<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996 Commission File No. 0-3953
SENSORMATIC ELECTRONICS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 34-1024665
(State of Incorporation) (I.R.S. Employer Identification
Number)
951 Yamato Road
Boca Raton, Florida 33431-0700
(Address of principal executive (Zip Code)
offices)
</TABLE>
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
561-989-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Common Stock, Par Value $.01 Per Share
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
NEW YORK STOCK EXCHANGE
---------------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes __ No X
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The aggregate market value of Common Stock held by non-affiliates of the
Registrant as of September 16, 1996 was $1,300,977,178.
As of September 16, 1996, there were 73,960,635 shares of the common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive proxy statement for the Company's 1996 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12 and 13
hereof).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS
INTRODUCTION
Founded in 1966, Sensormatic Electronics Corporation is a fully integrated
supplier of electronic security systems to retailers and commercial, industrial
and governmental ("commercial/industrial") users worldwide. The Company designs,
manufactures, markets and services Electronic Article Surveillance ("EAS")
systems (including the reusable hard tags and disposable labels used with such
systems), Closed Circuit Television ("CCTV") systems (including
microprocessor-controlled CCTV systems and exception monitoring systems), Access
Control systems and Electronic Asset Protection ("EAP") systems. The Company's
EAS and CCTV systems are used by retailers to deter shoplifting and internal
theft. Sensormatic's CCTV, Access Control and EAP security systems are used by
retail and commercial/industrial customers to protect assets, information and
people. Sensormatic is the leader in source tagging, the process in which EAS
labels are incorporated into manufactured articles or packaging by the
manufacturer or distributor. The Company's products are marketed by an extensive
worldwide sales and service organization complemented by a broad network of
business partners, independent distributors and dealers.
The Company operates in a single business segment. Certain information about the
Company's operations by geographic area is contained in the table under Summary
of Revenues below and in Note 11 of Notes to Consolidated Financial Statements
under Item 8 of this report.
The Company has its principal executive offices at 951 Yamato Road, Boca Raton,
Florida 33431-0700 (561-989-7000). As used in this report, the terms "Company"
and "Sensormatic" refer to Sensormatic Electronics Corporation and its
subsidiaries unless the context indicates otherwise.
STRATEGIC RESTRUCTURING AND OTHER STRATEGIES
Over the past decade, the Company has grown from a single technology, single
market company with gross revenues of less than $100 million in fiscal 1987 to a
global provider of multiple electronic security solutions with gross revenues of
approximately $1 billion in fiscal 1996. This significant growth in revenues can
be attributed in part to internal product research and development resulting in
new proprietary products and systems, a number of strategic acquisitions and
increased market penetration in existing and new markets. The Company has
increased its strong retail market share worldwide and has emerged as a major
worldwide supplier of integrated electronic security systems to
commercial/industrial users.
The rapid growth experienced by the Company in sales, customers and product
diversity and the demands of integrating acquired businesses outpaced the
Company's growth in corporate infrastructure and systems, resulting in excessive
growth in expenses and working capital needs. In fiscal 1996, the Company
launched a strategic restructuring plan with the following objectives: (i)
expense reduction and asset control, (ii) improved processes and systems, and
(iii) quality growth.
The initial phase of this plan included an extensive and systematic review of
the Company's operations, cost structure and balance sheet aimed at reducing its
operating expenses and manufacturing costs while increasing efficiencies. This
review of the Company's global operations focused primarily on operational and
organizational structures and systems, facilities utilization, product
rationalization, inventory valuation and accounts receivable balances and
related collection efforts.
As a result of this review, the Company instituted a major reorganization of its
business units and focused other Company strategies, the principal objective of
which is to improve market focus, customer service and product quality while
reducing costs and eliminating redundancies. Under the new structure, the
Company reorganized its six business units into four. The Company's two European
business units were combined as the European Retail business unit, the Export
and Asia/Pacific business units were combined as the International Retail
business unit and the North American Retail business unit operations were
reorganized internally. The Company's commercial/industrial operations were
consolidated as the Commercial/Industrial Worldwide Operations ("C/I Worldwide")
by uniting the international commercial/industrial activities with the U.S.
<PAGE> 3
Commercial/Industrial Group business unit, in order to allow the Company to
centralize and focus its commercial/industrial marketing and product development
strategies globally.
As part of the plan to focus certain strategies, the Company created product
line management functions both within C/I Worldwide and in support of the Retail
business units. The product line management functions coordinate and centralize
product marketing strategies globally. Additionally, the Company formed the
Global Source Tagging Division, with responsibility for managing and directing
the Company's source tagging initiatives globally. The Global Source Tagging
Division is staffed with sales, marketing and technical executives who work
globally with major retailers, manufacturers, packaging companies, associations
and industry consultants to implement and expand the use of source tagging by
manufacturers and distributors.
As a result of these reorganizations, personnel reductions and location
consolidations are being made as business units are combined and redundancies
are eliminated. The Company planned for the reduction of 875 people, most of
which has occurred, and the elimination of 30 locations, principally in the U.K.
and U.S. The headcount reductions will be offset by the addition of
approximately 250 employees in strategic growth areas.
The Company also reviewed its existing products and product sourcing, the
purpose of which was to reduce the number of products, and thereby reduce
inventory carrying costs and improve gross margins on continued products. As a
result of this review, the Company recorded a restructuring charge related to
discontinued products and equipment used in the manufacture of certain products
which will no longer be manufactured or purchased from third-party suppliers.
As part of the Company's plan to strengthen its balance sheet and focus on asset
management, as well as the general weakening in the retail industry climate
following a poor holiday season, the Company performed an extensive review of
the collectibility of accounts receivables (including off-balance sheet
receivables) and a review of slow moving inventory. This review resulted in a
special charge to operations which principally represented an increase in the
valuation allowances for doubtful accounts receivable and inventories.
In fiscal year 1996, as a result of the above initiatives, the Company recorded
restructuring and special charges of $186 million, with an after-tax impact of
approximately $118 million. The cash outlay related to the restructuring and
special charges is approximately $33 million. See Note 2 to the Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
In connection with its strategic restructuring plan, the Company has embarked
upon a long-term commitment to a total quality management program internally
referred to as the "Q(3) Program". The program's objective is to provide
superior value for customers, shareholders and employees. The Q(3) Program is a
multi-year, enterprise-wide, effort in which the Company will work to reengineer
operations in every function and business unit globally. The program will also
establish a culture of "continuous improvement" in all of the Company's business
processes. In connection with this program, the Company has committed to the
implementation of a new enterprise-wide management information system which is
expected to significantly enhance operational efficiencies and improve customer
service.
STRATEGIC MERGERS AND ACQUISITIONS
Over the past several years, the Company has increased its presence in a number
of the geographic areas in which it markets its products and has expanded into
new geographic areas. Additionally, the Company has expanded its
commercial/industrial business through strategic acquisitions.
The Company has expanded its direct and indirect sales and service efforts in
North America, Europe and certain Asia Pacific and Latin America countries. This
was accomplished through, among other things, the merger with Knogo
Corporation's European operations ("Knogo") in December 1994, and in July 1992,
the acquisition of Automated Security (Holdings) PLC's European EAS, CCTV and
exception monitoring loss prevention systems division ("ALPS"). In connection
with and following the acquisition of ALPS, the Company also acquired Security
Tag Systems, Inc. ("Security Tag"), a U.S. manufacturer of loss prevention
products.
2
<PAGE> 4
The Company's strategy to expand internationally also includes the use of
distribution arrangements with independent, local businesses in certain
countries, and, in some cases, controlling interest ventures with local
businesses. Currently the Company has controlling interest ventures in Brazil,
Peru and Turkey. The Company has acquired its distributors in the Scandinavian
countries, Mexico, Puerto Rico and most recently in Colombia. The Company plans
to expand into additional countries in the Middle East, Latin America, Africa
and eastern Europe using distribution or controlling interest venture
arrangements.
In the commercial/industrial area, important acquisitions include Software
House, Inc. ("Software House"), a designer and marketer of high-end access
control systems; Robot Research, Inc. ("Robot Research"), a manufacturer and
marketer of sophisticated CCTV display and transmission systems; American
Dynamics, a manufacturer of CCTV components; and Continental Instruments
Corporation, a supplier of proprietary electronic access control systems. As a
result of these acquisitions, the Company acquired additional product lines to
complement its existing CCTV and access control products, together with well
established dealer/distribution sales channels. The Company's research and
development programs for CCTV and access control products have been greatly
enhanced by the synergies with these companies.
Through selected strategic acquisitions of organizations with personnel trained
and experienced in designing, assembling, installing and servicing CCTV and
access control systems, the Company has further broadened its
commercial/industrial customer base. These acquisitions include three regional
U.S. electronic security system integrators, Glen Industrial Communications,
Inc., Advanced Entry Systems, Inc. and Security Specialists of San Francisco,
Inc. Additionally, the Company acquired Case Security Limited, a distributor of
video security systems principally to financial institutions in the U.K.
PRINCIPAL PRODUCTS AND SYSTEMS
Sensormatic's products and systems are focused in four general categories:
- EAS systems and devices, consisting of electronic detection units which
work in conjunction with specially designed reusable tags and/or
disposable labels and label deactivation units, and benefit denial
products. These systems and devices are most commonly used by retailers to
control inventory shrinkage.
- CCTV systems, consisting of computer controlled cameras integrated with
sophisticated video switching and transmission products which monitor
activity throughout an establishment for safety and/or theft deterrence
purposes.
- Access Control systems, which are software-based products used to
monitor, protect and track people and assets. These systems electronically
regulate access to facilities.
- EAP systems, consisting of electronic identification and tracking
technologies which work in conjunction with software-based applications to
protect office equipment and many other assets.
EAS Systems
EAS systems come in many different forms and make use of a number of different
technologies. The Company's typical EAS system is comprised of an electronic
detection unit, tags and/or labels and a detacher or deactivator. Detection
units can be bolted to floors as pedestals or buried under floors, mounted on
walls or hung from ceilings, and are usually placed in high traffic areas, such
as entrances and exits of stores or office buildings. Specially designed and
sensitized reusable tags or disposable labels are affixed to or embedded in the
merchandise or assets to be protected. When an active tag or label passes
through the detection unit, the system sounds an alarm, a light is activated
and/or other suitable control devices are set into operation indicating a
possible theft in progress. Tags and labels are available in a variety of
shapes, sizes and appearances. Tags are easily removed from merchandise using a
specially designed detacher, enabling the merchandise or asset to be taken
through a controlled zone without incident and, can then be reused. Labels are
deactivated by a deactivator and are generally disposed of after use. Certain
labels can be reactivated with the Company's deactivation/reactivation devices.
EAS systems are also used to protect assets in commercial/industrial
applications and are referred to as EAP systems.
3
<PAGE> 5
To satisfy many types of customers on a global basis, the Company offers every
EAS technology type available in addition to the Company's proprietary
technologies. The following is a description of the principal EAS technologies,
as well as the systems and products which incorporate such technologies, offered
by the Company.
Ultra-Max(R) systems utilize a proprietary acousto-magnetic technology; the most
advanced and fastest growing anti-theft technology in the world. This technology
is used in over 15 different electronic anti-theft systems sold under various
brand names including Pro-Max(R), Floor-Max(R), Euro-Max(TM), Sensor-Max,
Mega-Max and Max-Checkout(TM). The versatility of Ultra-Max enables it to
protect assets, merchandise, people, property and information for retailers and
commercial/industrial businesses.
The success of Ultra-Max is attributable to its unique combination of features,
which include freedom from false alarms, unobstructed coverage of wide exits, a
high "pick rate" or ability to detect labels or tags, ease of deactivation and
ability to be reactivated. This technology's sophisticated electronic capability
and the unique signal from the label or tag virtually eliminate false alarms, a
problem often encountered by retailers using competitive products.
For use in source tagging, the Company markets Ultra-Strip(TM) labels, which are
used in conjunction with Ultra-Max systems and have the performance
characteristics inherent in Ultra-Max. Ultra-Strip labels are the smallest EAS
labels available with wide exit coverage performance and are offered in a
standard and narrow width size. These labels have demonstrated superior pick
rates, are compatible with a wide range of packaging materials and product
substances, including foil and metal, are unaffected by moisture and are well
suited for high-speed manufacturing processes.
AisleKeeper(R) systems utilize proprietary advanced magnetostrictive technology
and standard low frequency magnetics technology. These systems are designed to
protect high-theft items in supermarkets and hypermarkets around the world as
well as bookstores, libraries, health clubs, liquor stores and video stores. The
AisleKeeper systems sold by the Company include AisleKeeper and AisleKeeper II
(known in Europe as Checkout Control and Checkout Control II, respectively). The
AisleKeeper II (Checkout Control II) is especially engineered to comply with the
Americans with Disabilities Act ("ADA") as well as the European Disabilities
Acts ("EDA"). The new generation of AisleKeeper systems is comprised of the
SensorStrip(TM) Checkout and the SensorStrip Checkout Plus Systems, which are
ADA and EDA compliant. The standard AisleKeeper label is a thin micromagnetic
wire encapsulated in transparent tape attached to protected merchandise which is
passed around the system during the checkout process or, with certain versions,
may be deactivated by means of a deactivation pad which may be fitted in the
conveyor belt at a checkout station. Like Ultra-Max, Sensormatic's
electromagnetic technology supports integrated source tagging programs.
Microwave systems are anti-shoplifting systems that utilize high radio frequency
technology. Microwave systems protect wide exits and are most commonly used by
department stores and soft goods (apparel merchandisers) specialty retailers.
These systems are marketed under the names of MicroMax(R), SlimLine(R), and
Sensormat(R) II and offer a variety of features and benefits such as concealed
protection which allows for wide exit, flexible installations which can fit in
multiple store configurations, and a variety of lightweight tags and labels with
snag-proof features.
Swept-RF or radio frequency systems utilize low radio frequency technology and
are principally used to cover single door exits. The Company markets this
technology under the brand name of System One(R). Advantages of this system are
its small, less obtrusive, low cost pedestals.
Benefit Denial products are non-electronic anti-theft devices that, when
tampered with, can destroy or damage valuable merchandise or otherwise make it
unfit for resale or use, thereby reducing the incentive to steal. Benefit denial
products can be used alone or in conjunction with other anti-theft systems to
provide an incremental level of security for soft goods retailers. The Company's
Inktag(R) and Microlock(R) products are part of a family of benefit denial
products. The Company's Inktag products are fastened to clothing and other soft
goods in the retail market. When unauthorized removal of an Inktag product is
attempted, the vials of ink inside the unit break and stain the merchandise. The
Company's Inktag products are sold primarily to department, specialty, discount
and mass merchandise stores. The Microlock product is used to protect items
4
<PAGE> 6
such as eyeglasses and jewelry products by creating physical obstructions to the
use of the merchandise until removed. The Microlock product is designed for use
primarily in department, specialty, discount, mass merchandise, jewelry, optical
and drug stores.
CCTV Systems
CCTV video surveillance systems are used by a wide-variety of businesses,
industries and government agencies to protect against inventory shrinkage in
retail businesses and for the protection and monitoring of personnel and assets
in office and manufacturing complexes, hospitals, casinos, nuclear facilities,
warehouses, and numerous other facilities. Sensormatic's CCTV systems can be
used alone, integrated with other CCTV components or used in combination with
EAS, Access Control and EAP systems. The following is a description of key CCTV
components and systems offered by the Company.
Video cameras can be used indoors and outdoors to monitor, investigate and
record events. The Company offers multiple types of cameras which include fixed,
pan/tilt/zoom and the more sophisticated SpeedDome(R) cameras. These cameras
include digital and high resolution color or monochrome features. SpeedDomes
have advanced surveillance features which include the ability to deliver high
resolution images of stationary or moving objects and focus on objects at a
distance in low light conditions, as well as the ability to acquire, zoom and
focus on targets in less than one second. SpeedDome video systems may be
integrated with EAS systems to create a more comprehensive overall loss
prevention program.
Video switchers/controllers are used to instruct cameras to focus on an object
in response to an alarm or at an operator's command. The Company markets a range
of switchers/controllers, some of which can support up to eight cameras and for
more complex applications, switchers/controllers which support over 1,000
cameras. These switchers/controllers are marketed under various brand names
including high-end matrix switchers/controllers such as the AD2050 (1,024
cameras/128 monitors) and AD 2052 (512 cameras/32 monitors) used in large
complex configurations and the more retail oriented family of products
consisting of View Manager(R) 96 ("VM96"), View Manager 16 and the View Manager
8, which when used with a hand-held Touch Tracker(R), can control from 96, 16
and eight cameras, respectively. The VM96 is a PC-based switcher/controller
which can be programmed to automatically pan, tilt and zoom cameras in response
to an alarm or at an operator's command.
Video multiplexers provide for sophisticated video manipulation of up to 16
video inputs recorded to a single VCR. This technology captures high quality
video from multiple cameras, providing for security surveillance of multiple
areas within a facility to be viewed on a video monitor.
Video transmission systems allow for the capability to remotely view stores,
warehouses, and other facilities. SensorLink(TM) PC is a PC-based video
transmission system and can be operated over standard telephone lines or ISDN
("Integrated Services Digital Network") allowing users to view video images
and/or control and operate cameras, alarm inputs, and relay controls. SensorLink
PC can allow users to view up to four different locations simultaneously.
Point-of Sale Exception Monitoring ("POS/EM(R)") systems provide the capability
to overlay sales transactions onto video and to monitor for predefined
exceptions (e.g. voids, refunds, no sales, sales over or under a specified
amount). POS/EM systems are used to deter, detect and document employee theft at
cash registers. The systems are integrated with a video switcher/controller or
video multiplexer. The Company markets these systems as POS/EM 1, which monitors
a maximum of four registers, and POS/EM Value which has the capability to
monitor up to 256 registers. These systems are marketed primarily to
supermarkets, department stores, specialty retailers and casinos.
Visual Reality System ("VRS2000(R) ") is a facility management system that
integrates CCTV, Access Control and alarm monitoring systems through a single
workstation. The VRS2000 allows one operator to manage multiple facilities in a
retail or commercial/industrial environment with easy to use maps and on screen
camera selection and control.
5
<PAGE> 7
Access Control Systems
Access Control systems are designed to monitor, control and appropriately
authorize passage (pedestrian or vehicular) into and out of designated areas. In
a typical Access Control system application, each individual is issued a badge;
the individual inserts or swipes the badge at a door reader to gain access to
buildings, rooms, etc. These systems offer a variety of features and benefits
such as environmental security of people, assets and information, automatic data
collection and report generation. Access Control systems can be integrated with
CCTV and EAP systems, thus providing for additional security and protection.
The Company offers numerous Access Control systems which address a full range of
customers and their requirements. Systems include the CCURE 1 Plus and AC500,
CCURE 750, CCURE 800 and EZ Entry(TM). These systems range in capacities from
eight readers with 3,000 cardholders up to 2,048 readers with 250,000
cardholders.
EAP Systems
Traditional EAP systems utilize much of the same technology and features as EAS
systems, but are used to protect assets in commercial/industrial environments
rather than retail merchandise. A variety of systems are available to meet
specific applications and safeguard all types of assets such as office
equipment, artwork, and personal computers. EAP systems are application flexible
due to the design features of the tags and/or labels placed on the assets to be
protected.
EAP systems include the more advanced Sentrac ID(TM) system which offers a
long-range, hands-free proximity transponder/reader technology with the use of
radio frequency identification ("RFID") to electronically identify and track
individuals, vehicles, and assets. Transponders are often attached to or
imbedded within employee access badges, vehicles or other objects. When access
into restricted areas is attempted, the coded information contained within the
transponder is revealed on a computer screen to security personnel and others.
Badges and transponders can function individually or in an integrated security
network. It was this technology, integrated with biometric hand readers, that
was utilized as the 1996 Olympic Games' access control security system.
Consolidated revenues by principal products and systems for the years ended June
30, 1996, 1995 and 1994 are as follows (in millions):
CONSOLIDATED REVENUES BY PRINCIPAL PRODUCTS AND SYSTEMS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1996 1995 1994
<S> <C> <C> <C>
---------------------------------------------------------------------------------------
EAS/EAP $542.2 $511.2 $413.7
CCTV 297.5 255.7 173.5
Access Control 60.8 46.1 16.8
---------------------------------------------------------------------------------------
Subtotal 900.5 813.0 604.0
---------------------------------------------------------------------------------------
Installation and Other 94.1 76.1 52.0
---------------------------------------------------------------------------------------
Total $994.6 $889.1 $656.0
---------------------------------------------------------------------------------------
</TABLE>
MARKETS AND MARKETING STRATEGY
Markets
The Company markets its products and systems directly to retail and
commercial/industrial users. In some retail environments, use of EAS systems has
become a standard operating practice because these products and systems have
proven to be a cost-effective method of reducing inventory shrinkage. Inventory
shrinkage is often the second largest variable operating expense of retailers,
after payroll costs, and will normally range from 1% to 5% of sales. EAS
products and systems help improve a retailer's profitability not only by
reducing inventory shrinkage, but also by allowing the use of open merchandising
which increases product exposure.
6
<PAGE> 8
EAS products and systems were first used by soft goods retailers to protect
clothing. Due to technological advances, applications for hard goods merchandise
(non-apparel merchandise) have become economical and effective. Hard goods
retailers, such as supermarkets, hypermarkets, home improvement centers, drug,
mass merchandise, optical, music, hardware, book and video stores, have
increasingly become users of EAS products and systems.
Commercial/industrial customers range from small to medium size businesses to
large domestic and international operations and businesses, all of which use
CCTV, Access Control and/or EAP products and systems for various security needs.
Retailers also make extensive use of CCTV and Access Control products and
systems to enhance security. Several of the newer EAS technologies used by hard
goods retailers are also used in EAP applications by commercial/industrial
customers to protect assets such as personal computers, facsimile and copy
machines, telephones, artwork, limited access files, and portable laboratory
equipment and tools from loss by unauthorized removal. Other specialized
applications include the protection of newborn infants in hospitals and patients
in nursing homes and other long-term care facilities.
The Company has a broad range of electronic security products and systems, and
businesses in general are increasingly receptive to the Company's ability to
design, supply, install and service integrated security systems that combine the
technologies of the Company's various products and systems.
Marketing Strategy
The sale of EAS systems and devices to hard goods retailers, where the potential
for growth remains great, has been a significant factor in the Company's growth
in recent years. Hard goods merchandise is protected with labels which leave the
store with the merchandise, representing a major source of recurring revenues to
the Company. These labels may be self-adhesive stick-on labels which are
attached to merchandise by the retailer, or affixed to or embedded in products
or packaging by the manufacturer or distributor ("source tagging").
Over the last several years the Company has focused its efforts to increase
future recurring label revenues through its source tagging program. As part of
the Company's strategic restructuring plan, the Company has further demonstrated
its commitment to source tagging with the formation of the Global Source Tagging
Division. The Source Tagging Division will focus the Company's strategies to
implement and expand the use of source tagging by manufacturers and
distributors. The Company has formed relationships with manufacturers and a
number of its retail customers around the world, from various segments of soft
goods and hard goods retailers (including music retailers, drug stores, home
improvement centers and discount stores), to enable merchandise to be protected
at the source, thereby, freeing sales associates to service customers. In
addition, source tagging is intended to help retailers increase product sales
and profitability through open merchandising and product exposure, as well as
reduce shrinkage.
Currently over 360 vendors in the U.S. and over 540 internationally participate
in source tagging with Ultra-Max and magnetics based labels. The Company
estimates that in 1996, over 900 manufacturers, distributors and vendors
provided U.S. and international retailers with millions of products source
tagged with Sensormatic labels.
The recognized goal of source tagging is the concealed integration of EAS labels
within a product or its primary packaging, thus keeping EAS labels out of sight
and reach of the consumer. This is referred to as "integrated source tagging" or
"source integration". The Company has recently introduced the Ultra-Strip narrow
label which delivers superior performance at a significantly lower cost and is
well suited, based on key performance criteria, for integrated source tagging.
The Company believes integrated source tagging will be increasingly necessary to
make source tagging an effective and widely accepted practice by manufacturers
and retailers.
As part of the Company's strategy to highlight the expansion of its
commercial/industrial business, Sensormatic was named the first ever official
electronic security supplier to the 1996 Olympic Games in Atlanta. The Company
provided electronic security technology including CCTV and Access Control
systems, and, on a smaller scale, EAS and EAP systems. The Olympic site
represented the largest security installation in the world covering 46 venues
throughout the U.S. All of the protected venues remained safe throughout the
Games for the 20,000 athletes, coaches and others.
7
<PAGE> 9
To enhance and expand its product capabilities, the Company has entered into
strategic alliances with leading companies such as Paxar, Motorola, and Texas
Instruments covering areas such as soft goods source tagging, proximity access
cards and readers and RFID technology in the security and tracking markets,
respectively. The Company has formed these alliances in order to respond to
customer needs and market demands quickly with the best technology available.
To improve market focus, customer service and product quality, as part of the
Company's strategic restructuring plan, the Company reorganized its product line
management and engineering efforts into focused marketing and product
development teams that operate as Centers of Excellence . The teams support the
Retail business units and retail customers as well as centralize and coordinate
global product development, management and marketing efforts. Additionally, C/I
Worldwide has restructured its three principal subsidiary companies, American
Dynamics, Robot Research and Software House, into an integrated product line
management and development organization called the Integrated Security Systems
(ISS) Division. The realignment of these functions will help to focus research
and development efforts related to CCTV and Access Control systems, streamline
product and software development and enhance overall customer service. Further,
C/I Worldwide has organized each of its regional sales organizations into a
Security Products Division ("SPD") and an Enterprise Accounts Division ("EAD").
The SPD division focuses on customer and sales channel requirements and the EAD
within each region focuses on integrated security solutions targeted to major
national and global customers.
SALES AND SERVICE ORGANIZATION AND DISTRIBUTION
At June 30, 1996, the Company employed a total of over 3,400 sales and customer
engineering personnel worldwide to market and service its products directly to
retail and commercial/industrial customers. In addition, over 600 sales and
customer engineering personnel employed by international distributors contribute
to this effort. Sales and service personnel are directed from offices located
throughout the U.S. and in more than 70 countries worldwide. The Company
believes that a major factor in its success has been the high quality of its
extensive and experienced sales and service organization.
The Company has organized its sales force into specialized sales groups to
market its systems to specific customer groups. For example, in addition to the
C/I Worldwide business unit and the Global Source Tagging Division specialized
sales groups, retail specialized sales groups have been created to target the
supermarket industry and key soft goods retailers in the U.S. and similar
specialization, concentrated on self-service stores and hypermarkets, has
occurred in Europe. The Company will continue to specialize its sales force and
believes such specialization will accelerate its success in marketing to
targeted user groups.
In fiscal 1996 the Company established a representative office in Moscow to
support its network of distributors in the Russian Federation and opened a
representative office in Beijing, The Peoples Republic of China, to expand its
distribution of products in mainland China.
BACKLOG
As of June 30, 1996 and June 30, 1995, the Company had a backlog of orders for
sales of approximately $85 million and $105 million, and had a backlog of orders
for operating leases providing for future lease revenues aggregating
approximately $17 million and $14 million, respectively.
Backlog includes only firm orders which are expected to be installed or
delivered within one year. Backlog at any time is not necessarily indicative of
the level of business to be expected in the ensuing period.
SEASONAL ASPECT OF THE BUSINESS
Although the business of the Company is not necessarily seasonal, it has been
the Company's experience, with respect to its retail customers, that new orders
and installations generally decrease during the December through February
period. The Company believes this is attributable to the preoccupation of retail
store management with the holiday selling season and year-end inventory analysis
during this period. Additionally, the traditional European vacation period
during the months of July and August results in a general decline of
8
<PAGE> 10
new orders and installations during this period. The Company does not experience
seasonal business from its commercial/industrial customers.
PATENTS AND RELATED RIGHTS
The Company owns or is the exclusive licensee of over 191 active patents issued
by the U.S. Patent Office. These patents cover a variety of inventions and
features, including the Company's acousto-magnetic, electromagnetic, microwave,
swept-RF systems and CCTV systems. The Company has over 55 patent applications
pending in the U. S. for various other inventions relating to its products.
Patents corresponding to many of the U. S. patents have been issued or are
pending in various foreign countries. There can be no assurance that any patents
will be issued to the Company on any of its pending applications. The Company is
also a non-exclusive licensee under certain patents issued in the U.S. and
various foreign countries relating to the manufacture, use and sale of certain
labels for use with its electromagnetic systems.
The Company does not make any representation as to the scope, validity or value
of any patents which have been or may be issued or licensed to it or as to the
possible infringement by its products on patents owned by others. Although the
Company's patent program is important, the Company believes that because of its
technical knowledge and experience and the abilities of its established and
experienced sales and service organization, it is not dependent upon patent
protection to maintain its leadership in the electronic security industry.
MANUFACTURING
The Company's major production facilities are located in Puerto Rico, Florida
and Ireland. The Company's strategy is to vertically integrate manufacturing
processes and to form strategic alliances with independent manufacturing
partners to produce its products at the lowest cost. This in-house capability,
combined with such alliances, provides control over costs, quality and
responsiveness to the demands of the market which results in a distinct
competitive advantage.
The Company has improved, and expects to continue to improve, its production
efficiencies through new processes, increased automation and improved
cost-reducing product designs. Such increased automation, particularly to
increase capacity and lower production costs of disposable EAS labels, has
required additional capital expenditures for new production equipment.
Approximately 60% of the Company's production takes place in Puerto Rico. Until
recently, this jurisdiction had a favorable income tax status, contributing to
the Company's relatively low effective tax rate. In August 1996, Congress
repealed the favorable tax status in Puerto Rico which will be phased out over a
ten year period for years beginning after December 31, 1995. See Management's
Discussion and Analysis of Financial Condition and Results of Operations for
further discussion.
In fiscal 1995 the Company began manufacturing operations in an 80,000 square
foot leased facility located in Cork, Ireland. This facility allows the Company
to manufacture certain EAS and CCTV products (including tags and labels) closer
to its large European customer base, in addition to being located in a low
income tax jurisdiction. Additionally, the Company entered into an agreement
with the Industrial Development Agency of Ireland providing for certain wage and
training tax credits and rent subsidies.
Independent suppliers provide various component products and materials used to
manufacture the Company's systems. Certain of the magnetic material for the
Ultra-Max labels and tags is purchased from a single vendor under a supply
agreement. Additionally, certain equipment and mechanical and component parts,
supplies and accessories are purchased from independent suppliers.
The Company also contracts with independent parties for the manufacture of
certain label products, such as the AisleKeeper and standard magnetic labels,
made to the Company's specifications. Additionally, certain CCTV accessories and
components are purchased, subject to the Company's specifications, from
approximately 10-15 large international electronics manufacturers.
9
<PAGE> 11
COMPETITION
The electronic security industry is highly competitive. Additionally, there are
many alternatives available to protect people and assets, in addition to the use
of EAS, CCTV, Access Control and EAP systems. These alternatives include, among
other things, guards and private detective services, mirrors, burglar alarms and
other magnetic and electronic devices, and services combining some or all of the
above elements. To the Company's knowledge, there are several other companies
that market, directly or through distributors, EAS equipment to retail stores,
of which Checkpoint Systems, Inc. and Minnesota, Mining and Manufacturing
Company in the U.S. and Europe, and Esselte Meto and Nedap B.V. in Europe, are
the Company's principal competitors. With respect to CCTV system components,
there are numerous companies, including Philips, Panasonic and Pelco, that
market directly or through distributors such equipment to both retail and
non-retail customers. There are many competing companies, including CardKey
Inc., Westinghouse Electronic Corporation, Northern Computers Inc. and
Casi-Rusco Inc. in the access control system market. The EAP market is in
initial development; principal potential competitors are expected to include
companies which manufacture EAS equipment.
The Company competes in marketing EAS, CCTV, Access Control and EAP systems
principally on the basis of product performance, multiple technologies, service
and price. There can be no assurance that other firms with greater financial and
other resources may not enter into direct competition, or expand the scope of
their existing competition, with the Company.
SALES REVENUE
Direct Sales and Sales-Type Leases
The Company's sales revenues are predominantly generated by direct sales and
sales-type leases of new products and systems. Additionally, the Company
generates sales revenues by: (i) export sales of new products and systems to
distributors in foreign countries; (ii) sales to third-party leasing companies
of selected operating leases, primarily in Europe; (iii) sales of selected new
equipment to dealers and system integrators; and (iv) sales of leased equipment
to existing customers converting from lease to purchase, primarily in Europe.
The Company sells its systems on a current, deferred or installment payment
basis. Substantially all deferred payment obligations are payable within one
year. Installment contract obligations are payable monthly over terms generally
up to five years. Both types of obligations are subject to stated or imputed
interest at prevailing market rates and are generally secured by the purchased
equipment. The Company's sales-type leases consist of non-cancelable leases of
new equipment with terms of 60 months or greater. The Company believes that
marketing its systems on flexible terms, including long-term financing, provides
it with a competitive advantage. For each of the three fiscal years in the
period ended June 30, 1996, no single customer accounted for 10% or more of the
Company's consolidated revenues.
Rental and Other Revenues
The Company also leases systems under non-cancelable operating leases. Such
leases are generally for terms of 36 to 54 months. Substantially all of the
Company's operating lease revenues are generated by certain of its European
subsidiaries. Additionally, the Company generates revenues from the
installation, maintenance and servicing of its systems.
10
<PAGE> 12
Summary of Revenues
The following table summarizes the results of the Company's marketing and sales
efforts for each of the five fiscal years in the period ended June 30, 1996 and
the month ended June 30, 1992.
SUMMARY OF REVENUES
(In millions)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------ YEAR ENDED
1996(1) 1995(1) 1994(1) 1993 MAY 31, 1992
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales(2)
United States $415.0 42% $372.0 42% $290.9 44% $197.6 41% $175.4 57%
International subsidiaries 398.2 40 358.9 40 239.7 37 182.1 37 65.5 21
Export to international
distributors 37.6 4 31.5 4 26.8 4 18.4 4 11.7 4
------ --- ------ --- ------ --- ------ --- ------ ---
850.8 86 762.4 86 557.4 85 398.1 82 252.6 82
Rentals and other(3)
International subsidiaries'
rentals 47.3 4 49.0 6 44.6 7 44.3 9 28.7 9
United States installation and
maintenance fees 56.0 6 47.0 5 30.3 5 21.4 4 18.0 6
International subsidiaries'
installation and maintenance
fees 38.1 4 29.1 3 21.7 3 21.7 5 8.8 3
Other 2.4 - 1.6 - 2.0 - 1.8 - 1.8 -
------ --- ------ --- ------ --- ------ --- ------ ---
143.8 14 126.7 14 98.6 15 89.2 18 57.3 18
------ --- ------ --- ------ --- ------ --- ------ ---
Total $994.6 100% $889.1 100% $656.0 100% $487.3 100% $309.9 100%
====== === ====== === ====== === ====== === ====== ===
Total revenues(4)
United States 473.4 47% 420.6 47% 323.2 49% 220.8 45% 195.2 63%
International subsidiaries 483.6 49 437.0 49 306.0 47 248.1 51 103.0 33
Export sales to international
distributors 37.6 4 31.5 4 26.8 4 18.4 4 11.7 4
------ --- ------ --- ------ --- ------ --- ------ ---
Total $994.6 100% $889.1 100% $656.0 100% $487.3 100% $309.9 100%
====== === ====== === ====== === ====== === ====== ===
</TABLE>
(1) For additional information relating to revenues, see "Revenues" under Item
7, Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(2) Total sales for the month ended June 30, 1992 were $15.2 consisting of $5.4
United States (26%); $8.6 international subsidiaries (41%); and $1.2 export
to international distributors (6%).
(3) Total rentals and other for the month ended June 30, 1992 were $5.8
consisting of $3.4 international subsidiaries' rentals (16%); $1.2 United
States installation and maintenance fees (6%); $1.0 international
subsidiaries' installation and maintenance fees (5%); and $0.2 other.
(4) Total revenues for the month ended June 30, 1992 were $21.0 consisting of
$6.8 United States (32%); $13.0 international subsidiaries (62%); and $1.2
export sales to international distributors (6%).
WORKING CAPITAL ITEMS
The Company has historically had a high level of receivables and sales-type
leases outstanding, measured as a percentage of revenues. This results in part
from a key element of the Company's marketing strategy of using its size and
financial strength to increase market penetration by providing alternative
financing options to its retail customers (i.e., vendor financing). This
strategy has given the Company a significant competitive advantage and has
helped the Company penetrate markets and increase customer loyalty and
commitment to Sensormatic. The ability to pursue such a strategy results from
the Company's relatively high gross profit margins and its ability to sell
receivables and leases to financing institutions.
PRODUCT RESEARCH, DEVELOPMENT AND ENGINEERING
The Company has increased its research, development and engineering expenditures
during the past decade. The increase in these activities has resulted in the
continued broadening of the systems and technology offered by the Company,
resulting in the expansion of the applications and customer base for the
Company's systems. New product development in all product categories continues
to be a high priority for the Company.
11
<PAGE> 13
The Company has strengthened its research, development and engineering
activities by increasing its investment in sophisticated engineering equipment,
expanding key consulting relationships throughout the world and substantially
increasing its professional engineering staff, with particular emphasis on
magnetic materials research and certain application software development skills.
Several of the Company's EAS systems depend on the use of magnetic materials.
Software is another major element in the Company's new product designs and
manufacturing processes. At June 30, 1996, the Company employed a staff of 194
engineers, including 54 with advanced Masters and Ph.D. degrees.
In fiscal 1996, 1995 and 1994, the Company spent approximately $28 million, $23
million and $18 million, respectively, for research, development and engineering
costs. During fiscal 1997, the Company expects spending for research,
development and engineering to be comparable to or slightly lower versus fiscal
1996, however, any reductions in expenditures will not jeopardize key strategic
development projects.
GOVERNMENTAL REGULATION
The Company's traditional EAS systems generate microwaves and are subject to the
Radiation Control for the Health and Safety Act of 1968. The Department of
Health and Human Services has adopted standards for certain microwave equipment
and has continued to monitor and evaluate safe emission levels for microwave and
electronic magnetic fields ("EMF") generated by equipment such as radio and
television transmitters, cellular telephones, household appliances and power
lines. The EMF emissions from the Company's EAS systems are within the levels
permitted by the current U.S. safety standards applicable to such equipment.
Although there can be no assurance that rules or regulations establishing more
restrictive standards will not be adopted in the U.S., the Company believes that
the EMF levels generated by its EAS systems will remain within any new safety
standards which may be established.
Certification of the Company's EAS systems is required under applicable
regulations of the U.S. Federal Communications Commission ("FCC"). The Company
has obtained such certification of its presently marketed equipment. Application
for certification of new equipment will be made as such equipment is developed
by the Company. There can be no assurance that such future applications will be
approved. FCC regulations are subject to change or amendment generally, and
there can be no assurance that adverse changes or amendments will not take place
or that future adverse rulings by the FCC will not be rendered.
The Company became aware through articles in newspapers and other periodicals of
an announcement by the Food and Drug Administration ("FDA") on or about
September 8, 1995 that it intends to conduct a study into the effects of devices
such as airport metal detectors, store security systems and some cellular
telephones on implantable heart devices. The Company has yet to receive any
direct notice from the FDA with regard to that study. The Company is also aware
of studies in Europe as to whether any hazards are posed to wearers of
implantable heart devices by a number of devices, including EAS systems. While
the Company believes there to be substantial evidence that no such hazards are
posed by the Company's EAS systems, and offers such evidence to persons
conducting such studies, there can be no assurance that one or more of such
studies will not result in the publication of reports, the recommendation of
precautionary measures and/or the adoption of regulations which could adversely
affect the Company.
Internationally, as in the United States, the sale and use of the Company's EAS
systems are subject to regulation by governmental authorities having
jurisdiction over electronic and communication equipment use. Such systems are
in compliance with the applicable requirements under the regulations of
government authorities in countries in which the Company markets such products
through its subsidiaries and in many other countries. In addition, in view of
the Company's high level of business activity in the European Union ("EU"), the
Company actively participates in the development of evolving technical standards
issued by CENELEC (Committee on European Normalization of Electrical Standards)
and ESTI (European Telecommunications Standards Institute). As of January 1,
1996 new standards were required to be met to apply the CE Mark and to market
products in the EU. The Company certified the majority of its products to the CE
Mark requirements during fiscal year 1996. There can be no assurance that all
products of the Company subject to regulations will meet the requirements of
such regulations in all countries in which the Company desires its products to
be marketed, nor can there be any assurance that adverse changes or
12
<PAGE> 14
amendments to existing regulations will not take place, nor that future adverse
rulings by the regulating authorities of such countries will not be rendered.
EMPLOYEES
As of June 30, 1996, the Company employed approximately 6,300 persons worldwide,
of whom approximately 3,400 were engaged in field sales, customer engineering
and marketing activities; approximately 1,900 in production; approximately 700
in administrative; and approximately 300 in research, development and
engineering.
ITEM 2. PROPERTIES
Domestically, the Company owns or leases facilities in Florida, Puerto Rico,
California, Massachusetts, New York and Texas for executive, marketing, product
development, manufacturing and warehousing activities. The Company also leases
space in various locations throughout the U.S. for sales and customer
engineering offices and warehouse space in order to most effectively serve its
customers.
The Company's international subsidiaries own or lease office and warehouse space
for their operations. The principal facilities are located in Australia,
Belgium, Brazil, Canada, France, Germany, Ireland, Italy, Mexico, The
Netherlands, Singapore, Spain, Sweden and the U.K.
The Company considers its key properties identified above as suitable to its
business and, in general, adequate for its current and near-term needs. All such
properties are fully utilized, except as discussed below. In July 1995, the
Company purchased a 150,000 square foot facility in Boca Raton, Florida to
consolidate its research, product development and engineering support personnel
and equipment and the Company's primary corporate administrative functions. The
Company is currently in the process of vacating its previous corporate
administrative and operation facilities in Deerfield Beach, Florida and
relocating these functions to its Boca Raton facilities. The Deerfield Beach
facilities are currently held for sale; except for the U.S. repair center
facility, which the Company currently expects to maintain in Deerfield Beach.
ITEM 3. LEGAL PROCEEDINGS
1. The Company and Ronald G. Assaf were named defendants in a putative class
action commenced on November 22, 1993, in United States District Court for the
Southern District of Florida, entitled Silver v. Sensormatic Electronics
Corporation, et al., Civil Action No. 93-8619. Plaintiff, who claimed to have
been a shareholder of the Company, asserted federal securities and negligent
misrepresentation claims alleging, among other things, that defendants made
false representations concerning the growth of the Company and the quality of
its Ultra-Max product. Plaintiff sought class certification and unspecified
compensatory damages for himself and other putative class members who purchased
the Company's common stock in the period from January 8, 1993, through November
11, 1993.
A settlement agreement has been entered into between the plaintiffs and the
Company, and was approved by the Court on July 16, 1996. The settlement
agreement fixes the end of the class period at April 30, 1993 and 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 will 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.
2. A number of putative shareholder class actions have been filed against the
Company in the United States District Court for the Southern District of
Florida, following announcements by the Company that its earnings for the
quarter and year ended June 30, 1995, would be substantially below expectations
and, in the later actions or complaint amendments, that the scope of the
Company's year-end audit had been expanded and results for the third quarter of
fiscal year 1995 were being restated. The actions were filed by (i) William
13
<PAGE> 15
Neuman ("Neuman") on or about July 10, 1995, (ii) Robert Ehrenreich
("Ehrenreich") on or about July 10, 1995, (iii) Eugene Friedman and Clara
Friedman, as joint tenants, on or about July 12, 1995, (iv) Raymond Cayuso on or
about July 20, 1995, (v) Steve Silvers ("Silvers") on or about July 17, 1995,
(vi) the Thomas E. Powell Profit Sharing Plan ("Powell") on or about August 3,
1995, (vii) William Steiner ("Steiner") on or about September 1, 1995, (viii)
Jeffrey Kaliser ("Kaliser") on or about September 1, 1995, (ix) Joseph DeFrank
on or about September 5, 1995, (x) Helen D'Amato ("D'Amato") on or about
September 7, 1995, (xi) Andrew W. Schonzeit, custodian for Gabriel M. Schonzeit,
on or about September 13, 1995, (xii) Sol Leventhal on or about September 13,
1995, and (xiii) Charles Miller, Robert Booth, Bernice Tillman and Jed Pomerantz
("Miller") on or about September 14, 1995. Neuman filed an amendment to his
complaint on or about September 5, 1995, which also added as plaintiffs Barry
Kirshner and K. A. Krinsk. Notices of joinder were filed in the Ehrenreich
action by Barbara E. Oldziej-Pardon and Mark Matthews.
In addition, Steven Fradin filed a substantially similar action in the United
States District Court for the Southern District of New York on or about October
25, 1995. By stipulation and order dated November 28, 1995, that case was
transferred to the United States District Court for the Southern District of
Florida.
By order dated November 8, 1995, the foregoing cases have been consolidated. The
Consolidated Amended Class Action Complaint, dated January 22, 1996, alleges,
among other things, that the Company and certain of its current and former
directors, officers, and employees, as well as the Company's auditors, violated
certain Federal securities laws by issuing allegedly materially false and
misleading statements concerning the Company's results and prospects, omitting
to disclose information necessary to make existing disclosures complete and
accurate, and misstating the Company's financial performance. The Consolidated
Complaint challenges, among other things, the Company's disclosures in
connection with the Company's financial results for the fiscal year ended June
30, 1994 and for each fiscal quarter of fiscal year 1995. The Consolidated
Complaint alleges (1) violations of Sections 10(b) and 20(a) of the Securities
Exchange Act, and Rule 10b-5 promulgated thereunder, (2) violations of Section
11 of the Securities Act, (3) violations of Section 12(2) of the Securities Act,
and (4) violations of Section 14(a) of the Securities Exchange Act, and Rule
14a-9 promulgated thereunder. The defendants named in the Consolidated
Complaint, other than the Company, are Ronald G. Assaf, the Company's Chairman
of the Board and former Chief Executive Officer; James E. Lineberger, a
director; Michael E. Pardue, the Company's retired Chief Operating Officer and
Chief Financial Officer and a former director; Dennis C. Gillette, the Company's
retired Vice President of Sales; Lawrence Simmons, the Company's former Vice
President of Corporate Finance; John T. Ray, Jr., a director; Arthur Milnes, a
director; Jerome M. LeWine, a director; Gerd Witter, President of Sensormatic
Europe; and Ernst & Young, LLP, the Company's auditors. One of the claims
against the Company's auditors asserted under state law, and 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
claim against Gerd Witter has been voluntarily dismissed by the plaintiffs.
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
traders in 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.
By stipulation, dated September 12, 1996, the parties to the above consolidated
class actions agreed to limit the proposed class to all persons who purchased,
or received through the exercise of options, shares of common stock of the
Company during the period from August 10, 1994 through and including August 31,
1995, provided that shares purchased on August 31, 1995 were purchased at a
price of $25.25 per share or higher. The stipulated class excludes persons who
acquired common stock pursuant to the Company's merger with Knogo approved by
its shareholders in December 1994. The stipulation is subject to court approval.
14
<PAGE> 16
The Company intends to vigorously defend against this action.
3. An action was filed against the Company and certain of its current and former
directors and officers, on or about July 3, 1996, in the United States District
Court for the Northern District of Illinois, entitled Gilford Partners, L.P. v.
Sensormatic Electronics Corp., et al., 96 Civ. 4072. In addition to the Company,
the complaint names as defendants Messrs. Assaf, Lineberger, Pardue, Witter,
Simmons, Ray, Milnes and LeWine. The plaintiff in this action claims to be a
"short seller" of the Company's common stock damaged by the alleged artificial
inflation in the price of the Company's stock caused by allegedly false and
misleading statements and omissions of material fact regarding, among other
things, the Company's financial results and accounting practices. The complaint
seeks compensatory damages and costs and expenses of bringing the action,
including attorneys' fees, accountants' fees, experts' fees and other relief.
The Company intends to vigorously defend against this action.
4. Three derivative actions were filed against certain directors of the Company
in the Court of Chancery of the State of Delaware by Marion Lord and Norman
Rabinstein, Harry Lewis, and Alan Freberg on or about September 7, September 13
and September 14, 1995. The complaints names Messrs. Assaf, Milnes, Ray, LeWine,
Lineberger and Thomas V. Buffett, current directors of the Company, and Mr.
Pardue, a former director, as defendants and the Company as nominal defendant.
The complaints assert, among other things, claims for breach of fiduciary duties
of care and loyalty, mismanagement and waste of corporate assets. The
plaintiffs, who claim to be stockholders of the Company, seek restitution and/or
damages in favor of the Company and imposition of a constructive trust upon
defendants' proceeds from trading activities in the Company's securities
allegedly based upon non-public information, together with costs, attorneys'
fees, accountants' fees and experts' fees and other relief. These three actions
have been consolidated. The Company intends to vigorously defend against these
actions.
5. Pursuant to a formal order dated September 27, 1995, the Securities and
Exchange Commission is conducting a private investigation into, among other
things, certain trading in the Company's stock prior to certain announcements in
1995 concerning the Company's results of operations, as well as the propriety of
certain of the Company's public statements, the accuracy of the Company's books
and records and the accuracy of the Company's public filings, including in
particular with respect to revenue recognition matters which were the subject of
the expanded audit for fiscal 1995 by the Company's independent auditors. The
Company is cooperating with this investigation.
6. The Company was notified, by receipt of a document subpoena on February 6,
1996, that the U.S. Federal Trade Commission has authorized a non-public
investigation to determine whether the Company, certain other U.S. manufacturers
of EAS systems and unspecified others agreed to refrain from truthful
comparative advertising relating to EAS systems, or agreed to boycott the EAS
standard-setting process of the National Association of Chain Drug Stores. The
Company is cooperating with this investigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
15
<PAGE> 17
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information as of September 16, 1996 with respect
to the executive officers of the Company.
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITION
- ------------------------ --- ------- --------------------------------------------
<S> <C> <C> <C>
Robert A. Vanourek 54 1995 President and Chief Executive Officer
Olin S. Giles 55 1985 Senior Vice President and Chief Technical
Officer
Garrett E. Pierce 52 1996 Senior Vice President and Chief Financial
Officer
Terry W. Price 52 1991 Senior Vice President and President of
Commercial/Industrial Worldwide Operations
Gerd Witter 52 1983 Senior Vice President and President of
Sensormatic Europe Retail Operations
John D. Cronan 52 1996 Vice President and Corporate Controller
John F. Daut 61 1988 Vice President of Manufacturing
Richard C. DeCook 54 1996 Vice President and Treasurer
Walter A. Engdahl 58 1992 Vice President -- Corporate Counsel and
Secretary
Bradley P. Kane 44 1990 Vice President of Retail Product Line
Management
Jerry T. Kendall 53 1993 Vice President of North American Retail
Operations
Ronald F. Premuroso 42 1996 Vice President of International Retail
Operations
</TABLE>
The terms of office of each of the above officers, pursuant to the By-Laws of
the Company, will continue until the next Annual Meeting of the Board of
Directors (to be held after the next Annual Meeting of Stockholders) and until a
successor is elected and qualified.
Robert A. Vanourek joined the Company as President and Chief Operating Officer
in October 1995 and on August 12, 1996 became President and Chief Executive
Officer. Prior to joining the Company, Mr. Vanourek was President and Chief
Executive Officer of Recognition International, Inc.("Recognition"), an
international provider of document processing hardware, software and services.
Prior to joining Recognition, he spent eight years at Pitney Bowes, including
four years as Group Vice President of Pitney Bowes' $800 million Mailing Systems
division. He also spent four years as President of Pitney Bowes' Monarch Marking
Systems subsidiary, which marketed price-marking systems and electronic article
surveillance equipment to retailers worldwide.
Olin S. Giles joined the Company in May 1985 as Vice President of Engineering
and served as Vice President of Operations from July 1987 to October 1988, when
he was re-appointed as Vice President of Engineering. In March of 1996, Mr.
Giles was appointed to Senior Vice President and Chief Technical Officer of the
Company. Prior to joining the Company, Mr. Giles served for over 20 years in a
number of management positions with General Electric Company.
Garrett E. Pierce joined the Company as Senior Vice President and Chief
Financial Officer in January 1996. Prior to joining the Company, Mr. Pierce was
the Executive Vice President and Chief Financial Officer of California
Microwave, Inc., a leading supplier of microwave, radio frequency, and satellite
systems and products for communications and wireless networks. From 1980 to
1993, Mr. Pierce was with Materials Research Corporation, a leading provider of
thin film technology to the semiconductor, telecommunications and media storage
industries, where he progressed from Chief Financial Officer to President and
CEO.
Terry W. Price joined the Company in April 1991 as Group Vice
President -- Commercial/Industrial. In 1996, the Company's international
commercial/industrial operations were united with the U.S. commercial/
industrial operations, with the combined entity managed by Mr. Price as
President of Sensormatic's Commercial/Industrial Worldwide Operations. At this
time, Mr. Price was also promoted to Senior Vice
16
<PAGE> 18
President of the Company. Prior to joining the Company, Mr. Price served as
President and Chief Executive Officer of AmeriSystems, a telecommunications
firm, for six years. Previously, Mr. Price was employed by IBM in a variety of
sales, marketing and management positions.
Gerd Witter joined the Company in April 1979 as General Manager of its German
subsidiary. Mr. Witter served as Director of European Operations from July 1981
until March 1983 when he was appointed Vice President of European Operations.
Mr. Witter was appointed President of Sensormatic Europe in September 1988. Mr.
Witter was previously responsible for a substantial portion of Sensormatic's
European Retail Operations. In 1995, Mr. Witter was appointed Senior Vice
President of the Company and the two former European retail business units were
combined into a single operating unit under his leadership.
John D. Cronan joined the Company as Vice President and Corporate Controller in
May 1996. Prior to joining the Company, Mr. Cronan spent over 26 years with
Scott Paper Company, serving since 1995 as Vice President of Finance and
Planning of Scott Paper Company's Worldwide Away From Home Business operating
division. Prior to that, Mr. Cronan was Vice President and Controller for Scott
Worldwide Operations.
John F. Daut joined the Company in December 1988 as Vice President of
Manufacturing. Prior to his joining the Company, Mr. Daut had over 31 years of
experience in manufacturing at IBM, including Site General Management.
Richard C. DeCook joined the Company as Vice President and Treasurer in May
1996. Prior to joining the Company, Mr. DeCook held the position of Chief
Financial Officer at The Wackenhut Corporation, a physical protection and
security services company. From 1978 to 1993, Mr. DeCook held various positions
with Trinova Corporation, most recently as Vice President of Financial Planning
and Control.
Walter A. Engdahl joined the Company in November 1983 as Corporate Counsel. Mr.
Engdahl was appointed Vice President -- Corporate Counsel in October 1992. In
November 1993, Mr. Engdahl was appointed Secretary of the Company. He is a
member of the Bars of both Florida and New York.
Bradley P. Kane joined the Company in 1974 as Marketing Staff Manager. Mr. Kane
served as Director of Marketing from 1988 to 1990 and in 1990 was promoted to
Vice President of Marketing. In 1991, Mr. Kane became Vice President of Product
Development and in 1996, Mr. Kane was appointed Vice President of Retail Product
Line Management.
Jerry T. Kendall joined Sensormatic as Senior Vice President -- Sales, Marketing
and Service of Security Tag Systems, Inc., which was acquired by the Company
during fiscal 1993, and was appointed Vice President of Marketing in September
1993. In 1996 Mr. Kendall was appointed Vice President, North American Retail
Operations, with responsibilities to lead the retail business unit field sales,
service and administrative organization in the U.S. and Canada. Prior to joining
Sensormatic, Mr. Kendall served in various sales and marketing executive
capacities at Security Tag from January 1990 to April 1991 and from January 1992
to September 1993. During the interim, Mr. Kendall held the position of
Executive Vice President with Computone Corp., a public company. Prior to
joining Security Tag, he served in various executive positions for 11 years,
including President and Chief Executive Officer of Paradyne Corporation, a data
communications company.
Ronald F. Premuroso joined the Company in November 1980, as a Manager in the
Corporate Finance Department. Mr. Premuroso served as Director of Finance and
Administration for the Company's European Operations from 1983 to 1988; Managing
Director of the Company's United Kingdom Operations from 1988 to 1989; Managing
Director of the Asia/Pacific Operations from 1989-1992 and Vice President of the
Asia/ Pacific Operations from 1992 to 1996. In 1996, Mr. Premuroso was appointed
Vice President of International Retail Operations with responsibilities to lead
the retail business unit field sales, service and administrative organization in
Asia Pacific and Latin America.
None of the above executive officers has any family relationship with any other
director or executive officer of the Company.
17
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Except as provided below, the information called for by this Item appears in
Item 6 under the heading "Selected Financial Data and Quarterly Summary and
Statistical Information".
The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol SRM. As of September 16, 1996, there were 5,353 shareholders of
record of the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA AND QUARTERLY SUMMARY AND STATISTICAL
INFORMATION
SELECTED FINANCIAL DATA
(In millions, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31,
1996 1995(1) 1994 1993(1) 1992(3)
-------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED
Total revenues $ 994.6 $ 889.1 $ 656.0 $487.3 $ 309.9
======== ======== ======== ====== ======
Operating (loss) income $ (134.5) $ 97.9 $ 104.8 $ 71.0 $ 43.6
======== ======== ======== ====== ======
(Loss) income from continuing operations $ (97.7) $ 69.6 $ 72.1 $ 54.1 $ 31.5
======== ======== ======== ====== ======
Net (loss) income $ (97.7) $ 73.7 $ 72.1 $ 54.1 $ 31.5
======== ======== ======== ====== ======
Primary (loss) earnings per common share:
Continuing operations $ (1.32) $ .97 $ 1.16 $ .97 $ .73
======== ======== ======== ====== ======
Net (loss) income $ (1.32) $ 1.02 $ 1.16 $ .97 $ .73
======== ======== ======== ====== ======
Fully diluted (loss) earnings per common
share:
Continuing operations $ (1.32) $ .97 $ 1.13 $ .93 $ .73
======== ======== ======== ====== ======
Net (loss) income $ (1.32) $ 1.02 $ 1.13 $ .93 $ .73
======== ======== ======== ====== ======
Cash dividends per common share $ .22 $ .22 $ .21 $ .15 (4) $ .20
======== ======== ======== ====== ======
AT YEAR-END
Total assets $1,630.3 $1,570.9 $1,155.5 $926.9 $ 467.3
======== ======== ======== ====== ======
Total debt(2) $ 516.5 $ 326.7 $ 219.2 $308.4 $ 150.6
======== ======== ======== ====== ======
Total stockholders' equity $ 831.7 $ 952.7 $ 727.7(2) $489.7 $ 255.7
======== ======== ======== ====== ======
</TABLE>
(1) In fiscal 1995, the Company acquired Knogo Corporation's operations outside
of the United States, Puerto Rico and Canada and in fiscal 1993, it acquired
ALPS and the outstanding common stock of Security Tag (see Note 12 of Notes
to Consolidated Financial Statements).
(2) In fiscal 1996, the Company issued $350 million of Senior Notes; in fiscal
1994, approximately $114 million of the $115 million principal amount of 7%
convertible subordinate debentures, issued in fiscal 1991, were converted to
approximately 7.3 million shares of Common Stock and; in fiscal 1993, the
Company issued $135 million of Senior Notes (see Note 7 of Notes to
Consolidated Financial Statements).
(3) Selected financial data for and as of the end of the one month ended June
30, 1992 is as follows: total revenues -- $21.0; operating loss -- $3.3;
loss from continuing operations and net loss -- $2.5; primary and fully
diluted loss per common share for continuing operations and net
loss -- $.06; total assets -- $462.2; total debt -- $150.3; and total
stockholders' equity -- $258.3.
(4) Fourth quarter dividend of $.05 per share of Common Stock was declared in
July 1993.
18
<PAGE> 20
QUARTERLY SUMMARY AND STATISTICAL INFORMATION (UNAUDITED)
(In millions, except share and per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
- ---------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C>
Total revenues $ 267.2 $ 244.6 $ 225.3 $ 257.5
Operating income (loss) $ 28.8 $ (98.9) $ (73.1) $ 8.7
Net income (loss) $ 16.9 $ (65.1) $ (50.0) $ 0.5
Primary and fully diluted earnings (loss) per
common share $ .23 $ (.88) $ (.68) $ .01
Dividends declared per common share $ .055 $ .055 $ .055 $ .055
Market price of common stock:
High $36 1/2 $24 1/2 $18 7/8 $22 7/8
Low $20 1/8 $16 1/4 $13 5/8 $15 5/8
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
- ---------------------------------------------------------------------------------------------------------
1995 (RESTATED)(2) (3)
<S> <C> <C> <C> <C>
Total revenues $ 190.9 $ 217.8 $ 218.5 $ 261.9
Operating income $ 28.4 $ 35.2 $ 22.9 $ 11.4
Income from continuing operations $ 20.1 $ 25.3 $ 15.7 $ 8.5
Discontinued operations(1) $ - $ - $ - $ 4.1
Net income $ 20.1 $ 25.3 $ 15.7 $ 12.6
Primary and fully diluted earnings per common
share:
Income from continuing operations $ .29 $ .36 $ .21 $ .11
Discontinued operations(1) $ - $ - $ - $ .05
Net income $ .29 $ .36 $ .21 $ .16
Dividends declared per common share $ .055 $ .055 $ .055 $ .055
Market price of common stock:
High $35 3/4 $37 7/8 $35 7/8 $38 1/4
Low $ 28 $30 3/4 $27 1/2 $25 5/8
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) In fiscal 1995 the Company reduced income tax liabilities by $4.1 million.
This amount related to a previously discontinued business and is no longer
required. (see Note 6 of Notes to Consolidated Financial Statements)
(2) As discussed in Note 10 of Notes to Consolidated Financial Statements, the
Company restated its consolidated financial statements for the three months
ended March 31, 1995. The effect of such restatement was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
---------------------
REPORTED RESTATED
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $238.6 $218.5
Operating income $ 34.3 $ 22.9
Net income $ 24.1 $ 15.7
Primary and fully diluted earnings per common share $ 0.33 $ 0.21
----------------------------------------------------------------------------------------------------------
</TABLE>
(3) During the fourth quarter, the Company recorded adjustments relating
primarily to (i) current year product installation costs, (ii) expenses
related to the merger with Knogo, (iii) certain operating assets and (iv)
deferral of certain revenue, (reducing income from continuing operations by
approximately $7 million, in the aggregate); offset by a reduction of prior
years' income tax liabilities associated with both continuing and
discontinued operations, which were no longer required (totaling
approximately $9 million; see Note 6 of Notes to Consolidated Financial
Statements).
19
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS.
RESULTS OF OPERATIONS
OVERVIEW
Consolidated revenues increased 12% to $994.6 million in fiscal 1996 versus
$889.1 million in fiscal 1995, as compared to an increase of 36% in fiscal 1995
versus fiscal 1994. In fiscal 1996, revenues in all regions and business units
increased over the previous year. The continued increase in revenues is
attributable to a strategy of product, customer and geographic market
diversification. The fiscal 1995 revenue growth also reflects, in part, the
impact of the acquisition of Knogo's non-U.S. operations in December 1994. More
than 50% of fiscal 1996 revenues were generated from outside the U.S.
Results of operations reflected a loss of $134.5 million in fiscal 1996 versus
income from operations of $97.9 million in fiscal 1995 and $104.8 million in
fiscal 1994. The Company reported a net loss of $97.7 million, or a per share
loss of $1.32, in fiscal 1996, versus net income in fiscal 1995 of $73.7
million, or earnings per share of $1.02, and net income in fiscal 1994 of $72.1
million, or earnings per share of $1.13. The Company's results for fiscal 1996
include the effects of restructuring and special charges totaling $186 million
pretax, with an after-tax effect of approximately $118.2 million or $1.60 per
share. See "Restructuring and Special Charges" below and Note 2 of Notes to the
Consolidated Financial Statements for further discussion.
