 1992
(In thousands, except dollar per share amounts)
<TABLE>
<CAPTION>
Notes
Currency Receivable
Common Retained Treasury Translation from Stock
Stock Earnings Stock Adjustments Sales Total
--------- -------- --------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1991 $138,469 $113,876 $ (27,166) $ 2,619 $ (5,578) $222,220
Issued pursuant to employee
benefit plans (1,193 shares) 6,594 - 1,738 - (2,654) 5,678
Collections of notes receivable
from stock sales - - - - 3,418 3,418
Common stock cash dividends
($.20 per share) - (8,151) - - - (8,151)
Tax benefit from exercise of non-
compensatory stock options 1,459 - - - - 1,459
Net income - 31,526 - - - 31,526
Other (92) - - (368) - (460)
-------- -------- --------- --------- -------- -------
Balance at May 31, 1992 146,430 137,251 (25,428) 2,251 (4,814) 255,690
Effect of change in fiscal year of certain
international subsidiaries - (2,223) - - - (2,223)
Net loss for June 1992 - (2,454) - - - (2,454)
Currency translation adjustments - - - 7,249 - 7,249
-------- -------- --------- -------- --------- --------
Balance at June 30, 1992 146,430 132,574 (25,428) 9,500 (4,814) 258,262
</TABLE>
(Continued on the following page.)
F-6
<PAGE> 51
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONT'D)
YEARS ENDED JUNE 30, 1994, 1993, AND MAY 31, 1992
AND MONTH ENDED JUNE 30, 1992
(In thousands, except dollar per share amounts)
<TABLE>
<CAPTION>
Notes
Currency Receivable
Common Retained Treasury Translation from Stock
Stock Earnings Stock Adjustments Sales Total
------- -------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992 146,430 132,574 (25,428) 9,500 (4,814) 258,262
Issued in connection with acquisitions
(14,231 shares) 236,619 - - - - 236,619
Issued pursuant to employee benefit
plans (1,567 shares) 6,314 - 6,789 - (7,038) 6,065
Collections of notes receivable from
stock sales - - - - 6,952 6,952
Common stock cash dividends
($.15 per share) - (8,640) - - - (8,640)
Common stock warrants exercised (525 shares) 1,998 - 3,882 - - 5,880
Tax benefit from exercise of non-
compensatory stock options 701 - - - - 701
Net income - 54,084 - - - 54,084
Currency translation adjustments - - - (70,995) - (70,995)
Other (56 shares) 829 - - - - 829
-------- -------- -------- -------- -------- --------
Balance at June 30, 1993 392,891 178,018 (14,757) (61,495) (4,900) 489,757
Conversion of Debentures (7,280 shares) 111,869 - - - - 111,869
Issued in connection with acquisitions
(1,065 shares) 31,055 - - - - 31,055
Issued pursuant to employee benefit
plans (1,038 shares) 8,755 - 5,984 - (223) 14,516
Collections of notes receivable from
stock sales - - - - 1,562 1,562
Common stock cash dividends
($.21 per share) - (12,530) - - - (12,530)
Common stock warrants exercised (150 shares) 189 - 1,499 - - 1,688
Tax benefit from exercise of non-
compensatory stock options 2,339 - - - - 2,339
Net income - 72,065 - - - 72,065
Currency translation adjustments - - - 15,892 - 15,892
Other (521) - - - - (521)
-------- -------- -------- -------- -------- --------
Balance at June 30, 1994 $546,577 $237,553 $ (7,274) $(45,603) $ (3,561) $727,692
======== ======== ======== ======== ======== ========
</TABLE>
The notes to consolidated financial statements on pages F-8 to F-27 are an
integral part of these statements.
F-7
<PAGE> 52
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
a. Basis of presentation
The Consolidated Financial Statements include the accounts of
Sensormatic Electronics Corporation and all of its subsidiaries (the
Company). All significant intercompany balances and transactions have
been eliminated. In August 1992, the Company changed its fiscal year-end
to June 30. Accordingly, the accompanying Consolidated Financial
Statements contain the results of operations and cash flows for the years
ended June 30, 1994 and 1993, May 31, 1992 and the one-month period
ended June 30, 1992 (June 1992). Certain international subsidiaries'
financial statements for the fiscal year ended March 31, 1992 are
included in the accompanying Consolidated Financial Statements for the
fiscal year ended May 31, 1992. The results of operations for such
international subsidiaries for the two-month period ended May 31, 1992 have
been reflected as an adjustment to retained earnings.
The accompanying Consolidated Balance Sheets are presented in a format
which does not segregate current assets and current liabilities. As a
result of the constantly changing mix of inventories and revenue
equipment sold and leased, including sales of equipment originally
installed under lease contracts, it is not possible to accurately
determine the amount of revenue equipment that will be sold and thus
realized currently. The Company believes presenting the non-classified
format will avoid misunderstandings as to the relationships of current and
non-current assets and liabilities.
b. Cash and marketable securities
The Company classifies as cash all highly liquid investments with a
maturity of three months or less when acquired. Marketable securities are
stated at cost or amortized cost which approximated market value at June
30, 1994 and 1993.
c. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
d. Revenue equipment and other property, plant and equipment
Revenue equipment (principally equipment on lease) and other property,
plant and equipment (including assets acquired under capital leases) are
recorded at cost and depreciated using the straight-line method over their
estimated useful lives (4 years and 6 years for revenue equipment, 10 years
through 40 years for buildings and improvements and 3 years through 10
years for other property, plant and equipment).
F-8
<PAGE> 53
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Cont'd)
e. Revenue recognition
Revenue from sales of equipment is recognized upon shipment, acceptance
of a customer order to purchase presently installed equipment, or
acceptance by a third party financing institution of an operating lease and
the related equipment. Payment terms are either cash and/or acceptance of
deferred term or installment contract obligations subject to stated or
imputed interest, and are generally secured. Revenue from sales-type
leases (primarily leases with terms of sixty months or greater) is
recognized as a "sale" upon shipment in an amount equal to the present
value of the minimum rental payments under the fixed non-cancelable lease
term. Interest income on receivables under deferred terms and installment
contract obligations, and net investment in sales-type leases is recognized
over the term of the contract using the effective interest method.
The Company also leases equipment under long-term operating leases which
are generally non-cancelable. Rental revenues are recognized as earned
over the term of the lease. Minimum future rentals on non-cancelable
operating leases at June 30, 1994 aggregated (in millions) $155.8 and are
due as follows: 1995 - $40.3; 1996 - $39.0; 1997 - $32.3; 1998 - $23.6 and
1999 - $20.6.
Installation and service revenues are recognized as earned and
maintenance revenues are recognized ratably over the service contract term.
f. Research, development and engineering
In fiscal 1994, 1993 and 1992, and June 1992, "Research, development and
engineering" included research and development expenses of $14.7 million,
$11.9 million, $9.5 million and $0.9 million, respectively.
g. Accounting for currency translation and transactions
The Company's international subsidiaries' assets and liabilities are
translated into U.S. dollars at the rate of exchange in effect at their
balance sheet dates and their revenues, costs and expenses are translated
into U.S. dollars at the average rate of exchange in effect during their
respective fiscal periods. Translation adjustments resulting therefrom and
transaction gains or losses attributable to certain intercompany
transactions are excluded from results of operations and accumulated in a
separate component of consolidated stockholders' equity. Gains and losses
attributable to other intercompany transactions are included in results of
operations.
The Company has a policy of not hedging its investment in the net assets
of its international subsidiaries (aggregating $250 million and $230
million at June 30, 1994 and 1993, respectively, primarily located in 15
countries in Europe) against exchange rate fluctuations due to the high
economic
F-9
<PAGE> 54
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Cont'd)
costs of such a program and the long-term nature of its investments.
The gains and losses resulting from these exchange rate fluctuations ($16
million gain in fiscal 1994 and $71 million loss in fiscal 1993) are
excluded from results of operations and accumulated in a separate component
of consolidated stockholders' equity.
The Company has a policy of purchasing forward exchange contracts
(forward contracts) and options designated to hedge certain identifiable
foreign currency anticipatory intercompany commitments. Forward contracts
and options are stated at cost, if any. Market value gains or losses
resulting from such forward contracts and options, and from the related
hedged commitments, occurring in periods prior to the period in which they
are settled, are deferred, to be recognized in the period when they are
settled. Cash flows resulting from the settlement of the forward contracts
and options are included in cash provided by operating activities.
Aggregate exchange gains resulting from currency transactions in fiscal
1994, 1993 and 1992 were (in millions) $0.7, $1.3 and $0.7, respectively,
resulting primarily from the settlement of unhedged intercompany transfers
of products manufactured in Florida and Puerto Rico and sold to certain
international subsidiaries, and are included in "Other income (expenses)"
in the Consolidated Statements of Operations.
h. Intangible assets
Patents, stated at cost, are amortized using the straight-line method
over 17 years. Costs in excess of net assets acquired are amortized using
the straight-line method over 10 to 40 years. The carrying value of costs
in excess of net assets acquired (or goodwill) will be reviewed if the
facts and circumstances suggest that it may be impaired. If this review
indicates the goodwill will not be fully recoverable over the remaining
amortization period, as determined based on the estimated undiscounted cash
flows of the assets acquired, the carrying value of the goodwill will be
adjusted accordingly. (See Note 11.)
i. Interest rate swap agreements
The differential to be paid or received on interest rate swap agreements
is accrued as interest rates change and is recognized as an adjustment to
interest expense. Premiums for the early termination of interest rate swap
agreements will be amortized into interest expense over the remaining
original term of the swap agreement should the Company elect to terminate
any of the interest rate swap agreements prior to their expiration date.
Interest rate swap agreements are stated at cost, if any.
F-10
<PAGE> 55
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (Cont'd)
j. Primary and fully diluted earnings (loss) per common share
Primary earnings (loss) per common share is calculated based on the
weighted average number of common shares and dilutive common stock
equivalents outstanding during the period. Common stock equivalents
include stock options issued under employee benefit plans and common stock
warrants. Fully diluted earnings (loss) per common share included the
if-converted dilutive effect of the 7% Convertible Subordinated Debentures
due in 2001 which were fully converted in May 1994. Earnings per share
for periods prior to fiscal 1994 have been restated. (See Notes 7., 8. and
11.)
k. Reclassifications
Certain amounts in the prior years' Consolidated Financial Statements
have been reclassified to conform to the current fiscal year's
presentation.
l. Prospective accounting changes
The Company has not yet adopted Financial Accounting Standards Board
(FASB) Statements No. 112 "Employers' Accounting for Postemployment
Benefits" and No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." Both standards will be adopted in fiscal 1995. These
adoptions will not have a material adverse effect on the Company's
financial statements.
2. Receivables and net investment in sales-type leases
Accounts receivable are stated net of an allowance for doubtful accounts
of $10.4 million and $4.7 million at June 30, 1994 and 1993, respectively.
Receivables under deferred terms, substantially all of which mature
within one year, and installment contract obligations are stated net of the
following (at June 30, in millions):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Allowance for doubtful accounts $ 6.4 $ 6.9
Unearned interest and maintenance $ 19.5 $ 17.2
</TABLE>
The Company leases equipment under sales-type lease agreements expiring
in various years through 2001. The net investment in sales-type leases
(leases) consisted of the following (at June 30, in millions):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Minimum lease payments receivable $151.6 $ 93.2
Allowance for uncollectible minimum
lease payments (3.4) (2.0)
Unearned interest and maintenance (38.6) (26.0)
------ ------
$109.6 $ 65.2
====== ======
</TABLE>
Net receivables and leases at June 30, 1994 are due as follows (in
millions): 1995 - $189.4 and $21.4; 1996 - $4.6 and $21.3; 1997 - $3.5 and
$21.9; 1998 - $1.4 and $21.6, respectively, and with respect to leases (in
millions): 1999 - $18.1 and $5.3 thereafter.
F-11
<PAGE> 56
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Receivables and net investment in sales-type leases (Cont'd)
The Company has agreements with third party financing institutions
whereby certain receivables under installment contract obligations in the
United States (U.S.) and leases in Europe together with certain related
rights are sold to the financing institutions. Under such agreements,
should certain events (substantially all related to customer non-payment)
occur, the Company is obligated to repurchase the specific receivables and
leases. The Company accrued loss contingencies at June 30, 1994 and 1993
of $1.3 million and $1.4 million, respectively, related to $199.9 million
and $125.9 million, respectively, of receivables and leases sold to and
outstanding with the financing institutions which are subject to full or
partial repurchase.
Under the U.S. agreement, the Company sells fixed interest rate
receivables to the financing institution. Under such agreement, the
financing institution earns interest throughout the term of the receivables
at a floating rate of interest indexed to one month LIBOR. Any resulting
differential in interest caused by the varying interest rates (variance
amounts) is either paid or received by the Company. In order to eliminate
the variance amounts, the Company enters into floating to fixed interest
rate swap agreements for notional amounts equal to the principal amounts of
receivables sold which result in interest rate differential payments or
receipts offsetting the variance amounts.
Additionally, the Company has an agreement with a third party financing
institution whereby the Company may assign certain pre-approved U.S.
accounts receivable (substantially all of which are not subject to
recourse). At June 30, 1994 and 1993, receivables assigned and outstanding
under such agreement were $57.9 million and $24.5 million, respectively, of
which the financing institution had advanced $50 million and $20 million,
respectively, to the Company (bearing interest at fluctuating rates, 4.9%
and 3.7% at June 30, 1994 and 1993, respectively).
The Company received proceeds of $270.5 million and $142.7 million upon
the sale and assignment of receivables and leases under these agreements in
fiscal 1994 and 1993, respectively (net of repurchases due to customer
non-payment of approximately $12.8 million and $8.7 million, respectively).
At June 30, 1994 balances due from financing institutions under these
agreements aggregated $29.1 million and are due within one year.
At June 30, 1994 and 1993, there were receivables (including those
subject to repurchase) due from the following sectors of the U.S. retail
market which represented a concentration of credit risk to the Company:
department and discount stores 1994-$40.5 million and 1993-$55.3 million;
and specialty stores 1994-$30.7 million and 1993-$36.9 million. Assuming
the obligors under these receivables were to fail to completely
perform
F-12
<PAGE> 57
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Receivables and net investment in sales-type leases (Cont'd)
according to the terms of the receivables at June 30, 1994, the Company
would have incurred a loss of approximately $30.3 million and $25.1
million, respectively, representing the amount of the receivables less any
related allowance for doubtful accounts and the estimated realizable value
of the collateralized equipment securing these receivables. The Company
minimizes its exposure to credit risk through its credit review procedures,
collection practices, and its policy of retaining a security interest in
the underlying equipment and ability to re-market such equipment.
The provision for doubtful accounts was as follows (in millions): 1994 -
$11.0; 1993 - $8.8; 1992 - $4.1 and June 1992 - $1.3.
3. Inventories
At June 30, 1994 and 1993, inventories were comprised of parts inventory
of $34.1 million and $18.5 million, work-in-process of $20.0 million and
$5.1 million and inventory available for sale or lease of $109.8 million
and $79.2 million; and were net of allowance for inventory losses of $10.6
million and $8.6 million, respectively.
Provisions for estimated losses in connection with obsolete, damaged and
slow moving inventories were charged to costs of sales as follows (in
millions): 1994 - $4.7; 1993 - $3.5; 1992- $2.6 and June 1992 - $0.2.
4. Other property, plant and equipment
Other property, plant and equipment is summarized as follows (at June
30, in millions):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Machinery and equipment $ 89.3 $ 67.6
Buildings and improvements 41.0 26.0
Leasehold improvements and
furniture and fixtures 19.8 13.9
Land 11.8 6.5
------ ------
161.9 114.0
Less accumulated depreciation
and amortization (54.7) (46.8)
------ ------
$107.2 $ 67.2
====== ======
</TABLE>
5. Income taxes
Effective July 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes" (FASB 109). As permitted by FASB 109, the
Company has elected not to restate the financial statements of any prior
periods. The cumulative effect of the change was not material and
therefore no adjustment was separately reported in the Consolidated
Statement of Operations for the year ended June 30, 1994.
F-13
<PAGE> 58
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Income taxes (Cont'd)
FASB 109 also required reclassification of certain balances on the
Consolidated Balance Sheet. Deferred income tax balances attributable to
different tax jurisdictions or arising in a business combination may no
longer be presented "net". The proforma June 30, 1993 amounts for certain
balance sheet accounts to reflect the adoption of FASB 109 at July 1, 1993
are as follows (in millions):
<TABLE>
<S> <C>
Inventories, net $ 96.8
Deferred charges, patents and other assets 69.2
Accrued liabilities 115.6
Accrued and deferred income taxes payable 9.7
</TABLE>
The United States (including Puerto Rico) and international components
of income (loss) before income taxes are as follows (in millions):
<TABLE>
<CAPTION>
June
1994 1993 1992 1992
------ ----- ----- -----
<S> <C> <C> <C> <C>
United States $65.7 $49.8 $28.9 $(5.4)
International 30.3 22.2 12.1 0.8
----- ----- ----- -----
$96.0 $72.0 $41.0 $(4.6)
===== ===== ===== =====
</TABLE>
The components of the provision for (benefit from) income taxes on
income (loss) before income taxes are as follows (in millions):
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -------
1994:
<S> <C> <C>
U.S. Federal $ 5.6 $ 2.1 $ 7.7
International 12.2 1.6 13.8
Other 1.4 1.0 2.4
------ ------- -------
$ 19.2 $ 4.7 $ 23.9
====== ======= =======
1993:
U.S. Federal $ 8.4 $ (4.1) $ 4.3
International 11.0 (0.2) 10.8
Other 3.3 (0.5) 2.8
------ ------ -------
$ 22.7 $ (4.8) $ 17.9
====== ======= =======
1992:
U.S. Federal $ 3.2 $ (0.9) $ 2.3
International 5.4 0.3 5.7
Other 1.6 (0.1) 1.5
------ ------- -------
$ 10.2 $ (0.7) $ 9.5
====== ======= =======
June 1992:
U.S. Federal $ - $ (2.1) $ (2.1)
International 0.5 - 0.5
Other - (0.5) (0.5)
------ ------- -------
$ 0.5 $ (2.6) $ (2.1)
====== ======= =======
</TABLE>
Other includes the provisions for state income taxes, and for fiscal
1994 also includes the deferred benefit for the effects of tax rate changes
and a deferred provision for the utilization of net operating losses (NOL).
F-14
<PAGE> 59
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Income taxes (Cont'd)
A reconciliation between the statutory U.S. Federal income tax rate and
the consolidated effective tax rate is as follows:
<TABLE>
<CAPTION>
June
1994 1993 1992 1992
----- ----- ----- -----
<S> <C> <C> <C> <C>
Statutory rate 35.0% 34.5% 34.0% (34.0)%
Benefits due to
tax exempt
earnings and
investment income
of the Puerto
Rico operations (9.5) (12.0) (16.4) (13.2)
International tax rate
differentials,
net of foreign
tax credits 0.9 0.7 5.0 7.7
Amortization of costs in
excess of net assets
acquired 2.7 2.7 1.0 0.7
Adjustment of prior
years' accruals (3.4) - - -
R & D credit (1.3) (0.9) (2.2) -
State income tax effect 1.6 1.2 1.0 (6.6)
Other (1.1) (1.3) 0.8 (0.7)
---- ---- ---- ----
24.9% 24.9% 23.2% (46.1)%
==== ==== ==== =====
</TABLE>
Undistributed earnings of international subsidiaries are indefinitely
reinvested in the respective subsidiaries' operations except for earnings
of the Company's subsidiary in Germany which are distributed in order to
avail itself of the lower German integrated tax rate. No provision has
been made for income taxes that might be payable upon the remittance of the
indefinitely reinvested earnings. If these earnings were not permanently
reinvested, it is anticipated that the U.S. Federal income tax provision
would not be materially affected due to the utilization of resulting
foreign tax credits.
The Company's manufacturing subsidiary located in Puerto Rico has been
granted an exemption from the Commonwealth of Puerto Rico income taxes
which remains in effect until August 2005. The grant exempts 90% of the
subsidiary's operating and qualified investment income earned through that
date. Additionally, such earnings are presently not subject to U.S.
Federal income taxes. At June 30, 1994, approximately $161 million of
undistributed earnings were indefinitely reinvested in the Puerto Rico
subsidiary and, accordingly, no provision has been made for certain
Commonwealth of Puerto Rico taxes which may be payable upon their
remittance (ranging from 0% to 10% depending on the fiscal year earned).
F-15
<PAGE> 60
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Income taxes (Cont'd)
The tax effects of temporary differences and carryforwards that give
rise to deferred tax assets and liabilities, at June 30, 1994, and the
principal sources of deferred taxes in prior years which were not restated
to reflect the adoption of FASB 109 are as follows (in millions):
<TABLE>
<CAPTION>
1994
---------------------
Assets Liab.
------ -----
<S> <C> <C>
Property, plant and equipment $19.0 $13.3
Reserves and allowances 14.3 0.6
Sales-type leases 2.6 28.3
Undistributed earnings of
German subsidiary 6.4 7.7
Prepaid royalties 5.8 -
Deemed sales revenues from
Puerto Rico operations 9.7 -
Tax credit carryforwards 4.4 -
Other 9.5 8.5
NOL carryforwards 20.2 -
Valuation allowance (2.6) -
----- -----
Deferred income taxes $89.3 $58.4
===== =====
</TABLE>
The principal sources of deferred income tax benefits in previous
periods are as follows (in millions):
<TABLE>
<CAPTION>
June
1993 1992 1992
----- ----- -----
<S> <C> <C> <C>
R & D tax credit carryovers $(0.6) $(0.9) $(0.1)
Undistributed earnings of
international subsidiaries 0.2 0.8 -
Provision for uncollectible
receivables 0.4 (0.4) (0.2)
Intercompany inventory
profit elimination (1.1) (0.4) 0.2
Depreciation 1.8 (0.3) (0.1)
Accelerated income recognition
of revenue equipment (3.2) - -
Income recognition from
sales-type leases (2.0) - -
NOL carryforwards - - (2.5)
Other (0.3) 0.5 0.1
----- ----- -----
Total deferred tax
benefit $(4.8) $(0.7) $(2.6)
===== ===== =====
</TABLE>
In fiscal 1994, the valuation allowance on deferred tax assets increased
from $2.1 million at July 1, 1993 to $2.6 million at June 30, 1994.
F-16
<PAGE> 61
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Income taxes (Cont'd)
At June 30, 1994, tax carryforwards available and related expiration
dates are as follows (in millions):
<TABLE>
<S> <C>
Net operating losses:
United States (fiscal 2001 through 2008) $17.8
International 39.5
Foreign tax credits (fiscal 1995 through 1998) 1.0
</TABLE>
The Company made income tax payments of approximately $9.0 million,
$11.2 million, $9.4 million and $0.9 million in fiscal 1994, 1993, 1992 and
June 1992, respectively.
The Company's Federal income tax returns for fiscal 1989 through 1992
are currently being examined by the U.S. Internal Revenue Service (IRS).
The examination has not been completed; however, all adjustments proposed
by the IRS to date are not material to the Consolidated Financial
Statements.
6. Debt
Debt is summarized as follows (at June 30, in millions):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
8.21% Senior Notes $135.0 $135.0
Unsecured revolving credit notes
payable, at 5.3% to 12.0% 64.0 41.3
Capital lease obligations and other,
at 6.0% to 12.0%, net of unamortized
interest of $5.3 and $5.4 at 1994
and 1993, respectively 17.2 6.8
Acquisition indebtedness, at 9.0% 3.0 11.1
------ ------
$219.2 $194.2
====== ======
</TABLE>
In January 1993, the Company issued $135 million aggregate principal
amount of 8.21% Senior Notes due January 2003 (the Senior Notes) and repaid
$100 million in short-term bank borrowings primarily incurred in connection
with the acquisition of ALPS in July 1992. (See Note 11.) Interest on the
Senior Notes is payable semiannually. Under the terms of the related Note
Agreement, the Company is required, among other things, to maintain a
certain minimum net worth, as defined, is allowed to incur debt up to a
level whereby certain debt-to-total capitalization ratios would not be
exceeded, and is subject to certain limitations with respect to repurchases
of its Common Stock and payment of dividends. The Company was in full
compliance with all such terms at June 30, 1994 and 1993. In the event of
a change in control, as defined, principal payment on the Senior Notes may
be accelerated.
Subsequently, the Company entered into fixed to floating interest rate
swap agreements in order to reduce the Company's interest expense by
taking advantage of lower prevailing short-
F-17
<PAGE> 62
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Debt (Cont'd)
term interest rates. The effective interest rate on the Senior Notes
for the years ended June 30, 1994 and 1993 was 6.8%.
At June 30, 1994 and 1993, outstanding borrowings, primarily by the
European subsidiaries, under all of the Company's credit lines bore
interest at weighted average rates of 6.5% and 8.4%, respectively. The
Company has a committed line of credit agreement expiring on August 25,
1995 with a group of financial institutions which provides for aggregate
unsecured borrowings by the Company and its European subsidiaries of up to
$100 million. Borrowings under this agreement bear interest at
fluctuating rates at LIBOR plus 0.3% and are subject to an annual
commitment fee of 0.15% of the total credit line.
Additionally, the Company has various unsecured and uncommitted line of
credit agreements with several financial institutions which provide for
aggregate borrowings up to approximately $100 million. Borrowings under
these agreements bear interest at fluctuating rates generally at LIBOR plus
0.5%.
Debt at June 30, 1994 matures as follows (in millions): 1995 - $68.5;
1996 - $3.5; 1997 - $2.4; 1998 - $2.5; 1999 - $2.7 and thereafter -
$139.6.
The Company paid interest of $22.5 million, $13.6 million, $11.0 million
and $0.4 million during fiscal 1994, 1993, 1992 and June 1992,
respectively.
7. Convertible subordinated debentures
In April 1994 the Company called the outstanding $114.1 million of 7%
Convertible Subordinated Debentures (the Debentures) due May 15, 2001 for
redemption. In May 1994 the Debentures were converted to approximately
7.3 million shares of Common Stock.
8. Capital stock and employee benefit plans
a. Stock dividend
On November 11, 1993 the Company's Board of Directors declared a
three-for-two stock split effected in the form of a 50% stock dividend to
shareholders of record on November 30, 1993, payable on December 17, 1993.
All share and per share amounts previously reported have been adjusted to
give retroactive effect to the increased number of common shares
outstanding due to the stock split.
F-18
<PAGE> 63
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Capital stock and employee benefit plans (Cont'd)
b. Common stock
The number of shares of Common Stock reserved for issuance is
summarized as follows (at June 30, in millions):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Conversion of Debentures - 7.3
Exercise of stock options 4.4 5.2
Employee Stock Purchase Plan 0.8 1.0
Exercise of warrants 0.5 0.7
---- ----
5.7 14.2
==== ====
</TABLE>
c. Warrants
In connection with an acquisition, the Company issued warrants to
purchase 1.2 million shares of its Common Stock. The warrants were
assigned an estimated value of $3.5 million using the Black Scholes
valuation method. The warrants are exercisable at an exercise price of
$11.25 per share, subject to adjustment, and expire on December 31, 1995.
d. Stock option plans
Under the Company's 1989 Stock Incentive Plan (the 1989 Plan), as
amended, stock options may be granted to officers, key employees, and
directors who are also officers or employees or otherwise participate in
the 1989 Plan. The 1989 Plan provides for granting of other awards, such
as stock appreciation rights, stock awards and cash awards, although the
Company intends to continue to principally grant stock options under the
1989 Plan. In September 1991, the Company adopted the Directors Stock
Option Plan under which non-qualified stock options may be granted to
directors not covered by the 1989 Plan.
The exercise price of a stock option granted under all stock option
plans is not less than the fair market value of the Common Stock on the
date of grant. Stock options granted under all such plans generally become
exercisable, cumulatively, in equal annual installments over three years,
and expire five or ten years from the date of grant. However, recently
granted options to corporate officers become exercisable in full the
earlier of five years from the date of grant or at any time after one year
from the date of grant when the price of the Company's Common Stock
equals or exceeds 135% of the exercise price. All such options are
non-compensatory; therefore, any U.S. Federal income tax benefits received
upon their exercise are recorded as an increase to "Stockholders' equity -
Common stock."
F-19
<PAGE> 64
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Capital stock and employee benefit plans (Cont'd)
Information for all such plans is summarized as follows (at June 30, in
millions, except for price per option amounts):
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Options outstanding at
beginning of year 3.7 3.1 3.2
Granted 1.3 2.0 0.8
Exercised (0.8) (1.4) (0.9)
----- ----- -----
Options outstanding at
end of year 4.2 3.7 3.1
===== ===== =====
Average price of options
exercised $ 13.50 $ 7.42 $ 6.25
Prices of options out-
standing at end of year $4.83 to $4.83 to $3.96 to
$ 36.38 $27.17 $17.25
Average price of options
outstanding at end of year $ 21.52 $15.73 $10.29
Exercisable options at end of
year 1.3 0.9 1.5
Options available for
future grants at end
of year 0.2 1.5 3.5
</TABLE>
A proposal to increase the number of options available for future grants
will be presented at the 1994 Annual Meeting of Shareholders.
e. Employee stock purchase plan
The Company has a qualified Employee Stock Purchase Plan whereby it may
sell shares of its Common Stock to U.S. employees at no less than
eighty-five percent of the fair market value of the Common Stock at the
date of the offering or on the quarterly dates the purchases are completed,
whichever is lower.
f. Other employee benefit plans
The Company has a qualified Employee Stock Ownership Plan (ESOP) for the
benefit of its U.S. employees. At June 30, 1994 and 1993, the receivable
from the ESOP in connection with the sale in fiscal 1991 of 450,000 shares
of Common Stock was $2.2 million and $2.7 million, respectively, bears
interest at an annual rate of 10% and was included in the Consolidated
Balance Sheets in "Stockholders' equity - Notes receivable from stock
sales."
F-20
<PAGE> 65
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Capital stock and employee benefit plans (Cont'd)
The Company also has: a) a retirement plan for U.S. employees which
allows for employee contributions, a retirement plan for Puerto Rico
employees and a retirement plan for certain European employees (all
qualified defined contribution plans); b) an Executive Salary Continuation
Plan for certain officers and key employees (a non-qualified defined
benefit plan) and c) a Senior Executive Defined Contribution Retirement
Plan for certain officers participating in the Executive Salary
Continuation Plan and a Key Executive Supplemental Retirement Plan covering
those officers and certain key employees not covered by the Executive
Salary Continuation Plan (non-qualified target benefit defined contribution
plans). Annual contributions by the Company to the qualified retirement
plans, the Senior Executive Defined Contribution Retirement Plan and the
Key Executive Supplemental Retirement Plan are discretionary.
The Executive Salary Continuation Plan provides for the payment of
defined deferred compensation benefits commencing at the earlier of the
participant's retirement or death. Generally, the benefits are determined
by action of the Board of Directors and are payable in monthly
installments over a fifteen-year period. Benefits under this plan vest
based upon the number of years of service, with 100% vesting generally
occurring upon the attainment of 15 years of service or death. The Company
has purchased life insurance policies on the participants and anticipates
the cash surrender value and death benefits of these policies will be
sufficient to reimburse the Company for its obligations under this plan.
"Deferred charges, patents and other assets" included $2.9 million and
$1.9 million and "Accrued liabilities" included $8.2 million and $6.8
million related to the Executive Salary Continuation Plan at June 30, 1994
and 1993, respectively. The net plan expense for the Executive Salary
Continuation Plan for fiscal 1994, 1993 and 1992 was (in millions) $0.5,
$0.2 and $0.2, respectively.
The Company charged to operations (in millions) $3.1, $1.9, $1.7 and
$1.5 in fiscal 1994, 1993, 1992 and June 1992, respectively, related to all
the plans described under this section.
9. Commitments and contingencies
a. Commitments
The Company has leased back certain of its franchise areas for
twenty-year terms with options to purchase the franchise rights at the end
of the lease terms in fiscal 1999 and 2001 for an aggregate amount of
approximately $1.8 million. The Company also leases certain operating
plant and equipment. The future lease commitments for plant, equipment and
franchise areas at June 30, 1994, aggregated $50.5 million and are due as
follows (in millions): 1995 - $12.5; 1996 - $10.1; 1997 - $5.5; 1998 -
$4.3; 1999 - $3.3 and thereafter - $14.8. Rent expense was charged to
operations as follows (in millions): 1994 - $10.2; 1993 - $4.7; 1992 - $3.8
and June 1992 - $0.3.
F-21
<PAGE> 66
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Commitments and contingencies (Cont'd)
b. Contingent royalty payments
In connection with certain acquisitions, the Company pays royalties
(ranging from 3% to 10%) on revenues generated by the acquired businesses
for periods expiring in 1996 through 2004. Such contingent payments, when
incurred, will be recorded as additional cost of the related acquisitions.
Royalty payments in fiscal 1994, 1993 and 1992 were $7.6 million, $5.6
million and $2.7 million, respectively.
c. Litigation
From time to time, the Company is party to litigation and other claims
incidental to its business, the ultimate resolution of which will not, in
the opinion of management, have a material adverse effect on the Company's
financial statements.
10. Business segment, geographic area and international operations data
The Company operates in a single business segment and its principal
products are electronic article surveillance and closed circuit television
systems. The Company's operations by geographic area are as follows (in
millions):
<TABLE>
<CAPTION>
June
1994 1993 1992 1992
-------- ------ ----- ------
Revenues:
<S> <C> <C> <C> <C>
North America $ 457.0 $307.4 $250.3 $ 11.6
Europe 274.7 232.0 96.4 12.1
Inter area transfers (75.7) (52.1) (36.8) (2.7)
-------- ------ ------ ------
Total consolidated $ 656.0 $487.3 $309.9 $ 21.0
======== ====== ====== ======
Operating income (loss):
North America $ 85.0 $ 51.5 $ 42.5 $ (4.4)
Europe 41.7 35.5 20.3 2.0
Inter area transfers 2.2 1.8 (1.8) 0.7
Corporate items (24.1) (17.8) (17.4) (1.6)
-------- ------ ------ ------
Total consolidated 104.8 71.0 43.6 (3.3)
Total other income (expenses) (8.8) 1.0 (2.6) (1.3)
-------- ------ ------ ------
Income (loss) from continuing
operations before income
taxes $ 96.0 $ 72.0 $ 41.0 $ (4.6)
======== ====== ====== ======
Identifiable assets:
North America $ 532.3 $329.6 $276.4 $266.2
Europe 543.8 457.0 106.4 112.8
Corporate items 79.4 140.3 84.5 83.2
-------- ------ ------ ------
Total consolidated $1,155.5 $926.9 $467.3 $462.2
======== ====== ====== ======
</TABLE>
F-22
<PAGE> 67
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Business segment, geographic area and international operations data
(Cont'd)
In fiscal 1994, 1993, 1992, and June 1992, export sales of $26.8
million, $18.5 million, $11.7 million and $1.2 million, respectively, are
reported in North America revenues. Transfers from North America to
Europe are accounted for at prices sufficient to recover a reasonable
profit margin. Corporate items include general corporate expenses,
research, development and engineering expenses and amortization of
patents. At June 30, 1994 and 1993, the international subsidiaries'
liabilities aggregated $166 million and $114 million, respectively.
Identifiable assets are comprised of those assets of the Company that
are identified with the operations in each geographic area. Corporate items
are comprised principally of cash and marketable securities and patents.
11. Acquisitions
In fiscal 1993, the Company acquired Automated Loss Prevention Systems
(ALPS), a large European distributor of EAS and CCTV products, and Security
Tag Systems, Inc. (Security Tag), a U.S.-based manufacturer and marketer of
loss prevention products, for an aggregate amount of approximately $323
million consisting of approximately $280 million (funded with net proceeds
of approximately $194.8 million from the issuance of 12.6 million shares of
its Common Stock and from borrowings under a short-term credit facility)
and 1.5 million shares of the Company's Common Stock (with a value of
approximately $43 million). In fiscal 1991, the Company acquired the
outstanding common stock of American Dynamics, a U.S. manufacturer of CCTV
components and systems for approximately $11.5 million and certain royalty
payments. (See Note 9b.)
The acquisitions of ALPS, Security Tag and American Dynamics resulted in
costs in excess of net assets acquired of approximately $282 million which
are being amortized using the straight-line method over 40 years. These
acquisitions were accounted for under the purchase method and the
respective subsidiaries were consolidated in the Company's financial
statements from their respective dates of acquisition.
The Company's unaudited proforma consolidated condensed statements of
income for fiscal 1993 and 1992, assuming the acquisitions of ALPS and
Security Tag were effected at the beginning of each year, are summarized as
follows (in millions, except per share data):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Total revenues $510.2 $421.6
Income from continuing
operations before income taxes 72.3 49.6
Net income 53.9 36.0
Primary earnings per common
share $ .91 $ .63
Fully diluted earnings per
common share $ .89 $ .63
</TABLE>
F-23
<PAGE> 68
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Acquisitions (Cont'd)
This proforma information does not purport to be indicative of the
results which may have been obtained had the acquisitions been consummated
at the dates assumed.
In connection with acquisitions during fiscal 1994 and 1993, the market
value of the assets acquired was as follows (in millions):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Cash paid (net of cash acquired) $ 11.5 $299.3
Liabilities assumed and/or incurred 13.2 76.6
Common stock 31.0 43.4
------ ------
Market value of assets acquired $ 55.7 $419.3
====== ======
</TABLE>
12. Financial Instruments
a. Fair value of financial instruments
The carrying or notional amount and estimated fair values of financial
instruments consist of the following (at June 30, in millions):
<TABLE>
<CAPTION>
1994 1993
--------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ --------- -------
Balance Sheet Instruments
-------------------------
<S> <C> <C> <C> <C>
Marketable securities $33.6 $34.0 $28.8 $29.5
Receivables other than leases
and accounts receivable 71.3 71.3 61.2 61.2
Debt, excluding capital leases 214.9 215.0 189.7 193.2
Convertible subordinated
debentures - - 114.2 198.5
Notional Fair Notional Fair
Amount Value Amount Value
-------- ------ --------- -------
Off-Balance Sheet Instruments
-----------------------------
Interest rate swap agreements $170.4 $(3.3) $150.0 $1.9
Currency hedging instruments 147.5 (7.4) 141.9 3.3
</TABLE>
The fair values of marketable securities and convertible subordinated
debentures are based primarily on quoted market prices for those
instruments.
The fair values of receivables other than leases and accounts receivable
and debt, excluding capital leases and unsecured revolving credit notes
payable, were estimated by discounting future cash flows using current
market interest rates.
The fair values for unsecured revolving credit notes payable, which are
generally due on demand, approximate their carrying amounts.
F-24
<PAGE> 69
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Financial Instruments (Cont'd)
The fair values of interest rate swap agreements and currency hedging
instruments are based on the estimated costs to terminate these agreements
in the OTC market as determined by the financial institution
counterparties. The financial institution counterparties determine the
costs to terminate swap agreements by discounting over the remaining term
of these agreements the differential cash flow between offsetting swap
agreements at market interest rates and existing swap agreements at their
coupon rates. The negative fair values (disclosed in the table above)
represent the incremental cost assuming the Company was to have terminated
these financial instruments at June 30, 1994. The decrease in the fair
value of the swap agreements from June 30, 1993 resulted primarily from the
increase in market interest rates over such period. The decrease in the
fair value of the currency hedging instruments from June 30, 1994 was
primarily due to the weakening of the U.S. dollar over such period. These
financial instruments have been designated to hedge the currency risks
associated with specific transactions and are not held as investments. It
is the Company's intent to hold such instruments for their respective
terms. Therefore, changes in their fair values will have no net effect on
the Company's operations, cash flows or financial position. (See Note 1.)
b. Currency hedging instruments
At June 30, 1994, the Company owned forward contracts and options
(designated to hedge substantially all of the Company's intercompany
commitments) which allowed it to sell currencies for the indicated U.S.
dollar amounts, in fiscal 1995 and 1996, as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
Currencies Options Forwards Options Forwards
---------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
French Francs $0.8 $18.9 $2.5 $29.0
Deutschmarks 0.6 12.7 1.7 21.1
British Pounds - 11.5 1.5 17.3
Other - 10.3 - 19.6
---- ----- ---- -----
$1.4 $53.4 $5.7 $87.0
==== ===== ==== =====
</TABLE>
The credit risk of these forward contracts and options is considered low
due to the credit quality of the issuers.
c. Interest rate swap agreements
The Company has entered into interest rate swap agreements with
financial institution counterparties to manage its exposure to interest
rate fluctuations associated with certain transactions and debt (see Notes
2. and 6.). Swap agreements are contracts
F-25
<PAGE> 70
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Financial Instruments (Cont'd)
between two parties to exchange interest rate payments based on a single
principal amount ("notional amount") over a specified term. The swap
agreements contain an element of risk that the counterparty may be unable
to perform, in which case, the effective interest rate on the debt or
underlying transactions would revert to the respective contractual rates.
However, the Company minimized such risk by limiting the counterparties to
major financial institutions with investment grade credit ratings. At
June 30, 1994, the Company was a party to the following swap agreements
(in millions):
FIXED TO FLOATING SWAP AGREEMENTS
<TABLE>
<CAPTION>
Notional Expiration Floating Rate Fixed Rate
Amount Date to be Paid to be Received
-------- ------------- ------------- --------------
<S> <C> <C> <C>
$50.0 February 1996 6 Month LIBOR 5.91%
50.0 February 1996 6 Month LIBOR 5.40%
35.0 June 1996 6 Month LIBOR 5.01%
</TABLE>
These swap agreements were entered into in order to reduce the interest
expense on the $135 million Senior Notes by taking advantage of lower
prevailing short-term interest rates. (See Note 6.)
The 5.91% swap agreement expiring February 1996 will be extended to
February 1998 should the two-year bid swap rate on February 16, 1996 equal
or exceed 7%. The rate received by the Company under this agreement will
increase to 6.92% in February 1996 should the expiration be extended.
The weighted average interest rate paid and received under all such
Fixed to Floating Swap Agreements at June 30, 1994 was 5.3% and 5.5%,
respectively, and would have been the same assuming market conditions at
June 30, 1994.
FLOATING TO FIXED SWAP AGREEMENTS
<TABLE>
<CAPTION>
Notional Expiration Floating Rate Fixed Rate
Amount Date to be Paid to be Received
-------- ------------- ------------- --------------
<S> <C> <C> <C>
$6.7 April 1999 4.60% 1 Month LIBOR
5.7 August 1998 4.80% 1 Month LIBOR
4.1 May 1998 4.94% 1 Month LIBOR
3.4 March 1999 4.65% 1 Month LIBOR
</TABLE>
These swap agreements were entered into in order to manage the interest
rate exposure associated with the U.S. receivables sales program. (See
Note 2.)
The weighted average interest rate paid and received under all such
Floating to Fixed Swap Agreements at June 30, 1994 was 4.7% and 4.6%,
respectively, and would have been the same assuming market conditions at
June 30, 1994.
F-26
<PAGE> 71
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Subsequent event
In August 1994, the Company announced it had reached an agreement to
merge Knogo Corporation's (Knogo) business interests and rights to products
outside of the U.S.and Canada (reporting revenues of $71 million for the
fiscal year ended February 28, 1994) into the Company in exchange for the
Company's Common Stock valued at approximately $100 million. Knogo is a
U.S.-based company engaged primarily in the business of manufacturing
(primarily in the U.S.), marketing and servicing EAS systems and marketing
and servicing CCTV systems. The agreement is subject to certain conditions,
including approval of Knogo's shareholders and expiration of regulatory
waiting periods. The agreement also has provisions for break-up fees,
under certain conditions, payable to either party should the transaction
fail to close.
F-27
<PAGE> 72
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------------
September December March June
30 31 31 30
--------- -------- --------- -------
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Fiscal 1994
- - -----------
Total revenues $ 143.3 $ 159.9 $ 162.2 $ 190.7
Operating income $ 22.3 $ 28.5 $ 25.1 $ 28.9
Net income $ 14.8 $ 18.8 $ 16.4 $ 22.0
Primary earnings per common
share (a) $ .25 $ .31 $ .27 $ .34
Fully diluted earnings per common
share (a) (b) $ .24 $ .29 $ .26 $ .34
Fiscal 1993
- - ------------
Total revenues $ 119.7 $ 122.1 $ 114.4 $ 131.0
Operating income $ 14.3 $ 16.6 $ 15.8 $ 24.3
Net income $ 10.9 $ 13.6 $ 11.9 $ 17.7
Primary earnings per common
share (a) $ .21 $ .24 $ .21 $ .30
Fully diluted earnings per common
share (a)(b) $ .21 $ .23 $ .21 $ .29
</TABLE>
(a) Adjusted to reflect the three-for-two stock split declared in November
1993. (See Note 8a.)
(b) Fully diluted earnings per common share include the if-converted
dilutive effect of the 7% convertible subordinated debentures due in
2001 which were converted in May 1994. (See Note 7.)
F-28
<PAGE> 73
SENSORMATIC ELECTRONICS CORPORATION
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance at
beginning Amounts end of
Name of debtor of period Additions Collected period
- - -------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended June 30, 1994:
Dennis C. Gillette $ - $ 223 $ 223 $ -
Jerome M. LeWine 120 - 120 -
James E. Lineberger 2,123 - 801 1,322(a)
Gerd Witter - 126 - 126(e)
Employee Stock Ownership
Plan Trust 2,657 - 426 2,231(b)
TSI Security Acquisition
Corp. 171 - 86 85(d)
Year ended June 30, 1993 (c):
Ronald G. Assaf $ - $ 3,339 $ 3,339 $ -
John F. Daut - 133 133 -
Olin S. Giles - 166 166 -
Dennis C. Gillette - 318 318 -
Jerome M. LeWine 120 399 399 120(a)
James E. Lineberger 1,322 1,856 1,055 2,123(a)
Michael E. Pardue - 458 458 -
Gerd Witter - 172 172 -
Henry W. Wurtele 129 - 129 -
Employee Stock Ownership
Plan Trust 3,243 - 586 2,657(b)
TSI Security Acquisition
Corp. 343 - 172 171(d)
</TABLE>
S-1
<PAGE> 74
SENSORMATIC ELECTRONICS CORPORATION
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES (CONT'D)
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance at
beginning Amounts end of
Name of debtor of period Additions Collected period
- - -------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended May 31, 1992:
Ronald G. Assaf $ - $ 661 $ 661 $ -
Miguel A. Flores 16 143 159 -
Dennis C. Gillette 46 388 434 -
Jerome M. LeWine - 179 59 120(a)
James E. Lineberger 1,627 - 305 1,322(a)
Michael E. Pardue - 1,043 1,043 -
Terry W. Price - 185 185 -
Gerd Witter - 161 161 -
Henry W. Wurtele 49 80 - 129(a)
Employee Stock Ownership
Plan Trust 3,759 - 516 3,243(b)
TSI Security Acquisition
Corp. 343 - - 343(d)
</TABLE>
(a) Notes receivable issued pursuant to Stock Purchase Loan Plan and
presented in the Consolidated Balance Sheets as "Stockholders' equity -
Notes receivable from stock sales."
