<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) QUARTERLY REPORT ( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly
Period Ended March 31, 1996 Commission File No. 1-10739
-------------- -------
SENSORMATIC ELECTRONICS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 34-1024665
- ------------------------------- -----------------------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
951 Yamato Road, Boca Raton, Florida 33431-0700
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 989-7000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Same
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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 .
----- -----
The Registrant had outstanding 73,828,707 shares of Common Stock (par value
$.01 per share) as of May 6, 1996.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets ....................... 1
Consolidated Condensed Statements of
Operations ................................................. 2
Consolidated Condensed Statements of
Cash Flows ................................................. 3
Notes to Consolidated Condensed
Financial Statements ....................................... 4-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................................ 13-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 19
Item 6. Exhibits and Reports on Form 8-K ............................... 20
Signatures ................................................................... 21
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value amounts)
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
(Unaudited) (See Note)
-------------- -------------
ASSETS
<S> <C> <C>
Cash and marketable securities (including
marketable securities of $17 and $27
at March 31 and June 30, respectively) $ 115 $ 70
Accounts receivable, net 242 222
Deferred and installment receivables, net 65 68
Net investment in sales-type leases 112 111
Inventories, net 191 241
Revenue equipment, net 63 50
Other property, plant and equipment, net 147 151
Deferred income taxes, patents and other assets, net 237 161
Costs in excess of net assets acquired, net 484 497
------ ------
$1,656 $1,571
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 59 $ 63
Accrued liabilities and income taxes payable 244 228
Debt 515 327
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Common stock, $.01 par value, 74 and
73 shares outstanding at March
31 and June 30, respectively 722 714
Retained earnings 186 296
Treasury stock, at cost and other (14) (13)
Currency translation adjustments (56) (44)
------ ------
Total stockholders' equity 838 953
------ ------
$1,656 $1,571
====== ======
</TABLE>
Note: The balance sheet at June 30, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and notes required by generally accepted accounting
principles for complete financial statements.
The notes to consolidated condensed financial statements on pages 4 - 12 are
an integral part of these statements.
1
<PAGE> 4
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
March 31, March 31,
--------------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales $ 192 $ 185 $ 631 $ 539
Rentals 13 14 38 37
Other 20 20 68 51
----- ----- ------- -----
Total revenues 225 219 737 627
Operating costs and expenses:
Costs of sales 107 85 336 246
Depreciation on revenue
equipment 5 5 16 12
Selling, customer service and
administrative 132 97 410 257
Restructuring charges 43 - 85 -
Research, development and
engineering 7 5 21 16
Amortization of intangible
assets 4 4 12 10
----- ----- ------- -----
Total operating costs
and expenses 298 196 880 541
----- ----- ------- -----
Operating income (loss) (73) 23 (143) 86
Other expenses, net (6) (2) (18) (5)
----- ----- ------- -----
Income (loss) before income taxes (79) 21 (161) 81
Provision for (benefit from) income taxes (29) 5 (63) 20
----- ----- ------- -----
Net income (loss) $ (50) $ 16 $ (98) $ 61
===== ===== ======= =====
Earnings (loss) per common share $(.68) $ .21 $ (1.33) $ .85
===== ===== ======= =====
Cash dividends per common
share $.055 $.055 $ .165 $.165
===== ===== ======= =====
Common shares used in
computation of
earnings (loss) per share: 74 74 74 71
===== ===== ======= =====
</TABLE>
The notes to consolidated condensed financial statements on pages 4 - 12
are an integral part of these statements.
2
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(In millions)
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(98) $ 61
Adjustments to reconcile net income (loss)
to net cash used in
operating activities:
Depreciation and amortization 37 28
Restructuring charges, net 78 -
Other non-cash charges to operations, net (see note b) 125 11
Net changes in operating assets and
liabilities, net of effect of acquisitions :
Increase in receivables and sales-type leases (98) (84)
Increase in current and deferred income taxes (86) (16)
Net increase in other operating assets and liabilities (25) (51)
---- ----
Net cash used in operating activities (67) (51)
---- ----
Cash flows from investing activities:
Capital expenditures (41) (39)
Maturities of marketable securities 13 7
Increase in revenue equipment
and inventory available for lease (37) (7)
Other, net (11) 1
---- ----
Net cash used in investing activities (76) (38)
---- ----
Cash flows from financing activities:
Issuance of Senior Notes, net 229 -
Bank borrowings (repayments) (net of effect of acquisitions) (29) 123
Cash dividends (12) (12)
Proceeds from issuances of common stock
under employee benefit plans, net 9 9
Other, net - 1
---- ----
Net cash provided by financing activities 197 121
---- ----
Net increase in cash 54 32
Cash at beginning of period 44 21
---- ----
Cash at end of period 98 53
Marketable securities at end of period 17 29
---- ----
Cash and marketable securities at end of period $115 $ 82
==== ====
</TABLE>
The notes to consolidated condensed financial statements on pages 4 - 12 are an
integral part of these statements.
3
<PAGE> 6
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
a) Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-and-nine-months ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the
year ending June 30, 1996. For further information, refer to the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K/A for the year ended June 30, 1995.
b) Restructuring and special charges
In the second quarter of fiscal 1996, the Company initiated an
extensive and systematic review of its operations, cost structure and
balance sheet aimed at reducing its operating expenses and manufacturing
costs, increasing its efficiencies and generally strengthening its
position as the world leader in electronic security. This review of the
Company's global operations focused primarily on operational and
organization structures and systems, product rationalization and inventory
valuation, receivable balances and related collection efforts and certain
other matters.
This review resulted in charges totaling $186 million with an after-tax
impact of $118 million. In the second quarter of fiscal 1996, total
restructuring and special charges were estimated at $139 million, of which
$112 million was recorded in the second quarter. At that time, the Company
estimated $27 million of additional restructuring charges would be
incurred in the third quarter. Actual restructuring and special charges
incurred in the third quarter of fiscal 1996 were $47 million greater than
originally estimated due to additional activities and incremental costs
identified related to the restructuring plan and additional valuation
allowances required with respect to various assets. It is anticipated
that approximately $33 million of these costs (all relating to
restructuring) will result in cash outlays, of which $7 million was paid
as of March 31, 1996.
Restructuring Charges
Product rationalization and related equipment charges. The Company
implemented and completed a review of its existing products and
product sourcing, the purpose of which was to reduce the number of
existing products, reduce inventory carrying costs and improve gross
margins on continued products. As a result of this review, in the
second quarter of fiscal 1996 the Company recorded a charge related
to assets, primarily equipment, used in the manufacture of certain
products which will be manufactured under an entirely new process or
purchased from third party suppliers (rather than manufactured
internally). The equipment impairment charge represented the difference
between the carrying value of the equipment and its fair value,
4
<PAGE> 7
which was assumed to be nominal due to its unique nature and lack of
alternative uses for the equipment. In addition, as a result of the
Company's decision to reduce the number of products it markets,
management assessed the net realizable value of its existing supply of
products and recorded inventory provisions in the second and third
quarter of fiscal 1996.
Operational and organization structures and systems. In connection
with its review of operational and organization structures and
systems, management adopted a plan to consolidate certain sales and
manufacturing facilities, reorganize certain business units and
corporate functions, and eliminate redundant positions. Through
March 31, 1996, cash expenditures related to facilities
consolidation totaled $400,000. The remaining accrual balance was $23
million at March 31, 1996.
As part of the restructuring plan, the Company expects to terminate
approximately 875 employees, primarily manufacturing and administrative
personnel in North America and Europe, with estimated termination and
related costs of $13 million. This represents an increase from the 775
employees, with estimated termination and related costs of $13 million,
originally estimated in the second quarter of fiscal 1996. As of March
31, 1996, approximately 800 employees had been terminated and $7 million
of severance and related costs were paid. Certain employees terminated in
March 1996 will receive payments subsequent to March 31, 1996. In
addition, other terminated employees are receiving severance payments over
time. The remaining liability for severance benefits at March 31, 1996 is
$10 million.
A summary of the restructuring charges and the periods recorded is
as follows (in millions):
<TABLE>
<CAPTION>
Three Months Three Months Nine Months
Ended Ended Ended
December 31, March 31, March 31,
1995 1996 1996
------------ ------------ -----------
<S> <C> <C> <C>
Product rationalization,
related equipment charges
and other $36 $ 9 $45
Closure of facilities and
related costs - 23 23
Employee termination and
related costs 7 10 17
--- --- ---
Total restructuring charges $43 $42 $85
=== === ===
</TABLE>
The third quarter restructuring charge of $42 million reflects an
increase of $15 million over the $27 million estimated in the second
quarter. The increase is due to additional activities and
incremental costs identified related to personnel reductions and
facilities consolidation, primarily in Europe, and worldwide product
rationalization.
5
<PAGE> 8
Special Charges
In the second quarter of fiscal 1996, the Company's management
conducted an extensive evaluation and review of the collectibility
of its receivable balances (including off-balance sheet receivables)
and related collection efforts. This initiative was primarily the
result of the overall weakening of the retail sector. Additionally,
the Company conducted a review of slow moving inventory and revenue
equipment in light of softening demand for certain EAS products. As
a result of these reviews, the Company recorded a charge to
operations of $69 million in the second quarter of fiscal 1996 which
principally represented increases in the valuation allowances for
receivables and inventories.
In the third quarter of fiscal 1996, the Company identified
additional assets which required valuation allowances, principally
receivables and inventories, and accordingly, recorded a charge of
$32 million for these and other miscellaneous items.
The special charges related to the valuation of receivables and
other items are recorded in "Selling, customer service and
administrative" expense. The special charges related to the
valuation of inventories and revenue equipment are recorded in "Cost
of sales" and "Depreciation on revenue equipment", respectively.
A summary of the special charges and the periods recorded is as
follows (in millions):
<TABLE>
<CAPTION>
Three Months Three Months Nine Months
Ended Ended Ended
December 31, March 31, March 31,
1995 1996 1996
------------ ------------ -----------
<S> <C> <C> <C>
Receivables
valuation provision
and other items $56 $19 $ 75
Inventories and
revenue equipment
valuation provision 13 13 26
--- --- ----
Total special charges $69 $32 $101
=== === ====
</TABLE>
6
<PAGE> 9
c) Receivables and net investment in sales-type leases
Amounts due to the Company in the form of accounts receivable (which
are due within 90 days), deferred receivables (which are generally due
within one year), installment receivables (which generally have periodic
payments over a term of five years) and net investment in sales-type
leases (sales-type leases) (which have periodic payments over lease terms
from five to six years) are summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
--------------- -------------
<S> <C> <C>
Accounts receivable $269 $236
Deferred and installment receivables 111 98
Sales-type leases 175 169
---- ----
Gross receivables and sales-type leases 555 503
Less allowance for doubtful accounts (65) (27)
Unearned interest and maintenance (71) (75)
---- ----
Net receivables and sales-type leases $419 $401
==== ====
</TABLE>
The increase in the allowance for doubtful accounts is discussed in
note b above.
The Company received net proceeds of $287 million and $307 million
from the sale or assignment of certain of its receivables and
sales-type leases in the nine months ended March 31, 1996 and 1995,
respectively. The uncollected principal balance of receivables and
sales-type leases sold which was subject to varying amounts of
recourse totaled $294 million and $298 million at March 31, 1996 and
1995, respectively. Adequate reserves have been provided for
receivables and leases sold and are included in accrued liabilities.
In addition to existing facilities, in December 1995, the Company
entered into a 364-day, 58 million European Currency Unit
(approximately $73 million at March 31, 1996) committed
facility with a group of European financial institutions. The
facility allows certain of the Company's European subsidiaries to
sell sales-type leases on a limited recourse basis. (See note 2 of
Notes to Consolidated Financial Statements in the Company's 1995
Annual Report on Form 10-K/A).
d) Inventory
Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
--------------- -------------
<S> <C> <C>
Available for sale or lease $166 $183
Parts 51 45
Work-in-process 25 23
---- ----
Gross inventories 242 251
Less allowance for inventory losses (51) (10)
---- ----
Net inventories $191 $241
==== ====
</TABLE>
The increase in the allowance for inventory losses is discussed in note b
above.
7
<PAGE> 10
e) Deferred income taxes, patents and other assets
Deferred income taxes, patents and other assets are comprised of the
following (in millions):
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
Deferred income taxes $124 $ 53
Patents and other intangibles 45 40
Prepaid expenses and deposits 26 24
Receivables from financing
institutions (due within one year) 5 8
Deferred charges 13 17
Other 24 19
---- ----
$237 $161
==== ====
</TABLE>
The increase in deferred income taxes is primarily due to tax benefits
related to the restructuring and special charges (see note b).
f) Debt
Debt is summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
7.74% Senior Notes $230 $ -
8.21% Senior Notes 135 135
Unsecured revolving credit notes 143 182
Capital lease obligations and other, net 7 10
---- ----
$515 $327
==== ====
</TABLE>
Interest expense for the nine months ended March 31, 1996 and 1995
was $26 million and $21 million, respectively. The Company made
interest payments of $30 million and $23 million for the nine months
ended March 31, 1996 and 1995, respectively.
In December 1995, the Company entered into a 364-day, $320
million-equivalent committed multi-currency credit facility with a
group of U.S. and international financial institutions. The
facility replaced the Company's pre-existing $100 million committed
facility and certain other U.S. and European uncommitted facilities.
In April 1996, the Company completed the issuance of $350 million of
Senior Notes which were issued in three tranches. In March 1996, $230
million 7.74% Notes due March 2006 were issued and are included as a
component of debt at March 31, 1996; the proceeds of which were used to
pay off borrowings in the U.S. under the Company's short-term credit
facilities. The remaining tranches of $70 million 6.99% Notes due March
2000 and $50 million 7.11% Notes due March 2001
8
<PAGE> 11
were issued in April 1996, the proceeds of which will be used to reduce
borrowings in Europe under short-term credit facilities and for general
corporate purposes. Under the terms of the related Note Agreement, the
Company is required, among other things, to maintain a certain minimum net
worth, as defined, and certain debt to total capitalization ratios, and is
subject to certain limitations with respect to repurchases of its Common
Stock and payment of dividends.
g) Income taxes
The estimated fiscal 1996 annual effective tax rate was revised from
41% estimated in the second quarter to 39% to reflect a change in
estimated results for the year.
A reconciliation between the statutory U.S. Federal income tax rate
of 35 percent and the estimated annual effective tax rate is as follows:
<TABLE>
<S> <C>
Statutory rate-U.S. Federal 35.0%
Benefits due to tax exempt earnings
and investment income from the Puerto Rico
operations 4.2
Amortization of costs in excess of net
assets acquired (2.1)
State income tax benefit 1.8
Research and development tax credit 1.0
Effect of change in valuation allowance
for deferred taxes (1.8)
Other 0.9
----
39.0%
----
</TABLE>
9
<PAGE> 12
h) Acquisitions
On December 29, 1994, the Company acquired the operations outside of
the United States, Puerto Rico and Canada of Knogo Corporation
("Knogo") for approximately 3.1 million shares of the Company's
Common Stock.
The Company's unaudited pro forma consolidated condensed statement
of income for the nine months ended March 31, 1995, assuming the
acquisition of Knogo was effected at the beginning of such period,
is summarized as follows (in millions, except per share amounts):
<TABLE>
<S> <C>
Total revenues $660
Net income $ 61
Earnings per share $.83
</TABLE>
This pro forma information does not purport to be indicative of the
results which may have been obtained had the acquisition been
consummated at the date assumed.
In connection with acquisitions, the market value of the assets
acquired for the nine months ended March 31, 1996 and 1995 was as
follows (in millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash paid (net of cash acquired) $8 $ 3
Liabilities assumed and/or incurred - 80
Common stock issued - 149
-- ----
Market value of assets acquired $8 $232
== ====
</TABLE>
i) Financial Instruments
(i) Currency hedging instruments
The Company has purchased forward exchange contracts and options
designated to hedge certain intercompany transactions and
identifiable anticipatory intercompany commitments which are
denominated in foreign currencies. The Company is evaluating this
policy as a result of recently issued revisions to guidelines on
accounting for derivatives. At March 31, 1996, the Company owned
forward exchange contracts which allowed it to sell currencies for
the indicated U.S. dollar amounts with respect to fiscal 1996 and
1997 intercompany transactions and commitments, as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
---- ----
Currencies
----------
<S> <C> <C>
French Francs $28 $26
Deutschemarks 18 7
British Pounds 18 5
Spanish Pesetas 9 4
Other 2 4
--- ---
$75 $46
=== ===
</TABLE>
10
<PAGE> 13
(ii) Interest rate instruments
The Company has entered into interest rate swap and cap agreements with
financial institution counterparties in order to manage its exposure to
interest rate fluctuations associated with certain transactions and debt.
(See notes 2., 6. and 12. of Notes to Consolidated Financial Statements
in the Company's 1995 Annual Report on Form 10-K/A for additional
discussion).
At March 31, 1996, the Company was a party to the following agreements (in
millions):
FIXED TO FLOATING SWAP AGREEMENT
<TABLE>
<CAPTION>
Notional Expiration Floating Rate Fixed Rate
Amount Date to be Paid to be Received
-------- ---------- ------------- --------------
<S> <C> <C> <C>
$35 June 1996 6 Month LIBOR 5.01%
</TABLE>
The weighted average interest rate paid and received under the Fixed
to Floating Swap Agreement at March 31, 1996 was 5.5% and 5.01%,
respectively.
FLOATING TO FIXED SWAP AGREEMENTS
<TABLE>
<CAPTION>
Notional Expiration Fixed Rate Floating Rate
Amount Date to be Paid to be Received
-------- ----------- ---------- --------------
<S> <C> <C> <C>
$10 May 1999 7.75% 1 Month LIBOR
8 May 2000 5.84% 1 Month LIBOR
7 May 2000 6.16% 1 Month LIBOR
4 April 2000 6.58% 1 Month LIBOR
3 April 1999 4.60% 1 Month LIBOR
3 August 1998 4.80% 1 Month LIBOR
2 May 1998 4.94% 1 Month LIBOR
1 March 1999 4.65% 1 Month LIBOR
</TABLE>
The weighted average interest rate paid and received under all such
Floating to Fixed Swap Agreements at March 31, 1996 was 6.2% and
5.35%, respectively.
j) Prospective Accounting Changes
In October 1995, FASB Statement No. 123 "Accounting for Stock-based
Compensation" was issued. FASB 123 allows companies to adopt either
significant new fair value-based accounting rules or increased disclosure
requirements for stock-based compensation plans. The Company plans to
adopt the disclosure requirements rather than the fair value accounting
rules beginning with the first quarter of fiscal 1997 with no charge to
earnings.
k) Reclassifications
Certain amounts in the prior period's consolidated condensed
financial statements have been reclassified to conform to the
current period's condensed presentation.
11
<PAGE> 14
l) Litigation and other matters
During the first six months of fiscal 1996, a number of actions were
filed in federal court by alleged shareholders of the Company
following announcements by the Company that, among other things, its
earnings for the quarter and year ended June 30, 1995, would be
substantially below expectations and that the scope of the Company's
year-end audit had been expanded. These actions have been
consolidated. The consolidated complaint alleges, among other
things, that the Company and certain of its current and former
directors and officers, as well as the Company's auditors, violated
certain Federal securities laws. One of the claims against the
Company's auditors, asserted under state law, originally included in
the consolidated complaint has been dismissed by the Court. That
claim alleged that the Company's auditors negligently misrepresented
certain information regarding the Company and failed to exercise
reasonable care. The claims recited in the consolidated complaint
relate to the same events and occurrences as those alleged in the
various actions referred to above, updated to incorporate more
recent events and occurrences and to reflect certain information
furnished to plaintiffs during pre-trial discovery. The
consolidated complaint requests certification of the action as a
class action on behalf of all purchasers of the common stock of the
Company and certain stock options from August 10, 1994 through
October 2, 1995, including those shareholders who received common
stock of the Company in connection with the Company's merger with
Knogo. The consolidated complaint also seeks rescissory and/or
compensatory damages, pre-judgment and post-judgment interest,
costs, attorneys' fees, and other relief, and further provides that
the shareholders of the Company who received common stock of the
Company in connection with the merger with Knogo are tendering back
to the Company such shares of common stock. The consolidated
complaint supersedes all prior complaints in the consolidated
actions.
Also in September 1995, three derivative actions were filed against
the Company and its directors for breach of fiduciary duties,
mismanagement and waste of corporate assets. Those claimants are
seeking, among other relief, restitution and/or damages in favor of
the Company and imposition of a constructive trust. These actions
have been consolidated.
The Company intends to vigorously defend against these actions. The
ultimate outcome of these actions cannot presently be determined.
Accordingly, no provision for any liability that may result has been
made in the consolidated financial statements.
12
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's consolidated condensed financial statements present a
consolidation of its worldwide operations. This discussion
supplements the detailed information presented in the Consolidated
Condensed Financial Statements and Notes thereto (which should be read
in conjunction with the financial statements and related notes
contained in the Company's 1995 Annual Report on Form 10-K/A) and is
intended to assist the reader in understanding the financial results
and condition of the Company.
Financial Condition
Cash and marketable securities increased $45 million primarily
due to an increase in debt, including the issuance of Senior Notes
(see note f of Notes to Consolidated Condensed Financial Statements);
offset in part by: (a) net cash used in operations ($67 million) due
primarily to increases in receivables and net investment in sales-type
leases and (b) net capital expenditures ($41 million) including
approximately $21 million related to the purchases of a corporate and
a business unit headquarters. Total stockholders' equity at March 31,
1996 decreased $115 million to $838 million. The decrease in
stockholders' equity is primarily attributable to restructuring and
special charges of $118 million on an after-tax basis (see
"Restructuring and special charges" under "Results of Operations"
below). The debt-to-total capitalization ratio was 0.38 to 1 at March
31, 1996, compared to 0.26 to 1 at June 30, 1995.
Total receivables and net investment in sales-type leases increased
to $419 million at March 31, 1996 from $401 million at June 30, 1995.
The increase resulted in part from lower than historical sales of
receivables and sales-type leases to financing institutions during
the nine months ended March 31, 1996 compared to the same period
last year. The increase was partly offset by additional allowances for
doubtful accounts recorded in the second and third quarter of fiscal
1996 (see "Results of Operations" below).
The Company is presently in discussion with certain financial
institutions regarding increases of existing facilities or
establishment of new facilities to expand its ability to sell
installment receivables and sales-type leases in anticipation of the
growth in such assets and potentially to reduce the effective cost of
these facilities.
Inventories at March 31, 1996 decreased $50 million from their
June 30, 1995 levels primarily as a result of an increase in inventory
placed on operating leases (i.e. revenue equipment) and additional
allowances for inventory losses recorded in conjunction with a review
of existing products (see "Results of Operations" below).
Total debt increased $188 million over the June 30, 1995 balance, to
$515 million, primarily as a result of an increase in net operating
assets and liabilities.
In December 1995, the Company entered into a 364-day, $320
million-equivalent committed multi-currency credit facility with a
group of U.S. and international financial institutions. The facility
replaced the Company's pre-existing $100 million committed facility and
certain other U.S. and European uncommitted facilities.
In April 1996, the Company completed the issuance of $350 million of
Senior Notes which were issued in three tranches. In March 1996, $230
million 7.74% Notes due March 2006 were issued, the proceeds of which
were used to pay off borrowings in the U.S. under the Company's
short-term credit facilities (primarily amounts borrowed under the
364-day committed multi-
13
<PAGE> 16
currency facility). The remaining tranches of $70 million 6.99%
Notes due March 2000 and $50 million 7.11% Notes due March 2001 were
issued in April 1996, the proceeds of which will be used to reduce
borrowings in Europe under short-term credit facilities and for general
corporate purposes.
The Company believes it is adequately positioned to meet anticipated
future capital requirements through the use of existing cash and
marketable securities, funds available under committed credit
facilities and cash generated by future operating activities
(including the sale and assignment of receivables and sales-type leases
to financing institutions).
The Company maintains a shelf registration statement filed 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
2.5 million shares remain available). These securities are available
for use in connection with acquisitions of other businesses or assets.
Results of Operations
Restructuring and special charges (see note b of Notes to
Consolidated Condensed Financial Statements)
In the second quarter of fiscal 1996, the Company initiated an
extensive and systematic review of its operations, cost structure and
balance sheet aimed at reducing its operating expenses and
manufacturing costs, increasing its efficiencies and generally
strengthening its position as the world leader in electronic security.
This review of the Company's global operations focused primarily on
operational and organization structures and systems, product
rationalization and inventory valuation, receivable balances and
related collection efforts and certain other matters.