The following table presents earnings for fiscal 1996, both as reported and
excluding restructuring and special charges, as compared to fiscal 1995 and
fiscal 1994 (in millions, except per share amounts):
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ -------- --------
EXCLUDING
RESTRUCTURING
AS AND SPECIAL AS AS
REPORTED CHARGES REPORTED REPORTED
-------- ------------- -------- --------
<S> <C> <C> <C> <C>
Operating (Loss) Income $ (134.5) $51.5 $ 97.9 $104.8
Net (Loss) Income $ (97.7) $20.5 $ 73.7 $ 72.1
(Loss) Earnings Per Share $ (1.32) $ .28 $ 1.02 $ 1.13
</TABLE>
RESTRUCTURING AND SPECIAL CHARGES AND OTHER STRATEGIES
Over the past decade, the Company has grown from a single technology, single
market company with gross revenues of less than $100 million in fiscal 1987 to a
global provider of multiple electronic security solutions with gross revenues of
approximately $1 billion in fiscal 1996. A significant percentage of this growth
was achieved over the past four years, as revenues reported for fiscal 1992 were
approximately $300 million and have since grown by a compound average growth
rate of 33.8%. This growth was attained principally through internally developed
new products, various strategic acquisitions and increased market penetration in
existing and new markets.
The rapid growth experienced by the Company in sales, customers and product
diversity and the demands of integrating acquired businesses outpaced the
development of the Company's corporate infrastructure and systems. In addition,
expenses and working capital requirements increased to unacceptable levels.
Consequently, in fiscal 1996, the Company launched a strategic restructuring
plan with the following objectives: (i) expense reduction and asset control,
(ii) improved processes and systems, and (iii) quality growth.
The initial phase of this plan included an extensive and systematic review of
the Company's operations, cost structure and balance sheet aimed at reducing its
operating expenses and manufacturing costs while increasing efficiencies. This
review of the Company's global operations focused primarily on operational
systems, organizational structures, facilities utilization, product
rationalization, inventory levels and accounts receivable balances. In fiscal
1996, as a result of the above initiatives, the Company recorded restructuring
and special charges totaling $186 million with an after-tax impact of $118.2
million.
20
<PAGE> 22
Restructuring Charges
The Company instituted a major reorganization of its business units as a result
of this review. The principal objective of the reorganization is to improve
market focus, customer service and product quality while reducing costs and
eliminating redundancies. Under the new structure, the Company reorganized its
six business units into four. The Company also created product line management
functions both within its C/I Worldwide business unit and in support of its
three retail business units. Additionally, the Company formed the Global Source
Tagging Division, with responsibility to manage and direct the Company's source
tagging initiatives worldwide.
The Company planned for the reduction of 875 people, most of which has occurred,
and the sale, disposal or termination of lease arrangements of 30 locations,
principally in the U.K. and U.S.
The Company also reviewed its existing product lines and product sourcing to
discontinue marginally profitable products and outsource other products. As a
result, the Company recorded a restructuring charge related to discontinued
products and equipment used in the manufacture of certain products which will no
longer be manufactured by the Company or purchased from third-party suppliers.
These actions are expected to result in lower inventory carrying costs and
improved gross margins on continued products.
The following table sets forth the details and activity of the restructuring
charges recorded in fiscal 1996 (in millions):
<TABLE>
<CAPTION>
ACCRUAL
REDUCTIONS BALANCE AT
1996 ----------------- JUNE 30,
PROVISION CASH NON-CASH 1996
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other $45.3 $ - $(34.2) $ 11.1
Closure of facilities and related costs 23.5 (1.0) (1.6) 20.9
Employee termination and related costs 16.5 (10.4) (0.7) 5.4
----------------------------------------------------------------------------------------------
Total $85.3 $(11.4) $(36.5) $ 37.4
----------------------------------------------------------------------------------------------
</TABLE>
It is anticipated that approximately $33.3 million of these costs will result in
cash outlays, of which $11.4 million was disbursed as of June 30, 1996. Upon
completion of the planned restructuring activities, the Company expects to
realize related 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
and key technical areas. In addition, the Company has initiated programs to
reduce other variable operating expenses, exclusive of payroll and related
costs, by approximately $10 million annually.
The restructuring plan is expected to be substantially completed prior to the
end of 1997 and, the Company believes the provisions recorded are adequate to
cover the costs associated with this plan.
Special Charges
As part of the Company's plan to focus on asset management and review its
balance sheet in view of the current business environment, the Company performed
an extensive review of the collectibility of accounts receivables, including
off-balance sheet receivables. This initiative was primarily the result of the
overall weakening in the retail industry following a poor holiday season. In
addition, several commercial/industrial and retail customers filed for
bankruptcy and other customers experienced financial difficulties. The Company
also conducted a review of slow moving and potentially obsolete inventory in
light of softening demand for certain EAS products.
As a result of these reviews, the Company recorded a charge to operations of
$100.7 million in fiscal 1996 which primarily represented increases in the
valuation allowances for doubtful accounts receivable and inventories. Of this
amount, $75.6 million related to receivables and other matters and $25.1 million
related to inventories and revenue equipment. Special charges are included in
the 1996 Consolidated Statement of Operations as follows: $29.1 million in costs
of sales; $2.6 million in depreciation on revenue equipment;
21
<PAGE> 23
$68.5 million in selling, customer service and administrative expenses and $0.5
million in research, development and engineering expenses.
Other Strategies
To assist with the Company's restructuring plan objective to improve processes
and systems, the Company has embarked upon a total quality management program
internally referred to as the "Q(3) Program". The program's objective is to
provide superior value for customers, shareholders and employees. The Q(3)
Program is a multi-year effort in which the Company will reengineer the way it
operates enterprise-wide. The program will also establish a culture of
"continuous improvement" in all of the Company's business processes to reduce
cost and increase customer satisfaction. In connection with this program, the
Company has committed to the implementation of a new enterprise-wide management
information system which is expected to significantly enhance operational
efficiencies and improve customer service.
Key revenue growth strategies of the Company include the following:
(1) Recurring revenues. The sales of disposable labels to hard goods retailers,
maintenance agreements entered into in connection with the sale or lease of
systems, and rental revenues from operating leases are an expanding source of
recurring revenues. In fiscal 1996, recurring revenues were approximately $166
million compared to approximately $152 million and $120 million in fiscal 1995
and fiscal 1994, respectively.
The Company has focused major efforts on increasing future recurring label
revenues through source tagging, the process in which EAS labels are
incorporated into manufactured articles or packaging by the manufacturer or
distributor at the point of manufacture or distribution. The ultimate goal of
source tagging is the concealed integration of EAS labels within a product or
its primary packaging, thus keeping EAS labels out of sight and reach of the
consumer. This is sometimes referred to as "integrated source tagging" or
"source integration". The Company has a leadership position in source tagging
and source integration, with over 900 manufacturers source tagging more than
12,000 stock keeping units (SKU's) with Sensormatic labels. The Company recently
introduced the Ultra-Strip narrow label which delivers superior performance at a
cost significantly lower than the standard Ultra-Strip label cost, and is well
suited, based on key performance criteria, for integrated source tagging. The
Company believes integrated source tagging will be increasingly necessary to
make source tagging an effective and widely accepted practice by manufacturers
and retailers.
(2) C/I Worldwide Operations. The Company has reorganized its
commercial/industrial operations into a single global business unit, C/I
Worldwide, to allow the Company to centralize and focus its
commercial/industrial marketing and product development strategies. C/I
Worldwide has carried out further reorganization and centralization of its
product line management and development functions to bring greater focus on
meeting customer requirements worldwide. Additionally, each of C/I Worldwide's
regional sales organizations has been organized into an Enterprise Accounts
Division, which focuses on integrated security solutions targeted to major
national and global customers through a direct sales force and a Security
Products Division, which focuses on customer and sales channel requirements
through a dealer/distributor network. The Company expects that the global
reorganization of C/I Worldwide will help to focus the Company's strategy to be
an integrated electronic security provider with enhanced products and a broader
customer base.
(3) Products. The Company has been focusing its research and development
efforts on a number of key strategic products including UltraDome (CCTV),
UltraPost (EAS) and RFID smart tag. RFID smart tags utilize a radio frequency
identification and acousto-magnetic technologies and can be used by retailers to
manage their merchandise and can also be used to protect and track assets and
people. The Company is combining its resources with other partners, such as
Texas Instruments, Motorola, Paxar and Micron Communications, Inc., ("Micron")
as part of its product development efforts. The Company's newest alliance is
with Micron, who is known for their remote intelligent communications
technology.
22
<PAGE> 24
RESULTS OF OPERATIONS -- FISCAL 1996 COMPARED TO FISCAL 1995
The following discussion of operating results excludes the effects of the
restructuring and special charges recorded in fiscal 1996, which were discussed
above.
Revenues
As noted above, revenues for fiscal 1996 increased 12%, or $105 million, over
fiscal 1995 as all regions and business units increased revenue as compared to
the prior year. The revenue growth resulted principally from increased sales of
CCTV products, which are used by both retail and commercial/industrial
customers, and EAS products and systems. CCTV revenues increased 16% from $255.7
million in fiscal 1995 to $297.5 million in fiscal 1996. EAS revenues increased
6% principally from the magnetic and Ultra-Max product line. Ultra-Max revenues
increased 11% primarily as a result of increased revenues from hard goods retail
customers and from Ultra-Max and Ultra-Strip labels used in source tagging.
Worldwide Access Control system revenues increased 32% to $60.8 million in
fiscal 1996 as compared to $46.1 million in fiscal 1995.
CCTV and Access Control system revenues from the U.S. region of C/I Worldwide
increased 35% to $192.5 million due primarily to increased sales of CCTV
products to non-retail customers and an increase in market penetration. Fiscal
1996 was a transition year for C/I Worldwide as the Company rationalized product
lines, manufacturing and overhead facilities and dealer/distributor
organizations.
Consolidated revenues for the EAS product lines increased 6% from the comparable
period last year, principally due to growth in all geographic areas from
Ultra-Max product line revenues, which increased 11% from the prior year as
noted previously. Revenues from the magnetic product lines increased 25%, with
the greatest increase in Europe, due in part to the acquisition of Knogo
effective in the third quarter of 1995; slightly offset by a decrease in the
U.S. where sales efforts are concentrated on the Ultra-Max product line. These
increases were partially offset by a decline of 24% in the microwave product
line revenues, principally in Europe, where sales efforts focused on the
magnetic product lines.
North American retail revenue for fiscal 1996 increased 4% versus fiscal 1995.
Following the downsizing and restructuring carried out in the second quarter,
revenues decreased in the third quarter but increased in the fourth quarter. EAS
revenues were adversely affected by a number of consolidations and bankruptcies
of retailers as well as increased competition in certain segments of the retail
market. The increased competition has also resulted in pricing pressures, and
the Company expects gross margins will be under pressure for a period of time.
The Company expects that the savings to be realized as a result of its
restructuring plan and its Q(3) program will help to offset some of the
anticipated negative impact of the pricing pressure on operating results.
In Europe, total revenues increased 4% over fiscal 1995. Operations in Europe
were negatively impacted by the downsizing and restructuring, particularly in
the U.K., where the Company carried out its most intensive restructuring while
facing an increase in competition. France's revenue growth was negatively
impacted by recent legislation restricting the expansion of hypermarkets. The
Company expects this legislation may ultimately result in an industry
consolidation and as a consequence, expects a greater amount of equipment
upgrade revenue rather than new product sales. The Company has also experienced
increased competition in Europe during the most recent year. The Company has
recently introduced its narrow lower-cost Ultra-Strip label; Max-Checkout, used
in aisle-based hypermarkets; and SensorStrip II proximity deactivatable,
low-cost magnetic labels; and is now offering a handheld price-marking gun to
dispense EAS labels. These products are expected to improve the Company's
competitive position in Europe.
Revenues in Asia/Pacific grew 9% over the prior year. Revenues were slightly
affected by some softness in Japan's and Australia's economies over the course
of the year, but recently these markets have begun to rebound. Additionally, the
Company is expanding its presence in China and in fiscal 1996 opened a
representative office in Beijing, The Peoples Republic of China. Revenues in
Latin America grew 55% to $53.6 million as compared to $34.5 million in fiscal
1995. All countries in Latin America reported revenue increases in excess of 15%
over fiscal 1995. In the fourth quarter of fiscal 1996, the Company completed
the acquisition of its distributor operations in Colombia.
23
<PAGE> 25
The Company anticipates that revenues for the first quarter of fiscal 1997 will
be lower than revenues reported in the first quarter of fiscal 1996. Such
decrease in revenues is due, in part, to shortages of key components and
products for certain product lines, particularly video cameras and certain
components of the Ultra-Max product line. The product shortages are due to
manufacturing disruptions in Puerto Rico caused by Hurricane Hortense in
September 1996, and order activity which was not forecasted and could not be
accommodated by lower inventory levels established in the fourth quarter of
fiscal 1996. Some of these product shortages are expected to continue into the
second quarter of fiscal 1997. The process of reducing inventories and improving
forecasts began in late fiscal 1996 in an effort to reduce inventories and is
ongoing.
Gross Margins and Operating Income
Before special charges, gross margins on sales were 50.2% for fiscal 1996
compared with 53.6% in fiscal 1995. The decline in margins is due primarily to
lower product pricing resulting from competition in certain segments of the EAS
markets, higher manufacturing costs resulting from temporary curtailment of
manufacturing operations during fiscal 1996 and higher costs associated with the
transfer of more production to the Company's facility in Ireland to support
operations in Europe. As previously discussed, the Company has experienced
pricing pressures in certain EAS retail market segments and expects the pricing
pressure to continue in future quarters. Manufacturing operations were
temporarily curtailed as a result of planned reductions in inventory levels and
operated at approximately 66% of prior year levels. Worldwide inventory levels
decreased $83 million from the previous year-end, including restructuring and
special writedowns. The Company has various plans in place to reduce its
manufacturing costs, and also expects to realize savings as a result of
manufacturing volume efficiencies, particularly on its Ultra-Strip label.
Excluding restructuring and special charges, operating income for fiscal 1996,
was $51.5 million or 5.2% of total revenue, versus $97.9 million or 11% of total
revenue in fiscal 1995. Operating costs and expenses in fiscal 1996 increased to
94.8% of consolidated revenues, compared with 89% in fiscal 1995.
Selling, Customer Service and Administrative Expenses
Excluding special charges; total selling, customer service and administration
expenses, as a percentage of total revenues, were 46% in fiscal 1996 versus
43.1% in fiscal 1995. Selling expenses increased in fiscal 1996 versus fiscal
1995 due to higher commission expense as a result of increased revenue. Customer
service (installation and service) costs increased as compared to the prior
year, primarily due to the increase in business. Overall the U.S. retail market
weakened following a poor holiday season and the consolidation of some retailers
led to stronger competition for other retailers. This resulted in an increase in
bankruptcies and financial difficulties. As a result, the Company has increased
its allowance on accounts receivable, resulting in an increase to bad debt
expense.
Administrative expenses for fiscal 1996 included approximately $9.8 million in
legal expenses compared to $4.5 million in fiscal 1995. The increase is due
primarily to expenses incurred to defend against certain actions which have been
brought against the Company and in connection with an investigation by the
Securities and Exchange Commission. It is anticipated that legal expenses and
related cash expenditures will remain at an elevated level until these matters
are concluded.
Additionally, Sensormatic was the electronic security sponsor to the 1996
Olympic Games. In fiscal 1996 the Company incurred expenses of $6.2 million and
expects to incur a like amount in the first half of fiscal 1997, related to its
involvement as the official electronic security supplier to the 1996 Olympic
Games. 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 sales benefit from the world "showcase" exposure has benefited
the Company through new business. To date, the Company has booked over $20
million of firm business and expects significant additional business. In
addition, certain of the expenses incurred are being recovered through the sale
of the vast majority of the equipment installed at the Games.
Research, Development and Engineering Expenses
Research, development and engineering expenses increased to 2.8% of revenue in
fiscal 1996 versus 2.5% in fiscal 1995. The Company's emphasis on research and
development activities has resulted in the continued broadening of the systems
and technology offered by the Company, resulting in the expansion of the
applications and customer base for the Company's systems. New product
development in all product
24
<PAGE> 26
categories continues to be a high priority for the Company. During the year the
Company introduced 27 new products including; 1) Ultra-Strip labels,
Max-Checkout, Pro-Max II, Pass-Around -- in the Ultra-Max product line; 2) EM
Rapid Pad, SensorStrip Aisle System and SensorStrip Checkout -- in the magnetic
product line; 3) a new line of video managers designed to give customers the
ability to integrate closed circuit television systems with other software
systems; and 4) various other product introductions including, the Microwaveable
Ultra-Max label for use in the food market industry, the Sentrac ID system and a
handheld price-marking gun. During fiscal 1997, the Company expects spending for
research, development and engineering to be comparable to or slightly lower
versus fiscal 1996, however, any reductions in expenditures will not jeopardize
key strategic development projects.
Interest and Other Income (Expenses)
Net interest expense of $21.5 million for fiscal 1996 increased by $9.7 over the
prior year. The increase is due in part to the higher level of short-term
borrowings outstanding during the first nine months of fiscal 1996 and the
issuance of $350 million of Senior Notes. The interest on the Senior Notes is
slightly higher than the current short-term borrowing rate.
Other income and expense items reflect expenses of $3.9 million in fiscal 1996
compared with income of $2.9 million in fiscal 1995. The change reflects the
impact of net currency exchange gains in fiscal 1995 totaling $5.2 million
resulting from a non-recurring gain related to the Knogo acquisition and the
settlement of intercompany transfers of products. Additionally, minority
interest expense in Brazil and higher factoring fees related to the sale of
accounts receivable resulted in increased expenses in fiscal 1996 as compared to
fiscal 1995.
Taxes
The Company's effective consolidated tax rate for fiscal 1996 was (38.9)% as
compared to 21.9% in fiscal 1995. The fiscal 1996 rate includes the effect of
restructuring and special charges. Excluding the effect of restructuring and
special charges, the Company's effective tax rate was 21%. The effective tax
rate for continuing operations for fiscal 1997 is expected to range between 29%
and 32%. The higher projected effective tax rate in fiscal 1997 as compared to
fiscal 1996 is due to an increase in the relative proportion of the Company's
profits earned in jurisdictions with tax rates higher than the effective tax
rate in fiscal 1996.
In August 1996, Congress repealed the favorable tax status in Puerto Rico which
will be phased out over a ten year period for years beginning after December 31,
1995. The Company does not anticipate any immediate adverse effects as a result
of the new law.
The Company has recognized a valuation allowance relating to the uncertainty as
to the realization of certain deferred tax assets, principally related to the
fiscal 1995 acquisition of Knogo. Based upon anticipated future results, the
Company has concluded, after review of the valuation allowance, that it is more
likely than not that the remaining balance of the net deferred tax assets will
be realized.
RESULTS OF OPERATIONS -- FISCAL 1995 COMPARED TO FISCAL 1994
Revenues
Consolidated revenues for fiscal 1995 were $889 million, a 36% increase from
$656 million in fiscal 1994. The revenue growth in fiscal 1995 resulted
principally from increased EAS revenues particularly from the Ultra-Max product
line, increased CCTV product volume from retailers, and increased volume from
the U.S. Commercial/Industrial Group.
Consolidated revenues from the EAS product lines for retail customers increased
25% to $511 million in fiscal 1995 compared to $406 million in fiscal 1994. This
increase resulted principally from a 47% volume increase from the Ultra-Max
product line and the inclusion in the last six months of fiscal 1995 of revenues
from the Knogo product line ($29 million). Revenues from the CCTV product line
for retailers exceeded $112 million compared to $72 million in fiscal 1994.
Revenues from the U.S. Commercial/Industrial Group increased 83%, to $143
million compared to $78 million in fiscal 1994, due primarily to the sale of
CCTV and Access Control products and systems to non-retail customers, and
incremental revenue from recent acquisitions. The Company generated $256 million
of revenue in fiscal 1995 from all of its CCTV products and systems combined,
worldwide.
25
<PAGE> 27
International revenues in fiscal 1995 were $468 million compared with $333
million in fiscal 1994 and include revenues of the European subsidiaries of $386
million and $275 million for fiscal 1995 and fiscal 1994, respectively.
Operating Costs and Operating Income
Total selling and customer service, administrative, research, development and
engineering expenses for fiscal 1995 increased to 46% as a percentage of total
consolidated revenues, from 41% in fiscal 1994. This was due primarily to
increased selling and customer service expenses due in part to the opening of a
distribution center and customer response center in the U.S., activities
associated with the expansion of the source tagging program, and expenses
associated with the Company's sponsorship of the 1996 Summer Olympics.
Additionally, selling and customer service expenses were higher as a result of
significant integration costs incurred in connection with the Knogo operations
in Europe. Research, development and engineering expenses increased 26% over
1994.
Operating income for fiscal 1995 was $97.9 million or 11% of total revenue,
versus $104.8 million or 16% of total revenue in fiscal 1994. Operating costs
and expenses in fiscal 1995 increased to 89% of consolidated revenues, compared
with 84% in fiscal 1994. The reduced operating margin in fiscal 1995 was due
primarily to increased operating expenses. Gross margin on product sales in
fiscal 1995 remained at 54% compared to fiscal 1994.
Interest, Other Income (Expenses) and Taxes
Interest income increased by $2.9 million in fiscal 1995 principally due to
higher amounts of sales-type leases and deferred and installment receivables
outstanding throughout fiscal 1995 compared to fiscal 1994. Interest expense
increased by $6.3 million in fiscal 1995 versus fiscal 1994 due to higher levels
of net short-term bank borrowings used to fund increases in the Company's
working capital and debt assumed as part of the acquisition of Knogo.
The effective consolidated tax rate on income from continuing operations was 22%
for fiscal 1995 and 25% for fiscal 1994. The fiscal 1995 effective tax rate was
negatively affected by (1) earnings of the Company's international subsidiaries
which are subject to statutory tax rates generally higher than the U.S.
effective rate, (2) increases in U.S. earnings not qualifying for U.S./Puerto
Rico "Section 936" tax benefits and (3) increases in amortization of costs in
excess of net assets acquired (substantially all of which are non-deductible for
income tax purposes). However, these effects were offset by an adjustment of
prior years' tax accruals which were no longer required.
Discontinued Operations
In fiscal 1995, the Company reduced income tax liabilities by $4.1 million; such
amount related to a previously discontinued business and was no longer required.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, cash and marketable securities increased $46.6 million
primarily due to proceeds of $350 million from the issuance of Senior Notes,
offset partially by the repayment of short term bank borrowings and other debt
and an increase in gross accounts receivable including deferred and installment
receivables and sales-type leases.
Cash flow used in operating activities was $49.2 million in fiscal 1996 compared
with cash provided by operations in fiscal 1995 of $9.1 million and cash flow
used in operations of $13.5 million in fiscal 1994. The use of cash in fiscal
1996 was primarily a result of a $144.5 million increase in total receivables as
a result of a decrease in the sale of receivables and sales-type leases to
third-party financing institutions. The Company was in the process of finalizing
new off-balance sheet receivable financing agreements, which would provide for
additional liquidity to sell new and existing receivables, and subsequent to
year end, entered into a new receivable financing agreement in the U.S.
Short-term receivables from the Company's slower paying retail customers are
becoming a relatively smaller part of the Company's overall business as a result
of the expansion of the Company's source tagging program and the continued
growth of the commercial/industrial customer base. Labels used in source tagging
are generally sold to vendors and manufacturers as opposed to retailers. The
commercial/industrial customers, to
26
<PAGE> 28
whom the Company markets directly, is made up of customers which tend to have
higher credit ratings. Other commercial/industrial sales are made through a
closely monitored network of third party dealers and distributors.
Planned reduction of inventories generated operating cash of $28.9 million in
fiscal 1996. As discussed earlier, the Company curtailed certain manufacturing
operations for the purpose of substantially lowering inventory levels and to
better align output with sales projections.
The Company's Consolidated Statement of Cash Flows reflects a use of cash of
$76.5 million for current and deferred income taxes. This principally represents
the significant tax benefits that relate to restructuring and special charges,
which have not yet been realized to reduce cash paid for taxes.
The Company's investing activities used $62.9 million of cash in fiscal 1996,
compared to $64 million in fiscal 1995. Additions to property, plant and
equipment totaled $49.8 million, primarily due to the purchase of a facility in
Boca Raton to consolidate the Company's research, product development,
engineering and corporate administrative facilities. The Company reported an
increase in revenue equipment of $36.8 million in fiscal 1996 as compared to $4
million in fiscal 1995. This increase is a result of a reduction in the sale of
operating leases to third party financing institutions in fiscal 1996.
Generally, under the terms of these sale agreements, the related revenue
equipment is transferred to the financing institution.
Fiscal 1996 financing activities generated $182.2 million of cash as compared to
$77.6 million in fiscal 1995. The increase is principally due to proceeds
received from the issuance of $350 million of Senior Notes. The proceeds from
the Senior Notes were primarily used to repay short-term U.S. and European bank
borrowing and for general corporate purposes. The Company's percentage of total
debt to total capital was 38% at June 30, 1996 as compared to 26% at June 30,
1995. The increase in debt is primarily due to an increase in accounts
receivable, a decrease in the level of sales-type leases sold, lower than
expected earnings, an increase in revenue equipment and capital spending;
partially offset by lower inventories and higher cash balances.
At June 30, 1996, the Company's primary sources of liquidity consisted of cash,
committed and uncommitted lines of credit totaling approximately $431.5 million
(of which approximately $24.8 million was utilized), and receivable financing
agreements all of which are available subject to compliance with certain
covenants. Additionally, the Company has entered into a new receivable financing
agreement subsequent to year-end which provide for the sale of receivables up to
$75 million. The Company believes that the liquidity provided by existing cash
and the financing arrangements described above will be sufficient to meet the
Company's capital requirements for fiscal 1997.
During 1997, the Company plans to invest $39 million in capital projects. The
projects include investments in manufacturing operations for new production
equipment, some of which will increase the output of the narrow Ultra-Strip
label to support the increase in source tagging requirements, and investments in
management information systems which will provide the Company with the
information infrastructure to support its future growth.
CURRENCY RISKS
The Company uses the U.S. dollar as the reporting currency for financial
statement purposes. The Company conducts business in numerous countries around
the world through its international subsidiaries which use local currencies to
denominate their transactions, and is therefore, subject to certain risks
associated with fluctuating foreign currencies. The Company believes these risks
are not significant as its major foreign operations are in Western European
countries which have relatively stable economies and currencies.
The Company monitors its currency exposures but has decided not to hedge its
translation exposures due to the high economic costs of such a program and the
long-term nature of its investments in its international subsidiaries.
Translation exposure is the result of translating local currency financial
statements into the Company's reporting currency. Management has estimated that
the net impact of currency fluctuations on the Company's Results of Operations,
while slightly unfavorable in fiscal 1996 due to the stronger U.S. dollar, was
not significant in any of the fiscal years in the three-year period ended June
30, 1996.
The Company does have a policy of managing its transaction exposure arising from
intercompany product purchase commitments. The policy provides for the use of
forward exchange contracts and options to sell the currencies received from
international subsidiaries in settlement of intercompany product purchases.
Forward
27
<PAGE> 29
contracts and options are subject to the risk of gain or loss from changes in
exchange rates, but these gains or losses are effectively offset by losses or
gains on the designated hedged commitments. The Company believes its policy to
hedge its transaction exposures has been successful as foreign exchange losses
were minimal in fiscal 1996, 1995 and 1994.
INTEREST RATE RISKS AND DERIVATIVES
The Company is subject to the risk of fluctuating interest rates in the normal
course of business on various assets, consisting primarily of cash, installment
receivables, sales-type leases and debt. Generally, the Company only uses
interest rate agreements to manage its exposure associated with the sale of
installment receivables. The Company's interest rate risks related to existing
outstanding debt are not significant as a major portion of the Company's debt is
at reasonably low fixed interest rates.
The Company does not enter into speculative derivative transactions or leveraged
swap arrangements. The derivative instruments it does own are not held as
investments, and it is the Company's intent to hold such instruments for their
respective terms. Therefore, changes in their fair values will have no effect on
the Company's operations, cash flows, or financial position.
See Notes 1, 3 , 7 and 13 of Notes to Consolidated Financial Statements for
further discussion.
LOSS CONTINGENCIES
As mentioned in Note 10 of Notes to the Consolidated Financial Statements, the
Company is a defendant in a number of class action lawsuits filed 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, in later actions or complaint
amendments, that the scope of the Company's year-end audit for fiscal 1995 had
been expanded and that the results for the third quarter of fiscal 1995 were
being restated. Also, in September 1995, actions were filed against the Company
and its directors for breach of fiduciary duties, mismanagement and waste of
corporate assets. The ultimate outcome of these actions cannot presently be
determined, and accordingly, the Company has not recorded a provision for any
liability that may result from these actions.
ACCOUNTING POLICIES
In fiscal 1996, the Company changed its presentation from an unclassified to a
classified balance sheet. The Company believes this change provides a better
presentation of the Company's financial position and conforms with industry
practice. The fiscal 1995 balance sheet has been reclassified to conform with
the 1996 presentation.
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities which are based
on a financial-components approach that focuses on control. The Company is
currently reviewing what modifications, if any, may be necessary to its
agreements with third party financing institutions and customer financing
agreements, such that when these assets are sold, they continue to qualify as
sales under the provisions of SFAS No. 125. See Notes 1 and 3 of Notes to
Consolidated Financial Statements.
The Company will adopt the disclosure requirements of SFAS No. 123 "Accounting
for Stock-Based Compensation," in fiscal 1997. However, the Company will
continue to follow the measurement provisions of Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees", as permitted by SFAS
No. 123.
28
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Certified Public Accountants.................................. 30
Consolidated Balance Sheets at June 30, 1996 and 1995............................... 31
Consolidated Statements of Operations for the years
ended June 30, 1996, 1995 and 1994............................................... 32
Consolidated Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994............................................... 33
Consolidated Statements of Stockholders' Equity
for the years ended June 30, 1996, 1995 and 1994................................. 34
Notes to Consolidated Financial Statements.......................................... 35
Financial Statement Schedules:
For the three years ended June 30, 1996:
Schedule II -- Valuation and Qualifying Accounts................................. S-1
</TABLE>
Consolidated Financial Statement schedules not included have been omitted
because they are not applicable or the required information is shown in the
Consolidated Financial Statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE> 31
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
Sensormatic Electronics Corporation
We have audited the accompanying consolidated balance sheets of Sensormatic
Electronics Corporation as of June 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1996. Our audit also
included the financial statement schedule listed at Item 8. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Sensormatic Electronics Corporation at June 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes 1 and 6 to the consolidated financial statements, in 1996
the Company changed its presentation from an unclassified to a classified
balance sheet and in 1994 the Company changed its method of accounting for
income taxes.
ERNST & YOUNG LLP
West Palm Beach, Florida
August 14, 1996
30
<PAGE> 32
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
(In millions, except par value amounts)
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and marketable securities (including marketable
securities of $3.2 in 1996 and $26.7 in 1995) $ 116.9 $ 70.3
Accounts receivable, net 244.0 221.9
Current portion of deferred and installment receivables, net 22.9 27.8
Current portion of net investment in sales-type leases 29.0 23.5
Inventories, net 157.8 240.8
Current portion of deferred income taxes 29.3 29.5
Other current assets 33.9 46.0
- -----------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 633.8 659.8
Deferred and installment receivables, net 41.3 32.0
Net investment in sales-type leases 111.3 95.4
Revenue equipment, less accumulated depreciation of
$47.1 in 1996 and $46.4 in 1995 56.9 49.9
Property, plant and equipment, net 147.8 151.0
Costs in excess of net assets acquired, less accumulated
amortization of $46.6 in 1996 and $29.9 in 1995 487.5 496.7
Deferred income taxes 96.9 38.5
Patents and other assets, less accumulated amortization
of $28.2 in 1996 and $17.7 in 1995 54.8 47.6
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS $1,630.3 $1,570.9
- -----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 24.8 $ 183.9
Accounts payable 59.9 63.3
Other current liabilities and deferred income taxes 174.5 156.2
- -----------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 259.2 403.4
Long-term debt 491.7 142.8
Other noncurrent liabilities and deferred income taxes 47.7 72.0
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 798.6 618.2
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10.0 shares authorized, none issued - -
Common stock, $.01 par value, 125.0 shares authorized, 73.9 and 73.0
shares outstanding in 1996 and 1995, respectively 723.8 713.9
Retained earnings 181.8 295.6
Treasury stock at cost and other, 1.7 shares in 1996 and 1.1 shares in
1995 (13.4) (13.2)
Currency translation adjustments (60.5) (43.6)
- -----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 831.7 952.7
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,630.3 $1,570.9
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 33
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In millions, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales $ 850.8 $762.4 $557.4
Rentals 49.7 50.6 46.6
Other 94.1 76.1 52.0
- ------------------------------------------------------------------------------------------------
Total revenues 994.6 889.1 656.0
- ------------------------------------------------------------------------------------------------
Operating costs and expenses:
Costs of sales 452.9 354.0 256.0
Depreciation on revenue equipment 20.3 16.3 15.0
Selling, customer service and administrative 525.8 383.6 252.0
Restructuring charges 85.3 - -
Research, development and engineering 27.7 22.7 18.0
Amortization of intangible assets 17.1 14.6 10.2
- ------------------------------------------------------------------------------------------------
Total operating costs and expenses 1,129.1 791.2 551.2
- ------------------------------------------------------------------------------------------------
Operating (loss) income (134.5) 97.9 104.8
- ------------------------------------------------------------------------------------------------
Other (expenses) income:
Interest income 16.9 17.2 14.3
Interest expense (38.4) (29.0) (22.7)
Other, net (3.9) 2.9 (0.4)
- ------------------------------------------------------------------------------------------------
Total other (expenses) income (25.4) (8.9) (8.8)
- ------------------------------------------------------------------------------------------------
(Loss) income from continuing operations before income taxes (159.9) 89.0 96.0
(Benefit) provision for income taxes (62.2) 19.4 23.9
- ------------------------------------------------------------------------------------------------
(Loss) income from continuing operations (97.7) 69.6 72.1
Discontinued operations (Note 6) - 4.1 -
Net (loss) income $ (97.7) $ 73.7 $ 72.1
- ------------------------------------------------------------------------------------------------
Primary (loss) earnings per common share:
Continuing operations $ (1.32) $ .97 $ 1.16
Discontinued operations - .05 -
- ------------------------------------------------------------------------------------------------
Net (loss) income $ (1.32) $ 1.02 $ 1.16
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 34
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In millions)
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations $(97.7) $ 69.6 $ 72.1
Adjustments to reconcile net (loss) income from continuing
operations to net cash (used in) provided by operating
activities:
Depreciation 42.1 33.4 26.9
Amortization 17.1 14.6 10.2
Restructuring and special charges, net 174.6 - -
Other non-cash charges to operations, net 39.0 20.0 11.5
Net changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable and receivables from financing
institutions (88.7) (77.3) (23.9)
Deferred and installment receivables (5.8) 4.9 (9.3)
Net investment in sales-type leases (50.0) 9.2 (42.3)
Inventories 28.9 (70.3) (60.6)
Current and deferred income taxes (76.5) (3.8) 7.4
Accounts payable and accrued liabilities (32.8) 18.3 24.3
Other, net 0.6 (9.5) (29.8)
- -----------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (49.2) 9.1 (13.5)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (49.8) (63.0) (51.8)
Purchases of marketable securities - (0.8) (18.2)
Proceeds from sales and maturities of marketable securities 23.3 7.7 13.3
Increase in revenue equipment, net (36.8) (4.0) (17.0)
Acquisitions (net of cash acquired of $6.7 in 1995 and $1.1 in
1994) (8.6) (9.6) (11.5)
Other, net 9.0 5.7 5.7
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (62.9) (64.0) (79.5)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of Senior Notes, net 348.3 - -
Repayments of bank borrowings and other debt (160.2) (25.2) (10.3)
Bank borrowings and other debt 1.3 105.4 30.5
Proceeds from issuance of common stock
under employee benefit plans and for acquisitions 8.9 12.9 17.1
Dividends paid (16.1) (15.5) (12.5)
- -----------------------------------------------------------------------------------------------
Net cash provided by financing activities 182.2 77.6 24.8
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash 70.1 22.7 (68.2)
Cash at beginning of year 43.6 20.9 89.1
- -----------------------------------------------------------------------------------------------
Cash at end of year 113.7 43.6 20.9
Marketable securities at end of year 3.2 26.7 33.6
- -----------------------------------------------------------------------------------------------
Cash and marketable securities at end of year $116.9 $ 70.3 $ 54.5
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid during the year $ 10.3 $ 5.9 $ 9.0
Interest paid during the year 30.4 26.5 22.5
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 35
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In millions)
<TABLE>
<CAPTION>
CURRENCY
COMMON RETAINED TREASURY STOCK TRANSLATION
STOCK EARNINGS AND OTHER ADJUSTMENTS TOTAL
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1993 $392.9 $177.8 $(19.5) $ (61.5) $489.7
Conversion of debentures (7.3 shares) 111.9 - - - 111.9
Stock issued in connection with
acquisitions (1.1 shares) 31.0 - - - 31.0
Stock issued pursuant to employee
benefit plans 8.8 - 5.8 - 14.6
Common stock cash dividends - (12.5) - - (12.5)
Net income - 72.1 - - 72.1
Other 2.0 - 3.0 15.9 20.9
- --------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 546.6 237.4 (10.7) (45.6) 727.7
Stock issued in connection with
acquisitions (4.6 shares) 149.3 - - - 149.3
Stock issued pursuant to employee
benefit plans 13.9 - (3.3) - 10.6
Common stock cash dividends - (15.5) - - (15.5)
Net income - 73.7 - - 73.7
Other 4.1 - 0.8 2.0 6.9
- --------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 713.9 295.6 (13.2) (43.6) 952.7
Stock issued pursuant to employee
benefit plans 9.9 - (1.1) - 8.8
Common stock cash dividends - (16.1) - - (16.1)
Net loss - (97.7) - - (97.7)
Other - - 0.9 (16.9) (16.0)
- --------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 $723.8 $181.8 $(13.4) $ (60.5) $831.7
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 36
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except for per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Consolidated Financial Statements include the accounts of Sensormatic
Electronics Corporation and all of its subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated.
In fiscal 1996, the Company changed its presentation from an unclassified to a
classified balance sheet. The Company believes this change provides a better
presentation of the Company's financial position and conforms with industry
practice. The fiscal 1995 balance sheet has been reclassified to conform with
the fiscal 1996 presentation.
Cash and marketable securities
Cash equivalents are comprised of highly liquid investments with a maturity of
less than three months. Effective July 1, 1994, the Company adopted SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities". In
accordance with SFAS No. 115, the Company has classified certain of its non-
equity investments as available-for-sale securities which are carried at market
value (versus cost or amortized cost prior to the adoption of SFAS No. 115).
Unrealized gains and losses are recorded, net of tax, in stockholders' equity.
The Company recorded unrealized losses of $0.1 and $0.3 as of June 30, 1996 and
1995, respectively.
Inventories
Inventories are stated at the lower of cost or market, cost being determined on
a first-in, first-out basis.
Revenue equipment and other property, plant and equipment
Revenue equipment (principally equipment on lease) and other property, plant and
equipment (including assets acquired under capital leases) are recorded at cost
and depreciated using the straight-line method over their estimated useful lives
(4 years and 6 years for revenue equipment, 10 years through 40 years for
buildings and improvements and 3 years through 10 years for other property,
plant and equipment).
Revenue recognition
Revenue from product sales is recognized at the time the product is shipped in
accordance with the terms agreed upon by the parties. Revenue from long-term
installation contracts is recognized on a percentage-of-completion basis.
Revenue from sales-type leases (primarily with terms of 60 months or greater) is
recognized as a "sale" upon shipment in an amount equal to the present value of
the minimum rental payments under the fixed non-cancelable lease term. The
deferred finance charges applicable to these leases are recognized over the
terms of the leases using the effective interest method.
The Company also leases equipment under long-term operating leases (primarily
leases with terms of 36 to 54 months) which are generally non-cancelable. Rental
revenues are recognized as earned over the term of the lease. Minimum future
rentals on non-cancelable operating leases at June 30, 1996 aggregated $105.4
and are due as follows: 1997 -- $41.8; 1998 -- $31.2; 1999 -- $19.9;
2000 -- $9.1; 2001 -- $2.9 and thereafter -- $0.5.
Service revenues are recognized as earned and maintenance revenues are
recognized ratably over the service contract term.
Research, development and engineering
In fiscal 1996, 1995 and 1994 "Research, development and engineering" included
research and development expenses of $21.4, $18.2 and $14.7, respectively.
35
<PAGE> 37
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting for currency translation and transactions
Foreign currency transactions and financial statements (except for those
relating to countries with highly inflationary economies) are translated into
U.S. dollars at the rate in effect on the date of the transaction or the date of
the financial statements, except that revenues, costs and expenses are
translated at average exchange rates during each reporting period. Translation
adjustments resulting therefrom and transaction gains or losses attributable to
certain intercompany transactions are excluded from results of operations and
accumulated in a separate component of consolidated stockholders' equity. Gains
and losses attributable to other intercompany transactions are included in
results of operations.
The financial statements of subsidiaries located in countries with highly
inflationary economies are remeasured as if the functional currency were the
U.S. dollar. The remeasurement creates translation adjustments that are
reflected in net income. Allocations for income taxes included in the
translation adjustments account in shareholders' equity were not significant.
Financial instruments
The Company enters into interest rate agreements and foreign exchange forward
and option contracts to manage exposure to fluctuations in interest and foreign
currency exchange rates. The Company does not hedge its investment in the net
assets of its international subsidiaries due to the high economic cost of such a
program and the long-term nature of its investments.
The cash differentials paid or received on interest rate agreements are accrued
and recognized as adjustments to interest expense or interest income. Gains and
losses realized upon the settlement of these agreements are deferred and either
amortized to interest expense over a period relevant to the agreement if the
underlying hedged instrument remains outstanding, or recognized immediately if
the underlying hedged instrument is settled. Interest rate agreements are stated
at cost, if any.
The Company uses foreign exchange forward and option contracts to hedge certain
identifiable, foreign currency intercompany commitments and certain short-term
intercompany advances. Gains and losses on the contracts which hedge
anticipatory intercompany commitments are deferred and recorded in net income in
the period in which the related transaction is consummated. Gains and losses on
the contracts which hedge intercompany advances are recorded as adjustments to
net income because such advances are expected to be repaid in the foreseeable
future. Forward contracts and options which hedge anticipatory intercompany
commitments and intercompany advances are stated at cost (if any) and market
value, respectively.
Cash flows related to interest rate agreements and foreign exchange forward and
option contracts are classified as operating activities in the Consolidated
Statement of Cash Flows.
Intangible assets
Patents, stated at cost, are amortized using the straight-line method over 17
years. Costs in excess of net assets acquired are amortized using the
straight-line method over 20 to 40 years.
Earnings per share
Primary earnings per common share is calculated based on the weighted average
number of common shares, plus dilutive common stock equivalents outstanding
during the period using the treasury stock method. Common stock equivalents
include stock options issued under employee benefit plans and common stock
warrants. For the fiscal year ended June 30, 1996, 1995 and 1994, fully diluted
per common share data were either not materially different than the primary per
common share data presented, or had an antidilutive effect on the primary per
common share data presented.
Impairment
The Company has adopted SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". In accordance
with this Statement, the Company reviews long-lived
36
<PAGE> 38
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assets and related goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be fully
recoverable. If this review indicates that goodwill will not be recoverable, as
generally determined based on the estimated undiscounted cash flows of the
entity acquired over the remaining amortization period, the carrying amount of
the goodwill is reduced by the estimated shortfall of cash flows.
Prospective accounting changes
In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This Statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities which are based on a financial-components
approach that focuses on control. This approach provides that after a transfer
of financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred and derecognizes financial assets
and liabilities when control has been surrendered or extinguished, respectively.
The Statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings and
is effective prospectively for transfers and servicing of financial assets and
extinguishments of liabilities that occur after December 31, 1996. The Company
is currently reviewing what modifications, if any, may be necessary to its
agreements with third party financing institutions (see Note 3) and customer
financing agreements, such that when these assets are sold, they continue to
qualify as sales under the provisions of SFAS No. 125.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation," for fiscal years beginning after December 15, 1995. This
Statement establishes a fair-value based method of accounting for stock
compensation plans with employees and others. The Company plans to continue
accounting for its stockbased compensation plans under Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees", as permitted by
SFAS No. 123 and will present the proforma disclosures required under SFAS No.
123 in fiscal year 1997 with no impact to the Company's results of operations.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassifications
Certain amounts in the prior years' Consolidated Financial Statements have been
reclassified to conform to the current fiscal year's presentation.
2. RESTRUCTURING AND SPECIAL CHARGES
During the second quarter of fiscal 1996, the Company initiated an extensive and
systematic review of its global operations, cost structure and balance sheet
aimed at reducing its operating expenses, manufacturing costs and increasing
efficiencies. This review focused primarily on operational and organizational
structures and systems, facilities utilization, product rationalization and
inventory valuation, receivable balances and related collection efforts and
certain other matters. This review resulted in charges totaling $186.0 with an
after-tax impact of approximately $118.2. It is anticipated that approximately
$33.3 of these costs (all relating to restructuring) will result in cash
outlays, of which $11.4 was paid as of June 30, 1996.
Restructuring Charges
The Company reviewed its existing products and product sourcing, the purpose of
which was to reduce the number of products, and thereby reduce inventory
carrying costs and improve gross margins on continued products. As a result of
this review, in fiscal 1996 the Company recorded a charge related to
discontinued products and equipment used in the manufacture of certain products
which will no longer be manufactured or
37
<PAGE> 39
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
purchased from third party suppliers. The equipment impairment charge
represented the difference between the carrying value of the equipment and its
fair value, which was assumed to be nominal due to its unique nature and the
fact that there is no alternative use for the equipment.
In connection with its review of operational and organizational 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. The Company has planned for the
termination of approximately 875 manufacturing and administrative personnel in
North America and Europe and the reduction of approximately 30 facilities. As of
June 30, 1996, approximately 810 employees have been terminated. Certain
employees terminated during fiscal 1996 will receive payments subsequent to the
fiscal year ended June 30, 1996 and other terminated employees are receiving
severance payments over time.
The following table sets forth the details and the activity of the restructuring
charges recorded in fiscal 1996:
<TABLE>
<CAPTION>
ACCRUAL
REDUCTIONS BALANCE AT
1996 ----------------- JUNE 30,
PROVISION CASH NON-CASH 1996
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other $45.3 $ - $(34.2) $ 11.1
Closure of facilities and related costs 23.5 (1.0) (1.6) 20.9
Employee termination and related costs 16.5 (10.4) (0.7) 5.4
----------------------------------------------------------------------------------------------
Total $85.3 $(11.4) $(36.5) $ 37.4
----------------------------------------------------------------------------------------------
</TABLE>
The restructuring plan is expected to be substantially completed prior to the
end of 1997 and the Company believes the provisions recorded are adequate to
cover the costs associated with this plan.
Special Charges
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 in fiscal 1996. This initiative was
primarily the result of the overall weakening in the retail industry following a
poor holiday season. In addition, several commercial/industrial and retail
customers filed for bankruptcy and other customers experienced financial
difficulties. The Company also conducted a review of slow moving inventory in
light of softening demand for certain EAS products.
As a result of these reviews, the Company recorded a charge to operations of
$100.7 in fiscal 1996 which primarily represented increases in the valuation
allowances for doubtful accounts receivable and inventories. Of this amount,
$75.6 related to receivables and other matters and $25.1 related to inventories
and revenue equipment. The special charges are recorded in the consolidated
statement of operations as follows: $29.1 in costs of sales, $2.6 in
depreciation on revenue equipment, $68.5 is included as selling, customer
service and administrative expenses and $0.5 in research, development and
engineering expense.
38
<PAGE> 40
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. RECEIVABLES AND NET INVESTMENT IN SALES-TYPE LEASES
At June 30, receivables and sales-type lease receivables and related allowances
for doubtful accounts, allowances for uncollectible minimum lease payments and
unearned interest and maintenance are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $276.1 $235.3
Allowance for doubtful accounts (32.1) (13.4)
--------------------------------------------------------------------------------------
Total accounts receivable, net $244.0 $221.9
--------------------------------------------------------------------------------------
Deferred receivables $ 11.3 $ 5.2
Installment receivables 90.6 84.5
Allowance for doubtful accounts (13.4) (5.5)
Unearned interest and maintenance (24.3) (24.4)
--------------------------------------------------------------------------------------
Total deferred and installment receivables, net 64.2 59.8
--------------------------------------------------------------------------------------
Less: Amounts due in 1 year, net (22.9) (27.8)
--------------------------------------------------------------------------------------
Total noncurrent deferred and installment receivables,
net $ 41.3 $ 32.0
--------------------------------------------------------------------------------------
Sales-type leases -- minimum lease payments receivable $206.0 $176.8
Allowance for uncollectible minimum lease payments (17.3) (7.5)
Unearned interest and maintenance (48.4) (50.4)
--------------------------------------------------------------------------------------
Total sales-type leases, net 140.3 118.9
--------------------------------------------------------------------------------------
Less: Amounts due in 1 year, net (29.0) (23.5)
--------------------------------------------------------------------------------------
Total noncurrent sales-type leases, net $111.3 $ 95.4
--------------------------------------------------------------------------------------
</TABLE>
The Company recorded provisions to the valuation allowance for doubtful accounts
receivable and sales-type lease receivables (including off-balance sheet
receivables) of $82.3, $19.6 and $11.0, during fiscal 1996, 1995 and 1994,
respectively. Refer to Note 2 for a discussion of special charges related to
receivables and sales-type lease receivables.
Net receivables and sales-type lease receivables at June 30, 1996 are due as
follows: 1997 -- $295.9; 1998 -- $41.4; 1999 -- $41; 2000 -- $38.1;
2001 -- $24.9 and $7.2 thereafter.
The Company has agreements with third party financing institutions whereby
certain installment receivables in the U.S. and sales-type lease receivables in
Europe, together with certain related rights, are sold to the financing
institutions. Under the agreements, if customer non-payment or other customer
related defaults should occur, the Company is obligated to repurchase the
specific receivables and sales-type lease receivables subject to certain
limitations.
The Company has an agreement with two third party financing institutions whereby
certain pre-approved U.S. accounts receivable may be assigned to the financial
institutions. At June 30, 1996 and 1995, receivables outstanding under such
agreements were $58 and $92.4, respectively (substantially all of which were
without customer non-payment recourse), of which the financing institution had
advanced in anticipation of their collection $49.6 and $74.6, respectively, to
the Company at fluctuating interest rates, 5.95% and 6.50% at June 30, 1996 and
1995, respectively.
The Company received proceeds of $371.3 and $458.1 upon the sale and assignment
of receivables and sales-type lease receivables under these agreements in fiscal
1996 and 1995, respectively (net of repurchases due to customer non-payment of
approximately $22.7 and $12.6, respectively). The uncollected principal balance
of receivables and sales-type lease receivables sold which is subject to varying
amounts of recourse totaled $291.0 and $333.0 at June 30, 1996 and 1995,
respectively. Loss reserves have been provided for receivables and sales-type
lease receivables sold and are included in accrued liabilities.
39
<PAGE> 41
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1996 and 1995, balances due from financing institutions under these
agreements aggregating $7.8 and $8.2, respectively, are due within one year and
are included in "Other current assets".
At June 30, 1996 and 1995, credit risk concentration for receivables (including
those subject to recourse) due from supermarkets and specialty, department and
discount store sectors of the U.S. retail market, aggregated $80.5 and $107.0,
respectively. Assuming the obligors under these receivables were to fail to
completely perform according to the terms of the receivables, at June 30, 1996,
the Company estimates its aggregate exposure to loss in these markets to be
$57.5. The estimate takes into consideration the related allowances for doubtful
accounts and the estimated realizable value of the collateralized equipment
securing these receivables. The Company minimizes its exposure to credit risk
through its credit review procedures and collection practices and its policy of
retaining a security interest in the underlying equipment and ability to re-
market such equipment if repossessed.
4. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $134.8 $183.0
Parts 42.4 44.7
Work-in-process 18.6 23.4
--------------------------------------------------------------------------------------
195.8 251.1
Less allowance for inventory losses (38.0) (10.3)
--------------------------------------------------------------------------------------
Total inventories, net $157.8 $240.8
--------------------------------------------------------------------------------------
</TABLE>
Refer to Note 2 for discussion of restructuring and special charges related to
inventories.
5. OTHER PROPERTY, PLANT AND EQUIPMENT
Other property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment $129.2 $131.5
Buildings and improvements 62.3 49.1
Leasehold improvements and furniture and fixtures 25.0 33.5
Land 17.4 11.8
--------------------------------------------------------------------------------------
233.9 225.9
Less accumulated depreciation and amortization (86.1) (74.9)
--------------------------------------------------------------------------------------
Total other property, plant and equipment, net $147.8 $151.0
--------------------------------------------------------------------------------------
</TABLE>
Refer to Note 2 for discussion of restructuring charges related to other
property, plant and equipment.
The Company leases certain operating plant and equipment. The future lease
commitments for plant and equipment and other assets at June 30, 1996 aggregated
$68.5 and are due as follows: 1997 -- $19.3; 1998 -- $12.3; 1999 -- $7.6;
2000 -- $5.5; 2001 -- $4.3 and $19.5 thereafter. Rent expense for certain
operating plant and equipment was charged to operations as follows:
1996 -- $18.9; 1995 -- $14.8 and 1994 -- $10.2.
6. INCOME TAXES
Effective July 1, 1993, the Company adopted SFAS No. 109 "Accounting for Income
Taxes". As permitted by SFAS No. 109, the Company elected not to restate the
financial statements of any prior periods. The cumulative effect of the change
was not material and therefore no adjustment was separately reported in the
Consolidated Results of Operations for the year ended June 30, 1994.
40
<PAGE> 42
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The United States (including Puerto Rico) and foreign components of (loss)
income from continuing operations before income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ (74.3) $62.8 $65.7
Foreign (85.6) 26.2 30.3
---------------------------------------------------------------------------------------
Total $(159.9) $89.0 $96.0
---------------------------------------------------------------------------------------
</TABLE>
The income tax (benefits) provisions on (loss) income from continuing operations
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income taxes:
Current $ 4.8 $ 2.0 $ 5.6
Deferred (27.3) 4.6 2.1
Foreign income taxes:
Current 3.6 3.2 12.3
Deferred (36.0) 10.0 3.1
State and other (7.3) (0.4) 0.8
---------------------------------------------------------------------------------------
Total $(62.2) $19.4 $23.9
---------------------------------------------------------------------------------------
</TABLE>
The 1996 and 1995 deferred provision includes a tax benefit of $59.2 and $20.0,
respectively, relating to net operating losses.
The U.S. Federal tax rate reconciles to the effective tax rate for continuing
operations as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal tax rate (35.0)% 35.0% 35.0%
Benefits due to tax exempt earnings
and investment income of the Puerto Rico operations (3.1) (10.2) (9.5)
Amortization of costs in excess of net assets acquired 2.4 4.6 2.7
Adjustment of prior years' accruals - (4.9) (3.4)
Valuation allowance (2.5) - -
Other (0.7) (2.6) 0.1
---------------------------------------------------------------------------------------
(38.9)% 21.9% 24.9%
---------------------------------------------------------------------------------------
</TABLE>
In fiscal year 1995, the Company reduced income tax liabilities by $4.1; such
amount related to a previously discontinued business and was no longer required.
Undistributed earnings of international subsidiaries are indefinitely reinvested
except for earnings of the Company's German subsidiary which are periodically
distributed to utilize the lower German integrated tax rate. No provision has
been made for income taxes that might be payable upon the remittance of the
indefinitely reinvested earnings. Upon distribution of those earnings, the
Company would be subject to both U.S. income taxes and withholding taxes payable
to the various foreign countries. The Company has not determined the amount of
tax liability associated with an unplanned distribution of these permanently
reinvested earnings.
Certain Commonwealth of Puerto Rico taxes (tollgate taxes) are due upon
distribution of earnings at rates ranging from 0% to 10% depending on the fiscal
year earned. At June 30, 1996, approximately $146 of undistributed earnings were
considered indefinitely reinvested in the Puerto Rico subsidiary, upon which no
tollgate taxes have been provided.
41
<PAGE> 43
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The effects of temporary differences and carryforwards that give rise to
deferred tax assets and liabilities at June 30, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------------------------------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property, plant and equipment $ 11.6 $ 11.5 $ 32.2 $ 20.7
Reserves and allowances 24.9 - 31.6 0.3
Knogo acquisition reserves and allowances 12.9 - 15.8 -
Sales-type leases - 68.9 10.6 96.3
Undistributed earnings of German subsidiary 2.4 3.0 6.0 7.2
Prepaid royalties 0.4 - 0.8 -
Deemed sales revenues from Puerto Rico operations 20.2 - 13.5 -
Restructuring and special charges 12.7 - - -
Tax credit carryforwards 10.9 - 10.8 -
NOL carryforwards 140.3 - 74.0 -
Valuation allowance (19.1) - (23.1) -
Other 21.0 34.1 11.1 18.9
------------------------------------------------------------------------------------------------
Total deferred income taxes $238.2 $ 117.5 $183.3 $ 143.4
------------------------------------------------------------------------------------------------
</TABLE>
The valuation allowance relates primarily to certain deferred tax assets
recorded in connection with the fiscal 1995 acquisition of Knogo (see Note 12).
At June 30, 1996, tax carryforwards available and related expiration dates are
as follows:
<TABLE>
<S> <C>
------------------------------------------------------------------------------------
Net operating losses:
U.S. (fiscal 2001 through 2011) $128.9
Foreign (generally no expiration dates) 248.2
Foreign tax credits (fiscal 1997 through 2001) 2.6
------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 44
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DEBT
Debt is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C>
7.74% Senior Notes due March, 2006(1) $230.0 $ -
6.99% Senior Notes due March, 2000(1) 70.0 -
7.11% Senior Notes due March, 2001(1) 50.0 -
8.21% Senior Notes due January, 2003(2) 135.0 135.0
Unsecured revolving credit notes payable, at 3.56% to 10.25%(3) 24.8 181.9
Other debt, at 4.4% to 12%, net of unamortized interest of
$4.5 and $5.4 at 1996 and 1995, respectively 6.7 9.8
--------------------------------------------------------------------------------------
Total debt 516.5 326.7
--------------------------------------------------------------------------------------
Less: Amounts payable in 1 year (24.8) (183.9)
--------------------------------------------------------------------------------------
Total noncurrent debt $491.7 $ 142.8
--------------------------------------------------------------------------------------
</TABLE>
(1) In April 1996, the Company completed the issuance of $350 of Senior Notes
which were issued in three tranches of which the proceeds were used to
reduce short-term borrowings in Europe and the U.S. and for general
corporate purposes. In March 1996, the Company issued $230 of 7.74% Notes
due 2006 and the remaining tranches of $70 of 6.99% Notes due March 2000 and
$50 of 7.11% Notes due March 2001 were issued in April 1996. Interest on the
Senior Notes is payable semiannually.
(2) In January 1993, the Company issued $135 aggregate principal amount of 8.21%
Senior Notes due January 2003. Interest on the Senior Notes is payable
semiannually. The Company had interest rate agreements that converted the
$135 million long-term fixed rate Senior Note into a floating interest rate
obligation over the term of the note which expired in 1996. The effective
interest rate of this obligation was 8.4% and 9.2% for fiscal year 1996 and
1995, respectively.
(3) The Company has multi-currency committed line of credit agreements expiring
in December 1996 with a group of U.S. and international banks which provides
for aggregate unsecured borrowings by the Company of up to $320 of which
$11.2 was utilized as of June 30, 1996. Borrowings under these agreements
bear interest at fluctuating rates at the London Interbank Offered Rate
(LIBOR) plus 0.3% and are subject to an annual facility fee of 0.15% of the
total credit line. Additionally, the Company has various uncommitted
lines-of-credit with several financial institutions which provide for
aggregate unsecured borrowings up to approximately $111.5 of which $13.6 was
utilized at June 30, 1996. Borrowings under these agreements bear interest
at fluctuating rates generally at LIBOR plus 0.3% to 0.5% and are due on
demand.
Under the terms of the Senior Notes agreements, the Company is required, among
other things, to maintain a minimum net worth, as defined, is allowed to incur
debt up to a level whereby certain debt-to-total capitalization ratios would not
be exceeded, and is subject to certain limitations with respect to repurchases
of its Common Stock and payment of cash dividends. The Company was in full
compliance with all of these terms at June 30, 1996 and 1995.
8. STOCK OPTION PLANS
Under the Company's existing stock incentive plan (the "1995 Plan") stock
options may be granted to officers, key employees, and directors who are also
officers or employees or otherwise participate in the 1995 Plan. The 1995 Plan
provides for granting of other awards, such as stock appreciation rights, stock
awards and cash awards, although the Company intends to continue to principally
grant stock options under this plan. The Company also has a Directors Stock
Option Plan under which nonqualified stock options may be granted to directors
not covered by the 1995 Plan.
The exercise price of a stock option granted under all stock option plans is not
less than the fair market value of the Common Stock on the date of grant. Stock
options granted under all such plans generally become exercisable, cumulatively,
in equal annual installments over three years, and expire five or ten years from
the date of grant. However, certain options granted in 1994 and 1995 to
corporate officers become exercisable in full the earlier of five years from the
date of grant or at any time after one year from the date of grant when the
price of the Company's Common Stock equals or exceeds 135% of the exercise
price. Additionally, the Company has granted to certain corporate officers
performance-based options under the 1995 Plan. These
43
<PAGE> 45
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
options become exercisable from four to nine years after grant depending upon
the Company's attainment of certain performance objectives.
All such options are non-compensatory; therefore, any U.S. Federal income tax
benefits received upon their exercise are recorded as an increase to
"Stockholders' equity -- Common stock."
Information for all such plans is summarized for fiscal 1996, 1995 and 1994 as
follows (in millions, except for price per option amounts):
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of year 4.6 4.2 3.7
Granted 2.3 0.9 1.3
Exercised (0.2) (0.5) (0.8)
Canceled (0.1) - -
---------------------------------------------------------------------------------------
Options outstanding at end of year 6.6 4.6 4.2
---------------------------------------------------------------------------------------
Average price of options exercised $13.72 $15.45 $13.50
Prices of options outstanding at end of year $ 5.87to $ 5.87to 4.83to
$36.38 $36.38 $36.38
Average price of options outstanding at end of year $22.22 $23.52 $21.52
Exercisable options at end of year 2.8 2.0 1.3
Options available for future grants at end of year 0.8 3.0 0.2
---------------------------------------------------------------------------------------
</TABLE>
At June 30, 1996 and 1995, 7.8 million and 8.8 million shares of Common Stock,
respectively, were reserved for issuance of which 7.4 million and 7.7 million,
respectively, were reserved for the exercise of stock options.
9. DEFINED CONTRIBUTION PLANS
The Company has: (a) retirement plans for U.S. employees, Puerto Rico employees
and for certain European employees which allow or require employee
contributions; (b) a Senior Executive Defined Contribution Retirement Plan for
certain officers; and (c) a Key Executive Supplemental Retirement Plan covering
certain officers and key employees. Annual contributions by the Company to all
such retirement plans are discretionary.
The Company charged to operations $2.5, $2.3 and $2.6 in fiscal 1996, 1995,
1994, respectively, related to the plans described under this section.
10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Contingent royalty payments
In connection with certain acquisitions, the Company pays royalties (ranging
from 3% to 10%) on revenues generated by the acquired businesses for periods
expiring in 1997 through 2004. Such contingent payments, when incurred, will be
recorded as additional cost of the related acquisitions and amortized over the
remaining amortization period. Royalty payments in fiscal 1996, 1995 and 1994
were $14.9, $13.3 and $7.6, respectively.
Litigation
During the first six months of fiscal 1996, a number of putative class 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, in the later actions or complaint amendments, that the scope of the
Company's year-end audit for the fiscal year ended 1995 had been expanded and
that results for the third quarter of fiscal 1995 were being restated. These
actions have been consolidated. The consolidated complaint alleges, among other
things, that the Company and certain of its current and former directors,
officers and employees, as well as the Company's auditors,
44
<PAGE> 46
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 requested
certification of the action as a class action on behalf of all purchasers of the
common stock of the Company and certain stock option traders 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. By
stipulation, dated September 12, 1996, the parties to the consolidated class
actions agreed to limit the proposed class to all persons who purchased, or
received through the exercise of options, shares of common stock of the Company
during the period from August 10, 1994 through and including August 31, 1995,
provided that shares purchased on August 31, 1995 were purchased at a price of
$25.25 per share or higher. The stipulated class excludes persons who acquired
common stock pursuant to the Company's merger with Knogo approved by its
shareholders in December 1994. The stipulation is subject to court approval.
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 the foregoing 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.