(b) Notes receivable received pursuant to sale of Common Stock to the
Employee Stock Ownership Plan Trust and presented in the Consolidated
Balance Sheets as "Stockholders' equity - Notes receivable from stock
sales" (see Note 8f. of Notes to Consolidated Financial Statements).
(c) There were no changes to the balances during the month ended June 30,
1992.
(d) Amount represents a note receivable from TSI Security Acquisition
Corp., a company of which James E. Lineberger is the principal
stockholder, assigned to the Company in relation to a discontinued
investment.
(e) Amount represents a note receivable bearing interest at market rates
and due in October 1998.
S-2
<PAGE> 75
SENSORMATIC ELECTRONICS CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance at
beginning charged to end of
Classification of period income Deductions Other (a) period
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended June 30, 1994:
Allowance for doubtful accounts $ 14,738 $ 10,996 $(5,980) $ 1,744 $ 21,498(b)
======== ======== ======= ======= =========
Allowance for inventory losses $ 8,555 $ 4,651 $(2,745) $ 140 $ 10,601
======== ======== ======= ======= =========
Year ended June 30, 1993:
Allowance for doubtful accounts $ 11,510 $ 8,833 $(5,281) $ (324) $ 14,738(b)
======== ======== ======= ======= =========
Allowance for inventory losses $ 7,088 $ 3,536 $(1,865) $ (204) $ 8,555
======== ======== ======= ======= =========
Month ended June 30,1992:
Allowance for doubtful accounts $ 10,571 $ 1,314 $ (510) $ 135 (c) $ 11,510(b)
======== ======== ======= ======= =========
Allowance for inventory losses $ 7,051 $ 210 $ (96) $ (77)(c) $ 7,088
======== ======== ======= ======= =========
Year ended May 31, 1992:
Allowance for doubtful accounts $ 9,406 $ 4,112 $(2,964) $ 17 $ 10,571(b)
======== ======== ======= ======= =========
Allowance for inventory losses $ 6,078 $ 2,617 $(1,637) $ (7) $ 7,051
======== ======== ======= ======= =========
</TABLE>
(a) Includes translation adjustments related to the application of FASB
Statement No. 52 (see Note 1f. of Notes to Consolidated Financial
Statements).
(b) Includes reserves related to receivables and sales-type leases sold
to financing institutions which are subject to partial or full
recourse.
(c) Includes effect of change in year-end of certain foreign subsidiaries
from March 31 to June 30.
S-3
<PAGE> 76
SENSORMATIC ELECTRONICS CORPORATION
SCHEDULE IX - SHORT-TERM BORROWINGS
(In thousands)
<TABLE>
<CAPTION>
Maximum Average Weighted
Weighted amount amount average
Balance at average outstanding outstanding interest
end of interest during during rate during
period rate the period the period the period
---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks:
Year ended June 30, 1994 $ 64,000 6.5% $100,432 $ 71,080 6.9%
Year ended June 30, 1993 $ 41,332 8.4% $130,149 (a) $ 81,652 (a) 6.0%
Month ended June 30, 1992 $ 11,756 11.1% $ 11,756 $ 10,889 11.0%
Year ended May 31, 1992 $ 12,355 10.1% $ 17,888 $ 13,472 10.6%
</TABLE>
The average amount outstanding for each period was computed by averaging the
month-end balances during the period. The weighted average interest rate was
computed by dividing interest expense for each period by the average amount
outstanding.
(a) Amounts reflect $100 million of a short-term bank borrowing incurred in
connection with the acquisition of ALPS. This bank borrowing was
outstanding from July 1992 to January 1993 at a weighted average interest
rate of 3.8% (See Note 6. of Notes to Consolidated Financial Statements).
S-4
<PAGE> 77
SENSORMATIC ELECTRONICS CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
<TABLE>
<CAPTION>
Years ended
------------------------------------- Month ended
June 30, May 31, June 30,
1994 1993 1992 1992
-------- -------- ------- -----------
<S> <C> <C> <C> <C>
Maintenance and repairs * * * $269
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals (a) $11,681 $7,917 $3,262 $273
======= ====== ====== ====
Taxes, other than payroll and
income taxes * * * *
Royalties * * * *
Advertising costs * * * *
</TABLE>
* Less than 1% of total revenues.
(a) Amortization of costs in excess of net assets acquired aggregated
$8,382, $5,559, $1,386, and $192 in fiscal 1994, 1993, 1992 and June
1992, respectively. Amortization of deferred charges, patents and
other assets aggregated $3,299, $2,358, $1,876 and $81 in fiscal 1994,
1993, 1992 and the June 1992, respectively.
S-5
<PAGE> 78
SENSORMATIC ELECTRONICS CORPORATION
INDEX TO EXHIBITS
(Item 14 (a)(3))
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------ ---------------
<S> <C> <C>
2(a) - Agreement Plan of Merger ("Merger Agreement") dated as of August 14, 1994, between Sensormatic Electronics
Corporation, Knogo Corporation ("Knogo") and Knogo North America Inc. ("Knogo North America") (excluding
schedules, but including: Exhibit A - Form of Delaware Certificate of Merger, Exhibit B - Form of New York
Certificate of Merger, Exhibit C - Form of Contribution and Divestiture Agreement (the "Divestiture Agreement")
between Knogo and Knogo North American and certain Exhibits thereto (incorporated by reference to Exhibits 2(a),
2(b) and 2(c) to Current Report on Form 8-K filed on August 25, 1994 (File Number 0-3953)).
3(a) - Composite Restated Certificate of Incorporation of the Company filed pursuant to Rule 232.102(c) of Regulation
S-T (incorporated by reference to Exhibit 4(d) to Registration Statement on Form S-3, File No. 33-61626).
3(b) - By-Laws of the Company (incorporated by reference to Exhibit 3(b) to Form 10-K for the fiscal year ended May
31, 1990).
4(a) - Article FOURTH of the Restated Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 4(d) to Registration Statement No. 33-61626).
4(b) - Note Agreement, dated as of January 15, 1993, among the Company, The Northwestern Mutual Life Insurance Company
and the other Purchasers named therein, including the form of 8.21% Senior Notes due January 30, 2003,
issued thereunder, and First Amendment to such Note Agreement dated as of May 31, 1993 (incorporated by
reference to Exhibit 4.4 to Registration Statement on Form S-4, File No. 33-62750.
4(c) - The Registrant agrees to furnish copies of any instrument defining the rights of holders of long-term debt of
the Registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the
Registrant and its consolidated subsidiaries, which is not required to be filed as an exhibit, to the Commission
upon request.
</TABLE>
44
<PAGE> 79
SENSORMATIC ELECTRONICS CORPORATION
INDEX TO EXHIBITS
(Item 14 (a)(3))
<TABLE>
<S> <C> <C>
10(a) - Grant of Industrial Tax Exemption to Sensormatic Electronics Corporation (Puerto Rico) from the Commonwealth of
Puerto Rico (incorporated by reference to Exhibit 10(n) to Form 10-K for the fiscal year ended May 31, 1986)
and Order of Conversion of Grant of Industrial Tax Exemption (incorporated by reference to Exhibit 10(m) to Form
10-K for the fiscal year ended May 31, 1988).
10(b) - Description of Non-qualified Stock Option Plan (incorporated by reference to Registration Statement No.
2-74526) and representative form of non-qualified stock option (incorporated by reference to Exhibit 3(c) to
Registration Statement No. 2-74526).
10(c) - Amended 1989 Stock Incentive Plan, and representative forms of a non-qualified stock option under such Plan.
10(d) - Directors Stock Option Plan and representative form of a non-qualified stock option under such Plan.
(Incorporated by reference to exhibit 10(h) to Form 10-K for the fiscal year ended May 31, 1992).
10(e) - Stock Purchase Loan Plan (incorporated by reference to Exhibit 10(g) to Form 10-K for the fiscal year ended
May 31, 1986).
10(f) - Executive Salary Continuation Plan and representative form of agreement thereunder (incorporated by reference
to Exhibit 10(g) to Form 10-K for the fiscal year ended May 31, 1989).
10(g) - Board of Directors Retirement Plan and representative form of agreement thereunder (incorporated by reference
to Exhibit 10(h) to Form 10-K for the fiscal year ended May 31, 1989).
10(h) - Senior Executive Defined Contribution Retirement Plan and representative form of agreement thereunder.
10(i) - Employment Agreement, dated as of September 24, 1993, between the Company and Ronald G. Assaf, Chairman of the
Board, President and Chief Executive Officer of the Company (incorporated by reference to Exhibit 10(j) to
Form 10-K for the fiscal year ended June 30, 1993).
10(j) - Employment Agreement, dated as of November 1, 1990, between the Company and Gerd Witter, President of
Sensormatic Europe (incorporated by reference to Exhibit 10(l) to Form 10-K for the fiscal year ended May
31, 1991).
</TABLE>
45
<PAGE> 80
SENSORMATIC ELECTRONICS CORPORATION
INDEX TO EXHIBITS
(Item 14 (a)(3))
<TABLE>
<S> <C> <C>
10(k) - Agreement, dated as of December 23, 1988, between the Company and Ronald G. Assaf, Chairman of the Board,
President and Chief Executive Officer of the Company (incorporated by reference to Exhibit 10(l) to Form
10-K for the fiscal year ended May 31, 1989).
10(l) - Agreement, dated as of December 23, 1988 between the Company and James E. Lineberger, Chairman of the
Executive Committee and a director of the Company, and amendment thereto, dated as of January 27, 1989
(incorporated by reference to Exhibit 10(m) to Form 10-K for the fiscal year ended May 31, 1989).
10(m) - Agreement dated as of December 23, 1988, between the Company and Michael E. Pardue, Executive Vice President,
Chief Operating Officer and Chief Financial Officer of the Company (incorporated by reference to Exhibit
10(n) to Form 10-K for the fiscal year ended May 31, 1989).
10(n) - Agreement, dated as of December 23, 1988, between the Company and Dennis C. Gillette, Senior Vice President of
the Company (incorporated by reference to Exhibit 10(o) to Form 10-K for the fiscal year ended May 31, 1989).
10(o) - Agreement, dated as of December 23, 1988, between the Company and Gerd Witter, President of Sensormatic Europe
(incorporated by reference to Exhibit 10(p) to Form 10-K for the fiscal year ended May 31, 1989).
10(p) - Service Agreement, dated as of July 27, 1992 between Sensormatic Limited (successor to Securitag U.K. Limited)
and Charles Dawson Buck, Senior Vice President and President of Sensormatic International Division
(incorporated by reference to Exhibit 10(q) to Form 10-K for the fiscal year ended June 30, 1993).
10(q) - Form of Agreement, dated as of January 27, 1989 between the Company and Dr. Arthur G. Milnes, director of the
Company (incorporated by reference to Exhibit 10(r) to Form 10-K for the fiscal year ended May 31, 1989).
10(r) - Agreement, dated as of December 23, 1988, between the Company and Jerome M. LeWine, a director of the Company,
and amendment thereto, dated as of January 27, 1989 (incorporated by reference to Exhibit 10(s) to Form 10-K
for the fiscal year ended May 31, 1989).
10(s) - Directors and Officers Liability Insurance Policies.
</TABLE>
46
<PAGE> 81
SENSORMATIC ELECTRONICS CORPORATION
INDEX TO EXHIBITS
(Item 14 (a)(3))
<TABLE>
<S> <C> <C>
10(t) - Credit Agreement, dated as of August 26, 1994, between the Company, Wachovia Bank of Georgia, N.A., ABN Amro
Bank N.V., the other Borrowers listed herein and the domestic banks and foreign company banks listed herein.
11 - Computation of Earnings (Loss) Per Common Share for the years ended June 30, 1994, 1993 and May 31, 1992 and
the month ended June 30, 1992.
21 - List of Subsidiaries of the Company.
23(a) - Consent of Independent Certified Public Accountant.
23(b) - Consent of Independent Certified Public Accountant.
27 - Financial Data Schedule
</TABLE>
47
<PAGE> 82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, on September 8, 1994.
SENSORMATIC ELECTRONICS CORPORATION
By: MICHAEL E. PARDUE
------------------------------------
Michael E. Pardue, Executive
Vice President, Chief Operating
Officer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities indicated on September 8, 1994.
Signature Title
--------- -----
RONALD G. ASSAF Chairman of the Board of Directors,
- - -------------------------- President and Chief Executive Officer
Ronald G. Assaf
THOMAS V. BUFFET Vice Chairman of the Board of
- - -------------------------- Directors
Thomas V. Buffett
JAMES E. LINEBERGER Chairman of the Executive Committee
- - -------------------------- and Director
James E. Lineberger
MICHAEL E. PARDUE Executive Vice President,
- - -------------------------- Chief Operating Officer, Chief
Michael E. Pardue Financial Officer and Director
LAWRENCE J. SIMMONS Vice President of Finance and Chief
- - -------------------------- Accounting Officer
Lawrence J. Simmons
JEROME M. LEWINE Director
- - --------------------------
Jerome M. LeWine
DR. ARTHUR G. MILNES Director
- - --------------------------
Dr. Arthur G. Milnes
JOHN T. RAY, JR. Director
- - --------------------------
John T. Ray, Jr.
<PAGE> 83
This Page Left Intentionally Blank
<PAGE> 1
EXHIBIT 10(c)
As Amended and Restated
November 12, 1993
SENSORMATIC ELECTRONICS CORPORATION
1989 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the 1989 Stock Incentive Plan (the "Plan") is
to aid the Company in attracting, retaining and motivating officers, key
employees and directors by providing them with incentives for making
significant contributions to the growth and profitability of the Company. The
Plan is designed to accomplish this goal by offering stock options and other
incentive awards, thereby providing Participants with a proprietary interest in
the growth, profitability and success of the Company.
2. Definitions.
(a) Award. Any form of stock option, stock appreciation right, stock or
cash award granted under the Plan, whether granted singly, in combination or in
tandem, pursuant to such terms, conditions and limitations as the Committee may
establish in order to fulfill the objectives, and in accordance with the terms
and conditions, of the Plan.
(b) Award Agreement. An agreement between the Company and a Participant
setting forth the terms, conditions and limitations applicable to an Award.
(c) Board. The Board of Directors of Sensormatic Electronics Corporation.
(d) Code. The Internal Revenue Code of 1986, as amended from time to time.
(e) Committee. Such committee of the Board as may be designated from time
to time by the Board to administer the Plan or any subplan under the Plan. Any
such committee shall consist of not less than two members of the Board who are
not officers or employees of the Company.
(f) Company. Sensormatic Electronics Corporation and its direct and
indirect subsidiaries.
(g) Fair Market Value. If the Stock is listed on the New York Stock
Exchange (or other national exchange), the average of the high and low sale
prices as reported on the New York Stock Exchange (or such other exchange) or,
if the Stock is not listed on a national exchange, the average of the high and
low sale prices of the Stock in the over-the-counter market, as reported by the
National Association of Securities Dealers through its Automated Quotation
System or otherwise, in either case for the date in question, provided that if
no transactions in the Stock are reported for that date, the average of the
high and low sale prices as so reported for the preceding day on which
transactions in the Stock were effected.
(h) Participant. An officer, director or employee of the Company to whom
an Award has been granted.
(i) Sensormatic. Sensormatic Electronics Corporation.
(j) Stock. Authorized and issued or unissued shares of Common Stock of
Sensormatic or any security issued in exchange or substitution therefor.
<PAGE> 2
3. Eligibility. Only officers, key employees, and directors who are also
officers or employees of the Company or who have been designated by the Board
as eligible to receive Awards are eligible to receive Awards under the Plan.
Key employees are those employees who hold positions of responsibility or whose
performance, in the judgment of the Committee, can have a significant effect on
the growth and profitability of the Company.
4. Stock Available for Awards. Subject to Section 14 hereof, a total of
4,000,000 shares of Stock shall be available for issuance pursuant to Awards
granted under the Plan, provided, however, that the aggregate number of shares
of Stock subject to options and upon which stock appreciation rights are based
pursuant to Awards hereunder shall not exceed 800,000 for any Participant
during any three consecutive years beginning on or after November 12, 1993.
From time to time, the Board and appropriate officers of Sensormatic shall file
such documents with governmental authorities and, if the Stock is listed on the
New York Stock Exchange (or other national exchange), with such stock exchange,
as are required to make shares of Stock available for issuance pursuant to
Awards and publicly tradeable. Shares of Stock related to Awards, or portions
of Awards, that are forfeited, canceled or terminated, expire unexercised, are
surrendered in exchange for other Awards, or are settled in cash in lieu of
Stock or in such manner that all or some of the shares of Stock covered by an
Award are not and will not be issued to a Participant, shall be restored to the
total number of shares of Stock available for issuance pursuant to Awards.
5. Administration.
(a) General. The Plan shall be administered by the Committee, which shall
have full and exclusive power to (i) authorize and grant Awards to persons
eligible to receive Awards under the Plan; (ii) establish the terms, conditions
and limitations of each Award or class of Awards; (iii) construe and interpret
the Plan and all Award Agreements; (iv) grant waivers of Plan restrictions; (v)
adopt and amend such rules, procedures, regulations and guidelines for carrying
out the Plan as it may deem necessary or desirable; and (vi) take any other
action necessary for the proper operation and administration of the Plan, all
of which powers shall be exercised in a manner consistent with the objectives,
and in accordance with the terms and conditions, of the Plan. The Committee's
powers shall include, but shall not be limited to, the authority to (A) adopt
such subplans as may be necessary or appropriate (1) to provide for the
authorization and granting of Awards to promote specific goals or for the
benefit of specific classes of Participants, (2) to provide for grants of
Awards by means of formulae, standardized criteria or otherwise, or (3) for any
other purposes as are consistent with the objectives of the Plan, and to
segregate shares of Stock available for issuance under the Plan generally as
being available specifically for the purposes of one or more subplans, and (B)
subject to Section 11 hereof, adopt modifications, amendments, rules,
procedures, regulations, subplans and the like as may be necessary or
appropriate (1) to comply with provisions of the laws of other countries in
which the Company may operate in order to assure the effectiveness of Awards
granted under the Plan and to enable Participants employed in such other
countries to receive advantages and benefits under the Plan and such laws, (2)
to effect the continuation, acceleration or modification of Awards under
certain circumstances, including events which might constitute a Change in
Control (as set forth in Section 7 hereof) of Sensormatic, or (3) for any other
purposes as are consistent with the objectives of the Plan. All such
modifications, amendments, rules, procedures, regulations and subplans shall be
deemed to be a part of the Plan as if stated herein.
(b) Committee Actions. All actions of the Committee with respect to the
Plan shall require the vote of a majority of its members or, if there are only
two members, by
2
<PAGE> 3
the vote of both. Any action of the Committee may be taken by a written
instrument signed by a majority (or both members) of the Committee, and any
action so taken shall be as effective as if it had been taken by a vote at a
meeting. All determinations and acts of the Committee as to any matters
concerning the Plan, including interpretations or constructions of the Plan and
any Award Agreement, shall be conclusive and binding on all Participants and on
any parties validly claiming through any Participants.
6. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer of Sensormatic and to other executive officers of the Company
certain of its administrative duties under the Plan, pursuant to such
conditions or limitations as the Committee may establish, except that the
Committee may not delegate its authority with respect to (a) the selection of
eligible persons as Participants in the Plan, (b) the granting or timing of
Awards, (c) establishing the amount, terms and conditions of any such Award,
(d) interpreting the Plan, any subplan or any Award Agreement or (e) amending
or otherwise modifying the terms or provisions of the Plan, any subplan or any
Award Agreement.
7. Awards. Subject to Section 4, the Committee shall determine the types
and timing of Awards to be made to each Participant and shall set forth in the
related Award Agreement the terms, conditions and limitations applicable to
each Award. Awards may include, but are not limited to, those listed below in
this Section 7. Awards may be granted singly, in combination or in tandem, or
in substitution for Awards previously granted under the Plan. Awards may also
be made in combination or in tandem with, in substitution for, or as
alternatives to, grants or rights under any other benefit plan of the Company,
including any such plan of any entity acquired by, or merged with or into, the
Company. Awards shall be effected through Award Agreements executed by the
Company in such forms as are approved by the Committee from time to time.
All or part of any Award may be subject to conditions established by the
Committee, and set forth in the Award Agreement, which conditions may include,
without limitation, achievement of specific business objectives, increases in
specified indices, attainment of growth rates and other measurements of Company
performance.
The Committee may determine to make any or all of the following Awards:
(a) Stock options. A grant of a right to purchase a specified number of
shares of Stock at an exercise price not less than 100% of the Fair Market
Value of the Stock on the date of grant, during a specified period, all as
determined by the Committee. Without limitation, a stock option may be in the
form of (i) an incentive stock option which, in addition to being subject to
such terms, conditions and limitations as are established by the Committee,
complies with Section 422 of the Code or (ii) a non-qualified stock option
subject to such terms, conditions and limitations as are established by the
Committee.
(b) Stock Appreciation Rights. A right to receive a payment, in cash or
Stock, equal to the excess of the Fair Market Value (or other specified
valuation) of a specified number of shares of Stock on the date the stock
appreciation right ("SAR") is exercised over the Fair Market Value (or other
specified valuation) on the date of grant of the SAR, except that if an SAR is
granted in tandem with a stock option, valuations on the grant and exercise
dates shall be no less than as determined on the basis of Fair Market Value.
-3-
<PAGE> 4
(c) Stock Awards. An Award made in Stock or denominated in units of
Stock. The eventual amount, vesting or issuance of a Stock Award may be
subject to future service and such other restrictions and conditions as may be
established by the Committee. Stock Awards may be based on Fair Market Value
or another specified valuation.
(d) Cash Awards. An Award made or denominated in cash. The eventual
amount of a cash Award may be subject to future service and such other
restrictions and conditions as may be established by the Committee.
Dividend equivalency rights, on a current or deferred basis, may be extended
to and be made part of any Award denominated in whole or in part in Stock or
units of Stock, subject to such terms, conditions and restrictions as the
Committee may establish.
Notwithstanding the provisions of the paragraphs of this Section 7, Awards
may be subject to acceleration of exercisability or vesting in the event of a
Change in Control of Sensormatic (i) as set forth in agreements between
Sensormatic and certain of its officers, directors and key employees which
provide for certain protections and benefits in the event of a change in
control (as defined in such agreements) or (ii) as may otherwise be determined
by the Committee under and in accordance with the terms and conditions of the
Plan. "Change in Control" for purposes of the Plan shall mean a change in
control of Sensormatic under such circumstances as shall be specified by (x)
the Committee or (y) where applicable to any Awards granted under the Plan by
such agreements between Sensormatic and a Participant as (1) may have been
entered into prior to the effective date of the Plan or (2) shall be entered
into after the effective date of the Plan (as amended in 1991) with, to the
extent such an agreement is applicable to an Award, the approval of the
Committee. A "Change in Control" may, without limitation, be deemed to have
occurred if (A) any "person" or "group" of persons (as the terms "person" and
"group" are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 and the rules thereunder) is or becomes the beneficial owner, directly or
indirectly, of securities of Sensormatic representing 30% or more of the
combined voting power of the then outstanding securities of Sensormatic or (B)
a change of more than 25% in the composition of the Board occurs within a
two-year period, unless such change in composition was approved in advance by
at least two-thirds of the previous directors.
8. Payment under Awards. Payment by the Company pursuant to Awards may be
made in the form of cash, Stock or combinations thereof and may be subject to
such restrictions as the Committee determines, including, in the case of Stock,
restrictions on transfer and forfeiture provisions. Stock subject to transfer
restrictions or forfeiture provisions is referred to herein as "Restricted
Stock". The Committee may provide for payments to be deferred, such future
payments to be made in installments or by lump-sum payment. The Committee may
permit selected Participants to elect to defer payments of some or all types of
Awards in accordance with procedures established by the Committee to assure
that such deferrals comply with applicable requirements of the Code.
The Committee may also establish rules and procedures for the crediting of
interest on deferred cash payments and of dividend equivalencies on deferred
payments to be made in Stock or units of Stock.
At the discretion of the Committee, a Participant may be offered an election
to substitute an Award for another Award or Awards, or for awards made under
any other benefit plan of the Company, of the same or different type.
-4-
<PAGE> 5
9. Stock Option Exercise. The price at which shares of Stock may be
purchased upon exercise of a stock option shall be paid in full at the time of
the exercise, in cash or, if permitted by the Committee, by (a) tendering Stock
or surrendering another Award, including Restricted Stock, or an option or
other award granted under another benefit plan of the Company, in each case
valued at, or on the basis of, Fair Market Value on the date of exercise, (b)
delivery of a promissory note issued by a Participant to the Company pursuant
to the terms and conditions of the Company's Stock Purchase Loan Plan or
otherwise as determined by the Committee, or (c) any other means acceptable to
the Committee. The Committee shall determine acceptable methods for tendering
Stock or surrendering other Awards or grants and may impose such conditions on
the use of Stock or other Awards or grants to exercise a stock option as it
deems appropriate. If shares of Restricted Stock are tendered as consideration
for the exercise of a stock option, the Committee may require that the number
of shares issued upon exercise of the stock option equal to the number of
shares of Restricted Stock used as consideration therefor be subject to the
same restrictions as the Restricted Stock so surrendered and any other
restrictions as may be imposed by the Committee. The Committee may also permit
Participants to exercise stock options and simultaneously sell some or all of
the shares of Stock so acquired pursuant to a brokerage or similar arrangement
which provides for the payment of the exercise price substantially concurrently
with the delivery of such shares.
10. Tax Withholding. The Company shall have the right to deduct
applicable taxes from any Award payment or shares of Stock receivable under an
Award and to withhold an appropriate number of shares of Stock for payment of
taxes required by law or to take such other action as may be necessary in the
opinion of the Company to satisfy all tax withholding obligations. In
addition, the Committee may permit Participants to elect to (a) have the
Company deduct applicable taxes resulting from any Award payment to, or
exercise of an Award by, such Participant by withholding an appropriate number
of shares of Stock for payment of tax obligations or (b) tender to the Company
for the purpose of satisfying tax payment obligations other Stock held by the
Participant. If the Company withholds shares of Stock to satisfy tax payment
obligations, the value of such Stock in general shall be its Fair Market Value
on the date of the Award payment or the date of exercise of an Award, as the
case may be. If a Participant tenders shares of Stock pursuant to clause (b)
above to satisfy tax payment obligations, the value of such Stock shall be the
Fair Market Value on the date the Participant tenders such Stock to the
Company.
11. Amendment, Modification, Suspension or Termination of the Plan. The
Board may amend, modify, suspend or terminate the Plan, or adopt subplans under
the Plan, (a) for the purpose of meeting or addressing any changes in any
applicable tax, securities or other laws, rules or regulations or (b) for any
other purpose permitted by law. Subject to changes in law or other legal
requirements which would permit otherwise, the Plan may not be amended without
the approval of the holders of a majority of the shares of Stock voting on such
amendment to (i) materially increase the aggregate number of shares of Stock
that may be issued under the Plan (except for any increase resulting from
adjustments pursuant to Section 14 hereof), (ii) materially increase the
benefits accruing to Participants or (iii) materially modify the requirements
as to eligibility for participation in the Plan. In addition, no subplan which
provides for the granting of Awards by a formula whose provisions fix the
selection of Participants, the granting and timing of Awards and the terms and
conditions of such Awards, shall be amended with respect to such provisions
more frequently than once every six months (other than to comport with changes
in the Code or the Employee Retirement Income Security Act or the rules
thereunder). Further, the Plan may not be amended in a manner that would
alter, impair, amend, modify, suspend or terminate any rights of a Participant
or obligation of the
-5-
<PAGE> 6
Company under any Awards theretofore granted, in any manner adverse to any such
affected Participant, without the consent of such affected Participant.
12. Termination of Employment. Except as otherwise set forth in an
applicable Award Agreement or determined by the Committee, or as
otherwise provided in paragraph (a) or (b) of this Section 12, if a
Participant's employment or association with the Company terminates,
all unexercised, deferred and unpaid Awards (or portions of Awards)
shall be canceled immediately.
(a) Retirement, Resignation or Other Termination. If a
Participant's employment or association with the Company terminates by
reason of the Participant's retirement or resignation, or for any other
reason (other than the Participant's death or disability), the
Committee may, under circumstances in which it deems an exception from
the provisions of the first sentence of this Section 12 to be
appropriate to carry out the objectives of the Plan and to be
consistent with the best interests of the Company, permit Awards to
continue in effect and be exercisable or payable beyond the date of
such termination, up until the expiration date specified in the
applicable Award Agreement and otherwise in accordance with the terms
of the applicable Award Agreement, and may accelerate the
exercisability or vesting of any Award, in either case, in whole or in
part.
(b) Death or Disability.
(i) In the event of a Participant's death, the
Participant's estate or beneficiaries shall have a period, not
extending beyond the expiration date specified in the applicable Award
Agreement (except as otherwise provided in such Award Agreement),
within which to exercise any outstanding Award held by the
Participant, as may be specified in the Award Agreement or as may
otherwise be determined by the Committee. All rights in respect of
any such outstanding Awards shall pass in the following order: (A) to
beneficiaries so designated in writing by the Participant; or if none,
then (B) to the legal representative of the Participant; or if none,
then (C) to the persons entitled thereto as determined by a court of
competent jurisdiction. Awards so passing shall be exercised or paid
at such times and in such manner as if the Participant were living,
except as otherwise provided in the applicable Award Agreement or as
determined by the Committee.
(ii) If a Participant ceases to be employed or
associated with the Company because the Participant is deemed by the
Company to be disabled, outstanding Awards held by the Participant may
be paid to or exercised by the Participant, if legally competent, or
by a committee or other legally designated guardian or representative
if the Participant is legally incompetent, for a period, not extending
beyond the expiration date specified in the applicable Award Agreement
(except as otherwise provided in such Award Agreement), following the
termination of his employment or association with the Company, as may
be specified in the Award Agreement or as may otherwise be determined
by the Committee.
(iii) After the death or disability of a
Participant, the Committee may at any time (A) terminate restrictions
with respect to Awards held by the Participant, (B) accelerate the
vesting or exercisability of any or all installments and rights of the
Participant in respect of Awards held by the Participant and (C)
instruct the Company to pay the total of any accelerated payments
under the Awards in a lump sum to the Participant or to the
Participant's estate, beneficiaries or representatives, notwithstand-
-6-
<PAGE> 7
ing that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the
Awards might ultimately have become payable to other beneficiaries.
(iv) In the event of uncertainty as to the
interpretation of, or controversies concerning, paragraph (b) of this
Section 12, the Committee's determinations shall be binding and
conclusive on all Participants and any parties validly claiming
through them.
13. Nonassignability.
(a) Except as provided for in paragraphs (a) and (b) of
Section 12 hereof and paragraph (b) of this Section 13, no Award or any other
benefit under the Plan, or any right with respect thereto, shall be assignable
or transferable, or payable to or exercisable by, anyone other than the
Participant to whom it is granted.
(b) If a Participant's employment or association with the
Company terminates in order for such Participant to assume a position with a
governmental, charitable or educational agency or institution, and the
Participant retains Awards pursuant to paragraph (a) of Section 12 hereof, the
Committee, in its discretion and to the extent permitted by law, may authorize
a third party (including, without limitation, the trustee of a "blind" trust),
acceptable to the applicable authorities, the Participant and the Committee, to
act on behalf of the Participant with respect to such Awards.
14. Adjustments. In the event of any change in the
outstanding Stock by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger or similar event, the
Committee shall adjust proportionally (a) the number of shares of Stock (i)
reserved under the Plan, (ii) available for options or other Awards and
available for issuance pursuant to options, or upon which SARs may be based,
for individual Participants and (iii) covered by outstanding Awards denominated
in Stock or units of Stock; (b) the prices related to outstanding Awards; and
(c) the appropriate Fair Market Value and other price determinations for such
Awards. In the event of any other change affecting the Stock or any
distribution (other than normal cash dividends) to holders of Stock, such
adjustments as may be deemed equitable by the Committee, including adjustments
to avoid fractional shares, shall be made to give proper effect to such event.
In the event of a corporate merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation, the Committee shall be
authorized to issue or assume stock options or other awards, whether or not in
a transaction to which Section 425(a) of the Code applies, by means of
substitution of new stock options or Awards for previously issued options or
awards or an assumption of previously issued stock options or awards.
15. Notice. Any written notice to Sensormatic required
by any of the provisions of the Plan shall be addressed to the Committee, c/o
the Secretary of Sensormatic, and shall become effective when received by the
Secretary.
16. Unfunded Plan. Insofar as the Plan provides for
Awards of cash or Stock, the Plan shall be unfunded unless and until the Board
otherwise determines. Although bookkeeping accounts may be established with
respect to Participants who are entitled to cash, Stock or rights
-7-
<PAGE> 8
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. Unless the Board otherwise determines, (a) the Company shall not
be required to segregate any assets that may at any time be represented by
cash, Stock or rights thereto, nor shall the Plan be construed as providing for
such segregation, nor shall the Company, the Board or the Committee be deemed
to be a trustee of any cash, Stock or rights thereto to be granted under the
Plan; (b) any liability of the Company to any Participant with respect to a
grant of cash, Stock or rights thereto under the Plan shall be based solely
upon any contractual obligations that may be created by the Plan and an Award
Agreement; (c) no such obligation of the Company shall be deemed to be secured
by any pledge or other encumbrance on any property of the Company; and (d)
neither the Company, the Board nor the Committee shall be required to give any
security or bond for the performance of any obligation that may be created by
or pursuant to the Plan.
17. Payments to Trust. Notwithstanding the provisions of
Section 16 hereof, the Committee may cause to be established one or more trust
agreements pursuant to which the Committee may make payments of cash, or
deposit shares of Stock, due or to become due under the Plan to Participants.
18. No Right to Employment. Neither the adoption of the
Plan nor the granting of any Award shall confer on any Participant any right to
continued employment or association with the Company or in any way interfere
with the Company's right to terminate the employment or association of any
Participant at any time, with or without cause, and without liability therefor.
Awards, payments and other benefits received by a Participant under the Plan
shall not be deemed a part of the Participant's regular, recurring compensation
for any purpose, including, without limitation, for the purposes of any
termination indemnity or severance pay law of any jurisdiction.
19. Governing Law. The Plan and all determinations made
and actions taken pursuant hereto, to the extent not otherwise governed by the
Code or the securities laws of the United States, shall be governed by and
construed under the laws of the State of Delaware.
20. Effective and Termination Dates. The Plan, and any
amendment hereof requiring stockholder approval, shall become effective as of
the date of its adoption by the Board, subject to the subsequent approval of
the stockholders of Sensormatic by the affirmative vote of a majority of the
votes cast at a stockholders' meeting at which the approval of the Plan (or any
such amendment) is considered, provided that the total vote cast represents
over 50% of all shares entitled to vote on the proposal. The Plan shall
terminate ten years after its initial effective date, subject to earlier
termination by the Board pursuant to Section 11 hereof, except as to Awards
then outstanding.
-8-
<PAGE> 1
EXHIBIT 10(h)
SENSORMATIC ELECTRONICS CORPORATION
SENIOR EXECUTIVE DEFINED CONTRIBUTION RETIREMENT PLAN
Effective March 1, 1994
1. Purpose. The purpose of this Senior Executive Defined Contribution
Retirement Plan (the "Plan") is to aid the Company in retaining the services of
certain officers and to avoid the substantial financial loss that the Company
would incur were such officers to leave the Company and enter the employment of
a competitor. Specifically, the Plan provides a means whereby such officers
may receive retirement benefits from the Company, which benefits could also be
payable to the officers or their designated beneficiaries in the event of death
or disability, in return for continued service to the Company and other
valuable consideration, subject to and in accordance with an agreement with the
Company as provided for in this Plan.
2. Effective date. The Plan shall commence as of March 1, 1994.
3. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board of Directors") or a committee thereof.
The Board of Directors or such committee shall have full power to interpret the
provisions of the Plan and the respective Senior Executive Defined Contribution
Retirement Agreements ("Agreements") under the Plan, and to establish and amend
rules and regulations for administration of the Plan and such Agreements. All
actions of
<PAGE> 2
the Board of Directors or such committee with respect to the Plan or
any Agreement shall be taken by a majority of its members then in office. Any
action may be taken by a written instrument signed by a majority of the members
of the Board of Directors or such committee and an action so taken shall be
fully as effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held. The determination of the Board of
Directors or a committee thereof with respect to any matter under the Plan or
any matter under any Agreement to be acted upon by the Board of Directors or a
committee thereof shall be conclusive and binding. The Board of Directors, or
if a committee thereof is designated by the Board of Directors to administer
the Plan, such committee, is hereby designated as the Named Fiduciary of the
Plan within the meaning of the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, if applicable.
4. Eligibility and Selection. Only officers of the Company and its
subsidiaries (including participants in the Company's Salary Continuation Plan)
with one or more Years of Employment (as such term is defined in the respective
Agreements) are eligible to receive benefits under the Plan. The chief
executive officer of the Company, subject to the approval of the Board of
Directors or a committee thereof, shall from time to time determine which of
the officers of the Company and its subsidiaries shall participate in the Plan.
2
<PAGE> 3
The amounts and terms of the benefits under the Plan shall be determined for
each participant so selected on a case by case basis by the chief executive
officer of the Company, subject to the approval of the Board of Directors or a
committee thereof.
5. Benefit Determination. At the date of a participant's attaining "Normal
Retirement Age", or upon the participant's "Normal Retirement", as defined in
Section 7 hereof, a calculation shall be made to determine the annual benefit
to be paid monthly to the participant over a fifteen-year period based on the
lesser of an annual benefit previously targeted for the participant or the
annual benefit which could be paid out of a theoretical investment account of
the participant, the annual yield of which shall be determined by the chief
executive officer of the Company, subject to the approval of the Board of
Directors or a committee thereof, subject to the vesting provisions of Section
8 hereof. The annual targeted benefit to be paid to a selected participant
under the Plan may be increased, in some cases, on a case by case basis over
the term of the participant's participation in the Plan, if so determined by
the chief executive officer of the Company, subject to the approval of the
Board of Directors or a committee thereof. Participants entering the Plan at
age 50 or over will have a lower annual targeted benefit than other
participants to the extent there is insufficient time to amortize current
annual cost and to accumulate the theoretical
3
<PAGE> 4
investment yield which would result in a higher targeted benefit upon Normal
Retirement attaining Normal Retirement Age. Participants attaining age 55
generally will not be considered for target benefit increases to the extent
there is insufficient time to amortize current annual cost and to accumulate
the theoretical investment yield which would result in higher targeted
benefits. The actual benefits received shall be subject to the express
provisions of the respective Agreements as fixed from time to time by the chief
executive officer of the Company subject to the approval of the Board of
Directors or a committee thereof.
6. Participation; Agreements. The terms and conditions of an eligible
officer's participation in the Plan shall be set forth in such officer's
Agreement (the "Officer's Agreement"), which shall be in substantially the form
of Exhibit A annexed hereto and made a part of this Plan or in such other form
as shall be determined by the Board of Directors or a committee thereof.
7. "Normal Retirement Age"; "Normal Retirement". For purposes of this
Plan, "Normal Retirement Age" shall mean the age of sixty (60), and "Normal
Retirement" shall mean the Officer's retirement or other termination of
employment with the Company (other than involuntary termination for cause as
contemplated by paragraph c of Section 4 of the Officer's Agreement) on or
after the day the Officer attains Normal Retirement Age.
4
<PAGE> 5
8. Vesting. (a) The rights of the Officer to receive the full amounts
payable under this Plan shall vest as follows:
<TABLE>
<CAPTION>
Percentage
Years of Service Vested
---------------- ----------
<S> <C>
Less than 3 Years of Service (as defined below) 0%
3 Years of Service or more, but less than 4 15%
4 Years of Service or more, but less than 5 20%
5 Years of Service or more, but less than 6 25%
6 Years of Service or more, but less than 7 30%
7 Years of Service or more, but less than 8 35%
8 Years of Service or more, but less than 9 40%
9 Years of Service or more, but less than 10 45%
10 Years of Service or more, but less than 11 50%
11 Years of Service or more, but less than 12 60%
12 Years of Service or more, but less than 13 70%
13 Years of Service or more, but less than 14 80%
14 Years of Service or more, but less than 15 90%
15 Years of Service or more 100%
</TABLE>
The Officer's "Vested Interest" shall be a percentage equal to the Officer's
Percentage Vested under the above table as of the time of the termination of
the Officer's employment with the Company, provided, however, that if at the
time of the - Officer's Normal Retirement the Officer shall have ten or more
Years of Employment (as hereinafter defined), the Officer's Vested Interest
shall be 100% notwithstanding the above table. Notwithstanding the vesting of
any rights of the Officer hereunder, the receipt of any benefit by the Officer
shall be subject to the terms and conditions of the Officer's Agreement and to
compliance by the Officer with his obligation thereunder.
(b) For purposes of this Section 8: (i) a "Year of Employment" shall mean a
fiscal year of the Company during
5
<PAGE> 6
which the Officer performed not less than 1,000 hours of service for the
Company; and (ii) periods during which the Officer is subject to a Disability
within the meaning of Section 11 hereof or on a leave of absence authorized
under Section 12 of the Officer's Agreement shall be deemed periods during
which the Officer was actively employed by the Company and performing 8 hours
per work day of such service, but only if, at the end of such period of
Disability or such leave, the Officer returns to full-time employment with the
Company (unless any failure to return is caused by the failure of the Company
to offer the Officer a position comparable to that held by him prior to such
period or leave, or by the nature of any such Disability), or the Officer
retires upon reaching Normal Retirement Age or dies. A "Year of Service", for
the purposes of the above vesting schedule, shall mean a Year of Employment
following the date first above written, provided, that if the Officer had any
Years of Employment prior to the date first above written, the Officer shall be
credited with an additional Year of Service, on a year by year basis, for each
actual Year of Service following the date first above written, up to a maximum
number of such additional years equal to the number of the Officer's Years of
Employment prior to the date first above written).
(c) For all purposes of this Plan, Officer's employment by or periods of
service with the Company shall be deemed to include Officer's employment by or
periods of
6
<PAGE> 7
service with (i) any direct or indirect wholly-owned subsidiary of the Company
during the period that such subsidiary is wholly-owned, and (ii) any other
subsidiary of the Company designated by the Board of Directors, or a committee
thereof, during the period specified by the Board of Directors in making such
designation.
(d) Notwithstanding any contrary provision of this Section 8, in the event
that the Officer is actively employed by the Company or is deemed to be
actively employed by the Company pursuant to the preceding paragraphs of this
Section 8, at the time that any "non-approved" Change in Control (as such terms
are defined in Section 18 of the Officer's Agreement) occurs, following such
"non-approved" Change in Control, the annual benefit payable monthly to the
Officer under this Section 8 shall be equal to the target benefit provided for
in the Officer's Agreement and any amendment thereto (the "Target Benefit"),
and the Officer's Vested Interest shall be deemed to be 100%, irrespective of
the amount credited to the Officer's Account or the number of Years of Service
credited to the Officer.
9. Death or Disability. (a) In the event the Officer should die after
payments due under this section have begun, but before all such payments have
been made, the Company shall make the remaining monthly payments to the
person(s) to whom payments would be made pursuant to Section 2 of the Officer's
Agreement.
7
<PAGE> 8
(b) Notwithstanding any contrary provision, in the event that the Officer
becomes entitled to receive death or Disability payments pursuant to Section 10
or Section 11 hereof before becoming entitled to receive payments pursuant to
Section 8, the provisions of Section 10 or Section 11 hereof, as the case may
be, shall be controlling in the event of any conflict with the provisions of
Section 8. In no event shall the Officer be entitled to receive benefits under
more than one of Sections 8, 10 and 11.
10. Death Benefit.
(a) In the event of the death of the Officer before payments under
Section 8 or Section 11 hereof have begun, subject to the terms and conditions
of this Plan and the Officer's Agreement, the Company shall make equal monthly
payments for fifteen (15) years from the first day of the month immediately
following the date of such death each in an amount equal to (i) the Target
Benefit, if the Officer is or is deemed to be actively employed by the Company
at the time of death, or (ii) the amount determined pursuant to Section 8
hereof, if the Officer is not so employed or deemed to be so employed. Such
payments shall be made by the Company to such person(s) as the Officer may
designate in the Officer's Agreement. In the event the Officer shall fail to
designate a recipient prior to his death, the payments shall be made to the
Officer's estate.
8
<PAGE> 9
(b) Notwithstanding anything to the contrary contained in this
Section 10, the benefits provided for under this Section 10 shall not be
payable in the event that the Officer's death results from suicide, whether
sane or insane, within two (2) years after the date of participation in this
Plan or, if later, two (2) years after the date of issuance of any policy of
life insurance purchased by the Company to fund its obligations under the
Officer's Agreement.
11. Disability.
(a) In the event of the Disability of the Officer while he is
actively employed by the Company and prior to his Normal Retirement, the
Officer shall be entitled to receive, in lieu of the payments provided for in
Section 5 hereof, 180 monthly payments each to be made in an amount equal to
1/12th of the annual Target Benefit, irrespective of the amount credited to the
Officer's Account or the Officer's Vested Interest. At the discretion of the
Board of Directors or a committee thereof, taking into account the economic
circumstances of the Officer at the time of such Disability occurs and
thereafter, such payments shall begin, subject to the terms and conditions of
this Plan and the Officer's Agreement, on the first day of the month
immediately following the month in which either (i) the Officer becomes
subject to a Disability or (ii) the Officer attains Normal Retirement Age, or
at such other time prior to the Officer's attaining Normal Retirement Age as
may be determined by the Board of Directors
9
<PAGE> 10
or a committee thereof. Notwithstanding the foregoing sentence, in the event
that payments pursuant to this paragraph "(a)" have not begun at the
time that any "non-approved" Change in Control occurs, such payments shall
begin on the first day of the first month immediately following the month in
which such Change in Control occurs.
(b) For the purposes of this Agreement, "Disability" shall mean a
total disability as defined in the Officer's Agreement, unless the company has
purchased a life or other insurance policy to informally fund its obligations
to the Officer under the Plan and said Agreement and such insurance policy
contains a different definition of total disability, in which event
"Disability" shall be defined as defined for purposes of such policy. Payment
of benefits under this Section 11 shall be subject to the additional conditions
and exclusions set forth in the Officer's Agreement or in the applicable
policy. The Officer shall not be considered to be totally disabled unless he
furnishes proof of the existence of such disability in such form and manner,
and at such times, as may be required by the Board of Directors or a committee
thereof, and such proof shall be satisfactory to the Board of Directors or a
committee thereof. The determination by the Board of Directors or a committee
thereof with respect to the existence of a Disability shall be conclusive and
binding upon the Officer.