This review resulted in charges totaling $186 million with an
after-tax impact of $118 million. In the second quarter of fiscal
1996, total restructuring and special charges were estimated at $139
million, of which $112 million was recorded in the second quarter. At
that time, the Company estimated $27 million of additional
restructuring charges would be incurred in the third quarter. Actual
restructuring and special charges incurred in the third quarter of
fiscal 1996 were $47 million greater than originally estimated due to
additional activities and incremental costs identified related to the
restructuring plan and additional valuation allowances required with
respect to various assets.
It is anticipated that approximately $33 million of these costs
(all relating to restructuring) will result in cash outlays, of which
$7 million was paid as of March 31, 1996. Upon completion of the
restructuring activities, the Company expects to realize, as a result
of such restructuring, an annual savings in operating expenses and
manufacturing costs of approximately $44 million. These savings will be
partially offset by costs associated with the addition of approximately
250 employees in strategic growth areas. In addition, the Company
anticipates reducing other variable operating expenses, exclusive of
payroll and related costs, by approximately $10 million annually.
14
<PAGE> 17
A summary of the restructuring charges and the periods recorded is
as follows (in millions):
<TABLE>
<CAPTION>
Three Months Three Months Nine Months
Ended Ended Ended
December 31, March 31, March 31,
1995 1996 1996
------------ ------------ -----------
<S> <C> <C> <C>
Product rationalization,
related equipment charges
and other $36 $ 9 $45
Closure of facilities and
related costs - 23 23
Employee termination and
related costs 7 10 17
--- --- ---
Total restructuring charges $43 $42 $85
=== === ===
</TABLE>
The third quarter restructuring charge of $42 million reflects
an increase of $15 million over the $27 million previously estimated in
the second quarter of fiscal 1996. The increase is due to additional
activities and incremental costs identified related to personnel
reductions and facilities consolidation, primarily in Europe, and
worldwide product rationalization.
A summary of special charges and the periods recorded is as follows
(in millions):
<TABLE>
Three Months Three Months Nine Months
Ended Ended Ended
December 31, March 31, March 31,
1995 1996 1996
------------ ------------ -----------
<S> <C> <C> <C>
Receivables
valuation provision
and other items $56 $19 $ 75
Inventories and
revenue equipment
valuation provision 13 13 26
--- --- ----
Total special charges $69 $32 $101
=== === ====
</TABLE>
In the third quarter of fiscal 1996, the Company identified
additional assets which required valuation allowances, principally
receivables and inventories, and accordingly, recorded a charge
15
<PAGE> 18
of $32 million for these and other miscellaneous items. The special
charges related to the valuation of receivables and other items are
recorded in "Selling, customer service and administrative" expense.
The special charges related to the valuation of inventories and
revenue equipment are recorded in "Cost of sales" and "Depreciation
on revenue equipment", respectively.
Three Months and Nine Months Ended March 31, 1996 Compared to Three
Months and Nine Months Ended March 31, 1995
Revenues for the three months and nine months ended March 31, 1996
increased 3% and 18%, respectively, over the three months and nine
months ended March 31, 1995. The revenue growth during the first nine
months of fiscal 1996 resulted principally from increased EAS revenues
particularly from the Ultra-Max(R) product line, which is used
primarily by hard goods retail customers and is used in the Company's
Universal Product Protection (UPPsm) program for source tagging, and
revenues from magnetic product lines; increased sales of CCTV products
used by retailers; and increased revenues from the
Commercial/Industrial Group.
The revenue growth during the third quarter resulted primarily from
increased revenues from the Commercial/Industrial Group and increased
EAS revenues from magnetic product lines. Revenues for the third
quarter were negatively affected by weak order rates for the EAS
retail business in the United States and Europe, primarily the United
Kingdom.
Revenues from retail customers for the EAS product lines were
unchanged in the third quarter of fiscal 1996 and increased 15% to
$408 million in the first nine months of fiscal 1996 from the
comparable period of fiscal 1995. This increase resulted principally
from growth in all geographic areas in Ultra-Max product line
revenues, totaling 23%; a 42% increase in the magnetic product line
revenues, with the greatest increase in Europe, slightly offset by a
decrease in the US. These increases were offset, in part, by a decline
in microwave product line revenues, principally in Europe, totaling
17%.
Revenues from the CCTV product lines for retailers increased 65%
to $33 million and 27% to $98 million for the third quarter and the
first nine months of fiscal 1996, respectively, from the comparable
periods of fiscal 1995. Revenues from the Commercial/Industrial Group
increased 27% to $48 million and 43% to $144 million (including
installation revenues) in the third quarter and the first nine months
of fiscal 1996, respectively, compared to fiscal 1995, due primarily to
increased sales of CCTV and access control products to non-retail
customers.
Gross margins on sales were 44% and 47% for the three and nine
months ended March 31, 1996, respectively, compared to 54% for the
comparable periods of the prior year. The decrease in margins is
primarily attributable to a change in product mix, unfavorable product
manufacturing variances resulting from lower than expected production
levels and the effect of special charges aggregating $14 million and
$29 million included in costs of sales in the three and nine months
ended March 31, 1996, respectively (see "Restructuring and special
charges" above). Exclusive of the effects of the special charges which
are included in costs of sales, gross margins would have been 51% for
both the three and nine months ended March 31, 1996. Additionally, the
Company has experienced pricing pressures in certain EAS retail
markets which have had a minor impact on gross margins to date,
however, the Company expects continuing pricing pressures in future
quarters. To offset the potential resulting negative impact on gross
margins, the Company has plans to reduce product costs by improving
manufacturing efficiencies and lowering material costs.
16
<PAGE> 19
Total selling, customer service and administrative, and research,
development and engineering expenses, as a percentage of total
revenues, was 62% and 58% for the third quarter and the first nine
months of fiscal 1996, respectively, compared to 47% and 44%, for
the comparable periods in fiscal 1995. The aggregate amount of these
operating expenses increased by 58% in the current year's first nine
months over last year's comparable period primarily as a result of
special charges aggregating $70 million (see discussion above under
"Restructuring and special charges").
Operating expenses for the three and nine months ended March 31,
1996 included approximately $2 million and $6 million, respectively, in
legal expenses compared to $1 million and $2 million in the prior
year comparable periods. The increase is due primarily to expenses
incurred to defend against certain actions which have been brought
against the Company (see note l of Notes to Consolidated Condensed
Financial Statements) and in connection with an investigation by the
Securities and Exchange Commission (see note j of Notes to Consolidated
Condensed Financial Statements in the Company's September 30, 1995 Form
10-Q/A). It is anticipated that legal expenses and related cash
expenditures will remain at an elevated level until these matters are
concluded.
Additionally, for the nine months ended March 31, 1996 and
1995, the Company incurred expenses of $4 million and $2 million,
respectively, related to its involvement as the official electronic
security supplier to the 1996 Olympic Games (Games) to be held in July
1996. The Company's association with the Games is part of its
strategy to expand general awareness of the Company's total electronic
security capabilities. The Company expects to incur an additional $7
million of costs over the next two quarters associated with the
Company's marketing efforts to showcase its product installations and
product installation support during the Games. As a result of its
association with the Games, the Company has received numerous
inquiries and requests for installation proposals from existing and
potential customers and estimates it has received orders in excess of
$20 million. Finally, certain of the expenses incurred may be
recovered by proceeds received from the sale of the installed
equipment subsequent to the end of the Games.
The Company reported operating losses for the three and nine
months ended March 31, 1996 of $73 million and $143 million,
respectively, compared to operating income of $23 million and $86
million reported for last year's comparable periods. This was
primarily due to the higher level of operating costs and expenses as
a percent of revenues incurred in both periods of fiscal 1996 and
restructuring and special charges aggregating $186 million recorded
in the first nine months of fiscal 1996 (see "Restructuring and
special charges" above). Exclusive of the effects of the
restructuring and special charges included in costs of sales and
operating expenses, operating income would have been $1 million and
$43 million for the three and nine months ended March 31, 1996,
respectively.
Total net other non-operating expenses in the third quarter and
the first nine months of fiscal 1996 increased by $4 million and $13
million, respectively, compared to the comparable periods of fiscal
1995. The increase is principally due to an increase in interest
expense resulting from the higher level of short-term borrowings
outstanding throughout the first nine months of fiscal 1996.
17
<PAGE> 20
The Company utilizes interest rate swap agreements and currency
forward contracts and options (derivatives) to hedge certain of its
currency and interest rate risks. The Company does not enter into
speculative derivative transactions. The derivative instruments it
does purchase 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 Management's
Discussion and Analysis of Financial Condition and Results of
Operations and Notes 1., 2., 6. and 12. of Notes to Consolidated
Financial Statements in the Company's fiscal 1995 Annual Report on Form
10-K/A for further discussion of the Company's currency and interest
rate risks and use of derivatives).
The estimated annual effective tax rate of 39% reflects the
impact of restructuring and special charges (see "Restructuring and
special charges" above). The restructuring and special charges are
principally related to jurisdictions with tax rates higher than the
effective tax rate of 25% calculated for the nine months ended March
31, 1995 resulting in a greater estimated effective tax rate for
fiscal 1996. The estimated fiscal 1996 annual effective tax rate of
20%, before restructuring and special charges, reflects a decrease
from the prior year primarily due to a decrease in the relative
proportion of the Company's profits earned in jurisdictions with tax
rates higher than the effective tax rate calculated for the nine
months ended March 31, 1995. Additionally, the 20% rate was revised
from the second quarter estimated fiscal 1996 annual effective tax
rate, before restructuring and special charges, of 29% to reflect a
change in estimated results for the year.
The Company reported a net loss of $50 million and $98 million for
the third quarter and first nine months of fiscal 1996, respectively,
due to the factors discussed above.
18
<PAGE> 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
With respect to the action entitled Silver v. Sensormatic
Electronics Corporation, et al., described in the Company's Annual
Report on Form 10-K/A for the year ended June 30, 1995, a settlement
agreement has been entered into between the plaintiffs and the
Company. The settlement has received preliminary approval from the
Court, and is subject to final Court approval following a hearing.
The settlement agreement provides for the establishment of a
settlement fund of $2 million, from which claims by members of the
plaintiff class (i.e., purchasers of the Company's common stock
during the period January 8, 1993 through April 30, 1993) and counsel
fees would be paid. Such fund would be primarily funded by insurance
proceeds. The agreement further provides for the dismissal of the
complaint with prejudice and the release of the Company by the
plaintiff class. Members of the plaintiff class would have the right
to "opt out" of the agreement, provided, that the Company would have
the right to terminate the agreement if more than a specified portion
of such members exercise such right.
With respect to the shareholder actions commenced in 1995 against the
Company in the United States District Court for the Southern District
of Florida, described in the Company's Annual Report on Form 10-K/A
for the year ended June 30, 1995, which have been consolidated as
described in the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995, the Court dismissed one of the
claims against the Company's auditors, asserted under state law,
originally included in the consolidated complaint. That claim alleged
that the Company's auditors negligently misrepresented certain
information regarding the Company and failed to exercise reasonable
care.
19
<PAGE> 22
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3 (a) By-Laws of the Company.
4 (a) Note Agreement dated March 29, 1996 and representative
forms of 6.99% Senior Notes due March 2000, 7.11% Senior
Notes due March 2001 and 7.74 Senior Notes due March 2006.
11) Computation of Earnings Per Common Share.
27) Financial Data Schedule (for SEC use only).
b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
three-month period ended March 31, 1996.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SENSORMATIC ELECTRONICS CORPORATION
By /s/ Garrett E. Pierce
-------------------------
Garrett E. Pierce
Senior Vice President and
Chief Financial Officer
Date: May 15, 1996
21
<PAGE> 1
EXHIBIT 3(a)
As amended through December 14, 1995
SENSORMATIC ELECTRONICS CORPORATION
BY-LAWS
Offices
0. Registered Office. The registered office of the Corporation shall be in
the City of Dover, County of Kent, State of Delaware, and the registered agent
of the Corporation shall be The Prentice-Hall Corporation System, Inc., whose
address is 229 South State Street, Dover, Delaware.
1. Other Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
I
Meetings of Stockholders
0. Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held on the first
Friday of November in each year, if not a legal holiday, and if a legal holiday,
then on the next succeeding day not a legal holiday, or on such other date as
may be fixed from time to time by resolution of the Board of Directors, and at
the principal office of the Corporation or at such other place within or without
the State of Delaware as shall be designated by the Board of Directors. The
Board of Directors may change the date and/or place of any scheduled annual
meeting, either before or after notice of such meeting has been given.
1. Special Meeting. Special meetings of the stockholders may be called at
any time only by the Chairman of the Board or the President of the Corporation
or the majority of the Board of Directors and may be so called and held for any
purpose or purposes as may be determined only by the Chairman of the Board or
the President of the Corporation or the majority of the Board of Directors. Such
meetings shall be held at such time and at such place within or without the
State of Delaware as shall be specified in the notice of the meeting. The date,
time and/or place of any scheduled special meeting of the stockholders may
subsequently be changed, either before or after notice of such meeting has been
given, by the Chairman of the Board or the President of the Corporation or the
majority of the Board of Directors.
2. Notice of Meetings. Notice of the place, date and time of the holding
of each annual and special meeting of the stockholders (and of any change in
such place, date and/or time) and the purpose or purposes thereof shall be given
personally or by mail in a postage prepaid envelope to each stockholder entitled
to vote at such meeting, not less than ten nor more than sixty days before the
date of such meeting, and, if mailed, it shall be directed to such stockholder
at his address as it appears on the records of the Corporation, unless he shall
have filed with the Secretary of the Corporation a written request that notices
to him be mailed to some other address, in which case it shall be directed to
him at such other address. Any such notice for any meeting other than the
annual meeting of stockholders shall indicate that it is being issued at the
direction of the Chairman of the Board, President, or a majority of the Board of
Directors. Notice of any meeting shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such
<PAGE> 2
meeting, object to the transaction of any business because the meeting is not
lawfully called or convened, or who shall, either before or after the meeting,
submit a signed waiver of notice, in person or by proxy. Unless the Board shall
fix a new record date for an adjourned meeting, notice of such adjourned meeting
need not be given if the time and place to which the meeting shall be adjourned
were announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
3. Quorum. At all meetings of the stockholders, the holders of one-third
of the shares of stock of the Corporation issued and outstanding and entitled to
vote and present in person or by proxy shall constitute a quorum for the
transaction of any business, except as otherwise required by law or the
Certificate of Incorporation in respect of the vote that shall be required for a
specified action. In the absence of a quorum, the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote, or if no
stockholder entitled to vote is present, then any officer of the Corporation,
may adjourn the meeting from time to time. At any such adjourned meeting at
which a quorum may be present, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 5. Organization. At each meeting of the stockholders, the
Chairman of the Board, or, in his absence or inability to act, the President,
or, in the absence or inability to act of both the Chairman of the Board and the
President, such other officer or person designated by the Board of Directors,
or, in the absence or inability to act of such designee, such other person
chosen by a majority of those stockholders present or represented, shall act as
chairman of the meeting. The Secretary, or, in his absence or inability to act,
an Assistant Secretary or any other officer appointed by the chairman of the
meeting, shall act as secretary of the meeting and keep the minutes thereof.
4. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
5. Voting. Except as otherwise provided by statute or the Certificate of
Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every share of such stock standing in his name on the record of
stockholders of the Corporation (a) on the date fixed by the Board of Directors
as the record date for the determination of the stockholders who shall be
entitled to notice of and to vote at such meeting; or (b) if such record date
shall not have been so fixed, then at the close of business on the day next
preceding the day on which notice thereof shall be given; or (c) if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him by a proxy
signed by such stockholder or his attorney-in-fact. Any such proxy shall be
delivered to the secretary of such meeting at or prior to the time designated in
the order of business for so delivering such proxies. No proxy shall be valid
after the expiration of three years from the date thereof, unless the proxy
provides for a longer period. Every proxy shall be revocable at the pleasure of
the stockholder executing it, except in those cases where an irrevocable proxy
is permitted by law. Except as otherwise required by law, the Certificate of
Incorporation or these By-Laws,
-2-
<PAGE> 3
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes cast at a meeting of stockholders by the
holders of shares present in person or represented by proxy and entitled to vote
on such action. Unless required by statute, or determined by the chairman of
the meeting to be advisable, the vote on any question need not be by written
ballot. On a vote by written ballot, each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and shall state the
number of shares voted.
6. List of Stockholders. The officer who has charge of the stock ledger of
the Corporation shall prepare and make or cause to be prepared and made, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
7. Inspectors. The Board of Directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If inspectors shall not be so appointed or if any of them
shall fail to appear or act, the chairman of the meeting may, and on the request
of any stockholder entitled to vote thereat shall, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding, the number of
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the chairman of the meeting or any stockholder
entitled to vote thereat, the inspectors shall make a report in writing of any
challenge, request or matter determined by them and shall execute a certificate
of any fact found by them. No director or candidate for the office of director
shall act as inspector of an election of directors. Inspectors need not be
stockholders.
8. No Action by Consent. No action required to be taken or which may be
taken at any annual or special meeting of stockholders of the Corporation may be
taken without a meeting and the power of stockholders to consent in writing to
the taking of any action is specifically denied.
9. Notice of Stockholder Business. At an annual meeting of stockholders,
only such business shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or by the
Chairman of the Board or the President of the Corporation or (c) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the
-3-
<PAGE> 4
stockholder must be given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be received at the
principal office of the Corporation not less than sixty (60) days nor more than
ninety (90) days prior to the meeting; provided, however, that in the event that
less than seventy (70) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the fifteenth
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made. As used in this Section 11 and in paragraph
B of Section 2 of Article III of these By-Laws, the phrase "notice or prior
public disclosure of the date of the meeting" shall mean notice or prior public
disclosure of the date on which the meeting is originally scheduled to be called
to order and shall not refer to notice or prior public disclosure of any date to
which such meeting may be adjourned. A stockholder's notice to the Secretary
shall set forth, as to each matter the stockholder proposes to bring before the
annual meeting, (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
stock transfer books, of the stockholder proposing such business, (c) the class
and number of shares of capital stock of the Corporation which are beneficially
owned (such term being used in this Section 11 and in paragraph B of Section 2
of Article III of these By-Laws with the meaning ascribed to such term in Rule
13d-3 of the rules under the Securities Exchange Act of 1934, as amended, as
such Rule was in effect on July 1, 1990) by the stockholder and (d) any material
interest of the stockholder in such business. Notwithstanding any other
provision of these By-Laws, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this Section 11. If the
presiding officer of an annual meeting determines and declares that business was
not properly brought before the meeting in accordance with this Section 11, any
such business shall not be transacted.
II
Board of Directors
0. General Powers. The property, business and affairs of the Corporation
shall be managed by the Board of Directors. The Board of Directors may exercise
all such authority and powers of the Corporation and do all such lawful acts and
things as are not by statute or the Certificate of Incorporation or these
By-Laws directed or required to be exercised or done by the stockholders.
1. Number, Classification, Term of Office, Qualifications and Election.
The Board of Directors shall initially consist of six directors. Thereafter,
the number of directors of the Corporation shall be determined by resolution
approved by at least a majority of the then authorized number of directors, but
shall not be more than fifteen nor less than five. The Board of Directors shall
be divided into three classes as nearly equal in number as possible, with the
term of office of one class expiring each year. The terms of office of the
directors elected at the annual meeting of stockholders in 1977 and initially
classified shall be as follows: directors of the first class shall hold office
for a term expiring at the next succeeding annual meeting; directors of the
second class shall hold office for a term expiring at the second succeeding
annual meeting; and directors of the third class shall hold office for a term
expiring at the third succeeding annual meeting. At each annual meeting of
stockholders after the annual meeting in 1977,
-4-
<PAGE> 5
directors elected to succeed the class of directors whose terms expire at such
annual meeting shall be elected to hold office for a term expiring at the third
succeeding annual meeting after their election. When the number of directors is
changed, any newly created directorships or any decrease in directorships shall
be so apportioned among the classes as to make all classes as nearly equal in
number as possible. Subject to the foregoing, the respective classes for which
directors shall be selected or chosen shall be determined by resolution approved
by at least a majority of the then authorized number of directors. Each
director shall hold office for the specified term and until his successor shall
be duly elected and qualified, or until his death, or until he shall have
resigned or he shall have been removed, as hereinafter provided in these
By-Laws, or as otherwise provided by statute or by the Certificate of
Incorporation. All the directors shall be of full age. Directors need not be
stockholders. Except as otherwise required by statute or the Certificate of
Incorporation or these By-Laws, directors to be elected at each annual meeting
of stockholders shall be elected by a plurality of the votes cast at the meeting
by the holders of shares present in person or represented by proxy and entitled
to vote for the election of directors.
. Nomination of Directors. Only persons who are nominated in accordance
with the procedures set forth in this paragraph B shall be eligible for election
as a director at any meeting of stockholders for the election of directors (an
"Election Meeting"). Nominations of candidates for election to the Board of
Directors of the Corporation at an Election Meeting may be made only by or at
the direction of the Board of Directors or by a stockholder entitled to vote at
such Election Meeting. All such nominations, except those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation of the stockholder's intention to
make such nomination. To be timely, any such notice must be received at the
principal office of the Corporation not less than sixty (60) nor more than
ninety (90) days prior to the date of the Election Meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the Election Meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the fifteenth day following the day on which such notice of the date of the
Election Meeting was mailed or such public disclosure was made. Such
stockholder's notice with respect to a proposed nomination shall set forth (a)
as to each person whom the stockholder proposes to nominate as a candidate for
election to the Board of Directors (i) the name, age, business address and
residence address and the principal occupation or employment of such person,
(ii) the class and number of shares of capital stock of the Corporation which
are beneficially owned by such person, (iii) such other information concerning
such person as would be required, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies for the election of such
person and (iv) a signed consent of such person to serve as a Director of the
Corporation, if elected, and (b) as to the stockholder giving the notice (i) the
name and address of such stockholder, as they appear in the Corporation's stock
transfer books and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such stockholder. In the event that
a person is validly designated as a nominee in accordance with the procedures
specified above and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the stockholder
who proposed such nominee, as the case may be, may designate a substitute
nominee; provided, however, that in the case of persons not nominated by the
Board of Directors, such a substitution may be made only if notice as provided
above in this paragraph B is received at the principal office of the Corporation
not
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later than the later of (x) thirty (30) days prior to the date of the Election
Meeting or (y) five (5) days after the stockholder proposing the original
nominee first learned that such original nominee has become unable or unwilling
to stand for election. If the presiding officer of an Election Meeting
determines and declares that a Director nomination was not made in accordance
with the foregoing procedures, such nomination shall be void and shall be
disregarded for all purposes.
2. Annual Meeting. The Board of Directors shall meet for the purpose of
organization, the election of officers and the transaction of other business, as
soon as practicable after each annual meeting of the stockholders, on the same
day and at the same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any other time or
place (within or without the State of Delaware) which shall be specified in a
notice thereof given as hereinafter provided in Section 6 of this Article III,
or in a waiver of notice thereof.
3. Regular Meetings. Regular meetings of the Board of Directors shall be
held at such times and places within or without the State of Delaware as the
Board of Directors may from time to time by resolution determine. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
4. Special Meetings. Special meetings of the Board of Directors may be
called at any time by the Chairman of the Board, the President or any two
directors of the Corporation and shall be held at such time and at such place
within or without the State of Delaware as shall be specified in the notice of
meeting or waiver thereof.
5. Notice of Meetings. Notice of each special meeting of the Board of
Directors (and of each regular meeting for which notice shall be required) shall
be given by the Secretary as hereinafter provided in this Section 6, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally (including by
courier) or by telephone, telex, telegraph, or facsimile transmission at least
twenty-four hours before the time at which such meeting is to be held, or shall
be mailed to each director by first-class mail postage prepaid, addressed to him
at his residence or usual place of business, at least three days before the day
on which such meeting is to be held. Notice of any such meeting need not be
given to any director who shall, either before or after the meeting, submit a
signed waiver of notice or who shall attend such meeting without objecting, at
the beginning of such meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice of any regular or
special meeting of the Board of Directors need not state the purpose or purposes
of such meeting.
6. Quorum and Manner of Acting. Except as provided in Section 5 of Article
IX of these By-Laws, a majority of the directors shall be present in person at
any meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting, and, except as otherwise expressly
required by statute or the Certificate of Incorporation, the act of a majority
of the directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors. In the absence of a quorum at any meeting of
the Board of Directors, a majority of the
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directors present thereat, or if no director be present, the Secretary, may
adjourn such meeting to another time and place, or such meeting, unless it be
the annual meeting of the Board of Directors, need not be held. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called. Except as
provided in Section 11 of this Article III, Article IV and Section 4 of Article
IX of these By-Laws and as otherwise specifically authorized by resolution of
the Board of Directors, the directors shall act only as a Board of Directors and
the individual directors shall have no power as such.