Restatement of Interim Financial Statements
In fiscal 1995, revenues related to certain shipments that were recorded
incorrectly in fiscal 1995 were identified and were reported to the Audit
Committee of the Board of Directors by the Company's independent certified
public accountants. The Audit Committee authorized an expansion of the scope of
the fiscal 1995 audit and retained independent counsel to assist in the
investigation of this matter.
The results of the investigation concluded that certain accounting
irregularities resulted in incorrectly recording revenues and related costs and
expenses for certain product shipments in each quarter of fiscal 1995, 1994 and
at fiscal year-end 1993. These shipments included both product shipments
actually made after the end of each quarter as well as shipments subject to
non-standard contractual terms.
In addition, during fiscal 1995, certain expenses were incorrectly capitalized
during the third and fourth quarters of fiscal 1995 as an element of the
purchase price of Knogo.
After carefully evaluating the findings, the Company concluded that the
financial statements for the third quarter of fiscal year 1995 required
restatement. (See Item 6. "Quarterly Summary and Statistical Information")
Further, the Company concluded the effects of these matters on fiscal 1993, on
fiscal 1994 and the quarters therein and on the first and second quarters of
fiscal 1995 were such that restatement of the financial statements of such
periods was not required.
45
<PAGE> 47
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. BUSINESS SEGMENT, GEOGRAPHIC AREA AND INTERNATIONAL OPERATIONS DATA
The Company operates in a single business segment and its principal products and
systems are electronic article surveillance, closed circuit television and
access control products and systems. The Company's operations by geographic area
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
North America $ 659.2 $ 584.9 $ 457.0
Europe 408.9 386.1 274.7
Inter area transfers (73.5) (81.9) (75.7)
-----------------------------------------------------------------------------------------
Total consolidated $ 994.6 $ 889.1 $ 656.0
-----------------------------------------------------------------------------------------
Operating (loss) income(1):
North America $ (55.3) $ 79.5 $ 85.0
Europe (50.3) 41.6 41.7
Inter area transfers 12.9 7.5 2.2
Corporate items (41.8) (30.7) (24.1)
-----------------------------------------------------------------------------------------
Subtotal (134.5) 97.9 104.8
Total other (expenses) (25.4) (8.9) (8.8)
-----------------------------------------------------------------------------------------
(Loss) income from continuing operations
before income taxes $ (159.9) $ 89.0 $ 96.0
-----------------------------------------------------------------------------------------
Identifiable assets:
North America $ 840.0 $ 654.8 $ 572.7
Europe 747.9 878.0 557.9
Corporate items 42.4 38.1 24.9
-----------------------------------------------------------------------------------------
Total consolidated $1,630.3 $1,570.9 $1,155.5
-----------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal 1996 includes restructuring and special charges of $186.0 of which
$114.6 and $71.4 were allocated to the geographical areas of North America
and Europe, respectively.
In fiscal 1996, 1995, 1994, export sales of $36.6, $30.9 and $26.8,
respectively, are reported in North America revenues. Transfers from North
America to Europe are accounted for at prices sufficient to recover a reasonable
profit margin. Corporate items include general corporate expenses, research,
development and engineering expenses and amortization of patents. At June 30,
1996 and 1995, the international subsidiaries' liabilities aggregated $163.1
million and $252, respectively.
Identifiable assets are comprised of those assets of the Company that are
identified with the operations in each geographic area. Corporate items are
comprised principally of patents and deferred costs.
12. ACQUISITIONS
On December 29, 1994, the Company acquired the operations outside of the United
States, Puerto Rico and Canada of Knogo for approximately 3.1 million shares of
the Company's Common Stock, with a value of approximately $100.
This acquisition was accounted for under the purchase method and was
consolidated in the Company's financial statements from the date of acquisition.
The acquisition of Knogo resulted in costs in excess of net assets acquired of
approximately $119.8 which is being amortized using the straight-line method
over 40 years.
46
<PAGE> 48
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's unaudited proforma consolidated condensed statements of income for
fiscal 1995 and 1994, assuming the acquisition of Knogo was effected at the
beginning of each year, is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
Total revenues $922.3 $726.1
Income from continuing operations before income taxes 89.6 108.7
Net income 73.7 79.3
Primary earnings per common share $ 1.00 $ 1.22
--------------------------------------------------------------------------------------
</TABLE>
This proforma information does not purport to be indicative of the results which
may have been obtained had the acquisitions been consummated at the dates
assumed.
In connection with acquisitions during fiscal 1996, 1995 and 1994, the market
value of the assets acquired was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid (net of cash acquired) $ 8.6 $ 9.6 $11.5
Liabilities assumed and/or incurred 4.3 101.1 13.2
Common stock issued - 149.3 31.0
---------------------------------------------------------------------------------------
Market value of assets acquired $12.9 $260.0 $55.7
---------------------------------------------------------------------------------------
</TABLE>
13. FINANCIAL INSTRUMENTS
Fair value of balance sheet financial instruments
At June 30, 1996 and 1995 the recorded value of balance sheet financial
instruments as compared to their estimated market values were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------------------------------------
RECORDED FAIR RECORDED FAIR
VALUE VALUE VALUE VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable securities $ 3.2 $ 3.2 $ 26.7 $ 26.7
Receivables other than leases and accounts
receivable 64.2 64.2 67.8 67.8
Debt, excluding capital leases 512.6 502.3 321.7 320.5
-------------------------------------------------------------------------------------------
</TABLE>
The fair values of marketable securities are based primarily on quoted market
prices for those instruments. The fair values of receivables other than leases
and accounts receivable and debt, excluding capital leases and unsecured
revolving credit notes payable, were estimated by discounting the future cash
flows using current market interest rates. The fair values for unsecured
revolving credit notes payable, which are generally due on demand, approximate
their carrying amounts. The Company does not enter into financial instruments
for trading purposes that would put principal capital at risk.
Interest rate agreements
The Company enters into interest rate agreements, principally to manage the
interest rate exposure associated with its sale of U.S. receivables. (See Note
3). Under the primary receivable financing agreement in the U.S., the Company
sells fixed interest rate receivables. Under such agreement, the financing
institution earns interest at a floating rate based on the one month LIBOR. Any
resulting differential in interest caused by the varying rates (variance amount)
is either paid or received by the Company. In order to manage the risk
associated with the variance amount, the Company enters into interest rate
agreements for notional amounts equal to the outstanding principal amounts of
receivables sold, which have the effect of converting the floating discount rate
to a fixed discount rate, thereby limiting the variance amount paid or received
by the Company.
47
<PAGE> 49
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1996, the Company was a party to the following interest rate
agreements:
(1) FLOATING TO FIXED SWAP AGREEMENTS
<TABLE>
<CAPTION>
NOTIONAL EXPIRATION FIXED RATE FLOATING RATE
AMOUNT DATE TO BE PAID TO BE RECEIVED
- -------------------------------------------------------------
<C> <S> <C> <C>
$ 10.0 May 1999 7.75% 1 Month LIBOR
7.5 September 1999 5.84% 1 Month LIBOR
6.5 May 2000 6.16% 1 Month LIBOR
3.3 April 2000 6.58% 1 Month LIBOR
2.7 April 1999 4.60% 1 Month LIBOR
2.5 August 1998 4.80% 1 Month LIBOR
2.1 May 1998 4.94% 1 Month LIBOR
1.2 March 1999 4.65% 1 Month LIBOR
- -------------------------------------------------------------
</TABLE>
The weighted average interest rates paid and received under all such Floating to
Fixed Swap Agreements in fiscal year 1996 were 6.2% and 5.5%, respectively, and
would have been the same assuming market conditions existing at June 30, 1996.
(2) INTEREST RATE CAP AGREEMENT
In fiscal 1995, the Company entered into an interest rate cap agreement expiring
in September 1999, with a notional amount at June 30, 1996, of $3.0. Under the
agreement the Company will be paid an amount equal to the excess, if any, of the
1 month LIBOR over 7% multiplied by the notional amount. At June 30, 1996 there
was no such excess.
The notional amount of the Company's interest rate agreements at June 30, 1996
and 1995 was $38.8 and $181.9, respectively. Notional amounts do not quantify
risks or represent assets or liabilities of the Company, but are used in the
calculation of cash settlements under the agreements.
At June 30, 1996 and 1995, the Company would have been required to pay $0.1 and
$1.1, respectively, to retire these agreements in the OTC market as determined
by the financial institution counterparties; such amounts represent the fair
value of these instruments on those dates. The fair value of the interest rate
agreements represents the discounted cash flow differential between offsetting
interest rate agreements at market interest rates and existing interest rate
agreements at their coupon rates. The increase in fair value of the interest
rate agreements from June 30, 1995 resulted primarily from the decrease in
market interest rates over such period and the shorter period to maturity of
certain of the interest rate agreements.
Foreign currency contracts
The Company conducts business in a wide variety of currencies and consequently
enters into foreign exchange forward and option contracts to manage its exposure
to fluctuations in foreign currency exchange rates. These contracts generally
involve the exchange of one currency for another at a future date and are used
to hedge substantially all of the Company's anticipatory intercompany
commitments. At June 30, 1996 and 1995, the Company had contract principal
amounts of approximately $247.8 and $187.5, respectively in contracts to sell
foreign currency in the future. At June 30, 1996 and 1995, the Company would
have been required to pay $1.7 and $16.1, respectively, to retire these
agreements in the OTC market as determined by the financial institution
counterparties; such amounts represent the fair value of these instruments. The
increase in the fair value from June 30, 1995 was primarily due to the
strengthening of the U.S. dollar over such period.
48
<PAGE> 50
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1996, the Company owned forward contracts which allowed it to sell
currencies for the indicated U.S. dollar amounts, in fiscal year 1997 and 1998,
as follows:
<TABLE>
<CAPTION>
CURRENCIES 1998 1997
--------------------------------------------------------------------------------------
<S> <C> <C>
French Francs $ - $ 92.7
British Pounds - 60.6
German Marks 18.9 24.8
Other 8.8 42.0
--------------------------------------------------------------------------------------
Total $27.7 $220.1
--------------------------------------------------------------------------------------
</TABLE>
Credit risk
The Company is exposed to credit risk to the extent of potential nonperformance
by counterparties on financial instruments. In the event of nonperformance by
the counterparties to the Company's interest rate agreements, the effective
interest rate on the underlying transaction would revert to the respective
contractual rate. The counterparties to the Company's interest rate agreements
and foreign currency contracts are limited to major financial institutions with
investment grade ratings; thus the Company believes the risk of incurring losses
due to credit risk is remote. Refer to Note 3 for disclosure regarding accounts
receivables subject to concentrations of credit risks.
Market risk
Exposure to market risk on financial instruments results from fluctuations in
interest and currency rates during the periods in which the contracts are
outstanding. The mark-to-market valuations of interest rate, foreign currency
agreements and of associated underlying exposures are closely monitored. Overall
financial strategies and the effects of using derivatives are reviewed
periodically.
49
<PAGE> 51
PART III
ITEMS 10 TO 13 INCLUSIVE.
The information required by Item 10 (Directors and Executive Officers of the
Registrant) (other than information as to executive officers of the Company,
which is set forth in Part I under the caption "Executive Officers of the
Registrant"), Item II (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and
Related Transactions) is incorporated by reference to the Company's definitive
proxy statement for the 1996 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before October 28, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The following documents are filed as a part of this report:
Financial Statements and Financial Statement Schedules -- See Index to
Consolidated Financial Statements at Item 8 of this report.
(3) Listing of exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<S> <C>
2(a) Amended and Restated Agreement and Plan of Merger dated as of August 14, 1994,
between Sensormatic Electronics Corporation, Knogo Corporation ("Knogo") and Knogo
North America Inc. ("Knogo North America") (excluding schedules, but including:
Exhibit A-Form of Delaware Certificate of Merger, Exhibit B-Form of New York
Certificate of Merger, Exhibit C-Form of Contribution and Divestiture Agreement
between Knogo and Knogo North America and certain Exhibits thereto (incorporated by
reference to Exhibits 2(a), 2(b) and 2(c) to Registration Statement No. 33-56619)).
(Copies of omitted schedules will be furnished supplementally to the Securities and
Exchange Commission upon request.)
3(a) Composite Restated Certificate of Incorporation of the Company filed pursuant to
Rule 232.102(c) of Regulation S-T (incorporated by reference to Exhibit 4(d) to
Registration Statement No. 33-61626).
3(b) By-Laws of the Company
4(a) Article FOURTH of the Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4(d) to Registration Statement No. 33-61626).
4(b) Note Agreement, dated as of March 29, 1996, among the Company, and the other
Purchasers named therein, including the form of 6.99% Senior Notes due March 2000,
7.74% Senior Notes due March 2006, and 7.11% Senior Notes due March 2001 issued
thereunder (incorporated by reference to Exhibit 4(a) to Form 10-Q for the fiscal
quarter ended March 31, 1996).
4(c) Note Agreement, dated as of January 15, 1993, among the Company, The Northwestern
Mutual Life Insurance Company and the other Purchasers named therein, including the
form of 8.21% Senior Notes due January 30, 2003, issued thereunder, and First
Amendment to such Note Agreement dated as of May 31, 1993 (incorporated by
reference to Exhibit 4.4 to Registration Statement No. 33-62750).
4(d) The Registrant agrees to furnish copies of any instrument defining the rights of
holders of long-term debt of the Registrant and its consolidated subsidiaries that
does not exceed 10 percent of the total assets of the Registrant and its
consolidated subsidiaries, which is not required to be filed as an exhibit, to the
Commission upon request.
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<S> <C>
10(a) Grant of Industrial Tax Exemption to Sensormatic Electronics Corporation (Puerto
Rico) from the Commonwealth of Puerto Rico (incorporated by reference to Exhibit
10(n) to Form 10-K for the fiscal year ended May 31, 1986) and Order of Conversion
of Grant of Industrial Tax Exemption (incorporated by reference to Exhibit 10(m) to
Form 10-K for the fiscal year ended May 31, 1988).
10(b) Description of Non-qualified Stock Option Plan (incorporated by reference to
Registration Statement No. 2-74526) and representative form of non-qualified stock
option (incorporated by reference to Exhibit 3(c) to Registration Statement No.
2-74526) and representative form of non-qualified stock option (incorporated by
reference to Exhibit 3(c) to Registration Statement No. 2-74526).
10(c) Amended 1989 Stock Incentive Plan and representative forms of non-qualified stock
option under such Plan (incorporated by reference to Exhibit 10(c) to Form 10-K for
the fiscal year ended June 30, 1994).
10(d) 1995 Stock Incentive Plan and representative forms of non-qualified stock options
and Restricted Stock Agreement under such Plan (incorporated by reference to
Exhibit 10(d) to Form 10-K for the fiscal year ended June 30, 1995).
10(e) Directors Stock Option Plan and representative form of a non-qualified stock option
under such Plan (incorporated by reference to Exhibit 10(h) to Form 10-K for the
fiscal year ended May 31, 1992).
10(f) Stock Purchase Loan Plan (incorporated by reference to Exhibit 10(g) to Form 10-K
for the fiscal year ended May 31, 1986).
10(g) Executive Salary Continuation Plan and representative form of agreement thereunder
(incorporated by reference to Exhibit 10(g) to Form 10-K for the fiscal year ended
May 31, 1989).
10(h) Board of Directors Retirement Plan and representative form of agreement thereunder
(incorporated by reference to Exhibit 10(h) to Form 10-K for the fiscal year ended
May 31, 1989).
10(i) Senior Executive Defined Contribution Retirement Plan and representative form of
agreement thereunder (incorporated by reference to Exhibit 10(h) to Form 10-K for
the fiscal year ended June 30, 1994).
10(j) Employment Agreement, dated as of September 24, 1993, between the Company and
Ronald G. Assaf, Chairman of the Board of the Company (incorporated by reference to
Exhibit 10(j) to Form 10-K for the fiscal year ended June 30, 1993).
10(k) Employment Agreement, dated as of January 1, 1996, between the Company and Gerd
Witter, President of Sensormatic Europe.
10(l) Employment Agreement, dated as of October 14, 1995, between the Company and Robert
A. Vanourek, President and Chief Executive Officer of the Company (incorporated by
reference to Exhibit 10(v) to Form 10-K/A for the fiscal year ended June 30, 1995).
10(m) Employment Agreement, dated as of December 21, 1995, between the Company and
Garrett E. Pierce, Senior Vice President and Chief Financial Officer of the
Company.
10(n) Agreement, dated as of December 23, 1988, between the Company and Ronald G. Assaf,
Chairman of the Company (incorporated by reference to Exhibit 10(l) to Form 10-K
for the fiscal year ended May 31, 1989).
10(o) Agreement, dated as of August 9, 1996, between the Company and Ronald G. Assaf,
Chairman of the Board, and former President and Chief Executive Officer of the
Company.
10(p) Agreement, dated as of December 23, 1988, between the Company and James E.
Lineberger, Chairman of the Executive Committee and a director of the Company, and
amendment thereto, dated as of January 27, 1989 (incorporated by reference to
Exhibit 10(m) to Form 10-K for the fiscal year ended May 31, 1989).
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------------------------------------------------------------------
<S> <C>
10(q) Agreement, dated as of December 23, 1988, between the Company and Gerd Witter,
President of Sensormatic Europe (incorporated by reference to Exhibit 10(p) to Form
10-K for the fiscal year ended May 31, 1989).
10(r) Form of Agreement, dated as of January 27, 1989, between the Company and Dr. Arthur
G. Milnes, a director of the Company (incorporated by reference to Exhibit 10(r) to
Form 10-K for the fiscal year ended May 31, 1989).
10(s) Agreement, dated as of December 23, 1988, between the Company and Jerome M. LeWine,
a director of the Company, and amendment thereto, dated as of January 27, 1989
(incorporated by reference to Exhibit 10(s) to Form 10-K for the fiscal year ended
May 31, 1989).
10(t) Termination Agreement dated as of June 5, 1995, between the Company and Michael E.
Pardue, formerly Executive Vice President, Chief Operating Officer and a director
of the Company (incorporated by reference to Exhibit 10(s) to Form 10-K for the
fiscal year ended June 30, 1995).
10(u) Form of Agreement, dated as of February 12, 1996, between the Company and each of
Thomas V. Buffett, Timothy P. Hartman and John T. Ray, Jr., directors of the
Company.
10(v) Directors and Officers Liability Insurance Policies.
10(w) Amended and Restated Credit Agreement, dated as of December 12, 1995, between the
Company, Wachovia Bank of Georgia, N.A., ABN Amro Bank N.V., the other Borrowers
listed therein and the domestic banks and foreign company banks listed therein.
11 Computation of Earnings Per Common Share for the years ended June 30, 1995, 1994
and 1993.
18 Letter regarding change in accounting principle
21 List of Subsidiaries of the Company.
23 Consents of Independent Certified Public Accountants.
27 Financial Data Schedule (EDGAR version only).
</TABLE>
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three month period ended
June 30, 1996.
52
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, on September 27, 1996.
SENSORMATIC ELECTRONICS CORPORATION
By: /s/ GARRETT E. PIERCE
------------------------------------
Garrett E. Pierce
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities indicated on September 27, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ ROBERT A. VANOUREK President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer) and Director
Robert A. Vanourek
/s/ GARRETT E. PIERCE Senior Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer)
Garrett E. Pierce
/s/ JOHN D. CRONAN Vice President and Corporate Controller
- --------------------------------------------- (Principal Accounting Officer)
John D. Cronan
/s/ RONALD G. ASSAF Chairman of the Board of Directors
- ---------------------------------------------
Ronald G. Assaf
/s/ JAMES E. LINEBERGER Chairman of the Executive Committee and
- --------------------------------------------- Director
James E. Lineberger
/s/ THOMAS V. BUFFETT Director
- ---------------------------------------------
Thomas V. Buffett
/s/ TIMOTHY P. HARTMAN Director
- ---------------------------------------------
Timothy P. Hartman
/s/ JEROME M. LEWINE Director
- ---------------------------------------------
Jerome M. LeWine
/s/ DR. ARTHUR G. MILNES Director
- ---------------------------------------------
Dr. Arthur G. Milnes
/s/ JOHN T. RAY, JR. Director
- ---------------------------------------------
John T. Ray, Jr.
</TABLE>
<PAGE> 55
SCHEDULE II
SENSORMATIC ELECTRONICS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDING JUNE 30, 1996, 1995, AND 1994
(In millions)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
1996(1) 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period $ 26.4 $ 20.1 $13.5
Additions charged to income 25.8 19.6 11.0
Special charges 56.5 - -
Amounts written off (47.3 ) (15.5) (6.1)
Other (including currency translation) 1.4 2.2 1.7
- ------------------------------------------------------------------------------------------------
Balance, end of period $ 62.8 $ 26.4 $20.1
- ------------------------------------------------------------------------------------------------
</TABLE>
ALLOWANCE FOR INVENTORY LOSSES
<TABLE>
<CAPTION>
1996(1) 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period $ 10.3 $ 10.6 $ 8.6
Additions charged to income 16.5 5.5 4.7
Restructuring and special charges 39.8 - -
Amounts written off (30.2 ) (6.0) (2.8)
Other (including currency translation) 1.6 0.2 0.1
- ------------------------------------------------------------------------------------------------
Balance, end of period $ 38.0 $ 10.3 $10.6
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Refer to Note 2 of the Consolidated Financial Statements for discussion of
restructuring and special charges.
S-1
<PAGE> 1
EXHIBIT 3(b)
As amended through September 6, 1996
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)
<PAGE> 2
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 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 Chief Executive Officer or, in his absence or inability to
act, such officer or other 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
-2-
<PAGE> 3
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, 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
-3-
<PAGE> 4
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
stock-
-4-
<PAGE> 5
holder must have 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.
-5-
<PAGE> 6
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, 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
-6-
<PAGE> 7
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 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. Chairman of the Board. The Board of Directors, by action of
a majority of the entire Board, shall from time to time designate a Chairman of
the Board, who shall serve at the discretion of the Board and who shall, if
present, preside at all meetings of the Board of Directors and perform such
other duties as may from time to time be assigned to him by the Board of
Directors. The Board of Directors may designate the Chairman of
-7-
<PAGE> 8
the Board as an officer of the Corporation and, if so designated, the Chairman
of the Board shall, in addition, have such powers, and perform such duties, as
are incidental to the office of Chairman of the Board and as otherwise may be
assigned to him by the Board of Directors.
3. 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 7 of
this Article III, or in a waiver of notice thereof.
4. 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.
5. 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.
6. 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
-8-
<PAGE> 9
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.
7. 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 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 12 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.
8. 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.
9. 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.
10. 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
-9-
<PAGE> 10
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.
11. 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.
12. 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.
13. 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 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.
14. 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.
-10-
<PAGE> 11
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
-11-
<PAGE> 12
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 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.
-12-
<PAGE> 13
IV
Officers
0. Number and Qualifications. The officers of the Corporation
shall be a President, a Vice President of Finance, one or more other Vice
Presidents, a Secretary, and, if designated as an officer by the Board of
Directors, the Chairman of the Board. 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.
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
-13-
<PAGE> 14
office which shall be vacant, in the manner prescribed in these By-Laws for the
regular election or appointment to such office.
4. 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. 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 Chief
Executive Officer, if the President is not 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.
5. Chief Executive Officer. The President shall be the Chief
Executive Officer of the Corporation, unless the Board of Directors has
designated the Chairman of the Board an officer of the Corporation, in which
case the Board may designate either the Chairman of the Board or the President
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 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.
6. 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;
(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
-14-
<PAGE> 15
(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 or the Chief
Executive Officer.
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.
7. 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 or the Chief Executive Officer.
8. 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 or
the Chief Executive Officer.
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.
9. 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 Chief
Executive Officer or the Treasurer.
10. 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
-15-
<PAGE> 16
Board of Directors, of the committees of the Board and of the stockholders;
(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 or the Chief Executive Officer.
11. 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 Chief Executive Officer or the Secretary.
12. 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.
13. 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.
-16-
<PAGE> 17
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 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, if designated an officer of the Corporation, 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
-17-
<PAGE> 18
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, if designated an officer of the Corporation, 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.
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
-18-
<PAGE> 19
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.
-19-
<PAGE> 20
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 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.
-20-
<PAGE> 21
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
-21-
<PAGE> 22
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, 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.
-22-
<PAGE> 23
(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
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
-23-
<PAGE> 24
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.
-24-
<PAGE> 25
(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
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
-25-
<PAGE> 26
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
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
-26-
<PAGE> 27
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.
-27-
<PAGE> 28
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.
-28-
<PAGE> 29
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).
-29-
<PAGE> 1
EXHIBIT 10(k)
EMPLOYMENT AGREEMENT
AGREEMENT, made as of the 1st day of January, 1996, by and between
Sensormatic Electronics Corporation, a Delaware corporation having its
principal place of business at 951 Yamato Road, Boca Raton, Florida 33431-0700,
USA (hereinafter referred to as the "Corporation"), and Gerd Witter, with an
office at Am Schimmersfeld 7, 40880 Ratingen, Germany (hereinafter referred to
as the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation desires that the Employee continue in the employ of
Sensormatic GmbH ("SG"), a subsidiary of the Corporation, and serve as
President of Sensormatic Europe and as a Senior Vice President of the
Corporation, and that the Corporation, through such subsidiary or otherwise, be
assured of having rights to the services of the Employee for a period
commencing on the date hereof and continuing until terminated by either party
as described herein, in the position of President of Sensormatic Europe or in
such other executive capacities with the Corporation and/or subsidiary
corporations of the Corporation (the Corporation and its subsidiary
corporations being collectively referred to herein as the "Corporation Group")
as may be determined by the Board of Directors of the Corporation and/or the
Board of Directors of one or more other members of the Corporation Group, and
as are acceptable to the Employee, and the Employee is willing to accept such
employment, all subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions hereof, the
Corporation hereby agrees to cause the Employee to be employed by SG (and/or
any other member or members of the Corporation Group), and the Employee hereby
accepts employment, for a period commencing on the date hereof and continuing
until terminated by either party, with or without cause, by giving written
notice to the other party pursuant to Section 4 herein (the "Term of
Employment").
2. DUTIES. The Employee shall serve the Corporation as a Senior Vice
President and he shall also serve SG as President and shall hold the office of
President of Sensormatic Europe which shall be headquartered in
Ratingen/Dusseldorf, Germany, or shall serve SG or any other member of the
Corporation Group in such other capacity or capacities as may be determined by
the Board of Directors of the Corporation, SG, and/or such other member of the
Corporation Group and as is acceptable to the Employee. The Employee shall
perform such executive, administrative and other services and duties as are
incidental to any office he holds and as may, from time to time, be assigned to
him by the Chief Executive Officer, the President, the Chairman of the Board or
Board of Directors of the Corporation or a committee thereof or by the Board of
Directors of SG. The Employee further agrees to serve as an officer and/or
director of any parent, subsidiary or affiliate of the Corporation, upon
request by the Corporation. During the term of this Agreement, the Employee
shall devote his entire business time, attention and energies to the business
of the Corporation Group except that the Employee may continue to serve as a
member of the Board of Directors of Carbofer, a German corporation.
3. COMPENSATION.
(a) As base compensation for the services to be rendered by the
Employee hereunder, the Corporation agrees to cause the Employee to be paid by
SG, or otherwise by a member of the
<PAGE> 2
Corporation Group, a salary at such rate as is fixed from time to time by the
Board of Directors of the Corporation or of SG, but in no event less than at
the rate, in the aggregate, of DM 462,000 per annum, such salary to be paid in
equal bi-weekly installments or other installments (not less often than
monthly) agreed to by the parties.
(b) The Corporation shall pay, or cause SG or another member of the
Corporation Group to pay, the Employee bonus incentive compensation based on
performance criteria as shall be agreed to by the Corporation and the Employee
for each fiscal year during the term of this Agreement. Such bonus incentive
compensation shall not exceed 40% of the Employee's total targeted
compensation. However, Employee's bonus incentive compensation for the last
half of the Corporation's 1996 fiscal year shall be guaranteed at 100% of the
targeted bonus. Employee's bonus incentive compensation for the first half of
the Corporation's 1996 fiscal year shall be calculated on the basis of the
existing bonus incentive plan and shall be paid promptly; however, such amount
shall be offset by the DM 28,700 overpayment to the Employee of the bonus
payment for the Corporation's 1995 fiscal year.
The Employee's base compensation and bonus incentive compensation
shall be reviewed annually at such time as compensation is generally reviewed
for European employees of SG or other members of the Corporation Group.
(c) Subject to the Corporation's policies and procedures in this
regard, the Employee shall be entitled to reimbursement for all normal and
reasonable travel, entertainment and other expenses necessarily incurred by him
in the performance of his obligations hereunder.
(d) The Employee shall be entitled to participate in, or benefit from,
such medical insurance, life insurance and other fringe benefit plans or
policies as SG may make available to or have in effect for its executive
personnel from time to time, as well as such other benefit plans of the
Corporation in which his participation shall have been specifically approved by
the Board of Directors of the Corporation. The Employee shall also be entitled
to vacations, sick leave and other fringe benefits in accordance with the
policies of SG from time to time in effect for executive personnel.
(e) Except as hereinafter provided, the Corporation shall cause the
Employee to be paid, for any period during the term of this Agreement during
which he is unable to fully perform his duties because of physical or mental
disability or incapacity, an amount equal to the compensation due him for such
period in accordance with this Agreement, less the aggregate amount of all
income disability benefits which for such period he may receive or to which he
may be entitled under or by reason of (i) any group health insurance plan; (ii)
any applicable compulsory governmental disability law; (iii) any applicable
social security type law of the Federal Republic of Germany; (iv) any
applicable workmen's compensation law or similar law; and (v) any plan toward
which SG or any member of the Corporation Group has contributed or for which it
has made payroll deductions, such as group accident or health policies.
4. COMPENSATION UPON TERMINATION.
(a) The Employee may terminate the Term of Employment at any time by
giving six (6) months' prior written notice to the Corporation at any time
after June 30, 1996. In the event of such voluntary termination by the
Employee, the Corporation may waive all or any portion of the notice period,
but Employee shall be paid his salary and any applicable bonus incentive
compensation and shall perform services at the direction of the Corporation,
through such portion of the notice period not waived by
- 2 -
<PAGE> 3
the Corporation. In addition, subject to the provisions of subsection 4(d), the
Employee shall be entitled to the benefits set forth in subsection 4(c) (i)
through (v).
The parties agree that the Employee is a participant in the Corporation's
Executive Salary Continuation Plan ("ESCP") and that the Employee has
sufficient years of service so that he is fully vested under the ESCP and that
he may retire at age 60 or thereafter and receive benefits under the ESCP for
15 years. The parties further agree that the Employee is a participant in the
Corporation's Senior Executive Defined Contribution Retirement Plan ("Senior
Plan") which was established in 1994. The Employee is presently 100% vested in
the Senior Plan and he may retire at age 60 or thereafter under the Senior Plan
and receive benefits for a 15 year period. The parties agree that the total
benefits to be paid to Employee pursuant to the ESCP and the Senior Plan will
equal fifty (50%) percent of the Employee's total targeted compensation at the
time of his retirement or termination, and that such benefits will be paid in
German marks. The parties acknowledge that the information set forth above with
respect to the ESCP and the Senior Plan is intended to confirm the level of
benefits expected to be paid to the Employee, but the parties agree that the
language of the plans themselves will control all other issues relating to the
plans.
(b) The Corporation may terminate the Term of Employment immediately
for cause as described in Section 6 by giving written notice to the Employee.
In such event, the Employee shall not be entitled to any of the benefits set
forth in Section 4(c)(i) through (v) or to any other benefits from the
Corporation or any member of the Corporation Group in excess of his then
presently vested benefit in any benefit plan carried by the Corporation or any
member of the Corporation Group.
(c) The Corporation may terminate the Term of Employment at any time
without cause by giving at least thirty (30) days' prior written notice to the
Employee. In the event of such termination without cause the Employee shall be
entitled to the following:
(i) payment of the Employee's total targeted compensation for a
period of two (2) years at the compensation level that is in effect at the time
the notice of termination is given, payable at the same regular interval as in
effect prior to the termination. Such payments to be in German marks.
(ii) the continued use of the automobile then being used by the
Employee for two (2) years at the Corporation's expense, including insurance,
taxes and maintenance costs.
(iii) continuation of full medical coverage as provided by SG for
the Employee, his spouse and his two (2) sons, unless his sons are employed and
covered for medical benefits by their employers, for two (2) years at the
Corporation's expense.
(iv) payment by the Corporation of the Employee's golf club
membership for two (2) years.
(v) unexercised stock options and restricted stock that have been
granted to the Employee shall continue in full force and effect for their full
terms in accordance with the respective terms and conditions of the related
stock option and restricted stock agreements (including those with respect to
vesting).
(d) The benefits set forth in subsection 4(c)(i) through (iv) shall not
be available beyond such date as: (x) the Employee becomes employed in a
position that involves salary and bonus that is comparable to that received by
the Employee when his employment with the Corporation or any member of the
- 3 -
<PAGE> 4
Corporation Group is terminated, or (y) the Employee accepts employment which
involves conduct that would violate the non-competition provisions of Section
7. The benefits set forth in subsection 4(c)(v) shall not be available beyond
such date as the Employee engages in any conduct that violates the
non-competition or confidentiality provisions of Section 7.
5. TERMINATION ON DISABILITY OR DEATH. In the event that the Employee, due
to physical or mental disability or incapacity, is unable to substantially
perform his duties hereunder for a period of three (3) or more successive
months, the Corporation or the Employee shall have the right to terminate this
Agreement and the Employee's employment hereunder upon thirty (30) days' prior
written notice. In the event that the Employee shall be able to and shall
recommence rendering services and performing his duties hereunder within such
thirty (30) day notice period, such notice shall be vitiated. In the event that
the Employee shall die during the term of this Agreement, this Agreement and
the Employee's employment hereunder shall terminate immediately upon the
Employee's death.
6. TERMINATION FOR CERTAIN CAUSES. In the event of the willful misconduct
of the Employee in the performance of his duties hereunder or the conviction of
the Employee for a felony, this Agreement and the Employee's employment
hereunder may be terminated by the Corporation without prior notice.
7. CONFIDENTIALITY, ASSIGNMENT OF INVENTIONS AND NON-COMPETITION.
(a) The Employee understands and hereby acknowledges that as a result
of his employment with one or more members of the Corporation Group, he will
necessarily become informed of, and have access to, confidential information of
the Corporation Group and its members and any joint ventures and other
affiliates of any member thereof, including, without limitation, inventions,
trade secrets, technical information, know-how, plans, specifications, identity
of customers and identity of suppliers, and that such information, even though
it may be developed or otherwise acquired by the Employee, is the exclusive
property of the Corporation to be held by the Employee in trust and solely for
the Corporation's benefit. Accordingly, the Employee hereby agrees that he
shall not, at any time, either during or subsequent to his employment
hereunder, use, reveal, report, publish, transfer or otherwise disclose to any
person, corporation or other entity, any confidential information of any member
of the Corporation Group without the prior written consent of the Corporation,
except for use on behalf of any member of the Corporation Group in connection
with its business and except for such information which legally and
legitimately is or becomes of general public knowledge from authorized sources
other than Employee. For the purposes of this Section 7, the terms
"Corporation" and "Corporation Group" shall also mean and include any joint
ventures and other affiliates of the Corporation or any other member of the
Corporation Group, respectively.
(b) The Employee covenants and agrees to disclose promptly and fully,
in writing whenever possible, to the Corporation and to its attorneys and
designated representatives, all ideas, devices, inventions, improvements,
technical information and know-how, whether or not patentable or copyrightable,
which he may conceive or make alone or jointly with others:
(i) during the term of his employment with any member of the
Corporation Group, whether during or outside of the usual hours of work;
(ii) within a period of two (2) years after termination of his
employment with the last member of the Corporation Group with which he is
employed, if such ideas, devices, inventions, improvements, technical
information and know-how relate to the business of any member of the
- 4 -
<PAGE> 5
Corporation Group; or
(iii) at any time after termination of his employment with the last
member of the Corporation Group with which he is employed, if such ideas,
devices, inventions, improvements, technical information and know-how arise out
of any work done or concepts developed during his employment by any member of
the Corporation Group.
The Employee hereby agrees that all his right, title and interest in and
to such ideas, devices, inventions, improvements, technical information and
know-how shall be deemed as held by him in a fiduciary capacity solely for the
benefit of the Corporation, and shall be the sole and exclusive property of
this Corporation and shall be subject to the confidentiality provisions of
Section 7(a) hereof as confidential information of the Corporation and the
Corporation Group.
(c) The Employee hereby transfers and assigns to the Corporation all
right, title and interest in and to the ideas, devices, inventions,
improvements, technical information and know-how referred to in Section 7(b)
hereof (together, the "Inventions"), including any and all United States and
foreign patent rights therein and any renewals thereof. No royalty or other
consideration or compensation shall be payable to the Employee by virtue of his
disclosure or assignment to the Corporation of any of the Inventions or any
rights therein. The Employee, when requested to do so, either during or after
the term of his employment with any member of the Corporation Group, shall:
(i) execute, acknowledge and deliver all such instruments of
assignment, transfer and conveyance, and any such further instruments and
documents, in form and substance satisfactory to the Corporation, as the
Corporation shall deem necessary or advisable to evidence the vesting in the
Corporation of all right, title and interest of the Employee in and to the
Inventions;
(ii) assist the Corporation and its agents in preparing patent
applications, domestic and foreign, covering the Inventions;
(iii) sign and deliver all such applications and assignments of the
same to the Corporation; and
(iv) generally give all information and testimony, sign all papers
and do all things which may be needed or requested by the Corporation to the
end that the Corporation may obtain, extend, reissue, maintain and enforce
United States and foreign patents covering the Inventions.
(d) The Employee hereby irrevocably nominates and appoints the
Corporation his attorney-in-fact to sign and deliver all such papers, and
perform all such acts, mentioned in Section 7(c) hereof, in the event of the
Employee's absence, unavailability, refusal, or death, such nomination and
appointment hereby being granted with full authority in the premises, and such
authority to be deemed coupled with an interest vested in the Corporation.
(e) The Corporation agrees to bear all expenses which it causes to be
incurred in obtaining, extending, reissuing, maintaining and enforcing such
patents and in investing and perfecting title thereto in the Corporation, and
agrees further to pay the Employee for any time which it may require of him
therefore, and for any services that may be required of him pursuant to Section
7(c) hereof, subsequent to the termination of his employment with the
Corporation, such payment to be at an hourly rate equivalent to that at which
the Employee is paid at the time of the termination of his employment with
- 5 -
<PAGE> 6
the Corporation.
(f) In the event of the unenforceability of all or part of the
foregoing provisions of this Section 7, as determined by a court of competent
jurisdiction, the Employee hereby transfers and assigns to the Corporation such
lesser interests in the Inventions, including, without limitation, any and all
United States and foreign patent rights therein and renewals thereof, as may be
determined by such a court to be a reasonable grant of interests under the
circumstances, but, in any event, and without limitation, the Employee shall be
deemed to have granted to the Corporation not less than an irrevocable,
non-exclusive license, with the right to sublicense others, to manufacture,
use, lease and sell the Inventions which have not been assigned to the
Corporation under the provisions of Section 7(c) hereof, without payment of any
royalty.
(g) The Employee agrees that, during the term of this Agreement and for
a period of two (2) years after the termination for any reason of his
employment with the last member of the Corporation Group with which he is
employed, he shall not, anywhere in Europe or elsewhere in the world (or for
such lesser area or such lesser period as may be determined by a court of
competent jurisdiction to be a reasonable limitation on the competitive
activity of the Employee), directly or indirectly:
(i) engage in a similar or competitive line of business to that
carried on by any member of the Corporation Group, either for his own account
or with or for anyone else;
(ii) solicit or attempt to solicit business of any customers of
any member of the Corporation Group for products or services the same or
similar to those offered, sold, produced or under development by any member of
the Corporation Group;
(iii)solicit or attempt to solicit for any business endeavor any
employee of any member of the Corporation Group; or
(iv) otherwise divert or attempt to divert from any member of the
Corporation Group any business whatsoever or interfere with any business
relationship between any member of the Corporation Group and any other person.
The foregoing shall not prevent the Employee from purchasing or owning
up to five (5%) percent of the voting securities of any corporation, the
securities of which are publicly traded.
(h) Upon the termination of his employment, for any reason whatsoever,
with the last member of the Corporation Group with whom he is employed, the
Employee shall promptly deliver to the Corporation all drawings, manuals,
letters, notes, notebooks, reports and copies thereof and all other materials,
including, without limitation, those of a secret or confidential nature,
relating to the business of any member of the Corporation Group which are in
the Employee's possession or control.
(i) Because the Corporation does not have an adequate remedy at law to
protect its business and that of the other members of the Corporation Group
from the Employee's competition or to protect its and their interests in its
trade secrets, privileged, proprietary or confidential information and similar
commercial assets, the Corporation shall be entitled to injunctive relief, in
addition to such other remedies and relief that would, in the event of a breach
of the provisions of this Section 7, be available to the Corporation. In the
event of such a breach, in addition to any other remedies, the Corporation
shall be entitled to receive from the Employee payment of, or reimbursement
for, its reasonable
- 6 -
<PAGE> 7
attorneys' fees and disbursements incurred in enforcing any such provision.
(j) The provisions of this Section 7 shall survive any termination of
this Agreement.
8. ENTIRE AGREEMENT. This Agreement merges and supersedes all prior
agreements and understandings between the parties and may not be changed or
terminated orally, and no change, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the parties
against whom the same is sought to be enforced; provided, however, that the
Employee's compensation may be increased at any time by the Corporation or any
member of the Corporation Group without in any way affecting any of the other
terms and conditions of this Agreement, which in all other respects shall
remain in full force and effect.
9. SUCCESSORS AND ASSIGNS. Neither party shall have the right to assign
this personal Agreement, or any rights or obligations hereunder, without the
consent of the other party, provided, however, that (i) the Corporation may
assign this Agreement to any other member of the Corporation Group (in which
event the Corporation shall guarantee the fulfillment of any of its obligations
hereunder) and (ii) upon the sale of all or substantially all of the assets,
business and goodwill of the Corporation, SG, or any other member of the
Corporation Group by which the Employee is employed, to another corporation, or
upon the merger or consolidation of the Corporation, SG, or any other member of
the Corporation Group by which the Employee is employed, with another
corporation, this Agreement shall inure to the benefit of, and be binding upon,
both the Employee and the corporation purchasing such assets, business and
goodwill, or surviving such merger or consolidation, as the case may be, in the
same manner and to the same extent as though such other corporation were the
Corporation, SG, or any other member of the Corporation Group by which the
Employee is employed, as the case may be. Subject to the foregoing, this
Agreement shall inure to the benefit of, and bind, the parties hereto and their
legal representatives, heirs, successors and assigns.
10. GOVERNING LAW. This Agreement is made and executed in, and shall be
governed by the laws of the State of Florida; provided, however, that the
Corporation may, in connection with any dispute under this Agreement, waive the
applicability of such Florida laws, in which case the laws of the Federal
Republic of Germany shall govern.
11. SEVERABILITY. If any provision of this Agreement is held to be invalid
or unenforceable by a court or tribunal of competent jurisdiction, such
invalidity or unenforceability shall not affect the validity and enforceability
of the other provisions of this Agreement and the provision held to be invalid
or unenforceable shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
SENSORMATIC ELECTRONICS CORPORATION GERD WITTER, INDIVIDUALLY
By: /s/ Robert A. Vanourek By: /s/
---------------------------- ----------------------
Print Name: Robert A. Vanourek
--------------------
Title: President
--------------------------
- 7 -
<PAGE> 1
EXHIBIT 10 (m)
EMPLOYMENT AGREEMENT
AGREEMENT, made as of the 21st day of December, 1995, by and between
SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation having its
principal place of business at 951 Yamato Road, Boca Raton, Florida 33431-0700
(hereinafter referred to as the "Corporation"), and GARRETT E. PIERCE, residing
at 350 Sharon Park Drive, #M21, Menlo Park, California 94025 (hereinafter
referred to as the "Employee");
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the Employee as Senior Vice
President and Chief Financial Officer, and the Employee is willing to accept
such employment, all subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions hereof, the
Corporation hereby agrees to employ the Employee, and the Employee hereby
accepts employment by the Corporation, for a period commencing as soon as
practicable, but in no event later than January 15, 1996, and continuing until
terminated by either party, with or without cause, by giving written notice to
the other party pursuant to Section 4 hereunder (the "Term of Employment").
2. DUTIES. The Employee shall serve the Corporation as Senior Vice
President and Chief Financial Officer and shall serve in such other executive
capacity as may be reasonably determined by the President and the Board of
Directors and is reasonably acceptable to him. The Employee shall be
responsible for all financial affairs of the Corporation, subject to the
control and supervision of the President of the Corporation. The Employee shall
perform such executive, administrative and other services and duties as are
incidental to the offices he holds and as may, from time to time, be assigned
to him by the President or by the Board of Directors of the Corporation or a
committee thereof. The Employee further agrees to serve as an officer and/or
director of any parent, subsidiary or affiliate of the Corporation, upon
request by the President or by the Board of Directors of the Corporation or a
committee thereof. The Employee shall report to the President of the
Corporation. During the term of this Agreement, the Employee shall devote
substantially all of his business time, attention and energies to the business
of the Corporation. Neither the Employee's participation in other businesses,
as a director or otherwise, with the approval of the Corporation's Board of
Directors (which approval shall be deemed to include the Board of Directors not
objecting to such participation following disclosure thereof to the Board of
Directors by Employee, and which approval may not subsequently be withdrawn
without cause) nor the Employee's engaging in charitable activities and
community affairs or managing his personal investments and affairs shall be
deemed to contravene the foregoing provision.
<PAGE> 2
3. COMPENSATION.
(a) As base compensation for the services to be rendered by the
Employee hereunder, the Corporation shall pay to the Employee a salary at the
rate of $300,000 per annum, to be paid in equal biweekly installments, during
the Term of Employment. The base salary shall be reviewed no less frequently
than annually for increase in the discretion of the Board of Directors of the
Corporation or a committee thereof.
(b) The Corporation shall pay the Employee bonus compensation, based
upon certain performance criteria, as shall be established by the President in
conjunction with the Board of Directors for each fiscal year during the Term of
Employment. Targeted bonus compensation shall be not less than $150,000 per
fiscal year. For the current fiscal year (fiscal year 1996) during which
Employee's employment commences, Employee's bonus compensation shall be a
guaranteed minimum of $150,000, with $100,000 to be paid in July 1996, and
$50,000 to be paid in January 1997 (subject only to Employee's continued
employment through such period in accordance with the terms of this Agreement).
Bonus compensation for fiscal year 1997 and beyond shall be payable within
sixty (60) days following the end of the Corporation's fiscal year or within
fifteen (15) days following the Corporation's release of final earnings,
whichever is later. If the Term of Employment terminates on a date other than
the last day of a fiscal year, the bonus payment which the Employee receives
for such fiscal year shall be prorated based upon the portion of the fiscal
year prior to termination.
(c) During the Term of Employment, the Employee shall be entitled to
reimbursement for all normal and reasonable travel, entertainment and other
expenses necessarily incurred by him in the performance of his obligations
hereunder. The Company shall also pay all reasonable legal expenses incurred in
connection with the preparation of the Employee's employment arrangements with
the Company.
(d) Until the time of his retirement, and thereafter in accordance
with their respective terms, the Employee shall be entitled to participate in
or benefit from such medical insurance, pension, retirement, life insurance,
bonus, profit-sharing, stock option, stock purchase, stock purchase loan, and
other fringe benefit plans or policies as the Corporation may make available to
or have in effect for its executive personnel from time to time. The Employee
shall also be entitled to vacations, sick leave and other fringe benefits in
accordance with the policies of the Corporation from time to time in effect for
executive personnel.
During the Term of Employment the Corporation shall provide and
maintain for the Employee's use an automobile of his reasonable choice by means
of a monthly car allowance, not to exceed $1,000 per month. The Corporation
shall also provide for the payment of reasonable fees for the equivalent of one
social (i.e., non-golfing) membership, to be held in the Corporation's name, at
a local country club or beach club, as well as for one or more airline club
rooms, all as are necessary or advisable, in the opinion of the Employee and
President, for the Employee's professional activities, including the
entertainment of business associates/clients.
- 2 -
<PAGE> 3
(e) Except as hereinafter provided, the Corporation shall pay the
Employee, for any period that this Agreement is in effect during which he is
unable fully to perform his duties because of physical or mental disability or
incapacity, an amount equal to the compensation due him for such period in
accordance with this Agreement less the aggregate amount of all income
disability benefits which for such period he may receive or to which he may be
entitled under or by reason of (i) any group health insurance plan; (ii) any
applicable compulsory state disability law; (iii) the Federal Social Security
Act; (iv) any applicable workmen's compensation law or similar law; and (v) any
plan towards which the Corporation or any parent, subsidiary or affiliate of
the Corporation has contributed or for which it has made payroll deductions,
such as group accident or health policies or the Senior Executive Defined
Contribution Retirement Plan.
(f) During the Employee's employment hereunder, and thereafter upon
retirement in accordance with such Plan, the Employee shall be entitled to
participate in the Corporation's Senior Executive Defined Contribution
Retirement Plan. The Employee's annual Target Benefits thereunder shall be not
less than $225,000 (i.e., fifty percent (50%) of Employee's targeted annual
cash compensation as of the date of this Agreement). The Employee's rights
under such Plan shall be 50% vested after ten (10) years of service, and 100%
vested at age 65 (assuming continued service to such date).
(g) Upon the commencement of the Employee's employment, the
Corporation shall grant him a 10-year option, substantially in the form
attached to this Agreement as Exhibit A, to purchase 200,000 shares of common
stock of the Corporation at an exercise price equal to the fair market value on
the date of the commencement of his employment. Such option shall vest and
become exercisable at the rate of 33 1/3% on the first, second and third
anniversaries of the date of this Agreement. The Employee shall also be
entitled to participate in future stock option grants made by the Corporation
to its employees, as determined by the Board of Directors or a committee
thereof or under the relevant plans.
(h) The Employee shall be entitled to participate in the
Corporation's Success Sharing Program, Long-Term Incentive Plan, with a target
benefit of $900,000, a three-year performance period, and an allocation of 60%
of the target benefit to stock options and 40% of the target benefit to
restricted stock. Financial targets of the Corporation under such Plan shall be
determined by the Board of Directors.
(i) The Employee shall be entitled to all of the benefits of the
Corporation's Relocation and Moving Expense Policy. Without limiting the
foregoing, the Employee shall also be entitled to reimbursement of or for:
(i) reasonable expenses connected with the sale of his
present residence in New Canaan, Connecticut;
(ii) all reasonable expenses (including rental payments and
utilities) not to exceed $2,500 per month, connected with the lease of his
Menlo Park, California apartment, for a period of five (5) months;
- 3 -
<PAGE> 4
(iii) all reasonable travel, meals, lodging and related
expenses incurred in connection with looking for housing or schools in the Boca
Raton, Florida, area;
(iv) interest costs of any bridge loan incurred to purchase a
new residence if his present residence has not been sold before the new one is
purchased;
(v) for a period not to exceed six (6) months, temporary
living expenses in the Boca Raton, Florida, area and weekend round trip
transportation costs between Florida and either of the Employee's two
residences for Employee until the Employee's family moves to Florida;
(vi) a lump sum miscellaneous expense allowance of one month's
base salary, which shall not be subject to the maximum amount set forth in the
Company's policy, to cover those expenses not otherwise covered.
4. COMPENSATION UPON TERMINATION.
(a) The Employee may terminate the Term of Employment at any time by
giving at least two (2) month's prior written notice to the Corporation. Except
as provided in Section 4(b) below, if the Employee provides less than two (2)
months' notice, he shall not be entitled to any bonus compensation (as set
forth in Section 3(b)) for the notice period.
(b) The Corporation may terminate the Term of Employment at any time
by giving at least 30 days' prior written notice to the Employee, if without
cause, or effective immediately on notice, if with cause (after compliance with
the provisions of Section 5). In the event of such termination (except for
cause pursuant to Section 5 hereunder), the Employee shall be entitled to:
(i) base salary through the date of termination of his
employment;
(ii) base salary, at the annualized rate in effect on the date
of termination of employment (or in the event a reduction in base salary is the
basis for a termination pursuant to Section 4(c) below, then the base salary in
effect immediately prior to such reduction), for a period of 24 months
following such termination (the "Continuation Period"), payable at the same
regular intervals as in effect prior to the termination;
(iii) pro rata annual bonus for the year in which termination
occurs based on the targeted bonus for such year, payable in a single
installment promptly following termination;
(iv) the balance of any incentive awards earned (but not yet
paid);
(v) continued vesting of stock options during the
Continuation Period and the right to exercise any such option (in accordance
with its vesting and other terms) for the remainder of the original term of
such option;
(vi) any other amounts earned, accrued or owing to the
Employee but not yet paid;
- 4 -
<PAGE> 5
(vii) continued participation in all medical, dental,
hospitalization and life insurance coverage and in other employee welfare
benefit plans or programs in which he was participating on the date of the
termination of his employment until the end of the Continuation Period;
provided that the Corporation's obligations under this clause shall be reduced
to the extent that the Employee is eligible for similar coverage and benefits
under the plans and programs of a subsequent employer; and provided further
that (x) if the Employee is precluded from continuing his participation in any
employee benefit plan or program as provided in this clause, he shall be
provided with the after-tax economic equivalent of the benefits provided under
the plan or program in which he is unable to participate for the period
specified in this clause, (y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that would be incurred by the Employee in
obtaining such benefit himself on an individual basis, and (z) payment of such
after-tax economic equivalent shall be made quarterly in advance; and
(viii) other or additional benefits in accordance with
applicable plans and programs of the Corporation.
(c) In the event that any of the following events occur, the
Employee may terminate the Term of Employment, without prior notice, by giving
written notice to the Corporation, and shall thereupon be entitled to the
payments, entitlements and benefits provided in Section 4(b) above as if the
Corporation had terminated the Term of Employment pursuant to Section 4(b)
above.
(i) a reduction in the Employee's then current base salary or
targeted bonus or the termination or material reduction of any employee benefit
or perquisite enjoyed by him (other than as part of an across-the-board
reduction of such benefit or perquisite applicable to all executive officers of
the Corporation);
(ii) a material diminution in the Employee's duties or the
assignment to the Employee of duties which are materially inconsistent with his
duties or which materially impair the Employee's ability to function as the
Senior Vice President and Chief Financial Officer of the Corporation, as the
case may be;
(iii) the relocation of the Corporation's principal office, or
the Employee's own office location as assigned to him by the Corporation, to a
location more than 35 miles from Boca Raton, Florida; or
(iv) the failure of the Corporation to obtain the assumption
in writing of its obligation to perform this Agreement by any successor to all
or substantially all of the assets of the Corporation within 15 days after a
merger, consolidation, sale or similar transaction.
(d) In the event that the aggregate of all payments or benefits made
or provided to the Employee following a change in control of the Corporation
under this Agreement and under all other plans and programs of the Corporation
(the "Aggregate Payment") is determined to include an excess parachute payment,
as such term is defined in Section 280G(b)(1) of the Internal Revenue Code, the
Corporation shall pay to the Employee, prior to the time any excise tax imposed
by Section 4999 of the Internal Revenue Code ("Excise Tax") is payable with
respect to such excess parachute payment,
- 5 -
<PAGE> 6
an additional amount which, after the imposition of all income and excise taxes
thereon, is equal to the Excise Tax on the excess parachute payment. The
determination of whether the Aggregate Payment includes an excess parachute
payment and, if so, the amount to be paid to the Employee and the time of
payment pursuant to this Section 4(d) shall be made by an independent auditor
(the "Auditor") jointly selected by the Corporation and the Employee and paid
by the Corporation. The Auditor shall be a nationally recognized United States
public accounting firm which has not, during the two years preceding the date
of its selection, acted in any way on behalf of the Corporation or any
affiliate thereof. If the Employee and the Corporation cannot agree on the firm
to serve as the Auditor, then the Employee and the Corporation shall each
select one accounting firm and those two firms shall jointly select the
accounting firm to serve as the Auditor.
(e) In the event of any termination of employment under this Section
4, the Employee shall be under no obligation to seek other employment and there
shall be no offset against amounts due the Employee under this Agreement on
account of any remuneration attributable to any subsequent employment that he
may obtain except as specifically provided in this Section 4.
5. TERMINATION FOR CERTAIN CAUSES. Notwithstanding anything to the
contrary set forth elsewhere herein, in the event of the willful misconduct of
the Employee in the performance of his duties hereunder resulting in material
economic harm to the Corporation or the conviction of the Employee for a felony
under federal or state law relating to the assets, business or affairs of the
Corporation or involving moral turpitude, the Term of Employment may be
terminated by the Corporation by written notice to the Employee, provided that
the Employee shall be given prior written notice by the Board of Directors of
the intention to terminate him for cause and the specific grounds for such
termination. The Employee shall be entitled to a hearing before the Board
before such termination becomes effective.
6. DISCLOSURE AND ASSIGNMENT OF DISCOVERIES. The Employee shall (without
any additional compensation) promptly disclose in writing to the Board of
Directors of the Corporation all ideas, formulae, programs, systems, devices,
processes, business concepts, discoveries and inventions (hereinafter referred
to collectively as "discoveries") whether or not patentable, which the
Employee, while employed by the Corporation, conceives, makes, develops,
acquires or reduces to practice, whether alone or with others and whether
during or after usual working hours, and which are related to the Corporation's
business or interests, or are used or usable by the Corporation; and the
Employee hereby transfers and assigns to the Corporation all right, title and
interest in and to said discoveries, including any and all domestic and foreign
patent rights therein and any renewals thereof. On request of the Corporation,
the Employee shall (without any additional compensation), from time to time
during or after the expiration or termination of his employment, execute such
further instruments (including, without limitation, applications for letters
patent and assignments thereof) and do all such other acts and things as may be
deemed necessary or desirable by the Corporation to protect and/or enforce its
rights in respect of said discoveries. All expenses of filing or prosecuting
any patent applications shall be borne by the Corporation, but the Employee
shall cooperate in filing and/or prosecuting any such applications.
7. CONFIDENTIALITY. The Employee agrees that all patent rights,
inventions, technical
- 6 -
<PAGE> 7
information and know-how and trade secrets relating to the Corporation's
electronic security systems and any other products marketed by the Corporation,
any information relating thereto, and any other information relating to the
business or interests of the Corporation which he knows or should know, is
regarded as confidential and valuable by the Corporation (whether or not any of
the foregoing information is actually novel or unique or is actually known to
others), made available to the Employee by the Corporation or acquired by the
Employee from the Corporation, other than that which legally and legitimately
is or becomes of general public knowledge or passes into the public domain from
authorized sources other than the Employee, will be held in confidence and will
not be divulged (or caused or permitted to be divulged) by the Employee,
without the prior written consent of the Corporation, to any person or entity,
except to responsible officers and employees of the Corporation and other
responsible persons who are in a contractual or fiduciary relationship with the
Corporation or who have a need for such information for purposes in the
interest of the Corporation or otherwise in the course of carrying out his
duties hereunder and except when required to disclose such information by a
court of law, by any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative body (including
a committee thereof) with the apparent jurisdiction to order him to divulge,
disclose or make accessible such information. The Employee further agrees that
his obligations of secrecy and confidentiality under this Section 7 shall
survive any termination of this Agreement unless specifically waived in writing
by the Corporation and, in the event of any such termination, the Employee
shall never use or market, nor disclose to others nor assist others in using or
marketing, any of the information or property rights of the Corporation
referred to in this Section 7, other than that which legally and legitimately
is or becomes of general public knowledge or passes into the public domain from
authorized sources other than the Employee.
8. NON-COMPETITION. The Employee shall not, directly or indirectly,
(a) engage in the business of manufacturing, leasing, selling,
maintaining, or servicing, anywhere in the world, anti-shoplifting, theft
detection, inventory/asset control, closed circuit television, access control,
or article surveillance devices which are similar to or purport to accomplish
results similar to the Corporation's electronic article surveillance, closed
circuit television and access control systems and other products marketed by
the Corporation;
(b) render any services as an officer, director, employee, partner,
consultant or otherwise to, or have any interest as a stockholder, partner,
lender or otherwise in, any person which is so engaged;
(c) solicit or attempt to solicit business of any customers of the
Corporation for products or services the same or similar to those offered,
sold, produced or under development by the Corporation during the Term of
Employment, or
(d) solicit or attempt to solicit for any business endeavor any
employee of the Corporation.
during the Term of Employment and for a period of two (2) years from and after
the date of termination of the Term of Employment, or for such lesser area or
lesser period as may be
- 7 -
<PAGE> 8
determined by a court of law or equity to be a reasonable limitation on the
competitive activity of the Employee, it being understood and agreed by the
parties hereto that this provision is reasonably necessary to protect the
patent rights, inventions, technical information and know-how, trademarks and
the good will and reputation of the Corporation. Notwithstanding the
foregoing, the Employee shall not be deemed to have violated this Section 8 if
(i) the competitor's annual sales attributable to the product or product lines
involved equal less than 5% of the competitor's total annual sales or (ii) the
Employee is employed by a business of which a unit is in competition with the
Corporation but as to which unit he does not have direct or supervisory
authority over the product or product lines involved. For the purpose of this
Section 8, the term "Corporation" shall include any and all affiliates of the
Corporation in existence from time to time. Notwithstanding anything to the
contrary contained in this Section 8, the provisions hereof shall not prevent
the Employee from purchasing or owning up to two (2%) percent of the voting
securities of any corporation, the stock of which is publicly traded.
9. INJUNCTIVE RELIEF. In the event of a breach or threatened breach by
the Employee of any of the provisions of Sections 6, 7 and 8, the Corporation
shall be entitled, if it shall so elect, to institute legal proceedings to
obtain damages or to enforce the specific performance of such provisions by the
Employee and to enjoin the Employee from any further violation of such
provisions and to exercise such remedies cumulatively or in conjunction with
all other rights and remedies provided by law. The Employee acknowledges,
however, that the remedies at law for any breach or threatened breach by him of
such provisions may be inadequate and that the Corporation shall be entitled to
injunctive relief against him in the event of any breach or threatened breach.
10. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements and
understandings between the parties pertaining to the subject matter hereof
(other than the plans and policies referred to in Sections 3(d), 3(f) 3(g),
3(h) and 3(i) hereof and any other agreements or understandings pertaining
thereto) and may not be changed or terminated orally, and no change,
termination or attempted waiver of any of the provisions hereof shall be
binding unless in writing and signed by the party against whom the same is
sought to be enforced; provided, however, that the Employee's compensation
and/or benefits may be increased at any time by the Corporation without in any
way affecting any of the other terms and conditions of this Agreement, which in
all other respects shall remain in full force and effect.
11. SUCCESSORS AND ASSIGNS. Neither party shall have the right to assign
this personal Agreement, or any rights or obligations hereunder, without the
consent of the other party, provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Corporation to
another corporation, or upon the merger or consolidation of the Corporation
with another corporation, this Agreement shall inure to the benefit of, and be
binding upon, both the Employee and the corporation purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other
corporation were the Corporation. In the event of a sale, merger or
consolidation described in the preceding sentence, the Corporation shall take
whatever action it legally can in order to cause such other corporation to
expressly assume the liabilities, obligations and duties of the Corporation
hereunder. Subject to the foregoing, this Agreement shall inure to the benefit
of, and bind, the parties hereto and their legal representatives, heirs,
successors and assigns.
- 8 -
<PAGE> 9
12. GOVERNING LAW. This Agreement is made and executed and shall be
governed by the laws of the State of Florida, without giving effect to choice
of law principles.
13. INDEMNIFICATION.
(a) The Corporation agrees that if the Employee is made a party, or
is threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that he is or was a director, officer, or employee of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
member, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is the Employee's alleged
action in an official capacity while serving as a director, officer, member,
employee or agent, the Employee shall be indemnified and held harmless by the
Corporation to the fullest extent legally permitted or authorized by the
Corporation's certificate of incorporation or bylaws or resolutions of the
Company's Board of Directors or, if greater, by the laws of the State of
Delaware against all cost, expense, liability and loss (including, without
limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by the Employee in connection therewith, and such indemnification shall
continue as to the Employee even if he has ceased to be a director, officer,
member, employee or agent of the Corporation or other entity and shall inure to
the benefit of the Employee's heirs, executors and administrators. The
Corporation shall advance to the Employee all reasonable costs and expenses
incurred by him in connection with a Proceeding within 20 days after receipt by
the Corporation of a written request for such advance. Such request shall
include an undertaking by the Employee to repay the amount of such advance if
it shall ultimately be determined that he is not entitled to be indemnified
against such costs and expenses.