12. Conditions to Payment of Benefits.
10
<PAGE> 11
(a) The payment of benefits under this Plan shall be conditioned upon
the Officer's full compliance with the terms of this Plan and the Officer's
Agreement.
13. Claims Procedure.
(a) The claims procedure of this Agreement shall be implemented by
the Board of Directors or a committee thereof designated by the Board of
Directors (either being hereinafter referred to as the "Claims Committee").
The Officer, or his designated recipient(s), or his estate, or any other person
claiming under under him, shall make a claim for the benefits provided under
this Plan and the Officer's Agreement by delivering a written request for such
benefits to the Claims Committee.
(b) If a claim is wholly or partially denied, notice of the decision,
meeting the requirements of paragraph "(c)" of this Section 13, shall be
furnished to the claimant within a reasonable period of time after receipt of
the claim by the Claims Committee.
(c) The Claims Committee shall provide to every claimant who is
denied a claim for benefits written notice setting forth, in a manner
calculated to be understood by the claimant, (i) the specific reason or reasons
for the denial, (ii) the specific reference or references to the provisions of
this Plan or this Agreement upon which the denial is based, (iii) a description
of any additional material or information necessary for the claimant to perfect
the
11
<PAGE> 12
claim and an explanation of why such material or information is necessary and
(iv) an explanation of the Plan's claim review procedure and the method of
appeal from the decision, as set forth in paragraphs (d) and (e) of this
Section 13.
(d) The purpose of the review procedure set forth in this paragraph
and in paragraph (e) of this Section 13 is to provide a procedure by which a
claimant under the Plan may have a reasonable opportunity to appeal a denial of
a claim to the Claims Committee for a full and fair review. To accomplish that
purpose, the claimant or his duly authorized representative may, by written
application to the Claims Committee, request a review of the Claims Committee's
decision. Such request may include a request to review any pertinent documents,
and may include also a submission of issues and comments in writing. Any
application for review of a decision denying a claim must be submitted to the
Claims Committee within sixty (60) days after receipt by the claimant of
written notice of the denial of his claim.
(e) The Claims Committee's decision on review shall be given within
sixty (60) days after receipt of the request for review, or, in the event that
a hearing is deemed necessary by the Claims Committee or other special
circumstances require an extension of the time for review, within one hundred
twenty (120) days after receipt of the request for review. The decision on
review shall be in writing and shall include specific reasons for the decision,
written in a manner
12
<PAGE> 13
calculated to be understood by the claimant, and specific references to the
provisions of the Plan or Agreement provisions on which the decision is based.
The final decision of the Claims Committee shall be conclusive and binding.
14. Allocations to the Plan. At annual intervals or at such other
intervals as may be determined by the chief executive officer of the Company,
subject to the approval of the Board of Directors or a committee thereof, the
Company intends to tentatively credit an amount to the account of each Plan
participant equal to that amount estimated by the Company to be required to be
set aside annually in order to permit the payment, in accordance with the terms
and conditions of the Agreements, of the targeted benefit for such participant
based on current annual cost amortization and theoretical investment yield.
Notwithstanding the foregoing, the amounts to be credited to the accounts of
Plan participants may be reduced or omitted to the extent determined by the
chief executive officer of the Company, subject to the approval of the Board of
Directors or a committee thereof, in light of the financial condition or
capital requirements of the Company.
Any amounts so credited to the account of any Plan participant which are not
ultimately distributed to such participant (whether by operation of the vesting
provisions of the applicable Agreement, over-allocation or otherwise) shall be
re-allocated to the accounts of the other Plan participants to the extent
required to provide for the payment in full of
13
<PAGE> 14
their respective targeted benefits pursuant to their respective Agreements,
with any excess reverting to the Company, unless otherwise determined in any
such case by the chief executive officer of the Company, subject to the
approval of the Board of Directors or a committee thereof, in his sole
discretion.
At annual intervals or such other intervals as are determined by the Board
of Directors or a committee thereof the Company shall furnish each Plan
participant with a statement of the total amount allocated to such
participant's account and the amount of the allocation thereto made since the
last such statement.
15. Funding. Direct funding of the Company's obligations under the Plan
is not required, but, unless otherwise determined by the chief executive
officer of the Company, subject to the approval of the Board of Directors or a
committee thereof, the Company intends to obtain, if available, and to continue
in effect at all times during their participation under the Plan, life
insurance, for the benefit of the Company, on all officers participating in the
Plan in amounts sufficient to provide funds for the payment or the
reimbursement of payment of benefits which may become due and payable under the
Plan. Said life insurance shall, at all times, be owned by the Company and
shall be subject to the claims of the general creditors of the Company.
14
<PAGE> 15
16. Reports. Any committee administering the Plan shall submit reports to
the Board of Directors, annually, and at such other times as may be requested
by the Board of Directors, such reports to indicate (i) the amount of benefits
paid to officers or their beneficiaries during the preceding year, (ii) to whom
such payments were made, (iii) persons entitled to future benefits under the
Plan and the amount of their respective target benefits, (iv) the inclusion in
the Plan of any additional officer and (v) such other pertinent information
with respect to the status of the Plan as the Board of Directors may require or
such committee may deem appropriate.
17. Amendment and Discontinuance. The Board of Directors may at any time
amend, suspend, discontinue or terminate the Plan, provided, that no such
amendment, suspension, discontinuance or termination shall affect the rights of
any Plan participant under any Agreement to which such participant is a party,
except to the extent provided for in such Agreement or that such participant
expressly consents thereto in writing.
15
<PAGE> 16
EXHIBIT A
SENSORMATIC ELECTRONICS CORPORATION
SENIOR EXECUTIVE DEFINED CONTRIBUTION RETIREMENT AGREEMENT
AGREEMENT, made as of this ___ day of _______, by and between Sensormatic
Electronics Corporation, a Delaware corporation having its principal place of
business at 500 N.W. 12th Avenue, Deerfield Beach, Florida 33442 (the
"Company"), and __________ residing at ______________________________________
_________________________________________, (the "Officer").
W I T N E S S E T H:
WHEREAS, the Officer has been employed by the Company for the requisite
number of years, and is currently employed by the Company in the capacity of
_____________________________;
WHEREAS, the Company desires to retain the valuable services and business
counsel of the Officer and to induce the Officer to remain with the Company;
WHEREAS, the Officer is willing to continue in the employment of the Company
provided the Company agrees to provide for certain benefits in the event of the
Officer's retirement (or attaining normal retirement age, if no longer employed
by the Company), death or disability, subject to and in accordance with the
terms and conditions of this Agreement; and
WHEREAS, the Officer has been designated by the Board of Directors of the
Company (the "Board of Directors",) or a committee thereof as eligible for the
Company's Senior Executive
<PAGE> 17
Defined Contribution Retirement Plan (the "Plan"), in accordance with the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
1. Retirement Benefit
a. At the date of the Officer's attaining "Normal Retirement Age", or upon
the Officer's "Normal Retirement", as defined in paragraph "d" hereof, a
calculation shall be made to determine the monthly benefit to be paid to the
Officer over a fifteen-year period based on the lesser of a benefit previously
targeted for the participant or the benefit which could be paid out of a
theoretical investment account of the Officer, the annual yield of which shall
be determined by the chief executive officer of the Company, subject to the
approval of the Board of Directors or a committee thereof, subject to the
vesting provisions of paragraph "e" hereof. The targeted benefit to be paid to
the Officer under the Plan may be increased, in some cases, on a case by case
basis over the term of the Officer's participation in the Plan, if so
determined by the chief executive officer of the Company, subject to the
approval of the Board of Directors or a committee thereof. If the Officer
entered into the Plan at age 50 or over, he will have a lower targeted benefit
than other participants in the Plan to the extent there is insufficient time to
amortize current annual cost and to accumulate the theoretical investment yield
which would result in a higher targeted benefit upon Normal Retirement or
-2-
<PAGE> 18
upon attaining Normal Retirement Age. Participants attaining age 55 generally
will not be considered for target benefit increases to the extent there is
insufficient time to amortize current annual cost and to accumulate the
theoretical investment yield which would result in higher targeted benefits.
The actual benefits received shall be subject to the express provisions of the
respective Agreements as fixed from time to time by the chief executive officer
of the Company subject to the approval of the Board of Directors or a committee
thereof.
b. At annual intervals or at such other intervals as may be determined by
the Board of Directors or a committee thereof, the Company intends to calculate
an amount to the Officer's annual retirement benefit which would be paid to him
monthly, in accordance with the terms and conditions of this Agreement. Set
forth on Schedule A hereto is the Officer's current annual targeted benefit
(the "Target Benefit"). Notwithstanding the foregoing, such benefit may be
increased to the extent determined by the chief executive officer of the
Company, subject to the approval of the Board of Directors or a committee
thereof.
c. Subject to the terms and conditions of this Agreement and to the vesting
schedule set forth in paragraph "d" of this Section 1, and subject to the de
minimus provisions of paragraph "e" of Section 6, the Company shall make
monthly payments to the Officer, for fifteen (15) years commencing on the first
day of the month immediately following (i) the date of the Officer's Normal
Retirement, if the Officer is actively employed
-3-
<PAGE> 19
by the Company immediately prior thereto, or (ii) the date on which the
Officer attains Normal Retirement Age, if the Officer is not then actively
employed by the Company, in an amount based on the lesser of (x) the Target
Benefit multiplied by the Officer's Vested Interest and (y) the annual benefit
which could be paid out of a theoretical investment account of the Officer,
the annual yield of which shall be determined by the chief executive officer
of the Company, subject to the approval of the Board of Directors or a
committee thereof, multiplied by the Officer's Vested Interest. The amount of
the monthly installments so payable to the Officer shall be paid over a period
of 180 months.
d. For purposes of this Agreement, "Normal Retirement Age" shall mean the
age of sixty (60), and "Normal Retirement" shall mean the Officer's retirement
or other termination of employment with the Company (other than involuntary
termination for cause as contemplated by paragraph "c" of Section 4 hereof) on
or after the day the Officer attains Normal Retirement Age.
e. The rights of the Officer to receive the full amounts payable under this
Agreement shall vest as follows:
-4-
<PAGE> 20
<TABLE>
<CAPTION>
Percentage
Years of Service Vested
---------------- ----------
<S> <C>
Less than 3 Years of Service (as defined below) 0%
3 Years of Service or more, but less than 4 15%
4 Years of Service or more, but less than 5 20%
5 Years of Service or more, but less than 6 25%
6 Years of Service or more, but less than 7 30%
7 Years of Service or more, but less than 8 35%
8 Years of Service or more, but less than 9 40%
9 Years of Service or more, but less than 10 45%
10 Years of Service or more, but less than 11 50%
11 Years of Service or more, but less than 12 60%
12 Years of Service or more, but less than 13 70%
13 Years of Service or more, but less than 14 80%
14 Years of Service or more, but less than 15 90%
15 Years of Service or more 100%
</TABLE>
The Officer's "Vested Interest" shall be a percentage equal to the Officer's
Percentage Vested under the above table as of the time of the termination of
the Officer's employment with the Company, provided, however, that if at the
time of the Officer's Normal Retirement the Officer shall have ten or more
Years of Service, the Officer's Vested Interest shall be 100% notwithstanding
the above table. Notwithstanding the vesting of any rights of the Officer
hereunder, the receipt of any benefit by the Officer shall be subject to the
terms and conditions of this Agreement and to compliance by the Officer with
his obligations hereunder.
f. For purposes of this section 1: (i) a "Year of Employment" shall mean a
fiscal year of the Company during which the Officer performed not less than
1,000 hours of service for the Company; and (ii) periods during which the
Officer is subject to a Disability within the meaning of Section 3 hereof or on
a leave of absence authorized under Section 12 hereof shall be deemed periods
during which the Officer was actively employed by
-5-
<PAGE> 21
the Company and performing 8 hours per work day of such service, but only if,
at the end of such period of Disability or such leave, the Officer returns to
full-time employment with the Company (unless any failure to return is caused
by the failure of the company to offer the Officer a position comparable to
that held by him prior to such period or leave, or by the nature of any such
Disability), or the Officer retires upon reaching Normal Retirement Age or
dies. A "Year of Service" shall mean a Year of Employment whether occurring
before or after the adoption of the Plan.
g. For all purposes of this Agreement, the Officer's employment by or
periods of Service with the company shall be deemed to include the Officer's
employment by or periods of service with (i) any direct or indirect
wholly-owned subsidiary of the Company during the period that such subsidiary
is wholly-owned, and (ii) any other subsidiary of the Company designated by the
Board of Directors during the period specified by the Board of Directors in
making such designation.
h. Notwithstanding any contrary provision of this Section 1, in the event
that the Officer is actively employed by the Company or is deemed to be
actively employed by the Company pursuant to paragraphs "f" or "g" of this
Section 1 at the time that any "non-approved" Change in Control (as such terms
are defined in Section 18 hereof) occurs, following such "non-approved" Change
in Control, the monthly benefit payable under paragraph "c" of this Section 1
shall be equal to the Target Benefit, and the Officer's Vested Interest shall
be deemed
-6-
<PAGE> 22
to be 100%, irrespective of the amount credited to the Officer's theoretical
account or the number of Years of Service credited to the Officer.
i. In the event the Officer should die after payments due under this
Section 1 have begun, but before all such payments have been made, the Company
shall make the remaining monthly payments to the person(s) to whom payments
would be made pursuant to Section 2 of this Agreement.
j. Notwithstanding any contrary provision of this Section 1, in the event
that the Officer becomes entitled to receive death or Disability payments
pursuant to Section 2 or Section 3 hereof before becoming entitled to receive
payments pursuant to this Section 1, the provisions of Section 2 or Section 3
hereof, as the case may be, shall be controlling in the event of any conflict
with the provisions of this Section 1. In no event shall the Officer be
entitled to receive benefits under more than one of Section 1, 2 and 3.
2. Death Benefits.
a. In the event of the death of the Officer before payments under Section 1
or Section 3 hereof have begun, subject to the terms and conditions of this
Agreement, the Company shall make equal 180 monthly payments from the first day
of the month immediately following the date of such death each in an amount
equal to (i) 1/12th of the annual Target Benefit, if the Officer is or is
deemed to be actively employed by the Company at the time of death, or (ii)
1/12th of the annual benefit determined on the basis of or theoretical
investment account of the Officer
-7-
<PAGE> 23
pursuant to paragraph "c" of Section 1 hereof, if the Officer is not so
employed or deemed to be so employed. Such payments shall be made by the
Company to such person(s) as the Officer may designate in Schedule B annexed
hereto and made a part hereof. The Officer shall have the right to change the
designated recipient(s) of these payments by presenting to the Company prior to
his death a revised designation in the form, or substantially in the form, of
Schedule B annexed hereto. In the event the Officer shall fail to designate a
recipient prior to his death, the payments shall be made to the Officer's
estate.
b. Notwithstanding anything to the contrary contained in this Section 2,
the benefits provided for under this Section 2 shall not be payable in the
event that the Officer's death results from suicide, whether sane or insane,
within two (2) years after the date of issuance of any policy of life insurance
purchased by the Company to fund its obligations hereunder, provided that such
policy is applied for no later than six months after the date first above
written.
3. Disability.
a. In the event of the Disability of the Officer while he is actively
employed by the Company and prior to his Normal Retirement, the Officer shall
be entitled to receive, in lieu of the payments provided for in Section 1
hereof, 180 monthly payments each to be made in an amount equal to 1/12th of
the annual Target Benefit, irrespective of the amount credited to the Officer's
theoretical investment account or the Officer's Vested interest. At the
discretion of the Board of Directors or a
-8-
<PAGE> 24
committee thereof, taking into account the economic circumstances of the
Officer at the time of such Disability occurs and thereafter, such payments
shall begin, subject to the terms and conditions of this Agreement, on the
first day of the month immediately following the month in which either (i) the
Officer become subject to a Disability or (ii) the Officer attains Normal
Retirement Age, or at such other time prior to the Officer's attaining Normal
Retirement Age as may be determined by the Board of Directors or a committee
thereof. Notwithstanding the foregoing sentence, in the event that payments
pursuant to this paragraph "a" have not begun at the time that any
"non-approved" Change in Control occurs, such payments shall begin on the first
day of the first month immediately following the month in which such Change in
Control occurs.
b. For the purposes of this Agreement, "Disability" shall mean a total
disability as defined in Appendix I hereto (provided that there is an Appendix
I attached hereto) unless the Company has purchased an insurance policy to
informally fund its obligations to the Officer under this Agreement and such
insurance policy contains a different definition of total disability, in which
event "Disability" shall be defined as defined for purposes of such policy
(whether or not there is an Appendix I hereto). Payment of benefits under this
Section 3 shall be subject to the additional conditions and exclusions set
forth in said Appendix I or in the applicable policy. In absence of an
Appendix I and of such insurance policy, "Disability" shall mean "Disability"
as defined in Title 42, Section 423(d) of the
-9-
<PAGE> 25
United States Code, relating to Federal Old-Age, Survivors, and Disability
Insurance Benefits. The Officer shall not be considered to be totally disabled
unless he furnishes proof of the existence of such disability in such form and
manner, and at such times, as may be required by the Board of Directors or a
committee thereof, and such proof shall be satisfactory to the Board of
Directors or a committee thereof. The determination by the Board of Directors
or a committee thereof with respect to the existence of a Disability shall be
conclusive and binding upon the Officer.
4. Conditions to Payment of Benefits.
a. The payment of benefits under this Agreement is conditioned upon the
Officer's full compliance with the term of this Agreement.
b. The payment of benefits under this Agreement is further conditioned
upon the Officer's not, at any time during his employment with the Company and
during the two years after termination of his employment with the Company,
directly or indirectly, anywhere in the United States of America or elsewhere
in the world:
(1) engaging in any activity for or on behalf of any person (including
the Officer) or entity engaged in a competitive line of business to that
carried on by the Company (which term for purposes of this paragraph "b"
includes the Company's affiliates (including, without limitation,
distributors, licensees, franchisees, subsidiaries and joint ventures)),
which activity is the
-10-
<PAGE> 26
same as, similar to, or embraces the activities engaged in by the Officer
during the Officer's employment with the Company;
(2) soliciting or attempting to solicit business of any customers of
the Company (including, during the Officer's employment with the Company,
prospective customers to whom solicitation has been made on behalf of the
Company and, after termination of Officer's employment with the Company,
prospective customers to whom such solicitation has been made within one
year prior to such termination) for products or services the same or similar
to those offered, sold, produced or under development by the Company;
(3) otherwise diverting or attempting to divert from the Company any
business whatsoever;
(4) soliciting or attempting to solicit for any business endeavor any
employee of the Company; or
(5) interfering with any business relationship between the Company and
any other person.
In the event that the Officer does not fulfill the conditions set forth
above in this paragraph "b", all remaining benefits under this Agreement will
be forfeited and the Company will have no further obligations under this
Agreement to the Officer or any other person. Notwithstanding anything to the
contrary contained in this paragraph "b", the provisions hereof shall not
prevent the Officer from purchasing or owning up to two percent (2%) of the
voting securities of any corporation, the stock of which is publicly traded.
The provisions of this
-11-
<PAGE> 27
paragraph "b" shall have no further force or effect following termination of
the Officer's employment with the Company which occurs after the occurrence of
a "non-approved" Change in Control.
c. Notwithstanding any contrary provision of this Agreement, in the event
that the Officer's employment with the Company is terminated for cause, the
Officer shall not be entitled to any benefits under this Agreement. For
purposes of this Agreement, the Company shall be deemed to have terminated the
Officer's employment with the Company for cause only if such termination is
effected by reason of the conviction of the Officer for a felony under federal
or state law relating to the assets, business or affairs Of the Company or by
reason of fraud or misappropriation relating to the assets, business or affairs
of the Company.
5. Claims Procedure.
a. The claims procedure of this Agreement shall be implemented by the Board
of Directors or a committee thereof designated by the Board of Directors
(either being hereinafter referred to as the "Claims Committee"). The Officer,
or his designated recipient (s) , or his estate, or any other person claiming
under him, shall make a claim for the benefits provided under this Agreement by
delivering a written request for such benefits to the Claims Committee.
b. If a claim is wholly or partially denied, notice of the decision,
meeting the requirements of paragraph "c" of this Section 5, shall be furnished
to the claimant within a
-12-
<PAGE> 28
reasonable period of time after receipt of the claim by the Claims Committee.
c. The Claims Committee shall provide to every claimant who is denied a
claim for benefits written notice setting forth, in a manner calculated to be
understood by the claimant, (i) the specific reason or reasons for the denial,
(ii) the specific reference or references to the provisions of the Plan or this
Agreement upon which the denial is based, (iii) a description of any additional
material or information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary and (iv) an
explanation of the Agreement's claim review procedure and the method of appeal
from the decision, as set forth in paragraphs "d" and "e" of this Section 5.
d. The purpose of the review procedure set forth in this paragraph and in
paragraph "e" of this Section 5 is to provide a procedure by which a claimant
under the Agreement may have a reasonable opportunity to appeal a denial of a
claim to the Claims Committee for a full and fair review. To accomplish that
purpose, the claimant or his duly authorized representative may, by written
application to the Claims Committee, request a review of the Claims Committee's
decision. Such request may include a request to review any pertinent documents,
and may include also a submission of issues and comments in writing. Any
application for review of a decision denying a claim must be submitted to the
Claims Committee within sixty (60) days after
-13-
<PAGE> 29
receipt by the claimant of written notice of the denial of his claim.
e. The Claims Committee's decision on review shall be given within sixty
(60) days after receipt of the request for review, or, in the event that a
hearing is deemed necessary by the Claims Committee or other special
circumstances require an extension of the time for review, within one hundred
twenty (120) days after receipt of the request for review. The decision on
review shall be in writing and shall include specific reasons for the decision,
written in a manner calculated to be understood by the claimant, and specific
references to the provisions of the Plan or Agreement provisions on which the
decision is based. The final decision of the Claims Committee shall be
conclusive and binding.
6. Funding.
a. The Company's obligations under this Agreement shall be unfunded and
the Company shall not be obligated under any circumstances to fund its
obligations under this Agreement. The Company may, however, at its sole and
exclusive option, fund this Agreement in whole or in part. No such funding
arrangement shall impair or derogate from the Company's direct obligation to
the Officer under this Agreement, provided, that the Officer shall in no event
be entitled to receive duplicative payments of any amounts provided for
hereunder or under the Plan.
b. If the Company shall determine to provide funds for the payment or the
reimbursement of payment of benefits under this Agreement, in whole or in part,
the manner of such funding,
-14-
<PAGE> 30
and the continuance or discontinuance of such funding, shall be the sole and
exclusive decisions of the Company, to be determined by or pursuant to the
direction of the Board of Directors.
c. If the Company shall determine to provide for the payment or
reimbursement to it of funds to cover the costs to it of this Agreement, in
whole or in part, by procuring, as owner, for its own benefit or that of an
assignee, life insurance on the life of the Officer and/or disability insurance
with respect to the Officer, the form and amount of such insurance shall be the
sole and exclusive decisions of the Company, and the Officer shall have no
interest in or right to acquire any such insurance policy which the company may
have procured. (Nothing in this Agreement shall in any way restrict the right
of the Company to borrow against any cash surrender value of any such life
insurance policy, to transfer or assign its interest in any such policy or
otherwise to exercise any rights of ownership with respect to any such policy.)
The Officer hereby agrees to submit to medical examination, supply such
information and execute such documents as may be required by the insurance
company or companies to whom the Company may have applied for any such
insurance, at any time or from time to time during the Officer's lifetime.
d. Funding for partially vested benefits for terminated officers who have
not reached Normal Retirement Age may be reduced by the Company to only permit
funding of the vested portion of the target benefit, if the vested benefit
exceeds $5,000 per year.
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<PAGE> 31
e. De Minimus Rule: If the present value of the vested annual Target
Benefit of an Officer, at the time of the termination of his employment with
the Company, shall be less than $10,000, the Company, at its sole discretion,
may pay the amount of said present value to the former participant in a
lump-sum and, thereupon, all obligations to the former participant for Plan
benefits hereunder and under the Plan shall cease.
7. Employment and Termination Rights.
This agreement shall not be deemed to create a contract of employment
between the Company and the Officer and shall create no right in the Officer to
continue in the Company's employ for any specific period of time, or to create
any other rights in the Officer or obligations on the part of the Company,
except as are set forth in this Agreement. Nor shall this Agreement in any
manner restrict the right of the Company at any time, with or without cause, to
terminate the Officer's employment.
8. Amendment and Termination of Agreement.
During the lifetime of the Officer, this Agreement may be amended or
terminated at any time, in whole or in part, by the mutual written agreement of
the parties.
9. Officer Right to Assets.
Subject to the rights, if any, of the Officer under any arrangement which
may be instituted by the Company as contemplated by paragraph "a" of Section 6
hereof, the rights of the Officer, any designated recipient(s) of the Officer,
the estate of the Officer or any other person claiming through the
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<PAGE> 32
Officer under this Agreement shall be solely those of an unsecured general
creditor of the Company. The Officer, any designated recipient(s) of the
Officer, the estate of the Officer or any other person claiming through the
Officer shall only have the right to receive from the Company those payments is
specified under this Agreement or any such arrangement, if instituted. Except
as expressly provided pursuant to any arrangement referred to in the first
sentence of this Section 9, the Officer agrees that he, his designated
recipient(s), his estate or any other person claiming through him shall have no
rights or interest whatsoever in any asset of the Company, including any
insurance policies or contracts which the Company may obtain to informally fund
the obligations of the Company under this Agreement, and that any asset
acquired by the Company in connection with the liabilities it has assumed under
this Agreement shall not be deemed to be held under any trust for the benefit
of the Officer or his designated recipient(s) or his estate or any other person
claiming through him, or considered security for the performance of the
obligations of the Company. Except as so provided, such asset shall be, and
remain, a general, unpledged and unrestricted asset of the Company.
10. Independence of Benefits.
The benefits payable under this Agreement shall be independent of, and in
addition to, any other benefits or compensation, whether by salary, bonus or
otherwise, payable to the Officer under any employment arrangements or plans
other than the Plan, including group insurance plans, incentive compensation
-17-
<PAGE> 33
plans and other retirement plans, that now exist or may hereafter exist from
time to time.
11. Acceleration of Payments.
Notwithstanding anything to the contrary contained herein, the Company
reserves the right, and may at any time at its option elect, to accelerate the
payment of any benefits payable under this Agreement without the consent of the
Officer, his designated recipient(s), his estate, or any other person claiming
through the Officer. In the event that the Company elects to accelerate the
payment of such remaining benefits, the Company shall pay to the Officer or
other person entitled to such benefits, in lieu of the monthly payments
remaining due, a lump sum equal to the present value of such remaining monthly
payments, computed on the basis of such reasonable interest rate as shall be
determined by the Board of Directors or a committee thereof.
12. Leaves of Absence.
The Company may, in its sole and exclusive discretion, permit the Officer to
take a leave of absence for a period not to exceed one (1) year, except that a
leave of absence for a disability may be allowed for a period in excess of one
(1) year. During such authorized leave, or the period of a Disability, the
Officer will still be considered to be in the continuous active employment of
the Company to the extent and subject to the conditions provided in paragraph
"f" of Section 1 hereof.
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<PAGE> 34
13. Assignability.
Except insofar as this provision may be contrary to applicable law, and
except as provided for herein, neither this Agreement nor any benefits under or
interests in this Agreement shall be assignable or transferable by the Officer
or be subject to attachment, execution or similar process, and no assignment,
pledge, collateralization, attachment, execution or other encumbrance or
disposition of or on the Officer's interest in or benefits under this Agreement
shall be valid or recognized by the Company, and in the event of any attempt at
any such disposition or process, the Company may immediately terminate this
Agreement and it shall thereupon become null and void.
14. Notices.
Any notices required or permitted hereunder shall be in writing and shall be
deemed to be sufficiently given at the time when delivered personally or when
mailed by certified or registered first class mail, postage prepaid, addressed
to either party hereto as follows:
If to the Company:
Sensormatic Electronics Corporation
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442
Attention: Chief Executive Officer;
If to the Officer:
At his last known address, as indicated by the employment records of the
Company;
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<PAGE> 35
or to such changed address as such parties may have fixed by notice; provided,
however, that any notice of change of address shall be effective only upon
receipt.
15. Governing Law.
This Agreement shall be governed by the laws of the State of Florida.
16. Parties in Interest.
This Agreement is solely between the Company and the Officer. However, this
Agreement shall be binding upon and, to the extent expressly provided for
herein, shall inure to the benefit of the designated recipient(s),
beneficiaries, heirs, executors and administrators of the Officer and shall be
binding upon and inure to the benefit of the successors and assigns of the
Company.
17. Controlling Instrument.
In the event of any inconsistency between any provision of this Agreement
and the Plan or any description or summary of the Plan furnished to the Officer
before or after the date of this Agreement, the applicable provisions of this
Agreement shall control.
18. Change in Control.
a. For the purposes of this Agreement, the term "Change in Control" shall
mean a change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), provided,
that, without limitation, such a change in control shall be
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<PAGE> 36
deemed to have occurred if (i) any "person" (as such term is used in Sections
13d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding voting securities or (ii) during any period
of 24 consecutive months, individuals (y) who at the beginning of such period
constitute the Board of Directors or (z) whose election, appointment or
nomination for election was approved prior to such election or appointment who
were directors at the beginning of such two-year period (other than any
directors who prior to the Change in Control were associated or affiliated with
any person involved with any Change in Control), cease for any reason to
constitute at least three-fourths of the Board of Directors of the Company.
b. A Change in Control shall be deemed, for purposes of this Agreement, to
be: (i) "non-approved" if (A) in connection with the consideration thereof by
the Board of Directors, a majority of the Previous Members of the Board of
Directors (as defined below), either before or after such Change in Control,
(x) votes to disapprove of such Change in Control, (y) votes to approve of such
Change in Control, but as a consequence of the existence of a competing
proposal for a Change in Control, or (z) otherwise expressly declares that such
Change in Control is "non-approved", or (B) a majority of the Previous Members
of the Board of Directors neither expressly approves nor disapproves of such
Change in Control, or (ii) "approved" if in connection with
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<PAGE> 37
the consideration thereof by the Board of Directors, a majority of the Previous
Members of the Board of Directors, either before or after such Change in
Control, (x) approves of such Change in Control (other than as a consequence of
the existence of a competing proposal for a Change of Control) or (y) otherwise
expressly declares that such Change in Control is "approved", notwithstanding
clause (A) (y) of this paragraph "b". The majority of the Previous Members of
the Board of Directors shall indicate its approval or disapproval of a Change
in Control by a statement or statements in writing to such effect. For purposes
of this Agreement, Previous Members of the Board of Directors shall mean
members of the Board of Directors as of the date of a Change in Control who had
been in office for a period of at least two year immediately prior to such
Change in Control (other than directors who prior to such Change in Control
were appointed or elected as directors as a consequence of their association or
affiliation with any person (as defined above) effecting such Change in
Control).
In addition, notwithstanding any previous determination that a Change in
Control was "approved", such Change in Control may subsequently be determined,
in good faith, to be "non-approved" by a majority of the Previous Members of
the Board of Directors who are then still in office with the Company or a
corporate successor of the Company (or if fewer than two such Previous Members
are still in office, then by a majority of the Previous Members of the Board of
Directors, whether or not still in office) within the 36-month period
immediately following such
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<PAGE> 38
Change in Control, if during such period there occur (1) actions of the Company
detrimental to an employee constituting involuntary termination upon a
subsequent termination of employment under agreements between the Company and
certain officers, key executives and other key employees of the Company
providing for benefits in the event of a Change in Control, (2) defaults by the
Company under agreements such as are referred to in (1) above, (3) the
involuntary termination (other than for cause or in the event of death or
permanent disability) of the employment of a number of the officers of the
Company who were officers immediately prior to such Change in Control exceeding
40% of the total number of such officers, or (4) the transfer (by sale, merger
or otherwise) of all or substantially all the equity securities of the Company
acquired by the person effecting such Change in Control, of all or
substantially all the assets of the company, or of all or substantially all the
equity securities of the Company's successor corporation, directly or
indirectly, to a third party (other than a majority owned affiliate of such
person). In the event of such a subsequent determination, the Officer shall be
entitled to all benefits arising under this Agreement out of a "non-approved"
Change in Control as if such Change in Control had been deemed "non-approved"
initially. Any additional benefits arising out of such "non-approved" Change in
Control which the Officer is entitled to receive through the date of such
determination shall be paid or satisfied promptly by the Company. For purposes
of this paragraph "b", the term "officers"
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<PAGE> 39
shall not include individuals whose only office with the Company is Assistant
Secretary or Assistant Treasurer.
c. For the purposes of this Section 18, references to provisions of the
Exchange Act and rules, regulations and schedules thereunder shall be to such
provisions as they are in effect and interpreted as of March 1, 1994.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
SENSORMATIC ELECTRONICS CORPORATION
(CORPORATE SEAL)
By:
------------------------------
Ronald G. Assaf
Chairman of the Board & Chief
Executive Officer
Attest:
By:
---------------------------
(Secretary or Assistant
Secretary)
Witnessed by:
- - -------------------------------------- -------------------------------
(Officer's Signature)
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<PAGE> 40
SCHEDULE A
It is agreed as of this day of that in accordance with and subject to the
term and conditions of the Senior Executive Defined Contribution Retirement
Agreement (the "Agreement") between Sensormatic Electronics Corporation (the
"Company"), and (the "Officer"), the amount of the Officer's annual Target
Benefit (as defined in the Agreement) shall be $________ per annum.
SENSORMATIC ELECTRONICS CORPORATION
(CORPORATE SEAL)
By:
-----------------------------
Ronald G. Assaf
Chairman of the Board & Chief
Executive Officer
Attest:
By:
-------------------------
(Secretary or Assistant
Secretary)
Witnessed by:
- - --------------------------------- -------------------------------------
(Officer's Signature)
<PAGE> 41
SCHEDULE B
DESIGNATION OF SENIOR EXECUTIVE DEFINED CONTRIBUTION
RETIREMENT AGREEMENT DEATH BENEFIT RECIPIENT
The undersigned, ____________________, hereby requests that Sensormatic
Electronics Corporation (the "Company") (mark/change) its records to reflect
__________________________ (1) as the designated recipient(s) of any death
benefit payable pursuant to the Senior Executive Defined Contribution
Retirement Agreement between the undersigned and the Company, in the event of
the undersigned's death, and to make payments of such death benefit to the
above designated recipient(s) as provided under the term Of such Agreement. The
Company is instructed to retain the above designated recipient(s) until Such
time is it receives a new "Designation of Senior Executive Defined Contribution
Retirement Agreement Death Benefit Recipient" from the undersigned which makes
a change.
- - --------------------------------- ---------------------------------
(Date) (Officer's Signature)
- - ---------------------------------
(1) Sample Designations:
1. Jane Smith, wife, if living, otherwise to John Smith, son.
2. John Smith, son, and Mary Smith, daughter, equally, or to the survivor.
3. Jane Smith, wife, if living, or otherwise to John Smith, son, and Mary
Smith, daughter, equally, or to the survivor.
4. (Name of Recipient).
5. His estate.
<PAGE> 1
EXHIBIT 10(s)
(LOGO)RELIANCE
<TABLE>
<CAPTION>
<S> <C>
1. RELIANCE INSURANCE COMPANY
EXCESS FINANCIAL PRODUCTS INSURANCE POLICY Philadelphia, Pennsylvania
NDA 0106919-93 2. PLANET INSURANCE COMPANY
- - ------------------ Sun Prairie, Wisconsin
POLICY NUMBER
6. UNITED PACIFIC INSURANCE COMPANY
Federal Way, Washington
/1/ Coverage is provided in the Company
designated by Number. Each is a Stock 9. RELIANCE NATIONAL INSURANCE COMPANY
Insurance Company, herein called the Wilmington, Delaware
Underwriters.
</TABLE>
NOTICE: THIS IS A CLAIMS-MADE POLICY, EXCEPT AS MAY BE OTHERWISE
PROVIDED HEREIN THE COVERAGE OF THIS POLICY IS LIMITED TO LIABILITY FOR
ACTS COVERED BY UNDERLYING INSURANCE (ITEM D.) FOR WHICH CLAIMS ARE
FIRST MADE AGAINST THE INSURED(S) WHILE THE POLICY IS IN FORCE. THIS
POLICY DOES NOT PROVIDE FOR THE UNDERWRITERS TO DEFEND THE INSURED AND
ANY DEFENSE COSTS AND OTHER CLAIM EXPENSE COVERED UNDER THE POLICY IS
PART OF AND NOT IN ADDITION TO THE LIMIT OF LIABILITY. PLEASE READ AND
REVIEW THE POLICY CAREFULLY.
DECLARATIONS
ITEM A. NAME OF INSURED: (hereinafter called the "Insured")
Sensormatic Electronics Corporation
ADDRESS OF INSURED: 500 Northwest 12th Avenue
Deerfield Beach, FL 33442
ITEM B. POLICY PERIOD: From 12:01 a.m. on 1/5/93 To 12:01 a.m. on 12/15/93
ITEM C. LIMIT OF LIABILTY: $5,000,000 AGGREGATE EACH POLICY YEAR, INCLUDING
CLAIM EXPENSE.
ITEM D. SCHEDULE OF UNDERLYING INSURANCE:
(1) PRIMARY POLICY: National Union Fire Insurance
Company of Pittsburgh, PA
COMPANY:
POLICY NUMBER: 440-30-94
LIMITS OF LIABILITY: $10,000,000
(2) UNDERLYING EXCESS POLICY(IES): N/A
ITEM E. ENDORSEMENTS EFFECTIVE AT INCEPTION: 1 (D087), 2(D064,2), 3(D089)
ITEM F. TERMINATION OF PRIOR POLICY(IES): N/A
ITEM G. DISCOVERY CLAUSE:
(1) ADDITIONAL PREMIUM: $31,875
(2) ADDITIONAL PERIOD: 1 Year
ITEM H. POLICY PERIOD PREMIUM: $ 38,888 (Annual Premium: $42,500)
COUNTERSIGNED BY: /s/ David Kahn
-------------------------
Authorized Representative
4/8/93
-------------------------
Date
<PAGE> 1
EXHIBIT 10(t)
$50,000,000 U.S. Dollar Loans
$50,000,000 Foreign Currency Loans
CREDIT AGREEMENT
dated as of
August 26, 1994
among
SENSORMATIC ELECTRONICS CORPORATION,
SENSORMATIC DISTRIBUTION INC.,
and
SENSORMATIC INTERNATIONAL, INC.
As Borrower
and
The Other Borrowers Listed Herein
and
The Domestic Banks and Foreign Currency Banks Listed Herein
and
WACHOVIA BANK OF GEORGIA, N.A.,
As Domestic Agent
and
ABN AMRO BANK N.V. and
ABN AMRO FOREIGN CREDIT & AGENCY SERVICES
As Foreign Currency Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 1.03. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 1.04. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 1.05. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II
THE DOMESTIC CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.02. Method of Borrowing Syndicated Dollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.03. Money Market Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.04. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.05. Maturity of Dollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.06. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.07. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.08. Optional Termination or Reduction of Dollar
Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.09. Other Terminations of Dollar Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.10. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.11. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.13. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
THE FOREIGN CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.02. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.03. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.04. Maturity of Foreign Currency Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.05. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.07. Optional Termination or Reduction of
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.08. Other Terminations of Syndicated Foreign
Currency Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.09. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.10. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.11. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.12. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IV
CONDITIONS TO BORROWINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.01. Conditions to First Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.02. Conditions to All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.02. Corporate and Governmental Authorization; No
Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.05. No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.07. Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.09. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.10. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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<TABLE>
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SECTION 5.11. Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.12. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.13. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.15. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.16. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.17. Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.02. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.03. Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.04. Incorporated Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.05. Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.06. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.07. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.08. Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.09. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.10. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.11. Environmental Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.13. Environmental Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.14. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE VII
DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
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ARTICLE VIII
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.01. Appointment; Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.02. Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.04. Rights of Agents as Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.06. Payee of Note Treated as Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.07. Nonreliance on Agents and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.08. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.09. Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE IX
CHANGE IN CIRCUMSTANCES; COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.01. Basis for Determining Interest Rate Inadequate
or Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.04. Base Rate Loans or Other Fixed Rate Loans
Substituted for Affected Fixed Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.05. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.06. Failure to Pay in Foreign Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.07. Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.03. Expenses; Documentary Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.05 Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
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SECTION 10.06. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.07. No Margin Stock Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 10.09. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.10. Representation by Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.11. Obligations Several . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.12. New York Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.14. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.15. Waiver of Jury Trial; Consent to
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
EXHIBIT A-1 Form of Syndicated Dollar Loan Note
EXHIBIT A-2 Form of Money Market Dollar Loan Note
EXHIBIT B-1 Form of Foreign Currency Loan Note
EXHIBIT B-2 Form of ITL Loan Note
EXHIBIT C Form of Opinion of Counsel for Parent, SDI and SSI
EXHIBIT D Form of Opinion of Special Counsel for the Agent
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F Form of Notice of Syndicated Dollar Borrowing
EXHIBIT G-1 Form of Notice of Syndicated Foreign Currency Borrowing
EXHIBIT G-2 Form of Notice of ITL Borrowing
EXHIBIT H Form of Compliance Certificate
EXHIBIT I Form of Closing Certificate
EXHIBIT J Form of Money Market Quote Request
EXHIBIT K Form of Money Market Quote
EXHIBIT L Form of Parent Guaranty
Schedule 6.03 Material Subsidiaries
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<PAGE> 7
CREDIT AGREEMENT
AGREEMENT dated as of August 26, 1994, among SENSORMATIC
ELECTRONICS CORPORATION, SENSORMATIC DISTRIBUTION, INC., SENSORMATIC
INTERNATIONAL, INC., the other BORROWERS listed on the signature pages hereof,
the DOMESTIC BANKS AND FOREIGN CURRENCY BANKS listed on the signature pages
hereof, WACHOVIA BANK OF GEORGIA, N.A., as Domestic Agent and ABN AMRO BANK
N.V. and ABN AMRO FOREIGN CREDIT & AGENCY SERVICES, as Foreign Currency Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment hereto
(except as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein:
"ABN AMRO" means ABN AMRO Bank N.V., a banking corporation
organized under the laws of The Netherlands, in its capacity as a Foreign
Currency Bank with respect to the ITL Loans and the ITL Loan Commitment, and
its successors and assigns in such capacity.
"ATS" means Austrian schillings.
"Adjusted Aggregate Unused Dollar Loan Commitment" means at
any date, an amount equal to the sum of the Unused Dollar Loan Commitments of
all Banks less the aggregate outstanding principal amount of all Money Market
Loans by all Banks.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.06(c).
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person"), (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person, or (iii)
any Person (other than a Subsidiary) of which the Borrower owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests. As
used herein, the term "control" means possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
<PAGE> 8
"Agency Office" refers to the office of FC&AS, acting on
behalf of the Foreign Currency Agent, from which various Syndicated Foreign
Currency Loans will be administered pursuant to this Agreement, and means the
office of FC&AS located at Foppingadreef 22, 102 BS Amsterdam, The Netherlands,
Attention: Peter von Lierop, Global Clients Agency Department, AA 4130,
Telecopier number 011-31-20-628-7968, confirmation number 011-31-20-628-4657,
or such other location in Amsterdam as may be specified by the Foreign Currency
Agent in a notice to the other parties hereto pursuant to Section 10.01:
"Agent" or "Agents" means, individually or collectively, as
the context shall require, the Domestic Agent or the Foreign Currency Agent.
"Agents' Letter Agreement" means that certain letter
agreement, dated April 18, 1994, between the Parent and the Agents relating to
the structure of the Loans, and certain fees from time to time payable by the
Borrowers to the Agents, together with all amendments and modifications
thereto.
"Agreement" means this Credit Agreement, together with all
amendments and supplements hereto.
"Applicable Margin" has the meaning set forth in (i) Section
2.06(a), with respect to Dollar Loans and (ii) Section 3.05(a), with respect to
Foreign Currency Loans.
"Assignee" has the meaning set forth in Section 10.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 10.08(c) in the form attached hereto as
Exhibit E.
"Authority" has the meaning set forth in Section 9.02.
"BFR" means Belgian francs.
"Bank" means a Domestic Bank or Foreign Currency Bank, or
both, as the context shall require.
"Base Rate" means for any Base Rate Loan for any day, the rate
per annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.
"Base Rate Loan" means a Dollar Loan to be made as a Base Rate
Loan pursuant to the applicable Notice of Borrowing, Section 2.02(f), or
Article IX, as applicable.
2
<PAGE> 9
"Borrower" or "Borrowers" means, individually and
collectively, as the context shall require: (i) with respect to Dollar Loans,
Parent, SDI, or SII; (ii) with respect to any Foreign Currency Loans, Parent or
SDI; and (iii) with respect to Foreign Currency Loans in specific Foreign
Currencies, the other Borrowers listed on the signature pages hereto, but only
as to (A)the Foreign Currency of the jurisdiction in which such other Borrower
is incorporated, as set forth opposite such other Borrower's name on such
signature pages, and their respective successors and permitted assigns, and (B)
Euro-USD, if the Foreign Currency Agent (with respect to Syndicated Foreign
Currency Borrowings), or ABN AMRO (with respect to ITL Borrowings) determines
that such Foreign Currency in such jurisdiction is not available.
"Borrowing" means a borrowing hereunder consisting of either
(i) Syndicated Dollar Loans which are made to a Borrower at the same time by
the Domestic Banks pursuant to Article II, (ii) Money Market Loans which are
made to a Borrower by a Bank or Banks pursuant to Article II, (iii) Syndicated
Foreign Currency Loans which are made to a Borrower at the same time by the
Foreign Currency Banks pursuant to Article III, or (iv) ITL Loans which are
made to a Borrower by ABN AMRO pursuant to Article III. A Borrowing consisting
of Syndicated Dollar Loans is a "Base Rate Borrowing" if such Loans are
Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar
Loans. A Borrowing consisting of ITL Loans is an "ITL Base Rate Borrowing" if
such Loans are ITL Base Rate Loans or a "ITL Fixed Rate Borrowing" if such
Loans are ITL Fixed Rate Loans. A Borrowing is a "Dollar Borrowing" if it is a
Base Rate Borrowing, Money Market Borrowing or a Euro-Dollar Borrowing. A
Borrowing is a "Foreign Currency Borrowing" if such Loans are Foreign Currency
Loans. A Borrowing is a "Syndicated Foreign Currency Borrowing if such Loans
are Syndicated Foreign Currency Loans. A Borrowing is an "ITL Borrowing" if
such Loans are ITL Base Rate Loans or ITL Fixed Rate Loans. A Dollar Borrowing
is a "Syndicated Dollar Borrowing" if it is made pursuant to Section 2.01 or a
"Money Market Borrowing" if it is made pursuant to Section 2.03.
"Capital Stock" means any nonredeemable capital stock of the
Borrower or any Consolidated Subsidiary (to the extent issued to a Person other
than the Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. and its
implementing regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section
9.02.