7. Organization. At each meeting of the Board of Directors, the Chairman
of the Board, or, in his absence or inability to act, the President, or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside thereat. The
minutes of the meeting shall be recorded by any officer of the Corporation
present and designated by the chairman.
8. Resignations. Any director of the Corporation may resign at any time by
giving written notice of his resignation to the Board of Directors, the Chairman
of the Board, the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
9. Removal of Directors. Except as otherwise provided in the Certificate
of Incorporation or in these By-Laws, any director may be removed, but only for
cause, at any time, by the affirmative vote of the holders of a majority of the
outstanding shares of stock entitled to vote for the election of directors of
the Company at a meeting of the stockholders called and held for that purpose.
10. Vacancies. Except as otherwise required by statute or by the
Certificate of Incorporation, during the intervals between annual meetings of
stockholders, any vacancies and any newly-created directorships resulting from
an increase in the authorized number of directors shall be filled by a majority
vote of the directors then in office, whether or not a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
election of the class for which such directors shall have been chosen and until
their successors shall be duly elected and qualified, unless sooner displaced.
If there are no directors in office, then a special meeting of stockholders for
the election of directors may be called and held in the manner provided by
statute. When one or more directors shall resign from the Board of Directors,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
11. Compensation. The Board of Directors or a committee of the Board
designated by it shall have authority to fix the compensation, including without
limitation fees and reimbursement of expenses, of directors for services to the
Corporation in any capacity; provided, however, that no such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
12. Action without Meeting. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may
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be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
13. Participation in Meetings by Telephone and Other Equipment. Members of
the Board of Directors or of any committee thereof may participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
III
Executive and Other Committees
0. Executive and Other Committees. The Board of Directors may, by a
resolution passed by a majority of the whole Board, designate an Executive
Committee, to consist of three or more directors of the Corporation, and one or
more other committees, each such other committee to consist of one or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of the Executive Committee or such other
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Executive
Committee, while the Board of Directors is not in session, shall have and may
exercise, and any such other committee to the extent provided in the resolution
of the Board of Directors, shall have and may exercise, all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or By-Laws expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Each committee shall keep
written minutes of its proceedings and shall report such minutes to the Board of
Directors when required. All such proceedings shall be subject to revision or
alteration by the Board of Directors; provided, however, that rights of third
parties shall not be prejudiced by such revision or alteration. The Board of
Directors, by action of a majority of the entire Board, may at any time fill
vacancies in, change the membership of, or dissolve any such committee.
1. Executive Committee: General. Regular meetings of the Executive
Committee shall be held at such times and places, within or without the State of
Delaware, as a majority of such Committee may from time to time by resolution
determine. Special meetings of the Executive Committee may be called at the
request of any member thereof and may be held at such times and places, within
or without the State of Delaware, as such Committee may from time to time by
resolution determine or as shall be specified in the respective notices or
waivers of notice thereof. Notice of regular meetings
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of such Committee need not be given except as otherwise required by statute or
these By-Laws. Notice of each special meeting of such Committee shall be given
to each member of such Committee in the manner provided for in Section 6 of
Article III of these By-Laws. Subject to the provisions of this Article IV, the
Executive Committee, by resolution of a majority of such Committee, shall fix
its own rules of procedure. A majority of the Executive Committee shall be
present in person at any meeting of the Executive Committee in order to
constitute a quorum for the transaction of business at such meeting, and the act
of a majority of those present at any meeting at which a quorum is present shall
be the act of the Executive Committee. The members of the Executive Committee
shall act only as a committee, and the individual members shall have no power as
such.
2. Other Committees: General. A majority of any committee may fix its
rules of procedure, determine its action, and fix the time and place, within or
without the State of Delaware, of its meetings, unless the Board of Directors
shall otherwise by resolution provide. Notice of such meetings shall be given
to each member of the committee in the manner provided for in Section 6 of
Article III of these By-Laws. Nothing in this Article IV shall be deemed to
prevent the Board of Directors from appointing one or more committees consisting
in whole or in part of persons who are not directors of the Corporation;
provided, however, that no such committee shall have or may exercise any
authority of the Board.
IV
Officers
0. Number and Qualifications. The officers of the Corporation shall be a
Chairman of the Board, a President, a Vice President of Finance, one or more
other Vice Presidents, and a Secretary. Any two or more offices may be held by
the same person. Such officers shall be elected from time to time by the Board
of Directors, each to hold office until the meeting of the Board following the
next annual meeting of the stockholders, or until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
have resigned or until he shall have been removed, as hereinafter provided in
these By-Laws. The Board of Directors shall designate a Chief Executive Officer
and may from time to time appoint such other officers (including a Treasurer and
one or more Assistant Treasurers and Assistant Secretaries) and such agents as
it may deem necessary or desirable for the business of the Corporation. The
Board of Directors may from time to time authorize any principal officer or
committee to appoint, and to prescribe the authority and duties of, any such
subordinate officers or agents. Each of such other officers and agents shall
have such authority, perform such duties, and hold office for such period, as
are provided in these By-Laws or as may be prescribed by the Board of Directors
or by the principal officer or committee appointing such officer or agent.
1. Resignations. Any officer of the Corporation may resign at any time by
giving written notice of his resignation to the Board of Directors, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
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2. Removal. Any officer or agent of the Corporation may be removed, either
with or without cause, at any time, by the vote of the majority of the entire
Board of Directors at any meeting of the Board, or, except in the case of an
officer or agent elected or appointed by the Board, by any principal officer or
committee upon whom such power of removal may be conferred by the Board.
3. Vacancies. A vacancy in any office, whether arising from death,
resignation, disqualification, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
4. Chairman of the Board. The Chairman of the Board shall, if present,
preside at all meetings of the Board of Directors and the stockholders. In
general, the Chairman of the Board shall have such other powers and perform such
other duties as may be incidental to the office of Chairman of the Board or as
from time to time may be assigned to him by the Board of Directors. Unless
otherwise directed by the Board of Directors, when there is no President, or in
the absence or inability to act of the President, the Chairman of the Board
shall perform all the duties and functions and exercise all the powers of the
President.
5. President. The President shall, in the absence or inability to act of
the Chairman of the Board, preside at all meetings of the Board of Directors and
the stockholders. In general, the President shall have such other powers and
perform such other duties as may usually pertain to the office of President, or
as from time to time may be assigned to him by the Board of Directors or the
Chairman of the Board, if the Chairman of the Board is also the Chief Executive
Officer. Unless otherwise directed by the Board of Directors, when there is no
Chairman of the Board, or in the absence or inability to act of the Chairman of
the Board, the President shall perform all the duties and functions and exercise
all the powers of the Chairman of the Board.
6. Chief Executive Officer. Either the Chairman of the Board of Directors
or the President, as the Board may designate, shall be the Chief Executive
Officer of the Corporation. The officer so designated shall have, in addition
to the powers and duties applicable to the office set forth in Section 5 or 6 of
this Article V of these By-laws, general and active supervision and direction
over the business and affairs of the Corporation and over its several officers,
agents and employees, subject, however, to the control of the Board of
Directors. The Chief Executive Officer shall see that all orders and
resolutions of the Board of Directors are carried into effect and, in general,
the Chief Executive Officer shall have such other powers and perform such other
duties as may be incidental to the position of Chief Executive Officer or as
from time to time may be assigned to him by the Board of Directors.
7. Vice President of Finance. The Vice President of Finance shall:
(a) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and have control of all books of account of
the Corporation;
(b) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
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(c) disburse funds of the Corporation, taking proper vouchers therefor;
(d) render to the Chairman of the Board, the President, the Board or
any committee thereof, whenever required, an account of the financial condition
of the Corporation and of his transactions as Vice President of Finance; and
(e) in general, have such other powers and perform such other duties as
usually pertain to the office of Vice President of Finance or as from time to
time may be assigned to him by the Board of Directors, the Chairman of the Board
or by the President.
At the request of the Treasurer or in case of the absence or inability
to act of the Treasurer, the Vice President of Finance shall perform all the
duties of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer.
8. Other Vice Presidents. Each other Vice President, including the
Executive Vice President, if appointed, shall have such powers and perform such
duties as usually pertain to his office or as from time to time may be assigned
to him by the Board of Directors, the Chairman of the Board or the President.
9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) cause all moneys and other valuables to be deposited to the credit
of the Corporation in such depositaries as may be designated by the Board of
Directors;
(c) supervise the investment of the Corporation's funds as ordered or
authorized by the Board of Directors, taking proper vouchers therefor; and
(d) in general, have such other powers and perform such other duties as
from time to time may be assigned to him by the Board of Directors, the Chairman
of the Board or the President.
At the request of the Vice President of Finance or in case of the
absence or inability to act of the Vice President of Finance, the Treasurer
shall perform all the duties of the Vice President of Finance, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Vice President of Finance.
10. Assistant Treasurers. Each Assistant Treasurer shall have such powers
and perform such duties as usually pertain to his office or as from time to time
may be assigned to him by the Board of Directors, the Chairman of the Board, the
President or the Treasurer.
11. Secretary. The Secretary shall:
( ) keep, or cause to be kept, in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, of the
committees of the Board and of the stockholders;
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(a) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(b) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(c) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(d) in general, have such other powers and perform such other duties as
usually pertain to the office of Secretary or as from time to time may be
assigned to him by the Board of Directors, the Chairman of the Board or the
President.
12. Assistant Secretaries. At the request of the Secretary or in case of
his absence or inability to act, the Assistant Secretary, or if there be more
than one, the Assistant Secretary designated by the Board of Directors or, in
the absence of such designation, by the President, shall perform all the duties
of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary. In general, each Assistant
Secretary shall have such other powers and perform such other duties as from
time to time may be assigned to him by the Board of Directors, the Chairman of
the Board, the President or the Secretary.
13. Officers' Bonds or Other Security. If required by the Board of
Directors, any officer of the Corporation shall give a bond for the faithful
performance of his duties, for such term and in such amount and with such surety
or sureties as the Board may require.
14. Compensation. The compensation of the officers of the Corporation for
their services as such officers shall be fixed from time to time by the Board of
Directors or a committee of the Board designated by it, and no officer of the
Corporation shall be prevented from receiving compensation by reason of the fact
that he is also a director of the Corporation.
V
Checks, Drafts, Bank Accounts, Etc.
0. Checks, Drafts, etc. All checks, drafts, bills of exchange or other
orders for the payment of money out of the funds of the Corporation, and all
notes or other evidences of indebtedness of the Corporation shall be signed in
the name and on behalf of the Corporation by such person or persons and in such
manner as shall from time to time be authorized by the Board of Directors.
1. Deposits. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may from time to
time designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time to time be delegated
by the Board of Directors. For the purpose of deposit and for the
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purpose of collection for the account of the Corporation, checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation may be endorsed, assigned and delivered by any officer or agent of
the Corporation.
2. General and Special Bank Accounts. The Board of Directors may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositaries as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be delegated by the
Board of Directors. The Board of Directors may make such special rules and
regulations with respect to such bank accounts, not inconsistent with provisions
of these By-Laws, as it may deem expedient.
3. Proxies in Respect of Securities of Other Corporations. Unless
otherwise provided by resolution adopted by the Board of Directors, the Chairman
of the Board, the President or any Vice President may from time to time appoint
an attorney or attorneys or agent or agents of the Corporation in the name and
on behalf of the Corporation to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
corporation, any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, or to consent in writing in the name of the Corporation as
such holder to any action by such other corporation, and may instruct the person
or persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
VI
Shares and Their Transfer - Examination of Books
0. Stock Certificates. Every holder of stock of the Corporation shall be
entitled to have a certificate, in such form as shall be approved by the Board
of Directors, certifying the number and class of shares of stock of the
Corporation owned by him. The certificates representing shares of the
respective classes of stock shall be numbered in order of their issue and shall
be signed in the name of the Corporation by the Chairman of the Board or the
President or a Vice President and by the Vice President of Finance, the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and sealed with the seal of the Corporation (which seal may be a facsimile,
engraved or printed). Any or all the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
1. Books of Account and Record of Stockholders. The books and records of
the Corporation may be kept at such places, within or without the State of
Delaware, as the Board of Directors may from time to time determine. The stock
record books and the blank stock certificate books shall be kept by the
Secretary or by any other officer or agent designated by the Board of Directors.
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2. Transfers of Shares. Transfers of shares of stock of the Corporation
shall be made on the stock records of the Corporation only upon authorization by
the registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of stockholders as the owner
of such share or shares for all purposes, including without limitation the
rights to receive dividends or other distributions and to vote as such owner,
and the Corporation may hold any such stockholder of record liable for calls and
assessments and the Corporation shall not be bound to recognize any equitable or
legal claim to or interest in any such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof. Whenever
any transfers of shares shall be made for collateral security and not
absolutely, and both the transferor and transferee request the Corporation to do
so, such fact shall be stated in the entry of the transfer.
3. Regulations. The Board of Directors may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
4. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board of Directors may, in its discretion, require such owner
or his legal representatives to give the Corporation and/or any agent of the
Corporation designated by it a bond in such sum, limited or unlimited, and in
such form and with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation and/or such agent
against any claim that may be made against it on account of the alleged loss
theft, or destruction of any such certificate, or the issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the laws of the State of
Delaware.
5. Stockholder's Right of Inspection. Any stockholder of record, in person
or by attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours of business to inspect
for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the
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Corporation at its registered office in the State of Delaware or at its
principal place of business.
6. Fixing of Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall be not more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
VII
Dividends
Subject to the provisions of the Certificate of Incorporation relating
thereto, if any, dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Subject to the provisions of the Certificate of Incorporation,
dividends may be paid in cash, in property or in shares of the capital stock of
the Corporation.
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose or purposes as the Board of Directors shall determine to be in the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
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VIII
Indemnification
0. Right to Indemnification. The Corporation shall, to the fullest extent
permitted by applicable law as then in effect, indemnify any person (the
"Indemnitee") who was or is involved in any manner (including, without
limitation, as a party or a witness) or was or is threatened to be made so
involved in any threatened, pending or completed investigation, claim, action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action, suit or proceeding by or in the
right of the Corporation to procure a judgment in its favor)(a "Proceeding") by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation or of a partnership, joint venture, trust or other
enterprise (including, without limitation, service with respect to any employee
benefit plan), whether the basis of any such Proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, against all expenses, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article IX shall include the right to receive
payment in advance of any expenses incurred by the Indemnitee in connection with
such Proceeding, consistent with applicable law as then in effect. All right to
indemnification conferred in this Article IX, including such right to advance
payments and the evidentiary, procedural and other provisions of this Article
IX, shall be a contract right. The Corporation may, by action of its Board of
Directors, provide indemnification for employees, agents, attorneys and
representatives of the Corporation with up to the same scope and extent as
provided for officers and directors.
1. Insurance, Contracts and Funding. The Corporation may purchase and
maintain insurance to protect itself and any person who is, was or may become an
officer, director, employee, agent, attorney or representative of the
Corporation or, at the request of the Corporation, an officer, director,
employee, agent, attorney or representative of another corporation or entity,
against any expense, liability or loss asserted against him or incurred by him
in connection with any Proceeding in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such expense, liability or loss under the provisions of this Article
IX or otherwise. The Corporation may enter into contracts with any director,
officer, employee, agent, attorney or representative of the Corporation, or any
person serving as such at the request of the Corporation for another corporation
or entity, in furtherance of the provisions of Article TENTH of the Certificate
of Incorporation or this Article IX and may create a trust fund, grant a
security interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
indemnification of any person entitled thereto.
2. Indemnification; Not Exclusive Right. The right of indemnification
provided in this Article IX shall not be exclusive of any other rights to which
any person seeking indemnification may otherwise be entitled under any provision
of the Certificate of Incorporation, By-Laws or agreement or otherwise. The
provisions of this Article IX shall inure to the benefit of the heirs and legal
representatives of any person entitled to indemnity under this Article IX and
shall be applicable to all Proceedings,
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whether arising from acts or omissions occurring before or after the adoption of
this Article IX. No amendment or repeal of any provision of this Article IX
shall remove, abridge or adversely affect any right of indemnification or any
other benefits of the Indemnitee under the provisions of this Article IX with
respect to any Proceeding involving any act or omission which occurred prior to
such amendment.
3. Advancement of Expenses; Procedures; Presumptions and Effect of Certain
Proceedings; Remedies. In furtherance, but not in limitation, of the provisions
of the Certificate of Incorporation or the foregoing provisions of this Article
IX, the following procedures, presumptions and remedies shall apply with respect
to advancement of expenses and the right to indemnification under the
Certificate of Incorporation or this Article IX:
( ) Advancement of Expenses. All reasonable expenses incurred by or on
behalf of the Indemnitee in connection with any Proceeding shall be advanced to
the Indemnitee by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements reasonably shall
evidence the expenses incurred by the Indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an undertaking by or on
behalf of the Indemnitee to repay the amounts advanced if it should ultimately
be determined that the Indemnitee is not entitled to be indemnified against such
expense pursuant to this Article IX.
(a) Procedure for Determination of Entitlement to Indemnification.
( ) To obtain indemnification, an Indemnitee shall submit to the
President or Secretary of the Corporation a written request, including such
documentation and information as is reasonably available to the Indemnitee and
reasonably necessary to determine whether and to what extent the Indemnitee is
entitled to indemnification (the "Supporting Documentation"). The determination
of the Indemnitee's entitlement to indemnification shall be made not later than
60 days after receipt by the Corporation of the written request for
indemnification together with the Supporting Documentation. The President or
Secretary of the Corporation shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that the Indemnitee
has requested indemnification.
(i) The Indemnitee's entitlement to indemnification shall be determined
in one of the following ways: (A) by a majority vote of the Disinterested
Directors (as hereinafter defined) (or the Disinterested Director, if only one);
(B) by a written opinion of Independent Counsel (as hereinafter defined) if (x)
a Change in Control (as hereinafter defined) shall have occurred and the
Indemnitee so requests or (y) there is no Disinterested Director or a majority
of the Disinterested Directors (or the Disinterested Director, if only one) so
directs; (C) by the stockholders of the Corporation (but only if a majority of
the Disinterested Directors (or the Disinterested Director, if only one)
determines that the issue of entitlement to indemnification should be submitted
to the stockholders for their determination); or (D) as provided in Section 4(c)
of this Article IX.
(ii) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 4(b)(ii) of this Article
IX, a majority of the Disinterested Directors (or the Disinterested Director, if
only one) shall select the Independent Counsel, but
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only an Independent Counsel to which the Indemnitee does not reasonably object;
provided, however, that if a Change in Control shall have occurred, the
Indemnitee shall select such Independent Counsel, but only an Independent
Counsel to which the Board of Directors does not reasonably object.
(b) Presumptions and Effect of Certain Proceedings. Except as otherwise
expressly provided in this Article IX, the Indemnitee shall be presumed to be
entitled to indemnification upon submission of a request for indemnification
together with the Supporting Documentation in accordance with Section 4(b)(i) of
this Article IX, and thereafter the Corporation shall have the burden of proof
to overcome that presumption in reaching a contrary determination. In any
event, if the person or persons empowered under Section 4(b) of this Article IX
to determine entitlement to indemnification shall not have been appointed or
shall not have made a determination within 60 days after receipt by the
Corporation of the request therefor together with the Supporting Documentation,
the Indemnitee shall be deemed to be entitled to indemnification. With regard
to the right to indemnification for expenses, if and to the extent that the
Indemnitee has been successful on the merits or otherwise in any Proceeding, or
if and to the extent that the Indemnitee was not a party to the Proceeding or if
a Proceeding was terminated without a determination of liability on the part of
the Indemnitee with respect to any claim, issue or matter therein or without any
payments in settlement or compromise being made by the Indemnitee with respect
to a claim, issue or matter therein, the Indemnitee shall be deemed to be
entitled to indemnification, which entitlement shall not be diminished by any
determination which may be made pursuant to Sections (4)(b)(ii)(A), (B) or (C).
In either case, the Indemnitee shall be entitled to such indemnification, unless
(A) the Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification or in the Supporting Documentation or (B)
such indemnification is prohibited by law, in either case as finally determined
by adjudication or, at the Indemnitee's sole option, arbitration (as provided in
Section 4(d)(i) of this Article IX). The termination of any Proceeding
described in Section 1 of this Article IX; or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, adversely affect the right
of the Indemnitee to indemnification or create any presumption with respect to
any standard of conduct or belief or any other matter which might form a basis
for a determination that the Indemnitee is not entitled to indemnification.
(c) Remedies of Indemnitee.
( ) In the event that a determination is made pursuant to Section 4(b)
of this Article IX that the Indemnitee is not entitled to indemnification under
this Article IX, (A) the Indemnitee shall be entitled to seek an adjudication of
his entitlement to such indemnification either, at the Indemnitee's sole option,
in (x) an appropriate court of the State of Delaware or any other court of
competent jurisdiction or (y) an arbitration to be conducted by three
arbitrators (or, if the dispute involves less than $100,000, by a single
arbitrator) pursuant to the rules of the American Arbitration Association; (B)
any such judicial proceedings or arbitration shall be de novo and the Indemnitee
shall not be prejudiced by reason of such adverse determination; and (C) in any
such judicial proceeding or arbitration the Corporation shall have the burden of
proof that the Indemnitee is not entitled to indemnification under this Article
IX.
(i) If a determination shall have been made or deemed to have been made,
pursuant to Section 4(b) or (c) of this Article IX, that the
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Indemnitee is entitled to indemnification, the Corporation shall be obligated to
pay the amounts constituting such indemnification within five days after such
determination has been made or deemed to have been made and shall be
conclusively bound by such determination, unless (A) the Indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B) such indemnification
is prohibited by law, in either case as finally determined by adjudication or,
at the Indemnitee's sole option, arbitration (as provided in Section 4(d)(i) of
this Article IX). In the event that (C) advancement of expenses is not timely
made pursuant to Section 4(a) of this Article IX or (D) payment of
indemnification is not made within five days after a determination of
entitlement to indemnification has been made or deemed to have been made
pursuant to Section 4(b) or (c) of this Article IX, the Indemnitee shall be
entitled to seek judicial enforcement of the Corporation's obligation to pay to
the Indemnitee such advancement of expenses or indemnification. Notwithstanding
the foregoing, the Corporation may bring an action, in an appropriate court in
the State of Delaware or any other court of competent jurisdiction, contesting
the right of the Indemnitee to receive indemnification hereunder due to the
occurrence of an event described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"), provided, however, that if the Indemnitee shall elect,
at his sole option, that such dispute shall be determined by arbitration (as
provided in Section 4(d)(I) of this Article IX), the Corporation shall proceed
by such arbitration. In any such enforcement or other proceeding or action in
which whether a Disqualifying Event has occurred is an issue, the Corporation
shall have the burden of proving the occurrence of such Disqualifying Event.
(ii) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 4(d) that the
procedures and presumptions of this Article IX are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
or arbitrators that the Corporation is bound by all the provisions of this
Article IX.
(iii) In the event that the Indemnitee, pursuant to this Article IX,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Article IX, or is
otherwise involved in any adjudication or arbitration with respect to his right
to indemnification, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any expenses
actually and reasonably incurred by him if the Indemnitee prevails in such
judicial adjudication or arbitration. If it shall be determined in such
judicial adjudication or arbitration that the Indemnitee is entitled to receive
part but not all of the indemnification or advancement of expenses sought, the
expenses incurred by the Indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
(d) Definitions. For purposes of this Section 4:
( ) "Change in Control" means a change in control of the Corporation of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934 (the "Act"), as such Item was in effect on July 1, 1990, whether or not the
Corporation is then subject to such reporting requirement; provided that,
without limitation, such a change in control shall be deemed to have occurred if
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Corporation
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representing 20 percent or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
to such acquisition; (B) the Corporation is a party to a merger, consolidation,
sale of assets or other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter; or (C) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for election by
the Corporation's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board of
Directors.
(i) "Disinterested Director" means a director of the Corporation who is
not or was not a material party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(ii) "Independent Counsel" means a law firm or a member of a law firm
that neither presently is, nor in the past five years has been, retained to
represent: (A) the Corporation or the Indemnitee in any matter or (B) any other
party to the Proceeding giving rise to a claim for indemnification under this
Article IX. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would have a
conflict of interest in representing either the Corporation or the Indemnitee in
an action to determine the Indemnitee's rights under this Article IX.
4. Acts of Disinterested Directors. Disinterested Directors considering or
acting on any indemnification matter under this Article IX or otherwise may
consider or take action as the Board of Directors or may consider or take action
as a committee or individually or otherwise. In the event Disinterested
Directors consider or take action as the Board of Directors, one-third of the
total number of directors shall constitute a quorum.