(b) Neither the failure of the Corporation (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by the Employee under Section 13(a) above that indemnification
of the Employee is proper because he has met the applicable standard of
conduct, nor a determination by the Corporation (including its board of
directors, independent legal counsel or stockholders) that the Employee has not
met such applicable standard of conduct, shall create a presumption that the
Employee has not met the applicable standard of conduct.
(c) The Corporation agrees to continue and maintain a directors and
officers' liability insurance policy covering the Employee to the extent the
Corporation provides such coverage for its other executive officers.
14. REPRESENTATION. The Corporation represents and warrants that it is
fully authorized and empowered by action of the Board of Directors to enter
into this Agreement and that the performance if its obligations under this
Agreement will not violate any agreement between it and any other person, firm
or organization.
15. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining
- 9 -
<PAGE> 10
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.
16. SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of the Employee's employment to the
extent necessary to the intended preservation of such rights and obligations.
17. BENEFICIARIES/REFERENCES. The Employee shall be entitled, to the
extent permitted under the applicable law, to select and change a beneficiary
or beneficiaries to receive any compensation or benefit payable hereunder
following the Employee's death by giving the Company written notice thereof. In
the event of the Employee's death or a judicial determination of his
incompetence, reference in this Agreement to the Employee shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.
18. RESOLUTION OF DISPUTES. Except for disputes which are subject to the
provisions of Section 9, any disputes arising under or in connection with this
Agreement shall, at the election of the Executive or the Company, be resolved
by binding arbitration, to be held in Ft. Lauderdale, Florida in accordance
with the rules and procedures of the American Arbitration Association. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Costs of the arbitration or litigation, including,
without limitation, reasonable attorneys' fees of both parties, shall be borne
by the Corporation.
19. NOTICES. Any notice given to a party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned at the address indicated at the beginning of this Agreement
or to such changed address as such party may subsequently give such notice of.
20. HEADINGS. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
SENSORMATIC ELECTRONICS CORPORATION GARRETT E. PIERCE
By: /s/ Robert A. Vanourek By: /s/ Garret S. Pierce
----------------------------- -----------------------------
Print Name: Robert A. Vanourek
----------------------
Title: President and C.O.O.
---------------------------
- 10 -
<PAGE> 11
EXHIBIT A
SENSORMATIC ELECTRONICS CORPORATION
NON-QUALIFIED STOCK OPTION
For valuable consideration, receipt of which is hereby
acknowledged, SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation (the
"Company"), hereby grants to GARRETT E. PIERCE, who resides at 3792 N.W. 65TH
LANE, BOCA RATON, FL 33496 (the "Optionee"), a non-qualified stock option
("Option"), subject to the terms and conditions hereof, to purchase from the
Company an aggregate of 200,000 shares of the Common Stock of the Company, par
value $.01 per share (the "Common Stock"), at the price of $17.75 per share
(the "Option Price"), such option to be exercisable in installments as set
forth below on or before the day (the "Termination Date") preceding the tenth
anniversary of the date hereof.
This Option may be exercised as to one-third of the shares of
Common Stock subject hereto on and after the first anniversary of the date
hereof, as to an additional one-third of such shares on and after the second
anniversary of the date hereof, and as to the remaining one-third of such
shares on and after the third anniversary of the date hereof.
This Option is granted pursuant to the Company's 1995 Stock
Incentive Plan (the "Plan") and is subject to the terms and conditions thereof.
The Plan is administered by the Company's Stock Incentive Plan Committee (the
"Committee"). All determinations and acts of the Committee as to any matters
concerning the Plan, including interpretations or constructions of this Option
<PAGE> 12
and of the Plan, shall be conclusive and binding on the Optionee and any
parties claiming through the Optionee.
Unless the Optionee ceases to be employed by the Company or a
direct or indirect subsidiary thereof, the right of the Optionee to purchase
shares subject to any installment may be exercised in whole at any time or in
part from time to time after the accrual of such respective installment and
prior to the Termination Date, except as otherwise provided herein. This Option
may be exercised only with respect to full shares.
Subject to the provisions of this Option, this Option may be
exercised by written notice (the "Notice") to the Company stating the number of
shares of Common Stock with respect to which it is being exercised. The Notice
shall be accompanied by the Optionee's payment in full of the Option Price for
each of the shares to be purchased by the Optionee, such payment to be made by
(a) certified or bank cashier's check payable to the order of the Company or
(b) any other means acceptable to the Committee.
As soon as practicable after receipt of the Notice and
payment, and subject to the next two paragraphs, the Company shall, without
transfer or issue tax or other incidental expense to the Optionee, deliver to
the Optionee a certificate or certificates for the shares of Common Stock so
purchased. Such delivery shall be made (a) at the offices of the Company at 951
Yamato Road, Boca Raton, Florida 33431-0700, (b) at such other place as may be
mutually acceptable to the Company and the Optionee, or (c) at the election of
the Company, by certified
- 2 -
<PAGE> 13
mail addressed to the Optionee at (i) the Optionee's address shown in the
employment records of the Company or (ii) the location at which the Optionee is
employed by the Company.
The Company shall have the right to withhold an appropriate
number of shares of Common Stock (based on the fair market value thereof on the
date of exercise) for payment of taxes required by law or to take such other
action as may be necessary in the opinion of the Company to satisfy all tax
withholding obligations.
The Company may postpone the time of delivery of
certificate(s) for shares of Common Stock for such additional time as the
Company shall deem necessary or desirable to enable it to comply with the
requirements of any securities exchange upon which the Common Stock may be
listed, or the requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, any rules or regulations of the
Securities and Exchange Commission promulgated thereunder, or any applicable
state laws relating to the authorization, issuance or sale of securities.
The issuance of the shares of Common Stock subject hereto and
issuable upon the exercise of this Option and the transfer or resale of such
shares shall be subject to such restrictions as are, in the opinion of the
Company's counsel, required to comply with the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and the
certificate(s) representing such shares shall, if it is deemed advisable by the
Company's counsel, bear a legend to such effect.
- 3 -
<PAGE> 14
If, upon tender of delivery thereof, the Optionee fails to
accept delivery of and pay or have paid for all or any part of the number of
shares of Common Stock specified in the Notice, the Optionee's right to
exercise this Option with respect to such undelivered and unpaid for shares may
be terminated by the Company.
During the Optionee's lifetime, this Option shall be
exercisable only by the Optionee (except as otherwise provided below), and
neither this Option nor any right hereunder shall be assignable or transferable
otherwise than by will or the laws of descent and distribution (as provided
below), or be subject to attachment, execution or other similar process. In the
event of any attempt by the Optionee to alienate, assign, pledge, hypothecate
or otherwise dispose of this Option or of any right hereunder, except as
provided for herein, or in the event of any levy or any attachment, execution
or similar process upon the rights or interest hereby conferred, the Company
may terminate this Option by notice to the Optionee, and it shall become null
and void.
If, prior to the Termination Date, the Optionee's employment
with the Company or its direct or indirect subsidiaries terminates for any
reason (otherwise than by reason of (i) the Optionee's death or disability (as
defined below), (ii) termination of the Optionee's employment by the Company
without cause (as defined in Section 5 of the Employment Agreement dated as of
December 21, 1995 between the Company and the Optionee (the "Employment
Agreement")) or (iii) by termination of the
- 4 -
<PAGE> 15
Optionee's employment by the Optionee pursuant to Section 4(c) of the
Employment Agreement), this Option, and all rights hereunder to the extent that
such rights shall not have been exercised, shall immediately terminate and
become null and void.
In the event of the Optionee's death prior to the Termination
Date, and while the Optionee is employed by the Company or a direct or indirect
subsidiary thereof, this Option shall immediately become fully exercisable and
may be exercised within one year after the date of the Optionee's death by the
person(s) to whom the right passes pursuant to the following sentence, but in
no event may this Option be exercised later than the Termination Date. All
rights with respect to this Option, including the right to exercise it, shall
pass in the following order: (a) to such person(s) as the Optionee may
designate in a writing duly delivered to the Company (in the form available
from the Company for such purpose), or in the absence of such a designation,
then (b) to the Optionee's estate (the Option to be exercised by the legal
representative).
In the event that the Optionee, prior to the Termination Date,
ceases to be employed by the Company or a direct or indirect subsidiary thereof
because the Optionee is deemed by the Company to be disabled, this Option shall
immediately become fully exercisable and may be exercised by the Optionee, if
legally competent, or by a committee or other legally designated guardian or
representative if the Optionee is legally incompetent, within one year after
the date the Optionee ceases to be employed by the Company or a direct or
indirect subsidiary
- 5 -
<PAGE> 16
thereof as a result of such disability, but in no event may this Option be
exercised later than the Termination Date. For purposes of this Option, the
Optionee shall be deemed by the Company to be disabled if the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve months. The Optionee shall not be considered to be
disabled unless the Optionee or the Optionee's representative furnishes proof
of the existence of such disability in such form and manner, and at such times,
as may be required by the Committee, and unless such proof shall be
satisfactory to the Committee. The determination by the Committee with respect
to the existence of such disability shall be conclusive and binding upon the
Optionee and any parties claiming through the Optionee.
In the event that the Optionee's employment is terminated prior to the
Termination Date by the Company without cause (as defined in Section 5 of the
Employment Agreement) or by the Optionee pursuant to Section 4(c) of the
Employment Agreement, this Option shall continue to become exercisable in
accordance with the second paragraph of this Option during the Continuation
Period (as defined in Section 4(b) of the Employment Agreement) and may be
exercised at any time on or prior to the Termination Date to the extent it
shall have become exercisable at the time of such exercise.
- 6 -
<PAGE> 17
In the event of any change in the outstanding Common Stock by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger or similar event, the Committee shall adjust
proportionally the number of shares of Common Stock covered by this Option and
the Option Price thereof. In the event of any other change affecting the Common
Stock or any distribution (other than normal cash dividends) to holders of
Common Stock, such adjustments as may be deemed equitable by the Committee,
including adjustments to avoid fractional shares, shall be made to give proper
effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation,
the Committee may authorize the assumption of this Option or the substitution
of a new stock option for this Option, whether or not in a transaction to which
Section 424(a) of the Internal Revenue Code of 1986, as amended from time to
time, applies. The judgment of the Committee with respect to any matter
referred to in this paragraph shall be conclusive and binding upon the Optionee
and any parties claiming through the Optionee.
Neither the Optionee nor any person or persons entitled to
exercise the Optionee's rights under this Option in accordance herewith shall
have any rights to dividends or any other rights of a stockholder with respect
to any shares of Common Stock subject to this Option, except to the extent that
a certificate for such shares shall have been issued upon the exercise of this
Option as provided herein.
- 7 -
<PAGE> 18
Each notice relating to this Option shall be in writing and
delivered in person or by certified mail to the proper address. All notices to
the Company shall be addressed to it at its offices at 951 Yamato Road, Boca
Raton, Florida 33431-0700, attention of the Committee, c/o the Company's
Secretary, and shall become effective when received by the Secretary. All
notices to the Optionee or other person or persons then entitled to exercise
any rights with respect to this Option shall be addressed to the Optionee or
such other person or persons at (i) the Optionee's address shown in the
employment records of the Company or (ii) the location at which the Optionee is
employed by the Company. Anyone to whom a notice may be given under this Option
may designate a new address by notice to that effect.
Neither the adoption of the Plan nor the granting of this
Option confers on the Optionee any right to continued employment with the
Company (or any of its direct or indirect subsidiaries) or in any way
interferes with or alters the Company's (and its direct and indirect
subsidiaries') right to terminate the employment of the Optionee at any time,
with or without cause, and without liability therefor. This Option shall not be
deemed a part of the Optionee's regular, recurring compensation for any
purpose, including, without limitation, for the purposes of any termination
indemnity or severance pay law of any jurisdiction.
This Option and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the Internal Revenue
Code of 1986, as amended from time to time,
- 8 -
<PAGE> 19
or the securities laws of the United States, shall be governed by and construed
under the laws of the State of Delaware.
IN WITNESS WHEREOF, SENSORMATIC ELECTRONICS CORPORATION has
caused this Option to be executed by its officers, thereunto duly authorized,
as of the 17th day of January, 1996.
SENSORMATIC ELECTRONICS CORPORATION
By:_____________________________________
Name:
Title:
ATTEST:
______________________________
Marian E. Fetchik
Assistant Secretary
- 9 -
<PAGE> 1
EXHIBIT 10(o)
AGREEMENT
AGREEMENT, made as of the 9th day of August, 1996, by and
between Sensormatic Electronics Corporation, a Delaware corporation with
offices at 951 Yamato Road, Boca Raton, Florida 33431 (hereinafter referred to
as the "Corporation"), and Ronald G. Assaf, residing at 21095 Hamlin Drive,
Boca Raton, Florida 33433 (hereinafter referred to as "Assaf").
W I T N E S S E T H:
WHEREAS, Assaf has served the Corporation for many years as an
officer and director, primarily and currently as its Chairman of the Board and
Chief Executive Officer, and during such years of service has developed
substantial knowledge of the Corporation's business operations and strategies;
and
WHEREAS, Assaf has tendered his resignation as Chief Executive
Officer and as an employee of the Corporation, effective August 12, 1996; and
WHEREAS, the Corporation wishes to assure itself of ready
access to Assaf's knowledge of the Corporation's business, including his
technical know-how, after such resignation, and to have the benefit of his
agreement not to compete with the Corporation during the term of this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
1. Retention and Term
Subject to the terms and conditions hereof, the Corporation
hereby agrees to retain Assaf, and Assaf hereby agrees to be retained by the
Corporation, to act as a consultant for the Corporation, for a term commencing
on August 12, 1996 (the "Effective Date") and ending on the fifth anniversary
of such date, or such earlier date as this Agreement may be terminated pursuant
to Section 4(a) hereof (the "Term").
2. Duties
During the Term, Assaf agrees to make himself available at the
executive offices of the Corporation in Palm Beach County, Florida to advise
and consult with, and assist, the Corporation with respect to matters specified
by the Chief Executive Officer or Board of Directors of the Corporation and
appropriate for a former Chief Executive Officer. Assaf shall perform such
services at such times as (i) are reasonably requested by the Chief Executive
<PAGE> 2
Officer or Board of Directors of the Corporation, (ii) are reasonably
acceptable to Assaf and (iii) are consistent with Assaf's duties and
obligations in the course of his then occupation or employment or other
business activities, if any. If requested by the Board of Directors of the
Corporation, Assaf shall also serve as a director and as a member of one or
more committees of the Board of Directors, as Chairman of the Corporation's
Board of Directors or chairman of any such committee, and in such other
positions as may reasonably be requested by the Board of Directors of the
Corporation.
3. Compensation
(a) As compensation for the services to be rendered by
Assaf hereunder during the Term, including services as a director and Chairman
of the Board and Assaf's other obligations under this Agreement, the
Corporation shall pay to Assaf during the Term $455,000 per annum, payable in
monthly installments, and shall furnish the additional consideration
contemplated by this Agreement.
(b) During the Term, Assaf shall continue to receive, at
the Corporation's expense, medical and dental coverage equivalent to that
currently afforded him, including the benefits currently provided under the
Corporation's Executive Medical Plan. During the Term, Assaf shall be entitled
to reimbursement for all normal and reasonable travel, entertainment and other
expenses necessarily incurred by him in the performance of his services for the
Corporation.
(c) With respect to the period following the Effective
Date, no further contributions shall be made by the Corporation (on behalf of
Assaf) or Assaf to the Corporation's SensorSave Plan, Employee Stock Ownership
Plan ("ESOP"), or any other savings or pension plans, and Assaf shall not be
entitled to make further payments (by payroll deductions or otherwise) toward
the purchase of the Corporation's Common Stock under the Corporation's Employee
Stock Purchase Plan, but Assaf shall have such rights with respect to his
participation and accounts in the Corporation's SensorSave Plan and ESOP,
regarding retention, distribution, rollover and otherwise, as are provided
under the terms of such plans, together with such rights to the Corporation's
common stock purchased for his account and any cash refunds to which he may be
entitled under the Employee Stock Purchase Plan.
(d) As of the date of this Agreement, Assaf holds (i)
fully vested, non-qualified options to purchase 59,500 shares of the
Corporation's Common Stock at an exercise price of $17.25 per share, granted
February 25, 1992, (ii) fully vested, non-qualified options to purchase
1,075,000 shares of the Corporation's Common Stock, at an exercise price of
$16.833 per share, granted August 6, 1992, (iii) non-qualified options to
purchase 75,000 shares of the Corporation's Common Stock at an exercise price
of $31.625 per share, granted April 18, 1994, which are scheduled to vest on
April 18, 1999 (or earlier, if the market price of the Common Stock appreciates
above $42.70 per share), (iv) non-qualified options to purchase 75,000 shares
of the Corporation's Common Stock at an exercise price of $31.1875 per share,
granted December 3, 1994 under the Corporation's Success Sharing Plan, which
are scheduled to vest on November 3, 2004 (or earlier, if the conditions for
early vesting set forth in such Success Sharing
-2-
<PAGE> 3
Plan are met), (v) non-qualified options to purchase 75,000 shares of the
Corporation's Common Stock at an exercise price of $28.50 per share, granted
February 3, 1995, which are scheduled to vest on February 3, 2000 (or earlier,
if such market price appreciates above $38.48 per share), (vi) non-qualified
options to purchase 100,00 shares of the Corporation's Common Stock at an
exercise price of $18.1875, granted February 2, 1996 and vesting as to
one-third of the shares covered hereby on each of the first, second and third
anniversary of the date of grant, and (vii) 23,300 shares of Restricted Stock
issued December 3, 1994 under the Corporation's Success Sharing Plan, which are
scheduled to vest on December 3, 2009 (or earlier, if the conditions for early
vesting of such shares under such Success Sharing Plan are met).
Notwithstanding the termination of Assaf's employment, the
options referred to in clauses (i) through (vi) above shall not terminate and
the shares of Restricted Stock referred to in clause (vii) shall not be
forfeited. Rather, such options shall continue in full force and effect for
the full terms of such options and in accordance with the respective terms and
conditions thereof (including those with respect to vesting), and Assaf shall
retain such shares of Restricted Stock subject to the vesting and other
conditions of the Restricted Stock Agreement relating thereto, as if Assaf
remained employed by the Corporation throughout the respective terms of such
options and the vesting period of such Restricted Stock; provided, however,
that if this Agreement is terminated pursuant to Section 4(a)(ii) hereof for
breach of Section 7 hereof, any of such options which are outstanding at the
effective date of termination shall thereupon automatically terminate, and any
then unvested shares of Restricted Stock shall thereupon automatically be
forfeited, without any further action by the Corporation.
(e) The final due date of Assaf's loans under the
Corporation's Stock Purchase Loan Plan, in the aggregate principal amount of
$1,364,250, shall be extended to August 12, 2001, subject upon the sale of any
option shares to repayment of the loan which was incurred with respect to such
option shares, in accordance with the terms of such Plan.
(f) Assaf shall continue to have use of the Mercedes
automobile that the Corporation currently owns and provides to him for his use.
The Corporation shall be responsible for maintaining required insurance on such
automobile and the repair and maintenance thereof. Assaf shall have the right
to purchase such vehicle at any time through the end of the Term for an amount
equal to its book value, as carried on the books of the Corporation at the time
of purchase.
(g) Assaf shall have the right to purchase, and the
Corporation shall assign to Assaf, any insurance policies maintained by the
Corporation on the life of Assaf then in effect (other than the policy or
policies maintained by the Corporation to fund the Corporation's obligations
under the Corporation's Salary Continuation Plan), for a price equal to the net
cash surrender value thereof.
(h) For the duration of any period during the Term in
which he is unable fully to perform his duties because of physical or mental
disability or incapacity, Assaf (or his personal representative) shall be
entitled to receive from the Corporation, in addition to any other benefits to
which he is entitled under Section 3 hereof, an amount equal to the amount
payable to
-3-
<PAGE> 4
him for such period pursuant to Section 3(a) hereof, less the aggregate amount
of all income disability benefits which for such period he may receive or to
which he may be entitled by reason of (i) any group health insurance plan which
is intended to function as a salary replacement plan, (ii) any applicable
compulsory state disability law, (iii) the Federal Social Security Act, (iv)
any applicable workmen's compensation law or similar law and (v) any plan
towards which the Corporation or any parent, subsidiary or affiliate of the
Corporation has contributed or for which it has made payroll deductions, such
as group accident or health policies, other than pension or retirement plans or
those which reimburse for actual medical expenses. In the event of Assaf's
death during the Term, the remaining obligations of the Corporation under
Section 3 hereof shall be payable to and/or inure to the benefit of his
beneficiaries, as specifically designated by Assaf in writing to the
Corporation, or if no such beneficiaries are designated, to his heirs or
estate.
(i) In the event that (i) the Corporation defaults in
making any payment contemplated by Section 3(a) hereof or affording any benefit
contemplated by Sections 3(b) through 3(h) hereof, which default remains
uncured for 30 days following notice thereof from Assaf to the Corporation, or
(ii) a Change in Control of the Corporation occurs, as such term is defined in
the Change in Control Agreement referred to in Section 8 hereof, all of the
remaining amounts payable under Section 3(a) hereof shall become immediately
due and payable. Such amounts shall be discounted to present value using an
interest rate equal to the rate published by the Pension Benefit Guaranty
Corporation for the purpose of discounting pension benefits to present value,
as in effect as of the date such amounts become due and payable hereunder, but
in no event greater than ten percent (10%) per annum. In the event that and for
so long as the Corporation is in default in any payments or benefits due under
this Section 3, Assaf shall not be bound by the provisions of Section 7 hereof.
4. Termination for Certain Causes
(a) This Agreement may be terminated by the Corporation,
by written notice to Assaf, in the event of (i) Assaf's unreasonable refusal to
perform any material consulting services contemplated by Section 2 hereof and
reasonably requested by the Corporation in writing, which unreasonable refusal
continues for 30 days after receipt by Assaf of notice from the Board of
Directors of the Corporation specifying the services unperformed to date, the
materiality thereof and the basis of the Board of Directors' view that Assaf's
refusal to perform the same is unreasonable, (ii) Assaf's violation of the
non-competition covenant set forth in Section 7 hereof of this Agreement which
violation remains uncured 30 days after receipt by Assaf of written notice from
the Corporation specifying such violation, (iii) the conviction of Assaf for a
felony under federal or state law relating to the assets, business or affairs
of the Corporation and for Assaf's personal benefit (but not including any such
conviction arising out of or relating to actions or omissions believed in good
faith by Assaf to be in or not opposed to the best interests of the
Corporation), or (iv) fraud against the Corporation or misappropriation of the
Corporation's assets, in each case for Assaf's personal benefit. Any
determination under this Section 4(a) or as to whether Assaf is in violation of
this Agreement for purposes of this Section 4(a) or otherwise shall be made by
the Board of Directors of the Corporation, and Assaf shall be entitled to a
hearing before the Board of Directors before any final determination is made,
-4-
<PAGE> 5
provided, that following a Change in Control, any such hearing shall be
conducted solely by, and any such determination shall be made solely by a
majority of, the Previous Members of the Board of Directors (as such term is
defined in the Change in Control Agreement) who are then in office with the
Corporation or its corporate successor.
(b) The Corporation shall have no further obligations
under Sections 3(a), 3(b), 3(f), 3(h) or 3(i) hereof with respect to any
periods following the effective date of termination of this Agreement pursuant
to Section 4(a) hereof. Termination of this Agreement shall not alter or impair
any obligations of the Corporation to Assaf accrued under this Agreement prior
to the date of termination, nor shall any amounts paid prior to the date of
termination be subject to any reduction or offset by reason thereof.
5. Disclosure and Assignment of Discoveries
Assaf shall (without any additional compensation) promptly
disclose in writing to the Board of Directors of the Corporation all ideas,
formulae, programs, systems, devices, processes, discoveries and inventions
(hereinafter referred to collectively as "discoveries") whether or not
patentable, which Assaf, while retained by the Corporation, conceives, makes,
develops or reduces to practice, whether alone or with others and whether
during or outside usual working hours, and which are directly related to
electronic article surveillance products and systems or other aspects of the
Corporation's business as to which Assaf has performed consulting services
under this Agreement and are used or usable by the Corporation in such aspects
of its business; and Assaf hereby transfers and assigns to the Corporation all
right, title and interest in and to said discoveries, including any and all
domestic and foreign patent rights therein and any renewals thereof. On request
of the Corporation, Assaf shall (without any additional compensation), from
time to time during or after the expiration or termination of the Term, execute
such further instruments (including, without limitation, applications for
letters patent and assignments thereof) and do all such other acts and things
as may be deemed necessary or desirable by the Corporation to protect and/or
enforce its rights in respect of said discoveries. All expenses of filing or
prosecuting any patent applications shall be borne by the Corporation, but
Assaf shall cooperate in filing and/or prosecuting any such applications.
6. Confidentiality
Assaf agrees that all patent rights, inventions, technical
information and know-how and trade secrets relating to the Corporation's
electronic article surveillance systems and any other products marketed by the
Corporation, any information relating thereto, and any other information
relating to the business or interests of the Corporation which he knows or
should know is regarded as confidential and valuable by the Corporation
(whether or not any of the foregoing information is actually novel or unique or
is actually known to others), and which is made available to Assaf by the
Corporation or acquired by Assaf from the Corporation, other than that which
legally and legitimately is or becomes of general public knowledge or passes
into the public domain from authorized sources other than Assaf, will be held
in confidence and will not be divulged (or caused or permitted to be divulged)
by Assaf, without the prior written consent of the Corporation, to any person
or entity, except to responsible officers and employees
-5-
<PAGE> 6
of the Corporation and other responsible persons who are in a contractual or
fiduciary relationship with the Corporation or who have a need for such
information for purposes in the interest of the Corporation, and except
pursuant to legal process or as otherwise required by law or any statute, rule
or regulation (provided that in such instance Assaf shall advise the
Corporation of such prospective disclosure in order to permit the Corporation
to take appropriate actions to object to such disclosure if it so desires).
Assaf further agrees that his obligations under Section 5 hereof and his
obligations of secrecy and confidentiality under this Section 6 shall survive
any termination of this Agreement unless specifically waived in writing by the
Corporation and, in the event of any such termination, Assaf shall never use or
market, nor disclose to others nor assist others in using or marketing, any of
the information or property rights of the Corporation referred to in Section 5
hereof or in this Section 6, other than that which legally and legitimately is
or becomes of general public knowledge or passes into the public domain from
authorized sources other than Assaf.
7. Non-Competition
Assaf shall not, directly or indirectly, anywhere in the
United States or elsewhere in the world,
(a) engage in the business of manufacturing, leasing,
selling, maintaining, or servicing, anywhere in the world,
anti-shoplifting, theft detection, inventory control, or surveillance
devices which are similar to or purport to accomplish results similar
to the Corporation's electronic article surveillance systems and other
products marketed by the Corporation, or
(b) render any services as an officer, director,
employee, partner, consultant or otherwise to, or have any interest as
a stockholder, partner, lender or other investor in, any person which
is so engaged;
during the Term and for a period of two (2) years from and after the date of
termination of this Agreement or for such lesser area or lesser period as may
be determined by a court of law or equity to be a reasonable limitation on the
competitive activity of Assaf, it being understood and agreed by the parties
hereto that this provision is reasonably necessary to protect the patent
rights, inventions, technical information and know-how, trademarks and the good
will and reputation of the Corporation. For the purpose of Sections 5 and 6
hereof and of this Section 7, the term "Corporation" shall include any and all
affiliates of the Corporation in existence from time to time. Notwithstanding
anything to the contrary contained in this Section 7, the provisions hereof
shall not prevent Assaf from purchasing or owning up to five percent (5%) of
the voting securities of any corporation or serving as a director of any major
corporation which is not primarily engaged in the business referred to in
clause (a) above.
-6-
<PAGE> 7
8. Amendment of Certain Agreements
(a) Effective as of the Effective Date, the Agreement
dated as of December 23, 1988 between Assaf and the Corporation (the "Change in
Control Agreement"), shall be amended as follows:
(i) Subject to the amendments contemplated by
this Section 8, the Change in Control Agreement shall remain in effect
throughout the Term, and, accordingly, the provisions of Sections 1(b)
and 1(c) thereof shall be without further force or effect.
(ii) In the event of a Change in Control, Assaf
shall be entitled to the benefits provided under Sections 6 (provided,
that for purposes of Section 6(e) thereof, Assaf's Special Bonus Base
shall be equal to four times his annual compensation under Section
3(a) of this Agreement), 7(a) and 8 of the Change in Control
Agreement. For purposes of such Sections and of Section 9 of the
Change in Control Agreement, "termination of Executive's employment"
shall mean termination of this Agreement in accordance with its terms,
and termination "for cause" shall mean termination of this Agreement
pursuant to Section 4(a) of this Agreement, in lieu of the provisions
of paragraphs (a) and (b) of such Section 9 relating to termination
for cause.
(iii) Because the obligations of Assaf and the
Corporation under this Agreement will continue throughout the Term,
irrespective of whether a Change in Control occurs (except that the
obligations of the Corporation under Section 3(a) hereof shall
accelerate as provided in Section 3(i) hereof), Assaf shall not be
entitled to any benefits under Sections 2, 3, 7(b), 7(c) of the Change
in Control Agreement, and Assaf shall not be subject to the provisions
of Sections 4, 7(d) or 7(e) of the Change in Control Agreement, all of
which provisions shall be without further force or effect.
The Change in Control Agreement may be amended by mutual agreement of Assaf and
the Corporation, and any such amendments shall be given effect for all purposes
of this Agreement.
(b) Effective as of the Effective Date, the Employment
Agreement dated September 24, 1993 between Assaf and the Corporation shall be
terminated and without further force or effect, provided that all obligations
accrued through the Effective Date under such Agreement and under all
compensation plans and arrangements of the Corporation shall survive such
termination.
9. Indemnification.
The Corporation agrees, as a separate contractual obligation,
to indemnify Assaf in the manner and to the extent provided with respect to an
Indemnitee under Article IX of the Corporation's By-Laws, the terms and
conditions of which are incorporated by reference herein.
-7-
<PAGE> 8
10. Injunctive Relief.
Because the Corporation would not have an adequate remedy at
law to protect its business from Assaf's competition or to protect its interest
in its trade secrets, privileged, proprietary or confidential information and
similar commercial assets, the Corporation shall be entitled to injunctive
relief, in addition to such other remedies and relief that would, in the event
of a breach of the provisions of Sections 5, 6 or 7 hereof, be available to the
Corporation.
11. Assignability.
Except insofar as this provision may be contrary to applicable
law, and except as provided for herein, neither this Agreement nor any benefits
under or interests in this Agreement shall be assignable or transferable or be
subject to attachment, execution or similar process, and no assignment, pledge,
collateralization, attachment, execution or other encumbrance or disposition of
or on this Agreement or any benefits under or interests in this Agreement shall
be valid or recognized by the Corporation. Upon the sale of all or
substantially all of the assets, business and goodwill of the Corporation to
another corporation or other entity, or upon the merger or consolidation of the
Corporation with another corporation or other entity, this Agreement shall
inure to the benefit of, and be binding upon, both Assaf and the corporation or
other entity purchasing such assets, business and goodwill, or surviving such
merger or consolidation, as the case may be, in the same manner and to the same
extent as though such other corporation or other entity were the Corporation.
12. Governing Law
This Agreement is made and executed and shall be governed by
the laws of the State of Florida, without giving effect to choice of law
principles.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SENSORMATIC ELECTRONICS
CORPORATION
By: /s/ Robert A. Vanourek /s/ Ronald G. Assaf
------------------------------ ---------------------------
Print Name: Robert A. Vanourek RONALD G. ASSAF
-----------------------
Title: President, COO
----------------------------
-8-
<PAGE> 1
EXHIBIT 10(U)
AGREEMENT
AGREEMENT, dated as of February 12, 1996, by and between SENSORMATIC
ELECTRONICS CORPORATION, a Delaware corporation ("Sensormatic"),
and____________ ______________* ("Director").
W I T N E S S E T H:
WHEREAS, Director is a member of the Board of Directors of Sensormatic
(the "Board of Directors"), and has made, and is expected to continue to make,
a significant contribution to the direction of Sensormatic's business and
affairs and the formulation of its policies;
WHEREAS, the Board of Directors of Sensormatic recognizes that, as is the
case with many publicly-held corporations, the possibility of a Change in
Control (as defined below) exists and that such possibility, and the
uncertainties which it may raise, may result in the distraction of directors to
the detriment of Sensormatic and its stockholders, particularly at a time when
Sensormatic is making significant efforts to expand its product lines and
markets;
WHEREAS, the Board of Directors of Sensormatic believes that the
protection of certain rights of Director, in the event of a Change in Control,
will help assure Director's continuing dedication to his duties to Sensormatic,
notwithstanding the possibility of a Change in Control, and, moreover, will
enable Director to objectively and impartially assess, and advise the Board of
Directors with respect to, any proposal received by Sensormatic regarding a
Change in Control and to take such action regarding any such proposal as the
Board of Directors may deem to be appropriate;
------------------------------
Entered into by Sensormatic Electronics Corporation with each of Messrs.
Thomas V. Buffett, Timothy P. Hartman and John T. Ray, Jr.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the parties hereto agree as follows:
0. Term.
( ) The term of this Agreement shall commence on the date hereof (which
for all purposes of this Agreement shall mean the date first above written) and
shall continue after a Change in Control so long as Sensormatic has or may have
any obligations under Sections 3, 5 or 7 hereof.
(a) Notwithstanding the provisions of Section l(a) hereof, Sensormatic
shall have the right to terminate this Agreement, effective on any anniversary
of the date of this Agreement, provided that no Change in Control shall have
occurred and no Attempted Change in Control (as defined below) shall have
occurred and then be pending. In the event that any Attempted Change in
Control is not followed by a Change in Control and is no longer pending,
Sensormatic shall again be entitled to terminate this Agreement as provided in
the first sentence of this Section l(b). Sensormatic may effect a termination
of this Agreement hereunder solely by notifying Director thereof at least 30
days prior to the relevant anniversary date hereof.
-2-
<PAGE> 3
(b) Notwithstanding the provisions of Sections 1(a) and 1(b) hereof, this
Agreement shall terminate automatically in the event that, prior to the
occurrence of a Change in Control and so long as no Attempted Change in Control
shall have occurred and then be pending, Director resigns or is removed from
his directorship with Sensormatic or the term of such office expires without
his being reelected thereto.
1. Change in Control.
( ) For purposes of this Agreement, the term "Change in Control" shall
mean a change in control of Sensormatic of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), provided,
that, without limitation, such a change in control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
Sensormatic representing 30% or more of the combined voting power of
Sensormatic's then outstanding voting securities or (ii) during any period of
24 consecutive months, individuals (y) who at the beginning of such period
constitute the Board of Directors of Sensormatic or (z) whose election,
appointment or nomination for election was approved prior to such election or
appointment by a vote of at least two-thirds of the directors in office
immediately prior to such election or appointment who were directors at the
beginning of such two-year period (other than any directors who prior to the
Change in Control were associated or affiliated with any person involved with
any Change in Control or Attempted Change in Control), cease for any reason to
constitute at least three-fourths of the Board of Directors of Sensormatic.
(a) For purposes of this Agreement, an "Attempted Change in Control" shall
be deemed to have occurred (i) if any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) files (or fails to file
-3-
<PAGE> 4
when required to do so) with the Securities and Exchange Commission (the "SEC")
a Statement on Schedule 13D relating to voting securities of Sensormatic (A)
disclosing the acquisition of 10% or more thereof or (B) while disclosing the
acquisition of less than 10% of such voting securities, indicates an intention
to effect any of the transactions listed in Item 4 of Schedule 13D or otherwise
to effect a Change in Control, (ii) upon the public announcement (including,
without limitation, the filing with the SEC of a Statement on Schedule 14D-1) by
any person (as defined above) of an intention to make a tender offer or
otherwise to effect a Change in Control, (iii) in the event of any solicitation
of proxies for the election of directors of Sensormatic pursuant to Rule 14a-11
of the Rules and Regulations under the Exchange Act or the filing of a Statement
on Schedule 14B in anticipation thereof or (iv) the receipt by Sensormatic from
any person (as defined above) of any other communication proposing, or
indicating an intention, to effect a Change in Control by the acquisition of
voting securities of Sensormatic, the solicitation of proxies for the election
of directors or otherwise. The termination of the pendency of an Attempted
Change in Control shall be determined by the Board of Directors of Sensormatic
(or a disinterested committee thereof).
(b) For the purposes of this Section 2, references to provisions of the
Exchange Act and rules, regulations and schedules thereunder shall be to such
provisions as they are in effect and interpreted as of the date hereof.
2. Benefits Resulting From a Change in Control.
In the event a Change in Control occurs, Director shall be entitled to the
following benefits:
( ) All stock options issued by Sensormatic to Director, whether or not
then exercisable, shall remain fully exercisable or shall become fully
exercisable immediately (or, notwithstanding the foregoing, in the event of an
-4-
<PAGE> 5
Attempted Change in Control involving a proposed merger, such options shall
become fully exercisable thirty days before the date of such merger), and such
options shall remain outstanding and fully exercisable for the stated term
thereof or, if earlier, until the end of nine months following the resignation
or removal of Director from his directorship with Sensormatic or the expiration
of the term of such office without his being re-elected thereto.
(a) In the event that (i) such Change in Control is effected through (A) a
tender or exchange offer (a "Tender Offer") or (B) any means, in one or more
transactions; with the result in either case that any person (as defined above)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Sensormatic representing 50% or
more of the combined voting power of Sensormatic's then outstanding voting
securities (any such Change in Control referred to in this clause (i),
including pursuant to a Tender Offer, being hereinafter referred to as a
"Majority Acquisition"), (ii) as a result of or within 24 months immediately
following a Change in Control, Sensormatic's Board of Directors shall have
approved a merger, consolidation, reclassification, reorganization or similar
event (a "Reorganization Event") as a result of which Sensormatic's Common Stock
shall cease to be outstanding or (iii) as a result of or within 24 months
immediately following a Change in Control, Sensormatic's Common Stock ceases to
be listed for trading on a national securities exchange or quoted through NASDAQ
or a comparable securities quotation system, Director shall have the right,
exercisable by written notice given at any time during the 13-month period
immediately following the date of such Change in Control (and, if later, the
date of any such Majority Acquisition, Reorganization Event or cessation of
listing or quotation), to require Sensormatic to purchase all stock options
issued by Sensormatic to Director, whether or not then exercisable, and/or any
shares of Sensormatic Common Stock held by Director on or immediately prior to
the date of such Change in Control or
-5-
<PAGE> 6
issued pursuant to the exercise of any such stock options following the date of
such Change in Control. In such event, Sensormatic shall pay to Director, (x)
within 10 days after Director's surrender of any such options, an amount equal
to the excess of the aggregate Fair Market Value (as defined below) of the
shares of Sensormatic Common Stock subject to such stock options over the
aggregate exercise price of such stock options and/or (y) within 10 days after
Director's surrender of the certificates representing any such shares of Common
Stock (or, if such certificates are in Sensormatic's possession, within 10 days
following Director's notice of exercise under this Section 3(b)), an amount
equal to the aggregate Fair Market Value of such shares, provided, that
Sensormatic may offset against the amount so payable for Common Stock all
amounts outstanding on any loans made to Director for the purchase of such
shares of Common Stock, as contemplated by Section 3(c) hereof or otherwise.
For purposes of this Section 3(b), the Fair Market Value of a share of
Sensormatic Common Stock means the highest fair market value per share of
Sensormatic Common Stock of the consideration paid in any transaction by any
person (as defined above) who effects such Change in Control, in connection
therewith, whether through open market purchases, Tender Offers, Reorganization
Events, private transactions or otherwise.
(b) Upon Director's request, Sensormatic shall lend to Director, interest
free, all amounts which are necessary to enable Director to exercise the
options referred to in Section 3(a) hereof, should Director elect to do so.
Such loan or loans shall be due and payable to Sensormatic upon the earliest of
(i) the fifth anniversary date of such loan, (ii) in the event of the
resignation or removal, other than for cause (as defined in Section 4 hereof),
of Director from his directorship with Sensormatic or the expiration of the
term of such office without his being re-elected thereto, upon the expiration
of 30 months following such resignation, removal or expiration, or in the event
of the removal of Director from his directorship with Sensormatic
-6-
<PAGE> 7
for cause, upon the expiration of 30 days after such removal, and (iii) promptly
(but in any event within five (5) business days) after receipt of the proceeds
of sale from the sale of such shares. Director shall deposit such shares with
Sensormatic as security for such loan, if Sensormatic shall so request.
Notwithstanding anything to the contrary contained in this Section 3(c),
Sensormatic's Stock Purchase Loan Plan or any promissory note or security
agreement executed by Director pursuant to such Plan, no additional collateral
shall be required by Sensormatic in connection with any such loan to Director,
and, if necessary to be in compliance with applicable margin regulations under
federal laws, such loans shall be unsecured; and if, because of Internal Revenue
Service or other rules, Sensormatic is unable to lend such funds to Director
interest free and without any imputation of interest, Sensormatic shall pay
Director a dollar amount of additional compensation which shall equal the amount
of interest required to be charged in order to avoid such imputation in such
instances and Director shall then pay Sensormatic the rate of interest on such
loan required by law to avoid imputation.
(c) In the event of the removal, other than for cause, or resignation of
Director from his directorship with Sensormatic or the expiration of the term
of such office without his being re-elected thereto, or the death of Director,
at any time following a Change in Control (unless a trust or other arrangement
previously determined in writing to be satisfactory by a majority of the
Previous Members of the Board of Directors then in office assuring payment of
benefits, in the event of a Change in Control, to or for the benefit of
Director under Sensormatic's Board of Directors Retirement Plan (which shall
include for all purposes of this Agreement Director's Board of Directors
Retirement Agreement thereunder) has been previously established and is then in
effect), Sensormatic shall take such steps as are necessary, within 30 days
after such termination of service as a director, to fully fund all of
-7-
<PAGE> 8
Director's benefits under such Plan through paid-up insurance, annuity contracts
and/or other similar means, so that the ultimate payment of benefits (at a rate
not less than the greater of the rates in effect under such Plan at the date of
such termination or immediately prior to such Change in Control) shall be
assured beyond any reasonable doubt. In addition, in any such event, any
noncompetition provisions included in such Plan shall have no force or effect.
3. Removal for Cause. In the event that Director is removed for cause at
any time after a Change in Control, Director shall not be entitled to any of
the benefits set forth in Section 3 of this Agreement not yet received by him,
except to the extent that Director exercised rights prior to such removal with
respect to options as provided under Sections 3(a) and 3(b) hereof. The
foregoing shall not affect any rights of Director accrued other than by virtue
of this Agreement. For purposes of this Agreement, Director shall be deemed to
have been removed for cause only if such removal is effected for any of the
following reasons:
( ) gross neglect or willful misconduct by Director in the performance of
Director's duties or obligations to Sensormatic; or
(a) the conviction of Director for a felony involving moral turpitude
under federal or state law;
provided, however, that the determination of the existence of the grounds
referred to in subparagraph (a) of this Section 4 shall be made, in good faith,
solely by a majority of the members of Sensormatic's (or its corporate
successor's) Board of Directors who were members of Sensormatic's Board of
Directors for a period of at least two years immediately prior to the Change in
Control (other than directors who prior to such Change in Control were
appointed or elected as directors as a consequence of their association or
affiliation with any person (as defined above) effecting such Change in
Control) ("Previous Members of the Board of Directors") who are then in office
-8-
<PAGE> 9
with Sensormatic or its corporate successor, provided that such majority shall
consist of not less than two persons.
4. Costs of Collection. Sensormatic agrees upon demand to pay all costs
and expenses of Director (including, without limitation, reasonable counsel fees
and expenses) in connection with the enforcement, whether through negotiations,
arbitration or legal proceedings or otherwise, of this Agreement and the
collection of any benefits due to Director hereunder.
5. Conflicts with Other Agreements. Nothing contained in or arising out
of this Agreement shall be deemed to discharge, release or modify the
obligations of Sensormatic to Director under the provisions of any other
agreement between them or of any plan or program of Sensormatic, regardless of
whether the subject matter of any provision thereof is the same or similar to
that of any provision of this Agreement, the rights and remedies of Director
under this Agreement and any other such agreement, plan or program being
cumulative and not in substitution of each other; provided, however, that
nothing in this Agreement shall entitle Director to receive duplicative
payments of salary or other benefits. Further, nothing in this Agreement shall
diminish or otherwise adversely affect Director's rights or benefits accruing
as a consequence of his death or permanent and total disability, at any time
after a Change in Control, under the terms and conditions of the plans or
programs of Sensormatic in which Director is a participant immediately prior to
any Change in Control and any additional plan or program of Sensormatic in
which Director is a participant at the time of Director's death or permanent
and total disability.
6. Maintenance of Plans. Sensormatic agrees that, for not less than 36
months after a Change in Control, it shall maintain in effect the plans and
programs in which Director is a participant immediately prior to such Change in
Control (or comparable plans and programs) to the extent necessary to assure
that the rights and benefits of Director thereunder shall
-9-
<PAGE> 10
be no less favorable after such Change in Control than immediately prior
thereto, provided, that Sensormatic shall in no event make any change in the
event of or at any time after a Change in Control in the Board of Directors
Retirement Plan resulting in a reduction of Director's benefits thereunder.
7. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration before the American Arbitration
Association in Miami, Florida, in accordance with its Rules. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Any costs, including, without limitation, attorneys' fees
and disbursements, incurred by the prevailing party in such arbitration or in
connection with any appeal therefrom or any action brought to enforce or collect
any such award or judgment thereon, shall be reimbursed by the losing party.
8. Survival. This Agreement (including, without limitation, the benefits
provided under Section 3 hereof) shall be binding on, enforceable against and
inure to the benefit of, Director and his heirs, executors, administrators,
personal representatives, successors and assigns and Sensormatic and its
successors and assigns, including, without limitation, any corporation with or
into which Sensormatic is merged or consolidated, or any entity which acquires
all or substantially all of the business and assets of Sensormatic, in
connection with any Change in Control.
9. Severability. If any provision of this Agreement is held to be invalid
or unenforceable by a court of competent jurisdiction, this Agreement shall be
interpreted and enforceable as if such provision were severed or limited, but
only to the extent necessary to render such provision and this Agreement
enforceable.
10. Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Florida
-10-
<PAGE> 11
applicable to agreements made and fully to be performed in such state, without
giving effect to conflicts of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
SENSORMATIC ELECTRONICS CORPORATION
By:
------------------------------------
Robert A. Vanourek
President
---------------------------------------
[NAME OF DIRECTOR]
-11-
<PAGE> 1
EXHIBIT 10(V)
NATIONAL UNION
[SEAL] FIRE INSURANCE COMPANY
OF PITTSBURGH, PA. POLICY NUMBER:
444-19-67
A CAPITAL STOCK COMPANY
RENEWAL OF:
ADMINISTRATIVE OFFICES: 444-30-94
70 PINE STREET, NEW YORK, N.Y. 10270-0150
DIRECTORS AND OFFICERS INSURANCE AND COMPANY REIMBURSEMENT POLICY
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE
COVERAGE OF THIS POLICY IS LIMITED GENERALLY TO LIABILITY FOR ONLY THOSE CLAIMS
THAT ARE FIRST MADE AGAINST THE INSUREDS AND REPORTED TO THE INSURER DURING THE
POLICY PERIOD. PLEASE READ THE POLICY CAREFULLY AND DISCUSS THE COVERAGE
THEREUNDER WITH YOUR INSURANCE AGENT OR BROKER.
NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL
BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL
DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND; HOWEVER, THE INSURER
MAY, AND IN CERTAIN CIRCUMSTANCES MUST, ADVANCE DEFENSE COSTS PAYMENTS PRIOR TO
THE FINAL DISPOSITION OF A CLAIM.
DECLARATIONS
ITEM 1. NAMED CORPORATION: SENSORMATIC ELECTRONICS CORP.
MAILING ADDRESS: 500 NW 12TH AVE
DEERFIELD BEACH, FL 33442
STATE OF INCORPORATION OF THE NAMED CORPORATION:
Delaware
ITEM 2. SUBSIDIARY COVERAGE: any past, present or future Subsidiary of the
Named Corporation
ITEM 3. POLICY PERIOD: From December 15, 1994 to December 15, 1995 (12:01
A.M. Standard Time at the address stated in Item 1)
ITEM 4. LIMIT OF LIABILITY: $10,000,000 aggregate for Coverages A and B
combined (including Defense Costs)
ITEM 5. RETENTION:
Company Reimbursement and Indemnifiable Loss: $500,000 for Loss
arising from claims alleging the same Wrongful Act or related
Wrongful Acts.
ITEM 6. PREMIUM: $225,000
JAYME PAYNE JAN 11, 1995
-----------------------------------------------
SEDGWICK JAMES OF PENNSYLVANIA Authorized Representative
600 GRANT STREET, STE. #5300
USX TOWER
PITTSBURGH, PA 15219 ------------------ ------------------
131447 COUNTERSIGNATURE COUNTERSIGNED
DATE AT
<PAGE> 2
ENDORSEMENT #23
This endorsement, effective 12:01 am, December 15, 1995 forms a part of policy
number 444-19-67 issued to SENSORMATIC ELECTRONICS CORP. by National Union Fire
Insurance Company of Pittsburgh, PA.
In consideration of the additional premium of $370,800, it is hereby understood
and agreed that Item 3 of the Policy Declarations Policy Period is amended to
read as follows:
From: December 15, 1994 To: December 15, 1996
It is further understood and agreed that for purposes of determining the policy
herein, the annual aggregate Limit of Liability is amended to be inclusive of
and apply to the following:
From: December 15, 1994 To: December 15, 1996
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
JAYME PAYNE
-------------------------
Authorized Representative
<PAGE> 3
(Logo)
EXECUTIVE RISK INDEMNITY INC.
Administrative Offices
82 Hopmeadow Street
Simsbury, CT 06070 RECEIVED
COMMERCIAL
MAY 29, 1996
EXCESS INDEMNITY POLICY MARSH & MCLENNAN
DECLARATIONS Coral Gables, FL
Renewal of: Policy No. 752-030205-95
THIS IS A CLAIMS-MADE EXCESS POLICY WHICH APPLIES ONLY TO ANY CLAIM FIRST MADE
AGAINST THE INSURED DURING THE POLICY PERIOD. THE LIMITS OF LIABILITY
AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED BY PAYMENT OF DEFENSE
EXPENSES.
ITEM 1. Insured: Sensormatic Electronics Corporation
Address: 500 951 Yamato Road
Boca Raton, FL 33431
ITEM 2. Policy Period: (a) Inception Date: December 15, 1995
(b) Expiration Date: December 15, 1996
at 12:01 a.m. Standard Time at the address stated
in ITEM 1.
ITEM 3. Limits of Liability (inclusive of Defense Expenses): 10,000,000.00
ITEM 4. Schedule of Underlying Insurance:
<TABLE>
<CAPTION>
Insurer Policy No. Limits Retention
------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Primary National Union Fire 444-19-67 $10,000,000.00 $0.00 / $0.00 /
Policy Insurance Company $500,000.00
of Pittsburgh, Pa.
First
Excess
Second
Excess
</TABLE>
ITEM 5. Premium: $250,000.00
These Declarations and the policy, with endorsements, shall constitute the
contract between the Insured and the Company.
D21160 D21161 D21368 D22272
By: /s/
------------------------------------
Authorized Company Representative
<PAGE> 4
(Logo) RELIANCE NDA 0106919-95
--------------
POLICY NUMBER
<TABLE>
<S> <C>
1 RELIANCE INSURANCE COMPANY
Philadelphia, Pennsylvania
1 Coverage is provided in the Company designated by Number.
Each is a stock insurance company, herein called the Underwriters. 2 RELIANCE NATIONAL INDEMNITY COMPANY
Madison, Wisconsin
6 UNITED PACIFIC INSURANCE COMPANY
Philadelphia, Pennsylvania
9 RELIANCE NATIONAL INSURANCE COMPANY
Wilmington, Delaware
NOTICE: THIS IS A CLAIMS MADE POLICY. EXCEPT AS MAY BE OTHERWISE PROVIDED HEREIN, THE COVERAGE OF THIS POLICY IS LIMITED TO
LIABILITY FOR ACTS COVERED BY UNDERLYING INSURANCE (ITEM D.) FOR WHICH CLAIMS ARE FIRST MADE AGAINST THE INSURED(S) WHILE THE POLICY
IS IN FORCE. THIS POLICY DOES NOT PROVIDE FOR THE UNDERWRITERS TO DEFEND THE INSURED AND ANY DEFENSE COSTS AND OTHER CLAIM EXPENSE
COVERED UNDER THE POLICY ARE PART OF AND NOT IN ADDITION TO THE LIMIT OF LIABILITY. PLEASE READ AND REVIEW THE POLICY CAREFULLY.
DECLARATIONS
ITEM A. Name of Insured: (hereinafter called the "Insured")
SENSORMATIC ELECTRONICS CORPORATION
Address of Insured: 951 Yamato Road
Boca Raton, Florida 33431
ITEM B. Policy Period: from 12:01 a.m. on December 15, 1995 To 12:01 a.m. on December 15, 1996
(Standard Time at the address stated in Item A)
ITEM C. Limit of Liability $10,000,000 Aggregate each Policy Year, including claim expense.
ITEM D. SCHEDULE OF UNDERLYING INSURANCE:
(1) Primary Policy:
Company: National Union Fire Insurance Company
Policy Number: 444-19-67
Limit of Liability: $10,000,000
(2) Underlying Excess Policy(ies): See Endorsement No. 1
ITEM E. ENDORSEMENTS EFFECTIVE AT INCEPTION: R012, R035, R013, R016, ENDT 5, ENDT 6, ENDT 7, ENDT 8
ITEM F. TERMINATION OF PRIOR POLICY(IES): NDA 0106919-94
ITEM G. DISCOVERY CLAUSE:
(1) Additional Premium: $129,600
(2) Additional Period: One year
ITEM H. POLICY PERIOD PREMIUM: $172,800
/s/
- ------------------------------------------ June 4, 1996
Authorized Representative ---------------
Date
</TABLE>
<PAGE> 5
- --------------------------------------------------------------------------------
[LOGO] Chubb Group of Insurance Companies
CHUBB
DECLARATIONS
15 Mountain View Road, DIRECTORS AND OFFICERS LIABILITY
Warren, New Jersey 07060 AND REIMBURSEMENT EXCESS POLICY
- --------------------------------------------------------------------------------
Item 1. Parent Corporation: Policy Number 8142-09-26-A
SENSORMATIC ELECTRONICS CORPORATION
Item 2. Principal Address: FEDERAL INSURANCE COMPANY
951 Yamato Road Incorporated under the laws of
Boca Raton, FL 33431-0700 New Jersey, a stock insurance
company herein called the
Company
================================================================================
Item 3. Limit of Liability:
Each Policy Year $ 10,000,000.
Item 4. Underlying Policy(ies):
(A) Primary Policy: See Endorsement #1
(B) Other Policy(ies) See Endorsement #1
Item 5. Policy Period: From 12:01 A.M. December 15, 1995
To 12:01 A.M. December 15, 1996
Item 6. Endorsement(s) Effective At Inception: 1 through 5
Item 7. Termination of Prior Policy(ies) 8142-09-26
IN WITNESS WHEREOF, the Company issuing this policy has caused this policy
to be signed by its Authorized Officers, but it shall not be valid unless
also signed by a duly authorized representative of the Company.
FEDERAL INSURANCE COMPANY
Henry G. Gemlick Danny R. O'Hare
---------------------- ---------------------
Secretary President
/s/ Mark S. Lamendola
-----------------------------
Authorized Representative
Mark S. Lamendola
-----------------------------
Date
12/26/95 nr
Page 1 of 4
<PAGE> 6
[LOGO ZURICH-AMERICAN INSURANCE GROUP] DIRECTORS AND OFFICERS LIABILITY
AND REIMBURSEMENT EXCESS POLICY
- -------------------------------------------------------------------------------
DECLARATIONS
- -------------------------------------------------------------------------------
Insurance is provided by the following company:
ZURICH INSURANCE COMPANY
Policy Number:DOC 3649549 00
Item 1. PARENT COMPANY AND ADDRESS: Sensormatic Electronics Corporation
951 N.W. 31st Street
Boca Raton, FL 334310700
Item 2. Limit of Liability: 10,000,000
Note that the Limit of Liability is reduced or exhausted by Defense
Costs.
Item 3. UNDERLYING INSURANCE:
(A) PRIMARY POLICY:
Insurer: NATIONAL UNION
Policy Number: 4441967
Limit of Liability: 10,000,000
(B) Other Policy(ies):
Insurer: See Attached Schedule of Other Policy(ies)
Underlying Insurance.
Policy Number:
Limit of Liability:
Item 4. POLICY PERIOD: From 12:01 A.M. on February 27, 1996
To 12:01 A.M. on December 15, 1996
Local time at the address shown in Item 1
Item 5. Endorsement(s) Effective at Inception: See Endorsement numbers 1 - 3 as
attached.
THIS POLICY IS WRITTEN ON A CLAIMS MADE BASIS. THIS POLICY COVERS ONLY CLAIMS
FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD. PLEASE READ CAREFULLY.
In witness whereof, the Underwriter issuing this policy has caused this policy
to be signed by its authorized officers, but it shall not be valid unless also
signed by the duly authorized representative of the Underwriter.
ZURICH INSURANCE COMPANY
/s/
- -------------------------------- W.A. Bolinder
Authorized Representative U.S. Manager Corporate Secretary
5/28/96
- --------------------------------
Date
Page 1 of 1
<PAGE> 1
EXHIBIT 10W
$220,000,000 U.S. Dollar Loans
$100,000,000 Foreign Currency Loans
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
December 12, 1995
among
SENSORMATIC ELECTRONICS CORPORATION,
SENSORMATIC DISTRIBUTION INC.,
and
SENSORMATIC INTERNATIONAL, INC.
As Borrower
and
The Other Borrowers Listed Herein
and
The Domestic Banks and Foreign Currency Banks Listed Herein
and
WACHOVIA BANK OF GEORGIA, N.A.,
As Domestic Agent
and
ABN AMRO BANK N.V. and
ABN AMRO FOREIGN CREDIT & AGENCY SERVICES
As Foreign Currency Agent
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 1.03. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 1.04. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 1.05. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE II
THE DOMESTIC CREDITS . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.02. Method of Borrowing Syndicated Dollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.03. Money Market Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.04. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.05. Maturity of Dollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.06. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.07. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.08. Optional Termination or Reduction of Dollar Loan Commitments . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.09. Other Terminations of Dollar Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.11. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.13. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE III
THE FOREIGN CREDITS . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.02. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.03. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.04. Maturity of Foreign Currency Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.05. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 3.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.07. Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.08. Other Terminations of Syndicated Foreign Currency Loan Commitments . . . . . . . . . . . . . . . . . . 47
SECTION 3.09. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.10. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.11. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.12. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE IV
CONDITIONS TO BORROWINGS . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.01. Conditions to First Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.02. Conditions to All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.05. No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.07. Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.09. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.10. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 5.11. Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.12. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.13. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.15. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.16. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.17. Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.02. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.03. Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.04. Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.05. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.06. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.07. Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.08. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.09. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.10. Environmental Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.12. Environmental Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.14. Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.15. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.16. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.17. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.18. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
SECTION 6.19. Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VII
DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE VIII
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.01. Appointment; Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.02. Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 8.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 8.04. Rights of Agents as Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 8.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 8.06. Payee of Note Treated as Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.07. Nonreliance on Agents and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.08. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.09. Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE IX
CHANGE IN CIRCUMSTANCES; COMPENSATION . . . . . . . . . . . . . . . . . . 77
SECTION 9.01. Basis for Determining Interest Rate Inadequate or or Unfair . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 9.04. Base Rate Loans or Other Fixed Rate Loans Substituted for Affected Fixed Rate Loans . . . . . . . . . . 81
SECTION 9.05. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.06. Failure to Pay in Foreign Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.07. Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.03. Expenses; Documentary Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10.05 Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.06. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10.07. No Margin Stock Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.09. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.10. Representation by Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.11. Obligations Several . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.12. New York Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.14. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.15. Waiver of Jury Trial; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
</TABLE>
EXHIBIT A-1 Form of Syndicated Dollar Loan Note
EXHIBIT A-2 Form of Money Market Dollar Loan Note
EXHIBIT B-1 Form of Foreign Currency Loan Note
EXHIBIT B-2 Form of ITL Loan Note
EXHIBIT C Form of Opinion of Counsel for Parent, SDI and SSI
EXHIBIT D Form of Opinion of Special Counsel for the Agent
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F Form of Notice of Syndicated Dollar Borrowing
<PAGE> 7
EXHIBIT G-1 Form of Notice of Syndicated Foreign Currency
Borrowing
EXHIBIT G-2 Form of Notice of ITL Borrowing
EXHIBIT H Form of Compliance Certificate
EXHIBIT I Form of Closing Certificate
EXHIBIT J Form of Money Market Quote Request
EXHIBIT K Form of Money Market Quote
EXHIBIT L Form of Parent Guaranty
EXHIBIT M Form of Subordination Provisions
Schedule 6.03 Material Subsidiaries
Schedule 6.16 Liens
<PAGE> 8
CREDIT AGREEMENT
AGREEMENT dated as of December 12, 1995 among SENSORMATIC
ELECTRONICS CORPORATION, SENSORMATIC DISTRIBUTION, INC., SENSORMATIC
INTERNATIONAL, INC., the other BORROWERS listed on the signature pages hereof,
the DOMESTIC BANKS AND FOREIGN CURRENCY BANKS listed on the signature pages
hereof, WACHOVIA BANK OF GEORGIA, N.A., as Domestic Agent and ABN AMRO BANK
N.V. and ABN AMRO FOREIGN CREDIT & AGENCY SERVICES, as Foreign
Currency Agent.
The Borrowers, the Agents and certain of the Banks were
parties to a Credit Agreement dated as of August 26, 1994, as amended by
amendments dated December 16, 1994 and September 7, 1995 (as so amended, the
"Original Credit Agreement"). The Borrowers have requested that the amounts
available for borrowing be increased, and the Banks are agreeable to so
increase the amounts available for borrowing, subject to certain changes and
terms and conditions, as set forth herein. This Amended and Restated Credit
Agreement amends and restates in its entirety the Original Credit Agreement,
and upon execution and delivery of this Amended and Restated Credit Agreement
and the satisfaction of the conditions set forth in Section 4.01, the Original
Credit Agreement will be superseded hereby.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment hereto
(except as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein:
"ABN AMRO" means ABN AMRO Bank N.V., a banking corporation
organized under the laws of The Netherlands, in its capacity as a Foreign
Currency Bank with respect to the ITL Loans and the ITL Loan Commitment, and
its successors and assigns in such capacity.
"ATS" means Austrian schillings.
"Adjusted Aggregate Unused Dollar Loan Commitment" means at
any date, an amount equal to the sum of the Unused Dollar Loan Commitments of
all Banks less the aggregate outstanding principal amount of all Money Market
Loans by all Banks.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.06(c).
<PAGE> 9
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person"), (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person, or (iii)
any Person (other than a Subsidiary) of which the Borrower owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests. As
used herein, the term "control" means possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agency Office" refers to the office of FC&AS, acting on
behalf of the Foreign Currency Agent, from which various Syndicated Foreign
Currency Loans will be administered pursuant to this Agreement, and means the
office of FC&AS located at Foppingadreef 22, 102 BS Amsterdam, The Netherlands,
Attention: Peter von Lierop, Global Clients Agency Department, AA 4130,
Telecopier number 011-31-20-628-7968, confirmation number 011-31-20-628-4657,
or such other location in Amsterdam as may be specified by the Foreign Currency
Agent in a notice to the other parties hereto pursuant to Section 10.01:
"Agent" or "Agents" means, individually or collectively, as
the context shall require, the Domestic Agent or the Foreign Currency Agent.
"Agents' Letter Agreement" means that certain letter
agreement, dated October 23, 1995, between the Parent and the Agents relating
to the structure of the Loans, and certain fees from time to time payable by
the Borrowers to the Agents, together with all amendments and modifications
thereto.
"Agreement" means this Amended and Restated Credit Agreement,
together with all amendments and supplements hereto.