3
<PAGE> 10
"Change in Control" shall mean any Person or two or more
Persons acting in concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 25% or more of the outstanding shares of
the voting stock of Parent.
"Closing Certificate" has the meaning set forth in Section
4.01(e).
"Closing Date" means August 26, 1994.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code.
"Commitments" means, collectively, the Dollar Loan
Commitments, the Syndicated Foreign Currency Loan Commitments and the ITL Loan
Commitment.
"Compliance Certificate" has the meaning set forth in Section
6.01(c).
"Consolidated Debt" means at any date the Debt of Parent and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of Parent in its consolidated financial statements as
of such date.
"Consolidated Total Assets" means, at any time, the total
assets of Parent and its Consolidated Subsidiaries, determined on a
consolidated basis, as set forth or reflected on the most recent consolidated
balance sheet of Parent and its Consolidated Subsidiaries, prepared in
accordance with GAAP and delivered to the Banks pursuant to Sections 6.01(a) or
(b).
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"DEM" means German deutsche marks.
"DKR" means Danish kroners.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in
4
<PAGE> 11
the ordinary course of business, (iv) all obligations of such Person as lessee
under capital leases, (v) all obligations of such Person to reimburse any bank
or other Person in respect of amounts payable under a banker's acceptance,
(vi) all Redeemable Preferred Stock of such Person (in the event such Person is
a corporation), (vii) all obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (viii) all Debt of others secured by a Lien on any asset of such
Person, even though such Debt is not assumed by such Person, (ix) all Debt of
others Guaranteed by such Person, and (x) amounts of any reserves for doubtful
accounts recorded on the books of such Person for leases, receivables and other
accounts sold, factored or otherwise disposed of by such Person; provided, that
in no event shall "Debt" include any Factored Receivables Obligations.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day,
the sum of 2% plus the then highest interest rate (including the Applicable
Margin) which may be applicable to any Loans hereunder in the same currency
(irrespective of whether any such type of Loans are actually outstanding
hereunder).
"Dollar Equivalent" means the Dollar equivalent of the amount
of a Foreign Currency Loan, determined by the Foreign Currency Agent, with
respect to Syndicated Foreign Currency Loans, and ABN AMRO, with respect to ITL
Loans, on the basis of its spot rate for the purchase of the appropriate
Foreign Currency with Dollars on the date of determination.
"Dollar Loan" means a Loan made in Dollars, which shall be
either a Base Rate Loan, a Euro-Dollar Loan, or a Money Market Loan.
"Dollar Loan Commitment" refers to the commitment of each
Domestic Bank to make Dollar Loans hereunder, and means, with respect to each
Domestic Bank, the amount set forth as the Dollar Loan Commitment opposite the
name of such Bank on the signature pages hereof, as such amount may be reduced
from time to time pursuant to Section 2.08.
"Dollar Loan Facility Fee" has the meaning specified in
Section 2.07.
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Domestic Agent" means Wachovia Bank of Georgia, N.A., a
national banking association organized under the laws of the United States of
America, in its capacity as agent for the Banks
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<PAGE> 12
hereunder with respect to Dollar Loans, and its successors and permitted
assigns in such capacity.
"Domestic Bank" means each bank listed on the signature pages
hereto as having a Dollar Loan Commitment, and its successors and assigns with
respect to its Dollar Loans and its Dollar Loan Commitment.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Georgia are authorized by law
to close.
"ESP" means Spanish pesetas.
"Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of Parent or any Subsidiary required by any
Environmental Requirement.
"Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
"Environmental Notices" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged
noncompliance with or liability under any Environmental Requirement, including
without limitation any complaints, citations, demands or requests from any
Environmental Authority or from any other person or entity for correction of
any, violation of any Environmental Requirement or any investigations
concerning any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or in any way associated with any
Environmental Requirement.
"Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.
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"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to Parent, any
Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation and all federal, state
and local laws, ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law. Any reference to any
provision of ERISA shall also be deemed to be a reference to any successor
provision or provisions thereof.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D, as in effect from time to time.
"Eurocurrency Liability Reserve Percentage" of any Foreign
Currency Bank for the Interest Period for any Syndicated Foreign Currency Loan
means the reserve percentage applicable during such Interest Period (of if more
than one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the then stated maximum rate (stated as a decimal) of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System as defined in Regulation D (or against any successor
category of liabilities as defined in Regulation D.
"Euro-Dollar Business Day" means any Domestic Business Day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"Euro-Dollar Loan" means a Dollar Loan to be made as a
Euro-Dollar Loan pursuant to the applicable Notice of Syndicated Dollar
Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.06(c).
"Euro-USD" refers to a Foreign Currency for purposes of this
Agreement, and means Dollars made available to the Borrowers in Europe.
"Event of Default" has the meaning set forth in Section 7.01.
"FC&AS" means ABN AMRO Foreign Credit & Agency Services,
Amsterdam, The Netherlands, which will perform certain functions delegated to
it by the Foreign Currency Agent hereunder.
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<PAGE> 14
"FFR" means French francs.
"FIM" means Finnish marks.
"Factored Receivables Obligations" means any recourse or
non-recourse obligation, guarantee or other contractual undertaking of the
Parent or any Subsidiary arising in connection with the sale, factoring or
other disposition of leases, receivables or other accounts, if such sale,
factoring or disposition, whether with or without recourse, is for a fair price
(on the basis of the face amount of the respective item, on the basis of the
present value or its income stream or on the basis of another arms' length
determination) together with the interests of the seller of such lease,
receivable or other account in the equipment or other property related to such
lease, receivable or other account, and not at a distress sale or other "deep"
discount.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Domestic Agent on
such day on such transactions, as determined by the Domestic Agent.
"Fiscal Quarter" means any fiscal quarter of Parent.
"Fiscal Year" means any fiscal year of Parent.
"Fixed Rate Borrowing" means a Euro-Dollar Borrowing, a Money
Market Borrowing, a Syndicated Foreign Currency Borrowing or an ITL Fixed Rate
Borrowing.
"Fixed Rate Loans" means Euro-Dollar Loans, Money Market
Loans, Syndicated Foreign Currency Loans, ITL Fixed Rate Loans, or any or all
of them, as the context shall require.
"Foreign Currencies" means, individually and collectively, as
the context shall require: ATS, BFR, DEM, DKR, ESP, Euro-USD, FFR, FIM, GBP,
ITL, NLG, NOK, PTE, SEK and SFR.
"Foreign Currency Agent" means ABN AMRO Bank N.V., a banking
corporation organized under the laws of The Netherlands, in its capacity as
agent for the Foreign Currency Banks hereunder with respect to Syndicated
Foreign Currency Loans, which term
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<PAGE> 15
shall also include FC&AS to functions delegated to it by the Foreign Currency
Agent hereunder, and its successors and permitted assigns in such capacity.
"Foreign Currency Bank" means (i) when used with respect to
Syndicated Foreign Currency Loans and matters related thereto, each bank listed
on the signature pages hereto as having a Syndicated Foreign Currency Loan
Commitment, and its successors and assigns with respect to its Syndicated
Foreign Currency Loans and its Syndicated Foreign Currency Loan Commitment, and
(ii) when used with respect to ITL Loans and matters related thereto, ABN AMRO,
and its successors and assigns with respect to its ITL Loans and its ITL Loan
Commitment.
"Foreign Currency Borrowing" has the meaning set forth in the
definition of "Borrowing."
"Foreign Currency Business Day" shall mean any day which is a
banking day in New York, New York on which, (i) as to any Syndicated Foreign
Currency Loan and matters relating thereto, the Agency Office is open, and (ii)
as to any ITL Loan and matters relating thereto, the Milan Office is open,
excluding one on which trading is not carried on by and between banks in
deposits of the applicable Foreign Currency in the applicable interbank market
for such Foreign Currency.
"Foreign Currency LIBOR/Reference Rate" has the meaning
specified in Section 3.05(c).
"Foreign Currency Loan" means a Syndicated Foreign Currency
Loan or any ITL Loan, or both, as the context shall require.
"Foreign Currency Reference Banks" means ABN AMRO, The First
National Bank of Boston, and Union Bank of Switzerland, and each other bank as
may be appointed pursuant to Section 10.08(f); provided, that any such bank
quotes Foreign Currency rates from an office located in Europe.
"GAAP" means generally accepted accounting principles in the
United States of America applied on a basis consistent with those which, in
accordance with Section 1.02, are to be used in making the calculations for
purposes of determining compliance with the terms of this Agreement.
"GBP" means British pounds sterling.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation
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<PAGE> 16
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to provide
collateral security, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. Section 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or
in any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976,
or in any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"ITL" means Italian liras.
"ITL Base Rate" means for any ITL Base Rate Loan for any day,
the borrowing rate per annum applicable to ITL as announced from time to time
at the Milan Office. For purposes of determining the ITL Base Rate for any day,
changes in the ITL Base Rate shall be effective on the date of each such
change.
"ITL Base Rate Loan" means a Foreign Currency Loan to be made
by ABN AMRO in ITL as an ITL Base Rate Loan pursuant to the applicable Notice
of ITL Borrowing, Section 3.02(f), or Article IX, as applicable.
"ITL Borrowing" has the meaning specified in the definition of
Borrowing.
"ITL Loan" means a Loan made in ITL, which shall be either an
ITL Base Rate Loan or an ITL Fixed Rate Loan.
"ITL Loan Commitment" refers to the commitment of ABN AMRO to
make ITL Loans hereunder, and means the Dollar Equivalent in ITL of $5,000,000,
as such amount may be reduced from time to time pursuant to Sections 3.07 and
3.08.
"ITL Loan Facility Fee" has the meaning specified in Section
3.06(a).
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<PAGE> 17
"ITL Loan Notes" means the promissory notes of SDI and
Sensormatic E.C., S.R.L., substantially in the form of Exhibit B-2, evidencing
the obligation of such Borrowers to repay the ITL Loans, together with all
amendments, consolidations, modifications, renewals and supplements thereto.
"Incorporated Covenants" has the meaning specified in Section
6.04.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, Syndicated Foreign Currency Borrowing and ITL Fixed Rate Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third, sixth or, subject to
availability, twelfth month thereafter, or, with respect to BFR, BPS, DEM and
FF only, the fourteenth day thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day or Foreign Currency
Business Day, as the case may be, shall be extended to the next
succeeding Euro-Dollar Business Day or Foreign Currency Business Day,
as the case may be, unless such Euro-Dollar Business Day or Foreign
Currency Business Day, as the case may be, falls in another calendar
month, in which case such Interest Period shall, subject to paragraph
(c) below end on the next preceding Euro-Dollar Business Day or
Foreign Currency Business Day, as the case may be;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day or Foreign Currency Business Day, as the case
may be, of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month) shall, subject to paragraph (c) below, end on the last
Euro-Dollar Business Day or Foreign Currency Business Day, as the case
may be, of the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which would end after
the Termination Date.
(2) with respect to each Base Rate Borrowing or ITL Base Rate Borrowing, the
period commencing on the date of such Borrowing and ending 30 days thereafter;
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to paragraph (b) below) which would otherwise end
on a day which is not a Domestic Business Day or Foreign Currency
Business Day, as the case may be, shall be extended to the next
succeeding Domestic Business Day or Foreign Currency Business Day, as
the case may be; and
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<PAGE> 18
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date
shall end on the Termination Date.
"Lending Office" means, (i) as to ABN AMRO with respect to ITL
Loans only, the Milan Office, (ii) and as to each Bank, its office located at
its address set forth on the signature pages hereof and (or identified on the
signature pages hereof as its Lending Office or such other office as such Bank
may hereafter designate as its Lending Office by notice to the Borrowers and
the Agents. Each Bank which is both a Domestic Bank and a Foreign Currency
Bank may designate a Lending Office for Dollar Loans and a different Lending
Office for Syndicated Foreign Currency Loans, and the term "Lending Office"
shall in such case mean either such Lending Office, as the context shall
require.
"Lien" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting
a security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For
the purposes of this Agreement, any Borrower or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
Notwithstanding the foregoing, in no event shall any of the following be deemed
to be a "Lien" on any assets or other properties of any Person: (1) filings of
financing statements in respect of operating leases of such Person, sales of
(and not merely security interests in) leases, receivables and other accounts
and of the equipment or other property related to such accounts, and other
similar filings of a precautionary nature, (2) the interest of a lessee in the
property subject to a lease under which such Person is the lessor, or (3) the
interest of the purchaser or factor of leases, receivables or other accounts of
such Person in the leases, receivables or accounts sold, factored or otherwise
disposed of, or in the related equipment or other property that is the subject
of such lease, receivable or account, even if described as a Lien in the
instrument pursuant to which such sale, factoring or other disposition is
effected.
"Loan" means a Euro-Dollar Loan, Syndicated Dollar Loan, Money
Market Loan, a Syndicated Foreign Currency Loan or an ITL Loan, and "Loans"
means Euro-Dollar Loans, Syndicated Dollar Loans, Money Market Loans,
Syndicated Foreign Currency Loans, or ITL Loans, or any or all of them, as the
context shall require.
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"Loan Documents" means this Agreement, the Notes, the Parent
Guaranty, any other document evidencing, relating to or securing the Loans, and
any other document or instrument delivered from time to time in connection with
this Agreement, the Notes, the Parent Guaranty or the Loans, as such documents
and instruments may be amended or supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.06(c).
"Margin Stock" means "margin stock" as defined in Regulations
G, T, U or X.
"Material Adverse Effect" means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any
of (a) the financial condition, operations, business, or properties which are
central to the business at such time, of the Parent and its Consolidated
Subsidiaries taken as a whole, (b) the ability of the Borrowers or the Parent
to perform their respective obligations under the Loan Documents to which it is
a party, as applicable, or (c) the legality, validity or enforceability of any
Loan Document.
"Material Subsidiary" means, as of each date of determination,
any Consolidated Subsidiary (i) whose consolidated total assets exceed 5% of
Consolidated Total Assets or (ii) whose consolidated total revenues exceed 10%
of the consolidated revenues of the Parent and its Subsidiaries determined in
accordance with GAAP as of the last day of the Fiscal Quarter of the Parent
most recently ended as of such date of determination and for which financial
statements have been delivered to the Banks pursuant to Section 6.02(a) or (b)
hereof, and in any event shall include Sensormatic GmbH.
"Milan Office" refers to the office of ABN AMRO from which
various ITL Loans will be administered pursuant to this Agreement, and means
the branch office of ABN AMRO located in Milan, Italy, or such other location
in Italy as may be specified by ABN AMRO in a notice to the other parties
hereto pursuant to Section 10.01:
"Money Market Loan Notes" means the promissory notes of the
Borrower, substantially in the form of Exhibit A-2, evidencing the obligation
of the Borrower to repay Money Market Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto.
"Money Market Loans" means Loans made pursuant to the terms
and conditions set forth in Section 2.03.
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"Money Market Quote" has the meaning specified in Section 2.03.
"Money Market Quote Request" has the meaning specified in
Section 2.03.
"Money Market Rate" has the meaning specified in Section 2.03.
"NLG" means Dutch guilders.
"NOK" means Norwegian kroners.
"Notes" means, individually and collectively, the Syndicated
Dollar Loan Notes, the Money Market Loan Notes, the Syndicated Foreign Currency
Loan Notes, or the ITL Loan Notes, as the context shall require.
"Note Agreement" means the Note Agreement dated as of January
15, 1993 pertaining to Parent's $135,000,000 Principal Amount 8.21% Senior
Notes Due January 30, 2003, as amended by the First Amendment dated as of May
31, 1993, and as it may be amended or supplemented from time to time (except as
otherwise expressly provided in Section 6.04).
"Notice of Borrowing" means, individually or collectively, as
the context shall require, a Notice of Syndicated Dollar Borrowing, a Notice of
Syndicated Foreign Currency Borrowing or a Notice of ITL Borrowing.
"Notice of ITL Borrowing" has the meaning specified in Section
3.02(a)(2).
"Notice of Syndicated Dollar Borrowing" has the meaning
specified in Section 2.02(a).
"Notice of Syndicated Foreign Currency Borrowing" has the
meaning specified in Section 3.02(a)(1).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PTE" means Portuguese escudos.
"Parent" means Sensormatic Electronics Corporation, a Delaware
corporation, and its successors and permitted assigns.
"Parent Guaranty" means the Guaranty Agreement dated as of
even date herewith substantially in the form of Exhibit L, executed by Parent
in favor of the Agents, for the benefit of the Banks, unconditionally
Guaranteeing the payment of all obligations of the other Borrowers hereunder,
under the Notes and under the other Loan Documents executed by them.
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<PAGE> 21
"Participant" has the meaning set forth in Section 10.08(b).
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a
member of the Controlled Group for employees of any member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding 5 plan years made
contributions but shall not include any plan which is maintained under the laws
of Puerto Rico, is covered by Section 4(b)(4) of ERISA, or is unfunded and
maintained primarily for the purpose of providing deferred compensation for a
select group of management, key executives or highly compensated employees.
"Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for borrowings.
The Prime Rate is but one of several interest rate bases used by Wachovia.
Wachovia lends at interest rates above and below the Prime Rate.
"Properties" means all real property owned, leased or
otherwise used or occupied by Parent or any Subsidiary, wherever located.
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which by its terms is, at any time prior to the
Termination Date, subject to mandatory redemption by such Person for cash at
the demand of the holder of such stock. No security shall be considered
"Redeemable Preferred Stock" by reason of such security being convertible into
other shares of capital stock (whether common or preferred) or any other
property other than cash, even if the terms of redemption or conversion provide
for a nominal portion of such security to be redeemable for cash in order to
avoid the issuance of fractional shares or irregular lots of shares or for
similar purposes, but in such case only an amount equal to the probable
aggregate cash expenditure in connection with the cash redemption shall be
considered "Redeemable Preferred Stock".
"Refunding Loan" means a new Loan made on the day on which an
outstanding Loan is maturing, if and to the extent that the proceeds thereof
are used entirely for the purpose of paying such maturing Loan, excluding any
difference between the amount
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<PAGE> 22
of such maturing Loan and any greater amount being borrowed on such day and
actually either being made available to the relevant Borrower pursuant to
Section 2.02(c) or 3.02(c) or remitted to the relevant Agent as provided in
Section 2.12 or 3.11, in each case as contemplated in Section 2.02(d) or
3.02(d)(v).
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Required Banks" means at any time Banks having at least 66
2/3% of the aggregate amount of the Commitments or, if the Commitments are no
longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding
principal amount of the (i) Syndicated Dollar Loans, (ii) Money Market Loans,
(iii) Syndicated Foreign Currency Loans, and (iv) ITL Loans.
"Required Domestic Banks" means at any time Domestic Banks
having at least 66 2/3% of the aggregate amount of the Dollar Loan Commitments
or, if the Dollar Loan Commitments are no longer in effect, Domestic Banks
holding at least 66 2/3% of the aggregate outstanding principal amount of the
(i) Syndicated Dollar Loans and (ii) Money Market Loans.
"Required Foreign Currency Banks" means at any time Foreign
Currency Banks having at least 66 2/3% of the aggregate amount of the
Syndicated Foreign Currency Loan Commitments and the ITL Loan Commitment or, if
the Syndicated Foreign Currency Loan Commitments and ITL Loan Commitment are no
longer in effect, Foreign Currency Banks holding at least 66 2/3% of the
aggregate outstanding principal amount of the Syndicated Foreign Currency Loans
and ITL Loans.
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<PAGE> 23
"Reuters Screen" shall mean, when used in connection with any
designated page and the London Interbank Offered Rate, the display page so
designated on the Reuters Monitor Money Rates Service (or such other page as
may replace that page on that service for the purpose of displaying rates
comparable to the London Interbank Offered Rate).
"SDI" means Sensormatic Distribution Inc., a Delaware
corporation, and its successors and permitted assigns.
"SEK" means Swedish kroners.
"SFR" means Swiss francs.
"SII" means Sensormatic International, Inc., a Delaware
corporation, and its successors and permitted assigns.
"Stated Maturity Date" means, with respect to any Money Market
Loan, the Stated Maturity Date therefor specified by the Bank in the applicable
Money Market Quote.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by Parent. Each
Borrower other than Parent is a direct or indirect Subsidiary of Parent.
"Syndicated Dollar Loan Notes" means the promissory notes of
each of the Borrowers, substantially in the form of Exhibit A-1, evidencing the
obligation of the Borrowers to repay Syndicated Dollar Loans, together with all
amendments, consolidations, modifications, renewals and supplements thereto.
"Syndicated Dollar Loans" means Base Rate Loans or Euro-Dollar
Loans made pursuant to the terms and conditions set forth in Section 2.01.
"Syndicated Foreign Currency Loan" means a Loan to be made as
a Syndicated Foreign Currency Loan pursuant to the applicable Notice of
Syndicated Foreign Currency Borrowing.
"Syndicated Foreign Currency Loan Commitment" refers to the
commitment of each Foreign Currency Bank to make Syndicated Foreign Currency
Loans hereunder, and means, with respect to each Foreign Currency Bank, the
amount set forth as the Syndicated Foreign Currency Loan Commitment opposite
the name of such Foreign Currency Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Sections 3.07 and 3.08.
"Syndicated Foreign Currency Loan Facility Fee" has the
meaning specified in Section 3.06(a).
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"Syndicated Foreign Currency Loan Notes" means promissory
notes of each of the Borrowers, substantially in the form of Exhibit B-1,
evidencing the obligation of the Borrowers to repay the Syndicated Foreign
Currency Loans, together with all amendments, consolidations, modifications,
renewals and supplements thereto.
"Telerate" shall mean, when used in connection with any
designated page and the Foreign Currency LIBOR/Reference Rate, the display page
designated for LIBOR on the Dow Jones Telerate Service (or such other page as
may replace that page on that service for the purpose of displaying rates
comparable to the Foreign Currency LIBOR/Reference Rate.
"Termination Date" refers to the date on which the Dollar Loan
Commitment or the Syndicated Foreign Currency Loan and ITL Loan Commitment, or
both, terminates pursuant to the provisions of this Agreement, and means August
25, 1995, unless (i) extended subject and pursuant to the provisions of Section
2.05(c), as to Dollar Loans, or Section 3.04(b), as to Syndicated Foreign
Currency Loans and ITL Loans, or (ii) terminated following a Change in Control
pursuant to the provisions of clause (ii) of Section 2.09, as to Dollar Loans,
or clause (ii) of Section 3.08, as to Syndicated Foreign Currency Loans or ITL
Loans, or (iii) terminated pursuant to Section 7.01 following an Event of
Default.
"Third Parties" means all lessees, sublessees, licensees and
other users of the Properties, excluding those users of the Properties in the
ordinary course of Parent's or any Consolidated Subsidiary's business and on a
temporary basis.
"Transferee" has the meaning set forth in Section 10.08(d).
"Unused Dollar Loan Commitment" means at any date, with
respect to any Domestic Bank, an amount equal to its Dollar Loan Commitment
less the aggregate outstanding principal amount of its Syndicated Dollar Loans.
"Unused Syndicated Foreign Currency Loan Commitment" means at
any date, with respect to any Foreign Currency Bank, an amount equal to its
Syndicated Foreign Currency Loan Commitment less the aggregate outstanding
principal amount of its Syndicated Foreign Currency Loans.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national
banking association, and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except
directors' qualifying shares and, in the case of certain Subsidiaries which are
not U.S. Persons, nominal shares held by non-U.S. Persons in accordance with
applicable laws) are at the
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time directly or indirectly owned by Parent. Each Borrower other than Parent
is a Wholly Owned Subsidiary.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by Parent's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of Parent and its Consolidated Subsidiaries delivered to
the Banks unless with respect to any such change concurred in by Parent's
independent public accountants or required by GAAP, in determining compliance
with any of the provisions of this Agreement or any of the other Loan
Documents: (i) Parent shall have objected to determining such compliance on
such basis at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made
(which, if objection is made in respect of the first financial statements
delivered under Section 6.01 hereof, shall mean the financial statements
referred to in Section 5.04).
SECTION 1.03. References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections"
and other Subdivisions are references to articles, exhibits, schedules,
sections and other subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.
SECTION 1.05. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the
plural shall include the singular. Titles of Articles and Sections in this
Agreement are for convenience only, and neither limit nor amplify the
provisions of this Agreement.
ARTICLE II
THE DOMESTIC CREDITS
SECTION 2.01. Commitments to Lend. Each Domestic Bank
severally agrees, on the terms and conditions set forth herein,
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to make Syndicated Dollar Loans to the Borrowers (which may be, at the option
of the Borrowers and subject to the terms and conditions hereof, Base Rate
Loans or Euro-Dollar Loans) from time to time before the Termination Date;
provided that, immediately after each such Syndicated Dollar Loan is made, (i)
the aggregate principal amount outstanding of Syndicated Dollar Loans by such
Domestic Bank shall not exceed the amount of its Dollar Loan Commitment, and
(ii) the aggregate principal amount outstanding of the sum of the Dollar
Equivalent on such date of all ITL Loans by ABN AMRO and all Syndicated Dollar
Loans, Money Market Loans and the aggregate of the Dollar Equivalent on such
date of all Syndicated Foreign Currency Loans by all Banks shall not exceed the
aggregate of all of the Commitments. The Domestic Agent shall be responsible
only for determining compliance with clause (i) of the foregoing proviso. Any
Borrower shall be permitted, subject to the terms and conditions hereof, to
obtain Dollar Loans up to the full aggregate amount of the Adjusted Aggregate
Unused Dollar Loan Commitments, provided, however, that all Syndicated Dollar
Loans and Money Market Loans outstanding to all Borrowers shall constitute a
usage of the Dollar Loan Commitments of all Domestic Banks for purposes of
determining such Aggregate Adjusted Unused Dollar Loan Commitments. Each (A)
Base Rate Borrowing under this Section 2.01 shall be in an aggregate principal
amount of $1,000,000 or any larger multiple of $1,000,000 and (B) Euro- Dollar
Borrowing shall be in an aggregate principal amount of $5,000,000 or any larger
multiple of $1,000,000 (except that any such Syndicated Dollar Borrowings may
be in the aggregate amount of the Unused Dollar Loan Commitments) and shall be
made from the several Domestic Banks ratably in proportion to their respective
Commitments. Any Domestic Bank's Money Market Loans shall not reduce such
Domestic Bank's Dollar Loan Commitment, or be included in calculating its
Unused Dollar Loan Commitment, for purposes of future Borrowings under this
Section 2.01. Within the foregoing limits, the Borrowers may borrow under this
Section 2.01, repay or, to the extent permitted by Section 2.10, prepay
Syndicated Dollar Loans and reborrow under this Section 2.01 at any time before
the Termination Date.
SECTION 2.02. Method of Borrowing Syndicated Dollar Loans.
(a) A Borrower shall give the Domestic Agent notice (a "Notice of Syndicated
Dollar Borrowing"), which shall be substantially in the form of Exhibit F, on
the same day for a Base Rate Borrowing, and at least 2 Euro-Dollar Business
Days' prior to each Euro-Dollar Borrowing (all notices being effective on the
day delivered so long as the Domestic Agent shall have received same prior to
(x) 12.00 P.M., Atlanta, Georgia time, for a Base Rate Borrowing, and (y) 11:00
A.M., Atlanta, Georgia time, for a Euro-Dollar Borrowing) specifying:
(i) the date of such Borrowing, which shall be
a Domestic Business Day in the case of a Base Rate Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
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(ii) the aggregate amount of such Borrowing,
(iii) whether the Syndicated Dollar Loans
comprising such Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, and
(iv) in the case of a Euro-Dollar Borrowing,
the duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Syndicated Dollar
Borrowing, the Domestic Agent shall promptly notify each Domestic Bank of the
contents thereof and of such Domestic Bank's ratable share of such Borrowing
and such Notice of Syndicated Dollar Borrowing shall not thereafter be
revocable by such Borrower.
(c) Not later than (x) 1:00 P.M. (Atlanta, Georgia,
time), for a Base Rate Borrowing, and (y) 10:00 A.M. (Atlanta, Georgia time)
for a Euro-Dollar Borrowing, in each case on the date of each Syndicated Dollar
Borrowing, each Domestic Bank shall (except as provided in paragraph (d) of
this Section) make available its ratable share of such Syndicated Dollar
Borrowing, in Federal or other funds immediately available in Atlanta, Georgia,
to the Domestic Agent at its address referred to in Section 10.01. Unless the
Domestic Agent determines that any applicable condition specified in Article
IV has not been satisfied, the Domestic Agent will make the funds so received
from the Domestic Banks available to the Borrowers at the Domestic Agent's
aforesaid address not later than 2:00 P.M. (Atlanta, Georgia time) on the date
of any relevant Syndicated Dollar Borrowing. Unless the Domestic Agent
receives notice from a Domestic Bank, at the Domestic Agent's address referred
to in or specified pursuant to Section 10.01, (i) in the case of a Base Rate
Borrowing, no later than 2:00 P.M. (Atlanta, Georgia time) on the same day as
such Base Rate Borrowing and (ii) in the case of any other type of Syndicated
Dollar Borrowing, no later than _3:00 P.M. (Atlanta, Georgia time) on the
Domestic Business Day before the date of a Syndicated Dollar Borrowing stating
that such Domestic Bank will not make a Loan in connection with such Syndicated
Dollar Borrowing, the Domestic Agent shall be entitled to assume that such
Domestic Bank will make a Loan in connection with such Syndicated Dollar
Borrowing and, in reliance on such assumption, the Domestic Agent may (but
shall not be obligated to) make available such Domestic Bank's ratable share of
such Syndicated Dollar Borrowing to the Borrower for the account of such
Domestic Bank. If the Domestic Agent makes any such Domestic Bank's ratable
share of a Borrowing available to the Borrower, the Domestic Agent shall
promptly notify (which notice may be telephonic) the Borrower of the identity
of the Domestic Bank for whom such funds were advanced and the amount of such
advance. The Domestic Agent shall promptly notify (which notice may be
telephonic) the Borrower of the details of any notice received from any
Domestic Bank stating that any such Domestic Bank does not intend to make its
ratable share of funds available
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in connection with any relevant Borrowing. If the Domestic Agent makes such
Domestic Bank's ratable share available to the Borrower and such Domestic Bank
does not in fact make its ratable share of such Syndicated Dollar Borrowing
available on such date, the Domestic Agent shall be entitled to recover such
Domestic Bank's ratable share from such Domestic Bank or, promptly upon request
therefor, the Borrower, together with interest thereon for each day during the
period from the date of such Syndicated Dollar Borrowing until such sum shall
be paid in full at a rate per annum equal to the rate at which the Domestic
Agent determines that it obtained (or could have obtained) overnight Federal
funds to cover such amount for each such day during such period, provided that
any such payment by the Borrower of such Domestic Bank's ratable share and
interest thereon shall be without prejudice to any rights that the Borrower may
have against such Domestic Bank. If the Domestic Agent does not exercise its
option to advance funds for the account of such Domestic Bank, it shall
forthwith notify the Borrower of such decision.
(d) If any Domestic Bank makes a new Syndicated Dollar
Loan hereunder on a day on which the Borrower is to repay all or any part of an
outstanding Syndicated Dollar Loan from such Domestic Bank, such Domestic Bank
shall apply the proceeds of its new Syndicated Dollar Loan to make such
repayment as a Refunding Loan and only an amount equal to the difference (if
any) between the amount being borrowed and the amount of such Refunding Loan
shall be made available by such Domestic Bank to the Domestic Agent as provided
in paragraph (c) of this Section, or remitted by the Borrower to the Domestic
Agent as provided in Section 2.12, as the case may be.
(e) Notwithstanding anything to the contrary contained in
this Agreement, including, without limitation Section 2.01 and Section 2.03, no
Fixed Rate Borrowing may be made if there shall have occurred a Default or an
Event of Default, which Default or Event of Default shall not have been cured
or waived.
(f) In the event that a Notice of Syndicated Dollar
Borrowing fails to specify whether the Syndicated Dollar Loans comprising such
Syndicated Dollar Borrowing are to be Base Rate Loans or Euro-Dollar Loans,
such Syndicated Dollar Loans shall be made as Base Rate Loans. If the Borrower
is otherwise entitled under this Agreement to repay any Syndicated Dollar Loans
maturing at the end of an Interest Period applicable thereto with the proceeds
of a new Syndicated Dollar Borrowing, and the Borrower fails to repay such
Syndicated Dollar Loans using its own moneys and fails to give a Notice of
Syndicated Dollar Borrowing in connection with such new Syndicated Dollar
Borrowing, a new Syndicated Dollar Borrowing shall be deemed to be made on the
date such Syndicated Dollar Loans mature in an amount equal to the principal
amount of the Syndicated Dollar Loans so maturing, and the Syndicated Dollar
Loans comprising such new Syndicated Dollar Borrowing shall be Base Rate Loans.
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(g) Notwithstanding anything to the contrary contained
herein, including, without limitation Section 2.01 and Section 2.03, there
shall not be more than 8 Euro-Dollar Loans and/or Money Market Loans
outstanding at any given time.
SECTION 2.03. Money Market Loans. (a) In addition to making
Syndicated Dollar Borrowings, the Borrower may, as set forth in this Section
2.03, request the Domestic Banks to make offers to make Money Market Dollar
Borrowings available to the Borrowers. The Domestic Banks may, but shall have
no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.03, provided that:
(i) there may be no more than 8 Euro-Dollar Loans and/or
Money Market Loans outstanding at any given time;
(ii) the aggregate principal amount of all Money Market
Loans, together with the aggregate principal amount of all Syndicated
Dollar Loans, at any one time outstanding shall not exceed the
aggregate amount of the Dollar Commitments of all of the Domestic
Banks at such time; and
(iii) the aggregate principal amount of all Money Market
Loans, together with the aggregate principal amount of all Syndicated
Dollar Loans and the aggregate of the Dollar Equivalent on such date
of all of all Syndicated Foreign Currency Loans and ITL Loans, at any
one time outstanding shall not exceed the aggregate amount of the
Commitments of all of the Banks at such time, except as expressly
permitted by clause (i) of Section 3.01(a).
(b) When a Borrower wishes to request offers to make
Money Market Loans, it shall give the Domestic Agent (which shall promptly
notify the Domestic Banks) notice substantially in the form of Exhibit J hereto
(a "Money Market Quote Request") so as to be received no later than 11:00 A.M.
(Atlanta, Georgia time) at least 1 Domestic Business Day prior to the date of
the Money Market Dollar Borrowing proposed therein (or such other time and date
as such Borrower and the Domestic Agent, with the consent of the Required
Domestic Banks, may agree), specifying:
(i) the proposed date of such Money Market Dollar
Borrowing, which shall be a Domestic Business Day (the "Borrowing
Date");
(ii) the maturity date (or dates) (each a "Stated Maturity
Date") for repayment of each Money Market Loan to be made as part of
such Money Market Dollar Borrowing (which Stated Maturity Date shall
be that date occurring either 7 days, 14 days, 30 days, or any other
number of days greater than 30 days but less than 180 days from the
date of such Money Market Dollar Borrowing); provided, that the Stated
Maturity Date for any Money Market Loan may not extend
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beyond the Termination Date (as in effect on the date of such Money
Market Quote Request); and
(iii) the aggregate amount of principal to be received by
the Borrower as a result of such Money Market Dollar Borrowing, which
shall be at least $5,000,000 (and in larger integral multiples of
$1,000,000) but shall not cause the limits specified in Section
2.03(a) to be violated.
A Borrower may request offers to make Money Market Loans having up to 3
different Stated Maturity Dates in a single Money Market Quote Request;
provided, that the request for each separate Stated Maturity Date shall be
deemed to be a separate Money Market Quote Request for a separate Money Market
Dollar Borrowing. Except as otherwise provided in the preceding sentence,
after the first Money Market Quote Request has been given hereunder, no Money
Market Quote Request shall be given until at least 5 Domestic Business Days
after all prior Money Market Quote Requests have been fully processed by the
Domestic Agent, the Domestic Banks and the Borrower pursuant to this Section
2.03.
(c) (i) Each Bank may, but shall have no obligation to,
submit a response containing an offer to make a Money Market Loan substantially
in the form of Exhibit K hereto (a "Money Market Quote") in response to any
Money Market Quote Request; provided, that, if the Borrower's request under
Section 2.03(b) specified more than 1 Stated Maturity Date, such Bank may, but
shall have no obligation to, make a single submission containing a separate
offer for each such Stated Maturity Date and each such separate offer shall be
deemed to be a separate Money Market Quote. Each Money Market Quote must be
submitted to the Domestic Agent not later than 10:00 A.M. (Atlanta, Georgia
time) on the Borrowing Date; provided that any Money Market Quote submitted by
Wachovia may be submitted, and may only be submitted, if Wachovia notifies the
Borrower of the terms of the offer contained therein not later than 9:45 A.M.
(Atlanta, Georgia time) on the Borrowing Date (or 15 minutes prior to the time
that the other Domestic Banks must have submitted their respective Money Market
Quotes). Subject to Section 6.01, any Money Market Quote so made shall be
irrevocable except with the written consent of the Domestic Agent given on the
instructions of the Borrower.
(ii) Each Money Market Quote shall specify:
(A) the proposed Borrowing Date and the Stated
Maturity Date therefor;
(B) the principal amounts of the Money Market
Loan which the quoting Bank is willing to make for the
applicable Money Market Quote, which principal amounts (x) may
be greater than or less than the Commitment of the quoting
Bank, (y) shall be at least $1,000,000 or a larger integral
multiple of $500,000, and (z) may not
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exceed the principal amount of the Money Market Borrowing for
which offers were requested;
(C) the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) offered
for each such Money Market Loan, (such amounts being
hereinafter referred to as the "Money Market Rate"); and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Domestic Agent and the Borrower, no
Money Market Quote shall contain qualifying, conditional or similar
language or propose terms other than or in addition to those set forth
in the applicable Money Market Quote Request (other than setting forth
the maximum principal amounts of the Money Market Loan which the
quoting Bank is willing to make for the applicable Interest Period)
and, in particular, no Money Market Quote may be conditioned upon
acceptance by the Borrower of all (or some specified minimum) of the
principal amount of the Money Market Loan for which such Money Market
Loan is being made.
(d) The Domestic Agent shall as promptly as practicable
after the Money Market Quote is submitted (but in any event not later than
11:00 A.M. (Atlanta, Georgia time)) on the Borrowing Date, notify the Borrower
of the terms (i) of any Money Market Quote submitted by a Bank that is in
accordance with Section 2.03(c) and (ii) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request.
Any such subsequent Money Market Quote shall be disregarded by the Domestic
Agent unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Domestic Agent's
notice to the Borrower shall specify (A) the principal amounts of the Money
Market Dollar Borrowing for which offers have been received and (B) the
respective principal amounts and Money Market Rates so offered by each Bank
(identifying the Bank that made each Money Market Quote).
(e) Not later than 12:00 P.M. (noon) (Atlanta, Georgia
time) on the Borrowing Date, the Borrower shall notify the Domestic Agent of
its acceptance or nonacceptance of the offers so notified to it pursuant to
Section 2.03(d) and the Domestic Agent shall promptly notify each affected
Bank. In the case of acceptance, such notice shall specify the aggregate
principal amount of offers (for each Stated Maturity Date) that are accepted.
The Borrower may accept any Money Market Quote in whole or in part; provided
that:
(i) the aggregate principal amount of each Money Market
Dollar Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
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(ii) the aggregate principal amount of each Money Market
Loan comprising a Money Market Dollar Borrowing shall be at least
$1,000,000 (and in larger multiples of $500,000) but shall not cause
the limits specified in Section 2.03(a) to be violated;
(iii) acceptance of offers may only be made in ascending
order of Money Market Rates; and
(iv) the Borrower may not accept any offer where the
Domestic Agent has advised the Borrower that such offer fails to
comply with Section 2.03(c)(ii) or otherwise fails to comply with the
requirements of this Agreement (including without limitation, Section
2.03(a)).
If offers are made by 2 or more Domestic Banks with the same Money Market Rates
for a greater aggregate principal amount than the amount in respect of which
offers are accepted for the related Stated Maturity Date, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Borrower among such Domestic Banks as nearly as possible in
proportion to the aggregate principal amount of such offers. Determinations by
the Borrower of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(f) Any Domestic Bank whose offer to make any Money
Market Loan has been accepted shall, not later than 1:00 P.M. (Atlanta,
Georgia time) on the Borrowing Date, make the appropriate amount of such Money
Market Loan available to the Domestic Agent at its address referred to in
Section 10.01 in immediately available funds. The amount so received by the
Domestic Agent shall, subject to the terms and conditions of this Agreement, be
made available to the Borrower on such date by depositing the same, in
immediately available funds, not later than 2:00 P.M. (Atlanta, Georgia time),
in an account of such Borrower maintained with Wachovia.
SECTION 2.04. Notes. (a) The Syndicated Dollar Loans of each
Domestic Bank shall be evidenced by a single Syndicated Dollar Loan Note
executed by each Borrower payable to the order of such Domestic Bank for the
account of its Lending Office in an amount equal to the original principal
amount of such Domestic Bank's Dollar Loan Commitment.
(b) The Money Market Loans made by any Domestic Bank to
the Borrower shall be evidenced by a single Money Market Loan Note executed by
each Borrower payable to the order of such Domestic Bank for the account of its
Lending Office in an amount equal to the original principal amount of the
aggregate Dollar Loan Commitments.
(c) Upon receipt of each Domestic Bank's Notes pursuant
to Section 3.01, the Domestic Agent shall deliver such
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Notes to such Domestic Bank. Each Domestic Bank shall record, and prior to any
transfer of its Syndicated Dollar Loan Notes and Money Market Loan Notes shall
endorse on the schedules forming a part thereof appropriate notations to
evidence, the date, amount and maturity of, and effective interest rate for,
each Syndicate Loan and Money Market Loan made by it, the date and amount of
each payment of principal made by the Borrower with respect thereto, and such
schedules of each such Domestic Bank's Notes shall constitute rebuttable
presumptive evidence of the respective principal amounts owing and unpaid on
such Domestic Bank's Notes; provided, that the failure of any Domestic Bank to
make any such recordation or endorsement shall not affect the obligation of the
Borrowers hereunder or under the Syndicated Loan Notes or Money Market Loan
Notes or the ability of any Domestic Bank to assign its Notes. Each Domestic
Bank is hereby irrevocably authorized by the Borrowers so to endorse its
Syndicated Loan Notes and Money Market Loan Notes and to attach to and make a
part of any such Note a continuation of any such schedule as and when required.
In order to verify the Dollar Loans outstanding from time to time, at the
request of the Borrowers, the Domestic Agent shall furnish the Borrowers with
its records of transactions under this Agreement, in reasonable detail.
SECTION 2.05. Maturity of Dollar Loans. (a) Each Syndicated
Dollar Loan included in any Syndicated Dollar Borrowing shall mature, and the
principal amount thereof shall be due and payable, on the last day of the
Interest Period applicable to such Borrowing.
(b) Each Money Market Loan included in any Money Market
Borrowing shall mature, and the principal amount thereof shall be due and
payable upon the Stated Maturity Date therefor.
(c) Notwithstanding the foregoing, the outstanding
principal amount of the Dollar Loans, together with all accrued but unpaid
interest thereon, if any, shall be due and payable on August 25, 1995, unless
the Termination Date is otherwise extended by the Domestic Agent and the
Domestic Banks, in their sole and absolute discretion. Upon the written
request of the Borrower, which request shall be delivered to the Domestic
Agent, with a copy to the Foreign Currency Agent and each of the Domestic
Banks, at least 60 days prior to the Termination Date, the Domestic Agent and
the Domestic Banks shall have the option (without any obligation whatsoever so
to do) of extending the Termination Date for an additional 364-day period,
provided, that, in no event shall the Termination Date be extended beyond
August 25, 1999. In connection with each such extension request, (i) each Bank
shall undertake a bona fide credit analysis of the Borrowers utilizing current
information on financial condition and trends; provided, that, no such credit
analysis shall be required of a Bank that elects not to extend the Termination
Date and (ii) the terms of any extension of the Termination Date shall be
independently negotiated among the Borrowers, the Domestic
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<PAGE> 34
Banks and the Domestic Agent at the time of the extension; provided, that, the
terms of the extension may be the same as those in effect prior to any
extension should the Borrowers, the Domestic Banks and the Domestic Agent so
agree; provided, further, that, should the terms of the extension be other than
those in effect prior to the extension, then the Loan Documents will be amended
to the extent necessary to incorporate any such different terms. In the event
that the Domestic Agent or a Bank chooses to extend the Termination Date for
such an additional 364-day period, notice shall be given by the Domestic Agent
or Bank to the Borrowers and the Agents at least 30 days prior to the relevant
Termination Date, but such notice may not be given more than 45 days prior to
such relevant Termination Date; provided, that, the Termination Date shall not
be extended with respect to the Domestic Agent or any of the Domestic Banks
(regardless of whether any relevant Domestic Bank has delivered a favorable
extension notice) unless the Domestic Agent and the Required Domestic Banks
have delivered favorable extension notices and are willing to extend the
Termination Date and either the (x) remaining Domestic Banks shall purchase
ratable assignments (without any obligation so to do) from each Bank that is
unwilling to extend the Termination Date, in accordance with their respective
percentage of the remaining Commitments; provided, that, such remaining
Domestic Banks shall be provided such opportunity (which opportunity shall
allow such Domestic Banks at least 5 Domestic Business Days in which to make a
decision) prior to the Borrowers finding another bank pursuant to the
immediately succeeding clause (y); provided, further, that, should any of the
remaining Domestic Banks elect not to purchase such an assignment, then, such
other remaining Domestic Banks shall be entitled to purchase an assignment from
any terminating Bank which includes the ratable interest that was otherwise
available to such non-purchasing remaining Domestic Bank or Domestic Banks, as
the case may be, (y) the Borrowers may, at their option, find another bank,
acceptable to the Agents, willing to accept an assignment from such terminating
Bank (in the form of an Assignment and Acceptance) or (z) the Borrowers shall
reduce the Dollar Loan Commitments on the then scheduled Termination Date in an
amount equal to the sum of the Dollar Loan Commitments of all such terminating
Domestic Banks; and provided, further, that should the Domestic Agent not elect
to extend the Termination Date but the Required Domestic Banks do so elect, the
Required Domestic Banks shall select a replacement Domestic Agent pursuant to
Section 8.09. In the event that the Borrowers elect to terminate a portion of
the Dollar Loan Commitments as provided in clause (z) of this paragraph, at any
time after the date of such termination and prior to the Termination Date (as
extended) if the Borrowers find a replacement bank or financial institution
acceptable to the Domestic Agent to become a party to this Agreement with a
Dollar Loan Commitment equal to all or a portion of the Dollar Loan Commitment
of the Domestic Bank whose Dollar Loan Commitment was so terminated, then upon
such new bank or financial institution's execution and delivery of a copy of
this Agreement, and funding to the Domestic Agent (for pro rata
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distribution to the other Domestic Banks) of its ratable share of any
outstanding Syndicated Dollar Loans, such bank or financial institution shall
become a "Domestic Bank" hereunder, and the aggregate amount of the Dollar Loan
Commitments shall increase by the amount of the Dollar Loan Commitment of such
new Domestic Bank. The Domestic Agent agrees to cooperate with the Borrowers to
find a replacement bank or financial institution in any of the circumstances
for such replacement contemplated by this Section 2.05(c).