5. Severability. If any provision or provisions of this Article IX shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (I)
the validity, legality and enforceability of the remaining provisions of this
Article IX (including, without limitation, all portions of any paragraph of this
Article IX containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (ii) to the fullest extent
possible, the provisions of this Article IX (including, without limitation, all
portions of any paragraph of this Article IX containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
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IX
Fiscal Year
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
X
Seal
The Board of Directors shall provide a corporate seal, which shall be
circular in form and bear the name of the Corporation and the words and figures
denoting its organization under the laws of the State of Delaware and the year
thereof.
XI
Amendments
These By-Laws may be amended or repealed, or new By-Laws may be adopted,
except as provided in Section 3 of Article IX of these By-Laws, (a) at any
annual or special meeting of the stockholders, by a majority of the total votes
of the stockholders or when stockholders are entitled to vote by class, by a
majority of the appropriate class, present in person or represented by proxy and
entitled to vote on such action; provided, however, that the notice of such
meeting shall have been given as provided in these By-Laws, which notice shall
mention that amendment or repeal of these By-Laws or the adoption of new By-Laws
is one of the purposes of such meeting, or (b) by the Board of Directors at any
meeting thereof; provided, however, that notice of such meeting shall have been
given as provided in these By-Laws, which notice shall mention that amendment or
repeal of the By-Laws or the adoption of new By-Laws is one of the purposes of
such meeting; provided, further, that By-Laws adopted by the Board of Directors
may be amended or repealed by the stockholders as hereinabove provided;
provided, further, that the stockholders may limit the power of the Board of
Directors to make, amend, alter or repeal the By-Laws of the Company.
Notwithstanding the foregoing, the provisions of these By-Laws with respect to
the number, classification, term of office, qualifications, election and removal
of directors and the filling of vacancies and newly created directorships, and
the amendment thereof, that is, Sections 2, 10 and 11 of Article III and this
Article XII, may be amended or repealed or new By-Laws affecting such provisions
may be adopted only with the unanimous approval of the entire Board of Directors
or by the affirmative vote of the holders of at least 80% of the outstanding
shares of stock of the Corporation entitled to vote in elections of directors
(except that if such proposed amendment or repeal or adoption of new By-Laws
shall be submitted to the stockholders with the unanimous recommendation of the
entire Board of Directors, such provisions may be amended or repealed or such
new By-Laws may be adopted by the affirmative vote of the holders of a majority
of such stock).
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[CONFORMED COPY]
SENSORMATIC ELECTRONICS CORPORATION
NOTE AGREEMENT
Dated as of March 29, 1996
$230,000,000 Principal Amount
7.74% Senior Notes
Due March 29, 2006
$50,000,000 Principal Amount
7.11% Senior Notes
Due March 29, 2001
$70,000,000 Principal Amount
6.99% Senior Notes
Due March 29, 2000
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TABLE OF CONTENTS
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Section 1. DESCRIPTION OF NOTES AND COMMITMENT
1.1 Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Commitment; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. PREPAYMENT OF NOTES
2.1 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Notice of Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Surrender of Notes on Prepayment or Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Direct Payment and Deemed Date of Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Allocation of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Payments Due on Saturdays, Sundays and Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. REPRESENTATIONS
3.1 Representations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Representations of the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. CLOSING CONDITIONS
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Payment of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Sale of Notes to Other Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Legality of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5. INTERPRETATION OF AGREEMENT
5.1 Certain Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.3 Valuation Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Direct or Indirect Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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Section 6. AFFIRMATIVE COVENANTS
6.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Taxes, Claims for Labor and Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 Maintenance of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Financial Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.7 Inspection of Properties and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 Acquisition of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.11 Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7. NEGATIVE COVENANTS
7.1 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.5 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.7 Consolidated Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.8 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1 Nature of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Remedies on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Annulment of Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.5 Conduct No Waiver; Collection Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.7 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9. AMENDMENTS, WAIVERS AND CONSENTS
9.1 Matters Subject to Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 Solicitation of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
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10.1 Form of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.2 Note Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.3 Issuance of New Notes upon Exchange or Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.4 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11. MISCELLANEOUS
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 Reliance on and Survival of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.9 Integration and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.11 Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ANNEXES
I - Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II - Indebtedness and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III - Lenders to be Repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV - Affiliates and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS
A-1 - Form of 10-Year Senior Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-2 - Form of 5-Year Senior Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-3 - Form of 4-Year Senior Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B - Form of Opinion of Purchasers' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C - Form of Opinion of Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D - Form of Opinion of Vice President-Corporate Counsel of Company . . . . . . . . . . . . . . . . . . .
E - Form of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
iii
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
NOTE AGREEMENT
Dated as of March 29, 1996
To Each of the Purchasers
Named in the Attached Schedule I
Ladies and Gentlemen:
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation (the
"Company"), agrees with you as follows:
0. DESCRIPTION OF NOTES AND COMMITMENT
0 Description of Notes. The Company has authorized the issuance
and sale of $350,000,000 aggregate principal amount of its Senior Notes (the
"Notes"), to be dated the date of issuance, to bear interest from such date
(computed on the basis of a 360-day year comprised of twelve 30-day months),
payable semi-annually on March 30 and September 30 of each year, commencing
September 30, 1996, and at maturity, at the rate per annum set forth therein
prior to maturity and to bear interest, for each day until paid, on any overdue
principal (including any overdue optional or required prepayment), on any
overdue Make-Whole Amount, and on any overdue installment of interest at a per
annum rate, for each day until paid, equal to the greater of (a) the default
rate set forth therein and (b) the sum of the reference rate announced by
Morgan Guaranty Trust Company of New York from time to time as its "prime rate"
for United States domestic loans in United States dollars plus 2%. The Notes
shall be issued in three separate series, each expressed to mature on the date
set forth therein, and shall be substantially in one of the forms attached as
Exhibit A-1 through A-3. The term "Notes" as used herein shall include each
Note delivered pursuant to this Note Agreement (the "Agreement") and each Note
delivered in substitution or exchange therefor and, where applicable, shall
include the singular number as well as the plural. Any reference to you in
this Agreement shall in all instances be deemed to include any nominee of yours
or any separate account or other person on whose behalf you are purchasing
Notes. You and the other purchasers are sometimes referred to herein
individually as a "Purchaser" and collectively as the "Purchasers."
1 Commitment; Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue
<PAGE> 6
and sell to you, and you agree to purchase from the Company, Notes in the
aggregate principal amount set forth opposite your name in the attached
Schedule I at a price of 100% of the principal amount thereof.
Delivery of and payment for the 7.74% Senior Notes shall be made at
the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, at 11:00 a.m., New York time, on March 29, 1996 and delivery of and
payment for the 7.11% Senior Notes and the 6.99% Senior Notes shall be made at
such offices at 11:00 a.m., New York time, on April 1, 1996 (each such date of
delivery and payment, a "Closing Date"). The Notes shall be delivered to you
in the form of one or more Notes in fully registered form, issued in your name
or in the name of your nominee. Delivery of the Notes to you on the applicable
Closing Date shall be against payment of the purchase price thereof in Federal
funds or other funds in U.S. dollars immediately available at Wachovia Bank of
North Carolina, A.B.A. No. 053-100-494, for deposit in the Company's Account
No. 8737-080-442. If on the applicable Closing Date the Company shall fail to
tender the Notes to you, you shall be relieved of all remaining obligations
under this Agreement. Nothing in the preceding sentence shall relieve the
Company of any liability occasioned by such failure to deliver the Notes. The
funding and other obligations of the Purchasers under this Agreement shall be
several and not joint.
1. PREPAYMENT OF NOTES
0 Optional Prepayments.
() Upon notice as provided in Section 2.2(a) and (c), the Company
may prepay the Notes, in whole or in part, at any time, in an aggregate
principal amount not less than $1,000,000, an integral multiple of $100,000 in
excess thereof or such lesser amount as shall constitute payment in full of the
Notes. Each such prepayment shall be at a price of 100% of the principal
amount to be prepaid, plus interest accrued thereon to the date of prepayment,
plus the Make-Whole Amount.
(a) In the event of a Change of Control Event, the Company,
pursuant to the notices provided in Section 2.2(b) and (c), shall offer to
prepay the entire principal amount of the Notes at a price of 100% of the
principal amount thereof, plus interest accrued thereon to the date of
prepayment, plus 50% of the Make-Whole Amount.
(b) Any optional prepayment of less than all of the Notes
outstanding pursuant to Section 2.1(a) or Section 2.1(b) or Section 7.5 shall
be applied to reduce the payment at maturity.
(c) Except as provided in this Section 2.1 or Section 7.5, the
Notes shall not be prepayable in whole or in part.
2
<PAGE> 7
1 Notice of Prepayments.
() The Company shall give notice of any optional prepayment of
the Notes pursuant to Section 2.1(a) to each holder of the Notes not less than
30 days nor more than 60 days before the date fixed for prepayment, specifying
(i) such date, (ii) the principal amount of the holder's Notes to be prepaid on
such date, (iii) the Determination Date for calculating the Make-Whole Amount,
(iv) a calculation of the estimated amount of the Make-Whole Amount showing in
detail the method of calculation and (v) the accrued interest applicable to the
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with the actual
Make-Whole Amount, if any, and accrued interest thereon shall become due and
payable on the prepayment date.
(a) The Company shall give notice of any offer to prepay the Notes
pursuant to Section 2.1(b) to each holder of the Notes. Such notice shall be
certified by an authorized officer of the Company and shall specify (i) the
nature of the Change of Control Event, (ii) the date fixed for prepayment
which, to the extent practicable in view of the timing of the Change of Control
Event, shall be not less than 30 or more than 45 calendar days after the date
of such notice but which, in any event, shall be not later than the Effective
Date of the Change of Control, (iii) the Determination Date for calculating 50%
of the Make-Whole Amount, (iv) a calculation of the estimated amount of 50% of
the Make-Whole Amount, (v) the accrued interest applicable to the prepayment
and (vi) the date by which any holder of a Note that wishes to accept such
offer must deliver notice thereof to the Company which shall not be later than
10 calendar days prior to the date fixed for prepayment. Not earlier than 7
calendar days prior to the date fixed for prepayment, the Company shall give
written notice to each holder of those holders, and the principal amount of
Notes held by each, who have given notices of acceptance of the Company's
offer, and thereafter any holder may change its response to the Company's offer
by written notice to such effect delivered to the Company not less than 3
calendar days prior to the date fixed for prepayment. Upon receipt by the
Company of any non-revoked notice of acceptance from any holder within the
required time period, the aggregate principal amount of Notes held by such
holder shall become due and payable on the prepayment date.
(b) The Company also shall give notice to each holder of the Notes
to be prepaid pursuant to Section 2.1(a) or (b), by telecopy, telegram, telex
or other same-day written communication, 1 Business Day prior to the prepayment
date, of the Make-Whole Amount applicable to such prepayment and the details of
the calculations used to determine the amount of such Make-Whole Amount.
2 Surrender of Notes on Prepayment or Exchange. Subject to
Section 2.4, upon any partial prepayment of a Note pursuant to this Section 2
or partial exchange of a Note pursuant to Section 10.3, such Note may, at the
option of the holder thereof, (i) be surrendered to the Company pursuant to
Section 10.3 in exchange for a new Note or Notes equal to the principal amount
remaining unpaid on the surrendered Note, or (ii) be made available to the
Company,
3
<PAGE> 8
at the Company's principal office, for notation thereon of the portion of the
principal so prepaid or exchanged. In case the entire principal amount of any
Note is prepaid or exchanged, such Note shall be surrendered to the Company
following such prepayment for cancellation and shall not be reissued, and no
Note shall be issued in lieu of such Note.
3 Direct Payment and Deemed Date of Receipt. Notwithstanding
any other provision contained in the Notes or this Agreement, the Company will
pay all sums becoming due on each Note held by you or any subsequent
Institutional Holder by wire transfer of immediately available funds to such
account as you have designated in Schedule I, or as you or such subsequent
Institutional Holder may otherwise designate by notice to the Company, in each
case without presentment and without notations being made thereon, except that
any such Note so paid or prepaid in full shall, at the Company's written
request, be surrendered to the Company for cancellation following such payment
or prepayment. Any wire transfer shall identify such payment in the manner set
forth in Schedule I and shall identify the payment as principal, Make-Whole
Amount, if any, and/or interest. You and any subsequent Institutional Holder
of a Note to which this Section 2.4 applies agree that, before selling or
otherwise transferring any such Note, you or it will make a notation thereon of
the aggregate amount of all payments of principal theretofore made and of the
date to which interest has been paid and, upon written request of the Company,
will provide a copy of such notations to the Company. Any payment made
pursuant to this Section 2.4 shall be deemed received on the payment date only
if received before 12:00 Noon, New York time. Payments received after 12:00
Noon, New York time, shall be deemed received on the next succeeding Business
Day.
4 Allocation of Payments. In the case of a prepayment pursuant
to Section 2.1(a), if less than the entire principal amount of all of the Notes
outstanding is to be paid, the Company will prorate the aggregate principal
amount to be prepaid among the outstanding Notes in proportion to the unpaid
principal amounts thereof.
5 Payments Due on Saturdays, Sundays and Holidays. If any
interest payment date on the Notes or the date fixed for any other payment of
any Note or exchange of any Note is a day other than a Business Day, then such
payment or exchange need not be made on such date but may be made on the next
succeeding Business Day, with interest payable to the actual date of payment.
2 REPRESENTATIONS
0 Representations of the Company. As an inducement to, and as
part of the consideration for, your purchase of the Notes pursuant to this
Agreement, the Company represents and warrants to you as follows:
() Corporate Organization and Authority. The Company is a
solvent corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, has all requisite corporate power and
authority to own and operate its properties, to carry on its
4
<PAGE> 9
business as now conducted and as presently proposed to be conducted, to enter
into and perform this Agreement and to issue and sell the Notes as contemplated
in this Agreement.
(a) Qualification to Do Business. The Company is duly qualified
or licensed and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the nature of the business transacted by it
or the character of its properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions, individually or in the
aggregate, where the failure to be so licensed or qualified could not
reasonably be expected to have a Material Adverse Effect.
(b) Subsidiaries. The Company has no Subsidiaries except those
listed in the attached Annex I, which correctly sets forth the jurisdiction of
incorporation and the percentage of the outstanding Voting Stock of each
Subsidiary which is owned, of record or beneficially, by the Company and/or one
or more Subsidiaries. Each Material Subsidiary is so designated on Annex I.
Each Material Subsidiary has been duly organized and is validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization and is duly licensed or qualified and in good standing as a
foreign corporation or other organization in each other jurisdiction where the
nature of the business transacted by it or the character of its properties
owned or leased makes such qualification or licensing necessary, except for
jurisdictions, individually or in the aggregate, where the failure to be so
licensed or qualified could not reasonably be expected to have a Material
Adverse Effect. Each Material Subsidiary has full corporate or other power and
authority to own and operate its properties and to carry on its business as now
conducted and as presently proposed to be conducted. The Company and each
Material Subsidiary have good and transferable title to all of the shares they
purport to own of the capital stock of each Subsidiary, and all such shares
have been duly issued and are fully paid and nonassessable, other than the
shares of any Subsidiary that is not a Material Subsidiary the lack of
ownership of which or their failure to be duly issued, fully paid and
nonassessable, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(c) Financial Statements. The consolidated balance sheets of the
Company and its Subsidiaries as of May 31, 1991 and as of June 30, 1992, 1993,
1994 and 1995, and the related consolidated statements of income and cash flows
for each of the years ended on such dates, accompanied by the reports and
unqualified (as to going concern or scope of audit) opinions of Ernst & Young
(or one of its predecessor firms), independent public accountants, copies of
which have heretofore been delivered to you, were prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise noted in such financial statements,
including the notes thereto) and, together with and subject to the 1995
Reports, present fairly the consolidated financial condition of the Company and
its Subsidiaries on such dates and their consolidated results of operations and
cash flows for the years then ended. The unaudited consolidated balance sheets
of the Company and its Subsidiaries as of December 31, 1995, the unaudited
consolidated statements of income and cash flows for the six months ended
December 31, 1994 and
5
<PAGE> 10
December 31, 1995, copies of which have heretofore been delivered to you, were
prepared in accordance with generally accepted accounting principles (except as
otherwise noted in such financial statements, including the notes thereto) and
the unaudited financial information presented in such financial statements,
together with and subject to the 1995 Reports, reflects all adjustments
consisting only of normal recurring accruals necessary for a fair presentation
of the consolidated financial condition of the Company 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
statements omit certain footnotes and are subject to normal year-end audit
adjustments.
(d) No Contingent Liabilities or Adverse Changes. Except for
matters disclosed in the 1995 Reports (as to which the ultimate outcome, and
whether such matters are material or could have a Material Adverse Effect,
cannot now be determined), neither the Company nor any of its Subsidiaries has
any contingent liabilities which, individually or in the aggregate, are
material to the Company and its Subsidiaries taken as a whole, other than as
indicated in the most recent audited and unaudited financial statements
described in the foregoing paragraph (d) of this Section 3.l and, except as set
forth in such financial statements or the matters disclosed in the 1995 Reports
as aforesaid, since December 31, 1995, there have been no changes in the
condition, financial or otherwise, of the Company and its Subsidiaries on a
consolidated basis except changes which, individually or in the aggregate, are
not material and are not required to be disclosed in the Company's consolidated
financial statements in accordance with generally accepted accounting
principles, or changes occurring in the ordinary course of business, or changes
which, individually or in the aggregate, have not had a Material Adverse
Effect.
(e) No Pending Litigation or Proceedings. Except for the
proceedings described in the 1995 Reports (as to which the ultimate outcome,
and whether such proceedings are material or could have a material Adverse
Effect, cannot now be determined), there are no actions, suits or proceedings
pending or, to the Company's knowledge, threatened against or affecting the
Company or any of its Subsidiaries, at law or in equity or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
6
<PAGE> 11
(f) Compliance with Law.
() Except for the matters disclosed in the 1995
Reports (as to which the ultimate outcome, and whether such matters could have
a Material Adverse Effect, cannot now be determined), neither the Company nor
any of its Subsidiaries is: (x) in default with respect to any order, writ,
injunction or decree of any court to which it is a named party; or (y) in
default under any law, rule, regulation, ordinance or order relating to its or
their respective businesses, the sanctions and penalties resulting from which
defaults described in clauses (x) and (y) could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(i) Neither the Company nor any Subsidiary of the
Company is an entity defined as a "designated national" within the meaning of
the Foreign Assets Control Regulations, 31 C.F.R. Chapter V, or is in violation
of any Federal statute or Presidential Executive Order, or any rules or
regulations of any department, agency or administrative body promulgated under
any such statute or Order, concerning trade or other relations with any foreign
country or any citizen or national thereof or the ownership or operation of any
property and no restriction or prohibition under any such statute, Order, rule
or regulation has a Material Adverse Effect.
(g) ERISA. In reliance on your representations and warranties in
Section 3.2 and assuming that in the case where you are making representations
and warranties under paragraph (a), (b) or (c) of Section 3.2, your purchase of
the Notes is covered by the Prohibited Transaction Exemption referred to in
such paragraph, neither the purchase of the Notes by you nor the consummation
of any of the other transactions between the Company and you contemplated by
this Agreement is or will constitute a "prohibited transaction" within the
meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), or Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). Each Plan of the Company or any ERISA Affiliate complies
in all material respects and has been operated and administered in compliance
with ERISA and other applicable laws. The Plans have been amended to comply
with the requirements of the Tax Reform Act of 1986 and subsequent Federal tax
legislation and, if applicable, the Company has made timely application to the
Internal Revenue Service for determination letters with respect thereto, and
such determination letters have not yet been received. There exist with
respect to the Company or any ERISA Affiliate no Multiemployer Plans for which
a material withdrawal or termination liability may be or has been incurred.
There exist with respect to each Plan or Plan trust established or maintained
by the Company or any ERISA Affiliate: (i) no accumulated funding deficiency
within the meaning of ERISA; (ii) no termination of any Plan or trust which
could result in any liability to the Pension Benefit Guaranty Corporation
("PBGC") or any "reportable event," as that term is defined in ERISA, which
could constitute grounds for termination of any Plan or Plan trust by the PBGC;
(iii) no "prohibited transaction," as that term is defined in ERISA, which
could subject any Plan, Plan trust or party dealing with any such Plan or trust
to
7
<PAGE> 12
any tax or penalty on prohibited transactions imposed by Section 4975 of the
Code; and (iv) no event, transaction or condition that could reasonably be
expected to result in the incurrence of any liability pursuant to Title I or IV
of ERISA or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA, other than any of the foregoing that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect. The present
value of the aggregate benefit liabilities under each Plan, determined as of
the end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities, determined as of the
end of such Plan's most recently ended plan year. The term "benefit
liabilities" has the meaning specified in Section 4001 of ERISA and the terms
"current value" and "present value" have the meaning specified in Section 3 of
ERISA. The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standard Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not material to the Company
and its Subsidiaries, taken as a whole. Annex IV sets forth a complete list of
all "affiliates" of the Company (within the meaning of Prohibited Transaction
Exemption 95-60 (issued July 12, 1995)("PTE 95-60")) and all "employee benefit
plans" (within the meaning of Section 3(3) of ERISA and subject to Part 4 of
Subtitle B of Title I of ERISA or to Section 4975 of the Code) maintained by
the Company or any of its "affiliates" (within the meaning of PTE 95-60).
(h) Title to Properties. Except as disclosed on the most recent
audited consolidated balance sheet described in the foregoing paragraph (d) of
this Section 3.1, the Company and each Material Subsidiary have (i) good and
marketable title in fee simple or its equivalent under applicable law to all
the real property owned by them and (ii) good title to all of the other
personal property reflected in such balance sheet or subsequently acquired by
the Company or any Material Subsidiary (except as sold or otherwise disposed of
in the ordinary course of business), in each case free from all Liens or
defects in title except those permitted by Section 7.3 and except for other
defects in title which, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
(i) Leases. The Company and each Material Subsidiary enjoy
peaceful and undisturbed possession under all leases under which the Company or
such Material Subsidiary is a lessee or is operating, except for leases the
termination of which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(j) Franchises, Patents, Trademarks and Other Rights. The Company
and each Material Subsidiary have all franchises, permits and licenses
necessary to carry on or used in their businesses as now being conducted,
except for franchises, permits and licenses the lack of which could not be
reasonably expected to have a Material Adverse Effect, and none are in default
under any of such franchises, permits or licenses except for defaults,
individually or in
8
<PAGE> 13
the aggregate, which could not reasonably be expected to have a Material
Adverse Effect. The Company and each Material Subsidiary own or possess all
patents, trademarks, service marks, trade names, copyrights, and licenses, or
rights with respect to the foregoing, necessary for, or used by them in, the
present conduct of their businesses, without any known conflict with the rights
of others, except to the extent that failure to own or possess the same, or
such conflict, could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(k) Authorization. This Agreement and the Notes have been duly
authorized on the part of the Company and this Agreement does, and the Notes
when issued will, constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their terms, except to the extent that
enforcement of this Agreement or the Notes may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
or by equitable principles, regardless of whether enforcement is sought in
equity or at law. The sale of the Notes and compliance by the Company with all
of the provisions of this Agreement and of the Notes (i) are within the
corporate powers of the Company, (ii) have been duly authorized by proper
corporate action, (iii) are legal and will not violate any provisions of any
law or regulation or order of any court, governmental authority or agency and
(iv) will not result in any breach of any of the provisions of, or constitute a
default under, or result in the creation of any Lien on any property of the
Company or any Material Subsidiary under the provisions of, any charter
document, by-law, loan agreement or other agreement or instrument relating to
Indebtedness of the Company or any Material Subsidiary to which the Company or
any Material Subsidiary is a party or by which any of them or their property
may be bound.
(l) No Defaults. No event has occurred and no condition exists
which, upon the issuance of the Notes, would constitute a Default or an Event
of Default under this Agreement. Neither the Company nor any Material
Subsidiary is in default under any charter document, by-law, loan agreement or
other material agreement or material instrument to which it is a party or by
which it or its property may be bound.
(m) Governmental Consent. Neither the nature of the Company or
any of its Subsidiaries, their respective businesses or properties, nor any
relationship between the Company or any of its Subsidiaries and any other
Person, nor (assuming the accuracy of the representations set forth in Section
3.2) any circumstances relative to the offer, issuance, sale or delivery of the
Notes is such as to require a consent, approval or authorization of, or
withholding of objection on the part of, or filing, registration or
qualification with, any governmental authority on the part of the Company in
connection with the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the Notes.