"Applicable Margin" has the meaning set forth in (i) Section
2.06(a), with respect to Dollar Loans and (ii) Section 3.05(a), with respect to
Foreign Currency Loans.
"Assignee" has the meaning set forth in Section 10.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 10.08(c) in the form attached hereto as
Exhibit E.
"Authority" has the meaning set forth in Section 9.02.
"BFR" means Belgian francs.
"Bank" means a Domestic Bank or Foreign Currency Bank, or
both, as the context shall require.
2
<PAGE> 10
"Base Rate" means for any Base Rate Loan for any day, the rate
per annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.
"Base Rate Loan" means a Dollar Loan to be made as a Base Rate
Loan pursuant to the applicable Notice of Borrowing, Section 2.02(f), or
Article IX, as applicable.
"Borrower" or "Borrowers" means, individually and
collectively, as the context shall require: (i) with respect to Dollar Loans,
Parent, SDI, or SII; (ii) with respect to any Foreign Currency Loans, Parent or
SDI; and (iii) with respect to Foreign Currency Loans in specific Foreign
Currencies, the other Borrowers listed on the signature pages hereto, but only
as to (A)the Foreign Currency of the jurisdiction in which such other Borrower
is incorporated, as set forth opposite such other Borrower's name on such
signature pages, and their respective successors and permitted assigns, and (B)
Euro-USD, if the Foreign Currency Agent (with respect to Syndicated Foreign
Currency Borrowings), or ABN AMRO (with respect to ITL Borrowings) determines
that such Foreign Currency in such jurisdiction is not available.
"Borrowing" means a borrowing hereunder consisting of either
(i) Syndicated Dollar Loans which are made to a Borrower at the same time by
the Domestic Banks pursuant to Article II, (ii) Money Market Loans which are
made to a Borrower by a Bank or Banks pursuant to Article II, (iii) Syndicated
Foreign Currency Loans which are made to a Borrower at the same time by the
Foreign Currency Banks pursuant to Article III, or (iv) ITL Loans which are
made to a Borrower by ABN AMRO pursuant to Article III. A Borrowing consisting
of Syndicated Dollar Loans is a "Base Rate Borrowing" if such Loans are
Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar
Loans. A Borrowing consisting of ITL Loans is an "ITL Base Rate Borrowing" if
such Loans are ITL Base Rate Loans or a "ITL Fixed Rate Borrowing" if such
Loans are ITL Fixed Rate Loans. A Borrowing is a "Dollar Borrowing" if it is a
Base Rate Borrowing, Money Market Borrowing or a Euro-Dollar Borrowing. A
Borrowing is a "Foreign Currency Borrowing" if such Loans are Foreign Currency
Loans. A Borrowing is a "Syndicated Foreign Currency Borrowing if such Loans
are Syndicated Foreign Currency Loans. A Borrowing is an "ITL Borrowing" if
such Loans are ITL Base Rate Loans or ITL Fixed Rate Loans. A Dollar Borrowing
is a "Syndicated Dollar Borrowing" if it is made pursuant to Section 2.01 or a
"Money Market Borrowing" if it is made pursuant to Section 2.03.
"Capital Proceeds" means the proceeds received by the Parent
(i) from the issuance of its Capital Stock, after deducting therefrom all
reasonable and customary costs and expenses incurred by the Parent directly in
connection with the issuance of such
3
<PAGE> 11
Capital Stock, or (ii) in connection with any conversion of Debt to Capital
Stock, the aggregate amount of Debt so converted.
"Capital Stock" means any nonredeemable capital stock of the
Borrower or any Consolidated Subsidiary (to the extent issued to a Person other
than the Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. and its
implementing regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section
9.02.
"Change in Control" shall mean any Person or two or more
Persons acting in concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 25% or more of the outstanding shares of
the voting stock of Parent.
"Closing Certificate" has the meaning set forth in Section
4.01(e).
"Closing Date" means December 12, 1995.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code.
"Commitments" means, collectively, the Dollar Loan
Commitments, the Syndicated Foreign Currency Loan Commitments and the ITL Loan
Commitment.
"Compliance Certificate" has the meaning set forth in Section
6.01(c).
"Consolidated Debt" means at any date the Debt of Parent and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Consolidated Net Income" means, for any period, the net
income (or deficit) of the Parent and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP 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 Parent or a
4
<PAGE> 12
Subsidiary shall have consolidated or which shall have merged into or with the
Parent 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
Parent or any Subsidiary has an ownership interest unless such net earnings are
immediately available without legal or contractual restriction for cash
distributions to the Parent or such Subsidiary; (v) any portion of the net
earnings of any Subsidiary which for any reason is legally or contractually
unavailable for payment of cash dividends to the Parent 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
December 31, 1992 of any reserve (other than a reserve created in the ordinary
course of business in accordance with GAAP) except to the extent that provision
for such reserve shall have been made from income arising subsequent to
December 31, 1992.
"Consolidated Net Worth" means the consolidated stockholders'
equity of the Parent and its Subsidiaries determined in accordance with GAAP,
but there shall be included therein only, (i) in the case of a positive foreign
currency adjustment account balance, the first $10,400,000 of a positive
foreign currency adjustment account balance, plus, if such account balance
exceeds $10,400,000, the portion of such account balance that exceeds
$50,400,000 and (ii) in the case of a negative foreign currency adjustment
account balance, the amount of a negative foreign currency adjustment account
balance to the extent that it exceeds $29,600,000.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of Parent in its consolidated financial statements as
of such date.
"Consolidated Total Assets" means the total assets of the
Parent and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Consolidated Total Capitalization" means the sum of
Consolidated Net Worth and Consolidated Debt.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"DEM" means German deutsche marks.
"DKR" means Danish kroners.
5
<PAGE> 13
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person to reimburse any bank or other
Person in respect of amounts payable under a banker's acceptance, (vi) all
Redeemable Preferred Stock of such Person (in the event such Person is a
corporation), (vii) all obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (viii) all Debt of others secured by a Lien on any asset of such
Person, even though such Debt is not assumed by such Person, (ix) all Debt of
others Guaranteed by such Person, and (x) amounts of any reserves for doubtful
accounts recorded on the books of such Person for leases, receivables and other
accounts sold, factored or otherwise disposed of by such Person; provided, that
in no event shall "Debt" include any Factored Receivables Obligations.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day,
the sum of 2% plus the then highest interest rate (including the Applicable
Margin) which may be applicable to any Loans hereunder in the same currency
(irrespective of whether any such type of Loans are actually outstanding
hereunder).
"Disposition" has the meaning set forth in Section 6.19(a).
"Dollar Equivalent" means the Dollar equivalent of the amount
of a Foreign Currency Loan, determined by the Foreign Currency Agent, with
respect to Syndicated Foreign Currency Loans, and ABN AMRO, with respect to ITL
Loans, on the basis of its spot rate for the purchase of the appropriate
Foreign Currency with Dollars on the date of determination.
"Dollar Loan" means a Loan made in Dollars, which shall be
either a Base Rate Loan, a Euro-Dollar Loan, or a Money Market Loan.
"Dollar Loan Commitment" refers to the commitment of each
Domestic Bank to make Dollar Loans hereunder, and means, with respect to each
Domestic Bank, the amount set forth as the Dollar Loan Commitment opposite the
name of such Bank on the signature pages hereof, as such amount may be reduced
from time to time pursuant to Section 2.08.
6
<PAGE> 14
"Dollar Loan Facility Fee" has the meaning specified in
Section 2.07.
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Domestic Agent" means Wachovia Bank of Georgia, N.A., a
national banking association organized under the laws of the United States of
America, in its capacity as agent for the Banks hereunder with respect to
Dollar Loans, and its successors and permitted assigns in such capacity.
"Domestic Bank" means each bank listed on the signature pages
hereto as having a Dollar Loan Commitment, and its successors and assigns with
respect to its Dollar Loans and its Dollar Loan Commitment.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Georgia are authorized by law
to close.
"ESP" means Spanish pesetas.
"Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of Parent or any Subsidiary required by any
Environmental Requirement.
"Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
"Environmental Notices" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged
noncompliance with or liability under any Environmental Requirement, including
without limitation any complaints, citations, demands or requests from any
Environmental Authority or from any other person or entity for correction of
any, violation of any Environmental Requirement or any investigations
concerning any violation of any Environmental Requirement.
7
<PAGE> 15
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or in any way associated with any
Environmental Requirement.
"Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to Parent, any
Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation and all federal, state
and local laws, ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law. Any reference to any
provision of ERISA shall also be deemed to be a reference to any successor
provision or provisions thereof.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D, as in effect from time to time.
"Eurocurrency Liability Reserve Percentage" of any Foreign
Currency Bank for the Interest Period for any Syndicated Foreign Currency Loan
means the reserve percentage applicable during such Interest Period (of if more
than one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the then stated maximum rate (stated as a decimal) of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System as defined in Regulation D (or against any successor
category of liabilities as defined in Regulation D.
"Euro-Dollar Business Day" means any Domestic Business Day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"Euro-Dollar Loan" means a Dollar Loan to be made as a
Euro-Dollar Loan pursuant to the applicable Notice of Syndicated Dollar
Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.06(c).
"Euro-USD" refers to a Foreign Currency for purposes of this
Agreement, and means Dollars made available to the Borrowers in Europe.
8
<PAGE> 16
"Event of Default" has the meaning set forth in Section 7.01.
"FC&AS" means ABN AMRO Foreign Credit & Agency Services,
Amsterdam, The Netherlands, which will perform certain functions delegated to
it by the Foreign Currency Agent hereunder.
"FFR" means French francs.
"FIM" means Finnish marks.
"Factored Receivables Obligations" means any recourse or
non-recourse obligation, guarantee or other contractual undertaking of the
Parent or any Subsidiary arising in connection with the sale, factoring or
other disposition of leases, receivables or other accounts, if such sale,
factoring or disposition, whether with or without recourse, is for a fair price
(on the basis of the face amount of the respective item, on the basis of the
present value or its income stream or on the basis of another arms' length
determination) together with the interests of the seller of such lease,
receivable or other account in the equipment or other property related to such
lease, receivable or other account, and not at a distress sale or other "deep"
discount.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Domestic Agent on
such day on such transactions, as determined by the Domestic Agent.
"Fiscal Quarter" means any fiscal quarter of Parent.
"Fiscal Year" means any fiscal year of Parent.
"Fixed Rate Borrowing" means a Euro-Dollar Borrowing, a Money
Market Borrowing, a Syndicated Foreign Currency Borrowing or an ITL Fixed Rate
Borrowing.
"Fixed Rate Loans" means Euro-Dollar Loans, Money Market
Loans, Syndicated Foreign Currency Loans, ITL Fixed Rate Loans, or any or all
of them, as the context shall require.
9
<PAGE> 17
"Foreign Currencies" means, individually and collectively, as
the context shall require: ATS, BFR, DEM, DKR, ESP, Euro-USD, FFR, FIM, GBP,
ITL, NLG, NOK, PTE, SEK and SFR.
"Foreign Currency Agent" means ABN AMRO Bank N.V., a banking
corporation organized under the laws of The Netherlands, in its capacity as
agent for the Foreign Currency Banks hereunder with respect to Syndicated
Foreign Currency Loans, which term shall also include FC&AS to functions
delegated to it by the Foreign Currency Agent hereunder, and its successors and
permitted assigns in such capacity.
"Foreign Currency Bank" means (i) when used with respect to
Syndicated Foreign Currency Loans and matters related thereto, each bank listed
on the signature pages hereto as having a Syndicated Foreign Currency Loan
Commitment, and its successors and assigns with respect to its Syndicated
Foreign Currency Loans and its Syndicated Foreign Currency Loan Commitment, and
(ii) when used with respect to ITL Loans and matters related thereto, ABN AMRO,
and its successors and assigns with respect to its ITL Loans and its ITL Loan
Commitment.
"Foreign Currency Borrowing" has the meaning set forth in the
definition of "Borrowing."
"Foreign Currency Business Day" shall mean any day which is a
banking day in New York, New York on which, (i) as to any Syndicated Foreign
Currency Loan and matters relating thereto, the Agency Office is open, and (ii)
as to any ITL Loan and matters relating thereto, the Milan Office is open,
excluding one on which trading is not carried on by and between banks in
deposits of the applicable Foreign Currency in the applicable interbank market
for such Foreign Currency.
"Foreign Currency LIBOR/Reference Rate" has the meaning
specified in Section 3.05(c).
"Foreign Currency Loan" means a Syndicated Foreign Currency
Loan or any ITL Loan, or both, as the context shall require.
"Foreign Currency Reference Banks" means ABN AMRO, The First
National Bank of Boston, and Union Bank of Switzerland, and each other bank as
may be appointed pursuant to Section 10.08(f); provided, that any such bank
quotes Foreign Currency rates from an office located in Europe.
"GAAP" means generally accepted accounting principles in the
United States of America applied on a basis consistent with those which, in
accordance with Section 1.02, are to be used in making the calculations for
purposes of determining compliance with the terms of this Agreement.
"GBP" means British pounds sterling.
10
<PAGE> 18
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee
of such Debt or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided that
the term Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. Section 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or
in any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976,
or in any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"ITL" means Italian liras.
"ITL Base Rate" means for any ITL Base Rate Loan for any day,
the borrowing rate per annum applicable to ITL as announced from time to time
at the Milan Office. For purposes of determining the ITL Base Rate for any day,
changes in the ITL Base Rate shall be effective on the date of each such
change.
"ITL Base Rate Loan" means a Foreign Currency Loan to be made
by ABN AMRO in ITL as an ITL Base Rate Loan pursuant to the applicable Notice
of ITL Borrowing, Section 3.02(f), or Article IX, as applicable.
"ITL Borrowing" has the meaning specified in the definition of
Borrowing.
"ITL Loan" means a Loan made in ITL, which shall be either an
ITL Base Rate Loan or an ITL Fixed Rate Loan.
"ITL Loan Commitment" refers to the commitment of ABN AMRO to
make ITL Loans hereunder, and means the Dollar Equivalent
11
<PAGE> 19
in ITL of $10,000,000, as such amount may be reduced from time to time pursuant
to Sections 3.07 and 3.08.
"ITL Loan Facility Fee" has the meaning specified in Section
3.06(a).
"ITL Loan Notes" means the promissory notes of SDI and
Sensormatic E.C., S.R.L., substantially in the form of Exhibit B-2, evidencing
the obligation of such Borrowers to repay the ITL Loans, together with all
amendments, consolidations, modifications, renewals and supplements thereto.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, Syndicated Foreign Currency Borrowing and ITL Fixed Rate Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third, sixth or, subject to
availability to all Banks, twelfth month thereafter, or, with respect to BFR,
GBP, DEM and FFR only, the fourteenth day thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day or Foreign Currency
Business Day, as the case may be, shall be extended to the next
succeeding Euro-Dollar Business Day or Foreign Currency Business Day,
as the case may be, unless such Euro-Dollar Business Day or Foreign
Currency Business Day, as the case may be, falls in another calendar
month, in which case such Interest Period shall, subject to paragraph
(c) below end on the next preceding Euro-Dollar Business Day or
Foreign Currency Business Day, as the case may be;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day or Foreign Currency Business Day, as the case
may be, of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month) shall, subject to paragraph (c) below, end on the last
Euro-Dollar Business Day or Foreign Currency Business Day, as the case
may be, of the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which would end after
the Termination Date.
(2) with respect to each Base Rate Borrowing or ITL Base Rate Borrowing, the
period commencing on the date of such Borrowing and ending 30 days thereafter;
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to paragraph (b) below) which would otherwise end
on a day which is not a Domestic Business Day or Foreign Currency
Business Day, as the case may be, shall be extended to the next
succeeding Domestic Business Day or Foreign Currency Business Day, as
the case may be; and
12
<PAGE> 20
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date
shall end on the Termination Date.
"Lending Office" means, (i) as to ABN AMRO with respect to ITL
Loans only, the Milan Office, (ii) and as to each Bank, its office located at
its address set forth on the signature pages hereof and (or identified on the
signature pages hereof as its Lending Office or such other office as such Bank
may hereafter designate as its Lending Office by notice to the Borrowers and
the Agents. Each Bank which is both a Domestic Bank and a Foreign Currency
Bank may designate a Lending Office for Dollar Loans and a different Lending
Office for Syndicated Foreign Currency Loans, and the term "Lending Office"
shall in such case mean either such Lending Office, as the context shall
require.
"Lien" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting
a security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For
the purposes of this Agreement, any Borrower or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
Notwithstanding the foregoing, in no event shall any of the following be deemed
to be a "Lien" on any assets or other properties of any Person: (1) filings of
financing statements in respect of operating leases of such Person, sales of
(and not merely security interests in) leases, receivables and other accounts
and of the equipment or other property related to such accounts, and other
similar filings of a precautionary nature, (2) the interest of a lessee in the
property subject to a lease under which such Person is the lessor, or (3) the
interest of the purchaser or factor of leases, receivables or other accounts of
such Person in the leases, receivables or accounts sold, factored or otherwise
disposed of, or in the related equipment or other property that is the subject
of such lease, receivable or account, even if described as a Lien in the
instrument pursuant to which such sale, factoring or other disposition is
effected.
"Loan" means a Euro-Dollar Loan, Syndicated Dollar Loan, Money
Market Loan, a Syndicated Foreign Currency Loan or an ITL Loan, and "Loans"
means Euro-Dollar Loans, Syndicated Dollar Loans, Money Market Loans,
Syndicated Foreign Currency Loans, or ITL Loans, or any or all of them, as the
context shall require.
"Loan Documents" means this Agreement, the Notes, the Parent
Guaranty, any other document evidencing, relating to or securing the Loans, and
any other document or instrument delivered
13
<PAGE> 21
from time to time in connection with this Agreement, the Notes, the Parent
Guaranty or the Loans, as such documents and instruments may be amended or
supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.06(c).
"Margin Stock" means "margin stock" as defined in Regulations
G, T, U or X.
"Material Adverse Effect" means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any
of (a) the financial condition, operations, business, or properties which are
central to the business at such time, of the Parent and its Consolidated
Subsidiaries taken as a whole, (b) the ability of the Borrowers or the Parent
to perform their respective obligations under the Loan Documents to which it is
a party, as applicable, or (c) the legality, validity or enforceability of any
Loan Document.
"Material Subsidiary" means, as of each date of determination,
any Consolidated Subsidiary (i) whose consolidated total assets exceed 5% of
Consolidated Total Assets or (ii) whose consolidated total revenues exceed 10%
of the consolidated revenues of the Parent and its Subsidiaries determined in
accordance with GAAP as of the last day of the Fiscal Quarter of the Parent
most recently ended as of such date of determination and for which financial
statements have been delivered to the Banks pursuant to Section 6.02(a) or (b)
hereof, and in any event shall include Sensormatic GmbH.
"Milan Office" refers to the office of ABN AMRO from which
various ITL Loans will be administered pursuant to this Agreement, and means
the branch office of ABN AMRO located in Milan, Italy, or such other location
in Italy as may be specified by ABN AMRO in a notice to the other parties
hereto pursuant to Section 10.01:
"Money Market Loan Notes" means the promissory notes of the
Borrower, substantially in the form of Exhibit A-2, evidencing the obligation
of the Borrower to repay Money Market Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto.
"Money Market Loans" means Loans made pursuant to the terms
and conditions set forth in Section 2.03.
"Money Market Quote" has the meaning specified in Section
2.03.
14
<PAGE> 22
"Money Market Quote Request" has the meaning specified in
Section 2.03.
"Money Market Rate" has the meaning specified in Section 2.03.
"NLG" means Dutch guilders.
"NOK" means Norwegian kroners.
"Notes" means, individually and collectively, the Syndicated
Dollar Loan Notes, the Money Market Loan Notes, the Syndicated Foreign Currency
Loan Notes, or the ITL Loan Notes, as the context shall require.
"Note Agreement" means the Note Agreement dated as of January
15, 1993 pertaining to Parent's $135,000,000 Principal Amount 8.21% Senior
Notes Due January 30, 2003, as amended by the First Amendment dated as of May
31, 1993, and as it may be amended or supplemented from time to time.
"Note Agreement Closing Date" means the "Closing Date", as
defined in the Note Agreement.
"Notice of Borrowing" means, individually or collectively, as
the context shall require, a Notice of Syndicated Dollar Borrowing, a Notice of
Syndicated Foreign Currency Borrowing or a Notice of ITL Borrowing.
"Notice of ITL Borrowing" has the meaning specified in Section
3.02(a)(2).
"Notice of Syndicated Dollar Borrowing" has the meaning
specified in Section 2.02(a).
"Notice of Syndicated Foreign Currency Borrowing" has the
meaning specified in Section 3.02(a)(1).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PTE" means Portuguese escudos.
"Parent" means Sensormatic Electronics Corporation, a Delaware
corporation, and its successors and permitted assigns.
"Parent Guaranty" means the Guaranty Agreement dated as of
even date herewith substantially in the form of Exhibit L, executed by Parent
in favor of the Agents, for the benefit of the Banks, unconditionally
Guaranteeing the payment of all obligations of the other Borrowers hereunder,
under the Notes and under the other Loan Documents executed by them.
15
<PAGE> 23
"Participant" has the meaning set forth in Section 10.08(b).
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a
member of the Controlled Group for employees of any member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding 5 plan years made
contributions but shall not include any plan which is maintained under the laws
of Puerto Rico, is covered by Section 4(b)(4) of ERISA, or is unfunded and
maintained primarily for the purpose of providing deferred compensation for a
select group of management, key executives or highly compensated employees.
"Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for borrowings.
The Prime Rate is but one of several interest rate bases used by Wachovia.
Wachovia lends at interest rates above and below the Prime Rate.
"Properties" means all real property owned, leased or
otherwise used or occupied by Parent or any Subsidiary, wherever located.
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which by its terms is, at any time prior to the
Termination Date, subject to mandatory redemption by such Person for cash at
the demand of the holder of such stock. No security shall be considered
"Redeemable Preferred Stock" by reason of such security being convertible into
other shares of capital stock (whether common or preferred) or any other
property other than cash, even if the terms of redemption or conversion provide
for a nominal portion of such security to be redeemable for cash in order to
avoid the issuance of fractional shares or irregular lots of shares or for
similar purposes, but in such case only an amount equal to the probable
aggregate cash expenditure in connection with the cash redemption shall be
considered "Redeemable Preferred Stock".
"Refunding Loan" means a new Loan made on the day on which an
outstanding Loan is maturing, if and to the extent that the proceeds thereof
are used entirely for the purpose of paying such maturing Loan, excluding any
difference between the amount of such maturing Loan and any greater amount
being borrowed on such day and actually either being made available to the
relevant
16
<PAGE> 24
Borrower pursuant to Section 2.02(c) or 3.02(c) or remitted to the relevant
Agent as provided in Section 2.12 or 3.11, in each case as contemplated in
Section 2.02(d) or 3.02(d)(v).
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Required Banks" means at any time Banks having at least 66
2/3% of the aggregate amount of the Commitments or, if the Commitments are no
longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding
principal amount of the (i) Syndicated Dollar Loans, (ii) Money Market Loans,
(iii) Syndicated Foreign Currency Loans, and (iv) ITL Loans.
"Required Domestic Banks" means at any time Domestic Banks
having at least 66 2/3% of the aggregate amount of the Dollar Loan Commitments
or, if the Dollar Loan Commitments are no longer in effect, Domestic Banks
holding at least 66 2/3% of the aggregate outstanding principal amount of the
(i) Syndicated Dollar Loans and (ii) Money Market Loans.
"Required Foreign Currency Banks" means at any time Foreign
Currency Banks having at least 66 2/3% of the aggregate amount of the
Syndicated Foreign Currency Loan Commitments and the ITL Loan Commitment or, if
the Syndicated Foreign Currency Loan Commitments and ITL Loan Commitment are no
longer in effect, Foreign Currency Banks holding at least 66 2/3% of the
aggregate outstanding principal amount of the Syndicated Foreign Currency Loans
and ITL Loans.
"Restricted Payments" has the meaning set forth in Section
6.17.
17
<PAGE> 25
"Reuters Screen" shall mean, when used in connection with any
designated page and the London Interbank Offered Rate, the display page so
designated on the Reuters Monitor Money Rates Service (or such other page as
may replace that page on that service for the purpose of displaying rates
comparable to the London Interbank Offered Rate).
"SDI" means Sensormatic Distribution Inc., a Delaware
corporation, and its successors and permitted assigns.
"SEK" means Swedish kroners.
"SFR" means Swiss francs.
"SII" means Sensormatic International, Inc., a Delaware
corporation, and its successors and permitted assigns.
"Senior Notes" means the Senior Notes issued pursuant to the
Note Agreement.
"Senior Consolidated Debt" means all Consolidated Debt other
than Subordinated Consolidated Debt.
"Stated Maturity Date" means, with respect to any Money Market
Loan, the Stated Maturity Date therefor specified by the Bank in the applicable
Money Market Quote.
"Subordinated Consolidated Debt" means any unsecured
Consolidated Debt which (i) is expressly subordinate in right of payment to the
Notes and the Senior Notes pursuant to a form of subordination substantially in
the form of Exhibit M, and (ii) has a Weighted Average Life to Maturity
extending beyond the Termination Date in effect from time to time and the final
maturity of the Senior Notes.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by Parent. Each
Borrower other than Parent is a direct or indirect Subsidiary of Parent.
"Syndicated Dollar Loan Notes" means the promissory notes of
each of the Borrowers, substantially in the form of Exhibit A-1, evidencing the
obligation of the Borrowers to repay Syndicated Dollar Loans, together with all
amendments, consolidations, modifications, renewals and supplements thereto.
"Syndicated Dollar Loans" means Base Rate Loans or Euro-Dollar
Loans made pursuant to the terms and conditions set forth in Section 2.01.
18
<PAGE> 26
"Syndicated Foreign Currency Loan" means a Loan to be made as
a Syndicated Foreign Currency Loan pursuant to the applicable Notice of
Syndicated Foreign Currency Borrowing.
"Syndicated Foreign Currency Loan Commitment" refers to the
commitment of each Foreign Currency Bank to make Syndicated Foreign Currency
Loans hereunder, and means, with respect to each Foreign Currency Bank, the
amount set forth as the Syndicated Foreign Currency Loan Commitment opposite
the name of such Foreign Currency Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Sections 3.07 and 3.08.
"Syndicated Foreign Currency Loan Facility Fee" has the
meaning specified in Section 3.06(a).
"Syndicated Foreign Currency Loan Notes" means promissory
notes of each of the Borrowers, substantially in the form of Exhibit B-1,
evidencing the obligation of the Borrowers to repay the Syndicated Foreign
Currency Loans, together with all amendments, consolidations, modifications,
renewals and supplements thereto.
"Telerate" shall mean, when used in connection with any
designated page and the London Interbank Offered Rate or the Foreign Currency
LIBOR/Reference Rate, the display page designated for LIBOR on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying rates comparable to the London Interbank Offered
Rate or the Foreign Currency LIBOR/Reference Rate, as applicable.
"Termination Date" refers to the date on which the Dollar Loan
Commitment or the Syndicated Foreign Currency Loan and ITL Loan Commitment, or
both, terminates pursuant to the provisions of this Agreement, and means
December 10, 1996, unless (i) extended subject and pursuant to the provisions
of Section 2.05(c), as to Dollar Loans, or Section 3.04(b), as to Syndicated
Foreign Currency Loans and ITL Loans, or (ii) terminated following a Change in
Control pursuant to the provisions of clause (ii) of Section 2.09, as to Dollar
Loans, or clause (ii) of Section 3.08, as to Syndicated Foreign Currency Loans
or ITL Loans, or (iii) terminated pursuant to Section 7.01 following an Event
of Default.
"Third Parties" means all lessees, sublessees, licensees and
other users of the Properties, excluding those users of the Properties in the
ordinary course of Parent's or any Consolidated Subsidiary's business and on a
temporary basis.
"Transferee" has the meaning set forth in Section 10.08(d).
"Unused Dollar Loan Commitment" means at any date, with
respect to any Domestic Bank, an amount equal to its Dollar Loan Commitment
less the aggregate outstanding principal amount of its Syndicated Dollar Loans.
19
<PAGE> 27
"Unused Syndicated Foreign Currency Loan Commitment" means at
any date, with respect to any Foreign Currency Bank, an amount equal to its
Syndicated Foreign Currency Loan Commitment less the aggregate outstanding
principal amount of its Syndicated Foreign Currency Loans.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national
banking association, and its successors.
"Weighted Average Life to Maturity" means, as applied to any
prepayment of principal of the Senior Notes, or to any Subordinated
Consolidated Debt, at any date, the number of years obtained by dividing (a)
the then outstanding principal amount of the Senior Notes to be prepaid, or the
then outstanding principal amount of such Subordinated Consolidated Debt, 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 the Senior Notes, or in respect of such Subordinated Consolidated
Debt, 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 Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except
directors' qualifying shares and, in the case of certain Subsidiaries which are
not U.S. Persons, nominal shares held by non-U.S. Persons in accordance with
applicable laws) are at the time directly or indirectly owned by Parent. Each
Borrower other than Parent is a Wholly Owned Subsidiary.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by Parent's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of Parent and its Consolidated Subsidiaries delivered to
the Banks unless with respect to any such change concurred in by Parent's
independent public accountants or required by GAAP, in determining compliance
with any of the provisions of this Agreement or any of the other Loan
Documents: (i) Parent shall have objected to determining such compliance on
such basis at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made
(which, if objection is made in respect of the first financial statements
delivered under Section 6.01 hereof, shall mean the financial statements
referred to in Section 5.04).
20
<PAGE> 28
SECTION 1.03. References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections"
and other Subdivisions are references to articles, exhibits, schedules,
sections and other subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.
SECTION 1.05. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the
plural shall include the singular. Titles of Articles and Sections in this
Agreement are for convenience only, and neither limit nor amplify the
provisions of this Agreement.
ARTICLE II
THE DOMESTIC CREDITS
SECTION 2.01. Commitments to Lend. Each Domestic Bank
severally agrees, on the terms and conditions set forth herein, to make
Syndicated Dollar Loans to the Borrowers (which may be, at the option of the
Borrowers and subject to the terms and conditions hereof, Base Rate Loans or
Euro-Dollar Loans) from time to time before the Termination Date; provided
that, immediately after each such Syndicated Dollar Loan is made, (i) the
aggregate principal amount outstanding of Syndicated Dollar Loans by such
Domestic Bank shall not exceed the amount of its Dollar Loan Commitment, and
(ii) the aggregate principal amount outstanding of the sum of the Dollar
Equivalent on such date of all ITL Loans by ABN AMRO and all Syndicated Dollar
Loans, Money Market Loans and the aggregate of the Dollar Equivalent on such
date of all Syndicated Foreign Currency Loans by all Banks shall not exceed the
aggregate of all of the Commitments. The Domestic Agent shall be responsible
only for determining compliance with clause (i) of the foregoing proviso. Any
Borrower shall be permitted, subject to the terms and conditions hereof, to
obtain Dollar Loans up to the full aggregate amount of the Adjusted Aggregate
Unused Dollar Loan Commitments, provided, however, that all Syndicated Dollar
Loans and Money Market Loans outstanding to all Borrowers shall constitute a
usage of the Dollar Loan Commitments of all Domestic Banks for purposes of
determining such Adjusted Aggregate Unused Dollar Loan Commitments. Each (A)
Base Rate Borrowing under this Section 2.01 shall be in an aggregate principal
amount of $1,000,000 or any larger multiple of $1,000,000 and (B) Euro-Dollar
Borrowing shall be in an aggregate principal amount of $5,000,000 or any larger
multiple of $1,000,000 (except that any such Syndicated Dollar Borrowings may
be in the aggregate amount of the Unused Dollar Loan Commitments) and shall be
made from the several Domestic Banks ratably in proportion to their respective
Commitments. Any
21
<PAGE> 29
Domestic Bank's Money Market Loans shall not reduce such Domestic Bank's Dollar
Loan Commitment, or be included in calculating its Unused Dollar Loan
Commitment, for purposes of future Borrowings under this Section 2.01. Within
the foregoing limits, the Borrowers may borrow under this Section 2.01, repay
or, to the extent permitted by Section 2.10, prepay Syndicated Dollar Loans and
reborrow under this Section 2.01 at any time before the Termination Date.
SECTION 2.02. Method of Borrowing Syndicated Dollar Loans.
(a) A Borrower shall give the Domestic Agent notice (a "Notice of Syndicated
Dollar Borrowing"), which shall be substantially in the form of Exhibit F, on
the same day for a Base Rate Borrowing, and at least 3 Euro-Dollar Business
Days' prior to each Euro-Dollar Borrowing (all notices being effective on the
day delivered so long as the Domestic Agent shall have received same prior to
(x) 12:00 A.M., Atlanta, Georgia time, for a Base Rate Borrowing, and (y) 11:00
A.M., Atlanta, Georgia time, for a Euro-Dollar Borrowing) specifying:
(i) the date of such Borrowing, which shall be
a Domestic Business Day in the case of a Base Rate Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Syndicated Dollar Loans
comprising such Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, and
(iv) in the case of a Euro-Dollar Borrowing,
the duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Syndicated Dollar
Borrowing, the Domestic Agent shall promptly notify each Domestic Bank of the
contents thereof and of such Domestic Bank's ratable share of such Borrowing
and such Notice of Syndicated Dollar Borrowing shall not thereafter be
revocable by such Borrower.
(c) Not later than (x) 1:00 P.M. (Atlanta, Georgia,
time), for a Base Rate Borrowing, and (y) 10:00 A.M. (Atlanta, Georgia time)
for a Euro-Dollar Borrowing, in each case on the date of each Syndicated Dollar
Borrowing, each Domestic Bank shall (except as provided in paragraph (d) of
this Section) make available its ratable share of such Syndicated Dollar
Borrowing, in Federal or other funds immediately available in Atlanta, Georgia,
to the Domestic Agent at its address referred to in Section 10.01. Unless the
Domestic Agent determines that any applicable condition specified in Article
IV has not been satisfied, the Domestic Agent will make the funds so received
from the Domestic Banks available to the Borrowers at the Domestic Agent's
aforesaid address not later than 2:00 P.M. (Atlanta, Georgia time) on the date
of any
22
<PAGE> 30
relevant Syndicated Dollar Borrowing. Unless the Domestic Agent receives
notice from a Domestic Bank, at the Domestic Agent's address referred to in or
specified pursuant to Section 10.01, (i) in the case of a Base Rate Borrowing,
no later than 2:00 P.M. (Atlanta, Georgia time) on the same day as such Base
Rate Borrowing and (ii) in the case of any other type of Syndicated Dollar
Borrowing, no later than 3:00 P.M. (Atlanta, Georgia time) on the Domestic
Business Day before the date of a Syndicated Dollar Borrowing stating that such
Domestic Bank will not make a Loan in connection with such Syndicated Dollar
Borrowing, the Domestic Agent shall be entitled to assume that such Domestic
Bank will make a Loan in connection with such Syndicated Dollar Borrowing and,
in reliance on such assumption, the Domestic Agent may (but shall not be
obligated to) make available such Domestic Bank's ratable share of such
Syndicated Dollar Borrowing to the Borrower for the account of such Domestic
Bank. If the Domestic Agent makes any such Domestic Bank's ratable share of a
Borrowing available to the Borrower, the Domestic Agent shall promptly notify
(which notice may be telephonic) the Borrower of the identity of the Domestic
Bank for whom such funds were advanced and the amount of such advance. The
Domestic Agent shall promptly notify (which notice may be telephonic) the
Borrower of the details of any notice received from any Domestic Bank stating
that any such Domestic Bank does not intend to make its ratable share of funds
available in connection with any relevant Borrowing. If the Domestic Agent
makes such Domestic Bank's ratable share available to the Borrower and such
Domestic Bank does not in fact make its ratable share of such Syndicated Dollar
Borrowing available on such date, the Domestic Agent shall be entitled to
recover such Domestic Bank's ratable share from such Domestic Bank or, promptly
upon request therefor, the Borrower, together with interest thereon for each
day during the period from the date of such Syndicated Dollar Borrowing until
such sum shall be paid in full at a rate per annum equal to the rate at which
the Domestic Agent determines that it obtained (or could have obtained)
overnight Federal funds to cover such amount for each such day during such
period, provided that any such payment by the Borrower of such Domestic Bank's
ratable share and interest thereon shall be without prejudice to any rights
that the Borrower may have against such Domestic Bank. If the Domestic Agent
does not exercise its option to advance funds for the account of such Domestic
Bank, it shall forthwith notify the Borrower of such decision.
(d) If any Domestic Bank makes a new Syndicated Dollar
Loan hereunder on a day on which the Borrower is to repay all or any part of an
outstanding Syndicated Dollar Loan from such Domestic Bank, such Domestic Bank
shall apply the proceeds of its new Syndicated Dollar Loan to make such
repayment as a Refunding Loan and only an amount equal to the difference (if
any) between the amount being borrowed and the amount of such Refunding Loan
shall be made available by such Domestic Bank to the Domestic Agent as provided
in paragraph (c) of this Section, or remitted by the Borrower to the Domestic
Agent as provided in Section 2.12, as the case may be.
23
<PAGE> 31
(e) Notwithstanding anything to the contrary contained in
this Agreement, including, without limitation Section 2.01 and Section 2.03, no
Fixed Rate Borrowing may be made if there shall have occurred a Default or an
Event of Default, which Default or Event of Default shall not have been cured
or waived.
(f) In the event that a Notice of Syndicated Dollar
Borrowing fails to specify whether the Syndicated Dollar Loans comprising such
Syndicated Dollar Borrowing are to be Base Rate Loans or Euro-Dollar Loans,
such Syndicated Dollar Loans shall be made as Base Rate Loans. If the Borrower
is otherwise entitled under this Agreement to repay any Syndicated Dollar Loans
maturing at the end of an Interest Period applicable thereto with the proceeds
of a new Syndicated Dollar Borrowing, and the Borrower fails to repay such
Syndicated Dollar Loans using its own moneys and fails to give a Notice of
Syndicated Dollar Borrowing in connection with such new Syndicated Dollar
Borrowing, a new Syndicated Dollar Borrowing shall be deemed to be made on the
date such Syndicated Dollar Loans mature in an amount equal to the principal
amount of the Syndicated Dollar Loans so maturing, and the Syndicated Dollar
Loans comprising such new Syndicated Dollar Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained
herein, including, without limitation Section 2.01 and Section 2.03, there
shall not be more than 8 Euro-Dollar Loans and/or Money Market Loans
outstanding at any given time.
SECTION 2.03. Money Market Loans. (a) In addition to making
Syndicated Dollar Borrowings, the Borrower may, as set forth in this Section
2.03, request the Domestic Banks to make offers to make Money Market Dollar
Borrowings available to the Borrowers. The Domestic Banks may, but shall have
no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.03, provided that:
(i) there may be no more than 8 Euro-Dollar Loans and/or
Money Market Loans outstanding at any given time;
(ii) the aggregate principal amount of all Money Market
Loans, together with the aggregate principal amount of all Syndicated
Dollar Loans, at any one time outstanding shall not exceed the
aggregate amount of the Dollar Commitments of all of the Domestic
Banks at such time; and
(iii) the aggregate principal amount of all Money Market
Loans, together with the aggregate principal amount of all Syndicated
Dollar Loans and the aggregate of the Dollar Equivalent on such date
of all of all Syndicated Foreign Currency Loans and ITL Loans, at any
one time outstanding shall not exceed the aggregate amount of the
Commitments of all of the Banks at such time, except as expressly
permitted
24
<PAGE> 32
by clause (i) of Section 3.01(a) and by clause (i) of Section 3.01(b).
(b) When a Borrower wishes to request offers to make
Money Market Loans, it shall give the Domestic Agent (which shall promptly
notify the Domestic Banks) notice substantially in the form of Exhibit J hereto
(a "Money Market Quote Request") so as to be received no later than 11:00 A.M.
(Atlanta, Georgia time) at least 1 Domestic Business Day prior to the date of
the Money Market Dollar Borrowing proposed therein (or such other time and date
as such Borrower and the Domestic Agent, with the consent of the Required
Domestic Banks, may agree), specifying:
(i) the proposed date of such Money Market Dollar
Borrowing, which shall be a Domestic Business Day (the "Borrowing
Date");
(ii) the maturity date (or dates) (each a "Stated Maturity
Date") for repayment of each Money Market Loan to be made as part of
such Money Market Dollar Borrowing (which Stated Maturity Date shall
be that date occurring either 7 days, 14 days, 30 days, or any other
number of days greater than 7 days but not more than 180 days from the
date of such Money Market Dollar Borrowing); provided, that the Stated
Maturity Date for any Money Market Loan may not extend beyond the
Termination Date (as in effect on the date of such Money Market Quote
Request); and
(iii) the aggregate amount of principal to be received by
the Borrower as a result of such Money Market Dollar Borrowing, which
shall be at least $5,000,000 (and in larger integral multiples of
$1,000,000) but shall not cause the limits specified in Section
2.03(a) to be violated.
A Borrower may request offers to make Money Market Loans having up to 3
different Stated Maturity Dates in a single Money Market Quote Request;
provided, that the request for each separate Stated Maturity Date shall be
deemed to be a separate Money Market Quote Request for a separate Money Market
Dollar Borrowing. Except as otherwise provided in the preceding sentence,
after the first Money Market Quote Request has been given hereunder, no more
that 2 Money Market Quote Requests shall be given in any period of 5
consecutive Domestic Business Days pursuant to this Section 2.03.
(c) (i) Each Bank may, but shall have no obligation to,
submit a response containing an offer to make a Money Market Loan substantially
in the form of Exhibit K hereto (a "Money Market Quote") in response to any
Money Market Quote Request; provided, that, if the Borrower's request under
Section 2.03(b) specified more than 1 Stated Maturity Date, such Bank may, but
shall have no obligation to, make a single submission containing a separate
offer for each such Stated Maturity Date and each such separate offer shall be
deemed to be a separate Money Market Quote. Each Money Market Quote must be
submitted to the Domestic Agent not later than
25
<PAGE> 33
10:00 A.M. (Atlanta, Georgia time) on the Borrowing Date; provided that any
Money Market Quote submitted by Wachovia may be submitted, and may only be
submitted, if Wachovia notifies the Borrower of the terms of the offer
contained therein not later than 9:45 A.M. (Atlanta, Georgia time) on the
Borrowing Date (or 15 minutes prior to the time that the other Domestic Banks
must have submitted their respective Money Market Quotes). Subject to Section
6.01, any Money Market Quote so made shall be irrevocable except with the
written consent of the Domestic Agent given on the instructions of the
Borrower.
(ii) Each Money Market Quote shall specify:
(A) the proposed Borrowing Date and the Stated
Maturity Date therefor;
(B) the principal amounts of the Money Market
Loan which the quoting Bank is willing to make for the
applicable Money Market Quote, which principal amounts (x) may
be greater than or less than the Commitment of the quoting
Bank, (y) shall be at least $1,000,000 or a larger integral
multiple of $500,000, and (z) may not exceed the principal
amount of the Money Market Borrowing for which offers were
requested;
(C) the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) offered
for each such Money Market Loan, (such amounts being
hereinafter referred to as the "Money Market Rate"); and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Domestic Agent and the Borrower, no
Money Market Quote shall contain qualifying, conditional or similar
language or propose terms other than or in addition to those set forth
in the applicable Money Market Quote Request (other than setting forth
the maximum principal amounts of the Money Market Loan which the
quoting Bank is willing to make for the applicable Interest Period)
and, in particular, no Money Market Quote may be conditioned upon
acceptance by the Borrower of all (or some specified minimum) of the
principal amount of the Money Market Loan for which such Money Market
Loan is being made.
(d) The Domestic Agent shall as promptly as practicable
after the Money Market Quote is submitted (but in any event not later than
10:45 A.M. (Atlanta, Georgia time)) on the Borrowing Date, notify the Borrower
of the terms (i) of any Money Market Quote submitted by a Bank that is in
accordance with Section 2.03(c) and (ii) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request.
Any such subsequent Money Market Quote shall be
26
<PAGE> 34
disregarded by the Domestic Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money Market Quote.
The Domestic Agent's notice to the Borrower shall specify (A) the principal
amounts of the Money Market Dollar Borrowing for which offers have been
received and (B) the respective principal amounts and Money Market Rates so
offered by each Bank (identifying the Bank that made each Money Market Quote).
(e) Not later than 12:00 P.M. (noon) (Atlanta, Georgia
time) on the Borrowing Date, the Borrower shall notify the Domestic Agent of
its acceptance or nonacceptance of the offers so notified to it pursuant to
Section 2.03(d) and the Domestic Agent shall promptly notify each affected
Bank. In the case of acceptance, such notice shall specify the aggregate
principal amount of offers (for each Stated Maturity Date) that are accepted.
The Borrower may accept any Money Market Quote in whole or in part; provided
that:
(i) the aggregate principal amount of each Money Market
Dollar Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market
Loan comprising a Money Market Dollar Borrowing shall be at least
$1,000,000 (and in larger multiples of $500,000) but shall not cause
the limits specified in Section 2.03(a) to be violated;
(iii) acceptance of offers may only be made in ascending
order of Money Market Rates; and
(iv) the Borrower may not accept any offer where the
Domestic Agent has advised the Borrower that such offer fails to
comply with Section 2.03(c)(ii) or otherwise fails to comply with the
requirements of this Agreement (including without limitation, Section
2.03(a)).
If offers are made by 2 or more Domestic Banks with the same Money Market Rates
for a greater aggregate principal amount than the amount in respect of which
offers are accepted for the related Stated Maturity Date, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Borrower among such Domestic Banks as nearly as possible in
proportion to the aggregate principal amount of such offers. Determinations by
the Borrower of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(f) Any Domestic Bank whose offer to make any Money
Market Loan has been accepted shall, not later than 1:00 P.M. (Atlanta, Georgia
time) on the Borrowing Date, make the appropriate amount of such Money Market
Loan available to the Domestic Agent at its address referred to in Section
10.01 in immediately available funds. The amount so received by the Domestic
Agent shall, subject
27
<PAGE> 35
to the terms and conditions of this Agreement, be made available to the
Borrower on such date by depositing the same, in immediately available funds,
not later than 2:00 P.M. (Atlanta, Georgia time), in an account of such
Borrower maintained with Wachovia.
SECTION 2.04. Notes. (a) The Syndicated Dollar Loans of each
Domestic Bank shall be evidenced by a single Syndicated Dollar Loan Note
executed by each Borrower payable to the order of such Domestic Bank for the
account of its Lending Office in an amount equal to the original principal
amount of such Domestic Bank's Dollar Loan Commitment.
(b) The Money Market Loans made by any Domestic Bank to
the Borrower shall be evidenced by a single Money Market Loan Note executed by
each Borrower payable to the order of such Domestic Bank for the account of its
Lending Office in an amount equal to the original principal amount of the
aggregate Dollar Loan Commitments.
(c) Upon receipt of each Domestic Bank's Notes pursuant
to Section 3.01, the Domestic Agent shall deliver such Notes to such Domestic
Bank. Each Domestic Bank shall record, and prior to any transfer of its
Syndicated Dollar Loan Notes and Money Market Loan Notes shall endorse on the
schedules forming a part thereof appropriate notations to evidence, the date,
amount and maturity of, and effective interest rate for, each Syndicate Loan
and Money Market Loan made by it, the date and amount of each payment of
principal made by the Borrower with respect thereto, and such schedules of each
such Domestic Bank's Notes shall constitute rebuttable presumptive evidence of
the respective principal amounts owing and unpaid on such Domestic Bank's
Notes; provided, that the failure of any Domestic Bank to make any such
recordation or endorsement shall not affect the obligation of the Borrowers
hereunder or under the Syndicated Loan Notes or Money Market Loan Notes or the
ability of any Domestic Bank to assign its Notes. Each Domestic Bank is hereby
irrevocably authorized by the Borrowers so to endorse its Syndicated Loan Notes
and Money Market Loan Notes and to attach to and make a part of any such Note a
continuation of any such schedule as and when required. In order to verify the
Dollar Loans outstanding from time to time, at the request of the Borrowers,
the Domestic Agent shall furnish the Borrowers with its records of transactions
under this Agreement, in reasonable detail.
SECTION 2.05. Maturity of Dollar Loans. (a) Each Syndicated
Dollar Loan included in any Syndicated Dollar Borrowing shall mature, and the
principal amount thereof shall be due and payable, on the last day of the
Interest Period applicable to such Borrowing.
(b) Each Money Market Loan included in any Money Market
Borrowing shall mature, and the principal amount thereof shall be due and
payable upon the Stated Maturity Date therefor.
28
<PAGE> 36
(c) Notwithstanding the foregoing, the outstanding
principal amount of the Dollar Loans, together with all accrued but unpaid
interest thereon, if any, shall be due and payable on December 10, 1996, unless
the Termination Date is otherwise extended by the Domestic Agent and the
Domestic Banks, in their sole and absolute discretion. Upon the written
request of the Borrower, which request shall be delivered to the Domestic
Agent, with a copy to the Foreign Currency Agent and each of the Domestic
Banks, at least 30 days but not more than 45 days prior to the Termination
Date, the Domestic Agent and the Domestic Banks shall have the option (without
any obligation whatsoever so to do) of extending the Termination Date for an
additional 364-day period; provided, that, in no event shall the Termination
Date be extended beyond December 11, 1999. In connection with each such
extension request, (i) each Bank shall undertake a bona fide credit analysis of
the Borrowers utilizing current information on financial condition and trends;
provided, that, no such credit analysis shall be required of a Bank that elects
not to extend the Termination Date and (ii) the terms of any extension of the
Termination Date shall be independently negotiated among the Borrowers, the
Domestic Banks and the Domestic Agent at the time of the extension; provided,
that, the terms of the extension may be the same as those in effect prior to
any extension should the Borrowers, the Domestic Banks and the Domestic Agent
so agree; provided, further, that, should the terms of the extension be other
than those in effect prior to the extension, then the Loan Documents will be
amended to the extent necessary to incorporate any such different terms. In
the event that the Domestic Agent or a Bank chooses to extend the Termination
Date for such an additional 364-day period, notice shall be given by the
Domestic Agent or Bank to the Borrowers and the Agents at least 15 days prior
to the relevant Termination Date, but such notice may not be given more than 30
days prior to such relevant Termination Date; provided, that, the Termination
Date shall not be extended with respect to the Domestic Agent or any of the
Domestic Banks (regardless of whether any relevant Domestic Bank has delivered
a favorable extension notice) unless the Domestic Agent and the Required
Domestic Banks have delivered favorable extension notices and are willing to
extend the Termination Date and either the (x) remaining Domestic Banks shall
purchase ratable assignments (without any obligation so to do) from each Bank
that is unwilling to extend the Termination Date, in accordance with their
respective percentage of the remaining Commitments; provided, that, such
remaining Domestic Banks shall be provided such opportunity (which opportunity
shall allow such Domestic Banks at least 5 Domestic Business Days in which to
make a decision) prior to the Borrowers finding another bank pursuant to the
immediately succeeding clause (y); provided, further, that, should any of the
remaining Domestic Banks elect not to purchase such an assignment, then, such
other remaining Domestic Banks shall be entitled to purchase, on the then
scheduled Termination Date, an assignment from any terminating Bank which
includes the ratable interest that was otherwise available to such
non-purchasing remaining Domestic Bank or Domestic Banks, as the case may be,
(y) the Borrowers may, at their option, find another bank,
29
<PAGE> 37
acceptable to the Agents, willing to accept, on the then scheduled Termination
Date, an assignment from such terminating Bank (in the form of an Assignment
and Acceptance) or (z) the Borrowers shall reduce the Dollar Loan Commitments
on the then scheduled Termination Date in an amount equal to the sum of the
Dollar Loan Commitments of all such terminating Domestic Banks; and provided,
further, that should the Domestic Agent not elect to extend the Termination
Date but the Required Domestic Banks do so elect, the Required Domestic Banks
shall select a replacement Domestic Agent pursuant to Section 8.09. In the
event that the Borrowers elect to terminate a portion of the Dollar Loan
Commitments as provided in clause (z) of this paragraph, at any time after the
date of such termination and prior to the Termination Date (as extended) if the
Borrowers find a replacement bank or financial institution acceptable to the
Domestic Agent to become a party to this Agreement with a Dollar Loan
Commitment equal to all or a portion of the Dollar Loan Commitment of the
Domestic Bank whose Dollar Loan Commitment was so terminated, then upon such
new bank or financial institution's execution and delivery of a copy of this
Agreement, and funding to the Domestic Agent (for pro rata distribution to the
other Domestic Banks) of its ratable share of any outstanding Syndicated Dollar
Loans, such bank or financial institution shall become a "Domestic Bank"
hereunder, and the aggregate amount of the Dollar Loan Commitments shall
increase by the amount of the Dollar Loan Commitment of such new Domestic Bank.
The Domestic Agent agrees to cooperate with the Borrowers to find a replacement
bank or financial institution in any of the circumstances for such replacement
contemplated by this Section 2.05(c).
SECTION 2.06. Interest Rates. (a) "Applicable Margin" means
(i) for any Base Rate Loan, 0.00% and (ii) for any Euro-Dollar Loan, 0.30%.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Base Rate Loan is
made until it becomes due, at a rate per annum equal to the Base Rate for such
day plus the Applicable Margin. Such interest shall be payable for each
Interest Period on the last day thereof. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus the
applicable Adjusted London Interbank Offered Rate for such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than 3 months, at intervals of 3 months
after the first day thereof. Any overdue principal of and, to the extent
permitted by law, overdue interest on any Euro-Dollar
30
<PAGE> 38
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan,the
rate per annum determined on the basis of the offered rate for deposits in
Dollars of amounts equal or comparable to the principal amount of such
Euro-Dollar Loan offered for a term comparable to such Interest Period, which
rates appear on Telerate Page 3750 as of 11:00 A.M., London time, 2 Euro-Dollar
Business Days prior to the first day of such Interest Period, provided that (i)
if no such offered rates appear on such page, the "London Interbank Offered
Rate" for such Interest Period will be the arithmetic average (rounded upward,
if necessary, to the next higher 1/100th of 1%) of rates quoted by not less
than 2 major banks in New York City, selected by the Domestic Agent, at
approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior
to the first day of such Interest Period, for deposits in Dollars offered to
leading European banks for a period comparable to such Interest Period in an
amount comparable to the principal amount of such Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office
of any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) After the occurrence and during the continuance of an
Event of Default, the principal amount of the Syndicated Dollar Loans and Money
Market Loans (and, to the extent permitted by applicable law, all accrued
interest thereon) may, at the election of the Required Domestic Banks, bear
interest at the Default Rate.
SECTION 2.07. Fees. (a) The Borrowers shall pay to the
Domestic Agent for the ratable account of each Bank a facility fee (the "Dollar
Loan Facility Fee") on the maximum amount of the aggregate Dollar Loan
Commitments in effect for any relevant period, irrespective of usage, in an
amount equal to 0.15% per
31
<PAGE> 39
annum. The Dollar Loan Facility Fee shall accrue at all times from and
including the Closing Date to but excluding the Termination Date and shall be
payable, in arrears, on each November 1, February 1, May 1, August 1 and on
the Termination Date, commencing February 1, 1996 (on which date the fees for
the period from the Closing Date through January 30, 1996 shall be prorated).
(b) The Borrowers shall pay to the Domestic Agent, for
the account and sole benefit of the Domestic Agent, such fees and other amounts
at such times as set forth in the Agents' Letter Agreement.
SECTION 2.08. Optional Termination or Reduction of Dollar Loan
Commitments. The Borrowers may, upon at least 3 Domestic Business Days'
notice to the Domestic Agent (which notice the Domestic Agent shall promptly
forward to the Foreign Currency Agent and the Domestic Banks), terminate at any
time, or proportionately reduce the Unused Dollar Loan Commitments from time to
time by an aggregate amount of at least $5,000,000, or any larger multiple of
$1,000,000. If the Dollar Loan Commitments are terminated in their entirety,
all outstanding principal and accrued and unpaid interest (as provided in
Section 2.11) and accrued fees (as provided in Section 2.07) shall be due and
payable on the effective date of such termination.
SECTION 2.09. Other Terminations of Dollar Loan Commitments;
Change in Control. (a) The Dollar Loan Commitments shall terminate on the
Termination Date, in which case any Dollar Loans (together with accrued
interest thereon, and all accrued fees, as provided in Section 2.07) then
outstanding shall be due and payable on such date.
(b) The Parent shall give notice to the Domestic Agent of the
occurrence of any Change of Control promptly after the senior management of the
Parent obtains knowledge thereof, and shall offer to terminate the Dollar Loan
Commitments of all of the Domestic Banks on a date specified in such notice,
which shall be not less than 30 nor more than 45 days after the date of such
notice. Such notice also shall specify the date by which each Domestic Bank
that wishes to accept such offer must deliver notice to the Parent (with a copy
to the Domestic Agent) of such acceptance, which date shall be no later than 10
days prior to the date of the proposed termination. If any Domestic Bank shall
accept such offer, then on the date so specified, the Dollar Loan Commitment of
such Domestic Bank shall terminate on the date so specified in the Parent's
notice (which date shall become the Termination Date for those Domestic Banks
for all purposes hereunder), and any Dollar Loans (together with accrued
interest thereon, and all accrued fees, as provided in Section 2.07) then
outstanding shall be due and payable on such date.
SECTION 2.10. Optional Prepayments. (a) The Borrowers may,
upon at least 1 Domestic Business Day's notice to the Domestic Agent (which
notice the Domestic Agent shall promptly forward to
32
<PAGE> 40
the Domestic Banks) and payment to the Domestic Agent, for the ratable benefit
of the Domestic Banks, of any amounts required by Section 9.05, prepay any
Dollar Borrowing in whole or in part at any time, in minimum amounts of
$500,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment
shall be applied to prepay ratably the Dollar Loans of the several Domestic
Banks included in such relevant Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to
this Section 2.10, the Domestic Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share of such prepayment and such
notice shall not thereafter be revocable by the Borrowers.
SECTION 2.11. Mandatory Prepayments. On each date on which
the Dollar Loan Commitments are reduced pursuant to Sections 2.08 or 2.09, the
Borrowers shall repay or prepay such principal amount of the outstanding Dollar
Loans (together with interest accrued thereon), as may be necessary so that
after such payment the aggregate unpaid principal amount of the Dollar Loans
does not exceed the amount of the aggregate Dollar Loan Commitments as then
reduced.
SECTION 2.12. General Provisions as to Payments. (a) The
Borrowers shall make each payment of principal of, and interest on, the Dollar
Loans and of the Dollar Loan Facility Fees not later than 1:00 P.M. (Atlanta,
Georgia time) on the date when due, without offset, in Federal or other funds
immediately available in Atlanta, Georgia, to the Domestic Agent at its address
referred to in Section 8.01. The Domestic Agent will promptly distribute to
each Domestic Bank (and, following the occurrence and during the continuance of
an Event of Default, for application by such Domestic Bank against amounts
owing to such Domestic Bank by the Borrowers in such order as such Domestic
Bank shall elect; provided, that in no event shall amounts paid by one Borrower
(other than Parent) be applied to the payment of any amount owed by any other
Borrower) its ratable share of each such payment received by the Domestic Agent
for the account of the Domestic Banks; provided, that, should the Domestic
Agent actually receive any relevant payment from the Borrowers prior to 1:00
P.M. (Atlanta, Georgia time) on the date when due, the Domestic Agent shall
initiate the distribution process (by wire or otherwise) to such Domestic Bank
of each such Domestic Bank's ratable portion of any payment received by the
Domestic Agent prior to 5:00 P.M. (Atlanta, Georgia time).
(b) Whenever any payment of principal of, or interest on,
the Base Rate Loans or Money Market Loans or Dollar Loan Facility Fees shall be
due on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment
33
<PAGE> 41
thereof shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in which
case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day.
(c) All payments of principal, interest and all other
amounts to be made by a Borrower pursuant to this Agreement with respect to any
Dollar Loan and the Dollar Loan Facility Fee shall be paid without deduction
for, and free from, any tax, imposts, levies, duties, deductions, or
withholdings of any nature now or at anytime hereafter imposed by any
governmental authority or by any taxing authority thereof or therein excluding
in the case of each Domestic Bank, taxes imposed on or measured by its net
income, and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Domestic Bank (as the case may be) is organized or any political
subdivision thereof and, in the case of each Domestic Bank, taxes imposed on or
measured by its income, and franchise taxes imposed on it, by the jurisdiction
of such Domestic Bank's applicable Lending Office or any political subdivision
thereof and other than any tax arising by reason of a connection between the
Domestic Agent or such Domestic Bank or such Domestic Bank's Lending Office and
the jurisdiction imposing such tax other than the making and performance by the
Domestic Agent or such Domestic Bank of this Agreement (all such non-excluded
taxes, imposts, levies, duties, deductions or withholdings of any nature being
"Taxes"). In the event that a Borrower is required by applicable law to make
any such withholding or deduction of Taxes with respect to any Dollar Loan or
Dollar Loan Facility Fee or other amount, such Borrower shall pay such
deduction or withholding to the applicable taxing authority, shall promptly
furnish to any Domestic Bank in respect of which such deduction or withholding
is made all receipts and other documents evidencing such payment and shall pay
to such Domestic Bank additional amounts as may be necessary in order that the
amount received by such Domestic Bank after the required deduction or
withholding shall equal the amount such Domestic Bank would have received had
no such deduction or withholding been made.
Each Domestic Bank which is not chartered and organized under
the laws of the United States of America or a state thereof (each a "Non-U.S.
Domestic Bank") agrees, as soon as practicable after request by it of a request
by a Borrower to do so, to file all appropriate forms and take other
appropriate action to obtain a certificate or other appropriate document from
the appropriate governmental authority in the jurisdiction imposing the
relevant taxes, establishing that it is entitled to receive payments of
principal and interest under this Agreement and the Syndicated Dollar Loan
Notes and Money Market Loan Notes without deduction and free from withholding
of any Taxes imposed by such jurisdiction; provided, that, if it is unable, by
virtue of any applicable law, rule or regulation, to establish such exemption
or to file such forms and, in any event, during such period of time as such
request for exemption is pending, the Borrowers shall nonetheless remain
obligated under the terms of the immediately preceding paragraph.
34
<PAGE> 42
Without limiting the foregoing, each Non-U.S. Domestic Bank agrees to deliver
to the Borrowers, promptly upon any request therefor from time to time, such
forms, documents and other information as may be required by applicable law
from time to time to establish that payment to such Non-U.S. Domestic Bank
hereunder or under the Notes or the Parent Guaranty are exempt from Taxes.
Without limiting the generality of the foregoing, each Non-U.S. Domestic Bank
agrees, on the date of its execution of this Agreement (or, in the case of an
assignee, on the date on which such assignee becomes a party to this
Agreement), to deliver to the Borrowers two accurate and duly completed and
executed Internal Revenue Service Form 4224 or 1001 (as applicable), together
with Internal Revenue Service Forms W-8 or W-9, as appropriate, establishing
that such Non-U.S.Domestic Bank is entitled to a complete exemption from all
Taxes imposed by the federal government of the United States by way of
withholding, including without limitation, all backup withholding ("U.S.
Withholding Taxes"). Thereafter, from time to time (a) upon any change by a
Domestic Bank of its Lending Office, (b) before or promptly after any event
occurs (including, without limitation, the passing of time) requiring a change
in or update of the most recent Form 4224 or 1001 previously delivered by such
Domestic Bank, or (c) upon the reasonable request of any of the Borrowers from
time to time, deliver to each Borrower two accurate and duly completed and
executed Forms 4224 or 1001 (as applicable) (together with Forms W-8 or W-9, as
aforesaid) in replacement for the forms previously delivered by such Domestic
Bank, establishing that such bank is entitled to an exemption in whole or in
part from all U.S. Withholding Taxes except to the extent that a change in law
has rendered all such forms inapplicable to such Non-U.S. Domestic Bank.
If any such Domestic Bank shall fail to timely deliver any such forms,
documents or other information required to be delivered by it pursuant to the
foregoing for 30 days after request therefor, the Borrowers may make deductions
or withholdings of taxes and shall not be obligated to pay any additional
amounts in respect thereof to such Domestic Bank which would not have been
payable had such forms, documents or other information been delivered.