SECTION 2.06. Interest Rates. (a) "Applicable Margin" means
(i) for any Base Rate Loan, 0.00% and (ii) for any Euro-Dollar Loan, 0.30%.
(b) Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such
Base Rate Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day plus the Applicable Margin. Such interest shall be
payable for each Interest Period on the last day thereof. Any overdue principal
of and, to the extent permitted by applicable law, overdue interest on any Base
Rate Loan shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus the
applicable Adjusted London Interbank Offered Rate for such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than 3 months, at intervals of 3 months
after the first day thereof. Any overdue principal of and, to the extent
permitted by law, overdue interest on any Euro-Dollar Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan,the
rate per annum determined on the basis of the offered rate for deposits in
Dollars of amounts equal or comparable to the principal amount of such
Euro-Dollar Loan offered for a term comparable to such Interest Period, which
rates appear on the Reuters Screen LIBO Page as of 11:00 A.M., London time, 2
Euro-Dollar Business Days prior to the first day of such Interest Period,
provided that (i) if more than one such offered rate appears on the Reuters
Screen LIBO Page, the "London Interbank Offered Rate" will be the arithmetic
average of such
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offered rates; (ii) if no such offered rates appear on such page, the "London
Interbank Offered Rate" for such Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates
quoted by not less than 2 major banks in New York City, selected by the
Domestic Agent, at approximately 10:00 A.M., New York City time, 2 Euro-Dollar
Business Days prior to the first day of such Interest Period, for deposits in
Dollars offered to leading European banks for a period comparable to such
Interest Period in an amount comparable to the principal amount of such
Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) After the occurrence and during the continuance of an
Event of Default, the principal amount of the Syndicated Dollar Loans and Money
Market Loans (and, to the extent permitted by applicable law, all accrued
interest thereon) may, at the election of the Required Domestic Banks, bear
interest at the Default Rate.
SECTION 2.07. Fees. (a) The Borrowers shall pay to the
Domestic Agent for the ratable account of each Bank a facility fee (the "Dollar
Loan Facility Fee") on the maximum amount of the aggregate Dollar Loan
Commitments in effect for any relevant period, irrespective of usage, in an
amount equal to 0.15% per annum. The Dollar Loan Facility Fee shall accrue at
all times from and including the Closing Date to but excluding the Termination
Date and shall be payable, in arrears, on each November 1, February 1, May 1,
August 1 and on the Termination Date, commencing November 1, 1994 (on which
date the fees for the period from the Closing Date through October 31, 1994
shall be prorated).
(b) The Borrowers shall pay to the Domestic Agent, for
the account and sole benefit of the Domestic Agent, such fees and other amounts
at such times as set forth in the Agents' Letter Agreement.
SECTION 2.08. Optional Termination or Reduction of Dollar Loan
Commitments. The Borrowers may, upon at least 3 Domestic Business Days' notice
to the Domestic Agent (which
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notice the Domestic Agent shall promptly forward to the Foreign Currency Agent
and the Domestic Banks), terminate at any time, or proportionately reduce the
Unused Dollar Loan Commitments from time to time by an aggregate amount of at
least $5,000,000, or any larger multiple of $1,000,000. If the Dollar Loan
Commitments are terminated in their entirety, all outstanding principal and
accrued and unpaid interest (as provided in Section 2.11) and accrued fees (as
provided in Section 2.07) shall be due and payable on the effective date of
such termination.
SECTION 2.09. Other Terminations of Dollar Loan Commitments;
Change in Control. (a) The Dollar Loan Commitments shall terminate on the
Termination Date, in which case any Dollar Loans (together with accrued
interest thereon, and all accrued fees, as provided in Section 2.07) then
outstanding shall be due and payable on such date.
(b) The Parent shall give notice to the Domestic Agent of the
occurrence of any Change of Control promptly after the senior management of the
Parent obtains knowledge thereof, and shall offer to terminate the Dollar Loan
Commitments of all of the Domestic Banks on a date specified in such notice,
which shall be not less than 30 nor more than 45 days after the date of such
notice. Such notice also shall specify the date by which each Domestic Bank
that wishes to accept such offer must deliver notice to the Parent (with a copy
to the Domestic Agent) of such acceptance, which date shall be no later than 10
days prior to the date of the proposed termination. If any Domestic Bank shall
accept such offer, then on the date so specified, the Dollar Loan Commitment of
such Domestic Bank shall terminate on the date so specified in the Parent's
notice (which date shall become the Termination Date for those Domestic Banks
for all purposes hereunder), and any Dollar Loans (together with accrued
interest thereon, and all accrued fees, as provided in Section 2.07) then
outstanding shall be due and payable on such date.
SECTION 2.10. Optional Prepayments. (a) The Borrowers may,
upon at least 1 Domestic Business Day's notice to the Domestic Agent (which
notice the Domestic Agent shall promptly forward to the Domestic Banks) and
payment to the Domestic Agent, for the ratable benefit of the Domestic Banks,
of any amounts required by Section 9.05, prepay any Dollar Borrowing in whole
or in part at any time, in minimum amounts of $500,000, by paying the principal
amount to be prepaid together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied to prepay ratably
the Dollar Loans of the several Domestic Banks included in such relevant
Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to
this Section 2.10, the Domestic Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share of such prepayment and such
notice shall not thereafter be revocable by the Borrowers.
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SECTION 2.11. Mandatory Prepayments. On each date on which
the Dollar Loan Commitments are reduced pursuant to Sections 2.08 or 2.09, the
Borrowers shall repay or prepay such principal amount of the outstanding Dollar
Loans (together with interest accrued thereon), as may be necessary so that
after such payment the aggregate unpaid principal amount of the Dollar Loans
does not exceed the amount of the aggregate Dollar Loan Commitments as then
reduced.
SECTION 2.12. General Provisions as to Payments. (a) The
Borrowers shall make each payment of principal of, and interest on, the Dollar
Loans and of the Dollar Loan Facility Fees not later than 1:00 P.M. (Atlanta,
Georgia time) on the date when due, without offset, in Federal or other funds
immediately available in Atlanta, Georgia, to the Domestic Agent at its address
referred to in Section 8.01. The Domestic Agent will promptly distribute to
each Domestic Bank (and, following the occurrence and during the continuance of
an Event of Default, for application by such Domestic Bank against amounts
owing to such Domestic Bank by the Borrowers in such order as such Domestic
Bank shall elect; provided, that in no event shall amounts paid by one Borrower
(other than Parent) be applied to the payment of any amount owed by any other
Borrower) its ratable share of each such payment received by the Domestic Agent
for the account of the Domestic Banks; provided, that, should the Domestic
Agent actually receive any relevant payment from the Borrowers prior to 1:00
P.M. (Atlanta, Georgia time) on the date when due, the Domestic Agent shall
initiate the distribution process (by wire or otherwise) to such Domestic Bank
of each such Domestic Bank's ratable portion of any payment received by the
Domestic Agent prior to 5:00 P.M. (Atlanta, Georgia time).
(b) Whenever any payment of principal of, or interest on,
the Base Rate Loans or Money Market Loans or Dollar Loan Facility Fees shall be
due on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business Day.
(c) All payments of principal, interest and all other
amounts to be made by a Borrower pursuant to this Agreement with respect to any
Dollar Loan and the Dollar Loan Facility Fee shall be paid without deduction
for, and free from, any tax, imposts, levies, duties, deductions, or
withholdings of any nature now or at anytime hereafter imposed by any
governmental authority or by any taxing authority thereof or therein excluding
in the case of each Domestic Bank, taxes imposed on or measured by its net
income, and franchise taxes imposed on it, by the jurisdiction
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under the laws of which such Domestic Bank (as the case may be) is organized or
any political subdivision thereof and, in the case of each Domestic Bank, taxes
imposed on or measured by its income, and franchise taxes imposed on it, by the
jurisdiction of such Domestic Bank's applicable Lending Office or any political
subdivision thereof and other than any tax arising by reason of a connection
between the Domestic Agent or such Domestic Bank or such Domestic Bank's
Lending Office and the jurisdiction imposing such tax other than the making and
performance by the Domestic Agent or such Domestic Bank of this Agreement (all
such non-excluded taxes, imposts, levies, duties, deductions or withholdings of
any nature being "Taxes"). In the event that a Borrower is required by
applicable law to make any such withholding or deduction of Taxes with respect
to any Dollar Loan or Dollar Loan Facility Fee or other amount, such Borrower
shall pay such deduction or withholding to the applicable taxing authority,
shall promptly furnish to any Domestic Bank in respect of which such deduction
or withholding is made all receipts and other documents evidencing such payment
and shall pay to such Domestic Bank additional amounts as may be necessary in
order that the amount received by such Domestic Bank after the required
deduction or withholding shall equal the amount such Domestic Bank would have
received had no such deduction or withholding been made.
Each Domestic Bank which is not chartered and organized under
the laws of the United States of America or a state thereof (each a "Non-U.S.
Domestic Bank") agrees, as soon as practicable after request by it of a request
by a Borrower to do so, to file all appropriate forms and take other
appropriate action to obtain a certificate or other appropriate document from
the appropriate governmental authority in the jurisdiction imposing the
relevant taxes, establishing that it is entitled to receive payments of
principal and interest under this Agreement and the Syndicated Dollar Loan
Notes and Money Market Loan Notes without deduction and free from withholding
of any Taxes imposed by such jurisdiction; provided, that, if it is unable, by
virtue of any applicable law, rule or regulation, to establish such exemption
or to file such forms and, in any event, during such period of time as such
request for exemption is pending, the Borrowers shall nonetheless remain
obligated under the terms of the immediately preceding paragraph. Without
limiting the foregoing, each Non-U.S. Domestic Bank agrees to deliver to the
Borrowers, promptly upon any request therefor from time to time, such forms,
documents and other information as may be required by applicable law from time
to time to establish that payment to such Non-U.S. Domestic Bank hereunder or
under the Notes or the Parent Guaranty are exempt from Taxes. Without limiting
the generality of the foregoing, each Non-U.S. Domestic Bank agrees, on the
date of its execution of this Agreement (or, in the case of an assignee, on the
date on which such assignee becomes a party to this Agreement), to deliver to
the Borrowers two accurate and duly completed and executed Internal Revenue
Service Form 4224 or 1001 (as applicable), together with Internal Revenue
Service Forms W-8
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or W-9, as appropriate, establishing that such Non-U.S.Domestic Bank is
entitled to a complete exemption from all Taxes imposed by the federal
government of the United States by way of withholding, including without
limitation, all backup withholding ("U.S. Withholding Taxes"). Thereafter,
from time to time (a) upon any change by a Domestic Bank of its Lending Office,
(b) before or promptly after any event occurs (including, without limitation,
the passing of time) requiring a change in or update of the most recent Form
4224 or 1001 previously delivered by such Domestic Bank, or (c) upon the
reasonable request of any of the Borrowers from time to time, deliver to each
Borrower two accurate and duly completed and executed Forms 4224 or 1001 (as
applicable) (together with Forms W-8 or W-9, as aforesaid) in replacement for
the forms previously delivered by such Domestic Bank, establishing that such
bank is entitled to an exemption in whole or in part from all U.S. Withholding
Taxes except to the extent that a change in law has rendered all such forms
inapplicable to such Non-U.S. Domestic Bank.
If any such Domestic Bank shall fail to timely deliver any such forms,
documents or other information required to be delivered by it pursuant to the
foregoing for 30 days after request therefor, the Borrowers may make deductions
or withholdings of taxes and shall not be obligated to pay any additional
amounts in respect thereof to such Domestic Bank which would not have been
payable had such forms, documents or other information been delivered.
If the Internal Revenue Service or any other taxation
authority in the United States or in any other jurisdiction in which a Borrower
may be incorporated successfully asserts a claim that such Non-U.S. Domestic
Bank or any Borrower did not properly withhold tax from amounts paid to or for
the account of any Non-U.S. Domestic Bank or its participant (because the
appropriate form was not properly executed, or because such Non-U.S. Domestic
Bank failed to notify the Borrowers of a change in circumstances which rendered
the exemption from (or reduction in) U.S. Withholding Taxes ineffective), such
Domestic Bank, shall indemnify the Borrowers fully for all amounts paid,
directly or indirectly, by any of the Borrowers as tax or otherwise, including,
without limitation, penalties and interest.
In the event any Domestic Bank receives a refund from the
authority to which such Taxes were paid of any Taxes paid by a Borrower
pursuant to this Section 2.12(c), it will pay to such Borrower the amount of
such refund promptly upon receipt thereof; provided, however, if at any time
thereafter it is required to return such refund, such Borrower shall promptly
repay to it the amount of such refund.
Nothing in this Section shall require any Domestic Bank to
disclose any information about its tax affairs or interfere with, limit or
abridge the right of any Domestic Bank to arrange its tax affairs in any manner
in which it desires.
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Without prejudice to the survival of any other agreement of
the Borrowers hereunder, the agreements and obligations of the Borrowers and
the Domestic Banks contained in this Section 2.12(c) shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions (i) shall be made based upon the circumstances of
such Participant, Assignee or other Transferee (subject to Section 10.08(e)),
and (ii) constitute a continuing agreement and shall survive for a period of
three years after the termination of this Agreement and the payment in full or
cancellation of the Syndicated Dollar Loan Notes and the Money Market Loan
Notes.
SECTION 2.13. Computation of Interest and Fees. Interest on
the Dollar Loans shall be computed on the basis of a year of (i) 365/366 days
as to Base Rate Loans, and (ii) 360 days as to all other Dollar Loans and paid
for the actual number of days elapsed, calculated as to each Interest Period or
Stated Maturity Date, as applicable, from and including the first day thereof
to but excluding the last day thereof. The Dollar Loan Facility Fee and the
Syndicated Foreign Currency Loan Facility Fee and any other fees payable
hereunder from time to time shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day
but excluding the last day).
ARTICLE III
THE FOREIGN CREDITS
SECTION 3.01. Commitments to Lend. (a) Each Foreign Currency
Bank severally agrees, on the terms and conditions set forth herein, to make
Syndicated Foreign Currency Loans to the Borrowers (which may be, at the option
of the Borrowers and subject to the terms and conditions hereof, Fixed Rate
Loans in any of the Foreign Currencies other than ITL, subject to the
availability thereof) from time to time before the Termination Date; provided
that, immediately after each such Syndicated Foreign Currency Loan is made, (i)
the aggregate outstanding of its share of the Dollar Equivalent on such date of
all Syndicated Foreign Currency Loans by such Foreign Currency Bank shall not
exceed the amount of its Syndicated Foreign Currency Loan Commitment, except
that, solely in connection with a Refunding Loan, if by virtue of currency rate
fluctuations since the maturing Loan was made, the Dollar Equivalent of the
amount of the Refunding Loan on the date the Refunding Loan is made would cause
the aggregate outstanding of its share of the Dollar Equivalent on such date of
all Syndicated Foreign Currency Loans by such Foreign Currency Bank to exceed
the amount of its Syndicated Foreign Currency Loan Commitment by an amount
which is less than 2.5% of such Syndicated Foreign Currency Loan Commitment,
the Foreign Currency Agent may, in its sole and absolute discretion, permit
such a condition to exist, and (ii) the aggregate principal amount outstanding
of the sum of the
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Dollar Equivalent on such date of all ITL Loans by ABN AMRO and all Syndicated
Dollar Loans, Money Market Loans and the aggregate of the Dollar Equivalent on
such date of all Syndicated Foreign Currency Loans by all Banks shall not
exceed the aggregate of all of the Commitments, except as expressly permitted
by clause (i) above. With respect to Syndicated Foreign Currency Loans, the
Foreign Currency Agent shall be responsible only for determining compliance
with clause (i) of the foregoing proviso. Any Borrower shall be permitted,
subject to the terms and conditions hereof, to obtain Syndicated Foreign
Currency Loans in an approximate Dollar Equivalent on such date up to the full
aggregate amount of the Unused Syndicated Foreign Currency Loan Commitments of
all Foreign Currency Banks. The aggregate of the Dollar Equivalent on such date
outstanding of all Syndicated Foreign Currency Loans by each Foreign Currency
Bank shall be deemed to be the amount of the Syndicated Foreign Currency Loan
of such Foreign Currency Bank outstanding for the purpose of calculating its
Unused Syndicated Foreign Currency Loan Commitment on the date of disbursement.
Each Borrowing under this Section with respect to a Foreign Currency shall be
in a minimum and integral multiple of the amount agreed upon between the
relevant Borrower and the Foreign Currency Agent before the delivery of the
relevant Notice of Foreign Currency Borrowing, which will in any event
approximate in the relevant Foreign Currency the Dollar Equivalent on the date
which is 3 Foreign Currency Business Days prior to the date of Borrowing of
$250,000 or any larger multiple of $100,000 in excess of $250,000 (except that
any such Borrowing may be in the approximate aggregate amount of the Unused
Syndicated Foreign Currency Loan Commitments) and shall be made from the
several Foreign Currency Banks ratably in proportion to their respective
Syndicated Foreign Currency Loan Commitments. Within the foregoing limits, the
Borrowers may borrow under this Section, repay or, to the extent permitted by
Section 3.09, prepay Syndicated Foreign Currency Loans and reborrow under this
Section at any time before the Termination Date.
(b) ABN AMRO agrees, on the terms and conditions set forth
herein, to make ITL Loans to the Borrowers (which may be, at the option of the
Borrowers and subject to the terms and conditions hereof, ITL Base Rate Loans
or ITL Fixed Rate Loans in ITL, subject to the availability thereof) from time
to time before the Termination Date; provided that, immediately after each such
ITL Loan is made, (i) the aggregate outstanding of the Dollar Equivalent on
such date of all ITL Loans by such Foreign Currency Bank shall not exceed the
amount of its ITL Loan Commitment, and (ii) the aggregate principal amount
outstanding of the sum of the Dollar Equivalent on such date of all ITL Loans
by ABN AMRO and all Syndicated Dollar Loans, Money Market Loans and the
aggregate of the Dollar Equivalent on such date of all Syndicated Foreign
Currency Loans by all Banks shall not exceed the aggregate of all of the
Commitments, except as expressly permitted by clause (i) of Section 3.01(a).
With respect to ITL Loans, ABN AMRO shall be responsible only for determining
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compliance with clause (i) of the foregoing proviso. Any Borrower shall be
permitted, subject to the terms and conditions hereof, to obtain ITL Loans in
an approximate Dollar Equivalent on such date up to the full aggregate amount
of the unused ITL Loan Commitment. The aggregate of the Dollar Equivalent on
any date of all ITL Loans outstanding on such date by ABN AMRO shall be deemed
to be the amount of the Loan of ABN AMRO outstanding for the purpose of
calculating its unused ITL Loan Commitment on the date of disbursement. Each
Borrowing under this Section with respect to ITL shall be in a minimum and
integral multiple of the amount agreed upon between the relevant Borrower and
ABN AMRO before the delivery of the relevant Notice of ITL Borrowing, which
will in any event approximate in ITL the Dollar Equivalent on such date of
$500,000 or any larger multiple of the Dollar Equivalent on such date of
$100,000 (except that such Borrowing may be in the approximate aggregate amount
of the unused ITL Loan Commitments) and shall be made available by ABN AMRO.
Within the foregoing limits, the Borrowers may borrow under this Section, repay
or, to the extent permitted by Section 3.09, prepay ITL Loans and reborrow
under this Section at any time before the Termination Date.
SECTION 3.02. Method of Borrowing. (a) (1) For Syndicated
Foreign Currency Borrowings, a Borrower shall give the Foreign Currency Agent,
c/o FC&AS at the Agency Office, notice (a "Notice of Syndicated Foreign
Currency Borrowing"), which shall be substantially in the form of Exhibit G-1,
prior to 11:00 A.M. London, England time) at least 3 Foreign Currency Business
Days before each Syndicated Foreign Currency Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Foreign
Currency Business Day in the Agency Office,
(ii) the Foreign Currency which such Borrower desires to
borrow (which, except for Parent and SDI, must be the Foreign Currency
of the jurisdiction in which such Borrower is incorporated, as
specified on the signature pages hereof) and the approximate amount
thereof in such Foreign Currency, and
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period.
(2) For ITL Borrowings, a Borrower shall give ABN AMRO, at
the Milan Office, notice (a "Notice of ITL Borrowing"), which shall be
substantially in the form of Exhibit G-2, prior to 11:00 A.M. Milan, Italy
time) on the same day for an ITL Base Rate Borrowing, and at least 3 Foreign
Currency Business Days before each ITL Fixed Rate Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Foreign
Currency Business Day in the Milan Office,
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(ii) the approximate amount in ITL,
(iii) whether the ITL Loans comprising such Borrowing are to
be ITL Base Rate Loans or ITL Fixed Rate Loans, and
(iv) in the case of an ITL Fixed Rate Borrowing, the duration
of the Interest Period applicable thereto, subject to the provisions
of the definition of Interest Period.
(b) (1) For Syndicated Foreign Currency Borrowings, upon
receipt of a Notice of Syndicated Foreign Currency Borrowing, the Foreign
Currency Agent shall promptly determine the Dollar Equivalent on such date
thereof (taking into account the provisions of Section 3.02(d), if applicable),
and notify each Foreign Currency Bank of the contents of such Notice of
Syndicated Foreign Currency Borrowing, of such Dollar Equivalent on such date
of the amount of such Borrowing in the relevant Foreign Currency, and of such
Foreign Currency Bank's ratable share of such Borrowing, and such Notice of
Syndicated Foreign Currency Borrowing shall not thereafter be revocable by the
Borrower.
(2) For ITL Borrowings, upon receipt of a Notice of ITL
Borrowing, ABN AMRO shall promptly determine the Dollar Equivalent thereof on
such date (taking into account the provisions of Section 3.02(d), if
applicable), and notify the Foreign Currency Agent of the Dollar Equivalent on
such date and of the amount of such Borrowing in the relevant Foreign Currency
and such Notice of ITL Borrowing shall not thereafter be revocable by the
Borrower.
(c) (1) For Syndicated Foreign Currency Borrowings, not later
than 11:00 A.M. (London, England time) on the date of each Syndicated Foreign
Currency Borrowing, each Foreign Currency Bank shall (except as provided in
paragraph (d) of this Section) make available its ratable share of such
Syndicated Foreign Currency Borrowing, in Federal or other funds immediately
available in Amsterdam, The Netherlands, to the Foreign Currency Agent at the
Agency Office, which funds shall be in the applicable Foreign Currency. Unless
the Foreign Currency Agent determines that any applicable condition specified
in Article IV has not been satisfied, the Foreign Currency Agent will make the
funds so received from the Foreign Currency Banks available to the Borrower by
wire transfer (free of wire transfer charges imposed by the Foreign Currency
Agent) at the bank account specified by, and in the name of, such Borrower.
Unless the Foreign Currency Agent receives notice from a Foreign Currency Bank,
at the Agency Office, no later than 11:00 A.M. (London, England time) on the
Foreign Currency Business Day before the date of such Syndicated Foreign
Currency Borrowing, stating that such Foreign Currency Bank will not make a
Loan in connection with such Syndicated Foreign Currency Borrowing, the Foreign
Currency Agent shall be entitled to assume that such Foreign Currency Bank will
make a Loan in connection with such Syndicated Foreign Currency
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Borrowing and, in reliance on such assumption, the Foreign Currency Agent may
(but shall not be obligated to) make available such Foreign Currency Bank's
ratable share of such Syndicated Foreign Currency Borrowing to the Borrower for
the account of such Foreign Currency Bank. If the Foreign Currency Agent makes
such Foreign Currency Bank's ratable share available to the Borrower and such
Foreign Currency Bank does not in fact make its ratable share of such Borrowing
available on such date, the Foreign Currency Agent shall be entitled to recover
such Foreign Currency Bank's ratable share from such Foreign Currency Bank or,
promptly upon request therefor, the Borrower, together with interest thereon
for each day during the period from the date of such Borrowing until such sum
shall be paid in full at a rate per annum equal to the rate at which the
Foreign Currency Agent determines that it obtained (or could have obtained)
overnight funds to cover such amount for each such day during such period,
provided that any such payment by the Borrower of such Foreign Currency Bank's
ratable share and interest thereon shall be without prejudice to any rights
that the Borrower may have against such Foreign Currency Bank. If the Foreign
Currency Agent does not exercise its option to advance funds for the account of
such Foreign Currency Bank, it shall forthwith notify the Borrower of such
decision.
(2) For ITL Borrowings, unless ABN AMRO determines that any
applicable condition specified in Article IV has not been satisfied, it will
make the relevant ITL Loan available to the Borrower by wire transfer (free of
wire transfer charges imposed by the Foreign Currency Agent) at the bank
account specified by, and in the name of, such Borrower.
(d) If any Foreign Currency Loan is to be continued beyond the
Interest Period applicable thereto (a "maturing loan"), it shall be made as a
new Loan (a "new Loan"), and a new Notice of Borrowing shall be submitted in
connection therewith, but subject to the following provisions:
(i) If such new Loan is to Parent or SDI and is in a different
currency (the "new currency") from that in which the maturing Loan is
denominated (the "old currency"), the maturing Loan shall be repaid by
the relevant Borrower in full at the end of its current Interest
Period in the old currency, and, subject to the provisions of this
Agreement, shall be re-advanced in the new currency. If both the
maturing Loan and the new Loan are Syndicated Foreign Currency Loans,
the amount of each Foreign Currency Bank's share of such new Loan will
be determined by converting its share of the Dollar Equivalent on the
date of the conversion of the maturing Loan into the new currency and
determining its share of the Dollar Equivalent on the date of
conversion of such new Loan.
(ii) If any Foreign Currency Bank or ABN AMRO makes a new Loan
hereunder on a day on which the relevant Borrower
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is to repay all or any part of a maturing Loan in the same Foreign
Currency from such Foreign Currency Bank or in ITL from ABN AMRO, such
Foreign Currency Bank or ABN AMRO, as applicable, shall apply the
proceeds of its new Loan to make such repayment and only an amount
equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Foreign
Currency Bank to the Foreign Currency Agent at the Agency Office for
the relevant Borrower or funded by ABN AMRO to the relevant Borrower,
as applicable, as provided in paragraph (c) of this Section, or
remitted by the Borrower to the Foreign Currency Agent at the Agency
Office or ABN AMRO at the Milan Office, as applicable, as provided in
Section 2.12, as the case may be.
(e) Notwithstanding anything to the contrary contained in
this Agreement, no Fixed Rate Loans may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not
have been cured or waived.
(f) In the event that a Notice of ITL Borrowing fails to
specify whether the ITL Loans comprising such ITL Borrowing are to be ITL Base
Rate Loans or ITL Fixed Rate Loans, such Loans shall be made as ITL Base Rate
Loans. If the Borrower is otherwise entitled under this Agreement to repay any
Syndicated Foreign Currency Loans or ITL Loans maturing at the end of an
Interest Period applicable thereto with the proceeds of a new Syndicated
Foreign Currency Borrowing or ITL Borrowing, as the case may be, and the
Borrower fails to repay such Syndicated Foreign Currency Loans or ITL Loans
using its own moneys and fails to give a Notice of Borrowing in connection with
such new Syndicated Foreign Currency Borrowing or ITL Borrowing, as the case
may be, a new Foreign Currency Borrowing in the same Foreign Currency as such
maturing Foreign Currency Loans shall be deemed to be made on the date such
Foreign Currency Loans mature in an amount determined pursuant to paragraph (d)
above and (i) any Syndicated Foreign Currency Loans comprising such new
Foreign Currency Borrowing shall have an Interest Period determined by the
Foreign Currency Agent, or (ii) any ITL Loans comprising such new ITL Borrowing
shall be ITL Base Rate Loans.
(g) Notwithstanding anything to the contrary contained
herein, there shall not be more than (i) one 14 day Interest Period made
available per month for Syndicated Foreign Currency Loans made in each of BFR,
BPS, DEM and FF, and (ii) an aggregate of one hundred Syndicated Foreign
Currency Loans (including any with 14 day Interest Periods) made available per
year.
SECTION 3.03. Notes. (a) The Syndicated Foreign Currency
Loans of each Foreign Currency Bank shall be evidenced by a single Syndicated
Foreign Currency Loan Note, payable to the order of such Foreign Currency Bank
for the account of its Lending Office. The ITL Loans of ABN AMRO shall be
evidenced by
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the ITL Loan Note, payable to the order of ABN AMRO for the account of the
Milan Office.
(b) Upon receipt of each Foreign Currency Bank's Syndicated
Foreign Currency Loan Note and the ITL Loan Note pursuant to Section 3.01, the
Foreign Currency Agent shall deliver such Note to such Foreign Currency Bank
and ABN AMRO, as applicable. Each Foreign Currency Bank and ABN AMRO shall
record, and prior to any transfer of its Syndicated Foreign Currency Loan Note
or the ITL Loan Note shall endorse on the schedule forming a part of such Note
notations to evidence the date, amount, maturity and (as to Syndicated Foreign
Currency Loans) Foreign Currency of, and effective interest rate for, each
Foreign Currency Loan made by it, the date and amount of each payment of
principal made by the Borrower with respect thereto, and such schedule to each
Syndicated Foreign Currency Note or ITL Loan Note shall constitute rebuttable
presumptive evidence of the principal amount owing and unpaid on such
Syndicated Foreign Currency Bank's Syndicated Foreign Currency Loan Note or on
the ITL Loan Note, as applicable; provided that the failure of any Foreign
Currency Bank or ABN AMRO to make any such recordation or endorsement shall not
affect the obligation of the Borrowers hereunder or under the Syndicated
Foreign Currency Loan Notes or ITL Loan Note, or the ability of any Foreign
Currency Bank or ABN AMRO to assign its Syndicated Foreign Currency Loan Note
or ITL Loan Note. Each Foreign Currency Bank and ABN AMRO, as the case may be,
is hereby irrevocably authorized by the Borrowers so to endorse its Syndicated
Foreign Currency Loan Note or ITL Loan Note, as applicable, and to attach to
and make a part of any Syndicated Foreign Currency Loan Note or ITL Loan Note,
as applicable, a continuation of any such schedule as and when required.
SECTION 3.04. Maturity of Foreign Currency Loans. (a) Each
Foreign Currency Loan included in any Borrowing shall mature, and the principal
amount thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal
amount of the Syndicated Foreign Currency Loans together with all accrued but
unpaid interest therein, if any, shall be due and payable on August 25, 1995,
unless the Termination Date is otherwise extended by the Foreign Currency Agent
and the Foreign Currency Banks, in their sole and absolute discretion. Upon the
written request of the Borrower, which request shall be delivered to the
Foreign Currency Agent, with a copy to the Domestic Agent and each of the
Foreign Currency Banks, at least 60 days prior to the Termination Date, the
Foreign Currency Agent and the Foreign Currency Banks shall have the option
(without any obligation whatsoever so to do) of extending the Termination Date
for an additional 364-day period, provided, that, in no event shall the
Termination Date be extended beyond August 25, 1999. In connection with each
such
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extension request, (i) each Foreign Currency Bank shall undertake a bona fide
credit analysis of the Borrowers utilizing current information on financial
condition and trends; provided, that, no such credit analysis shall be required
of a Foreign Currency Bank that elects not to extend the Termination Date and
(ii) the terms of any extension of the Termination Date shall be independently
negotiated among the Borrowers, the Foreign Currency Banks and the Foreign
Currency Agent at the time of the extension; provided, that, the terms of the
extension may be the same as those in effect prior to any extension should the
Borrowers, the Foreign Currency Banks and the Foreign Currency Agent so agree;
provided, further, that, should the terms of the extension be other than those
in effect prior to the extension, then the Loan Documents will be amended to
the extent necessary to incorporate any such different terms. In the event
that the Foreign Currency Agent or a Foreign Currency Bank chooses to extend
the Termination Date for such an additional 364-day period, notice shall be
given by the Foreign Currency Agent or Foreign Currency Bank to the Borrowers
and the Agents at least 30 days prior to the relevant Termination Date, but
such notice may not be given more than 45 days prior to such relevant
Termination Date; provided, that, the Termination Date shall not be extended
with respect to the Foreign Currency Agent or any of the Foreign Currency Banks
(regardless of whether any relevant Foreign Currency Bank has delivered a
favorable extension notice) unless the Foreign Currency Agent and the Required
Foreign Currency Banks have delivered favorable extension notices and are
willing to extend the Termination Date and either the (x) remaining Foreign
Currency Banks shall purchase ratable assignments (without any obligation so to
do) from each Bank that is unwilling to extend the Termination Date, in
accordance with their respective percentage of the remaining Commitments;
provided, that, such remaining Foreign Currency Banks shall be provided such
opportunity (which opportunity shall allow such Foreign Currency Banks at least
5 Domestic Business Days in which to make a decision) prior to the Borrowers
finding another bank pursuant to the immediately succeeding clause (y);
provided, further, that, should any of the remaining Foreign Currency Banks
elect not to purchase such an assignment, then, such other remaining Foreign
Currency Banks shall be entitled to purchase an assignment from any terminating
Bank which includes the ratable interest that was otherwise available to such
non-purchasing remaining Foreign Currency Bank or Foreign Currency Banks, as
the case may be, (y) the Borrowers may, at their option, find another bank,
acceptable to the Agents, willing to accept an assignment from such terminating
Bank (in the form of an Assignment and Acceptance) or (z) the Borrowers shall
reduce the Syndicated Foreign Currency Loan Commitments on the then scheduled
Termination Date in an amount equal to the sum of the Syndicated Foreign
Currency Loan Commitments of all such terminating Foreign Currency Banks; and
provided, further, that should the Foreign Currency Agent not elect to extend
the Termination Date but the Required Foreign Currency Banks do so elect, the
Required Foreign Currency Banks shall select a replacement Foreign Currency
Agent
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pursuant to Section 8.09. The ITL Loan Note shall be payable on the date that
the Syndicated Foreign Currency Loan Note of ABN AMRO is payable pursuant to
the foregoing, and if ABN AMRO extends or terminates its Syndicated Foreign
Currency Loan Commitment pursuant to the foregoing, the ITL Loan Commitment
likewise shall be deemed to have been extended or terminated. In the event that
the Borrowers elect to terminate a portion of the Foreign Currency Loan
Commitments as provided in clause (z) of this paragraph, at any time after the
date of such termination and prior to the Termination Date (as extended) if the
Borrowers find a replacement bank or financial institution acceptable to the
Foreign Currency Agent to become a party to this Agreement with a Syndicated
Foreign Currency Loan Commitment equal to all or a portion of the Syndicated
Foreign Currency Loan Commitment of the Foreign Currency Bank whose Syndicated
Foreign Currency Loan Commitment was so terminated, then upon such new bank or
financial institution's execution and delivery of a copy of this Agreement, and
funding to the Foreign Currency Agent (for pro rata distribution to the other
Foreign Currency Banks) of its ratable share of any outstanding Syndicated
Foreign Currency Loans, such bank or financial institution shall become a
"Foreign Currency Bank" hereunder, and the aggregate amount of the Syndicated
Foreign Currency Loan Commitments shall increase by the amount of the
Syndicated Foreign Currency Loan Commitment of such new Foreign Currency Bank.
The Foreign Currency Agent agrees to cooperate with the Borrowers to find a
replacement bank or financial institution in any of the circumstances for such
replacement contemplated by this Section 3.04(b).
SECTION 3.05. Interest Rates. (a) "Applicable Margin" means
(i) for any ITL Base Rate Loan, 0.30%, and (ii) for any ITL Fixed Rate Loan or
Syndicated Foreign Currency Loan, 0.30%.
(b) Each ITL Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to the ITL Base Rate for
such day plus the Applicable Margin. Such interest shall be payable for each
Interest Period on the last day thereof. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on any ITL Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the Default Rate.
(c) Each Syndicated Foreign Currency Loan or ITL Fixed Rate
Loan shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
Applicable Margin plus the applicable Foreign Currency LIBOR/Reference Rate for
such Interest Period. Such interest shall be payable for each Interest Period
on the last day thereof and, if such Interest Period is longer than 6 months,
at intervals of 6 months after the first day thereof. Any overdue principal of
and, to the extent permitted by law, overdue interest on any Foreign Currency
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Fixed Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the Default Rate.
"Foreign Currency LIBOR/Reference Rate" means, for any
Interest Period, with respect to Syndicated Foreign Currency Loans and ITL
Fixed Rate Loans, the offered rate for deposits in the applicable Foreign
Currency, for a period comparable to the Interest Period and in an amount
comparable to the amount of such Foreign Currency Fixed Rate Loan appearing on
Telerate Page 3750 (or, if it is unavailable from Telerate for any reason, by
reference to the Reuters Screen) as of 11:00 A.M. (London, England time) on the
day that is 2 Foreign Currency Business Days prior to the first day of the
Interest Period; provided, that if the foregoing rate is unavailable from
Telerate or the Reuters Screen for any reason, then such rate shall be the
interest rate per annum, equal to the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a multiple)
of the rate per annum at which deposits in the relevant Foreign Currency are
offered by the principal office of each of the Foreign Currency Reference Banks
to prime banks in the relevant interbank market at 11:00 A.M. (London, England
time) 2 Foreign Currency Business Days prior to the first day of the Interest
Period for a period comparable to the Interest Period and in an amount
comparable to the amount of such Foreign Currency Fixed Rate Loan, determined
by the Foreign Currency Agent on the basis of applicable rate furnished to and
received by the Foreign Currency Agent at the Agency Office 2 Foreign Currency
Business Days prior to the first day of the Interest Period.
In addition, the relevant Borrower shall pay to each Foreign
Currency Bank, so long as such Foreign Currency Bank shall be required (A)
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (a "U.S. Reserves Foreign Currency Bank"),
or (B) under regulations of the Bank of England to maintain reserves with
respect to liabilities or assets consisting of or including Foreign Currency
Loans made in BPS (a "British Reserves Foreign Currency Bank"), or (C) under
regulations of any other applicable authority in any other country to maintain
reserves with respect to liabilities or assets consisting of or including
Foreign Currency Loans made in the Foreign Currency of such country (an "Other
Country Reserves Foreign Currency Bank") additional interest on the unpaid
principal amount of each Syndicated Foreign Currency Loan of such Foreign
Currency Bank during such periods as such Syndicated Foreign Currency Loan is a
Eurocurrency Liability, from the date of such Syndicated Foreign Currency Loan
until such principal amount is paid un full, at an interest rate per annum
equal at all times to the remainder obtained by subtracting (i) the Foreign
Currency LIBOR/Reference Rate for such Interest Period for such Syndicated
Foreign Currency Loan from (ii) the rate obtained by dividing such Foreign
Currency LIBOR/Reference Rate by a percentage equal to
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100% minus (x) as to a U.S. Reserves Foreign Currency Bank, the Eurocurrency
Liability Reserve Percentage of such Foreign Currency Bank for such Interest
Period, and (y) as to a British Reserves Foreign Currency Bank and an Other
Country Foreign Currency Reserves Bank, a percentage sufficient to compensate
such Bank for any increase during such Interest Period in any reserves,
liquidity and/or special deposit requirements of the Bank of England or such
other applicable authority directly or indirectly affecting the maintenance or
funding of such Foreign Currency Loan in BPS or such other Foreign Currency,
payable on each date on which interest is payable on such Syndicated Foreign
Currency Loan. Such additional interest shall be determined by such Bank and
notified to the relevant Borrowers through the Foreign Currency Agent.
(d) The Foreign Currency Agent shall determine each interest
rate applicable to the Syndicated Foreign Currency Loans hereunder and shall
give prompt notice to the Borrower and the Foreign Currency Banks by telecopier
of each rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error. ABN AMRO shall determine each
interest rate applicable to the ITL Loans hereunder and shall give prompt
notice to the Borrower by telecopier of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of manifest
error.
(e) After the occurrence and during the continuance of an
Event of Default, the principal amount of the Syndicated Foreign Currency Loans
and ITL Loans (and, to the extent permitted by applicable law, all accrued
interest thereon) may, at the election of the Required Foreign Currency Banks,
bear interest at the Default Rate.
SECTION 3.06. Fees. (a) Parent shall pay to the Foreign
Currency Agent at the Agency Office for the ratable account of each Foreign
Currency Bank a facility fee (the "Syndicated Foreign Currency Loan Facility
Fee") on the maximum amount of the aggregate Syndicated Foreign Currency Loan
Commitments in effect for any relevant period, irrespective of usage, in an
amount equal to 0.15% per annum. Parent shall pay to ABN AMRO at the Milan
Office a facility fee (the "ITL Loan Facility Fee") on the maximum amount of
the ITL Loan Commitment in effect for any relevant period, irrespective of
usage, in an amount equal to 0.15% per annum. The Syndicated Foreign Currency
Loan Facility Fee and the ITL Loan Facility Fee shall accrue at all times from
and including the Closing Date to but excluding the Termination Date and shall
be payable, in arrears, on each November 1, February 1, May 1, August 1 and on
the Termination Date, commencing November 1, 1994 (on which date the fees for
the period from the Closing Date through October 31, 1994 shall be prorated)
(b) Parent shall pay to the Foreign Currency Agent at the
Agency Office, for the account and sole benefit of the
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Foreign Currency Agent, such fees and other amounts at such times as set forth
in the Agents' Letter Agreement.
SECTION 3.07. Optional Termination or Reduction of
Commitments. (a) The Borrowers may, upon at least 3 Foreign Currency Business
Days' notice to the Foreign Currency Agent (which notice the Foreign Currency
Agent shall promptly forward to the Domestic Agent and the Foreign Currency
Banks), terminate at any time, or proportionately reduce the Unused Syndicated
Foreign Currency Loan Commitments from time to time by an aggregate amount of
at least the Dollar Equivalent of $5,000,000 or any larger multiple of the
Dollar Equivalent of $1,000,000. If the Syndicated Foreign Currency Loan
Commitments are terminated in their entirety, all accrued fees (as provided
under Section 3.06) shall be due and payable on the effective date of such
termination.
(b) The Borrowers may, upon at least 3 Foreign Currency
Business Days' notice to ABN AMRO (which notice ABN AMRO shall promptly forward
to the Domestic Agent and the Foreign Currency Agent), terminate at any time,
or proportionately reduce the unused ITL Loan Commitment from time to time by
an aggregate amount of at least the Dollar Equivalent of $500,000 or any larger
multiple of the Dollar Equivalent of $100,000. If the ITL Loan Commitment is
terminated in its entirety, all outstanding principal and accrued and unpaid
interest (as provided in Section 2.11) and accrued fees (as provided in Section
3.06) shall be due and payable on the effective date of such termination.
SECTION 3.08. Other Terminations of Syndicated Foreign
Currency Loan Commitments and ITL Loan Commitment; Change in Control. (a) The
Syndicated Foreign Currency Loan Commitments shall terminate on the Termination
Date, in which case any Syndicated Foreign Currency Loans (together with
accrued interest thereon, and all accrued fees, as provided in Section 3.06)
then outstanding shall be due and payable on such date. If the Syndicated
Foreign Currency Loan Commitments of ABN AMRO are terminated pursuant to the
foregoing, the ITL Loan Commitment likewise shall terminate automatically and
without notice, and any ITL Loans (together with accrued interest thereon) then
outstanding shall be due and payable on such date.
(b) The Parent shall give notice to the Foreign Currency Agent
of the occurrence of any Change of Control promptly after the senior management
of the Parent obtains knowledge thereof, and shall offer to terminate the
Syndicated Dollar Loan Commitments of all of the Foreign Currency Banks and the
ITL Loan Commitment on a date specified in such notice, which shall be not less
than 30 nor more than 45 days after the date of such notice. Such notice also
shall specify the date by which each Foreign Currency Bank that wishes to
accept such offer must deliver notice to the Parent (with a copy to the Foreign
Currency Agent) of such acceptance, which date shall be no later than 10 days
prior to the date of the proposed termination. If any
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Foreign Currency Bank shall accept such offer, then on the date so specified,
the Foreign Currency Loan Commitment of such Foreign Currency Bank (and the ITL
Loan Commitment, if the Foreign Currency Loan Commitment of ABN AMRO is so
terminated) shall terminate on the date so specified in the Parent's notice
(which date shall become the Termination Date for those Foreign Currency Banks
for all purposes hereunder), and any Foreign Currency Loans (together with
accrued interest thereon, and all accrued fees, as provided in Section 3.06)
then outstanding shall be due and payable on such date.
SECTION 3.09. Optional Prepayments. (a) The Borrowers may,
upon at least 3 Foreign Currency Business Days' notice to ABN AMRO, prepay any
Foreign Currency Borrowing in whole at any time, or from time to time in part
in a minimum and integral multiple of the amounts agreed upon between the
relevant Borrower and ABN AMRO which will in any event approximate at least the
Dollar Equivalent of $250,000 or any larger multiple of the Dollar Equivalent
of $100,000 or the full outstanding principal amount of such Borrowing, by
paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment and any amounts required by Section 9.05.
(b) Upon receipt of a notice of prepayment pursuant to
this Section 3.09, ABN AMRO shall promptly notify the Foreign Currency Agent of
the contents thereof and such notice shall not thereafter be revocable by the
Borrowers.
SECTION 3.10. Mandatory Prepayments. On each date on which
the Syndicated Foreign Currency Loan Commitments or ITL Loan Commitment are
reduced pursuant to Section 3.07, the Borrower shall repay or prepay such
principal amount of the outstanding relevant Syndicated Foreign Currency Loans
or ITL Loans, if any (together with interest accrued thereon), as may be
necessary so that after such payment the aggregate unpaid principal amount
(determined by reference to the Dollar Equivalent on such date of each
Syndicated Foreign Currency Loan or ITL Loan) of the Syndicated Foreign
Currency Loans or ITL Loans, as applicable does not exceed the aggregate amount
of the Syndicated Foreign Currency Loan Commitments or the ITL Loan Commitment,
as applicable, in each case as then reduced.
SECTION 3.11. General Provisions as to Payments.
(a) (1) With respect to the Syndicated Foreign Currency Loans, the Borrowers
shall make each payment of principal of, and interest on, the Syndicated
Foreign Currency Loans and of the Syndicated Foreign Currency Loan Facility
Fees hereunder, not later than 11:00 A.M. (London, England time) on the date
when due, in Federal or other funds (subject to paragraph (c) below with
respect to Syndicated Foreign Currency Loans) immediately available in
Amsterdam, The Netherlands to the Foreign Currency Agent at the Agency Office.
The Foreign Currency Agent will promptly distribute to each Foreign Currency
Bank (and, following the occurrence and during the continuance of an Event of
Default,
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for application by such Foreign Currency Bank against amounts owing to such
Foreign Currency Bank by the Borrowers in such order as such Foreign Currency
Bank shall elect; provided, that in no event shall amounts paid by one Borrower
(other than Parent) be applied to the payment of any amount owed by any other
Borrower) its ratable share of each such payment received by the Foreign
Currency Agent for the account of the Foreign Currency Banks.