(n) Taxes. All income tax returns and all other material tax
returns required to be filed by the Company or any Material Subsidiary in any
jurisdiction have been timely filed, and all taxes, assessments, fees and other
governmental charges upon the Company or any
9
<PAGE> 14
Material Subsidiary, or upon any of their respective properties, income or
franchises, which are due and payable, have been paid timely or contested in
good faith by appropriate proceedings that stay the collection thereof by the
applicable governmental authority during the period of the contest and as to
which reserves reasonably believed by the Company to be adequate are maintained
in accordance with generally accepted accounting principles. The Company does
not know of any proposed additional tax assessment against it or any Material
Subsidiary for which provision reasonably believed by the Company to be
adequate has not been made on its books in accordance with generally accepted
accounting principles. The statute of limitations with respect to United
States Federal income tax liability of the Company and its consolidated
Subsidiaries has expired for all taxable years up to and including the taxable
year ended May 31, 1988 and no material controversy in respect of additional
taxes due since such date is pending or, to the Company's knowledge,
threatened, other than the pending audit of the United States Federal income
tax returns of the Company and its consolidated Subsidiaries for the fiscal
years ended in 1989, 1990, 1991, 1992, 1993 and 1994, in respect of which
issues have arisen involving material amounts and in respect of which reserves
reasonably believed by the Company to be adequate have been established in
accordance with generally accepted accounting principles. The Company's
consolidated income tax liability as of December 31, 1995 as set forth in the
consolidated balance sheet of the Company and its consolidated Subsidiaries as
of that date, appearing in the Company's Form 10-Q as of that date, is adequate
as determined in accordance with generally accepted accounting principles for
all open years and for the current fiscal period.
(o) Status under Certain Statutes. Neither the Company nor any
Subsidiary is: (i) a "public utility company" or a "holding company," or an
"affiliate" or a subsidiary company" of a "holding company," or an "affiliate"
of such a "subsidiary company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (ii) a "public utility" as defined
in the Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(p) Private Offering. Neither the Company, nor Schroder Wertheim
& Co. Incorporated (the only Person authorized or employed by the Company as
agents, brokers, dealers or otherwise in connection with the offering of the
Notes or any similar security of the Company) has offered any of the Notes or
any similar security of the Company for sale to, or solicited offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto with,
any prospective purchaser, other than institutional investors, including the
Purchasers, each of whom was offered all or a portion of the Notes at private
sale for investment. Neither the Company nor anyone acting on its express
authorization will offer the Notes or any part thereof or any similar security
for issuance or sale to, or solicit any offer to acquire any of the same from,
anyone so as to cause the issuance and sale of the Notes to be subject to the
provisions of Section 5 of the Securities Act.
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<PAGE> 15
(q) Effect of Other Instruments. Neither the Company nor any
Material Subsidiary is bound by any agreement or instrument or subject to any
charter or other corporate restriction which (i) in any way restricts the
Company's ability to perform its obligations under this Agreement or the Notes
or any Material Subsidiary's ability to pay dividends or make advances to the
Company or (ii) has a Material Adverse Effect.
(r) Use of Proceeds. The Company will apply the net proceeds from
the sale of the Notes to general corporate purposes, primarily the repayment of
certain short-term Indebtedness of the Company and its Subsidiaries. The
short-term Indebtedness that will be repaid with such net proceeds is owed to
the lenders listed in the attached Annex III. None of the transactions
contemplated in this Agreement (including, without limitation thereof, the use
of the proceeds from the sale of the Notes) will violate or result in a
violation of Section 7 of the Exchange Act, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System (12 C.F.R., Chapter II). Neither
the Company nor any Subsidiary owns nor does the Company or any Subsidiary
intend to carry or purchase any "margin stock" within the meaning of Regulation
G, and none of the proceeds from the sale of the Notes will be used to purchase
or carry or refinance any borrowing the proceeds of which were used to purchase
or carry any "margin stock" or "margin security" in violation of Regulations G,
T, U or X.
(s) Condition of Property. All of the Facilities of the Company
and its Material Subsidiaries are in sound operating condition and repair,
except for facilities being repaired in the ordinary course of business or
facilities which, individually or in the aggregate, are not material to the
Company and its Subsidiaries, taken as a whole.
(t) Books and Records. The Company and each of its Material
Subsidiaries (i) maintain books, records and accounts in reasonable detail
which accurately and fairly reflect in all material respects their respective
transactions and business affairs, and (ii) maintain a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are executed in accordance with management's general or specific
authorization and to permit preparation of financial statements in accordance
with generally accepted accounting principles (except for the application of
non-United States accounting principles and practices to the financial
statements of certain non-United States Subsidiaries, to the extent that such
application does not prevent the Company from preparing consolidated financial
statements in accordance with generally accepted accounting principles).
(u) Environmental Compliance. The Company, each domestic
Subsidiary and each Material Subsidiary (including their operations and the
conditions at or in the Facilities) comply in all material respects with all
Environmental Laws; the Company, each domestic Subsidiary and each Material
Subsidiary have obtained all permits under Environmental Laws necessary to
their respective operations, all such permits are in full force and effect, and
the Company, each domestic Subsidiary and each Material Subsidiary are in
compliance with all material terms and conditions of such permits except, in
each of the foregoing cases, for
11
<PAGE> 16
permits, the failure of which to obtain, maintain and comply with, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect; and neither the Company nor any domestic Subsidiary nor any
Material Subsidiary has any liability (contingent or otherwise) in connection
with any Release of any Hazardous Material or the existence of any Hazardous
Material on, under or about any Facility that could give rise to an
Environmental Claim that could reasonably be expected to have a Material
Adverse Effect.
(v) Full Disclosure. Neither the Private Placement Memorandum
dated February 1996 (including the attachments and enclosures), the financial
statements referred to in paragraph (d) of this Section 3.1, nor this
Agreement, nor any other written statement or document furnished by the Company
or Schroder Wertheim & Co. Incorporated to you in connection with the
negotiation of the sale of the Notes, taken together and taken together with
the 1995 Reports, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained therein or
herein not misleading in light of the circumstances under which they were made,
except that, as to projections furnished to you in such documents, such
projections, as modified by additional communications from the Company and
Schroder Wertheim & Co. Incorporated to the Purchasers subsequent to the
distribution of such projections, constitute good faith estimates of the
Company based upon current information and assumptions believed by the Company
to be reasonable. There are no facts (exclusive of general economic, political
or social conditions or trends) particular to the Company and known by the
Company that the Company has not disclosed in the 1995 Reports or otherwise to
you in writing and that have, individually or in the aggregate, a Material
Adverse Effect or, so far as the Company can now reasonably foresee, will have,
individually or in the aggregate, a Material Adverse Effect.
1 Representations of the Purchasers. You represent and warrant,
and in entering into this Agreement the Company understands, that you are
acquiring the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to any distribution thereof, provided that the disposition of
your property shall at all times be and remain within your control; subject,
however, to compliance with Federal securities laws. You acknowledge that the
Notes have not been registered under the Securities Act and you understand and
agree that the Notes must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. You have been advised that the Company does not contemplate
registering, and is not legally required to register, the Notes under the
Securities Act.
You further represent and warrant that at least one of the following
statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(a) If you are an insurance company, the Source is an "insurance
company general account", within the meaning of Section V(e) of Prohibited
Transaction Exemption
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<PAGE> 17
("PTE") 95-60 (issued July 12, 1995) and the amount of reserves and liabilities
(as defined by the annual statement for life insurance companies approved by
the National Association of Insurance Commissioners ("NAIC Annual Statement")
and before reduction for credits on account of any reinsurance ceded on a
coinsurance basis (the "Reserves and Liabilities")) for your general account
contract(s) held by or on behalf of any employee benefit plan disclosed by the
Company pursuant to Section 3.1(h) hereof or all such disclosed employee
benefit plans does not exceed 10% of the total Reserves and Liabilities of such
general account (exclusive of separate account liabilities) plus surplus, as
set forth in the NAIC Annual Statement filed with your state of domicile; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990) or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan subject to Title I of
ERISA or any plan subject to Section 4975 of the Code (herein collectively
referred to as an "ERISA Plan") or group of ERISA Plans maintained by the same
employer or employee organization beneficially owns more than 10% of the total
of all assets in such pooled separate account or in such collective investment
fund; or
(c) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of PTE 84-14 issued May 25, 1984) which is managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of Part V
of PTE 84-14), no ERISA Plan's assets that are included in such investment
fund, when combined with the assets of all other ERISA Plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of PTE 84-14) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of PTE 84-14 are
satisfied, neither the QPAM nor a Person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of PTE 84-14) owns a 5%
or more interest in the Company and (i) the identity of such QPAM and (ii) the
names of all ERISA Plans whose assets are included in such investment fund have
been disclosed to the Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more ERISA Plans, or a separate account
or trust fund comprised of one or more ERISA Plans, each of which has been
identified to the Company in writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any ERISA Plan.
As used in this Section 3.2, the terms "employee benefit plan" and
"governmental plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
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<PAGE> 18
3. CLOSING CONDITIONS
Your obligation to purchase the Notes on the applicable Closing Date
shall be subject to the performance by the Company of its agreements hereunder
which are to be performed at or prior to the time of delivery of the Notes, and
to the following conditions to be satisfied on or before such Closing Date:
0 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement or otherwise made in
writing in connection herewith shall be true and correct on or as of the
applicable Closing Date and the Company shall have delivered to you a
certificate to such effect, dated such Closing Date and executed by the
president, the chief financial officer, the chief accounting officer or the
Treasurer of the Company.
1 Legal Opinions. You shall have received from Davis Polk &
Wardwell, who is acting as your special counsel in this transaction, from
Christy & Viener, special New York counsel to the Company, and from Walter A.
Engdahl, Vice President Corporate Counsel of the Company, their opinions, dated
the applicable Closing Date, in form and substance satisfactory to you and
covering substantially the matters set forth or provided in the attached
Exhibits B, C and D, respectively.
2 Events of Default. No Default or Event of Default shall have
occurred and be continuing on the applicable Closing Date after giving effect
to the issue and sale of the Notes and the application of the proceeds thereof,
and the Company shall have delivered to you a certificate to such effect, dated
such Closing Date and executed by the president, the chief financial officer,
the chief accounting officer or the Treasurer of the Company.
3 Payment of Fees and Expenses. The Company shall have paid the
fees and expenses of Davis Polk & Wardwell, your special counsel, through the
applicable Closing Date and incident to the proceedings in connection with, and
transactions contemplated by, this Agreement and the Notes to the extent that
the Company has received that firm's invoice not later than 1 Business Day
prior to such Closing Date (all fees and expenses not so invoiced shall remain
payable pursuant to Section 11.1).
4 Sale of Notes to Other Purchasers. In the case of the 7.74%
Senior Notes, the Company shall have consummated the sale of the entire
$230,000,000 principal amount of such Notes to be sold on the applicable
Closing Date pursuant to this Agreement and, in the case of the 7.11% Senior
Notes and the 6.99% Senior Notes, the Company shall have consummated the sale
of the entire $120,000,000 principal amount of such Notes to be sold on the
applicable Closing Date pursuant to this Agreement.
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<PAGE> 19
5 Legality of Investment. Your acquisition of the Notes shall
constitute a legal investment as of the applicable Closing Date under the laws
and regulations of each jurisdiction to which you may be subject (without
resort to any "basket" or "leeway" provision which permits the making of an
investment without restrictions as to the character of the particular
investment being made), and such acquisition shall not subject you to any
penalty or other onerous condition in or pursuant to any such law or
regulation; and you shall have received such certificates or other evidence as
you may reasonably request to establish compliance with this condition.
6 Private Placement Number. A private placement number with
respect to each series of Notes shall have been issued by the CUSIP Service
Bureau of Standard & Poor's Corporation and you shall have received written
confirmation thereof.
7 Proceedings and Documents. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation of such transactions shall be
satisfactory in form and substance to you and your special counsel, and you and
your special counsel shall have received copies (executed or certified as may
be appropriate) of all legal documents or proceedings which you and they may
reasonably request.
4. INTERPRETATION OF AGREEMENT
0 Certain Terms Defined. The terms hereinafter set forth when
used in this Agreement shall have the following meanings:
Affiliate. Any Person (other than a Subsidiary or an original
Purchaser) (i) who is a director or executive officer of the Company or any
Material Subsidiary, (ii) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company, (iii) which beneficially owns or holds securities representing 5%
or more of the combined voting power of the Voting Stock of the Company or any
Material Subsidiary or (iv) of which securities representing 5% or more of the
combined voting power of its Voting Stock (or in the case of a Person not a
corporation, 5% or more of its equity) is beneficially owned or held by the
Company or any Material Subsidiary. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Agreement. As defined in Section 1.1.
Business Day. Any day, other than Saturday, Sunday or a legal holiday
or any other day on which banking institutions in New York, New York generally
are authorized by law to close.
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<PAGE> 20
Capitalized Lease. Any lease the obligation for Rentals with respect
to which, in accordance with generally accepted accounting principles, would be
required to be capitalized on a balance sheet of the lessee or for which the
amount of the asset and liability thereunder, as if so capitalized, would be
required to be disclosed in a note to such balance sheet.
Change of Control Event. The (i) acquisition through purchase or
otherwise by any Person, or group of Persons acting in concert, directly or
indirectly, in one or more transactions, of beneficial ownership or control of
securities representing more than 50% of the combined voting power of the
Company's Voting Stock (including the written agreement to act in concert (in a
way which could reasonably be expected to have a material impact on the
operations or methods of operation of the Company) by Persons who beneficially
own or control securities representing more than 50% of the combined voting
power of the Company's Voting Stock) or (ii) entering into by the Company of a
written agreement providing for or contemplating an event described in clause
(i) or (iii) hereof, or (iii) expiration, without withdrawals reducing such
percentage to 50% or less, of ten days following the date on which shares
representing more than 50% of the combined voting power of the Company's Voting
Stock have been tendered pursuant to a tender offer by any Person, including
the Company or a Subsidiary, for securities representing more than 50% of the
combined voting power of the Company's Voting Stock, whether or not such
securities are purchased pursuant to such tender offer. The date on which an
event described in the foregoing sentence occurs is referred to as the
"Effective Date of the Change of Control."
Closing Date. As defined in Section 1.2.
Code. As defined in Section 3.1(h).
Consolidated Indebtedness. Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Net Income. For any period, the net income (or loss) of
the Company and its Subsidiaries for such period, determined on a consolidated
basis in accordance with generally accepted accounting principles and after
eliminating earnings or losses attributable to outstanding minority interests,
but excluding in any event (i) net earnings and losses of any Subsidiary
accrued prior to the date it became a Subsidiary; (ii) net earnings and losses
of any corporation (other than a Subsidiary), substantially all the assets of
which have been acquired in any manner, realized by such other corporation
prior to the date of such acquisition; (iii) net earnings and losses of any
corporation (other than a Subsidiary) with which the Company or a Subsidiary
shall have consolidated or which shall have merged into or with the Company or
a Subsidiary prior to the date of such consolidation or merger; (iv) net
earnings of any business entity (other than a Subsidiary) in which the Company
or any Subsidiary has an ownership interest unless such net earnings are
immediately available without legal or contractual restriction for cash
distributions to the Company or such Subsidiary; (v) any portion of the net
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<PAGE> 21
earnings of any Subsidiary which for any reason is legally or contractually
unavailable for payment of cash dividends to the Company or any other
Subsidiary; (vi) earnings resulting from any reappraisal, revaluation or
write-up of assets; (vii) any deferred or other credit representing any excess
of the equity in any Subsidiary at the date of acquisition thereof over the
amount invested in such Subsidiary; and (viii) any reversal subsequent to March
31, 1996 of any reserve (other than a reserve created in the ordinary course of
business in accordance with generally accepted accounting principles), except
to the extent that provision for such reserve shall have been made from income
arising subsequent to March 31, 1996.
Consolidated Net Worth. The consolidated stockholders' equity of the
Company and its Subsidiaries determined in accordance with generally accepted
accounting principles.
Consolidated Total Assets. The total assets of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Total Capitalization. At any time, the sum of
Consolidated Net Worth and Consolidated Indebtedness at such time.
Default. Any event which, with the lapse of time or the giving of
notice, or both, would become an Event of Default.
Determination Date. The day 1 Business Day before (i) the date fixed
for a prepayment pursuant to Section 2.1(a) or (b) or Section 7.5 or (ii) the
date of declaration pursuant to Section 8.2.
Environmental Claim. Any written notice of violation, claim, demand,
abatement order or other order by any Person for any damage, including personal
injury (including sickness, disease or death), tangible or intangible property
damage, contribution, indemnity, indirect or consequential damages, damage to
the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, resulting from or
based upon (i) the existence of a Release (whether sudden or non-sudden or
accidental or nonaccidental) of, or exposure to, any Hazardous Material in,
into or onto the environment at, in, by, from or related to any Facility, (ii)
the use, handling, transportation, storage, treatment or disposal of Hazardous
Materials in connection with the operation of any Facility, or (iii) the
violation, or alleged violation, of any statute, rule, regulation, ordinance,
order, permit, license or authorization of or from any governmental authority,
agency or court relating to environmental matters pertaining to the Facilities.
Environmental Laws. All laws relating to environmental matters,
including those relating to (i) fines, orders, injunctions, penalties, damages,
contribution, cost recovery compensation, losses or injuries resulting from the
Release or threatened Release of Hazardous Materials and to the generation,
use, storage, transportation, or disposal of Hazardous
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<PAGE> 22
Materials, in any manner applicable to the Company or any of its Subsidiaries
or any of their respective properties, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9601 et seq.), the Hazardous Material Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), and the
Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001 et
seq.), and (ii) environmental protection, including the National Environmental
Policy Act (42 U.S.C. Section 4321 et seq.), and comparable state and foreign
laws, each as amended or supplemented, and any similar or analogous local,
state, federal and foreign statutes and regulations promulgated pursuant
thereto, each as in effect as of the date of determination.
ERISA. As defined in Section 3.1(h).
ERISA Affiliate. Any trade or business, whether or not incorporated,
that is treated as a single employer together with the Company under Section
414 of the Code.
Event of Default. As defined in Section 8.1.
Exchange Act. The Securities Exchange Act of 1934, as amended, and as
it may be further amended from time to time.
Facilities. Any and all real property (including all buildings,
fixtures or other improvements located thereon) now or heretofore owned,
leased, operated or used (under permit or otherwise) by the Company or any of
its Subsidiaries.
Guaranties. All obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection) of a
Person guaranteeing or, in effect, guaranteeing any Indebtedness, dividend or
other obligation of any other Person in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of
such Indebtedness or obligation, (y) to maintain working capital or other
balance sheet condition or (z) otherwise to advance or make available funds for
the purchase or payment of such Indebtedness or obligation, (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation against
loss in respect thereof, or (iv) otherwise to assure the owner of the
Indebtedness or obligation against loss in respect thereof. Notwithstanding
the foregoing, in no event shall any recourse obligation, guarantee or other
contractual undertaking arising in connection with the sale, factoring or other
disposition of leases, receivables or other accounts in the ordinary course of
business by the Company or any Subsidiary be deemed to be a Guaranty. For the
purposes of all computations made under this
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<PAGE> 23
Agreement, Guaranties in respect of any Indebtedness for borrowed money shall
be deemed to be Indebtedness equal to the principal amount of such Indebtedness
for borrowed money which has been guaranteed, and Guaranties in respect of any
other obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
Hazardous Materials. (i) Any chemical, material or substance defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any
Environmental Laws; (ii) any oil, petroleum or petroleum derived substance, any
drilling fluid, produced water or other waste associated with the exploration,
development or production of crude oil, any flammable substance or explosive,
any radioactive material, any hazardous waste or substance, any toxic waste or
substance or any other material or pollutant that (x) poses a hazard to any
property of the Company or any of its Subsidiaries or to Persons on or about
such property or (y) causes such property to be in violation of any
Environmental Law; (iii) any friable asbestos, urea formaldehyde foam
insulation, electrical equipment which contains any oil or dielectric fluid
with levels of polychlorinated biphenyls in excess of fifty parts per million;
and (iv) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority.
Indebtedness. For any Person, without duplication, the outstanding
principal amount of all borrowings which in accordance with generally accepted
accounting principles would be included in determining total liabilities of
such Person as shown on the liability side of a consolidated balance sheet
prepared in accordance with generally accepted accounting principles, and in
any event all (i) obligations for borrowed money or to pay the deferred
purchase price of property or assets (except trade account payables), (ii)
obligations secured by any Lien upon property or assets owned by such Person,
even though such Person has not assumed or become liable for the payment of
such obligations, (iii) obligations created or arising under any conditional
sale or other title retention agreement with respect to property acquired,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of property, (iv) Capitalized Leases, (v) unfunded pension liabilities
in connection with any Plan, (vi) amounts of any reserves for doubtful accounts
recorded on the books of such Person for leases, receivables or other accounts
sold, factored or otherwise disposed of by such Person and (vii) Guaranties of
obligations of others of the character referred to in this definition.
Notwithstanding the foregoing, in no event shall any recourse obligation,
guarantee or other contractual undertaking arising in connection with the sale,
factoring or other disposition of leases, receivables or other accounts in the
ordinary course of business by the Company or any Subsidiary be deemed to be
Indebtedness.
Institutional Holder. Any bank, trust company, insurance company,
pension fund, mutual fund or other similar financial institution, including,
without limiting the foregoing, any
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<PAGE> 24
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act, which is or becomes a holder of any Note.
Lien. Any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any agreement to grant any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to file any financing statement under
the Uniform Commercial Code of any jurisdiction in connection with any of the
foregoing, other than filings of financing statements in respect of operating
leases and other similar filings of merely a precautionary nature including
filings of financing statements in respect of sales of (and not security
interests in) receivables and other accounts.
Make-Whole Amount. As of any Determination Date and with respect to
any Note, to the extent that the Reinvestment Yield on such Determination Date
is lower than the interest rate payable on or in respect of such Note, the
excess of (a) the present value of the principal and interest payments to be
foregone by any prepayment (exclusive of accrued interest on such Note through
the date of prepayment) on such Note (taking into account the manner of
application of such prepayment required by Section 2.1(c)), determined by
discounting (semi-annually on the basis of a 360-day year composed of twelve
30-day months), such payments at a rate that is equal to the Reinvestment Yield
over (b) the aggregate principal amount of such Note then to be prepaid or
paid. To the extent that the Reinvestment Yield on any Determination Date is
equal to or higher than the interest rate payable on or in respect of such
Note, the Make-Whole Amount is zero.
Material Adverse Effect. (i) A material adverse effect on the
business, properties, profits, prospects which are central to the business at
the time, operations or financial condition of the Company and its
Subsidiaries, taken as a whole, (ii) the material impairment of the ability of
the Company to perform its obligations under this Agreement or the Notes or
(iii) the impairment of the ability of the holders of the Notes to enforce the
Company's obligations under this Agreement or the Notes.
Material Subsidiary. As of the date of determination, Sensormatic
GmbH, and any other Subsidiary (i) whose consolidated total assets exceed 5% of
Consolidated Total Assets or (ii) whose consolidated revenues exceed 10% of the
consolidated revenues of the Company and its Subsidiaries determined in
accordance with generally accepted accounting principles.
Multiemployer Plan. Any Plan that is a "multi-employer plan" (as such
term is defined in Section 4001(a)(3) of ERISA).
1995 Reports. Collectively, (i) the report of the Company on Form
10-K for the fiscal year of the Company ended on June 30, 1995, (ii) the report
of the Company on Form 10-Q/A for the fiscal quarter of the Company ended on
September 30, 1995, (iii) the report of the Company on Form 8-K dated October
30, 1995, (iv) the report of the Company on Form
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<PAGE> 25
10-Q for the fiscal quarter of the Company ended December 31, 1995, and (v) the
Company's press release dated March 19, 1996.
Notes. As defined in Section 1.1.
PBGC. As defined in Section 3.1(h).
Person. Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any governmental authority, agency or political subdivision.
Plan. Any "employee pension benefit plan" (as defined in Section
3(2)(A) of ERISA) covered by Title IV of ERISA (other than any employee pension
benefit plan described in Section 4021(b) of ERISA) or subject to the minimum
funding standards under Section 412 of the Code and that is or, within the
preceding 5 years, has been established or maintained, or to which
contributions are or, within the preceding 5 years, have been made or required
to be made, by the Company or any ERISA Affiliate or with respect to which the
Company or any ERISA Affiliate may have any liability.
Purchaser. As defined in Section 1.1.
Reinvestment Yield. With respect to any Note then being prepaid or
paid, the sum of (i) 0.50% plus (ii) the yield reported, as of 10:00 A.M. (New
York City time) on the Determination Date, on the Cantor-Fitzgerald Brokerage
Screen available on the Bloomberg and Knight Ridder Information System (or, if
not available, any other nationally recognized trading screen reporting on-line
intraday trading in United States government securities) for actively traded
U.S. Treasury securities having a maturity equal to the Weighted Average Life
to Maturity of such Note as of the date of prepayment or payment, rounded to
the nearest month, or if such yields shall not be reported as of such time or
the yields reported as of such time are not ascertainable in accordance with
the preceding clause, then the arithmetic mean of the yields published in the
statistical release designated H.15(519) (or any successor publication) of the
Board of Governors of the Federal Reserve System under the caption "U.S.