If the Internal Revenue Service or any other taxation
authority in the United States or in any other jurisdiction in which a Borrower
may be incorporated successfully asserts a claim that such Non-U.S. Domestic
Bank or any Borrower did not properly withhold tax from amounts paid to or for
the account of any Non-U.S. Domestic Bank or its participant (because the
appropriate form was not properly executed, or because such Non-U.S. Domestic
Bank failed to notify the Borrowers of a change in circumstances which rendered
the exemption from (or reduction in) U.S. Withholding Taxes ineffective), such
Domestic Bank, shall indemnify the Borrowers fully for all amounts paid,
directly or indirectly, by any of the Borrowers as tax or otherwise, including,
without limitation, penalties and interest.
35
<PAGE> 43
In the event any Domestic Bank receives a refund from the
authority to which such Taxes were paid of any Taxes paid by a Borrower
pursuant to this Section 2.12(c), it will pay to such Borrower the amount of
such refund promptly upon receipt thereof; provided, however, if at any time
thereafter it is required to return such refund, such Borrower shall promptly
repay to it the amount of such refund.
Nothing in this Section shall require any Domestic Bank to
disclose any information about its tax affairs or interfere with, limit or
abridge the right of any Domestic Bank to arrange its tax affairs in any manner
in which it desires.
Without prejudice to the survival of any other agreement of
the Borrowers hereunder, the agreements and obligations of the Borrowers and
the Domestic Banks contained in this Section 2.12(c) shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions (i) shall be made based upon the circumstances of
such Participant, Assignee or other Transferee (subject to Section 10.08(e)),
and (ii) constitute a continuing agreement and shall survive for a period of
three years after the termination of this Agreement and the payment in full or
cancellation of the Syndicated Dollar Loan Notes and the Money Market Loan
Notes.
SECTION 2.13. Computation of Interest and Fees. Interest on
the Dollar Loans shall be computed on the basis of a year of (i) 365/366 days
as to Base Rate Loans, and (ii) 360 days as to all other Dollar Loans and paid
for the actual number of days elapsed, calculated as to each Interest Period or
Stated Maturity Date, as applicable, from and including the first day thereof
to but excluding the last day thereof. The Dollar Loan Facility Fee and the
Syndicated Foreign Currency Loan Facility Fee and any other fees payable
hereunder from time to time shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day
but excluding the last day).
ARTICLE III
THE FOREIGN CREDITS
SECTION 3.01. Commitments to Lend. (a) Each Foreign Currency
Bank severally agrees, on the terms and conditions set forth herein, to make
Syndicated Foreign Currency Loans to the Borrowers (which may be, at the option
of the Borrowers and subject to the terms and conditions hereof, Fixed Rate
Loans in any of the Foreign Currencies other than ITL, subject to the
availability thereof) from time to time before the Termination Date; provided
that, immediately after each such Syndicated Foreign Currency Loan is made, (i)
the aggregate outstanding of its share of the Dollar Equivalent on such date of
all Syndicated Foreign Currency Loans by such Foreign Currency Bank shall not
exceed the amount of its Syndicated Foreign Currency Loan Commitment, except
that, solely in connection with a Refunding Loan, if by virtue of currency rate
36
<PAGE> 44
fluctuations since the maturing Loan was made, the Dollar Equivalent of the
amount of the Refunding Loan on the date the Refunding Loan is made would cause
the aggregate outstanding of its share of the Dollar Equivalent on such date of
all Syndicated Foreign Currency Loans by such Foreign Currency Bank to exceed
the amount of its Syndicated Foreign Currency Loan Commitment by an amount
which is less than 2.5% of such Syndicated Foreign Currency Loan Commitment,
the Foreign Currency Agent may, in its sole and absolute discretion, permit
such a condition to exist, and (ii) the aggregate principal amount outstanding
of the sum of the Dollar Equivalent on such date of all ITL Loans by ABN AMRO
and all Syndicated Dollar Loans, Money Market Loans and the aggregate of the
Dollar Equivalent on such date of all Syndicated Foreign Currency Loans by all
Banks shall not exceed the aggregate of all of the Commitments, except as
expressly permitted by clause (i) above and by clause (i) of Section 3.01(b).
With respect to Syndicated Foreign Currency Loans, the Foreign Currency Agent
shall be responsible only for determining compliance with clause (i) of the
foregoing proviso. Any Borrower shall be permitted, subject to the terms and
conditions hereof, to obtain Syndicated Foreign Currency Loans in an
approximate Dollar Equivalent on such date up to the full aggregate amount of
the Unused Syndicated Foreign Currency Loan Commitments of all Foreign Currency
Banks. The aggregate of the Dollar Equivalent on such date outstanding of all
Syndicated Foreign Currency Loans by each Foreign Currency Bank shall be deemed
to be the amount of the Syndicated Foreign Currency Loan of such Foreign
Currency Bank outstanding for the purpose of calculating its Unused Syndicated
Foreign Currency Loan Commitment on the date of disbursement. Each Borrowing
under this Section with respect to a Foreign Currency shall be in a minimum and
integral multiple of the amount agreed upon between the relevant Borrower and
the Foreign Currency Agent before the delivery of the relevant Notice of
Foreign Currency Borrowing, which will in any event approximate in the relevant
Foreign Currency the Dollar Equivalent on the date which is 3 Foreign Currency
Business Days prior to the date of Borrowing of $250,000 or any larger multiple
of $100,000 in excess of $250,000 (except that any such Borrowing may be in the
approximate aggregate amount of the Unused Syndicated Foreign Currency Loan
Commitments) and shall be made from the several Foreign Currency Banks ratably
in proportion to their respective Syndicated Foreign Currency Loan Commitments.
Within the foregoing limits, the Borrowers may borrow under this Section, repay
or, to the extent permitted by Section 3.09, prepay Syndicated Foreign Currency
Loans and reborrow under this Section at any time before the Termination Date.
(b) ABN AMRO agrees, on the terms and conditions set forth
herein, to make ITL Loans to the Borrowers (which may be, at the option of the
Borrowers and subject to the terms and conditions hereof, ITL Base Rate Loans
or ITL Fixed Rate Loans in ITL, subject to the availability thereof) from time
to time before the Termination Date; provided that, immediately after each such
ITL Loan is made, (i) the aggregate outstanding of the Dollar Equivalent on
such date of all ITL Loans by ABN AMRO shall not
37
<PAGE> 45
exceed the amount of its ITL Loan Commitment, except that, solely in connection
with a Refunding Loan, if by virtue of currency rate fluctuations since the
maturing Loan was made, the Dollar Equivalent of the amount of the Refunding
Loan on the date the Refunding Loan is made would cause the aggregate
outstanding of the Dollar Equivalent on such date of all ITL Loans by ABN AMRO
to exceed the amount of its ITL Loan Commitment by an amount which is less than
2.5% of such ITL Loan Commitment, ABN AMRO may, in its sole and absolute
discretion, permit such a condition to exist, and (ii) the aggregate principal
amount outstanding of the sum of the Dollar Equivalent on such date of all ITL
Loans by ABN AMRO and all Syndicated Dollar Loans, Money Market Loans and the
aggregate of the Dollar Equivalent on such date of all Syndicated Foreign
Currency Loans by all Banks shall not exceed the aggregate of all of the
Commitments, except as expressly permitted by clause (i) of Section 3.01(a) and
by clause (i) of this Section 3.01(b). With respect to ITL Loans, ABN AMRO
shall be responsible only for determining compliance with clause (i) of the
foregoing proviso. Any Borrower shall be permitted, subject to the terms and
conditions hereof, to obtain ITL Loans in an approximate Dollar Equivalent on
such date up to the full aggregate amount of the unused ITL Loan Commitment.
The aggregate of the Dollar Equivalent on any date of all ITL Loans outstanding
on such date by ABN AMRO shall be deemed to be the amount of the Loan of ABN
AMRO outstanding for the purpose of calculating its unused ITL Loan Commitment
on the date of disbursement. Each Borrowing under this Section with respect to
ITL shall be in a minimum and integral multiple of the amount agreed upon
between the relevant Borrower and ABN AMRO before the delivery of the relevant
Notice of ITL Borrowing, which will in any event approximate in ITL the Dollar
Equivalent on such date of $500,000 or any larger multiple of the Dollar
Equivalent on such date of $100,000 (except that such Borrowing may be in the
approximate aggregate amount of the unused ITL Loan Commitments) and shall be
made available by ABN AMRO. Within the foregoing limits, the Borrowers may
borrow under this Section, repay or, to the extent permitted by Section 3.09,
prepay ITL Loans and reborrow under this Section at any time before the
Termination Date.
SECTION 3.02. Method of Borrowing. (a) (1) For Syndicated
Foreign Currency Borrowings, a Borrower shall give the Foreign Currency Agent,
c/o FC&AS at the Agency Office, notice (a "Notice of Syndicated Foreign
Currency Borrowing"), which shall be substantially in the form of Exhibit G-1,
prior to 11:00 A.M. London, England time) at least 3 Foreign Currency Business
Days before each Syndicated Foreign Currency Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Foreign
Currency Business Day in the Agency Office,
(ii) the Foreign Currency which such Borrower desires to
borrow (which, except for Parent and SDI, must be the Foreign Currency
of the jurisdiction in which such Borrower is
38
<PAGE> 46
incorporated, as specified on the signature pages hereof) and the
approximate amount thereof in such Foreign Currency, and
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period.
(2) For ITL Borrowings, a Borrower shall give ABN AMRO, at the
Milan Office, notice (a "Notice of ITL Borrowing"), which shall be
substantially in the form of Exhibit G-2, prior to 11:00 A.M. Milan, Italy
time) at least 1 Foreign Currency Business Day before each ITL Base Rate
Borrowing, and at least 3 Foreign Currency Business Days before each ITL Fixed
Rate Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Foreign
Currency Business Day in the Milan Office,
(ii) the approximate amount in ITL,
(iii) whether the ITL Loans comprising such Borrowing are to
be ITL Base Rate Loans or ITL Fixed Rate Loans, and
(iv) in the case of an ITL Fixed Rate Borrowing, the duration
of the Interest Period applicable thereto, subject to the provisions
of the definition of Interest Period.
(b) (1) For Syndicated Foreign Currency Borrowings, upon
receipt of a Notice of Syndicated Foreign Currency Borrowing, the Foreign
Currency Agent shall promptly determine the Dollar Equivalent on such date
thereof (taking into account the provisions of Section 3.02(d), if applicable),
and notify each Foreign Currency Bank of the contents of such Notice of
Syndicated Foreign Currency Borrowing, of such Dollar Equivalent on such date
of the amount of such Borrowing in the relevant Foreign Currency, and of such
Foreign Currency Bank's ratable share of such Borrowing, and such Notice of
Syndicated Foreign Currency Borrowing shall not thereafter be revocable by the
Borrower.
(2) For ITL Borrowings, upon receipt of a Notice of ITL
Borrowing, ABN AMRO shall promptly determine the Dollar Equivalent thereof on
such date (taking into account the provisions of Section 3.02(d), if
applicable), and notify the Foreign Currency Agent of the Dollar Equivalent on
such date and of the amount of such Borrowing in the relevant Foreign Currency
and such Notice of ITL Borrowing shall not thereafter be revocable by the
Borrower.
(c) (1) For Syndicated Foreign Currency Borrowings, not later
than 11:00 A.M. (London, England time) on the date of each Syndicated Foreign
Currency Borrowing, each Foreign Currency Bank shall (except as provided in
paragraph (d) of this Section) make available its ratable share of such
Syndicated Foreign Currency Borrowing, in Federal or other funds immediately
available in Amsterdam, The Netherlands, to the Foreign Currency Agent at the
39
<PAGE> 47
Agency Office, which funds shall be in the applicable Foreign Currency. Unless
the Foreign Currency Agent determines that any applicable condition specified
in Article IV has not been satisfied, the Foreign Currency Agent will make the
funds so received from the Foreign Currency Banks available to the Borrower by
wire transfer (free of wire transfer charges imposed by the Foreign Currency
Agent) at the bank account specified by, and in the name of, such Borrower.
Unless the Foreign Currency Agent receives notice from a Foreign Currency Bank,
at the Agency Office, no later than 11:00 A.M. (London, England time) on the
Foreign Currency Business Day before the date of such Syndicated Foreign
Currency Borrowing, stating that such Foreign Currency Bank will not make a
Loan in connection with such Syndicated Foreign Currency Borrowing, the Foreign
Currency Agent shall be entitled to assume that such Foreign Currency Bank will
make a Loan in connection with such Syndicated Foreign Currency Borrowing and,
in reliance on such assumption, the Foreign Currency Agent may (but shall not
be obligated to) make available such Foreign Currency Bank's ratable share of
such Syndicated Foreign Currency Borrowing to the Borrower for the account of
such Foreign Currency Bank. If the Foreign Currency Agent makes such Foreign
Currency Bank's ratable share available to the Borrower and such Foreign
Currency Bank does not in fact make its ratable share of such Borrowing
available on such date, the Foreign Currency Agent shall be entitled to recover
such Foreign Currency Bank's ratable share from such Foreign Currency Bank or,
promptly upon request therefor, the Borrower, together with interest thereon
for each day during the period from the date of such Borrowing until such sum
shall be paid in full at a rate per annum equal to the rate at which the
Foreign Currency Agent determines that it obtained (or could have obtained)
overnight funds to cover such amount for each such day during such period,
provided that any such payment by the Borrower of such Foreign Currency Bank's
ratable share and interest thereon shall be without prejudice to any rights
that the Borrower may have against such Foreign Currency Bank. If the Foreign
Currency Agent does not exercise its option to advance funds for the account of
such Foreign Currency Bank, it shall forthwith notify the Borrower of such
decision.
(2) For ITL Borrowings, unless ABN AMRO determines that any
applicable condition specified in Article IV has not been satisfied, it will
make the relevant ITL Loan available to the Borrower by wire transfer (free of
wire transfer charges imposed by the Foreign Currency Agent) at the bank
account specified by, and in the name of, such Borrower.
(d) If any Foreign Currency Loan is to be continued beyond the
Interest Period applicable thereto (a "maturing loan"), it shall be made as a
new Loan (a "new Loan"), and a new Notice of Borrowing shall be submitted in
connection therewith, but subject to the following provisions:
(i) If such new Loan is to Parent or SDI and is in a different
currency (the "new currency") from that in which the
40
<PAGE> 48
maturing Loan is denominated (the "old currency"), the maturing Loan
shall be repaid by the relevant Borrower in full at the end of its
current Interest Period in the old currency, and, subject to the
provisions of this Agreement, shall be re-advanced in the new
currency. If both the maturing Loan and the new Loan are Syndicated
Foreign Currency Loans, the amount of each Foreign Currency Bank's
share of such new Loan will be determined by converting its share of
the Dollar Equivalent on the date of the conversion of the maturing
Loan into the new currency and determining its share of the Dollar
Equivalent on the date of conversion of such new Loan.
(ii) If any Foreign Currency Bank or ABN AMRO makes a new Loan
hereunder on a day on which the relevant Borrower is to repay all or
any part of a maturing Loan in the same Foreign Currency from such
Foreign Currency Bank or in ITL from ABN AMRO, such Foreign Currency
Bank or ABN AMRO, as applicable, shall apply the proceeds of its new
Loan to make such repayment and only an amount equal to the difference
(if any) between the amount being borrowed and the amount being repaid
shall be made available by such Foreign Currency Bank to the Foreign
Currency Agent at the Agency Office for the relevant Borrower or
funded by ABN AMRO to the relevant Borrower, as applicable, as
provided in paragraph (c) of this Section, or remitted by the Borrower
to the Foreign Currency Agent at the Agency Office or ABN AMRO at the
Milan Office, as applicable, as provided in Section 2.12, as the case
may be.
(e) Notwithstanding anything to the contrary contained in
this Agreement, no Fixed Rate Loans may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not
have been cured or waived.
(f) In the event that a Notice of ITL Borrowing fails to
specify whether the ITL Loans comprising such ITL Borrowing are to be ITL Base
Rate Loans or ITL Fixed Rate Loans, such Loans shall be made as ITL Base Rate
Loans. If the Borrower is otherwise entitled under this Agreement to repay any
Syndicated Foreign Currency Loans or ITL Loans maturing at the end of an
Interest Period applicable thereto with the proceeds of a new Syndicated
Foreign Currency Borrowing or ITL Borrowing, as the case may be, and the
Borrower fails to repay such Syndicated Foreign Currency Loans or ITL Loans
using its own moneys and fails to give a Notice of Borrowing in connection with
such new Syndicated Foreign Currency Borrowing or ITL Borrowing, as the case
may be, a new Foreign Currency Borrowing in the same Foreign Currency as such
maturing Foreign Currency Loans shall be deemed to be made on the date such
Foreign Currency Loans mature in an amount determined pursuant to paragraph (d)
above and (i) any Syndicated Foreign Currency Loans comprising such new
Foreign Currency Borrowing shall have an Interest Period determined by the
Foreign Currency Agent, or (ii) any ITL Loans comprising such new ITL Borrowing
shall be ITL Base Rate Loans.
41
<PAGE> 49
(g) Notwithstanding anything to the contrary contained
herein, there shall not be more than (i) one 14 day Interest Period made
available per month for Syndicated Foreign Currency Loans made in each of BFR,
GBP, DEM and FFR, and (ii) an aggregate of one hundred Syndicated Foreign
Currency Loans (including any with 14 day Interest Periods) made available per
year.
SECTION 3.03. Notes. (a) The Syndicated Foreign Currency
Loans of each Foreign Currency Bank shall be evidenced by a single Syndicated
Foreign Currency Loan Note, payable to the order of such Foreign Currency Bank
for the account of its Lending Office. The ITL Loans of ABN AMRO shall be
evidenced by the ITL Loan Note, payable to the order of ABN AMRO for the
account of the Milan Office.
(b) Upon receipt of each Foreign Currency Bank's Syndicated
Foreign Currency Loan Note and the ITL Loan Note pursuant to Section 3.01, the
Foreign Currency Agent shall deliver such Note to such Foreign Currency Bank
and ABN AMRO, as applicable. Each Foreign Currency Bank and ABN AMRO shall
record, and prior to any transfer of its Syndicated Foreign Currency Loan Note
or the ITL Loan Note shall endorse on the schedule forming a part of such Note
notations to evidence the date, amount, maturity and (as to Syndicated Foreign
Currency Loans) Foreign Currency of, and effective interest rate for, each
Foreign Currency Loan made by it, the date and amount of each payment of
principal made by the Borrower with respect thereto, and such schedule to each
Syndicated Foreign Currency Note or ITL Loan Note shall constitute rebuttable
presumptive evidence of the principal amount owing and unpaid on such
Syndicated Foreign Currency Bank's Syndicated Foreign Currency Loan Note or on
the ITL Loan Note, as applicable; provided that the failure of any Foreign
Currency Bank or ABN AMRO to make any such recordation or endorsement shall not
affect the obligation of the Borrowers hereunder or under the Syndicated
Foreign Currency Loan Notes or ITL Loan Note, or the ability of any Foreign
Currency Bank or ABN AMRO to assign its Syndicated Foreign Currency Loan Note
or ITL Loan Note. Each Foreign Currency Bank and ABN AMRO, as the case may be,
is hereby irrevocably authorized by the Borrowers so to endorse its Syndicated
Foreign Currency Loan Note or ITL Loan Note, as applicable, and to attach to
and make a part of any Syndicated Foreign Currency Loan Note or ITL Loan Note,
as applicable, a continuation of any such schedule as and when required.
SECTION 3.04. Maturity of Foreign Currency Loans. (a) Each
Foreign Currency Loan included in any Borrowing shall mature, and the principal
amount thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal
amount of the Syndicated Foreign Currency Loans together with all accrued but
unpaid interest therein, if any, shall be due and payable on December 10, 1996,
unless the Termination Date is otherwise extended by the Foreign Currency Agent
and the Foreign
42
<PAGE> 50
Currency Banks, in their sole and absolute discretion. Upon the written request
of the Borrower, which request shall be delivered to the Foreign Currency
Agent, with a copy to the Domestic Agent and each of the Foreign Currency
Banks, at least 30 days but not more than 45 days prior to the Termination
Date, the Foreign Currency Agent and the Foreign Currency Banks shall have the
option (without any obligation whatsoever so to do) of extending the
Termination Date for an additional 364-day period, provided, that, in no event
shall the Termination Date be extended beyond December 11, 1999. In connection
with each such extension request, (i) each Foreign Currency Bank shall
undertake a bona fide credit analysis of the Borrowers utilizing current
information on financial condition and trends; provided, that, no such credit
analysis shall be required of a Foreign Currency Bank that elects not to extend
the Termination Date and (ii) the terms of any extension of the Termination
Date shall be independently negotiated among the Borrowers, the Foreign
Currency Banks and the Foreign Currency Agent at the time of the extension;
provided, that, the terms of the extension may be the same as those in effect
prior to any extension should the Borrowers, the Foreign Currency Banks and the
Foreign Currency Agent so agree; provided, further, that, should the terms of
the extension be other than those in effect prior to the extension, then the
Loan Documents will be amended to the extent necessary to incorporate any such
different terms. In the event that the Foreign Currency Agent or a Foreign
Currency Bank chooses to extend the Termination Date for such an additional
364-day period, notice shall be given by the Foreign Currency Agent or Foreign
Currency Bank to the Borrowers and the Agents at least 15 days prior to the
relevant Termination Date, but such notice may not be given more than 30 days
prior to such relevant Termination Date; provided, that, the Termination Date
shall not be extended with respect to the Foreign Currency Agent or any of the
Foreign Currency Banks (regardless of whether any relevant Foreign Currency
Bank has delivered a favorable extension notice) unless the Foreign Currency
Agent and the Required Foreign Currency Banks have delivered favorable
extension notices and are willing to extend the Termination Date and either the
(x) remaining Foreign Currency Banks shall purchase ratable assignments
(without any obligation so to do) from each Bank that is unwilling to extend
the Termination Date, in accordance with their respective percentage of the
remaining Commitments; provided, that, such remaining Foreign Currency Banks
shall be provided such opportunity (which opportunity shall allow such Foreign
Currency Banks at least 5 Domestic Business Days in which to make a decision)
prior to the Borrowers finding another bank pursuant to the immediately
succeeding clause (y); provided, further, that, should any of the remaining
Foreign Currency Banks elect not to purchase such an assignment, then, such
other remaining Foreign Currency Banks shall be entitled to purchase, on the
then scheduled Termination Date, an assignment from any terminating Bank which
includes the ratable interest that was otherwise available to such non-
purchasing remaining Foreign Currency Bank or Foreign Currency Banks, as the
case may be, (y) the Borrowers may, at their option, find another bank,
acceptable to the Agents, willing to accept, on the then
43
<PAGE> 51
scheduled Termination Date, an assignment from such terminating Bank (in the
form of an Assignment and Acceptance) or (z) the Borrowers shall reduce the
Syndicated Foreign Currency Loan Commitments on the then scheduled Termination
Date in an amount equal to the sum of the Syndicated Foreign Currency Loan
Commitments of all such terminating Foreign Currency Banks; and provided,
further, that should the Foreign Currency Agent not elect to extend the
Termination Date but the Required Foreign Currency Banks do so elect, the
Required Foreign Currency Banks shall select a replacement Foreign Currency
Agent pursuant to Section 8.09. The ITL Loan Note shall be payable on the date
that the Syndicated Foreign Currency Loan Note of ABN AMRO is payable pursuant
to the foregoing, and if ABN AMRO extends or terminates its Syndicated Foreign
Currency Loan Commitment pursuant to the foregoing, the ITL Loan Commitment
likewise shall be deemed to have been extended or terminated. In the event that
the Borrowers elect to terminate a portion of the Foreign Currency Loan
Commitments as provided in clause (z) of this paragraph, at any time after the
date of such termination and prior to the Termination Date (as extended) if the
Borrowers find a replacement bank or financial institution acceptable to the
Foreign Currency Agent to become a party to this Agreement with a Syndicated
Foreign Currency Loan Commitment equal to all or a portion of the Syndicated
Foreign Currency Loan Commitment of the Foreign Currency Bank whose Syndicated
Foreign Currency Loan Commitment was so terminated, then upon such new bank or
financial institution's execution and delivery of a copy of this Agreement, and
funding to the Foreign Currency Agent (for pro rata distribution to the other
Foreign Currency Banks) of its ratable share of any outstanding Syndicated
Foreign Currency Loans, such bank or financial institution shall become a
"Foreign Currency Bank" hereunder, and the aggregate amount of the Syndicated
Foreign Currency Loan Commitments shall increase by the amount of the
Syndicated Foreign Currency Loan Commitment of such new Foreign Currency Bank.
The Foreign Currency Agent agrees to cooperate with the Borrowers to find a
replacement bank or financial institution in any of the circumstances for such
replacement contemplated by this Section 3.04(b).
SECTION 3.05. Interest Rates. (a) "Applicable Margin" means
(i) for any ITL Base Rate Loan, 0.30%, and (ii) for any ITL Fixed Rate Loan or
Syndicated Foreign Currency Loan, 0.30%.
(b) Each ITL Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to the ITL Base Rate for
such day plus the Applicable Margin. Such interest shall be payable for each
Interest Period on the last day thereof. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on any ITL Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the Default Rate.
(c) Each Syndicated Foreign Currency Loan or ITL Fixed Rate
Loan shall bear interest on the outstanding principal amount
44
<PAGE> 52
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the sum of the Applicable Margin plus the applicable Foreign Currency
LIBOR/Reference Rate for such Interest Period. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period
is longer than 6 months, at intervals of 6 months after the first day thereof.
Any overdue principal of and, to the extent permitted by law, overdue interest
on any Foreign Currency Fixed Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the Default Rate.
"Foreign Currency LIBOR/Reference Rate" means, for any
Interest Period, with respect to Syndicated Foreign Currency Loans and ITL
Fixed Rate Loans, the offered rate for deposits in the applicable Foreign
Currency, for a period comparable to the Interest Period and in an amount
comparable to the amount of such Foreign Currency Fixed Rate Loan appearing on
Telerate Page 3750 (or, if it is unavailable from Telerate for any reason, by
reference to the Reuters Screen) as of 11:00 A.M. (London, England time) on the
day that is 2 Foreign Currency Business Days prior to the first day of the
Interest Period; provided, that if the foregoing rate is unavailable from
Telerate or the Reuters Screen for any reason, then such rate shall be the
interest rate per annum, equal to the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a multiple)
of the rate per annum at which deposits in the relevant Foreign Currency are
offered by the principal office of each of the Foreign Currency Reference Banks
to prime banks in the relevant interbank market at 11:00 A.M. (London, England
time) 2 Foreign Currency Business Days prior to the first day of the Interest
Period for a period comparable to the Interest Period and in an amount
comparable to the amount of such Foreign Currency Fixed Rate Loan, determined
by the Foreign Currency Agent on the basis of applicable rate furnished to and
received by the Foreign Currency Agent at the Agency Office 2 Foreign Currency
Business Days prior to the first day of the Interest Period.
In addition, the relevant Borrower shall pay to each Foreign
Currency Bank, so long as such Foreign Currency Bank shall be required (A)
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (a "U.S. Reserves Foreign Currency Bank"),
or (B) under regulations of the Bank of England to maintain reserves with
respect to liabilities or assets consisting of or including Foreign Currency
Loans made in GBP (a "British Reserves Foreign Currency Bank"), or (C) under
regulations of any other applicable authority in any other country to maintain
reserves with respect to liabilities or assets consisting of or including
Foreign Currency Loans made in the Foreign Currency of such country (an "Other
Country Reserves Foreign Currency Bank") additional interest on the unpaid
principal amount of each Syndicated Foreign Currency Loan of such Foreign
Currency Bank during such periods as such Syndicated Foreign Currency Loan is a
Eurocurrency Liability, from the date of
45
<PAGE> 53
such Syndicated Foreign Currency Loan until such principal amount is paid un
full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Foreign Currency LIBOR/Reference Rate for such
Interest Period for such Syndicated Foreign Currency Loan from (ii) the rate
obtained by dividing such Foreign Currency LIBOR/Reference Rate by a percentage
equal to 100% minus (x) as to a U.S. Reserves Foreign Currency Bank, the
Eurocurrency Liability Reserve Percentage of such Foreign Currency Bank for
such Interest Period, and (y) as to a British Reserves Foreign Currency Bank
and an Other Country Foreign Currency Reserves Bank, a percentage sufficient to
compensate such Bank for any increase during such Interest Period in any
reserves, liquidity and/or special deposit requirements of the Bank of England
or such other applicable authority directly or indirectly affecting the
maintenance or funding of such Foreign Currency Loan in GBP or such other
Foreign Currency, payable on each date on which interest is payable on such
Syndicated Foreign Currency Loan. Such additional interest shall be determined
by such Bank and notified to the relevant Borrowers through the Foreign
Currency Agent.
(d) The Foreign Currency Agent shall determine each interest
rate applicable to the Syndicated Foreign Currency Loans hereunder and shall
give prompt notice to the Borrower and the Foreign Currency Banks by telecopier
of each rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error. ABN AMRO shall determine each
interest rate applicable to the ITL Loans hereunder and shall give prompt
notice to the Borrower by telecopier of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of manifest
error.
(e) After the occurrence and during the continuance of an
Event of Default, the principal amount of the Syndicated Foreign Currency Loans
and ITL Loans (and, to the extent permitted by applicable law, all accrued
interest thereon) may, at the election of the Required Foreign Currency Banks,
bear interest at the Default Rate.
SECTION 3.06. Fees. (a) Parent shall pay to the Foreign
Currency Agent at the Agency Office for the ratable account of each Foreign
Currency Bank a facility fee (the "Syndicated Foreign Currency Loan Facility
Fee") on the maximum amount of the aggregate Syndicated Foreign Currency Loan
Commitments in effect for any relevant period, irrespective of usage, in an
amount equal to 0.15% per annum. Parent shall pay to ABN AMRO at the Milan
Office a facility fee (the "ITL Loan Facility Fee") on the maximum amount of
the ITL Loan Commitment in effect for any relevant period, irrespective of
usage, in an amount equal to 0.15% per annum. The Syndicated Foreign Currency
Loan Facility Fee and the ITL Loan Facility Fee shall accrue at all times from
and including the Closing Date to but excluding the Termination Date and shall
be payable, in arrears, on each November 1, February 1, May 1, August 1 and on
the Termination Date, commencing February 1, 1996 (on
46
<PAGE> 54
which date the fees for the period from the Closing Date through January 30,
1996 shall be prorated).
(b) Parent shall pay to the Foreign Currency Agent at the
Agency Office, for the account and sole benefit of the Foreign Currency Agent,
such fees and other amounts at such times as set forth in the Agents' Letter
Agreement.
SECTION 3.07. Optional Termination or Reduction of
Commitments. (a) The Borrowers may, upon at least 3 Foreign Currency Business
Days' notice to the Foreign Currency Agent (which notice the Foreign Currency
Agent shall promptly forward to the Domestic Agent and the Foreign Currency
Banks), terminate at any time, or proportionately reduce the Unused Syndicated
Foreign Currency Loan Commitments from time to time by an aggregate amount of
at least the Dollar Equivalent of $5,000,000 or any larger multiple of the
Dollar Equivalent of $1,000,000. If the Syndicated Foreign Currency Loan
Commitments are terminated in their entirety, all accrued fees (as provided
under Section 3.06) shall be due and payable on the effective date of such
termination.
(b) The Borrowers may, upon at least 3 Foreign Currency
Business Days' notice to ABN AMRO (which notice ABN AMRO shall promptly forward
to the Domestic Agent and the Foreign Currency Agent), terminate at any time,
or proportionately reduce the unused ITL Loan Commitment from time to time by
an aggregate amount of at least the Dollar Equivalent of $500,000 or any larger
multiple of the Dollar Equivalent of $100,000. If the ITL Loan Commitment is
terminated in its entirety, all outstanding principal and accrued and unpaid
interest (as provided in Section 2.11) and accrued fees (as provided in Section
3.06) shall be due and payable on the effective date of such termination.
SECTION 3.08. Other Terminations of Syndicated Foreign
Currency Loan Commitments and ITL Loan Commitment; Change in Control. (a) The
Syndicated Foreign Currency Loan Commitments shall terminate on the Termination
Date, in which case any Syndicated Foreign Currency Loans (together with
accrued interest thereon, and all accrued fees, as provided in Section 3.06)
then outstanding shall be due and payable on such date. If the Syndicated
Foreign Currency Loan Commitments of ABN AMRO are terminated pursuant to the
foregoing, the ITL Loan Commitment likewise shall terminate automatically and
without notice, and any ITL Loans (together with accrued interest thereon) then
outstanding shall be due and payable on such date.
(b) The Parent shall give notice to the Foreign Currency Agent
of the occurrence of any Change of Control promptly after the senior management
of the Parent obtains knowledge thereof, and shall offer to terminate the
Foreign Currency Loan Commitments of all of the Foreign Currency Banks and the
ITL Loan Commitment on a date specified in such notice, which shall be not less
than 30 nor more than 45 days after the date of such notice. Such notice also
shall specify the date by which each Foreign Currency Bank that
47
<PAGE> 55
wishes to accept such offer must deliver notice to the Parent (with a copy to
the Foreign Currency Agent) of such acceptance, which date shall be no later
than 10 days prior to the date of the proposed termination. If any Foreign
Currency Bank shall accept such offer, then on the date so specified, the
Foreign Currency Loan Commitment of such Foreign Currency Bank (and the ITL
Loan Commitment, if the Foreign Currency Loan Commitment of ABN AMRO is so
terminated) shall terminate on the date so specified in the Parent's notice
(which date shall become the Termination Date for those Foreign Currency Banks
for all purposes hereunder), and any Foreign Currency Loans (together with
accrued interest thereon, and all accrued fees, as provided in Section 3.06)
then outstanding shall be due and payable on such date.
SECTION 3.09. Optional Prepayments. (a) The Borrowers may,
upon at least 3 Foreign Currency Business Days' notice to ABN AMRO, prepay any
Foreign Currency Borrowing in whole at any time, or from time to time in part
in a minimum and integral multiple of the amounts agreed upon between the
relevant Borrower and ABN AMRO which will in any event approximate at least the
Dollar Equivalent of $250,000 or any larger multiple of the Dollar Equivalent
of $100,000 or the full outstanding principal amount of such Borrowing, by
paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment and any amounts required by Section 9.05.
(b) Upon receipt of a notice of prepayment pursuant to
this Section 3.09, ABN AMRO shall promptly notify the Foreign Currency Agent of
the contents thereof and such notice shall not thereafter be revocable by the
Borrowers.
SECTION 3.10. Mandatory Prepayments. On each date on which
the Syndicated Foreign Currency Loan Commitments or ITL Loan Commitment are
reduced pursuant to Section 3.07, the Borrower shall repay or prepay such
principal amount of the outstanding relevant Syndicated Foreign Currency Loans
or ITL Loans, if any (together with interest accrued thereon), as may be
necessary so that after such payment the aggregate unpaid principal amount
(determined by reference to the Dollar Equivalent on such date of each
Syndicated Foreign Currency Loan or ITL Loan) of the Syndicated Foreign
Currency Loans or ITL Loans, as applicable does not exceed the aggregate amount
of the Syndicated Foreign Currency Loan Commitments or the ITL Loan Commitment,
as applicable, in each case as then reduced.
SECTION 3.11. General Provisions as to Payments.
(a) (1) With respect to the Syndicated Foreign Currency Loans, the Borrowers
shall make each payment of principal of, and interest on, the Syndicated
Foreign Currency Loans and of the Syndicated Foreign Currency Loan Facility
Fees hereunder, not later than 11:00 A.M. (London, England time) on the date
when due, in Federal or other funds (subject to paragraph (c) below with
respect to Syndicated Foreign Currency Loans) immediately available in
Amsterdam, The Netherlands to the Foreign Currency Agent at the Agency Office.
48
<PAGE> 56
The Foreign Currency Agent will promptly distribute to each Foreign Currency
Bank (and, following the occurrence and during the continuance of an Event of
Default, for application by such Foreign Currency Bank against amounts owing to
such Foreign Currency Bank by the Borrowers in such order as such Foreign
Currency Bank shall elect; provided, that in no event shall amounts paid by one
Borrower (other than Parent) be applied to the payment of any amount owed by
any other Borrower) its ratable share of each such payment received by the
Foreign Currency Agent for the account of the Foreign Currency Banks.
(2) With respect to the ITL Loans, the Borrowers shall make
each payment of principal of, and interest on, the ITL Loans and of the ITL
Loan Facility Fees hereunder, not later than 11:00 A.M. (Milan, Italy time) on
the date when due, in Federal or other funds (subject to paragraph (c) below
with respect to ITL Loans) immediately available in Milan, Italy to ABN AMRO at
the Milan Office.
(b) Whenever any payment of principal of, or interest on,
the Syndicated Foreign Currency Loans or ITL Loans or of fees hereunder
pertaining to the Syndicated Foreign Currency Loans or ITL Loans shall be due
on a day which is not a Foreign Currency Business Day, the date for payment
thereof shall be extended to the next succeeding Foreign Currency Business Day,
unless such Foreign Currency Business Day, falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Foreign
Currency Business Day.
(c) All payments of Syndicated Foreign Currency Loans
shall be made in the Foreign Currency in which the related Foreign Currency
Loan was made. All payments of ITL Loans shall be made in ITL.
(d) All payments of principal, interest and all other
amounts to be made by a Borrower pursuant to this Agreement with respect to any
Foreign Currency Loan and Syndicated Foreign Currency Loan Facility Fees and
ITL Loan Facility Fees shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Foreign Currency
Bank or ABN AMRO, as applicable, taxes imposed on or measured by its net
income, and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Foreign Currency Bank or ABN AMRO (as the case may be) is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on or measured by its income, and franchise taxes imposed on it,
by the jurisdiction of such Foreign Currency Bank's or ABN AMRO's applicable
Lending Office or any political subdivision thereof and other than any tax
arising by reason of a connection between the Foreign Currency Agent or such
Foreign Currency Bank or such Foreign Currency Bank's Lending Office and the
jurisdiction imposing such tax other than the making and performance by the
Foreign Currency Agent or such Foreign Currency Bank of this
49
<PAGE> 57
Agreement (all such non-excluded taxes, imposts, levies, duties, deductions or
withholdings of any nature being "Taxes"). In the event that any Borrower is
required by applicable law to make any such withholding or deduction of Taxes
with respect to any Foreign Currency Loan or Syndicated Foreign Currency Loan
Facility Fee or ITL Loan Facility Fees or other amount, such Borrower shall pay
such deduction or withholding to the applicable taxing authority, shall
promptly furnish to any Foreign Currency Bank or ABN AMRO, as applicable, in
respect of which such deduction or withholding is made all receipts and other
documents evidencing such payment and shall pay to such Foreign Currency Bank
or ABN AMRO, as applicable, additional amounts as may be necessary in order
that the amount received by such Foreign Currency Bank or ABN AMRO, as
applicable, after the required deduction or withholding shall equal the amount
such Bank would have received had no such deduction or withholding been made.
Each Foreign Currency Bank which is not chartered and
organized under the laws of the United States of America or a state thereof and
ABN AMRO (each a "Non-U.S. Foreign Currency Bank") agrees, as soon as
practicable after request by it of a request by a Borrower to do so, to file
all appropriate forms and take other appropriate action to obtain a certificate
or other appropriate document from the appropriate governmental authority in
the jurisdiction imposing the relevant taxes, establishing that it is entitled
to receive payments of principal and interest under this Agreement and the
Foreign Currency Notes without deduction and free from withholding of any Taxes
imposed by such jurisdiction; provided, that, if it is unable, by virtue of any
applicable law, rule or regulation, to establish such exemption or to file such
forms and, in any event, during such period of time as such request for
exemption is pending, the Borrower shall nonetheless remain obligated under the
terms of the immediately preceding paragraph. Without limiting the foregoing,
each Non-U.S. Foreign Currency Bank agrees to deliver to the Borrowers,
promptly upon any request therefor from time to time, such forms, documents and
other information as may be required by applicable law from time to time to
establish that payment to such Non-U.S. Foreign Currency Bank hereunder or
under the Notes or the Parent Guaranty are exempt from Taxes. Without limiting
the generality of the foregoing, each Non-U.S. Foreign Currency Bank, agrees,
on the date of its execution of this Agreement (or, in the case of an assignee,
on the date on which such assignee becomes a party to this Agreement), to
deliver to the Borrowers two accurate and duly completed and executed Internal
Revenue Service Form 4224 or 1001 (as applicable), together with Internal
Revenue Service Forms W-8 or W-9, as appropriate, establishing that such
Non-U.S. Foreign Currency Bank is entitled to a complete exemption from (or
reduction in) all Taxes imposed by the federal government of the United States
by way of withholding including, without limitation, all back-up withholding
("U.S. Withholding Taxes"). Thereafter, from time to time (a) upon any change
by a Foreign Currency Bank of its Lending Office, (b) before or promptly after
any event occurs (including, without limitation, the passing of time) requiring
a change in or
50
<PAGE> 58
update of the most recent Form 4224 or 1001 previously delivered by such
Foreign Currency Bank, or (c) upon the reasonable request of any of the
Borrowers from time to time, deliver to each Borrower two accurate and duly
completed and executed Forms 4224 or 1001 (as applicable) (together with Forms
W-8 or W-9, as aforesaid) in replacement for the forms previously delivered by
such Foreign Currency Bank, establishing that such bank is entitled to a
complete exemption in whole or in part from all U.S. Withholding Taxes except
to the extent that a change in law has rendered all such forms inapplicable to
such Non-U.S. Foreign Currency Bank.
If any such Foreign Currency Bank shall fail to timely deliver any
such forms, documents or other information required to be delivered by it
pursuant to the foregoing for 30 days after request therefor, the Borrowers may
make deductions or withholdings of taxes and shall not be obligated to pay any
additional amounts in respect thereof to such Foreign Currency Bank which would
not have been payable had such forms, documents or other information been
delivered.
If the Internal Revenue Service or any other taxation authority in the
United States or in any other jurisdiction in which a Borrower may be
incorporated successfully asserts a claim that such Non-U.S. Foreign Currency
Bank or any Borrower did not properly withhold tax from amounts paid to or for
the account of any Non-U.S. Foreign Currency Bank or its participant (because
the appropriate form was not properly executed, or because such Non U.S.
Foreign Currency Bank failed to notify the Borrowers of a change in
circumstances which rendered the exemption from (or reduction in) U.S.
Withholding Taxes ineffective), such Non-U.S. Foreign Currency Bank, shall
indemnify the Borrowers fully for all amounts paid, directly or indirectly, by
any of the Borrowers as tax or otherwise, including, without limitation,
penalties and interest.
In the event any Foreign Currency Bank or ABN AMRO receives a
refund from the authority to which such Taxes were paid, of any Taxes paid by
any Borrower pursuant to this Section 3.11(d) it will pay to such Borrower the
amount of such refund promptly upon receipt thereof; provided, however, it at
any time thereafter it is required to return such refund, such Borrower shall
promptly repay to it the amount of such refund.
Nothing in this Section shall require any Foreign Currency
Bank to disclose any information about its tax affairs or interfere with, limit
or abridge the right of any Foreign Currency Bank to arrange its tax affairs in
any manner in which it desires.
Without prejudice to the survival of any other agreement of
the Borrowers hereunder, the agreements and obligations of the Borrowers and
the Foreign Currency Banks and ABN AMRO contained in this Section 3.11(d) shall
be applicable with respect to any Participant, Assignee or other Transferee,
and any calculations required by such provisions (i) shall be made based upon
the
51
<PAGE> 59
circumstances of such Participant, Assignee or other Transferee, and (ii)
constitute a continuing agreement and shall survive for a period of three years
after the termination of this Agreement and the payment in full or cancellation
of the Syndicated Foreign Currency Loan Notes or ITL Loan Notes, as the case
may be.
SECTION 3.12. Computation of Interest and Fees. Interest on
Foreign Currency Loans shall be computed on the basis of a year of 360 days
(except for any Foreign Currency Loans outstanding in GBP or BFR, which shall
be computed on the basis of a year of 365 or 366 days, as the case may be) and
paid for the actual number of days elapsed, calculated as to each Interest
Period from and including the first day thereof to but excluding the last day
thereof. The Syndicated Foreign Currency Loan Facility Fee, ITL Loan Facility
Fee and any other fees payable hereunder shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed (including the
first day but excluding the last day).
ARTICLE IV
CONDITIONS TO BORROWINGS
SECTION 4.01. Conditions to First Borrowing. The obligation
of each Bank to make a Loan on the occasion of the first Borrowing is subject
to the satisfaction of the conditions set forth in Section 4.02 and receipt by
the Agents of the following (in sufficient number of counterparts, except as to
the Parent Guaranty and the Notes) for delivery of a counterpart to each Bank
and retention of one counterpart by each Agent:
(a) from each of the parties hereto of either (i) a duly
executed counterpart of this Agreement signed by such party or (ii) a
facsimile transmission stating that such party has duly executed a
counterpart of this Agreement and sent such counterpart to the Agents;
(b) a duly executed Syndicated Dollar Loan Note, a duly
executed Money Market Loan Note, and a duly executed Foreign Currency
Loan Note executed by the appropriate Borrowers for the account of
each Bank, and a duly executed ITL Loan Note complying with the
provisions of Sections 2.04 and 3.03 (and upon execution and delivery
thereof, the Notes issued under the Original Credit Agreement shall be
null and void and of no further force or effect);
(c) a duly executed Parent Guaranty, executed by Parent;
(d) an opinion of Christy & Viener, counsel for Parent,
SDI and SII, as of the Closing Date, substantially in the form of
Exhibit C and covering such additional matters relating to the
transactions contemplated hereby as the Agents or any Bank may
reasonably request (and each such Borrower requests and
52
<PAGE> 60
authorizes such counsel to address and deliver such opinion to the
Agents for the benefit of the Agents and the Banks);
(e) an opinion of Jones, Day, Reavis & Pogue, special
counsel for the Agents, dated as of the Closing Date, substantially in
the form of Exhibit D and covering such additional matters relating to
the transactions contemplated hereby as the Agents may reasonably
request;
(f) a certificate (the "Closing Certificate")
substantially in the form of Exhibit I), dated as of the Closing Date,
signed by a principal financial officer of each of the Borrowers, to
the effect that (i) no Default has occurred and is continuing on the
date of the first Borrowing and (ii) the representations and
warranties of the Borrower contained in Article V are true on and as
of the date of the first Borrowing hereunder;
(g) all documents which the Agents or any Bank may
reasonably request (except that the types of items described in
clauses (i), (ii) and (iii) below shall be limited to those pertaining
to Parent, SDI and SII (each a "U.S. Obligor" and collectively, the
"U.S. Obligors")) relating to the existence of Borrowers, the
corporate authority for and the validity of this Agreement, the Parent
Guaranty and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agents, including, without
limitation, a certificate of incumbency of the Borrowers, signed by
the Secretary or an Assistant Secretary of the Borrowers, certifying
as to the names, true signatures and incumbency of the officer or
officers of the Borrowers authorized to execute and deliver the Loan
Documents, and certified copies of the following items: (i) each U.
S. Obligor's Certificate of Incorporation, (ii) each U.S. Obligor's
Bylaws, (iii) a certificate of the Secretary of State of the State of
Delaware as to the good standing of each U.S. Obligor as a Delaware
corporation and a certificate of the Secretary of State of Florida as
to the good standing of Parent as a foreign corporation, and (iv) the
action taken by the Board of Directors of each Borrower authorizing
such Borrower's execution, delivery and performance of this Agreement,
the Notes, the Parent Guaranty (as to Parent) and the other Loan
Documents to which such Borrower is a party;
(h) a Notice of Syndicated Dollar Borrowing, or a Notice
of Syndicated Foreign Currency Borrowing, or a Notice of ITL
Borrowing, or a combination of the foregoing, as the case may be; and
(i) receipt of the fees payable to the Agents on or prior
to the date of the initial Borrowing pursuant to the Agents' Letter
Agreement.
53
<PAGE> 61
SECTION 4.02. Conditions to All Borrowings. The obligation of
each Bank to make a Syndicated Dollar Loan, Money Market Loan or a Syndicated
Foreign Currency Loan, and the obligation of ABN AMRO to make an ITL Loan on
the occasion of each Syndicated Dollar Borrowing, Money Market Borrowing,
Foreign Currency Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Domestic Agent of a Notice of
Syndicated Dollar Borrowing or notice pursuant to Section 2.03(e) of
the acceptance of such Bank's offer to make such Money Market Loan, or
receipt by the Foreign Currency Agent of a Notice of Syndicated
Foreign Currency Borrowing, or receipt by ABN AMRO of a Notice of ITL
Borrowing, as the case may be;
(b) unless such Borrowing involves only a Refunding Loan,
the fact that, immediately before and after such Borrowing, no Default
shall have occurred and be continuing;
(c) unless such Borrowing involves only a Refunding Loan,
the fact that the representations and warranties of the Borrowers
contained in Article V of this Agreement shall be true on and as of
the date of such Borrowing; provided, that on the occasion of each
Borrowing, the representations and warranties set forth in Sections
5.05, 5.07, 5.11, the first sentence of 5.12, 5.13 and 5.14 shall be
made only by Parent and, if such Borrower is not the Parent, by the
Borrower making such Borrowing with respect to itself; and
(d) the fact that the conditions set forth in Sections
2.01, 2.03(a) or 3.01, as applicable, and all other conditions set
forth in this Agreement which are applicable thereto, have been
satisfied.
Each Borrowing hereunder, other than a Borrowing which involves only a
Refunding Loan, shall be deemed to be a representation and warranty by the
Borrowers on the date of such Borrowing as to the truth and accuracy of the
facts specified in paragraphs (b), (c) and (d) of this Section.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers represents and warrants that:
SECTION 5.01. Corporate Existence and Power. Each Borrower
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, is duly qualified to
transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, except for any failure to comply with the
foregoing which does not have a Material Adverse Effect, and
54
<PAGE> 62
has all corporate powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except for any failure to comply with the foregoing which does not have a
Material Adverse Effect.
SECTION 5.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes, the Parent Guaranty and the other Loan Documents executed
by each Borrower (i) are within such Borrower's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) require no action
by or in respect of or filing with, any governmental body, agency or official,
(iv) do not contravene, or constitute a default under, any material provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of such Borrower or, to the best of such Borrower's knowledge, of any
material agreement relating to Debt, judgment, injunction, order, decree or
other instrument relating to Debt binding upon such Borrower or any of the
Subsidiaries, and (v) do not result in the creation or imposition of any Lien
on any asset of such Borrower or any of the Subsidiaries.
SECTION 5.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of each Borrower enforceable in accordance with its
terms, and the Notes, the Parent Guaranty and the other Loan Documents executed
by each Borrower, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of such Borrower
enforceable in accordance with their respective terms, provided that the
enforceability hereof and thereof is subject in each case to general principles
of equity and to bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally.
SECTION 5.04. Financial Information. (a) The consolidated
balance sheet of Parent and its Consolidated Subsidiaries as of June 30, 1995
and the related consolidated statements of income, shareholders' equity and
cash flows for the Fiscal Year then ended, reported on by Ernst & Young,
copies of which have been delivered to each of the Banks, and the unaudited
consolidated financial statements of the Parent for the interim period ended
September 30, 1995, copies of which have been delivered to each of the Banks,
(i) in the case of the aforementioned annual financial statements, fairly
present, in conformity with GAAP, the consolidated financial position of Parent
and its Consolidated Subsidiaries as of such dates and their consolidated
results of operations and cash flows for such periods stated and (ii) in the
case of the aforementioned interim financial statements, reflect all
adjustments consisting only of normal recurring accruals necessary for a fair
presentation of the consolidated financial condition of the Parent and its
Subsidiaries as of such date and the consolidated results of their operations
and changes in their cash flow for the period then ended, except that such
interim financial statements omit certain footnotes and
55
<PAGE> 63
are subject to normal year-end adjustments; provided, that, during the term of
this Agreement after the Closing Date, future representations as to the matters
set forth in this Section 5.04(a) shall be deemed to refer to the most recent
financial statements delivered pursuant to Section 6.01(a) or 6.01(b),
respectively, including the notes thereto and any statements of the Parent or
auditors accompanying such financial statements.
(b) Except for matters disclosed in the Parent's (i) Form
10-K for the fiscal year ended June 30, 1995 (the "Form 10-K"), (ii) Form
10-Q/A for the quarterly period ended September 30, 1995 (the "Form 10-Q/A")
and (iii) Form 8-K, dated October 30, 1995 (the "Form 8-K"), as to which the
ultimate outcome, and whether such matters would have a Material Adverse
Effect, cannot be determined at this time, since September 30, 1995, there has
been no event, act, condition or occurrence having a Material Adverse Effect;
provided, that, during the term of this Agreement after the Closing Date,
future representations as to the matters set forth in this Section 5.04(b)
shall be deemed to refer to the most recent financial statements delivered
pursuant to Section 6.01(a) or 6.01(b), respectively, including notes thereto
and any statement of the Parent or auditors accompanying such financial
statements.
SECTION 5.05. No Litigation. Except for the proceedings
described in the Form 10-K, the Form 10-Q/A and the Form 8-K, as to which the
ultimate outcome, and whether such proceedings would have a Material Adverse
Effect, cannot be determined at this time, and any other actions, suits or
proceedings based primarily on allegations similar to those contained in such
proceedings, there is no action, suit or proceeding pending, or to the
knowledge of each Borrower threatened, against or affecting such Borrower or
any of the Subsidiaries before any court or arbitrator or any governmental
body, agency or official which could have a Material Adverse Effect or which
in any manner draws into question the validity of or could impair in any
material respect the ability of the Borrowers taken as a whole or, on the
occasion of each Borrowing, of the Borrower making such Borrowing, to perform
its obligations under, this Agreement, the Notes, the Parent Guaranty or any of
the other Loan Documents executed by such Borrower.
SECTION 5.06. Compliance with ERISA. (a) To the best of
Parent's knowledge, Parent and each member of the Controlled Group have
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and has not
incurred any liability to the PBGC or a Plan under Title IV of ERISA, provided,
that Parent makes no representation or warranty under this Section 5.06 as to
any Subsidiary for matters pertaining to periods prior to the date on which
such Subsidiary became a Subsidiary of Parent except to the extent that Parent
received any such representations and/or warranties from the seller (or any of
its affiliates) of any relevant Subsidiary in connection with the acquisition
of any relevant Subsidiary.
56
<PAGE> 64
(b) To the best of Parent's knowledge, neither Parent nor
any member of the Controlled Group is or ever has been obligated to contribute
to any Multiemployer Plan provided, that Parent makes no representation or
warranty under this Section 5.06 as to any Subsidiary for matters pertaining to
periods prior to the date on which such Subsidiary became a Subsidiary of
Parent except to the extent that Parent received any such representations
and/or warranties from the seller (or any of its affiliates) of any relevant
Subsidiary in connection with the acquisition of any relevant Subsidiary.
SECTION 5.07. Compliance with Laws; Payment of Taxes. Each
Borrower and each Material Subsidiary is in compliance with all applicable
laws, regulations and similar requirements of governmental authorities, except
where such compliance is being contested in good faith through appropriate
proceedings or does not have a Material Adverse Effect. There have been filed
on behalf of each Borrower and each Material Subsidiary all Federal, state and
material local income, excise, property and other tax returns which are
required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of such Borrower or any
Material Subsidiary have been paid or are being contested in good faith or, if
unpaid and uncontested, are in immaterial amounts. The charges, accruals and
reserves on the books of each Borrower and each Material Subsidiary in respect
of taxes or other governmental charges are, in the opinion of such Borrower,
adequate. United States income tax returns of each Borrower which is a U.S.
Person and each Subsidiary which is a U.S. Person have been examined and closed
through the Fiscal Year ended 1988.
SECTION 5.08. Subsidiaries. Parent represents that each
Material Subsidiary which is not a Borrower is a corporation or joint venture
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except for failures to comply with the
foregoing which do not have a Material Adverse Effect. Parent has no active
Subsidiaries except for those Subsidiaries listed on Exhibit 22 of Parent's
annual report on form 10-K, as updated from time to time by filing with the
Securities and Exchange Commission or by notice to the Agents or in Schedule
6.03 hereto. All of Parent's Subsidiaries which are Material Subsidiaries as
of the Fiscal Quarter most recently ended at the Closing Date or any later date
of determination and for which financial statements are required to have been
delivered pursuant to Section 6.01(a) or (b), are specified in Schedule 6.03,
as supplemented from time to time pursuant to Section 6.03.
SECTION 5.09. Investment Company Act. Neither any Borrower
nor any of Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
57
<PAGE> 65
SECTION 5.10. Public Utility Holding Company Act. Neither any
Borrower nor any of Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
SECTION 5.11. Ownership of Property; Liens. Each of the
Borrower and the Material Subsidiaries has title to or leasehold or other
interests in its material properties sufficient for the conduct of its
business, and none of such property is subject to any Lien except as permitted
in the Section 6.16.
SECTION 5.12. No Default. Neither any Borrower nor any of the
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which could have or cause a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
SECTION 5.13. Full Disclosure. To the best of each Borrower's
knowledge, all written information heretofore furnished by the Borrowers to the
Agents or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter
furnished by the Borrowers to the Agents or any Bank will be, true, accurate
and complete in every material respect or based on reasonable estimates on the
date as of which such information is stated or certified.
SECTION 5.14. Environmental Matters. (a) To the best of each
Borrower's actual knowledge (without, as to Properties not located in the
United States of America, having performed any further independent inquiry
therefor solely in connection with this Agreement), neither any Borrower nor
any Subsidiary is aware that it is subject to any Environmental Liability which
could have or cause a Material Adverse Effect, neither any Borrower nor any
Subsidiary (except in respect of immaterial Environmental Liabilities in de
minimis amounts) has received notice that it has been designated as a
potentially responsible party under CERCLA or under any state statute similar
to CERCLA, and none of the Properties located in the United States, owned by
any Borrower or a Material Subsidiary, has been identified on any current or
proposed (i) National Priorities List under 40 C.F.R. Section 300, (ii)
CERCLIS list or (iii) any list arising from a state statute similar to CERCLA.
(b) To the best of each Borrower's actual knowledge,
(without having performed any further independent inquiry therefor solely in
connection with this Agreement), no Hazardous Materials have been or are being
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from the Properties or are otherwise present at, on, in or under the Properties
owned by any Borrower or a Material Subsidiary, or, to
58
<PAGE> 66
the best of the actual knowledge of each Borrower, at or from any adjacent site
or facility, except for Hazardous Materials, such as cleaning solvents,
pesticides and other materials used, produced, manufactured, processed,
treated, recycled, generated, stored, disposed of, managed, or otherwise
handled in minimal amounts in the ordinary course of business in compliance
with all applicable Environmental Requirements.
(c) Each Borrower represents as to itself, and Parent
represents as to each Material Subsidiary which is not a Borrower, that to the
best of each Borrower's and Parent's actual knowledge (without having performed
any further independent inquiry therefor solely in connection with this
Agreement), each Borrower and each of the Material Subsidiaries which is not a
Borrower is in compliance in all material respects with all Environmental
Requirements in connection with the operation of the Properties and each
Borrower's and each such Material Subsidiary's respective businesses.
SECTION 5.15. Capital Stock. All Capital Stock, debentures,
bonds, notes and all other securities of each Borrower and the Material
Subsidiaries presently issued and outstanding are validly and properly issued
in accordance with all applicable laws in all material respects, including but
not limited to, the "Blue Sky" laws of all applicable states and the federal
securities laws. The issued shares of Capital Stock of the Wholly Owned
Subsidiaries are owned by the Parent free and clear of any Lien or adverse
claim, except for (a) nominal shares of Subsidiaries which are not U.S. Persons
that are held by non-U.S. Persons in accordance with applicable law, (b)
directors' qualifying shares, and (c) the shares of American Dynamics, a New
Jersey corporation, which are pledged to the sellers thereof to secure payment
of the purchase price thereof. At least a majority of the issued shares of
capital stock of each of the Parent's other Subsidiaries (other than Wholly
Owned Subsidiaries) is owned by Parent free and clear of any Lien or adverse
claim.
SECTION 5.16. Margin Stock. Neither any Borrower nor any
Material Subsidiary is engaged principally, or as one of its important
activities, in the business of purchasing or carrying any Margin Stock, and no
part of the proceeds of any Loan will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulation X.
SECTION 5.17. Insolvency. After giving effect to the
execution and delivery of the Loan Documents and the making of the Loans to
such Borrower under this Agreement, no Borrower which is a U.S. Person will be
"insolvent," within the meaning of such term as used in O.C.G.A. Section
18-2-22 or as defined in Section 101 of Title 11 of the United States Code, as
amended from time to time, or be unable to pay its debts generally as such
debts become due, or have an
59
<PAGE> 67
unreasonably small capital to engage in any business or transaction, whether
current or contemplated.
ARTICLE VI
COVENANTS
The Borrowers agree that, so long as any Bank has any
Commitment hereunder or any amount payable hereunder or under any Note remains
unpaid:
SECTION 6.01. Information. The Borrowers will deliver to each
of the Banks:
(a) as soon as available and in any event within 120 days
after the end of each Fiscal Year, a consolidated balance sheet of
Parent and its Consolidated Subsidiaries as of the end of such Fiscal
Year and the related consolidated statements of income, shareholders'
equity and cash flows for such Fiscal Year, setting forth in each case
in comparative form the figures for the previous Fiscal Year, and
accompanied by a report, unqualified as to scope of audit and
unqualified as to going concern as to the consolidated balance sheet
and the related consolidated statements of income and cash flows by
Ernst & Young, or any other firm of independent public accountants of
recognized national standing selected by the Parent, as to fairness
and consistency; provided, that the information required by this
paragraph may be satisfied by delivery of information pursuant to
paragraph (f) or (g) of this Section 6.01.
(b) as soon as available and in any event within 60 days
after the end of each of the first 3 Fiscal Quarters of each Fiscal
Year, a consolidated balance sheet of Parent and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal
Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified by a senior
financial or accounting officer or the chief financial officer or the
Treasurer of Parent (i) outlining the basis of presentation, and (ii)
stating that the unaudited financial information presented in such
financial statements reflects all adjustments consisting only of
normal recurring accruals necessary for a fair presentation of the
consolidated financial condition of the Parent and its Subsidiaries as
of such dates and the consolidated results of their operations and
changes in their cash flows for the periods then ended, except that
such financial statements omit certain footnotes and are subject to
normal year-end adjustments; provided, that the information required
by this paragraph may be satisfied by
60
<PAGE> 68
delivery of information pursuant to paragraph (f) or (g) of this
Section 6.01;
(c) simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and (b) above, a
certificate, substantially in the form of Exhibit H (a "Compliance
Certificate"), of a senior financial or accounting officer or the
chief financial officer or chief accounting officer or the Treasurer
of Parent (i) stating whether Parent was in compliance with the
requirements of the Sections 6.14 through 6.19, inclusive, on the date
of such financial statements and attaching a true, accurate and
complete copy of the compliance certificate furnished on or about the
date thereof pursuant to the Note Agreement, and (ii) stating whether,
to such person's knowledge, after due inquiry, any Default exists on
the date of such certificate and, if such officer is aware that any
Default then exists, setting forth the details thereof and the action
which Parent is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
annual financial statements referred to in paragraph (a) above, a
statement of the firm of independent public accountants which reported
on such statements to the effect that nothing has come to their
attention to cause them to believe that any Default the occurrence of
which is ascertainable by accountants in the course of normal audit
procedures under any of Sections 6.14 through 6.19, inclusive, or
Section 7.01(e) existed on the date of such financial statements, or,
if they obtained knowledge of any Default, describing the nature
thereof and the length of time such Default existed;
(e) (i) promptly, and, in any event, within 7 Domestic
Business Days after any Borrower becomes aware of the occurrence of
any Default pertaining to the Parent, and (ii) within 15 Domestic
Business Days after any Borrower becomes aware of any other Default,
a certificate of a senior financial or accounting officer or the chief
financial officer or the chief accounting officer or the Treasurer of
such Borrower (or of Parent) setting forth the details thereof and the
action which such Borrower (or Parent) is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the shareholders
of Parent generally, copies of all financial statements, reports and
proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent or any
registration statements relating to employee benefit plans) and
annual, quarterly or monthly reports which Parent
61
<PAGE> 69
shall have filed with the Securities and Exchange Commission (other
than exhibits thereto);
(h) if and when any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be
given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice;
or (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, a
copy of such notice; and
(i) from time to time such additional information
regarding the financial position or business of the Borrowers and the
Subsidiaries as either Agent, at the request of any Bank, may
reasonably request.