(2) With respect to the ITL Loans, the Borrowers shall make
each payment of principal of, and interest on, the ITL Loans and of the ITL
Loan Facility Fees hereunder, not later than 11:00 A.M. (Milan, Italy time) on
the date when due, in Federal or other funds (subject to paragraph (c) below
with respect to ITL Loans) immediately available in Milan, Italy to ABN AMRO at
the Milan Office.
(b) Whenever any payment of principal of, or interest on,
the Syndicated Foreign Currency Loans or ITL Loans or of fees hereunder
pertaining to the Syndicated Foreign Currency Loans or ITL Loans shall be due
on a day which is not a Foreign Currency Business Day, the date for payment
thereof shall be extended to the next succeeding Foreign Currency Business Day,
unless such Foreign Currency Business Day, falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Foreign
Currency Business Day.
(c) All payments of Syndicated Foreign Currency Loans
shall be made in the Foreign Currency in which the related Foreign Currency
Loan was made. All payments of ITL Loans shall be made in ITL.
(d) All payments of principal, interest and all other
amounts to be made by a Borrower pursuant to this Agreement with respect to any
Foreign Currency Loan and Syndicated Foreign Currency Loan Facility Fees and
ITL Loan Facility Fees shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Foreign Currency
Bank or ABN AMRO, as applicable, taxes imposed on or measured by its net
income, and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Foreign Currency Bank or ABN AMRO (as the case may be) is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on or measured by its income, and franchise taxes imposed on it,
by the jurisdiction of such Foreign Currency Bank's or ABN AMRO's applicable
Lending Office or any political subdivision thereof and other than any tax
arising by reason of a connection between the Foreign Currency Agent or such
Foreign Currency Bank or such Foreign Currency Bank's Lending Office and the
jurisdiction imposing such tax other than the making and performance by the
Foreign Currency Agent or such Foreign Currency Bank of this Agreement (all
such non-excluded taxes, imposts, levies, duties, deductions or
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withholdings of any nature being "Taxes"). In the event that any Borrower is
required by applicable law to make any such withholding or deduction of Taxes
with respect to any Foreign Currency Loan or Syndicated Foreign Currency Loan
Facility Fee or ITL Loan Facility Fees or other amount, such Borrower shall pay
such deduction or withholding to the applicable taxing authority, shall
promptly furnish to any Foreign Currency Bank or ABN AMRO, as applicable, in
respect of which such deduction or withholding is made all receipts and other
documents evidencing such payment and shall pay to such Foreign Currency Bank
or ABN AMRO, as applicable, additional amounts as may be necessary in order
that the amount received by such Foreign Currency Bank or ABN AMRO, as
applicable, after the required deduction or withholding shall equal the amount
such Bank would have received had no such deduction or withholding been made.
Each Foreign Currency Bank which is not chartered and
organized under the laws of the United States of America or a state thereof and
ABN AMRO (each a "Non-U.S. Foreign Currency Bank") agrees, as soon as
practicable after request by it of a request by a Borrower to do so, to file
all appropriate forms and take other appropriate action to obtain a certificate
or other appropriate document from the appropriate governmental authority in
the jurisdiction imposing the relevant taxes, establishing that it is entitled
to receive payments of principal and interest under this Agreement and the
Foreign Currency Notes without deduction and free from withholding of any Taxes
imposed by such jurisdiction; provided, that, if it is unable, by virtue of any
applicable law, rule or regulation, to establish such exemption or to file such
forms and, in any event, during such period of time as such request for
exemption is pending, the Borrower shall nonetheless remain obligated under the
terms of the immediately preceding paragraph. Without limiting the foregoing,
each Non-U.S. Foreign Currency Bank agrees to deliver to the Borrowers,
promptly upon any request therefor from time to time, such forms, documents and
other information as may be required by applicable law from time to time to
establish that payment to such Non-U.S. Foreign Currency Bank hereunder or
under the Notes or the Parent Guaranty are exempt from Taxes. Without limiting
the generality of the foregoing, each Non-U.S. Foreign Currency Bank, agrees,
on the date of its execution of this Agreement (or, in the case of an assignee,
on the date on which such assignee becomes a party to this Agreement), to
deliver to the Borrowers two accurate and duly completed and executed Internal
Revenue Service Form 4224 or 1001 (as applicable), together with Internal
Revenue Service Forms W-8 or W-9, as appropriate, establishing that such
Non-U.S. Foreign Currency Bank is entitled to a complete exemption from (or
reduction in) all Taxes imposed by the federal government of the United States
by way of withholding including, without limitation, all back-up withholding
("U.S. Withholding Taxes"). Thereafter, from time to time (a) upon any change
by a Foreign Currency Bank of its Lending Office, (b) before or promptly after
any event occurs (including, without limitation, the passing of time) requiring
a change in or update of the most recent Form
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4224 or 1001 previously delivered by such Foreign Currency Bank, or (c) upon
the reasonable request of any of the Borrowers from time to time, deliver to
each Borrower two accurate and duly completed and executed Forms 4224 or 1001
(as applicable) (together with Forms W-8 or W-9, as aforesaid) in replacement
for the forms previously delivered by such Foreign Currency Bank, establishing
that such bank is entitled to a complete exemption in whole or in part from all
U.S. Withholding Taxes except to the extent that a change in law has rendered
all such forms inapplicable to such Non-U.S. Foreign Currency Bank.
If any such Foreign Currency Bank shall fail to timely deliver any
such forms, documents or other information required to be delivered by it
pursuant to the foregoing for 30 days after request therefor, the Borrowers may
make deductions or withholdings of taxes and shall not be obligated to pay any
additional amounts in respect thereof to such Foreign Currency Bank which would
not have been payable had such forms, documents or other information been
delivered.
If the Internal Revenue Service or any other taxation authority in the
United States or in any other jurisdiction in which a Borrower may be
incorporated successfully asserts a claim that such Non-U.S. Foreign Currency
Bank or any Borrower did not properly withhold tax from amounts paid to or for
the account of any Non-U.S. Foreign Currency Bank or its participant (because
the appropriate form was not properly executed, or because such Non U.S.
Foreign Currency Bank failed to notify the Borrowers of a change in
circumstances which rendered the exemption from (or reduction in) U.S.
Withholding Taxes ineffective), such Non-U.S. Foreign Currency Bank, shall
indemnify the Borrowers fully for all amounts paid, directly or indirectly, by
any of the Borrowers as tax or otherwise, including, without limitation,
penalties and interest.
In the event any Foreign Currency Bank or ABN AMRO receives a
refund from the authority to which such Taxes were paid, of any Taxes paid by
any Borrower pursuant to this Section 3.11(d) it will pay to such Borrower the
amount of such refund promptly upon receipt thereof; provided, however, it at
any time thereafter it is required to return such refund, such Borrower shall
promptly repay to it the amount of such refund.
Nothing in this Section shall require any Foreign Currency
Bank to disclose any information about its tax affairs or interfere with, limit
or abridge the right of any Foreign Currency Bank to arrange its tax affairs in
any manner in which it desires.
Without prejudice to the survival of any other agreement of
the Borrowers hereunder, the agreements and obligations of the Borrowers and
the Foreign Currency Banks and ABN AMRO contained in this Section 3.11(d) shall
be applicable with respect to any Participant, Assignee or other Transferee,
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and any calculations required by such provisions (i) shall be made based upon
the circumstances of such Participant, Assignee or other Transferee, and (ii)
constitute a continuing agreement and shall survive for a period of three years
after the termination of this Agreement and the payment in full or cancellation
of the Syndicated Foreign Currency Loan Notes or ITL Loan Notes, as the case
may be.
SECTION 3.12. Computation of Interest and Fees. Interest on
Foreign Currency Loans shall be computed on the basis of a year of 360 days
(except for any Foreign Currency Loans outstanding in GBP or BFR, which shall
be computed on the basis of a year of 365 or 366 days, as the case may be) and
paid for the actual number of days elapsed, calculated as to each Interest
Period from and including the first day thereof to but excluding the last day
thereof. The Syndicated Foreign Currency Loan Facility Fee, ITL Loan Facility
Fee and any other fees payable hereunder shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed (including the
first day but excluding the last day).
ARTICLE IV
CONDITIONS TO BORROWINGS
SECTION 4.01. Conditions to First Borrowing. The obligation
of each Bank to make a Loan on the occasion of the first Borrowing is subject
to the satisfaction of the conditions set forth in Section 4.02 and receipt by
the Agents of the following (in sufficient number of counterparts, except as to
the Parent Guaranty and the Notes) for delivery of a counterpart to each Bank
and retention of one counterpart by each Agent:
(a) from each of the parties hereto of either (i) a duly
executed counterpart of this Agreement signed by such party or (ii) a
facsimile transmission stating that such party has duly executed a
counterpart of this Agreement and sent such counterpart to the Agents;
(b) a duly executed Syndicated Dollar Loan Note, a duly
executed Money Market Loan Note, and a duly executed Foreign Currency
Loan Note executed by the appropriate Borrowers for the account of
each Bank, and a duly executed ITL Loan Note complying with the
provisions of Sections 2.04 and 3.03;
(c) a duly executed Parent Guaranty, executed by
Parent;
(d) an opinion of Christy & Viener, counsel for Parent,
SDI and SII, as of the Closing Date, substantially in the form of
Exhibit C and covering such additional matters relating to the
transactions contemplated hereby as the Agents or any Bank may
reasonably request (and each such
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Borrower requests and authorizes such counsel to address and deliver
such opinion to the Agents for the benefit of the Agents and the
Banks);
(e) an opinion of Jones, Day, Reavis & Pogue, special
counsel for the Agents, dated as of the Closing Date, substantially in
the form ofExhibit D and covering such additional matters relating to
the transactions contemplated hereby as the Agents may reasonably
request;
(f) a certificate (the "Closing Certificate")
substantially in the form of Exhibit I), dated as of the Closing Date,
signed by a principal financial officer of each of the Borrowers, to
the effect that (i) no Default has occurred and is continuing on the
date of the first Borrowing and (ii) the representations and
warranties of the Borrower contained in Article V are true on and as
of the date of the first Borrowing hereunder;
(g) all documents which the Agents or any Bank may
reasonably request (except that the types of items described in
clauses (i), (ii) and (iii) below shall be limited to those pertaining
to Parent, SDI and SII (each a "U.S. Obligor" and collectively, the
"U.S. Obligors")) relating to the existence of Borrowers, the
corporate authority for and the validity of this Agreement, the Parent
Guaranty and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agents, including, without
limitation, a certificate of incumbency of the Borrowers, signed by
the Secretary or an Assistant Secretary of the Borrowers, certifying
as to the names, true signatures and incumbency of the officer or
officers of the Borrowers authorized to execute and deliver the Loan
Documents, and certified copies of the following items: (i) each U. S.
Obligor's Certificate of Incorporation, (ii) each U.S. Obligor's
Bylaws, (iii) a certificate of the Secretary of State of the State of
Delaware as to the good standing of each U.S. Obligor as a Delaware
corporation and a certificate of the Secretary of State of Florida as
to the good standing of Parent as a foreign corporation, and (iv) the
action taken by the Board of Directors of each Borrower authorizing
such Borrower's execution, delivery and performance of this Agreement,
the Notes, the Parent Guaranty (as to Parent) and the other Loan
Documents to which such Borrower is a party;
(h) a Notice of Syndicated Dollar Borrowing, or a Notice
of Syndicated Foreign Currency Borrowing, or a Notice of ITL
Borrowing, or a combination of the foregoing, as the case may be;
(i) receipt of the fees payable to the Agents on or prior
to the date of the initial Borrowing pursuant to the Agents' Letter
Agreement; and
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(j) execution and delivery of an Amendment of Purchase
Agreement dated December 29, 1992 by Parent and ABN AMRO,
incorporating into such Purchase Agreement the Incorporated Covenants,
and receipt by the Agents of conformed copies thereof.
SECTION 4.02. Conditions to All Borrowings. The obligation of
each Bank to make a Syndicated Dollar Loan, Money Market Loan or a Syndicated
Foreign Currency Loan, and the obligation of ABN AMRO to make an ITL Loan on
the occasion of each Syndicated Dollar Borrowing, Money Market Borrowing,
Foreign Currency Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Domestic Agent of a Notice of
Syndicated Dollar Borrowing or notice pursuant to Section 2.03(e) of
the acceptance of such Bank's offer to make such Money Market Loan, or
receipt by the Foreign Currency Agent of a Notice of Syndicated
Foreign Currency Borrowing, or receipt by ABN AMRO of a Notice of ITL
Borrowing, as the case may be;
(b) unless such Borrowing involves only a Refunding Loan,
the fact that, immediately before and after such Borrowing, no Default
shall have occurred and be continuing;
(c) unless such Borrowing involves only a Refunding Loan,
the fact that the representations and warranties of the Borrowers
contained in Article V of this Agreement shall be true on and as of
the date of such Borrowing; provided, that on the occasion of each
Borrowing, the representations and warranties set forth in Sections
5.05, 5.07, 5.11, the first sentence of 5.12, 5.13 and 5.14 shall be
made only by Parent and, if such Borrower is not the Parent, by the
Borrower making such Borrowing with respect to itself; and
(d) the fact that the conditions set forth in Sections
2.01, 2.03(a) or 3.01, as applicable, and all other conditions set
forth in this Agreement which are applicable thereto, have been
satisfied.
Each Borrowing hereunder, other than a Borrowing which involves only a
Refunding Loan, shall be deemed to be a representation and warranty by the
Borrowers on the date of such Borrowing as to the truth and accuracy of the
facts specified in paragraphs (b), (c) and (d) of this Section.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers represents and warrants that:
SECTION 5.01. Corporate Existence and Power. Each Borrower
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, is duly qualified to
transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, except for any failure to comply with the
foregoing which does not have a Material Adverse Effect, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except for any failure to
comply with the foregoing which does not have a Material Adverse Effect.
SECTION 5.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes, the Parent Guaranty and the other Loan Documents executed
by each Borrower (i) are within such Borrower's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) require no action
by or in respect of or filing with, any governmental body, agency or official,
(iv) do not contravene, or constitute a default under, any material provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of such Borrower or, to the best of such Borrower's knowledge, of any
material agreement relating to Debt, judgment, injunction, order, decree or
other instrument relating to Debt binding upon such Borrower or any of the
Subsidiaries, and (v) do not result in the creation or imposition of any Lien
on any asset of such Borrower or any of the Subsidiaries.
SECTION 5.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of each Borrower enforceable in accordance with its
terms, and the Notes, the Parent Guaranty and the other Loan Documents executed
by each Borrower, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of such Borrower
enforceable in accordance with their respective terms, provided that the
enforceability hereof and thereof is subject in each case to general principles
of equity and to bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally.
SECTION 5.04. Financial Information. (a) The consolidated
balance sheet of Parent and its Consolidated Subsidiaries as of June 30, 1993
and the related consolidated statements of income, shareholders' equity and
cash flows for the Fiscal Year then ended, reported on by Ernst & Young,
copies of which have been delivered to each of the Banks, and the unaudited
consolidated financial statements of Parent for the interim
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periods ended March 31, 1994, copies of which have been delivered to each of
the Banks, (i) in the case of the aforementioned annual financial statements,
fairly present, in conformity with GAAP, the consolidated financial position of
Parent and its Consolidated Subsidiaries as of such dates and their
consolidated results of operations and cash flows for such periods stated and
(ii) in the case of the aforementioned interim financial statements, reflect
all adjustments consisting only of normal recurring accruals necessary for a
fair presentation of the consolidated financial condition of the Parent and its
Subsidiaries as of such date and the consolidated results of their operations
and changes in their cash flow for the period then ended, except that such
interim financial statements omit certain footnotes and are subject to normal
year-end adjustments; provided, that, during the term of this Agreement after
the Closing Date, future representations as to the matters set forth in this
Section 5.04(a) shall be deemed to refer to the most recent financial
statements delivered pursuant to Section 6.01(a) and 6.01(b), respectively.
(b) Since March 31, 1994, there has been no event, act,
condition or occurrence having a Material Adverse Effect; provided, that,
during the term of this Agreement after the Closing Date, future
representations as to the matters set forth in this Section 5.04(b) shall be
deemed to refer to the most recent financial statements delivered pursuant to
Section 6.01(a) and 6.01(b), respectively.
SECTION 5.05. No Litigation. There is no action, suit or
proceeding pending, or to the knowledge of each Borrower threatened, against or
affecting such Borrower or any of the Subsidiaries before any court or
arbitrator or any governmental body, agency or official which could have a
Material Adverse Effect or which in any manner draws into question the
validity of or could impair in any material respect the ability of the
Borrowers taken as a whole or, on the occasion of each Borrowing, of the
Borrower making such Borrowing, to perform its obligations under, this
Agreement, the Notes, the Parent Guaranty or any of the other Loan Documents
executed by such Borrower.
SECTION 5.06. Compliance with ERISA. (a) To the best of
Parent's knowledge, Parent and each member of the Controlled Group have
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and has not
incurred any liability to the PBGC or a Plan under Title IV of ERISA, provided,
that Parent makes no representation or warranty under this Section 5.06 as to
any Subsidiary for matters pertaining to periods prior to the date on which
such Subsidiary became a Subsidiary of Parent except to the extent that Parent
received any such representations and/or warranties from the seller (or any of
its affiliates) of any relevant Subsidiary in connection with the acquisition
of any relevant Subsidiary.
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(b) To the best of Parent's knowledge, neither Parent nor
any member of the Controlled Group is or ever has been obligated to contribute
to any Multiemployer Plan provided, that Parent makes no representation or
warranty under this Section 5.06 as to any Subsidiary for matters pertaining to
periods prior to the date on which such Subsidiary became a Subsidiary of
Parent except to the extent that Parent received any such representations
and/or warranties from the seller (or any of its affiliates) of any relevant
Subsidiary in connection with the acquisition of any relevant Subsidiary.
SECTION 5.07. Compliance with Laws; Payment of Taxes. Each
Borrower and each Material Subsidiary is in compliance with all applicable
laws, regulations and similar requirements of governmental authorities, except
where such compliance is being contested in good faith through appropriate
proceedings or does not have a Material Adverse Effect. There have been filed
on behalf of each Borrower and each Material Subsidiary all Federal, state and
material local income, excise, property and other tax returns which are
required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of such Borrower or any
Material Subsidiary have been paid or are being contested in good faith or, if
unpaid and uncontested, are in immaterial amounts. The charges, accruals and
reserves on the books of each Borrower and each Material Subsidiary in respect
of taxes or other governmental charges are, in the opinion of such Borrower,
adequate. United States income tax returns of each Borrower which is a U.S.
Person and each Subsidiary which is a U.S. Person have been examined and closed
through the Fiscal Year ended 1988.
SECTION 5.08. Subsidiaries. Parent represents that each
Material Subsidiary which is not a Borrower is a corporation or joint venture
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except for failures to comply with the
foregoing which do not have a Material Adverse Effect. Parent has no
Subsidiaries except for those Subsidiaries listed on Exhibit 22 of Parent's
annual report on form 10-K, as updated from time to time by filing with the
Securities and Exchange Commission or by notice to the Agents or in Schedule
6.03 hereto. All of Parent's Subsidiaries which are Material Subsidiaries as
of the Fiscal Quarter most recently ended at the Closing Date or any later date
of determination and for which financial statements are required to have been
delivered pursuant to Section 6.01(a) or (b), are specified in Schedule 6.03,
as supplemented from time to time pursuant to Section 6.03.
SECTION 5.09. Investment Company Act. Neither any Borrower
nor any of Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
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SECTION 5.10. Public Utility Holding Company Act. Neither any
Borrower nor any of Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
SECTION 5.11. Ownership of Property; Liens. Each of the
Borrower and the Material Subsidiaries has title to or leasehold or other
interests in its material properties sufficient for the conduct of its
business, and none of such property is subject to any Lien except as permitted
in the Incorporated Covenants.
SECTION 5.12. No Default. Neither any Borrower nor any of the
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which could have or cause a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
SECTION 5.13. Full Disclosure. To the best of each Borrower's
knowledge, all written information heretofore furnished by the Borrowers to the
Agents or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter
furnished by the Borrowers to the Agents or any Bank will be, true, accurate
and complete in every material respect or based on reasonable estimates on the
date as of which such information is stated or certified.
SECTION 5.14. Environmental Matters. (a) To the best of each
Borrower's actual knowledge (without, as to Properties not located in the
United States of America, having performed any further independent inquiry
therefor solely in connection with this Agreement), neither any Borrower nor
any Subsidiary is aware that it is subject to any Environmental Liability which
could have or cause a Material Adverse Effect, neither any Borrower nor any
Subsidiary (except in respect of immaterial Environmental Liabilities in de
minimis amounts) has received notice that it has been designated as a
potentially responsible party under CERCLA or under any state statute similar
to CERCLA, and none of the Properties located in the United States, owned by
any Borrower or a Material Subsidiary, has been identified on any current or
proposed (i) National Priorities List under 40 C.F.R. Section 300, (ii)
CERCLIS list or (iii) any list arising from a state statute similar to CERCLA.
(b) To the best of each Borrower's actual knowledge,
(without having performed any further independent inquiry therefor solely in
connection with this Agreement), no Hazardous Materials have been or are being
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
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from the Properties or are otherwise present at, on, in or under the Properties
owned by any Borrower or a Material Subsidiary, or, to the best of the actual
knowledge of each Borrower, at or from any adjacent site or facility, except
for Hazardous Materials, such as cleaning solvents, pesticides and other
materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, managed, or otherwise handled in minimal
amounts in the ordinary course of business in compliance with all applicable
Environmental Requirements.
(c) Each Borrower represents as to itself, and Parent
represents as to each Material Subsidiary which is not a Borrower, that to the
best of each Borrower's and Parent's actual knowledge (without having performed
any further independent inquiry therefor solely in connection with this
Agreement), each Borrower and each of the Material Subsidiaries which is not a
Borrower is in compliance in all material respects with all Environmental
Requirements in connection with the operation of the Properties and each
Borrower's and each such Material Subsidiary's respective businesses.
SECTION 5.15. Capital Stock. All Capital Stock, debentures,
bonds, notes and all other securities of each Borrower and the Material
Subsidiaries presently issued and outstanding are validly and properly issued
in accordance with all applicable laws in all material respects, including but
not limited to, the "Blue Sky" laws of all applicable states and the federal
securities laws. The issued shares of Capital Stock of the Wholly Owned
Subsidiaries are owned by the Parent free and clear of any Lien or adverse
claim, except for (a) nominal shares of Subsidiaries which are not U.S. Persons
that are held by non-U.S. Persons in accordance with applicable law, (b)
directors' qualifying shares, and (c) the shares of American Dynamics, a New
Jersey corporation, which are pledged to the sellers thereof to secure payment
of the purchase price thereof. At least a majority of the issued shares of
capital stock of each of the Parent's other Subsidiaries (other than Wholly
Owned Subsidiaries) is owned by Parent free and clear of any Lien or adverse
claim.
SECTION 5.16. Margin Stock. Neither any Borrower nor any
Material Subsidiary is engaged principally, or as one of its important
activities, in the business of purchasing or carrying any Margin Stock, and no
part of the proceeds of any Loan will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulation X.
SECTION 5.17. Insolvency. After giving effect to the
execution and delivery of the Loan Documents and the making of the Loans to
such Borrower under this Agreement, no Borrower which is a U.S. Person will be
"insolvent," within the meaning of such term as used in O.C.G.A. Section
18-2-22 or as defined in Section 101 of
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Title 11 of the United States Code, as amended from time to time, or be unable
to pay its debts generally as such debts become due, or have an unreasonably
small capital to engage in any business or transaction, whether current or
contemplated.
ARTICLE VI
COVENANTS
The Borrowers agree that, so long as any Bank has any
Commitment hereunder or any amount payable hereunder or under any Note remains
unpaid:
SECTION 6.01. Information. The Borrowers will deliver to each
of the Banks:
(a) as soon as available and in any event within 120 days
after the end of each Fiscal Year, a consolidated balance sheet of
Parent and its Consolidated Subsidiaries as of the end of such Fiscal
Year and the related consolidated statements of income, shareholders'
equity and cash flows for such Fiscal Year, setting forth in each case
in comparative form the figures for the previous fiscal year, and
accompanied by a report, unqualified as to scope of audit and
unqualified as to going concern as to the consolidated balance sheet
and the related consolidated statements of income and cash flows by
Ernst & Young, or any other firm of independent public accountants of
recognized national standing selected by the Parent, as to fairness
and consistency; provided, that the information required by this
paragraph may be satisfied by delivery of information pursuant to
paragraph (f) or (g) of this Section 6.01.
(b) as soon as available and in any event within 60 days
after the end of each of the first 3 Fiscal Quarters of each Fiscal
Year, a consolidated balance sheet of Parent and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal
Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified by a senior
financial or accounting officer or the chief financial officer or the
Treasurer of Parent (i) outlining the basis of presentation, and (ii)
stating that the unaudited financial information presented in such
financial statements reflects all adjustments consisting only of
normal recurring accruals necessary for a fair presentation of the
consolidated financial condition of the Parent and its Subsidiaries as
of such dates and the consolidated results of their operations and
changes in their cash flows for the periods then ended, except that
such financial
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statements omit certain footnotes and are subject to normal year-end
adjustments;provided, that the information required by this paragraph
may be satisfied by delivery of information pursuant to paragraph (f)
or (g) of this Section 6.01.;
(c) simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and (b) above, a
certificate, substantially in the form of Exhibit H (a "Compliance
Certificate"), of a senior financial or accounting officer or the
chief financial officer or chief accounting officer or the Treasurer
of Parent (i) stating whether Parent was in compliance with the
requirements of the Incorporated Covenants on the date of such
financial statements and attaching a true, accurate and complete copy
of the compliance certificate furnished on or about the date thereof
pursuant to the Note Agreement, and (ii) stating whether, to such
person's knowledge, after due inquiry, any Default exists on the date
of such certificate and, if such officer is aware that any Default
then exists, setting forth the details thereof and the action which
Parent is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
annual financial statements referred to in paragraph (a) above, a
statement of the firm of independent public accountants which reported
on such statements to the effect that nothing has come to their
attention to cause them to believe that any Default the occurrence of
which is ascertainable by accountants in the course of normal audit
procedures under any of the Incorporated Covenants or Section 7.01(e)
existed on the date of such financial statements, or, if they obtained
knowledge of any Default, describing the nature thereof and the length
of time such Default existed;
(e) (i) promptly, and, in any event, within 7 Domestic
Business Days after any Borrower becomes aware of the occurrence of
any Default pertaining to the Parent, and (ii) within 15 Domestic
Business Days after any Borrower becomes aware of any other Default, a
certificate of a senior financial or accounting officer or the chief
financial officer or the chief accounting officer or the Treasurer of
such Borrower (or of Parent) setting forth the details thereof and the
action which such Borrower (or Parent) is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the shareholders
of Parent generally, copies of all financial statements, reports and
proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent or
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any registration statements relating to employee benefit plans) and
annual, quarterly or monthly reports which Parent shall have filed
with the Securities and Exchange Commission (other than exhibits
thereto);
(h) if and when any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be
given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice;
or (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, a
copy of such notice; and
(i) from time to time such additional information
regarding the financial position or business of the Borrowers and the
Subsidiaries as either Agent, at the request of any Bank, may
reasonably request.
SECTION 6.02. Inspection of Property, Books and Records. The
Parent will (i) keep, and cause each Material Subsidiary to keep, proper books
of record and account in which full, true and correct entries in conformity
with GAAP (or, in the case of any non-domestic Subsidiary, such other
accounting standards, rules, regulations and practices applicable to businesses
operating in the locality in which each such Person operates) shall be made of
all dealings and transactions in relation to its business and activities; and
(ii) permit, and cause each Subsidiary to permit, representatives of any Bank
(x) at such Bank's expense and upon reasonable notice prior to the occurrence
of a Default and (y) at the Borrower's expense after the occurrence of a
Default, to visit and inspect any of their respective properties, to examine
and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants. The Borrowers agree to
cooperate and assist in such visits and inspections, in each case at such
reasonable times and as often as may reasonably be desired.
SECTION 6.03. Material Subsidiaries. Promptly after the
delivery to the Banks of the financial statements referred to in Section
6.01(a) and (b), the Parent shall deliver to the Banks a supplement to Schedule
6.03, showing any changes in the composition of the Material Subsidiaries since
the date of the last delivery of such a notice.
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SECTION 6.04. Incorporated Covenants. The agreements,
covenants and obligations contained in Sections 7.1 through 7.6, inclusive, of
the Note Agreement (together with the definitions of the defined terms used
therein), as in effect (x) on the Closing Date and (y) as amended or
supplemented by any amendment or supplement expressly approved by the Required
Banks under this Agreement in their sole and absolute discretion (collectively,
the "Incorporated Covenants") are incorporated by reference herein and shall be
a part of this Agreement as if they were set forth in full herein, regardless
of whether the Note Agreement is terminated or in force or effect or whether
the Notes issued thereunder have been paid or satisfied, and the Incorporated
Covenants shall survive for all purposes hereof notwithstanding any such event;
provided, however, that for purposes of this Agreement:
(i) the term "Company", wherever used in Sections 7.1 through 7.6,
inclusive, of the Note Agreement, shall mean and refer to Parent;
(ii) the term "Notes" wherever used (x) in Section 7.2(b) of the Note
Agreement, shall mean and refer to the Notes issued under the Note Agreement,
(y) in Section 7.5(a)(i) of the Note Agreement, shall mean and refer to the
Notes issued under this Agreement, and (z) in Section 7.2(a) of the Note
Agreement and in the definition of "Subordinated Consolidated Indebtedness"
contained in the Note Agreement, shall mean and refer both to the Notes issued
under the Note Agreement and the Notes issued under this Agreement;
(iii) the terms "Default" and "Event of Default", wherever used in
Sections 7.1 through 7.6, inclusive, of the Note Agreement, shall mean and
refer to a Default or Event of Default under this Agreement;
(iv) the term "Agreement", wherever used in Section 7.5(a)(i) of the
Note Agreement, shall mean and refer to this Agreement;
(v) the term "Indebtedness", wherever used in the Note Agreement,
shall mean "Debt", as defined in this Agreement; and
(vi) the term "Senior Consolidated Indebtedness", wherever used in
Section 7.1 through 7.6, inclusive, of the Note Agreement, shall include the
Notes issued under this Agreement.
SECTION 6.05. Maintenance of Existence. Except as permitted
in the Incorporated Covenants, each Borrower shall, and Parent shall cause each
Material Subsidiary to, maintain its corporate existence and carry on the major
part of its business in substantially the same fields as such business is now
carried on and maintained; provided, that the foregoing shall not prevent the
termination of corporate existence or business of any Borrower other than
Parent if: (i) on the date of termination of
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such Borrower's corporate existence or business, such Borrower shall have
delivered to the Domestic Agent or the Foreign Currency Agent, or both, as
applicable, a letter terminating all rights of such Borrower to obtain
Borrowings under this Agrement, and has no Loans outstanding under this
Agreement; and (ii) in the opinion of the Parent's Board of Directors, such
termination is in the best interests of the Parent, is not disadvantageous to
the Banks and is not otherwise prohibited by this Agreement.
SECTION 6.06. Dissolution. Neither any Borrower nor any
Material Subsidiary shall be permitted to be dissolved or liquidated, except
through corporate reorganization to the extent permitted by the Incorporated
Covenants; provided, that any Borrower other than Parent, and any Material
Subsidiary, may be dissolved if: (i) on the date of liquidation or dissolution
of such Borrower, such Borrower shall have delivered to the Domestic Agent or
the Foreign Currency Agent, or both, as applicable, a letter terminating all
rights of such Borrower to obtain Borrowings under this Agreement, and has no
Loans outstanding under this Agreement; and (ii) in the opinion of the Parent's
Board of Directors, such dissolution is in the best interests of the Parent, is
not disadvantageous to the Banks and is not otherwise prohibited by this
Agreement.
SECTION 6.07. Use of Proceeds. The proceeds of the Loans will
be used for general corporate purposes. No portion of the proceeds of the
Loans will be used by any Borrower or any Subsidiary (i) in connection with,
whether directly or indirectly, any tender offer for, or other acquisition of,
stock of any corporation with a view towards obtaining control of such other
corporation, except in a negotiated, consensual transaction (ii) directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, or (iii) for any purpose in violation
of any applicable law or regulation.
SECTION 6.08. Compliance with Laws; Payment of Taxes. Each
Borrower will, and Parent will cause each of its Material Subsidiaries and each
member of the Controlled Group to, comply in all material respects with
applicable laws (including but not limited to ERISA), regulations and similar
requirements of governmental authorities (including but not limited to PBGC),
except where the necessity of such compliance is being contested in good faith
through appropriate proceedings or if failure to comply does not have a
Material Adverse Effect. Each Borrower will, and Parent will cause each of its
Material Subsidiaries to, pay, prior to the date on which penalties attach
thereto, all taxes, assessments, governmental charges, claims for labor,
supplies, rent and other obligations which, if unpaid, might become a lien
against the property of such Borrower or any Material Subsidiary, except
liabilities being contested in good faith and against which, if requested by
either of the Agents, Parent will set up reserves in accordance with GAAP and
other than taxes, assessments, governmental changes and other amounts
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which are not material in amount and could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.09. Insurance. Each Borrower will maintain, and
Parent will cause each of the Material Subsidiaries to maintain (either in the
name of such Borrower or in such Material Subsidiary's own name), with
financially sound and reputable insurance companies, insurance on such of its
property in at least such amounts, and with such deductibles, and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business.
SECTION 6.10. Maintenance of Property. Each Borrower shall,
and Parent shall cause each Material Subsidiary to, maintain all of its
properties and assets in good condition, repair and working order, ordinary
wear and tear excepted.
SECTION 6.11. Environmental Notices. The Borrowers shall
furnish to the Agents prompt written notice of all Environmental Liabilities,
pending or threatened Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases of which the
respective Borrower shall have received actual notice or have actual knowledge
at, on, in, under or in any way affecting the Properties or any adjacent
property, if the amount of liability or of remediation cost to the Borrowers is
or could reasonably be expected to have a Material Adverse Effect, and all
facts, events, or conditions actually known to the Borrowers that could
reasonably be expected to lead to any of the foregoing.
SECTION 6.12. Environmental Matters. The Borrowers will not,
and will not knowingly permit any Third Party to, use, produce, manufacture,
process, treat, recycle, generate, store, dispose of, manage at, or otherwise
handle, or ship or transport to or from the Properties any Hazardous Materials
except for Hazardous Materials such as cleaning solvents, pesticides and other
similar materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed, managed, or otherwise handled in minimal amounts
in the ordinary course of business or of management or maintenance of the
Properties in material compliance with all applicable Environmental
Requirements.
SECTION 6.13. Environmental Release. Each Borrower agrees
that upon its becoming aware of the occurrence of an Environmental Release,
except for any Environmental Release which occurred in substantial compliance
with all Environmental Requirements, at or on any of the Properties owned or
operated by it, it will act promptly to determine the extent of, and to take
appropriate remedial action to eliminate, any such Environmental Release,
whether or not ordered or otherwise directed to do so by any Environmental
Authority, except to the extent that failure to take remedial action would not
have a Material Adverse Effect.
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SECTION 6.14. Transactions with Affiliates. Neither any
Borrower nor any of the Subsidiaries shall enter into, or be a party to, any
transaction with any Affiliate of the Borrowers or any Subsidiary (which
Affiliate is not a Borrower or a Subsidiary, other than a Person in which such
Borrower or Subsidiary owns less than a majority interest and which, if it were
a Subsidiary, would not be a Material Subsidiary), except as permitted by law
and in the ordinary course of business and pursuant to reasonable terms which
are no less favorable to such Borrower or such Subsidiary than would be
obtained in a comparable arm's length transaction with a Person which is not an
Affiliate; provided, that the foregoing shall not affect the ability of the
Parent, any other Borrower or any Subsidiary from determining, in its sole
discretion, the amount or form of executive or directors compensation from time
to time.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrowers shall fail to pay when due any
principal of any Loan or shall fail to pay any interest on any Loan
within 5 Domestic Business Days after such interest shall become due,
or shall fail to pay any fee or other amount payable hereunder within
5 Domestic Business Days after such fee or other amount becomes due;
or
(b) the Borrowers shall fail to observe or perform any of
the Incorporated Covenants or any covenant contained in Sections
6.01(e), 6.02(ii), the proviso in Section 6.05, the proviso in Section
6.06, or Section 6.07; or
(c) the Borrowers shall fail to observe or perform any
covenant or agreement contained or incorporated by reference in this
Agreement (other than those covered by paragraph (a) or (b) above), or
Parent shall fail to observe or perform any covenant or agreement
contained or incorporated by reference in the Parent Guaranty, and in
either case such failure shall not have been cured within (1) 20 days,
with respect to Section 6.01(a), (b), (c), (d), (f) or (g), and (2) 30
days, with respect to all other covenants or agreements, after the
earlier to occur of (i) written notice thereof has been given to
Borrowers by either Agent at the request of the Required Banks or (ii)
an executive, senior financial or accounting officer of any of the
Borrowers otherwise becomes aware of any such failure; or
(d) any representation, warranty, certification or
statement made by the Borrowers in Article V of this Agreement or in
any certificate, financial statement or
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other document delivered pursuant to this Agreement or by Parent in
the Parent Guaranty shall prove to have been incorrect or misleading
in any material respect when made (or deemed made); or
(e) any Borrower or any Material Subsidiary shall fail to
make any payment in respect of Debt outstanding in an aggregate
principal amount equal to or greater than $5,000,000 (other than the
Notes) after the expiry of any applicable grace period; or
(f) any event or condition (other than a Change of Control or
similar event as provided for any loan agreement or other Debt
instrument) shall occur which (i) results in the acceleration of the
maturity of Debt (other than Debt which would not constitute a
"liability" in accordance with GAAP) outstanding of any Borrower or
any Material Subsidiary in an aggregate principal amount equal to or
greater than $10,000,000 (including, without limitation, any required
mandatory prepayment or "put" of such Debt to any Borrower or any
Material Subsidiary) or (ii) enables (and any required notice shall
have been given and any applicable grace period shall have expired)
the holders of such Debt or any Person acting on such holders' behalf
to accelerate the maturity thereof (including, without limitation, any
required mandatory prepayment or "put" of such Debt to any Borrower or
any Material Subsidiary); or
(g) any Borrower or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be
commenced against any Borrower or any Material Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered
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against any Borrower or any Material Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
(i) Parent or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by Parent, any member of the Controlled Group, any
plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans
or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or
a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(j) one or more judgments or orders for the payment of
money in an aggregate amount in excess of $5,000,000 shall be rendered
against any Borrower or any Material Subsidiary and such judgment or
order shall continue unsatisfied and unstayed for a period of 60 days;
or
(k) a federal tax lien shall be filed against any
Borrower under Section 6323 of the Code or a lien of the PBGC shall be
filed against any Borrower under Section 4068 of ERISA and in either
case if the amount involved is in aggregate amount in excess of
$5,000,000 and such lien shall remain undischarged for a period of 25
days after the date of filing;
then, and in every such event, the Agents shall (i) if
requested by the Required Banks, by notice to the Borrowers terminate
the Commitments and they shall thereupon terminate, (ii) any Bank may
terminate its obligation to fund a Money Market Loan in connection
with any relevant Money Market Quote, and (iii) the Agents shall, if
requested by the Required Banks, by notice to the Borrowers declare
the Notes (together with accrued interest thereon) to be, and the
Notes shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrowers and Parent (with respect to the
Parent Guaranty) together with interest at the Default Rate accruing
on the principal amount thereof from and after the date of such Event
of Default;provided that if any Event of Default specified in
paragraph (g) or (h) above occurs with respect to any Borrower,
without any notice to such Borrower or Parent (with respect to the
Parent Guaranty) or any other act by the Agents or the Banks, the
Commitments shall thereupon terminate and the Notes (together with
accrued interest
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thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrowers and Parent (with respect to the
Parent Guaranty) together with interest thereon at the Default Rate
accruing on the principal amount thereof from and after the date of
such Event of Default. Notwithstanding the foregoing, the Agents
shall have available to them all other remedies at law or equity, and
shall exercise any one or all of them at the request of the Required
Banks.
SECTION 7.02. Notice of Default. The Agents shall give notice
to the Borrowers of any Default under Section 7.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks
thereof.
ARTICLE VIII
THE AGENTS
SECTION 8.01. Appointment; Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes each Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agents by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. The Foreign
Currency Agent may delegate any functions to be performed by it under Article
III at the Agency Office, or any other function to be performed by it
hereunder, to FC&AS, who may perform any such delegated function on behalf of
and as the Foreign Currency Agent. The Agents: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement
or any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by any Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and then only on terms and conditions
satisfactory to the Agents, and (d) shall not be responsible for any action
taken or omitted to be taken by them hereunder or under any other Loan Document
or any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for their own gross
negligence or wilful misconduct. The Agents may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact
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selected by it with reasonable care. The provisions of this Article VIII are
solely for the benefit of the Agents and the Banks, and the Borrowers shall not
have any rights as a third party beneficiary of any of the provisions hereof.
In performing its functions and duties under this Agreement and under the other
Loan Documents, the Agents shall act solely as agents of the Banks and do not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for the Borrowers. The duties of the
Agents shall be ministerial and administrative in nature, and the Agents shall
not have by reason of this Agreement or any other Loan Document a fiduciary
relationship in respect of any Bank.
SECTION 8.02. Reliance by Agents. The Agents shall be
entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telefax, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by the Agents. As to any
matters not expressly provided for by this Agreement or any other Loan
Document, the Agents shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with
instructions signed by the Required Banks, and such instructions of the
Required Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
SECTION 8.03. Defaults. Neither Agent shall be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the
nonpayment of principal of or interest on the Loans) unless such Agent has
received notice from the other Agent, a Bank or a Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that either Agent receive such a notice of the
occurrence of a Default or an Event of Default, such Agent shall give prompt
notice thereof to the Banks and (unless originally notified by the other Agent)
the other Agent. Each Agent shall give each Bank and the other Agent prompt
notice of each nonpayment of principal of or interest on the Loans payable to
it under Section 2.12 or 3.11, as applicable, whether or not it has received
any notice of the occurrence of such nonpayment. The Agents shall (subject to
Section 10.06) take such action hereunder with respect to such Default or Event
of Default as shall be directed by the Required Banks, provided that, unless
and until the Agents shall have received such directions, the Agents may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as they shall deem
advisable in the best interests of the Banks.
SECTION 8.04. Rights of Agents as Banks. With respect to the
Loans made by it, each of Wachovia and ABN AMRO in its capacity as a Bank
hereunder shall have the same rights and
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powers hereunder as any other Bank and may exercise the same as though it were
not acting as the Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include each of Wachovia and ABN AMRO in its
individual capacity. Each Agent may (without having to account therefor to any
Bank) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with any Borrower (and any of its Affiliates)
as if it were not acting as the Agent, and each Agent may accept fees and other
consideration from the Borrowers (in addition to any agency fees and
arrangement fees heretofore agreed to between the Borrowers and the Agents) for
services in connection with this Agreement or any other Loan Document or
otherwise without having to account for the same to the Banks.
SECTION 8.05. Indemnification. Each Domestic Bank severally
agrees to indemnify the Domestic Agent, and each Foreign Currency Bank
severally agrees to indemnify the Foreign Currency Agent, in each case to the
extent such Agent shall not have been reimbursed by the Borrowers, ratably in
accordance with its Domestic Commitment (as to indemnification of the Domestic
Agent by the Domestic Banks) or Foreign Currency Commitment (as to
indemnification of the Foreign Currency Agent by the Foreign Currency Banks),
for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against such Agent in any way relating
to or arising out of this Agreement or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (excluding, unless an Event of Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or wilful misconduct of such Agent. If
any indemnity furnished to either Agent for any purpose shall, in the opinion
of such Agent, be insufficient or become impaired, such Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
SECTION 8.06. Payee of Note Treated as Owner. The Domestic
Agent (as to the Dollar Notes) and the Foreign Currency Agent (as to the
Foreign Currency Notes) may deem and treat the payee of any such Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the relevant Agent
and the provisions of Section 9.08(c) have been satisfied. Any requests,
authority or consent of any Person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be conclusive
and binding on any
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subsequent holder, transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor or replacement thereof.
SECTION 8.07. Nonreliance on Agents and Other Banks. Each
Bank agrees that it has, independently and without reliance on the Agents or
any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrowers and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agents or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Loan Documents. The Agents shall not be required to keep themselves
informed as to the performance or observance by the Borrowers of this Agreement
or any of the other Loan Documents or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Borrowers or any other Person. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agents
hereunder or under the other Loan Documents, the Agents shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrowers or any
other Person (or any of their Affiliates) which may come into the possession of
the Agents.
SECTION 8.08. Failure to Act. Except for action expressly
required of the Agents hereunder or under the other Loan Documents, each Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction
by the Banks of their indemnification obligations under Section 8.05 against
any and all liability and expense which may be incurred by such Agent by reason
of taking, continuing to take, or failing to take any such action.
SECTION 8.09. Resignation or Removal of Agents. Subject to
the appointment and acceptance of a successor Agent as provided below, either
Agent may resign at any time by giving notice thereof to the other Agent, the
Banks and the Borrowers and either Agent may be removed at any time with or
without cause by the Required Banks. Upon any such resignation or removal, the
Required Domestic Banks (as to resignation or removal of the Domestic Agent) or
Required Foreign Currency Banks (as to resignation or removal of the Foreign
Currency Agent) shall have the right to appoint a successor Domestic Agent
Required or Foreign Currency Agent, as the case may be (with the prior written
consent of the Parent, if no Default or Event of Default is in existence, which
consent shall not be unreasonably withheld or delayed). If no successor
Domestic Agent or Foreign Currency Agent, as applicable, shall have been so
appointed by the Required Domestic Banks or Foreign Currency Banks, as
applicable,
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and shall have accepted such appointment within 30 days after the retiring
Domestic Agent's or Foreign Currency Agent's, as applicable, notice of
resignation or the Required Domestic Banks' or Required Foreign Currency
Banks', as applicable, removal of the retiring Domestic Agent or Foreign
Currency Agent, then the retiring Domestic Agent or Foreign Currency Agent, as
applicable, may, on behalf of the Domestic or Foreign Currency Banks, as
applicable, appoint a successor Domestic Agent or Foreign Currency Agent. Any
such successor Agent shall be a bank which has a combined capital and surplus
of at least $500,000,000. Upon the acceptance of any appointment as Domestic
Agent or Foreign Currency Agent hereunder by a successor Domestic Agent or
Foreign Currency Agent, as applicable, such successor Domestic Agent or Foreign
Currency Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Domestic Agent or Foreign
Currency Agent, as applicable, and the retiring Domestic Agent or Foreign
Currency Agent shall be discharged from its duties and obligations hereunder.