Government Securities--Treasury Constant Maturities" (the "statistical
release") for the maturity corresponding to the remaining Weighted Average Life
to Maturity of such Note as of the date of such prepayment or payment rounded
to the nearest month. For purposes of calculating the Reinvestment Yield, the
most recent weekly statistical release published prior to the applicable
Determination Date shall be used. In the event the statistical release is not
published, the arithmetic mean of such reasonably comparable index as may be
designated by the holders of at least 51% in aggregate principal amount of the
Notes, for the maturity corresponding to the remaining Weighted Average Life to
Maturity of such Note then being prepaid or paid as of the date of prepayment
or payment, as the case may be, rounded to the nearest month shall be used. If
no maturity exactly corresponding to such rounded Weighted Average Life to
Maturity shall appear therein, yields for the two most closely corresponding
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published maturities (one of which occurs prior and the other subsequent to the
Weighted Average Life to Maturity) shall be calculated pursuant to the
foregoing sentence and the Reinvestment Yield shall be interpolated from such
yields on a straight-line basis (rounding, in each of such relevant periods, to
the nearest month).
Release. Any release, spill, emission, leaking, pumping, pouring,
emptying, dumping, injection, escaping, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment
(including the abandonment or disposal of any barrel, container or other closed
receptacle containing any Hazardous Material), or into or out of any Facility,
including the movement of any Hazardous Material through the air, soil, surface
water, groundwater or property.
Rentals. As of the date of any determination thereof, all fixed
payments (including all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Subsidiary, as lessee or sublessee under a lease of real or
personal property, but exclusive of any amounts required to be paid by the
Company or a Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes, assessments,
amortization and similar charges. Fixed rents under any so-called "percentage
leases" shall be computed on the basis of the minimum rents, if any, required
to be paid by the lessee, regardless of sales volume or gross revenues.
Securities Act. The Securities Act of 1933, as amended, and as it may
be further amended from time to time.
Senior Consolidated Indebtedness. At any time, all Consolidated
Indebtedness other than Subordinated Consolidated Indebtedness at such time.
Subordinated Consolidated Indebtedness. Any unsecured Consolidated
Indebtedness (i) which is expressly subordinate in right of payment to the
Notes pursuant to a form of subordination substantially in the form of the
attached Exhibit E, and (ii) which has a Weighted Average Life to Maturity
extending beyond the final maturity of the 7.74% Senior Notes.
Subsidiary. Any corporation of which shares of Voting Stock
representing more than 50% of the combined voting power of each outstanding
class of Voting Stock are owned or controlled, directly or indirectly, by the
Company and any other corporation whose assets and operations are consolidated
with those of the Company.
Voting Stock. Capital stock of any class of a corporation having
power to vote for the election of members of the board of directors of such
corporation, or persons performing similar functions.
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Weighted Average Life to Maturity. As applied to any prepayment of
principal of any Note (or to any Subordinated Consolidated Indebtedness) at any
date, the number of years obtained by dividing (a) the then outstanding
principal amount of such Note to be prepaid (or the then outstanding principal
amount of such Subordinated Consolidated Indebtedness) into (b) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity, or other required payment,
including payment at final maturity, foregone by virtue of such prepayment of
such Note (or in respect of such Subordinated Consolidated Indebtedness) by
(ii) the number of years (calculated to the nearest 1/12th) which would have
elapsed between such date and the making of such payment.
Wholly-Owned. When applied to a Subsidiary, any Subsidiary 100% of
the Voting Stock of which is owned by the Company and/or its Wholly-Owned
Subsidiaries, other than directors' qualifying shares or, in the case of
Subsidiaries organized under the laws of a jurisdiction other than the United
States or a state thereof, nominal shares held by foreign nationals in
accordance with local law.
Terms which are defined in other Sections of this Agreement shall have
the meanings specified therein.
1 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with
United States generally accepted accounting principles as in effect from time
to time (and the term "generally accepted accounting principles" shall have
such meaning).
2 Valuation Principles. Except where indicated expressly to the
contrary by the use of terms such as "fair value," "fair market value" or
"market value," each asset, each liability and each capital item of any Person,
and any quantity derivable by a computation involving any of such assets,
liabilities or capital items, shall be taken at the net book value thereof for
all purposes of this Agreement. "Net book value" with respect to any asset,
liability or capital item of any Person shall mean the amount at which the same
is recorded or, in effect from time to time in accordance with generally
accepted accounting principles, should have been recorded in the books of
account of such Person, as reduced by any reserves which have been or, in
accordance with generally accepted accounting principles, should have been set
aside with respect thereto, but in every case (whether or not permitted in
accordance with generally accepted accounting principles) without giving effect
to any write-up, write-down or write-off (other than any write-down or
write-off the entire amount of which was charged to Consolidated Net Income or
to a reserve which was a charge to Consolidated Net Income or a write-up
permitted by generally accepted accounting principles in connection with
business acquisitions) relating thereto which was made after the date of this
Agreement.
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3 Direct or Indirect Actions. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
5. AFFIRMATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on
any Note:
0 Corporate Existence. The Company will maintain and preserve,
and will cause each Material Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and maintain, preserve, renew and
extend all of its rights, powers, privileges and franchises necessary to the
proper conduct of its business; provided, however, that the foregoing shall not
prevent any transaction permitted by Section 7.4 or 7.5 or the termination of
the corporate existence of any Material Subsidiary or of any such right, power,
privilege or franchise of the Company or any Material Subsidiary if, in the
opinion of the Board of Directors of the Company, such termination is in the
best interests of the Company, is not disadvantageous to holders of the Notes
and is not otherwise prohibited by this Agreement.
1 Insurance. The Company will, and will cause each Material
Subsidiary to, maintain insurance coverage with financially sound and reputable
insurers in such amounts, with such deductibles and against such risks as are
required by law or sound business practice and are customary for corporations
engaged in the same or similar businesses and owning and operating similar
properties as the Company and its Subsidiaries.
2 Taxes, Claims for Labor and Materials. The Company will pay
and discharge, and will cause each Material Subsidiary to pay and discharge,
all taxes, assessments and governmental charges or levies imposed upon it or
its property or assets, or upon properties leased by it (but only to the extent
required to do so by the applicable lease), other than taxes which,
individually or in the aggregate, are not material in amount and the
non-payment of which could not reasonably be expected to have a Material
Adverse Effect, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien not permitted by Section
7.3(b) upon its property or assets, provided that neither the Company nor any
Material Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim, the payment of which is being contested in good faith and by
proper proceedings that will stay the forfeiture or sale of any property and
with respect to which adequate reserves are maintained in accordance with
generally accepted accounting principles.
3 Maintenance of Properties. The Company will maintain,
preserve and keep, and will cause each Material Subsidiary to maintain,
preserve and keep, its properties (whether owned in fee or a leasehold
interest) in good repair and working order, ordinary wear and tear excepted,
and from time to time will make all necessary repairs, replacements, renewals
and additions.
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4 Maintenance of Records. The Company will keep, and will cause
each Subsidiary to keep, at all times proper books of record and account in
which full, true and correct entries will be made of all dealings or
transactions relating to the business and affairs of the Company or such
Subsidiary in order to permit preparation of financial statements in accordance
with generally accepted accounting principles (except for the application of
non-United States accounting principles and practices to the financial
statements of certain non-United States Subsidiaries, to the extent that such
application does not prevent the Company from preparing consolidated financial
statements in accordance with generally accepted accounting principles), and
the Company will, and will cause each Subsidiary to, provide reasonable
protection against loss or damage to such books of record and account.
5 Financial Information and Reports. The Company will furnish
to the Securities Valuation Office of the National Association of Insurance
Commissioners, 195 Broadway, New York, New York 10007, a copy of the financial
statements referred to in Section 6.6(b) at the times required below. The
Company will furnish to you and to any other Institutional Holder (in duplicate
if you or such other holder so request) the following:
() As soon as available and in any event within 60 days after the
end of each of the first three quarterly accounting periods of each fiscal year
of the Company, a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such period and consolidated statements of income
and cash flows of the Company and its Subsidiaries for the periods beginning on
the first day of such fiscal year and the first day of such quarterly
accounting period and ending on the date of such balance sheet, setting forth
in comparative form the corresponding consolidated figures for the
corresponding periods of the preceding fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for changes
disclosed in such financial statements or in the notes thereto and concurred in
by the Company's independent certified public accountants) and accompanied by a
certificate of the chief financial officer or chief accounting officer of the
Company (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 Company 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 statements omit certain footnotes and are subject to normal
year-end audit adjustments;
(a) As soon as available and in any event within 120 days after
the last day of each fiscal year, a consolidated balance sheet of the Company
and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income and cash flows for such fiscal year, in each
case setting forth in comparative form figures for the preceding fiscal year,
all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied throughout the period involved
(except for changes disclosed in such
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financial statements or in the notes thereto and concurred in by independent
certified public accountants) 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 Company, to the effect that such
financial statements present fairly, in all material respects, the consolidated
financial condition of the Company and its Subsidiaries in conformity with
generally accepted accounting principles and that the examination of such
financial statements by such accounting firm has been made in accordance with
generally accepted auditing standards;
(b) Together with the financial statements delivered pursuant to
paragraphs (a) and (b) of this Section 6.6, a certificate of the chief
financial officer, chief accounting officer or Treasurer of the Company, (i) to
the effect that such officer has re-examined the terms and provisions of this
Agreement and that at the date of such certificate, no Default or Event of
Default is occurring or has occurred as of the date of such certificate, during
the periods covered by such financial statements and as of the end of such
periods, or if such officer is aware of any Default or Event of Default, such
officer shall disclose in such statement the nature thereof, its period of
existence and what action, if any, the Company has taken or proposes to take
with respect thereto, (ii) stating whether the Company is in compliance with
Sections 7.1 through 7.8 and setting forth, in sufficient detail, the
information and computations required to establish whether or not the Company
was in compliance with the requirements of Sections 7.1 through 7.4 during the
periods covered by the financial reports then being furnished and as of the end
of such periods, (iii) describing the Company's sales of "trade receivables
under deferred terms and installment sales contract obligations", "net
investment in sales-type leases" and "trade receivables" and the reserves for
each of the foregoing as reflected on the Company's most recent consolidated
balance sheet included in such financial statements and (iv) giving the
aggregate notional dollar amount of all leases, receivables and other accounts
in respect of the sale, factoring or other disposition of which the Company has
or has given or made any recourse obligation, guarantee or other contractual
undertaking;
(c) Together with the financial reports delivered pursuant to
paragraph (b) of this Section 6.6, a letter of the Company's independent
certified public accountants stating that in making the examination necessary
for expressing an opinion on such financial statements, nothing came to their
attention that caused them to believe that there is in existence or has
occurred any Default or Event of Default hereunder (the occurrence of which is
ascertainable by accountants in the course of normal audit procedures) or, if
such accountants shall have obtained knowledge of any such Default or Event of
Default, describing the nature thereof and the length of time it has existed;
(d) Promptly after the Company obtains knowledge thereof, notice
of any litigation or any governmental proceeding pending against the Company or
any Subsidiary in which the damages sought exceed $10,000,000, individually or
in the aggregate, or which could reasonably be expected to have a Material
Adverse Effect;
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(e) Promptly, copies of each financial statement, notice, report
and proxy statement which the Company furnishes to its stockholders; copies of
each registration statement and periodic report (without exhibits and other
than registration statements relating to employee benefit plans) which the
Company files with the Securities and Exchange Commission, and any similar or
successor agency of the Federal government administering the Securities Act,
the Exchange Act or the Trust Indenture Act of 1939, as amended; without
duplication, copies of each report (other than reports relating solely to the
issuance of, or transactions by others involving, its securities) relating to
the Company or its securities which the Company files with any securities
exchange on which any of the Company's securities may be registered; copies of
any orders applicable to the Company or a Material Subsidiary in any material
proceedings to which the Company or any of its Material Subsidiaries is a
party, issued by any governmental agency, Federal or state, having jurisdiction
over the Company or any of its Material Subsidiaries (which orders in any event
shall not include notices, orders and other decisions of a routine nature
issued in connection with audits or similar proceedings before Federal, state,
local or foreign taxing authorities or orders that could not, individually or
in the aggregate, be reasonably expected to have a Material Adverse Effect);
and, at any time when the Company is not a reporting company under Section 13
or 15(d) of the Exchange Act or has not complied with the requirements for the
exemption from registration under the Exchange Act set forth in Rule
12g-3-2(b), such financial or other information as any holder of the Notes or
prospective purchaser of the Notes may reasonably determine is required to
permit such holder to comply with the requirements of Rule 144A under the
Securities Act in connection with the resale by it of the Notes;
(f) As soon as available, a copy of each other report submitted to
the Company or any Subsidiary by independent accountants retained by the
Company or any Subsidiary in connection with any special audit made by them of
the books of the Company or any Subsidiary;
(g) At the time of delivery of the financial statements referred
to in Section 6.6(a) or (b), an updated list setting forth the information
specified in Annex I;
(h) If at any time the Company provides consolidating financial
statements to any holder of Indebtedness, copies of such consolidating
financial statements; and
(i) Such additional information as you or such other Institutional
Holder of the Notes may reasonably request concerning the Company and its
Subsidiaries.
6 Inspection of Properties and Records. The Company will allow,
and will cause each Subsidiary to allow, any representative of you or any other
Institutional Holder, so long as you or such other Institutional Holder holds
any Note, to visit and inspect any of its properties, to examine its books of
record and account and to discuss its affairs, finances and accounts with its
officers and its present and former public accountants (and by this provision
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the Company authorizes such accountants to discuss with you or such
Institutional Holder its affairs, finances and accounts), all at such
reasonable times and as often as you or such Institutional Holder may
reasonably request and, if at the time thereof any Default or Event of Default
has occurred and is continuing, at the Company's expense.
7 ERISA.
() All assumptions and methods used to determine the actuarial
valuation of employee benefits, both vested and unvested, under any qualified
Plan of the Company or any Subsidiary in the United States, and each such Plan,
whether now existing or adopted after the date hereof, will comply in all
material respects with ERISA and other applicable laws.
(a) The Company will not at any time permit any Plan to:
() engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Code or in Section 406 of ERISA;
(i) incur any "accumulated funding deficiency" as such term
is defined in Section 302 of ERISA, whether or not waived; or
(ii) be terminated under circumstances which are likely to
result in the imposition of a lien on the property of the Company or any such
Subsidiary pursuant to Section 4068 of ERISA, if and to the extent such
termination is within the control of the Company; if the event or condition
described in clauses (i), (ii) or (iii) above is likely to subject the Company
or any Material Subsidiary or ERISA Affiliate to liabilities which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) The Company will furnish you or any other Institutional Holder
a copy of the annual report of each Plan (Form 5500) required to be filed with
the Internal Revenue Service no later than 45 days after the date such report
has been filed with the Internal Revenue Service.
(c) Promptly upon obtaining knowledge of the occurrence thereof,
the Company will give you and each other Institutional Holder notice of (i) a
reportable event (within the meaning of Section 4043(c) of ERISA and the
regulations thereunder) with respect to any Plan; (ii) the institution of any
steps by the Company, any Subsidiary, any ERISA Affiliate, the PBGC or any
other Person to terminate any Plan; (iii) the institution of any steps by the
Company, any Subsidiary, or any ERISA affiliate to withdraw from any Plan; (iv)
the institution of any steps by the PBGC to appoint a trustee to administer any
Plan; (v) a prohibited transaction in connection with any Plan; (vi) any
material increase in the contingent liability of the Company or any Subsidiary
with respect to any postretirement welfare liability; (vii) any event,
transaction or condition that could result in the incurrence of any liability
by the
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Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of a Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions; or (viii) the taking of any action by
the Internal Revenue Service, the Department of Labor or the PBGC with respect
to any of the foregoing, if any of the events specified in this paragraph (d)
could reasonably be expected to result in a Material Adverse Effect.
8 Compliance with Laws.
() The Company will comply, and will cause each Subsidiary to
comply, with all laws, rules and regulations, including Environmental Laws,
relating to its or their respective businesses, other than laws, rules and
regulations the failure to comply with which and the sanctions and penalties
resulting therefrom, individually or in the aggregate, would not have a
Material Adverse Effect; provided, however, that the Company and its
Subsidiaries shall not be required to comply with laws, rules and regulations
the validity or applicability of which are being contested in good faith and by
appropriate proceedings and as to which the Company or such Subsidiary has
established adequate reserves on its books in accordance with generally
accepted accounting principles.
(a) Promptly upon the occurrence thereof, the Company will give
you and each other Institutional Holder notice of the institution of any
proceedings against, or the receipt of written notice of potential liability or
responsibility of, the Company or any Subsidiary for violation, or the alleged
violation, of any Environmental Law which violation could reasonably be
expected to give rise to a Material Adverse Effect.
9 Acquisition of Notes. Neither the Company nor any Subsidiary
nor any Affiliate acting on behalf of the Company, directly or indirectly, will
repurchase or offer to repurchase any Notes unless the offer is made to
repurchase Notes pro rata from all holders at the same time and on the same
terms. The Company will forthwith cancel any Notes in any manner or at any
time acquired by the Company or any Subsidiary or Affiliate and such Notes
shall not be deemed to be outstanding for any of the purposes of this Agreement
or the Notes.
10 Private Placement Number. The Company consents to the filing
of copies of this Agreement with the CUSIP Service Bureau of Standard & Poor's
Corporation to obtain private placement numbers.
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6. NEGATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on
any Note:
0 Net Worth. The Company will not permit at any time its
Consolidated Net Worth to be less than $715,000,000 plus (i) 50% of
Consolidated Net Income (without reduction for any net losses) for the period
from April 1, 1996 to June 30, 1996, plus (ii) the cumulative sum of 50% of
Consolidated Net Income (without reduction for any net losses) for each
completed fiscal year ending after June 30, 1996 and on or before the date 120
days prior to the date of determination, plus (iii) for the then current fiscal
year, the cumulative sum of 50% of Consolidated Net Income (without reduction
for any net losses) from the beginning of such year to the last day of the
fiscal quarter of the Company most recently ended as of the date 60 days prior
to the date of determination.
1 Indebtedness. The Company will not, and will not permit any
Subsidiary to, permit to exist, create, assume, incur or otherwise be or become
liable for, directly or indirectly, any Indebtedness other than:
() the Notes;
(a) Indebtedness of the Company and its Subsidiaries existing on
the date hereof and described in the attached Annex II and after applying the
proceeds from the sale of the Notes to reduce the outstanding amount shown in
Annex II;
(b) Indebtedness of a Subsidiary owed to the Company or another
Subsidiary;
(c) additional Indebtedness, provided that at the time of
incurring such additional Indebtedness and after giving effect thereto and to
the application of the proceeds therefrom, the aggregate principal amount of
all Senior Consolidated Indebtedness then to be outstanding shall not exceed
50% of Consolidated Total Capitalization and (ii) the aggregate principal
amount of all Consolidated Indebtedness then to be outstanding shall not exceed
55% of Consolidated Total Capitalization;
(d) additional Indebtedness of Subsidiaries, provided that, at the
time of incurring such additional Indebtedness and after giving effect thereto
and to the application of the proceeds therefrom, (i) such Indebtedness may be
incurred pursuant to paragraph (d) of this Section 7.2 and (ii) the sum
(without duplication) of the aggregate principal amount of outstanding (A)
Indebtedness of Subsidiaries (other than Indebtedness referred to in paragraph
(c) of this Section 7.2), and (B) Indebtedness of the Company or any Subsidiary
(other than Indebtedness referred to in paragraph (c) of this Section 7.2)
secured by Liens permitted by Section 7.3 (other than secured Indebtedness
permitted by paragraphs (j) and (m) of Section
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7.3) does not exceed 20% of the maximum aggregate principal amount of
Consolidated Indebtedness permitted to be outstanding under this Section 7.2;
and
(e) Indebtedness of a Person existing at the time it becomes a
Subsidiary, or substantially all of its assets are acquired by the Company or a
Subsidiary, provided such Indebtedness was not created or incurred in
contemplation of such Person becoming a Subsidiary or such acquisition and
extensions, renewals, refinancings and refundings of such Indebtedness provided
there is no increase in the principal amount of such Indebtedness at the time
thereof.
2 Liens. The Company will not, and will not permit any
Subsidiary to, permit to exist, create, assume or incur, directly or
indirectly, any Lien on its properties or assets, whether now owned or
hereafter acquired, except:
() Liens existing on property or assets of the Company or any
Subsidiary as of the date of this Agreement that are described in the attached
Annex II;
(a) Liens for taxes, assessments, governmental charges, levies or
claims not then due and delinquent or the validity of which is being contested
in good faith and as to which the Company has established adequate reserves on
its books in accordance with generally accepted accounting principles;
(b) Liens arising in connection with court proceedings, provided
the execution of such Liens is effectively stayed, such Liens are being
contested in good faith by appropriate proceedings and the Company has
established adequate reserves therefor on its books in accordance with
generally accepted accounting principles;
(c) Liens arising in the ordinary course of business or incidental
to the ownership of property or assets and not incurred in connection with the
borrowing of money (including, but not limited to, encumbrances in the nature
of zoning restrictions, easements, rights and restrictions of record on the use
of real property, defects in title and landlord's, lessor's, mechanics' and
materialmen's liens) that in the aggregate do not materially interfere with the
conduct of the business of the Company and its Subsidiaries taken as a whole or
materially impair the value of the property or assets subject thereto;
(d) Liens in connection with workers compensation, unemployment
insurance or other social security obligations;
(e) Liens securing the performance of bids, tenders, contracts,
surety and appeal bonds;
(f) Liens to secure progress or partial payments on contracts and
other obligations;
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(g) Unexercised rights of set-off, bankers' liens and other rights
arising solely by operation of law and not created to secure Indebtedness;
(h) To the extent considered a Lien on assets of the Company or
any Subsidiary, Liens arising in connection with the sale or factoring of
leases, receivables or other accounts in the ordinary course of business;
provided that such assets, in accordance with generally accepted accounting
principles, are not shown on the consolidated balance sheet of the Company;
(i) Liens on properties or assets of a Person existing at the time
such Person becomes a Subsidiary or is merged or consolidated with or into the
Company or any Subsidiary and not created in contemplation of such event;
(j) To the extent considered a Lien on assets of the Company or
any Subsidiary, the interest of the lessee or purchaser in assets of the
Company or any Subsidiary leased to such lessee under a lease or sold to such
purchaser under the terms of a conditional sale arrangement;
(k) Liens securing Indebtedness of a Subsidiary to the Company or
to any Wholly-Owned Subsidiary;
(l) Liens (i) existing on property at the time of its acquisition
by the Company or a Subsidiary and not created in contemplation thereof,
provided the Indebtedness secured by such Lien is assumed by the Company or a
Subsidiary; or (ii) on property created substantially contemporaneously with
the date of acquisition or within 12 months of the acquisition or completion of
construction thereof to secure or provide for all or a portion of the purchase
price or cost of construction of such property; provided in the case of clauses
(i) and (ii) that such Liens do not extend to other property of the Company or
any Subsidiary, that the aggregate principal amount of Indebtedness secured by
each such Lien does not exceed 100% of the lesser of the cost or fair market
value at the time of acquisition of the property or completion of construction
subject thereto and that the Indebtedness secured by such Liens could be
incurred pursuant to Section 7.2; and
(m) Liens not otherwise permitted by paragraphs (a) through (m)
above incurred subsequent to the date hereof to secure Indebtedness, provided
that at the time of incurring such additional Indebtedness and after giving
effect thereto and to the application of the proceeds therefrom, (i) such
Indebtedness can be incurred pursuant to Section 7.2(d) or, if of a Subsidiary,
Section 7.2(e), and (ii) the sum (without duplication) of the aggregate
principal amount of outstanding (A) Indebtedness of Subsidiaries (other than
Indebtedness referred to in paragraph (c) of Section 7.2), and (B) Indebtedness
of the Company or any Subsidiary (other than Indebtedness referred to in
paragraph (c) of Section 7.2) secured by Liens permitted by this Section 7.3
(other than secured Indebtedness permitted by paragraphs (j) and (m) above)
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does not exceed 20% of the maximum aggregate principal amount of Consolidated
Indebtedness permitted to be outstanding under Section 7.2.