SECTION 6.02. Inspection of Property, Books and Records. The
Parent will (i) keep, and cause each Material Subsidiary to keep, proper books
of record and account in which full, true and correct entries in conformity
with GAAP (or, in the case of any non-domestic Subsidiary, such other
accounting standards, rules, regulations and practices applicable to businesses
operating in the locality in which each such Person operates) shall be made of
all dealings and transactions in relation to its business and activities; and
(ii) permit, and cause each Subsidiary to permit, representatives of any Bank
(x) at such Bank's expense and upon reasonable notice prior to the occurrence
of a Default and (y) at the Borrower's expense after the occurrence of a
Default, to visit and inspect any of their respective properties, to examine
and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants. The Borrowers agree to
cooperate and assist in such visits and inspections, in each case at such
reasonable times and as often as may reasonably be desired.
SECTION 6.03. Material Subsidiaries. Promptly after the
delivery to the Banks of the financial statements referred to in Section
6.01(a) and (b), the Parent shall deliver to the Banks a supplement to Schedule
6.03, showing any changes in the composition of the Material Subsidiaries since
the date of the last delivery of such a notice.
SECTION 6.04. Maintenance of Existence. Except as permitted
in Sections 6.18 and 6.19, each Borrower shall, and Parent shall cause each
Material Subsidiary to, maintain its corporate existence and carry on the major
part of its business in substantially the same fields as such business is now
carried on
62
<PAGE> 70
and maintained; provided, that the foregoing shall not prevent the termination
of corporate existence or business of any Borrower other than Parent if: (i) on
the date of termination of such Borrower's corporate existence or business,
such Borrower shall have delivered to the Domestic Agent or the Foreign
Currency Agent, or both, as applicable, a letter terminating all rights of such
Borrower to obtain Borrowings under this Agreement, and has no Loans
outstanding under this Agreement; and (ii) in the opinion of the Parent's Board
of Directors, such termination is in the best interests of the Parent, is not
disadvantageous to the Banks and is not otherwise prohibited by this Agreement.
SECTION 6.05. Dissolution. Neither any Borrower nor any
Material Subsidiary shall be permitted to be dissolved or liquidated, except
through corporate reorganization to the extent permitted by Section 6.18;
provided, that any Borrower other than Parent, and any Material Subsidiary, may
be dissolved if: (i) on the date of liquidation or dissolution of such
Borrower, such Borrower shall have delivered to the Domestic Agent or the
Foreign Currency Agent, or both, as applicable, a letter terminating all rights
of such Borrower to obtain Borrowings under this Agreement, and has no Loans
outstanding under this Agreement; and (ii) in the opinion of the Parent's Board
of Directors, such dissolution is in the best interests of the Parent, is not
disadvantageous to the Banks and is not otherwise prohibited by this Agreement.
SECTION 6.06. Use of Proceeds. The proceeds of the Loans will
be used for general corporate purposes. No portion of the proceeds of the
Loans will be used by any Borrower or any Subsidiary (i) in connection with,
whether directly or indirectly, any tender offer for, or other acquisition of,
stock of any corporation with a view towards obtaining control of such other
corporation, except in a negotiated, consensual transaction, (ii) directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, or (iii) for any purpose in violation
of any applicable law or regulation.
SECTION 6.07. Compliance with Laws; Payment of Taxes. Each
Borrower will, and Parent will cause each of its Material Subsidiaries and each
member of the Controlled Group to, comply in all material respects with
applicable laws (including but not limited to ERISA), regulations and similar
requirements of governmental authorities (including but not limited to PBGC),
except where the necessity of such compliance is being contested in good faith
through appropriate proceedings or if failure to comply does not have a
Material Adverse Effect. Each Borrower will, and Parent will cause each of its
Material Subsidiaries to, pay, prior to the date on which penalties attach
thereto, all taxes, assessments, governmental charges, claims for labor,
supplies, rent and other obligations which, if unpaid, might become a lien
against the property of such Borrower or any Material Subsidiary, except
liabilities being contested in good faith and against which, if requested by
either of the Agents, Parent will set up reserves in
63
<PAGE> 71
accordance with GAAP and other than taxes, assessments, governmental changes
and other amounts which are not material in amount and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 6.08. Insurance. Each Borrower will maintain, and
Parent will cause each of the Material Subsidiaries to maintain (either in the
name of such Borrower or in such Material Subsidiary's own name), with
financially sound and reputable insurance companies, insurance on such of its
property in at least such amounts, and with such deductibles, and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business.
SECTION 6.09. Maintenance of Property. Each Borrower shall,
and Parent shall cause each Material Subsidiary to, maintain all of its
properties and assets in good condition, repair and working order, ordinary
wear and tear excepted.
SECTION 6.10. Environmental Notices. The Borrowers shall
furnish to the Agents prompt written notice of all Environmental Liabilities,
pending or threatened Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases of which the
respective Borrower shall have received actual notice or have actual knowledge
at, on, in, under or in any way affecting the Properties or any adjacent
property, if the amount of liability or of remediation cost to the Borrowers is
or could reasonably be expected to have a Material Adverse Effect, and all
facts, events, or conditions actually known to the Borrowers that could
reasonably be expected to lead to any of the foregoing.
SECTION 6.11. Environmental Matters. The Borrowers will not,
and will not knowingly permit any Third Party to, use, produce, manufacture,
process, treat, recycle, generate, store, dispose of, manage at, or otherwise
handle, or ship or transport to or from the Properties any Hazardous Materials
except for Hazardous Materials such as cleaning solvents, pesticides and other
similar materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed, managed, or otherwise handled in minimal amounts
in the ordinary course of business or of management or maintenance of the
Properties in material compliance with all applicable Environmental
Requirements.
SECTION 6.12. Environmental Release. Each Borrower agrees
that upon its becoming aware of the occurrence of an Environmental Release,
except for any Environmental Release which occurred in substantial compliance
with all Environmental Requirements, at or on any of the Properties owned or
operated by it, it will act promptly to determine the extent of, and to take
appropriate remedial action to eliminate, any such Environmental Release,
whether or not ordered or otherwise directed to do so by
64
<PAGE> 72
any Environmental Authority, except to the extent that failure to take remedial
action would not have a Material Adverse Effect.
SECTION 6.13. Transactions with Affiliates. Neither any
Borrower nor any of the Subsidiaries shall enter into, or be a party to, any
transaction with any Affiliate of the Borrowers or any Subsidiary (which
Affiliate is not a Borrower or a Subsidiary, other than a Person in which such
Borrower or Subsidiary owns less than a majority interest and which, if it were
a Subsidiary, would not be a Material Subsidiary), except as permitted by law
and in the ordinary course of business and pursuant to reasonable terms which
are no less favorable to such Borrower or such Subsidiary than would be
obtained in a comparable arm's length transaction with a Person which is not an
Affiliate; provided, that the foregoing shall not affect the ability of the
Parent, any other Borrower or any Subsidiary from determining, in its sole
discretion, the amount or form of executive or directors compensation from time
to time.
SECTION 6.14. Net Worth. The Parent will not permit at any
time its Consolidated Net Worth to be less than $714,548,000 plus (i) 50% of
Consolidated Net income (without reduction for any net losses) for each
completed Fiscal Quarter ending after June 30, 1995 plus (ii) 66 2/3% of all
Capital Proceeds.
SECTION 6.15. Debt. The Parent 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 Debt other than:
(a) the Notes and the Senior Notes;
(b) Debt of the Parent and its Subsidiaries existing on
the date hereof and described in the attached Schedule 6.15;
(c) Debt of a Subsidiary owed to the Parent or another
Subsidiary;
(d) Additional Debt, provided that at the time of
incurring such additional Debt and after giving effect thereto and to the
application of the proceeds therefrom, the aggregate principal amount of all
Senior Consolidated Debt then to be outstanding shall not exceed 50% of
Consolidated Total Capitalization and (ii) the aggregate principal amount of
all Consolidated Debt then to be outstanding shall not exceed 60% of
Consolidated Total Capitalization;
(e) Additional Debt of Subsidiaries, provided that at the
time of incurring such additional Debt and after giving effect thereto and to
the application of the proceeds therefrom, (i) such Debt may be incurred
pursuant to paragraph (d) of this Section 6.15 and (ii) the sum (without
duplication) of the aggregate principal amount of outstanding (A) Debt of
Subsidiaries (other than Debt referred to in paragraph (c) of this Section
6.15), and (B) Debt of
65
<PAGE> 73
the Parent or any Subsidiary (other than Debt referred to in paragraph (c) of
this Section 6.15) secured by Liens permitted by Section 7.3 (other than
secured Debt permitted by paragraphs (j) and (m) of Section 6.16) does not
exceed 20% of the maximum aggregate principal amount of Consolidated Debt
permitted to be outstanding under this Section 6.15; and
(f) Debt of a Person existing at the time it becomes a
Subsidiary, or substantially all of its assets are acquired by the Parent or a
Subsidiary, provided such Debt was not created or incurred in contemplation of
such Person becoming a Subsidiary or such acquisition and extensions, renewals,
refinancings and refundings of such Debt provided there is no increase in the
principal amount of such Debt at the time hereof.
SECTION 6.16. Liens. The Parent 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 owned or hereafter
acquired, except:
(a) Liens existing on property or assets of the Parent or
any Subsidiary as of the date of this Agreement that are described in the
attached Schedule 6.16;
(b) 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 Parent has established adequate
reserves on its books in accordance with GAAP;
(c) 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 Parent has
established adequate reserves therefor on its books in accordance with GAAP;
(d) 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 ont he 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 Parent and
its Subsidiaries taken as a whole or materially impair the value of the
property or assets subject thereto;
(e) Liens in connection with workers' compensation,
unemployment insurance or other social security obligations;
(f) Liens securing the performance of bids, tenders,
contracts, surety and appeal bonds;
66
<PAGE> 74
(g) Liens to secure progress or partial payments on
contracts, surety and appeal bonds;
(h) Unexercised rights of set-off, bankers' liens and
other rights arising solely by operation of law and not created to secure Debt;
(i) To the extent considered a Lien on assets of the
Parent or any Subsidiary, Liens arising in connection with the sale or
factoring of leases, receivables or other accounts in the ordinary course of
business;
(j) 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 Parent or any Subsidiary and not created in contemplation of such
event;
(k) 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 Parent or any Subsidiary leased to such lessee under a lease or sold to
such purchaser under the terms of a conditional sale arrangement;
(l) Liens securing Debt of a Subsidiary to the Parent or
to another Wholly-Owned Subsidiary;
(m) Liens (i) existing on property at the time of its
acquisition by the Parent or a Subsidiary and not created in contemplation
thereof, provided the Debt secured by such Lien is assumed by the Parent 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 Parent or
any Subsidiary, that the aggregate principal amount of Debt 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 Debt secured by such Liens could be incurred
pursuant to Section 6.15; and
(n) Liens not otherwise permitted by paragraphs (a)
through (m) above incurred subsequent to the Note Agreement Closing Date to
secure Debt, provided that at the time of incurring such additional Debt and
after giving effect thereto and to the application of the proceeds therefrom,
(i) such Debt can be incurred pursuant to Section 6.15(d) and, if of a
Subsidiary, Section 6.15(e), and (ii) the sum (without duplication) of the
aggregate principal amount of outstanding (A) Debt of Subsidiaries (other than
Debt referred to in paragraph (c) of Section 6.15) and (B) Debt of the Parent
or any Subsidiary (other than Debt referred to in paragraph (c) of Section
6.15) secured by Liens permitted by this Section 6.16 (other than secured Debt
permitted by paragraphs
67
<PAGE> 75
(j) and (m) above) does not exceed 20% of the maximum aggregate principal
amount of Consolidated Debt permitted to be outstanding under Section 6.15
SECTION 6.17. Restricted Payments. The Parent will
not, except as hereinafter provided:
(a) declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of common stock of the Parent);
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem, retire or otherwise acquire any shares of its capital stock
of any class or any warrants, rights or options to purchase or acquire any
shares of its capital stock;
(c) make any other payment or distribution, either
directly or indirectly, or through any Subsidiary, in respect of its capital
stock; or
(d) make any payment (which shall not be deemed to
include a conversion), other than a scheduled mandatory prepayment or payment,
on any Subordinated Consolidated Debt;
(all such non-permitted declarations, payments, purchases, redemptions,
retirements, acquisitions or distributions being hereinafter referred to as
"Restricted Payments") unless, after giving effect thereto, (i) the aggregate
amount of Restricted Payments made after December 31, 1992 to and including the
date of making the Restricted Payment in questions would not exceed the sum of:
(w) $25,000,000; (x) 50% of consolidated Net Income for the period from January
1, 1993 to June 30, 1993 (less 100% thereof in case of a deficit); (y) 50% of
Cumulative Consolidated Net Income for each Fiscal Year ending after June 30,
1993 (less 100% thereof in case of a deficit); and (z) the net cash proceeds
received by the Parent from the sale of common stock subsequent to the Closing
Date or the net cash proceeds received by the Parent from the sale of
securities convertible into common stock of the Parent upon conversion thereof
subsequent to the Closing date; (ii) no Default or Event of Default would
exist; and (iii) the Parent could incur at least $1.00 of additional Debt under
Section 6.15.
SECTION 6.18. Merger or Consolidation. The Parent will not,
and will not permit any Subsidiary to, merge or consolidate with, or sell all
or substantially all of its assets to, any Person, except that:
(a) The Parent 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,
68
<PAGE> 76
(i) The Parent is the successor corporation or, if
the Parent is not the successor corporation, (x) the successor
corporation is a solvent corporation organized under the laws
of the state of the United States of America or the District
of Columbia and expressly assumes in writing the Parent'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;
(ii) There shall exist no Default or Event of
Default; and
(iii) The Parent or such successor corporation could
incur at least $1.00 of additional Debt under Section 6.15;
and
(b) Any Subsidiary may (i) merge into the Parent or a
Wholly Owned Subsidiary or (ii) sell, transfer or lease all or any part of its
assets to the Parent or a Wholly-Owned Subsidiary or (iii) merge with any
Person which, as a result of such merger, becomes a Wholly-Owned Subsidiary, or
(iv) merge with any Person which does not become a Wholly-Owned Subsidiary as a
result of such merger so long as such merger is not prohibited by Section 6.19;
provided in each instance set forth in clauses (i) through (iv) that
immediately before or after giving effect thereto there shall exist no Default
or Event of Default.
SECTION 6.19. Sale of Assets. (a) The Parent 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, and
other than as permitted by clause (ii) of Section 6.18(b)), 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 Note
Agreement Closing Date, 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
69
<PAGE> 77
exists or (iv) if the Parent cannot incur at least $1.00 of additional Debt
pursuant to Section 6.15
(b) Notwithstanding the foregoing limitations in
paragraph (a) of this Section 6.19, the Parent or a Subsidiary may make a
Disposition and the net book value of the assets subject to such Disposition
and shall not be subject to or included in the foregoing limitations and
computations (i) if the proceeds (net of taxes and related expenses) from such
Disposition are either (A) reinvested, within twelve months after such
Disposition, in productive assets of the Parent or its Subsidiaries (including
capital stock of Subsidiaries other than Wholly-Owned Subsidiaries) or (B) the
Parent, by written notice mailed to each holder of outstanding Senior
Consolidated Debt not less than 30 days prior to the date fixed by the Parent
for the prepayment or purchase referred to below (which notice shall state that
it is given pursuant to this Section 6.19 and that any holder that elects to
accept such offer must do so by notice given to the Parent 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 Debt, to apply an amount equal to such proceeds 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
Debt (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 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 Debt
associated therewith or (iii) if such Disposition is to the Parent or a
Wholly-Owned Subsidiary.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrowers shall fail to pay when due any
principal of any Loan or shall fail to pay any interest on any Loan
within 5 Domestic Business Days after such interest shall become due,
or shall fail to pay any fee or other amount payable hereunder within
5 Domestic Business Days after such fee or other amount becomes due;
or
(b) the Borrowers shall fail to observe or perform any
covenant contained in Sections 6.01(e), 6.02(ii), the proviso in
Section 6.04, the proviso in Section 6.05, Section 6.06, or Sections
6.14 through 6.19, inclusive; or
70
<PAGE> 78
(c) the Borrowers shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by paragraph (a) or (b) above), or Parent shall fail to
observe or perform any covenant or agreement contained in the Parent
Guaranty, and in either case such failure shall not have been cured
within (1) 20 days, with respect to Section 6.01(a), (b), (c), (d),
(f) or (g), and (2) 30 days, with respect to all other covenants or
agreements, after the earlier to occur of (i) written notice thereof
has been given to Borrowers by either Agent at the request of the
Required Banks or (ii) an executive, senior financial or accounting
officer of any of the Borrowers otherwise becomes aware of any such
failure; or
(d) any representation, warranty, certification or
statement made by the Borrowers in Article V of this Agreement or in
any certificate, financial statement or other document delivered
pursuant to this Agreement or by Parent in the Parent Guaranty shall
prove to have been incorrect or misleading in any material respect
when made (or deemed made); or
(e) any Borrower or any Material Subsidiary shall fail to
make any payment in respect of Debt outstanding in an aggregate
principal amount equal to or greater than $5,000,000 (other than the
Notes) after the expiry of any applicable grace period; or
(f) any event or condition (other than a Change of Control or
similar event as provided for any loan agreement or other Debt
instrument) shall occur which (i) results in the acceleration of the
maturity of Debt (other than Debt which would not constitute a
"liability" in accordance with GAAP) outstanding of any Borrower or
any Material Subsidiary in an aggregate principal amount equal to or
greater than $10,000,000 (including, without limitation, any required
mandatory prepayment or "put" of such Debt to any Borrower or any
Material Subsidiary) or (ii) enables (with any required notice of
default having been given and any applicable cure or grace period
having expired) the holders of such Debt or any Person acting on such
holders' behalf to accelerate the maturity thereof (including, without
limitation, any required mandatory prepayment or "put" of such Debt to
any Borrower or any Material Subsidiary); or
(g) any Borrower or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an
71
<PAGE> 79
involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be
commenced against any Borrower or any Material Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against any Borrower or
any Material Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
(i) Parent or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by Parent, any member of the Controlled Group, any
plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans
or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or
a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(j) one or more judgments or orders for the payment of
money in an aggregate amount in excess of $5,000,000 shall be rendered
against any Borrower or any Material Subsidiary and such judgment or
order shall continue unsatisfied and unstayed for a period of 60 days;
or
(k) a federal tax lien shall be filed against any
Borrower under Section 6323 of the Code or a lien of the PBGC shall be
filed against any Borrower under Section 4068 of ERISA and in either
case if the amount involved is in aggregate amount in excess of
$5,000,000 and such lien shall remain undischarged for a period of 25
days after the date of filing;
then, and in every such event, the Agents shall (i) if
requested by the Required Banks, by notice to the Borrowers terminate
the Commitments and they shall thereupon terminate, (ii) any Bank may
terminate its obligation to fund a Money Market Loan in connection
with any relevant Money Market
72
<PAGE> 80
Quote, and (iii) the Agents shall, if requested by the Required Banks,
by notice to the Borrowers declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Borrowers and Parent (with respect to the Parent Guaranty) together
with interest at the Default Rate accruing on the principal amount
thereof from and after the date of such Event of Default; provided
that if any Event of Default specified in paragraph (g) or (h) above
occurs with respect to any Borrower, without any notice to such
Borrower or Parent (with respect to the Parent Guaranty) or any other
act by the Agents or the Banks, the Commitments shall thereupon
terminate and the Notes (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrowers and Parent (with respect to the Parent Guaranty)
together with interest thereon at the Default Rate accruing on the
principal amount thereof from and after the date of such Event of
Default. Notwithstanding the foregoing, the Agents shall have
available to them all other remedies at law or equity, and shall
exercise any one or all of them at the request of the Required Banks.
SECTION 7.02. Notice of Default. The Agents shall give notice
to the Borrowers of any Default under Section 7.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks
thereof.
ARTICLE VIII
THE AGENTS
SECTION 8.01. Appointment; Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes each Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Agents by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. The Foreign
Currency Agent may delegate any functions to be performed by it under Article
III at the Agency Office, or any other function to be performed by it
hereunder, to FC&AS, who may perform any such delegated function on behalf of
and as the Foreign Currency Agent. The Agents: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement
or any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document
73
<PAGE> 81
referred to or provided for herein or therein or for any failure by any
Borrower to perform any of its obligations hereunder or thereunder; (c) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
the Required Banks, and then only on terms and conditions satisfactory to the
Agents, and (d) shall not be responsible for any action taken or omitted to be
taken by them hereunder or under any other Loan Document or any other document
or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for their own gross negligence or wilful
misconduct. The Agents may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The provisions of this
Article VIII are solely for the benefit of the Agents and the Banks, and the
Borrowers shall not have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and under the other Loan Documents, the Agents shall act solely as agents of
the Banks and do not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the
Borrowers. The duties of the Agents shall be ministerial and administrative in
nature, and the Agents shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Bank.
SECTION 8.02. Reliance by Agents. The Agents shall be
entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telefax, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by the Agents. As to any
matters not expressly provided for by this Agreement or any other Loan
Document, the Agents shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with
instructions signed by the Required Banks, and such instructions of the
Required Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
SECTION 8.03. Defaults. Neither Agent shall be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the
nonpayment of principal of or interest on the Loans) unless such Agent has
received notice from the other Agent, a Bank or a Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that either Agent receive such a notice of the
occurrence of a Default or an Event of Default, such Agent shall give prompt
notice thereof to the Banks and (unless originally notified by the other Agent)
the other Agent. Each Agent shall give each Bank and the other Agent prompt
notice of each nonpayment of principal of or interest on the Loans payable to
it under Section 2.12 or 3.11, as applicable, whether or not it has received
any notice of the
74
<PAGE> 82
occurrence of such nonpayment. The Agents shall (subject to Section 10.06)
take such action hereunder with respect to such Default or Event of Default as
shall be directed by the Required Banks, provided that, unless and until the
Agents shall have received such directions, the Agents may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as they shall deem advisable in the
best interests of the Banks.
SECTION 8.04. Rights of Agents as Banks. With respect to the
Loans made by it, each of Wachovia and ABN AMRO in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though it were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include each
of Wachovia and ABN AMRO in its individual capacity. Each Agent may (without
having to account therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with any
Borrower (and any of its Affiliates) as if it were not acting as the Agent, and
each Agent may accept fees and other consideration from the Borrowers (in
addition to any agency fees and arrangement fees heretofore agreed to between
the Borrowers and the Agents) for services in connection with this Agreement or
any other Loan Document or otherwise without having to account for the same to
the Banks.
SECTION 8.05. Indemnification. Each Domestic Bank severally
agrees to indemnify the Domestic Agent, and each Foreign Currency Bank
severally agrees to indemnify the Foreign Currency Agent, in each case to the
extent such Agent shall not have been reimbursed by the Borrowers, ratably in
accordance with its Domestic Commitment (as to indemnification of the Domestic
Agent by the Domestic Banks) or Foreign Currency Commitment (as to
indemnification of the Foreign Currency Agent by the Foreign Currency Banks),
for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against such Agent in any way relating
to or arising out of this Agreement or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (excluding, unless an Event of Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or wilful misconduct of such Agent. If
any indemnity furnished to either Agent for any purpose shall, in the opinion
of such Agent, be insufficient or become impaired, such Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
75
<PAGE> 83
SECTION 8.06. Payee of Note Treated as Owner. The Domestic
Agent (as to the Dollar Notes) and the Foreign Currency Agent (as to the
Foreign Currency Notes) may deem and treat the payee of any such Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the relevant Agent
and the provisions of Section 9.08(c) have been satisfied. Any requests,
authority or consent of any Person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor or replacement thereof.
SECTION 8.07. Nonreliance on Agents and Other Banks. Each
Bank agrees that it has, independently and without reliance on the Agents or
any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrowers and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agents or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Loan Documents. The Agents shall not be required to keep themselves
informed as to the performance or observance by the Borrowers of this Agreement
or any of the other Loan Documents or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Borrowers or any other Person. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agents
hereunder or under the other Loan Documents, the Agents shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrowers or any
other Person (or any of their Affiliates) which may come into the possession of
the Agents.
SECTION 8.08. Failure to Act. Except for action expressly
required of the Agents hereunder or under the other Loan Documents, each Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction
by the Banks of their indemnification obligations under Section 8.05 against
any and all liability and expense which may be incurred by such Agent by reason
of taking, continuing to take, or failing to take any such action.
SECTION 8.09. Resignation or Removal of Agents. Subject to
the appointment and acceptance of a successor Agent as provided below, either
Agent may resign at any time by giving notice thereof to the other Agent, the
Banks and the Borrowers and either Agent may be removed at any time with or
without cause by the Required Banks. Upon any such resignation or removal, the
Required Domestic Banks (as to resignation or removal of the Domestic Agent) or
76
<PAGE> 84
Required Foreign Currency Banks (as to resignation or removal of the Foreign
Currency Agent) shall have the right to appoint a successor Domestic Agent
Required or Foreign Currency Agent, as the case may be (with the prior written
consent of the Parent, if no Default or Event of Default is in existence, which
consent shall not be unreasonably withheld or delayed). If no successor
Domestic Agent or Foreign Currency Agent, as applicable, shall have been so
appointed by the Required Domestic Banks or Foreign Currency Banks, as
applicable, and shall have accepted such appointment within 30 days after the
retiring Domestic Agent's or Foreign Currency Agent's, as applicable, notice of
resignation or the Required Domestic Banks' or Required Foreign Currency
Banks', as applicable, removal of the retiring Domestic Agent or Foreign
Currency Agent, then the retiring Domestic Agent or Foreign Currency Agent, as
applicable, may, on behalf of the Domestic or Foreign Currency Banks, as
applicable, appoint a successor Domestic Agent or Foreign Currency Agent. Any
such successor Agent shall be a bank which has a combined capital and surplus
of at least $500,000,000. Upon the acceptance of any appointment as Domestic
Agent or Foreign Currency Agent hereunder by a successor Domestic Agent or
Foreign Currency Agent, as applicable, such successor Domestic Agent or Foreign
Currency Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Domestic Agent or Foreign
Currency Agent, as applicable, and the retiring Domestic Agent or Foreign
Currency Agent shall be discharged from its duties and obligations hereunder.
After any retiring Domestic Agent's or Foreign Currency Agent's resignation or
removal hereunder as Domestic Agent or Foreign Currency Agent, the provisions
of this Article VIII shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Domestic
Agent or Foreign Currency Agent, as applicable, hereunder.
ARTICLE IX
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 9.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) the Domestic Agent determines that deposits in
Dollars, or the Foreign Currency Agent determines that a particular
Foreign Currency (in the applicable amounts), are not being offered in
the relevant market for such Interest Period, or
(b) the Required Domestic Banks advise the Domestic Agent that
the London Interbank Offered Rate, or the Required Foreign Currency
Banks advise the Foreign Currency Agent that the Foreign Currency
LIBOR/Reference Rate for any Foreign Currency, as the case may be, as
determined by such Agent, will not adequately and fairly reflect the
cost to such Banks
77
<PAGE> 85
of funding the relevant type of Fixed Rate Loans for such Interest
Period,
such Agent shall forthwith give notice thereof to the other Agent, the
Borrowers and the Domestic Banks or Foreign Currency Banks, as applicable,
whereupon until such Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Domestic Banks
or Foreign Currency Banks, as applicable, to make the type of Fixed Rate Loans
specified in such notice shall be suspended. Unless the affected Borrower
notifies the Domestic Agent at least 2 Domestic Business Days before the date
of any Borrowing of such type of Fixed Rate Loans for which a Notice of
Syndicated Dollar Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing. Unless the affected Borrower notifies the Foreign Currency Agent at
least 2 Foreign Currency Business Days before the date of any Borrowing of such
type of Fixed Rate Loans for which a Notice of Foreign Currency Borrowing has
previously been given that it elects not to borrow on such date, such Borrowing
shall instead be made as a Foreign Currency Base Rate Borrowing. Upon the
affected Borrower's written request, the relevant Agent shall negotiate with
the affected Borrower and the relevant Banks for a reasonable period of time,
as determined in such Agent's discretion, to develop a substitute interest rate
basis for Borrowings hereunder; provided, however, (x) the Agents, the Banks
and the Borrowers make no representation, warranty or covenant that any such
agreement will be made, and (y) any relevant Loans shall continue to have
interest accrue thereon at the Base Rate or the Foreign Currency Base Rate, as
appropriate, during the continuance of any such negotiations and thereafter
should no alternate interest rate be agreed to by the necessary parties.
SECTION 9.02. Illegality. If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof (any such agency being referred to as an "Authority" and
any such event being referred to as a "Change of Law"), or compliance by any
Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any Authority shall make it unlawful or impossible
for any Domestic Bank or Foreign Currency Bank (or its Lending Office) to make,
maintain or fund its Euro-Dollar Loans or Foreign Currency Loans and such Bank
shall so notify the appropriate Agent, such Agent shall forthwith give notice
thereof to the other Domestic Banks or Foreign Currency Banks, as applicable,
and the relevant Borrowers, whereupon until such Bank notifies the relevant
Borrowers and the relevant Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans or Foreign Currency Loans, as the case may be, shall be suspended. Before
giving any notice to the relevant Agent pursuant to this Section, such Bank
shall designate a different Lending Office if
78
<PAGE> 86
such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
Bank shall determine that it may not lawfully continue to maintain and fund any
of its outstanding Euro-Dollar Loans or Foreign Currency Loans, as the case may
be, to maturity and shall so specify in such notice, the relevant Borrowers
shall immediately prepay in full the then outstanding principal amount of each
Euro-Dollar Loan or Foreign Currency Loans, as the case may be, of such Bank,
together with accrued interest thereon. Concurrently with prepaying each such
Euro-Dollar Loan or Foreign Currency Loans, as the case may be, such Borrowers
shall borrow as a Refunding Loan, without any requirement for the satisfaction
of any of the conditions precedent set forth an any of Sections 2.02(a), (b) or
(c) or 3.02(a), (b) or (c) a Base Rate Loan or Syndicated Foreign Currency Loan
in Euro-USD or ITL Base Rate Loan, as appropriate, in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans or Foreign Currency Loans,
as the case may be, of the other Banks), and such Bank shall make such a Base
Rate Loan or Syndicated Foreign Currency Loan in Euro- USD or ITL Base Rate
Loan, as appropriate.
SECTION 9.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by any Bank (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any Authority:
(i) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, or, with respect to Loans in GBP, by the Bank of
England, but excluding (A) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve
Percentage and (B) with respect to any Foreign Currency Loan, any
requirement for which the subject Bank has already been compensated
pursuant to Section 3.05(c)) against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its Lending
Office); or
(ii) shall impose on any Bank (or its Lending Office) or on
the relevant interbank market any other condition affecting its Fixed
Rate Loans, its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its relevant Notes with respect thereto,
by an amount deemed by such Bank to be material, then, within 15 days after
demand by such Bank (with a copy to the Domestic Agent or the Foreign Currency
Agent, as appropriate), the affected Borrowers
79
<PAGE> 87
shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such increased cost or reduction; provided, however, that no
Borrower shall be responsible to the Banks for any increased cost or reduced
return, under either this Section 9.03(a) or the immediately succeeding Section
9.03(b), which accrued at any time before that date which is 90 calendar days
prior to the date upon which such Borrower is notified of same.
(b) If any Bank shall have determined that after the date
hereof the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any Authority, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for
such adoption, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand by such Bank,
the relevant Borrowers shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such reduction, subject to the proviso at the
end of Section 9.03(a).
(c) Each Bank will promptly notify the relevant Borrowers
and the relevant Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation pursuant to and
subject to the limitations contained in this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods. Nothing in this Section shall require any
Bank to disclose any information about its tax affairs or interfere with, limit
or abridge the right of any Bank to arrange its tax affairs in any manner in
which it desires.
(d) Any Bank claiming increased costs or other amounts under
this Section 9.03 shall, at the time of making any claim for such increased
cost or other amount and as a condition precedent to the obligation of the
Borrower to reimburse the same, certify to the relevant Borrower in writing
that such Bank, as a matter of policy, is seeking reimbursement of similar
increased costs and other amounts from its borrowers generally for similar
types of loans.
(e) The provisions of this Section 9.03 (i) shall be
applicable with respect to any Participant, Assignee or other
80
<PAGE> 88
Transferee, and any calculations required by such provisions shall be made
based upon the circumstances of such Participant, Assignee or other Transferee
and (ii) shall constitute a continuing agreement and shall survive for a period
of one year after the termination of this Agreement and the payment in full or
cancellation of the Notes.
SECTION 9.04. Base Rate Loans or Other Fixed Rate Loans
Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank
to make or maintain any type of Fixed Rate Loans has been suspended pursuant to
Section 9.02 or (ii) any Bank has demanded compensation under Section 9.03, and
the affected Borrower shall, by at least 5 Euro-Dollar Business Days' or
Foreign Currency Business Days, as applicable, prior notice to such Bank
through the relevant Agent, have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank notifies such
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank
as Euro-Dollar Loans or Foreign Currency Loans, as the case may be,
shall be made instead either (A) as Base Rate Loans or Syndicated
Foreign Currency Loans in Euro-USD or ITL Base Rate Loans, as
appropriate, (B) if such suspension or demand for compensation relates
to Euro-Dollar Loans, but not Foreign Currency Loans, as Foreign
Currency Loans, (C) if such demand for compensation relates to
Euro-Dollar Loans, but not Foreign Currency Loans, as Foreign Currency
Loans, or (D) if such demand for compensation relates to Foreign
Currency Loans, but not Euro-Dollar Loans, as Euro-Dollar Loans, as
the affected Borrowers may elect in the notice to such Bank through
the Agents referred to hereinabove (in all cases interest and
principal on such Loans shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans or Foreign
Currency Loans, as the case may be, has been repaid, all payments of
principal which would otherwise be applied to repay such Fixed Rate
Loans shall be applied to repay its Base Rate Loans or Syndicated
Foreign Currency Loan in Euro-USD or ITL Base Rate Loans, as
applicable, instead.
Upon the written request of the affected Borrower, the relevant Agent shall
negotiate with the affected Borrower and the Banks for a reasonable period of
time, as determined in such Agent's discretion, to develop a substitute
interest rate basis for Borrowings hereunder; provided, however, (x) the
Agents, the Banks and the Borrowers make no representation, warranty or
covenant that any such agreement will be made, and (y) any relevant Loans shall
continue to have interest accrue thereon at the Base Rate or the rate for
Syndicated Foreign Currency Loans in Euro-USD or ITL Base Rate, as appropriate,
during the continuance of any such negotiations and thereafter should no
alternate interest rate be agreed to by the necessary parties.
81
<PAGE> 89
SECTION 9.05. Compensation. Upon the request of any Bank,
delivered to the affected Borrower and the relevant Agent, such Borrower shall
pay to such Bank such amount or amounts as shall compensate such Bank for any
loss, cost or expense (but not loss of margin or profit) incurred by such Bank
as a result of:
(a) any payment or prepayment (pursuant to Section 2.10,
2.11, 3.09, 3.10, 7.01, 9.02 or otherwise) of a Fixed Rate Loan or Money Market
Loan on a date other than (i) in the case of a Fixed Rate Loan, the last day of
the Interest Period for such Fixed Rate Loan and (ii) in the case of a Money
Market Loan, on the Stated Maturity Date for such Money Market Loan; or
(b) any failure by any Borrower to borrow a Fixed Rate
Loan on the date for the Fixed Rate Borrowing of which such Fixed Rate Loan is
a part specified in the applicable Notice of Syndicated Dollar Borrowing,
Notice of Syndicated Foreign Currency Borrowing or Notice of ITL Borrowing
delivered pursuant to Section 2.02 or 3.02, as applicable (other than by reason
of a default by the relevant Bank or Agent);
such compensation to include, without limitation, as applicable: (A) an amount
equal to the excess, if any, of (x) the amount of interest which would have
accrued on the amount so paid or prepaid or not prepaid or borrowed for the
period from the date of such payment, prepayment or failure to prepay or borrow
to the last day of the then current Interest Period for such Fixed Rate Loan
(or, in the case of a failure to prepay or borrow, the Interest Period for such
Fixed Rate Loan which would have commenced on the date of such failure to
prepay or borrow) at the applicable rate of interest for such Fixed Rate Loan
provided for herein over (y) the amount of interest (as reasonably determined
by such Bank) such Bank would have paid on (i) deposits in Dollars of
comparable amounts having terms comparable to such period placed with it by
leading banks in the London interbank market (if such Fixed Rate Loan is a
Euro-Dollar Loan), or (ii) any deposit in a Foreign Currency of comparable
amounts having terms comparable to such period placed with it by lending banks
in the applicable interbank market for such Foreign Currency (if such Fixed
Rate Loan is a Foreign Currency Loan); or (B) any such loss, cost or expense
incurred by such Bank in liquidating or closing out any foreign currency
contract undertaken by such Bank in funding or maintaining such Fixed Rate Loan
(if such Fixed Rate Loan is a Foreign Currency Loan); provided, that (i) the
Borrowers shall be responsible to the Banks only for their actual costs
incurred in connection with same (i.e. not for any lost profits which were
expected over the course of such Interest Period), (ii) the Banks shall take
reasonable efforts to mitigate their damages in connection with same, and (iii)
the Borrowers shall not be responsible to the Banks for such losses in excess
of those amounts as the Banks would have incurred had they funded their
Euro-Dollar Loans in the London interbank market or their Foreign Currency
Loans in the relevant interbank market for such Foreign Currency.
82
<PAGE> 90
SECTION 9.06. Failure to Pay in Foreign Currency. If any
Borrower is prevented by application of any applicable law, rule or regulation
from effecting payment in a relevant Foreign Currency as required by this
Agreement, each Foreign Currency Bank may, through the Foreign Currency Agent,
require such payment to be made in Dollars in the Dollar Equivalent on the date
of payment of the amount of such payment. In any case in which any Borrower
shall make such payment in Dollars, such Borrower agrees to hold the Foreign
Currency Banks harmless from any loss incurred by the Foreign Currency Banks
arising from any change in the value of Dollars in relation to such Foreign
Currency between the date such payment became due and the date of payment
thereof.
SECTION 9.07. Judgment Currency. If for the purpose of
obtaining judgment in any court or enforcing any such judgment it is necessary
to convert any amount due in any Foreign Currency into any other currency, the
rate of exchange used shall be the Foreign Currency Agent's spot rate of
exchange for the purchase of the Foreign Currency with such other currency at
the close of business on the Foreign Currency Business Day preceding the date
on which judgment is given or any order for payment is made. The obligation of
the relevant Borrower in respect of any amount due from it hereunder shall,
notwithstanding any judgment or order for a liquidated sum or sums in respect
of amounts due hereunder or under any judgment or order in any other currency
or otherwise be discharged only to the extent that on the Foreign Currency
Business Day following receipt by the Foreign Currency Agent of any payment in
a currency other than the relevant Foreign Currency the Foreign Currency Agent
is able (in accordance with normal banking procedures) to purchase the relevant
Foreign Currency with such other currency. If the amount of the relevant
Foreign Currency that the Foreign Currency Agent is able to purchase with such
other currency is less than the amount due in the relevant Foreign Currency,
notwithstanding any judgment or order, such Borrower shall indemnify the
Foreign Currency Banks for the shortfall.
SECTION 9.08. Replacement of Banks. If any Bank claims
increased costs or other amounts or exercises any of its other rights or
remedies under Section 2.12(b), 2.12(c), 9.01, 9.02 or 9.03, the Parent shall
have the right to replace such Bank with another bank or financial institution,
subject to the approval of the relevant Agent, which approval shall not be
unreasonably withheld, provided that if more than one Bank claims increased
costs or other amounts or otherwise exercises such other rights on a similar
basis, the Parent must replace all or none of such Banks. Upon payment by the
new bank or financial institution to such Bank of the outstanding principal
amount of such bank's Dollar Loans, together with interest thereon and any fees
which are accrued and unpaid to the date of payment, and payment by the
Borrower to such Bank of any amounts payable pursuant to Section 9.05 as a
result of any payment of principal to such Bank on any day other than the last
day of an Interest Period, such new bank or financial institution shall become
a "Bank" under this Agreement with the rights and obligations of the Bank so
replaced.
83
<PAGE> 91
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telecopier or similar writing) and shall be given to such party at its address
or telecopier number set forth on the signature pages hereof (with a copy of
any such notice to the Foreign Currency Agent also sent to FC&AS at the Agency
Office), or such other address or telecopier number as such party may hereafter
specify for the purpose by notice to each other party. Each such notice,
request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section and the appropriate confirmation is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Agent under Article II, Article III or Article IX shall not be effective
until received.
SECTION 10.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note or other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.03. Expenses; Documentary Taxes. The Borrower
shall pay (i) all out-of-pocket expenses of the Agents, including fees and
disbursements of one special counsel for the Banks and the Agents, in
connection with the preparation of this Agreement and the other Loan Documents,
any waiver or consent hereunder or thereunder or any amendment hereof or
thereof or any Default or alleged Default hereunder or thereunder and (ii) if
an Event of Default occurs, all out-of-pocket expenses incurred by the Agents
and the Banks, including fees and disbursements of counsel, in connection with
such Event of Default and collection and other enforcement proceedings
resulting therefrom, including out-of-pocket expenses incurred in enforcing
this Agreement and the other Loan Documents. The Borrowers shall indemnify the
Agents and each Bank against any transfer taxes, documentary taxes, stamp
duties, assessments or charges made by any Authority by reason of the execution
and delivery of this Agreement or the other Loan Documents.
SECTION 10.04. Indemnification. The Borrowers, ratably in
accordance with the aggregate principal amount of their respective Loans,
shall indemnify the Agents, the Banks and each
84
<PAGE> 92
affiliate thereof and their respective directors, officers, employees and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject, insofar
as such losses, liabilities, claims or damages arise out of or result from any
actual or proposed use by the Borrower of the proceeds of any extension of
credit by any Bank hereunder or breach by any Borrower of this Agreement or any
other Loan Document or from any investigation, litigation (including, without
limitation, any actions taken by the Agents or any of the Banks to enforce this
Agreement or any of the other Loan Documents) or other proceeding (including,
without limitation, any threatened investigation or proceeding) relating to the
foregoing, and the Borrowers shall reimburse the Agents and each Bank, and each
affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any expenses (including, without limitation, legal
fees) incurred in connection with any such investigation or proceeding; but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or wilful misconduct of the Person to be
indemnified. The indemnification provisions (including, without limitation,
provisions for default interest, to the extent that this Section 10.04 might be
construed as duplicating the Borrowers' obligations to pay interest at the
Default Rate as required elsewhere in this Agreement) set forth in this Section
10.04 are meant to be without duplication of any other indemnification
provisions set forth in this Agreement and without limiting the generality of
the foregoing, the costs, expenses and other amount that are provided for in
Sections 2.12, 9.03 and 9.04 hereof shall not be covered by this Section 10.04,
nor shall any costs, expenses or other amounts that are excluded from those
Sections be covered by this Section 10.04.
If any indemnified party shall have notice of any event or condition
for which indemnification will be sought from the Borrowers hereunder, such
indemnified party shall give prompt and timely notice of such event or
condition to the Parent and shall cooperate fully with the Parent in taking any
action with respect to such event or condition. The Parent shall have the right
to control any proceedings in connection with any event or condition that is
the subject of indemnification hereunder, including, without limitation, the
decision to commence or not to commence such proceeding, to defend or not to
defend, to discontinue or settle such proceeding or to appeal any decision with
respect thereto, so long as the indemnified party is held entirely harmless
pursuant hereto and the Parent is not in default in any of its obligations
under this Section 10.04; provided, however, that the Parent may not, in
connection with the settlement or disposition thereof, or otherwise, admit or
acknowledge liability, fault or wrongdoing on the part of any indemnified party
without the express written consent of such indemnified party.
Upon the payment of any amounts due to the indemnified parties under
this Section 10.04, the Borrowers shall be subrogated to all
85
<PAGE> 93
of the indemnified party's rights and claims with respect to the subject of
such indemnity payment.
SECTION 10.05 Sharing of Setoffs. Each Bank agrees that if
it shall, by exercising any right of setoff or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest owing with respect to the Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of all
principal and interest owing with respect to the Note held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks owing to such other Banks,
and such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the Banks
owing to such other Banks shall be shared by the Banks pro rata; provided that
(i) nothing in this Section shall impair the right of any Bank to exercise any
right of setoff or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of any Borrower other than its
indebtedness under the Notes, and (ii) if all or any portion of such payment
received by the purchasing Bank is thereafter recovered from such purchasing
Bank, such purchase from each other Bank shall be rescinded and such other Bank
shall repay to the purchasing Bank the purchase price of such participation to
the extent of such recovery together with an amount equal to such other Bank's
ratable share (according to the proportion of (x) the amount of such other
Bank's required repayment to (y) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. Each Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not acquired pursuant
to the foregoing arrangements, may exercise rights of setoff or counterclaim
and other rights with respect to such participation as fully as if such holder
of a participation were a direct creditor of such Borrower in the amount of
such participation.
SECTION 10.06. Amendments and Waivers. (a) Any provision of
this Agreement, the Notes or any other Loan Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrowers and (i) if such amendment or waiver relates only to Article II, the
Required Domestic Banks, (ii) if such amendment or waiver relates only to
Article III, the Required Foreign Currency Banks, and (iii) if such amendment
or waiver relates to any other provision of this Agreement, the Required Banks
(and in each case, if the rights or duties of either of the Agents are affected
thereby, by such Agent); provided that, no such amendment or waiver shall:
(A) unless signed by all Banks, (1) change the percentage of the
Commitments, or the aggregate unpaid principal amount of the Notes, or the
percentage of Banks, which shall be required to take any action required to be
taken by the Banks or the Required Banks
86
<PAGE> 94
under this Section or any other provision of this Agreement, (2) change the
manner of application of any payments made under this Agreement or any of the
Notes, (3) change the date fixed for any payment of principal of or interest on
any Loan or any fees payable to the Banks hereunder, (4) change the amount of
principal, interest or fees on any date fixed for the payment thereof, (5)
release or substitute all or any substantial part of the collateral (if any)
held as security for the Loans, or (6) release any Guarantee given to support
payment of the Loans;
(B) unless signed by all Domestic Banks, (1) change the Dollar Loan
Commitment of any Domestic Bank or subject any Domestic Bank to any additional
obligation, (2) change the percentage of the Dollar Loan Commitments, or of
the aggregate unpaid principal amount of the Dollar Loan Notes, or the
percentage of Domestic Banks, which shall be required for the Domestic Banks to
take any action under this Section or any other provision of this Agreement; or
(C) unless signed by all Foreign Currency Banks, (1) change the
Foreign Currency Loan Commitment of any Foreign Currency Bank or subject any
Foreign Currency Bank to any additional obligation, (2) change the percentage
of the Foreign Currency Loan Commitments, or of the aggregate unpaid principal
amount of the Foreign Currency Loan Notes, or the percentage of Foreign
Currency Banks, which shall be required for the Foreign Currency Banks to take
any action under this Section or any other provision of this Agreement.
(b) The Borrowers will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement except through the relevant Agent and shall supply
such Agent with such information with respect thereto as may be reasonably
requested by such Agent. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Agreement shall be
delivered by the Borrowers to the Agents (in sufficient counterparts for each
of the Banks) forthwith following the date on which the same shall have been
executed and delivered by the requisite percentage of Domestic Banks, Foreign
Currency Banks or Banks, as applicable. The Borrowers will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any Bank (in its
capacity as such) as consideration for or as an inducement to the entering into
by such Bank of any waiver or amendment of any of the terms and provisions of
this Agreement unless such remuneration is concurrently paid, on the same
terms, ratably to all such Banks.
SECTION 10.07. No Margin Stock Collateral. Each of the Banks
represents to the Agents, the Borrowers and each of the other Banks that it in
good faith is not, directly or indirectly (by negative pledge or otherwise),
relying upon any Margin Stock as collateral in the extension or maintenance of
the credit provided for in this Agreement.
87
<PAGE> 95
SECTION 10.08. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the Borrowers
may not assign or otherwise transfer any of their rights under this Agreement.
(b) Any Bank may, without the consent of the Borrowers, at any
time sell to one or more Persons (each a "Participant") participating interests
in any Loan owing to such Bank, any Note held by such Bank, any Commitment
hereunder or any other interest of such Bank hereunder. In the event of any
such sale by a Bank of a participating interest to a Participant, such Bank's
obligations under this Agreement shall remain unchanged, such Bank shall remain
solely responsible for the performance thereof, such Bank shall remain the
holder of any such Note for all purposes under this Agreement, and the Borrowers
and the Agents shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. In no
event shall a Bank that sells a participation be obligated to the Participant to
take or refrain from taking any action hereunder except that such Bank may agree
that it will not (except as provided below), without the consent of the
Participant, agree to (i) the change of any date fixed for the payment of
principal of or interest on or fees with respect to the related loan or loans,
(ii) the change of the amount of any principal, interest or fees due on any date
fixed for the payment thereof with respect to the related loan or loans, (iii)
the change of the principal of the related loan or loans, (iv) any change in the
rate at which either interest is payable thereon or (if the Participant is
entitled to any part thereof) fee is payable hereunder from the rate at which
the Participant is entitled to receive interest or fee (as the case may be) in
respect of such participation, (v) the release or substitution of all or any
substantial part of the collateral (if any) held as security for the Loans, or
(vi) the release of any Guarantee given to support payment of the Loans. Each
Bank selling a participating interest in any Loan (other than a Money Market
Loan), Note, Commitment or other interest under this Agreement shall, within 10
Domestic Business Days of such sale, provide the Borrowers and the Agents with
written notification stating that such sale has occurred and identifying the
Participant and the interest purchased by such Participant. Each Borrower agrees
that each Participant shall be entitled to the benefits of Article IX with
respect to its participation in Loans outstanding from time to time, but only to
the extent that such Bank which sold the relevant participation would have been
entitled to pursuant to the terms of this Agreement.
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement, the Notes and the
other Loan Documents, and such Assignee shall assume all such rights and
obligations, pursuant to an Assignment and Acceptance in the form attached
hereto as Exhibit E, executed by such Assignee, such transferor Bank and the
Agents
88
<PAGE> 96
(and, in the case of an Assignee that is not then a Bank or an affiliate
thereof, by the Parent, which consent shall not be unreasonably withheld);
provided that (i) no interest may be sold by a Bank pursuant to this paragraph
(c) unless the Assignee shall agree to assume ratably equivalent portions of
the transferor Bank's Commitment, (ii) the amount of the Commitment of the
assigning Bank subject to such assignment (determined as of the effective date
of the assignment) shall be equal to $10,000,000 (or any larger multiple of
$1,000,000, (iii) no interest may be sold by a Bank pursuant to this paragraph
(c) to any Assignee that is not then a Bank or an affiliate thereof without the
consent of the Borrowers and the Agents, which consent shall not be
unreasonably withheld, and (iv) a Bank may not have more than 2 Assignees that
were not previously Banks or affiliates thereof at any one time. Upon (A)
execution of the Assignment and Acceptance by such transferor Bank, such
Assignee, the Agents and (if applicable) the Borrowers, (B) delivery of an
executed copy of the Assignment and Acceptance to the Borrowers and the Agents,
(C) payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee, and (D)
payment of a processing and recordation fee of $2,000 to the relevant Agent,
such Assignee shall for all purposes be a Bank party to this Agreement and
shall have all the rights and obligations of a Bank under this Agreement to the
same extent as if it were an original party hereto with a Commitment as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by the Borrowers, the Banks or the Agents shall be
required. Upon the consummation of any transfer to an Assignee pursuant to
this paragraph (c), the transferor Bank, the Agents and the Borrowers shall
make appropriate arrangements so that, if required, new Notes are issued to
such Assignee, but only if such Transferee, prior to receiving any such
information, agrees to be bound by the provisions of Section 10.09 in a written
instrument for the benefit of the Borrowers.
(d) Subject to the provisions of Section 10.09, each Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning such Borrower which
has been delivered to such Bank by such Borrower pursuant to this Agreement or
which has been delivered to such Bank by such Borrower in connection with such
Bank's credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater
payment under Section 2.12(c), Section 3.11(d) or Section 9.03 than the
transferor Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 9.02 or 9.03 requiring such
Bank to designate a different Lending Office under certain circumstances or at
a time
89
<PAGE> 97
when the circumstances giving rise to such greater payment did not exist.
(f) If any Foreign Currency Reference Bank assigns its Notes
to an unaffiliated institution, the Foreign Currency Agent shall, with the
consent of the Parent and with the consent of the Required Foreign Currency
Banks, appoint another bank to act as a Foreign Currency Reference Bank
hereunder.
(g) Anything in this Section 10.08 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion of the Loans
and/or obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such
assigned Loans and/or obligations made by the Borrowers to the assigning and/or
pledging Bank in accordance with the terms of this Agreement shall satisfy the
Borrowers' obligations hereunder in respect of such assigned Loans and/or
obligations to the extent of such payment. No such assignment shall release
the assigning and/or pledging Bank from its obligations hereunder.
SECTION 10.09. Confidentiality. Without limiting any duty of
confidentiality imposed on the Agents or the Banks or any of them under
applicable law, each Bank and each Agent agrees to exercise its best efforts to
keep any information delivered or made available by the Borrowers to it,
including, without limitation, information obtained by such Agent or such Bank
by reason of a visit or investigation by any Person contemplated in Section
6.02, which is clearly indicated to be confidential information, confidential
from anyone other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or administrative agency, (iii) upon the request or demand
of any regulatory agency or authority having jurisdiction over such Bank, (iv)
which has been publicly disclosed, other than in violation of this Section
10.09, (v) to the extent reasonably required in connection with any litigation
to which the Agent, any Bank or their respective affiliates may be a party,
(vi) to the extent reasonably required in connection with the exercise of any
remedy hereunder, (vii) to such Bank's legal counsel and independent auditors
and (viii) to any actual or proposed Participant, Assignee or other Transferee
of all or part of its rights hereunder which has agreed in writing, for the
benefit of the Borrowers, to be bound by the provisions of this Section 10.09.
SECTION 10.10. Representation by Banks. Each Bank hereby
represents that it is a commercial lender or financial institution which makes
Loans in the ordinary course of its business and that it will make its Loans
hereunder for its own account in the ordinary course of such business;
provided, however that, subject
90
<PAGE> 98
to Section 10.08, the disposition of the Note or Notes held by that Bank shall
at all times be within its exclusive control.
SECTION 10.11. Obligations Several. The obligations of each
Bank hereunder are several, and no Bank shall be responsible for the
obligations or commitment of any other Bank hereunder. Nothing contained in
this Agreement and no action taken by the Banks pursuant hereto shall be deemed
to constitute the Banks to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Bank shall be a separate and independent debt, and each Bank shall be entitled
to protect and enforce its rights arising out of this Agreement or any other
Loan Document and it shall not be necessary for any other Bank to be joined as
an additional party in any proceeding for such purpose.
SECTION 10.12. New York Law. This Agreement and each Note
shall be construed in accordance with and governed by the law of the State of
New York.
SECTION 10.13. Severability. In case any one or more of the
provisions contained in this Agreement, the Notes or any of the other Loan
Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.
SECTION 10.14. Interest. In no event shall the amount of
interest due or payable hereunder or under the Notes exceed the maximum rate of
interest allowed by applicable law, and in the event any such payment is
inadvertently made to any Bank by any Borrower or inadvertently received by any
Bank, then such excess sum shall be credited as a payment of principal, unless
such Borrower shall notify such Bank in writing that it elects to have such
excess sum returned forthwith. It is the express intent hereof that the
Borrowers not pay and the Banks not receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may legally be paid by any
Borrower under applicable law.
SECTION 10.15. Waiver of Jury Trial; Consent to Jurisdiction.
THE BORROWERS (A) AND EACH OF THE BANKS AND THE AGENTS IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THIS
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, (B) SUBMITS TO THE NONEXCLUSIVE PERSONAL
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF
NEW YORK, AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, FOR THE ENFORCEMENT OF THIS AGREEMENT, THE NOTES, THE PARENT GUARANTY AND
THE OTHER LOAN DOCUMENTS, (C) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW
OF ANY JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING, WITHOUT LIMITATION,
INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN SUCH COURTS AND (D)
91
<PAGE> 99
AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN THE MANNER PRESCRIBED IN
SECTION 10.01 FOR THE GIVING OF NOTICE TO THE BORROWER. NOTHING HEREIN
CONTAINED, HOWEVER, SHALL PREVENT THE AGENTS FROM BRINGING ANY ACTION OR
EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST THE BORROWERS
PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER, WITHIN ANY OTHER STATE OR
JURISDICTION.
SECTION 10.16. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
92
<PAGE> 100
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed in New York, New York, by their respective
authorized officers as of the day and year first above written.
SENSORMATIC ELECTRONICS
CORPORATION
By: /s/ Raymond R. Monteleone
---------------------------------------
Title: Acting Chief Financial Officer
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Raymond R. Montelone
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
SENSORMATIC DISTRIBUTION INC.
By: /s/ Raymond R. Monteleone
---------------------------------------
Title: Acting Chief Financial Officer
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Raymond R. Montelone
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
SENSORMATIC INTERNATIONAL,
INC.
By: /s/ Raymond R. Monteleone
---------------------------------------
Title: Acting Chief Financial Officer
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Raymond R. Montelone
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
93
<PAGE> 101
SENSORMATIC AB
Incorporated
in Sweden
By: /s/ Gerd Witter
-------------------------------
Foreign Currency: SEK Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC A.G.
Incorporated
in Switzerland
By: /s/ Gerd Witter
-------------------------------
Foreign Currency: SFR Title: Director
c/o Sensormatic Electronics
Corporation at its address for
specified pursuant
to Section 10.0
SENSORMATIC AS
Incorporated
in Denmark
By: /s/ Gerd Witter
-------------------------------
Foreign Currency: DKR Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC AS
Incorporated
in Norway
By: /s/ Gerd Witter
-------------------------------
Foreign Currency: NOK Title: President of Board
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
94
<PAGE> 102
SENSORMATIC B.V.
Incorporated
in The Netherlands
By: /s/ Gerd Witter
------------------------------
Foreign Currency: NLG Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
95
<PAGE> 103
SENSORMATIC E.C., S.R.L.
Incorporated
in Italy
By: /s/ Gerd Witter
------------------------------
Foreign Currency: ITL Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC GES.M.B.H.
Incorporated
in Austria
By: /s/ Gerd Witter
------------------------------
Foreign Currency: ATS Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC G.M.B.H.
Incorporated
in Germany
By: /s/ Gerd Witter
------------------------------
Foreign Currency: DEM Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
96
<PAGE> 104
N.V. SENSORMATIC S.A.
Incorporated
in Belgium
By: /s/ Gerd Witter
------------------------------
Foreign Currency: BFR Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC OY
Incorporated
in Finland
By: /s/ Gerd Witter
------------------------------
Foreign Currency: FIM Title: General Manager
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC S.A.
Incorporated
in France
By: /s/ Gerd Witter
------------------------------
Foreign Currency: FFR Title: General Forman
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
97
<PAGE> 105
SENSORMATIC HOLDINGS LTD.
Incorporated
in United Kingdom
By: /s/ C. D. Buck
------------------------------
Foreign Currency: GBP Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC INTERNATIONAL LTD.
Incorporated
in United Kingdom
By: /s/ Phil Hollett
------------------------------
Foreign Currency: GBP Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC CAMERA LTD
Incorporated
in United Kingdom
By: /s/ Phil Hollett
------------------------------
Foreign Currency: GBP Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
98
<PAGE> 106
SENSORMATIC E.C., S.A.
Incorporated
in Spain
By: /s/ Emilio Perez
------------------------------
Foreign Currency: ESP Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC PROTECCAO CONTRA
O FURTO, L.D.A.
Incorporated
in Portugal
By: /s/ Antonio Garcia
------------------------------
Foreign Currency: PTE Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC LIMITED
Incorporated
in United Kingdom
By: /s/ Phil Hollett
------------------------------
Foreign Currency: GBP Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
99
<PAGE> 107
SENSORMATIC FINANCE LIMITED
Incorporated
in United Kingdom
Foreign Currency: GBP By: /s/ Phil Hollett
------------------------
Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SENSORMATIC CASE LIMITED
Incorporated
in United Kingdom
Foreign Currency: GBP By: /s/ Phil Hollett
-------------------------
Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
SECURE IMAGING LIMITED
Incorporated
in United Kingdom
Foreign Currency: GBP By: /s/ Phil Hollett
-------------------------
Title: Director
c/o Sensormatic Electronics
Corporation at its address for
notices specified pursuant
to Section 10.01
100
<PAGE> 108
COMMITMENTS
Dollar Loans: WACHOVIA BANK OF GEORGIA, N.A.,
$40,000,000 as Domestic Agent and
as a Bank
Syndicated Foreign
Currency Loans:
$0.00
By: /s/ Leo Baltz
------------------------------
Title: Vice President
Lending Office
--------------
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Atlanta Corporate Group
Telecopier number: 404-332-5016
Confirmation number: 404-332-5920
Dollar Loans: ABN AMRO BANK N.V., as Foreign
$0.00 Currency Agent and as a Bank
Syndicated Foreign
Currency Loans:
$40,000,000
By: /s/ P. J. van Lierop
------------------------------
Title: Assistant Vice President
By: /s/ R. J. A. Slabbers
------------------------------
Title: Assistant Vice President
Lending Office
--------------
ABN AMRO Bank N.V.
Foppingadreef 22
102 BS Amsterdam, The Netherlands
Attention: Peter van Lierop
Telecopier number: 31-20-628-7716
Confirmation number: 31-20-628-4657
ABN AMRO FOREIGN CREDIT & AGENCY
SERVICES, a division of ABN AMRO
Bank, N.V.
By: /s/ P. J. van Lierop
------------------------------
Title: Assistant Vice President
By: /s/ R. J. A. Slabbers
------------------------------
Title: Assistant Vice President
101
<PAGE> 109
Dollar Loans: CHEMICAL BANK
$25,000,000
Syndicated Foreign
Currency Loans: By: /s/ Scott S. Ward
------------------------------
$0.00 Title: Vice President
Lending Office
--------------
Chemical Bank
270 Park Avenue, 9th Floor
New York, New York 10017
Attention: Abigail L. Grecia
Telecopier number: 212-818-1456
Confirmation number: 212-270-5425
Dollar Loans: THE FIRST NATIONAL BANK OF BOSTON
$0.00
Syndicated Foreign
Currency Loans:
$45,000,000 By: /s/ Jay Massimo
------------------------------
Title: Vice President
Lending Office for Dollar Loans
-------------------------------
The First National Bank of Boston
100 Federal Street
MS 01-08-04
Boston, MA 02110
Attention: Jay Massimo
Telecopier number: 617-434-0819
Confirmation number: 617-434-7824
Lending Office for Foreign
--------------------------
Currency Loans
---------------
The First National Bank of Boston
City-Haus
Friedrich-Ebert-Anlage 2-14
0-60325 Frankfurt/Main
Germany
Attention: Wolfgang Ramthor
Telecopier number: 49-69-7545-142
Confirmation number: 49-69-7545-0
102
<PAGE> 110
Dollar Loans: UNION BANK OF SWITZERLAND, NEW
$0.00 YORK BRANCH
Syndicated Foreign
Currency Loans: By: /s/ Robert W. Casey, Jr.
------------------------------
$15,000,000 Title: Vice President
By: /s/ Laurent J. Chaix
------------------------------
Title: Vice President
Lending Office
--------------
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
Attention: Robert W. Casey, Jr.