After any retiring Domestic Agent's or Foreign Currency Agent's resignation or
removal hereunder as Domestic Agent or Foreign Currency Agent, the provisions
of this Article VIII shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Domestic
Agent or Foreign Currency Agent, as applicable, hereunder.
ARTICLE IX
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 9.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) the Domestic Agent determines that deposits in
Dollars, or the Foreign Currency Agent determines that a particular
Foreign Currency (in the applicable amounts), are not being offered in
the relevant market for such Interest Period, or
(b) the Required Domestic Banks advise the Domestic Agent that
the London Interbank Offered Rate, or the Required Foreign Currency
Banks advise the Foreign Currency Agent that the Foreign Currency
LIBOR/Reference Rate for any Foreign Currency, as the case may be, as
determined by such Agent, will not adequately and fairly reflect the
cost to such Banks of funding the relevant type of Fixed Rate Loans
for such Interest Period,
such Agent shall forthwith give notice thereof to the other Agent, the
Borrowers and the Domestic Banks or Foreign Currency Banks, as applicable,
whereupon until such Agent notifies the Borrowers that the circumstances giving
rise to such suspension
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no longer exist, the obligations of the Domestic Banks or Foreign Currency
Banks, as applicable, to make the type of Fixed Rate Loans specified in such
notice shall be suspended. Unless the affected Borrower notifies the Domestic
Agent at least 2 Domestic Business Days before the date of any Borrowing of
such type of Fixed Rate Loans for which a Notice of Syndicated Dollar Borrowing
has previously been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Borrowing. Unless the affected
Borrower notifies the Foreign Currency Agent at least 2 Foreign Currency
Business Days before the date of any Borrowing of such type of Fixed Rate Loans
for which a Notice of Foreign Currency Borrowing has previously been given that
it elects not to borrow on such date, such Borrowing shall instead be made as a
Foreign Currency Base Rate Borrowing. Upon the affected Borrower's written
request, the relevant Agent shall negotiate with the affected Borrower and the
relevant Banks for a reasonable period of time, as determined in such Agent's
discretion, to develop a substitute interest rate basis for Borrowings
hereunder; provided, however, (x) the Agents, the Banks and the Borrowers make
no representation, warranty or covenant that any such agreement will be made,
and (y) any relevant Loans shall continue to have interest accrue thereon at
the Base Rate or the Foreign Currency Base Rate, as appropriate, during the
continuance of any such negotiations and thereafter should no alternate
interest rate be agreed to by the necessary parties.
SECTION 9.02. Illegality. If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof (any such agency being referred to as an "Authority" and
any such event being referred to as a "Change of Law"), or compliance by any
Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any Authority shall make it unlawful or impossible
for any Domestic Bank or Foreign Currency Bank (or its Lending Office) to make,
maintain or fund its Euro-Dollar Loans or Foreign Currency Loans and such Bank
shall so notify the appropriate Agent, such Agent shall forthwith give notice
thereof to the other Domestic Banks or Foreign Currency Banks, as applicable,
and the relevant Borrowers, whereupon until such Bank notifies the relevant
Borrowers and the relevant Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans or Foreign Currency Loans, as the case may be, shall be suspended.
Before giving any notice to the relevant Agent pursuant to this Section, such
Bank shall designate a different Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall determine that it
may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans or Foreign Currency Loans, as the case may be, to maturity
and shall so specify in
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such notice, the relevant Borrowers shall immediately prepay in full the then
outstanding principal amount of each Euro-Dollar Loan or Foreign Currency
Loans, as the case may be, of such Bank, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan or Foreign
Currency Loans, as the case may be, such Borrowers shall borrow as a Refunding
Loan, without any requirement for the satisfaction of any of the conditions
precedent set forth an any of Sections 2.02(a), (b) or (c) or 3.02(a), (b) or
(c) a Base Rate Loan or Syndicated Foreign Currency Loan in Euro-USD or ITL
Base Rate Loan, as appropriate, in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans or Foreign Currency Loans, as the case may be, of the
other Banks), and such Bank shall make such a Base Rate Loan or Syndicated
Foreign Currency Loan in Euro-USD or ITL Base Rate Loan, as appropriate.
SECTION 9.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by any Bank (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any Authority:
(i) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, or, with respect to Loans in BPS, by the Bank of
England, but excluding (A) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve
Percentage and (B) with respect to any Foreign Currency Loan, any
requirement for which the subject Bank has already been compensated
pursuant to Section 3.05(c)) against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its Lending
Office); or
(ii) shall impose on any Bank (or its Lending Office) or on
the relevant interbank market any other condition affecting its Fixed
Rate Loans, its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its relevant Notes with respect thereto,
by an amount deemed by such Bank to be material, then, within 15 days after
demand by such Bank (with a copy to the Domestic Agent or the Foreign Currency
Agent, as appropriate), the affected Borrowers shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction; provided, however, that no Borrower shall be responsible to
the Banks for any increased cost or reduced return, under either this Section
9.03(a) or the immediately succeeding Section 9.03(b), which accrued at any
time before that
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date which is 90 calendar days prior to the date upon which such Borrower is
notified of same.
(b) If any Bank shall have determined that after the date
hereof the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any Authority, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for
such adoption, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand by such Bank,
the relevant Borrowers shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such reduction, subject to the proviso at the
end of Section 9.03(a).
(c) Each Bank will promptly notify the relevant Borrowers
and the relevant Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation pursuant to and
subject to the limitations contained in this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods. Nothing in this Section shall require
any Bank to disclose any information about its tax affairs or interfere with,
limit or abridge the right of any Bank to arrange its tax affairs in any manner
in which it desires.
(d) Any Bank claiming increased costs or other amounts under
this Section 9.03 shall, at the time of making any claim for such increased
cost or other amount and as a condition precedent to the obligation of the
Borrower to reimburse the same, certify to the relevant Borrower in writing
that such Bank, as a matter of policy, is seeking reimbursement of similar
increased costs and other amounts from its borrowers generally for similar
types of loans.
(e) The provisions of this Section 9.03 (i) shall be
applicable with respect to any Participant, Assignee or other Transferee, and
any calculations required by such provisions shall be made based upon the
circumstances of such Participant, Assignee or other Transferee and (ii) shall
constitute a continuing agreement and shall survive for a period of one year
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after the termination of this Agreement and the payment in full or cancellation
of the Notes.
SECTION 9.04. Base Rate Loans or Other Fixed Rate Loans
Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank
to make or maintain any type of Fixed Rate Loans has been suspended pursuant to
Section 9.02 or (ii) any Bank has demanded compensation under Section 9.03, and
the affected Borrower shall, by at least 5 Euro-Dollar Business Days' or
Foreign Currency Business Days, as applicable, prior notice to such Bank
through the relevant Agent, have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank notifies such
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank
as Euro-Dollar Loans or Foreign Currency Loans, as the case may be,
shall be made instead either (A) as Base Rate Loans or Syndicatated
Foreign Currency Loans in Euro-USD or ITL Base Rate Loans, as
appropriate, (B) if such suspension or demand for compensation relates
to Euro-Dollar Loans, but not Foreign Currency Loans, as Foreign
Currency Loans, (C) if such demand for compensation relates to
Euro-Dollar Loans, but not Foreign Currency Loans, as Foreign Currency
Loans, or (D) if such demand for compensation relates to Foreign
Currency Loans, but not Euro-Dollar Loans, as Euro-Dollar Loans, as
the affected Borrowers may elect in the notice to such Bank through
the Agents referred to hereinabove (in all cases interest and
principal on such Loans shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans or Foreign
Currency Loans, as the case may be, has been repaid, all payments of
principal which would otherwise be applied to repay such Fixed Rate
Loans shall be applied to repay its Base Rate Loans or Syndicated
Foreign Currency Loan in Euro-USD or ITL Base Rate Loans, as
applicable, instead.
Upon the written request of the affected Borrower, the relevant Agent shall
negotiate with the affected Borrower and the Banks for a reasonable period of
time, as determined in such Agent's discretion, to develop a substitute
interest rate basis for Borrowings hereunder; provided, however, (x) the
Agents, the Banks and the Borrowers make no representation, warranty or
covenant that any such agreement will be made, and (y) any relevant Loans shall
continue to have interest accrue thereon at the Base Rate or the rate for
Syndicated Foreign Currency Loans in Euro-USD or ITL Base Rate, as
appropriate, during the continuance of any such negotiations and thereafter
should no alternate interest rate be agreed to by the necessary parties.
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SECTION 9.05. Compensation. Upon the request of any Bank,
delivered to the affected Borrower and the relevant Agent, such Borrower shall
pay to such Bank such amount or amounts as shall compensate such Bank for any
loss, cost or expense (but not loss of margin or profit) incurred by such Bank
as a result of:
(a) any payment or prepayment (pursuant to Section 2.10,
2.11, 3.09, 3.10, 7.01, 9.02 or otherwise) of a Fixed Rate Loan or Money Market
Loan on a date other than (i) in the case of a Fixed Rate Loan, the last day of
the Interest Period for such Fixed Rate Loan and (ii) in the case of a Money
Market Loan, on the Stated Maturity Date for such Money Market Loan; or
(b) any failure by any Borrower to borrow a Fixed Rate
Loan on the date for the Fixed Rate Borrowing of which such Fixed Rate Loan is
a part specified in the applicable Notice of Syndicated Dollar Borrowing,
Notice of Syndicated Foreign Currency Borrowing or Notice of ITL Borrowing
delivered pursuant to Section 2.02 or 3.02, as applicable (other than by reason
of a default by the relevant Bank or Agent);
such compensation to include, without limitation, as applicable: (A) an amount
equal to the excess, if any, of (x) the amount of interest which would have
accrued on the amount so paid or prepaid or not prepaid or borrowed for the
period from the date of such payment, prepayment or failure to prepay or borrow
to the last day of the then current Interest Period for such Fixed Rate Loan
(or, in the case of a failure to prepay or borrow, the Interest Period for such
Fixed Rate Loan which would have commenced on the date of such failure to
prepay or borrow) at the applicable rate of interest for such Fixed Rate Loan
provided for herein over (y) the amount of interest (as reasonably determined
by such Bank) such Bank would have paid on (i) deposits in Dollars of
comparable amounts having terms comparable to such period placed with it by
leading banks in the London interbank market (if such Fixed Rate Loan is a
Euro-Dollar Loan), or (ii) any deposit in a Foreign Currency of comparable
amounts having terms comparable to such period placed with it by lending banks
in the applicable interbank market for such Foreign Currency (if such Fixed
Rate Loan is a Foreign Currency Loan); or (B) any such loss, cost or expense
incurred by such Bank in liquidating or closing out any foreign currency
contract undertaken by such Bank in funding or maintaining such Fixed Rate Loan
(if such Fixed Rate Loan is a Foreign Currency Loan); provided, that (i) the
Borrowers shall be responsible to the Banks only for their actual costs
incurred in connection with same (i.e. not for any lost profits which were
expected over the course of such Interest Period), (ii) the Banks shall take
reasonable efforts to mitigate their damages in connection with same, and (iii)
the Borrowers shall not be responsible to the Banks for such losses in excess
of those amounts as the Banks would have incurred had they funded their
Euro-Dollar Loans in the London interbank market or their Foreign Currency
Loans in the relevant interbank market for such Foreign Currency.
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SECTION 9.06. Failure to Pay in Foreign Currency. If
any Borrower is prevented by application of any applicable law, rule or
regulation from effecting payment in a relevant Foreign Currency as required by
this Agreement, each Foreign Currency Bank may, through the Foreign Currency
Agent, require such payment to be made in Dollars in the Dollar Equivalent on
the date of payment of the amount of such payment. In any case in which any
Borrower shall make such payment in Dollars, such Borrower agrees to hold the
Foreign Currency Banks harmless from any loss incurred by the Foreign Currency
Banks arising from any change in the value of Dollars in relation to such
Foreign Currency between the date such payment became due and the date of
payment thereof.
SECTION 9.07. Judgment Currency. If for the purpose of
obtaining judgment in any court or enforcing any such judgment it is necessary
to convert any amount due in any Foreign Currency into any other currency, the
rate of exchange used shall be the Foreign Currency Agent's spot rate of
exchange for the purchase of the Foreign Currency with such other currency at
the close of business on the Foreign Currency Business Day preceding the date
on which judgment is given or any order for payment is made. The obligation of
the relevant Borrower in respect of any amount due from it hereunder shall,
notwithstanding any judgment or order for a liquidated sum or sums in respect
of amounts due hereunder or under any judgment or order in any other currency
or otherwise be discharged only to the extent that on the Foreign Currency
Business Day following receipt by the Foreign Currency Agent of any payment in
a currency other than the relevant Foreign Currency the Foreign Currency Agent
is able (in accordance with normal banking procedures) to purchase the relevant
Foreign Currency with such other currency. If the amount of the relevant
Foreign Currency that the Foreign Currency Agent is able to purchase with such
other currency is less than the amount due in the relevant Foreign Currency,
notwithstanding any judgment or order, such Borrower shall indemnify the
Foreign Currency Banks for the shortfall.
SECTION 9.08. Replacement of Banks. If any Bank claims
increased costs or other amounts or exercises any of its other rights or
remedies under Section 2.12(b), 2.12(c), 9.01, 9.02 or 9.03, the Parent shall
have the right to replace such Bank with another bank or financial institution,
subject to the approval of the relevant Agent, which approval shall not be
unreasonably withheld, provided that if more than one Bank claims increased
costs or other amounts or otherwise exercises such other rights on a similar
basis, the Parent must replace all or none of such Banks. Upon payment by the
new bank or financial institution to such Bank of the outstanding principal
amount of such bank's Dollar Loans, together with interest thereof accrued to
the date of payment, such new bank or financial institution shall become a
"Bank" under this Agreement with the rights and obligations of the Bank so
replaced.
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telecopier or similar writing) and shall be given to such party at its address
or telecopier number set forth on the signature pages hereof (with a copy of
any such notice to the Foreign Currency Agent also sent to FC&AS at the Agency
Office), or such other address or telecopier number as such party may hereafter
specify for the purpose by notice to each other party. Each such notice,
request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section and the appropriate confirmation is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Agent under Article II, Article III or Article IX shall not be effective
until received.
SECTION 10.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note or other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.03. Expenses; Documentary Taxes. The Borrower
shall pay (i) all out-of-pocket expenses of the Agents, including fees and
disbursements of one special counsel for the Banks and the Agents, in
connection with the preparation of this Agreement and the other Loan Documents,
any waiver or consent hereunder or thereunder or any amendment hereof or
thereof or any Default or alleged Default hereunder or thereunder and (ii) if
an Event of Default occurs, all out-of-pocket expenses incurred by the Agents
and the Banks, including fees and disbursements of counsel, in connection with
such Event of Default and collection and other enforcement proceedings
resulting therefrom, including out-of-pocket expenses incurred in enforcing
this Agreement and the other Loan Documents. The Borrowers shall indemnify the
Agents and each Bank against any transfer taxes, documentary taxes, stamp
duties, assessments or charges made by any Authority by reason of the execution
and delivery of this Agreement or the other Loan Documents.
SECTION 10.04. Indemnification. The Borrowers, ratably in
accordance with the aggregate principal amount of their respective Loans,
shall indemnify the Agents, the Banks and each
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affiliate thereof and their respective directors, officers, employees and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject, insofar
as such losses, liabilities, claims or damages arise out of or result from any
actual or proposed use by the Borrower of the proceeds of any extension of
credit by any Bank hereunder or breach by any Borrower of this Agreement or any
other Loan Document or from any investigation, litigation (including, without
limitation, any actions taken by the Agents or any of the Banks to enforce this
Agreement or any of the other Loan Documents) or other proceeding (including,
without limitation, any threatened investigation or proceeding) relating to the
foregoing, and the Borrowers shall reimburse the Agents and each Bank, and each
affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any expenses (including, without limitation, legal
fees) incurred in connection with any such investigation or proceeding; but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or wilful misconduct of the Person to be
indemnified. The indemnification provisions (including, without limitation,
provisions for default interest, to the extent that this Section 10.04 might be
construed as duplicating the Borrowers' obligations to pay interest at the
Default Rate as required elsewhere in this Agreement) set forth in this Section
10.04 are meant to be without duplication of any other indemnification
provisions set forth in this Agreement and without limiting the generality of
the foregoing, the costs, expenses and other amount that are provided for in
Sections 2.12, 9.03 and 9.04 hereof shall not be covered by this Section 10.04,
nor shall any costs, expenses or other amounts that are excluded from those
Sections be covered by this Section 10.04.
If any indemnified party shall have notice of any event or condition
for which indemnification will be sought from the Borrowers hereunder, such
indemnified party shall give prompt and timely notice of such event or
condition to the Parent and shall cooperate fully with the Parent in taking any
action with respect to such event or condition. The Parent shall have the right
to control any proceedings in connection with any event or condition that is
the subject of indemnification hereunder, including, without limitation, the
decision to commence or not to commence such proceeding, to defend or not to
defend, to discontinue or settle such proceeding or to appeal any decision with
respect thereto, so long as the indemnified party is held entirely harmless
pursuant hereto and the Parent is not in default in any of its obligations
under this Section 10.04.
Upon the payment of any amounts due to the indemnified parties under
this Section 10.04, the Borrowers shall be subrogated to all of the indemnified
party's rights and claims with respect to the subject of such indemnity
payment.
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SECTION 10.05 Sharing of Setoffs. Each Bank agrees that if
it shall, by exercising any right of setoff or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest owing with respect to the Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of all
principal and interest owing with respect to the Note held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks owing to such other Banks,
and such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the Banks
owing to such other Banks shall be shared by the Banks pro rata; provided that
(i) nothing in this Section shall impair the right of any Bank to exercise any
right of setoff or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of any Borrower other than its
indebtedness under the Notes, and (ii) if all or any portion of such payment
received by the purchasing Bank is thereafter recovered from such purchasing
Bank, such purchase from each other Bank shall be rescinded and such other Bank
shall repay to the purchasing Bank the purchase price of such participation to
the extent of such recovery together with an amount equal to such other Bank's
ratable share (according to the proportion of (x) the amount of such other
Bank's required repayment to (y) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. Each Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not acquired pursuant
to the foregoing arrangements, may exercise rights of setoff or counterclaim
and other rights with respect to such participation as fully as if such holder
of a participation were a direct creditor of such Borrower in the amount of
such participation.
SECTION 10.06. Amendments and Waivers. (a) Any provision of
this Agreement, the Notes or any other Loan Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrowers and (i) if such amendment or waiver relates only to Article II, the
Required Domestic Banks, (ii) if such amendment or waiver relates only to
Article III, the Required Foreign Currency Banks, and (iii) if such amendment
or waiver relates to any other provision of this Agreement, the Required Banks
(and in each case, if the rights or duties of either of the Agents are affected
thereby, by such Agent); provided that, no such amendment or waiver shall:
(A) unless signed by all Banks, (1) change the percentage of the
Commitments, or the aggregate unpaid principal amount of the Notes, or the
percentage of Banks, which shall be required to take any action required to be
taken by the Banks or the Required Banks under this Section or any other
provision of this
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Agreement, (2) change the manner of application of any payments made under
this Agreement or any of the Notes, (3) change the date fixed for any payment
of principal of or interest on any Loan or any fees payable to the Banks
hereunder, (4) change the amount of principal, interest or fees on any date
fixed for the payment thereof, (5) release or substitute all or any substantial
part of the collateral (if any) held as security for the Loans, or (6) release
any Guarantee given to support payment of the Loans;
(B) unless signed by all Domestic Banks, (1) change the Dollar Loan
Commitment of any Domestic Bank or subject any Domestic Bank to any additional
obligation, (2) change the percentage of the Dollar Loan Commitments, or of
the aggregate unpaid principal amount of the Dollar Loan Notes, or the
percentage of Domestic Banks, which shall be required for the Domestic Banks to
take any action under this Section or any other provision of this Agreement; or
(C) unless signed by all Foreign Currency Banks, (1) change the
Foreign Currency Loan Commitment of any Foreign Currency Bank or subject any
Foreign Currency Bank to any additional obligation, (2) change the percentage
of the Foreign Currency Loan Commitments, or of the aggregate unpaid principal
amount of the Foreign Currency Loan Notes, or the percentage of Foreign
Currency Banks, which shall be required for the Foreign Currency Banks to take
any action under this Section or any other provision of this Agreement.
(b) The Borrowers will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement except through the relevant Agent and shall supply
such Agent with such information with respect thereto as may be reasonably
requested by such Agent. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Agreement shall be
delivered by the Borrowers to the Agents (in sufficient counterparts for each
of the Banks) forthwith following the date on which the same shall have been
executed and delivered by the requisite percentage of Domestic Banks, Foreign
Currency Banks or Banks, as applicable. The Borrowers will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any Bank (in its
capacity as such) as consideration for or as an inducement to the entering into
by such Bank of any waiver or amendment of any of the terms and provisions of
this Agreement unless such remuneration is concurrently paid, on the same
terms, ratably to all such Banks.
SECTION 10.07. No Margin Stock Collateral. Each of the Banks
represents to the Agents, the Borrowers and each of the other Banks that it in
good faith is not, directly or indirectly (by negative pledge or otherwise),
relying upon any Margin Stock
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as collateral in the extension or maintenance of the credit provided for in
this Agreement.
SECTION 10.08. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the Borrowers
may not assign or otherwise transfer any of their rights under this Agreement.
(b) Any Bank may, without the consent of the Borrowers,
at any time sell to one or more Persons (each a "Participant") participating
interests in any Loan owing to such Bank, any Note held by such Bank, any
Commitment hereunder or any other interest of such Bank hereunder. In the
event of any such sale by a Bank of a participating interest to a Participant,
such Bank's obligations under this Agreement shall remain unchanged, such Bank
shall remain solely responsible for the performance thereof, such Bank shall
remain the holder of any such Note for all purposes under this Agreement, and
the Borrowers and the Agents shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. In no event shall a Bank that sells a participation be obligated to
the Participant to take or refrain from taking any action hereunder except that
such Bank may agree that it will not (except as provided below), without the
consent of the Participant, agree to (i) the change of any date fixed for the
payment of principal of or interest on or fees with respect to the related loan
or loans, (ii) the change of the amount of any principal, interest or fees due
on any date fixed for the payment thereof with respect to the related loan or
loans, (iii) the change of the principal of the related loan or loans, (iv) any
change in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) fee is payable hereunder from the
rate at which the Participant is entitled to receive interest or fee (as the
case may be) in respect of such participation, (v) the release or substitution
of all or any substantial part of the collateral (if any) held as security for
the Loans, or (vi) the release of any Guarantee given to support payment of the
Loans. Each Bank selling a participating interest in any Loan (other than a
Money Market Loan), Note, Commitment or other interest under this Agreement
shall, within 10 Domestic Business Days of such sale, provide the Borrowers and
the Agents with written notification stating that such sale has occurred and
identifying the Participant and the interest purchased by such Participant.
Each Borrower agrees that each Participant shall be entitled to the benefits of
Article IX with respect to its participation in Loans outstanding from time to
time, but only to the extent that such Bank which sold the relevant
participation would have been entitled to pursuant to the terms of this
Agreement.
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under
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this Agreement, the Notes and the other Loan Documents, and such Assignee shall
assume all such rights and obligations, pursuant to an Assignment and
Acceptance in the form attached hereto as Exhibit E, executed by such Assignee,
such transferor Bank and the Agents (and, in the case of an Assignee that is
not then a Bank or an Affiliate thereof, by the Parent, which consent shall not
be unreasonably withheld); provided that (i) no interest may be sold by a Bank
pursuant to this paragraph (c) unless the Assignee shall agree to assume
ratably equivalent portions of the transferor Bank's Commitment, (ii) the
amount of the Commitment of the assigning Bank subject to such assignment
(determined as of the effective date of the assignment) shall be equal to
$1,000,000 (or any larger multiple of $1,000,000, (iii) no interest may be sold
by a Bank pursuant to this paragraph (c) to any Assignee that is not then a
Bank or an Affiliate thereof without the consent of the Borrowers and the
Agents, which consent shall not be unreasonably withheld, and (iv) a Bank may
not have more than 2 Assignees that were not previously Banks or Affiliates
thereof at any one time. Upon (A) execution of the Assignment and Acceptance
by such transferor Bank, such Assignee, the Agents and (if applicable) the
Borrowers, (B) delivery of an executed copy of the Assignment and Acceptance to
the Borrowers and the Agents, (C) payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, and (D) payment of a processing and recordation fee of
$2,000 to the relevant Agent, such Assignee shall for all purposes be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
under this Agreement to the same extent as if it were an original party hereto
with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by the Borrowers, the
Banks or the Agents shall be required. Upon the consummation of any transfer
to an Assignee pursuant to this paragraph (c), the transferor Bank, the Agents
and the Borrowers shall make appropriate arrangements so that, if required, new
Notes are issued to such Assignee, but only if such Transferee, prior to
receiving any such information, agrees to be bound by the provisions of Section
10.09 in a written instrument for the benefit of the Borrowers.
(d) Subject to the provisions of Section 10.09, each Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning such Borrower which
has been delivered to such Bank by such Borrower pursuant to this Agreement or
which has been delivered to such Bank by such Borrower in connection with such
Bank's credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater
payment under Section 2.12(c), Section 3.11(d) or Section 9.03 than the
transferor Bank would have been entitled to receive
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with respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 9.02
or 9.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
(f) If any Foreign Currency Reference Bank assigns its Notes
to an unaffiliated institution, the Foreign Currency Agent shall, with the
consent of the Parent and with the consent of the Required Foreign Currency
Banks, appoint another bank to act as a Foreign Currency Reference Bank
hereunder.
(g) Anything in this Section 10.08 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion of the Loans
and/or obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such
assigned Loans and/or obligations made by the Borrowers to the assigning and/or
pledging Bank in accordance with the terms of this Agreement shall satisfy the
Borrowers' obligations hereunder in respect of such assigned Loans and/or
obligations to the extent of such payment. No such assignment shall release
the assigning and/or pledging Bank from its obligations hereunder.
SECTION 10.09. Confidentiality. Without limiting any duty of
confidentiality imposed on the Agents or the Banks or any of them under
applicable law, each Bank and each Agent agrees to exercise its best efforts to
keep any information delivered or made available by the Borrowers to it,
including, without limitation, information obtained by such Agent or such Bank
by reason of a visit or investigation by any Person contemplated in Section
6.02, which is clearly indicated to be confidential information, confidential
from anyone other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or administrative agency, (iii) upon the request or demand
of any regulatory agency or authority having jurisdiction over such Bank, (iv)
which has been publicly disclosed, other than in violation of this Section
10.09, (v) to the extent reasonably required in connection with any litigation
to which the Agent, any Bank or their respective Affiliates may be a party,
(vi) to the extent reasonably required in connection with the exercise of any
remedy hereunder, (vii) to such Bank's legal counsel and independent auditors
and (viii) to any actual or proposed Participant, Assignee or other Transferee
of all or part of its rights hereunder which has agreed in writing, for the
benefit of the Borrowers, to be bound by the provisions of this Section 10.09.
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SECTION 10.10. Representation by Banks. Each Bank hereby
represents that it is a commercial lender or financial institution which makes
Loans in the ordinary course of its business and that it will make its Loans
hereunder for its own account in the ordinary course of such business;
provided, however that, subject to Section 10.08, the disposition of the Note
or Notes held by that Bank shall at all times be within its exclusive control.
SECTION 10.11. Obligations Several. The obligations of each
Bank hereunder are several, and no Bank shall be responsible for the
obligations or commitment of any other Bank hereunder. Nothing contained in
this Agreement and no action taken by the Banks pursuant hereto shall be deemed
to constitute the Banks to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Bank shall be a separate and independent debt, and each Bank shall be entitled
to protect and enforce its rights arising out of this Agreement or any other
Loan Document and it shall not be necessary for any other Bank to be joined as
an additional party in any proceeding for such purpose.
SECTION 10.12. New York Law. This Agreement and each Note
shall be construed in accordance with and governed by the law of the State of
New York.
SECTION 10.13. Severability. In case any one or more of the
provisions contained in this Agreement, the Notes or any of the other Loan
Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.
SECTION 10.14. Interest. In no event shall the amount of
interest due or payable hereunder or under the Notes exceed the maximum rate of
interest allowed by applicable law, and in the event any such payment is
inadvertently made to any Bank by any Borrower or inadvertently received by any
Bank, then such excess sum shall be credited as a payment of principal, unless
such Borrower shall notify such Bank in writing that it elects to have such
excess sum returned forthwith. It is the express intent hereof that the
Borrowers not pay and the Banks not receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may legally be paid by any
Borrower under applicable law.
SECTION 10.15. Waiver of Jury Trial; Consent to Jurisdiction.
THE BORROWERS (A) AND EACH OF THE BANKS AND THE AGENTS IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THIS
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, (B) SUBMITS TO THE NONEXCLUSIVE PERSONAL
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK FOR
86
<PAGE> 93
THE COUNTY OF NEW YORK, AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, FOR THE ENFORCEMENT OF THIS AGREEMENT, THE NOTES, THE
PARENT GUARANTY AND THE OTHER LOAN DOCUMENTS, (C) WAIVES ANY AND ALL PERSONAL
RIGHTS UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING,
WITHOUT LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN
SUCH COURTS AND (D) AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN THE
MANNER PRESCRIBED IN SECTION 10.01 FOR THE GIVING OF NOTICE TO THE BORROWER.
NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE AGENTS FROM BRINGING ANY
ACTION OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST THE BORROWERS
PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER, WITHIN ANY OTHER STATE OR
JURISDICTION.
SECTION 10.16. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
87
<PAGE> 94
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed in New York, New York, by their respective
authorized officers as of the day and year first above written.
SENSORMATIC ELECTRONICS
CORPORATION
By:
---------------------------------
Title:
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Miguel A. Flores
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
SENSORMATIC DISTRIBUTION INC.
By:
---------------------------------
Title:
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Miguel A. Flores
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
SENSORMATIC INTERNATIONAL,
INC.
By:
---------------------------------
Title:
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Miguel A. Flores
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
88
<PAGE> 95
SENSORMATIC AB
Incorporated
in Sweden
By:
---------------------------------
Foreign Currency: SEK Title:
------------------------------------
------------------------------------
------------------------------------
Attention:
--------------------------
Telecopier number:
-----------------
Confirmation number:
---------------
SENSORMATIC A.G.
Incorporated
in Switzerland
By:
---------------------------------
Foreign Currency: SFR Title:
------------------------------------
------------------------------------
------------------------------------
Attention:
--------------------------
Telecopier number:
-----------------
Confirmation number:
---------------
SENSORMATIC AS
Incorporated
in Denmark
By:
---------------------------------------
Foreign Currency: DKR Title:
------------------------------------------
------------------------------------------
------------------------------------------
Attention:
--------------------------------
Telecopier number:
-----------------------
Confirmation number:
---------------------
89
<PAGE> 96
SENSORMATIC AS
Incorporated
in Norway
By:
----------------------------------
Foreign Currency: NOK Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC B.V.
Incorporated
in The Netherlands
By:
----------------------------------
Foreign Currency: NLG Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC CAMERA S.A.R.L.
Incorporated
in France
By:
----------------------------------
Foreign Currency: FFR Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
90
<PAGE> 97
SENSORMATIC E.C., S.R.L.
Incorporated
in Italy
By:
----------------------------------
Foreign Currency: ITL Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC GES.M.B.H.
Incorporated
in Austria
By:
----------------------------------
Foreign Currency: ATS Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC G.M.B.H.
Incorporated
in Germany
By:
----------------------------------
Foreign Currency: DEM Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
91
<PAGE> 98
N.V. SENSORMATIC S.A.
Incorporated
in Belgium
By:
----------------------------------
Foreign Currency: BFR Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC OY
Incorporated
in Finland
By:
----------------------------------
Foreign Currency: FIM Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC S.A.
Incorporated
in France
By:
----------------------------------
Foreign Currency: FFR Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
------------------
92
<PAGE> 99
SENSORMATIC HOLDINGS LTD.
Incorporated
in United Kingdom
By:
----------------------------------
Foreign Currency: GBP Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC INTERNATIONAL LTD.
Incorporated
in United Kingdom
By:
----------------------------------
Foreign Currency: GBP Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC CAMERA LTD
Incorporated
in United Kingdom
By:
----------------------------------
Foreign Currency: GBP Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
93
<PAGE> 100
SENSORMATIC E.C., S.A.
Incorporated
in Spain
By:
----------------------------------
Foreign Currency: ESP Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC PROTECCAO CONTRA
O FURTO, L.D.A.
Incorporated
in Portugal
By:
----------------------------------
Foreign Currency: PTE Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
SENSORMATIC LIMITED
Incorporated
in United Kingdom
By:
----------------------------------
Foreign Currency: GBP Title:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------------
Telecopier number:
------------------
Confirmation number:
----------------
94
<PAGE> 101
COMMITMENTS
Dollar Loans: WACHOVIA BANK OF GEORGIA, N.A.,
$30,000,000 as Domestic Agent and
as a Bank
Syndicated Foreign
Currency Loans:
$0.00
By:
----------------------------------
Title:
Lending Office
--------------
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Atlanta Corporate Group
Telecopier number: 404-332-5016
Confirmation number: 404-332-5920
Dollar Loans: ABN AMRO BANK N.V., as Foreign
$0.00 Currency Agent and as a Bank
Syndicated Foreign
Currency Loans:
$25,000,000
By:
---------------------------------
Title:
By:
--------------------------------
Title:
Lending Office
--------------
ABN AMRO Bank N.V.
Foppingadreef 22
102 BS Amsterdam, The Netherlands
Attention: Peter van Lierop
Telecopier number: 31-20-628-7716
Confirmation number: 31-20-628-4657
ABN AMRO FOREIGN CREDIT & AGENCY
SERVICES, a division of ABN AMRO
Bank, N.V.
By:
--------------------------------
Title:
By:
--------------------------------
Title:
95
<PAGE> 102
Dollar Loans: CHEMICAL BANK
$10,000,000
Syndicated Foreign
Currency Loans: By:
---------------------------
$0.00 Title:
Lending Office
--------------
Chemical Bank
270 Park Avenue, 9th Floor
New York, New York 10017
Attention: Abigail L. Grecia
Telecopier number: 212-818-1456
Confirmation number: 212-270-5425
Dollar Loans: THE FIRST NATIONAL BANK OF BOSTON
$5,000,000
Syndicated Foreign
Currency Loans:
$10,000,000 By:
-----------------------------------
Title:
Lending Office for Dollar Loans
-------------------------------
The First National Bank of Boston
100 Federal Street
MS 01-08-04
Boston, MA 02110
Attention: Jay Massimo
Telecopier number: 617-434-0819
Confirmation number: 617-434-7824
Lending Office for Foreign
--------------------------
Currency Loans
---------------
The First National Bank of Boston
City-Haus
Friedrich-Ebert-Anlage 2-14
0-60325 Frankfurt/Main
Germany
Attention: Wolfgang Ramthor
Telecopier number: 49-69-7545-142
Confirmation number: 49-69-7545-0
96
<PAGE> 103
Dollar Loans: UNION BANK OF SWITZERLAND, NEW
$5,000,000 YORK BRANCH
Syndicated Foreign
Currency Loans: By:
--------------------------------
$10,000,000 Title:
By:
--------------------------------
Title:
Lending Office
--------------
Union Bank of Switzerland, New York
Branch
299 Park Avenue
New York, New York 10171
Attention: Robert W. Casey, Jr.
Telecopier number: 212-821-3383
Confirmation number: 212-821-3329
TOTAL COMMITMENTS:
Dollar Loans:
$50,000,000
Syndicated Foreign
Currency Loans:
$45,000,000
ITL Loans
$5,000,000
97
<PAGE> 104
EXHIBIT A-1
FORM OF SYNDICATED DOLLAR LOAN NOTE
As of August 26, 1994
For value received,_____________________________________
__________________________, a _______________ corporation (the "Borrower"),
promises to pay to the order of__________________________________________,
a ________________ (the "Bank"), for the account of its Lending Office, the
principal sum of ___________________________________________________ and
No/100 Dollars ($____________), or such lesser amount as shall equal the unpaid
principal amount of each Syndicated Dollar Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below, on the dates and
in the amounts provided in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of this Note on the dates and at the
rate or rates provided for in the Credit Agreement referred to below. Interest
on any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other immediately available funds at the office of Wachovia Bank of Georgia,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other
address as may be specified from time to time pursuant to the Credit Agreement.
All Syndicated Dollar Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable thereto,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This Note is one of the Syndicated Dollar Loan Notes referred
to in the Credit Agreement dated as of even date herewith among the Borrower,
the other borrowers listed on the signature pages thereof, the Domestic Banks
and Foreign Currency Banks listed on the signature pages thereof, Wachovia Bank
of Georgia, N.A., as Domestic Agent and ABN AMRO Bank N.V. and ABN AMRO Foreign
Credit & Agency Services as Foreign Currency Agent (as the same may be amended
and modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the optional and mandatory prepayment
and the repayment hereof and the acceleration of the maturity hereof.
98
<PAGE> 105
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed, under seal, by its duly authorized officer as of the day and
year first above written.
__________________________
___________________________ (SEAL)
By: __________________________
Title:
99
<PAGE> 106
Form of Syndicated Dollar Loan Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- - ----------------------------------------------------------------------------
Base Rate Amount Amount of
or Euro- of Principal Maturity Notation
Date Dollar Loan Loan Repaid Date Made By
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
100
<PAGE> 107
EXHIBIT A-2
FORM OF MONEY MARKET NOTE
As of August 26, 1994
For value received,______________________________________
a _______________ corporation (the "Borrower"), promises to pay to the order
of________________________________, a ________________ (the "Bank"), for the
account of its Lending Office, the principal sum of FIFTY MILLION and
No/100 Dollars ($50,000,000.00), or such lesser amount as shall equal the
unpaid principal amount of each Money Market Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below, on the dates and
in the amounts provided in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of this Note on the dates and at the
rate or rates provided for in the Credit Agreement referred to below. Interest
on any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other immediately available funds at the office of Wachovia Bank of Georgia,
N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other
address as may be specified from time to time pursuant to the Credit Agreement.
All Money Market Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable thereto,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This Note is one of the Money Market Loan Notes referred to in
the Credit Agreement dated as of even date herewith among the Borrower, the
other borrowers listed on the signature pages thereof, the Domestic Banks and
Foreign Currency Banks listed on the signature pages thereof, Wachovia Bank of
Georgia, N.A., as Domestic Agent and ABN AMRO Bank N.V. and ABN Foreign Credit
& Agency Services as Foreign Currency Agent (as the same may be amended and
modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the optional and mandatory prepayment
and the repayment hereof and the acceleration of the maturity hereof.
101
<PAGE> 108
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed, under seal, by its duly authorized officer as of the day and
year first above written.
_______________________ (SEAL)
_______________________
By:
______________________________
______________________________
_____________________________
Title:
102
<PAGE> 109
Form of Money Market Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- - --------------------------------------------------------------------------------
Amount Amount of Stated
Interest of Principal Maturity Notation
Date Rate Loan Repaid Date Made By
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
103
<PAGE> 110
EXHIBIT B-1
FORM OF SYNDICATED FOREIGN CURRENCY LOAN NOTE
Atlanta, Georgia
August 26, 1994
For value received, ________________, a ___________
corporation (the "Borrower"), promises to pay to the order of
__________________________________________________, a ____________________ (the
"Bank"), for the account of its Lending Office, the outstanding principal
amount of the Syndicated Foreign Currency Loans made by the Bank to the
Borrower as Syndicated Foreign Currency Loans pursuant to the Credit Agreement
referred to below, on the dates and in the amounts provided in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for
Syndicated Foreign Currency Loans in the Credit Agreement. Interest on any
overdue principal of and, to the extent permitted by law, overdue interest on
the principal amount hereof shall bear interest at the Default Rate, as
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the applicable Foreign Currency in
immediately available funds at the Agency Office, or such other address as may
be specified from time to time pursuant to the Credit Agreement.
All Syndicated Foreign Currency Loans made by the Bank, the
respective maturities thereof, the interest rates from time to time applicable
thereto, and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This Note is one of the Syndicated Foreign Currency Loan Notes
referred to in the Credit Agreement dated as of even date herewith among the
Borrower, the other borrowers listed on the signature pages thereof, the
Domestic Banks and Foreign Currency Banks listed on the signature pages
thereof, ABN AMRO N.V. and ABN AMRO Foreign Credit & Agency Services, as
Foreign Currency Agent and Wachovia Bank of Georgia, N.A., as Domestic Agent
(as the same may be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the optional and mandatory prepayment and the repayment hereof and the
acceleration of the maturity hereof.
104
<PAGE> 111
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed, under seal, by its duly authorized officer as of the day and
year first above written.
_______________________ (SEAL)
_______________________
By:
_____________________________
Title:
105
<PAGE> 112
Syndicated Foreign Currency Note (cont'd)
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF _____________________________________
DATED AUGUST 26, 1994
Principal
Amount of Maturity Principal
Loan and of Interest Amount Unpaid
Date Currency Period Paid Balance
- - ------------------------------------------------------------
106
<PAGE> 113
EXHIBIT B-2
FORM OF ITL LOAN NOTE
Atlanta, Georgia
August 26, 1994
For value received, ________________, a ___________
corporation (the "Borrower"), promises to pay to the order of ABN AMRO BANK
N.V. and ABN AMRO Foreign Credit & Agency Services, Netherlands banking
organization (the "Bank"), at the Milan Office, the outstanding principal
amount of the Loans made by the Bank to the Borrower as ITL Loans pursuant to
the Credit Agreement referred to below, on the dates and in the amounts
provided in the Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of this Note on the dates and at the rate or rates
provided for ITL Loans in the Credit Agreement. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest on the
principal amount hereof shall bear interest at the Default Rate, as provided
for in the Credit Agreement. All such payments of principal and interest shall
be made in lawful money in ITL in immediately available funds at the Milan
Office, or such other address as may be specified from time to time pursuant to
the Credit Agreement.
All ITL Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable thereto,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This Note is the ITL Loan Note referred to in the
Credit Agreement dated as of even date herewith among the Borrower, the other
borrowers listed on the signature pages thereof, the Domestic Banks and Foreign
Currency Banks listed on the signature pages thereof, ABN AMRO N.V. and ABN
AMRO Foreign Credit & Agency Services, as Foreign Currency Agent and Wachovia
Bank of Georgia, N.A., as Domestic Agent (as the same may be amended and
modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the optional and mandatory prepayment
and the repayment hereof and the acceleration of the maturity hereof.
107
<PAGE> 114
IN WITNESS WHEREOF, the Borrower has caused this Note
to be duly executed, under seal, by its duly authorized officer as of the day
and year first above written.
_______________________ (SEAL)
By:
_____________________________
Title:
108
<PAGE> 115
ITL Loan Note (cont'd)
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF _____________________________________
DATED AUGUST 26, 1994
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- - ------------------------------------------------------------
109
<PAGE> 116
EXHIBIT C
OPINION OF
COUNSEL FOR PARENT, SDI AND SII
August 26, 1994
To the Domestic Banks
Foreign Currency Banks
and the Agents Referred
to Below, c/o:
Wachovia Bank of Georgia, N.A.,
as Domestic Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: _______________________
ABN Amro Bank N.V. and
ABN Amro Foreign Credit
& Agency Services,
as Foreign Currency Agent
_________________________
_________________________
_________________________
Dear Sirs:
We have acted as special, New York counsel for Sensormatic
Electronics Corporation, a Delaware corporation ("Parent"), Sensormatic
Distribution Inc., a Delaware corporation ("SDI") and Sensormatic
International, Inc., a Delaware corporation ("SII"; Parent, SDI and SII
sometimes being collectively referred to herein as the "Obligors") in
connection with the Credit Agreement (the "Credit Agreement") dated as of even
date herewith, among the Obligors, the other borrowers listed on the signature
pages thereof, the Domestic Banks and Foreign Currency Banks listed on the
signature pages thereof, Wachovia Bank of Georgia, N.A., as Domestic Agent and
ABN-Amro N.V. as Foreign Currency Agent. Terms defined in the Credit Agreement
are used herein as therein defined, unless otherwise indicated.
We have examined originals or copies, certified or otherwise
identifies to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. We have assumed for purposes of our opinions set
110
<PAGE> 117
forth below that the execution and delivery of the Credit Agreement by each
Borrower (other than the Obligors), by each Bank and by the Agents have been
duly authorized by each Borrower (other than the Obligors), by each Bank and by
the Agents.
Upon the basis of the foregoing, we are of the opinion that:
1. Each Obligor is a corporation duly incorporated,
validly existing and, based solely on the Good Standing Certificates (as
hereinafter defined) in good standing under the laws of Delaware and has all
corporate powers required to carry on. its business as now conducted. The
"Good Standing Certificates" are the certificate of good standing dated August
12, 1994 of the Secretary of State of the State or Delaware with respect to the
Parent, the certificate of good standing dated August 12, 1994 of the Secretary
of state of the State of Delaware with respect to SII, and the certificate of
good standing dated August 12, 1994 of the Secretary of State of the State of
Delaware with respect to SDI.
2. The execution, delivery and performance by the
Obligors of the Credit Agreement and the Notes executed by the obligors (the
"Obligor Notes"), and by Parent of the Parent Guaranty (i) are within each such
Obligor's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of, or filing with,
any governmental body, agency or official, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by- laws of any of the obligors or of any
material agreement, judgment, injunction, order, decree or other instrument
relating to Debt which to our knowledge is binding upon any of the Obligors and
(v) to our knowledge do not result in the creation or imposition of any Lien on
any asset of any of the Obligors.
3. The Credit Agreement constitutes a valid and binding
obligation of the Obligors enforceable against the respective Obligor in
accordance with its terms, and the Parent Guaranty constitutes a valid and
binding obligation of the Parent enforceable against the parent in accordance
with its terms, in each case except as such enforceability be limited by (1)
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
voidable preference, moratorium or other similar laws affecting the enforcement
of creditors' rights generally, (ii) general principles of equity (including,
without limitation, the availability or non-availability of equitable
remedies), whether considered in a proceeding at law or in equity, and (iii)
the possible judicial application, for reasons of comity, of foreign laws,
rules or regulations.
4. To our knowledge, there is no action, suit or proceeding
pending, or threatened, against or affecting the Obligors or any Subsidiary
before any court or arbitrator or any
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governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Parent and the Consolidated Subsidiaries, considered as a whole, or
which in any manner questions the validity or enforceability of the Credit
Agreement, any Obligor Note or the Parent Guaranty.
5. Sensormatic Electronics corporation (Puerto Rico) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry
on its business as now conducted.