3 Merger or Consolidation. The Company will not merge or
consolidate with, or sell all or substantially all of its assets to, any
Person, except that the Company may merge into or consolidate with, or sell all
or substantially all of its assets to, any Person or permit any Person to merge
into it, provided that immediately after giving effect thereto,
() The Company is the successor corporation or, if the Company
is not the successor corporation, (x) the successor corporation is a solvent
corporation organized under the laws of a state of the United States of America
or the District of Columbia and expressly assumes in writing the Company's
obligations under the Notes and this Agreement and (y) the holders of the Notes
shall have received an opinion of legal counsel reasonably acceptable to them
that this Agreement and the Notes are legal, valid and binding obligations of
the successor corporation, enforceable against the successor corporation in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and
other similar laws affecting creditors' rights generally, and to the
application of general principles of equity;
(i) There shall exist no Default or Event of Default; and
(ii) The Company or such successor corporation could incur at
least $1.00 of additional Indebtedness under Section 7.2.
4 Sale of Assets.
() The Company will not, and will not permit any Subsidiary to
(other than in the ordinary course of business (including sales of receivables,
leases and rental equipment)), sell, lease, transfer or otherwise (including by
way of merger) dispose of (collectively a "Disposition") any assets, including
capital stock of Subsidiaries, in one or a series of transactions, to any
Person, (i) if in any fiscal year, after giving effect to such Disposition, the
aggregate net book value of assets subject to Dispositions during such fiscal
year would exceed 15% of Consolidated Total Assets as of the end of the
immediately preceding fiscal year or (ii) if, after giving effect to such
Disposition and all prior Dispositions since the date hereof, the aggregate net
book value of assets subject to Dispositions would exceed, on a cumulative
basis, 30% of Consolidated Total Assets as of the end of the immediately
preceding fiscal year or (iii) if a Default or Event of Default exists or (iv)
if the Company cannot incur at least $1.00 of additional Indebtedness pursuant
to Section 7.2.
(a) Notwithstanding the foregoing limitations in paragraph (a) of
this Section 7.5, the Company or a Subsidiary may make a Disposition and the
net book value of the assets subject to such Disposition shall not be subject
to or included in the foregoing limitations and computations (i) if (A) the
proceeds (net of taxes and related expenses) from such Disposition
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<PAGE> 38
are reinvested, within twelve months after such Disposition, in productive
assets of the Company or its Subsidiaries (including capital stock of
Subsidiaries other than Wholly-Owned Subsidiaries) or (B) the Company, by
written notice mailed to each holder of outstanding Senior Consolidated
Indebtedness not less than 30 days prior to the date fixed by the Company for
the prepayment or purchase referred to below (which notice shall state that it
is given pursuant to this Section 7.5 and that any holder that elects to accept
such offer must do so by notice given to the Company not less than 10 days
prior to such date of prepayment or purchase) shall have offered, pursuant to a
pro-rata offer made concurrently to all holders of then outstanding Senior
Consolidated Indebtedness, to apply an amount equal to the proceeds (net of
taxes and related expenses) from such Disposition to the prepayment or
purchase, on the date specified in such notice (which date shall be not later
than 30 days following such Disposition) of Senior Consolidated Indebtedness
(at a prepayment or purchase price equal to the principal amount thereof and
accrued interest thereon to the date of such prepayment or purchase) or (ii) if
such Disposition is of assets of a Subsidiary or a business which was acquired
by the Company or a Subsidiary within 12 months of the date of such Disposition
and the proceeds (net of taxes and related expenses) from such Disposition are
applied contemporaneously to the repayment of Indebtedness associated with such
acquisition or (iii) if such Disposition is to the Company or a Wholly-Owned
Subsidiary.
5 Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, enter into any transaction (including the
furnishing of goods or services) with an Affiliate (other than a joint venture
which, if a Wholly-Owned Subsidiary, would not be a Material Subsidiary) except
on terms and conditions no less favorable to the Company or such Subsidiary
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate; provided that the Company will not, and will not permit any
Subsidiary to, enter into any transaction (including the furnishing of goods or
services) with any such joint venture unless such transaction is consistent
with the Company's past practices or is otherwise reasonably believed by the
Company to be prudent in the circumstances of such transaction.
6 Consolidated Tax Returns. The Company will not file, or
consent to the filing of, any consolidated Federal income tax return with any
Person other than a Subsidiary, except to the extent that the Company is
required under the Code to do otherwise.
7 Nature of Business. The Company will not, and will not permit
any Subsidiary to, engage in any business if, as a result thereof, the business
then to be conducted by the Company and its Subsidiaries taken as a whole,
would cease to be predominantly as described in the Private Placement
Memorandum dated February 1996.
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<PAGE> 39
7. EVENTS OF DEFAULT AND REMEDIES THEREFOR
0 Nature of Events. An "Event of Default" shall exist if any
one or more of the following occurs:
() Any default in the payment of interest when due on any of the
Notes and continuance of such default for a period of 3 days;
(a) Any default in the payment of the principal of any of the
Notes or the Make-Whole Amount thereon, if any, at maturity, upon acceleration
of maturity or at any date fixed for prepayment;
(b) Any default (i) in the payment of the principal of, or
interest or premium on, any other Indebtedness of the Company and its
Subsidiaries aggregating in excess of $10,000,000 as and when due and payable
(whether by lapse of time, declaration, call for redemption or otherwise) and
the continuation of such default beyond the period of grace, if any, allowed
with respect thereto, or (ii) under any mortgages, agreements or other
instruments of the Company and its Subsidiaries under or pursuant to which
Indebtedness aggregating in excess of $10,000,000 is issued and the
continuation of such default beyond the period of grace, if any, allowed with
respect thereto;
(c) Any default in the observance of any covenant or agreement
contained in Sections 7.1 through 7.8 or in Section 8.7;
(d) Any default in the observance or performance of any other
covenant or provision of this Agreement which is not remedied within 30 days
after the earlier of (i) the chief financial officer or chief accounting
officer of the Company obtaining actual knowledge of such default or (ii) the
Company receiving written notice of such default from the holder of any Note;
(e) Any representation or warranty made by the Company in this
Agreement, or made by the Company in any written statement or certificate
furnished by the Company in connection with the issuance and sale of the Notes
or furnished by the Company pursuant to this Agreement, proves incorrect as of
the date of the making thereof;
(f) Any judgment, writ or warrant of attachment or any similar
process in an aggregate amount in excess of $5,000,000 shall be entered or
filed against the Company or any Subsidiary or against any property or assets
of either and remain unpaid, unvacated, unbonded or unstayed (through appeal or
otherwise) for a period of 60 days after the Company or any Subsidiary receives
notice thereof;
(g) This Agreement or the Notes at any time for any reason cease
to be in full force and effect as a result of acts taken by the Company or
shall be declared to be null and
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<PAGE> 40
void in whole or in part by a court or other governmental or regulatory
authority having jurisdiction, or the validity or enforceability thereof shall
be contested by the Company, or the Company shall renounce this Agreement or
the Notes or deny that it has any or further liability thereunder;
(h) Any of the following events shall occur and such event, either
individually or together with any other such event or events, could reasonably
be expected to have a Material Adverse Effect (as used in this paragraph (i),
the terms "employee benefit plan" and "employee welfare benefit plan" shall
have the respective meanings assigned to such terms in Section 3 of ERISA):
(i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code;
(ii) a notice of intent to terminate any Plan shall have been
or is reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA Section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject to any such proceedings;
(iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of Section 4001(a)(18) of ERISA) under all Plans,
determined in accordance with Title IV of ERISA, shall exceed $10,000,000;
(iv) the Company or any ERISA Affiliate shall have incurred
or is reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans;
(v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan; or
(vi) the Company or any Material Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or any
Material Subsidiary thereunder; or
(i) The Company or any Subsidiary shall
( ) generally not pay its debts as they become due or admit
in writing its inability to pay its debts generally as they become due;
(i) file a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Federal Bankruptcy Code, or any
similar applicable bankruptcy or
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<PAGE> 41
insolvency law, as now or in the future amended (herein collectively called
"Bankruptcy Laws"); file an answer or other pleading admitting or failing to
deny the material allegations of such a petition; fail to file, within the time
allowed for such purpose, an answer or other pleading denying or otherwise
controverting the material allegations of such a petition; or file an answer or
other pleading seeking, consenting to or acquiescing in relief provided for
under the Bankruptcy Laws;
(ii) make an assignment of all or a substantial part of its
property for the benefit of its creditors;
(ii) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a substantial
part of its property;
(iv) be finally adjudicated bankrupt or insolvent;
(v) be subject to the entry of a court order, (A) appointing a
receiver, liquidator, custodian or trustee of it or for all or a substantial
part of its property, or (B) for relief pursuant to an involuntary case brought
under, or effecting an arrangement in, bankruptcy or (C) for a reorganization
pursuant to the Bankruptcy Laws or (D) for any other judicial modification or
alteration of the rights of creditors; or
(vi) be subject to the assumption of custody or sequestration by a
court of competent jurisdiction of all or a substantial part of its property,
which custody or sequestration shall not be suspended or terminated within 60
days from its inception.
1 Remedies on Default. When any Event of Default described in
paragraphs (a) through (i) of Section 8.1 has occurred and is continuing, the
holders of at least 33-1/3% in aggregate principal amount of the Notes then
outstanding may, by notice to the Company, declare the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and all
interest accrued on all Notes to be, and such Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are expressly waived. Notwithstanding the
foregoing, (i) when any Event of Default described in paragraph (a) or (b) of
Section 8.1 has occurred and is continuing, any holder may by notice to the
Company declare the entire principal, together with the Make-Whole Amount (to
the extent permitted by law) and all interest accrued on the Notes then held by
such holder to be, and such Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are expressly waived, and (ii) when any Event of Default described
in paragraph (j) of Section 8.1 has occurred, then the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and all
interest accrued on all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind, all of which are
expressly waived. Upon the Notes or any of them becoming due and payable as
aforesaid, the Company will forthwith pay to the holders of such Notes the
entire principal of and interest accrued on
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<PAGE> 42
such Notes, plus the Make-Whole Amount (to the extent permitted by law) which
shall be calculated on the Determination Date.
2 Annulment of Acceleration of Notes. The provisions of Section
8.2 are subject to the condition that if the principal of, the Make-Whole
Amount and accrued interest on any Note have been declared immediately due and
payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (i), inclusive, of Section 8.1, the holder or holders of
at least 66-2/3% in aggregate principal amount of the Notes then outstanding
may, by written instrument filed with the Company, rescind and annul such
declaration and the consequences thereof, provided that (i) at the time such
declaration is annulled and rescinded no judgment or decree has been entered
for the payment of any monies due pursuant to the Notes or this Agreement, (ii)
all arrears of interest upon all the Notes and all other sums payable under the
Notes and under this Agreement (except any principal, Make-Whole Amount or
interest on the Notes which has become due and payable solely by reason of such
declaration under Section 8.2) shall have been duly paid and (iii) each and
every Default or Event of Default shall have been cured or waived; and provided
further, that no such rescission and annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent thereto.
3 Other Remedies. If any Event of Default shall be continuing,
any holder of Notes may enforce its rights by suit in equity, by action at law,
or by any other appropriate proceedings, whether for the specific performance
(to the extent permitted by law) of any covenant or agreement contained in this
Agreement or in the Notes or in aid of the exercise of any power granted in
this Agreement, and may enforce the payment of any Note held by such holder and
any of its other legal or equitable rights.
4 Conduct No Waiver; Collection Expenses. No course of dealing
on the part of any holder of Notes, nor any delay or failure on the part of any
holder of Notes to exercise any of its rights, shall operate as a waiver of
such rights or otherwise prejudice such holder's rights, powers and remedies.
If the Company fails to pay, when due, the principal of, the Make-Whole Amount,
or the interest on, any Note, or fails to comply with any other provision of
this Agreement, the Company will pay to each holder, to the extent permitted by
law, on demand, such further amounts as shall be sufficient to cover the cost
and expenses, including but not limited to reasonable attorneys' fees, incurred
by such holders of the Notes in collecting any sums due on the Notes or in
otherwise enforcing any of their rights.
5 Remedies Cumulative. No right or remedy conferred upon or
reserved to any holder of Notes under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy given under this
Agreement or now or hereafter existing under any applicable law. Every right
and remedy given by this Agreement or by applicable law to any holder of Notes
may be exercised from time to time and as often as may be deemed expedient by
such holder, as the case may be.
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6 Notice of Default. With respect to Defaults, Events of
Default or claimed defaults, the Company will give the following notices:
() The Company promptly, but in any event within the earlier of
(i) 3 days after an executive officer of the Company has knowledge thereof or
(ii) the date on which similar notice is given to any other creditor of the
Company, will furnish to each holder of a Note written notice of the occurrence
of a Default or an Event of Default. Such notice shall specify the nature of
such default, the period of existence thereof and what action the Company has
taken or is taking or proposes to take with respect thereto.
(a) If the holder of any Note or of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default, the Company will forthwith give
written notice thereof to each holder of the then outstanding Notes, describing
the notice or action and the nature of the claimed default.
8. AMENDMENTS, WAIVERS AND CONSENTS
0 Matters Subject to Modification. Any term, covenant,
agreement or condition of this Agreement may, with the written consent of the
Company, be amended, or compliance therewith may be waived (either generally or
in a particular instance and either retroactively or prospectively), if the
Company shall have obtained the consent in writing of the holder or holders of
at least 66-2/3% in aggregate principal amount of outstanding Notes; provided,
however, that, without the written consent of the holder or holders of all of
the Notes then outstanding, no such waiver, modification, alteration or
amendment shall be effective which will (i) change the time of payment
(including any required prepayment or optional prepayment) of the principal of
or the interest on any Note, (ii) reduce the principal amount thereof or the
Make-Whole Amount, if any, or change the rate of interest thereon, (iii) change
any provision of any instrument affecting the preferences between holders of
the Notes or between holders of the Notes and other creditors of the Company,
or (iv) change any of the provisions of Section 8.2, Section 8.3 or this
Section 9.
For the purpose of determining whether holders of the requisite
principal amount of Notes have made or concurred in any waiver, consent,
approval, notice or other communication under this Agreement, Notes held in the
name of, or owned beneficially by, the Company, any Subsidiary or any Affiliate
thereof, shall not be deemed outstanding.
1 Solicitation of Holders of Notes. The Company will not
solicit, request or negotiate for or with respect to any proposed waiver or
amendment of any of the provisions of this Agreement or the Notes unless each
holder of the Notes (irrespective of the amount of Notes then owned by it)
shall concurrently be informed thereof by the Company and shall be afforded the
opportunity of considering the same and shall be supplied by the Company with
sufficient information to enable it to make an informed decision with respect
thereto. Executed
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or true and correct copies of any waiver or consent effected pursuant to the
provisions of this Section 9 shall be delivered by the Company to each holder
of outstanding Notes forthwith following the date on which the same shall have
been executed and delivered by the holder or holders of the requisite
percentage of outstanding Notes. The Company 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 holder of the Notes as
consideration for or as an inducement to the entering into by any holder of the
Notes 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 each holder of the then outstanding Notes.
2 Binding Effect. Any such amendment or waiver shall apply
equally to all the holders of the Notes and shall be binding upon them, upon
each future holder of any Note and upon the Company whether or not such Note
shall have been marked to indicate such amendment or waiver. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right related thereto.
9. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
0 Form of Notes. Each Note initially delivered under this
Agreement will be in the form of one fully registered Note in the form attached
as Exhibit A. The Notes are issuable only in fully registered form and in
denominations of at least $500,000 (or the remaining outstanding balance
thereof, if less than $500,000).
1 Note Register. The Company shall cause to be kept at its
principal office a register (the "Note Register") for the registration and
transfer of the Notes. The names and addresses of the holders of Notes, the
transfer thereof and the names and addresses of the transferees of the Notes
shall be registered in the Note Register. The Company may deem and treat the
person in whose name a Note is so registered as the holder and owner thereof
for all purposes and shall not be affected by any notice to the contrary, until
due presentment of such Note for registration of transfer as provided in this
Section 10.
2 Issuance of New Notes upon Exchange or Transfer. Upon
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section 11.2, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest has been paid on the Notes so surrendered (or,
if no interest has been paid, the date of such surrendered Note), but in the
same aggregate unpaid principal amount as such surrendered Note, and registered
in the name of such person or persons as shall be designated in writing by such
holder. Every Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or by his attorney duly authorized in writing. The
Company may condition its issuance of any new Note in connection
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<PAGE> 45
with a transfer by any Person on the making of the representations and
warranties set forth in Section 3.2, by Institutional Holders on compliance
with Section 2.4 and on the payment to the Company of a sum sufficient to cover
any stamp tax or other governmental charge imposed in respect of such transfer.
3 Replacement of Notes. Upon receipt of evidence satisfactory
to the Company of the loss, theft, mutilation or destruction of any Note, and
in the case of any such loss, theft or destruction upon delivery of a bond of
indemnity in such form and amount as shall be reasonably satisfactory to the
Company or in the event of such mutilation upon surrender and cancellation of
the Note, the Company, without charge to the holder thereof, will make and
deliver a new Note, of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note. If any such lost, stolen or destroyed Note is owned by you or
any other Institutional Holder, then the affidavit of an authorized officer of
such owner setting forth the fact of such loss, theft or destruction and of its
ownership of the Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof, and no further indemnity shall be
required as a condition to the execution and delivery of a new Note, other than
a written agreement of such owner (in form reasonably satisfactory to the
Company) to indemnify the Company.
10. MISCELLANEOUS
0 Expenses. Whether or not the purchase of Notes herein
contemplated shall be consummated, the Company agrees to pay directly all
expenses in connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated by this Agreement, including, but
not limited to, out-of-pocket expenses, filing fees of Standard & Poor's
Corporation in connection with obtaining a private placement number, charges
and disbursements of special counsel, photocopying and printing costs and
charges for shipping the Notes, adequately insured, to you at your home office
or at such other address as you may designate, and all similar expenses
(including the fees and expenses of counsel) relating to any amendments,
waivers or consents in connection with this Agreement or the Notes, including,
but not limited to, any such amendments, waivers or consents resulting from any
work-out, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes. The Company
also agrees that it will pay and save you harmless against any and all
liability with respect to stamp and other documentary taxes, if any, which may
be payable, or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes (but not in connection
with a transfer or replacement of any Notes), whether or not any Notes are then
outstanding. The obligations of the Company under this Section 11.1 shall
survive the retirement of the Notes. The Company agrees to pay the fees and
expenses of your special counsel (to the extent not previously paid pursuant to
Section 4.4) within 3 Business Days of receipt of an itemized statement
therefor.
1 Notices. Except as otherwise expressly provided herein, all
communications provided for in this Agreement shall be in writing and delivered
or sent by registered or certified mail, return receipt requested, or by
overnight courier (i) if to you, to the address set
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<PAGE> 46
forth below your name in Schedule I, or to such other address as you may in
writing designate, (ii) if to any other holder of the Notes, to such address as
the holder may designate in writing to the Company, and (ii) if to the Company,
to Sensormatic Electronics Corporation, 951 Yamato Road, Boca Raton, Florida
33431-0700 (telephone number: (407) 989-7000; facsimile (407) 989-7021),
Attention: Garrett E. Pierce, Senior Vice President and Chief Financial
Officer, or to such other address as the Company may in writing designate.
2 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by you
at the closing of the purchase of the Notes (except the Notes themselves), and
(iii) financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process, and you may destroy any original document so reproduced. The Company
agrees and stipulates that any such reproduction which is legible shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence; provided that nothing herein contained
shall preclude the Company from objecting to the admission of any reproduction
on the basis that such reproduction is not accurate, has been altered or is
otherwise incomplete.
3 Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. In connection with the restructuring of the Company's
international operations (among other things), the Company is actively
considering forming a holding company that would hold all of the shares of
capital stock of the Company. In the event that such holding company is formed,
such holding company would be substituted as the obligor hereunder and under
the Notes in lieu of the Company; provided that such substitution will not
occur without the prior written consent of the holder or holders of all of the
Notes then outstanding (which consent each holder may grant or withhold in its
sole discretion).
4 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
5 Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
6 Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart or reproduction thereof permitted by Section
11.3.
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7 Reliance on and Survival of Provisions. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant to this Agreement, whether or not in connection
with a closing, (i) shall be deemed to have been relied upon by you,
notwithstanding any investigation heretofore or hereafter made by you or on
your behalf and (ii) shall survive the delivery of this Agreement and the
Notes.
8 Integration and Severability. This Agreement embodies the
entire agreement and understanding between you and the Company, and supersedes
all prior agreements and understandings relating to the subject matter hereof.
In case any one or more of the provisions contained in this Agreement or in any
Note, or application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained in this Agreement and in any Note, and any other application thereof,
shall not in any way be affected or impaired thereby.
9 Confidentiality. You agree that you will keep confidential in
accordance with your internal policies and procedures in effect from time to
time any written information with respect to the Company or its Subsidiaries
which is furnished pursuant to this Agreement and which is designated by the
Company or its Subsidiaries to you in writing as confidential, provided that
you may disclose any such information (a) as has become generally available to
the public (other than as a consequence of your actions) or to you on a
non-confidential basis from a source other than the Company or its Subsidiaries
or as was known to you on a non-confidential basis prior to its disclosure by
the Company or its Subsidiaries, (b) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over you or to the
National Association of Insurance Commissioners or similar organizations or
their successors, (c) as may be required or appropriate in response to any
summons or subpoena or in connection with any litigation, (d) to the extent
that you reasonably believe it appropriate in order to protect your investment
in the Notes or in order to comply with any law, order, regulation or ruling
applicable to you, (e) to your directors, officers, trustees, employees,
auditors, financial advisors or counsel or to rating agencies or another holder
of the Notes, (f) to Persons who are parties to similar confidentiality
agreements, or (g) to the prospective transferee in connection with any
contemplated transfer of any of the Notes by you. By its acceptance of a Note,
any transferee shall be bound by the terms of this Section 11.10.
10 Usury Savings Clause. Anything in this Agreement or the Notes
to the contrary notwithstanding, in no event shall the rate of interest payable
on any overdue principal (including any overdue optional or required
prepayment), on any overdue Make-Whole Amount or on any overdue installment of
interest exceed the highest rate which may be lawfully charged under the laws
found to apply by a court of competent jurisdiction interpreting this Agreement
and the Notes.
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IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed and delivered by their respective officer or officers
thereunto duly authorized.
SENSORMATIC ELECTRONICS CORPORATION
By: /s/ Mike A. Flores
--------------------------------------
Title: Vice President & Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Trustee of a Commingled Pension Fund
By: /s/ David G. Muller
--------------------------------------
Title: Vice President
J.P. MORGAN INVESTMENT MANAGEMENT INC.
as Investment Manager for Various
Institutional Investors
By: /s/ David G. Muller
--------------------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Investment Manager for Various
Institutional Investors
By: /s/ David G. Muller
--------------------------------------
Title: Vice President
44
<PAGE> 49
COMERICA BANK as Trustee
By: /s/ Anna L. Ngo
--------------------------------------
Title: Trust Officer
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Robert Derrick
--------------------------------------
Title: Senior Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ Robert Derrick
--------------------------------------
Title: Senior Vice President
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Jon C. Heiny
--------------------------------------
Title: Counsel
By: /s/ James Hovey
--------------------------------------
Title: Director Securities Investment
METROPOLITAN INSURANCE AND ANNUITY COMPANY
By: /s/ James Wiviott
--------------------------------------
Title: Vice President
45
<PAGE> 50
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James Dingler
--------------------------------------
Title: Assistant Vice President
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Gary A. Poliner
--------------------------------------
Title: Vice President
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc.
By: /s/ James G. Schelling
--------------------------------------
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, on behalf of one or more
separate accounts
By: CIGNA Investments, Inc.
By: /s/ James G. Schelling
--------------------------------------
Title: Managing Director
46
<PAGE> 51
CENTURY INDEMNITY COMPANY
By: CIGNA Investments, Inc.
By: /s/ James G. Schelling
--------------------------------------
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA Investments, Inc.