Telecopier number: 212-821-3383
Confirmation number: 212-821-3329
Dollar Loans: THE SAKURA BANK LIMITED, ATLANTA
$30,000,000 AGENCY
Syndicated Foreign
Currency Loans: By: /s/ Hiroyasu Imanishi
--------------------------
$0.00 Title: Vice President and
Senior Manager
By:
--------------------------
Title:
Lending Office
--------------
The Sakura Bank Limited, Atlanta
Agency
245 Peachtree Center Avenue
Suite 2703
Atlanta, Georgia 30303
Attention: Richard L. Spencer
Telecopier number: 404-521-1133
Confirmation number: 404-521-3111
103
<PAGE> 111
Dollar Loans: THE INDUSTRIAL BANK OF JAPAN,
$25,000,000 LIMITED, ATLANTA AGENCY
Syndicated Foreign
Currency Loans: By: /s/ Shusai Nagai
--------------------------
$0.00 Title: General Manager
By:
--------------------------
Title:
Lending Office
--------------
The Industrial Bank
of Japan, Limited, Atlanta Agency
191 Peachtree Street, N.E.
Suite 3600
Atlanta, Georgia 30303
Attention: Chip McCollum
Telecopier number: 404-524-8509
Confirmation number: 404-420-3326
Dollar Loans: COMMERZBANK AG, ATLANTA AGENCY
$20,000,000
Syndicated Foreign
Currency Loans: By: /s/ Andreas K. Bremer
--------------------------
$0.00 Title: SVP & Manager
By: /s/ Claudia Rost
--------------------------
Title: Asst. Treasurer
Lending Office
--------------
Commerzbank AG, Atlanta Agency
Promenade Two, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Claudia Rost
Telecopier number: 404-888-6539
Confirmation number: 404-888-6500
104
<PAGE> 112
Dollar Loans: THE FUJI BANK LIMITED, NEW YORK
$20,000,000 BRANCH
Syndicated Foreign
Currency Loans: By: /s/ Teiji Teramato
--------------------------
$0.00 Title: VP & Manager
By:
--------------------------
Title:
Lending Office
--------------
The Fuji Bank Limited, New York
Branch
Two World Trade Center, 79th Floor
New York, New York 10048
Attention: Ray Ventura
Telecopier number: 212-912-0516
Confirmation number: 212-898-2000
Dollar Loans: CITIBANK, N.A.
$15,000,000
Syndicated Foreign
Currency Loans: By: /s/ David Harris
--------------------------
$0.00 Title: Asst. Vice President
Lending Office
--------------
Citibank, N.A.
One Court Square, 7th Floor
Long Island City, New York 11120
Attention: Jeannine P. Campbell
Telecopier number: 718-248-4845
Confirmation number: 718-248-5358
105
<PAGE> 113
Dollar Loans: CREDIT SUISSE
$15,000,000
Syndicated Foreign
Currency Loans: By: /s/ William P. Murray
--------------------------
$0.00 Title: Member of Sr. Management
By: /s/ Kristian Kristinsson
--------------------------
Title: Associate
Lending Office
--------------
Credit Suisse
Tower 49, 12 East 49th Street
New York, New York 10017
Attention: Hazel Leslie
Telecopier number: 212-238-5247
Confirmation number: 212-238-5218
Dollar Loans: SUNTRUST BANK SOUTH FLORIDA, N.A.
$15,000,000
Syndicated Foreign
Currency Loans: By: /s/ Margaret D'Angelo
--------------------------
$0.00 Title: Sr. Vice President
Lending Office
--------------
SunTrust Bank South Florida, N.A.
501 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Russell Burnette
Telecopier number: 954-765-7301
Confirmation number: 954-765-7631
106
<PAGE> 114
Dollar Loans: THE SANWA BANK LIMITED, ATLANTA
$15,000,000 AGENCY
Syndicated Foreign
Currency Loans: By: /s/ P.J. Pawlak
----------------------------------------
$0.00 Title: Vice President and Senior Manager
By:
----------------------------------------
Title:
Lending Office
--------------
The Sanwa Bank Limited, Atlanta
Agency
133 Peachtree Street, Suite 4750
Atlanta, Georgia 30303
Attention: Kristie Hartrampf
Telecopier number: 404-589-1629
Confirmation number: 404-586-6893
TOTAL COMMITMENTS:
Dollar Loans:
$220,000,000
Syndicated Foreign
Currency Loans:
$90,000,000
ITL Loans
$10,000,000
107
<PAGE> 115
EXHIBIT A-1
FORM OF SYNDICATED DOLLAR LOAN NOTE
As of December 12, 1995
For value received,
________________________________________________________________________________
___, a _______________ corporation (the "Borrower"), promises to pay to the
order of ________________________________________, a ________________ (the
"Bank"), for the account of its Lending Office, the principal sum of
_________________________ __ ________________________ and No/100 Dollars
($____________), or such lesser amount as shall equal the unpaid principal
amount of each Syndicated Dollar Loan made by the Bank to the Borrower pursuant
to the Credit Agreement referred to below, on the dates and in the amounts
provided in the Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of this Note on the dates and at the rate or rates
provided for in the Credit Agreement referred to below. Interest on any
overdue principal of and, to the extent permitted by law, overdue interest on
the principal amount hereof shall bear interest at the Default Rate, as
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Wachovia Bank of Georgia, N.A.,
191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address
as may be specified from time to time pursuant to the Credit Agreement.
All Syndicated Dollar Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable thereto,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This Note is one of the Syndicated Dollar Loan Notes referred
to in the Amended and Restated Credit Agreement dated as of even date herewith
among the Borrower, the other borrowers listed on the signature pages thereof,
the Domestic Banks and Foreign Currency Banks listed on the signature pages
thereof, Wachovia Bank of Georgia, N.A., as Domestic Agent and ABN AMRO Bank
N.V. and ABN AMRO Foreign Credit & Agency Services as Foreign Currency Agent
(as the same may be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the optional and mandatory prepayment and the repayment hereof and the
acceleration of the maturity hereof.
108
<PAGE> 116
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed, under seal, by its duly authorized officer as of the day and
year first above written.
--------------------------
(SEAL)
---------------------------
By:
--------------------------
Title:
109
<PAGE> 117
Form of Syndicated Dollar Loan Note (cont'd)
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Base Rate Amount Amount of
or Euro- of Principal Maturity Notation
Date Dollar Loan Loan Repaid Date Made By
</TABLE>
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
110
<PAGE> 118
EXHIBIT A-2
FORM OF MONEY MARKET NOTE
As of December 12, 1995
For value received,
________________________________________________________________________________
___, a _______________ corporation (the "Borrower"), promises to pay to the
order of ________________________________________, a ________________ (the
"Bank"), for the account of its Lending Office, the principal sum of TWO
HUNDRED TWENTY MILLION and No/100 Dollars ($220,000,000.00), or such lesser
amount as shall equal the unpaid principal amount of each Money Market Loan
made by the Bank to the Borrower pursuant to the Credit Agreement referred to
below, on the dates and in the amounts provided in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of this Note
on the dates and at the rate or rates provided for in the Credit Agreement
referred to below. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All
such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
Wachovia Bank of Georgia, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia
30303-1757, or such other address as may be specified from time to time
pursuant to the Credit Agreement.
All Money Market Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable thereto,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This Note is one of the Money Market Loan Notes referred to in
the Amended and Restated Credit Agreement dated as of even date herewith among
the Borrower, the other borrowers listed on the signature pages thereof, the
Domestic Banks and Foreign Currency Banks listed on the signature pages
thereof, Wachovia Bank of Georgia, N.A., as Domestic Agent and ABN AMRO Bank
N.V. and ABN Foreign Credit & Agency Services as Foreign Currency Agent (as
the same may be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the optional and mandatory prepayment and the repayment hereof and the
acceleration of the maturity hereof.
111
<PAGE> 119
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed, under seal, by its duly authorized officer as of the day and
year first above written.
(SEAL)
-----------------------
-----------------------
By:
----------------------------------
Title:
112
<PAGE> 120
Form of Money Market Note (cont'd)
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amount Amount of Stated
Interest of Principal Maturity Notation
Date Rate Loan Repaid Date Made By
</TABLE>
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
113
<PAGE> 121
EXHIBIT B-1
FORM OF SYNDICATED FOREIGN CURRENCY LOAN NOTE
Atlanta, Georgia
December 12, 1995
For value received, ________________, a ___________
corporation (the "Borrower"), promises to pay to the order of
__________________________________________________, a ____________________ (the
"Bank"), for the account of its Lending Office, the outstanding principal
amount of the Syndicated Foreign Currency Loans made by the Bank to the
Borrower as Syndicated Foreign Currency Loans pursuant to the Credit Agreement
referred to below, on the dates and in the amounts provided in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for
Syndicated Foreign Currency Loans in the Credit Agreement. Interest on any
overdue principal of and, to the extent permitted by law, overdue interest on
the principal amount hereof shall bear interest at the Default Rate, as
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the applicable Foreign Currency in
immediately available funds at the Agency Office, or such other address as may
be specified from time to time pursuant to the Credit Agreement.
All Syndicated Foreign Currency Loans made by the Bank, the
respective maturities thereof, the interest rates from time to time applicable
thereto, and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This Note is one of the Syndicated Foreign Currency Loan Notes
referred to in the Amended and Restated Credit Agreement dated as of even date
herewith among the Borrower, the other borrowers listed on the signature pages
thereof, the Domestic Banks and Foreign Currency Banks listed on the signature
pages thereof, ABN AMRO N.V. and ABN AMRO Foreign Credit & Agency Services, as
Foreign Currency Agent and Wachovia Bank of Georgia, N.A., as Domestic Agent
(as the same may be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the optional and mandatory prepayment and the repayment hereof and the
acceleration of the maturity hereof.
114
<PAGE> 122
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed, under seal, by its duly authorized officer as of the day and
year first above written.
(SEAL)
-----------------------
-----------------------
By:
----------------------------------
Title:
115
<PAGE> 123
Syndicated Foreign Currency Note (cont'd)
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF _____________________________________
DATED DECEMBER 12, 1995
Principal
Amount of Maturity Principal
Loan and of Interest Amount Unpaid
Date Currency Period Paid Balance
- ------------------------------------------------------------
116
<PAGE> 124
EXHIBIT B-2
FORM OF ITL LOAN NOTE
Atlanta, Georgia
December 12, 1995
For value received, ________________, a ___________
corporation (the "Borrower"), promises to pay to the order of ABN AMRO BANK
N.V. and ABN AMRO Foreign Credit & Agency Services, Netherlands banking
organization (the "Bank"), at the Milan Office, the outstanding principal
amount of the Loans made by the Bank to the Borrower as ITL Loans pursuant to
the Credit Agreement referred to below, on the dates and in the amounts
provided in the Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of this Note on the dates and at the rate or rates
provided for ITL Loans in the Credit Agreement. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest on the
principal amount hereof shall bear interest at the Default Rate, as provided
for in the Credit Agreement. All such payments of principal and interest shall
be made in lawful money in ITL in immediately available funds at the Milan
Office, or such other address as may be specified from time to time pursuant to
the Credit Agreement.
All ITL Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time applicable thereto,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This Note is the ITL Loan Note referred to in the
Amended and Restated Credit Agreement dated as of even date herewith among the
Borrower, the other borrowers listed on the signature pages thereof, the
Domestic Banks and Foreign Currency Banks listed on the signature pages
thereof, ABN AMRO N.V. and ABN AMRO Foreign Credit & Agency Services, as
Foreign Currency Agent and Wachovia Bank of Georgia, N.A., as Domestic Agent
(as the same may be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the optional and mandatory prepayment and the repayment hereof and the
acceleration of the maturity hereof.
117
<PAGE> 125
IN WITNESS WHEREOF, the Borrower has caused this Note
to be duly executed, under seal, by its duly authorized officer as of the day
and year first above written.
(SEAL)
-----------------------
-----------------------
By:
-----------------------------------
Title:
118
<PAGE> 126
ITL Loan Note (cont'd)
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF _____________________________________
DATED DECEMBER 12, 1995
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ------------------------------------------------------------
119
<PAGE> 127
EXHIBIT C
OPINION OF
COUNSEL FOR PARENT, SDI AND SII
December 12, 1995
To the Domestic Banks
Foreign Currency Banks
and the Agents Referred
to Below, c/o:
Wachovia Bank of Georgia, N.A.,
as Domestic Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Atlanta Corporate Group
ABN Amro Bank N.V. and
ABN Amro Foreign Credit
& Agency Services,
as Foreign Currency Agent
Foppingadreef 22
102 BS Amsterdam, The Netherlands
Attention: Peter van Lierop
Dear Sirs:
We have acted as special, New York counsel for Sensormatic
Electronics Corporation, a Delaware corporation ("Parent"), Sensormatic
Distribution Inc., a Delaware corporation ("SDI") and Sensormatic
International, Inc., a Delaware corporation ("SII"; Parent, SDI and SII
sometimes being collectively referred to herein as the "Obligors") in
connection with the Amended and Restated Credit Agreement (the "Credit
Agreement") dated as of even date herewith, among the Obligors, the other
borrowers listed on the signature pages thereof, the Domestic Banks and Foreign
Currency Banks listed on the signature pages thereof, Wachovia Bank of Georgia,
N.A., as Domestic Agent and ABN-Amro N.V. as Foreign Currency Agent. Terms
defined in the Credit Agreement are used herein as therein defined, unless
otherwise indicated.
We have examined originals or copies, certified or otherwise
identifies to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. We have assumed for purposes of our opinions set
forth below that the execution and delivery of the Credit
120
<PAGE> 128
Agreement by each Borrower (other than the Obligors), by each Bank and by the
Agents have been duly authorized by each Borrower (other than the Obligors), by
each Bank and by the Agents.
Upon the basis of the foregoing, we are of the opinion that:
1. Each Obligor is a corporation duly incorporated,
validly existing and, based solely on the Good Standing Certificates (as
hereinafter defined) in good standing under the laws of Delaware and has all
corporate powers required to carry on. its business as now conducted. The
"Good Standing Certificates" are the certificate of good standing dated
November 29, 1995 of the Secretary of State of the State or Delaware with
respect to the Parent, the certificate of good standing dated November 29, 1995
of the Secretary of state of the State of Delaware with respect to SII, and the
certificate of good standing dated November 29, 1995 of the Secretary of State
of the State of Delaware with respect to SDI.
2. The execution, delivery and performance by the
Obligors of the Credit Agreement and the Notes executed by the obligors (the
"Obligor Notes"), and by Parent of the Parent Guaranty (i) are within each such
Obligor's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of, or filing with,
any governmental body, agency or official, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of any of the obligors or of any
material agreement, judgment, injunction, order, decree or other instrument
relating to Debt which to our knowledge is binding upon any of the Obligors and
(v) to our knowledge do not result in the creation or imposition of any Lien on
any asset of any of the Obligors.
3. The Credit Agreement constitutes a valid and binding
obligation of the Obligors enforceable against the respective Obligor in
accordance with its terms, and the Parent Guaranty constitutes a valid and
binding obligation of the Parent enforceable against the parent in accordance
with its terms, in each case except as such enforceability be limited by (1)
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
voidable preference, moratorium or other similar laws affecting the enforcement
of creditors' rights generally, (ii) general principles of equity (including,
without limitation, the availability or non-availability of equitable
remedies), whether considered in a proceeding at law or in equity, and (iii)
the possible judicial application, for reasons of comity, of foreign laws,
rules or regulations.
4. Except for the proceedings described in Parent's (i)
Form 10-K for the fiscal year ended June 30, 1995, (ii) Form 10-Q/A for the
quarterly period ended September 30, 1995 and (iii) Form 8-K, dated October 30,
1995 and any other actions,
121
<PAGE> 129
suits or proceedings based primarily on allegations similar to those contained
in such proceedings, to our knowledge, there is no action, suit or proceeding
pending, or threatened, against or affecting the Obligors or any Subsidiary
before any court or arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Parent and the Consolidated
Subsidiaries, considered as a whole, or which in any manner questions the
validity or enforceability of the Credit Agreement, any Obligor Note or the
Parent Guaranty.
5. Sensormatic Electronics corporation (Puerto Rico) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry
on its business as now conducted.
6. Neither the Obligors nor any of the Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
7. Neither the Obligor nor any of the Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.
8. You have requested our opinion that the choice of New
York law to govern the Credit Agreement, the Obligor Notes and the Parent
Guaranty in which such choice is stipulated is a valid and effective choice of
law under the laws of the State of New York, and adherence to existing judicial
precedents generally would require a court sitting in the State of New York to
abide by such choice of law, unless a fundamental policy of the State of New
York would be violated. Section 5-1401 of the General Obligations Law of the
State of New York provides in relevant part as follows:
"1. The parties to any contract, agreement or undertaking,
contingent or otherwise, in consideration of, or relating to
any obligation arising out of a transaction covering in the
aggregate not less than two hundred fifty thousand dollars. .
. may agree that the law of this state shall govern their
rights and duties in whole or in part, whether or not such
contract, agreement or undertaking bears a reasonable relation
to this state. . [certain exceptions omitted]".
To our knowledge, no court of the State of New York in a published decision has
construed Section 5-1401 as requiring the court to enforce the parties' choice
of the law of the State of New York in all circumstances. Nevertheless, a
United States
122
<PAGE> 130
federal court sitting in the State of New York has interpreted Section 3-1401
as follows:
"It is clear that where a contract is for more than $250,000,
was entered into after 1984, contains a choice of law
provision designating New York law as controlling disputes
arising out of that contract, N.Y. Gen Oblig. Law s. 5-1401
mandates the enforcement of that choice or law provision.
There is no indication in the statute, or in the very limited
judicial interpretation of it, of any exception which would
apply in the case at bar."
Bank of America National Trust and Savings Association v. Envases Venezolanos,
S.A., 740 F. Supp. 260, 265 (S.D.N.Y. June 23, 1990). Based on the foregoing,
we believe that, in the absence of duress, ignorance or undue influence or
other similar circumstances, and unless a fundamental policy of the State of
New York would be violated (collectively, the "Countervailing Factors"), the
choice of the law of the State of New York to govern the Credit Agreement, the
Obligor Notes and the Parent Guaranty is a valid choice of law if proceedings
for the enforcement thereof are litigated in the courts in the State of New
York. We doubt that any of the Countervailing Factors are present in this
transaction, but we note that the presence of one or more Countervailing
Factors would be a matter to be decided by the court.
We are qualified to practice in the State of New York and do
not purport to be experts on any laws other than the federal laws of the United
States, the State of New York and the General Corporation Law of the State of
Delaware and this opinion is rendered only with respect to such laws. We have
made no independent investigation of the laws of any other jurisdiction.
In rendering the opinion in paragraphs 3 and 8 above, we have
assumed, with your permission, that:
(a) The Credit Agreement has been duly authorized,
executed and delivered by the Agents and the Banks and, to the extent
provided therein, constitutes the legal, valid and binding obligation
of the Agents and the Banks, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance,
voidable preference, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, (ii) general principles of
equity (including, without limitation, the availability or
non-availability of equitable remedies), whether considered in a
proceeding at law or in equity, and (iii) the possible judicial
application, for reasons of comity, of foreign laws, rules or
regulations.
123
<PAGE> 131
(b) Neither the authorization, execution and delivery of
the Credit Agreement or the Obligor Notes or the Parent Guaranty nor
the consummation of the transactions contemplated therein, nor the
fulfillment or compliance with the terms thereof, violates or will
result in the violation of the provisions of any law, rule or
regulation of the State of Georgia (the jurisdiction in which the
Dollar Loans are to be paid) or of the Netherlands (the jurisdiction
in which the Foreign currency Loans will be paid) or of Italy (the
jurisdiction in which the ITL Loans will be paid), or any other
jurisdiction in which any Borrower may be located. Illegality in any
of those jurisdictions could, in certain limited circumstances, affect
the enforceability of the obligations of the Parent under the Parent
Guaranty. Nevertheless, we note that in a recent decision of the
United States District Court for the southern District of New York, a
guarantor was unsuccessful in asserting illegality under the laws of
the principal debtor's jurisdiction as a defense against payment under
a guarantee that was stated to be governed by New York law, and held
that extraterritorial effect would be given to the foreign law only by
application of principles of comity.
Bank Leumi Trust Company of New York v.
David Wulkan, 735 F. Supp. 72 (S.D.N.Y. April 2, 1990). Without
having made any specific inquiry into this matter, we are not aware of
factors present in the Credit Agreement which, under circumstances
existing today, would cause a court in the State of New York to apply
principles of comity, but no confident conclusion can be expressed
without a detailed examination of matters both intrinsic and extrinsic
to the transaction, such as the laws, rules and regulations of each
relevant jurisdiction, and the policies of relevant agencies of the
government of the United States toward those jurisdictions and toward
the particular matters that are the subject of the relevant foreign
laws, rules and regulations to which extraterritorial effect would be
given.
The foregoing opinions are subject to the qualifications that:
(I) We express no opinion as to (a) any Borrower's title to
or rights in any of its assets or other properties, (b) the
enforceability of the following sections of the Credit Agreement (or
of any comparable provision of the Parent Guaranty): the last sentence
of Section 9.06, Section 9.07, the first sentence of Section 10.02,
Section 10.06 insofar as it purports to preclude the validity or
effectiveness of non-written amendments, Section 10.13, Section
10.15(a), Section 10.15(c), Section 10.15(d); (c) the jurisdiction of
any court over the subject matter of any dispute arising out of the
credit Agreement, the obligor Notes or the Parent Guaranty; (d) any
provision of the Credit Agreement, the Obligor Notes or the Parent
Guaranty purporting to provide for interest after judgment, to
124
<PAGE> 132
establish evidentiary standards, or to grant or waive rights of
set-off or counterclaim.
(II) Without limiting the generality of the statements in
paragraph I above, we express no opinion as to the applicability of
the laws of the State of Florida, the State of Georgia or any other
jurisdiction that may limit the enforceability of provisions for
interest on defaulted obligations, or the maximum rate or amount of
interest that may be charged, taken, collected or received with
respect to the obligations under the Credit Agreement, the Notes or
the Parent Guaranty, or as to the effect of such laws (other than the
State of New York) if applicable.
(III) We point out the enforceability of indemnities set
forth in the Credit Agreement, the Notes or the Parent Guaranty may be
limited by applicable securities laws, by public policy or by the
discretion of the court.
(IV) Without limiting the statements in paragraph 3, we point
out that, in applying general principles of equity, a court may
decline to enforce the right of the Agents or the Banks to accelerate
the maturity or the Loans or to exercise other remedies in connection
with a default if such rights were to be invoked in the context of
fraud or exploitative overreaching by any Agent or Bank, or
unconscionable conduct by any Agent or Bank to exploit a technical
breach. Moreover, provisions of the Credit Agreement, the Notes or
the Parent Guaranty that permit any Agent or Bank to take actions or
make determinations may be subject to requirements that such actions
be taken and such determinations be made on a reasonable basis and in
good faith.
(V) We caution you that not all of the waivers and
consents set forth in the Parent Guaranty necessarily would be given
effect in the State of New York. For example, the Banks' purported
right, set forth in Section 3 of the Parent Guaranty, to extend,
renew, compromise, waive or release certain obligations, or to modify,
amend or supplement the Credit Agreement or any Note, without
affecting their rights under the Parent Guaranty might,
notwithstanding those provisions, affect the rights of the Agents or
Banks against the Parent, especially if the extension, renewal,
compromise, waiver, release, modification, amendment or supplement
were to be of an essential term of the Credit Agreement or the Notes,
or were to be so extensive as to create a new contract. Nevertheless,
we do not believe that the inclusion of such provisions would render
the Parent Guaranty invalid or unenforceable, or that the inclusion of
such provisions would deprive the Banks of the practical benefits of
the Parent Guaranty. We also note that a recent decision of the
United States District Court for the Southern District of New York
held that a "sweeping waiver"
125
<PAGE> 133
of the type set forth in portions of said Section 3 was enforceable,
notwithstanding allegations of tortious interference with contractual
relations, interference with prospective economic advantage,
negligence and violations of certain laws. American Express Bank,
Ltd. v. Peter L. Coker, et al., 1990 WL 100888 (S.D.N.Y. July 13,
1990).
(VI) We wish to point out further that, if enforcement of the
Parent's obligations under the Parent Guaranty were to be sought in
the State of New York, (a) a New York statute provides that a judgment
rendered by a court of the State of New York in respect of an
obligation denominated in a currency other than U.S. Dollars (a
"Foreign Currency") may be rendered in such Foreign currency, and if
20 would be converted into U.S. Dollars at the rate of exchange
prevailing on the date of entry of the judgment; and (b) a judgment
rendered by a Federal court in New York in respect of an obligation
denominated in a Foreign currency may be expressed in U.S. Dollars,
but we express no opinion as to the rate of exchange such court would
apply.
(VII) We note further, that the willingness of any United
States federal court to accept jurisdiction over any dispute arising
out of the Credit Agreement, the Notes or the Parent Guaranty may,
notwithstanding the submission by the Borrowers to the personal
jurisdiction of certain federal courts pursuant to Section 10.15(b) of
the Credit Agreement (and any comparable provision of the Parent
Guaranty), be subject to applicable law and to such court's
discretion.
(VIII) We have relied, with your permission, solely on the
opinion of Walter Engdahl, dated December 12, 1995, addressed to us,
a copy of which is annexed to this letter as Appendix A, that the
execution, delivery and performance of the Credit Agreement, the
Obligor Notes and the Parent Guaranty do not contravene, or constitute
a default under, any provision of applicable law, rule or regulation
of the State of Florida.
In this opinion letter, the phrase "to our knowledge" means to
the actual knowledge of those attorneys in our firm who are actively involved
in work on behalf of the Parent, without independent investigation outside the
firm. The phrase "valid and binding obligation of the obligors, respectively,
enforceable against such Obligor in accordance with their respective terms"
means that the obligation in question is of the type that is capable of
enforcement under the law of the State of New York, but does not mean that such
obligation necessarily would be enforced by a court in all circumstances.
This opinion is delivered to you at the request of the
Borrowers in connection with the transaction referenced above and may not,
without our prior written consent, be communicated to or
126
<PAGE> 134
relied upon by anyone other than You or any Assignee under the Credit
Agreement, except that it may be communicated to Participants and to Jones,
Day, Reavis & Pogue, your special counsel.
This opinion speaks only as of the date hereof, and we do not
undertake any duty to advise you of any change herein. Without limiting the
generality of the foregoing, we note that certain agreements to which the
Borrowers now are or hereafter may become parties may contain limitations on
the incurrence from time to time of Debt and other obligations by the Parent
and its Subsidiaries (for example, Section 6.15), which limitations could be
violated by a borrowing of Loans under the Credit Agreement by the Parent or
the other Borrowers. We do not undertake to advise you of those circumstances.
Very truly yours,
127
<PAGE> 135
EXHIBIT D
OPINION OF
JONES, DAY, REAVIS & POGUE, SPECIAL COUNSEL
FOR THE AGENT
[Dated as provided in Section 4.01 of the Credit Agreement]
To the Domestic Banks,
Foreign Currency Banks
and the Agents Referred
to Below, c/o:
Wachovia Bank of Georgia, N.A.,
as Domestic Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Atlanta Corporate Group
ABN AMRO Bank N.V. and
ABN AMRO Foreign Credit
& Agency Services
as Foreign Currency Agent
Foppingadreef 22
102 BS Amsterdam, The Netherlands
Attention: Peter van Lierop
Dear Sirs:
We have participated in the preparation of the Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of even date
herewith, among Sensormatic Electronics Corporation, a Delaware corporation
("Parent"), Sensormatic Distribution Inc., a Delaware corporation ("SDI") and
Sensormatic International, Inc., a Delaware corporation ("SII"), the other
borrowers listed on the signature pages thereof, the Domestic Banks and Foreign
Currency Banks listed on the signature pages thereof, Wachovia Bank of Georgia,
N.A., as Domestic Agent and ABN-Amro N.V. as Foreign Currency Agent
(collectively, the "Agents"), and have acted as special counsel for the Agents
for the purpose of rendering this opinion pursuant to Section 4.01(e) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualification, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith.
128
<PAGE> 136
The law covered by the opinions expressed herein is limited to the Federal Law
of the United States and the Law of the State of New York.
Based on the foregoing, and subject to the exceptions,
qualifications and assumptions noted herein, including the assumption and in
the Accord, we are of the opinion that:
Upon the basis of the foregoing, assuming the due
authorization, execution and delivery of the Credit Agreement and each of the
Notes by or on behalf of Parent, SDI and SII (collectively, the "Obligors") and
of the Parent Guaranty by Parent, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of each of the Obligors,
the Parent Guaranty constitutes a valid and binding agreement of Parent, and
each Note executed by each of the Obligors constitutes valid and binding
obligations of such Obligor, in each case enforceable in accordance with its
terms, except, in addition to exceptions contained in the Accord, as such
enforceability may be limited by the possible judicial application, for reasons
of comity, of foreign laws, rules or regulations (see, in this connection, the
discussion contained in paragraph (b) of the opinion of Christy & Viener of
even date herewith addressed to you). Note also the discussion in paragraph 8
of such opinion as to the effectiveness under New York law of the choice of New
York law to govern the Credit Agreement, the Notes and the Parent Guaranty.
We express no opinion as to the validity or enforceability of any
provision contained in the Credit Agreement (i) purporting to preclude the
amendment or other modification of the Credit Agreement or the waiver, release
or discharge of obligations except by an instrument in writing or (ii)
providing for the severability of unenforceable provisions.
We express no opinion as to the effect of the compliance or
noncompliance of the Agents or any of the Banks with any state or federal laws
or regulations applicable to the Agents or any of the Banks by reason of the
legal or regulatory status or the nature of the business of the Agents or any
of the Banks.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you and any Assignee,
Participant or other Transferee under the Credit Agreement without our prior
written consent.
Very truly yours,
129
<PAGE> 137
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Dated __________ __, 19__
Reference is made to the Amended and Restated Credit Agreement
dated as of December 12, 1995 (together with all amendments and modifications
thereto, the "Credit Agreement") among Sensormatic Electronics Corporation,
Sensormatic Distribution Inc., Sensormatic International, Inc., the other
borrowers listed on the signature pages thereof, the Domestic Banks and Foreign
Currency Banks listed on the signature pages thereof, Wachovia Bank of Georgia,
N.A., as Domestic Agent and ABN AMRO N.V. and ABN AMRO Foreign Credit and
Agency Services as Foreign Currency Agent. Terms defined in the Credit
Agreement are used herein with the same meaning.
____________________________________________________ (the "Assignor") and
________________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, a
______% interest in and to all of the Assignor's rights and obligations as a
[Domestic Bank\Foreign Currency Bank] under the Credit Agreement as of the
Effective Date (as defined below) (including, without limitation, a _____%
interest (which on the Effective Date hereof is $__________) in the Assignor's
[Dollar Loans/Syndicated Foreign Currency Loans/ITL Loan] Commitment and a
______ interest (which on the Effective Date hereof is $_______________) in the
[Dollar Loans/Syndicated Foreign Currency Loans/ITL Loan] owing to the Assignor
and a ___% interest in the [Dollar Loan Notes/Syndicated Foreign Currency Loan
Note/ITL Loan Note] held by the Assignor (which on the Effective Date hereof is
$__________).
2. The Assignor (i) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder, that such interest is free and clear
of any adverse claim and that as of the date hereof its [Dollar Loan
Commitment/Syndicated Foreign Currency Loan Commitment/ITL Loan Commitment]
(without giving effect to assignments thereof which have not yet become
effective) is $__________ and the aggregate outstanding principal amount of
[Dollar Loans/Syndicated Foreign Currency Loans/ITL Loans] owing to it (without
giving effect to assignments thereof which have not yet become effective) is
$_________________;
130
<PAGE> 138
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or the performance or
observance by the Borrowers of any of their obligations under the Credit
Agreement or any other instrument or document furnished pursuant thereto; and
(iii) attaches the [Dollar Loan Notes/Syndicated Foreign Currency Loan
Notes/ITL Loan Note] referred to in paragraph 1 above and requests that the
[Domestic Agent/Foreign Currency Agent] exchange such [Dollar Loan
Notes/Foreign Currency Loan Notes/ITL Loan Note] for new Notes as follows: [a
Syndicated Loan Note dated ________________, ____ in the principal amount of
$_____________ payable to the order of the Assignor] [a Money Market Loan Note
dated _________________, ____ in the principal amount of $__________ __] [a
Syndicated Foreign Currency Loan Note dated _____________, ____] [an ITL Loan
Note dated ___________________, ___ ] payable to the order of the Assignee.
3. The Assignee (i) confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements
referred to in Section 5.04(a) thereof (or any more recent financial statements
of Parent delivered pursuant to Section 6.01(a) or (b) thereof) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Agents, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank
or financial institution; (iv) appoints and authorizes the Agents to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agents by the terms thereof, together with
such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank
(including, without limitation, for the benefit of the Borrowers, the
confidentiality provisions of Section 10.09 thereof); (vi) specifies as its
Lending Office (and address for notices) the office set forth beneath its name
on the signature pages hereof, (vii) represents and warrants that the
execution, delivery and performance of this Assignment and Acceptance are
within its corporate powers and have been duly authorized by all necessary
corporate action[add the following if the Assignee is not a Bank which is
chartered under the laws of the United States or a state thereof][, and (viii)
attaches the forms prescribed by the Internal Revenue Service of the United
States and each other applicable jurisdiction certifying as to the Assignee's
status for purposes of determining exemption from withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Notes or such other documents as are necessary to indicate that all
such payments are subject to such taxes at a rate reduced by an applicable tax
treaty].
131
<PAGE> 139
4. The Effective Date for this Assignment and Acceptance shall
be __________, 19__ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Domestic Agent and/or
Foreign Currency Agent, as appropriate, for execution and acceptance by such
Agent or Agents and to the Borrowers for execution by the Borrowers.
5. Upon such execution and acceptance by the relevant Agent or
Agents [and execution by the Borrowers] [If the Assignee is not a Bank or
affiliate thereof PRIOR TO THE EFFECTIVE DATE], from and after the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent rights and obligations have been transferred to it by this Assignment
and Acceptance, have the rights and obligations of a [Domestic Bank/Foreign
Currency Bank/ABN AMRO with respect to the ITL Loan Commitment and ITL Loans]
thereunder and (ii) the Assignor shall, to the extent its rights and
obligations have been transferred to the Assignee by this Assignment and
Acceptance, relinquish its rights (other than under Section 10.03 of the Credit
Agreement) and be released from its obligations under the Credit Agreement.
6. Upon such execution and acceptance by the relevant Agent or
Agents [and execution by the Borrowers] [IF THE ASSIGNEE IS NOT A BANK OR
AFFILIATE THEREOF PRIOR TO THE EFFECTIVE DATE], from and after the Effective
Date, the relevant Agent shall make all payments in respect of the interest
assigned hereby to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to such acceptance by the
relevant Agent directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
[NAME OF ASSIGNOR]
By:
---------------------------
Title:
[NAME OF ASSIGNEE]
By:
---------------------------
Title:
Lending Office:
[Address]
132
<PAGE> 140
WACHOVIA BANK OF GEORGIA, N.A.,
As Domestic Agent
By:
--------------------------
Title:
ABN AMRO BANK N.V.,
As Foreign Currency Agent
By:
---------------------------
Title:
By:
----------------------------
Title:
ABN AMRO FOREIGN CREDIT
& AGENCY SERVICES
By:
----------------------------
Title:
133
<PAGE> 141
[Add signatures of Borrowers if the
Assignee is not a Bank prior to the
Effective Date.]
134
<PAGE> 142
NOTICE OF SYNDICATED DOLLAR BORROWING
_____________________, 199__
Wachovia Bank of Georgia, N.A., as Domestic Agent
191 Peachtree Street, N.W.
Atlanta, Georgia 30303-1757
Attention: Atlanta Corporate Group
Re: Amended and Restated Credit Agreement (as amended and modified
from time to time, the "Credit Agreement") dated as of
December 12, 1995 by and among Sensormatic Electronics
Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign
Currency Banks from time to time parties thereto, and Wachovia
Bank of Georgia, N.A., as Domestic Agent and ABN AMRO and ABN
AMRO Foreign Credit & Agency Services, as Foreign Currency
Agent.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of Syndicated Dollar Borrowing is delivered to you
pursuant to Section 2.02 of the Credit Agreement.
The Borrower hereby requests a Syndicated Dollar Borrowing in the
aggregate principal amount of $ ___________ to be made on _______________,
199__, and for interest to accrue thereon at the rate established by the Credit
Agreement for [Euro-Dollar Loans] [Base Rate Loans]. The duration of the
Interest Period with respect thereto shall be [1 month] [2 months] [3 months]
[6 months] [12 months] [30 days].
135
<PAGE> 143
The Borrower has caused this Notice of Syndicated Dollar Borrowing to
be executed and delivered by its duly authorized officer this _____ day of
___________, 199___.
[
-----------------------------
By:
-------------------------------
Title:
136
<PAGE> 144
EXHIBIT G-1
NOTICE OF SYNDICATED FOREIGN CURRENCY BORROWING
_____________________, 199__
ABN AMRO Bank N.V. and
as Foreign Currency Agent
c/o ABN AMRO Foreign Credit & Agency Services
_________________________
_________________________
Attention: _____________
Re: Re: Amended and Restated Credit Agreement (as amended and
modified from time to time, the "Credit Agreement") dated as
of December 12, 1995 by and among Sensormatic Electronics
Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign
Currency Banks from time to time parties thereto, and Wachovia
Bank of Georgia, N.A., as Domestic Agent and ABN AMRO Bank
B.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign
Currency Agent.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of Syndicated Foreign Currency Borrowing is delivered to
you pursuant to Section 3.02 of the Credit Agreement.
The Borrower hereby requests a Syndicated Foreign Currency Borrowing,
to be made in ___, in the approximate aggregate principal amount in such
Foreign Currency of ___________, in ___, on _______________, 199__, and for
interest to accrue thereon at the rate established by the Credit Agreement for
Syndicated Foreign Currency Loans. The duration of the Interest Period with
respect thereto shall be [1 month] [2 months] [3 months] [6 months] [12 months]
[14 days].
137
<PAGE> 145
The Borrower has caused this Notice of Syndicated Foreign Currency
Borrowing to be executed and delivered by its duly authorized officer this
_____ day of ___________, 199___.
[ ]
------------------------
By:
------------------------
Title:
138
<PAGE> 146
EXHIBIT G-2
NOTICE OF ITL BORROWING
_____________________, 199__
ABN AMRO Bank, Milan Branch
_________________________
_________________________
Attention: _____________
Re: Re: Amended and Restated Credit Agreement (as amended and
modified from time to time, the "Credit Agreement") dated as
of December 12, 1995 by and among Sensormatic Electronics
Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign
Currency Banks from time to time parties thereto, and Wachovia
Bank of Georgia, N.A., as Domestic Agent and ABN AMRO Bank
N.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign
Currency Agent.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of ITL Borrowing is delivered to you pursuant to Section
3.02 of the Credit Agreement.
The Borrower hereby requests an ITL Borrowing, to be made in the
approximate aggregate principal amount of the Dollar Equivalent of
$___________, in ITL, on _______________, 199__, and for interest to accrue
thereon at the rate established by the Credit Agreement for [ITL Fixed Rate
Loans] [ITL Base Rate Loans]. The duration of the Interest Period with respect
thereto shall be [1 month] [2 months] [3 months] [6 months] [12 months] [30
days].
139
<PAGE> 147
The Borrower has caused this Notice of ITL Borrowing to be executed
and delivered by its duly authorized officer this _____ day of ___________,
199___.
[ ]
------------------------
By:
------------------------
Title:
140
<PAGE> 148
EXHIBIT H
COMPLIANCE CERTIFICATE
Re: Amended and Restated Credit Agreement (as amended and modified
from time to time, the "Credit Agreement") dated as of
December 12, 1995 by and among Sensormatic Electronics
Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign
Currency Banks from time to time parties thereto, and Wachovia
Bank of Georgia, N.A., as Domestic Agent and ABN AMRO Bank
N.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign
Currency Agent. Capitalized terms used herein shall have the
meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 6.01(c) of the Credit Agreement,
_______________, the duly authorized ______________ _____ of Sensormatic
Electronics Corporation, hereby certifies to the Agents and the Banks that
Parent is in compliance with the requirements of Sections 6.14 through 6.19,
inclusive, as of the date of the financial statements furnished to the Agents
and the Banks on or about the date hereof pursuant to Section 6.01(a) or (b) of
the Credit Agreement, and attached hereto is a true, accurate and complete copy
of the calculations showing such compliance, and that, to the best knowledge of
the undersigned, after due inquiry, no Default is in existence on and as of the
date hereof.
SENSORMATIC ELECTRONIC CORPORATION
By:
-------------------------------
Title:
[TO FOLLOW]
141
<PAGE> 149
EXHIBIT I
CLOSING CERTIFICATE
Re: Amended and Restated Credit Agreement (as amended and modified
from time to time, the "Credit Agreement") dated as of
December 12, 1995 by and among Sensormatic Electronics
Corporation, Sensormatic Distribution Inc., Sensormatic
International, Inc., the other Borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign
Currency Banks from time to time parties thereto, and Wachovia
Bank of Georgia, N.A., as Domestic Agent and ABN AMRO Bank
N.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign
Currency Agent. Capitalized terms used herein shall have the
meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 4.01(f) of the Credit Agreement,
______________________________, the
duly authorized _______ ____________ of ______________ hereby certifies to the
Agent and the Banks that (i) no Default has occurred and is continuing as of
the date hereof, and (ii) the representations and warranties contained in
Article IV of the Credit Agreement are true on and as of the date hereof.
Certified as of this
_____ day of _______________, 19__.
By:
---------------------------
Printed Name:
--------------
Title:
---------------------
142
<PAGE> 150
EXHIBIT J
MONEY MARKET QUOTE REQUEST
Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Atlanta Corporate Group
Re: Money Market Quote Request
This Money Market Quote Request is given in accordance with Section
2.03 of the Amended and Restated Credit Agreement (as amended or modified from
time to time, the "Credit Agreement") dated as of December 12, 1995 by and
among Sensormatic Electronics Corporation, Sensormatic Distribution Inc.,
Sensormatic International, Inc., the other Borrowers listed on the signature
pages thereof, the Domestic Banks and Foreign Currency Banks from time to time
parties thereto, and Wachovia Bank of Georgia, N.A., as Domestic Agent and ABN
AMRO Bank N.V. and ABN AMRO Foreign Credit & Agency Services, as Foreign
Currency Agent. Capitalized terms used herein shall have the meanings ascribed
thereto in the Credit Agreement.
The undersigned Borrower hereby requests that the Domestic Agent
obtain quotes for a Money Market Dollar Borrowing based upon the following:
1. The proposed date of the Money Market Dollar Borrowing shall
be ____________, 19____ (the "Borrowing Date").(1)
2. The aggregate amount of the Money Market Dollar Borrowing
shall be $____________.(2)
3. The Stated Maturity Date(s) applicable to the Money Market
Dollar Borrowing shall be ______ days.(3)
Very truly yours,
-------------------------
By:
---------------------------
Title:
---------------------
(1) The date must be a Euro-Dollar Business Day.
(2) The amount of the Money Market Dollar Borrowing is subject to Section
2.03(a) and (b).
(3) The Stated Maturity Dates are subject to Section 2.03(b)(ii). The
Borrower may request that up to ___
143
<PAGE> 151
different Stated Maturity Dates be applicable to any Money Market
Dollar Borrowing, provided, that (i) each such Stated Maturity Date
shall be deemed to be a separate Money Market Quote Request and (ii)
the Borrower shall specify the amounts of such Money Market Dollar
Borrowing to be subject to each such different Stated Maturity Date.
144
<PAGE> 152
EXHIBIT K
MONEY MARKET QUOTE
Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Atlanta Corporate Group
Re: Money Market Quote to Sensormatic Electronics Corporation
This Money Market Quote is given in accordance with Section
2.03(c)(ii) of the Amended and Restated Credit Agreement (as amended or
modified from time to time, the "Credit Agreement")dated as of December 12,
1995 by and among Sensormatic Electronics Corporation, Sensormatic Distribution
Inc., Sensormatic International, Inc., the other Borrowers listed on the
signature pages thereof, the Domestic Banks and Foreign Currency Banks from
time to time parties thereto, and Wachovia Bank of Georgia, N.A., as Domestic
Agent and ABN AMRO Bank N.V. and ABN AMRO Foreign Credit & Agency Services, as
Foreign Currency Agent. Capitalized terms used herein shall have the meanings
ascribed thereto in the Credit Agreement.
In response to the Money Market Quote Request of
______________ (the "Borrower") dated ____________, 19_ , we hereby make the
following Money Market Quote on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. Date of Borrowing:(1)*
4. We hereby offer to make Money Market Loan(s) in the following
maximum principal amounts for the following Interest Periods and at the
following rates:
Maximum Stated
Principal Maturity
Amount(2) Date(3) Rate Per Annum(4)
- --------- -------- ---- --- -----
________________________
* All numbered footnotes appear on the last page of this Exhibit K.
145
<PAGE> 153
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Credit Agreement, irrevocably obligate(s) us to make the Money Market Loan(s)
for which any offer(s) [is] [are] accepted, in whole or in part (subject to the
last sentence of Section 2.03(c)(i) of the Credit Agreement).
Very truly yours,
[Name of Bank]
Dated: By:
---------------------------
Authorized Officer
- ---------------------------
___________________________
(1) As specified in the related Money Market Quote Request.
(2) The principal amount bid for each Stated Maturity Date may not exceed
the principal amount requested. Money Market Quotes must be made for at
least $5,000,000 or a larger multiple of $1,000,000.
(3) The Stated Maturity Dates are subject to Section 2.03(b)(ii).
(4) Subject to Section 2.03(c)(ii)(C).
146
<PAGE> 154
EXHIBIT L
FORM OF PARENT GUARANTY
THIS GUARANTY (this "Guaranty") is made as of [NOVEMBER/DECEMBER
__], 1995, by SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation (the
"Guarantor") in favor of the Agents, for the ratable benefit of the Banks,
under the Credit Agreement referred to below;
W I T N E S E T H
WHEREAS, pursuant to a Amended and Restated Credit Agreement
dated as of even date herewith (as amended or modified from time to time, the
"Credit Agreement", the Guarantor, SENSORMATIC DISTRIBUTION INC., a Delaware
corporation, as Borrower, SENSORMATIC INTERNATIONAL, INC., a Delaware
corporation, as Borrower, the other Borrowers listed on the signature pages
thereof (all such Borrowers, other than the Guarantor being collectively or
individually, as the context shall require, referred to as the "Principal" or
the "Principals"), the Domestic Banks and Foreign Currency Banks parties
thereto from time to time, and WACHOVIA BANK OF GEORGIA, N.A., as Domestic
Agent and ABN AMRO N.V. and ABN AMRO Foreign Credit & Agency Services, as
Foreign Currency Agent(collectively, the "Agents"), the Banks have provided,
subject to the terms and conditions thereof, for extensions of credit to be
made by the Banks to the Principals and the Guarantor for the benefit of the
Principals and of the Guarantor;
WHEREAS, it is a condition precedent to the Agents and the Banks
executing the Credit Agreement that the Guarantor execute and deliver this
Guaranty whereby the Guarantor shall guarantee the payment when due of all
principal, interest and other amounts that shall be at any time payable by the
Principals under the Credit Agreement, the Notes and the other Loan Documents;
and
WHEREAS, in consideration of the financial and other support
that the Principals have provided, and such financial and other support as the
Principals may in the future provide, to Guarantor, and in order to induce the
Banks and the Agents to enter into the Credit Agreement, the Guarantor is
willing to guarantee the obligations of the Principals under the Credit
Agreement, the Notes, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and
147
<PAGE> 155
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the respective meanings
provided for therein.
SECTION 2. The Guaranty. The Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Principals pursuant to the Credit Agreement, and the full and punctual
payment of all other amounts payable by the Principals under the Credit
Agreement and the other Loan Documents, including without limitation, all fees,
costs, expenses, compensation amounts and indemnification amounts (all of the
foregoing obligations being referred to collectively as the "Guaranteed
Obligations"). Upon failure by the Principals to pay punctually any such
amount, the Guarantor agrees that it shall forthwith on demand pay the amount
not so paid at the relevant place and in the manner and relevant currency
specified in the Credit Agreement, the relevant Note or the relevant Loan
Document, as the case may be, together with interest on amounts recoverable
under this Guaranty from the time such amounts become due until payment, at the
Default Rate.
SECTION 3. Guaranty Unconditional. The obligations of the
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Principals under
the Credit Agreement, any Note, or any other Loan Document, by operation
of law or otherwise or any obligation of any other guarantor of any of
the Obligations;
(ii) any modification or amendment of or supplement to
the Credit Agreement, any Note, or any other Loan Document;
(iii) any release, nonperfection or invalidity of any
direct or indirect security for any obligation of the Principals under
the Credit Agreement, any Note, any Loan Document, or any obligations of
any other guarantor of any of the Obligations;
(iv) any change in the corporate existence, structure
or ownership of the Principals or any other guarantor of any of the
Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Principals, or any other
guarantor of the Guaranteed Obligations, or its assets
148
<PAGE> 156
or any resulting release or discharge of any obligation of the
Principals, or any other guarantor of any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights
which the Guarantor may have at any time against the Principals, any
other guarantor of any of the Guaranteed Obligations, either Agent, any
Bank or any other Person, whether in connection herewith or any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Principals, or any other guarantor of any of the Guaranteed
Obligations, for any reason related to the Credit Agreement, any other
Loan Document, or any other Guaranty, or the lack of legal existence of
any Principal, or any provision of applicable law or regulation
purporting to prohibit or make illegal the payment by the Principals, or
any other guarantor of the Guaranteed Obligations, of the principal of
or interest on any Note or any other amount payable by the Principals
under the Credit Agreement, the Notes, or any other Loan Document, or
the performance of any other obligation or undertaking of any of the
Principals under the Credit Agreement, any other Loan Document, or any
other Guaranty or otherwise making any of the Guaranteed Obligations
irrecoverable from any of the Principals for any reason;
(vii) any law, regulation, order, decree or directive
(whether or not having the force of law) or any interpretation thereof,
now or hereafter in effect in any jurisdiction, that purports to modify
any of the terms of or rights of any Foreign Currency Bank with respect
to any Guaranteed Obligation or under the Credit Agreement or any other
Loan Document or this Guaranty, including without limitation any law,
regulation, order, decree or directive or interpretation thereof that
purports to require or permit the satisfaction of any Guaranteed
Obligation other than strictly in accordance with the terms of the
Credit Agreement or any other Loan Document (such as by the tender of a
currency other than the relevant Foreign Currency) or that restricts the
procurement of the Foreign Currency by any Borrower or the Guarantor, or
any agreement, whether or not signed by or on behalf of any Foreign
Currency Bank, in connection with the restructuring or rescheduling of
public or private obligations in any Borrower's country, whether or not
such agreement is stated to cause or permit the discharge of the
Guaranteed Obligations prior to the final payment in full of the
Guaranteed Obligations in the relevant Foreign Currency in strict
149
<PAGE> 157
accordance with the Credit Agreement or other Loan Documents; or
(viii) any other act or omission to act or delay of
any kind by the Principals, any other guarantor of the Guaranteed
Obligations, either Agent, any Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the Guarantor's
obligations hereunder, other than the defense of payment in full.
The Guarantor acknowledges that, (A) at its express request, the Foreign
Currency Agent and the Foreign Currency Banks did not require, pursuant to
Section 4.01(d) and (g) of the Credit Agreement, delivery of opinions of
counsel, or documents, certificates or other items of the types (or equivalent
to the types) described in clauses (i), (ii) and (iii) of Section 4.02(g) of
the Credit Agreement, for Borrowers which are not U.S. Persons, and (B) the
Foreign Currency Agent and the Foreign Currency Banks agreed to such request
solely because of, and in full reliance on, the unconditional undertakings and
obligations of the Guarantor hereunder and the express waivers and consents set
forth above.
SECTION 4. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. The Guarantor's obligations hereunder shall remain
in full force and effect until all Guaranteed Obligations shall have been paid
in full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any
Note or any other amount payable by the Principals under the Credit Agreement
or any other Loan Document is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Principals or
otherwise, the Guarantor's obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
SECTION 5. Waiver of Notice by the Guarantor. The Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Principals, any other guarantor of the Guaranteed Obligations, or any other
Person.
SECTION 6. Subordination by the Guarantor. Until termination
of this Guaranty and payment in full of the Guaranteed Obligations, at any time
when any Principal is subject to a case or proceeding for bankruptcy,
insolvency, liquidation or moratorium, the Guarantor shall have, but
150
<PAGE> 158
shall not exercise in respect of any payment made by or for the account of the
Guarantor pursuant to this Guaranty, any rights of subrogation, indemnity or
otherwise from or against such Principal.
SECTION 7. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by the Principals under the Credit Agreement,
any Note or any other Loan Document is stayed upon the insolvency, bankruptcy
or reorganization of the Principals, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other
Loan Document shall nonetheless be payable by the Guarantor hereunder forthwith
on demand by the Agents made at the request of the Required Banks.
SECTION 8. Notices. All notices, requests and other
communications to any party hereunder shall be given or made by telecopier or
other writing and telecopied or mailed or delivered to the intended recipient
at its address or telecopier number set forth on the signature pages hereof or
such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the Agent in accordance with the provisions of
Section 10.01 of the Credit Agreement. Except as otherwise provided in this
Guaranty, all such communications shall be deemed to have been duly given when
transmitted by telecopier, or personally delivered or, in the case of a mailed
notice, 72 hours after such communication is deposited in the mails with first
class postage prepaid, in each case given or addressed as aforesaid.
SECTION 9. No Waivers. No failure or delay by either Agent or
any Banks in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, the Notes, and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 10. Successors and Assigns. This Guaranty is for the
benefit of the Agents and the Banks and their respective successors and assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Loan Documents, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty may not be assigned by the Guarantor without the
prior written consent of the Agent and the Required Banks, and shall be binding
upon the Guarantor and its successors and permitted assigns.
151
<PAGE> 159
SECTION 11. Changes in Writing. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Guarantor and the Agent with the consent of the
Required Banks.
SECTION 12. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. EACH OF THE GUARANTOR AND THE AGENT
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF THE SUPREME COURT OF THE
STATE OF NEW YORK, COUNTY OF NEW YORK AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE GUARANTOR AND THE AGENTS HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13. Taxes, etc. All payments required to be made by
the Guarantor hereunder shall be made without setoff or counterclaim and free
and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political or taxing authority as
required pursuant to Sections 2.12(d)and 3.11(d) of the Credit Agreement.
SECTION 14. Failure to Pay in Foreign Currency. If any the
Guarantor is prevented by application any law, rule or regulation from
effecting payment in a relevant Foreign Currency as required by this Guaranty,
each Foreign Currency Bank may, through the Foreign Currency Agent, require
such payment to be made in Dollars in the Dollar Equivalent amount of such
payment. In any case in which the Guarantor shall make such payment in
Dollars, the Guarantor agrees to hold the Foreign Currency Banks harmless from
any loss incurred by the Foreign Currency Banks arising from any change in the
value of Dollars in relation to such Foreign Currency between the date such
payment became due and the date of payment thereof.
SECTION 15. Judgment Currency. If for the purpose of obtaining
judgment in any court or enforcing any such judgment it is necessary to convert
any amount due in any Foreign Currency into any other currency, the rate of
exchange used shall be the Foreign Currency Agent's spot
152
<PAGE> 160
rate of exchange for the purchase of the Foreign Currency with such other
currency at the close of business on the Foreign Currency Business Day
preceding the date on which judgment is given or any order for payment is made.
The obligation of the Guarantor in respect of any amount due from it hereunder
shall, notwithstanding any judgment or order for a liquidated sum or sums in
respect of amounts due hereunder or under any judgment or order in any other
currency or otherwise be discharged only to the extent that on the Foreign
Currency Business Day following receipt by the Foreign Currency Agent of any
payment in a currency other than the relevant Foreign Currency the Foreign
Currency Agent is able (in accordance with normal banking procedures) to
purchase the relevant Foreign Currency with such other currency. If the amount
of the relevant Foreign Currency that the Foreign Currency Agent is able to
purchase with such other currency is less than the amount due in the relevant
Foreign Currency, notwithstanding any judgment or order, the Guarantor shall
indemnify the Foreign Currency Banks for the shortfall.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
duly executed in New York, New York by its authorized officer as of the date
first above written.
SENSORMATIC ELECTRONICS CORPORATION
By:
-----------------------------
Title:
500 Northwest 12th Avenue
Deerfield Beach, Florida 33442-1795
Attention: Mr. Raymond R. Monteleone
Telecopier number: 305-429-1490
Confirmation number: 305-427-9700,
ext. 4200
153
<PAGE> 161
EXHIBIT M
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
marshalling 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
154
<PAGE> 162
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 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
155
<PAGE> 163
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 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
156
<PAGE> 164
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 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 of 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 acknowledge 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.
157
<PAGE> 1
EXHIBIT 11
SENSORMATIC ELECTRONICS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
- -----------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Income:
Income from continuing operations $(97,674) $69,551 $72,065
Discontinued operations - 4,100 -
- -----------------------------------------------------------------------------------------------
(97,674) 73,651 72,065
Add interest expense (net of tax) on 7% convertible
subordinated debentures - - 4,902
- -----------------------------------------------------------------------------------------------
Adjusted net income for fully diluted computation $(97,674) $73,651 $76,967
===============================================================================================
Common shares:
Weighted average shares outstanding during the year 73,588 70,752 60,097
Potential dilutive exercise of stock options and warrants(1) - 1,227 1,788
- -----------------------------------------------------------------------------------------------
Shares included in computation or primary earnings per share 73,588 71,979 61,885
Shares issuable on conversion of 7% convertible
subordinated debentures - - 6,359
Maximum dilution of stock options and warrants(2) - 188 99
- -----------------------------------------------------------------------------------------------
Shares included in computation of fully diluted earnings per
share 73,588 72,167 68,343
===============================================================================================
</TABLE>
(1) Computed under the treasury stock method based on the average price during
the periods.
(2) Computed under the treasury stock method based on the stock price at end of
periods if higher than the average price during the periods.
<PAGE> 1
EXHIBIT 18
August 14, 1996
Mr. Garrett E. Pierce
Chief Financial Officer
Sensormatic Electronics Corporation
951 Yamato Road
Boca Raton, Florida 33431
Dear Mr. Pierce:
Note 1 of the notes to the financial statements of Sensormatic Electronics
Corporation for the year ended June 30, 1996 included in its Form 10-K for the
year then ended, describes a change in presentation from an unclassified to a
classified balance sheet. You have advised us that you believe that the change
is to a preferable method in your circumstances because the Company believes
that this change provides a better presentation of the Company's financial
position and conforms with industry practice.
There are no authoritative criteria for the preparation of financial statements
to apply in considering whether to prepare an unclassified or a classified
balance sheet. However, we conclude that the change in presentation from an
unclassified to a classified balance sheet is to an acceptable alternative
method which, based on your business judgment to make this change for the
reasons cited above, is preferable in your circumstances.
Very truly yours,
ERNST & YOUNG LLP
<PAGE> 1
EXHIBIT 21
SENSORMATICS ELECTRONICS CORP
Filename:Subslist LIST OF SUBSIDIARIES
6/30/96
<TABLE>
<CAPTION>
PLACE OF INCORPORATION
OPERATING COMPANIES OR ORGANIZATION
- ------------------- ----------------------
<S> <C>
NORTH AMERICA
- -------------
American Dynamics New Jersey
CamEra US Delaware
Glen Industrial Communications, Inc. Delaware
POS Data Products, Inc. Delaware
Robot Research Inc. Delaware
Sensormatic Canada, Inc. Canada
Sensormatic Electronics Corporation (Puerto Rico) Delaware
Sensormatic, SA de CV Mexico
Sensormatic del Caribe, Inc. Puerto Rico
Sortware House, Inc. Delaware
EUROPE
- ------
All Security Systems N.V. Belgium
BAN Sensormatic Security Systems Gmbh Germany
Case Security Limited United Kingdom
Datamast SA France
ICF SARL France
International Engineering SARL France
Knogo Australia Pty. Ltd. Australia
Knogo SA Belgium
Knofo Nederland B.V. Netherlands
Robot Consult SA France
Secure Imaging Limited United Kingdom
Sensormatic AB Sweden
Sensormatic A.G. Switzerland
Sensormatic A/S Denmark
Sensormatic AS Norway
Sensormatic Belgium NV Belgium
Sensormatic B.V. Netherlands
Sensormatic CamEra Ltd.. United Kingdom
Sensormatic CamEra S.A.R.L. France
Sensormatic Distribution Inc. Delaware (primary operation in Switz)
Sensormatic E.C., S.A. Spain
Sensormatic E.C., S.R.L. Italy
Sensormatic France SA France
Sensormatic Ges.m.b.h. Austria
Sensormatic G..m.b.H. Germany
Sensormatic Electronics Corporation (Ireland) Limited Ireland
Sensormatic Finance Limited United Kingdom
SEC Investments of Ireland Ireland
Sensormatic Ireland Limited Ireland
Sensormatic International Ltd. United Kingdom
Sensormatic Portugesa Seguranca L.D.A. Portugal
Sensormatic Proteccao Contra O Furto, L.D.A. Portugal
Sensormatic Limited United Kingdom'
N.V. Sensormatic S.A. Belgium
Sensormatic OY Finland
Sensormatic Kft. Hungary
Sensormatic Franceservices S.A.R.L. France
Svensk Sakerhetskonsult SAKON AB Sweden
Visual Information Systems Limited United Kingdom
</TABLE>
Page 1
<PAGE> 2
SENSORMATICS ELECTRONICS CORP
Filename:Subslist LIST OF SUBSIDIARIES
6/30/96
<TABLE>
<CAPTION>
PLACE OF INCORPORATION
OPERATING COMPANIES OR ORGANIZATION
- ------------------- ----------------------
<S> <C>
ASIA / PACIFIC
- --------------
Sensormatic Asia/Pacific, Inc. Delaware (primary operations in Sing.)
Sensormatic Australis Pty Limited Australia
Sensormatic Hong Kong Limited Hong Kong
Sensormatic New Zealand Limited New Zealand
OTHERS
- ------
Sensormatic Middle East, Inc. Delaware
Senelco Iberia, Inc. Delaware
International Financing, Inc. Delaware
Sensormatic (Barbados) Export, Inc. Barbados
Sensormatic Cayman Finance Ltd. Cayman Islands
Sensormatic del Peru Peru
Sensormatic Distribution & Holdings B.V, Netherlands
Sensormatic Electronics Corporation (Brazil) Delaware
Sensormatic Holdings Ltd. United Kingdom
Sensormatic International, Inc. Delaware
Senelco Resting, Aps Denmark
Sensormatic International Management Corporation Delaware
Sensormatic Investments Associates B.V. Netherlands
SEC Investments of Canada Ltd. Canada
Sensormatic Investments Ltd. United Kingdom
Sensormatic Holding Ges.m.b.H. Austria
Sensormatic Electronics Corporation (Japan) Japan
Sensormatic S.A. France
Sensormatic (U.K.) Ltd. United Kingdom
Elkinlane Ltd. United Kingdom
BI Merger Corp. Delaware
Kingsclere Investments Ltd. United Kingdom
Knogo Holdings S.A. Belgium
Sensormatic International Distributors, Inc. Delaware
Sensormatic do Brasil Electronica Ltda. Brazil
Sensormatic Guvenlik Sistemleri Ticaret, A.S. Turkey
Sensormatic Colombia Colombia
</TABLE>
All companies listed herein are wholly-owned by the Company, directly or
indirectly, with the exception of Sensormatic do Brasil Electronica
Ltda., Sensormatic Guvenlik Sistemleri Ticaret A.S. and Sensormatic de
Peru, which are 51% owned.
Page 2
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-19339, 33-26786, 33-38753, 33-54626 and 33-58299) pertaining to
the Incentive and Non-Qualified Stock Option Plans and the Employee Stock
Purchase Plan of Sensormatic Electronics Corporation of our report dated August
14, 1996, with respect to the consolidated financial statements of Sensormatic
Electronics Corporation included in the Annual Report on Form 10-K for the year
ended June 30, 1996.
ERNST & YOUNG LLP
West Palm Beach, Florida
September 27, 1996
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 Nos. 33-61626 and 33-59865 and Form S-4 No. 33-51957) of Sensormatic
Electronics Corporation and in the related Prospectuses of our report dated
August 14, 1996, with respect to the consolidated financial statements of
Sensormatic Electronics Corporation included in the Annual Report on Form 10-K
for the year ended June 30, 1996.
ERNST & YOUNG LLP
West Palm Beach, Florida
September 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 114
<SECURITIES> 3
<RECEIVABLES> 515
<ALLOWANCES> 67
<INVENTORY> 158
<CURRENT-ASSETS> 634
<PP&E> 234
<DEPRECIATION> 86
<TOTAL-ASSETS> 1,630
<CURRENT-LIABILITIES> 259
<BONDS> 27
0
0
<COMMON> 724
<OTHER-SE> 108
<TOTAL-LIABILITY-AND-EQUITY> 1,630
<SALES> 851
<TOTAL-REVENUES> 995
<CGS> 453
<TOTAL-COSTS> 473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 82
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> (160)
<INCOME-TAX> (62)
<INCOME-CONTINUING> (98)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98)
<EPS-PRIMARY> (1.32)
<EPS-DILUTED> (1.32)
</TABLE>