6. Neither the Obligors nor any of the Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
7. Neither the Obligor nor any of the Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.
8. You have requested our opinion that the choice of New
York law to govern the Credit Agreement, the Obligor Notes and the Parent
Guaranty in which such choice is stipulated is a valid and effective choice of
law under the laws of the State of New York, and adherence to existing judicial
precedents generally would require a court sitting in the State of New York to
abide by such choice of law, unless a fundamental policy of the State of New
York would be violated. Section 5-1401 of the General Obligations Law of the
State of New York provides in relevant part as follows:
"1. The parties to any contract, agreement or undertaking,
contingent or otherwise, in consideration of, or relating to
any obligation arising out of a transaction covering in the
aggregate not less than two hundred fifty thousand dollars. .
. may agree that the law of this state shall govern their
rights and duties in whole or in part, whether or not such
contract, agreement or undertaking bears a reasonable relation
to this state. . [certain exceptions omitted]".
To our knowledge, no court of the State of New York in a published decision has
construed Section 5-1401 as requiring the court to enforce the parties' choice
of the law of the State of New York in all circumstances. Nevertheless, a
United States federal court sitting in the State of New York has interpreted
Section 3-1401 as follows:
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"It is clear that where a contract is for more than $250,000,
was entered into after 1984, contains a choice of law
provision designating New York law as controlling disputes
arising out of that contract, N.Y. Gen Oblig. Law s. 5-1401
mandates the enforcement of that choice or law provision.
There is no indication in the statute, or in the very limited
judicial interpretation of it, of any exception which would
apply in the case at bar."
Bank of America National Trust and Savings Association v. Envases Venezolanos,
S.A., 740 F. Supp. 260, 265 (S.D.N.Y. June 23, 1990). Based on the foregoing,
we believe that, in the absence of duress, ignorance or undue influence or
other similar circumstances, and unless a fundamental policy of the State of
New York would be violated (collectively, the "Countervailing Factors"), the
choice of the law of the State of New York to govern the Credit Agreement, the
obligor Notes and the Parent Guaranty is a valid choice of law if proceedings
for the enforcement thereof are litigated in the courts in the State of New
York. We doubt that any of the Countervailing Factors are present in this
transaction, but we note that the presence of one or more Countervailing
Factors would be a matter to be decided by the court.
We are qualified to practice in the State of New York and do
not purport to be experts on any laws other than the federal laws of the United
States, the State of New York and the General Corporation Law of the State of
Delaware and this opinion is rendered only with respect to such laws. We have
made no independent investigation of the laws of any other jurisdiction.
In rendering the opinion in paragraphs 3 and 8 above, we have
assumed, with your permission, that:
(a) The Credit Agreement has been duly authorized,
executed and delivered by the Agents and the Banks and, to the extent
provided therein, constitutes the legal, valid and binding obligation
of the Agents and the Banks, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance,
voidable preference, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, (ii) general principles of
equity (including, without limitation, the availability or
non-availability of equitable remedies), whether considered in a
proceeding at law or in equity, and (iii) the possible judicial
application, for reasons of comity, of foreign laws, rules or
regulations.
(b) Neither the authorization, execution and delivery of
the Credit Agreement or the Obligor Notes or the Parent Guaranty nor
the consummation of the transactions contemplated therein, nor the
fulfillment or compliance with
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the terms thereof, violates or will result in the violation of the
provisions of any law, rule or regulation of the State of Georgia (the
jurisdiction in which the Dollar Loans are to be paid) or of the
Netherlands (the jurisdiction in which the Foreign currency Loans will
be paid) or of Italy (the jurisdiction in which the ITL Loans will be
paid), or any other jurisdiction in which any Borrower may be located.
Illegality in any of those jurisdictions could, in certain limited
circumstances, affect the enforceability of the obligations of the
Parent under the Parent Guaranty. Nevertheless, we note that in a
recent decision of the United States District Court for the southern
District of New York, a guarantor was unsuccessful in asserting
illegality under the laws of the principal debtor's jurisdiction as a
defense against payment under a guarantee that was stated to be
governed by New York law, and held that extraterritorial effect would
be given to the foreign law only by application of principles of
comity. Bank Leumi Trust Company of New York v. David Wulkan, 735 F.
Supp. 72 (S.D.N.Y. April 2, 1990). Without having made any specific
inquiry into this matter, we are not aware of factors present in the
Credit Agreement which, under circumstances existing today, would
cause a court in the State of New York to apply principles of comity,
but no confident conclusion can be expressed without a detailed
examination of matters both intrinsic and extrinsic to the
transaction, such as the laws, rules and regulations of each relevant
jurisdiction, and the policies of relevant agencies of the government
of the United States toward those jurisdictions and toward the
particular matters that are the subject of the relevant foreign laws,
rules and regulations to which extraterritorial effect would be given.
The foregoing opinions are subject to the qualifications that:
(I) We express no opinion as to (a) any Borrower's title to
or rights in any of its assets or other properties, (b) the
enforceability of the following sections of the Credit Agreement (or
of any comparable provision of the Parent Guaranty): the last sentence
of Section 9.06, Section 9.07, the first sentence of Section 10.02,
Section 10.06 insofar as it purports to preclude the validity or
effectiveness of non-written amendments, Section 10.13, Section
10.15(a), Section 10.15(c), Section 10.15(d); (c) the jurisdiction of
any court over the subject matter of any dispute arising out of the
credit Agreement, the obligor Notes or the Parent Guaranty; (d) any
provision of the Credit Agreement, the Obligor Notes or the Parent
Guaranty purporting to provide for interest after judgment, to
establish evidentiary standards, or to grant or waive rights of
set-off or counterclaim.
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(II) Without limiting the generality of the statements in
paragraph I above, we express no opinion as to the applicability of
the laws of the State of Florida, the State of Georgia or any other
jurisdiction that may limit the enforceability of provisions for
interest on defaulted obligations, or the maximum rate or amount of
interest that may be charged, taken, collected or received with
respect to the obligations under the Credit Agreement, the Notes or
the Parent Guaranty, or as to the effect of such laws (other than the
State of New York) if applicable.
(III) We point out the enforceability of indemnities set
forth in the Credit Agreement, the Notes or the Parent Guaranty may be
limited by applicable securities laws, by public policy or by the
discretion of the court.
(IV) Without limiting the statements in paragraph 3, we point
out that, in applying general principles of equity, a court may
decline to enforce the right of the Agents or the Banks to accelerate
the maturity or the Loans or to exercise other remedies in connection
with a default if such rights were to be invoked in the context of
fraud or exploitative overreaching by any Agent or Bank, or
unconscionable conduct by any Agent or Bank to exploit a technical
breach. Moreover, provisions of the Credit Agreement, the Notes or
the Parent Guaranty that permit any Agent or Bank to take actions or
make determinations may be subject to requirements that such actions
be taken and such determinations be made on a reasonable basis and in
good faith.
(V) We caution you that not all of the waivers and
consents set forth in the Parent Guaranty necessarily would be given
effect in the State of New York. For example, the Banks' purported
right, set forth in Section 3 of the Parent Guaranty, to extend,
renew, compromise, waive or release certain obligations, or to modify,
amend or supplement the Credit Agreement or any Note, without
affecting their rights under the Parent Guaranty might,
notwithstanding those provisions, affect the rights of the Agents or
Banks against the Parent, especially if the extension, renewal,
compromise, waiver, release, modification, amendment or supplement
were to be of an essential term of the Credit Agreement or the Notes,
or were to be so extensive as to create a new contract. Nevertheless,
we do not believe that the inclusion of such provisions would render
the Parent Guaranty invalid or unenforceable, or that the inclusion of
such provisions would deprive the Banks of the practical benefits of
the Parent Guaranty. We also note that a recent decision of the
United States District Court for the Southern District of New York
held that a "sweeping waiver" of the type set forth in portions of
said Section 3 was enforceable, notwithstanding allegations of
tortious interference with contractual relations, interference with
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<PAGE> 122
prospective economic advantage, negligence and violations of certain
laws. American Express Bank, Ltd. v. Peter L. Coker, et al., 1990 WL
100888 (S.D.N.Y. July 13, 1990).
(VI) We wish to point out further that, if enforcement of the
Parent's obligations under the Parent Guaranty were to be sought in
the State of New York, (a) a New York statute provides that a judgment
rendered by a court of the State of New York in respect of an
obligation denominated in a currency other than U.S. Dollars (a
"Foreign Currency") may be rendered in such Foreign currency, and if
20 would be converted into U.S. Dollars at the rate of exchange
prevailing on the date of entry of the judgment; and (b) a judgment
rendered by a Federal court in New York in respect of an obligation
denominated in a Foreign currency may be expressed in U.S. Dollars,
but we express no opinion as to the rate of exchange such court would
apply.
(VII) We note further, that the willingness of any United
States federal court to accept jurisdiction over any dispute arising
out of the Credit Agreement, the Notes or the Parent Guaranty may,
notwithstanding the submission by the Borrowers to the personal
jurisdiction of certain federal courts pursuant to Section 10.15(b) of
the Credit Agreement (and any comparable provision of the Parent
Guaranty), be subject to applicable law and to such court's
discretion.
(VIII) We have relied, with your permission, solely on the
opinion of Walter Engdahl, dated August 26, 1994, addressed to us, a
copy of which is annexed to this letter as Appendix A, that the
execution, delivery and performance of the Credit Agreement, the
Obligor Notes and the Parent Guaranty do not contravene, or constitute
a default under, any provision of applicable law, rule or regulation
of the State of Florida.
In this opinion letter, the phrase "to our knowledge" means to
the actual knowledge of those attorneys in our firm who are actively involved
in work on behalf of the Parent, without independent investigation outside the
firm. The phrase "valid and binding obligation of the obligors, respectively,
enforceable against such Obligor in accordance with their respective terms"
means that the obligation in question is of the type that is capable of
enforcement under the law of the State of New York, but does not mean that such
obligation necessarily would be enforced by a court in all circumstances.
This opinion is delivered to you at the request of the
Borrowers in connection with the transaction referenced above and may not,
without our prior written consent, be communicated to or relied upon by anyone
other than You or any Assignee under the Credit Agreement, except that it may
be communicated to
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Participants and to Jones, Day, Reavis & Pogue, your special counsel.
This opinion speaks only as of the date hereof, and we do not
undertake any duty to advise you of any change herein. Without limiting the
generality of the foregoing, we note that certain agreements to which the
Borrowers now are or hereafter may become parties may contain limitations on
the incurrence from time to time of Debt and other obligations by the Parent
and its Subsidiaries (for example, the Incorporated Covenants as set forth in
the Note Agreement), which limitations could be violated by a borrowing of
Loans under the Credit Agreement by the Parent or the other Borrowers. We do
not undertake to advise you of those circumstances.
Very truly yours,
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EXHIBIT D
OPINION OF
JONES, DAY, REAVIS & POGUE, SPECIAL COUNSEL
FOR THE AGENT
[Dated as provided in Section 4.01 of the Credit Agreement]
To the Domestic Banks,
Foreign Currency Banks
and the Agents Referred
to Below, c/o:
Wachovia Bank of Georgia, N.A.,
as Domestic Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: ___________________________
ABN AMRO Bank N.V. and
ABN AMRO Foreign Credit
& Agency Services
as Foreign Currency Agent
_________________________
__________________________
Attn: ___________________
Dear Sirs:
We have participated in the preparation of the Credit
Agreement (collectively, the "Agents"), and have acted as special counsel for
the Agents for the purpose of rendering this opinion pursuant to Section
4.01(e) of the Credit Agreement. Terms defined in the Credit Agreement are
used herein as therein defined.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualification, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the
opinions expressed herein is limited to the Federal Law of the United States
and the Law of the State of New York.
Based on the foregoing, and subject to the exceptions,
qualifications and assumptions noted herein, including the assumption and in
the Accord, we are of the opinion that:
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<PAGE> 125
Upon the basis of the foregoing, assuming the due
authorization, execution and delivery of the Credit Agreement and each of the
Notes by or on behalf of Parent, SDI and SII (collectively, the "Obligors") and
of the Parent Guaranty by Parent, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of each of the Obligors,
the Parent Guaranty constitutes a valid and binding agreement of Parent, and
each Note executed by each of the Obligors constitutes valid and binding
obligations of such Obligor, in each case enforceable in accordance with its
terms, except, in addition to exceptions contained in the Accord, as such
enforceability may be limited by the possible judicial application, for reasons
of comity, of foreign laws, rules or regulations (see, in this connection, the
discussion contained in paragraph (b) of the opinion of Christy & Viener of
even date herewith addressed to you). Note also the discussion in paragraph 8
of such opinion as to the effectiveness under New York law of the choice of New
York law to govern the Credit Agreement, the Notes and the Parent Guaranty.
We express no opinion as to the validity or enforceability of any
provision contained in the Credit Agreement (i) purporting to preclude the
amendment or other modification of the Credit Agreement or the waiver, release
or discharge of obligations except by an instrument in writing or (ii)
providing for the severability of unenforceable provisions.
We express no opinion as to the effect of the compliance or
noncompliance of the Agents or any of the Banks with any state or federal laws
or regulations applicable to the Agents or any of the Banks by reason of the
legal or regulatory status or the nature of the business of the Agents or any
of the Banks.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you and any Assignee,
Participant or other Transferee under the Credit Agreement without our prior
written consent.
Very truly yours,
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EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Dated __________ __, 19__
Reference is made to the Credit Agreement dated as of August
26, 1994 (together with all amendments and modifications thereto, the "Credit
Agreement") among Sensormatic Electronics Corporation, Sensormatic Distribution
Inc., Sensormatic International, Inc., the other borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign Currency Banks listed
on the signature pages thereof, Wachovia Bank of Georgia, N.A., as Domestic
Agent and ABN AMRO N.V. and ABN AMRO Foreign Credit and Agency Services as
Foreign Currency Agent. Terms defined in the Credit Agreement are used herein
with the same meaning.
____________________________________________________ (the "Assignor") and
________________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, a
______% interest in and to all of the Assignor's rights and obligations as a
[Domestic Bank\Foreign Currency Bank] under the Credit Agreement as of the
Effective Date (as defined below) (including, without limitation, a _____%
interest (which on the Effective Date hereof is $__________) in the Assignor's
[Dollar Loans/Syndicated Foreign Currency Loans/ITL Loan] Commitment and a
______ interest (which on the Effective Date hereof is $_______________) in the
[Dollar Loans/Syndicated Foreign Currency Loans/ITL Loan] owing to the Assignor
and a ___% interest in the [Dollar Loan Notes/Syndicated Foreign Currency Loan
Note/ITL Loan Note] held by the Assignor (which on the Effective Date hereof is
$__________).
2. The Assignor (i) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder, that such interest is free and clear
of any adverse claim and that as of the date hereof its [Dollar Loan
Commitment/Syndicated Foreign Currency Loan Commitment/ITL Loan Commitment]
(without giving effect to assignments thereof which have not yet become
effective) is $__________ and the aggregate outstanding principal amount of
[Dollar Loans/Syndicated Foreign Currency Loans/ITL Loans] owing to it (without
giving effect to assignments thereof which have not yet become effective) is
$_________________;
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(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or the performance or
observance by the Borrowers of any of their obligations under the Credit
Agreement or any other instrument or document furnished pursuant thereto; and
(iii) attaches the [Dollar Loan Notes/Syndicated Foreign Currency Loan
Notes/ITL Loan Note] referred to in paragraph 1 above and requests that the
[Domestic Agent/Foreign Currency Agent] exchange such [Dollar Loan
Notes/Foreign Currency Loan Notes/ITL Loan Note] for new Notes as follows: [a
Syndicated Loan Note dated ________________, ____ in the principal amount of
$_____________ payable to the order of the Assignor] [a Money Market Loan Note
dated _________________, ____ in the principal amount of $_____________] [a
Syndicated Foreign Currency Loan Note dated _____________, ____] [an ITL Loan
Note dated ___________________, ____] payable to the order of the Assignee.
3. The Assignee (i) confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements
referred to in Section 5.04(a) thereof (or any more recent financial statements
of Parent delivered pursuant to Section 6.01(a) or (b) thereof) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Agents, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank
or financial institution; (iv) appoints and authorizes the Agents to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agents by the terms thereof, together with
such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank
(including, without limitation, for the benefit of the Borrowers, the
confidentiality provisions of Section 10.09 thereof); (vi) specifies as its
Lending Office (and address for notices) the office set forth beneath its name
on the signature pages hereof, (vii) represents and warrants that the
execution, delivery and performance of this Assignment and Acceptance are
within its corporate powers and have been duly authorized by all necessary
corporate action[ADD THE FOLLOWING IF THE ASSIGNEE IS NOT A BANK WHICH IS
CHARTERED UNDER THE LAWS OF THE UNITED STATES OR A STATE THEREOF][, and (viii)
attaches the forms prescribed by the Internal Revenue Service of the United
States and each other applicable jurisdiction certifying as to the Assignee's
status for purposes of determining exemption from withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Notes or such other documents as are necessary to indicate that all
such payments are subject to such taxes at a rate reduced by an applicable tax
treaty].
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4. The Effective Date for this Assignment and Acceptance
shall be __________, 19__ (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Domestic Agent
and/or Foreign Currency Agent, as appropriate, for execution and acceptance by
such Agent or Agents and to the Borrowers for execution by the Borrowers.
5. Upon such execution and acceptance by the relevant Agent or
Agents [and execution by the Borrowers] [If the Assignee is not a Bank or
Affiliate thereof PRIOR TO THE EFFECTIVE DATE], from and after the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent rights and obligations have been transferred to it by this Assignment
and Acceptance, have the rights and obligations of a [Domestic Bank/Foreign
Currency Bank/ABN AMRO with respect to the ITL Loan Commitment and ITL Loans]
thereunder and (ii) the Assignor shall, to the extent its rights and
obligations have been transferred to the Assignee by this Assignment and
Acceptance, relinquish its rights (other than under Section 10.03 of the Credit
Agreement) and be released from its obligations under the Credit Agreement.
6. Upon such execution and acceptance by the relevant Agent or
Agents [and execution by the Borrowers] [IF THE ASSIGNEE IS NOT A BANK OR
AFFILIATE THEREOF PRIOR TO THE EFFECTIVE DATE], from and after the Effective
Date, the relevant Agent shall make all payments in respect of the interest
assigned hereby to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to such acceptance by the
relevant Agent directly between themselves.
7. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the laws of the State of New York.
[NAME OF ASSIGNOR]
By:
---------------------------
Title:
[NAME OF ASSIGNEE]
By:
---------------------------
Title:
Lending Office:
[Address]
WACHOVIA BANK OF GEORGIA, N.A.,
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As Domestic Agent
By:
--------------------------
Title:
ABN AMRO BANK N.V.,
As Foreign Currency Agent
By:
---------------------------
Title:
By:
----------------------------
Title:
ABN AMRO FOREIGN CREDIT
& AGENCY SERVICES
By:
----------------------------
Title:
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<PAGE> 130
[Add signatures of Borrowers
if the Assignee is not a Bank prior to
the Effective Date.]
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<PAGE> 131
NOTICE OF SYNDICATED DOLLAR BORROWING
_____________________, 199__
Wachovia Bank of Georgia, N.A., as Domestic Agent
191 Peachtree Street, N.W.
Atlanta, Georgia 30303-1757
Attention: Atlanta Corporate Group
Re: Credit Agreement (as amended and modified from time to time,
the "Credit Agreement") dated as of August 26, 1994 by and
among Sensormatic Electronics Corporation, Sensormatic
Distribution Inc., Sensormatic International, Inc., the other
Borrowers listed on the signature pages thereof, the Domestic
Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent
and ABN AMRO and ABN AMRO Foreign Credit & Agency Services, as
Foreign Currency Agent.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of Syndicated Dollar Borrowing is delivered to you
pursuant to Section 2.02 of the Credit Agreement.
The Borrower hereby requests a Syndicated Dollar Borrowing in the
aggregate principal amount of $__________ to be made on _______________, 199__,
and for interest to accrue thereon at the rate established by the Credit
Agreement for [Euro-Dollar Loans] [Base Rate Loans]. The duration of the
Interest Period with respect thereto shall be [1 month] [2 months] [3 months]
[6 months] [12 months] [30 days].
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The Borrower has caused this Notice of Syndicated Dollar Borrowing to
be executed and delivered by its duly authorized officer this ___ day of
___________, 199___.
[_____________________________
By:_______________________________
Title:
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EXHIBIT G-1
NOTICE OF SYNDICATED FOREIGN CURRENCY BORROWING
_____________________, 199__
ABN AMRO Bank N.V. and
as Foreign Currency Agent
c/o ABN AMRO Foreign Credit & Agency Services
_________________________
_________________________
Attention: _____________
Re: Re: Credit Agreement (as amended and modified from time to
time, the "Credit Agreement") dated as of August 26, 1994 by
and among Sensormatic Electronics Corporation, Sensormatic
Distribution Inc., Sensormatic International, Inc., the other
Borrowers listed on the signature pages thereof, the Domestic
Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent
and ABN AMRO Bank B.V. and ABN AMRO Foreign Credit & Agency
Services, as Foreign Currency Agent.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of Syndicated Foreign Currency Borrowing is delivered to
you pursuant to Section 3.02 of the Credit Agreement.
The Borrower hereby requests a Syndicated Foreign Currency Borrowing,
to be made in ___, in the approximate aggregate principal amount in such
Foreign Currency of ___________, in ___, on _______________, 199__, and for
interest to accrue thereon at the rate established by the Credit Agreement for
Syndicated Foreign Currency Loans. The duration of the Interest Period with
respect thereto shall be [1 month] [2 months] [3 months] [6 months] [12 months]
[14 days].
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<PAGE> 134
The Borrower has caused this Notice of Syndicated Foreign Currency
Borrowing to be executed and delivered by its duly authorized officer this
_____ day of ___________, 199___.
[________________________]
By:________________________
Title:
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EXHIBIT G-2
NOTICE OF ITL BORROWING
_____________________, 199__
ABN AMRO Bank, Milan Branch
_________________________
_________________________
Attention: _____________
Re: Re: Credit Agreement (as amended and modified from time to
time, the "Credit Agreement") dated as of August 26, 1994 by
and among Sensormatic Electronics Corporation, Sensormatic
Distribution Inc., Sensormatic International, Inc., the other
Borrowers listed on the signature pages thereof, the Domestic
Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent
and ABN AMRO Bank N.V. and ABN AMRO Foreign Credit & Agency
Services, as Foreign Currency Agent.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of ITL Borrowing is delivered to you pursuant to Section 3.02 of
the Credit Agreement.
The Borrower hereby requests an ITL Borrowing, to be made in the
approximate aggregate principal amount of the Dollar Equivalent of $__ _______,
in ITL, on _______________, 199__, and for interest to accrue thereon at the
rate established by the Credit Agreement for [ITL Fixed Rate Loans] [ITL Base
Rate Loans]. The duration of the Interest Period with respect thereto shall be
[1 month] [2 months] [3 months] [6 months] [12 months] [30 days].
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The Borrower has caused this Notice of ITL Borrowing to be executed
and delivered by its duly authorized officer this _____ day of __________,
199___.
[________________________]
By:________________________
Title:
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EXHIBIT H
COMPLIANCE CERTIFICATE
Re: Credit Agreement (as amended and modified from time to time,
the "Credit Agreement") dated as of August 26, 1994 by and
among Sensormatic Electronics Corporation, Sensormatic
Distribution Inc., Sensormatic International, Inc., the other
Borrowers listed on the signature pages thereof, the Domestic
Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent
and ABN AMRO Bank N.V. and ABN AMRO Foreign Credit & Agency
Services, as Foreign Currency Agent. Capitalized terms used
herein shall have the meanings ascribed thereto in the Credit
Agreement.
Pursuant to Section 6.01(c) of the Credit Agreement,
_______________, the duly authorized ____________________ of Sensormatic
Electronics Corporation, hereby certifies to the Agents and the Banks that
Parent is in compliance with the requirements of the Incorporated Covenants as
of the date of the financial statements furnished to the Agents and the Banks
on or about the date hereof pursuant to Section 6.01(a) or (b) of the Credit
Agreement, and attached hereto is a true, accurate and complete copy of the
compliance certificate furnished on or about the date hereof pursuant to the
Note Agreement , and that, to the beswt knowledge of the undersigned, after due
inquiry, no Default is in existence on and as of the date hereof.
SENSORMATIC ELECTRONIC CORPORATION
By:_______________________________
Title:
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<PAGE> 138
EXHIBIT I
CLOSING CERTIFICATE
Re: Credit Agreement (as amended and modified from time to
time, the "Credit Agreement") dated as of August 26, 1994 by
and among Sensormatic Electronics Corporation, Sensormatic
Distribution Inc., Sensormatic International, Inc., the other
Borrowers listed on the signature pages thereof, the Domestic
Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent
and ABN AMRO Bank N.V. and ABN AMRO Foreign Credit & Agency
Services, as Foreign Currency Agent. Capitalized terms used
herein shall have the meanings ascribed thereto in the Credit
Agreement.
Pursuant to Section 4.01(f) of the Credit Agreement,
_____________________________, the duly authorized ____________________ of
_____________ hereby certifies to the Agent and the Banks that (i) no Default
has occurred and is continuing as of the date hereof, and (ii) the
representations and warranties contained in Article IV of the Credit Agreement
are true on and as of the date hereof.
Certified as of this ____ day of _______________, 19__.
By:___________________________
Printed Name:______________
Title:_____________________
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<PAGE> 139
EXHIBIT J
MONEY MARKET QUOTE REQUEST
Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Atlanta Corporate Group
Re: Money Market Quote Request
This Money Market Quote Request is given in accordance with Section
2.03 of the Credit Agreement (as amended or modified from time to time, the
"Credit Agreement")dated as of August 26, 1994 by and among Sensormatic
Electronics Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the signature pages thereof,
the Domestic Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent and ABN AMRO
Bank N.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign Currency
Agent. Capitalized terms used herein shall have the meanings ascribed thereto
in the Credit Agreement.
The undersigned Borrower hereby requests that the Domestic Agent
obtain quotes for a Money Market Dollar Borrowing based upon the following:
1. The proposed date of the Money Market Dollar Borrowing shall
be ____________, 19____ (the "Borrowing Date").(1)
2. The aggregate amount of the Money Market Dollar Borrowing
shall be $____________.(2)
3. The Stated Maturity Date(s) applicable to the Money Market
Dollar Borrowing shall be ______ days.(3)
Very truly yours,
____________________________________
By:_________________________________
Title:_________________________
(1) The date must be a Euro-Dollar Business Day.
(2) The amount of the Money Market Dollar Borrowing is subject to Section
2.03(a) and (b).
(3) The Stated Maturity Dates are subject to Section 2.03(b)(ii). The
Borrower may request that up to ___ different Stated Maturity Dates be
applicable to any Money Market Dollar Borrowing, provided, that (i)
each such Stated
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<PAGE> 140
Maturity Date shall be deemed to be a separate Money Market Quote
Request and (ii) the Borrower shall specify the amounts of such Money
Market Dollar Borrowing to be subject to each such different Stated
Maturity Date.
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<PAGE> 141
EXHIBIT K
MONEY MARKET QUOTE
Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Atlanta Corporate Group
Re: Money Market Quote to Sensormatic Electronics Corporation
This Money Market Quote is given in accordance with Section
2.03(c)(ii) of the Credit Agreement (as amended or modified from time to time,
the "Credit Agreement")dated as of August 26, 1994 by and among Sensormatic
Electronics Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the signature pages thereof,
the Domestic Banks and Foreign Currency Banks from time to time parties
thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent and ABN AMRO
Bank N.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign Currency
Agent. Capitalized terms used herein shall have the meanings ascribed thereto
in the Credit Agreement.
In response to the Money Market Quote Request of
______________ (the "Borrower") dated ____________, 19__, we hereby make the
following Money Market Quote on the following terms:
1. Quoting Bank:
2. Person to contact
at Quoting Bank:
3. Date of Borrowing:1*
4. We hereby offer to make Money Market Loan(s) in the following
maximum principal amounts for the following Interest Periods and at the
following rates:
Maximum Stated
Principal Maturity
Amount (2) Date (3) Rate Per Annum(4)
- - --------- -------- ---- --- -----
________________________
* All numbered footnotes appear on the last page of this Exhibit K.
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<PAGE> 142
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Credit Agreement, irrevocably obligate(s) us to make the Money Market Loan(s)
for which any offer(s) [is] [are] accepted, in whole or in part (subject to the
last sentence of Section 2.03(c)(i) of the Credit Agreement).
Very truly yours,
[Name of Bank]
Dated: By:
-------------------------
Authorized Officer
- - ---------------------------
- - ---------------------------
(1) As specified in the related Money Market Quote Request.
(2) The principal amount bid for each Stated Maturity Date may not exceed
the principal amount requested. Money Market Quotes must be made for
at least $5,000,000 or a larger multiple of $1,000,000.
(3) The Stated Maturity Dates are subject to Section 2.03(b)(ii).
(4) Subject to Section 2.03(c)(ii)(C).
136
<PAGE> 143
EXHIBIT L
FORM OF PARENT GUARANTY
THIS GUARANTY (this "Guaranty") is made as of the 26th day of
August, 1994, by SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation
(the "Guarantor") in favor of the Agents, for the ratable benefit of the Banks,
under the Credit Agreement referred to below;
W I T N E S S E T H
WHEREAS, pursuant to a Credit Agreement dated as of even date
herewith (as amended or modified from time to time, the "Credit Agreement", the
Guarantor, SENSORMATIC DISTRIBUTION INC., a Delaware corporation, as Borrower,
SENSORMATIC INTERNATIONAL, INC., a Delaware corporation, as Borrower, the other
Borrowers listed on the signature pages thereof (all such Borrowers, other than
the Guarantor being collectively or individually, as the context shall require,
referred to as the "Principal" or the "Principals"), the Domestic Banks and
Foreign Currency Banks parties thereto from time to time, and WACHOVIA BANK OF
GEORGIA, N.A., as Domestic Agent and ABN AMRO N.V. and ABN AMRO Foreign Credit
& Agency Services, as Foreign Currency Agent(collectively, the "Agents"), the
Banks have provided, subject to the terms and conditions thereof, for
extensions of credit to be made by the Banks to the Principals and the
Guarantor for the benefit of the Principals and of the Guarantor;
WHEREAS, it is a condition precedent to the Agents and the Banks
executing the Credit Agreement that the Guarantor execute and deliver this
Guaranty whereby the Guarantor shall guarantee the payment when due of all
principal, interest and other amounts that shall be at any time payable by the
Principals under the Credit Agreement, the Notes and the other Loan Documents;
and
WHEREAS, in consideration of the financial and other support
that the Principals have provided, and such financial and other support as the
Principals may in the future provide, to Guarantor, and in order to induce the
Banks and the Agents to enter into the Credit Agreement, the Guarantor is
willing to guarantee the obligations of the Principals under the Credit
Agreement, the Notes, and the other Loan Documents;
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<PAGE> 144
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the respective meanings
provided for therein.
SECTION 2. The Guaranty. The Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Principals pursuant to the Credit Agreement, and the full and punctual
payment of all other amounts payable by the Principals under the Credit
Agreement and the other Loan Documents, including without limitation, all fees,
costs, expenses, compensation amounts and indemnification amounts (all of the
foregoing obligations being referred to collectively as the "Guaranteed
Obligations"). Upon failure by the Principals to pay punctually any such
amount, the Guarantor agrees that it shall forthwith on demand pay the amount
not so paid at the relevant place and in the manner and relevant currency
specified in the Credit Agreement, the relevant Note or the relevant Loan
Document, as the case may be, together with interest on amounts recoverable
under this Guaranty from the time such amounts become due until payment, at the
Default Rate.
SECTION 3. Guaranty Unconditional. The obligations of the
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Principals under
the Credit Agreement, any Note, or any other Loan Document, by operation
of law or otherwise or any obligation of any other guarantor of any of
the Obligations;
(ii) any modification or amendment of or supplement to
the Credit Agreement, any Note, or any other Loan Document;
(iii) any release, nonperfection or invalidity of any
direct or indirect security for any obligation of the Principals under
the Credit Agreement, any Note, any Loan Document, or any obligations of
any other guarantor of any of the Obligations;
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<PAGE> 145
(iv) any change in the corporate existence, structure
or ownership of the Principals or any other guarantor of any of the
Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Principals, or any other
guarantor of the Guaranteed Obligations, or its assets or any resulting
release or discharge of any obligation of the Principals, or any other
guarantor of any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights
which the Guarantor may have at any time against the Principals, any
other guarantor of any of the Guaranteed Obligations, either Agent, any
Bank or any other Person, whether in connection herewith or any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Principals, or any other guarantor of any of the Guaranteed
Obligations, for any reason related to the Credit Agreement, any other
Loan Document, or any other Guaranty, or the lack of legal existence of
any Principal, or any provision of applicable law or regulation
purporting to prohibit or make illegal the payment by the Principals, or
any other guarantor of the Guaranteed Obligations, of the principal of
or interest on any Note or any other amount payable by the Principals
under the Credit Agreement, the Notes, or any other Loan Document, or
the performance of any other obligation or undertaking of any of the
Principals under the Credit Agreement, any other Loan Document, or any
other Guaranty or otherwise making any of the Guaranteed Obligations
irrecoverable from any of the Principals for any reason;
(vii) any law, regulation, order, decree or directive
(whether or not having the force of law) or any interpretation thereof,
now or hereafter in effect in any jurisdiction, that purports to modify
any of the terms of or rights of any Foreign Currency Bank with respect
to any Guaranteed Obligation or under the Credit Agreement or any other
Loan Document or this Guaranty, including without limitation any law,
regulation, order, decree or directive or interpretation thereof that
purports to require or permit the satisfaction of any Guaranteed
Obligation other than strictly in accordance with the terms of the
Credit Agreement or any other Loan Document (such as by the tender of a
currency other than
139
<PAGE> 146
the relevant Foreign Currency) or that restricts the procurement of the
Foreign Currency by any Borrower or the Guarantor, or any agreement,
whether or not signed by or on behalf of any Foreign Currency Bank, in
connection with the restructuring or rescheduling of public or private
obligations in any Borrower's country, whether or not such agreement is
stated to cause or permit the discharge of the Guaranteed Obligations
prior to the final payment in full of the Guaranteed Obligations in the
relevant Foreign Currency in strict accordance with the Credit Agreement
or other Loan Documents; or
(viii) any other act or omission to act or delay of
any kind by the Principals, any other guarantor of the Guaranteed
Obligations, either Agent, any Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the Guarantor's
obligations hereunder, other than the defense of payment in full.
The Guarantor acknowledges that, (A) at its express request, the Foreign
Currency Agent and the Foreign Currency Banks did not require, pursuant to
Section 4.01(d) and (g) of the Credit Agreement, delivery of opinions of
counsel, or documents, certificates or other items of the types (or equivalent
to the types) described in clauses (i), (ii) and (iii) of Section 4.02(g) of
the Credit Agreement, for Borrowers which are not U.S. Persons, and (B) the
Foreign Currency Agent and the Foreign Currency Banks agreed to such request
solely because of, and in full reliance on, the unconditional undertakings and
obligations of the Guarantor hereunder and the express waivers and consents set
forth above.
SECTION 4. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. The Guarantor's obligations hereunder shall remain
in full force and effect until all Guaranteed Obligations shall have been paid
in full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any
Note or any other amount payable by the Principals under the Credit Agreement
or any other Loan Document is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Principals or
otherwise, the Guarantor's obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
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<PAGE> 147
SECTION 5. Waiver of Notice by the Guarantor. The Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Principals, any other guarantor of the Guaranteed Obligations, or any other
Person.
SECTION 6. Subordination by the Guarantor. Until termination
of this Guaranty and payment in full of the Guaranteed Obligations, at any time
when any Principal is subject to a case or proceeding for bankruptcy,
insolvency, liquidation or moratorium, the Guarantor shall have, but shall not
exercise in respect of any payment made by or for the account of the Guarantor
pursuant to this Guaranty, any rights of subrogation, indemnity or otherwise
from or against such Principal.
SECTION 7. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by the Principals under the Credit Agreement,
any Note or any other Loan Document is stayed upon the insolvency, bankruptcy
or reorganization of the Principals, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other
Loan Document shall nonetheless be payable by the Guarantor hereunder forthwith
on demand by the Agents made at the request of the Required Banks.
SECTION 8. Notices. All notices, requests and other
communications to any party hereunder shall be given or made by telecopier or
other writing and telecopied or mailed or delivered to the intended recipient
at its address or telecopier number set forth on the signature pages hereof or
such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the Agent in accordance with the provisions of
Section 10.01 of the Credit Agreement. Except as otherwise provided in this
Guaranty, all such communications shall be deemed to have been duly given when
transmitted by telecopier, or personally delivered or, in the case of a mailed
notice, 72 hours after such communication is deposited in the mails with first
class postage prepaid, in each case given or addressed as aforesaid.
SECTION 9. No Waivers. No failure or delay by either Agent or
any Banks in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
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<PAGE> 148
other right, power or privilege. The rights and remedies provided in this
Guaranty, the Credit Agreement, the Notes, and the other Loan Documents shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10. Successors and Assigns. This Guaranty is for the
benefit of the Agents and the Banks and their respective successors and assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Loan Documents, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty may not be assigned by the Guarantor without the
prior written consent of the Agent and the Required Banks, and shall be binding
upon the Guarantor and its successors and permitted assigns.
SECTION 11. Changes in Writing. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Guarantor and the Agent with the consent of the
Required Banks.
SECTION 12. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. EACH OF THE GUARANTOR AND THE AGENT
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF THE SUPREME COURT OF THE
STATE OF NEW YORK, COUNTY OF NEW YORK AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE GUARANTOR AND THE AGENTS HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13. Taxes, etc. All payments required to be made by
the Guarantor hereunder shall be made without setoff or counterclaim and free
and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political
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<PAGE> 149
or taxing authority as required pursuant to Sections 2.12(d)and 3.11(d) of the
Credit Agreement.
SECTION 14. Failure to Pay in Foreign Currency. If any the
Guarantor is prevented by application any law, rule or regulation from
effecting payment in a relevant Foreign Currency as required by this Guaranty,
each Foreign Currency Bank may, through the Foreign Currency Agent, require
such payment to be made in Dollars in the Dollar Equivalent amount of such
payment. In any case in which the Guarantor shall make such payment in
Dollars, the Guarantor agrees to hold the Foreign Currency Banks harmless from
any loss incurred by the Foreign Currency Banks arising from any change in the
value of Dollars in relation to such Foreign Currency between the date such
payment became due and the date of payment thereof.
SECTION 15. Judgment Currency. If for the purpose of obtaining
judgment in any court or enforcing any such judgment it is necessary to convert
any amount due in any Foreign Currency into any other currency, the rate of
exchange used shall be the Foreign Currency Agent's spot rate of exchange for
the purchase of the Foreign Currency with such other currency at the close of
business on the Foreign Currency Business Day preceding the date on which
judgment is given or any order for payment is made. The obligation of the
Guarantor in respect of any amount due from it hereunder shall, notwithstanding
any judgment or order for a liquidated sum or sums in respect of amounts due
hereunder or under any judgment or order in any other currency or otherwise be
discharged only to the extent that on the Foreign Currency Business Day
following receipt by the Foreign Currency Agent of any payment in a currency
other than the relevant Foreign Currency the Foreign Currency Agent is able (in
accordance with normal banking procedures) to purchase the relevant Foreign
Currency with such other currency. If the amount of the relevant Foreign
Currency that the Foreign Currency Agent is able to purchase with such other
currency is less than the amount due in the relevant Foreign Currency,
notwithstanding any judgment or order, the Guarantor shall indemnify the
Foreign Currency Banks for the shortfall.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
duly executed in New York, New York by its authorized officer as of the date
first above written.
SENSORMATIC ELECTRONICS CORPORATION
By: _____________________________
Title:
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Miguel A. Flores
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
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Schedule 6.03
Material Subsidiaries
[To Follow]
145
<PAGE> 1
Exhibit 11
SENSORMATIC ELECTRONICS CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(In thousands)
<TABLE>
<CAPTION>
Years ended Month ended
------------------------------------------- June 30,
June 30, May 31,
Income (loss): 1994 1993 1992 1992
-------- --------- --------- -------
<S> <C> <C> <C> <C>
Net income (loss) for primary computation $ 72,065 $ 54,084 $ 31,526 $(2,454)
Add interest expense (net of tax)
on 7% convertible subordinated
debentures (4) 4,902 5,133 5,360 -
-------- --------- -------- -------
Adjusted net income (loss) for fully
diluted computation $ 76,967 $ 59,217 $ 36,886 $(2,454)
======== ========= ========== ========
Common shares (1):
Weighted average shares outstanding during the
period 60,097 54,179 41,184 41,697
Potential dilutive exercise of stock options
and warrants (2)(4) 1,788 1,849 1,892 -
-------- --------- -------- -------
Shares included in computation of primary
earnings per share 61,885 56,028 43,076 41,697
Shares issuable on conversion of 7%
convertible subordinated debentures (4) 6,359 7,287 7,341 -
Maximum dilution of stock options and warrants (3)(4) 99 317 63 -
-------- ---------- ------- -------
Shares included in computation of fully diluted
earnings per share 68,343 63,632 50,480 41,697
======== ========== ======== =======
</TABLE>
(Continued on the following page.)
<PAGE> 2
Exhibit 11
SENSORMATIC ELECTRONICS CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (CONT'D)
(In thousands)
(1) Share amounts reflect the three-for-two stock split declared in November
1993.
(2) Computed under the treasury stock method based on the average price
during the periods.
(3) Computed under the treasury stock method based on stock price at end of
periods if higher than the average price during the periods.
(4) The effect of options and warrants outstanding and the shares issuable on
conversion of the debentures and the adjustment for interest expense
related to such debentures are anti-dilutive and are therefore not
considered in the calculation of primary and fully diluted loss per share
for the month ended June 30, 1992.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES (1)
SEPTEMBER 8, 1994
<TABLE>
<CAPTION>
Place of Incorporation
or Organization
-------------------------
OPERATING COMPANIES
- - -------------------
<S> <C> <C>
North America
- - -------------
Advanced Entry Systems, Inc. Texas
American Dynamics New Jersey
CamEra Inc. Delaware
Continental Instruments Corporation New York
PSDP, Inc. Delaware
Robot Research Inc. Delaware
Security Tag Systems, Inc. Delaware
Sensormatic Canada, Inc. Canada
Sensormatic Electronics Corporation (Puerto Rico) Delaware
Sensormatic, SA de CV Mexico
Sensormatic del Caribe, Inc. Puerto Rico
Software House, Inc. Delaware
Europe
- - ------
Automated Security Portugesa Seguranca L.D.A. Portugal
Case Security Limited United Kingdom
Midland Vision Limited United Kingdom
Sensormatic AB Sweden
Sensormatic A.G. Switzerland
Sensormatic A/S Denmark
Sensormatic AS Norway
Sensormatic Belgium NV Belgium
Sensormatic B.V. The Netherlands
Sensormatic CamEra Ltd. United Kingdom
Sensormatic CamEra S.A.R.L. France
Sensormatic Distribution Inc. Delaware (primary
operation in Switzerland)
Sensormatic E.C., S.A. Spain
Sensormatic E.C., S.R.L. Italy
Sensormatic France SA France
Sensormatic Ges.m.b.H. Austria
Sensormatic G.m.b.H. Germany
Sensormatic Electronics Corporation
(Ireland) Limited Ireland
Sensormatic Investments of Ireland Ireland
Sensormatic International Ltd. United Kingdom
Sensormatic Italia S.R.L. Italy
Sensormatic Proteccao Contra O Furto, L.D.A. Portugal
Sensormatic Limited United Kingdom
Sensormatic Nederland B.V. The Netherlands
N.V. Sensormatic S.A. Belgium
Sensormatic OY Finland
Sensormatic S.A. France
Sensormatic Kft. Hungary
Sensormatic France Services S.A.R.L. France
Svensk Sakerhetskonsult SAKON AB Sweden
Visual Information Systems Limited United Kingdom
</TABLE>
<PAGE> 2
EXHIBIT 21
LIST OF SUBSIDIARIES (1)
SEPTEMBER 8, 1994
(CONT'D)
<TABLE>
<CAPTION>
Place of Incorporation
or Organization
-----------------------
<S> <C> <C>
Asia/Pacific
- - ------------
Sensormatic Asia/Pacific, Inc. Delaware (primary
operation in Singapore)
Sensormatic Australia Pty Limited Australia
Sensormatic Hong Kong Limited Hong Kong
Sensormatic New Zealand Limited New Zealand
OTHER SUBSIDIARIES
- - -------------------
Sensormatic Middle East, Inc. Delaware
Senelco Iberia, Inc. Delaware
International Financing, Inc. Delaware
Sensormatic Cayman Finance Ltd. Cayman Islands
Sensormatic de Peru Peru
Sensormatic Distribution & Holdings B.V. The Netherlands
Sensormatic Electronics Corporation (Brazil) Delaware
Sensormatic Holdings Ltd. United Kingdom
Sensormatic International, Inc. Delaware
Senelco Resting, ApS Denmark
Sensormatic International Management Corporation Delaware
Sensormatic Investments Associates B.V. The Netherlands
SEC Investments of Canada Ltd. Canada
Sensormatic Investments Ltd. United Kingdom
Sensormatic Electronics Corporation (Japan) Japan
Sensormatic (U.K.) Ltd. United Kingdom
Elkinlane Ltd. United Kingdom
BI Merger Corp. Delaware
Kingsclere Racing Stables Limited United Kingdom
Sensormatic International Distributors, Inc. Delaware
Sensormatic do Brasil Electronica Ltda. Brazil
Sensormatic Guvenlik Sistemleri
Ticaret, A.S. Turkey
</TABLE>
(1) All companies listed herein are wholly owned by the Company, directly
or indirectly, with the exception of Sensormatic do Brasil Electronica
Ltda., Sensormatic Guvenlik Sistemleri Ticaret A.S. and Sensormatic de
Peru which are 51% owned.
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-19339, 33-26786, 33-38753 and 33-54626) pertaining to the
Incentive and Non-Qualified Stock Option Plans and the Employee Stock Purchase
Plan of Sensormatic Electronics Corporation of our report dated August 8, 1994,
with respect to the consolidated financial statements and schedules of
Sensormatic Electronics Corporation included in this Annual Report (Form 10-K)
for the year ended June 30, 1994.
ERNST & YOUNG LLP
West Palm Beach, Florida
September 8, 1994
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-61626 and Form S-4 No. 33-51957) of Sensormatic Electronics
Corporation and in the related Prospectuses of our report dated August 8, 1994,
with respect to the consolidated financial statements and schedules of
Sensormatic Electronics Corporation included in this Annual Report (Form 10-K)
for the year ended June 30, 1994.
ERNST & YOUNG LLP
West Palm Beach, Florida
September 8, 1994
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF RELIANCE FOR THE YEAR ENDED JUNE 30, 1994, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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