By: /s/ James G. Schelling
--------------------------------------
Title: Managing Director
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ John Litchfield
--------------------------------------
Title: Director - Private Placements
NATIONWIDE LIFE AND ANNUITY INSURANCE
COMPANY
By: /s/ Michael D. Groseclose
--------------------------------------
Title: Associate Vice President
WEST COAST LIFE INSURANCE COMPANY
By: /s/ Michael D. Groseclose
--------------------------------------
Title: Attorney-in-Fact
47
<PAGE> 52
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Michael D. Groseclose
--------------------------------------
Title: Associate Vice President
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By: /s/ Beatriz M. Cuervo
--------------------------------------
Title: Investment Officer
SUNLIFE ASSURANCE COMPANY OF CANADA
By: /s/ Margaret S. Mead
--------------------------------------
Title: Assistant Vice President
& Counsel - for Secretary
SUNLIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: /s/ John N. Whelihan
--------------------------------------
Title: Vice President
U.S. Private Placements
for President
48
<PAGE> 53
THE MINNESOTA MUTUAL LIFE INSURANCE
COMPANY
By: MIMLIC Asset Management Company
By: /s/ Loren Haugland
--------------------------------------
Title: Vice President
GENERAL AMERICAN LIFE INSURANCE COMPANY
By: /s/ Douglas R. Koester
--------------------------------------
Title: Vice President, Gaimco
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By: /s/ Michael A. Boedeker
--------------------------------------
Title: Vice President, Fixed Income
Securities
MODERN WOODMEN OF AMERICA
By: /s/ W.B. Foster
--------------------------------------
Title: President
49
<PAGE> 54
BANKERS SECURITY LIFE
INSURANCE SOCIETY
By: /s/ Gregory M. Anderson
--------------------------------------
Title: Vice President
By: /s/ James V. Wittich
--------------------------------------
Title: Vice President
UNITED SERVICES LIFE INSURANCE COMPANY
By: /s/ Gregory M. Anderson
--------------------------------------
Title: Vice President
MELLON BANK, N.A., as Trustee of the
AT&T Master Trust for Employees Pension
Plans Trust (as directed by J.P. Morgan
Investment Management, Inc.)
By: /s/ Robert Fass
--------------------------------------
Title: Vice President
50
<PAGE> 55
EXHIBIT A-1
SENSORMATIC ELECTRONICS CORPORATION
7.74% SENIOR NOTE
Due March 29, 2006
THIS NOTE IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") THE HOLDER HEREOF, BY PURCHASING THIS
NOTE, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY, (2) TO A PERSON WHO
CERTIFIES TO THE SELLER AS TO ITS STATUS AS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
Registered Note No. C-___ March 29, 1996
$___________
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation
(the "Company), for value received, promises to pay to _______________ or
registered assigns, on March 29, 2006, the principal amount of $_________ and
to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at
the rate of 7.74% per annum from the date hereof until maturity, payable on
[March 30] and [September 30] in each year, commencing [September 30], 1996,
and at maturity, and to pay interest, for each day until paid, on any overdue
principal, on any overdue Make-Whole Amount and on any overdue installment of
interest at a per annum rate equal to the greater of (a) the rate of 9.74% and
(b) the sum of the reference rate announced by Morgan Guaranty Trust Company of
New York from time to time as its "prime rate" for United States domestic loans
in United States dollars plus 2%. Payments of the principal of, the Make-Whole
Amount, if any, and the interest on this Note shall be made in lawful money of
the United States of America in the manner and at the place provided in Section
2.4 of the Note Agreement hereinafter defined.
51
<PAGE> 56
This Note is issued under and pursuant to the terms and
provisions of the Note Agreement, dated as of March 29, 1996 entered into by
the Company with the Purchasers named in Schedule I thereto (the "Note
Agreement"), and this Note and any holder hereof are entitled to all of the
benefits provided for by such Note Agreement or referred to therein. Reference
is made to the Note Agreement for a statement of such benefits.
As provided in the Note Agreement, upon surrender of this Note
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder hereof or its
attorney duly authorized in writing, a new Note for a like unpaid principal
amount will be issued to, and registered in the name of, the transferee upon
the payment of the taxes or other governmental charges, if any, that may be
imposed in connection therewith. The Company may treat the person in whose
name this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
This Note may be declared due prior to its expressed maturity
date and voluntary prepayments may be made hereon all in the events, on the
terms and in the manner as provided in the Note Agreement. Such prepayments
include certain optional prepayments with a Make-Whole Amount.
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Note Agreement or be
placed in the hands of attorneys for collection, the Company agrees to pay, in
addition to the principal, Make-Whole Amount, if any, and interest due and
payable hereon, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
This Note and the Note Agreement are governed by and construed
in accordance with the laws of the State of New York.
SENSORMATIC ELECTRONICS CORPORATION
By:
-------------------------------------
Its:
---------------------------------
EXHIBIT A-2
SENSORMATIC ELECTRONICS CORPORATION
7.11% SENIOR NOTE
Due March 29, 2001
52
<PAGE> 57
THIS NOTE IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") THE HOLDER HEREOF, BY PURCHASING THIS
NOTE, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY, (2) TO A PERSON WHO
CERTIFIES TO THE SELLER AS TO ITS STATUS AS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
Registered Note No. B-___ April 1, 1996
$___________
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation
(the "Company), for value received, promises to pay to _______________ or
registered assigns, on March 29, 2001, the principal amount of $_________ and
to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at
the rate of 7.11% per annum from the date hereof until maturity, payable on
[March 30] and [September 30] in each year, commencing [September 30], 1996,
and at maturity, and to pay interest, for each day until paid, on any overdue
principal, on any overdue Make-Whole Amount and on any overdue installment of
interest at a per annum rate equal to the greater of (a) the rate of 9.11% and
(b) the sum of the reference rate announced by Morgan Guaranty Trust Company of
New York from time to time as its "prime rate" for United States domestic loans
in United States dollars plus 2%. Payments of the principal of, the Make-Whole
Amount, if any, and the interest on this Note shall be made in lawful money of
the United States of America in the manner and at the place provided in Section
2.4 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms and
provisions of the Note Agreement, dated as of March 29, 1996 entered into by
the Company with the Purchasers named in Schedule I thereto (the "Note
Agreement"), and this Note and any holder hereof are entitled to all of the
benefits provided for by such Note Agreement or referred to therein. Reference
is made to the Note Agreement for a statement of such benefits.
As provided in the Note Agreement, upon surrender of this Note
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by
53
<PAGE> 58
the registered holder hereof or its attorney duly authorized in writing, a new
Note for a like unpaid principal amount will be issued to, and registered in
the name of, the transferee upon the payment of the taxes or other governmental
charges, if any, that may be imposed in connection therewith. The Company may
treat the person in whose name this Note is registered as the owner hereof for
the purpose of receiving payment and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
This Note may be declared due prior to its expressed maturity
date and voluntary prepayments may be made hereon all in the events, on the
terms and in the manner as provided in the Note Agreement. Such prepayments
include certain optional prepayments with a Make-Whole Amount.
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Note Agreement or be
placed in the hands of attorneys for collection, the Company agrees to pay, in
addition to the principal, Make-Whole Amount, if any, and interest due and
payable hereon, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
This Note and the Note Agreement are governed by and construed
in accordance with the laws of the State of New York.
SENSORMATIC ELECTRONICS CORPORATION
By:
-------------------------------------
Its:
---------------------------------
54
<PAGE> 59
EXHIBIT A-3
SENSORMATIC ELECTRONICS CORPORATION
6.99% SENIOR NOTE
Due March 29, 2000
THIS NOTE IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR
THE BENEFIT OF THE ISSUER THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO THE COMPANY, (2) TO A PERSON WHO CERTIFIES TO THE
SELLER AS TO ITS STATUS AS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
Registered Note No. A-___ April 1, 1996
$___________
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation (the "Company), for
value received, promises to pay to _______________ or registered assigns, on
March 29, 2000, the principal amount of $_________ and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 6.99%
per annum from the date hereof until maturity, payable on [March 30] and
[September 30] in each year, commencing [September 30], 1996, and at maturity,
and to pay interest, for each day until paid, on any overdue principal, on any
overdue Make-Whole Amount and on any overdue installment of interest at a per
annum rate equal to the greater of (a) the rate of 8.99% and (b) the sum of the
reference rate announced by Morgan Guaranty Trust Company of New York from time
to time as its "prime rate" for United States domestic loans in United States
dollars plus 2%. Payments of the principal of, the Make-Whole Amount, if any,
and the interest on this Note shall be made in lawful money of the United
States of America in the manner and at the place provided in Section 2.4 of the
Note Agreement hereinafter defined.
55
<PAGE> 60
This Note is issued under and pursuant to the terms and provisions of the Note
Agreement, dated as of March 29, 1996 entered into by the Company with the
Purchasers named in Schedule I thereto (the "Note Agreement"), and this Note
and any holder hereof are entitled to all of the benefits provided for by such
Note Agreement or referred to therein. Reference is made to the Note Agreement
for a statement of such benefits.
As provided in the Note Agreement, upon surrender of this Note for registration
of transfer, duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder hereof or its attorney duly authorized
in writing, a new Note for a like unpaid principal amount will be issued to,
and registered in the name of, the transferee upon the payment of the taxes or
other governmental charges, if any, that may be imposed in connection
therewith. The Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
This Note may be declared due prior to its expressed maturity date and
voluntary prepayments may be made hereon all in the events, on the terms and in
the manner as provided in the Note Agreement. Such prepayments include certain
optional prepayments with a Make-Whole Amount.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition
to the principal, Make-Whole Amount, if any, and interest due and payable
hereon, all costs of collecting this Note, including reasonable attorneys' fees
and expenses.
This Note and the Note Agreement are governed by and construed in accordance
with the laws of the State of New York.
SENSORMATIC ELECTRONICS CORPORATION
By:
-------------------------------------
Its:
---------------------------------
EXHIBIT B
LEGAL OPINIONS
The opinion of Davis Polk & Wardwell, special counsel for the Purchasers, shall
be to the effect that:
56
<PAGE> 61
11. The Company is a corporation duly incorporated, validly existing and,
based solely on good standing certificates from appropriate state authorities,
in good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to enter into the Agreement and to issue and sell
the Notes.
12. The Agreement and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application relating to or affecting the enforcement of the rights
of creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
13. Based upon the representations set forth in the Agreement, the offering,
sale and delivery of the Notes do not require the registration of the Notes
under the Securities Act of 1933, as amended, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
14. The issuance and sale of the Notes and compliance with the terms and
provisions of the Notes and the Agreement by the Company will not conflict with
or result in any breach of any of the provisions of the Certificate of
Incorporation or By-Laws of the Company.
15. No authorization, approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any governmental body,
Federal or state, is necessary in connection with the execution and delivery of
the Note Agreement or the Notes.
The opinion of Davis Polk & Wardwell also shall state that the legal opinions
of Christy & Viener, special New York counsel for the Company, delivered to you
pursuant to the Agreement, are satisfactory in form and scope to Davis Polk &
Wardwell, and that, in its opinion, the Purchasers and it are justified in
relying thereon and shall cover such other matters relating to the sale of the
Notes as the Purchasers may reasonably request.
57
<PAGE> 62
EXHIBIT C
LEGAL OPINIONS
The opinion of Christy & Viener, special New York counsel for the Company,
shall be to the effect that:
16. Each of the Company and each Material Subsidiary in the United
States is a corporation duly incorporated, validly existing and, based solely
on good standing certificates from appropriate state authorities, in good
standing under the laws of its jurisdiction of incorporation, and each has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted, and, in the case of the Company, to
enter into and perform the Agreement and to issue and sell the Notes.
17. The Company and each Material Subsidiary in the United States
are duly qualified or licensed and in good standing as foreign corporations
authorized to do business in each jurisdiction where the nature of its or their
businesses or the character of its or their properties makes such qualification
or licensing necessary, except where such failure to be so qualified or
licensed would not have a Material Adverse Effect.
18. The Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, have been duly executed
and delivered by an authorized officer of the Company, and constitute the
legal, valid and binding agreements of the Company, enforceable in accordance
with their terms, except to the extent that enforcement thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application relating to or affecting the enforcement of the
rights of creditors or by equitable principles, regardless of whether
enforcement is sought in a proceeding in equity or at law.
19. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
20. No authorization, approval, consent or withholding of
objection on the part of any governmental or regulatory body is necessary or
required in connection with the lawful execution and delivery by the Company of
the Agreement or the lawful offering, issuance and sale by the Company of the
Notes, and no designation, filing, declaration, registration and/or
qualification with any governmental authority is required in connection with
the offer, issuance and sale of the Notes by the Company.
58
<PAGE> 63
21. The issuance and sale of the Notes by the Company and
compliance with the terms and provisions of the Notes and the Agreement by the
Company will not conflict with, or result in any breach or violation of any of
the provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon the property of the Company or any Material
Subsidiary pursuant to the provisions of (i) the Certificate of Incorporation
(or other charter document) or by-laws of the Company or any Material
Subsidiary or any loan agreement under which the Company or any Material
Subsidiary is bound, or other agreement or instrument under which the Company
or any Material Subsidiary is a party or by which any of them or their property
is bound or may be affected or (ii) any law or regulation of the United States
or a state thereof, order, writ, injunction or decree of any United States or
state court or governmental authority applicable to the Company or any Material
Subsidiary.
22. Except as disclosed in the 1995 Reports, there are no actions,
suits or proceedings pending or, to the best of such counsel's knowledge after
due inquiry, threatened against, or affecting the Company or any Subsidiary in
the United States, at law or in equity or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality in the United States, which are likely to have a Material
Adverse Effect.
23. Neither the Company nor any Subsidiary in the United States
is: (i) a "public utility company" or a "holding company," or an "affiliate"
or a "subsidiary company" of a "holding company," or an "affiliate" of such a
"subsidiary company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, or (ii) a "public utility" as defined in the
Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person", as such terms are defined in the Investment Company Act of 1940, as
amended.
24. In reliance upon the representations and warranties of the
Company in the Agreement, the issuance of the Notes and the use of the proceeds
of the sale of the Notes do not violate or conflict with Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System (12 C.F.R., Chapter
II).
[10. After due inquiry, nothing has come to such counsel's
attention that causes such counsel to believe that the Private Placement
Memorandum dated February 1996, as supplemented by a Supplement dated March _,
1996, taken together with the 1995 Reports (including the attachments and
enclosures, but excluding the financial statements, schedules and other
financial data included therein, as to which such counsel need express no
belief) contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances under which they were made.]
The opinion of Christy & Viener, special New York counsel for the
Company, shall cover such other matters relating to the sale of the Notes as
the Purchasers may reasonably
59
<PAGE> 64
request, and shall be subject to such reasonable assumptions and qualifications
as such special counsel may consider appropriate. With respect to matters of
fact on which such opinion is based, such counsel shall be entitled to rely on
appropriate certificates of public officials and officers of the Company and
with respect to matters governed by the laws of any jurisdiction other than the
United States of America and the General Corporation Law of the State of
Delaware and the laws of the State of New York, such counsel may rely upon the
opinions of counsel deemed by them to be competent and reliable.
60
<PAGE> 65
EXHIBIT D
LEGAL OPINIONS
The opinion of Walter A. Engdahl, Vice President-Corporate counsel of
the Company, shall be to the effect that:
25. No authorization, approval or consent of any State of Florida
governmental or regulatory body is necessary or required in connection with the
lawful execution and delivery by Sensormatic of the Agreement or the lawful
offering, issuance and sale by Sensormatic of the Notes, and no designation,
filing, declaration, registration and/or qualification with any such
governmental authority is required in connection with the offer, issuance and
sale of the Notes by Sensormatic.
26. The issuance and sale of the Notes by Sensormatic and compliance with
the terms and provisions of the Notes and the Agreement by Sensormatic will not
conflict with, or result in any breach or violation of any of the provisions
of, or result in the creation or imposition of any Lien upon the property of
Sensormatic pursuant to, the provisions of any applicable law (including usury
laws) or regulation of the State of Florida.
61
<PAGE> 66
EXHIBIT E
FORM OF SUBORDINATION
SECTION 4.01. Agreement That Debentures to Be Subordinate. The
Trustee acknowledges, the Company covenants and agrees, and each holder of
Debentures issued hereunder by his acceptance thereof likewise covenants and
agrees, that all payments of principal of, premium, if any, and interest on the
Debentures and all other monetary claims, including such monetary claims as may
result from rights of repurchase or rescission, under or in respect of the
Debentures shall be subordinated in accordance with the provisions of this
Article Four to the prior payment in full in cash of all amounts payable under
all Senior Indebtedness of the Company.
SECTION 4.02. Limitation During Certain Defaults on Senior
Indebtedness. No direct or indirect payment by or on behalf of the Company on
account of principal, premium, if any, or interest on the Debentures or any
other monetary claims, including such monetary claims as may result from rights
of repurchase or rescission, under or in respect of the Debentures whether
pursuant to the terms of the Debentures or upon acceleration or otherwise shall
be made, and no Debentures shall be redeemed or purchased, either directly or
indirectly, by the Company or any Subsidiary, if, at the time of such payment
or purchase or immediately after giving effect thereto, there shall exist a
default in the payment of all or any portion of the obligations under any
Senior Indebtedness.
SECTION 4.03. Priority of Senior Indebtedness. Upon (i) any
acceleration of the principal amount due on the Debentures or (ii) any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution or winding-up
or total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, or upon an assignment for the benefit of creditors or any other
marshaling of assets or liabilities of the Company, all amounts payable under
Senior Indebtedness shall first be paid in full in cash, before any payment is
made on account of the principal of, premium, if any, or interest on the
indebtedness evidenced by the Debentures, or on account of any other monetary
claims, including such monetary claims as may result from rights of repurchase
or rescission, under or in respect of the Debentures, or any payment is made to
acquire any of the Debentures for cash, property or securities or any
distribution is made with respect to the Debentures of any cash, property or
securities, and upon any such dissolution or winding-up or liquidation or
reorganization any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the holders of
the Debentures or the Trustee under this Indenture would be entitled, except
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the holders of Debentures or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior
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<PAGE> 67
Indebtedness (pro rata to each such holder on the basis of the respective
amounts of Senior Indebtedness held by such holder) or their representatives,
to the extent necessary to pay all such Senior Indebtedness in full, in cash,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness, before any payment or distribution is made to
the holders of the indebtedness evidenced by the Debentures or to the Trustee
under this Indenture.
SECTION 4.04. Payment Over of Proceeds in Certain Events. In the
event that any payment or distribution of assets of the Company of any kind or
character not permitted by Sections 4.02 or 4.03, whether in cash, property or
securities, shall be received by the Trustee or paying agent, if any, or the
holders of the Debentures before all Senior Indebtedness is paid in full cash,
such payment or distribution shall be received and held in trust for the
benefit of the holders of Senior Indebtedness and shall be paid over or
delivered to, in the case of clause (ii) of Section 4.03, the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
person making payment or distribution of assets of the Company and, in the case
of Section 4.02 and clause (i) of Section 4.03, to the Company, in each case in
trust for the holders of, and for application to the payment of, all Senior
Indebtedness remaining unpaid to the extent necessary to pay all obligations in
respect of such Senior Indebtedness in full cash in accordance with its terms,
after giving effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness.
SECTION 4.05. No Waiver of Subordination Provisions. Without notice
to or the consent of the debentureholders or the Trustee, the holders of Senior
Indebtedness may at any time and from time to time, without impairing or
releasing the subordination herein made, change the manner, place or terms of
payments, or change or extend the time of payment of or renew or alter the
Senior Indebtedness, or amend or supplement in any manner any instrument
evidencing the Senior Indebtedness, any agreement pursuant to which the Senior
Indebtedness was issued or incurred or any instrument securing or relating to
the Senior Indebtedness; release any person liable in any manner for the
payment or collection of the Senior Indebtedness, exercise or refrain from
exercising any rights in respect of the Senior Indebtedness against the Company
or any other person; apply any moneys or other property paid by any person or
released in any manner to the Senior Indebtedness; or accept or release any
security for the Senior Indebtedness.
SECTION 4.06. Notice to Trustee of Specified Events: Reliance on
Certificate of Liquidating Agent. The Company shall give prompt written notice
to the Trustee and any paying agent of any fact known to the Company that would
prohibit the making of any payment to or by the Trustee or any paying agent in
respect of the Debentures pursuant to the provisions of this Article.
Upon any distribution of assets of the Company or payment by or on
behalf of the Company referred to in this Article Four, the Trustee and the
holders of the Debentures shall be entitled to rely upon any order or decree of
a court of competent jurisdiction in which any
63
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proceedings of the nature referred to in Section 4.03 are pending, and the
Trustee and the holders of the Debentures shall be entitled to rely upon a
certificate of the liquidating trustee or agent or other person making any such
distribution to the Trustee or to the holders of the Debentures for the purpose
of ascertaining the persons entitled to participate in such distribution, the
holders of Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Four.
SECTION 4.07. Subrogation. Subject to the payment in full of all
amounts payable under or in respect of all Senior Indebtedness, in cash, the
holders of the Debentures (together with holders of any other indebtedness of
the Company which is subordinate in right of payment to the payment of other
indebtedness of the Company, but is not subordinate in right of payment to the
Debentures and by its terms grants such right of subrogation to the holders
thereof) shall be subrogated to the rights of the holders of Senior
Indebtedness to receive distributions of assets of the Company or payments by
or on behalf of the Company, made on the Senior Indebtedness, until the
principal of (and premium, if any) and interest on the Debentures shall be paid
in full; and, for the purposes of such subrogation, no distributions or
payments to the holders of Senior Indebtedness of any cash, property or
securities to which the holders of the Debentures or the Trustee would be
entitled except for the provisions of this Article Four, and no payment over
pursuant to the provisions of this Article Four to the holders of Senior
Indebtedness by the holders of the Debentures or the Trustee, shall, as between
the Company, its creditors other than the holders of Senior Indebtedness and
the holders of Debentures, be deemed to be a payment by the Company to or on
account of Senior Indebtedness, it being understood that the provisions of this
Article Four are, and are intended, solely for the purpose of defining the
relative rights of the holders of the Debentures, on the one hand, and the
holders of Senior Indebtedness on the other hand.
SECTION 4.08. Obligation to Pay Not Impaired. Nothing contained in
this Article Four or elsewhere in this Indenture, or in the Debentures, is
intended to or shall alter or impair, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of (and premium, if any)
and interest on the Debentures at the time and place and at the rate and in the
currency therein prescribed, or to affect the relative rights of the holders of
the Debentures and creditors of the Company other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the right, if any,
under this Article Four of the holders of the Senior Indebtedness in respect of
cash, property or securities of the Company received upon the exercise of any
such remedy.
SECTION 4.09. Reliance by Senior Indebtedness on Subordination
Provisions. Each holder of a Debenture by his acceptance thereof acknowledges
and agrees that the foregoing subordination provisions are, and are intended to
be, an inducement and a
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<PAGE> 69
consideration to each holder of any Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of the
Debentures, to acquire and continue to hold, or to continue to hold, such
Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness. The
subordination provisions in this Article Four may be enforced directly by the
holders of Senior Indebtedness.
SECTION 4.10. Subordination Not to Be Prejudiced by Certain Acts. No
present or future holder of Senior Indebtedness shall be prejudiced in his
right to enforce subordination of the indebtedness evidenced by the Debentures
by any act or failure to act in good faith by any such holder or by
noncompliance by the Company with the terms and provisions and covenants herein
regardless of any knowledge thereof any such holder may have or otherwise be
charged with.
SECTION 4.11. Trustee Authorized to Effectuate Subordination. Each
holder of Debentures by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination as provided in this Article Four
and appoints the Trustee his attorney-in-fact for any and all such purposes
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, or
receivership or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Company, to file a claim for the unpaid balance of its Debentures in the
form required in said proceedings and to cause said claim to be approved. If
the Trustee does not file a proper claim or proof of debt in the form required
in such proceeding prior to 30 days before the expiration of the time to file
such claim or proof, then the holders of the Senior Indebtedness shall have the
right to file and are hereby authorized to file an appropriate claim or proof
for and on behalf of the holders of said Debentures.
65
<PAGE> 1
EXHIBIT 11
SENSORMATIC ELECTRONICS CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(IN MILLIONS)
<TABLE>
Three Months ended Nine Months ended
March 31, March 31,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ (50) $16 $ (98) $61
===== === ===== ===
Common shares:
Weighted average shares
outstanding during the period 74 73 74 70
Potential dilutive exercise
of stock options
and warrants - 1 - 1
----- --- ----- ---
Shares included in computation
of earnings (loss) per share 74 74 74 71
===== === ===== ===
</TABLE>
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SENSORMATIC ELECTRONICS CORPORATION FOR THE NINE MONTHS
ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 98
<SECURITIES> 17
<RECEIVABLES> 484
<ALLOWANCES> 65
<INVENTORY> 191
<CURRENT-ASSETS> 0
<PP&E> 243
<DEPRECIATION> 95
<TOTAL-ASSETS> 1,656
<CURRENT-LIABILITIES> 0
<BONDS> 374
0
0
<COMMON> 722
<OTHER-SE> 116
<TOTAL-LIABILITY-AND-EQUITY> 1,656
<SALES> 630
<TOTAL-REVENUES> 737
<CGS> 336
<TOTAL-COSTS> 352
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> (161)
<INCOME-TAX> (63)
<INCOME-CONTINUING> (98)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98)
<EPS-PRIMARY> (1.33)
<EPS-DILUTED> (1.33)
</TABLE>
